Here are the key things you need to know before you leave work today (or if you already work from home, before you shutdown your laptop).
MORTGAGE RATE CHANGES
Bank of China trimmed all its fixed rates for terms of 2 years and longer.
TERM DEPOSIT RATE CHANGES
Rabobank raise rates so that their six month rate is now 5.20%, highest of any bank), their nine month rates 5.75% (ditto), and 5.85% for one year (highest except for SBS Bank's 6%). ASB raised some short rates, besting their main rivals but not challenger banks.
SMALLISH DEFICIT
The half year Crown Accounts to December 2022 shows an operating deficit of -$1.3 bln and an OBEGAL result of -$2.8 bln. These levels are at about what was expected in the HYFEU. Net debt is rising and is now at a low 21.3% of GDP, but easing away from their June 2023 target of 19.9%.
HOT LABOUR MARKET VERIFIED
Those Crown Accounts also show taxes from employment are up +11.9% from a year ago, essentially verifying that the labour market is super-strong with higher levels of employment (marginal) and higher levels of pay (substantial). Bracket creep will be responsible for some of that increase too, but probably no more than a percentage point or two.
HIGHER TAXES ON RISING INTEREST RATES
Those same Crown Accounts also shows that withholding taxes on interest earnings are back rising fast too. They are now running at $170 mln per month in tax collected, up from a low of about $50 mln/month in the 2021 year. Savers' shift out of current accounts and low yielding savings accounts (when imminent pandemic risks were high) and back into term deposits just as interest rates are rising, is turbocharging these tax gains. Interestingly, there is no equivalent rise in taxes on dividend income.
POSITIVE 'NET TOURISM'
Essentially because Aussie tourists are flooding back, there were 359,855 inbound tourist arrivals in December 2022, bringing monthly arrivals to 68% of pre-pandemic (December 2019) levels. This result was the highest number of tourist arrivals since February 2020, before the borders were shut early in the pandemic. December was the second consecutive month of positive “net tourism”, with 106,588 more arrivals than departures.
BORDERS OPEN
Overseas worker and student numbers are steadily picking up again. More than +16,600 people arrived in New Zealand on work visas last month (January 2023) and another +7400 on student visas.
DO THEY REALLY NEED MORE DEBT?
The Government is making it easier for people in financial difficulty as a result of the catastrophic flooding to get temporary debt. They have actioned a short-term exemption to the Credit Contracts and Consumer Finance Act (CCCFA) to allow banks and other lenders to quickly lend money to affected consumers to address damage, replace property, provide for loss of income, and meet their everyday living costs. The exemption removes the requirement for extensive assessments for temporary credit of up to $10,000.
PUBLIC DEBT COSTS RISE SHARPLY
$1.2 bln was bid today for the total $400 mln in Government Bonds on offer, putting last week's bond bust behind us. The $200 mln May 2028 offer attracted $697 mln in bids from 56 parties. 27 won something at 4.32%, which was quite a jump from the 3.93% two weeks ago. The $150 mln April 2033 offer got $385 mln in bids frpm 36 parties. 20 of them won something at 4.34%, and up solidly from the 4.09% two weeks ago. The final $50 mln of April 2037 paper got 22 bids worth $136 mln. This yield was 4.52%, and also up solidly from 4.29% two weeks ago.
AUSSIE INFLATION STICKY
Australian consumer inflation expectations are proving sticky. The latest MI survey shows them at 5.1% and while this is down from 5.6% in January, it has now been a year where it has oscillated between 5% and 6%.
ON A DOWNWARD TRACK NOW
In Australia, their labour market is wavering. It shed workers for the second month in a row in January, in a sign the nine consecutive official rate rises are starting to bite. They were expected to record +20,000 new jobs added but in fact they lost -11,500 jobs. Their unemployment rate rose to 3.7% (from 3.5%), adding 21,900 to the jobless rolls.
NAB'S MARGINS SWELL TOO
Hot on the heals of yesterday's half year CBA strong profit announcement, NAB has reported quarterly results that show higher interest margins and low bad debt levels. But credit impairment charges did rise from low levels.
AUSSIE TOURISM RECOVERS TOO
Aussie tourism has also recovered strongly, quickly. It is now back to 75% of its pre-pandemic levels, and back to full 2015 levels. Kiwis are the largest group visiting. New Zealand is also their largest destination, but that was from where only 17% of all Aussies returned.
SHUNNED
Officially, prices for new houses in China fell -1.5% in January from a year ago. But given this market is in the doldrums with few sales (and low demand), it is doubtful this tells the real story. Resales are probably harder hit, with official data showing only six of 70 large cities recording prices the same as or higher than the same month last year. This is unusually low for them.
SWAP RATES LIKELY STAY UP
Wholesale swap rates likely rose in a steeper bias today with the 1 and 2 years probably not moving much. The real action in swap rates comes near the close. Our chart will record the final positions. The 90 day bank bill rate is down -2 bps at 5.04%. The Australian 10 year bond yield is now at 3.79% and up +1 bp from yesterday. The China 10 year bond rate is little-changed at 2.91%. The NZ Government 10 year bond rate is now at 4.38% and up +1 bp, and still above the earlier RBNZ fix at 4.33% which was unchanged. The UST 10 year is now at 3.80% and up +6 bps from this time yesterday.
EQUITIES TURN UP
The S&P500 ended its Wednesday session up a tame +0.3% on Wall Street today. Tokyo has opened higher, up +0.7% in morning trade. Hong Kong is up +0.8% at its open, and Shanghai is essentially unchanged at its open. The ASX200 is up +0.9% so far in early afternoon trade. The NZX50 is up +0.5% in late trade.
GOLD DROPS
In early Asian trade, gold is now at US$1836/oz, and down a sharpish -US$22 from this time yesterday.
NZD RETREATS
The Kiwi dollar is at 62.7 USc and down almost -1c from this time yesterday. Against the Aussie we are marginally softer at 91.2 AUc. Against the euro we are -¾c weaker at 59.3 euro cents. The TWI is now at 70.4 and down -60 bps from a day ago.
BITCOIN EXPLODES HIGHER
The bitcoin price is up a very sharp +11.5% from this time yesterday, now up at US$24,676. Volatility has been extreme at +/- 6.4%. Short sellers have been cashing out their positions, and the rise is the most since early September 2022.
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49 Comments
Officially, prices for new houses in China fell -1.5% in January from a year ago. But given this market is in the doldrums with few sales (and low demand), it is doubtful this tells the real story.
In the year 2025, countries in Asia will use half of the electricity in the world. According to the International Energy Agency, Asia's share of global electricity consumption has been rising quickly from just around a quarter in the year 2000. China is the biggest factor in this transformation. While in 2000, it used just 10 percent of the world's energy, that share is predicted to be up to 33 percent in 2025. Link
As referred to above, potentially a short squeeze as these kind of movements are not common. Alts all up too but ol' ratty leading from the front so I suspect liquidations of short positions. Those betting against BTC have been punished quite badly over the past 3 months.
Anyway, if you didn't buy BTC y'day for USD21,600, that's OK because you can buy it today for USD24,700.
Burn that coal in Asia, there's nothing the rest of world can do anything about it,let alone NZ. NZ, shoot yourself in the foot, pales into absolute insignificance in its costly attempt to reduce fossil fuels.
I think a re-post, https://www.youtube.com/watch?v=zJdqJu-6ZPo Can skip to the first minute but the relevant fossil fuel stuff is about 2and1/2 minutes in.
Relevant to the Asian comment "In the year 2025, countries in Asia will use half of the electricity in the world."
Ok this is off subject this column here but I was thinking of being at a meeting during the Kirk Labour government where the Transport Minister, McGuigan I think, outlined a prospective that eventuated in the Shipping Corporation of New Zealand, eg vessels NZ Waitangi and New Zealand Pacific for export. But the theme carried further into developing more coastal shipping. Currently Maersk are evaluating a service of major ports but it would seem worthwhile for smaller ports such as Gisborne when infrastructure as road and rail breakdown. Moving freight by sea is a hell of a lot less taxing on the landscape. Introduction of containers and better operation and coordination of logistics etc would make transit times hardly less than land transport. Just thinking.
What happens to the container at the far end?
That's an issue with even Auckland. Empty containers that are too expensive to repatriate, and in an import reliant economy, not enough to fill them for the return journey. A truck can just return with one empty and add it to the pile in Auckland.
Imagine there would be a fair percentage of LCL /LCL or even FCL/LCL which would see the contained stripped at the receiving port and goods on transported.Plus there are roll on roll off configurations, palletised cargo options, computerised mechanical stacking. The world is moving on.
NZ GOVERNMENT BOND REPURCHASES
LSAP Repurchase History Data
Published: 16 Feb 2023
Published by New Zealand Debt Management at https://debtmanagement.treasury.govt.nz/investor-resources/data
Deal Date Settlement Date Maturity Date Type Volume accepted ($m) Accepted Yield %
15-Feb- 2023 17-Feb- 2023 15-Apr- 2037 Nominal $415 4.448
Soros has decided to back ARK and Cathie Wood - the source of ridicule for many. Not all in by any stretch but interesting all the same.
But the financier can count on the support of the legendary investor George Soros. Indeed, the financier acquired call options on Ark Innovation ETF in the fourth quarter according to recent regulatory filings.
These call options -- bets that a stock price will rise -- relate to 500,000 shares whose value was $15.62 million at the time of the contract between Soros Fund Management and the seller.
https://www.thestreet.com/technology/billionaire-george-soros-bets-on-a…
https://www.afr.com/policy/economy/the-end-of-the-great-housing-delusio… its behind a paywall about UK market TLDR; just read normal DGM comments here, same thing will happen in the UK, overvalued by 50%.
I have access to AFR. Reasonably good article. This kind of sums it up. Similar across the Anglosphere. Few of the realities that are shared from the UK to Nu Zillun..
But Britain’s property boom is different; almost everyone involved knows that it is a mass exercise in self-deception, our economy’s biggest lie.
Real wages have hardly risen for more than 20 years – and the pensions of today’s workers are mostly paper-thin – but the dizzying rise of the property market has offered a substitute for economic growth. It was a substitute people accepted because it seemed permanent: the expensive house that sucked up a lifetime’s wages became the savings account, the pension, the inheritance. That wealth is now beginning to dissolve.
This is not an act of selfishness, but rather the reality of the post-2008 economy, where houses have become financial assets rather than goods. The simple laws of supply and demand have ceased to apply, and people have been incentivised to keep an expensive property because it’s their biggest and most dependable asset. In an era of stagnant real wages, the house has become the bank.
“It is part of your retirement, because your pension won’t be enough … it’s the money you’re going to give to your grown-up kids, that will give them their deposit,” Dorling says.
This creates a market that is fundamentally irrational. “It’s such a large amount of money that people aren’t in a position to accept that drop in their perceived wealth … We’re just not ready for a fall that’s a real fall, where it doesn’t return again. And the more we don’t accept the fall, the sharper we make the fall that actually occurs.”
Yep. I'm in the behavioral economics camp so I see it how it is all executed. Broadly the same across the Anglosphere. The "spruikers" range from the mini-Trump syndrome right up to the fatherly views of Lord Key (who I think is not as smart as he seems to be) to the bank lackeys and even the RBNZ.
I'm in the behavioral economics camp so I see it how it is all executed. Broadly the same across the Anglosphere.
So why is this a phenomenon of the anglosphere? Why has a low interest rate environment not seen similar gains in property values in say, Japan, Spain, or Italy?
If you do a google image search for:
"Japan Property Crash"
"Spain Property Crash"
"Italy Property Crash"
You'll find the graph/stats that give you the answers to your question
It turns out that when a generation is burnt in a meaningful way by the crash of an investment class, they tend to not blow up another bubble on their next turn.
Every country has its "greedy self entitled" generation. It's a cycle. NZ's boomers came through a little later than the Japan, Spain and Italy equivalents. Post-Boomer generations learnt empathy and moderation by being burnt. This is despite the boomers being quick to claim everyone else is frivolous.
NZ's boomers came through a little later than the Japan, Spain and Italy equivalents.
15-30 years later? That would make them not boomers.
Further, if their crashes re-empathised the populations of these countries, why is tax avoidance so high in Spain, why have wages remained surpressed in Japan, and why does Italy foster so much indentured labour?
Weren’t you the one saying it was a foregone conclusion for National once Ardern left?
Not a reference to me because I would never say that. To believe that a govt can prevent a bubble from bursting is hopium IMO. Mind you, Bernard Hickey seems to be of that persuasion. He seems to think govts / central banks are omnipotent.
But Britain’s property boom is different; almost everyone involved knows that it is a mass exercise in self-deception, our economy’s biggest lie.
As Nu Zilund has the highest house prices on most metrics in the world you'd have to argue that Kiwi's have been lied to and conned the most.
I'm pretty sure when a Royal Commission looks into "How was it allowed to happen" there will be dishonorable mention made to MSM and ole Tony the Comb & Co with vested interests
"25 reasons house prices are going up"
"House price rises will moderate to only 5% increases next year"
"Don't be an idiot and try and time the last 5% fall in the market"
"Interest rates have peaked"
"Prices are going to whipsaw back up next year"
Lie after lie after lie
I think that is broadly right. Chatting to randoms in middle-age+, they all seem to know now what has happened in general, that the young are tending to give up or are leaving and markets are battling to correct despite govt/bank bad intentions, even that the conclusion is a reduced standard of living. But I don't get the sense yet that they are feeling panicky about giving things up as a result. Humans on average, it seems, have an in-built bias to optimism. Keeps us going, but it's a bias so doesn't lead to optimal decisions.
I guess blaming the uninvolved will wait for a later phase.
I don't think anyone is lying DDDDebt, they are all opinions. No one has to take everything they read at face value. Make your own mind up by reading a diverse set of opinions then decide what to do. If you make the wrong decision don't blame others. Such is life.
Yes all opinions... presented and positioned as experts by MSM
Unfortunately, FHBs/Mom & Dad owner occupiers haven't got time to read a diverse set of opinions before making the biggest financial decision of their lives.
They are too busy trying get through life - to put some food on the table, get the kids through school, look after their parents/whanau etc
So they trust the likes of Granny Herald to be informing them and read it at face value.
Instead they get fed pro-property-aganda from Oneroof via the Herald as news
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