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
There are no changes to report today (although we did update Pepper Money rates).
TERM DEPOSIT RATE CHANGES
General Finance raised rates today. Mutual Credit Finance did too. And Forsyth Barr raised their cash management rates as well, responding to the OCR.
CHECK BEFORE YOU BUY A USED CAR
Insurers are urging buyers to look for signs of water damage and to check Waka Kotahi’s written off vehicle register when buying a vehicle so they can make well informed decisions. Between 1 and 22 February, 524 vehicles were added to the register as write-offs with the water damage annotation.
PERVERSE INCENTIVES MAY OR MAY NOT BE INVESTIGATED
An eight-week Inquiry is about to start looking at land use that caused woody debris, including forestry slash, and sediment-related damage in Tairāwhiti/Gisborne and Wairoa during the recent series of Cyclones. No word however whether it will cause a re-think of the economic incentives the Government has given to convert livestock farms into pine forests so that we can all pay offshore 'investors' carbon credits - just so they don't have to cut back in their home markets (we are looking at you James Shaw and Ikea).
ANOTHER STEP COMPLETED IN SOPROLE SALE
Fonterra said it has received approval from the Chilean competition authority, one of a set of key pre-conditions for the sale of their Soprole dairy business to the local Gloria Foods. There are more pre-conditions that have to be worked through, but today's approval is a significant one.
THE NATIONAL COST OF VANITY
Some minor prep work has started (base sampling) for Auckland's boondoggle light-rail-to-the-airport project. It currently has a projected cost of between $15 bln and $30 bln for the preferred underground options, although a $9 bln "modest" above-ground remains on the table. It is a massive vanity project for the MPs electorates through which this service is projected to run (and is likely to set back national productivity significantly). Like the CRL and the Waterview Tunnel, both engineering marvels, these sort of grand statements deliver little for the extra cost they impose. The Waterview Tunnel could easily have been an above ground freeway extension. The CRL is a massive fixed rail project solving yesterday's issues. The world moved on, pretty much as many critics suggested it would. The benefits fall to a few, the costs to everyone..
TREBLING
Another major bank is making another 'big' increase in its support for flood-affected customers. Westpac initially gave $1 mln in $2,500 non-repayable cash grants to their small business customers affected by the late January flooding and Cyclone Gabrielle, and they have now increased the amount available to $3 mln. Another $1 mln is being given to local community organisations.
BIG GAINS
Meanwhile, Kiwibank has announced it has delivered a big increase in profits. A jump in net interest income has pushed their half-year profit to almost $100 mln, up +53%. (While this is big for Kiwibank, it is small beer compared to the big four Aussie banks).
INVESTORS GET +50 BPS IN 14 DAYS
Seventy-seven bids were received for the $400 mln NZ Govt bonds tendered today in three tranches. $807 mln was bid and 49 of them won something. The $200 mln April 2027 tranche went for 4.65% yield, up +55 bps from the same bond offer two weeks ago. The May 2034 tranche went for a yield of 4.67%, up +50 bps in two weeks. And the $50 mln May 2051 tranche went for a yield of 4.75%, up +51 bps in the same two weeks.
BRAZIL CONFIRMS MAD-COW OUTBREAK
We should note that the case of mad-cow disease in Brazil has been confirmed. Already, China has suspended imports. This may rock beef prices in the short-term.
SWAP RATES HIGHER AGAIN
Wholesale swap rates are likely up quite a bit further for a second straight day, after the OCR implications sink in. But the real action in swap rates comes near the close. Our chart will record the final positions. The 90 day bank bill rate is up +5 bps to 5.08%. The Australian 10 year bond yield is now at 3.90% and up a tad. The China 10 year bond rate is little-changed at 2.94%. The NZ Government 10 year bond rate however is now at 4.67% and up +13 bps and above the earlier RBNZ fix at 4.55% and up +6 bps. It looks like policy rates may be further away from the top than markets had been pricing and so there is some catchup underway. The UST 10 year is down -2 bps at 3.92% in a settling.
EQUITIES MIXED BUT NZX50 ON TOP
The S&P500 ended down -0.2% on Wall Street taking the two-day shift lower to -2.2%. Tokyo isn't trading today because it is a public holiday (Emperor' Birthday). Both Hong Kong and Shanghai have opened little-changed today. The ASX200 is down -0.3% so far in early afternoon trade. The NZX50 is up +0.5% in late trade today.
GOLD SLIPS FURTHER
In early Asian trade, gold is soft, now at US$1825 and down -US$13 from this time yesterday.
NZD UP SLIGHTLY AGAIN
The Kiwi dollar is little-changed from this time yesterday at 62.3 USc. Against the Aussie we are +½c higher and now at 91.4 AUc. Against the euro we are firmer at 58.7 euro cents. That means the TWI-5 is now at just over 70.3 and a +20 bps rise from yesterday.
BITCOIN SLIPS
Bitcoin has retreated again from yesterday to be now at US$24,164 which is a -1.0% fall. Volatility over the past 24 hours has been modest at +/- 1.8%..
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95 Comments
Insurers are urging buyers to look for signs of water damage and to check Waka Kotahi’s written off vehicle register when buying a vehicle so they can make well informed decisions.
Can't remember exactly when, late 90s or 00s, but there was flooding in Nagoya and whole fleets of water damaged European cars (primarily Mercs and BMWs) were exported as used cars. Think some washed up on NZ shores. Think the cars were owned by a Yakuza-related company.
Recall vehicles ex the Wahine in 1968 were salvaged and sold. Friends of friends got one, a Ford Zephyr I think, and it did them quite well too. Different cars on tap in those days. Commonwealth Trading Preference Scheme saw British makes dominant except for the ever growing favourite Holdens.
The Wahine storm. My late Godfather was an Upper Hutt car dealer in '68, and the story I got is that the cops roped in car dealers with 4wd vehicles to come down to the foreshore to help with rescue and recovery. He ended up dragging bodies out of the surf, and had nightmares for years.
My Dad was also a car dealer, in WN. He'd sold a car and needed to deliver it that day, so prepared with a few tricks like packing paper into the grill to reduce the slosh into the electrics, then made his delivery. Joked that it was probably the only car delivered in WN that day.
They were both from the north of England and knew a bit about shitty weather.
Reading https://businessdesk.co.nz/article/property/du-val-converts-mortgage-fu… it sounds plausible that they've gone under, plenty of red flags.
You can follow the journey on Facebook.
Yup. I remember learning in finance years ago - any company that has to advertise for new investors is in trouble - and you'll see their adverts ramping up all they way till they go bust. And anyone promising 'guaranteed' investment returns should be steered clear of with a 1000-ft barge pole.
It'll be interesting to see if the FMA takes a view on the NZ property ponzi companies, and attempts to claw back excess profits from investors already paid out same as it did with RAM.
Known before the covid fiasco but to mention it during the fiasco was verboten. Add to the long list of covid public health balls ups.
"The most rigorous and comprehensive analysis of scientific studies conducted on the efficacy of masks for reducing the spread of respiratory illnesses — including Covid-19 — was published late last month. Its conclusions, said Tom Jefferson, the Oxford epidemiologist who is its lead author, were unambiguous.
“There is just no evidence that they” — masks — “make any difference,” he told the journalist Maryanne Demasi. “Full stop.”
https://www.nytimes.com/2023/02/21/opinion/do-mask-mandates-work.html
Back in 2003 during the SARS outbreak, Australia was literally fining people for claiming that masks were effective protection against coronaviruses:
https://www.smh.com.au/national/farce-mask-its-safe-for-only-20-minutes…
People working with viruses wear eye protection. Beanie puts air filters on the car head lights - just to be safe/kind. "The ocular surface can serve as a reservoir and source of contagion for SARS-CoV-2. SARS-CoV-2 can be transmitted to the ocular surface through hand-eye contact and aerosols, and then transfer to other systems through nasolacrimal route and hematogenous metastasis."
https://pubmed.ncbi.nlm.nih.gov/33658750/
Read the next sentence? “The pooled results of RCTs did not show a clear reduction in respiratory viral infection with the use of medical/surgical masks. There were no clear differences between the use of medical/surgical masks compared with N95/P2 respirators in healthcare workers when used in routine care to reduce respiratory viral infection.”
David,
Please can Profile be banned from the comments section for continuously spreading misinformation? He is paid to do this.
These are the actual words used in the plain language section of the report he quoted under key messages.
"Do physical measures such as hand‐washing or wearing masks stop or slow down the spread of respiratory viruses?
Key messages
We are uncertain whether wearing masks or N95/P2 respirators helps to slow the spread of respiratory viruses based on the studies we assessed.
Hand hygiene programmes may help to slow the spread of respiratory viruses."
Well you are right about hand hygiene. There is no evidence in the pooled studies masks made any difference. The author was pretty clear about this. How do think masks stop ocular transmission of viruses?
"Its conclusions, said Tom Jefferson, the Oxford epidemiologist who is its lead author, were unambiguous.
“There is just no evidence that they” — masks — “make any difference,”
Based on the study outcomes, you could equally say that there is just no evidence that masks do not make a difference.
But you already know this. Your whole angle is to try to undermine scientific consensus with misrepresentation and misinterpretation.
David,
People have been banned from the comments for much less than this.
Given the obvious ocular transmission route there are seemingly obvious reasons why masks are ineffective. Not to mention human behaviour like touching your mask. Are you planning to whinge to the lead author, The Lancet and the New York Times about "undermining consensus"? Why stop with profile - go all the way!
.. it is the best interest of the current government to maintain the fear factor , keeping us sheepishly compliant .... and supporting them for " protecting " us from the nasty virus ..
Wakey wakey sheeples : Ardern / Hipkins / Robbo have all been lying to you : wakey wakey !!!
"Given the obvious ocular transmission route there are seemingly obvious reasons why masks are ineffective."
I'm not interested in your take on science. You posted a link to a scientific article and then tried to misrepresent what the article actual said by selectively quoting it. You do this a lot and that's why I think you should be banned.
You are so right agnostium, he is a serial misinformer, on everything from climate change to viruses.
This blows that Cochrane 'study' out of the water: https://www.gavi.org/vaccineswork/yes-masks-reduce-risk-spreading-covid…
I'd been told face masks were useless or even counter-productive because we touch them with our hands. Then, when the govt managed to get a supply, I was told they were essential and later when I flew to the UK I was told they were essential except when eating dinner. My conclusion is to generally trust scientists but be very skeptical of government public relations and especially the media. This attitude has spilled over to other issues such as climate change.
I think they were useful because seeing someone approach wearing a face mask made me step away - being absent minded I probably would have forgotten without the face mask. Of course any indicator would have worked such as a flashing light on the top of the head. If there had been no face mask mandates in supermarkets and buses maybe the outbreaks would have been bigger but over with quicker. Given the number of spare beds and medical staff probably NZ did roughly the right thing but for the wrong scientific reason.
Unfortunately this Cochrane metastudy is not actually useful, there are 2 key things wrong with it:
1. They insist on only looking at randomised studies, where people are randomly assigned to a control group or a treatment group. During the COVID pandemic, very few such studies like this have been done, for fairly obvious reasons (ie, it's unethical to expose people to a deadly pandemic virus by preventing them from wearing masks).
2. Because of the above, they used randomised studies involving influenza, a much more mild and much much less contagious illness than COVID
So this unfortunately means the results aren't transit relevant to the efficacy of marks when it comes to stopping COVID transmission.
Sorry profile, but once again the detail of the data and the study at hand does not back up your conspiracy theories.
Imagine paying $1.7 million in rent on a pretty basic Auckland rental over your lifetime. An average house is probably worth 700,000. Its 'dead money' someone told me
595 pw from age 20 to 75. Not allowing for inflation as rents didn't go up this year.
Rents increasing at 3 percent means total payments to landlord $4.15 million. When you die sadly none of it will go to your kids or grandkids
That wouldn't be very common though would it? Unless buying at the top of the market, after being sucked in by very low rates , and then rates rising and staying up. But many landlords who purchased investment properties maybe in that same situation, and as shown in Oz, rents are increasing as a result of the rising interest rates, pushing up inflation even more.
No not really, I showed you both sides, with and without minimal inflation. Use a spreadsheet and plug in best and worst case scenarios. Anyone who is not prepared to do that, is biased and refuses to keep their eyes open
What I would like to know is how much money a landlord will have if he simply invested all the proceeds. From a purely objective perspective it might be worth considering
Imagine paying $1.7 million in rent on a pretty basic Auckland rental over your lifetime. An average house is probably worth 700,000. Its 'dead money' someone told me
That would mean living in Auckland for your entire existence--very much a boomer mindset. Not something I personally would enjoy. But each to their own.
Meanwhile if you increase mortgage payments alongside wage increases, you can easily get your loan term down to 15 years. No different than rent going up with wages. It's the years post mortgage discharge that really magnify the gains. $30k per year from age 45-50 not going on rent is $500-$600k for retirement.
Mind you, it's generally cheaper in the short term to rent, so people with a bit of risk appetite may want to invest the savings between rent and owning early on and make some good coin from compounded gains.
HW2 - Imagine not knowing when it’s cheaper to rent than own
Luckily Opes Partners the property investment education & property developer ticket clipper have created this handy tool for property investors
https://www.opespartners.co.nz/investment/property-investment/managing-…
It shows how much investors need to ‘top-up’ an average $769k mortgage over the next ten years - with $600pw rental income
Top-up means how much more investors need to contribute to cover the shortfall on their rental income
Of course, their numbers were based on Uncle Tony’s expert projections from 6 months ago of retail mortgage rates peaking at 4.5% - so you need to add another 50% in income shortfall if the OCR hits 5.5% like the RBNZ have promised
Also, I’m sure they haven’t allowed for increased rates and insurance so for calculations sake you might as well double it and say you’re saving about $15k+ per year renting the average property
And then chuck in another $10k compounding from your $200k deposit on term deposit, and you start to realise why HW2 is the only Spruiker left on here
Residential Property Investment has always been a mugs game without capital gains - it's always been about timing the market, not time in the market - everyone knows that right?
I am talking about over the lifetime of a tenant.
With very modest inflation. It costs literally multi millions to rent.
After a period of time, a tenant becomes stuck, with all the will in the world theyre unable to buy. Having kids in a rental is not a bright idea, as family demands and expenses eat your cash and reduce your income. After that they are too old and the bank won't lend.
Depressing huh
You've clearly not run the numbers
5%+ on term deposit is the game changer
www.theshapeofmoney.co.nz/general-resources/calculators/rent-versus-buy…
It's not depressing to rent if you have 0% capital growth/gains and run the numbers on rent vs own... it's enlightening and I wish more FHB's would understand this... roughly $750k+ saved over the first 15 years
If there is 5% capital growth per annum you still save $150k
Rates, Maintenance and Insurance are the thief in the night - every landlord with admit that.
Of course when property is falling -10%+ per year it's an absolute no brainer... the numbers don't lie.
The fact is that tenants pay a kings ransom and then have nothing to show for all that cost. Your blindspots are showing
I always run my numbers on a zero capital growth. I even did the rent at zero percent inflation which I know is ludicrous. I got accused of being biased by someone who closed their mind to an alternative possibility for inflation.
It's always about timing.
https://www.opespartners.co.nz/property-markets/waikato
How much capital growth was there in Thames between 2006 and 2016. Roughly none.
So you're happy to bet this cycle is different?
If you need to make it simpler, the only fact you need to know is a stagnate flat or falling market for landlords can't compete with 5% capital gains on term deposits for tenants. It's leverage in reverse.
The numbers don't lie. Don't let the blinkers from the old days of capital gains and 1% on term deposit confuse you.
DDDDEBT Why do you mention that about Thames, and what happened after 2016
I dont think I am betting anything, the figures above have showed more than I have ever seen been before that it is not TIMING as much as TIME-IN
You keep turning the discussion to landlords perspective
So you are biding your time and waiting it out? Is it possible you will miss the moment while you are waiting for 'right house right price right location' and how can you be sure. You mightn't have that long to wait but I think you are thinking it will be years away and put the money in TD and throw away the key
I'm 41, and I so far in my life, I've paid about $250k in rent. Heavily offset by being single in my 20's and flatting, and then having a family in my 30s now requiring a larger house than average - but we'll only need that till the kids leave home (and if they don't they'll be contributing towards the rent).
How much interest (dead money also), is the average mortgage owner going to pay over that time? There are significant advantages to owning, but without capital gains, a renter's investment will out-perform a house. With capital gains it may be another story, but the numbers haven't stacked up for us for years, so we keep choosing to rent. This market should've crashed long ago, but I underestimated how hard the VIB would work to keep it going.
Depends on appetite for risk and what the individual sees as important. Invest the savings from rent vs own in the NZX50 8% p.a. (20 yr ave = 7.14%) you're on your way to some great compounded gains. Say mortgage is gone in 15 years, and the owner starts investing. By year 15 their returns will only be 40% of the renter's return AFTER rent is factored in.
Me personally, I'd rather avoid having my daughter potentially change schools at the whim of a landlord. "Sorry you had to change schools and make new friends, but look on the bright side, daddy is set up for retirement".
Another 700,000 hectares slated to go into pines, much of it replacing sheep and cattle farms that were one of our biggest export earners. Many thanks to the Green Party for their legislation that made this possible. We can see the result with all the pine trees clogging waterways after the cyclone.
I'd be careful blaming it all on forestry (although they certainly deserve a lot of flak). Take a look at the article here https://www.nzherald.co.nz/hawkes-bay-today/news/flight-over-hawkes-bay-coast-reveals-severe-landscape-damage/3Q2VPHBF2ZFL7NZEHH5A5K3ECY/
Trees cut down to grow sheep and cattle causing massive erosion...
Carbon forestry does not create slash , it reduces silt runoff on steep farmland that should never have been cleared. https://scontent.fakl4-1.fna.fbcdn.net/v/t39.30808-6/331974799_64219013…
The slash is coming form prouction forestry been harvested.
Any links to transport experts ( not road transport adovcates) that claim " The CRL is a massive fixed rail project solving yesterday's issues. The world moved on, pretty much as many critics suggested it would".
I thought that story about the South Korean fertility rate slipping to 0.7 births per woman was interesting. If the replacement rate is 2.1 I guess it means that the next generation will be only a third the size of the current generation. Talk about a demographic squeeze!
Couldn't agree more on your comments on the light rail debacle.
One way the dorks are talking about part paying for it is "value uplift". ie Those who live near it will have to cough up cash "if" their properties become more valuable. "If", because it's a falling market. Plus it could become less desirable to live in that area as it becomes increasingly dense with housing.
Also, I don't want to think about how long it would take to get to the airport on it!
I respect David's editorial line on many things but with transport he is way off but it's not unusual in New Zealand.
New Zealander's attitude to car travel is very similar to US attitudes to carrying guns. Anyone else looking in can see how crazy the policies are but New Zealander's just can't see the problem.
The solutions are congestion charges, higher parking fees, less public subsidies for driving and parking, investment into making alternatives to driving more attractive and safe, building more houses closer to public transport links and closer to main centres.
It's all well established and proven best practice abroad but it appears we a doomed to go through the same arguments other more advanced societies went through 40 years ago rather than learn from their experience.
In defence of David, he is right, AKL Light rail is a) not a worldclass metro system (Tube, MRT, Subway) and d b) not a world class rail network (Shinkansen, Europe) train network.
An article on the news tonight compared it to the DART in Dublin. Having lived there and used the DART Regularly. It is apples and oranges. , the AKL one will be nothing like the DART.
- One serves a densly built up city and a purpose built business park housing the European head offices of many of the worlds biggest tech firms.
- The other will connect a functionally dead CBD with an Airport.
Our car policies are indeed crazy...to a point. But one should note, that all of these countries with top notch public transport, all have equally top notch roading systems.
We have shit roads, and worse public transport. First world dreams reliant on third world exports.
The trench/underground version is a dog, you will not find many transport experts who would suggest it is a good idea. Surface option is sound, it will be an important part of an overall system.
You are right though, public transport is not as good as it should be in Auckland. This is mainly because Auckland decided to actively undermine it and promote car use instead. This was a stupid idea and we now live with the consequences of those actions. We're also in denial about the changes that are required to fix those decisions and the cost of implementing them.
Auckland's councils' refused to invest in proper solutions in order to appease "ratepayers" who couldn't bring themselves to face the consequences of their decisions. I think it's a bit rich to complain about public transport being rubbish and then also complain about improvements to public transport, and having to pay for improvements to public transport.
I don't know what you mean by functionally dead CBD.
As others have said the airport is not the main reason to do it. In fact you could cut it short of the airport and get most of the benefits. The airport bit is to appease the rich business travelers who also happen to sit on some of the most influential boards.
Yeah he does. As stated before he’s a very curious mix of climate change denier / public transport skeptic / Trump hater / Dem Party supporter / Aussie basher / NZ patriot
edit: climate change denier is probably unfair. Perhaps more like a denier of any notion that we can do anything meaningful about it. Which I have some time for as a notion.
Shut down 1 lane each way of State Highways 1, 16, 20, 20A and 20 B and build a loop railway system on top of the road. Car parks near by the train stops. Could be used by commuters as well as Airport users. It would cover a large amount of the Auckland population. If it was efficient enough you wouldn't miss the highway lanes as so many people would use it. Bet that wouldn't cost (Auckland rate payers) $30billion.
The Mayor will not even consider removing a few unused car parks on arterial roads to help improve bus travel times and reliability. There is no way in hell he would support that.
Waka Kotahi will not even consider removing one lane of traffic over the harbour bridge to let people cross by foot or bike even though it's been proven that it will have no impact on traffic flows. There is no way in hell they would take a motorway traffic lane.
Car is sacrosanct.
" Auckland's boondoggle light-rail-to-the-airport project. It currently has a projected cost of between $15 bln and $30 bln for the preferred underground options, although a $9 bln "modest" above-ground remains on the table."
$9 billion that is slower than a bicycle, outstanding ... geniuses.
I noted after the Ed Sheeran concert what a mess the public transport in Auckland is.
Because it would only add one or two new stations, and contrary to popular belief, airports are not particularly busy stations. The main goals of light rail are to provide good public transport to the central isthmus, onehunga and Māngere, the airport is just a bonus.
No one ever said such a comment about the south western motorway.
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