What happened Thursday

Business / news

A review of things you need to know before you sign off on Thursday; still no main bank rate moves, realtors in deep valley, terms of trade improve, bond yields rise, swaps firm, NZD firm, & more

[updated]

2nd Mar 23, 3:59pm by David Chaston

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
Avanti Finance raised its floating rate, up +50 bps to 8.65%.

TERM DEPOSIT/SAVINGS RATE CHANGES
Westpac has announced some term deposit rate changes for terms less than 1 year. They are adding +10 bps to most terms, so that their new six month rate is now 4.80% and their nine month rate 5.20%. Essentially they are just matching ASB and BNZ.

FEW AUCKLAND HOUSES SELL IN FEBRUARY
Dominant Auckland realtor Barfoot & Thompson reported a very tough February result. Typically February's are the start of the prime annual selling period. However this year their February sales were their lowest in at least 25 years. At the same time their stock of listings for sale rose substantially.

A GROWING MOUNTAIN OF UNSOLD PROPERTIES
Meanwhile on a national level, listing portal realestate.co.nz said they are awash with unsold properties at what should be its busiest time of the year.

NO RUSH TO THE COUNTRY
Farm sales aren't faring much better. REINZ said their were down by a third in the period to January 2023. And lifestyle block sales were down -15% on the same basis.

AN UNEXPECTED IMPROVEMENT
New Zealand’s goods terms of trade improved +1.8% in the December quarter from the prior quarter. Year-on-year they are down -3.8% however. Both import and export prices fell, as softer energy prices pushed import prices down -2.1% q/q, outpacing the 0.6% q/q fall in export prices. Export volumes were particularly weak, falling -6.3% for the quarter as dairy, forestry and meat exports were all impacted by weaker market demand.

HOW NZ SURVIVES IN THE MODERN WORLD
The same data shows that a quarter of our exports are dairy products, meat is 8% and logs are 5.5%. In contrast, the main imports are cars and fuel (18%), electronics (3)% and machinery (16%). So it is true that essentially we export rural products (40%) so urban consumers can have their cars and electronics, and contractors their machinery (37%).

ONE BIDDER DIDN'T GET THE 'HIGHER YIELDS' MEMO
Treasury's Debt Management Office tendered $400 mln of government bonds today in three maturities, and it was very well supported, attracting more than $1.2 bln in bids. The May 2028 $200 mln went for a yield of 4.61%, up from 4.32% two weeks ago and up from 3.94% at the start of the year. The $150 mln April 2023 went for 4.60%, up from 4.34% two weeks ago. And the May 2051 $50 mln was won by a single bidder at 4.69% who succeeded because they offered a lower yeild than the 4.79% tow weeks ago.

PAYING 6.59% FOR SIX YEAR MONEY
Summerset Group's $175 mln six-year bond offer will have an interest rate of 6.59%. These bonds will not have a credit rating. The listed company itself (SUM, #14) has no credit rating. This issue will be essentially replacing a six-year bond issue that matures in July and had a coupon of 4.78%.

DASHBOARD UPDATED
The RBNZ updated its Dashboard data today, bringing this comparative tool up to December 2022. We have also updated our Key Bank Metrics tool which uses the same data. For readers who need to compare individual bank performance and structure, this tool allows close comparison (and in a very much easier way than the traditional Disclosure Statements).

IT'S TOUGH IN AUSTRALIA TOO
Aussie building consents collapsed in January. They slumped -28% month-on-month to 12,065 units, reversing from an +18% rise in December and coming in worse than market expectations for an -8% drop. That is a decade low. Year-on-year they are down -8.4%. This was also among the steepest declines on record as higher interest rates dampened economic activity. A +40% drop in multi-unit dwellings was the main drag.

SWAP RATES HOLD HIGH
Wholesale swap rates are likely little-changed today. The real action in swap rates comes near the close. Our chart will record the final positions. The 90 day bank bill rate is unchanged at 5.15% which is now +40 bps above the current OCR. The Australian 10 year bond yield is now at 3.82% and little-changed from this time yesterday. The China 10 year bond rate is unchanged at 2.93%. And the NZ Government 10 year bond rate is now at 4.64% and up +1 bp and still above the earlier RBNZ fix at 4.59% which was down -3 bps today. The UST 10 year is up +7 bps at 4.01% in a further strong rise to be its highest since November.

EQUITIES MOSTLY LOWER AGAIN
Wall Street ended its Wednesday session with the S&P500 down -0.5%. The NZX50 is down -0.3% in late trade. The ASX200 is unchanged in afternoon trade. Hong Kong has opened down -0.7% after yesterday's truly spectacular late jump. Shanghai is little-changed today. And Tokyo is off -0.2% to start its Thursday trade.

GOLD FIRMS AGAIN
In early Asian trade, gold is slightly firmer from this time yesterday, now at US$1834/oz and up another +US$11.

NZD FIRMER
The Kiwi dollar is up +¾c from this time yesterday at 62.4 USc. Against the Aussie we are almost +½c firmer at 92.5 AUc. Against the euro we are marginally firmer at 58.6 euro cents. That means the TWI-5 is now at just at 70.5 and up another +50 bps from yesterday.

BITCOIN FIRM
Bitcoin is up +2.1% today, now at US$23,533. Volatility over the past 24 hours has remained modest at +/- 1.6%.

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

Daily swap rates

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Source: NZFMA

This soil moisture chart is animated here.

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54 Comments

by AdamJay1990 | 2nd Mar 23, 4:03pm 1677726198

Kiwibank, ASB & Westpac still not passing on the OCR, one week on. Wonder how much extra profit that makes them? Vote with your feet.

by Norm | 2nd Mar 23, 4:23pm 1677727381

I have, goodbye Westpac!

by MisterB | 2nd Mar 23, 4:48pm 1677728917

Presumably it will only make them extra profit if their savings account balance was higher than their variable lending balance (because no one has put up their home loan variable rates either)

by EdwardD | 2nd Mar 23, 5:54pm 1677732875

I did this week

by IanME | 2nd Mar 23, 9:44pm 1677746673

Anyone have a suggestion when a good time to lock in a 1year TD would be?

by WellingtonInvestor | 3rd Mar 23, 12:10am 1677755439

Kiwibank were one of the last last time. The more they delay the bigger the profit and they seem to have made record profits last year. I moved a lot of my money out of them as as result. It isn't good. Rabo and Heartland seem to be the best in terms of making changes quickly after OCR rises

by HW2 | 2nd Mar 23, 4:08pm 1677726488

846

The number of two bedroom auckland properties for rent this afternoon

881 the number yesterday

1057 the number available just 16 days ago

Wtf is going on, that's a lot of uptakes after the floods

by Albert2020 | 2nd Mar 23, 4:13pm 1677726785

International students?

by bw | 2nd Mar 23, 4:19pm 1677727194

Stock taken of the Rental Market and placed into the increasing glut of For Sale stuff? Easier to sell an empty investment unit, that might be getting harder to finance.

by Chaosinflesh | 2nd Mar 23, 5:20pm 1677730851

[edit: was replying to rastus below]

Haha.. too true. I was looking at one yesterday a stone's throw from my wife's work - advertised (and priced) as 4-bed - and thought it looked suspiciously like a 3-bed. No photos of room #4, but reading the description, it was the storeroom in the garage!

by rastus1 | 2nd Mar 23, 4:32pm 1677727935

They have wacked up some shower curtains and advertised them as four bedders perhaps?

by HW2 | 2nd Mar 23, 5:04pm 1677729883

The 2 bedroom package should be the bread and butter of the tonne of new build apartments. We should be swimming in them

Instead we are all time lows for the last 4 years, the recent peak was June last year at 2067, now 60 percent less. There is not 60 percent less tenants, if anything there is more.

For comparison, with Feb last year 1650. The 2 bedroom market is down 50 percent. Total rentals was 5229 now 3195, down around 40 percent

by HW2 | 2nd Mar 23, 5:27pm 1677731268

Lets not forget there is around 50 to 60, 2 bedroom properties coming on each day. Around 180 total rentals.

I dont see this as a good news story

by Pa1nter | 2nd Mar 23, 5:55pm 1677732904

University has started.....

by HW2 | 2nd Mar 23, 6:32pm 1677735135

Does that mean the trend will change back from this month. Lets hope so.

by JamesM | 2nd Mar 23, 7:11pm 1677737487

Which website are you looking on? Given the ads are only valid for so long unless you pay again maybe a whole lot rolled off at the end of Feb?

by Jonny.Foe | 2nd Mar 23, 4:41pm 1677728505

export rural products (40%) so urban consumers can have their cars and electronics, and contractors their machinery (37%)

We export Govt bonds (and interest on those bonds) so that we can maintain a trade deficit. Overseas investors now hold $67 billion of Govt bonds. The more we do this, the more we become dependent on matching Fed monetary policy. Crazy.

by Advisor | 2nd Mar 23, 4:58pm 1677729519

The worst part is that nobody seems to care. We feed the world with our agrarian commodity exports but buy a higher value goods and services back from them.

Then you factor in the tens of thousands of migrants being brought into NZ each year to service the bloating domestic market, adding directly to aggregate import demand and virtually nothing to exports; hospitality and retail being among the top 3-4 large sectors employing migrants in bulk.

by Let me be Frank | 2nd Mar 23, 5:17pm 1677730668

"We feed the world with our agrarian commodity exports..."

If only we did...we 'feed' approx 0.005% of the world, less than a rounding error and not exactly a significant quantity if push came to shove.

by Zachary Smith | 2nd Mar 23, 7:07pm 1677737269

We only feed 400,000 people?

by JimboJones | 2nd Mar 23, 7:54pm 1677740044

Could be right if you exclude our own consumption. Milk and lamb only make up a small percentage of anyone’s total diet. Maybe we supply 1% of the food to 40 million people.

by keithwoodford | 2nd Mar 23, 8:05pm 1677740706

But the 'reality', as opposed to the 'maybe', is that both you and letmebefrank are 100% wrong.

KeithW

by Let me be Frank | 2nd Mar 23, 8:51pm 1677743513

It is indeed quite possible i am wrong, however the industry spiel is that we produce food for 40 million and the inference is we are vital to world food supplies....am happy for you to provide amore accurate assessment

by Pa1nter | 2nd Mar 23, 9:13pm 1677744794

I'm not sure what the point is in this debate.

Fact is there are plenty of places that dont make enough food for themselves.

The poorest ones buy cheap grains and cereals.

The better off ones gravitate to the more expensive food products that we produce.

by Let me be Frank | 2nd Mar 23, 9:20pm 1677745224

A pretty important point I would suggest....our entire economy rests on the fact somebody wants/needs that 0.005% of 'food'.

Feeling significant?

by Pa1nter | 2nd Mar 23, 9:29pm 1677745762

What does feeling significant have to do with anything?

We obviously aren't feeding the entire world.

Several of our primary industries are larger players in their niche markets.

I guess if everyone can only afford rice and wheat then maybe we have a problem.

by Let me be Frank | 2nd Mar 23, 9:42pm 1677746529

Or can expend resources on sourcing basic foodstuffs from the most distant supplier.

by Pa1nter | 2nd Mar 23, 9:50pm 1677747025

In that end of globalisation scenario at least we'd have burgers.

Probably better than being a manufacturer and exporter of consumer trinkets.

by Gummy Bear Hero | 3rd Mar 23, 12:15am 1677755749

0.5 % of " the world's " food ... that's one human fed by us out of every 200 ...

... as a nation , our population is a mere 0.063 % of the total human race ...

by keithwoodford | 2nd Mar 23, 9:19pm 1677745165

The 40 million is a rough estimate that the energy within NZ food exports is enough energy to provide the energy needed to feed 40 million.

But there are probably more than 1 billion people who consume some NZ dairy product each year in something that they eat. And that is just dairy.

And of course, NZ food exports are actually predominantly protein rather than energy, with protein always valued higher than energy.

KeithW

by Let me be Frank | 2nd Mar 23, 9:24pm 1677745484

So in effect a rounding error....or if we are being kind, a nice to have.

by IT GUY | 2nd Mar 23, 9:53pm 1677747183

Globally NZ will always be a rounding error, but being on the right side of that error is a cool place for us to be.

by Let me be Frank | 2nd Mar 23, 11:57pm 1677754659

Except we are not on the 'right side' of that error....even at pretty much max possible output we run a persistent trade deficit.

We may not have any concerns about stocking the barbie anytime soon, but aside from that we look very vulnerable....we not only dont 'feed the world', we would be largely unnoticed to its needs (as opposed to wants) if we disappeared tomorrow....not an encouraging position from which to obtain that which we require that is not available in house.

by Pa1nter | 3rd Mar 23, 6:57am 1677779824

Most countries on Earth aren't capable of producing everything they consume. And the country that's most capable of that (United States) runs a perpetual trade deficit.

So yeah, I guess everyone's kind of vulnerable, and if any country disappeared, after a generation or two no one would miss them.

by rastus1 | 3rd Mar 23, 8:50am 1677786643

..not to overlook that we are in fact converting imported overseas energy into food and sending it back.

This is not an entirely home grown effort by any means.

by Let me be Frank | 2nd Mar 23, 8:27pm 1677742063

I believe 0.005% of 8 billion is 40 million...a figure often claimed that NZ primary industries feed (and I also assume that includes the 5 million domestic mouths)

by Zachary Smith | 2nd Mar 23, 9:05pm 1677744301

8 billion times 0.005 is 40 million but that's not a percentage. The percentage of humanity we feed is 0.5% which is still quite small.

by Let me be Frank | 2nd Mar 23, 9:30pm 1677745803

You are of course correct....poor terminology on my part.

by keithwoodford | 3rd Mar 23, 9:00am 1677787219

The NZ population comprises about 0.06% of the world population.

The NZ food production comprises about 0.5% of world food production with the caveat that it depends on how that is measured.

So NZ produces about 8 times as much food as it consumes.

A good guiding principle is to think globally but act locally. If all countries were to do that then the world would be a better place.

KeithW

by Let me be Frank | 3rd Mar 23, 5:51pm 1677819099

yes we produce 8 times the food we require, no denying that..and that is not the point. The critical factor is we produce little else and that 8 times food production is dependent upon the ability to source all those things we do not/cannot supply....and that is not a first world position.

It is eeiily similar to the likes of Zimbabwe or Sri Lanka....and it was not our position 40 years ago.

Progress??

by Pa1nter | 2nd Mar 23, 5:56pm 1677732975

Someone should start a business and do something about it.

Or wait for someone else to, I guess.

by Advisor | 2nd Mar 23, 8:41pm 1677742900

Let's start by retaining the ones we have. The higher-ups in my company (service exporter to SE Asia and Australia) are thinking about gradually moving operations to Australia, since we can neither attract the skills nor offer the cost advantage that we once used to.

by Pa1nter | 2nd Mar 23, 9:22pm 1677745357

We used to make cars in NZ. Then that retreated to Australia. Now Australia doesn't make cars either.

If your company can't pay people enough here to justify its business case then I'm not sure what you're expecting to be done about that.

I've been in that position for about 5 years, I just don't do as much business. People aren't interested in doing the sort of work I need doing and there's no robots to do it.

by keithwoodford | 2nd Mar 23, 5:16pm 1677730566

The notion that only 40% of exports are rural products is seriously wrong. MPI reports every 3 months in SOPI that a little over 80% of merchandise exports are from primary industries (farming, forestry, and fish).

KeithW

by Chaosinflesh | 2nd Mar 23, 6:14pm 1677734045

Does merchandise include services - such as SaaS, etc.? Or is it limited to physical items? [Serious question].

by keithwoodford | 2nd Mar 23, 8:11pm 1677741079

Services lie outside merchandise exports.

Services are messy and there are lots of measurement issues.

Overall, NZ's services exports are less than services imports.

NZ's main services items that earn overseas funds are tourism and students from overseas.

However these services earnings are all eaten up by services imports.

Hence merchandise (physical) imports must be paid for by merchandise exports plus the sale of NZ capital assets.

KeithW

by IT GUY | 2nd Mar 23, 8:01pm 1677740517

indeed how do we value Rocket Labs contribution

by keithwoodford | 2nd Mar 23, 9:12pm 1677744732

Yes, we can make the contribution seem large or small. I suspect the net effect of Rocket Lab is modest.

KeithW

by IT GUY | 2nd Mar 23, 9:56pm 1677747390

This is true, but for our brightest young engineers offering share options just might keep them here, opening up further avenues for Future research and dev...... I fear there is little reason to stay for many trained NZer.........

by Pa1nter | 2nd Mar 23, 10:04pm 1677747863

The problem with the share option is it's usually in such minute offerings as to be worthless or diluted by the primary shareholders. The nature of NZs market means few companies will get the sorts of parabolic share price increases we see overseas so as to be attractive to minor shareholders.

We are fairly stuck. Almost everyone else is also trying to develop new markets away from their core competencies and natural advantages. The scale of wealth being put into this endeavour globally ridiculously dwarves anything NZ could muster, and most of that probably won't find a worthwhile home.

I can't see much of scale viable outside of increased science and technology applications of NZs core advantages.

by keithwoodford | 3rd Mar 23, 9:11am 1677787871

One of the key issues is that NZ's R&D system is essentially broken. However, the system is very good at PR and convincing the Government that everything is marvelous. It is all about self-preservation, with this being the prime attribute and skill set of the system.

KeithW

by Squishy | 2nd Mar 23, 5:59pm 1677733141

The same data shows that a quarter of our exports are dairy products, meat is 8% and logs are 5.5%. In contrast, the main imports are cars and fuel (18%), electronics (3)% and machinery (16%). So it is true that essentially we export rural products (40%) so urban consumers can have their cars and electronics, and contractors their machinery (37%).

New Zealand has excess labour capacity, that's why we have such low wages and poor productivity. We create employment through inefficiency.

by Pa1nter | 2nd Mar 23, 6:50pm 1677736259

Our efficiency issues are often compliance related. Our institutions demand compliance.

by IT GUY | 2nd Mar 23, 6:52pm 1677736377

https://www.zerohedge.com/markets/nomura-first-bank-call-50bps-rate-hik…