A review of things you need to know before you sign off on Tuesday; more small retail rate changes, inflation turbocharges the tax take, slide in auction activity, eyes on dairy prices, swaps firm, NZD soft, & more

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
ICBC raised their six month fixed rates and cut longer terms.

TERM DEPOSIT/SAVINGS RATE CHANGES
In case you missed it late yesterday, Westpac has pushed the boat out a bit further for the main banks for TD's 12 months and longer, now with the highest offers for these key rivals. Their new one year rate is 5.50%. First Credit Union also raised rates.

INFLATION + BRACKET CREEP TURBOCHARGES TAX COLLECTIONS
Bracket creep (fiscal drag) is working a treat for the Government as more and more middle-income people are dragged into higher tax brackets. The Crown Accounts for the year to January shows that PAYE taxes on individuals are up +15% in January from the same month a year ago, a tax-take far larger that pay increases. It gets worse for taxpayers because inflation is pushing up prices, and GST along with it. The increase in January GST is +29% higher than year ago levels. Inflation has turbocharged the overall tax take which in January was +17 higher to $10.2 bln for the month, the highest January ever.

TAXES & SPENDING SWELL
For the seven months to January, those same Crown Accounts show that Total Expenditure was up +4.3% from the same seven month period in 2022. But that hides the fact that Operating Expenses were up +14.6%, payroll was up +7.5%, and interest on its debt was up +138% to $3.8 bln. Keeping a lid on the overall costs was a sharp fall in Transfer Payments (including jobless benefits) which were down -20% on a comparable basis. If unemployment rises, then the Crown deficit will blow out. We haven't 'repaired the roof while the sun has been shining' so it is all sharply downhill if we get a recession. The early 2023 floods will require substantial funding and we will start with the Debt to GDP ratio at 35.8% which is where the 2022/23 Budget and HYFEU forecasted it. For the seven months to January, Government Spending was on track to exceed $162 bln in the year to June 2023. The weather emergency won't cause that level to be held. The pressure will be on to raise taxes, not lower them. The political instinct is to impose them of your opponents constituency. That makes for a very partisan battle ahead.

DRAMATIC SLIDE LOWER
There was been a dramatic slide in the number of homes being auctioned in February but the sales rate has barely changed over the last year. February auction activity is down by more than half compared to a year ago.

MORE 'GREEN' BONDS, PLUS SOME EXTRA
Meridian Energy is in the debt markets for $200 mln of 5½ year unsecured, unsubordinated, fixed rate green bonds. They will replace their existing $150 mln (MEL030) bonds, which are due to mature on March 14, 2023.

WHAT WILL TOMORROW'S DAIRY AUCTION BRING?
A week ago, the GDT Pulse even sold 1000 tonnes of wholemilk powder at an average of US$3,210. This was -1.7% lower than the last full dairy auction two weeks ago (US$3,264/tonne) which itself was -2.0% lower than the prior event. Tomorrow we get another full auction event and more soft outcomes are likely. However, a wildcard is Chinese demand. If the Chinese service and hospitality sector really is expanding faster, mayme we will see a turnaround. Fonterra will know based on the fact that most of their orders come from private direct deals and not via auction transactions. Recall, Fonterra recently trimmed its expected farmgate payout forecast for the current season. Another factor will be buyer reactions to lower New Zealand milk flows after the recent bad weather events in the NI East Coast.

WATCHING LOWE
We will update this item when we know the results of the RBA's cash rate target review. This is currently 3.35% and is widely expected to rise to 3.60% at 4pm today. But as ever, most of the market reaction will flow from parsing the central bank's commentary. If their rate does rise to 3.60% as expected, that will be an eleven year high and will dominate Australian economic commentary for weeks. Presently, Australian consumer sentiment remains 'very low' ahead of this decision. Update: Yes, they raised their rate to the expected 3.60%. They were also very direct in saying that "further tightening of monetary policy will be needed" and they will keep at it until inflation is back in its "2-3%" policy box. Immediately after the AUD fell, with the NZD jumping +40 bps. It had no immediate impact on the NZD:USD rate but it is buffeting the NZD:EUR and NZD:JPN rates a small amount.

SWAP RATES FIRM
Wholesale swap rates are likely firmer today across the curve. However, 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 5.18% which is still +43 bps above the current OCR. The Australian 10 year bond yield is now at 3.79% and down -1 bp today. The China 10 year bond rate is softer by -1 bp at 2.91%. And the NZ Government 10 year bond rate is now at 4.68% and also down -1 bp from yesterday and now slightly below the earlier RBNZ fix at 4.69% which was up +3 bps today. The UST 10 year is at 3.97%, basically where it was this time yesterday.

EQUITIES MOSTLY HIGHER, EXCEPT CHINA
Although it started its Monday session with good gains, those petered out in afternoon trade and the S&P500 ended essentially unchanged. Tokyo has opened with a good +1.4% rise to start its Tuesday session. But early in the Hong Kong session the Hang Send index is up a very strong +1.8% (note why in the comment section below if you know - and if it lasts). Shanghai has opened up +0.6%. The ASX200 has erased morning losses and is unchanged in afternoon trade. The NZX50 is down -0.3% in late trade as a drag builds here.

GOLD MARGINALLY SOFTER AGAIN
In early Asian trade, gold is slightly softer from this time yesterday, now at US$1848/oz and down -US$5.

NZD SLIPS SLIGHTLY
The Kiwi dollar is a little softer from this time yesterday, now at 62 USc even. Against the Aussie we are also a little softer at just over 92 AUc. Against the euro we are down -½c at 58 euro cents. That means the TWI-5 is down -20 bps at 70.1.

BITCOIN STILL BECALMED
Bitcoin has moved very little today, now at US$22,482. Volatility over the past 24 hours has been low at just under +/-0.7%.

This soil moisture chart is animated here.

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