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
None to report today.
TERM DEPOSIT/SAVINGS RATE CHANGES
None here either
'WHERE IS THIS NEW ZEALAND?'
The FMA has issued a formal warning to Vanguard (actually, Vanguard Investments Australia), for failing to lodge a required notice on the New Zealand Companies Office Disclose Register. A notice should have been lodged of an exercise of power taken against it, by the Australian Securities and Investment Commission. Vanguard is an American registered investment manager with more than US$8 tln in global assets under management (about Japan+Germany GDP).
'GETTING BY, NOT GETTING AHEAD'
The Westpac-McDermott-Miller employment confidence index rose slightly in March as perceptions of the labour market stayed firmly positive (and better than the 2009-2016 period) - even if it isn't as overheated as it was in the 2017-2019 period. But confidence about earnings remains subdued, as wage growth continues to be eaten up by the rising cost of living.
BETTER, BUT NOT GREAT
Labour productivity rose 2.2% in the year ended March 2022, according to figures released today by Stats NZ. This was was largest growth in the measure since 2010 and came during the heart of the pandemic. Labour productivity measures the quantity of goods and services (output) produced per hour of labour. This is a part of multifactor productivity, which rose 1.2% in the same period. "Multifactor productivity captures the effects of unobserved inputs such as technological progress, efficiency gains, and economies of scale." The fact that multifactor productivity rose less than labour productivity isn't a great sign and probably relates to a reluctance to invest during that year. We should also note that StatsNZ only measures productivity in the "measured sectors" or about of the economy. Predominantly non-market service industries like education and healthcare are not included in the measured sectors. That almost certainly means overall national productivity isn't as positive as the headline suggests.
ITS TOUGHER TO MAKE A BUCK IN INSURANCE
Updated data from the RBNZ on the insurance industry shows a sector that is struggling somewhat. General insurance premiums rose +9.6% in 2021 from 2020, and by another +9.5% in 2022. But life insurance premiums hardly moved. The net result is that industry profits have fallen from $969 mln in 2020 to $902 mln in 2021, and slumped to $636 mln in 2022. Risks and costs are rising faster than premium income. And it is unlikely to get any better in 2023.
LOWER THAN EXPECTED
In Australia, their inflation rate is moderating, although it remains very high. Their CPI rose 6.8% in the year to February, easing from a 7.4% gain in the year to January. This was less than the 7.1% expected and was the second straight month of lower annual inflation and the softest pace since last June. The easing is largely due to slower rises in prices of housing, food, and transport. Financial markets were pricing virtually no change to the RBA cash rate at next week's review, and may be vindicated by this CPI update. But ANZ says it thinks the RBA will hike by +25 bps again next week because inflation is "still too high". New Zealand won't get its March CPI update until April 20.
SWAP RATES RISE AGAIN
Wholesale swap rates have probably risen again today. 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 up another +2 bps at 5.19% and +44 bps above the current OCR. However markets are pricing in less than a +25 bps rise at the next RBNZ review on Wednesday, April 5, 2023 and one week from today. The Australian 10 year bond yield is now at 3.32% and up +4 bps from yesterday. The China 10 year bond rate is unchanged at 2.88%. And the NZ Government 10 year bond rate is now at 4.14%, up another +2 bps and back to being above the earlier RBNZ fix at 4.11% and up +1 bps from yesterday. The UST 10 year yield is now at 3.58% and up another +6 bps from this time yesterday.
EQUITIES ALL OVER THE PLACE
The NZX50 has had a tough day, currently down -0.9% near the end of trade although it has been falling increasingly through the session. Not so in Australia where the ASX200 is now up +0.1% in afternoon trade after a down start. Tokyo has opened its Wednesday trade up +0.5%. Hong Kong is doing its usual volatile thing, up +2.7% in very early trade. Shanghai has opened unchanged. Earlier, Wall Street closed its Tuesday session with the S&P500 down just -0.2% with a late rally.
GOLD FIRMISH
In early Asian trade, gold is up +US$4 from this time yesterday, now at US$1968/oz, although that is down from the New York close earlier in the day at US$1974/oz.
NZD FIRMER
The Kiwi dollar has risen again today, now at 62.6 USc. Against the Aussie we are firm too at 93.4 AUc. And against the euro we are firm at 57.7 euro cents. That means the TWI-5 is now at 70.5 and up +40 bps.
BITCOIN FIRMS
The bitcoin price has risen from this time yesterday, now at US$27,410 and up +1.8% in a day. Volatility has been modest today at +/-1.6%.
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52 Comments
CPI at 6.8% and a cash rate at 3.6% = Madness. But, hey. Let's start dropping nominal interest rates anyway, because we are sure Inflation will do as it's told and continue falling.....
The whole purpose of having an Inflation target of 1%-3% was to keep it within those boundaries. And where is it today? Triple that and more. Bzzzt! Fail!
So why on earth do we think that 'pausing' cash rate rises is going to do anything but aggravate the problem? We know why, of course - massive debt load. But pandering to its demands isn't going to make it magically go away. In fact, it will encourage it to get larger.
And if we all lose trust in the value of our money/wages/income, as we will if we watch its value inflated away, then if we think a CPI of what any of us see today is high, then watch where it will be as anyone and everyone spends whatever saving they have, and those that can borrow every cent they can do to buy everything and anything before the price rises.
"So why on earth do we think that 'pausing' cash rate rises is going to do anything but aggravate the problem?"
Because there is a long lag between rising rates, and their effect on inflation bw. The lowering of inflation we're experiencing now, is the result of interest rates starting to rise 12 months ago. The full effect is still to be felt. That's why bw.
I generally agree, at least on lag. However - the majority of Australian mortgages are floating, their OCR has been quite aggressively hiked yet inflation is still high. So this fact challenges the lag theory.
I tend to side with JFoe who fundamentally questions the utility of OCR hiking to reduce inflation. And that further, OCR hiking can have not insignificant inflationary influences.
No I am not saying that. 0.25 was ultra-stimulatory, inflation would certainly have been significantly higher if the OCR wasn’t raised.
But I think your thinking on it is far too binary.
I think at some point - above 3% perhaps - raising the OCR offers diminishing returns in fighting inflation, and even starts contributing to it.
The lowering of inflation we are seeing now is mainly the result of reductions in imported input costs and some moderation of margins. Little known fact, but imported goods and services - on average - hit 26% year on year increase in 2022Q3, only subsiding in the last 6 months. Here's the data from Stats NZ (table OTP031AA for the geeks):
Now, what does a 26% increase in the price of fuel, fertiliser, plastic, building materials etc do to our domestic prices?
Our problem in little ol' NZ is that we think we are price makers. We are NOT. Our control over pricing is tiny - way less than Stats NZ worked out when they came up with the tradable vs nontradable methodology in 2003 (and, no, they haven't updated it since!)
This is one (of the many) reasons I think monetary policy and fiddling with the OCR is dumb on our little island. We are playing with a lever that can make a big difference to levels of domestic demand and unemployment, because of our stupidly high private debt. However, price changes in NZ are not, in the main, demand-driven. We are getting the pain from beating ourselves with the monetary policy stick, but not any of the supposed benefits.
We need to drop our Napoleon Complex.
Australian inflation can be said to be moderating? 22 days to our next CPI figures and let’s just hope that the good ship HMNZ New Zealand has come round on tack, and is before the same fair wind. If not, then that will be rather telling for our economic prospects indeed.
Deserves a mention (from Linkedin of Robett Hollis)
Just a Instagram post of Ex-Government Minister Stuart Nash proudly repping a Manaaki Hoody and having some public banter with industry bestie and Manaaki Director Andy Hamilton.
So if you’ve been wondering how far up the chain this gong show goes that’s forced us to get to this point legally and publicly that’s STILL not being addressed from those in power -- maybe this image will START to paint a clear picture of who’s really ‘friends’ with who. And trust me when I say this - This is an insanely well connected tentacled web of influence and power that goes back yeaaarrrrssss for those in a certain ‘club’. Hint hint. Nudge nudge.
So you know what - today I might have to put in a few more OIAs and go deeper down this sh*t hole (I mean rabbit hole) to discover how a few of these ‘key players’ across government have actually enabled certain ‘friends’ (private individuals) to pull off securing over 10 million dollars of taxpayers money so easily, in record time, with no oversight, accountability or responsibility from anyone. And don’t get me started on their Dumb Diligence - sorry I meant ‘Gold Standard’ Due Diligence.
https://www.linkedin.com/posts/robett_absolutely-nothing-to-see-here-ju…
The $3 span for milk prices should give us all pause. During covid the Ag industry pulled us through, but with the Maize farmers in Waikato raising alarm and much more, I for one am holding my breath. There is always a lag. We are oversupplied on the local market for logs, but with the fallout of Gabrielle, we've yet to see the pattern on what is happening in the ports. I am keeping an eye on supply lines and imports.
General insurance premiums rose +9.6% in 2021 from 2020, and by another +9.5% in 2022
Don't know if you have heard about this amazing thing called monetary policy - domestic prices within teh CPI index (like insurance) will soon be under the control of the mighty RBNZ and safely back in the prescribed 1% to 3% range. We just need interest rates to go up high enough.
Risks and costs are rising faster than premium income. And it is unlikely to get any better in 2023.
By way of explanation insurance companies use fixes price instruments, like bonds, to manage reserves. The price of bonds has collapsed as inflation has risen, insurance companies are gradually having to realise losses as their bond portfolios decline in value. In insurance when things are good they are really good but when they go bad it's terrible.
What you might note is that CPI can also be driven up by rates in some areas.
Russian regiment loses ‘large proportion’ of tanks in ‘ill-disciplined attack’ | Stuff.co.nz
https://i.stuff.co.nz/world/europe/300842292/russian-regiment-loses-lar…
Russian to get the war over
Ironically Russians that I know don’t dislike him. I do wonder how much of what we hear is propaganda especially after the last few years under labour where the media have completely lost any objectivity. I reckon there will be evil committed by both sides and if you really want to open a can of worms Kiev was once (admittedly over a thousand years ago) the capital of Russia (Oleg). Maybe it’s a bit more complicated than Russia bad, Ukraine good.
Up until 2022 most Russians either loved Putin, or were apathetic towards him, because he's spent nearly a quarter century building a cult of personality around him, and eliminating any credible threat. And that's off the back of nearly a century of political oppression under the Soviets. You don't remember people being killed trying to flee the iron curtain?
I know a few Russian migrants that turned up to NZ loving him, spent a few years here, went home for visits, and then once they came back to NZ conceded what a load of bollocks he is.
Bias and propaganda is everywhere, but sometimes bad juju is undeniable.
True, and I always wonder if they stay positive about him for fear of retribution to families there. Either way, it’s hard to know. For example recent Russian visitors to this country were draft age….but no hint of being drafted. At the time media were saying young Russian men forced to fight and many were fleeing Russia to avoid it. See the issue?
So for about 100 years, Russia has pillaged it's territories of people and resources, whilst keeping it's main cities like Moscow relatively prosperous and safe - keep your core citizens happy and you get to stay in the big chair. By their own accounts they have only drafted 300,000 troops or so, and these have been from distant ethnic populations, criminals, rural areas - highly likely the sort of demographics that dont have the ability to travel to NZ.
So there's millions of Russians currently that think things are still just dandy, or at worse, slightly concerning. That may change.
Under socialism there have been more people killed than under Putin
The more they kill the smaller becomes the denominator which makes the successive govts statistics potentially worse.
Imagine a govt that ranks its performance by how many of their population they did or didn't kill
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