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
The Police Credit Union raised its fixed rates today. Heartland Bank raised its floating rate to 6.99%, up +24 bps. However it is still well below all of its rivals.
TERM DEPOSIT/SAVINGS RATE CHANGES
NZCU Auckland trimmed their 12 and 18 month term deposit rates.
CHEAPER, LESS DEBT
In the new skinny real estate market, first home buyers are paying less for their homes and taking out smaller mortgages - despite higher interest rates (or maybe because of them).
IN THE TOILET
The latest ANZ-Roy Morgan consumer sentiment survey remains very poor, far worse than in 2008-09 (when people were actually losing their jobs). The proportion of people who believe it is a good time to buy a major household item, a key retail indicator, remains very low. Inflation expectations rose from 5.2% to 5.4%. That’s the highest read in nine months. That won’t please the RBNZ, noted ANZ, though they put more weight on business expectations.
FONTERRA IN OTHER COLOURS
Fonterra's Global Dairy Update reinforces the fact that the Global Dairy Trade auctions are essentially only supported by Fonterra - even though the auction platform has been sold partially sold off. At the last event Fonterra said it sold 25,100 tonnes of product. GDT said at the same event they sold 26,795 tonnes. So almost 94% of all product sold was from Fonterra. Having new owners hasn't yet broadened the auction supply.
FONTERRA COMPLETES SOPROLE SALE
The sale of its Chilean business to Gloria Foods has now been completed.
CUTTING-EDGE TECH
Check out our new in-depth interview on the mitigation technologies that could 'make a big hole' in NZ livestock methane emissions. Gareth Vaughan talks to the Pastoral Greenhouse Gas Consortium's Mark Aspin on the journey to reduce methane emissions from farm animals.
FASTER TRACK
The National Party plans to introduce national standards for wind and solar power that will fast-track the consenting process.
HOUSEHOLDS SIGNAL BORROWING STRESS
Growth in mortgage books rose only +3.7% in February from a year ago. You have to go back to 2012 to find a slower expansion. Bank mortgage books grew even slower at +3.6% while non-bank lending rose +10% on the same basis. That tells you something. Also telling is that the long-run fall in personal borrowing has ended at it is expanding again. And its not banks doing that, its non-banks.
MAKING MONEY WORK HARDER
Household deposits grew +5.2% in February from a year ago to almost $228 bln, a rate little-changed in 2023. But that was the slowest rate expansion since October 2021. Transaction account balances slumped -16% to $44 bln, savings account balances fell -5.5% on the same basis. But term deposit balances rose +29% from year-ago levels to a record $108 bln. Households are seeking out all the income they can as they get hit be inflation. But there is still more they could do. TD balances are 47.4% of all household bank account balances. They were 57% in early 2019. Perhaps that suggests there could be as much as another $22 bln that could shift into TD accounts before that earlier benchmark is reached.
BUSINESSES BORROWING MORE
Bank lending to businesses is up +5.7% year-on-year continuing a 20 month expansion run. Lending to the rural sector has turned up in February, growing +1.2% and although that is pretty minor, it is the largest growth in borrowing that that sector has recorded since before the start of the pandemic.
CHINA'S PMIs TURN QUITE POSITIVE
In China, their factory expansion extended to a third straight month, even if it didn't quite rise to the expected level. But according to the official data, their service sector is positively booming. But before accepting those conclusions it is probably best to await the private survey results which are due out on Monday.
JAPAN IMPRESSES
Japan's stats are a different story, accepted as unvarnished. They reported a surprise rise in industrial production in February, far stronger than anticipated. And they reported far better retail sales for February than expected as well. If they keep this up, the world's third largest economy may become a driver of international trends.
LOOKING AHEAD
On Tuesday April 4, the RBA will review its cash rate target. It is widely expected to raise it +25 bps at 3.85% and its highest since 2012. Then on Wednesday April 5, the RBNZ will review its OCR. It is widely expected to raise it by +25 bps to 5.00% and its highest level since 2008. The RBA is unlikely to do anything else, but the RBNZ will also be considering a 0% rise and a +50 bps rise given inflation's lingering habit.
SWAP RATES HOLD
Wholesale swap rates have probably been unchanged 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 +1 bp at 5.23% and +47 bps above the current OCR. However markets are now pricing in a +25 bps rise at the next RBNZ review on Wednesday. The Australian 10 year bond yield is now at 3.33% and down -2 bps from yesterday. The China 10 year bond rate is little-changed at 2.88%. And the NZ Government 10 year bond rate is now at 4.25%, up another +2 bps and back to being above the earlier RBNZ fix at 4.20% and up +3 bps from yesterday. The UST 10 year yield is now at 3.56% and down -2 bps from this time yesterday.
EQUITIES ENDING THE QUARTER STRONGLY
The NZX50 is down -0.4% near the end of trade today but if that holds it will be up +2.6% for the week, its best weekly gain for 2023. In Australia where the ASX200 is now up +0.7% in afternoon trade and heading for a strong +3.1% weekly rise. Tokyo has opened its Friday trade up +1.0% and heading for a +2.1% weekly rise. Hong Kong is up +1.6% in very early trade on track to post a strong +3.9% weekly gain. Shanghai has opened up +0.4% and the weakest of the markets we follow. Their weekly gain may only be +0.4% as well. Earlier, Wall Street closed its Thursday session with the S&P500 up +0.6%. So far this week it is up +2.0%
GOLD UP
In early Asian trade, gold is up +US$22 from this time yesterday, now at US$1981/oz and very similar to the New York close. London closed earlier at US$1966/oz..
NZD FIRM AGAINST ALLCOMERS
The Kiwi dollar has risen +¾c today, now at 62.8 USc. Against the Aussie we are up +¼c at 93.4 AUc. And against the euro we are firm at 57.5 euro cents. That means the TWI-5 is now at 70.6 and up +50 bps.
BITCOIN HOLDS
The bitcoin price has slipped very marginally from this time yesterday, now at US$28,294 down a mere -0.1% in a day. Volatility has been moderate however at +/-2.6%.
This soil moisture chart is animated here.
Keep abreast of upcoming events by following our Economic Calendar here ».
66 Comments
Japan impresses. An extraordinary nation. Boney volcanic set of Islands, besieged with earthquakes.Only dragged out of the dark ages in the latter 19th century. 1923 Honshu eq, estimated deaths upwards of 140k largely destroyed the capital. Yet 10 years later Japan is invading China and 8 years after that engages the USA in WW2 and wages that for 4 years, suffers eventual humiliating defeat with colossal loss of both military and civilian life and decimation of its industry. And here the nation now stands as the world’s third biggest economy and, for the present chapter, now a powerful ally of the West. Often wonder in terms of natural resources what such application and industry might have achieved in NZ’s similar set of Islands?
Check out list of PPP comparisons - a smallish fourth in respect of those countries above.
On PPP per capita NZ beats Japan. But wealth per person is not the only way of judging a country. After the Kobi earthquake Japan had no looting; social cohesion has a non-monetary value.
Yep, Carlos Ghosn found that out, with their hostage justice system. There's not a long list of foreign executives queuing up to work in Japan now.
How can you say NZ is wealthier than Japan, which is a net creditor nation?
I think he's saying per person the average Kiwi is better off than the average Japanese.
Having some fairly decent ties to Japan, I'd have to agree in principal.
We’re almost at par with Japan on GNI per capita (GDP + foreign income of residents - domestic income of nonresidents).
Also, just 2 years of virtually no net migration brought the NZ economy to its knees. Japan has had a declining working population for 15 years now and more than a decade of zero growth in workforce before that. Wealthier or not, this says a lot about economic resilience.
We’re almost at par with Japan on GNI per capita (GDP + foreign income of residents - domestic income of nonresidents).
NZ household debt to GDP has increased 4x since 1992. Japan household debt to GDP is flat over the same time period.
I'd put a lot of it down to a culture based on discipline, respect, and taking pride in one's work.
Yes, I sound like your old high-school principal. But it's true. What's our culture based on?
Entitlement
Standing up for your rights.
That you earned based on the cavern you entered the world from.
Most Japanese I met when over there couldn’t believe I could afford to travel, that I don’t have to work 12 hour days, that my company gave me time off, etc. maybe working hard isn’t the answer.
Japanese wages are notoriously low, because you don't ever ask for a payrise.
Great place, arguably not happier people though.
A lot of it down to shame. Family shame was one of the reasons the Japanese fought suicidally until the death for the Emperor in WW2. There are many cool aspects about Japanese culture but most people in New Zealand would not thrive or be happy under their social constraints.
Hibred vigor according to my farmer husband.
Often wonder in terms of natural resources what such application and industry might have achieved in NZ’s similar set of Islands?
Do the resources include 100 million extra people, closer proximity to a couple billion extra customers, a homogenous culture and massive amounts of aid in the 50s?
With the addition of those small things, NZ could accomplish about the same, I reckon.
Only 'aid in the 50's' qualifies as a 'resource', the others ain't. And it depends what the aid was spent on...
Actually, what the Japanese have always done is NOT use their resources; they've always used someone else's. They went to war eyeing up other's resources (although our histories forget energy, conveniently
https://nationalinterest.org/blog/reboot/why-imperial-japan-went-war-am…
Humans and geography are definitely resources.
It's why "why can't NZ be like X country" views are dumb. Find me another isolated country with 5 million people doing better.
Singapore. Denmark. Hong Kong. Iceland. Finland. And many improving faster than NZ - the Baltic states.
None of those countries are isolated though, they all have hundreds of million, or billions of people very close.
I bet Estonia would prefer not sharing a land border with Russia right now or with Germany 80 years ago?
We were among the top 5 in GDP per capita nearly half a century ago. Are you really suggesting geographical distance is more of an economic inhibitor today with major recent advancements in ICT and air travel than it was back then?
We've had a relatively easy task attracting workers into the country compared to other non-English speaking small Western countries, and all we did was use it to grow low-value service industries and pump a housing bubble.
We were among the top 5 in GDP per capita nearly half a century ago. Are you really suggesting geographical distance is more of an economic inhibitor today with major recent advancements in ICT and air travel than it was back then?
Dumb argument. Economies of scale is always a thing, and 50 years ago, most of today's high value industries didn't exist.
You're trying to argue why we didn't turn wool into micro processors.
So shouldn't your argument that we didn't move on from shearing wool to higher value things?
most of today's high value industries didn't exist
Those industries wouldn't be considered high value today if they existed back then. Many large companies of then and even last decade died away because they didnt move on to the next big thing.
Even if you had a hi-tech economy today, doesn't mean you have continued success in 5 years' time. Know a country called Finland and its Nokia-led economy of early 2000s.
50-60 years ago Europe was just coming out of being a post war basket case, and NZ was a more efficient environment for primary goods, and hadn't spent nearly a decade getting the shit kicked out of it. Of course us and Argentina would be up the top. Perfect climates, fertile soils, rich coastlines, less people. How could you mess that up?
Oh yeah, by trying to emulate Californian suburbia, in a sub-tropical climate.
I advise you to consult a map, and a short history of the 20th century.
Since then, other markets developed more intensive tech through economies of scale. They can attract the best talent, and more of them, and more capital investment funds. What's the average Kiwi got, other than a massive chip on their shoulder?
I know a country called Finland, and they're about equal with NZ. They have less of our barriers to trade, and they've made no extra benefit from it. Nokia is now a Chinese owned branding exercise like almost every English car brand. The rest are owned by India, in a massive twist of fate.
I been almost everywhere. There's bigger, better, larger, louder. In NZ, the value is actually the distance from that, but with most of the trappings of modernity. Its always more to stay at a resort than Tokyo.
You get more productivity by chasing the dollar. If that's what you're interested in, just get good at something you can charge well for, start a business or be a sole trader. Don't wait for some company to take you under their wing. You are effectively trading your income for security.
An expression by my father who flew Catalinas and then served in the intelligence unit in US General Murray’s HQ on Guadalcanal, that prior to WW2 the Japanese brought up ship load after ship load of so called waste and scrap and then fired the whole damn lot back at the vendors with great pleasure. He witnessed the aftermath of much of the atrocities of that battle. Unfortunately that obviously affected him but that could never be admitted.
With the addition of those small things, NZ could accomplish about the same, I reckon.
You reckon? Like KiwiBuild? Sounds like you have a dose of the ol' Kiwi exceptionalism.
Japan was industrially more mighty than NZ from the Meiji period (way before WWII if you don't know your history). A Japanese battleship escorted ANZACs to Gallipoli - a technically far superior vessel.
You reckon? Like KiwiBuild? Sounds like you have a dose of the ol' Kiwi exceptionalism.
Did you even read or understand what I said.
Massive amounts of aid in the fifties. True to some extent but so too the Marshall plan in Europe. Like it or not, that policy of gratis expenditure by the USA has to now be acknowledged as being successful in establishing and defining a boundary against what was then perceived as encroachment by unfriendly regimes, for want of a better word. So much to the extent that today the major axis nations of WW2 are now all allied with the then Allies and two of the then major Allies are the opposite.
Massive amounts of aid in the fifties.
Similar to Germany. Who progressed and industrialized more in the Meiji Period? Japan or NZ?
By the end of the Meiji Period NZ was more advanced as a humane civilization. Women's suffrage for example.
Mmmmm, maybe or maybe not.
The poll tax on Chinese people was far from humane. And Maori were still often getting a hard time.
Did Japan even allow Chinese immigrants?
They only barely begrudgingly tolerate them now, from necessity.
Why are they analogous?
One was just another culture, migrated to the other side of the world with limited resources. Most human endeavour was expended trying to replicate the status quo. Been to the west coast? Imagine that without electricity.
The other culture actively chose to isolate themselves from the rest of the world for centuries before being thrust into the modern era. If you've read about that 1850-1900 era you will know about the huge adoption of Western technology in Japan. It was all a Hybrid German-English-American pan-European mish mash, that got adopted in 2 generations. It's not like they developed the technology themselves. That's why Japanese Students Uniforms look like turn of the century sailor suits.
NZ can never be Japan. Their rail is amazing and makes them more efficient than NZ, but it needs a large population size to be barely profitable. They've massive industrial firms with footholds all through Asia with billions of customers.
I don't know what parts of Japan people think we can replicate here.
Not as much as you'd think...roughly 2,2 billion between '46 and '52 (or about $30 per capita)
You have to factor in that the US used Japan as a manufacturing base for the Korean War. 30% of Japan's GDP was funded by the US state department.
Thats why Mistubishi made a licensed WW2 Willys Jeep till the 90s.
Japan has done amazing, but also on the back of large population growth, including 50 years or so when it had an empire along with all the benefits that other metropoles got from their colonies.
Biggest challenge now is population decline and an aversion to immigration. How do you maintain GDP growth with a declining population? Can a modern economy last long without GDP growth or will the engine of capitalism start to backfire?
Re US:
GDP revisions for Q4 2022 didn't really change much apart from slight downward revisions to consumer spending. Doesn't matter, in real terms overall demand has been really weak - and that's before we get to this March's major negatives. https://youtu.be/Y_KboMpKsMM Link
Japan response to inflation: Prime minister told companies to pay their workers more to make sure wages kept up with profits. Bank of Japan maintained iron grip on interest rates, holding their short-term rate at -0.1% and their 10-year rate at zero, and coldly dismissed any suggestion that they needed to hike rates to tame inflation. Inflation is now down from a high of 4.3% to 3.3%.
Surely at some point other central banks might work out that the Bank of Japan is getting it right, and it is their model that is the freakshow.
Nah. I’ve been to Japan several times, it’s such a great place, but considering the amount of work they do and the number of highly successful companies they have, the average Japanese person seems to have a worse life than us. They are doing something really wrong.
I think you are talking about a totally different thing to JFoe. ie. JFoe is talking about economic management, you - society. Obviously linked to some extent of course.
You have made a big generalisation there. I would say some aspects of life are better here, and some there.
very crudely (and generalised):
Better in NZ: work/life balance, personal freedom and expression and ability to be oneself
Better in Japan: ability to get around (public transport), healthcare system, personal safety, cost of living
If I were to summarise (and generalise) - utilitarian aspects of living are better in Japan, personal freedom and life balance is better in NZ.
Thanks. I would love to spend some proper time in Japan. It's on my bucket list.
I thought this article made some good points on Japanese wellbeing... https://www.japantimes.co.jp/life/2022/05/30/lifestyle/japan-happiness-…
Good article. The bureaucracy certainly is bad there. Much worse than here, in my opinion.
Still plenty of generalisations in what I wrote. But pretty informed I think (I studied Japanese history and language in my first degree, lived in Japan for a couple of years in the mid-90s and have been married to my Japanese wife since then and visited many times)
Great country, but they also have plenty of problems.
I’m talking economic. They didn’t seem to be more well off than us considering their amazing companies and long work hours.
They definitely have better transport and safety. It just didn’t feel like the average Jo is benefiting much from their amazing export economy. Despite all our bludgers and criminals and poor planning and rip off supermarkets and easy going attitudes and lack of exports, we are somehow almost on par with them in my opinion.
And this is based on what, a holiday or two in Japan?
Global demand for Japanese goods is only doing moderately better. Exports though were only up 6.5% y/y though that includes price changes. Account for prices, volumes fell 7.8%. As you can see, major collapse in trade for second straight month. Link
At the bad end of the macro spectrum, global trade recession not as some future possibility but as happening right now. Or, underway from late last year. Japan trade data, imports going down, down, down as Japanese economy is getting slammed by prices. Link
UPDATE 2-Slower China manufacturing activity growth dents economic recovery prospects (yahoo.com)
So much for the investor optimism on the Chinese economy reopening and once again exporting deflation to the world. Fall in optimism were noted across all subindices with net pessimism in employment.
International demand for manufactured exports is down and China's domestic economy is being dragged down by turmoil in its oversized construction/real estate sector.
I am old enough to have gone through a few cycles, the media and even the perma bulls like HW2 only have one setting, DGMs are right about once every 10 years in the cycle, this one is going to be a doozey, not even QE can fix this mess.... its now default time.
Another little tick in the box for us China Bears 🐻
And NZ is a carbon Copy of the US (political cronyism), without cheap energy. Corporate monopolies controlling government spending, even here in little old Invercargill with our 'Inner City Rebuild' indebting the ratepayers, for the Richardson Group to profit.
Don't ignore the Chinese trillions recently pumped into their economy. Nor the Fed and EU flush of money. Hate to say it but we are repeating the same ol same ol and yes there is a good reason why the US market is way again.
https://www.stuff.co.nz/national/education/131660369/low-staff-morale-a…
One assumes they are semi skilled workers....
Low staff morale and hundreds of job losses are on the horizon but the head of Te Pūkenga remains adamant it was right to merge the country’s 16 polytechs.
Between 200 and 1000 jobs will go, said chief executive Peter Winder, as the national tertiary provider faces a $63 million deficit.
“The brutal reality is, there will be some job losses.”
One assumes
You seem to say that alot...
Job losses and potential job losses are certainly mounting.
I can't see the reasoning for that, I think possibly a similar portion of each skill level will be reduced.
Looking shaky across the ditch.
Victorian-based home builder Porter Davis is going into liquidation, while a second construction firm has entered voluntary administration
Construction has been suspended on all Porter Davis' projects, with 1,700 homes affected across Victoria and Queensland.
The construction company has about 470 employees and was forecasting revenue of $555 million in the 2023 financial year
Yep getting ugly. Their interest rate hikes are hitting home quicker, with most Aussies being on floating rates
Inflation down, thats why RBA pausing come Tuesday
Looks like a crash and smells like a crash. From the mighty Chris Joye:
Every day we are reading about builders, developers, breweries and other businesses going bust. This gels with the data. We seasonally-adjust ASIC's corporate insolvency data, which climbed to more than 700 insolvencies in February alone relative to the pandemic lows around 200 per month. The concern would be if this trend continued...
Whereas lenders can and do often hide defaults by extending and pretending (restructuring borrowers’ loans so that no formal defaults show up in the official data), the insolvency time-series does not lie. Another data source that does not lie and which we study closely is the monthly arrears reported on the circa $90 billion home loan-backed bonds, known as residential mortgage-backed securities (RMBS). We compute our own compositionally adjusted arrears indices for all Aussie RMBS, which reveals a striking recent increase in the 30 days-plus arrears rate.
https://www.livewiremarkets.com/wires/corporate-and-rmbs-default-waves-…
I’ve been wanting to see some insights into non-bank lending. All of a sudden I’ve seen a lot of advertising for high deposit rates. Some beads of sweat forming I assume, there’s a lot of stress in those charts.
Too bad there’s no financial commentators or economists remotely close to Joye’s quality here in NZ.
All we get is obvious backwards looking crap here, with little nuance or depth of insight beyond conventional data and analysis.
Check out Dr Andrew Wilson
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