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 were no changes announced today.
TERM DEPOSIT/SAVINGS RATE CHANGES
None here either.
IMMEDIATE IMPACT
The economic impact of the recent weather events are starting to show up in the 2022/2023 Crown Accounts. The February data shows that GST receipts were -7.3% lower than the same month a year ago. And PAYE tax deductions, which have been rising strongly up until January, faltered in February, up only +6.3% and half the rate of rise from earlier months. The costs are forcing taxpayers to pull back on consumption activity, and earnings are being affected too. The overall impacts are small in the year-to-date numbers, but they are quickly imposing themselves.
DEMAND FALTERS
While current economic activity isn’t weak, The latest NZIER Quarterly Survey of Business Opinion (QSBO) points to a cooling in demand. Capacity pressures are easing and businesses are more worried about sales than hiring. Cost pressures remain intense, which is squeezing margins. Crucially, it is expected the pressures on businesses’ finances will continue to mount over the year ahead.
BIG-TIME CLIMATE COST
The Insurance Council says the amounts claimed so far for the Auckland flood and Cyclone Gabrielle have now topped the amounts claimed for the Kaikoura earthquake, and almost reaching $2.5 bln.
GREENHOUSE GAS EMISSIONS TURN LOWER
Greenhouse gas emissions decreased -3.5% (-696 kilotonnes) in the September 2022 quarter, according to data released by Stats NZ today. This retreat follows successive increases over the previous three quarters and was driven mostly by significant reductions in the electricity, gas, water, and waste services industry, and in the manufacturing industry. Meanwhile the transport sector, and the household sector generated more GHG emissions. The agricultural sector booked a marginal reduction, and their emissions have been stable in absolute terms for 5 consecutive quarters.
ANOTHER TECH ISSUE
We have an issue delivering our charts today. Please bear with us while we get this utility back up. Sorry.
RBA HOLDS
As expected, the RBA kept its cash rate target unchanged at 3.60% rate. They see the US and Swiss banking problems will lead to tighter financial conditions, which would be an additional headwind for the global economy. But they are also battling very high local inflation, especially services inflation and the risks of cost-plus inflation remain high there. So they say they expect that some further tightening of monetary policy may well be needed to ensure that inflation returns to target. More here.
NOT SEEING A BIG CHANGE
The crude oil price is little-changed today at US$80.50/bbl in the US, and the international Brent price is still at $85/bbl. Apart from the initial reaction, there isn't a growing rise - so far at least. If it stays like this, the impact of the supply cut will be minimal.
SWAP RATES HOLD
Wholesale swap rates have probably been little-changed today ahead of tomorrows RBNZ OCR decision. 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 to 5.25% and now +50 bps above the current OCR. The Australian 10 year bond yield is now at 3.29% and up unchanged 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 4.12%, down another -7 bps and well above the earlier RBNZ fix at 4.04% which was down a massive -14 bps from yesterday. The UST 10 year yield is now at 3.43% and down -9 bps from this time yesterday.
EQUITIES MIXED
The NZX50 is little-changed in late trade today. The ASX200 is also unchanged in early afternoon trade. Tokyo has opened up +0.2%. But Hong Kong has opened down -1.1% while Shanghai has opened up +0.3%. The S&P500 ended its Monday trade up +0.4%.
GOLD UP
In early Asian trade, gold is up +US$24 from this time yesterday, now at US$1981/oz.
NZD FIRMS
The Kiwi dollar has risen almost +¾c to just shy of 63 USc. Against the Aussie we are have dipped to 92.9 AUc. And against the euro we are little-changed at 57.8 euro cents. That means the TWI-5 is up at 70.7 and up +30 bps.
BITCOIN SLIPS
The bitcoin price has slipped from this morning's open, now at US$27,786 which is a retreat of -1.5%. Volatility has been modest however at +/-1.7%.
This soil moisture chart is animated here.
Keep abreast of upcoming events by following our Economic Calendar here ».
41 Comments
Current economic activity isn't weak?!?
Aggregate demand is plummeting because consumers don't have as much money in real terms as they had before - particularly the poor souls with chunky mortgages that have rolled over to high rates already. Consumers with money are moving cash into term deposits etc. All of this has been showing in the leading indicators for a few months now, and the business survey results are just the latest signal that the tide is turning quickly.
if those oil prices get momentum, all bets are off on how deep the recession is going to be.
All of which are good signs that inflation is now under control. Let’s hope the RBNZ doesn’t overcook it.
We got lucky with GHG emissions. High lake levels and high wind levels, not much else in it. Without concerted effort, we won't make a dent in them however. The Greens "hooray!" announcement looks like even they were shocked that GHG emissions dropped.
Yes less coal used for power generation compared to 2021 winter.
More EV's on the road - see related article. High wind levels ..having lived in Wellington there is nothing lucky about this?
I have not noticed it being windier than normal except for the ex cyclone parking near Ak for a few days.
I find wind roses interesting:
https://teara.govt.nz/en/interactive/47384/wind-roses
Unfortunately these are from old data. Not sure over what length of time. But it will be multi-years.
Auckland not windy. Dunedin not windy. Wellington!!!!! Whoooah.
Transport emissions were up overall.
Yeah.
Apart from the rich (who splashed out on a spanky tesla last year to boast about when flying to their overseas holidays) the rest of us are either climate-ignorant-rich who bought a new ute and paid the rebate thing anyway.. or poor to mid class who are now far skinter than b4 and thus whose (already old) petrol car just got another year older and less efficient.
Funny thing is that the teslas and EVs we did buy.. are being charged by coal power stations so actually (due also to massive additional environment damage from the manufaturing and shipping) caused more climate mess than keeping the old cars.. lol.
Just so you know which camp I'm in, when my 19 year old Honda dies, I am screwed.
This nonsense just gets tiring to read yet again from the ignorant sods that keep repeating it.
When we do burn fossil fuel to generate electricity it's mostly gas from taranaki, not coal.
And even if it was coal, its still better environmentally, and economically than burning imported petrol or diesel in an inefficient combustion engine crawling down the southern motorway at 15kph.
We have been burning a lot of coal the last few years due to field shutdowns and the fact Huntly has switched back.
The Coal is shitty stuff from Indonesia. Emissions wise it is probably slightly better than petrol/diesel. But in terms of environmental damage - i.e. how and where it is sourced. I would say significantly worse.
This ignores the fact that old cars eventually have to be replaced because they stop producing parts for them. What would you suggest they get replaced with? Given that every life cycle analysis of electric vs ICE cars I have ever read shows electric cars are far less damaging to the environment overall and thats usually using European/US energy mix (which is roughly only 22% renewable energy). In NZ with over 85% renewable energy, the difference is enormous. And since we are blessed with an almost endless supply of renewables for the near future, its even more compelling.
RBA .25 increase for sure if they want to get ahead of inflation otherwise more pain later.
Oh well more pain later small bounce for consumers hoping the top is in.
This comment dated very quickly.
yes picking the RBA to make the appropriate move has been a losing bet for 18 months now. Looks like they are taking the drawn out road......
If you're thinking OPEC's production cuts are going to reignite "inflation", markets still absolutely sure it won't. The inversions are back to extremes where they'd been in January. If anything, a short run increase in WTI will only hasten the Fed pivot. https://youtu.be/AnUd4_h52TM Link
Isn't that because markets are betting on what the Fed will do with interest rates, rather than what will happen to price indices? Normally these things are connected (prices go up, Fed raises rates), but all bets are off now that Fed rate hikes are devaluing the assets that underpin pension funds etc.
In little old NZ, if oil prices get much higher and stay there, we will absolutely see much slower easing of CPI measured inflation. Two-thirds of our energy as a country (and countless other major input costs) hinge on oil prices.
The RBA holding at 3.6% and the RBNZ raising to 5% this week, makes for an interesting comparison on who's got it right (or less wrong?), we will have to wait at least 12 months to find out though.
(a bit like Sweden not enforcing draconian CV lockdowns)
Maybe they didn't have any "vulnerable people".
Lower inflation and more mortgage loans in Australia are on variable rates so in theory increases should be incurred immediately. In New Zealand we love short term fixed loans over 1 to 2 years so rate changes have a delayed impact on homeowners.
Neither country is anywhere near it's target inflation rate however.
I'm not sure that's right - I thought mortgage term structures were pretty similar?
It is right, most aussies float, some kiwis are still sitting on mortgages starting with a 2 or 3.
Yes, it was about 50/50 fixed to floating during the pandemic, now down to about 25% of borrowers on fixed rates.
The economic impact of the recent weather events are starting to show up in the 2022/2023 Crown Accounts. The February data shows that GST receipts were -7.3% lower than the same month a year ago. And PAYE tax deductions, which have been rising strongly up until January, faltered in February, up only +6.3% and half the rate of rise from earlier months. The costs are forcing taxpayers to pull back on consumption activity, and earnings are being affected too. The overall impacts are small in the year-to-date numbers, but they are quickly imposing themselves.
People have taken a kicking from all corners here. They are paying more tax as brackets haven't changed with inflation, the cost of goods has risen substantially due to runaway inflation and we have had an anemic response to recent weather events. If there is a slowdown in consumer spending it's because we engineered it.
The Local supermarket are still cranking up their base prices.
A few more items I get went up again.
And gas and electricity going up again in May.
Tax bracket need moving.
The biggest shock might be the tax increases pencilled in on petrol, that will immediately bump fuel up 25c per litre starting in July. Petrol is 3.5% of the entire CPI index.
They will extend and pretend…
And how much of the rest of the CPI is affected by increases to fuel costs?
Yep im still seeing the rises at the supermarket, and yep power and water up 10 and 9% this month.....
Re crown accounts - you think it’s bad now? Just wait for all that GST revenue from new home sales to slump later this year.
The house building slump is the elephant in several rooms.
Smells like an elephant has been around the industry......
"The house building slump is the elephant in several rooms" - true, and very appropriate!
NZ builds cannot fit Elephant in the room........
I assume they go in the garage? Given the amount of cars parked in driveways/on the street, they clearly aren't being used for vehicles.
Don't worry this is the circus, we're used to elephants & clowns here...
Watch hippy is going to put his head in the lions......
This is kind of like the final straw for me with this arrogant, entitled government and their clowns. Seriously thinking of a protest vote for the Nats:
https://www.nzherald.co.nz/nz/kiri-allan-apologises-for-remarks-at-mani…
Yes, another revealing comment.
As a white sith male I am outraged. But vote for the Gnats, HM? Where does that kind of vicious escalation lead?
Doesn’t lead anywhere. Just gives me the thrill of helping to vote this godawful government and its hapless MPs out. Haha
At least I might get a tax cut with the Gnats. Self centred? Yeah, but then Labour aren’t doing anything meaningful for poverty, inequality and the environment anyway.
hope that gnats sit down with winston for a nice cup of tea
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