What happened Wednesday

Business / news

A review of things you need to know before you sign off on Wednesday; RBNZ surprises with another +50 bps, Barfoots March tough, consumers spent freely in March, swaps up, NZD up, & more

5th Apr 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
There were no changes announced today so far. The surprise OCR hike will have lender thinking hard about their future rate offers however.

TERM DEPOSIT/SAVINGS RATE CHANGES
NBS raised both term deposit and savings rates. General Finance also raised rates today.

BIG SURPRISE
The RBNZ surprised financial markets with an outsized +50 bps rate hike today to 5.25%. Markets had expected a +25 bps rise to 5.00%. (And remember, the equivalent Aussie rate is 3.60%.) The NZD jumped, although only a modest +40 bps. Analysis and implications here and here.

SIX-FIGURE DROPS IN A YEAR
CoreLogic said the average value of NZ homes was down more than -$100,000 in the March year with the rate of decline increasing in 2023. the average dwelling values in Auckland are down by almost -$200,000 in last 12 months; Wellington values were down almost -$300,000. Overall falls at these levels hurt the viability of new builds hard.

AND BIG VOLUME DROPS
Meanwhile, dominant Auckland realtor Barfoot & Thompson has just had a very tough month. Their 80+ branch network and 1800+ real estate agents sold just 638 properties in March 2023, their lowest March sales since the GFC in 2008. This was down by a third compared to a year ago.

WE'RE STILL SPENDING FREELY
Consumer spending in March through core retail merchants (excluding hospitality) in Worldline NZ’s payments network reached $3.1 bln, which is up +8.3% on March 2022 and up a record +19.2% on the same month in 2019.

DIVIDED VIEWS
We are nearing the end of the current dairy season. Local milk flows are up, bolstering good international dairy production. But more supply isn't helpful for dairy prices. Today's GDT action was a weak one, the latest in a series that is only occasionally interrupted by one-off rises. Analysts are mixed in what this means for farm-gate payout forecasts, even after Fonterra itself signaled a reduction recently. BNZ trimmed its forecasts, but Westpac has held the line with its, including its $10/kgMS forecast for next season. They think China will come back strongly.

UPGRADED CHARGES
An Auckland man charged by the Serious Fraud Office for allegedly submitting false COVID-19 wage subsidy applications is now facing further fraud charges related to COVID relief funds and GST returns. In August 2022, the SFO filed charges against Hun Min Im for allegedly attempting to claim $1.88 million under the wage subsidy scheme. He is alleged to have received just over $600,000. The added charges relate to an additional $400,00+ in fraudulent claims from the Small Business Cashflow Scheme, COVID-19 Support Payments and Resurgence Support Payments.

'NORMAL' LABOUR FORCE GROWTH
Stats NZ released its working aged population data today for the March quarter, the base used for the upcoming HLFS labour market stats. That shows our labour force grew by +21,100 from the prior quarter, the fastest expansion since the start of the pandemic, and back similar to the quarterly growth we had in the 2013 to 2020 period.

ANZ STRUGGLES TO GET BOQ DEAL PAST THE ACCC
In Australia, their competition regulator is very sceptical the ANZ purchase of the Bank of Queensland is in the public interest. If it kills the deal, it will be a significant blow to ANZ.

SWAP RATES UP
Wholesale swap rates have probably been jerked higher after RBNZ OCR decision. Certainly bond rates have. 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 5.25% before the OCR decision, and after it that means the premium vanished. The Australian 10 year bond yield is now at 3.24% and down -5 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 4.20%, and up +8 bps and well above the earlier RBNZ fix at 4.05% which was up +1 bp from yesterday but set before the OCR decision. The UST 10 year yield is now at 3.36% and down another -7 bps from this time yesterday.

EQUITIES MOSTLY LOWER
The NZX50 is down -0.2% in late trade today, a drop from the pre-OCR rise of +0.3%. The ASX200 is unchanged in early afternoon trade after being higher earlier. Tokyo has opened down a sharp -1.2%. Hong Kong has opened down -0.7% in a building sell-off while Shanghai has opened up +0.5% in a continuing rise. The S&P500 ended its Tuesday trade down -0.6%.

GOLD UP
In early Asian trade, gold is up +US$39 from this time yesterday, now at US$1920/oz.

NZD FIRMS
The Kiwi dollar has risen more than +½c to 63.6 USc following the OCR hike. Against the Aussie we are up more than +1c to 94 AUc. And against the euro we are firmer too at 58 euro cents. That means the TWI-5 is up at 71.2 and up another +50 bps. But the OCR surprise is sure to move things around unexpectedly so best to check our currencies page (RH sidebar) for the latest movements.

BITCOIN RISES
The bitcoin price has risen from this time yesterday, now at US$28,657 which is a gain of +3.1%. Volatility has remained modest however at +/-1.7%.

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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50 Comments

by Yvil | 5th Apr 23, 4:08pm 1680667704

The RB wants to counteract rates dropping. Very interesting! So we basically have a tug-of-war between the RBNZ and the market, the likely outcome being a more inverted yield curve (longer term rates being lower than shorter term rates)

by CeeJ | 5th Apr 23, 8:15pm 1680682519

Maybe that's what the market thinks also.

by Yvil | 5th Apr 23, 4:13pm 1680668004

gold is up +US$39 from this time yesterday, now at US$1920/oz.

Shouldn't that be US$2020/oz ?

by rastus1 | 5th Apr 23, 4:15pm 1680668146

Check - Gold at $2,023 at 1614hrs.

by Baywatch | 5th Apr 23, 4:44pm 1680669846

What's the best preforming asset Q1 in 2023?

by lonewolfnz | 5th Apr 23, 5:20pm 1680672041

As a "class" its crypto by a mile, although I think of bitcoin as separate to Crypto - a nice 80% gain or so in Q1.

Some of the individual cryptos are doing even better though, last I locked my FETCH-AI tokens were well up over 1000% this year.

Ethereum starting off to a great start for Q2 though :)

by Averageman | 5th Apr 23, 4:19pm 1680668352

Orr has been warning of this for a while "don't load up on excess debt". One also notes that a DTI framework was announced earlier this week. All upwardly mobile for speculation...tui.

by J.C. | 5th Apr 23, 4:33pm 1680669223

Orr has been warning of this for a while "don't load up on excess debt". One also notes that a DTI framework was announced earlier this week. All upwardly mobile for speculation...tui.

20 years+ too late to restrain / stop credit creation for the housing bubble. As the mighty Werner said this month:

.....if new credit is used for unproductive purposes such as trading financial assets (including bonds, shares and futures) or real estate, this leads to asset price inflation, a form of economic bubble which can trigger a banking crisis if the boom is large enough. Similarly, if bank credit is created chiefly to support household consumption, this will inevitably result in consumer price inflation.

Unfortunately, in the UK and many other countries – especially those with only a few, very large retail banks – there has been a significant shift of bank credit away from lending for productive business investment to lending for asset purchases. As big banks want to do big deals, bank lending for asset purchases now accounts for the vast majority of lending (75% or more, according to my analysis of Bank of England data).

by Albert2020 | 5th Apr 23, 4:50pm 1680670211

The same Orr that told banks to be courageous with their lending and people to lump it if they didnt like their pathetic term deposit rates in 2020?

by EdwardD | 5th Apr 23, 6:44pm 1680677046

I remember well. I wonder if he really thought people would leave their $'s in the bank earning 1%? A lot of my elderly friends bought property. Thankfully I bought gold and eth.

by J.C. | 5th Apr 23, 4:35pm 1680669306

In early Asian trade, gold is up +US$39 from this time yesterday, now at US$1920/oz.

Actually US$2020/oz most of my day. PMGOLD howling on the ASX and GDX up 4.17% on the day.

Gold a little stretched when looking at relationship with fed funds future pricing. But systemic risk may be lurking.

Checking in on little bro silver in Kiwi pesos. Up 15% in past month and 74% in past 3 years. Happy days.

by Albert2020 | 5th Apr 23, 4:53pm 1680670382

If you take it back to its peak in Aug 2020 silver in NZ dollars has been going sideways with slight downward trend for the past 3 years

by J.C. | 5th Apr 23, 5:19pm 1680671943

If you take it back to its peak in Aug 2020 silver in NZ dollars has been going sideways with slight downward trend for the past 3 years

Yes. But I think you know the relevance of March / April 2020. In the space of 4 months, the price went up approx 70%. Commodities are not house prices. And we shouldn't think they behave like them.

by Albert2020 | 5th Apr 23, 5:43pm 1680673400

Well then take it back to its 2011 peak then which it hasn't reached. As someone that has $20k in physical silver I would love for it to do well but its been a pretty lousy investment thus far. Lets see what happens during the coming recession.

by J.C. | 5th Apr 23, 5:50pm 1680673842

The fact that it doesn't trend up in a line to the right is a good thing. You might find that exposure to the ol' rat poison is better suited for that at this point in time (caveat emptor).

by HW2 | 5th Apr 23, 4:58pm 1680670724

Domain.com.au shows 13 percent of 2 bed Melbourne rentals below 600pw

by HouseMouse | 5th Apr 23, 5:37pm 1680673047

And…???

by HW2 | 5th Apr 23, 6:14pm 1680675244

What 500pw is to auckland 600pw is to melbourne. A lot of moolah for a 2 bed. So Auckland rents will increase you betcha. Which is not morbid or mean but raising awareness

You can't stay away from me despite calling for my public flogging and removal. Funny.

by HouseMouse | 5th Apr 23, 6:26pm 1680676001

Most websites take a dim view of trolls. It’s a form of bullying after all. This one doesn’t seem to.

I reckon you take pleasure from the flogging.

Mmmmmmm

by HW2 | 5th Apr 23, 7:05pm 1680678344

Yeah but at least I made a point. Whereas you, sledging. Have a good evening

by Officebound | 5th Apr 23, 7:40pm 1680680439

You guys might have decent debates if you weren't both plonkers.

by Beanie | 5th Apr 23, 8:26pm 1680683181

This is one time I think HW2 will be right. In a year or three we will be arguing over who is to blame for the rental crisis.

by Norm | 5th Apr 23, 8:35pm 1680683710

Well that made my laugh, thanks. Both!! So true!! Comment of the day, and there have been a few.

by Rob Reid | 5th Apr 23, 7:51pm 1680681095

Melbourne incomes are higher though. If Aucklanders can't pay they won't.

by Beanie | 5th Apr 23, 8:29pm 1680683379

Nobody wants their family on the street. It's going to be awful for society but people who can find a rental will find a way to pay.

by Pragmatist | 5th Apr 23, 5:02pm 1680670938

Check out the swaps reaction to the OCR increase. Looks about what you'd expect for the 1 yr (+0.19%, so most of the increase above the already baked in 0.25 got carried through), but the rest of the terms, the market is not buying it.

by Justa comment | 5th Apr 23, 7:24pm 1680679477

Yes this is Orrs strategy of going hard and fast to 5.5% to get the job done quicker. The 5 yr swap has fallen. The US will join Orr on 5.25% tomorrow. Good move by Orr in my opinion. Todays consumer spending vindicates Orrs decision, the spending rolls on.

by IT GUY | 5th Apr 23, 5:19pm 1680671991

This might be some small relief for concerned homeowners but any expectation that rates could be falling again in the near future has been blown out of the water.

I expect that this move may move a few hesitant sellers to lower their price... Or they could take it off the market and just continue to pay the high rates for much longer.

Re Chippy, all people will be able to afford to eat soon is Bread and Butter... maybe just bread... so you better keep throwing all that aspirational stuff on your bonfire

by Frank Sobotka | 5th Apr 23, 5:32pm 1680672734

A tide of change is coming and that is what you fear

The earthquake is a coming, but you don't want to hear

You're just too blind to see

Have you seen the writing on the wall?

Have you seen that writing?

Can you see the riders on the storm?

Can you see them riding?

Can you see them riding, riding next to you?

by powerdownkiwi | 5th Apr 23, 6:20pm 1680675626

...but now the Empire's gone

Good stuff.

by Rob Reid | 5th Apr 23, 8:02pm 1680681740

Good riddance

by Frank Sobotka | 5th Apr 23, 5:24pm 1680672289

We used to make things in this country. Build things. Now we just stick our hand in the next guys pocket

by Final Account | 5th Apr 23, 7:30pm 1680679846

Comment of the decade.

by JimboJones | 5th Apr 23, 7:46pm 1680680772

I still make things (if you count software as things). Almost all my friends make things (although most I met in engineering school so I guess that’s expected).

by E46 | 5th Apr 23, 9:14pm 1680686063

I really like this talk from the late Sir Paul Callaghan that gives an overview of how our choices have really screwed us all over.

by HouseMouse | 5th Apr 23, 5:49pm 1680673793

Overseas-based Capital Economics, who I think have been pretty good and made much better calls than NZ economists, think this hike will definitely result in a ‘protracted recession’ and rate cuts by end of 2023:

https://www.nzherald.co.nz/business/ocr-reserve-bank-to-decide-on-rate-…

by J.C. | 5th Apr 23, 5:52pm 1680673947

Great comment on gold:

Gold signaling that Boomers are still in charge

And they are not going quietly

They want to go out with a big bang

Just as Hiroshima/Nagasaki heralded the Age of the Boomer; their war in Europe promises to send them off in the same way that they entered the world

by Rob Reid | 5th Apr 23, 8:08pm 1680682095

"Gold signaling that Boomers are still in charge"

Does this mean that boomers own most of the gold and are managing to push it's value up to fund their final 20 year party?

by J.C. | 5th Apr 23, 8:22pm 1680682969

It means all the global risk, economic and war, driven by the Western ruling elite (WRE) is the key driver of the gold price. The WRE is acting in the interests of the boomers.

by Caughtinthemiddle | 5th Apr 23, 6:21pm 1680675705

Bringing inflation to heel without causing a recession when using an economic broadsword such as the OCR is as achievable as brain surgery with a dessert spoon.

by bw | 5th Apr 23, 6:38pm 1680676712

Sharon Zollner sees it for what it's worth.

If (the RBNZ) don’t do enough, and lose their inflation targeting credibility, rates will have to go higher for longer with much greater real economic costs. If you follow that line of thinking to its logical end, it implies if they haven’t already done too much then they probably will.”

by Audaxes | 5th Apr 23, 6:59pm 1680677946

Thankfully, the prominent bank interest rate trading room teams have placed their deeply inverted curve bets, which have nothing in common with the economics research teams ECON 101 presumptions. The former have much more power than the later.

by IT GUY | 5th Apr 23, 7:10pm 1680678613

Some of those Interest Rate Traders are no longer there, but Sharon is.......

by HW2 | 5th Apr 23, 8:10pm 1680682219

Orr and Zollner and ardern all have something in common. Hard and early. Orr does not want a soft landing. He has not made much dent in inflation numbers yet but I have heard something about building materials costs are dropping.

All joking aside, this will ultimately cause various market reactions. Both good and bad

by HW2 | 5th Apr 23, 8:15pm 1680682541

Trump got the door closed in his face, which bruised his ego 🤣

by JimboJones | 5th Apr 23, 7:51pm 1680681065

Does anyone understand the RBNZ least regrets policy? Not so long ago avoiding a recession was the least regret, now creating one is. My regret is that they keep on going from one extreme to another.

by IT GUY | 5th Apr 23, 8:05pm 1680681955

Assume the brace position, this landing will be hard.

by Frank Sobotka | 5th Apr 23, 8:13pm 1680682392

To the windows

to the walls

till the house prices fall through the floor

by Rob Reid | 5th Apr 23, 8:21pm 1680682881

My regret is we still have central planners trying to influence the price of money. Whatever will they do if we manage to wrest control of the money supply from them?

by estateagent | 6th Apr 23, 7:23am 1680722605

@David Chaston it was 765 sales for Barfoots in March - you used 638 above!