What happened Monday

Business / news

A review of things you need to know before you sign off on Monday; no significant rate changes, food prices jump, rents up too, service sector expands except retail, swaps firm, NZD stable, & more

17th 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
Avanti Finance has raised their floating rate from 8.65% to 8.90%, a +25 bps rise. CMFL raised their by +50 bps to 9.45%. Heretaunga Building Society raised their floating rate by +25 bps, and their 1 year fixed rate by the same amount

TERM DEPOSIT/SAVINGS RATE CHANGES
None today here. This review of bonus savings rates may be useful however.

FOOD PRICES UP FASTER
Food prices were up +12.1% in the year to March 2023 - which is the highest annual rate of increase seen since 1989. Kiwis are being 'crushed at the checkout', National's Willis says. Meanwhile, Infometrics is reporting that supermarkets (Foodstuffs) has paid +10.3% more to its suppliers in March, from a year ago.

RENTS UP TOO, BUT SLOWER
According to the Stats NZ rental price index, rents in Auckland were up +4.9% in March from a year ago. That is their fastest rise since March 2017. On the same basis rents in Wellington rose only +1.9%. In Canterbury that were up +5.2% but for them that is unremarkable because they have been rising at that rate or more since October 2020. Nationally, rents are up +2.7% for properties that are changing tenants. For all properties rents are up +3.9% year-on-year.

SERVICE SECTOR STILL EXPANDING
The local services sector was still expanding at a good clip in March even if it was slightly off February's faster pace. Still the March level is above the long term average for expansion in this big sector. Activity is still at a good pace but new orders expanded at a noticeably slower pace. Employment isn't expanding much, but it is still expanding. It is the retail business that are the drag in the broader services sector - every other corner was growing (although we should probably note that the FIRE sector barely fits the 'growth' label. And don't forget the earlier-released PMI revealed that the manufacturing sector is now contracting.

TOUGH & SLIPPING BEHIND
Retailing is tough, with many more unexpected (and expensive) events hitting the bricks-and-mortar sector. Half of retailers aren't meeting sales targets and don't expect to in the next three months either. Two thirds of them increased their prices over the past 3 months, but 'only' by +5.4%. Lat month they signaled they were expcting to raise them +7.1% (CPI is 7.2%).

MORE, FASTER
According to Auckland Council's Code Compliance Certificate data, the number of new homes being completed in Auckland remained near a record high in February at 1164 - a five year high for a February. And they're taking less time to build as supply constraints ease.

'SLASHING FIXED RATES' ACROSS THE DITCH
In Australia, banks both large and small are 'slashing' their fixed rate offers. CBA today cut its advertised 3 year fixed rate by -40 bps to 5.59%. (Their new 'comparison rate which loads in the myriad costs Aussie banks also charge - which NZ banks don't - takes that rate to 7.20%. ASB, CBA's New Zealand subsidiary offers a 3 year fixed rate at 6.59%).

SWAP RATES FIRM
Wholesale swap rates are probably a little higher 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 +1 bp at 5.55% and 30 bps above the OCR. The Australian 10 year bond yield is now at 3.37% and down -4 bps from this morning. The China 10 year bond rate is unchanged at 2.86%. And the NZ Government 10 year bond rate is now at 4.17%, and that is up another +2 bps from this morning, and still above the the earlier RBNZ fix at 4.15% which is up another +6 bps and still in catch-up mode. The UST 10 year yield is now at 3.51% and little-changed from this morning.

SHANGHAI EQUITIES STAR
The NZX50 is unchanged near the close (but up from its opening drop). The ASX200 is up a minor +0.1% in afternoon trade. Tokyo has opened its week unchanged. But Hong Kong is up +0.4% in opening trade. Shanghai is up a very impressive +1.0% in its opening Monday trade. The S&P500 futures suggests Wall Street may open unchanged as well.

GOLD UNCHANGED
In early Asian trade, gold is unchanged from this morning's open, still at US$2004/oz.

NZD HOLDS LOWER
The Kiwi dollar is still just at 62 USc and little-changed from today's open. Against the Aussie we are soft at 92.4 AUc. And against the euro we are still at 56.5 euro cents. That means the TWI-5 is still at 69.8.

BITCOIN SLIPS
The bitcoin price has fallen -1.0% since this morning's open, now at US$30,037. At one point it hit US$29,801. Volatility over the past 24 hours has stayed low at +/-1.3%. Most of the move down happened at 12:20 pm NZT.

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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48 Comments

by IT GUY | 17th Apr 23, 4:11pm 1681704662

Mortgage demand drops as property market slumps further - NZ Herald

Mortgage spending continues to plummet as home-buyers across the country sit on the sidelines of the slumping property market.

Equifax New Zealand’s consumer credit demand index for the three months ended March shows overall consumer credit demand fell 6.2 percent from a year ago, to its lowest point since the first Covid-19 lockdown in 2020.

Meanwhile, mortgage demand plunged by a fifth compared to a year ago.

by Frank Sobotka | 17th Apr 23, 10:03pm 1681725780

Interest is up and the housing markets down

and you only get mugged if you go downtown (or to the supermarket)

by J.C. | 17th Apr 23, 9:19pm 1681723171

Saw an interesting price comparison today. Jack Daniels and Cola in a can. Has just hit the shelves in Japan for the princely sum in a single can of JPY217 ($2.40 in Aussie dollars).

The same product and formula is being sold on Aussie shelves for $11 (JPY988). Even buying in bulk - a box of 20 cans - is AUD6 (JPY539).

by IT GUY | 17th Apr 23, 4:20pm 1681705234

Alcohol is taxed heavily in Aussie

by J.C. | 17th Apr 23, 4:56pm 1681707409

That's OK then

by kiwikidsnz | 17th Apr 23, 5:02pm 1681707775

...in the last decade or so it's never been worth buying duty free spirits in ANZ when Dan Murphy's & Big barrel are cheaper ?

by Pragmatist | 17th Apr 23, 6:23pm 1681712608

I wouldn't agree, you have to be careful you are comparing the same thing. Duty free often has different sizes, eg just checking Aberlour 12yo Scotch, in duty free is 1L, but retail (Dan Murphy) is 700ml. Both about the same price ~AUD$100, but get 42% more at duty free. And online in NZ is NZD$90 for 700ml.

Ditto with Ardbeg An Oa, 1L in duty free, 700ml in retail, but about the same price.

If you are after cheap spirits, then duty free usually has deals, particularly the two bottles for $79 type deals.

by IT GUY | 17th Apr 23, 7:01pm 1681714888

Fenchurch Liquor Glen Innes - like a duty free shop without the Glamour

by rolande | 17th Apr 23, 8:19pm 1681719542

I love that place too. They got good beers from around the world .

But not rheineck, for that you gotta go to Thirsty Liquor on Line Rd

by Juzz | 17th Apr 23, 10:20pm 1681726813

Haha that's an understatement, haven't been there since the 90's though, it's probably alot nicer these days

by rolande | 17th Apr 23, 8:20pm 1681719657

Beer tax is about 70 yen a can, alcopops a bit less. So in % terms that's still about a third .

by Pragmatist | 17th Apr 23, 5:59pm 1681711187

I couldn't find a price for singles, but Dan Murphys sells 6pks for ~$34. So $6/can, not $11/can. And as has been pointed out, Oz has high booze taxes ($1.76 per can for Jack and Cola by my calcs) so that part of the reason for the price difference. And in 24pk the Aussie price is $4.33per can.

I think the Japanese Alcohol duty works out to AUD$0.37 per can, but the webpage is a little confusing.

by Advisor | 17th Apr 23, 4:16pm 1681705007

The Nats released some numbers today showing a ~57% increase in the number of comms staff in the core public service since Labour took office in 2017.

This is after a bit of number massaging in the sector, thanks to new guidance from the Public Service Commission to remove some bureaucratic roles from the list of comms staff.

In what world are marketing specialists and community liaison advisers not comms staff roles?

by Shaft | 17th Apr 23, 4:55pm 1681707300

Cant the officials actually front thier policies/ comms anymore.

If you have to employ a spinner to manipulate your data/ info politically then whats the point?

Comms people are only employed to diguise the truth in a vérbal mumblefuck with no meaning or value.

Sack the lot and get the over paid department heads to front thier cockups and waste .

by kiwikidsnz | 17th Apr 23, 5:24pm 1681709078

What passes for journalist qualifications these days need a career path to aspire to

by Uninterested | 17th Apr 23, 7:05pm 1681715157

One issue though is that the public are now quite crazy.

Witness the burning effergies of a power company boss a few years ago.

If that was me I'd want a whole lot of Jack Reacher (not Tom Cruise) type spin doctors to front media....

by Independent_Observer | 17th Apr 23, 4:45pm 1681706734

US money supply (M2) growth is negative for the first time since great depression.

https://pbs.twimg.com/media/FtcU74faIAAiBXE?format=png&name=4096x4096

We might be living through a 1 in 100 year period of financial/economic change.

https://pbs.twimg.com/media/FtO1yxzWcAAnmsC?format=jpg&name=large

The last time the Fed hiked interest rates while M2 was declining was 1931.

by Yvil | 17th Apr 23, 4:51pm 1681707101

Not a good omen, I agree, but is "negative money supply growth" not a normal outcome due to money tightening?

by Independent_Observer | 17th Apr 23, 5:01pm 1681707670

In 2008 the U.S. financial system experienced massive asset destruction when the housing bubble burst, taking down a superstructure of derivative mortgage products. To keep banks afloat the Federal Reserve began creating money and purchasing assets. The U.S. monetary basewent from the now-quaint level of US$850 billion in August 2008 to more than US$2 trillion in March 2010. Occasional attempts to slow its growth thereafter caused sharp drops in the stock market, which forced the Fed to keep easing. By late 2014 the monetary base had topped US$4 trillion.

But where was the inflation? It didn’t happen because people weren’t borrowing and/or the banks weren’t lending. U.S. bank excess reserves held on deposit at the Fed had historically been an even more quaint US$2 billion or less, but after 2008 they put the flood of cash on deposit at the Fed, accumulating US$2.6 trillion in excess reserves by late 2014. This resulted in declining velocity of circulation, which neutralized the effect of the monetary expansion.

https://www.fraserinstitute.org/article/inflation-why-now-and-not-post-…

by Independent_Observer | 17th Apr 23, 5:16pm 1681708566

Yvil - it’s a good question. My response is when was the last time we ‘tightened money?’ And what was the result?

It appears it was 1931 and it caused a depression.

And the difference then was they had deflation and the asset/debt bubble had already burst.

This time we still have high inflation and record low unemployment (showing the economy was massively over stimulated and we may need high rates for years to remove the excess demand - but it’s almost inevitable that if/when deflation arrives from an economic slow down, that the Fed will be back to its policies of monetary expansion - but then the thought comes, how bad will things become, between where we are now and when deleveraging and deflation come knocking on the door? And how many quarters/years will that take?).

Be great to hear other peoples views on this though to get more/better perspective/s.

by IT GUY | 17th Apr 23, 6:23pm 1681712624

For a long time the BoJ has also been a source of cheap money, they are reversing, DO NOT UNDERS ESTIMATE the impact of the BoJ alone trying to turn its domestic rates higher, if Mrs Watanabe starts repatriating her NZD and AUD etc etc etc things are going to get way more interesting. at 134 I think USDJPY is high and heading lower....

by Rob Reid | 17th Apr 23, 8:18pm 1681719508

My 2 cents: Govts and the expectations on them are now hugely expensive. We are currently in a brief period of "inflation might almost be topping out!" but the general trend is for one bailout/stimulus after another driving persistent inflation until confidence in currency is down the tubes. Along the way govts/banks will try to switch us to CBCDs, but they will head down the same gurgler. The wealth (redeemable claims on resources) has already gone, and the recognition of the loss will get pushed around to different groups for a while.

So I see bits of tightening, overwhelmed by panicky loosening. Labour is having it's day over Capital for the first time in decades as demographics bite, which also feeds inflation. This has years to play out. It's a big drop in standard living for most of us. And over time there will be a lot of thrashing about to try and find somewhere to park wealth that retains value (PMs, art, BTC, maybe farm land, whatever is next, but not currency).

Kitco interviewed Prof Hanke a few days ago and he was all like "Look - the money supply has stopped growing - inflation is done", but he didn't seem to appreciate that we are in a brief respite before a whole string of pivots.

There will be deleveraging and asset price deflation, but not deflation of cost of living.

by IT GUY | 17th Apr 23, 8:30pm 1681720204

You think therefore that collapse will occur over time? History tells us that collapse is now very quick compared with past events, it could be all over in days./ weeks this time.

by Rob Reid | 17th Apr 23, 8:55pm 1681721723

Yeah, I see it as death of the present financial system by a thousand cuts, many of which have already been dealt.

NZ's balance of payments deficit is an illustration of the slow leak. It will probably lead to steps of currency decline (compared to other currencies), but it's proving to be a long slow one. Long slow withdrawal of boomers from work force, their long slow load on welfare system, long slow burning of the cheapest oil and then the next cheapest, long slow battle to retain skilled labour at a price that is barely affordable, long slow transfer of wealth out of bubbles into wage earners pockets. A pile of sand blowing away, not a suddenly failing decayed sky scraper.

by J.C. | 17th Apr 23, 4:56pm 1681707385

Guessing that the Fed will be able to find a way out of this.

The Fed is bankrupt — and I don’t just mean intellectually.

Like a private bank, the Fed maintains some level of capital as a buffer against losses. When those losses exceed the value of its capital, the Fed becomes insolvent, meaning the liabilities it owes to others are greater than the total value of the assets it holds.

The most recent data show that the Fed owes the Treasury over $41 billion, which exceeds its total capital. The Fed, by common standards, is indeed insolvent.

https://www.aier.org/article/the-fed-is-bankrupt/

by Jonny.Foe | 17th Apr 23, 8:52pm 1681721526

You're smarter than this - this is kids owing money to their parents level drama.

by J.C. | 17th Apr 23, 9:21pm 1681723301

You're smarter than this - this is kids owing money to their parents level drama.

Actually I'm not smart. Central banks are supposedly 'private'. Aren't they?

by Jonny.Foe | 17th Apr 23, 9:48pm 1681724898

No. It's like dad owing mum some money, or a subsidiary company paying a licence fee to it's owners. Take NZ as an example, Govt has s $30 billion credit in their crown current account, which is a $30 billion liability for RBNZ. So what's the overall Crown position? Zero.

by J.C. | 18th Apr 23, 1:34am 1681738456

I think you need to read this. Hogan is discussing 'deferred assets':

Deferred assets represent cash inflows the Fed expects in the future that will offset funds it owes to the Treasury. As the Fed describes, “the deferred asset is the amount of net earnings the Reserve Banks will need to realize before their remittances to the US Treasury resume.” The Fed had already accrued $41 billion in deferred assets, and the amount is only getting larger.

by J.C. | 17th Apr 23, 5:00pm 1681707636

SEC now has insiders protesting against the anti-crypto regime run by Gary Gensler who is positioning himself for political office. The main charge is that the establishment is stifling innovation.

https://www.sec.gov/news/statement/peirce-rendering-inovation-2023-04-12

by Squishy | 17th Apr 23, 5:38pm 1681709911

That food price inflation is really unfortunate. I'd kind of hoped that a supply side response would, at least partially, curtail inflation in areas like food and energy. Instead we are seeing food and energy prices very resilient.

Unless someone has a better idea I suppose we have to keep going with the big rate hikes.

by Nifty1 | 17th Apr 23, 6:18pm 1681712295

How are rate hikes helping food prices? The major supermarkets are killing it in profits regardless...

by Squishy | 17th Apr 23, 9:02pm 1681722144

Raising the OCR will increase its relative value of NZD making food cheaper. Similarly it will create turnover in the jobs market suppressing wages.

by IT GUY | 17th Apr 23, 6:31pm 1681713063

I could ignore the food infaltion as people who cannot afford will buy cheaper farm gate etc etc etc, but the current account (we don't import much food) shows we are still spending it up, hell i am EV shopping.... so yeah OCR goes higher here till we stop spending, funny banks giving 1% loans on EVs...... which must be blowing out the current acc deficeit massively

by Rob Reid | 17th Apr 23, 8:21pm 1681719667

I can't imagine central planners controlling prices (price of money) doing anything good. We should turn our back on central banks and Monetary Policy and see if the dry up and blow away. I don't care how they fiddle with the OCR.

by Frank Sobotka | 17th Apr 23, 10:08pm 1681726109

Energy prices globally have fallen, as has shipping drastically, however these are convenient excuses for domestic failings.

by Wrong John | 17th Apr 23, 6:10pm 1681711851

The big squeeze is on.

by danicriss | 17th Apr 23, 6:54pm 1681714495

Rental prices in Auckland are up due to the need for temporary accommodation for those affected by floods. It's finally visible in the statistics

Market started to ease late March but it'll take a while for this wave to pass

by Palmtree08 | 17th Apr 23, 7:54pm 1681718076

No panic. Our illustrious govt knows just how to keep the housing/rental bubble boiling.

https://www.interest.co.nz/business/120747/more-20000-people-arrived-ne…

by Squishy | 17th Apr 23, 9:05pm 1681722313

I'm not so sure excess demand isn't fueling inflation at the moment.

by Rob Reid | 17th Apr 23, 7:54pm 1681718047

For those who can be bothered staying up, Space-X will be launching the next big (unamanned) test of their Starship, this time with the new booster to lift it to orbit, around midnight NZT tonight. As Musk says, it will be exciting no matter what happens.

My punt on the outcome is that the launch will happen, the thing won't blow up on the launch pad but the booster will run into a few engine problems, fail to get Startship to the planned separation altitude and the mission will abort at that point, crashing booster and starship safely into the sea. Based on comments by SpaceX boss Gwynne Shotwell, this would be good enough to consider the test a success. Musk doesn't want to blow up all their ground facilities (Stage Zero). But if it does blow it will be on the scale of a small nuke.

by IT GUY | 17th Apr 23, 8:34pm 1681720481

I preferred it as the FBR F en cool though

by Rob Reid | 17th Apr 23, 9:00pm 1681722034

I guess you mean Big Fucken Rocket (BFR) - me too. I still call it that in my brain.

by iliketobike | 17th Apr 23, 8:45pm 1681721137

Good call Rob, here's the link to view;

https://www.spacex.com/launches/mission/?missionId=starship-flight-test

by another andrew | 18th Apr 23, 1:07am 1681736874

Thanks so much for this. Watching it now. T minus 13 minutes.

by another andrew | 18th Apr 23, 1:24am 1681737858

Launch called off due to technical issue. Good show though.

by Jonny.Foe | 17th Apr 23, 8:55pm 1681721700

So, pushing landlord costs up by hiking interest rates might be putting pressure on rents, and increasing the cost of revolving credit (on top of high import prices) is pushing up food prices? Sounds perfectly sane.

by Frank Sobotka | 17th Apr 23, 10:11pm 1681726265

Supermarket profits are pushing up food prices, which are astronomically high relative to other countries and our food production power.

Frank would like to see the Comcom grow some cojones and do something about this, we’ve seen Comcom have new power so go and use them.