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
Co-operative Bank tweaked its six-18 month fixed rates, all by 10 basis points and all to the same new rate. The owner-occupied rate increased from 6.35% to 6.45%, while the standard product increased from 6.85% to 6.95%.
Kiwibank followed its comprehensive range of changes to fixed lending rates late last week with a 50 bps rise to its floating rates, wiht the changes applicable from Monday for new lending and May 8 for existing mortgages. The variable and offset variable rates both move to 8.25%, while the revolving rate is now 8.30%.
TERM DEPOSIT/SAVINGS RATE CHANGES
Kiwibank's moved it 90-day notice saver up by 35 bps to 5.10% while the 32-day notice save moves up 40 bps to 4.55%. Kiwibank's call rates all move up by 50 bps to a base rate of 4.35%. (The business on-call rate also has 0.05% bonus rate on top.)
RATING THE CHANCES OF RATE CUTS
Kiwibank economists are pencilling in an Official Cash Rate cut in November of this year. They are confident inflation's past its peak after the drop in annual inflation last week to 6.7% from 7.2%. They expect one more OCR rise, (which they don't think is needed) to 5.5% in May. More widely, market pricing on the wholesale interest rate markets is increasingly looking at the possibility of OCR cuts this year - with the possibility of a cut seen as early as October.
RBNZ TO ALLOW FAVOURABLE CAPITAL TREATMENT FOR BANKS' INVESTMENTS VIA GOVT'S PROPOSED BGF
The Reserve Bank has confirmed banks will have a 250% capital risk weight for equity investments made via the government's proposed Business Growth Fund (BGF). That's below the 400% risk weight their equity investments typically require. The 250% risk weight is in line with what the Aussie parents of NZ's major banks get for investments made via Australia's BGF. The Reserve Bank says this capital treatment will be capped at investments of up to 2% of a bank’s common equity tier 1 capital, also in line with Australia. Last year's Budget proposed a BGF, along the same lines as ones up and running in Australia, Canada and the UK, to improve SMEs' access to finance. Up to $100 million was earmarked for Crown investment as a minority shareholder in the BGF alongside banks. This followed a recommendation from the Small Business Council's NZ Small Business Strategy in 2019 to establish a BGF. See more on the proposed BGF here.
TOWER CREDIT RATING AFFIRMED
Global credit rating agency AM Best has reaffirmed Tower Limited’s Financial Strength Rating as A- (Excellent), with a stable outlook, after completing its annual review. Tower’s Long-Term Issuer Credit Rating was also affirmed as a- (Excellent), with a stable outlook. AM Best assesses Tower's balance sheet as very strong, as well as its operating performance, business profile and enterprise risk management. AM Best also noted Tower’s prudent capital management and that AM Best expects Tower’s risk-adjusted capitalisation to remain at least at the very strong level over the medium term. Tower Chair, Michael Stiassny said the confirmation recognises Tower’s strong performance as it remains resilient following recent large events while continuing to support customers and communities.
HOME DETENTION FOR TAX EVASION
A Bay of Plenty man, who claimed his company was not subject to New Zealand law, has been sentenced to home detention on six tax evasion charges and ordered to pay $30,000 in reparations. Stephen George Gibson Clark of Opotiki claimed his agricultural and fertiliser business company Probitas Systems NZ Limited (“PSL”) was vested in a Maori trust and was not subject to New Zealand laws. However, Inland Revenue told the company many times that there was no basis in law for this position. Despite multiple requests, Clark had failed to supply information in relation to the company’s tax affairs as required under Section 17 of the Tax Administration Act 1994. That meant PSL evaded a minimum of $55,919.58 of income tax and GST.
BANKS SEE 'SUBDUED' MORGAGE BORROWING CONTINUING OVER NEXT SIX MONTHS
The country's banks are telling the Reserve Bank that borrower sentiment 'will likely tend towards more caution' due to the fast-changing housing market conditions
SWAP RATES FIRM SLIGHTLY
Wholesale swap rates are probably slightly firmer Monday in what's a quiet day ahead of a public holiday. 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 5.59%. The Australian 10 year bond yield is now at 3.47% and up 1 bp from the weekend. The China 10 year bond rate is down 1 bp at 2.84%. And the NZ Government 10 year bond rate is now at 4.18%, and that is up 2 bps from the weekend. The UST 10 year yield is at at 3.56% and down 1 bp.
LISTLESS EQUITIES MIXED
The S&P500 went into the weekend with a modest 0.1% gain. Tokyo has opened the week up 0.3% but Hong Kong has started its week down -0.5% and Shanghai is down another 0.2%. The ASX200 is just up a touch in afternoon trade and the NZX50 is showing a 0.3% gain late in its session.
GOLD SITTING UNEASILY BELOW US$2000
In early Asian trade, gold is down slightly, having fallen with a bump in the weekend. It was down around US$3.50 on Monday to US$1980/oz.
NZD STILL DRIFTING LOWER
The Kiwi dollar has dropped a little more, from US61.4c at the weekend to US61.3c a short time ago. Against the Aussie we are not much changed at A91.8c. And against the euro we are slightly lower than over the weekend at 55.8 euro cents. The TWI-5 is at 68.6, which is down 50 bps from the weekend.
BITCOIN TRYING TO RALLY
The bitcoin price has been having an up-and-down Monday as the cryptocurrency looks to rally from losses in the past seven days, during which it has dipped back under US$30,000. At time of writing Bitcoin was up 0.6% in the past 24 hours at US$27,760, having come close at one point to climbing back over $28,000.
ANZAC DAY
Readers outside New Zealand should know that ANZAC Day is on Tuesday, April 25, a full public holiday.
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49 Comments
"pencilling in an Official Cash Rate cut in November of this year. They are confident inflation's past its peak after the drop in annual inflation last week"
This, the RBNZ moves, is not only about Inflation. We have a whole economy to be restructured, and the pollies are incapable of doing that.
Next OCR a rise of 0.25% looks a given as the RBNZ doesn’t easily dismount once it’s got itself into the saddle. More so though it would be an action preemptive, as far as the banks softening interest rates premature to RBNZ’s strategy if there is one.
RBNZ just needs to hike enough to maintain interest rates where they are now.
Every month more unsuspecting home amd businesses owners get their discretionary spend smashed as their loans roll over... and local inflation takes another hit.
I reckon will probably take until end q1 next year to hit enough people have inflation moving down around 4% ... then maybe RBNZ will shave off .15 or somthing to help businesses but simultaneously warning that if inflation starts to rise the rates will be back up in a flash.
They cant risk house prices looking likely to rise until inflation is steadily within targets for a while.. else a boom would cause spending qnd inflation again...
You are right OldSkool, I think they will do what they said they would do 5 months ago, that is take the OCR to 5.5% and hold it there for a period. The patient hasnt had all their medicine yet............
The RBNZ are walking a fine line towards overdose.
with the possibility of a cut seen as early as October.
Why the hell would you raise again only to drop the OCR tout suite This shows the RBNZ has lost all credibility.
The higher any unnecessary OCR rises go, the faster will be the cuts imo
Dropping as low as they did and lowering the LVR already did that. Time to share that crazy train, just not in favor of debt speculation this time.
Unfortunately it’s also in favour of a terrible recession. While the idea of a recession is popular amongst interest commentators, it won’t be that popular with working class people.
Just out and up on my reading list. Gladstein is a sharp thinker.
The IMF and World Bank were created to help countries survive financial crises and to help them develop into prosperous economic actors. But their 75-year track record shows the opposite: their loans and structural adjustment policies have plunged poor countries into impossibly large debt traps and forced the Third World to focus on producing goods for consumption in the West, instead of growing consumption and industry at home. The Bank and the Fund’s “development and assistance” has been anything but. The reality is a history of neocolonial exploitation with shocking results.
Alex Gladstein has a lot to say about Bitcoin, human rights, financial privilege, and personal freedom. In his first book Check Your Financial Privilege, he says it, starting with the fact that anyone born into a reserve currency like the euro, yen, or pound has financial privilege over the 89% of the world population born into weaker systems.
https://www.amazon.com/Hidden-Repression-Exploitation-Development-Glads…
The book sounds interesting but also like a paid advertisement for Crypto.
I would like to see the educational Degrees of Kiwi Bank economic forecasters.
The only qualification is being able to toss coin .
I would like to see the educational Degrees of Kiwi Bank economic forecasters.
All exceptional no doubt. But as anyone knows, the easy path to strong academic pedigree in economics is to pay homage to the status quo and the prevalent thinking.
I am not convinced there will be a rate cut this year. Things are STILL (today) going up at the supermarket. Fuel subsidy definitely ending in June will flow straight into the economy. Many sectors pushing hard for big pay rises. Kiwibank seem a little ahead of things here, I could be wrong. Also depends also on what the fed does, affecting out dollar.
BUT... Kiwibank has topped the big 4 in the savings arena today, their on-call account at 4.35% leads the pack. (4.35% on-call v ASB Premium saver 4.15% for 3 months), a no brainer there, off to KB.
Zero chance of rates cuts this year. As you said that petrol tax going back on is going to be an overnight killer, watch for ques down the road the day before on the 6 O'clock news. Cuts are still 12 months away.
Still 8 months left in this year, that is a long time. If inflation drops and a recession hits, rate cuts are on the cards. Although I agree this year is unlikely, especially with our quarterly CPI stats which will mean the RBNZ has to wait a fair while to know if inflation is really dead.
When rate cuts happen and prices are still rising we will see the NZD drop like a stone. Kiwibank economists are trying to calm the sheep. They know once people understand the situation all hell will break loose.
I see a problem here.
A majority of millennial and Gen Z Americans, born between 1981 and 2013, now believe their best chance at affording to buy a home is to win the lottery.
https://www.inman.com/2023/04/19/millennials-and-gen-z-have-a-plan-for-…
Yeah working hard these days to buy a house is so Gen X.
A boomer, a millennial and a zoomer walk into a bar
That's right- Gen X just got ignored again.
millennial and a zoomer too health conscious to go to a bar aren't they?
Oh well, at least we are the coolest generation.
For two children, born 1969 & 1973 kept for the first a Life Magazine from week born and the second a copy of New Yorker. Presented on 50th birthdays, latest just recently. Then they knew what were we having to cope with before they came along. Nixon, bouffant hair, flares, motors with tail fins, agitator washing machines, witches britches you name it.
1969: Apollo 11, Woodstock, birth of the Internet (Arpanet)...
1973: The United States ends its involvement in the Vietnam War after the signing of the Paris Peace Accords,
OPEC oil to increase by 200%, Roe vs Wade legalises abortion...
From North to South. Lion Red, Red Band, Crown, Speights. Say no more.
Tell your eldest they were born the year the aspirations of western civilisation peaked, and the decline into realisation since then is all their fault.
That doesn’t surprise me. I believe the best chance for me to upgrade my home is to win the lottery.
I sold at the top, it was like winning the lottery
If I’d sold at the top would have made about $350,000 on current value. That would have taken me a long way towards a new house.
I sold at the top (November 2021) and made $345k on top of our $210k purchase from 2017 (Wairarapa). This coupled with our initial deposit took us a very long way. Although that equity is shrinking at quite the rate of knots according to ANZ, but a forever home.
How much for...
🤣 Actually you dont need to say as you've repeated it a dozen times.
Anyway bravo. I hope you can rinse and repeat
thanks. Pay yourself first and that bollocks.
Good strategy
I bet you're welcomed by Mr fat cat banker... what TD rate would you accept IT GUY
Remember when winning the lottery was enough to buy a big flash house with pool and views and a couple of new cars. Now it would barely buy you a rot box in south Auckland.
Dont worry.....South Auck rot boxes will be back to 350 - 450 within the next 4 years, when we finally bottom out and scape along for a while.....
ECB To Keep Raising Rates Unless Wage Growth Slows
https://twitter.com/LiveSquawk/status/1650351695275106304
And chances that wage demands are going to ease - anywhere ? Nil.
Crazy how you could define 6.6% jobless rate in the Eurozone as ‘tight’ labour market conditions. Then again, their workforce participation rate is higher than ours (74.7% vs 71% in NZ vs 66.7% in Aus vs 62.6% in the US).
"Nationwide childcare provider Rainbow Corner is an example of this, Fisk says, with IR having applied to have the group and its three subsidiaries put into liquidation last month with $6 million in unpaid PAYE and GST"
“Businesses that have been able to keep trading because they haven’t been paying the PAYE and GST, what that is doing is creating more of a problem later down the track.”
Two quotes from NZ leading insolvency practitioner in today's stuff. And from the latest treasury report:
The core Crown residual cash deficit of $20.3 billion was $0.3 billion higher than forecast, primarily driven by higher than forecast net operating cash outflows due to tax receipts being lower than forecast and differences in the timing of operating payments being made.
No wonder headlines like these appear: NZD softer than its peers!
Some great analysis on the U.S. housing bubble by Nick Gerli. Here's some of the highlights but the whole thread is a great narrative:
-- "Home Prices are growing way faster than Incomes. Real Home Prices up +102% since 1970. Real Incomes only up +26%."
-- "When I talk to real estate investors, most of them are still thinking like its 2019 or 2021. They think higher rates are temporary. And that there won't be bad economic consequences coming. So they still have a "rosy" view of things, built off two decades of Fed bailouts."
-- "Now some people disagree with me. They say that there's a "Housing Shortage" that will keep prices high. They base this argument off the historically low inventory levels present in today's Housing Market."
"The reality is that we actually have plenty of houses in America. The ratio of Housing Units / Population was 0.43 in 2022. That's the highest level ever. The ratio of Housing Units / Employment was 0.90. Above long-term average."
https://twitter.com/nickgerli1/status/1649464895065169939
When things get tough people share houses and kids move back home, it's not that tough yet in NZ, but I think its coming. I still do not understand why we have such levels of unempolyment..... anyone could get a job here still.
That’s another reason I don’t think we’ll have a rental crisis in the next 1-2 years - many people who lose their jobs will stop flatting and return to live with their parents, or maybe with friends.
Yes absolutely
One question. Have you ever flip flopped before?
🤣 same response as I gave to IT person above
"Kids moving back home and people sharing", that started 10 years ago in NZ didnt it? Also, many recent migrants have 3 generations sharing the same house. Many of these cultures parents will not go the the Ryman and Sommersets, they stay with their family in their culture.
Yes and they help out with child care which saves other family members serious dosh. There is so much to be said for multigenerational living. Makes it hard for profit generating care companies to extract their money!
Who would become a landlord in this environment https://www.nzherald.co.nz/nz/papakura-rental-property-in-auckland-comp… Labour SOFT ON CRIME I wonder if this was CIS WHITE MEN
Papakura is the new Otara. Otara is considered central and affordable for fhb... by some people at least.
Kiwibank economists are pencilling in an Official Cash Rate cut in November of this year.
Will they put their money where their mouth is? I'd be interested in a slice at evens or better.
This will have to be after some dire economic results or the RB won't move
Maybe Kiwibank is really a mouthpiece for Robertson. He is softening us up for very bad results, so that when the govt release just bad results we will all breathe a sign of relief. And be grateful to labour and vote red
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