A review of things you need to know before you sign off on Tuesday; no retail rate changes, Westpac's forecast moves financial markets, ponzis and fraud cases, swaps rise, NZD rises, & more

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
No changes to report today.

TERM DEPOSIT/SAVINGS RATE CHANGES
No changes to report here either.

A HIGHER PEAK
Westpac sees surging inbound migration adding demand to the local economy, with Westpac economists now forecasting a net gain of +100,000 migrants this year. And they say that means the OCR could peak at 6% by August and remaining there until mid- 2024, which is higher than any previous forecast. (It is currently 5.25% and will be reviewed again next Wednesday when it is widely expected to rise by another +25 bps.)

NON-RESIDENTIAL BUILDING CONSENTS SLUMP WORSE THAN FOR RESIDENTIAL
A significant downturn is likely for the entire building industry, not just housing. The building industry slump is likely to extend beyond residential market and hit commercial building projects as well.

A CHRISTCHURCH PONZI
A Christchurch couple is facing Serious Fraud Office charges for allegedly running a $4.1 mln Ponzi scheme using funds obtained from more than 60 investors, the SFO has announced today. Thomas Alexander Kokouri Tuira (also known as Alex Tuira) and Aroha Awhinanui Tuira each face 115 charges of obtaining by deception. The SFO alleges that between 2014 and 2021 the defendants exploited their clients’ trust to obtain funds which were not invested legitimately, but instead used to pay other investors in a Ponzi-type scheme or used for personal and business expenses.

HAPPY TO FUND US
Holding of NZ Government bonds by foreigners remains popular. Remember all NZ Government debt is in NZD, so the Government essentially takes no FX risk. But there is $108.6 bln gross of this debt outstanding and 62% is held by foreigners who seem happy to fund it (and take the FX risk or pay the hedging cost). A year ago gross debt was $92.9 bln with $54.4 bln held by foreigners or 58.5%. So foreigner appetite is rising no matter which way you look at it.

FALSE CLAIM FOR COVID RELIEF BRINGS JAIL
An Auckland man who made fraudulent applications for COVID-19 financial relief has been jailed. The Small Business Cashflow Loan scheme was implemented under urgency in May 2020 using a “High Trust” application model so small businesses could access funds quickly. Jason Laurence Gray made two applications for loans even though he knew a business he was part of didn’t meet the loan scheme criteria. Gray applied for $27,000 and received $13,600. He has been jailed for 20 months.

RARE TERRITORY CONFIRMED
Fitch Ratings has affirmed Australia's Long-Term Foreign-Currency Issuer Default Rating at 'AAA' with a Stable Outlook. Currently Moody's have Australia rated , and S&P have them rated AAA too. Australia is only one of nine countries to be rated AAA by all three major credit rating agencies.

LOW-INCOME CONSUMERS VERY UNHAPPY
Consumer sentiment slumped in May in Australia, according to the Westpac-MI survey. It dropped by almost -8% from the prior month when only a -1.7% fall was expected. But recall it did jump more than +9% in April. Since April they have had another rate increase when none was expected, and they had a Budget that is being seen as more restrained than expected. This sentiment result highlights continuing pessimism among households, and especially low income renter households, at levels that first arrived in November and hasn't really shown any sustained improvement from then. This overall pessimism is reflected in new home sales remaining at rock bottom levels.

CHINA RETAIL STRONG
China said its retail sales rose in April by a strong amount, up +18% above year ago levels. But remember retail sales were down more than -11% in April 2022. Still that is only a +5.3% gain above April 2021. In that same period, consumer price inflation rose +1.6%, so there are real gains here. This 2023 year-on-year gain underpins the good service sector expansion there.

BUT CHINA INDUSTRIAL PRODUCTION NOT STRONG
China also reported that industrial production rose by +5.6% year-on-year in April, but this was below market forecasts of an +11% rise, so it comes with a tinge of disappointment. But it is faster than the 3.9% rise in March and it was the fastest growth in industrial production since last September. Looking behind this production, we see that electricity production was up +6.1%. Their domestic coal production was up only +4.1% but imported coal was 140 mln tonnes in April, a year-on-year increase of +89%. (Given that New Zealand emits 79 mln tonnes of CO2 in a full year from all sources, even if we cut that to zero, China would have accounted for almost that just from the increase in imported coal in just one month.)

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SWAP RATES RISE
Wholesale swap rates are probably a higher today not this time on international influences, but perhaps in response to the Westpac OCR forecast. 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 +6 bps at 5.64% and 39 bps above the OCR. This is an unusually large daily rise. The Australian 10 year bond yield is now at 3.44% and up +3 bps from this time yesterday. The China 10 year bond rate is little-changed at 2.74%. But the NZ Government 10 year bond rate is now at 4.19% which is up +9 bps, and back above the earlier RBNZ fix at 4.12% which is up +7 bps from yesterday. The UST 10 year yield is now at 3.49% and up just +3 bps from yesterday.

EQUITIES MIXED & MUTED
The NZX50 is virtually unchanged again today near the close. Equity markets are awaiting Thursday's Budget, although what for isn't clear. The ASX200 is down -0.3% in afternoon trade. Tokyo has opened its Tuesday session up +0.7%. Hong Kong is up +0.5% at their open, but Shanghai is down -0.1% as 'stimulus' talk wanes. On Wall Street, the S&P500 ended its Monday session up a modest +0.3% with a modest afternoon flourish.

GOLD HOLDS
In early Asian trade, gold is holding at US$2017/oz and virtually unchanged from this time yesterday. It closed in New York earlier at US$2016/oz, and in London at US$2015/oz.

NZD RISES
The Kiwi dollar is back up +½c from this time yesterday at 62.5 USc. Against the Aussie we are up +¼c at 93.4 AUc. And against the euro we are up too at 57.4 euro cents. That means the TWI-5 is holding at 72.1 and up almost +2c from this time yesterday.

BITCOIN SOFT
The bitcoin price is soft today, now at US$27,022 and down -0.9% from where we were this time yesterday. Volatility over the past 24 hours has been modest at just under +/- 1.5%.

This soil moisture chart is animated here.

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