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%.
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74 Comments
never heard of so many Ponzi schemes until I came to NZ, what is it about NZ that they happen so often?
A lot of ignorant people live here, very poor financial education and a lack of consequences.
Yes, a lot of ignorant people live here.
Most of them are financially educated - hence the ignorance.
And that 'education' calls consequences, externalities.
A lot of people lost billions in the finance collapses in 07 - 08, but that was partly due to poor regulations and as a result they have made changes. We do need protections and regulations in place to protect consumers. Also the GFC got blamed. NZ is an ambulance at the bottom of the cliff. You just need to look at that tragic fire in Wellington, and only now do they see some major holes in the various fire codes and why such a building didn't need to have sprinklers. NZ needs a crisis to fix problems. Otherwise the people in power walk around in tunnel vision. I am just waiting for the next electricity / power crisis, due to the lack of investment in hydro, which a growing EV fleet and growing population from migration
There are many good people who feel as you do, you are not alone.
One of our main economic drivers is selling our houses back and forth for more and more debt we expect following generations to pay. It's a mentality ripe for ponzis.
You'll be told that this type of view is 'redonkulous' if not careful.
White collar crime does not make the news as often as Vape shop smash and grabs,..they even have their own low risk security jails (if they ever get prosecuted) - golf anyone?
Get rich quick.
Coupled with naiety.
Dumb gullible kiwis.
If you give me a 100k now I will tell you how to avoid such schemes. Trust me, what could go wrong.
Jason Laurence Gray. Probably the first of many...
Definitely not the first, and won't be the last.
But there is $108.6 bln gross of this debt outstanding and 62% is held by foreigners who seem happy to fund it
Addition of NZ bonds to a global bond index has helped, but the main reason for the increase is our trade deficit. In crude terms, we offset our trade deficit by exporting Govt bonds, now our number one export!
surely its number two export. Number one is still qualified people to the lucky country across the ditch
What am I missing in respect of Treasury's claim of outstanding bond issuance?
Westpac cynically pulling market expectations up a week ahead of the OCR decision. Anyone would think that higher interest rates are in their, ermmm, interest.
It has to go up, its still way too low. The result of it being too low is that it going to take much longer to pull in inflation along with the risk it doesn't work at all because the market has time to respond to it and adjust. At least a 25bps rise with possibility of a 50 but its unlikely, the housing market cannot take it.
I believe a solid argument could be made that to tame inflation an extremely hard landing for the housing market is required.
I'd appreciate it if an interest.co.nz reporter asked Mr Luxon if National want house prices to go UP or Down.
Asking 7 House Luxon if he wants house prices to go up or down is a pointless question.
As Taleb says 'don't tell me what you think, show me what is in your portfolio'.
There are potential advantages to having wealthy politicians - they are potentially harder to bribe and can potentially make tough decisions/change without the fear of being left destitute if not re-elected.
Saying that, ummmm, I may have.. potentially started the "7 house Luxon" thing on the blogs after Luxon's ascension to the leadership and the corresponding Checkpoint (with Lisa Owen) interview.
Let's be real, National use to be the party of, "there is no housing crisis", so a well deserved barb.
Best to just ask him though, "Oi! Luxon! House Prices - UP or Down Mate?
Luxon might be trying to position himself for a board position at ANZ like his mate John Key? Why not.....spend a few years promoting housing and debt speculation as leader of the national party and then jump ship to a cruisy roll with one of the big banks.
He strikes me as a man who beats around the bush.. someone who has a hard time speaking uncomfortable truths about the State of the Nation.
Unfortunately for him, due to the state of media in NZ, speaking the truth is the only real power available to him.
So far he is too foolish, badly advised and wilfully blind to see this. As such he's self-neutered and rightly appears useless.
Yip - the problem could also be the National party and its culture as well. I was pretty dismayed at Peter Goodfellows repeated poor judgement when selecting troubled personalities into the party while president. Perhaps Syvia Wood can fix all that. Not sure.
Jury well out on the ability of very old white haired people to actually choose the correct candidate, hence Acts rise
?
National still select by local committee, they are not young... Luxon at the Tukituki wool shed meeting, looked like most would not make the next election.... National only appeal to the middle and old, the youngsters are all waiting at the viaduct for David to get off the boat each election cycle.... while the Nats are up at sky city, read the room you do not have enough votes in a democracy
IT GUY, unfortunately, it might be time to ACTivate the Seymour bot.
as you see Maori Labour moving left you will see sensible Nats moving right.....
I bet he has cash and TDs to.
Jealousy is such an ugly behaviour!... usually held by the wannabes than the "want for nothings"!
7 house luxor or spin artist Ardern?... I know who I would trust with my money!
If you think hiking rates is going to 'pull in inflation', you might want to look at the data that will come out later this week (PPI). Businesses are now saying loud and clear that higher interest rates are pushing their prices up - debt costs are now a whopping 15% of gross business income! We have an OCR / price spiral. It's brilliant.
Yip been warning about this for a few years when rates started rising - that given the quantity of debt that everyone (companies and some households) that rising costs of debt will be passed to consumers as price rises (and demand for wage increases) - which will be measured as even more inflation - which will result in the central bank raising the cost of debt even higher.
The only other option from the business perspective is to shrink/become more efficient - but that may only be achieved by laying staff off. Or to shut down the business completely (or pay down debt - but that isn't good for profit/employment).
Maybe they're just holding too much debt, not all businesses have excessive debt levels. Those who don't face significantly increased debt servicing costs will not need to inflate prices as much, this should increase their market share. Those beholden to debt will suffer a loss in profitability and market share.
RBNZ publish data on loan purpose. So much of our business is seasonal that kiwi businesses rely heavily on revolving credit. Leave the econ 101 in the classroom!
Jfoe the OCR has to get far enough ahead of the inflation rate to slow it, Taylor rule. But they shat in their own bed with ZIRP........The Taylor Rule is a formula tying a central bank's policy rate to inflation and economic growth. Developed by economist John Taylor in 1993, it assumes an equilibrium federal funds rate 2% above the annual inflation rate.
Like I said, get out of the econ 101 classroom. All of this 'OCR higher than increase in price level' crap is nonsense. The real world don't beat to that drum.
Hi Joe did you graduate from the university of life, after undergrad at the school of hard knocks?
Dp
The COVID fraud case seems quite a harsh punishment however he did have two charges laid by Inland Revenue; as well as a police charge of using forged documents; and a Corrections charge of breaching home detention.
If they apply a scale so that $13,600 gets you 20 months when the big ones start coming (e.g. over $100k) through for the criminals should be getting 5 years plus.
He got 20 months for scamming $13600 from the government. That seems like a fairly light touch.
Harsh?
Having his right hand cut off and a picture of the severed appendage posted on the IRD website, as a warning to others not to steal, might be considered harsh. Or perhaps during times of social emergency funding (also known as "Look! Free money!"), it might just be appropriate.
Well harsh by the standards of the current zeitgeist but obviously not by the standards of the interest.co commentariat. Just saying there was more to it than the fraud thing.
Others will get lighter sentences if they fess up, pay it back and don't abscond from home detention.
Actually ya get less for manslaughter these days and 40 months less for ram raids.
This Government is fecked up!
Worst Pm ever Labour soft on crime
I would say that's pretty harsh. There's violent offenders who get away with a lot worse.
That's a month for each $650 stolen. Now imagine applying that to all of the criminals that get prosecuted.
In addition, we have to pay $80,000 a year for the privilege of punishing him!
Agreed, it does seem on the harsh side to me unless the sentence is also factoring in the other charges as in he's going down for multiple crimes? (I couldn't gather that from reading the IRD blurb) when you consider that you can go ram raiding, violently assault people or drive drunk, crash and kill someone and spend less time in jail - if you go to the slammer at all - or even walk away with home detention for rape.
I'm guessing it's because he was deliberately fraudulent in his activities as opposed to just being negligent in checking the eligibility criteria.
Can someone who actually understands this stuff chime in?
He clearly didnt qualify for a "cultural report".
He should have self identified as local iwi... why not ethnic heritage... seems as difficult to fake as chromosome based sex. So sick of this BS do the crime do the time.
Maybe his sentence is about right, and the criminals that you are referring to are being let off lightly. I still think 3 strikes rules for violent crimes, and dropping cultural reports which are nothing short of excusing people for their crimes.
Watched the 7 News 'Busting the Scammers' doco last night. To be honest, this was typical boiler room business out of South-East Asia. Nothing particularly revealing but the scale of it (USD1 billion+) was fascinating because the kingpin himself was not living particularly large. I suspect payoffs to Malaysian police, politicians, and officials would have been substantial. It also reminded me of the Thailand based boiler tooms and scams as they are a particularly nasty lot (NZer was assassinated in broad daylight in the central city). Many of the ill-gotten gains have been poured into tourist businesses and property throughout Thailand, including the notorious red light districts.
British journalist and foreign correspondent Andrew Drummond did much to expose these boiler rooms and also highlight the incompetency and uselessness of ASIC and the Australian Federal Police. However, it appears he got too close (which is something he alluded to publicly and relocated back to the UK from Thailand) and most of the content that appeared on his own website has been taken down.
Another reason why the desperation with immigration (and with NZ having boomers leaving the workforce at present):
"Anyone remember when Japanese home prices peaked, then when working age demographics peaked, home prices collapsed for 20 years and never fully recovered"
https://pbs.twimg.com/media/FwMgVE8acAAe5Wz?format=jpg&name=4096x4096
Yes, but the argument goes that NZ / Australia are migrant countries and Japan is not, so what happened in Japan cannot happen here.
But as you can see from both govt responses (NZ/Aust), they're opening the floodgates in a desperate attempt that seems to a tactic in putting a floor under house prices.
Matt Barrie's superb opinion piece summed it up nicely (https://medium.com/@matt_11659/the-great-australian-scream-dbc4095af1a0)
Albanese must have recently been to a strip club, because he’s gone berko on immigration: increasing permanent migration to 195,000, abolishing the skills list, guaranteeing 2.1m temporary migrants a path to citizenship, halving withholding tax on foreigner developers, mulling rent caps, and allowing New Zealanders citizenship. What’s next, Tasmanians?
What’s crazy about the ponzi is 69% of immigrants are in rental stress, with outgoings greater than income, the second worst group after the elderly. That’s why they say migrants are net contributors to the economy, because they’re drawing down their savings to live.
I seem to recall Ireland being a migrant country and having an outflux of people when their property entitlement scheme collapsed too.
Ireland has also had an influx of migrants. It's also quite a racist place.
https://www.irishcentral.com/opinion/ireland-anti-immigration-epic
It's amazing that Ireland has a million fewer people now than it did in 1841.
Not really that's what a massive potato famine does in 1844. A million people starved to death and a couple of million people left the place. The nut cases stayed behind and started killing one another over religion in the 1970's. By the way the place is still not sorted, the neighbourhood's still have barbed wire up separating them and the communities still don't mix and its 2023. Its amazing there is anyone still living there.
Consider, though, that the population of England went from 15M in 1841 to 56M in 2021.
Albanese government offers 10.5pc pay rise to public sector (AFR)
Someone tell me again that our CPI and the OCR isn't going higher. But we'll be right. Kiwis will just sit back and go for less. ( sarc/off)
The RBNZ has to get out ahead of this on the 24th, or we are going to be in all sorts of (foreseeable) strife.
All of the swaps 1-10 years all appear to be stuck in a very flat channel and not giving any sign of where to or which way next.
Shocking reasons these crucial indications are down so much. Way beyond 2008.
Forward rates and forward rate spreads have substantially deteriorated since March. They were already more inverted than at any time in 2007 leading up to 2008. How could they be so much worse in 2023? You have to understand what forward rate spreads are telling us and why.
Oliver Hartwich on the mediocrity of NZ. Nothing too startling here.
This article was first published in The Australian titled 'Unaffordable, unwelcoming, NZ’s land of the long white cloud now just land of mediocrity'.
Instead, today’s New Zealand feels like a country that has conspired to make itself poorer at every opportunity.
If someone had put the devil in charge of New Zealand’s politics, the outcome could have hardly been worse.
This is not a verdict on the current government, or at least not just that. Developments have been going in the wrong direction for many decades, under governments of all stripes, shapes and colours.
https://www.bassettbrashandhide.com/post/oliver-hartwich-from-godzone-t…
Its apparently too expensive and contrary to climate change to even make wine in this country any more. Just chuck the grapes into tanks, then ship it off to the UK to make the wine. Another "value add" slipping away from NZ. Just like timber. Will there be any thing actually produced in NZ in future, or are we just becoming the dirt in which things are grown and then moved overseas?
https://www.stuff.co.nz/business/132042248/uncertainty-over-future-of-v…
It's not really much in the way of 'value add.'
It is, if you consider the value of the export. What is a tank of grape juice worth compared to 12,500 bottles of premium branded wine? Like timber, what is the difference in value between shipping a rough log vs shipping milled lumber? We export things in their raw state, and then pay 10 times as much to import them back again in their finished form.
Well your example depends on who owns the brand. Bottling itself is not value add. Coca Cola owns the brand but do not own the bottling business.
.
We used to make things in this country, build things.
now we just stick our hands in the next guys pocket
Stevens steps back from the fan The former RBA governor says it will be difficult for central banks to achieve a soft economic landing and reduce inflation that is “still way too high”.
It’s a shit sandwich it’s just the thickness of the bread for the leveraged now
Property starts have really turned ugly in China. Won’t be good for Aussie, nor the global economy in general:
https://www.macrobusiness.com.au/2023/05/chinas-unstoppable-property-co…
Re: building consent slump. I don’t think it’s right to say the commercial slump is bigger than residential, although it looks like that at face value. The residential side has a greater lag, that’s why commercial looks worse right now. Many commercial builds, especially warehouses, are relatively simple compared to residential in terms of consenting. Most commercial building consents are turned around significantly more quickly than most new residential consents for new dwellings, hence the slump in consent issuance is showing up quicker in commercial.
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