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 so far today.
TERM DEPOSIT/SAVINGS RATE CHANGES
None here either.
DTI RATIOS DROP VERY SHARPLY - AGAIN
Latest RBNZ figures show new mortgage borrowers stretching themselves much less than has been seen in recent years in regards to the amount of debt they're taking on relative to income.
86.5% EFFECTIVE SO FAR
The 2023 Census date was March 7, 2023. Now Stats NZ says not-quite 4.5 mln people have returned their census forms so far, and households that have not taken part yet can expect to receive a Final Notice about the census. The 2018 census, which was considered an operational failure for which the head of Stats NZ lost their job, came in with a 97.4% population coverage. The 2023 census is only running at 86.5% so far. The is about 700,000 uncounted. "We are focusing effort on lifting responses from Māori and Pacific peoples, with the support of partnerships and collaborations," they say.
MEO-GROSER TO AVANTI
Avanti Finance has appointed a new Chief Risk Officer, Olivia Meo-Groser. She was previously at the now-closed New Zealand operation of hummgroup, where she was the General Counsel and Head of Operational Risk.
HOUSEHOLDS TO PAY MOST OF THE +$7.6 BLN RISE IN TAXES
The Budget revealed that the Government expects to collect $133 mln in tax and other 'revenues' in the 2023/24 year, or 32% of GDP. Taxes on individuals from income taxes and GST make up more than half of this. The PAYE collected is expected to rise +6.0% and GST will rise by +9.2% in a year, together an extra +$4.7 bln or an extra +1.1% of GDP. We have started releasing our summaries of the tax and spending data from Budget 2023. The tax/income data is the first summary to be released, and is here.
MOVING SURPLUSES, BUT NARROWER
April is an unusual month on trade front, a month when we report a surplus. April 2023 was no different, and a +$427 mln surplus was achieved. Goods exports rose +10% from year-ago levels to $6.8 mln in the month. Goods imports rose +12% to be $6.2 bln. That trend meant the April surplus reduced from the +$469 mln in 2022 and the +$558 mln in April 2021. Our surplus with China actually picked up to +$759 mln in April 2023, a rise from +$471 in April 2022 - so we are more dependent on them recently, even though for the full year to April that dependency is decreasing fast. In that year, our surplus with China has been +$920 mln and down from +$2.164 bln in the prior April year.
RISING RATES COST THE CROWN BILLIONS
The Budget 2023 revealed some large rises in the upcoming NZGB bond program yesterday. There was a bond tender under the old program today and it was well supported, but at rising yields. There were 110 bids todalling $1.388 bln for the $400 mln on offer in three parcels. The May 2026 $200 mln was broadly supported and resulted in a yield of 4.69%, up +36 bps from the prior equivalent tender two weeks ago. The $150 mln May 2032 parcel had 51 bidders but only 3 won anything. They bid 4.40% on average, up +27 bps from two weeks ago. The final $50 mln went for a yield of 4.65%, only +15 bps more over the past two weeks. The Government is only paying about -1% less than similar term deposit rates. The Budget allows for the Crown to pay $5.6 bln in interest ("debt servicing") in the next fiscal year, a +9.0% increase from the current year, and a massive +445% increase from the 2021/22 fiscal year ($4.0 bln)
CARDS PUT AWAY
Spending using credit cards has been falling recently and was down to $3.5 bln in April. It peaked recently at $4.2 bln in December. It all-time peak was $4.3 bln in December 2021. The April 2022 spending level was a miniscule +$12 mln more than year-ago levels and far less that can be accounted for by inflation. If this spending just kept pace with inflation it would have been more than +$200 mln higher.
NO STRESS SHOWING YET
Weak credit card spending is flowing through to lower credit card balances and lower credit limits. And helpfully, the proportion of balances that incur interest isn't rising. So that suggests credit stress isn't actually showing up in credit card activity. Lower activity, yes, but not higher balances, and not more slipping through to be being interest bearing.
BEATING DEFLATION, FINALLY
Japanese inflation came in at 3.5% in April, well above the expected +2.5% and above March's 3.2%. Japanese inflation is settling in above the Bank of Japan's 2% target rate. That's twelve consecutive months higher than that target.
THE ASSOCIATION GETS UNCOMFORTABLE
In Australia, the brand damage to PwC is getting worse. And now corporate clients are trying to distance themselves from the firm as their tax scandal creates a bad odour. In New Zealand ASB, Kiwibank and Westpac are all PwC clients. The odour hasn't spread to New Zealand yet, but the parents of ASB and Westpac NZ may well trigger a move away. They could also come true for other brands with high public profiles.
SWAP RATES RISE FURTHER
Wholesale swap rates are probably a higher yet again today and maybe substantially too. 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 +9 bps at 5.79% and 54 bps above the OCR. This is yet another unusually large daily rise. The Australian 10 year bond yield is now at 3.60% and up +16 bps from this time yesterday. The China 10 year bond rate is little-changed at 2.74%. And the NZ Government 10 year bond rate is now at 4.45% which is up another +8 bps, and still above the earlier RBNZ fix at 4.41% which is up +15 bps from yesterday. The UST 10 year yield is now at 3.65% and up another +8 bps from yesterday.
EQUITIES RISE STRONGLY
The NZX50 is up +0.7% near the close, and heading for a weekly rise of +1.0%. The ASX200 is up +0.6% in early afternoon trade but it might only reach a weekly rise of +0.4%. Tokyo is up +1.0% in an extension of they strong run so far this week. If this holds they will be up +4.6% for the week. But Hong Kong is down -1.0% in early trade today and will be lucky to end the week unchanged. Shanghai is down a marginal -0.1% in their early Friday trade, heading for a gain of +0.7%. The S&P500 ended its Thursday trade up another +0.9% with a late surge. So far this week this index is up +1.8%.
GOLD LOWER
In early Asian trade, gold is down at US$1963/oz and down another -US$21 from this time yesterday. It closed in New York earlier at US$1957/oz, and in London at US$1960/oz.
NZD HOLDS
The Kiwi dollar is little-changed from this time yesterday at 62.5 USc and not much moved by the Budget. Against the Aussie we are also unchanged at 94.1 AUc. And against the euro we are up at 58 euro cents. That means the TWI-5 is up slightly at 72.4.
BITCOIN SLIPS
The bitcoin price is a little lower today, now at US$26,799 and down -1.9%. Volatility over the past 24 hours has been moderate at just on +/- 2.0%.
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62 Comments
Never received any census forms or a visit as we had in the last few censuses at this address. So we tried to do it online, except we couldn't because it didn't recognize our address. Gave up. Maybe something I have posted on here has had us canceled 😞.
Wouldn't worry about it, between those not returning it and those that just fill out crap on it they should just drop the whole thing its a waste of time and money.
That's ignorant. The data is useful and gets used.
The "data".
Do you need to be woke about the word "data" now.
Statistics
Information
County-count stuff
I got two, maybe one of them was yours.
I also received 2, was told to ignore 1.
I hope they fine the 700k that didn't do it.
But knowing this gumment they will offer free tesla to each loser who completes it.
I hope they also fire the head statistician for failure to meet the target.
This is a $500,000,000 feck up worse than the 2018 cluster.
Next census i am going to wait for the free Warriors Tickets and KFC vouchers
I'm waiting for the free Tesla, or the one way ticket to Oz
Make sure ypu do one when you get there or it could cost you over $200 a day...
There was a phone number they were advertising to call if you didn't receive the letter with the code. I thought they were out door knocking those that never responded, but I guess they can't knock on your door if they don't think you exist.
A few years before 0 CE, a littel over 2200 years ago, a census led to a revolt in a province of Romes Syria. The revolt was over property taxes and was put down.
Politicians haven't improved in a couple of millennia really
"RISING RATES COST THE CROWN BILLIONS"
Is that on a gross or net basis? Surely, there must be a large inflow of Withholding Tax to The Crown, on the increased savings that we now have with our banks at higher deposit % rates, that get taxed at whatever the depositors marginal tax rate is? WH Tax on 12 month depos at 6% must be a lot higher than when they were at 1%.
Quite right. There will be offsets.
So this guy reckons "real" current inflation is in freefall and going to 0%
Australia and USA charts are in the link below
https://twitter.com/ShaneOliverAMP/status/1659377672500428800
And our swaps are currently going in the opposite direction to that inflation forecast (straight up).
Very confusing times
Who believes this unemployment & wage forecast ? & if they do what are Labour doing about it ?
"As economic activity slows, labour market conditions will deteriorate, resulting in the unemployment rate rising to 5.3% by late-2024, before falling back to 4.8% by the end of the forecast period. Wage growth will also decline, from a peak of 7.4% in September last year to a more moderate 4.2% by mid-2027"
https://www.treasury.govt.nz/publications/efu/budget-economic-and-fisca….
I think their unemployment forecast looks sound, maybe a little on the low side. But what will help is that a lot of migrant workers will be surplus to needs. That’s one of the benefits of bringing in lots of people on work visas - when the SHTF they can go home, and local employment is somewhat insulated.
If they are correct with this, and wage growth takes until 2027 to fall to 4.2%, then the RBNZ aren't going to be dropping the OCR for years. It will mean CPI is stuck outside its mandated band at least for the next 4 years.
(this doesn't necessarily align with my view....but who knows).
It's not fair to compare the 2018 census post enumeration survey result of 97% coverage to the interim result for the current census. The interim result for the 2018 census was also 80 something percent if I recall correctly.
Japanese inflation came in at 3.5% in April, well above the expected +2.5% and above March's 3.2%. Japanese inflation is settling in above the Bank of Japan's 2% target rate. That's twelve consecutive months higher than that target.
If the BoJ started chasing this with the OCR, the world enters into a whole new level of risk as capital starts to repatriate back to Japan for yield.
Another solid day for the Nikkei too. Approaching 31,000.
What a life, a builder tradie loves his van so much he lives in it. Tools by day, pillows by night. Stuff that if you've got the skills and tools to build your own shelter
'Brutal' rental market: Tradie shares van with two dogs, working couple's three-year search for a home
https://www.nzherald.co.nz/bay-of-plenty-times/news/tauranga-rentals-la…
[Stalk] Wonder if it's the same Dan Nash that appears in these Tenancy Tribunal orders for rent arrears and leaving the place in a tip? Maybe this is Karma?
- 2021 https://forms.justice.govt.nz/search/Documents/TTV2/PDF/7421055-Tribuna…
- 2022 https://forms.justice.govt.nz/search/Documents/TTV2/PDF/7292869-Tenancy…
The other person, Chrissy, put up a Facebook post a few days ago to which "Dan Nash" replied. He has a photo on his profile 5 days ago of him lying down in a van with a dog on his lap so definitely the same person.
https://www.facebook.com/chrissy.mallinder/posts/633483015302349:633483… [/Stalk]
This Dan Nash character is best stopped before bringing all Dans into disrepute.
Good work Nz Dan
Well Dans are pretty dodgy as it is, but we're not generally known as rip off artists.
That is the kind of unfact-checked, woke, rubbish journalism you would expect from Stuff, do better NZ Herald!
Ripple is the company in court with the SEC over whether or not their digital token is an unregistered security. Meanwhile they're doing innovation like the following in other parts of the world.
America and the Anglosphere are slipping behind.
Ripple will participate in the Hong Kong Monetary Authority’s (HKMA’s) digital Hong Kong dollar (e-HKD) central bank digital currency (CBDC) pilot program by showcasing a real estate asset tokenization solution. The company will reveal its new CBDC platform at the same time.
Ripple will partner with Taiwan’s Fubon Bank and others to demonstrate equity release with tokenized assets using a retail version of the e-HKD CBDC. Equity release, also known as a reverse mortgage, is the practice of a lender letting a homeowner access the equity in their home, with payment coming due only when the house is sold or the borrower dies.
https://cointelegraph.com/news/ripple-new-cbdc-platform-hkma-e-hkd-pilo…
Disgusting.
It's beyond disgusting. This is a power struggle between the ruling elite (Wall St and the U.S. govt) vs the public. Doesn't matter if you don't like Ripple or XRP. It's all about principles.
Very nice but... I bet you that those trials won't involve the XRP token, which as far as I can tell is fairly useless
Very nice but... I bet you that those trials won't involve the XRP token, which as far as I can tell is fairly useless
Naturally. But that was not the point as I said. In terms of XRP being 'useless', I don't think I've ever used or experienced a faster cross-border digital transfer at very little cost. For ex, I can transfer funds from Australia and NZ to Japan very cheaply that can be exchanged into JPY or BTC. XRP exists as a bridge currency for cross-currency and cross-border payments.
As a speculative instrument, I also think XRP is potentially explosive. But not for its intrinsic value.
1 year swap up 50bps in 4 days! And hitting the 6% mark for the first time this cycle. Now 75bps above OCR.
90 day bank bill rate now 5.8% as well....thus 55bps above OCR. These are really big moves that will be concerning to the RBNZ.
Standby for a 50bps rise next week from Orr - perhaps even 75bps given the trend in these charts. 100bps may not be completely off the cards given what we are seeing here.
Note I didn't think the 1 year swap was ever going to hit the 6%...but now that it has broken out of the 5% channel that it has been sitting in for about 6 months, I have no idea how high interest rates could go....my thinking was that the one year had probably peaked....but now I am not as convinced this view is true/accurate. People should be prepared that we may have an OCR of 7 or 8% down track...its possible given the moves we are seeing (but not necessarily probable - but certainly possible) as the RBNZ continues to chase these market rates and its continuously behind where they need to be.
Is this spike a result of the budget? Any thoughts? It is such a big move in such a short space of time.
Yep, the 'reached their peak' brigade of Homes.co and Squirrel and the like about to be proved wrong AGAIN. Better off reading the comments on this site if you want the unbiased truth, and good forecasts.
10%, guaranteed
yes, the floating could now hit 10%
1 year rates may be heading higher in the interim based on the swap moves. So more people move to longer fixed terms e.g. 3-5 years to avoid this perceived pain.
But here's the curve ball.....if/when deflation comes with recession, and RBNZ want to stimulate, they cut rates expecting this to provide immediate relief....but instead it takes 3-5 years for those benefits to flow through to most of the mortgage holders who need it the most because they decided to fix for the longer term (as opposed to being on the 1 year rate). So the recession is exacerbated because the people who need the help the most, are stuck on higher rates for years - thus making monetary policy less effective at stimulating a dying economy.
FHB's sitting on the sidelines can buy a house off someone using cheaper 1 year rates from a mortgage holder who got their interest rate play wrong and was stuck on higher 3-5 year rates.
Just a theory.....but what would be the chances?
Its a shocking state of affairs that I never thought I would see and quite possibly will not live to tell the tale.
As well as properties, but those beloved yet indebted shares that you hold will be slammed and savaged by this turn of events too. They could be having a very bad day on the sharemarket today and I totally understand.
(Pauses to check NZX50) wait a minute.... UP over 1 percent today
Love the comedy HW2 - you're always good for a laugh!
Its powerful stuff to say that interest rates are inverse to property prices. The higher the interest rates the lower the HPI prices
The opposite has happened before and will happen again
What will be first. You are right or I will be broke. Let's see
'You are right or I will be broke. Let's see'
Sounds like you are gambling on a particular outcome HW2. Heads or tail stuff. Not my type of investing game so can't comment.
"Its powerful stuff to say that interest rates are inverse to property prices. The higher the interest rates the lower the HPI prices"
Not really - it is simply understanding how to discount future cash flows (something I did a lot of during uni finance papers).
And if you don't want to believe me, then here is Warren Buffett. A guy much smarter and more successful than me - to whom you may have more trust than an online commentator that you appear to really dislike....
- 'Interest rates are to asset prices what gravity is to the apple. When there are low interest rates, there is a very low gravitational pull on asset prices' Warren B.
For asset prices, we've gone from having the gravitational pull of the moon and are now being forced back to earth. Asset prices went crazy as we got to 0% and now they risk doing the reverse.
Of course, my predictions are and have been that at some point we could see a 40-50% drop in inflation adjusted house prices. We are about 30% now so there may not be that much more to go if my 'could happen' prediction turns out to be true - but who knows. I wouldn't bet my future viability on a particular outcome by being highly leveraged right now. The risk is too high of being wrong. If you think you know what is going to happen with high enough probability (which it sounds like you do), then you don't need to sweat it - but from my perspective I think you must have far bigger kahunas than me, because I can't be sure what is going to happen, other than be aware that there is a lot of risk of further price falls ahead unless interest rates start dropping - and that is something neither you, nor I can control, nor predict accurately.
BTW - it is possible we quickly move to deflation and interest rates start falling and if that happens, it changes things* - although it could initially increase the rate of price falls as people lose jobs and companies run into insolvency/debt problems.
*(this is why I'm surprised the swaps have gone up so aggressively lately as I thought they were going to start falling with inflation.....but they haven't)
Btw I think what I wrote is ambiguous
When I said that "the opposite has been true" I meant that opposite to inverse. In other words interest rates and inflation were high AND property prices. Over 15 years from early 70s to late 80s property prices increased as many times that is 15 times.
Though you will remind us they were negative against inflation increases.
(Pauses to check NZX50) wait a minute.... UP over 1 percent today
Smartshares Top 50
Past 6 months - +3%
Past 12 months - + 2.6%
Past 5 years - +22%
Since 2005 - +115%
You'd have been better off riding the Nikkei 225.
You're really good at calling it
After the fact
Worth noting commercial rates have hit 9%. CBRE this week predicted a 20-30% drop in NZ commercial office values in 2023.
Ray Dalio's latest update - released earlier today. Definitely worth a read if you have a spare 5min. Especially given his background dealing with and advising upon 'big debt crisis'.
What Should Be Done About the Debt Ceiling Argument Between the Democrats and Republicans?
Summary - the US is in real trouble (financially and politically) and they need to reduce spending and improve productivity. If not, we are approaching a point of no return. One where the US may find itself face a debt crisis and defaulting on its debt, or that there is a run on the debt that they issue (due to a lack of confidence that the US can service their debt).
Probably the most serious tone I've read from him about how serious this situation is becoming (after skim reading 'Big Debt Crisis' and carefully reading 'Changing World Order')
Ray Dahlio is having to backtrack in recent times, because a lot of his position assumed Chinese data was accurate - and his predictions of American decline are assuming China supplants them.
That's a really interesting summary and something I think most 'bipartisan moderate types' would agree with. It's a pity that the USA is so partisan, and growing ever more partisan by the day. I find it really hard to believe that The Dems and GOP will actually work together to sort out Americas economic and societal issues and eventually the problem will become so dire that it will be beyond repair. I actually think because of this we will see the balance of power change to the east and we'll see China usurp the States as the worlds premier superpower.
And so the house building carnage continues. Classic Builders reckon housing starts could halve. Possibly on the optimistic side:
https://www.nzherald.co.nz/business/classic-builders-forecasts-housing-…
Construction prices ($/sqm) are going to have to come down a long way to make a new build economic.
Land will fall a bit but no where near enough.
Japanese inflation came in at 3.5% in April, well above the expected +2.5% and above March's 3.2%. Japanese inflation is settling in above the Bank of Japan's 2% target rate. That's twelve consecutive months higher than that target.
The US inventory cycle is hitting Japan, too, though Americans are still paying a lot more to get a lot less. Japan exports to the US were up 10% y/y by value but down 6% y/y. Link
Big part of Japan's trade weakness is, of course, China. Exports to China were down big to start the year and then reopening really didn't change much. Demand is just not there. Nominal values way down as obviously real volumes. Bigger than just a trade recession. Link
You can see why JPY is being closely connected to CNY. Japanese trade is really started to get hit. Even though Q1 GDP was finally positive, the future is far from good or bright. Even nominal exports are now falling while volumes are way down (like Germany if not nearly as bad). Link
The revived dollar "bull" isn't just plaguing CNY/JPY pair. Korea's won this week fell to multi-month low. Also dollar shortage is forcing India to intervene in INR. RBI doesn't "sell $S" to "buy rupees", it is supplying $s at prices the market won't. https://youtu.be/okssSGL7upo Link
Another great piece of China skepticism over at Macrobusiness:
https://www.macrobusiness.com.au/2023/05/groveller-in-chief-readies-tri…
Typo ?
Did you mean Billion ?
"The Budget revealed that the Government expects to collect $133 mln in tax and other 'revenues' in the 2023/24 year, or 32% of GDP."
Might not be a typo, if this government stays in power $133 million could very well be 32% of GDP,
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