What happened Friday

Business / news

A review of things you need to know before you sign off on Friday; some more home loan changes, rents up, confidence low, LVRs loosened, log prices sag, swaps hold, NZD dips, & more

26th May 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
SBS Bank have raised their floating rate to 8.49%, a +25 bps increase. Their reverse equity rate however is raised by +50 bps to 9.50% (and matching Heartland Bank's existing reverse equity rate of 9.50% which hasn't been changed yet). NZCU Auckland raised its floating rate from 7.70% to 8.55%, a bit of catchup here.

TERM DEPOSIT/SAVINGS RATE CHANGES
No changes at this time.

THE MAY RESIDENTIAL RENT REPORT
Median rents are up by +$15 a week in 12 months to March nationally, now at $565/week ($29,380/year). Auckland is unchanged from a year ago at $600/week ($31,200/year) while the median rent in Queenstown-Lakes is up by +$110/week for the year to $700/week or $36,400/year. The full Rent Report is here and it includes all cities, towns and provinces. The lowest median rents are in Timaru and Invercargill at $400/week ($20,800/year).

GRIM CONSUMERS SEE LESS INFLATION AHEAD
The latest ANZ-Roy Morgan consumer confidence poll for May was basically flat at 79.2 index points, an extremely low level. The proportion of people who believe it is a good time to buy a major household item, a key retail indicator, fell 3 points to ‑34 and while this is low, it is actually little-changed from November when it fell back to this general level. However, inflation expectations eased from 5.2% to 4.8%. That’s only the second time since mid-2021 that they’ve dipped under the 5% mark.

S&P DARK ON BNZ's PREF SHARE ISSUE
Ratings agency S&P don't particularly like the upcoming BNZ perpetual preference share issue. They rate them BBB which is five notches below BNZ's AA- long-term issuer credit rating. They say this reflects a one notch penalty for the subordinated status of the issue, another two notches for the risk of partial or untimely payment, and yet another two notches for their expectation that government is unlikely to support perpetual preference shares.

FEWER LVR RESTRICTIONS
The RBNZ has confirmed some loosening of low equity mortgage lending restrictions. Banks will be allowed to do a bit more high LVR lending from June 1.

NZME FINED FOR SELLING DANGEROUS TOYS
The Commerce Commission reported that NZME Advisory (which tradede as GrabOne) has been fined in the Auckland District Court yesterday for supplying unsafe magnetic puzzle toys, commonly known as buckyballs, which breached product safety laws and caused harm to a child in 2021. NZME sold GrabOne in October 2021.

LOG PRICES SAG
Log exports to China are quite soft and prices for logs are falling. Log demand in China has been steady, but market forecasts of an increase in construction activity have not eventuated and an increase is now less likely as China enters its hotter months of June-August when construction activity traditionally reduces.

AUSSIE RETAIL STRUGGLING
Australian retail sales didn't change in April from March and were +4.2% higher than year-ago levels. That means in volume terms they will be lower because Australian inflation is running at 6.3%. (Their April CPI will be released on Wednesday.)

BARRED FROM $0.5 BLN OF WORK
And staying in Australia, PwC's woes just get worse as more details are revealed about its behaviour relating to confidential tax advice and breaches. It is having international implications. They are now effectively shut out of future Australian government contracts, deals that have been hugely lucrative for them. PwC had secured more than AU$0.5 bln in Australian federal government contracts during the past two years. New rules that bar firms from bidding for work who have breached confidentiality means they will no longer be in that trough. (Although the partnership is separate in New Zealand, you have to wonder how that reputation dump will affect their work here.)

SOLAR POWER KNOCKS OIL INTO SECOND PLACE
The IEA says global investment in clean energy is on course to rise to US$1.7 tln in 2023, with solar generation set to eclipse oil production for the first time.

SWAP RATES TURN UP AGAIN
Wholesale swap rates are likely up only minorly. 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 5.69% and holding yesterday's huge downward correction. The Australian 10 year bond yield is now at 3.76% and up another +7 bps from this time yesterday. The China 10 year bond rate is little-changed at 2.73%. And the NZ Government 10 year bond rate is still at 4.45% and up only +1 bp, and still above the earlier RBNZ fix at 4.42% which is up +2 bps from yesterday. The UST 10 year yield is now at 3.82% and up another +7 bps from this time yesterday. A week ago it was at 3.65%. The US debt negotiation standoff is costing everyone real money.

EQUITIES MIXED
In New York, the S&P500 ended its day up +0.9% on Wall Street as markets are a deal is close on the debt limit. Tokyo has opened its Friday session up another +1.0%. But Hong Kong is closed for a public holiday. But Shanghai is down another -0.6% in early trade today, compounding the week's fall so far to just under -3%. The ASX200 is little-changed in afternoon trade today but might end the week -1.9% lower. The NZX50 is down -0.9% in late trade and heading for a weekly loss of -2.0%.

GOLD SLIDES AGAIN
In early Asian trade, gold is down to US$1946/oz and down another -US$11 from this time yesterday. Earlier the gold price closed at US$1941/oz in New York, and earlier still at US$1948/oz in London.

NZD DIPS FURTHER
The Kiwi dollar has dipped from this time yesterday to 60.7 USc. Against the Aussie we are off slightly at 93.2 AUc. And against the euro we are soft at 56.5 euro cents. That means the TWI-5 is down -20 bps at 69.7.

BITCOIN HOLDS
The bitcoin price is marginally firmer today, now at US$26,430 and recovering +1.3% from this time yesterday. Volatility over the past 24 hours has been low at just under +/- 1.0%.

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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53 Comments

by ToThePurloined | 26th May 23, 4:10pm 1685074244

Banks will be allowed to do a bit more high LVR lending from June 1.

Be Quick!

by bw | 26th May 23, 4:18pm 1685074698

...and find that Buyer you've been hoping for to let you escape?

by HouseMouse | 26th May 23, 6:34pm 1685082897

Nice name

by HouseMouse | 26th May 23, 5:37pm 1685079447

Two of my biggest fans (you know who you are) had a few swings at me a month or so ago on my bearish views on shares for 2023. Well, after a strong February and March the NZX50 is only 2.09% for the YTD and the ASX200 2.88%.

S & P 500 much stronger on the back of the tech mini-boom but let’s see how long that lasts.

I am more than happy with my TD and KS cash-fund, for now.

by chebbo | 26th May 23, 5:18pm 1685078313

Cash is king for the time being HM. There will always be exceptions and counter-trend rallies, but I suspect that even if the punchbowl hasn't quite been taken away just yet, it has at least been watered down.

by MLSmith1 | 26th May 23, 5:18pm 1685078329

Broken clock is right some of the time too… well done

by Silvi | 26th May 23, 5:23pm 1685078614

Whereas I am more than happy with the New Zealand shares,I invested in two years. Been outstanding so far for me, great divs, and all reporting growth in profit. I continue to buy on the dips with these shares and plan to expand if we have another dip.

by HouseMouse | 26th May 23, 5:28pm 1685078923

Of course some individual shares have done well. The overall market hasn’t

by JimboJones | 26th May 23, 7:00pm 1685084435

Plenty have come undone with that strategy. You sound like someone who invested in Brierleys before the crash.

by morepork | 26th May 23, 8:30pm 1685089831

If you annualise that to get 5% for the NZX50, 7% for the ASX200 and 20% for the S&P500. Pretty good if the trend continues for the rest of the year.

by HouseMouse | 26th May 23, 8:37pm 1685090266

I doubt it will for the S & P, but time will tell.

by HughJorgan | 26th May 23, 9:56pm 1685094996

Is your KS actuallycash or just conservative? Many KS conservative funds are loaded with fixed interest and don’t provide a safe place to hide.

My KS is with Juno and their conservative is no place to hide!

by Officebound | 26th May 23, 4:13pm 1685074401

Rents increased 2.7% over the last year, significantly lagging CPI and Wage data.

I'm confused, I was told that added regulation would increase rents astronomically? After all, property is the one asset where the expenses dictate the income right?

by Zwifter | 26th May 23, 4:19pm 1685074769

Not sure what you are smoking and more importantly where in NZ you are smoking it, but practically nothing other than nowhere went up only 2.7% in the last 12 months. Just have a look at the other article on interest right now.

by JimboJones | 26th May 23, 4:23pm 1685074999

You mean the article that starts off with "The national median weekly rent for newly tenanted properties increased by $15 a week (+2.7%) over the 12 months to the end of March this year."

by HouseMouse | 26th May 23, 4:27pm 1685075279

Auckland went nowhere

by Zwifter | 26th May 23, 6:20pm 1685082035

Like the traffic up there. Over 8% rise down here but predictable really, everyone's bailing out of the cities.

by Baywatch | 26th May 23, 8:40pm 1685090418

Queenstown...no where for the staff to live...and businesses moaning, rents sky rocketing and yet half the homes empty...nuts

by Hardly | 26th May 23, 5:16pm 1685078175

Yes property vested interests and the national party need to come out and apologise for misleading people.

by Pa1nter | 26th May 23, 6:09pm 1685081373

The problem is, people expect everything to happen immediately.

For instance, the interest deduction rules are phased in over several years. Until about 2025. Rent reviews can only happen yearly. So it'll be 2026 till the full extent of the costs of this are experienced in the market.

What's the ad, "it won't happen overnight, but it will happen"

by Officebound | 26th May 23, 7:14pm 1685085271

That was pantene, and 5% deflation in real terms, when the tax is already partially effective, suggests you are wrong.

by Pa1nter | 26th May 23, 7:20pm 1685085640

You'd need most of the rental houses to be highly indebted. Would you honestly expect rents to go down in a vacuum, if you increase the holding costs?

This is a 5-10 year story.

by Baywatch | 26th May 23, 8:41pm 1685090492

Deduction against other income was 2 years ago...

by Pa1nter | 26th May 23, 8:54pm 1685091265

Do you think removal of deductable expenses like interest is more significant than offsetting loss making rentals against income?

by JimboJones | 26th May 23, 4:21pm 1685074899

Its confusing how rent is so "cheap" in Auckland (compared to house prices that is). Why would this be the case if there is a housing shortage? The average rent in Auckland is only 50% more than Invercargill, yet the average house price in Auckland is 120% more than Invercargill.

by kiwikidsnz | 26th May 23, 4:48pm 1685076520

It's quite clear that rents are determined by the markets ability to pay more than any other factor.

Theres also plenty of historical evidence in NZ that any "well meaning" Govt subsidies simply increase rent to a higher equilibrium point.

by bw | 26th May 23, 5:02pm 1685077332

(I suspect JJ is being sarcastic. Jane, below, has the explanation)

by JimboJones | 26th May 23, 6:54pm 1685084099

Maybe. But why would there be any property investors in Auckland when the yield is so much higher in Invercargill? I think I know the answer - it has something to do with the potential of capital gains. Although I’m not sure anyone other than Tony A sees any capital gains coming to Auckland any time soon.

by Jonny.Foe | 26th May 23, 4:48pm 1685076483

Rents in Auckland are simply set at the amount that people can afford to pay without starving or throwing themselves under a bus.

by ToThePurloined | 26th May 23, 4:52pm 1685076770

Can’t throw yourself under a bus if no buses turn up 🤷‍♂️

by IT GUY | 26th May 23, 5:58pm 1685080690

So this is where the missing 1.9 bil on mental health has gone - cancelling bus services

by Jonny.Foe | 26th May 23, 8:12pm 1685088777

And I was worried that I was trivialising mental health issues.

by Uninterested | 26th May 23, 5:18pm 1685078310

There are lots of rundown rotting weatherboard rentals in INV. Not a lot of money floating around down there unfortunately.

by Audaxes | 26th May 23, 4:24pm 1685075076

Log exports to China are quite soft and prices for logs are falling.

Residents of Siberia’s Irkutsk and Krasnoyarsk regions have protested against the activities of Chinese timber firms, which rely heavily on Russia to meet the demands of China’s rapidly expanding market for wood.

by HouseMouse | 26th May 23, 4:26pm 1685075168

Early doledrums for retail and hospo is following construction. Yet we’ve had all these recent immigrant flows many of whom are working in these sectors. Clever!!!

by JimboJones | 26th May 23, 7:06pm 1685084786

The irony being that immigrants may also revive those sectors.

by Jonny.Foe | 26th May 23, 8:14pm 1685088881

Yes, but are they bringing loads of money with them - i.e. reducing the current account deficit? I simply do not see how we avoid a serious downturn whilst Govt cuts net spending and households / businesses aren't borrowing more than they pay back. Something has to give.

by The Black Swan | 26th May 23, 4:32pm 1685075572

NZD down 2.7% for the week against the USD. Imported inflation is ramping up again....

by J.C. | 26th May 23, 5:13pm 1685077994

NZD down 2.7% for the week against the USD. Imported inflation is ramping up again....

XAUNZD (gold measured in the peso) up 1.9% in past week. +12% YTD and approx 50% since Covid start (Q1 2020).

Doing its thang as an inflation hedge perhaps.

by kiwikidsnz | 26th May 23, 4:56pm 1685077017

It's surely a serious concern that over half of nz University academics feel that they cannot speak on any unpopular & controversial topics (eg ToW), despite legislative provisions for academic freedom.

https://i.stuff.co.nz/opinion/300889028/academics-dont-feel-free-to-air…

by nktokyo | 26th May 23, 8:24pm 1685089474

I'm offended.

by lonewolfnz | 26th May 23, 5:18pm 1685078320

So I happen to have the worst kiwisaver performer by far. Down 60% since the top!!!!

Having that said, I managed to actually look at it today and its up 30% YTD. Still a VERY long way to go - lets see if I can breakeven before I actually can withdraw

by Beanie | 26th May 23, 6:43pm 1685083427

?? Who are you with..or when you say "kiwisaver" do you actually mean your crypto..

by lonewolfnz | 26th May 23, 7:06pm 1685084801

If only because then I would be massively up.

Its Nikko-ARK. Then again, they do have some (I think?) crypto exposure in their holdings like COIN

by Beanie | 26th May 23, 9:12pm 1685092347

Thanks. Interesting fund. I hadn't realized such volatile funds were an option within kiwisaver. You should do better over the long run though.

by Squishy | 26th May 23, 5:29pm 1685078994

I thought a "bucky ball" was where a carbon was interlinked into a sphere?

by Rob Reid | 26th May 23, 7:37pm 1685086673

Yeah - C60.

Next they'll get sued by the ghost of Buckminster Fuller. It's a pile on.

by HW2 | 26th May 23, 8:03pm 1685088206

Exactly as I thought HM can't see the woods for the trees. The favourite saying in October used to be 'dead cat bounce' yawn. Dow up 20 percent and NZX50 10, nasdaq 30 percent

by HouseMouse | 26th May 23, 8:09pm 1685088545

You could be right, good luck

by HW2 | 26th May 23, 8:30pm 1685089816

The two NZX heavyweights Mainfreight and Fisher Healthcare have each had a disastrous week and month. Look them up.

I luckily was in the right place at the right time after covid and did well but personally hate shares. Too hit and miss as the above examples show.

As interest rates normalise down, shares get double boost. Growth companies paying interest make higher profits and dividend stocks favourability with investors increases. Watch that.

Do you follow any online share forums

by nktokyo | 26th May 23, 8:23pm 1685089396

I bought a caramel slice today. Inflationary spending I know but to hell with the consequences.

by Pa1nter | 26th May 23, 8:24pm 1685089490

Yes but what about your thighs

by JimboJones | 26th May 23, 10:12pm 1685095953

Even thighs are expensive these days.

Yep that was the worst inflation I’ve witnessed recently when I bought a caramel slice from a pretty average cafe expecting it to be around $4 and instead it was $8.