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
ASB pushed some key fixed rates to 15 year highs today. Kiwibank raised a few rates too. Unity Money also raised rates, both floating and fixed.
TERM DEPOSIT/SAVINGS RATE CHANGES
ASB raised term deposit rates today, taking their 6 month rate up +5 bps to 5.65% and their one year rate up +10 bps to 5.85%. These levels just match rivals. Meanwhile Heartland Bank raised rates too taking their six month rate to 5.90% and their one year rate offer to 6.10%. Both these rates are market-leading.
MORTGAGE STRESS SIGNS EMERGE
Mortgage arrears show a sharp rise. Latest Reserve Bank figures show non-performing housing loans rose nearly 12% in May, climbing to levels last seen around eight years ago.
NEW RESIDENTIAL CONSENTS SLIDE AWAY
May new dwelling building permits were down -18% year-on-year. Statistics NZ says there were 5856 fewer new homes consented in the May year than in the previous 12 months. Westpac noted: "We expect the downtrend in consent issuance will deepen over the coming months. As we’ve highlighted before, financial conditions in the construction sector have become a lot tougher. House prices have tumbled over the past year, dropping by 17% across the country. At the same time, operating costs for construction firms have skyrocketed, rising by around 9% over the past year. On top of that, interest rates have risen to their highest levels in more than a decade. The combination of those factors mean that prospective buyers are reluctant to purchase off the plan, while developers are increasingly hesitant to bring new projects to market. Consistent with that, those in the industry continue to report low levels of forward orders."
NON-RES CONSENTS RISE
For non-residential building permits, it is largely about taxpayer-funded building, like for hospitals and schools. But there were another big projects consented; activity was bolstered by a $72 mln consent for part of Auckland Airport’s 120-store shopping centre and $36 mln as part of IKEA’s new three-storey building in Mt Wellington.
GRINDING ALONG THE BOTTOM
Housing market continued to grind along the bottom in June, not really falling further, but making no noticeable recovery either. The average asking price on Realestate.co.nz declined for the fourth consecutive month in June.
A RECORD SPLURGE ON CARS
Sales of cars were strong in June, with new registrations totalling 17,302, an +82% increase from May. Driving this was a big increase in hybrid sales. Used-import registrations were also strong, totalling 16,680 in June, a +73% increase from the previous month. Driving this unusual behaviour were government policies; the impending end of the clean car rebates at July 1. The effect was so strong that the June new-car registrations were a record high, beating the pervious 11,874 in September 2021 which was the post-pandemic surge. Light commercial sales were unusually high too. All this super-activity will weigh on our current account deficit in Q2, given that new car sales were +24% higher in Q2 than Q1. Used imports were +40% higher.
TOWER LEAVES THE SOLOMONS
Tower sold its Solomon Islands subsidiary to a PNG firm. It was a tiny part of its business. But Tower isn't retreating from the Pacific. Tower is continuing to invest there with the roll out of its My Tower online sales and service platform and the rebrand of its Tonga, American Samoa and Samoa businesses to Tower following its acquisition of minority interests in National Pacific Insurance in 2021. Tower’s Suva operations hub now has 200 staff serving both Pacific and New Zealand customers.
ROD DRURY LEAVES XERO BOARD
Founder Rod Drury is quitting the Xero board, but will remain an adviser to the firm, the company said today.
PROPOSED BUILDING SOCIETIES ACT CHANGES STUCK IN THE SLOW LANE
The Government's plans to change the Building Societies Act to stop rogue NZ registered, but unregulated, building societies from operating overseas are on the backburner. In 2018 the Government moved to make changes to the 1965 Building Societies Act with Cabinet agreeing to changes in 2019. These changes are included in the Regulatory Systems Amendment Bill (No 3). This bill hasn't yet been introduced to Parliament and a MBIE spokesman says there's no timeframe for it to be introduced. (There's background on this issue here).
CAIXIN PMI NOT SO BAD
Again less negative than the official measure, the Caixin factory PMI for China did not contract in the way the official survey suggested. But it isn't really an expansion either. But this 'good news' is enough to help Hong Kong and Shanghai equities maintain their rise.
LUMPY BUT HIGHER
Australian building permits rose sharply in May, driven by the volatile apartment-building sector. The total number of dwellings approved rose +20.6% following a -6.8% decrease in April. By far the largest rises were in Sydney.
WHERE HOUSE PRICES ARE RISING
In Australia it is a different story with house prices turning up, according to CoreLogic analysis. The cumulative +4.1% lift since February comes after a -9.7% decline over the previous ten months. The pace of Annual price declines moderated from -6.8% in the year to May to -4.8% in the year to June. The recent turn up is consistent with the new lending data.
ESG TARGETS FOR THE C-SUITE WINNING IN THE BOARDROOM
Company and fund manager remuneration committees are starting to introduce ESG metrics in addition to financial ones in manager remuneration. ESG targets are getting embedded into corporate life despite the culture war battles against it in public life in the US and Australia. (H/T ResearchIP.)
SWAPS UP AGAIN
Wholesale swap rates are possibly ending today higher at the short end on global trends. 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 down -1 bp to 5.70% and now +20 bps above the 5.50% OCR. The Australian 10 year bond yield is down -3 bps from this morning at 3.98%. The China 10 year bond rate is little-changed at 2.70%. And the NZ Government 10 year bond rate is now at 4.66%, also little-changed and which is still higher than the earlier RBNZ fix which fell -5 bps to 4.62%. The UST 10 year yield is now at 3.84% and unchanged from this morning.
EQUITIES MOSTLY POSITIVE
The NZX50 has opened the week down -0.3% near its Monday close. The ASX200 is up +0.3% in afternoon trade. Tokyo has opened its Monday trade strongly, up +1.5%. Hong Kong is up +1.0% and Shanghai is up +0.6% in their early Monday trade. The S&P500 futures are signaling a +0.8% rise when markets open tomorrow - even though it may be a stunted market given they have a public holiday (July 4) the next day.
GOLD STEADY
In early Asian trade, gold is at US$1917/oz and down -US$3 from this morning's open.
NZD HOLDS TO START JULY
The Kiwi dollar is holding from this morning's open at 61.3 USc. Against the Aussie we are little-changed at 92.3 AUc. Against the euro we are little-changed at 56.3 euro cents. That means the TWI-5 is also little-changed at 69.8.
BITCOIN HOLDS
The bitcoin price has risen marginally today and is now at US$30,721 which is up a minor +0.7% from where we opened this morning. Volatility has remained low at just under +/- 1.0%.
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30 Comments
The Yuan is trading close to its weakest point in the last 5 years against USD (even with aggressive intervention by the PBOC). And Kyle Bass has suggested China’s ‘economic might’ could be 30-50% lower in dollar terms.
So if NZ has doubled down on exports to Chyna (education, tourism, high-margin, 'premium' F&B), this does not seem to be a good situation, particularly trying to sell in a market where wallets are closing and consumers are more sensitive to price.
Just my reckon.
And where are we going to get the money from to pay for all the half price Teslas and goods from AliExpress if we can't leverage up a deprecating local asset to extract more 'wealth' from to pay the import bills? "If you can't borrow, you can't buy" no matter how cheap the asking price becomes.
I have close friends from India and they all concur that the media and government are feeding us lies about the rush of talent heading to our shores. NZ has become less desirable as a place to live and work for urban talent from India.
Fear not if you're a low-value business or landlord though because NZ is still popular among "economic refugee" circles for relative ease of permanent migration.
Ease of migration is a joke, the stories I have been hearing lately of people arriving here paying 20k+ to get a job and visa and being absolutely demoralized when they arrive and see not only the hours and pay but the cost of living. First hand stories. I have heard second hand how local businesses employ people paying up to 100k for a resident visa and stack them in poor living conditions. NZ basically allowing modern slavery is mind blowing for me. It is beyond question the businesses are getting kick backs. What a low life country we are becoming.
Across the ditch, being 'Australian-made', 'local', or 'green' are no longer unique selling points.
The most recent NAB data highlights the new retail reality - in the face of the rising cost of living, Aussie shoppers are increasingly choosing cheaper options. This is impacting the sales of those products and retailers that have felt they had to, or simply could, charge higher prices because they were Australian-made, stocked in local shops, or had some form of ESG environmental or social benefit.
While you can debate and decry the lack of patriotism, the bottom line is that competitive pricing is now a retail baseline requirement.
Fun times are ahead.
https://business.nab.com.au/nab-consumer-sentiment-survey-q2-2023-61002/
To be fair, this is the "circle of life" of mass market retailing isn't it?
Look at The Warehouse - that company came along and tightened the screws on many small "mum and dad" businesses, independent retailers etc.
Then the Internet came along and we realised we could get our cheap crap even cheaper, and The Warehouse has been somewhat stuck in the doldrums ever since.
With particular respect to Freedom, I don't find their pricing unreasonable but having to wait some undisclosed number of months to actually get the product is not good.
In 2008, the EU economy was 10% larger than that of the U.S.
Now the U.S. economy is is 50% larger than the EU. The price of being a lapdog of the US.
-- The EU was sucked in and scammed by the Wall St real estate bubble and subprime mortgage crisis.
-- The US made sure that Europe never developed alternatives to the likes of Google, Facebook, Amazon - e-commerce and cloud computing, Apple etc.
-- Europe has also fallen behind in startups and the number of European companies in the global Fortune 500 list has dropped dramatically.
-- The US bombed countries and forced Europe to accept millions of refugees from Afghanistan, Iraq, Syria, Somalia etc.
The biggest culprits are the ruling elite of the EU who have dumped on their own people. And the average European citizen has been brainwashed by the woke propaganda. The collective suicide is astonishing.
The US didnt make sure Europe didnt have successful start ups - Europes beaurocratic leadership did that for them... Software startups depend on minimal regulations and fast growth.
In fact most if Europes issues are of their own making
- german reliance on russian gas
- brexit
- inadaquate local military ability to defend Ukraine.
- infighting on economics to defend the euro and fight pandemic
The list goes on, but Europe has been a mess for a long time, UK too. And they are getting worse
It would be impossible for the US to maintain its actual foreign relations according to a law, as China is doing: Much of what happens is done secretly & a lot is illegal. Although the CIA rule of Germany is operated under the 1945 occupation statutes. End colonial exploitation! Link
A byproduct of this confrontation with Russia has been to lock in America’s control over its Western European satellites. The aim of this intra-NATO jockeying was to foreclose Europe’s dream of profiting from closer trade and investment relations with Russia by exchanging its industrial manufactures for Russian raw materials. The United States derailed that prospect by blowing up the Nord Stream gas pipelines, cutting off Germany and other countries from access to low-priced Russian gas. That left Europe’s leading economy dependent on higher-cost U.S. Liquified Natural Gas (LNG).
In addition to having to subsidize domestic European gas to prevent widespread insolvency, a large proportion of German Leopard tanks, U.S. Patriot missiles and other NATO “wonder weapons” are being destroyed in combat against the Russian army. It has become clear that the U.S. strategy is not simply to “fight to the last Ukrainian,” but to fight to the last tank, missile and other weapon being deleted from NATO stocks.
This depletion of NATO’s arms was expected to create a vast replacement market to enrich America’s military-industrial complex. Its NATO customers are being told to increase their military spending to 3 or even 4 percent of GDP. But the weak performance of U.S. and German arms on the Ukrainian battlefield may have crashed this dream, while Europe’s economies are sinking into depression. And with Germany’s industrial economy deranged by the severing of its trade with Russia, German Finance Minister Christian Lindner told the Die Welt newspaper on June 16, 2023 that his country cannot afford to pay more money into the European Union budget, to which it has long been the largest contributor. Link
Japan would've handled a strong Yen. The US knew that. So the US Fed instructed the Bank of Japan to blow up the old system without opposition, using credit guidance to create a vast bubble & keep credit tight for 20 years after See book Princes of the Yen http://quantumpublishers.com Link
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