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 here today.
TERM DEPOSIT/SAVINGS RATE CHANGES
None here either.
ON HOLD AS ECONOMY SLOWS
The RBNZ hit the pause button today after nearly two years of OCR hikes as the economy shows signs of slowing. The OCR stays at 5.50%, surprising virtually no-one. A savvy perspective of the decision is here.
'NOT ON MY WATCH'
The Prime Minister has said that the capital gains and wealth taxes which were being considered in Budget 2023, won't be part of Labour's 2023 election platform.
OVERSEAS WORKERS FLOODING IN
More than 105,000 overseas workers have arrived in the country since the beginning of the year. That is an average of +15,000 per month and at that pace it is like adding a Hamilton every year. (But only if no-one leaves, and of course emigration is elevated too.) The data released today for June and is from MBIE. More data was released today by Stats NZ but that was for May and that more generic data showed May was the second month where the pace was down sharply from the peak seen earlier in the year.
OVERSEAS VISITOR ARRIVAL GROWTH EASES
Overseas visitor arrivals were 160,300 in May, up 87,600 from the May 2022 month. The biggest changes were in arrivals from Australia (up 24,200), United States (up 10,100), India (up 9,000). China (up 7,600), and Korea (up 2,900). But Infometrics signaled a note of caution: "The pace of recovery in tourism arrivals moderated in May, reinforcing our view that the global economic slowdown is taking momentum out of international tourism. We expect higher living costs and interest rates will keep a lid on Australian arrivals, which eased from 81% of pre-pandemic levels in April to 78% in May."
STABLE NEGATIVE CONFIDENCE
The Rabobank June farmer confidence survey found confidence in the broader agricultural economy was still very low and little-changed on the previous quarter (March), with the net confidence reading rising to -57%, from -58% previously. Farmers were also more positive about the prospects for their own farm business performance, with the net confidence reading for this measure rising to -35%, from -45% previously.
BANK STRIKE THREATENED
First Union said more than 95% of its members have voted to reject a pay offer from Westpac after 4 months of bargaining, and they will vote on taking industrial action this week. Only a minority of Westpac's workers are in the union however. They says they are seeking "significant pay rises that reflect the bank’s excessive profitability". First Union is also striking some parts of the Auckland Transport bus network.
SWAPS SLIP AGAIN
Wholesale swap rates are probably lower again today. 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 +1 bp at 5.69% and now +19 bps above the 5.50% OCR. The Australian 10 year bond yield is down another -6 bps from this time yesterday at 4.17%. The China 10 year bond rate is unchanged at 2.69%. And the NZ Government 10 year bond rate has again eased back, this time by -10 bps to 4.80%, but still higher than the earlier RBNZ fix which also fell -10 bps to 4.74%. The UST 10 year yield has fallen back, and by another -4 bps, to just on 3.96%.
EQUITIES MOSTLY HIGHER AGAIN
The S&P500 ended its Tuesday session on Wall Street up +0.7%. Tokyo has opened its Wednesday session down -0.8%. Hong Kong has risen strongly at its open, up +1.2%. Shanghai is unchanged in their early trade. The ASX200 is up +0.4% in afternoon trade. The NZX50 which is down just -0.1% in late trade after overcoming earlier weakness.
GOLD FIRMS
In early Asian trade, gold is up +US$15 from where we were this time yesterday, now at US$1940/oz. It closed earlier in New York at US$1932/oz, and earlier still in London at US$1935/oz
NZD HOLDS
The Kiwi dollar is marginally firmer, now at just on 62.3 USc. Against the Aussie we are up +½c at just over 92.6 AUc. Against the euro we are little-changed at 56.5 euro cents. That means the TWI-5 is also up but just slightly to 70.4.
BITCOIN UP +US$14
The bitcoin price has held today and is now at US$30,611 which is virtually unchanged from yesterday's US$30,597. Volatility has been low at just on +/- 0.8%. It is very noticeable that since TradFin acceptance, this price action has virtually stalled.
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36 Comments
Twas a bad day to be a Dgm today.
Hopkins knocks their hopes of a CGT or wealth tax for 6, then the RBNZ say nope to an OCR increase.
Street parties happening everywhere they reckon. Will be noisy out there with all the champagne corks popping at the same time.
Some of the water cooler vibes suggest that Hippie has revived the bubble. Winter vacations for Fiji being booked as we speak.
U.S. CPI. Last month-to-month (April to May) read was 0.1%. 4% YOY.
May to June read in 2022 was 1.2%. If the CPI read for May to June 2023 is only 0.2%, then YOY will be falling a whole pct point.
4% to 3% is a big move.
If the CPI read is <0.2%, then the U.S. CPI will be in the 2-3% range.
You got a link for this? Would be a sigh of relief for NZ as a whole if this is the case off the back of todays pause and presumed pause next policy meeting.
No link. But the data is all there if you look for it.
Not sure why you think it's a relief for NZ. A falling CPI in the U.S. does not mean prices fall to the same extent here.
More that persistent inflation in the US over the next 3 months would cause more hawkish rises in their rate over the next two reviews while we sit at 5.5 until after the election. Given a significant amount of international investment in NZ is due to higher return, we can't afford to be operating at a lower rate than the Fed.
Correct me if I'm wrong, but surely if we're offering less attractive rates than the US and other "stable" economies, our government bonds become less attractive internationally and we need to look internally to balance the books. More tax, and a higher interest rate long term would be likely. Not to mention our dollar would drop against the USD and potentially stir further inflation here.
More that persistent inflation in the US over the next 3 months would cause more hawkish rises in their rate over the next two reviews while we sit at 5.5 until after the election
But there are signals that inflation is on the wane in the U.S. Not conclusive of course.
That’s not what I said…?
Anyway, the sigh of relief is about the Fed central rate which is influenced by inflation. And that if their central rate goes higher in the next few months, it will be trouble for us, our exchange and investment in NZ, and potentially in turn, imported inflation.
If it does not, which it’s looking like it possibly won’t, then that is one less thing we have to worry about. Not that that will have an immediate impact on our inflationary pressures locally, that’s not what I said.
The U.S. is much different from Aussie. Used car prices plunging.
Used auto prices are down for a third straight month, setting the expectation that the sector will contribute to further signs of easing in June's Consumer Price Index print due on Wednesday.
Wholesale used vehicle prices decreased by a record 4.2% in June from the previous month, according to Manheim Market Insights. The Manheim Used Vehicle Value Index, a closely watched measure of prices, plunged 10.3% year-over-year in June.
https://finance.yahoo.com/news/used-vehicle-prices-drop-by-a-record-for…
Ecommerce prices also plunging in the U.S. YOY falls in prices for appliances (8.3%) is the largest in data going back to 2014.
https://www.bloomberg.com/news/articles/2023-07-11/us-online-prices-are…
With projections like that, the US might have to support the immediate membership of Ukraine to NATO. How else is the debt going to be devalued without continued inflation? And conflict anywhere, as long as it's not back home, as always is the option of last resort to get that going.
Ukraine is never getting into NATO. Doesn't really matter anyway as NATO is already fighting a proxy war in Ukraine. If the rest of the world had not poured weapons into Ukraine the "War" would have been over in 3 weeks. The war will continue until the rest of the world gets sick of it and then Ukraine will get hung out to dry.
My sarcasm is kind of what you write. The war is going on because it's 'necessary'. But for whom? Certainly not the citizens of Ukraine or even Russia. Anyway, the point of my post was to highlight that Inflation is necessary - however it's generated (e.g.; War)
Without Inflation, the Status Quo Collapses; With Inflation, It Also Collapses
https://www.oftwominds.com/blogjuly23/inflation-collapse7-23.html
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