Here are the key things you need to know before you leave work today for the long holiday weekend (or if you already work from home, before you shutdown your laptop).
MORTGAGE RATE CHANGES
BNZ has raised its floating rate by +35 bps tp 8.49% effective for both new and existing customers from July 19. This is an unusual out-of-cycle change. But it only raises it to levels lower than its main rivals. TSB raised most fixed rates, but not their competitive 6.99% one year rate. China Construction Bank also raised most fixed rates. NBS raised their one and two year fixed rates. SBS Bank raised all their fixed rates for terms 6 months to 2 years.
TERM DEPOSIT/SAVINGS RATE CHANGES
TSB raised all their TD rates for terms 18 months to 5 years, but none went higher than their existing 6% one year rate.
MIXED MESSAGES IN HOUSING MARKETS
The REINZ reports that housing sales volumes were up and down in June, prices up slightly with fewer vendors, and buyers remaining hesitant. Despite the stunted activity most bank economists suggested this is "the bottom" and it will be up from here. Independent economic consultancy Infometrics noted: "Although a single month of data is not yet enough to say definitively whether house prices have bottomed out in New Zealand, the first positive result in 18 months indicates we are indeed approaching the trough." But they also said "Because of high debt-servicing costs, the support that net migration is providing to house sales activity is more likely to put a floor under house prices, rather than propel them upwards."
FOOD PRICE JUMP SHARPLY
Food prices rose again in June, up +12.5% from a year ago, Stats NZ reported today. But, fruit and vegetable prices charged on with 22% annual rise. This will be one component in the Q2-2023 CPI data that is released on Wednesday next week. Q1-2023 CPI rose +6.7%. Some analysts estimates are starting to come through for the expected Q2-2023 result. ANZ says the headline number will be 5.9%, Westpac also says 5.9%. Recall that at the last MPS, the RBNZ penciled in an estimate in May for Q2 to be of 6.1%. And don't forget, we do have some large base effects rolling through from a year ago, so that may make the heading numbers harders to read as an indication for what is coming up.
AVAILABLE RESERVES DROP SHARPLY
MBIE’s latest petroleum data shows the effect of the sharp change in investment signals, with gas reserves dropping below 10 years of remaining use for the first time. Some are warning that without change, our energy security is now threatened.
A ONE-OFF RISE?
A big petrol splurge ahead of the excise tax changes brought a June rise in retail spending via electronic cards. Stats NZ figures show that total card spending rose by +1.3% in June held up by that rush on petrol
RENT MOVEMENTS DIVERGE
Stats NZ released its rent index data today and overall the changes are modest on both a stock and flow basis, each just over +3% in June from a year ago. But there is wide regional variability. For Auckland, the flow is up +7.3% in a year and rising (+6.8% in May, +4.9% in March), but for Wellington things are going the other way, down -0.5% in the year to June (+1.9% in the year to March).
TOUGH TIMES FOR MANUFACTURERS
The BNZ/Business NZ PMI is contracting faster. It marked the fourth straight month of contraction in our factory sector and the steepest since last November as activity was held back by declining demand, cost increases and production/staffing issues. Sadly the new order component was one of the weakest elements. The overall contraction is its longest since 2009.
NZGB's VERY POPULAR
Today's NZGB tender was a little unusual. Rather than the usual $400 mln on offer, it was $500 mln in three tranches. But there was no lack of support; in fact $1.5 bln was bid in 129 bids. But only 21 won anything. The May 2026 was for $250 mln this time, going for a yield of 4.83% which was +14 bps higher than the equivalent tender two weeks ago (to 12 winners). The May 2031 $150 mln went for a yield 4.57% (it has been six months since this was last offered) to 5 winners. The May 2051 offer was for $100 mln and very well supported but for a winning yield at 4.80% to just 4 winners, up from 4.65% two weeks ago.
STUCK HIGH
Australian inflation expectations are not retreating. They were 5.2% in June are are also 5.2% in July the the Melbourne Institute survey.
SWAPS FALL AGAIN
Wholesale swap rates are probably noticeably 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 down -4 bps at 5.65% and now +15 bps above the 5.50% OCR. The Australian 10 year bond yield is down another -12 bps from this time yesterday at 4.05% although most of that fall happened last night. The China 10 year bond rate is little-changed at 2.70%. And the NZ Government 10 year bond rate has again fallen back, this time by another -17 bps to 4.63%, but still higher than the earlier RBNZ fix which also fell -12 bps to 4.62%. The UST 10 year yield has fallen back, and by another -11 bps, to just on 3.85%.
EQUITIES HIGHER AGAIN
The S&P500 ended its Wednesday session on Wall Street up another +0.7%. Tokyo has opened its Thursday session with a strong +1.3% bounce back. Hong Kong has risen even stronger at its open, up +2.5%. Shanghai is up +0.7% in their early trade. The ASX200 is up +1.5% in afternoon trade. The NZX50 has joined the party and is up +0.7% in late trade.
GOLD RISES STRONGLY
In early Asian trade, gold is up another +US$19 from where we were this time yesterday, now at US$1959/oz. It closed earlier in New York at US$1957/oz, and earlier still in London at US$1953/oz
NZD RISES
The Kiwi dollar is almost +1c firmer, now at just on 63.2 USc. Against the Aussie we are up +¼c at just over 92.7 AUc. Against the euro we are firm at 56.7 euro cents. That means the TWI-5 is to over 71.
BITCOIN SLIPS
The bitcoin price has slipped -0.9% today and is now at US$30,334. Volatility has been modest at just on +/- 1.2%.
HOLIDAY
Please note that Friday, July 14, 2023 is a public holiday in New Zealand, Matariki. It is a normal public holiday with most retail services open but most business and government operations closed. We will have holiday coverage tomorrow and return for normal weekend coverage following that.
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41 Comments
Rising rents will feed into CPI. A resurgent housing market will also bring consumer confidence back.
In both cases, an uptick in aggregate demand will quickly exceed supply capacity and inflation will start to rise again, keeping OCR higher for longer. Things will get worse on the long-term supply side as skilled workers leave and are replaced with low-skilled migrant labour in larger numbers.
Funny how our housing obsession is caught in a self-defeating loop.
Australian inflation expectations are not retreating. They were 5.2% in June are are also 5.% in July the the Melbourne Institute survey.
Makes sense, commodities have largely settled into a holding pattern so any further decrease in inflation will now need to be RBA driven.
Do we know how many private landlords/rental properties we actually need?
Would property be as unaffordable as it is if we didn't have conditions where someone could effectively borrow 100% of purchase price and then tax deduct the costs? I reckon at least 1/3rd of Landlords in this country are an unnecessary waste of capital, resources and everyone's time. Just a bunch of "middlemen" losers adding no value to society, winning the race to get their name on a property title no expenses spared.
Would property be as unaffordable
Pretty hard to say if the prices would be 100% the same without private landlords, but house level ownership would still be on the decline in NZ if not for private landlords. We see all the same sort of housing affordability issues going on across developed economies regardless of the configuration of individual countries' level of landlording.
Someone has to own a property for people to live in, 1/3 of renters are unlikely to be buyers, and the state doesn't appear to want to finance being everyone's landlord. Hard to say if overall the state would make a more affordable landlord, having seen how the state manages it's rental housing.
But, fruit and vegetable prices charged on with 22% annual rise.
Yes, or course they did! The cost of producing fruit and vegetables has nearly doubled in the last 18 months. Now, what is the biggest driver of those higher costs? Yep, interest rates - accounting for over half of the cost increases. Food prices across the world are subsiding quickly, but it will be a lot slower here because, errrm, RBNZ are very serious about reducing inflation.
Wouldn’t hold my breath for change any time soon. Getting the country to vote for systems that will allow for greater controls over inflationary and deflationary pressures is futile when half the country truly believe they’re millionaires for free.
In comes whichever of the main two, for another round of tinkering with the sails of a sinking boat.
Austerity will claim us before we claim ourselves.
"half the country truly believe they’re millionaires for free." They are millionaires...as long as someone else assumes an increased amount of Debt to allow them to realise the fruits of their labour. But, hey. Interest rates need to fall, so that process should be all the easier. (Sinking boat, you say? Just take on-board more cheap debt for more speculative bungs to ram in the holes)
Immigration up. Tick. Cost of credit up. Tick. Cost of everything up. That's a tick from way back. The premium for living in a small nation at the bottom end of the planet has always been an extra % more than Australia [for most of my life] and usually an extra couple of %s from what has traditionally taken place in North America, at least from a home mortgage perspective.
That, as a small nation, we can compete at all in some areas is a miracle in itself, however, we seem to lurch from one extreme to the next with a lot of shouting & the waving of bodily parts, but here we still are. Hanging on in there. ''Thar's choppy seas in the South Pacific me Heartays!''
The dollar is up to is economy-wrecking ways again.
The Chinese aren't taking their #eurodollar #dollar woes weakening yuan lying down #recession. But they aren't doing a whole lot meaningful about it, either. Why and why not? That's the (euro)dollar conundrum.
Lots of talk on the waterfront about the gutless decision of Labour. Lot of long time left wing labour guys in the union all disappointed and questioning what Labour stands for.
They are all looking to take their votes elsewhere with TOP seeming the most likely destination. Labour are going to get hammered at the polls.
In 2017 they started to campaign on a CGT, but quickly dropped it when JA took over Little as leader which was due to the poor polling. So it isn't a surprise that new taxes aren't going to win many new votes. But IMO they could have dropped the wealth tax and still had a CGT as we almost already have one with the brightline test.
I see our labour government told us more LIES under Jacinda and didn't follow there own rules about climate emissions scheme in which we have all paid dearly for .Can anybody tell me if this government told us the truth about anything, since they told us they would be the most transparent at the last election. Cant believe they are polling at 30% it should be 3% but hey kiwis have very short memories me think
This is what the reality is of everyday small business owners
and the public in NZ today https://tinyurl.com/labourasleep
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