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/LOAN RATE CHANGES
Nothing to report.
TERM DEPOSIT/SAVINGS RATE CHANGES
No changes to report today here either.
A BIGGER SHARE
Migrants' share of the housing market continues to grow. According to updated data released by StatsNZ today, migrants on residence visas accounted for 12.4% of dwelling purchases in year to June. That is up from 7.9% in 2018. To be fair, it is a bigger share of smaller volumes.
INTEREST COSTS RAMPING UP FAST
The RBNZ released its mortgage reconciliation for the June quarter today (C35), basically showing mortgage stress is absent still. Payment deficiencies are now lower than they were two years ago and hardly register at 0.08%. Meanwhile, borrowers are maintaining their "excess repayments" over an above the scheduled repayments at more than $4 bln per quarter, a level they have maintained for years. All this is despite paying a truckload more in interest. In the year to June 2023, home loan borrowers paid $14.8 bln. And that is +48% more than the $10.0 bln they paid in the year to June 2022. These reconciliation records began in 2014, and there has never been a year this high - or a quarter as high as $4.2 bln in interest paid. In the background of course, household incomes are rising, helping the affordability of all this extra mortgage load. Stats NZ reports that debt servicing costs were 7.5% of household income as at March 2023 (the latest data) and while that is rising, it isn't anything like the 16% when it peaked in late 2008.
LGFA BORROWS A$1B FOR COUNCILS IN FIRST OVERSEAS FORAY
The Local Government Funding Agency (LGFA) is borrowing A$1 billion through a five-year bond issue that marks its first offshore borrowing. Chief Executive Mark Butcher says the LGFA issued in the Aussie dollar but swapped the proceeds back into the NZ dollar to neutralise any foreign exchange risk, and to be able to lend to councils in the NZ dollar. Butcher says pricing of the bond back into the NZ dollar was only slightly above LGFA's domestic borrowing levels, making it "a small price to pay for the volume and diversification." The LGFA is borrowing in the Aussie dollar market because its funding programme has grown to a level, projected to be more than NZ$4 billion for each of the next three years, where it needed to diversify, Butcher says. Central banks and official institutions were the biggest group of investors at 47.8%, followed by asset managers and insurers at 43.7%. Some 36% of investors came from Australia and NZ, and 34% from Asia.
BACK ON TRACK?
After the Government conceded its position and now 'complies' with the Climate Change Commission advice and sharply reduces the number of ETS units available in the next five years. the carbon price has spiked to $64.50/NZU on these tightened settings. That up +44%, although still well below the peak $74/NZU in February.
SHAREHOLDER OK
Fonterra shareholders have today voted to pass the resolution to approve the scheme of arrangement for the Co-operative’s return of approximately $800 mln of capital to shareholders, with 99.24% of the total shareholder votes cast in favour of the resolution. Today’s result means that the Co-operative can now seek final Court orders to undertake the return of capital.
IN THE PAIN ZONE
'This season's milk price is likely to be below many farmers' break-even points' says Westpac. Their review expects Fonterra to have to lower its milk price forecast soon, and Westpac has slashed their forecast price by over a dollar. Even after doing that, their forecast is still higher than many other analysts. You can compare these forecasts at the bottom of this page.
RISING INVESTOR CONFIDENCE
The CAANZ investor confidence survey (of mum-and-dad investors) shows rising sentiment, and more tolerance to invest again after the post-pandemic shocks knock this impetus back. The survey showed 56% of respondents looking to increase the scale of their investment over the coming year. We are not quite back to 2021 levels, but across multiple indicators, investor confidence is holding steady or rising in 2023.
ENABLING INVESTMENT
The New Zealand Green Investment Fund has agreed to supply up to $15 mln in working capital to Lodestone Energy to support the construction of five solar farms from Northland to the Bay of Plenty which when complete should have renewable energy capacity of 199 MW. This "working capital funding" is to enable the connection requirements in the Transpower grid, for example.
BIGGER ROLE FOR WESTPAC NZ'S MARTIN GASKELL
Westpac NZ has expanded the role of Martin Gaskell, its Chief Transformation Officer, giving him the additional responsibility of Operations Officer. On top of overseeing change and transformation activities across Westpac, Gaskill will also oversee customer care, enterprise and mortgage operations, fraud and financial crime operations, card services, transaction operations and reconciliations, vendor and network management, commercial and property services, and business continuity and operations, including protective services. He takes on the new role from August 14.
'NO COMPETITION PLEASE'
The Government has initiated a review by Treasury and MBIE into the competitive tension in weather forecasting between NIWA and MetSevice. Both are State-owned and competitive forecasting isn't appreciated by the Government. The new enquiry is an attempt to sort out who does what.
EXTREME BUILDING COST RISES HAVE 'SLOWED' IN 2023
QV's unique CostBuilder tool is reporting an easing in cost increases. They remain very high, rising +9.5% in the year to June. But that is lower than the extreme +20.9% in the year to June 2022, and a still high +11.3% for calendar year 2022. Fast rising plumbing prices are noted for 2023 as still occurring. This tool covers costs for more than 8,000 items, plus labour rates, labour constants, and other . construction components.
SHRINKING MARKET
According to REINZ data, there were only 217 farms sold in the three months to June, a huge -37% fall from the 346 sold in June 2022 and 408 sold in the three months to June 2021. So far prices for the farms that do sell are holding up, which may just reflect that sellers aren't budging and fewer buyers are prepared to meet those levels.
HOLDING OUT FOR A SPRING BOUNCE
Lifestyle block sales are retreating too, but agents are talking up the "signs of an upturn". They might be dreaming. They say “Median values are consistent with the same period last year being just 2.9% down. The median for bare land lifestyle properties is however down 13.1%, perhaps reflecting the increased building and development costs being felt across much of New Zealand. With these cost rises and interest rate rises, buyers are taking a considered approach to purchases.” Like all rea estate agents they will be hoping Spring, the election, and Summer will breathe life back into these markets.
STILL HIGH BUT SLOWING
In Australia, CPI inflation rose +6.0% in the June quarter from the same period a year ago. (Expected: 6.2%.) But it is slowing; it only rose at the rate of 3.2% annualised from the March quarter to the June quarter. New Zealand has already released its June CPI rate and that was up +6.0% as well. Australia also tracks CPI inflation monthly, and the year-on-year June month rate was 5.4%, down from 5.6% in May. Housing and food costs are keeping inflation elevated in Australia.
SWAPS MIGHT BE FIRMER
Wholesale swap rates might be a little firmer today but it won't be by much. 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 5.66% and now +16 bps above the 5.50% OCR. The Australian 10 year bond yield is up +3 bps at 4.02%. The China 10 year bond rate is up +2 bps at 2.70%. And the NZ Government 10 year bond rate is up +3 bps from yesterday at 4.69%, but still higher than the earlier RBNZ fix which was unchanged at 4.61%. The UST 10 year yield is up +3 bps at 3.90% today.
EQUITIES SETTLE IN
The NZX50 is marginally firmer late in its Wednesday session, now up +0.2% near the close. The ASX200 is up +1.0% in afternoon trade after getting a fillip from the CPI result. Tokyo is little-changed in morning trade. Hong Kong is down -0.8% today in early trade after yesterday's zoom. Shanghai is down -0.3%. Wall Street ended its Tuesday session up +0.3%.
GOLD LITTLE-CHANGED
In early Asian trade, gold is at US$1962/oz and unchanged from yesterday. It closed earlier in New York at US$1965/oz and earlier still at US$1959/oz in London.
NZD STABLE
The Kiwi dollar is down -¼c from this time yesterday, now at just on 62 USc. Against the Aussie we are little changed at 91.8 AUc. Against the euro we little-changed at 56.2 euro cents. That means the TWI-5 is still at 69.9.
BITCOIN STUCK
The bitcoin price is virtually unchanged from this time yesterday at US$29,178 which was only +US$49 up. Volatility has been low at just over +/- 0.5%. What happened to the great TradFin adoption hope?
Daily exchange rates
Select chart tabs
Daily swap rates
Select chart tabs
This soil moisture chart is animated here.
Keep abreast of upcoming events by following our Economic Calendar here ».
58 Comments
Zollner (ANZ):
We expect the Q2 labour market report to show a relatively looser picture than Q1, although in an absolute sense, the labour market remains intensely inflationary.
https://pbs.twimg.com/media/F17W7TZaIAA8zmr?format=png&name=small
Some time ago we had a finance minister, Cullen I think, who seemed to think he could “talk” the NZ$ down. Seems to be today, there are some in the powers that be, that seem to think they can “talk” inflation down. Unfortunately for the people in the street, living the reality, “talk” is cheap. Still guess if it’s that, you could claim at least, it’s not inflationary.
The bitcoin price is virtually unchanged from this time yesterday at US$29,178 which was only +US$49 up. Volatility has been low at just over +/- 0.5%. What happened to the great TradFin adoption hope?
Funny that this was mentioned as FundStrat claimed y'day that BTC could go to USD180K before next April (before the halving, not after) because of the Blackrock ETF. Wonder if they're gaming the market here.
https://markets.businessinsider.com/news/currencies/bitcoin-price-outlo…
Now. you could crudely estimate USD50 billion flowing into the ETF in the U.S. market. Why? In Canada - 10% of U.S. popn - USD5 billion flowed into the market on the ETF launch.
Krugman now calling Japan a role model and China a potential disaster.
"Japan, rather than being a cautionary tale, is a kind of role model — an example of how to manage difficult demography while remaining prosperous and socially stable."
That's enough to get the coffee spilling around the water cooler if it weren't said by the great Krugman himself. People get humble around economists who are often in the media.
Anyway, an easily digestible narrative.
https://www.nytimes.com/2023/07/25/opinion/japan-china-economy.html?smi…
Japan should be considered a role model in innovation and efficiency. Any other country with such a rapidly declining workforce would be in an economic death spiral by now.
By comparison, look at countries such as Aussie, Canada and NZ importing workers by the planeloads as a blanket solution to our socioeconomic woes and putting ourselves deeper into misery in the process.
Ultimately Japan is in the people importing game. There's suburbs of Tokyo now which are mostly Chinese.
It just has barriers that Anglo countries don't, such as:
- cultural and language barrier - there's way more speakers of English
- the indigenous population, while lovely people, don't take kindly to some foreigners
One thing they have going for them is their culture, as you said. It's much less efficient and expensive to have a population of rabid individuals. Their staff will endure wages and conditions NZ workers would refuse. That's more due to accident than intention though.
Announcements in Chinese are heard on streets and in railway stations, department stores, and large home electronics stores in areas like Ginza and Shinjuku. Even the chatter of Chinese visitors is commonly heard on streets and in shops. This is especially true of the area north of Ikebukuro Station, with its multitude of Chinese-run restaurants. Mobile phone stores and real estate agents in the neighborhood commonly display Chinese notices explaining consultations are accepted regardless of nationality and without a guarantor or that Chinese clerks are on staff.
Chinese students in Japan are known for sending money from part-time jobs back home. However, their purse strings have loosened amid China’s new economic clout and nowadays they are buying everything from daily necessities to real estate.
Ultimately Japan is in the people importing game.
Nonsense. Residents of Japan of foreign descent are approx 2% of the popn.
https://japaneveryday.jp/2023/01/number-of-foreign-residents/#:~:text=A….
It's in the game, it's just not doing it to the same degree - I outlined part of why that is in my comment. New countries like NZ, Australia and the USA have populations that are largely reliant on 200 years of migration.
We are seeing the same story play out across the developed world. There's degrees to which it's occurring, some via deliberate intent, but most via happenstance.
Japan is not a very good planner. Shut down country for centuries, fall behind the world. Try to catch up, kill 10s of millions of people in the process. Recover with the help of outside entities, lasts only 30-40 years before imploding. They have turned their culture upside down 4 times in 200 years.
Sweet trains though.
Japan changed its visa program to open long-term residency to a wider scope of skilled foreign workers on Friday, with the cabinet approving the removal of maximum residency limits. The amended specified skilled worker visa program is expected to be rolled out in the latter part of the year.
The number of foreign residents in Japan at the end of 2022 rose 11.4% from a year before to hit a record high of 3,075,213, the Immigration Services Agency has said.
The number of foreign students and technical trainees rose sharply following the easing of COVID-19 border measures, the agency said Friday.
The total included 761,563 people from China, the largest group by nationality, 489,312 from Vietnam and 411,312 from South Korea. The figures all increased from a year earlier.
Japan is an economic failure. Despite having so many mega companies their lifestyle isn’t particularly great, they have to work long hours with few holidays to live a similar lifestyle as here. It’s a great place to visit and probably an ok place to live, but the people are not as wealthy as they should be.
But at the end of the day, the Japanese worker can go to 7/11 and get one of those delicious hot curry breads and a ridiculously strong can of ready-to-drink spirits mix for the equivalent of a few NZ dollars, and then wash off the hangover the next morning with a 100 yen can of iced coffee from a vending machine that can actually stay standing and stocked without some yob having driven a Toyota Aqua through the front of it. And the train to work will actually be on time, which helps.
But at the end of the day, the Japanese worker can go to 7/11 and get one of those delicious hot curry breads and a ridiculously strong can of ready-to-drink spirits mix for the equivalent of a few NZ dollars
They often earn 1/3 as much as the same job in NZ, so things have to be that pricing to be affordable. It's really cheap, if you're earning money in a much higher wage economy, like NZ. It's all relative.
That's why Japan is now a cheap holiday destination, whereas 30 years ago, it was quite an expensive exercise.
Race to the Bottom
Over the ditch, ANZ observed consumption data down 10% yoy from July.
If that is anyway true and a forward indicator, quite possibly S has HTF in Aussie according to David Taylor (ABC reporter).
https://twitter.com/DaveTaylorNews/status/1684002803629559808
US Equity Risk Premium
"The S&P 500 equity risk premium hit the lowest level in two decades, which will be a headwind for longer-term returns"
https://twitter.com/SoberLook/status/1683766690557972480?s=20
And John Hussman's (PhD) research is showing now could be a terrible time to be long on equities. We are at an outlier position where future returns could be very bad.
https://twitter.com/hussmanjp/status/1683966178862006273?s=20
This chart shows the issue challenges/risk that is ahead:
https://pbs.twimg.com/media/F16mIGVXsAMuIMX?format=jpg&name=medium
What does this mean? If history repeats - then now is a bad time to have a highly risky portfolio. Returns on a 10 year government bond will provide you with better returns than a share portfolio/average share holding if purchased now.
"Equity returns are stable"
Yes but the point of the posts above is that given current conditions, compared to other points in history, is that returns from equities may not be stable going forward as investors will favour other assets - as the risk/return no longer stacks up - per Hussmans scatter plot.
The comment above is about potential future returns (or lack of) not that equities are currently stable which appears to be your position.
Why buy the risky asset that stands to return you 7.2% less than the risk free asset? This is more Investment Analysis 300 than CAPM 101.
NY Feds recession probability indicator is sky high - at least the highest it has been in the past 40 years.
https://www.newyorkfed.org/medialibrary/media/research/capital_markets/…
Accountability. UK NatWest CEO resigns over Farage bank account disclosures after Downing Street "displeased".
https://www.bbc.com/news/live/business-66296935
The same sanctions should also apply to the Canadian banks who facilitated Trudeau's political actions against the striking truckers last year, freezing their bank accounts to break the strike.
Then again, Trudeau invoked an Emergency Act so perhaps the voters might have to deal with him at the next election.
For sure. He should be in prison. Summarily jeered and booed at the North American Indigenous Games when he gave a speech.
https://torontosun.com/news/national/justin-trudeau-booed-at-north-amer…
Very true JC. The Farage case is bigger than just the banks or the UK. The idea that enterprises, especially publically listed ones should be compelled to do more than just comply with the law, and meet the listing rules of their stock exchange.
No, this whole "ESG" concept being foisted on company boards by woke busybodies, while supposedly "guidance" for best practice on how they deal with the environment, diversity of employees, sustainability of product, etc., all to take into account the needs of a wide range of "stakeholders" (who apparently include the general public who may have no financial interest in the company!)
It is these sort of issues, the need to enhance the brownie points earned by a company, which is behind the action of bank in question to exclude Farage to enhance its self proclaimed " institutional reputation".
This ESG nonsense is being actively pushed here in NZ too. In my opinion a board has quite enough on its plate to produce its products at a profit whilst complying with both the spirit and letter of the law, and keeping its staff reasonably content. Worrying about how many lgbt, minorities etc., on the board and in top management; worrying about "green" perceptions, and so on, especially the feelings of those claiming to be stakeholders simply by living in the same city, is both a distraction and a drag on the economic performance needed to succeed. And successful enterprises are something vital to everyones' future.
Bull---t.
The problem is that physical maintainability and economic growth, are incompatible.
Temporarily, growth hoed into a finite planet like there was no tomorrow, did so at exponentially-increasing rates, and used a one-off finite energy source to do the work. Money is merely a forward bet; work it through and that bet is on future energy doing future work to future-available resources. Nothing else.
If they aren't there in expected amounts - and I suggest that is happening already - then your money (that which is the sacrosanct obligation of board-members to bigger - shades of the Lorax) is worth less, proportionately. And, given depletion, increasingly.
So it's an invalid metric. Suited those temporarily winning in the temporary game, but ultimately an invalid accounting format.
Go easy on those attempting to put something in its place - through a glass darkly and all that. Wellbeing was a brave stab. Other bits, not so. Ultimately, the financial system is sub-system of the production system, and the production system is dependent on the energy/resource-stock system. And growth is ecologically untenable, beyond a certain point (we die, regardless of proxy held). So a zero-growth system the next one will be - have a wee think about what that means for return, profit.....
I never cease to be amazed at the amount of assuming done by so many for so long...
The grossest bit of this is the bare faced cheek of a bank - any bank - trying to act like a moral arbiter on anything in the first place. Just shut up and take my money (a reference for the Futurama fans if there are any) and enjoy your state mandated right to make enormous profit with little risk, and then when you screw it up just come along with your palm outstretched to roger the public that little bit more.
I don't agree with many of Farage's views and he has got the 'Conservative Grift' down to a fine art (I actually can't knock his hustle in this respect) but Farage is secondary to this.
It's only because it's Farage and he is second to Trump in the naughty right winger stakes that many people - including family of mine in the UK - think it's great a bank would deny somebody service based on their political views. They are so blinded by their hatred of the man that they can't see all the nasty implications of what the bank in question has done. How did we go in the space of a decade from the likes of Occupy Wall Street to people bootlicking morally questionable banks just because they wrongly get one over on someone you disagree with?
At the end of the day banking is a fairly iffy industry - I'd put it one rung on the ladder above casino operations, perhaps - and I would imagine that a prestige bank (i.e. a bank for rich people) is going to come into even more regular contact with money that may not exactly be squeaky clean. In fact wasn't NatWest fined a few years back for letting drug dealers deposit literal garbage bags full of cash through their branches?
There's a reason Jesus cast the money changers out of the temple, and not the plasterers, fruit and vege pickers, or heavy diesel mechanics.
He'd probably have a few words for the property spruikers too though, I'd imagine.
Speaking to a developer today, he’s one of the few happy chaps out there right now. Buying sites 30% below peak value, 3 months due diligence, and 18-24 months settlement. Not many out there able to do this, and he doesn’t have much competition. ‘Long may the slump continue’, he said.
Yeah,but…..
The capital’s infrastructure is in a shocking state. To upgrade it, you either hike rates or you incur much more debt, or quite a bit of both. I don’t know how much more debt that that council could incur.
Sure there’s undoubtedly wasteful spend that could be cut, but that only goes so far.
Rather than whinge, it’s better to understand that lack of collective foresight, and greed, has got us here.
One reaps what one sows with neoliberalism.
Wellingtonians must feel good about who they elected mayor and who is responsible for solving this problem for them then. I say good luck. Wellington will be a lot more miserable than it is now when she is finally shown the door. Christchurch is much better off. The damage done by Leanne is bad enough, but at least there is a doer rather than a corrupt drunk in charge down there now. For Wellington we just know that the mayor is an entitled drunk. We don’t know about the corrupt part yet.
People aren't the problem. You could change every elected person for their political oppo, and it would make ZERO difference.
https://consciousnessofsheep.co.uk/2023/07/25/an-exercise-in-denial/
This is the problem facing every mayor on the planet:
https://consciousnessofsheep.co.uk/2023/07/25/an-exercise-in-denial/
It's just really rare to have anyone use that term and follow it up with a truly insightful piece of information. Because at its core, it's denying the social requirements of humans to conform to a group norm, while hypocritically expecting other people to adopt their views.
Basically, it's not a term truly great thinkers usually adopt, but it is a term many fundamentalists do. An actual smart person wouldn't use it to promote their views, because they'd want to be taken more seriously.
Major Bank Just Collapsed! FDIC Tried To Hide Everything
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.