A review of things you need to know before you sign off on Wednesday; no retail rate changes but a flurry of other news including LGFA's first overseas borrowing, interest paid on mortgages up +48%, swaps and NZD stable, & very much more

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?

This soil moisture chart is animated here.

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