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
BNZ upped its 6 mth, 4 yr and 5 yr rates today. Kāinga Ora raised all its rates including its floating rate.
TERM DEPOSIT/SAVINGS RATE CHANGES
Unity Money raised its 9 and 18 month TD rates.
MORE WORRYING HOUSING MARKET DATA
New Realestate.co.nz figures suggest the housing market fell into a hole in July. Anyone seeing green shoots in their latest housing or listing figures has probably been smoking them.
RESIDENTIAL BUILDING PIPELINE PULLS BACK
Meanwhile, the residential building downturn is looking serious with the number of new homes being consented down sharply in June. The number of new homes consented in the June quarter was down -20% on last year.
PRIVATE UP, PUBLIC DOWN
Infometrics has noted that the value of non-residential building consents issued in June totalled $764 mln, up +17% from June 2022. However, after accounting for both seasonal patterns and building cost inflation, this result was -3.1% below the average value over the previous six months. There were some big new consents for an Auckland data center and the big new Ikea retail center, but they were offset by a big falloff in new hospital building consents. Private sector consents up, public sector consents down.
'BIG' CAPITAL INJECTION
New Crown-owned Kiwibank parent company injects $225 mln into Kiwibank from the proceeds of the sale of Kiwi Wealth. But to be fair that is less than +10% more (and only equivalent to just 10% of ANZ's annual tax-paid profits). After 15 years, Kiwibank has less than 6% of the banking assets of the big four Aussie banks. Just to match the smallest Aussie bank in NZ, Kiwibank would need another $6 bln in capital.
UP SHARPLY FROM A LOW BASE
Non-performing housing loans rose by almost +50% in first half of the year even though they remain historically low. The latest Reserve Bank figures show the total of officially 'impaired' housing loans has now surpassed the peak of the sharp, but brief rise during the pandemic in 2020
CHINA FACTORIES CONTRACTING NOW
The economic news just keeps sliding lower for China. Today the Caixin China General Manufacturing PMI fell now contracting in July after a small expansion in June. Market estimates expected another small expansion but it hit its lowest reading in six months. It also confirmed the official factory PMI contraction. It was the first Caixin drop in factory activity since April, as new orders dropped after growing in the prior two months, and export sales contracted the most since September 2022.
WHAT WILL THE RBA DO?
At 4:30pm today the RBA will release the results of its latest review of its cash rate target. Basically, no-one really knows what it will do. Analysts have come down on the side of a +25 bps hike, but financial markets are pricing in very little of that (+7 bps). We'll know soon enough.
AI DEPLOYED TO CATCH TAX CHEATS
The AFR is reporting that the Australian Taxation Office has used artificial intelligence on an industrial scale to identify more than AU0.5 bln of unpaid tax bills and stop AU$2.5 bln being fraudulently claimed. The agency’s deep learning models had helped staff identify AU$295 mln in superannuation guarantee underpayments, and natural language models had scoured leaked documents, such as the Panama Papers, to detect AU$242 mln owed by tax evaders since 2018.
THE SQUEEZE IN ON COMMERCIAL PROPERTY FUNDS
The AFR is also reporting that two property funds run by ASX-listed Centuria Capital Group (which bought out NZ Augusta Funds recently) have drastically cut the amount of redemptions they are paying out to their investors after recent requests exceeded the unlisted vehicles’ withdrawal thresholds. The move to limit, or “scale”, the redemption payouts is the latest sign of pressure emerging in the country’s unlisted property funds sector. The ASIC requirement for such funds to mark-to-market every quarter is going to add pain soon too.
SWAPS BACK UP
Wholesale swap rates are probably a bit higher 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 a minor -1 bp at 5.66% and now +16 bps above the 5.50% OCR. The Australian 10 year bond yield is up +1 bp from this time yesterday at 4.02%. The China 10 year bond rate is down -2 bps at 2.69%. And the NZ Government 10 year bond rate is up +4 bps from this morning at 4.77%, and still higher than the earlier RBNZ fix which was up +5 bps bps at 4.68%. The UST 10 year yield is down -1 bp from yesterday at 3.97%.
EQUITIES HOVER MAINLY UNCHANGED
The NZX50 is down -0.6% in late Tuesday trade. The ASX200 is up +0.3% in afternoon trade. Tokyo has opened up +0.7%, Honk Kong up +0.1% in very earl;y trade, and Shanghai has opened down -0.1%. The S&P500 ended its Monday session up +0.2%.
GOLD HOLDS
In early Asian trade, gold is at US$1960/oz and up +US$4 from this time yesterday. But it closed earlier in New York at US$1966/oz and earlier still in London at US$1971/oz
NZD RISES
The Kiwi dollar is up marginally, now at just on 62 USc. Against the Aussie we are unchanged at 92.5 AUc. Against the euro we firmer at 56.4 euro cents. That means the TWI-5 is up slightly to 70.2.
BITCOIN SLIPS BELOW US$29,000
The bitcoin price is down -1.7% from this time yesterday, now at US$28,946. Volatility has been modest however at just over +/- 1.2%.
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36 Comments
In all honesty, it doesn't surprise me. The RBA have been absent in any affirmative decision-making for years now. But it doesn't temper my frustration at them not seeing the obvious in front of their eyes. If the RBNZ follows suit - more fool them. It will hasten the need for a catch-up of quite some magnitude in the near future. And if we think the OCR hurts today, then tomorrow it will be doubly so.
The Australian economy should be one of the most vibrant, dynamic economic on the planet. But look at it. It can't stand interest rates above 4%? All, because those, whose job it is to make the hard decisions, won't. Nick O'Kane isn't paid a million bucks a year like the Governor of the RBA, he earns a million bucks a week. Why doesn't he work for the RBA? Because he's a smart, decisive operator who makes tough decisions when they have to be made. And if he gets things wrong, he cuts his losses early. It's because the best bankers don't work for Central Banks, and never have, that we are where we are today.
Last I checked shipping tonnes of coal and over 650 million tonnes iron ore. Its great when you can just dig shit up in a country the size of Australia. Their economy is massively dependant on China. This is why the Australians are the greatest climate change deniers on the planet.
Looking at state level, NSW and Vic have consumption-focused and migration-driven economies (much like NZ) that incur large trade deficits with the rest of the world. These states rely on high net exports originating in WA and Qld to keep the economy ticking.
Aussie has the same relationship with mining as NZ does with agri. Every attempt to diversify away from bulk exports has meant greater dependence on cheap debt and importing consumers.
Not in my back yard but I'll oppose it anyway. Go Kiwi!
"Waka Kotahi NZ Transport Agency has come out against a proposed residential and business development near Cromwell.
The government agency said, in a plan change submission, it opposed the Parkburn proposal because of climate change concerns and the relatively isolated location of the development.
Fulton Hogan runs a large quarry in the area — about 10km west of Cromwell — but it is nearing the end of its life."
https://www.nzherald.co.nz/nz/waka-kotahi-opposes-central-otago-housing…
Because climate change? Bringing more sections to the market would lower the average price of sections and FHB wouldn't have to got to Oz? If this is a "classic business plan" that has worked a zillion times why are shitty sections so eye watering expensive in this country? Otago has the same population density as Lapland but this bullshit sends the kids to Oz. This is classic tall poppy nimby bullshit. Rant over.
As someone who lives not far from this quarry, I fully support FHs plan. It will be left as a big hole in the ground serving no useful purpose if this doesn't get approval as it is a 'end of life quarry site'. Cromwell is expected to get as big as Wanaka in the future, and with 'high quality soils protection' happening, Cromwell is going to need land like this to expand on. Also the Dunstan trail which starts just a bit further north, goes straight past this site, so people will be able to cycle to Cromwell - not sure what NZTA is going on about really. Have they not heard of EVs? Or is it just sour grapes from NZTA towards one of its roading contractors?
Heineken's shares drop 7% on poor earnings report. Sales are down in APAC and Nigeria (which alongside Vietnam have been the most profitable growth markets in recent years).
Imagine the pain being felt amongst the craft beer businesses.
https://edition.cnn.com/2023/07/31/business/heineken-profit-beer-sales-…
Charlene de Carvalho-Heineken is a Dutch billionaire businesswoman, and the owner of a 25% controlling interest in the world's second-largest brewer, Heineken N.V. She is the richest person in the Netherlands, with a net worth of $16.7 billion as of May 2021, according to the Forbes billionaires Link
Michel de Carvalho, her husband, was one of my old bosses.
Global:
So, Yellow is done. It may not be much of a surprise now but it would've been a complete surprise a year ago. The company was ramping up training and hiring expecting good times to last. It was a microcosm of the whole supply shock cycle. https://buff.ly/3OC0cFj Link
This is just gold. Jeff Snider. A Twitter (X) post but has to get some air:
LOL.
Treasury plans to sell ONE TRILLION in debt during Q3. Just Q3.
That # is up a f-ing ridiculous $274 bln since May estimate. Janet Yellen just decided three months later she needs a quarter trill more. Because the economy is fine, obviously.
https://twitter.com/JeffSnider_AIP/status/1686227460881358848
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