What happened Friday

Economy / news

A review of things you need to know before you sign off on Friday; no retail rate changes, Barfoot volumes hold low, prices fall, building cost pressure eases, dairy payout slashed, ANZ rejected, swaps and NZD stable, & more

4th Aug 23, 3:59pm by David Chaston

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 again today.

TERM DEPOSIT/SAVINGS RATE CHANGES
None here either.

DOWN -$1500/DAY IN AUCKLAND
Barfoot & Thompson's July sales report shows volumes were steady but the median price dropped $45,000 in 31 days. They say the Auckland housing market 'has found a natural plateau'. Sellers seem motivated with listings rising. Will there be buyers?

PRESSURE ON COSTS STARTING TO EASE
Residential building costs show signs of flattening out. Construction costs for stand alone houses and apartments fell slightly in the second quarter, build costs for retirement village units still surging.

BEFORE BREAK-EVEN
Fonterra has slashed its 2023/2024 payout forecast by -$1 after a tough recent dairy auction that saw WMP demand from China drop. It has cut is payout range from a midpoint of $8.00/kgMS to $7.00/kg/MS. See here. If it holds, it will be below the break-even point for many dairy farmers. And that will be felt at Treasury in their company tax receipts. (This election might be a good one to lose?)

ANZ PLAN REJECTED
The Australian competition regulator has knocked back ANZ's AU$4.9 bln takeover of Suncorp Bank. It is not a complete surprise, with others working to merge Suncorp Bank with Bendigo Bank. The ACCC is promoting that 'solution'. But the problem with the alternative is that would be two weak institutions combining, and it wouldn't necessarily result in any strength improvement. The ACC said “We are not satisfied that the acquisition [by ANZ] is not likely to substantially lessen competition in the supply of home loans nationally, small to medium enterprise banking in Queensland, and agribusiness banking in Queensland. ... Second-tier banks such as Suncorp Bank are important competitors against the major banks, especially because barriers to new entry at scale into banking are very high”. ANZ said it isn't giving up.

SWAPS FIRMER & STEEPER
Wholesale swap rates are probably higher again today. And steeper. 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 an unusual -3 bps to 5.64% and now +14 bps above the 5.50% OCR. The Australian 10 year bond yield is up +8 bps from this time yesterday at 4.14%. The China 10 year bond rate is down -2 bps at 2.68%. And the NZ Government 10 year bond rate is up +8 bps from this time yesterday at 4.88%, and still higher than the earlier RBNZ fix which was up another +6 bps bps at 4.82%. The UST 10 year yield is also up another +6 bps from yesterday at 4.17% as the bond rout roll on.

EQUITIES WAVER
The S&P500 ended down -0.3% in Wall Street trade in their Thursday session ahead of the July non-farm payrolls report and fast-rising bond yields (that is, fast-falling bond prices). Tokyo has opened its Friday session little-changed. Hong Kong is up +0.8% in early trade. Shanghai is back yo +0.2%. The ASX200 is down -0.2% in afternoon trade but heading for a substantial -1.5% weekly retreat. The NZX50 is little-changed in late Friday trade heading for a -0.2% weekly dip.

GOLD STABLE
In early Asian trade, gold is at US$1935/oz and down only -US$1 from this time yesterday. It closed earlier in New York at US$1933/oz and earlier still in London at US$1936/oz

NZD HOLDS
The Kiwi dollar is little-changed at just on 60.9 USc. But it is down -80 bps in a week. Against the Aussie we are holding at 92.8 AUc. Against the euro we also holding at 55.6 euro cents. That means the TWI-5 is still at 69.7.

BITCOIN ESSENTIALLY ON HOLD
The bitcoin price is virtually unchanged from this time yesterday, now at US$29,157 and down a mere -0.2%. Volatility has been low at just over +/- 0.7%.

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

Daily swap rates

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Source: NZFMA

This soil moisture chart is animated here.

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64 Comments

by Pragmatist | 4th Aug 23, 4:01pm 1691121710

Hey David Chaston, your Bitcoin price data is corrupt, pretty sure it never got to $4m/buttcoin.

by J.C. | 4th Aug 23, 4:13pm 1691122394

More interestingly and this just blew my mind.

We are now in the 4th 'epoch' of Bitcoin. An epoch is defined by a 4-year period ending in the halving.

Now, thinking about BTC on exchanges:

Epoch 1 - Increased by 5 BTC per day

Epoch 2 - Increased by 768 per day

Epoch 3 - Increased by 1,428 per day

Epoch 4 (which we are in right now) - Decreasing by 642 per day

by Pa1nter | 4th Aug 23, 5:46pm 1691127982

We are now in the 4th 'epoch' of Bitcoin. An epoch is defined by a 4-year period ending in the halving.

So it's basically a currency that's gone LARPing.

On the 20th day of the tabernacle, as the moon rounds it's new epoch, the Golden Goose will lay half as many eggs. And doth, the people will pay more for the existing eggs

by J.C. | 4th Aug 23, 5:49pm 1691128187

On the 20th day of the tabernacle, as the moon rounds it's new epoch, the Golden Goose will lay half as many eggs. And doth, the people will pay more for the existing eggs

What it means is that more ratty is being moved off exchanges than ratty put on exchanges. The whole market structure has fundamentally changed.

by Pa1nter | 4th Aug 23, 6:08pm 1691129294

Sounds a reliable way to invest then.

by J.C. | 4th Aug 23, 6:48pm 1691131707

It means that more BTC is moving to cold storage. Like gold in a pvte vault.

by Pa1nter | 4th Aug 23, 6:36pm 1691130998

I meant your assertion it's nature has fundamentally changed.

Implies large amounts of luck. And should bring the current narrative into high suspicion, because the old 'certainties' did not come to pass.

by J.C. | 4th Aug 23, 7:50pm 1691135426

Implies large amounts of luck. And should bring the current narrative into high suspicion, because the old 'certainties' did not come to pass.

I don't think you understand. Ratty was never designed to sit on exchanges, but it did as adoption progressed. As the market has evolved, more people are self custodying. That is exactly the intention of decentralization.

by Pa1nter | 4th Aug 23, 8:16pm 1691136994

I understand what you are saying, you are missing my drift. The use case and mechanism keeps changing. That's not great, from an investment perspective.

As a use model, it's even worse. If someone told me I had to only deal in physical fiat, I'd tell them to take a jump.

by JimboJones | 4th Aug 23, 6:45pm 1691131546

Why would any investment have fixed cycles? Any known future event should be baked into the current price, unless of course the investment is actually just a speculative piss take.

by Pa1nter | 4th Aug 23, 6:48pm 1691131686

For it to be a good bet for JC, it'll need to hit something like $500k per coin.

At that point, how much with Satoshi Pokemyhoshi be worth?

I guess maybe he can drag that many in, even at lower decimals. Blackrock seem to think so, and if they were a country they'd be the third wealthiest on earth. So, plenty of sway.

by J.C. | 4th Aug 23, 7:08pm 1691132885

Monetary policy by design. Not the whims of central bankers.

by sit23 | 4th Aug 23, 4:21pm 1691122919

Fonterra's best bet is probably to disassociate themselves from anything to do with China, unless there is an obvious profit in any deal. Remember, this is the same business culture that they used, in tandem with Theo Speirings to try to send Fonterra broke. It cut a big hole in Fonterra's profitably for quite a few years. Luckily Fonterra showed a bit of sense and got rid of Theo pretty quick. Things have been pretty good for them since that millstone was dumped. I hope the present directors and management don't repeat the same mistakes that were made with trusting him and them!

by Foxglove. | 4th Aug 23, 4:33pm 1691123621

Searched but couldn’t find what percentage of Fonterra’s exports is in the form of WMP. Would hazard a guess at rather a big percentage and that in itself would be a significant driver of their trade with China I would suggest?

by rolande | 4th Aug 23, 5:27pm 1691126820

I found this, looks like 40%ish by value...(I would have guessed more)

https://figure.nz/chart/HdSMOAyTNzvVTM7k

But other categories like cheese also have a growing market in China.

by J.C. | 4th Aug 23, 4:37pm 1691123858

Chinese dairy manufacturers and brands are doing well in a tough environment. As a commodity producer, NZ has to toe the line and feed off the niche brand opportunities.

by Te Kooti | 4th Aug 23, 4:43pm 1691124236

What happened to the grey market for milk powder and Chinese paying overs? Are those days finished?

by J.C. | 4th Aug 23, 4:52pm 1691124727

What happened to the grey market for milk powder and Chinese paying overs? Are those days finished?

You mean the Daigou channel. It's now more formalized and less lucrative as costs have increased and Chinese consumers less willing to pay a premium.

by Te Kooti | 4th Aug 23, 4:59pm 1691125196

Yes, that was it.

by Baywatch | 4th Aug 23, 7:00pm 1691132452

Less babies...less formula....the smart farmers are pivoting to other markets (I hope)

by morepork | 4th Aug 23, 5:43pm 1691127784

With the Chinese tightening their belts, and the massive declining number of children (i.e. infant formula) there, demand for milk is unlikely to increase any time soon. Maybe we need to hitch ourselves to India, get started on those ghee factories.

by rolande | 4th Aug 23, 5:47pm 1691128067

But then they all start eating pizza (mozzarella) and drinking cream cheese machiattos. Still a massive market.

by Officebound | 4th Aug 23, 4:43pm 1691124210

The 'Tax Take' will be a 'Tax Give' for most farmers this year, claiming rebates after net losses.

Govt books go boom.

by IT GUY | 4th Aug 23, 5:15pm 1691126157

Baldrick is also a poet. His greatest poem is, without a doubt, 'The German Guns'. The words are:

Boom, Boom, Boom, Boom,

Boom, Boom, Boom,

Boom, Boom, Boom, Boom,

Boom, Boom, Boom

by Hamish | 4th Aug 23, 5:29pm 1691126961

Man we could do with a new season of Black Adder set in modern times.

Or The New Statesman (rip Rik).

Instead we will get....the reality show that will be our next government (whatever the make up of it is)

by Pa1nter | 4th Aug 23, 5:49pm 1691128183

How could you write better comedic material than the last 20 years.

It's like reality has become a parody of itself.

by Audaxes | 4th Aug 23, 4:44pm 1691124266

A rising terms of trade was a big part of the NZ econ story from about 2003 to 2014. The level is still high by historical standards, but the current fall is a drag on real national income and purchasing power (and fiscal revenues) Link

by J.C. | 4th Aug 23, 4:59pm 1691125163

The mighty Chris Joye on "Why the Kiwis are thrashing Australia in economics". He obviously hasn't seen the Fonterra news yet.

While Australia and New Zealand have almost identical inflation problems, interest rate settings are radically different.

https://www.afr.com/wealth/personal-finance/why-the-kiwis-are-thrashing…

by Te Kooti | 4th Aug 23, 5:03pm 1691125431

Rare credit to Orr, he had the stomach to do what was needed where as Lowe bottled it and was a melt. Sydney house prices +5.5% last quarter as well, still they are the Saudi of the West so maybe life really is easier over there?

Also, If Australia can't hike rates beyond 4.1%, what does that say about the amount of debt they have?

by J.C. | 4th Aug 23, 5:18pm 1691126324

Also, If Australia can't hike rates beyond 4.1%, what does that say about the amount of debt they have?

Bingo

by Jonny.Foe | 4th Aug 23, 5:55pm 1691128530

Aussie debt is similar in structure and size to ours. Their inflation will come down with ours but they won't lose as many businesses or jobs.

by IT GUY | 4th Aug 23, 5:51pm 1691128283

I actually agree, mistake lowering but a once in a 100 pandemic forecast (actually just a light flu) but has done hard yards pushing up...... we should never have locked down for such a lite death rate thing..... maybe 3-5% plus but we should never do this shite again

by KH | 4th Aug 23, 5:45pm 1691127957

Bardot and Thompson call it a "plateau". The real estate industry is owed thanks for creating new meanings for old words.

by IT GUY | 4th Aug 23, 5:52pm 1691128361

Its a black diamond run, not a plateau Remers is down 26% and it ain't finished, was 40% overvalued at top so some to run yet......

by marewa | 4th Aug 23, 9:14pm 1691140488

Diamonds don't shine. They reflect. Can hardly see them when the lights are out.

by J.C. | 4th Aug 23, 5:56pm 1691128606

Cindy's mate Justin Trudeau said this week that affordable housing is not a “federal responsibility.”

However,

The Liberals’ 2015 campaign platform promised “affordable housing for Canadians.” “We have a plan to make housing more affordable for those who need it most – seniors, persons with disabilities, lower-income families, and Canadians working hard to join the middle class,” Trudeau said at the time.

https://nationalpost.com/opinion/justin-trudeau-housing-not-a-federal-r…

by HouseMouse | 4th Aug 23, 6:01pm 1691128909

He might even have the honour of being a bigger Woke Phoney than Ardern. And that’s saying something.

by agnostium | 4th Aug 23, 7:34pm 1691134490

Disappointed in you HM, using "woke" It's lazy and below you. Unless you care to define what woke means...

by J.C. | 4th Aug 23, 7:56pm 1691135763

Even if you used the adjective 'woke' in its most positive interpretation, the words used were 'woke phoney'.

My interpretation of 'woke' is negative. Something more tribal, totalitarian, and close-minded than liberalism.

by HouseMouse | 4th Aug 23, 8:18pm 1691137095

I could use ‘Chardonnay Socialist’ if you prefer. Same thing. Profess to care deeply about social (and other) issues, but do jack all to meaningfully address them. In fact do a number of things that make things worse.

with lots of empty virtue signalling.

by JimboJones | 5th Aug 23, 8:54am 1691182447

I feel like she was too obsessed with polling and the reaction of Hosking and ilk that she never pushed through the more radical changes she would have wanted. Hard to know if that was her or the party. Capital gains tax was an obvious example. I doubt she’s the terrible person that the likes of yourself like to portray her as.

Things were actually doing pretty well prior to Covid, house prices had stabilised, houses were being built, economy growing, etc.

by Beanie | 4th Aug 23, 6:03pm 1691129031

Sean Plunkett being a cock, but will be of interest to possible Top voters.

https://theplatform.kiwi/podcasts/episode/top-leader-raf-manji-doesn-t-…

by nzphoenix | 4th Aug 23, 6:38pm 1691131135

God Sean is such an insufferable prick, isn’t he?

by Independent_Observer | 4th Aug 23, 7:36pm 1691134571

Watched the first minute of that and had similar thoughts.

by Beanie | 4th Aug 23, 7:54pm 1691135675

There is NO excuse for ringing someone live on air without telling them. A bit like putting someone on speakerphone without saying who else is listening.

by Rob Reid | 4th Aug 23, 7:50pm 1691135447

Shouting over Raf after the first half of the first sentence of each reply. Sounded like Sean wasn't getting the sound bites and reactions he wanted so just kept trying another angle.

Good to hear Raf just saying I don't want to be on the Platform so didn't answer the calls - no excuses.

by Murray Falconer | 4th Aug 23, 8:18pm 1691137110

He phoned me as I offered to be a candidate for TOP when Gareth started it and assume he drew the short straw. I had a really good yarn with him (yes, I told him I preferred a land tax to what they had then) and he seemed quite a nice agreeable fellow to be honest.

Ditto Raf from speaking with him at TOP 3.0 meetups.

7am call aside, I probably agree with Sean - TOP should take the opportunity to spread the message and educate Sean on current TOP policies which he clearly isn't up with the play on!

by HouseMouse | 4th Aug 23, 6:04pm 1691129056

Got an email today advertising discounted Kiwibuild homes. First time I have seen that

by Nzdan | 4th Aug 23, 6:32pm 1691130725

I wonder how this young property baron is doing. In 2022: 51 properties, $11m in mortgages. $9m in equity (45%). $1m in gross rental income.

$11m P&I @ 30 year,
- 2.5% = $500k p.a.
- 5.5% = $750k p.a.
- Rates $3k each = $150k p.a.
- Insurance $100 p/m each = $60k p.a.

Net @ 5.5% mortgages = $40k - $50k? Tax bill $100k @ 50% deduction

https://www.nzherald.co.nz/nz/aucklander-jonathan-brownlee-owns-51-prop…

by Murray Falconer | 4th Aug 23, 7:01pm 1691132516

'He says it pumps money into the economy, by employing tradies and spending up to $100,000 per year with property managers. 100k'

I guess he's doing everything himself now.

by JimboJones | 4th Aug 23, 7:09pm 1691132994

At least he’ll be paying tax for the first time now too. Well at least until October when it goes back to being “fair” under National and he pays none.

by Nzdan | 4th Aug 23, 7:15pm 1691133333

This is his current very basic website uploaded in August last year. https://getproperty.co.nz/

"Join my buyers list". He's a "Buyers Agent" now. I wonder if it's a front for property that he's trying to liquidate?

by Murray Falconer | 4th Aug 23, 7:33pm 1691134383

How altruistic, everyone in NZ may now replicate his success - we can save a fortune by scraping NZ super and might as well close down KiwiSaver too.

It would be interesting to know how this played out since it made the news initially, probably sold out and walked away with millions.

by Baywatch | 4th Aug 23, 7:03pm 1691132598

Also no news from the brightest star of former PM.. sorry Sir.., Max?

by JimboJones | 4th Aug 23, 7:06pm 1691132814

Banks make it hard to top up your mortgage without proving every cent of income and expense’s regardless of equity, then let 26yo go that much into debt. World has gone mad.

by Nzdan | 4th Aug 23, 7:19pm 1691133563

A small amount of digging through some publicly available information suggests he lives(d) in a $6m property in Whenuapai which was bought in 2014 for $2.4m, which I assume belongs to his parents. Dad's equity and the kids name on the loan document.

by Murray Falconer | 4th Aug 23, 7:48pm 1691135319

Parents were 'acting as guarantors on the bank loan' which makes a joke of the narrative pushed from that point on really. Paid the deposit parents loaned him back, but no word on the line of credit being dropped.

by bw | 4th Aug 23, 7:18pm 1691133502

"with his parents lending the difference and acting as guarantors on the bank loan."

I doubt the lenders have relinquished that lein, and it may be even more comprehensive now. Why wouldn't it be? After all, you can't lose on property.....

by Squishy | 4th Aug 23, 7:55pm 1691135752

Plateau has a very unfortunate connotation in investing.

Economist Irving Fisher proclaimed, “stock prices have reached...what looks like a permanently high plateau." The boom ended in a cataclysmic bust. On Black Monday, October 28, 1929, the Dow declined nearly 13 percent.

by Beanie | 4th Aug 23, 8:00pm 1691136032

File that alongside low interest rates are the new normal.

by Jethro | 4th Aug 23, 11:04pm 1691147056

Call time

One go of the things that happened today in our clean green NZ was a teenage killer walked free.

Hanara knifed the 40-year-old four times before he fell to the ground and was stomped and kicked by the group.

This person is now free in our society.

Something is wrong.

And being kind is not going to fix it.

Your vote counts

by JimboJones | 5th Aug 23, 8:45am 1691181917

Too much concern about the criminal and no concern about society. If you don’t want to go to jail then don’t stab someone, it’s not difficult logic even for someone who is young, poor, unfortunate, racially disadvantaged, or whatever other factors.

by Nzdan | 5th Aug 23, 9:14am 1691183673

Exactly. If you asked these young, poor, racially disadvantaged youths if they'd skydive without a parachute or dive head first off a cliff they'd say no. Why is that? Because they know what the consequences are.

Maybe if these young people start seeing some real consequences dished out to their peers, then it might kick into life that logic portion of the brain that has been left to sit dormant.

by the Joneses | 5th Aug 23, 8:49am 1691182173

People usually 'walk free' from jail after they have served time. Do you think it should be a one way gate?

If your going to give anyone a second chance, I think someone who commited a crime at 14yo would be high on the list. They need ongoing support though.

The victims family were apparently OK with the reduced sentence. Maybe they need to take into account the opinion of outrage electioneering commenters on unrelated forums?