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
Update: HSBC has raised the rate on its only fixed home loan offer by +10 bps to 7.19%.
TERM DEPOSIT/SAVINGS RATE CHANGES
None here today.
TWO OF LAST THREE ARE LOWER
Stats NZ figures show that total retail spending using electronic cards & phones fell by -0.9% in July, reversing some of the gains made in June when there was a rush of fuel spending to beat the excise tax duty rise. A fall in national overall retail spending when population growth is high does suggest that belt tightening is quite severe at the individual household level.
MAKING MORE IN A RISING RATE ENVIRONMENT
In their full year to June, ASB posted a record profit of $1.559 bin as their net interest margin rose from a year ago to 2.44% (about average for the big four Aussie owned banks). And they said they are 'proactively contacting' thousands of refixing home loan borrowers. (This just part of the big banks usual spin when record profits are announced; they always allude to 'tough times ahead' in some way. But the records keep coming anyway.)
LONG LUNCH 'STRIKE'
Meanwhile, Westpac was hit with "a nationwide 2-hour strike" today from 12:00 noon to 2 pm, and there was a full-day stoppage at selected branches. The union says they have been in pay negotiations with the bank for five months and are seeking meaningful wage increases above the cost of living. Westpac is reported to have offered a +7% rise for the next 18 months, which is what is being rejected. About 800 union members are involved of Westpac's 5000 staff and bank operations have not been affected.
COMMERCIAL CONSENTS KEEP PIPELINE FULL
Less new warehouse space is being consented but more retail projects are in the pipe for the commercial construction sector. The value of building work consented for new retail projects hit a record high in the second quarter.
PUMPED HYDRO & PORTFOLIO APPROACH FEASIBLE OPTIONS TO SOLVE DRY YEAR PROBLEM, MBIE SAYS
The NZ Battery Project, being run by the Ministry of Business, Innovation & Employment to investigate the ability of pumped hydro and alternative technologies to address NZ's dry year electricity problem, says Cabinet has decided its next steps. Two options will be progressed to the next stage of the project. They are a multi-billion dollar pumped hydro scheme at Lake Onslow, and a portfolio approach drawing on multiple technologies such as biomass and geothermal technologies. The two options will now be run through a detailed business case framework, with a preferred option likely to be confirmed in mid-2024.
DATE SET
Update: Now the High Court has given the green light, Fonterra said it will make its special capital distribution to shareholders of record on August 16, and pay them on August 18, 2023.
HEAVY PROFIT HAIRCUT IN ONE PART, BIG GAIN IN ANOTHER
Significant weather events, a more than 50% increase in natural disaster claims costs, reinsurance increases and claims inflation has led to a general insurance profit of NZ$65 mln for Suncorp NZ, down -56% on the previous financial year. Suncorp NZ operates here with the insurance brands Vero, Asteron Life, AA Insurance and AA Life, as well as AA Money. Because other parts of their New Zealand business did well, overall they posted an after tax profit of $115 mln for the year to 30 June, just a -30% reduction. One key part was a sharp improvement in its Asteron Life business, which posted a tax-paid profit of $50 mln, up +$35 mln in a year.
A POSITIVE QUARTER
Morningstar has published its KiwiSaver Survey for the June 2023 quarter. All multisector KiwiSaver funds produced positive returns over the June quarter. The average multisector category returns ranged from 1.2% for the conservative category (including default options) to 5.4% for the aggressive category. Top performers over the quarter against their peer group included Kiwi Wealth Default Conservative fund 2.1% (multisector conservative), Generate Moderate fund 2.7% (multisector moderate), QuayStreet Socially Responsible Investment fund 4.8% (multisector balanced), QuayStreet Growth fund 6.4% (multisector growth), and Generate Focused Growth fund 7.7% (multisector aggressive). But the most appropriate to evaluate performance of a KiwiSaver scheme is by studying its long-term returns. Over 10 years, the aggressive category average has given investors an annualised return of 8.7%, followed by growth (8.3%), balanced (6.6%), moderate (4.6%), and conservative (4.2%).
HIGHER FOR LONGER?
The influential RBNZ survey of business expectations shows a slight rise in the expected level of inflation in two years time - which was a surprise because it was expected to dip. Perhaps that has been behind a late rise in the NZD and a late rise in short NZGB yields?
DEFLATION FOR CONSUMER PRICES
Deflation has arrived in China again for its consumer prices. They fell -0.3% in July from a year ago (the first time in two years) but rose a minor +0.2% from June, but given year-ago levels it is unlikely to repeat on a monthly basis in future months. Food prices are deflating, so is clothing. Beef prices are down -1.4% in a month, lamb prices are down -1.3%. Milk is holding however, unchanged from a year ago. Recently petrol prices have blipped up, but they are lower than a year ago.
DEFLATION IN THE FACTORY SECTOR
China's producer prices fell -4.4% in July from a year ago, worse than market forecasts of a -4.1% decline, after a -5.4% drop in the prior month, which was the steepest decrease since December 2015. It was the tenth consecutive month of producer deflation amid weakening demand and wavering commodity prices. Yesterday's weak export data won't be helping.
FOOD NOT ADDING TO INFLATION
World food prices rose in July, but only because vegetable oils turned up. Dairy and meat prices were little changed in the month on a global basis, cereal and sugar prices fell noticeably. Given the global weather (and war) pressures, perhaps this is all a bit surprising.
SWAPS UNCHANGED
Wholesale swap rates are probably little-changed. 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 yet again at 5.64% and now +14 bps above the 5.50% OCR. The Australian 10 year bond yield is down -7 bps from yesterday at 4.01%. The China 10 year bond rate is little-changed at 2.66%. And the NZ Government 10 year bond rate is down -4 bps from this time yesterday at 4.81%, and still very much higher than the earlier RBNZ fix which was down -2 bps bps at 4.74%. The UST 10 year yield is at 4.02% and down -4 bps from yesterday. Yesterday's volatility isn't around today.
EQUITIES LOWER ON RISK-OFF MOOD
The S&P500 ended its Tuesday session on Wall Street down -0.4%. Tokyo has opened its Wednesday session down -0.3%. Hong Kong is down -0.2% and Shanghai is down -0.3%. The ASX200 is unchanged in afternoon trade (on the Matilda effect?), but the NZX50 is also down -0.3% in late trade.
GOLD LOWER AGAIN
In early Asian trade, gold is at US$1929/oz and down -US$5 from yesterday. It closed earlier in New York at US$1925, and earlier still in London at US$1926/oz.
NZD SOFTISH
The Kiwi dollar is only marginally softer from this time yesterday is just on 60.6 USc although it had been lower earlier in the afternoon today. Against the Aussie we are also marginally lower at 92.5 AUc. Against the euro we also holding at 55.3 euro cents. That means the TWI-5 is at 69.3 and down -20 bps.
BITCOIN RISES
The bitcoin price has risen from yesterday, now at US$29,738 and up a bit less than +2.0%. Over the past 24 hours, it got as high as US$30,192. Volatility has been modest at just over +/- 1.8%.
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52 Comments
Lake Onslow the battery. Had thought this had already been assessed and resultantly found not to be viable? Why does Taiwai Point continue to consume vast power just to process another country’s raw material. Would not the cost of closing that and then the infrastructure to divert and conduct that power into the grid so to speak, be more viable, less costly. No expert here, just asking.
> Had thought this had already been assessed and resultantly found not to be viable?
Nope. Ongoing.
re: Tiwai's power, it doesn't really solve the same issue as Onslow. The battery project is about smoothing out supply and demand so as to keep them in balance, even across a scale of years (the dry year problem) and not just hours or days (addressable with conventional batteries). Having Manapouri's output go into the grid (rather than to the smelter at Tiwai) is about more generation all the time, which isn't the same thing.
Just do it,this is why Australia keeps moving ahead of us...
https://www.snowyhydro.com.au/snowy-20/about/
Snowy 2.0 is the next chapter in the Snowy Scheme’s history. It is a nation-building renewable energy project that will provide on-demand energy and large-scale storage for many generations to come.
If Tiwai point smelter closed, and all the power was shipped up to Auckland, and the Aucklanders had to pay the cost of shipping it, they wouldn't bother. Apparently up to 40% of the power is lost in pushing it up the country. This has to be paid for. We are better off selling it to people who are closer to the power source. Aucklanders are real lucky that all the power sent North to them is subsidized by the Southerners at present. As is their whole lifestyle.
consume vast power just to process another country’s raw material
It is called value-added exports. FYI NZAS exported over a NZ $1.7 billion worth of aluminium in 2022.
We should be grasping at every export dollar we can scrape together in our current situation (terms of trade fallen back to 2018 levels due to low global prices of agri goods and our already wide current account gap).
Seriously,
What makes us think the future will have any dry years, at least for the Southern Alps ? Surely the future is flooding regardless of the Southern Oscillation.
Can we use we use fluctuating lake levels as a reserve battery and go for broke on wind and solar in the North Island...who needs onslow?
ive had a look at the bright new future for geothermal, throw it in the too hard, bag along with fusion reactors.
it seems be fraught with problems in drilling and production..
Hmmm...
The current hydro lakes don't have that much storage. They could, if we're willing to occasionally flood Tekapo or Taupo township and surrounding farmland, or to present our tourists with hundreds of metres of mud between them and a distant lake.
I'm not an expert on our future climate but that's a big gamble. If we lose we end up shuttering industries and/or rationing power and/or having rolling brown/blackouts around the country if we do hit a dry year or two. The option isn't Onslow or nothing, it's Onslow or a broad portfolio of smaller schemes or industries that can be scaled up and down in response to available power, like the hydrogen plant Meridian and Contact want to build down south.
The fact that the big gentailers are pushing the portfolio option and fighting Onslow tells you everything you need to know about what Onslow would do to our power system.
i dont have enough information but we may have become tunnel visioned, however there are a number of shelved projects in the South Island that reuse river flows such as Project Aqua, perhaps they need a revisit, as do the agreement for water use for example Lake Te Anau and Manapouri, we may get a few Gigawatt hrs from better management using AI.
We are running a crisis and everyone needs to a give little..
it still has to be moved up most of the country to where it is needed, and we now have new tech that you could build a lot smaller battery storage facilities for a fraction of the lake onslow cost that could be recharged either by solar or off peak power that can come online much faster
This has ~200MWh storage capacity, Onslow is more like 5,000,000 MWh.
25,000 times the storage for just ~100 times the cost.
Both have a role - battery plants are great for the day-to-day, Onslow can also solve the dry year problem which chemical batteries are currently not appropriate for.
When I think about it, Onslow is just another lake and the south already has about 1000 sq kilometers of them, its probably a waste of money. As well, Niwa are saying the South West will get wetter in future, warmer of course, so the probability of dry year is diminishing.
That wont stop us of course...
You may have to think deeper (no pun intended). You need a lake with significant capacity, with another nearby water source that is at a significantly different elevation. Onslow at nearly 700m (higher once dammed) is about 20km from Roxburgh at 130m - the bigger the difference in elevation the more potential energy stored.
Then, the useful storage is going to be roughly proportional to the variation in lake level you are willing to accept. No good having a big lake full of water if you can't drain it. Onslow is proposed to have a lake level range of about 70 metres. That won't be acceptable on any of the scenic tourist lakes, or those with significant towns next to them. How big does a boat ramp have to be if the lake shore might vary by half a km year-to-year?
We last had one way back in 2021 - we kept the lights on by burning a pile of imported coal. Onslow would eventually make us able to deal with this without burning coal. Gas could be used instead, but won't last long unless we find and extract more or build expensive import terminals.
First excel spreadsheet:
https://www.mbie.govt.nz/building-and-energy/energy-and-natural-resourc…
on table 2 you will see a huge bump in coal burnt and a corresponding drop in hydro generation in 2021. If you look further back, you'll see this happens fairly regularly.
You might remember 2021 because certain segments of the media and many commenters on here thought that the heavy coal burning was somehow Labour's fault, as if they control the weather.
this gives a picture
https://www.newsroom.co.nz/electricity-grid-operator-warns-of-more-emer…
Too overpopulated, and often for too long. And too prone to becoming too hot.
Our house uses 20+ cubes of insulated thermal mass, and can coast for 3 days without sun. And I though I was pushing the envelope. A season? Different animal entirely. Better digging down a few hundred metres....
But you can live solar-ly very well in the south; just takes being smart and organised.
Re food, you're right, seasonally. But you can extend a high-latitude growing season with a glasshouse; if you insulate them (I insulate the raised beds they sit on) and solidify/insulate the southern wall (no sun ever gets in, it's a permanent chill-face) they do a month extra either shoulder. Putting something degradable under the soil in late winter helps too; the heat of decomposition kick-starts the season...
There's plenty of underpopulated places that sit at around 24 degrees all year. Want some food? Spear a fish or climb a coconut tree.
It's seasonal climates that drove human endeavour towards the energy intensive existence we have today. You can obviously do it more efficiently, but then youre stuck in a situation where the fruits of your labour become worth a lot less, assuming you can make more value of your time working a paid job.
https://temprite.co.nz/milk-refrigeration/promax-insulated-water-tanks/
Not the actuallink i was looking for , and a small scale example.You don't need a lot of heat/ cold to make a big difference with a heat pump with a C.o.p of 5- 7 , especailly if you can get the input above 0 degrees when the heat pumps cop drops to 1. i.e the same as a resistance heater.
Best advice for anyone who doesn't know more than the market (i.e. virtually everyone) and doesn't need the funds for a decade or more, is to stick in high risk and forget about it.
I am in a growth fund but my KS is only about 20% of my share portfolio. I max out the employer contributions and plan to leave it as is for a few decades.
I have to agree, having tried to time the market and fail twice now. Got my money into safety as soon as Covid hit just for shares to go crazy. I don’t care what anyone says, no one could have predicted that, it cost me a fortune. Even this year my growth fund seems to be doing well despite the economic turmoil.
Choose a low fee fund with risk commensurate with your goals. The younger you are the more aggressive the fund, just set it and forget it. Some facts and figures from Vanguard AU...
Capturing 30 years of Australian and global investment market history, the Index Chart can help you navigate conversations around investing....download the chart and be enlightened...
I would caution on predicting the future based on the past. At best, the past is useful information to take into account.
Strong performance across aggressive funds over 10 years is within an economic context very different to the present / future.
I am *not* saying aggressive funds should not be contemplated. Just to be mindful of very different and quickly changing economic, societal and environmental contexts which will have significant influences.
I would caution on predicting the future based on the past. At best, the past is useful information to take into account.
2011-2023 Annualized returns
Rat poison (BTCUSD) - 151%
Nasdaq100 (QQQ)- 17.8%
U.S. Growth (IWF) - 14.9%
Convertible bonds (CWB) - 8.9%
U.S. REITs (VNQ) - 8.6%
Gold (GLD) - 2.2%
"-7.5%. Yikes. Worst estimated 12yr equity risk premium in history. Only other instance: 2000 peak. If it's any consolation, the S&P 500 had only lagged Treasuries by -6% a year by 2012. Best to actually test other methods across history before dismissing this one. They're junk."
John P. Hussman
https://pbs.twimg.com/media/F2nPkNAaoAEZdmX?format=jpg&name=medium
The above chart should be a warning to anyone who is heavily weighted to shares at present. For those who don't have a finance background and can't make any sense of the chart. Basically if history is correct, shares are going to be (edit: are likely to be) a terrible investment if you purchase now (relative to less risky assets - so why would you take more risk when probability says that you can get greater return from something else (bonds) with less risk?)
I’m happy for Onslow etc if they are the best environmental bang for the buck. But I have a feeling we are better off occasionally using gas or coal and spending that money on clean car discounts etc instead.
As long as all options are being considered and not just “we need 100% renewable power at any cost”
We seem to be at an interesting crossroad at present. The NZD looks like it is about to head below .60 and our wholesale interest rates look like they are ready to give us guidance on whether domestic interest rates have peaked, or about to head even higher (I can see compelling cases for both arguments - that is rates going higher or dropping).
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