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
Westpac cut its two year home loan rate today. The Co-operative Bank and TSB both raised some fixed rates. And the Co-operative Bank raised its minimum personal loan rate from 6.99% to now 8.99%. The maximums haven't changed.
TERM DEPOSIT/SAVINGS RATE CHANGES
None to report so far.
SERVICE SECTOR NOW IN GRIM POSITION
Service sector activity took a clear hit in July with the PSI dropping to 47.8 from 49.6 in June. BNZ says: "That is concerning enough given it [is] indicating contraction for a significant share of the economy. But it is the details that reveal the real slump. The PSI activity/sales indicator sank to 39.6 in July from 50.9 in June. Outside of lockdown periods, this is the worst sales reading since the survey started in 2007 (including through the GFC). Adding to concerns, the new orders/business indicator also dropped heavily (to 43.8 from 50.4)."
ANOTHER BIG CITY ARRIVES
Data released by Stats NZ today showed that estimates migration for for the year to June 2023 compared the same year in 2022 were for migrant arrivals: 195,200, up +219%,migrant departures: 108,400, up +37%, and so annual net migration was a gain of 86,800, compared with a net loss of -17,600 in the prior year. The increase in the past year is very similar to New Plymouth's population.
TOURISM STILL IN RECOVERY MODE
But tourism still has not fully recovered its pre-pandemic levels. Overseas visitor arrivals were 178,400 in June, or 84% of pre-pandemic levels, but they were double the same month a year ago and up +11% from May. The biggest changes were in arrivals from Australia and the United States.
"WE DON'T KNOW HOW MUCH THE REGULATOR WILL CATCH"
SkyCity told investors estimating potential exposure to penalties for money laundering breaches at its Adelaide casino was “challenging”. However they have provisioned $50 mln anyway.
RBNZ PAYS BANKS $235 MLN IN INTEREST IN JULY
The Crown settlement balances at the RBNZ were unchanged (from June) at the end of July at $21.1 bln but they were down -$8.5 bln from a year ago. However, bank settlement balances bounced back from their June dip, now at $52 bln (earning 5.5%) and up +$4.3 bln from a year ago.
MORE ELECTION POLICY RELEASED
Today we updated more party policy positions for new releases from Labour and their plan to remove the GST from fruit and vegetables. There is also their In-Work Tax Credit and Working for Families proposals. Then there is the Greens housing energy policies. They can all be compared here.
SWAPS HIGHER
Wholesale swap rates are probably higher again across all tenors. 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 little-changed yet again at 5.64% and now +14 bps above the 5.50% OCR. The Australian 10 year bond yield is up +4 bps from this morning at 4.21%. The China 10 year bond rate is down -2 bps at 2.64% and a one year low. And the NZ Government 10 year bond rate is up +6 bps to 4.96% and its highest since 2011, and still higher than the earlier RBNZ fix which was up +5 bps bps at 4.88%. The UST 10 year yield is at 4.18% and up +2 bps from this morning. Rising long rates are a global trend (except in China).
EQUITIES SHARPLY LOWER IN SHANGHAI
The NZX50 is down a marginal -0.1% in late trade. The ASX200 is down a more chunky -0.9%. Tokyo has opened its week down -1.0% in morning trade. Hong Kong has opened down a very sharp -2.5% and Shanghai is down -1.2%. Fear is spreading over the Chinese economy situation. The S&P500 futures are currently indicating Wall Street will open +0.2% tomorrow.
GOLD SOFT
In early Asian trade, gold is at US$1911/oz and down a further -US$2 from this morning.
NZD SOFTER TOO
The Kiwi dollar is down another -20 bps from this morning to just under 59.6 USc. Against the Aussie we are unchanged at 92.2 AUc. Against the euro we soft at 54.5 euro cents. That means the TWI-5 is at 68.6 and down a bit more than -20 bps.
BITCOIN STILL NOT GOING ANYWHERE
The bitcoin price has slipped slightly from where we opened this morning, now at US$29,275 and down a minor -0.3% or -US$99. Volatility has stayed low at just under +/- 0.6%.
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117 Comments
I think this is an extremely interesting concept. Selling electric scooters relatively cheaply without a battery. You then pick up a battery from multiple battery banks (like petrol stations if you like) and when your battery runs out, you just swap it for another one at the next battery bank. This could be a game changer in highly populated asian countries to lower pollution and noise.
Hmmm coal powered electric scooters...changing 25% of generation would be more beneficial...
The power sector will play a major role in the energy transition, but is today the country’s largest contributor to emissions from fossil fuel combustion. Over 60% of the electricity is supplied by a young fleet of coal-fired power plants whose installed capacity will meet a significant share of demand for years to come unless steps are taken now to mitigate their emissions
https://www.iea.org/reports/enhancing-indonesias-power-system/executive…
Why are battery swaps needed?
I was in rural China 2018. Swarms of battery scooters - many more than cars. I don't even recall petrol scooters. All were just plug in. It worked. You saw plugged in scooters all the time.
Strangely, we don't see electric scooters here. Few scooters here in NZ, probably well outnumbered by electric bikes for urban use.
It makes a lot of sense, and saves a lot of time.
- 1/3 of the original cost of the scooter is battery cost
- takes 3-4 hours to charge a battery
- batteries last only 2-4 years (presume depends on usage)
I am betting the recharge service provider further discounts the initial scooter cost to lock the customer in. Maybe $499-999 to buy a scooter and then a monthly subscription of say $49 - 99 a month depending on the number of battery swaps.
Customer will also upgrade the scooter after 2 years like we upgrade a phone? so the provider makes more then too.
Its more convenient than lime, nicer maintained scooter (its yours) and probably cheaper to run if used regularly. can also be shared amongst the house/friends?
hmmm.. i am tempted
Clean and quiet, London once boasted a fleet of 20 electric buses. They were more efficient and reliable than their petrol equivalents, and operated on battery power. Mounted under the bus, the batteries had a 60 km range and could be removed and swapped for a fresh one in just three minutes.
This was in 1906, and the bus looked like this:
https://earthbound.report/2018/04/23/your-bus-is-running-approximately-…
You then pick up a battery from multiple battery banks (like petrol stations if you like) and when your battery runs out, you just swap it for another one at the next battery bank.
Happening in Taiwan already.
Gogoro Batteries Power 90% Of Taiwan’s Electric Scooters
https://cleantechnica.com/2023/01/11/gogoro-batteries-power-90-of-taiwa…
But....Coal is the main source for electricity production in Taiwan. In 2022, coal accounted for nearly 43 percent of total electricity generation. This was followed by natural gas power plants, which made up 39.5 percent, with the fossil fuel total being around 84 percent.
Then everything turns into a crisis. eg Health system crisis, power crisis coming soon. I can't even enrol at my health centre for over a year because they can't get new doctors.
We don't even know what population NZ should be as there doesn't appear to be any actual planning. Migration seems to get controlled by businesses employment needs, but they aren't required to pay anything to improve infrastructure.
The conundrum is that we've let this low-skilled mass migration run for far too long. The ones already here generally don't pay enough in taxes to cover cost of building new infrastructure to play catch up and the ones who are able to pay more in taxes no longer want to come to a country with such outdated infrastructure.
The PC report released in 2021 said between 2010 and 2019, no change was noted in the influx of workers across skill levels 1 and 2 (managers, professionals, building/engineering trades, etc.). However, workers across levels 3, 4 and 5 (waiters, retail workers, labourers/cleaners, farm workers, etc.) posted 4-6x increases in influx.
Ha, there is hot competition for critical workers and much better places for them to go with house prices being the major drawback to NZ. For example, my niece packed up her new statistics PhD off to the USA, now happily enscounced in a solid near mansion at a small fraction of NZ prices. Nice going boomers.
Lack of public transport and cycling / walking networks in our major cities is also a drawback. People who have lived in cities abroad are not used to being forced into cars on congested roads to get anywhere, they normally have an alternative if they don't want to drive.
Excellent comment. I had an operation six months ago and three weeks ago I received a text from my doctor's office asking me to get a blood test in order to check all is ok. I went online to my local blood testing office and they have no appointments available for another four weeks.
Apparently, a new starter collecting blood samples from patients at one of NZ's largest pathology labs sits at $23/hour or 30c above minimum wage.
Aranui won't meet their wage increase demands, despite paying out a $41 million dividend to shareholders in the last financial year
Link
It is all just so short sighted. I don't think many politicians have a clue. One MP only recently lowered themselves to go to the supermarket to be like and everyday man, and saw the price of tasty cheese was $20. Haven't they been watching the news or shopping over the last 3 years? Many of them seem to live such sheltered lives.
Even money can't buy quality healthcare in this country now. My partner had an issue with her lower back, so we went to the GP and asked her to put it on our insurance if it helped speed things up.
Turns out it still takes 3-4 months to see a specialist because of all the backlog of elective surgeries and doctor shortages. All you can do in the meantime is pop painkillers everyday like breath mint.
Agreed JJ, I own three businesses and I have been surprised how well they have done so far. But in July I noticed a clear slow down in one of them and now, another one is also slowing down markedly. It could of course be just a weak winter month, but I think it's rather due to people running out of money because of higher interest rates and cost of living.
Economy definitely cooling. in our B2B market:
- People are really reading and re-reading proposal details. questioning details that they wouldn't have even read 12 months ago.
- Time to pay bills has been pushed out by weeks in several industries.. lots of excuses but ultimately their revenues are down.
- More enquiries are coming in, but less converting, taking more time to close and for less money.
All indicators that the boom is over. Expect things to wobble for a year or two.
No problem Yvil- completely understand. Was just curious to get a feel for which industries were experiencing a downturn.
I am a shareholder in a property consultancy business and an air-conditioning business. The consultancy business is still doing well as it is exposed to all industries as clients but the air-con business has seen a marked reduction in forward work due to fewer new developments and existing landlords feeling the pinch with increased interest costs at a time when their assets are being revalued down.
I wouldn't call myself a Labour supporter, I am very much in the swing vote territory at the moment. While I dislike almost every National party policy, at least I would get a tax cut so I may go there yet. Sick of Labour promising to improve infrastructure but only delivering on handouts.
I’ll let you know closer to the election. But Labour seem to be focusing on the short term cost of living crisis which is a huge change in direction from their last 2 campaigns which were all about fixing infrastructure deficits, housing, health, etc. I hate government throwing away vast sums of money on short term solutions that become permanent costs.
I've lost two relatively longstanding retainer clients in the last week (who I'm on good enough terms with for them to be straight up and say 'hey, we haven't got the work/cashflow to keep paying you any more). Also commented the other day that I'm really noticing it taking longer to get paid by some clients. My clients are typically reporting to me a challenging environment too.
Wouldn't say disastrous by any stretch, but noticeable for sure.
Lucky for me, I don't have a huge cost base in the business and can trim further if needed - in some respects I wouldn't mind a bit less of a hectic time as I'd like more family time and also have some internal/non-client projects to work on that are yielding me a small but growing amount of USD (which could be very helpful). I'm backing out of a couple of purchases though e.g. new equipment and upgrading a vehicle.
Some of my clients in 'consistent' industries or ones that have recently been buzzing are reporting the same.
I'm basically trying to get as much cash in the door (and have as little leave) as I can in the short term, so I can go on hibernation/cruisy mode for a while if needed.
Exactly - but they are living 2 families/workers to every house. So they can afford the rent on unskilled wages vs those that left on skilled wages.
Mind you they double the infrastructure needs of those they replaced - 2 cars, 2 hospital beds, 2 pensions, etc etc
Money contraction (as measured by change in growth in U.S. M2) now the greatest since the Great Depression. From peak to trough, it's the worst since at least the 1860s.
Yes if something really bad happens in the next few years (thinking a 1929 style crash and/or a 1930's style depression, or excessive money printing and run away inflation) then this shouldn't be a surprise given charts like the above you link to.
I think the biggest difference between then and now is that the taps can be turned more easily. In fact they're already open. I'm not an expert but my mentors say that liquidity is flowing.
The only reason we are not in a recession/depression is because of the deficit spending of governments around the world. This isn't sustainable.
It is possible we see even more credit rating downgrades in the next few years - but that will just put more pressure on interest rates (i.e. higher rate of default = higher demanded reward for investing in that nations government bonds/treasuries).
So I'm not sure how we can expect to have a soft landing out of this...
Governments keep spending to support economies and the situation gets worse.
They cut spending to keep inflation and interest rate down (and keep credit ratings from deteriorating) but then I think our economies quickly fall into recession.
So not a good place to be.
Yes and Neill Howe has just released: 'The 4th Turning Is Here - what the seasons of history tells us about how and when this crisis will end'
https://www.amazon.com/Fourth-Turning-Here-Seasons-History/dp/1982173734
Yes this is the great flaw in the plan… The modern idea is to buffer the economy with low interest rates when times are tough, so that the debt can be repaid when “things improve”. The problem is, if the economy isn’t left to retract naturally (quickly), then things may never actually improve.
Part of the normal retraction process is the clearing of dead-wood (unproductive businesses) from the system. This frees up resources and revenue stream for the remaining productive players. But if all businesses are bolstered artificially and are able to survive, then there’s no re-birth process and the stagnation continues indefinitely (until who knows what happens…).
1. The drop in US M2 is tiny when compared to the prior yeeting: https://fred.stlouisfed.org/series/M2SL
2. The velocity of M2 has substantially been increasing which mitigates most drops in the overall level: https://fred.stlouisfed.org/series/M2V
I would be suprised if that happened SteveO, as the meat processing industry is fairly marginalized anyway. The buyers have enough capital to support suppliers.
Through put is a problem as everyone wants to kill at the same time and there is no point in the companies increasing killing capacity when the volume isn't there for most of the year.
Also farmers won't commit to one processor and play them off against each other which makes it difficult for the company to work out supply chain issues.
Yip - US 30 year treasury yield comfortably back up above 4% now.
https://fred.stlouisfed.org/series/DGS30
The last 10 years, its traded well below this so could be a sign of inflation being higher for longer.
RBNZ collaborating with Ripple / XRP for a CBDC? I call bs but who knows
https://www.cryptopolitan.com/reserve-bank-of-new-zealand-collaborates-…
An equivalent of 10%+ of the Aussie govt's deficit has gone to fraudsters.
Next-level incompetence.
The Tax Office has admitted paying out more than $1.6 billion in fake GST claims as part of a $4.6 billion fraud based on a simple scheme promoted on social media platform TikTok – a total that is twice previous reports and the biggest tax fraud in Australian history.
The fraud was uncovered by Westpac and other banks, some of which passed on a series of alerts to the Tax Office from 2020. But after being frustrated by the apparent lack of action by the Tax Office, some bank staff shared their concerns informally with the Reserve Bank, which then alerted Treasury and the Tax Office in February last year.
https://www.afr.com/companies/professional-services/tiktok-gst-fraud-hi…
"You were right. It's not a passing fad"
NYT capitulates on the ol' rat poison after 10+ years of trying to create a negative impression for the likes of Jamie Dimon and Liz 'Pocahontas' Warren.
It's like the MSM has entered a new position on crypto — bargaining.
https://www.nytimes.com/2023/08/13/your-money/cryptocurency-personal-fi…
"percentage of people in the United States owning crypto grew to 11 percent from 3 percent in just a year"
"younger adults are more open to this way of putting money to work"
"41 percent of men ages 18 to 29 reported having owned or used cryptocurrency, just 16 percent of women in that age range"
Here we all are again - Revenge of the Nerds.
Good friends over from Aussie say The NZ vibe has turned well south vs western aussie..... they come over each year as from NZ, but cannot believe how negitive the view is in NZ right now, clearly the country is heading in the wrong direction vs Aussie. Bring on 14th oct.
The natural buyers of kiwi are the exporters converting USD back to NZD but with diary prices down and timber and red meat there are less buyers... and it looks like NZ recession is going to be much deeper so FX traders are positioning for this and the serious possibility/eventuality of a ratings downgrade, which is looking certain now.... Kiwi tends to decide to live above or below 60.... down we go. USD safe haven trade
Total stock of rmb loans up y/y in July barely more than the worst months last year - lockdown months. That's how bad the credit environment has gotten to be in China. They were counting on a global soft landing but it has let them down big time. https://buff.ly/3Oqv6io Link
The Crown settlement balances at the RBNZ were unchanged (from June) at the end of July at $21.1 bln but they were down -$8.5 bln from a year ago. However, bank settlement balances bounced back from their June dip, now at $52 bln (earning 5.5%) and up +$4.3 bln from a year ago.
Government keeps crediting qualified beneficiary bank accounts faster than bank underwritten government bond issuance proceeds are deducted from bank settlement balances. Latest bank settlement cash balance stands at $56.275bn.
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