What happened Wednesday

Economy / news

A review of things you need to know before you sign off on Wednesday; Auckland house completions fall, farmer sentiment at record low, immigration high, swaps little-changed, NZD holds, & more

11th Oct 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
None today so far.

TERM DEPOSIT/SAVINGS RATE CHANGES
The Cooperative Bank raised TD rates for 3 and 4 year terms.

DOWNTREND STARTING?
The number of new homes being built in Auckland may be starting to decline just as immigration ramps up.

DOWNTREND WELL UNDERWAY
Farmers’ confidence in their own farm business performance fell to a new record low off the back of plummeting sentiment among dairy farmers and sheep & beef farmers. More farmers are now self-identifying as unviable.

DOWNTURN EVIDENCE
Infometrics is pointing out that there were 273 new very heavy commercial vehicle registrations in September, a fall of -6.2% from the same month a year ago and the first such decline in ten months. And they note: "RUC distances purchased for very heavy vehicles have been falling for nearly all of the 2023 calendar year so far and are likely a better representation of current economic demand for heavier transport. Less freight to be moved around will require fewer RUC kilometres to be purchased. This falling RUC trend, in tandem with the fall in very heavy registrations on an annual basis for the first time in nine months, suggests a turning point could be on the cards".

MIXED TRENDS
A CoreLogic construction cost index shows building materials cost pressures are easing but rising wages are still driving up construction costs.

UPTURN EVIDENCE
Provisional data released by Stats NZ indicates that, after seasonal adjustment, the country saw a net inflow of almost +10,000 permanent and long-term migrants in August, taking the annual inflow to a record of +110,200.

FINAL POLICY RELEASES
The final policy releases are coming through from the parties contesting the election. Today's are from the ACT Party (health), National (climate change), and Labour (electricity). Our policy comparison tool is getting well used. Remember advance voting has been open all this week, and although there are no official indications of voting levels so far, unofficial indications are that advance voting has been quite slow. All polling places will be open on Saturday, October 14 until 7pm. 50% of votes are expected to be counted by 10pm, 95% counted by 11:30pm that same day.

HOT DEMAND, TIGHTER PRICING
Yesterday we reported on the Kiwibank unsecured 5 year bond offer for $100 mln "plus unlimited over-subscriptions". Offers close tomorrow morning. Demand is strong and the update is that at least $500 mln will be allocated. The margin is tightened to +110 bps over swap. 5 year swap rates fell yesterday to 5.25%, but NZGB benchmark rates are stable today.

UPCOMING
We will have the September REINZ data at 9am tomorrow (Thursday).

UPWARD INSURANCE PREMIUM PRESSURE
Giant Australian general insurer, who is dominant in New Zealand, had its Annual Meeting today, and there highlighted the costs its New Zealand business has had to adsorb from the series of 2023 weather events. Claims costs in the past period had lifted “more than we expected” as of June. They said they are fighting to improve margins because the margin guidance they gave investors earlier is proving tough to achieve and they will be “around the lower end of our guidance range”. Customers of their NZI, Lumley, State and AMI brands (and via their Lantern and NAC distribution networks) are probably all facing higher premiums (and lesser cover?) so they can report better results to investors.

SWAPS HOLD
Wholesale swap rates are probably little-changed today. But the real reaction will come at the close. Our chart will record the final positions. The 90 day bank bill rate is unchanged at 5.68% and now +18 bps above the OCR. The Australian 10 year bond yield is little-changed, down -1 bp from this time yesterday to 4.43%. The China 10 year bond rate is up another +1 bp at 2.73%. The NZ Government 10 year bond rate is down -2 bps to 5.49%, and still above the earlier RBNZ fixing of 5.44% which was unchanged today. The UST 10 year yield is unchanged at 4.64%. The UST 2yr is up +2 bps at 4.97%.

EQUITIES FLAT-TO-FIRM
You wouldn't know there are wars and geopolitical tensions raging globally from the way equity markets are behaving. The NZX50 is down a minor -0.1% near the end of Wednesday trade. The ASX200 is up +0.4% in afternoon trade. Tokyo has opened up +0.6% on top of yesterday's big rise. Hong Kong has opened up +1.9% on new Beijing stimulus expectations. Shanghai is up +0.4% at its open. Earlier on Wall Street, the S&P500 closed up +0.5% in its Tuesday trade.

GOLD HOLDS
In early Asian trade, gold is now at US$1861/oz and down -US$3 today. It closed earlier in New York at US$1860/oz and earlier still in London at US$1857/oz.

NZD HOLDS
The Kiwi dollar has risen marginally today to be now at 60.5 USc. Against the Aussie we are holding high at 93.9 AUc and against the euro we are still at 57 euro cents. That means the TWI-5 is holding at 70.4.

BITCOIN SOFTISH AGAIN
The bitcoin price is softer today, now at US$27,456 and down a minor -0.5% from this time yesterday. Volatility over the past 24 hours has been low at also just under +/- 0.8%.

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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59 Comments

by Kiwisaint | 11th Oct 23, 4:07pm 1696993679

I'm shocked that immigration hasn't been a more significant election issue. This used to be a core election strategy for NZ First etc.

All parties have been quiet.

by JohnTrz | 11th Oct 23, 4:42pm 1696995738

Flashback: 2017 August 22

https://www.nzherald.co.nz/nz/policy-series-where-do-the-parties-stand-…

by Te Kooti | 11th Oct 23, 6:08pm 1697000902

It's not an election issue because neither of the larger parties has an alternative path to headline GDP growth.

by HouseMouse | 11th Oct 23, 6:15pm 1697001333

Correct. Lacking in strategic thinking across multiple areas of life, including the economy. So revert to what they know best, the short term ‘sugar rush’ of high immigration and house price inflation!

by powerdownkiwi | 11th Oct 23, 7:43pm 1697006584

Luxon on about the next three years.

Sheesh - we need to be looking further than that...

Mind you, if they hit the nuke button nothing else will matter

by WellingtonInvestor | 11th Oct 23, 11:01pm 1697018511

I think the mainstream media control the narrative over the main issues in the election. I haven't heard a single question about what NZs population should be in 2 years, 5 year, 10 years, 20 years etc. That information is essential, otherwise we are going to have 'crisis' after 'crisis', and the current government will just blame the previous government.

Very little about the 'housing crisis' as well this time. Despite all these new people needing to be housed.

by Eschaton | 12th Oct 23, 7:24am 1697048675

Bernard Hickey has asked everone hes interviewed on his pod

by kiwikidsnz | 11th Oct 23, 4:08pm 1696993689

A few snippets from the IMF WEO | croaking cassandra

a sorry picture

by J.C. | 11th Oct 23, 4:25pm 1696994744

A few snippets from the IMF WEO | croaking cassandra

a sorry picture

So IMF forecasting that Japan will have much higher real GDP per capita growth than Australia and NZ, even though we have opened the migration floodgates while Japan's popn is in decline.

A very sorry picture indeed.

by J.C. | 11th Oct 23, 6:40pm 1697002842

IMF particularly vicious on the Aussies.

Australians devote a greater share of their income to mortgage repayments than any other advanced economy, the IMF has revealed, as it downgraded its forecasts for the local economy and warned inflation will be higher than previously thought.

https://www.afr.com/policy/economy/australians-lead-the-world-in-mortga…

by Foxglove. | 11th Oct 23, 4:09pm 1696993788

Final policy releases. That must mean the end of all the caterwauling is nigh. Day after tomorrow in fact. TGIF & amen.

by a watchman | 11th Oct 23, 4:10pm 1696993836

Voted last Tuesday. Now I don't have to listen to Hipkins again. What a relief! TV is turned off until Saturday night.

by dumbthoughts | 11th Oct 23, 4:17pm 1696994260

Vote cast as well. TV is going to be locked strictly to the Playstation's HDMI input until Saturday night, and I've got two days of travel for work upcoming anyway to keep me away from the final crescendo of this overflowing, fetid portaloo of an election.

by HouseMouse | 11th Oct 23, 6:17pm 1697001476

Switching away from tv only now?

I haven’t watched or listened to *anything* on the election. Just too cringeworthy.

But I read enough to make up my mind.

by tis i | 11th Oct 23, 6:40pm 1697002854

What’s ’tv’?

by EdwardD | 11th Oct 23, 5:38pm 1696999132

Same applies in my household. Streaming, rugby and NFL until it's all over. As a backup plan, I was searching Australian realestate sites today.

by meh | 11th Oct 23, 5:50pm 1696999842

Lol reminds me of bread and circus' on a larger scale...

by bender | 11th Oct 23, 4:26pm 1696994809

Anyone read Bernard Hickey's blog atoday? Tax cuts for mega-landlords to average $1.3m. Each.

"The proposed tax switch of changing interest deductibility rules and reducing the bright line test for capital gains from rental property trading in exchange for moving indexation for beneficiaries from wages to prices will see $464 million in tax benefits go to 346 landlords with over 200 rentals each, while 350,000 people on benefits will each receive $17,000 less in benefits over four years. In my view, this fails the ‘distributionally neutral’ test set by John Key and Bill English in 2010 when they engineered their GST-hike for tax-cuts switch, albeit after Key had ruled out a GST hike in the 2008 election campaign."

by kiwikidsnz | 11th Oct 23, 5:11pm 1696997506

Well, he & the CTU would say that wouldn't they.

What they didn't say was that the change is to reset the tax regime back to the long established & accepted business tax regime that existed for decades/centuries?- before Labour corrupted it in a virtue signalling kneejerk response to their massive house price inflation resulting from their & the RBNZs respective Covid fiscal & monetary management failures. And without any electoral mandate for a major tax principle change.

Edit: blatantly disingenuous straw man attempts to conflate business cost tax deductions with increasing child poverty should be treated with the contempt they deserve

Disclaimer: I haven't had any personal interest in rental properties for at least 15 years

by Frank Sobotka | 11th Oct 23, 5:12pm 1696997544

Business tax? I thought these were “hardworking mum and dad investors” who are borrowing money on retail not commercial rates and securing it against residential property?

By all means ensure interest deductibility extends across all registered businesses, in the same way commercial lending rates, commercial council rates and insurance and commercial accommodation regulations apply.

Sound good?

by Norm | 11th Oct 23, 5:47pm 1696999661

Many smaller businesses secure their house against a loan, do they pay commercial rates? Genuine question.

by KH | 11th Oct 23, 6:47pm 1697003239

Norm. Business was secured against the house. Never paid commercial rates. The bank did like to look at the business books but after about year 2000 they showed no interest at all. I had a floating mortgage, and could take cash out or put it in at will. Overall the bank had no idea what I was doing with it, or cared.

by meh | 11th Oct 23, 5:48pm 1696999688

Nobody wants to understand that for profit, non tax incentivised businesses need to make real profit in the first years to remain viable and for capital gains, tax subsidised "investments" relying on the next greater fool, FOMO buyer and debt leverage to the moon does not equate. Just because outdated tax laws and financial beliefs make it so does not make it truth. There's also the issue of providing goods or services that people choose to purchase rather than exploiting peoples need for shelter. It would appear parasitic at best.

by TronMVP | 11th Oct 23, 9:29pm 1697012982

By your reasoning, shops are exploiting peoples need for food and clothing!

by Nzdan | 11th Oct 23, 6:17pm 1697001437

Rarararara something about residential property being lower risk than commercial enterprises, hence their interest rates reflect that risk.

But yes, they're Cheshire Cats. Call themselves "Mum and Dad" investors when they need to meet minimum health standards (like other businesses do), but they are "businesses" when they want to claim tax benefits from leveraging up on other people's money.

by TronMVP | 11th Oct 23, 9:23pm 1697012622

As Zwifter, or someone similar, said, this comments section is full of anti-property investor commenters.

by malamah | 11th Oct 23, 6:30pm 1697002225

Untrue. New Zealand used to have extraordinarily high tax rate for “unearned” income such as rent and interest. The majority of this was used to relieve the burden of debt taken on to pay for the First World War. NZ became a welfare state and pushed through major socialist policies of which your very hard working parents benefited from and left in good steed to a growing nation. Massive social housing efforts after the Second World War, government backed home loans and rent to buy schemes. “A home for everyone”. Since the 70s we’ve managed to completely undo almost all of that hard work in an effort to become individual capitalists of our own houses, thinking we’re millionaires by right.

Currently this nation sits in a jaw dropping amount of public and private debt. To suggest that those who have significantly contributed to the amount of private debt are immune from policies to help reduce the inflationary pressure caused by their actions, and instead lump the cost on to renters and PAYE payers, is ridiculous. This is a tax incentive to property investors which bids up the burden of paying for a roof over one’s head, for no real gain, other than to bank shareholders. We’re playing pretend, and given our two main exports in dairy and tourism are waning, we’re running out of sources to pay for the debt we already have, let alone more debt. What have we got to show for any of it? Laziness.

by meh | 11th Oct 23, 6:58pm 1697003903

Ignorance mainly.

Adam Smith and many great philosophers spoke against it. The original rules of Monopoly were the opposite to what was eventually promoted.

It would appear that many teachings from earlier civilisations, Greek, Roman etc have been cherry picked and lost in translation by those in power.

by kiwikidsnz | 11th Oct 23, 7:19pm 1697005179

Another straw man. "Income" is not gross sales/turnover. Those high tax rates were paid on profits, after deducting legitimate business expenses including interest & depreciation.

by malamah | 11th Oct 23, 8:00pm 1697007602

My argument, that we as a nation foolishly provide incentives, exemptions and subsidies to what is effectively a growing problem of inequality, non-productivity and spiralling debt, stands. We also had crazy expense exemption rules to incentivise exports, people threw money at agriculture for tax relief. It doesn’t mean those rules are right. The outcome of the real estate investment experiment is god awful, you’re mad if you can’t see that. So why should we accept that this is ok, just because the rules were there creating this mess in the first place.

I don’t really care if we think it’s a business or not. Selling meth has all the same characteristics of business, maybe we should take out million dollar loans and sell drugs to each other if we’re that desperate to get high on nothing to the detriment of society.

by meh | 11th Oct 23, 9:33pm 1697013218

Lol you still don't want to know.

https://en.wikipedia.org/wiki/Taxation_in_New_Zealand

https://en.wikipedia.org/wiki/History_of_taxation_in_the_United_States#….

https://en.wikipedia.org/wiki/Income_tax_in_Australia

by WellingtonInvestor | 11th Oct 23, 11:07pm 1697018833

I understand NZ was supposed to bring in a CGT when certain tax reforms were brought in. But it never happened.The Greens now want a wealth tax due to a lack of taxation around assets and capital gains, using the justification that almost every other country has either a 'wealth tax' or a 'CGT'. IMO this wording causes e confusion for many, because yes most countries do have a CGT, but very few have a wealth tax. So IMO they should have never used that wording to support a wealth tax, and the media should have pulled them up on it.

by powerdownkiwi | 11th Oct 23, 7:50pm 1697007029

kknz - no, it's directly cause/causal.

Landlords do nothing constructive, compete with would-be single-dwelling owners, and are entirely parasitic on tenant income.

The rest was a ponzi bubble - real estate but everything if you achieve real perspective.

Houses could have been a lot cheaper, if the middle-class knee-jerk re leaky homes (the problem itself driven by arrogance) hadn't happened. They all panicked and demanded that their asses be covered. That meant a huge addition of regulation, and a few disciplines took the opportunity to clip the ticket. Nothing to do with the more recent Govt - but it's a form of complexity that society can no longer support.

by rastus1 | 12th Oct 23, 9:21am 1697055710

What you didn't say is that the issue is about the tax switch. Mega landlords gain more unearned wealth, the poor get poorer.

by rastus1 | 12th Oct 23, 9:18am 1697055499

Bloody disgraceful.

by J.C. | 11th Oct 23, 4:21pm 1696994505

Non-Western foreign retail brands are pouring into the Russia market. Russian retail figures are up 10% plus, as European retail sales decline.

The number of foreign brands that have registered in Russia this year has soared, defying sanctions aimed at discouraging business engagement in the country, according to data from the Russian consumer consulting firm NF Group.

In the nine months between January and September this year, two new foreign retailers a month began operations in Russia, reaching a four-year peak of 16 in the year to date. That compares with just 11 for the whole of 2022.

Most of these newly established companies are in the clothing, footwear, and home goods sectors. While most originate from Türkiye, with brands from Belarus, Kyrgyzstan, Australia, South Korea, and Estonia all making up the newcomers.

https://www.russia-briefing.com/news/non-western-foreign-retail-brands-…

by HouseMouse | 11th Oct 23, 4:22pm 1696994545

What’s happened to the warm Spring we are supposed to get?

by Zwifter | 11th Oct 23, 4:36pm 1696995419

Only 3.5mm of rain so far this week and the sun has been shining everyday down here. Been doing an outdoor job all week, its been great.

by Nifty1 | 11th Oct 23, 4:52pm 1696996368

Alot of hot air in the comments section...

by EarlyRiser | 11th Oct 23, 6:26pm 1697001970

Daily highs of between 21 and 24 forecast here in Napier over the next week....perfectly pleasant spring weather here!

by Palmtree08 | 11th Oct 23, 6:47pm 1697003236

Warm spring? Heading into an El Nino summer usually means a spring weather procession of fronts from the south west. In my part of NZ it means a southerly front dumping some snow, followed by a couple of cool days and potential frost, then the wind swings to the north west and heats up ahead of the next cold front. So are El Nino springs warm? No. Not on the east coast of the south island. Add to that lower humidity from the weather systems from the south and any given temperature feels colder.

by Grattaway | 11th Oct 23, 4:35pm 1696995309

Advance voting figures I have seen say 843,000 votes already cast

last election at this point the number was 1,415,000

so a low turnout coming? Worse for the left if that happens?

by Nifty1 | 11th Oct 23, 4:40pm 1696995615

It will be one of the worst turn outs

by dumbthoughts | 11th Oct 23, 4:42pm 1696995773

If I recall anything from this lesson at university, it's that low turnout tends to favour the right. I remember a professor explaining that "the left falls in love, the right falls in line" (or words to that effect) in other words right party voters will generally turn out no matter how unenthusiastic they are about their candidate(s), whereas for left wing voters you tend to have worse turnout but then occasionally someone will come along - e.g. 2008 Obama, or maybe 2017 Ardern - who rallies the troops more effectively.

There was an American study done some time ago that posited hypothetical scenarios and how they might affect voter turnout for left versus right. E.g. what would the impact of bad weather be, or of unreliable public transport and so on. Long story short, there was basically no scenario in which right-leaning voters were put off voting, whereas something like 30% of left voters said that a minor inconvenience such as bad weather out stop them voting (I don't recall the exact numbers). The craziest bit was that right wing voters were not even put off by a hypothetical scenario of violent assault at the polling booth.

I note ACT has just sent an email calling out specifically the low turnout so far, and that this is advantageous for ACT as potentially means a disproportionate influence. Fair play to them ... will be interesting to see what pans out. I also suspect that for this election, the most motivated voters are those most eager to see the government removed.

by morepork | 11th Oct 23, 4:46pm 1696995967

Also last election advance voting started 2 days earlier, but we are looking at a lower turnout than last election, but probably still above 2017

See https://vote.nz/2023-general-election/resources/voting-statistics

by Frank Sobotka | 11th Oct 23, 5:14pm 1696997675

Still trying to make up mind, NZ first are soaring whilst ACT are plummeting by looks of todays polling.

by Albert2020 | 11th Oct 23, 5:32pm 1696998723

That previous high turnout was likely due to people worrying we would be thrown into lockdown again before a chance to vote

by morepork | 11th Oct 23, 4:41pm 1696995665

The daily advance voting numbers are available officially here:

https://vote.nz/2023-general-election/resources/voting-statistics

by custard | 11th Oct 23, 5:00pm 1696996803

We merrily continue to be our own worst enemy in this regard – and as others have posted – no meaningful policy or discussion from any party during the entire election campaign.

Perhaps we simply deserve what we get – and sadly wallow in the consequences.

“The number of new homes being built in Auckland may be starting to decline just as immigration ramps up”

by HouseMouse | 11th Oct 23, 5:02pm 1696996959

‘Perhaps we simply deserve what we get’

yeah, probably

by EdwardD | 11th Oct 23, 5:46pm 1696999565

I agree and the MSM should be ashamed of themselves. There has been no real policy discussion, just lots of clickbait comments, sausage roll and icecream shots.

by JimboJones | 11th Oct 23, 5:36pm 1696998986

This election has the be the weirdest ever. Maybe Maori are not needed for a left wing coalition with NZF. Could it be 2017 all over again? Anything could happen!

by Uninterested | 11th Oct 23, 6:16pm 1697001393

Polls can be really wrong. eg Scott Morrison getting in.

by RandomKiwi | 11th Oct 23, 5:55pm 1697000155

I'm holding out for a KFC voucher.

by meh | 11th Oct 23, 6:01pm 1697000464

Could someone explain why we promote competition and more choices for the customer yet we allow everything to be sucked into one giant insurer? Same goes for most FMCG brands.

Is it just me that sees the contradictions?

by J.C. | 11th Oct 23, 6:37pm 1697002653

Paul Tudor Jones is is worth $8.1 billion and pioneered the modern hedge fund industry. He's doubling down on rat poison and gold. Mentioned this at the water cooler but no bites.

Hedge fund manager Paul Tudor Jones continues to tout bitcoin amid a macro backdrop that he said makes it difficult to invest in equities.

The US is likely to slip into a recession in the first quarter of 2024, the billionaire told CNBC in an interview Tuesday.

“I would love gold and bitcoin together,” Tudor Jones said. “I think they probably take on a larger percentage of your portfolio than they would [historically] because we’re going to go through both a challenging political time here in the United States and we’ve obviously got a geopolitical situation.”

https://blockworks.co/news/paul-tudor-jones-bitcoin-looming-recession

by meh | 11th Oct 23, 7:04pm 1697004284

Robert Kiyosaki of Rich Dad Poor Dad fame promotes the same thing, but I'd consider him the biggest grifter there is.

The "value" of gold and bitcoin is still measured in fiat currency. What use will either of these be to the everyday Joe and Jane Bloggs? If crypto is to become the new currency how exactly will it's "worth" be measured and how will it be distributed for everyone to use?

by J.C. | 11th Oct 23, 7:25pm 1697005516

The "value" of gold and bitcoin is still measured in fiat currency.

Not the value. The market price.

PTJ is in a different league to RK. I never had much time for the latter either.

by Nzdan | 11th Oct 23, 8:03pm 1697007788

Robert "Debt is tax free" Kiyosaki.