What happened Friday

Economy / news

A review of things you need to know before you sign off on Friday; Reverse mortgage rate almost touches 10%, PMI weaker, retail sales fall, SkyTV mulls takeover offer, swaps up, NZD down, & more

13th 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
Heartland Bank raised the interest rate on their reverse mortgages, from 9.75% to 9.98%.

TERM DEPOSIT/SAVINGS RATE CHANGES
General Finance changed rates today, both up and down depending on the term.

UNDERPERFORMING
Despite a small uptick in new order levels, factories contracted more in September than August and the factory PMI is now at its lowest level in two years - and apart from the pandemic interruptions, is down to levels not seen since the GFC. It has been a steady downward slide since April. Demand is softening, production levels are weak, and stocks are higher than they should be. It's an entrenched contraction now.

HOUSEHOLD BUDGETS TIGHTEN SHARPLY IN SEPTEMBER
The monthly data that tracks retail sales is cooling off quite quickly now. If we realise that immigration has raised the population by more than +2% over the past year, and that inflation has upped prices by about +6%, then knowing that the value of retail electronic card transactions rose by only +1.6% in the same period will paint a picture very tight household budgets. As Westpac analysts note, "households are splashing out more cash, but taking fewer goods home with them." From August to September, the retail data actually fell -0.8%.

TIME TO DECIDE
Don't forget to vote. The final election policy releases are done. Our policy comparison tool is getting well used. And our final campaign wrap-up is here. 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.

RESPONSIBLE INTERNAL FINANCIAL MANAGEMENT
For the year to June 2023, the RBNZ's Annual Report revealed that its total assets shrank from $93.9 bln in 2022 to $88.9 bln in 2023. It earned +$4.3 bln in interest income and paid out just under -$4.0 bln interest on its liabilities. It spent $159 mln in operating expenses, up mainly due to a $14 mln rise in staff expenses. Overall, it reported a modest surplus of +$202 mln although that is not the point of it as a regulator. But at least it didn't spend more than it earned.

WESTPAC SINKS MORE MONEY INTO FINTECH AKAHU
Red Bird Ventures, Westpac NZ's venture capital fund, has made a second investment in fintech firm Akahu, leading a $1.4 million investment round alongside co-investors K1W1 and NZ7 Investments. Red Bird first invested in Akahu in late 2020 and owns about a third of the business. A Westpac NZ spokesman says Akahu is free to and encouraged to work with other banks.

ANOTHER NZ50 MEMBER TO DEPART?
SkyTV (SKT, #40) has disclosed that it has received a non-binding takeover offer.

INFLATION EVAPORATES
In China, consumer prices were unexpectedly unchanged in September from a year ago, missing market forecasts of a +0.2% gain. Meanwhile their PPI fell -2.5% in September from a year ago.

SWAPS RISE
Wholesale swap rates are probably much higher today. But the real reaction will come at the close. Our chart will record the final positions. The 90 day bank bill rate is up +2 bps at 5.70% and now +20 bps above the OCR. The Australian 10 year bond yield is up +11 bps from this time yesterday to 4.48%. The China 10 year bond rate reversed yesterday's rise, down -3 bps to 2.73%. The NZ Government 10 year bond rate is up +11 bps to 5.54%, and still above the earlier RBNZ fixing of 5.41% which was up +6 bps today. The UST 10 year yield is back up +11 bps at 4.68%. The UST 2yr is up +7 bps at 5.06% as the curve inversion widens further.

EQUITIES MOSTLY HAVE A GOOD WEEK
The NZX50 is down -0.9% in late trade today and erasing all the earlier gains in the week; it is heading for a -0.8% weekly retreat. The ASX200 is down -0.3% in afternoon trade on its way to a +1.7% weekly rise. Tokyo has opened down -0.3%, however if it holds that it will record a strong +4.5% weekly gain. Hong Kong has opened .... But Shanghai is ... at their open. On Wall Street earlier today, the S&P500 ended down -0.6% in their Thursday session and up +1.0% in the first four days of this week.

GOLD SLIPS
In early Asian trade, gold is now at US$1872/oz and down -US$6 today. It closed earlier in New York at US$1869/oz and earlier still in London at US$1874/oz.

NZD SHARPLY LOWER
The Kiwi dollar has fallen -1c today to be now at 59.2 USc. Against the Aussie we have slipped slightly to 93.7 AUc and against the euro we are down -½c to 56.2 euro cents. That means the TWI-5 is down -60 bps at just under 69.5.

BITCOIN ESSENTIALY HOLDS
The bitcoin price is a bit firmer today, now at US$26,816 and up +1.0% from this time yesterday. Volatility over the past 24 hours has been low at just under +/- 0.7%.

Daily exchange rates

Select chart tabs

Source: RBNZ

Source: CoinDesk

Daily swap rates

Select chart tabs

Source: NZFMA

This soil moisture chart is animated here.

Keep abreast of upcoming events by following our Economic Calendar here ».

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

52 Comments

by HouseMouse | 13th Oct 23, 4:05pm 1697166337

Anyone still reckon it’s a ‘soft landing’ in 2024?

by AshwinRai1488 | 13th Oct 23, 4:06pm 1697166419

The stock market ;)

by JimboJones | 13th Oct 23, 4:25pm 1697167519

Depends how long Orr waits to lower interest rates. If he waits as long as he says he will, then no.

Although many commentators say that once NACTFirst get elected everything will be rosy as global inflation was all Labour's / Jacinda's fault.

by Advisor | 13th Oct 23, 5:00pm 1697169600

CPI will remain high in NZ for a couple more quarters at least off the backs of higher fuel, accommodation and food prices.

Ultra-high migration has achieved f-all in capping wage inflation despite all the promises.

Regardless of the election outcome tomorrow, no party has a solid plan or even the intention to improve our crammed infrastructure and broken markets.

by JimboJones | 13th Oct 23, 5:13pm 1697170428

Food price inflation is down big time, only 0.8% for the quarter. I think that will more than make up for fuel rises.

by HouseMouse | 13th Oct 23, 5:24pm 1697171054

The primary CPI measure is annual. Annual food inflation will likely still be north of 6-7%

by JimboJones | 13th Oct 23, 6:30pm 1697175040

The annual food price inflation is well down, so all else being equal the CPI will also be well down. But fuel prices may make up for it.

Food inflation was in the double digits not long ago.

by Matt_B | 13th Oct 23, 7:10pm 1697177416

I trip to Countdown this afternoon

A manufactured packaged food item I was going to try was $7.99 last week is now $8.70

by TronMVP | 13th Oct 23, 10:07pm 1697188056

CPI will be down for sure. Manufacturing is down, and a recession around the corner. Unemployment will rise, and the Reserve Bank will reduce the OCR much sooner than predicted. The new government will inherit a disaster of an economy.

by sit23 | 13th Oct 23, 8:35pm 1697182508

That is equivalent to 3.2% p.a. Still way above the 2% goal.

by nzphoenix | 13th Oct 23, 4:45pm 1697168732

About as soft of a landing as inflation was 'transitory'

by Justa comment | 13th Oct 23, 7:59pm 1697180381

I see the long end swaps have just changed direction again, upwards

by Dgm | 13th Oct 23, 4:08pm 1697166513

Amongst all the gloom, rates are rising.. who would have imagined.. you can't say I didn't tell you so...

by Retired-Poppy | 13th Oct 23, 4:20pm 1697167250

Heartland Bank Reverse Mortgages @ 9.98%.......

Maybe it it will reach 10% by years end? 😜

by Nifty1 | 13th Oct 23, 4:23pm 1697167392

Even less inheritance for those kids now, little suckers...

by JimboJones | 13th Oct 23, 4:26pm 1697167586

The bank of mum and dad are going under

by J.C. | 13th Oct 23, 4:23pm 1697167402

This is appalling. People have no power or say in the retail banks blowing massive bubbles. And now they're granted the right to make out like bandits with this kind of nonsense. Remember that these debt assets will also be created 'out of thin air.'

by Palmtree08 | 13th Oct 23, 8:31pm 1697182316

Of course people have the power. They exercise it by voting for business as usual.

by J.C. | 13th Oct 23, 9:58pm 1697187496

Of course people have the power. They exercise it by voting for business as usual.

No. People do not get to vote for the privilege of banks. You have no say whatsoever.

by NZGecko | 13th Oct 23, 4:25pm 1697167522

10% rates are guaranteed in 2024!

To think they persecuted the Prophet .....and he only ever said the truth.

by nzphoenix | 13th Oct 23, 4:46pm 1697168799

That's Guaranteed (with a capital G!)

by HouseMouse | 13th Oct 23, 5:07pm 1697170073

*TM

by TronMVP | 13th Oct 23, 6:25pm 1697174720

Oh, I get it now - he was referring to the Heartland Bank reverse mortgage all along!

by KH | 13th Oct 23, 7:30pm 1697178633

Are you talking TDs ?

by J.C. | 13th Oct 23, 4:15pm 1697166955

More mighty stuff from Chis Joye unpacking what's really going on in Aussie. My money's on CJ over the govt and RBA propaganda. Chris says "The Reserve Bank of Australia likes to spin that “most” borrowers are fine, but between 15 and 20 per cent are in trouble."

Although more than 80 per cent of fixed-rate borrowers have spare savings to cover more than three months of scheduled mortgage repayments, and about two-thirds have savings to cover at least 12 months of repayments, almost one in five fixed-rate borrowers do not.

In the RBA’s sanguine words, “there is also a smaller share of fixed-rate borrowers (less than 20 per cent) who will roll off onto higher interest rates with much lower savings buffers, equivalent to less than three months of scheduled mortgage payments.

https://www.afr.com/wealth/personal-finance/one-in-five-borrowers-screw…

by Retired-Poppy | 13th Oct 23, 4:20pm 1697167238

by J.C. | 13th Oct 23, 4:23pm 1697167382

delete

by Independent_Observer | 13th Oct 23, 4:31pm 1697167862

Ray Dalio: Another step toward international war

https://www.linkedin.com/pulse/another-step-toward-international-war-ra…

by HouseMouse | 13th Oct 23, 4:35pm 1697168144

Had a quick read, don’t buy his analysis to be honest

by Independent_Observer | 13th Oct 23, 4:40pm 1697168414

Fair enough - any parts/theme that you specifically disagree with? (always good to try and triangulate views with intelligent people like yourself).

by HouseMouse | 13th Oct 23, 5:05pm 1697169914

I don’t think a global war is as precarious as he suggests. Nothing to back my position other than a global war being in no one’s interests.

Some nasty regional stuff is certainly a real chance.

If he thinks a global war is a 50% chance I assume his investment positions are very defensive

by JimboJones | 13th Oct 23, 5:15pm 1697170541

A 50% chance is a very big call. We have only had 2 of them in history (and a lot of predictions of them since).

by tim52 | 13th Oct 23, 9:07pm 1697184434

The biggest difference this time is the "global south" has started to believe that the US or NATO can be beaten militarily. Israel has also had more casualties in a war than they have had for 50 years just in the opening days, mostly up against just Hamas.

I think Hamas have decided to roll the dice and see if they can get the Arabs (and most importantly Iran) into the war to defeat Israel and Hezbollah in the very least seem up for it. After the failure of air defense in Ukraine, there is good reason to believe that those aircraft carriers the US and others have brought in can be easily sunk.

How sure are you that the countries that Israel repeatedly threatens or attacks might not back down as Gaza's civilians get bombed without military justification?

by sit23 | 13th Oct 23, 9:35pm 1697186145

Yes . Equating those two completely different wars is just so obviously wrong. Also I don't think I remember the Yanks or the Brits ever saying it was a bad idea to completely beat up the Germans and the Japs.

by J.C. | 13th Oct 23, 4:37pm 1697168226

“people dying in the fighting is the marker that almost certainly signifies the progression to the next and more violent civil war stage, which will continue until the winners and losers are clearly determined.”

Think of this in the context of Israel. Most people are generally unaware of the inner turmoil that country has been going through. People seem to believe that Israelis all think and believe the same thoughts. The footage of the Orthodox protesting for Palestine and against the Israeli state is telling.

by KH | 13th Oct 23, 7:41pm 1697179308

The USA is sending a carrier to the Gaza conflict. Not smart, but there they go. In the modern era these are coffin ships.

A missile out of nowhere, and the 5000 crew are toast.

Then it will be all on.

by sardines | 14th Oct 23, 12:30am 1697196656

Japanese Admiral Isoroku Yamamoto, who planned the attack on Pearl Harbor would reportedly write in his diary, “I fear all we have done is to awaken a sleeping giant and fill him with a terrible resolve.”

Sending a missile toward an American carrier would have far bigger implications than just damaging the ship

by tim52 | 14th Oct 23, 8:04am 1697223886

Yes, they would sink it and then the hot phase of WW3 would start. All those US bases in the ME with well known locations will come under attack from drones and land simultaneously as well. Russia gets dragged in through Syria and China makes sure no one runs out of weapons.

Arab states would not be taking sides like they are now unless they were confident.

by Audaxes | 13th Oct 23, 4:48pm 1697168920

Just in time for election day, the RB this afternoon released the latest data on their LSAP losses, taking the estimated total RB-caused loss to just over $12bn. And no one in the RB has paid any price.... Link

by profile | 13th Oct 23, 6:58pm 1697176710

That's why they get paid the big bucks. Never hit their targets and laugh all the way to the bank. Tough luck taxpayer.

"@MHReddell

The remuneration table from the RB Ann Report. 11 senior managers being paid $300-399K & another 11 getting more than $400k. All this while inflation is going to be well outside the target range for a 3rd year in succession. Accountability & restraint are simply unknown concepts"

DC is very forgiving.

"It spent $159 mln in operating expenses, up mainly due to a $14 mln rise in staff expenses. But at least it didn't spend more than it earned."

by HouseMouse | 13th Oct 23, 7:15pm 1697177711

Obscene

by J.C. | 13th Oct 23, 4:55pm 1697169308

Aussie corporate insolvencies reaching their highest level since 2015 with construction leading the way -- builders have been squeezed by fixed-price contracts on existing projects and reduced demand for new work.

https://www.livewiremarkets.com/wires/corporate-insolvencies-head-highe…;

by HouseMouse | 13th Oct 23, 4:57pm 1697169435

Interesting that it seems to be happening faster in Aus

by JimboJones | 13th Oct 23, 5:16pm 1697170584

Our builders made such a profit over the last 5 years they should be solvent for a long time.

by Nzdan | 13th Oct 23, 6:38pm 1697175487

Wouldn't have happened under National.

by bobestm | 13th Oct 23, 5:16pm 1697170611

Hi folks, as a retail investor, how do I purchase 10, 20 year NZ bonds?

by Independent_Observer | 13th Oct 23, 6:11pm 1697173905

https://debtmanagement.treasury.govt.nz/kiwi-bonds

by Rob Reid | 13th Oct 23, 6:24pm 1697174695

"Reverse mortgage rate almost touches 10%"

All yee, shall be banished by this host,

who upon the Prophet gave a look askance.

Unless thou hast a green tick

in which case a second chance.

by JimboJones | 13th Oct 23, 6:39pm 1697175576

The Prophets predictions have an “up to” clause like Nationals tax cuts? More people are probably borrowing money at 0% (Bank of Mum and Dad) than at 10%

by Rob Reid | 13th Oct 23, 7:06pm 1697177172

Much as it pains me, as a DGM Death Cultist, to admit it, when things really break I could see govts just giving up on inflation (other than lip service) and holding rates as low as they can justify. But based on life experience there is no way I'm going to trust my luck.

The extreme concentration of economic power these days makes predictions really hard (for me, anyway).

Also, thou art a heretic, be gone with thee.

by J.C. | 13th Oct 23, 9:59pm 1697187580

Much as it pains me, as a DGM Death Cultist, to admit it, when things really break I could see govts just giving up on inflation (other than lip service) and holding rates as low as they can justify.

Destroying the power of people's purchasing power. To save their own asses and reputations.

by Rob Reid | 13th Oct 23, 11:03pm 1697191401

Yes. But let's look on the bright side. There shall be many reassuring speeches:

"Sadly, many of you will lose your meager savings and your livelihoods. This is a price I'm willing to pay."

- Lord Farquaad