What happened Wednesday

Economy / news

A review of things you need to know before you sign off on Wednesday; big banks move rates up, strong immigration doesn't bring strong growth, Aussie inflation in surprise rise, swaps hold, NZD holds, & more

25th 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
Today it was BNZ who raised fixed rates, following ANZ late yesterday.

TERM DEPOSIT/SAVINGS RATE CHANGES
The Cooperative Bank raised rates, also following ANZ and Westpac yesterday.

TRACKING THE POPULATION FLOWS
Stats NZ reported that the country's population grew by +105,900 people in the year to June, with Auckland's population up +47,000. Migration was responsible for three-quarters of the Auckland growth. Net internal migration flowed out of some cities, especially Auckland, Wellington and Christchurch. The one city gaining big from internal migration was Tauranga.

IMMIGRATION NOT GIVING MUCH PUSH
The ANZ monitoring of traffic flows via their Truckometer series was headlined "Spring pothole". They see tame heavy traffic activity, and tamer-than-expected light traffic activity given the strong immigration data. While we may not be stick in a pothole exactly, the low demand potholes are going to be reflected in weak local growth outcomes in Q4-2023.

HIGH STREET IS STRUGGLE STREET
This lackluster outlook matches what retailers are seeing and saw in Q3-2023. Their Retail Radar Report didn't find confident retailers, although more than half suggested/hoped Q4 would be better. Worryingly, more than 10% of retailers doubt they will survive the next 12 months. Another 30% say it is touch-n-go.

FARMERS GET THE MESSAGE, DOCTORS NOT SO MUCH
A new report from NZ Food Safety shows agricultural antibiotic use has fallen by a quarter (except for horses), but human use is still dangerously high.

A LICENSING FIRST
The first Financial Institution Licence has been issued by the FMA. This licensing system was established following the joint FMA and RBNZ review into the conduct and culture of banks operating in 2018, in the shadow of the Aussie Haynes Report. The first institution granted this licence is Christchurch-based Gold Band Finance.

UPWARD PRESSURE RETURNS
In Australia, inflation is rising again. Their monthly inflation indicator came in at 4.9% in July, 5.2% in August,and that rose again to 5.6% in September (5.4% was expected). This locked in the Q3-2023 CPI at 5.4% and although down from 6.0% in Q2, it is clearly on the rise again. Fuel, electricity, housing and insurance all are keeping the pressure on. The AUD rose on the news, in the expectation of a higher chance the RBA will raise rates there on November 7. That comes just a few hours after Westpac Australia economists set their forecast as a no change, followed by reductions from September 2024 (see page 19).

YOU CAN STAND UP TO CHINA'S PRESSURE
On the trade front, Australia seems to have won a range of backdowns from China, opening the door to a visit to Beijing by the Australian prime minister soon (from November 4 to 7). And all this comes after Australia shored up its security arrangements with Washington, Tokyo - and New Delhi.

SWAPS HOLD
Wholesale swap rates have probably held little-changed today at the shorter end. But the real reaction will come at the close. Our chart will record the final positions. The 90 day bank bill rate is -1 bp lower at 5.64% and now only +14 bps above the OCR. The Australian 10 year bond yield is up +2 bps from yesterday to 4.73%. The China 10 year bond rate dipped -1 bp to 2.74%. The NZ Government 10 year bond rate is down -7 bps at 5.50% from yesterday, but still above the earlier RBNZ fixing of 5.44% which was down another -7 bps from yesterday. The UST 10 year yield is down -6 bps from this time yesterday at 4.81%.

EQUITIES QUITE MIXED
The NZX50 is down -0.6% in late trade today compounding yesterday's dip. The ASX200 is down -0.3% in afternoon trade. But Tokyo has opened up +1.1% in its Wednesday trades. Singapore is little-changed at its open. Hong Kong has opened up +2.2% following President Xi's apparent renewed interest in reviving the Chinese economy. Shanghai has opened up +0.9%. Wall Street closed up +0.7% on the S&P500 in its Tuesday trade.

GOLD MARGINALLY SOFTER
In early Asian trade, gold is now at US$1973/oz and down -US$4 from this time yesterday. Earlier in New York it closed at US$1971/oz, and earlier still in London it closed at US$1964/oz.

NZD HOLDS THROUGH SHIFTING CHANGES
The Kiwi dollar has inched up from this time yesterday and is now at 58.7 USc. But against the Aussie we sharply lower (post their CPI data), now at 91.7 AUc and more than a -½c drop. Against the euro we are up +½c at 55.4 euro cents. That means the TWI-5 is marginally firmer at 68.5.

BITCOIN HIGHER
The bitcoin price is higher again today, now up at US$34,178 and up +1.4% from where we were this time yesterday. Volatility over the past 24 hours has been moderate at just over +/- 2.8%.

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.

53 Comments

by J.C. | 25th Oct 23, 4:08pm 1698203327

In Australia, inflation is rising again.

RBA expecting 0.9bps, printed 1.2% to 1.3% in Sep quarter; core inflation was 5.2% last 12mths (vs 2.5% RBA target); trimmed mean last quarter revised up from 0.9% to 1.0%. Last 6mths core annualised is 4.3% vs RBA forecast of ~3.6%.

Their forecasts are woefully understated.

They should hike in November. But the RBA has a kind of Stockholm Syndrome because of the property ponzi lobby - which is massive. Basket case.

by HouseMouse | 25th Oct 23, 4:14pm 1698203674

The property ponzi is strong across the Tazzie. Possibly even more than here…

by J.C. | 25th Oct 23, 4:30pm 1698204616

TBH, I think it's a house of cards so I understand their fears and would not want to be in their shoes. But they're the architects of their own sh*tshow. My analyst mate reckons there could be multiple rate hikes over the next few months (given Bullock said ‘low tolerance’, anything short of multiple rate hikes will crash AUD).

And,

One in five Western Australians are going hungry according to food relief charity Foodbank. Thousands of families are skipping meals to make ends meet, with some needing the service for the first time as we head into an expensive part of the year.

https://twitter.com/9NewsPerth/status/1716407787515744384

by Independent_Observer | 25th Oct 23, 4:40pm 1698205253

Crazy policy - who would have thought they might come with consequences.

Reap what you sow.

10+ years of complete lunacy (perhaps more like 20-30).

by J.C. | 25th Oct 23, 4:56pm 1698206213

Good heavens. Comments before the CPI data released from ex-RBA pointy head Luci Ellis who moved to Westpac.

The next RBA rate move will be down, says Westpac

The next move in interest rates will be down, says the bank’s economics team, which is now led by a highly regarded former Reserve Bank assistant governor.

https://www.afr.com/companies/financial-services/the-reserve-bank-is-do…

by Independent_Observer | 25th Oct 23, 5:33pm 1698208395

Everyone is guessing - anyone who says something is a certainty is doing so for their vested interest and as such is worth ignoring.

by sit23 | 25th Oct 23, 7:37pm 1698215835

Anybody with Westpac executive on their CV has zero credibility with anyone who has kept an eye on Aussie bank crookery over the last 20 years.

by WellingtonInvestor | 25th Oct 23, 4:56pm 1698206185

They never had a property crash like NZ, but their prices also didn't increase a much as NZs. Their migration inflow is even higher (better or worse) than NZs which seems to be a key driver.

by nz-it-worker | 25th Oct 23, 5:59pm 1698209952

Their migration inflow is even higher

Lower on a per capita basis.

by TommyYank-old | 25th Oct 23, 6:34pm 1698212051

Here is what the head of the largest US Bank by asset size had to say about Central Bankers: https://www.cnbc.com/2023/10/24/jamie-dimon-rips-central-banks-for-bein…

And he warned to be prepared for anything next year.

by J.C. | 25th Oct 23, 4:12pm 1698203574

Japan's running out of workers. Almost everyone in the working-age population is employed, leading the country to steps like recruiting 80-year-olds to drive taxis. Strangely, this might actually be a good thing for the economy.

Just as well Japanese like to work.

https://www.bloomberg.com/opinion/articles/2023-10-24/what-80-year-old-…

by Kauri | 25th Oct 23, 4:28pm 1698204520

Interesting article. Quote: "[Economists] expect the higher labor costs that will inevitably result [from labour scarcity] to spur company investment in raising Japan’s unusually low labor productivity and lift economic growth".

Here in NZ we have low labour productivity and low economic growth and how do we deal with the problem...ramp up imported labour to keep labour costs low which suppressed productivity growth and economic growth per capita...

by J.C. | 25th Oct 23, 4:34pm 1698204874

It's a fascinating juxtaposition. Their exports and export receipts have been going gangbusters because of the weak yen. I think our minimum wage is 60-70% higher than Japan's yet their cost of living is arguably better. Look at rents. One week of student rent in Auckland is a month's rent in Osaka and / or Tokyo (the latter is usually higher).

by WellingtonInvestor | 25th Oct 23, 4:58pm 1698206335

When I went to Japan in the 90 things were really expensive. But now comparing prices, prices look so cheap, especially for things like meals out. Even new build houses aren't too bad in price on the outskirts of Tokyo, although the quality of things like window frames seem to suck on new builds compared to NZ.

by J.C. | 25th Oct 23, 5:10pm 1698207059

although the quality of things like window frames seem to suck on new builds compared to NZ.

I doubt that. Japanese housing construction and building mats companies are the best on the planet now - Misawa, Sekisui, Panasonic, Sumitomo, Daiwa, etc.

by WellingtonInvestor | 25th Oct 23, 5:56pm 1698209818

Their electronics and cars are some of the best, but I have seen windows and doors on a new build in Japan, and compared them to those in NZ, and they were pretty poor. Thin flimsy aluminum frames, and walls very thin. Maybe that wasn't typical, but Japanese houses aren't generally made to last as long as NZs (partly due to earthquakes so very light weight construction) , and people over there don't like to live in older houses and prefer new. In NZ I understand they must be designed to last at least 50 years. I understand houses over there depreciate in value the older they get and you can pick up some really cheap houses out of the cities.

by J.C. | 25th Oct 23, 6:19pm 1698211194

but I have seen windows and doors on a new build in Japan, and compared them to those in NZ, and they were pretty poor.

It's not the 90s anymore.

by agnostium | 25th Oct 23, 7:27pm 1698215235

This is another quirk of Japan. Their houses are only built to last a couple of decades

"An unusual feature of Japanese housing is that houses are presumed to have a limited lifespan, and are often torn down and rebuilt after a few decades, generally twenty years for wooden buildings and thirty years for concrete buildings – see regulations for details."

https://en.wikipedia.org/wiki/Housing_in_Japan#:~:text=An%20unusual%20f….

by sit23 | 25th Oct 23, 7:48pm 1698216489

I built a spec house in Te Awamutu a few years ago and caught the builder putting Batts in the internal walls. He said, " You don't want the sound travelling through to the next room." You won't get that in Japan..

by sit23 | 25th Oct 23, 8:01pm 1698217263

by J.C. | 25th Oct 23, 8:07pm 1698217663

This is another quirk of Japan. Their houses are only built to last a couple of decades

This is also an urban myth.

by WellingtonInvestor | 25th Oct 23, 8:02pm 1698217345

The house was completed last year.

by rolande | 25th Oct 23, 6:17pm 1698211027

I lived in an 80s era apartment block in Japan for a few years and it was single glazed, but offset by extensive use of air con all year.

It seems to still be the case that in some parts of the country single glazed is used. Probably a wheels within wheels thing based on the power of the power companies

https://neojaponisme.com/2008/05/07/ask-an-architect-insulation/

Sometimes Japan is weirdly backwards e.g. still the biggest user of fax machines.

But I agree on Sekisui etc. They do make many excellent housing units cheap and could insulate well if they needed to by regulation. We need some more group builders like them. Whatever happened to the factory builds promised a few years ago?

by Zwifter | 25th Oct 23, 5:01pm 1698206508

Not sure I would like to get in a taxi with an 80+ year old driving it. Driving skills are pretty bad past 80 and the chances of them croaking while at motorway speeds must be pretty high. Think I would rather get the bus or train.

by Audaxes | 25th Oct 23, 6:34pm 1698212077

The globally synchronized recession is showing up in Japan, too, where everyone seems convinced the Japanese is in such an inflationary boom the BoJ is somehow going to have to raise rates. Jibun's comment instead says at all. https://buff.ly/46KnqQ0 Link

by Jonny.Foe | 25th Oct 23, 5:36pm 1698208606

So...

Auckland rents going bananas (up 9.4%) as new migrants turn up and pay top dollar with their precious savings - leaving residents with no choice but to ship out.
Residential construction on the floor - murdered by high interest costs. So, tiny increases in supply swatted aside by demand.
Benefit numbers flying up, accommodation supplement back on a relentless march to the sky, job vacancies plummeting.
Consumer demand continuing to plummet - been going on for a year but the bank economists that dominate our media have consistently described the economy as overheating (they seemingly forgot how to adjust spending data for inflation)
Inflation not coming down because businesses are managing huge increases in interest payments, which are running at $1.3bn per month (around 10% of consumer spending!) We are also seeing huge increases in rents, insurance, and Local Govt rates, and reintroduction of fuel excise etc - all helping us sustain a higher CPI while other countries glide down into target bands.

The new Govt and RBNZ are looking at this looming disaster and they think the answer is: higher rates for longer, tighter benefits, more power to landlords, lower Govt spending, and an innovative, exciting future of selling milk powder and logs. Not that the departing lot had much more to offer to be fair.

by WellingtonInvestor | 25th Oct 23, 5:48pm 1698209320

National seem to be looking at using austerity, which is often bad for lower income and vulnerable in society. But also giving tax cuts to higher income people and landlords, which is inflationary as higher income people spend more, and so may result in interest rates rising further.

by lonewolfnz | 25th Oct 23, 6:14pm 1698210847

National tax cuts were only really targeted at the middle. 39% rate hasn't changed (even for trusts it will stay the same). The benefit of the tax cuts maxes out at 70k

As for land-lords - they aren't really tax cuts. They just reduce the tax they were paying on a cash flow loss - so no those land lords don't have any extra money in their pockets

by agnostium | 25th Oct 23, 7:30pm 1698215408

What tax cuts? It's like $5 a week or something for middle income earners.

by lonewolfnz | 25th Oct 23, 8:02pm 1698217377

I'm more an ACT man but if you look up their tables more like $20 for an average worker, so $80k per family (both working). Crappy but not that bad. Plus the child care rebate thing

by Jonny.Foe | 25th Oct 23, 6:15pm 1698210939

Cutting govt spending to fund tax cuts for people who either won't spend it all or will use the extra $ to pay down debt is net negative stimulation.

I strongly believe that Govt should be planning a targeted deficit spending programme - infrastructure, native tree planting, community solar etc, but by the time Govt realises that it will be too late.

by agnostium | 25th Oct 23, 7:31pm 1698215504

Not a chance. NACT stood on a platform of cutting government spending, investment and services. They are following the UK Tory model. Look how that has turned out.

by Jonny.Foe | 25th Oct 23, 8:11pm 1698217905

Yep, that's almost certain. They are being advised by ghouls from the NZ Initiative who genuinely believe that a small de-regulated state is the key to economic prosperity. It isn't.

by HouseMouse | 25th Oct 23, 9:03pm 1698221011

It’s all so 1990s….

’ghouls’ - well put!

by JustAnOpinion | 26th Oct 23, 10:36am 1698269785

I think this is misguided. They are changing the mix, from consultants to front line. Interestingly I saw a headline calling out the mass-migration of consultants into full time roles in government. Honestly the trough that the welly beauracrats have been swimming in needs draining, at least occasionally.

by HouseMouse | 25th Oct 23, 5:54pm 1698209694

NZX50 now below 10,900, but no-one seems to care.

by WellingtonInvestor | 25th Oct 23, 5:55pm 1698209731

Pushes people into buying houses as an investment. The NZX is way too small, and perhaps time to merge with the ASX.

by lonewolfnz | 25th Oct 23, 6:15pm 1698210939

NZS is a poor performer.

AUS is nice and has the same tax benefits.

USD and others (Asia etc) are roaring but a slight tax issue.

Housing is crap as an investment and has terrible tax treatment (even under national)

Crypto is an incredible investment but with bad tax.

Looking at the above, why pick property? There is a reason why rental property investment is at a low.

by J.C. | 25th Oct 23, 7:02pm 1698213747

Remember these public-private companies like Spring Sheep Milk? Whatever happened there? Thought they were going to make a real splash. Finally have a team in Chyna. One of the heads has a fancy pants degree from Stanford or Harvard.

by Retired-Poppy | 25th Oct 23, 6:15pm 1698210916

Rymans, Sommerset and Oceania shares all still falling. I would strongly suspect this to be a leading indicator of the near-term fortunes of the housing market. The current easy on the eye returns on TD's also play a part. Investors are waking up to easier and more dependable ways to make one's money work harder.

by HouseMouse | 25th Oct 23, 6:26pm 1698211615

Yep.

These indexes are pretty good indicators of the general state of the economy.

by Flying high | 25th Oct 23, 9:37pm 1698223028

But but ... 2023 was supposed to be total annihilation. The big crash with lay-offs and gfc like liquidations. I can't understand what went wrong

by J.C. | 25th Oct 23, 6:29pm 1698211790

Rymans, Sommerset and Oceania shares all still falling. I would strongly suspect this to be a leading indicator of the near-term fortunes of the housing market.

You understand well young Jedi.

These shares are a fantastic barometer for many things IMO.

by HouseMouse | 25th Oct 23, 7:07pm 1698214049

All the normie financial advisors still pushing shares and aggressive KS funds.

by IT GUY | 25th Oct 23, 8:41pm 1698219663

they can only push things that carry a commision.......

by rolande | 25th Oct 23, 7:33pm 1698215604

Listed property companies also generally down. You can get better returns on lower risk bonds and even cash.

by oscar87 | 25th Oct 23, 8:41pm 1698219699

I suspect a number of my friends and relatives who started using Sharsies in 2021 might care. Won't be much green on their dashboards I suspect (my own ASB securities portfolio looking pretty grim for anything bought post covid)

by powerdownkiwi | 25th Oct 23, 9:25pm 1698222349

Why people don't just buy what they will need in the future - non-perishable or storable, of course - instead of 'investing'?

It was all clearly a ponzi - as been for at least since 2008, arguably since Clinton repealed Glass-Steagall, even arguably since the need to privatize (because of scarcity of opportunities) via Reagan/Thatcher/Chicago.

Reconciliation is an interesting word. So benign, yet not...

by HouseMouse | 25th Oct 23, 9:26pm 1698222407

Yeah talk about a hyped up thing. Recall all the hyped stories on Stuff etc in 2021 and 2022 from all the overnight shares experts?

by JamesM | 25th Oct 23, 7:24pm 1698215073

Hi Guys- wondering if anyone can point me in the right direction. I’m looking for historic data for on call interest rates from September 2017 to present day. Thanks.

by Te Kooti | 25th Oct 23, 7:29pm 1698215382

You need to be a bit more descriptive, what is an on-call interest rate? If you mean the OCR you can get that from the RBNZ website.

by ShoreThing | 25th Oct 23, 8:05pm 1698217523

Maybe this is what you are after? RBNZ has a bunch of series.

https://www.rbnz.govt.nz/statistics/series/exchange-and-interest-rates/…

by Norm | 25th Oct 23, 8:56pm 1698220587

This maybe helpful too: https://www.rbnz.govt.nz/statistics/series/exchange-and-interest-rates/…