What happened Thursday

Economy / news

A review of things you need to know before you sign off on Thursday; real economy soft as public service expands fast, bank funding rise slows, another unticked box brings more FMA reaction, swaps down, NZD up, & more

2nd Nov 23, 4:08pm 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
No changes to report today.

TERM DEPOSIT/SAVINGS RATE CHANGES
None here either.

LOG MARKET FACES STALLED DEMAND
The latest log market report for October shows that China log inventories have stayed low but demand not rising. Local log supply is tight as some forest owners stop harvesting. Local demand has risen post-election however. European demand for sawn timber has stalled.

PUBLIC SERVICE HEADCOUNT UPDATE
Updated public service headcount data shows there were 63,117 FTEs as at June 30, 2023, up +4.5% from a year ago, and up +26.1% from six years ago at the start of the Ardern/Robertson Labour government.

ACC RECOVERS
Out today, the ACC Annual Report reveals a better financial outcome over the past year. They had a surplus of +$911 mln in the twelve months to June 2023, a turnaround from a deficit of -$49 mln in the prior June year. Their investment fund grew Investment Fund grew to $46.9 bln and returned 7.07% in the year. ACC treated almost 2 mln injured Kiwis, and new claims rose by almost +10%. Their outstanding claims liability rose to $51.6 bln, up +2.6%. 2024 will mark ACC's 5pth year of operations.

A P2P RETIREMENT
The Peer-to-peer lending platform Lending Crowd is throwing in the towel, and will close mid November. It has been unable to generate sufficient volume to justify continuing and prospects can't have been promising.

BANK SAVERS ARE SHORT-TERMERS
New data out today as at the end of September shows that 84.3% of customer deposits (non-market) at New Zealand banks are on terms of 6 months or less with 53.4% of them at call. Only 1.0% is on a 1 year term and that is basically unchanged since April 2019. Risk management is vital for bank treasurers because no bank wants to be caught borrowing short (from depositors) and lending long (mortgages) without proper treasury management techniques in place. Banks have $566 bln of funding in place from all sources, up +2.1% in a year, the lowest year-on-year rise since this data series started in 2012.

NOT IN CONTROL?
The FMA has issued an infringement notice to CFD platform CTRL Investments for failing to file audited financial statement by the due date. CTRL Investments is a New zealand-registered operation, having held a derivatives licence from the FMA since 2015.

BOND ENTHUSIASTS MOSTLY LEAVE UNSATISFIED
Demand from just 23 of the 151 bids at today's (Thursday) $500 mln NZGB tender was so hot, they drove down yields. All up just a fraction under $2 bln was bid ($1.974 bln). Far and away the most popular was the May 2030 $225 mln which attracted more than $1 bln in bids. The four winners (of 63) drove the yield down to 5.19% pa from the 5.31% three weeks ago. The May 2034 $175 bond had 5 winners of 52 bids ($693 mln) and the yield fell as well, down to 5.35% from 5.59% three weeks ago. The final May 2051 $100 mln had 14 bid winners (of 36) and their demand saw the yield fall to 5.43% from 5.53% three weeks ago. This is very enthusiastic demand. Just nine bidders set the tone today.

HOW GOOD IS THIS
Watch.

TAKEN AS A STRONG HINT
In his post-meeting press conference, Fed boss Powell said the central bank has 'come far' in its fight against inflation, and market are taking that as a strong hint that they may be done raising rates for now. That pushed up the equity market, with the S&P500 closing up almost +1.1%. It generated a bond price rally, which has seen the UST10yr benchmark yield fall to 4.71%. And it has pushed down the USD.

CRUNCH TIME AHEAD
In Australia, Westpac’s new business banking boss says the fate of many struggling small firms will hinge on the December-January period. Might be so here too. The the new Westpac Australia chief economist, ex the RBA, says her old employer may be forced into more than one more rate rise because inflation isn't tamed there yet. That won't help those SMEs either.

SHARP SHINKAGE IN SURPLUS
In Australia, their merchandise trade surplus fell to a 30-month low of +AU$6.8 bln in September from an upwardly revised AU$10.2 bln in August. The September result was well below market forecasts of an AU$9.4 bln surplus as exports fell -1.4% while imports surged +7.5% from the prior month.

OWNER OCCUPIERS RETREAT AS INVESTORS EXPAND
Housing investor demand (+2.6% from a year ago) is keeping mortgage lending up in Australia, while owner occupiers are borrowing less. Lending for new houses remained at 20 year lows. On the commercial side, construction loans rose, and rather sharply (+55%).

AN 'OLD FRIEND' REACHES THE TOP
In the US, President Biden officially nominated long-time “Asia hand” Kurt Campbell as deputy secretary of state earlier today (Thursday NZT), a move analysts said showed Biden’s commitment to his Indo-Pacific strategy which involves containing China's expansion. Campbell is an 'old friend' of New Zealand. We awarded him an honorary Companion of the New Zealand Order of Merit for services to New Zealand-United States relations in 2014.

SWAPS TURN DOWN SHARPLY AT LONG END
Wholesale swap rates have probably changed little at the short end but probably down a lot at the long end, deepening the inversions. The real reaction will come at the close. Our chart will record the final positions. The 90 day bank bill rate is unchanged at 5.64% and now +14 bps above the OCR. The Australian 10 year bond yield is down -17 bps from yesterday at 4.80%. The China 10 year bond rate is unchanged at 2.71%. The NZ Government 10 year bond rate is down -18 bps at 5.40% from yesterday, but still above the earlier RBNZ fixing of 5.38% which was down -15 bps from yesterday. The UST 10 year yield is down a very sharp -22 bps from this time yesterday to 4.71%. The UST 2yr is down -16 bps to 4.93%, so the curve inversion has deepened to -22 bps. These levels may be different when you read this.

EQUITIES ALL HIGHER
The NZX50 is up +1.5% in late trade today, reacting to global sentiment. The ASX200 is up +1.3% in early afternoon trade for the same reason. Tokyo has opened up a strong +1.2%. Hong Kong is starting its Thursday up +1.8%, and Shanghai is up +0.3% at its open. Singapore is up +0.6% at their open. The S&P500 ended its Wednesday Wall Street session up +1.1% in a Fed relief rally, one that is gathering pace this week.

GOLD HOLDS
In early Asian trade, gold is now at US$1984/oz and up +US$4 from where were this time yesterday. Earlier it closed in New York at US$1983/oz. And earlier still at US$1986/oz in London.

NZD RISES
The Kiwi dollar has risen almost +1c to 58.9 USc from this time yesterday as the greenback falls sharply after today's Fed decisions and the US Treasury bond program announcement. But against the Aussie we are unchanged at 91.6 AUc. Against the euro we are softer at 54.5 euro cents. That means the TWI-5 is up +50 bps at 68.7.

BITCOIN RISES
The bitcoin price is rising today, now at US$35,451 and up 2.6% from this time yesterday. Volatility over the past 24 hours has been moderate at just under +/- 2.2%.

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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66 Comments

by J.C. | 2nd Nov 23, 4:18pm 1698895115

Blackstone Inc.’s $66 billion real estate trust limited investor redemptions for a 12th straight month in October. Basically you don't have access to and can't redeem your investment.

They've got you by the balls.

The real estate trust is a colossus in US property markets, with its reach spanning from apartments to data centers. In late 2022, BREIT curbed withdrawals after redemption requests picked up and its wealthy clients became jittery about having money locked into commercial real estate. Property values have fallen as the costs of borrowing increased with the Federal Reserve’s rate hikes.

https://finance.yahoo.com/news/blackstone-66-billion-real-estate-124602…

by Yvil | 2nd Nov 23, 4:27pm 1698895676

Yep, commercial RE in the US is in deep trouble, and by extension, many lenders (banks) are equally in trouble. Actually many lenders would be insolvent if they had to value the collateral they have lent against, at today's much lower valuation.

by HughJorgan | 2nd Nov 23, 9:03pm 1698912191

Yeah, lending is easy. Getting paid back is the tough bit.

by J.C. | 2nd Nov 23, 4:21pm 1698895317

Jay Powell said last night: "We haven't really thought about extending the BTFP program."

BTFP is preventing a cascade of bank failures that could occur if the $1.5 trillion of unrealized losses in the US Treasury market had to be realized.

The program ends in March.

Probably nothing. They will if they have to.

by Yvil | 2nd Nov 23, 4:22pm 1698895374

public service headcount data shows there were 63,117 FTEs as at June 30, 2023, up +26.1% from six years ago at the start of the Ardern/Robertson Labour government.

No wonder we can't get anything done in NZ !

by WestieAJ | 2nd Nov 23, 4:28pm 1698895694

At least it keeps them out of the private sector where they could do more damage. At least they are all paying 15k plus per year in PAYE and GST on their spending.

by JimboJones | 2nd Nov 23, 4:28pm 1698895728

We need less people to get things done? I guess we will find out...

by Foxglove. | 2nd Nov 23, 4:41pm 1698896469

You are best to come back to Northcote Parkinson’s law in that work expands itself relative to the time available to do it. And then include in that according to as well, personnel available to do it. The conclusion for both elements though is that the efficiency of the work achieved decreases relatively.

by JimboJones | 2nd Nov 23, 4:51pm 1698897084

So should NZ scale itself back to one teacher / doctor / fireman / etc to be more efficient?

by Foxglove. | 2nd Nov 23, 5:22pm 1698898922

Suggest worthwhile you read that edict and other samples. But if you think the context is as simple as your post, then don’t bother.

by johno1234 | 3rd Nov 23, 8:23am 1698953014

The public sector growth is in office bureaucrats, not the coal face. Despite that colossal 26% FTE growth we don't have any increase in teachers, doctors or firemen.

We are paying more and getting less.

by KH | 2nd Nov 23, 6:14pm 1698902054

Jimbo. You are making a wrong assumption there if you think that all those people are productive. Or the bigger staff roll produces more for us with greater quality.

Once it was believed that there was a swing factor between quality and cost. It was believed that increased quality and output meant more cost.

But amongst many others Japanese car manufactures proved that wrong. Turned it on it's head They vastly improved quality, and reduced cost rapidly. And it continues.

Think about it.

by Yvil | 2nd Nov 23, 6:40pm 1698903653

JJ, have you ever heard the saying "if you want to get something done, give the job to a busy person". Sounds counter intuitive but it's very true. I invite you to think about it.

by kiwikidsnz | 2nd Nov 23, 7:19pm 1698905997

+1 & in my experience, a busy woman is usually the best choice ;)

by Foxglove. | 2nd Nov 23, 7:37pm 1698907057

Well now, would venture that the female of our species is much more adept at multitasking than her male equivalent. But that is not to say that the latter is not without virtue in a mindset to not commence on another task until the one on hand is completed. To weigh up the superiority of one or the other you need to consider then , is one completed job more or less valuable than say four not quite completed jobs.

by kiwikidsnz | 2nd Nov 23, 7:55pm 1698908121

Fair enough. I was expressing my own experiences managing roughly 50/50 genders in chemical process / manufacturing workplaces.

Or maybe I've spent too much time with engineers, most of whom were male...your comment "...a mindset to not commence on another task until the one on hand is completed." rang a bell.

by Foxglove. | 2nd Nov 23, 7:56pm 1698908206

Common toast round London bars in the 1980s, “cheers, queers and engineers,” but no need to expand on that here.

by cjmain | 2nd Nov 23, 5:06pm 1698897977

National will come in and headcount will come down but half of who they let go will private contract back at three times the rate

by HouseMouse | 2nd Nov 23, 5:22pm 1698898975

Yep. And a number of Nats have vested interest in Wellington property - that will limit the cuts

by RickStrauss | 2nd Nov 23, 6:06pm 1698901581

Always seems to be the way. In my industry we get hit up by people for full-time jobs when a Labour govt comes in because the departments are allowed to increase headcount so the lucrative contracting gigs aren't as plentiful. When a National govt comes in it's hard to get people because they're back on the contracting money as National restricts headcount increases. Has been that way in the past, anyway.

by interesting1234 | 3rd Nov 23, 8:29am 1698953387

public service headcount data shows there were 63,117 FTEs as at June 30, 2023, up +26.1% from six years ago at the start of the Ardern/Robertson Labour government.

An interesting note anecdotally. From my experience working in govt over the last few years, with the large attrition due to competing wages across the board, may departments are desperate to hang onto staff for the loss of efficiency they realise form staff leaving. This has resulted in many medium-higher level roles being easy achievements for those who hung on due to the lack of credible staff left to pick form in the talent pool internally. Many have succeeded in said roles, but many have been promoted without merit and struggle.

by kiwikidsnz | 2nd Nov 23, 4:25pm 1698895538

The 26% increase in the public service under Labour has done nothing to improve their wilfully obfuscatory practices in hiding information from the public.

Left blogger "norightturn" has done everyone a service by holding them to the OIA, a longstanding feature of the blog.

http://norightturn.blogspot.com/2023/11/why-nothing-changes-in-oia-land.html?m=1

by J.C. | 2nd Nov 23, 4:41pm 1698896503

Cindy's regime had all kinds of key fixers and operators leading the govt and public service in how it operates. All kinds of deception and trickery. Cindy was well aware behind the 'aw shucks' girl-next-door clown show.

by Palmtree08 | 2nd Nov 23, 4:57pm 1698897452

Kind of like JKs openness about not knowing (not wanting to know) about the massive speculation by foreigners in our property market?

by Stev-O | 2nd Nov 23, 5:26pm 1698899178

Lol wtf..? The squirrel's too far away.. like on the other side of the planet :D

by J.C. | 2nd Nov 23, 5:47pm 1698900446

Lol wtf..? The squirrel's too far away.. like on the other side of the planet :D

I did use the past tense. For sure, I don't expect transparency because of the change of govt. I was just suggesting that we should look through all the BS of the soon-to-be-departed govt.

by Baywatch | 2nd Nov 23, 6:04pm 1698901485

Looks like we have heaps of time before the next pack of clowns are sworn in..the 3 stooges coming to a town near you.

by interesting1234 | 3rd Nov 23, 8:39am 1698953998

This in no way surprises me, sickening lack of accountability under the Labour government, and no matter what political lean one has, there is no excuse for eroding democracy through such lack of action.

by Nifty1 | 2nd Nov 23, 4:36pm 1698896180

Always interesting how fast the economic outlook can change...

Also interesting how short term kiwis are with their savings, you'd think judging by commentators on interest that people would be locking in their funds longer at 6%+ rates... what are kiwis waiting for, what are they going to use their funds for?

by Palmtree08 | 2nd Nov 23, 5:00pm 1698897603

Back into property, now the pumps are working on the next bubble on a bubble.

by WildOscar | 2nd Nov 23, 5:21pm 1698898895

Household deposits at banks rose +5.3% in September from a year ago to a new record high $236.9 bln, up +$12 bln in the year. But transaction account balances fell -$8.9 bln, savings account balances fell -$2.5 bln, while term deposit balances rose +$23.3 bln in the year. Term deposit balances now represent 51.3% of all household bank balances, the highest since July 2020. In July 2020 banks were paying savers 1.5% for a one year TD. Now they are paying 6.1%.

This was from the Tuesday afternoon commentary. Can someone explain this because it suggests that:

$114billion of household deposits are in transactional or savings accounts. ($23k per person - which seems a lot).
For reference there is <$100 billion in KiwiSaver.

What's the reason for so much household cash in low yield accounts? Or have I missed something obvious?

by Eschaton | 3rd Nov 23, 7:12am 1698948770

Short term with everything.

by kiwichas | 2nd Nov 23, 4:33pm 1698896005

BANK SAVERS ARE SHORT-TERMERS

Does this include PIE deposits??

by Zwifter | 2nd Nov 23, 5:04pm 1698897868

I find the figures a bit strange, I always go on the best rate really and that's typically 9 months or 12 months.

by Midnight Singer | 2nd Nov 23, 5:12pm 1698898345

Agreed.

by Chaosinflesh | 2nd Nov 23, 5:29pm 1698899357

53% on call accounts? How many are there because TD's have a minimum amount, and are out of most of the population's reach?

Sad I know, but for those living pay-check to pay-check, at least getting something on a few bucks is better than the nothing most banks pay on current accounts.

TDs are for those with an asset base to start off with and don't need the liquidity.

by Pagz | 2nd Nov 23, 6:36pm 1698903369

I imagine some on call savers will be waiting to buy the right home.

by Pragmatist | 2nd Nov 23, 5:18pm 1698898728

HOW GOOD IS THIS

Watch.

Do you really want an honest answer?

by False economies | 2nd Nov 23, 5:28pm 1698899335

Up there with the "100% pure" propaganda

by HouseMouse | 2nd Nov 23, 6:45pm 1698903932

Not quite as cringeworthy as the Air NZ safety videos

by Rob Reid | 2nd Nov 23, 9:39pm 1698914392

My impression exactly.

I've been living in NZ since the 60s but, whoa, that Aotearoa place looks awesome - should see if I can go there sometime.

by riffraff | 2nd Nov 23, 5:31pm 1698899506

I'm confused... it is sarc isn't it?

by tis i | 2nd Nov 23, 6:26pm 1698902812

What’s the problem with it?

We still do some pretty cool shit here but if all ya gonna do is piss n moan about stuff you’re gonna miss it.

by Pragmatist | 2nd Nov 23, 8:19pm 1698909564

Did you read the sub titles/listen to the kids speech? Worra load of bollocks. The video itself without the propoganda nonsense could indeed be cool.

by tis i | 2nd Nov 23, 10:06pm 1698915961

Yip sure did. Still can’t figure out why it bothers you so much.

by Pragmatist | 3rd Nov 23, 7:48am 1698950893

Who said it 'bothers' me. Just another crappy cringe nz promotion video. We're rather good at them.

by Yvil | 2nd Nov 23, 6:49pm 1698904162

What's the connection between the people dancing in grass skirts and the high tech stuff on the video ?

by agnostium | 2nd Nov 23, 7:48pm 1698907727

Appearances can be deceptive Yvil, like you know the Swiss Guards that are dressed as clowns but are actually highly trained soldiers.

I guess you find it hard to see beyond the surface layer of most things.

by Foxglove. | 2nd Nov 23, 8:07pm 1698908878

One dimensional true, but at least there is consistency.

by tis i | 2nd Nov 23, 8:00pm 1698908420

It’s a puff piece yvil does it need a connection?

Not entirely sure of the purpose of it but it doesn’t seem to be something to get all cut up about.

by 26@Main | 2nd Nov 23, 8:41pm 1698910906

It's a snippet of a video game called Guardian Maia made by Maru Nihoniho, she founded Metia Interactive in 2003.

by tis i | 2nd Nov 23, 10:09pm 1698916193

Nice.

by Nzdan | 2nd Nov 23, 11:13pm 1698920003

The video game that has yet to be released, basically a cutscene in Unreal Engine.

by Rob Reid | 2nd Nov 23, 10:33pm 1698917628

Nek minit, we welcome them to the party after they see the vid. And then...

https://www.msn.com/en-nz/news/national/we-have-zero-money-migrants-who…

"Many of them paid thousands of dollars to come to Aotearoa New Zealand for work, but when the work didn't eventuate they were put into emergency housing. Now they've been booted out with little notice - given until 10am Friday to get out."

Haere mai. Aroha. Kia ora.

Hasta la Vista.

by IT GUY | 2nd Nov 23, 10:48pm 1698918524

RBNZ predicts about a doubling in unemployment which is about 6 times in real world as before recession only those who did not want to work where on benefit..... Only those about 55plus have lived through what is about to happen....

by Rob Reid | 2nd Nov 23, 11:12pm 1698919942

Yeah, those of us of an age will lose ourselves in nostalgia and be singing our 70s hits one more time. "I got those stagflation blues, oooze, oooze, oooze"

by longjohndrop | 2nd Nov 23, 5:54pm 1698900888

Swap rates “plummet” David - just saying

by Pragmatist | 2nd Nov 23, 9:00pm 1698912000

Yeah, thats a hell of a single day drop need to see if it sticks or if it bounces back in the next couple of days.

by TronMVP | 2nd Nov 23, 11:25pm 1698920713

All the swap rates 1 year to 5 years dropped (plummeted) in a straight line down. Is this a mistake on the graph or a true crash?

by HouseMouse | 2nd Nov 23, 6:04pm 1698901452

INCA closing its doors. A restaurant I loved. Sign of the times.

https://www.nzherald.co.nz/business/gut-wrenching-award-winning-restaur…

by Baywatch | 2nd Nov 23, 6:06pm 1698901595

When did you last dine there ...?

by HouseMouse | 2nd Nov 23, 6:12pm 1698901975

I only went there twice, for special occasions as $$$. Last time was maybe a year ago

by Zwifter | 2nd Nov 23, 6:10pm 1698901846

I thought you were the guy that complained a while back your local takeaway had gone up $2 ? I bet it was a very expensive place to dine, people are pulling their heads in, even those with the money to spend.

by Yvil | 2nd Nov 23, 6:56pm 1698904602

It's a bummer, I know Nic, he's an idealist and passionate about his cooking, hard working too, but maybe his passion exceeds his financial wisdom. I'm sad for him.

by J.C. | 2nd Nov 23, 6:37pm 1698903431

Headline of the month in Aussie:

Despite rocketing rents and property prices, a key RBA housing analysis group hasn't met for a year

The Housing Market Discussion Group brought together internal experts to share insights on household budgets, the lending markets and the stability of our financial system.

It hasn't met since September 8 2022.

Documents sought through the Freedom of Information (FOI) process reveal the most recent meeting of the group — also known as the Domestic Housing Community Meeting — was one day after the central bank hiked interest rates for a fifth time.

https://www.abc.net.au/news/2023-11-02/despite-rocketing-rents-property…

by HouseMouse | 2nd Nov 23, 6:43pm 1698903800

The elite don’t care about the plebs, anywhere