What happened Monday

Economy / news

A review of things you need to know before you sign off on Monday; more dwellings hit Auckland housing market, PSI not expanding, grocery price pressure eases, ANZ profits, swaps up, NZD stable, & more

13th Nov 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
Unity Money raised fixed rates today.

TERM DEPOSIT/SAVINGS RATE CHANGES
Unity Money raised TD rates for terms 2 to 5 years.

MOMENTUM RISE
New home completions in Auckland hit a record high in September with 1927 new dwellings completed according to Auckland Council records.

LOST MOMENTUM I
The services sector went back into contraction in October, according to the BNZ-BusinessNZ Performance of Services Index. But it more a case of going sideways without any momentum, pretty much like it has been for most of 2023. A better indication was that new orders were nicely positive. But given the strong immigration, things should be better than they are. Maybe, as ANZ suggests, this is what a soft landing feels like.

MOMENTUM EASING I
Supermarkets paid more for the items they stock, in 5544 cases actually. Year on year, these add to a +5.4% rise so the momentum is easing in grocery inflation now, the slowest rise since April 2022 nineteen months ago. But the index rise was +4 points (+0.3%) in October from September and this was an uptick in pace compared to the rises in the prior two months.

MOMENTUM EASING II
ANZ NZ's annual profit holds above $2 bln despite higher loan impairments in the full year to September. This was a small year-on-year slip. The local CEO expects more stress among businesses & mortgage holders. But the ANZ Group CEO likes what he gets from New Zealand, talking up the 16% return on equity here. Group wise, the AU$7.7 bln profit was considered by markets as a 'miss'. The full local industry comparison ability will come on November 27, when the September quarterly Dashboard is released.

McLAUGHLAN TO RETIRE, POWER TO TAKE OVER
Fisher Funds has announced CEO Bruce McLachlan will retire and spurned Westpac executive and TVNZ CEO, Simon Power, will take over the role in February 2024.

IRD GETS THERE MEN
The IRD has had two 'wins' for the tax system integrity. An Auckland man has been jailed for five and a half years on tax fraud charges. Surasak Pootinun was sentenced on 69 different tax evasion and forgery charges involving nearly a million dollars. And a Christchurch man was sentenced to eight months home detention on tax fraud charges. Jackson Leon Maxwell Tauhinu plead guilty to three charges of dishonestly using a document to obtain a pecuniary advantage and two charges of knowingly using a forged document to obtain a pecuniary advantage. He was sentenced at the District Court in Christchurch on 8 November. His defence council claimed Tauhinu was “just a puppet” in the offending and had not actually submitted the false returns and forged documents. He said he plead guilty because he was not willing to share the identity of a gang member behind it.

PRODUCER DEFLATION LOOMS AGAIN
Japanese producer prices rose by just +0.8% in October from a year ago, slowing from an upwardly revised +2.2% annual gain in the prior month and coming slightly less than market forecasts of +0.9%. This was the lowest producer inflation since a deflation in February 2021 and was the tenth straight month of a slowdown.

A LONG & BUMPY ROAD
In Australia, via a speech by their acting chief economist, the RBA says "the road ahead could be bumpy" in their fight to control inflation and bring it back into target ranges. Certainly they see it now as a long struggle against domestic price pressures and higher wage expectations. No-one should expect the RBA to be cutting its policy rate any time soon. Perhaps the opposite.

LOST MOMENTUM II
According to the IMD World Competitiveness rankings for 2022 released overnight, New Zealand is ranked #31, down a very sharp -11 places from 2021, and down an uncomfortable -8 places from pre-pandemic 2018. Australia is 19th, improving three places from the prior year to be exactly where it was pre-pandemic. Top was Denmark, which improved +2 places. Canada is now 14th, down-4 places since 2019. China is 17th, also down 4 places. Japan is 34th down -9 places. Singapore is third, unchanged. Taiwan is seventh, "Hong Kong" (not really a country) is 7th. The US is tenth. It was #1 in 2019.

SWAPS MOVE UP
Wholesale swap rates have probably turned up on global forces today. The real reaction will come at the close. Our chart will record the final positions. The 90 day bank bill rate is unchanged at 5.62% and now just +12 bps above the OCR. The Australian 10 year bond yield is up +4 bps from yesterday to 4.67%. The China 10 year bond rate is little-changed at 2.67%. And the NZ Government 10 year bond rate is up +2 bps at 5.25% from yesterday, and the earlier RBNZ fixing was at 5.17% which was also up +2 bps today. The UST 10 year yield is back up at 4.66% for +1 bp rise from this morning's open. The UST 2yr is now at 5.07% so that curve inversion is unchanged at -41 bps.

EQUITIES RETREAT, AND SHARPLY IN SOME BOURSES
The NZX50 is down -0.3% in late trade today. The ASX200 has started its week unchanged. Tokyo has opened up +0.4%. Hong Kong has opened up +0.1% and Shanghai has opened down -0.2%. The S&P500 futures suggests that Wall Street will open tomorrow barely changed from its Friday close.

GOLD STABLE
In early Asian trade, gold is now at US$1940/oz and up just +US$1 from where were when we opened this morning.

NZD STABLE OVERALL
The Kiwi dollar has moved little today, still at 58.9 USc which was where we opened this morning. But against the Aussie we are a tad softer at 92.6 AUc. Against the euro we are also a little softer at 55.1 euro cents. That means the TWI-5 is little-changed at 68.8.

BITCOIN RISES FRACTIONARY
The bitcoin price is firmer again today, now at US$37,212 and up a tiny +0.2% from where we started this morning. Volatility over the past 24 hours has been modest at just over +/- 1.5%.

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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41 Comments

by J.C. | 13th Nov 23, 4:18pm 1699845516

According to the IMD World Competitiveness rankings for 2022 released overnight, New Zealand is ranked #31, down a very sharp -11 places from 2021, and down an uncomfortable -8 places from pre-pandemic 2018.

If there is anything that stimulates doom and gloom around the water cooler, it's when NZ slips down one of these rankings.

The strange thing is that nobody really knows how the rankings are designed. It's just the slide in the ranking that's enough to trigger negative emotion. Granny Herald capitalizes on this by finding rankings that tell us how great we are. Usually something from Conde Nest or something.

by Foxglove. | 13th Nov 23, 4:58pm 1699847921

It gets a bit emotive but that’s entirely understandable if you are a business owner of any size that is feeling the pinch. What was the figure, one in four new business ventures have failed in the last three or so years. A friend is a longstanding member of the local Chamber of Commerce, attends most meetings. Advises a lot involved in business had come to the conclusion that the previous government neither rated nor liked their activity. Felt as if their profits didn’t belong to them. Quite some ill feeling which overrides the financial assistances given out during the lockdown etc. For some obviously it was either not enough or insufficient to ride out the downturn in the aftermath and exacerbated by the inflation crunch.Could it therefore then be argued that these downgrades are reflective of all of this?

by Baywatch | 13th Nov 23, 5:05pm 1699848314

From my experience the Owners/Shareholders banked the assistance a the time (profit's) and now are reluctant to put in more capital as inflation rises due to the world printing machine. Also C19 assured in a change in work habits..so business need to adapt or die unfortuntely.

Blaming it on the previous government not liking business activity is a bit emotive and quite laughable.

by Pa1nter | 13th Nov 23, 6:23pm 1699852999

Except if you own a business. We have big flashing red signs now for more commercial operations than ever saying "avoid unless you're super keen, or naive".

We have this assumption of adapt or die, that assumes there's an endless supply of willing new entrants. Then wonder why we do less and less "productive" stuff.

by Flying high | 13th Nov 23, 8:27pm 1699860421

Socialism = survival of the dumbest

by Audaxes | 13th Nov 23, 4:19pm 1699845574

ANZ NZ's annual profit holds above $2 bln despite higher loan impairments in the full year to September.

ANZ NZ's total lending book rising $3 billion to $107 billion. Housing comprises 72% of ANZ NZ's total lending.

“Ultimately there’s no natural income streams to be able to service and repay loans. What you have is capital gains which are contingent on the game continuing. So it’s a Ponzi scheme. says Werner. - https://wire.insiderfinance.io/richard-werner-qe-infinity-707e2c627e03

Therein lies the problem

by J.C. | 13th Nov 23, 4:25pm 1699845933

Thanking you for the moment of clarity good sir.

The rebuttal to this might come from "but the migration floodgates are open and buses are brimming with Chinese and South Asians with suitcases of cash willing to pay a king's ransom for suburban houses."

by Yvil | 13th Nov 23, 4:47pm 1699847263

Just to clarify, the article describes QE as a ponzi scheme.

by meh | 13th Nov 23, 6:46pm 1699854392

Lol. What was QE used for - for banks to keep pumping capital gains in residential property and financial assets.

by J.C. | 13th Nov 23, 4:22pm 1699845757

Engaging with one of my smarter buddies who outlined the issue with U.S. treasuries and debt well.

Roughly half of all Treasuries outstanding today will mature by the end of 2025. The current average interest rate on federal debt is 2.6%. The current prevailing interest rate is over 5%. If nothing changes, the US government will be forced to refinance this debt at roughly double the current rate, taking interest expense from 14% of federal tax revenue to 29%, or a whopping 22% of total outlays.

For this reason, he reckons the Fed’s "higher for longer" idea is not possible. Other govts around the world desperate to cut rates and print money because they can see the writing on the wall. Rates will need to come down rapidly or the US government would have to raise taxes and cut spending aggressively. This cannot happen.

So, we’re back in the same place. Debt, deficits, and monetary debasement. It’s a virtual certainty.

by Yvil | 13th Nov 23, 4:49pm 1699847372

Your buddy is a smart man indeed !

by Audaxes | 13th Nov 23, 4:49pm 1699847381

Bond Vigilantes: They're Back

by Jonny.Foe | 13th Nov 23, 5:14pm 1699848885

I wonder if he factored in the interest saved on reserves balances? US banks and institutions have $3.3 trillion in their reserve accounts at the Fed. The Fed pays 5.4% interest on those reserves. The Fed's plan is to reduce those reserves back to usual levels by selling more bonds than needed to match govt spending and by using quantitative tightening (selling Fed-owned bonds back into the open market).

When the Fed sells bonds they take the payment from those reserve accounts - thus reducing the balance that the Fed is paying 5.4% interest on. So, a bond sale is effectively a swap of floating rate debt at 5.4% for fixed rate debt at whatever is payable on the bond.

It's the same in NZ of course. The Crown is effectively paying 5.5% on $50 billion of settlement account reserves - a cool $7.5M per day. When Treasury sell a bond they reduce the balance - basically moving floating rate debt to fixed rate. Our dumb LSAP (QE) programme did the reverse.

by J.C. | 13th Nov 23, 6:03pm 1699851786

I wonder if he factored in the interest saved on reserves balances? US banks and institutions have $3.3 trillion in their reserve accounts at the Fed. The Fed pays 5.4% interest on those reserves. The Fed's plan is to reduce those reserves back to usual levels by selling more bonds than needed to match govt spending and by using quantitative tightening (selling Fed-owned bonds back into the open market).

Who is buying the bonds?

by Jonny.Foe | 13th Nov 23, 7:47pm 1699858061

The only people that can buy bonds (securities) *from the Fed* are institutions with settlement account / reserve balances at the Fed. They have to use those accounts to buy the bonds. Those institutions then typically sell the bonds into the secondary market where they are traded etc. The net impact of a bond sale is a reduction in settlement account balances.

by J.C. | 13th Nov 23, 4:37pm 1699846622

Is Antonia Watson the NZ Derek Zoolander?

“We are a really, really big company - as big as Spark, Auckland International Airport and Infratil combined when it comes to the number of shareholders invested in us - so that demands a larger dollar return.”

“If you look back through history, whenever we have been in tough times like these - like the Global Financial Crisis (GFC) - we just would not have had the ability to use data and send electronic messages and things the way that we can do now,”

https://www.nzherald.co.nz/business/anz-bank-chief-executive-antonia-wa…

by jt_nzl | 13th Nov 23, 4:54pm 1699847641

Reminds me of that Warren Buffett quote about Coca-Cola's moat being so strong that the company could be run by a ham sandwich.

Don't know much about the ANZ CEO, but can certainly think of a few ham sandwiches at the top of NZ public companies at the moment.

by J.C. | 13th Nov 23, 5:00pm 1699848027

To me it's also a bit clownish to suggest that what could be done now with communicating with customers through tech couldn't be done back in 2009.

by meh | 13th Nov 23, 6:18pm 1699852700

Much easier to spit out propaganda now after the Covid disinformation/misinformation machinations. Notice the word salads being served up by the bank preachers in recent statements. A fair hodgepodge of buzzwords with no meaning or context being spouted from their ivory towers. And no-one seems to question it. No journalists ask for clarification, what does it mean to anyone outside of the bank head office?

In plain speak - the divinely anointed prophets are serving mammon's word and our flock continue to fill our coffers with their tithing.

by oscar87 | 13th Nov 23, 5:04pm 1699848250

why is the number of shareholders invested relevant at all to her point?

by meh | 13th Nov 23, 6:48pm 1699854508

Bigger numbers demand bigger numbers, hence her point - we demand larger returns.

by oscar87 | 13th Nov 23, 6:55pm 1699854930

yeah but surely it is the $ amount invested (market cap) which is more relevant

by meh | 13th Nov 23, 7:11pm 1699855866

Since when did the fundamentals matter?

by Grattaway | 13th Nov 23, 6:01pm 1699851676

Given they have an implicit Govt guarantee because they are to big in NZ to fail should they pay a tax premium to operate here?

by meh | 13th Nov 23, 6:53pm 1699854801

They should've been paying a massive royalty fee for the right to print money?

Could our property market be likened to Saudi Arabia and Norway's oil reserves and be used for a massive sovereign wealth fund? It seems like our only real natural resource (other than milk). We could've been buying up the rest of the world. That sounds like communism though.

by WellingtonInvestor | 14th Nov 23, 12:37am 1699875451

IMO they shouldn't have been getting the tax payer Funding For Lending Program money for so long. That essentially allowed them to increase their coffers. The Reserve Bank should have pivoted and stopped that scheme as soon as it was apparent that it was not needed.

by Yvil | 13th Nov 23, 4:43pm 1699847037

According to the IMD World Competitiveness rankings for 2022 released overnight, New Zealand is ranked #31, down a very sharp -11 places from 2021, and down an uncomfortable -8 places from pre-pandemic 2018

That result is clearly due to Labour's policies while governing since 2017

by Baywatch | 13th Nov 23, 5:14pm 1699848841

Denmark has reached the number one spot in the IMD World Competitiveness Ranking (WCR) for the first time in the ranking’s 34-year history.

Reducing inflation from 10% would have helped ...all achieved without any notable increase in unemployment (now at 2.5%) and with mortgage rates only moderately increased to just over 4%.

How did they do it? The Govt got involved and stopped price rises in energy and food from spreading through other prices. They used temporary subsidies for energy and paid for houses to switch from old gas boilers to electric heating. They capped rent increases to a couple of per cent for two years. They monitored the hell out of grocery stores (and gave grants to rural shops). Their heavily unionised workforce agreed to phased wage rises.

In other words, they played it right. Jofoe)

Yer imagine if the previous Government had tried any of these policies'..boomer riots on the streets..!!

by HouseMouse | 13th Nov 23, 5:53pm 1699851234

‘Bloody Socialism!’

by HouseMouse | 13th Nov 23, 5:56pm 1699851391

Ironically, most of the top 10 would be ostensibly centre-left governments who are quite interventionist.

Socialism.

Lol

by meh | 13th Nov 23, 6:23pm 1699852998

But they're not that interventionist in the market, more interventionist in the people. What does that make them?

It would appear the Danish govt are actually serving the people. A government governing for the people rather than governing for the market. How preposterous.

by Pa1nter | 13th Nov 23, 6:25pm 1699853117

Most governments that do that too much inevitably fail.

by meh | 13th Nov 23, 6:32pm 1699853574

Links, data, peer reviewed papers please. Define "most", "too much" and "fail" in the context of your statement.

by Pa1nter | 13th Nov 23, 7:07pm 1699855648

At the extreme end we've seen 10s of millions starve to death while peers adopting market economies prosper and grow. The absolute best case scenario is a small handful of Nordic countries that have unreplicable levels of cultural homogeneity. And the most common experience is a worser experience than more open markets.

This shouldn't be that foreign a notion for you.

by meh | 13th Nov 23, 7:42pm 1699857724

If 10s of millions were starved to death it doesn't sound like a govt serving the people. Sounds more like they were serving tyrannical beliefs of power and fear.

We've prospered and grown in material and financial terms. How's the health of the people and environment in those market economies?

We have a cultural homogeneity here - money, asset prices and wealth.

You still haven't provided an example of a govt serving the people as described above and failing. It would appear the Danish govt. went against orthodox economic/capitalist/monetary discourse and won.

Links, data please. Define "most", "too much" and "fail" in the context of your original statement.

by Pa1nter | 13th Nov 23, 8:02pm 1699858932

The people weren't served, but the centrally controlled economy that led to those people starving certainly thought they were acting with good intentions. The government was trying to feed it's people using ideology and instead they starved.

There isn't much cultural homogeneity in NZ, because we're a migrant culture with an extremely shallow shared history. Very hard to get such a diverse split of people beating to the same drum. The most organized and equitable countries have shared ethnicity and culture stretching back centuries.

Venuzuela

North Korea

China (before they embraced market economics)

Soviet Union

Cambodia

These are all countries that took profound shifts towards being for the people, and the outcome is the exact opposite. This is because it's very hard for a government to generate and distribute resources as efficiently as a market economy, and usually gravitates towards political oppression. Kill everyone with glasses, that sort of thing. In Cambodia, the people serving government was so poor, they worked out the cheapest way to dispatch people was a hammer to the skull.

As for links and data, it's hard to know where to start, if you're that unaware of the history of the 20th century.

by meh | 14th Nov 23, 1:45am 1699879548

Very historical cases with a variety of factors, and doesn't qualify as "most". Lol, the Soviet, Chinese and North Korean atrocities were never for the people but dumb ideological fantasies by illiterate dictators. If they were serving the people they would have organised the will of the people not imposed their own will.

Back to the modern day and current issues. Denmark is a market economy, did it different and won with regards to inflation and interest rates, according to the OP. Obviously Denmark have developed their markets better than we have, and I don't know if the Danes are as pumped up on house prices as we are. They appear to generate and distribute their resources very well with their welfare policies, strong trade unions and high tax burden. Is it their cultural homogeneity that enables this, or just better government? Maybe the Danes aren't as individualised as our "western" cultures have become. They seem more willing to counter act against the extremes and negative results of capitalism though, which was my point.

The majority of other market economies and democratic nations (that we predominately report on) followed the orthodox and what has been the result? High interest, continuing inflation issues, constant political arguments (especially here) and failure, serving vested interests rather than the whole.

You obviously didn't understand my sarcastic reference to our cultural homogeneity. We were more equitable not that long ago and ironically named after one of Denmark's regions. It would appear then that we have had incompetent governance for a number of decades, and rather than creating an environment that encourages shared values and meaning we'd rather model ourselves on the extremes of the US model. Does that mean that our government and media have actively done more to divide us, to misinform us than actually serve us? What does that say about we the people? Don't bother answering, just ponder it.

Your original comment wasn't even playing devil's advocate, more an unwillingness to acknowledge that someone went against the norm and it can be done.

by Pa1nter | 14th Nov 23, 6:11am 1699895485

Some of the cases are still operating today, and are illistrative of the overshoot issues initiating social policies and state wealth distribution. You can't initiate them without increasing state oversight and reducing personal freedoms, and invariably the state is simply not as efficient as the market, and usually far less transparent.

You obviously didn't understand my sarcastic reference to our cultural homogeneity.

Yeah I did, I just generally tend to debunk such counter productive quips with cold facts.

We were more equitable not that long ago and ironically named after one of Denmark's regions

Yep, when the country was predominantly Christian white dudes. That's not an advocacy for Christian white dudes either, just pointing out how much more challenging our society is now to cater to en masse. Not just via immigration, but also because shared Christian values have eroded.

It can be done, but the likelihood is more that it'll be done badly.

rather than creating an environment that encourages shared values and meaning

I'm not sure how you do that without a great deal of indoctrination. As it is, our education system has gone down a road for several decades now of idealogical indoctrination that's made people less likely to challenge government norms, not the other way round.

I'm not actually championing the free market. I don't think humans have worked out a model for so many individuals to live together, happily and peacefully, that's also prosperous, that doesn't have a high likelihood of gravitating towards tyranny. Instead we are engaging a bastard hybrid system that's hoping for positive aggregate results.

by Grattaway | 13th Nov 23, 5:59pm 1699851574

But the previous govt did try these policies just badly - so they shut down Auckland for longer than necessary - and then stopped people from even driving through it to get home

Our Gov overcooked the interest reductions then bungled the increases meantime the govt paid people not to work so the unemployment rate never got to 2.5%

Fired people because they wouldnt get vaccinated

and then subsidised supermarkets and supervised then with a wet bus ticket while stopping rural shops from trading at all

and our heavily unionised civil service didnt agree to anything at all

and I dont think it was the boomers rioting in Wellington

hence our crap rating - but please be kind its our new motto

by Tin Pot Tony | 13th Nov 23, 8:38pm 1699861122

IRD GETS THEIR MEN

Their

by Rob Reid | 13th Nov 23, 10:24pm 1699867461

True. Or:

Its