What happened Thursday, the brief edition

Economy / news

A review of things you need to know before you sign off on Thursday; some minor home loan and TD changes, Fonterra raises milk payout forecast, rates surge, swaps and NZD hold, and more

7th Dec 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
ASB tweaked some fixed rates by cutting both their 6 and 12 month rates by -6 bps to 7.39%, and raising its five year rate by +6 bps to 6.75%. These changes tend to line them up with the carded rates of their main rivals.

TERM DEPOSIT/SAVINGS RATE CHANGES
ASB tweaked some TD rates too. They cut their three year offer by -55 bps to 5.55%, and their four year rate by -10 bps to the same level.

TOP END INDICATION
Fonterra raised its milk price forecast by +25c to the range $7 to $8/kgMS, or a mid-point of $7.50/kgMS. They did this by raising the bottom end of their range. Fonterra also said that they are upgrading their earnings forecast (but haven't given a dividend indication). In the 26 years we have been monitoring the Fonterra payout, the latest 2023/24 level is the sixth highest. Also, Rabobank reset their forecast higher at $7.70/kgMS today.

JUST POLITICS?
A business sentiment survey run by Canterbury Employers came in with a very pessimistic view in August. But that has turned up sharply in the December survey released today. Unfortunately, that just adds to the impression that surveys of business people are essentially political.

LOCAL AUTHORITY REVENUES
In the year to September, rates and regulatory income from local authorities rose +9.8%. That is the fastest this has grown since 2009.

THINKING AHEAD
The Aussies have been looking ahead at where their population is going. Today their official statisticians said that in 50 years, their current 26 mln population will grow to at least 34 mln and could well reach 46 mln if the current high immigration does not slow. These forecasts assume the current ten year average annual growth rate (+1.4%) is projected to decline to between +0.2% and +0.9%. Even with high immigration, their median age (38.5 years) is projected to increase to between 43.8 and 47.6 years. over the next 50 years. (For reference, New Zealand's current median age is 38 years.) Australia currently has five times as large population than New Zealand. If that relationship held to 2071 our population would grow to between 7.5 mln and 9 mln.

SWAPS HOLD
Wholesale swap rates are probably marginally firmer today. However, the key reaction will come at the close. Our chart will record the final positions. The 90 day bank bill rate is down -1 bp at 5.63% and now +13 bps above the OCR. The Australian 10 year bond yield is down -5 bps 4.26%. The China 10 year bond rate is little-changed at 2.71%. And the NZ Government 10 year bond rate is holding, up +1 bp at 4.93%, while the earlier RBNZ fixing was at 4.87% which was up +3 bps today. The UST 10 year yield is now at 4.13% and down -6 bps from yesterday. The UST 2yr is now at 4.60% so that key curve inversion is marginally higher at -41 bps.

EQUITIES RETREAT FURTHER
The NZX50 is heading for a minor -0.1% retreat in late trade today. But the ASX200 is down a more substantial -0.4% in afternoon trade. Tokyo has opened down -1.6% in a continuing back-peddling. Hong Kong has opened down -1.7% and is now down -4% for the week so far. Shanghai is down -0.4% at its open. And Singapore is down -1.0% at its start. The S&P500 ended down -0.4% in Wednesday trade in New York.

OIL SLIPS YET AGAIN
The crude oil price is down -US$2.50 from yesterday, now at US$70/bbl in the US, and the Brent benchmark is at US$74.50/bbl. Although to be fair, most of this retreat happened last night.

GOLD FIRMS SLIGHTLY
In early Asian trade, gold is now at US$2028/oz and up +US$8 from this time yesterday. Earlier in New York it closed at US$2025/oz. And earlier still it closed in London at US$2026/oz.

NZD HOLDS
The Kiwi dollar is moved sideways from this time yesterday, now at 61.4 USc. Against the Aussie we have risen +20 bps to 93.8 AUc. Against the euro we are down -10 bps at 57 euro cents. That means the TWI-5 is little-changed at 70.6.

BITCOIN TAKES A BREATHER
The bitcoin price has moved up to US$43,940 and up a mere +0.2% from where this time yesterday. Volatility over the past 24 hours has been low at just under +/- 1.0%.

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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44 Comments

by J.C. | 7th Dec 23, 4:05pm 1701918308

The Aussies have been looking ahead at where their population is going. Today their official statisticians said that in 50 years, their current 26 mln population will grow to at least 34 mln and could well reach 46 mln if the current high immigration does not slow.

Subjectively it feels they're heading towards socio-economic collapse. You cannot have unconstrained popn growth without the requisite spend on infrastructure. And nobody seems to be challenging this at all, except those on the 'fringe' like Maccy B.

by JimboJones | 7th Dec 23, 4:13pm 1701918821

Why not just do the "spend on infrastructure"? Plenty of countries have grown faster than that before. The spend on infrastructure mostly comes back in economic growth and tax.

by HouseMouse | 7th Dec 23, 4:28pm 1701919711

If it were that simple.

by JimboJones | 7th Dec 23, 4:31pm 1701919864

Its been done before. Why is it so impossible to build infrastructure in Aus/NZ these days?

by HouseMouse | 7th Dec 23, 4:45pm 1701920749

Cost is obviously a major factor. As is the lack of MOW style organisations and capabilities. Also greater complexity, where new infrastructure is often retrofitting within an existing established city. More complex environmental requirements. Etc etc etc

by Flying high | 7th Dec 23, 9:13pm 1701936782

We have made it multiple times more difficult than it needs be. We've lost our can-do attitude and don't know where to find it

by powerdownkiwi | 7th Dec 23, 5:04pm 1701921882

Jimbo, have you not ever read a thing I've written, posted or referred to?

Just askin'.

by Zachary Smith | 7th Dec 23, 5:07pm 1701922057

You're a voice crying in the wilderness.

by Flying high | 7th Dec 23, 9:14pm 1701936846

But John the baptist ate locusts and honey .... wait a minute.

by JimboJones | 7th Dec 23, 5:15pm 1701922530

I've read it, you might be right one day. But at the moment:

The government has money - they can afford $3 billion for a tiny tax cut for example. The Aussie government has even more money.
People can build stuff for money - it happens on a daily basis.
So the only thing missing is for the government to give some money to people to build stuff - not sure why this bit is so hard.

by Zachary Smith | 7th Dec 23, 5:23pm 1701923017

We're about 7 billion years away from PDK's endgame.

by Baywatch | 7th Dec 23, 6:53pm 1701928398

Beam me up SCOTTY...no sign of intelligence on this planet..

by Zachary Smith | 7th Dec 23, 7:08pm 1701929289

I'm pretty sure Captain Kirk would be in my corner.

by agnostium | 7th Dec 23, 6:40pm 1701927606

No we're not. If we don't get ahead of if it will be gradually and then suddenly.

PDK comes can come across as arrogant but 90% of his premise is correct. Systematic change is coming in the next two decades.

by powerdownkiwi | 7th Dec 23, 5:44pm 1701924297

You haven't read it.

Trust me.

Or you wouldn't revert to 'money'

by IT GUY | 7th Dec 23, 6:39pm 1701927584

CRL 1bil per km..... so we can afford 3km?

I think 5 waters has a 180bil cost over 30 years.....

Roading perhaps another 120bil

The only way to pay user USER PAY via tolling or paying for water (come on WGTN you are a joke!!!), talk is free stuff costs money

by agnostium | 7th Dec 23, 6:42pm 1701927721

Add on all the infrastructure that is coming up for renewal and the fact it's increasingly going to get more expensive to extract energy and materials and transport them, we're reaching a tipping point. The recent record rate increases is not even keeping us treading water.

by IT GUY | 7th Dec 23, 7:10pm 1701929451

transmission grid will be prioritised over everything is my bet

by Flying high | 7th Dec 23, 9:22pm 1701937320

Hamilton council still has 700 thousand to move the bus stop that is directly outside the peaches and cream adult shop. Event though the stop and the shop have both been there for many years the new councillors wish to use their new brooms.

The same council sold off all their major income generating land and buildings assets for peanuts. They wasted the proceeds.

by Let me be Frank | 7th Dec 23, 8:06pm 1701932799

'Money' is only as useful as to what it represents....it represents less and less to the point where, if all confidence is lost, it represents nothing at all.

by KH | 7th Dec 23, 7:47pm 1701931666

You can gouge the residents to pay for the infrastructure for the population increase they don't want. Usual process.

by kiwikidsnz | 7th Dec 23, 4:15pm 1701918907

Its often said that 97% of Australia's population lives in 3% of it's land area.

So, currently approx 5x NZs population living in less than 90% of NZ

by Rob Reid | 7th Dec 23, 5:44pm 1701924252

In a dried up horrible desert like oz the constraint is more water than land.

by Zachary Smith | 7th Dec 23, 4:58pm 1701921522

"socio-economic collapse" seems a bit extreme. However, I wonder if countries assumed they could just borrow at low interest rates to build infrastructure whenever they needed it. If that was "the plan" then high immigration may need reviewing.

by powerdownkiwi | 7th Dec 23, 5:08pm 1701922091

Seems in an invalid word.

And folk don't just occupy land - they need supporting acres.

And in the last 100 years, we added underground-stored, fossilised acres. Those are half-gone. Trying to displace those fossil acres using real-time above-ground ones, means about 2 billion global inhabitants. Extrapolate for Aus/NZ.

Physics just IS.

Seems?

by Zachary Smith | 7th Dec 23, 5:17pm 1701922648

I'm ready, I've watched Mad Max.

by Rob Reid | 7th Dec 23, 5:46pm 1701924364

Which character would you be?

by GregF | 7th Dec 23, 6:21pm 1701926512

Mad.

by Zachary Smith | 7th Dec 23, 7:00pm 1701928803

I bags being Lord Humungus

by IT GUY | 7th Dec 23, 7:12pm 1701929556

I prefer water world as I am an offshore sailor and the ice caps are melting

Those big things that eat boats are crazy though

by Palmtree08 | 7th Dec 23, 5:06pm 1701922002

Nobody challenging? More like no one has a choice. A vote for tweedle dum, or tweedle dumber, same bollocks. Socio economic collapse will come after the environmental collapse. We'll see what happens when they can only bath in recycled sewerage once a week when it's 40+deg every day for two months.

by GetFeeling | 7th Dec 23, 5:51pm 1701924666

re ... "Subjectively it feels they're heading towards socio-economic collapse."

How old were you 50 years ago J.C.?

How much did a pint of milk cost? Shoes? What about a mobile phone? ;-)

lol. Perspective please.

by WellingtonInvestor | 7th Dec 23, 10:53pm 1701942796

Ironically we are doing all these token things to reduce CO2 and plastic, yet increasing the Population only increases pollution. The world should be looking at controlling the population levels

by Squishy | 7th Dec 23, 4:56pm 1701921398

...if the current high immigration does not slow.

At present if you extrapolate out declining fertility rates we'll get there well before the UNs 2050 estimate. Global population growth is slowing rapidly. Most people who move countries are young, there will be fewer young people:

https://ourworldindata.org/grapher/population-by-age-group-with-project…

by malamah | 7th Dec 23, 5:12pm 1701922339

I wonder if this is a healthy projection, I assume it factors in natural deaths - what about famine? War?

by Squishy | 7th Dec 23, 7:36pm 1701931004

The last time we had a major war we had a massive boom in birth rates afterwards.

by IT GUY | 7th Dec 23, 8:43pm 1701935021

Their was no birth control pill back then

by Rob Reid | 7th Dec 23, 10:38pm 1701941910

and oil and land were cheap

by Palmtree08 | 7th Dec 23, 5:15pm 1701922533

Seeing as we are already a few billion above planet Earths carrying capacity and we are drawing down nonrenewable resources and turning them into toxic waste as fast as possible, there's more factors than just declining fertility to extrapolate future population.

https://www.science.org/doi/10.1126/sciadv.adh2458

by agnostium | 7th Dec 23, 6:45pm 1701927930

We'll be taken over long before that by China, either directly or indirectly.

by IT GUY | 7th Dec 23, 10:27pm 1701941270

I will die preventing this

by GetFeeling | 7th Dec 23, 5:47pm 1701924447

Couple of observations:

- long TD rates are going to tumble ... last chance.

- RBNZ jawboning was fun ... for a few days

by IT GUY | 7th Dec 23, 6:42pm 1701927741

agree i think long term dep prob good right now , but is see mortgages reseting to 5.6-5.85% as the base rate for 1-2 years forget lower , if it does go lower you will have a lot more to worry about then your mortgage payments, the world will be screwed

As the big squid says we are moving to a time where bad news is BAD NEWS

by KH | 7th Dec 23, 7:51pm 1701931889

Why would Australia do such a stupid thing? For that matter why do we?