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 today.
TERM DEPOSIT/SAVINGS RATE CHANGES
None here either today.
LOW SALES, TRACKING SIDEWAYS
Residential property sales as released by the REINZ were the second-lowest for the month on November in 12 years. ANZ said this market is "going nowhere quickly".
STILL EXCESSIVE
Instead of just food prices being released monthly, Stats NZ is also releasing a wider set, building up to the Quarterly CPI. Almost half of the CPI is now released quarterly. Food prices were up +6.0% in November from a year ago, and as high as that is, it is lowest rise in nearly two years. From October they actually fell and that is the third straight month that has happened. Some analysts were surprised but the recent softer trends. So there are reasons to be encouraged about the recent trend in food prices. But domestic airfares and local travel accommodation rose, while international airfares and fuel both fell on the same basis (ie from the prior month).
STUCK AT A LARGE CURRENT ACCOUNT DEFICIT
The September current account deficit narrowed by another -$600 million for the prior year, holding at -7.6% of GDP which isn't a level to be proud of. (It peaked at -8.8% in December 2022 but was just -0.9% in September 2020.) The improvement came from welcoming more incoming tourists. Unfortunately the goods trade deficit widened to -$13.2 bln. The Q3 GDP record of economic activity is released tomorrow and the expectation is that it will show a small annual expansion of just +0.5% and still no quarter yet suggesting a recession is imminent.
NET INTERNATIONAL INVESTMENT POSITION IMPROVES
Our net external debt is pegged at -$184 bln as at September (47.9% of GDP), -$3 bln less than the -$187 bln a year ago (52.2% of GDP). Maybe somewhat surprisingly our gross external debt rose -$10 bln but offshore entities owed us +$13 bln more than a year ago. (Nominal GDP probably grew by +$27 bln in the year and touching $400 bln for the first time ever.) ANZ noted that our current account is still "far too out of balance to call it sustainable" and said progress is stalling.
OPEN, BUT DEMAND IS WEAK
ANZ is the next bank to release analysis of their merchant card activity. That shows annual growth in most categories of spending continued to slip in November, down -3.2% from a year ago (and more than the -2.6% drop in October). Spending related to housing is lackluster, and clothing retail continues to weaken. Neither population growth nor inflation shows up in this ANZ data, just emphasising its weakness.
SLOWING RAPIDLY
The Auckland-based Employers and Manufacturers Association says a marked increase in requests for restructuring and redundancy support from employers is further evidence that the economy is rapidly slowing.
BEST & WORST ACCORDING TO CONSUMER
Consumer NZ has surveyed the nation’s mobile and internet customers to gauge their satisfaction with their service providers. Skinny and Sky Broadband have come out on top of those respective categories. One.NZ has the most customers and the most unsatisfied customers and was at the bottom of the mobile rankings. Contact emerged as the worst internet service provider, just enabling One.NZ to not score bottom of both.
NO MANDATE
Support for keeping & enhancing our smoke-free laws is widespread according to a very recent poll. The coalition compromise to roll back these protections has caught many voters by surprise.
NO MORE FUNDING SUPPORT
The new coalition Government has declined a KiwiRail request to contribute significant additional funding to address cost escalations in the project to replace the InterIslander ferry fleet. KiwiRail had sought an additional $1.5 bln, part of which was for cost escalations related to Wellington and Picton harbourside infrastructure. But the cost of this project has almost quadrupled since 2018 to approximately $3 bln.
THE LUCK RUNS ON
Australia's Mid Year Economic & Fiscal Outlook (MYFEO) was released today and it was surprisingly positive, signaling that they may in fact get another surplus this year - making it two years in a row Canberra has achieved that. It is built on the "usual suspects" - very high mining profits and delaying infrastructure spending. The tax receipt uplift is due predominantly to personal income taxes being +$30 bln higher than forecast, including +$9 bln for this financial year, and company tax receipts being $34 bln higher over the four years and $9 bln higher for this financial year. The tax-to-GDP ratio has reached 23.7%, the highest since the 23.9% in the very early 2000s. (New Zealand is at about 34%.)
SWAPS STILL ON HOLD
Wholesale swap rates are little-changed today, possibly easing slightly. However, the key reaction will come at the close. Update: There was a big retreat at the end. Our chart below records the final positions. The 90 day bank bill rate is unchanged yet again at 5.63% and still +13 bps above the OCR. The Australian 10 year bond yield is down -6 bps at 4.29%. The China 10 year bond rate is down slightly at 2.67%. And the NZ Government 10 year bond rate is down -8 bps at 4.91%, while the earlier RBNZ fixing was at 4.90% which was down -2 bps today. The UST 10 year yield is now at 4.20% and down -3 bps from yesterday. The UST 2yr is now at 4.72% so that key curve inversion is now out to -52 bps.
EQUITIES UP EXCEPT CHINA
The NZX50 is up +0.5% in late trade today. The ASX200 is up +0.3% in afternoon trade. Tokyo has opened up another +0.7% in their early trade. Hong Kong is down -0.6% at its open, and Shanghai is down -0.5%. But don't forget the "home team" can be brought into play late in the session - just like it was yesterday. Singapore has opened its Wednesday session little-changed. The S&P500 was up +0.5% on Wall Street in Tuesday trade
OIL LOWER
The crude oil price is down -US$3 from this time yesterday, still at US$68.50/bbl in the US, and the Brent benchmark is still at US$73.50/bbl.
GOLD ON HOLD
In early Asian trade, gold is now at US$1980/oz and down -US$4 from where we were this time yesterday. Earlier in New York it also closed at US$1980/oz, and earlier still in London at US$1981/oz.
NZD HOLDS
The Kiwi dollar is now at 61.3 USc and essentially unchanged from this time yesterday. Against the Aussie we are also unchanged at 93.3 AUc. Against the euro we are also down -20 bps at 56.7 euro cents. That means the TWI-5 is still at about 70.7.
BITCOIN SLIPS AGAIN, BUT LESS
The bitcoin price has moved down to US$41,118 and a slip of -1.4% from where we were this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.7%.
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98 Comments
Just to clarify, come Autumn 24, mortgage rates will be plummeting, house prices will be rising and immigrants on work permits flooding into a fast contracting job market?
Anything is impossible.
This is traditionally the peak selling season and despite high immigration and the myopic opinions mortgage holders would adjust to higher for longer borrowing rates, this market remains far from healthy.
I have a feeling that in the past 2-3 years, the previous government gravtitated towards a mindset of "just get things done at any cost" and greatly expanded how much they'll throw at public works. Due to political expediency, because their lack of providing results around aspects like Kiwibuild was fairly badly received. Now the current lot are wanting to take a more serious look at what projects are on the box, to see if they are actually of good value.
Just from what I've picked up working near or in some government projects, the purse strings were loosened, and the level of enthusiasm to get projects completed as fast as possible went up.
Thomas Coughlan writes in the NZH (someone may like to copy here) that t Mr Ryan the Auditor General has condemned reckless, wilful spending $billions, by the last government with so little thought to accountability, it is virtually impossible to audit. Probably those of us who suspected as much will hardly be surprised. What will be surprising though is if the new government can actually now be in a position to right the ship given the black holes now emerging from the shadows.
It's an election ploy. Labour will spend as much as they can possibly get away with. They don't care what it's on or how it's funded, the more they spend the better. They then attack with "you are cutting public spending! What services will you cut!" over and over knowing the media are too lazy to investigate.
Agree, the largesse in government has been huge.
National however, if you hadn't noticed, deliver whatever their special interest groups demand. Usually this is business groups (trucking lobby, smoking lobby, racing lobby etc). They are captured by special interests. What is "good value" doesn't come into it, they ignore whats best bang for buck (i.e. ROI) as much as Labour does, who are driven by ideology. Neither will be able to deliver projects that actually matter, because both are driven by equally stupid ideas.
Which is why we actually need an independent infrastructure authority which delivers only based on ROI and has a future outlook of 10-100 years.
You start to think that NZ needs an upper authority to produce an independent and serious analysis, audit if you like, of a departing government. For example it would have been helpful to the public at large to be fully informed on exactly what happened for example - Muldoon’s irresponsibility in not ceding power, what the Bolger government covered up with the BNZ fail and sale, Cullen cleaning out the cupboard and this last Labour government’s wilful neglect and extravagance . Auditors should and often bring private company board member’s and executive’s feet to the fire, why not cabinet ministers then.
I mean National are
1 - not publishing their regulatory impact assessments for their tobacco lobby pay-back
2 - instructing civil servants not to do regulatory impact statements for any of their other policies that they are passing under urgency because they know they are dogshit policies.
So much for transparency. When the government gags civil servants whose job it is to present information impartially it's not a good sign...
Something of a problem isn’t it. For instance on this forum would estimate over 90% of comment by participants, from either side of the political divide, are negative, fault finding and derogatory about NZ’s parliamentary representation. Hardly ever can a post be commendable about anything. Instead the opinion just reaches to the bottom of the barrel of counter-productivity, by claiming oh one side is far worse so that justifies the other side, regardless.
It's already close to legal for anyone motivated. Name the affliction, you can get a legal cannabis prescription. And not cannabis based creams and drops, actual cannabis. They'll courier it to your letterbox.
Something similar needs to happen with most drugs, to be honest.
Way over half the people on this site claim they want democracy, but then vote for a revolving door between an ideologically driven bunch of muppets and another bunch of muppets driven by special interest groups. Then all complain when they get what they vote for.
"The Government won't contribute significant new funding to KiwiRail to address cost escalations involved in the replacement of the Interislander ...only 21 percent of the costs are now associated with the core project of replacing the ageing ferries..."
https://www.newshub.co.nz/home/politics/2023/12/govt-makes-significant-…
From Stuff: "Willis said she had been told Hyundai had not yet started building the ships."
Perhaps the new ferries should now be scaled down to be able to use existing terminals...duh
https://en.m.wikipedia.org/wiki/False_equivalence#:~:text=A%20false%20e…
OTOH, its good to see the adults pull the empire building unbudgeted scope creep on other people's money at KR back in line
Nats are back,the trucking lobby will be driving this...
https://www.rnz.co.nz/news/national/441993/rail-funding-plan-rubbished-…
Rail funding plan rubbished by trucking lobby and opposition (National 2021)
https://democracyproject.nz/2023/09/26/bryce-edwards-the-vested-interes…
Good story,but apparently the boats haven't been started yet !!
https://www.stuff.co.nz/national/politics/301025748/nz-politics-live-ne…
Willis said she had been told Hyundai had not yet started building the ships.
Ok well I have a couple of colleagues on the project and have been informed of some of the blowout causes.
That's not opinion, that's relaying 2nd hand info.
If you have a more reliable source for what's involved in this billion dollar plus blowout, by all means.
SIPS panel temporary terminal - budget: $2 million, actual: $7 million (shoulda got PDK to build it)
It's a massive project ,aircraft & ships are expensive and their infrastructure is too...but it is essentially an extension of State Highway One,so if you think of it as a road,it is not unusual for expensive overruns:
The holiday highway is 18.5km,the ferries effectively replace 100km of "road"
https://www.stuff.co.nz/motoring/300769965/hundreds-of-millions-in-cont….
The project has already significantly overrun in both cost and time.
According to the Government’s statement of accounts, it had spent $1.05 billion on the motorway by the end of June 30, 2022.
The original budget was $780 million and the Waka Kotahi website still says $877.5 million.
Construction has some fundamental issues that cause cost blowouts in both the private and public sector, I see both occuring.
But the public sector has so many layers of additional complication, and tangential, non-construction based ideology running over it that the level of over-run exceeds that which you'd see from private entities. This hasn't been as bad under previous administrations, including Labour ones, but the last government took it to a new level of ridiculousness.
They had some admirable positions, that over-shadowed basic operational fundamentals.
Happy to have the new ships. But the infrastructure cost blowout has to be the result the fevered dreams of designers.
I have done fixed price contracts. You need good and clear design. Finalised prior. The modern way of cost outrage comes from useless professions and dreaming clients, making it up as they go along.
That can be changed.
You hit the bulk of the issue. Not confined to the public sector though, and getting worse, not better.
My bill for almost any new construction work I'm involved with ends up being at least 30% more than the price I supply based off the information I'm given. Unless I'm specifying and running the project, in which case it'll be dead on.
My bill for almost any new construction work I'm involved with ends up being at least 30% more than the price I supply based off the information I'm given. Unless I'm specifying and running the project, in which case it'll be dead on.
That makes no sense, why are you not questioning the information you are given? What the point in having you involved?
I'm submitting a tender based on the information I'm given. I submit requests for information about any grey areas I see in the tender documentation.
Between then and actually doing the job, there can be a significant number of variations either from the client changing their mind, or because the proposed method by the architect can't actually achieve what they thought.
If I don't agree with some of the specification, there's often little I can do, because it gets pre-approved as part of the consenting process, and any initiative I want to take will make me 100% liable for any issues, irrespective of whether it's related to my work or not.
Make sense?
Unless I say I can do something at a price, and can't because I've cocked something up. Then it's on me. There is also a level of give and take, I will eat some imposed costs if they're negligible, often the energy involved in identifying and recovering them is greater than just carrying on.
Some firms will actually underprice a job, with the aim of making it up on variations. That's not something I'm interested in, because I'd rather not have to argue over them, and because variations invariably mean the job will take longer, and my schedule is usually pretty tight.
Significantly important. Its saying "we can't afford to create new infrastructure to support a bigger population, the old will have to be kept going for as long as possible". When our ferries are already breaking down quite often, this is quite a big issues.
National are classic at doing this when in power with public goods. Just keep doing the thing that costs more and more over time, but stops us from having to foot the bill today for major upgrades which will benefit the future. Cos F the future. As we can see with their climate change rollbacks, smoking changes etc.
Infrastructure has never gone down in price. The cost of this next time they look will be double the current price and we will all question why it was ever stopped. This has happened with almost every piece of infrastructure delivered in the last 10 years, minus IRDs new computer system, which is the only one I can think of that has come under budget.
It could also be very symptomatic of us continuing to retreat from infrastructure spending, because its simply too expensive to even maintain what we have. PDKs scenario sounds like its playing out. Roads in Marlborough won't be fixed, ferries won't be fixed, how long until they become unmaintainable altogether?
Willis better join the Coast Guard in Welly, she might have to help pull the bodies out of the water one day...but at least she won't have to resign,she is gonna make sure the tax cuts for hardworking kiwis gets pushed through...
https://www.rnz.co.nz/news/national/502312/timeline-the-troubled-cook-s…
During one January sailing, the Interislander's Kaitaki ferry lost all power from its engines in rough conditions and drifted dangerously close to Red Rocks on Wellington's south coast, with more than 800 passengers and 80 crew on board. After about four hours without power, tug boats accompanied it into Wellington Harbour and multiple investigations were launched.
And the disruptions could be ongoing, as some vessels in the Interislander fleet are reaching the end of their expected 30-year lifespan, but the first of their new replacement ferries are not expected to be ready until 2025.
RNZ has put together a timeline of the breakdowns of the Cook Strait ferries this year.
Govt cutting spending as we head into a recession because they care more about hitting dumb targets and pleasing idiots than they do about jobs and the economy. Great work. Keep it up guys.
We had a water cooler discussion on why we can't just keep priming public spending forever to keep the sheeple protected. I mentioned that I don't think we can. Because our currency and economic influence is not that strong enough.
Surely the private sector has to take a hit at some stage. We can't expect to get given free stuff whenever times get tough.
I agree with you. Govt spending should be countercyclical and focused on improvements. But National (and Labour in early 2023) are doing the opposite. It's a recipe for recession, which will force Govt to deficit spend on welfare instead. Makes no sense.
The macro challenge here is that increases in (Govt debt + private debt) have to be more than increases in (current account deficit + private savings) to avoid an economic slump. The key therefore is to use debt for productive purposes (to increase productivity/ efficiency) while using tax and other tools to keep money moving round the domestic economy. It's not rocket science.
Yes agreed but if I got presented with a capital project that had quadrupled in cost such as the new ferries someone would be looking for a new job
The skill set is clearly deficient and its deceitful project management - "lets get this under way as we know when we ask for more money we will get it"
and while looking at local projects its clear that Wellington Water and most likely the WCC are also in need of a new CEO. the bleating for the last 3 years says that they are not up to the job
It's a capacity and capability thing. The mistake the politicians (and public servants) make is thinking that making the money available is all it takes to get something done. It took over ten years of developing capacity / capability before NZ (and Aus / UK) could get infrastructure done well in the 40s and 50s. You need to bring a lot of supply chains together, make mistakes, learn, go again. In modern NZ we have a go at doing something once, mess it up, then start again the next time.
This is how we resolved a housing crisis in the first half or so of the 1900s.
- come up with a uniform process/materials
- identify a select group of key builders and suppliers
- set a rate
- make 10s of thousands of houses.
The last government totally ignored all of those steps, or did the opposite.
Subprime auto-loans in the U.S. appear to be on the ropes.
Subprime is re-getting into trouble, after having somewhat gotten out of trouble during the free-money pandemic, when folks used some of the free money to catch up with past-dues.
So subprime is a high-risk-high-profit business on the specialized fringes of auto sales. But the players in that small portion of auto sales are taking big hits. The risks they had taken were too big, and during the 0%-era they’d gotten too greedy, and now they bear the consequences of loading their customers up with ridiculously overpriced vehicles financed with usurious rates, all of which was very profitable until the risks came home to roost.
https://wolfstreet.com/2023/12/06/subprime-comes-home-to-roost-for-spec…
"4.3% of new vehicles sales" are subprime. OMG. If you can't afford a brand new car, maybe buy a second hand one!
The majority of subprime loans are for used cars.
Americans love debt.
The Anglosphere is roughly the same in terms of pvte debt IMO. Roughly 50% of NZ h'holds have <$1000 in cash savings and live paycheck to paycheck. Only 1/3 of h'holds have more than $10K cash savings.
After all these project cuts and smoking etc, to get a budget that works, the optics are looking terrible for reinstating investment property interest deductibility.
I think there is a chance, even a small one that they don’t go through with the deductibility even though all 3 parties campaigned on it. Or maybe it’s not retrospective.
Anecdotally, I caught up with a good friend yesterday. They had five properties and have already sold one to help with cashflow. They have had them a while so all their own home borrowings have been pushed into the rentals. They are crossing their fingers for the mini budget.
Willis was just on the news agreeing we will need new ferries,but couldn't commit to when...I am sure Hyundai will hold the price for us lol.
These will end up costing us as much as the total including the infrastructure..except in 5 years we'll just be getting the boats...not to mention all the money already sunk...criminal.
You would like to think the cost of new, drive on drive off ferries would be significantly less than new, roll on roll off/drive on drive off capable ferries plus the infrastructure cost.
Likely also there's a greater choice of supplier for the former.
My overall preference is for whatever it is to be a more reliable service than what we have had for the past few years. I had to leave a car in Wellington for 2 months this year because they cancelled the crossing, with no space available for that amount of time. Until then I'll just fly and rent a car, costs about the same (or less, depending on how long I'm away for).
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