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). It's a skinny edition today.
MORTGAGE/LOAN RATE CHANGES
None so far today.
TERM DEPOSIT/SAVINGS RATE CHANGES
Westpac raised its 6 and 8 month term deposit rate is a Chinese New Year promotion.
HIGHER PRICES
There was another good dairy auction overnight, up +4.3% and this is the ninth rise in the past twelve auctions. A feature is the recovery in the milkfat commodities, indicating food service demand is returning.
HIGHER PAYOUT
Based on that some analysts are raising their farmgate milk price payout forecasts (Westpac today, and making it the top forecast of the ones we follow) and all eyes are now on a potential rise from Fonterra. You can compare the various forecasts here.
A GRISLY MARKET
Meanwhile 2023 meat export values fell according to MIA monitoring. Lower world prices and stiff competition pulled down these value.
MORE JOBLESS, BUT HIGHER PAY
Our December jobless rate rose to 4% from 3.9% in September. But analysts were more impressed about how resilient the labour market is. Although some other labour data was softish, average ordinary time hourly earnings, as measured in the Quarterly Employment Survey, increased by +6.9% over the year to reach $40.84/hour. Average weekly earnings (including overtime) for FTEs were up +6.1% over the year to December to reach $1,588/week. Obviously bother were far higher than inflation and this emerging labour cost inflation will worry policymakers. The ANZ analysts are wondering if the next OCR change will be a hike.
HOUSING SUPPLY PRESSUES RETURNING
Residential building costs are now stabilising just as fewer homes are being built. The number of new homes being consented is down -36% in just over two years.
SERIES CHANGE
Please note we will have a series change in our NZX50 Capitalisation data this week as shares on issue details are upgraded.
SENTENCED
A Waikato sharemilker, Gordon Kenneth Morris, who used COVID support money on online gambling was sentenced to nine months home detention at a Hamilton court appearance.
CHANGING OF THE GUARD
BNZ's parent National Australia Bank (NAB) has made an internal appointment to replace (kiwi) Ross McEwen as CEO. McEwen retires on April 2, 2024 aged 66. He will be replaced by Andrew Irvine, a Canadian-British dual citizen and currently head of Business and Private Banking at NAB. McEwen started at ASB, moved up to CBA. Then left to rescue the Royal Bank of Scotland, before taking over NAB from Andrew Thorburn in 2020. More broadly, both ANZ Group's Shayne Elliot (61, also a kiwi) and Westpac Australia's Peter King are also expected to move on some time in 2024.
SWAP RATES RISE FURTHER
Wholesale swap rates will probably be noticeably higher again today, on the jobs data implications. However, the key reaction will come at the close. Our chart below records the final positions. The 90 day bank bill rate is unchanged at 5.67%. The Australian 10 year bond yield is holding at 4.10%. The China 10 year bond rate is little-changed at 2.46%. And the NZ Government 10 year bond rate is up another +8 bps at 4.81% and a one month high, while the earlier RBNZ fixing was at 4.66% and up +9 bps from Friday. The UST 10 year yield is now at 4.09% and unchanged from this morning. The UST 2yr is at 4.40% and so that key inversion is down to -31 bps.
EQUITY WINNERS & LOSERS
The S&P500 closed its Tuesday session up +0.2% thanks to a late bump. The NZX50 looks like it will close its Wednesday session also up +0.2%. The ASX is up +0.7% in early afternoon trade, encouraged by the talk of potential Chinese stimulus. Hong Kong has opened its Wednesday session up +1.6% on the same talk, but Shanghai is only up +0.2% at its open. Singapore has opened up a strongish +1.1%.
OIL PRICES HOLD
Oil prices are unchanged from this morning at just on US$73.50/bbl in the US while the international Brent price is now just over US$78.50/bbl.
GOLD SOFTENS SLIGHTLY
In early Asian trade, gold is now at US$2034 and down -US$3 from this morning. It closed in London at US$2,036/oz.
NZD FIRM
The Kiwi dollar is now just on 61 USc and up +30 bps from this morning. Against the Aussie we are up +20 bps to at 93.4 AUc. Against the euro we are also up +20 bps at 56.7 euro cents. That means the TWI-5 is now at just under 70.2 today and up +20 bps from this morning.
BITCOIN HOLDS
The bitcoin price dipped ever-so-slightly today from where we opened this morning, now at US$43,127. There's been low volatility again over the past 24 hours of just under +/- 0.9%.
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122 Comments
Rates are going to be JH...
A slow burn for all those with high debt
https://www.cnbc.com/2024/02/07/debt-crisis-is-in-the-making-and-it-won…
Higher rates definitely have an effect however it's on lower income earners and not the affluent. The wealth transfer to asset owners from Covid will take years to unwind, if ever. The wealthy I know have never been so flush with cash and are looking to buy 3rd and 4th homes, 2 or 3 long-haul trips a year. Boats, cars etc etc.
Perhaps they ought to do right by this transfer and donate to the community a tad more. With wealth also comes more ability and responsibility to give back. Simply because one pays a higher income tax bracket isn't an excuse, we're all in this together, and need to lift each other up.
The money printing was a good idea given it kept people in jobs and the economy afloat.
Where it failed, where all politicians fail, was in not taxing it back out of the economy again but instead allowing corporates to jack up prices which caused inflation.
A report has just come out in Australia that confirms corporations caused the inflation by profiteering behaviour and increasing prices far beyond their actual cost increases.
Adam Smith had no problem with government issuing sovereign currency when required (as many nations did during COVID) however the flipside is that the government needs to tax it back out again to balance the books. That NZ did not do so, was an abject failure of all economic rationale.
Um, yes it it does. We have just had the classic economics 101 experiment. It goes like this.
1. Slash interest rates.
2. Ignore people that say this will cause inflation.
3. Stand idly by while house prices go up up up, and inflation goes though the roof.
4. Say stupid stuff, i.e. this inflation of transitory or some other idiotic statement.
5. Belatedly raise rates to stave off an inflation crisis.
6. Watch as people in debt start to moan about higher costs, and asset prices drop.
7. Wonder why this is not all happening fast enough.
You: Question whether this is all a coincidence and whether there is any relationship between interest rates and inflation.
Did you learn anything ?
The reality is the damage is done. Low interest rates resulted in high inflation. Sticky employment due to previous government incompetence (massive hiring in the public service of people that do little to nothing). This means unemployment will be stubbornly low, and interest rates will stay high (if not higher). Inflation will come slowly down. People are terrified of high mortgage rates as they are over committed. Many will have signed 2-3 year deals with banks in the 7% - 8% range due to the fear of higher interest rates down the road. If interest rates come down over the next year (which now seems unlikely), then a big chunk of mortgage holders are going to be making eyewatering payments for the next 2-3 years at least, regardless of what inflation rates or interest rates do. This mess is going to take a number of years to unwind. It will not happen with a few OCR cuts, it will be years following those cuts before things are rebalanced.
I was talking with a distant relative yesterday. He mentioned that one of his grandchildren has just left her long career in the NZDF to work FIFO in WA. They have 2 kids <5 & they'd traded up at the 2021 peak (in P Nth), now their interest rates have trebled. So, home is rented for a few years until market recovers its purchase price, partner has also resigned his job to move north to stay with kids & relatives until they can setup home again together in Oz. A very stressful situation & I'm sure they're not the only people facing hard life changing decisions.
A wise move considering the extra income can supplement the mortgage and some once they are over there. I have family in AUS and they would love to move back for the lifestyle here, but it makes 0 financial sense to do so given the level of their salaries and abilities to pay down their mortgages over there, as well as the loss of income as an added cost for living here. We're in for an interesting next decade I think.
EV sales fallen off a cliff. When Team Cindy set the price point for the rebate, manufacturers/distributors had the choice to pick a model and load with features for optimal sales price point.
Young woke professionals who were lining up to buy EVs are now finding out what the trade prices are. Word at my water cooler is that trying to find a sucker to buy it for what they owe to finance companies.
If it weren't so tragic, it would be laughable.
https://newsroom.co.nz/2024/02/07/ev-sales-plummet-after-clean-car-disc…
Yes, I did read this. There is more to this too. There was a further article about people now trying to remove the charging plugs and or batteries from their hybrid cars because now there are road user charges coming their cars will be more expensive than petrol cars to run. Manufacturers are now re-investing in ICE car development too, diverting investment away from EV development. There will be a lot of lemons for sale in the coming years as people offload junk EVs.
Road user charges should apply to ICE vehicles as well. That will fix the distortion with older hybrids that have virtually no battery capacity. Petrol taxes need to be removed to offset the RUC. Carbon taxes can be added to reflect the cost of burning fossil fuels. This makes the costs more in line with reality. I can then mow my lawn without paying tax for roading.
Um….you do understand that RUC is already built into petrol prices in the form of taxation? That farmers and other industries that use non road going vehicles can purchase petrol free of these taxes as they don’t use the roads (I’m sure you could not do this for your mower petrol purchases). If RUC were applied to petrol cars, the petrol would cost less, not more.
Another example that fiddling with the market by way of subsidies is entirely counterproductive and self defeating. Blimey, Muldoon himself illustrated that fact with his disastrous SMPs & other rural handouts. NZ is a mercantile nation and it where the world takes it, trying to resist that reality by political niceties is just plain daft.
NZ is a mercantile nation
Not sure if that is correct. See this evidence-based gem.
We have the 5th lowest foreign trade share of any OECD countries. Of the four lower than us, three are large countries and the fourth (Australia) has a population five times our size. Every single other small country has trade shares higher than New Zealand’s. In all but Israel’s case, materially higher, and Israel is another example of a country fairly geographically remote (surrounded by plenty of other countries but not wealthy advanced economies, and wealthy advanced economies tend to trade a lot with other countries like them).
https://croakingcassandra.com/2024/02/06/once-were-a-trading-nation/
I had posted this on today's Breakfast Briefing
Once were a trading nation | croaking cassandra
"...no growth in foreign trade as a share of GDP over those decades" (27years).
Your point is valid. But in reality whatever NZ might offer in that regard is not much more than farting at thunder. So fiddling, to any tune you might choose to favour, in the south east end of nowhere, is regrettably of very little consequence to the actual destruction of the planet. What you need to do is get on your bike and convince the powers that be in Beijing, Mumbai, and a whole pack of USA cities and on and on, to fiddle as you would wish. But in the meantime here, a considerable number of folk appear to be heading for an unfortunate loss from following the fiddling of the previous government.
Oh yes, I'm not saying we force everyone onto a bike, but if people thought a little more and toughened up a little you'd think we could replace a solid proportion of car journeys with an ebike. Not sure if that number is 10, 20, 30% or what, but you'd save a bunch of money in future road upgrades and maintenance.
Quite a few transit bikes, kids seats and hitched on bikes taking kids to school on my commute to work.
I love my ebike! I use it to ride down to the dairy to buy a loaf of bread or bottle of wine. Safe locally, downright suicidal outside of our snug suburban haven... that's where the V6 double-cab excels.
Get a motorbike. Far more practical and has different use cases. eBikes are a woke fad.
More expensive to run (and buy maybe?), uses a finite fuel resource, contribute to air pollution, contribute to noise pollution... What's the plus point?
To be honest I have no use for either, here in Christchurch I can get anywhere under my own steam, and it'll be faster and less faff than a car if it's near the city centre.
eBikes are a woke fad.
Come to Nelson, you'll see endless boomers all around the bay doing commutes, as well as longer bikes for several hours through the countryside as there's been a lot of work go into cycling trails (off the road). Also plenty using them to access the mountain biking trails, especially those with longer term injuries that would prevent them from being able to do so otherwise, or just can't be bothers with the uphill grunt. Much more than a fad here.
It's interesting seeing the new hospital car park in Christchurch. Opened a couple of months ago after years of drivers complaining about lack of parking. Now it's open and seems to be barely used.
I think the misunderstanding is drivers wanted free parking, and expect everyone else to pick up the tab as usual.
Looks like it's about $6 an hour, max $24 per day. Doesn't seem crazy, the building it taking up a prime space right in the health precinct and they'll want to make a return.
In my service at least, patients who need to make regular visits are looked after separately with a variety of schemes.
Not necessarily so. The are a multitude of cargo bikes to suit all households and purposes. Three kids in a bin or cabin on a cargo bike is normal in parts of Europe and becoming more prevalent in NZ. Weight carrying capacity is extended with a cargo bike. My 20 year old Bullit is rated for 100kg on the deck. It's my 'ute'. Others such as the Urban Arrows are up to160+ kg. deck load. These are electric assist and range is greatly enhanced. Over 8 years old kids should be riding their own bike. Plenty of these available in Europe second hand. Just needs some capital to bring in a few container loads which then galvanises the bike shops into offering value instead of gold plated one offs.
What experience do you have to make this statement? Have you ridden in Europe on shared cycleways with the crowds? Do you have experience of actually riding either a longtail or a leading deck bike or are you just repeating what the last person told you? I ride with steel capped boots. Those in their steel cocoon who are within 800mm of the bike on the road get a boot in the door- wakes them up pronto and their insurance company is not sympathetic.
What experience do you have to make this statement?
None. But it's not about me. I've ridden road bikes, mountain bikes, and shopper bikes 'solo' in NZ, Japan, and Vietnam. But I take responsibility for myself. I think these death traps are irresponsible. Not much protection from any vehicle that hits your little wagon. But that's your choice. I've seen Westerners with this stuff in a residential area of Saigon. Pure cringe. Let alone the safety aspects.
You're in NZ. Not a tranquil neighborhood of Amsterdam. But go ahead and take your kids out in them. You can be like the Green MP who thought it was good to ride a bike to the hospital to give birth. Doesn't impress me.
Totally agree.
It’s one thing to do it in the Netherlands on a dedicated cycleway, another thing to do it on a busy road in NZ with a small child exposed to a slip of attention or idiocy.
Moronic. And selfish. Seems to be more about making a virtue-signalling statement.
I cycled from Sylvia Park to Onehunga the other day on fully separated paths (apart from about 150m which was on a road where I didn't encounter a single car. We also cycled from Devonport to Takapuna on a beautiful safe route that went on boardwalks through the mangroves and gave amazing views across the harbour.
The infrastructure is not great yet but it is much better than most people think and slowly getting better. The Netherlands used to be like Auckland.
Spent 3 months in the Netherlands last year. Yes family-sized ebikes are common but they also have the infrastructure and culture that enables cycle safety... a 50-year project here methinks. Chuck a New Zealander into the cycle lane in Lyon or Maastricht, they don't take kindly.
Well they should learn about the advantages, and councils etc should develop more safe cycling infrastructure. Because it is a better way of making a large number of trips. And get some of those V6 double cabs off the road while at it - not many genuinely need them. In fact until about 20 yrs ago they didn’t even exist in NZ, so why so indispensable now?
The transition to BEV was always going to be challenging. The mistake that has been made is governments around the world distorting markets by using credits and tax write offs to stimulate BEV demand. This has enabled Elon to become beyond rich in crazy fast time. Elon is the first to say that he’d prefer all credits/writeoffs be removed and the transition to BEV occur at a deserving pace. When BEV’s are cheaper to purchase than ICE without credits etc they will usurp them. Let it happen naturally with better and cheaper BEV products, because it will happen.
I guess they just have to deal with the range issues, charging issues, price, fire risk, durability, charging network availability and reliability and cost and they will be almost there. Currently the product is far inferior to a standard car so they have huge improvements to make to become viable.
There was (is) an argument for initial subsidies. BEV need charging. Without charging points no BEV; without BEV no charging points. So it is sensible to spend taxpayers money to get the market started and then wait and see. An alternative to subsidies would be to get Auckland Council and AT to migrate rapidly to BEV starting with all their company cars.
Let market decide. My guess is solar will become far cheaper such that power is almost free but you pay to connect. Then BEVs would make sense again. BUT my guess or the politicians guess or tossing a coin makes little difference.
There was (is) an argument for initial subsidies. BEV need charging. Without charging points no BEV; without BEV no charging points.
Japan has a govt subsidy scheme for EVs (low uptake apparently). They made sure they had a minimum required charging infrastructure first.
https://japannews.yomiuri.co.jp/politics/politics-government/20231124-1….
https://www.electrive.com/2023/09/04/japan-doubles-ev-infrastructure-ta…
I don’t think we will see the national charging network. This one is like a KiwiBuild promise except this time the govt knows it’s not needed and will cancel it, or water it down to busy cities where there are at least some people using EVs. I think we are going to see EV sales dribble along for the next few years at between 1-3% of sales and they will call time on the plan for a charging network. We also have all the class actions to come from people suing EV companies for range and battery issues (and exploding car and self drive related deaths). That will be very costly indeed.
Yep. Much better to develop a cleaner fuel to reuse the existing vehicle stock and 120 years of research and development than scrap everything and start again with an inferior alternative. People talked about this at the very beginning, much like thinking low interest rates would not cause inflation, they believed they could replace all the vehicles on earth by replacing them with vehicles that don’t work, and cannot be refuelled in the numbers required to make them viable. People are fast coming to this realisation I suspect.
You should. Buy them up. You will make a killing just like if you had a mint RX7 or or Holden Monaro. The reason is they don’t make them any more. But, you can drive those two models because they would still work. Your EV however will have a dead battery that you cannot replace, so it may take a big bite out of the value as you would be able to sit on it, or look at it.
Yep a big problem with batteries, they age even if you are not using them. Your old ICE car will still be going long after the EV is dead, or more specifically the battery is simply too expensive to replace so the whole car gets scrapped. My Subaru turns 20 this year, its been a great car.
You'll only be able to drive your ICE car about 100m as the price of petrol will be so exorbitant. That's if we manage to tax the rich enough to pay to upkeep the roads. Why the rich? because the poor are tapped out and will not be using ICE or Tesla's, they might be using small electric vehicles but not your current big electric car.
Not everyone thinks that
"Surveys from the EECA and consultancy KPMG show that about 82 percent of EV charging takes place from home. So when they arrive home each day, EV owners will all plug in and charge their vehicles at about the same time.
This will coincide with already high levels of peak electricity use, driven by the normal daily habits of nearly 2 million New Zealand households.
To meet this peak demand for power, new electrical infrastructure will have to be built, costing billions of dollars. It’s an inefficient investment because its only needed to supply power for a small period of the day – but electricity customers will still have to foot the bill.
A much smarter solution is to make sure the EV charging is managed and controlled."
https://www.intellihub.com.au/nz-ev-explosion-to-propel-the-electricity…
You sound like Tommy Parker, the chap from NZTA that went on to head up Auckland's Light Rail
https://www.newshub.co.nz/home/new-zealand/2017/02/ribbon-cut-on-wellin…
Reminds me of this song:
”I started a joke, which started the whole world crying,
Oh but I didn't see that the joke was on me, oh no.”
It is hilarious all those people who bought EVs to lower New Zealand’s emissions and save the country money from importing gas and now our know nothing National Government is charging them more to drive on the roads than most petrol cars pay.
Heres the thing - NZ has to reduce its emissions. The easy way to do it was EVs and Labour assisting industries to convert to cleaner technology. If we don’t do it the easy way, we’ll have to do it the hard way which will probably involve a rapidly rising emissions tax. And all those people with petrol cars will be asking why the gas prices are going up so fast. And the answer will be because your neighbour doesn’t have an EV.
I guess you could go educate yourself on the subject, like looking into the research from Niwa (I think) which is recent and indicates that the algae in our EEZ consumes more C02 than we produce, and also maybe why our native forests which are a huge carbon sink are not allowed to be included in our figures, or why grass (which is everywhere is also not included) and then decide whether punishing yourself for something you are not doing is a reasonable way to life you life.
They don't need to follow they are already leading. They have a whole bunch of urban transport policies to decarbonise their transport system (restrictions on car use, massive investment in EV R&D, public transport infrastructure) things that New Zealanders would baulk at.
China's per capita GDP is only a tiny bit more than ours and they are having to catch up building a whole bunch of infrastructure to raise their people's standard of living to ours. If they discounted the emissions they are burning to feed our more affluent lifestyles their per capita emissions would be lower. We just offshore ours so we can pretend we're clean and green.
No need to raise emissions tax. The price on carbon will rise as the number of emissions permitted by the cap and trade scheme reduces. This will increase the price of petrol.
The scheme does the entire job of lowering emissions, anything else is the government picking winners, often inefficiently.
From the stats release:
However, our checks indicated an increased level of non-response bias in the forestry and mining, construction, and retail trade industries.
Lucky the OCR hasn’t had an impact on these trades. Maybe the people who usually respond to these surveys have been made redundant.
Aaaaaagh! "Obviously both were far higher than inflation and this emerging labour cost inflation will worry policymakers"
In the last five quarters household living costs have gone up by 8.2%, 7.7%, 7.2%, 7.4%, and 7.0% (comfortably ahead of average wage increases). Real wages have seen their worst two years since the GFC while commentators have been screaming about over-heating wages and the labour market. The idea that we need to stop wages catching up with prices to tame inflation AND that the way to stop wages going up is to increase household and landlord interest payments is simply bonkers. RBNZ are still tackling inflation like it is driven by excess demand rather than higher costs (which they are contributing to significantly)
Secondly, look beyond the unemployment rate, which is a seriously lagging indicator. Look at the number of people 'underutilised' - now back above 2019 levels. Or, consider what happens to the unemployment rate if 100,000+ new migrants arrive and take all of the precarious, low-paid, and undesirable jobs. You get a boost in domestic unemployment (as we can see in the booming benefits numbers) but a muted impact on unemployment (for now).
$500 million in Chinese mortgage fraud from just 10 branches of HSBC in Toronto Canada. Long, deep investigation. Canada's ruling elite prefers to turn a blind eye to all this. Essentially fraud mixed with money laundering.
The Bureau’s seven-month investigation into D.M.’s allegations suggests HSBC Canada and other Canadian banks could have issued many billions of dollars in questionable mortgages to Chinese diaspora buyers, and a significant cause of Canada’s real estate bubble is hundreds of billions in illicit fund transfers from China into Canada, and bank lending that amplifies its impacts, especially in Toronto and Vancouver home prices.
This investigation suggests D.M. 's calculation is plausible, that the Aurora branch and other Toronto-area HSBC branches have issued at least $500-million in questionable Chinese income loans since 2015.
https://www.thebureau.news/p/fake-chinese-income-mortgages-fuel?r=3zc64
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