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
No changes today.
TERM DEPOSIT/SAVINGS RATE CHANGES
None here either.
SERVICES TO THE RESCUE
Probably surprising some, the BNZ-BusinessNZ services PMI expanded solidly in January on the back of a pick-up in new orders. This is in quite a contrast to the factory PMI which is contracting.
NO SWEAT
Latest quarterly Reserve Bank figures show ahead of the likely introduction of debt-to-income restrictions in the middle of the year, most new borrowers are currently well below the proposed lending limits to be imposed on banks.
HUNT FOR VALUE AMID TIGHTER BUDGETS
NZ Post conducts online retail research. Their Q4-2023 report found the single most important driver of spending levels was the sharp increase in transactions. There were just over 16 mln transactions in the quarter, an impressive +2.4 mln more (+17%) than in the same period the prior year. Although shoppers were buying more often, the average value of the quarter’s transactions was -$12 less (-11% lower) than a year ago, down to about $100. This was the third consecutive quarter where we saw online transactions grow and the online average basket size fall, compared to the same quarter in 2022.
TURBULENCE AHEAD
Our national airline has announced profit guidance that suggests the second half of the current financial year is proving to be a very bumpy one. Profits will be scarce, they warn.
DOWNGRADE COMING I
Fletcher Building says it has been notified that credit rating agency Moody’s has placed the Company’s credit rating of Baa2 and medium-term note program rating of Baa2 on review for downgrade from an outlook of stable. The current level is only two notches above junk grade.
DOWNGRADE COMING II
Ryman Healthcare also flagged lower earnings today on lower demand and lower margins. Potential residents seem to be negotiating much better deals.
A2 MILK RECOVERING STRONGLY
It isn't all negative on the NZX50. A2 Milk has reported that both its China and US strategies are paying off. Sales are up less than 4%, but profit rose +15%. Investors are bidding its price up on the improved outlook. (These gains are unlikely to be reflected in similar gains at Synlait Milk, its one-time close partner - but no more.)
INTEGRATING
Fonterra said it is combining Fonterra Brands New Zealand and Fonterra Australia, effective May 1, 2024. Local brands Anchor, Mainland and Kāpiti, will continue to utilise New Zealand milk. The Australian milk pool will continue to provide the milk solids for their Australian brands and ingredients..
POPULATION POLICY COMING?
Immigration Minister Erica Stanford said she will tighten visa rules and create a long term population plan. More here and here.
SHOE ON OTHER FOOT
Both Meridian Energy (the main one) and Contact Energy (the secondary one) are renegotiating electricity supply agreements with NZAS, the Tiwai Point aluminium smelter. (Aluminium is basically solid electricity.) Given its green credentials, the NZAS facility is likely to stay. The two electricity suppliers are expecting a new agreement to be long-term, "at a fair price materially above the current pricing", and "including demand response". Rio Tinto (the 80% owner) no longer has the upper hand. Perhaps the Government should get back its previous subsidies?
BOUNCEBACK, SORT OF
Japanese machinery orders bounced back in December after a terrible November. They came in better that expected (+2.7% vs +2.5%) but nowhere near enough to make up for that November -4.9% fall.
SWAP RATES HOLD
Wholesale swap rates will probably be little-changed again today. 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 5.71%. The Australian 10 year bond yield is down -2 bps at 4.20%. The China 10 year bond rate is unchanged at 2.45% and holding after the holiday. And the NZ Government 10 year bond rate is up +2 bps to 4.94%, while the earlier RBNZ fixing was at 4.86% and up +5 bps from Friday. The UST 10 year yield is now at 4.29% and up +1 bp from this morning. The UST 2yr is now down to 4.64% and so that key inversion is little-changed at -35 bps.
EQUITY WINNERS & LOSERS
The NZX50 has opened the week down -0.2% in late trade. The ASX200 is up almost +0.3% in afternoon trade. Tokyo has opened its Monday trade little-changed. Hong Kong is down a full -1.0%. Shanghai however has opened after their week-long break up +0.3%. (Over the same timeframe, Hong Kong is up a net +1.3%.) Singapore has opened unchanged. The US is on a long holiday weekend and Wall Street will be closed until Wednesday NZT. The S&P500 futures suggests it will re-open then with a +0.5% gain. But there is still some time to go before then.
FBU MADE IT A BAD WEEK
Fletcher Building -7% dive took the breath out of the NZX50 last week. It wasn't the only big decliner, but there were also some notable gainers too. More here.
OIL STABLE
Oil prices are down -50 USc at US$78/bbl in the US while the international Brent price is holding at just under US$82.50/bbl.
GOLD MOVES UP
In early Asian trade, gold is now at US$2020/oz and up +US$7 from this morning.
NZD FIRM
The Kiwi dollar has risen slightly from where we were this morning, now at 61.4 USc and up +20 bps. Against the Aussie we have firmed to 93.8 AUc, a -30 bps slip. Against the euro we are also firmisah at 56.9 euro cents. That means the TWI-5 is now at just under 71 today after a +20 bps gain.
BITCOIN ESSENTIALLY STILL ON HOLD
The bitcoin price has moved up a little today, now at US$52,199 and up +0.8% from this morning's open. There's been high modest over the past 24 hours of just on +/- 1.1%.
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60 Comments
There is a new oceanside development in Mt Albert that has had to stop building a new resident hospital as they have run out of capital. They had the money to demolish the old building and now have had to revert to covering the large area with hay. Suffice to say its now a massive weedbowl for the residents to look at who forked out a cool $850k for an apartment.
Ryman back to $5. More bad news for the conservative funds. Those credit downgrades for FBU and RYM are going to hurt credit renewals. Was looking at Kiwisaver returns the other day. At present you have to compare the 3 year return, the 1 and 2 yr are too distorted.
"Rio Tinto (the 80% owner) no longer has the upper hand." Why is that? Both National & Labour governments have blinked every negotiation time in the past
However, NZ would be much better off with Manapouri supplying the country's grid (incl NI transmission), Luxon would have the time to build the dams & improve generation capacity he was talking about recently
In the past, Rio Tinto has threatened to pull out of Tiwai point if the electricity was not supplied at 1.5 to 2cents a unit. The last time they pulled that stunt, the government said we have data centres and electric car charging stations who are happy to pay substantially more than yourselves for Manapouri electricity. Can you please give us a pulling out date? They said, we will pay the asking price, and will get back to you about pulling out. Deafening silence so far. Tiwai is famous for being the cleanest, greenest, most profitable smelter in the world.
If Tiwai is cleanest and greenest then what are the rest like?
https://www.rnz.co.nz/news/national/468066/tiwai-point-toxic-waste-clea…
we should kick them out build data centres and a NZ chip FAB we have the power and the water, we need to build damns to build chips not farm cows Chris... the future of nz is not agri its agri plus new stuff, , hell building drones and artillery shells is probably more profitable right now
It isn't all negative on the NZX50. A2 Milk has reported that both its China and US strategies are paying off. Sales are up less than 4%, but profit rose +15%. Investors are bidding its price up on the improved outlook.
Hmmm. Looking at the golden IMF category in China.
The overall China IMF market declined 10.7% in volume and 13.6% in value in 1H24. The decline in Key&A cities slightly exceeded BCD cities, with Key&A market value decreasing by 13.7% in 1H24 and BCD market value decreasing by 13.5%. The overall market decline reflected the decrease in newborns over the past few years, increased competitive intensity and promotional activity (amplified by the market-wide transition to new GB registered products), and macroeconomic conditions impacting retail sales.
OCR in Aussie not going anywhere in a hurry according to AFR
A less restrictive policy stance in Australia is not justified by economic conditions. Australia does not rank well in terms of how far inflation is above target and the tightness of the labour market. The US, euro area and Canada have all tightened much more given their macroeconomic conditions and so have better prospects of containing inflation.
There are many different paths that inflation can take in returning to target and maybe we are witnessing an immaculate disinflation. But given the evidence that the cash rate has not been high enough, there is an increased risk that inflation will be persistent and so it will take longer before the RBA can cut the cash rate.
https://www.afr.com/policy/economy/the-evidence-is-that-immaculate-disi…
No significant change in the proportion of cash-strapped Americans. My general rule of thumb is that this is similar across the Anglosphere.
When faced with an unexpected $1,000 expense, more than one-third of Americans would borrow the money, according to a new Bankrate survey. That may include tapping their credit cards, seeking money from friends or family or taking out a personal loan.
Most would not turn to cash savings because they don’t have it, the personal finance website found.
Fewer than half of Americans, 44%, say they can afford to pay a $1,000 emergency expense from their savings, according to Bankrate.
https://www.cnbc.com/2024/01/24/many-americans-cannot-pay-for-an-unexpe…
Aussie insurers playing games familiar to Kiwis
https://www.abc.net.au/news/2024-02-19/general-insurers-use-dirty-trick…
There you have it people in black and white. Luxon confirming his policy is based on ideology trumping evidence.
“It’s about principles,” Luxon said when challenged on how advice from an expert welfare group said harsh sanctions were not so effective.
Whether you agree or disagree with this ideology, at least we can now agree that National's approach is purely ideological and not evidence based. Consistent with their approach to transport, housing and education.
What a f****ing shambles. I guess that's what you can expect when National is being led by religious fundamentalists and tobacco lobbyists.
https://www.nzherald.co.nz/nz/politics/christopher-luxon-fronts-media-a…
That's a really lazy comment and you know it HM. This is a govt that is making decisions based on ideology (which in practice has been proven, time and time again to be ineffective).
This isn't about left and right this is about evidence based policy. I would have been equally critical of any left government that did the same.
MSD's own commissioned research shows:
- Nearly three quarters (74%) of all beneficiaries up to age 25 had a parent on benefit while they were a child, and just over a third (35%) had a parent on benefit throughout their teenage years.
- The greater the family benefit history the longer the client tended to stay on a benefit, particularly for the Jobseeker benefit.
Edit:
1. graph showing increased children on welfare dependency under Labour, with references LINDSAY MITCHELL: A terrible trend in desperate need of turning (bassettbrashandhide.com)
2. part of Nationals previous success in 2017: Number of teen mothers on welfare down 57 per cent from 2009 - NZ Herald
I think there were a number of ideological positions strongly informing the previous government’s approach. Just very different ideologies. And not all of them ‘leftist’.
one of their strongest ideologies was a neoliberal one - that massively freeing up planning rules (in already very liberal planning systems, at least in Auckland) would make a meaningful difference to housing affordability.
Now you could say that is evidence-based, not ideological. To which I would say ‘only up to a point’. There’s a growing challenge to that viewpoint - ‘Supply Skepticism’.
No. It wasn't ideologically based it was evidence based.
The idea that freeing up planning rules helps housing affordability is mainstream evidence based economic orthodoxy so you can't accuse Labour of being ideological in this particular case, they were following the evidence based orthodoxy.
https://thespinoff.co.nz/politics/15-02-2024/opinion-wellingtons-housin…
If the evidence is challenged and it turns out to be wrong then that is a different thing, that is the nature of science and why it is valuable. If facts change then the theory changes. But as it stands freeing up supply by freeing up planning rules demonstrably increases affordability.
The difference here is that Luxon is saying the evidence is irrelevant because it's about principles (ideology).
Labour has some seriously shit policies, especially around the need for mega transport projects, they were not evidence based and I am highly critical of them also. This isn't about National=bad, Labour=good or vice versa it is about evidence based policy=good and ideological dogma = bad.
The reason this National govt (not every possible incarnation of the National Party) is bad is because they are putting ideology before evidence, and openly so.
Those defending them for doing it are eroding the idea that we SHOULD be putting evidence above ideology.
I don't give a shit if National or Greens or Labour get into power so long as they move us towards evidence based decisions rather than the culture war shit that is destroying the UK and US.
It may not be mainstream but there are growing dissenting voices, a movement called ‘supply skepticism’. It’s not a tiny one either. The economists at Macrobusiness are big proponents of it, and there are a number of North American proponents.
Very Few people, including myself, think that more permissive planning systems don’t *help* enable supply and contribute to affordability. What’s at question is how far liberalising can achieve gains. I think there’s a point where planning deregulation and liberalisation offers diminishing returns, yet at the same time presents a whole range of negative externalities.
For me, that is where the MDRS landed (the NPS-UD requirements were great)
I'm not going to get into an economic argument about whether reducing planning restriction increases supply and the nuances of what gets culled or what doesn't. That isn't the point I was making.
Luxon's National is openly putting aside evidence-based policy in favour of ideology. He is saying it out loud.
This is the issue that should be causing outrage for those of us, and I count you as one of them, who believe in evidence based policy.
It is a very slippery slope when people defend this type of approach because it just happened to be the party they voted for. (Yes, I know you voted NZF, but that was a vote for National, so own it.)
"...harsh sanctions were not so effective"
It seems that low/no sanctions are a lot worse:
"In a statement, Upston said the coalition was taking "early action" to curb welfare dependency.
She pointed to a decline in the number of sanctions applied in the past six years, from 60,588 in 2017 to 25,329 in 2023.
"Over that time, people on jobseeker benefits increased by about 70,000 and about 40,000 more people have been receiving this support for a year or more," she said."
https://www.rnz.co.nz/news/political/509590/benefit-sanctions-to-ramp-u…
At a time of peak employment opportunities & record low skill immigration to fill the jobs that are there if you actually want to work
"It seems that low/no sanctions are a lot worse"
Evidence please.
Also I don't claim to be an expert in this by any means but I do have real life experience of working in job centre for a few months when I was at Uni. I can tell you now that trying to punish people on benefits and forcing them to work does not work. It takes a huge amount of human resource to keep checking up on what they are doing and trying to catch them out, then another huge amount of human resource to get them set back up on the system after you've booted them off for a few weeks.
I came to conclusion that it was a better use of my time to just sign off the ones that obviously weren't looking for work and focusing my efforts on helping those that were looking. It's actually cheaper and less hassle to just let some people take their benefit and jog on.
It's pretty easy to go to a job interview but even when they were forced to go the people that didn't want to work were pretty proficient in doing enough to not throw the job but just enough that they wouldn't be hired.
The long term unemployed really need a lot of support in terms of training and mentoring to get them up to a level were an employer would be willing to hire them. It often requires employers to be incentivised to take them on as they can be high risk.
Anyway in summary all of the above requires more money and resource thrown at the problem rather than less.
"I came to conclusion that it was a better use of my time to just sign off the ones that obviously weren't looking for work and focusing my efforts on helping those that were looking. It's actually cheaper and less hassle to just let some people take their benefit and jog on."
Clearly people who won't do the job taxpayers are paying them to do is a big part of the problem. Hence sanctions.
You're missing the point. I only worked in the office for a few months, in my third month I placed more people in work than the rest of the team combined and our little office smashed their previous records
Head office came down to interview me to ask what I was doing differently. I told them that I had decided not to keep wasting the 10 min slot per benefit claimant doing a job search on my shitty govt job search engine for:
- people who were obviously already working another job (report them up the chain)
- or were way overqualified for me to find them a job (e.g. previously Head of marketing for Virgin) but needed to sign on the benefit to get their home insurance covered
- Were unemployable without mental health/drug addiction support
The only reason we had to do this was to try to convince them to apply for jobs on the system so that hopefully they wouldn't turn up to the interview and we could penalise them a couple of weeks benefit.
Instead I said I was just signing them off quickly and was using all those saved 10 min slots and using them to spend longer periods really trying to help the people who wanted a job.
There was a bit of an awkward silence and I never heard from them again. I left soon after as it was only a temporary uni role.
Most people want to work. If they aren't it's generally because they need some help or there aren't that many jobs available that they can do. It's easier to just pay those who don't want to work to stay home and focus on trying to break the cycle with their kids by giving them extra educational support.
Do I resent my taxpayer money going towards paying them to sit around? Hell yeah. But I resent even more of it being spent on trying to punish them for being lazy bastards and ending up achieving nothing. You have to realise the likely scenario is that you cut their benefit, they turn to crime and we end up paying more in policing and prison costs. From what I could see, living on benefits as a long-term unemployed is a fairly shitty life. Think of it as home detention if you're really nasty and need to feel like you're punishing them for being lazy.
It's easy to sit on the internet and say "well cut their benefit, do this, do that". Watch as property crime soars because these scrotes would rather sell your flat screen TV for chump change than work an honest day if it means tying them over with food and booze for the next week.
and with that all the south africans with residency move to aussie, they have seen it before, take a stand here against crime. otherwise you will see an increase in security fencing, big black dogs, and shotgun sales (for duck shooting)
there have been a lot of jobs available, why are people not in them?
Aussie diversified builder, developer and investor Landlease hits the skids with a net loss of AUD136 million in the first half of the fiscal year 2024.
Watch these guys. Their focus is on the fancy pants stuff.
Delays in settlements worth $130 million to $160 million at the communities business – which would still go to Lendlease, post sale to Stockland – as well as an estimated $150 million (pretax, $100 million post-tax) earnings from settlements at Residences One at Barangaroo in Sydney and settlements of apartments in a tower at its Elephant & Castle project in London were also in the mix for this year or in FY25, he said.
https://www.afr.com/property/commercial/we-re-not-there-yet-lendlease-s…
Good that unproductive, anti-competitive, middle management heavy, bloated and cheap liquidity reliant companies are going poorly. While productive or unique tech/biotech companies who are productive, lean and agile are gaining traction. Long may it continue for a better future economy.
Also - I GOT MY YUBI KEY! Thanks Interest team!
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