What happened Tuesday

Economy / news

A review of things you need to know before you sign off on Tuesday; again no retail rate changes, Robertson quits, office consents unusually low, MPI critiqued, few tractors sold, swaps stable, NZD holds, & more

20th Feb 24, 4:00pm 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). It's a skinny edition today.

MORTGAGE/LOAN RATE CHANGES
No changes again today.

TERM DEPOSIT/SAVINGS RATE CHANGES
None here either.

ROBERTSON QUITS POLITICS
Former Finance Minister Grant Robertson is to leave Parliament and be replaced as Labour's Finance Spokesperson by Barbara Edmonds.

PUBLIC SERVICE FACES CUTBACKS
The public service is bracing for staffing cutbacks. And the PSA today lambasted the new government for disestablishing the Productivity Commission. But the criticism rings a bit hollow. No government (National nor Labour) has ever listened to their advice, making their reports (as valuable as I thought they were), essentially irrelevant. And then the Labour government appointed its own favoured economist from the economic consultancy it prefers (BERL) to lead the Commission. They surely can't be surprised it isn't surviving a new government.

WFH UNDERMINES OFFICE BUILDING DEMAND
The number of new office buildings being consented is now at a 32 year low. Overall, construction of new commercial buildings is in decline with new retail premises at a particularly low ebb.

BIG FUNDRAISING LAUNCHED
Treasury is going ahead with its well-signaled giant new 30-year bond issue. It expects to issue at least $2 bln of the 5% coupon 15 May 2054 nominal bond, with the transaction capped at $4 bln. Initial price guidance is -1 to +6 bps over the 15 May 2051 nominal bond (which last week yielded about 5.08%). Because of the large funding, the normal $500 mln weekly bond tenders are cancelled this week.

A BLIND EYE TO SAFETY OF IMPORTED FOODS
The Auditor-General has taken MPI to task for not monitoring food safety of high-risk imported foodstuffs. “In my view, the Ministry does not have a clear understanding of the effectiveness of the food import system. This is because the Ministry has not been consistently monitoring whether importers are assessing the safety and suitability of specified high-risk foods before they arrive in the country." Imported berries are a key risk, they say.

JAIL FOR TAX FRAUD
A former construction company director has been jailed on tax charges for 2 years and eight months. In 2021, Stephen Eugene Foley was found guilty by a jury of aiding and abetting his construction companies (HPTP 2014 Ltd and Point to Point Construction Ltd) of deducting PAYE from employee’s wages but not paying it to Inland Revenue. Foley has been the director of many failed companies. He was adjudicated bankrupt in 2001 and again in 2018, and in 2006 he was prohibited from being a director for 2 years and 9 months.

FARMERS PULL BACK HARD
Yesterday we reported very low births. Today we can report that the sale of tractors were also unusually low. They reached a 17 year low for a January month, just 128 nationwide were registered. And that comes after a string of low months. The annual rate of sales dipped to its lowest since 2011 (excluding the pandemic year).

MOSTLY UNIMPRESSIVE
There were more half year updates released today. Kathmandu (KMD Brands) disappointed with weak sales and earnings, whith their shares dropping almost -10% in NZ and almost -7% in Australia. Steel & Tube (STU) reported earnings at the top end the range indicated earlier. But markets weren't impressed discounting their shares by -1.7%. Gentailer Mercury (NCY) also reported lower earnings but their shares have risen +1.2% on future indications. Tourism Holding (THL) reported a large profit rebound, but that wasn't enough for investors who marked their shares down -3.9%.

ANZ WINS CONTROL OF SUNCORP BANK
Although the Australian competition regulator sought to block the ANZ-Suncorp merger, today the appeal to the Australian Competition Tribunal successfully overturned the ACCC decision. The final hurdles will be legislative approvals by the Queensland parliament, and the Federal Treasurer. Neither are expected to block it.

HOUSING RATE CUT
The Chinese central bank surprised markets somewhat with the Loan Prime Rate moves. The didn't change their one year rate, holding it at 3.45% when a -15 bps cut was expected. But they cut their 5 year LPR by -25 bps when a -15 bps cut was expected. That is the biggest cust they have every made to this rate. The five year rate underpins their home loan market. The One year rate is more of a reference for other consumer and business lending. This move shows that Beijing's worries about their failing property sector are front-of-mind. Oddly,a Party boss is calling for 'forceful action' to improve economic sentiment. They don't seem to understand you can't just dial it up by forcing people to 'smile'.

SWAP RATES HOLD AGAIN
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 up +1 bp at 4.21%. The China 10 year bond rate is little-changed at just under 2.45% with signs of softness. And the NZ Government 10 year bond rate is up +1 bp to 4.95%, while the earlier RBNZ fixing was at 4.89% and up +3 bps from yesterday. The UST 10 year yield is now at 4.31% and up +2 bps from this time yesterday. The UST 2yr is now down to 4.65% and so that key inversion is little-changed at -34 bps.

EQUITY WINNERS & LOSERS
The NZX50 is having another tough day, down -0.7% near its close. Twenty listed shares are down -2% or more today. Only eight were up 2% or more. The ASX200 is little-changed however in afternoon trade. Tokyo has opened up +0.6% and back near its record high. Hong Kong has opened little -changed today, while Shanghai has opened down -0.6%. Singapore has opened its Tuesday trade up +0.2%. The S&P500 futures suggest Wall Street will open tomorrow after its long holiday weekend up only +0.2%, less than earlier signaled.

OIL FIRM
Oil prices are up +50 USc to US$78.50/bbl in the US while the international Brent price is up at just under US$83/bbl.

GOLD MOVES UP
In early Asian trade, gold is now at US$2016/oz and down -US$4 from yesterday.

NZD HOLDS
The Kiwi dollar has slipped slightly from where we were this time yesterday, now at 61.3 USc and down -10 bps. Against the Aussie we have firmed to 94 AUc. Against the euro we are also firmish again, at 57 euro cents. That means the TWI-5 is still at just on 71 today.

BITCOIN SLIPS
The bitcoin price has moved lower today, now at US$51,591 and down -1.2% from this time yesterday. There's been low volatility over the past 24 hours of just on +/- 0.9%.

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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57 Comments

by Foxglove. | 20th Feb 24, 4:17pm 1708399065

MPI. Safety of imported food!? What about the safety of food at retail, full stop. Simply unbelievable that front line supermarkets can be riddled with rodents. Why with all the enormous increase in NZ’s bureaucracy can this be allowed to happen. Where is the vigilance, the inspections that should prevent any remote possibility? Or is that just too much of NZ’s bureaucracy is prioritised on shining the seats of their pants and climbing the greasy pole rather than the irksome duty of getting out of the office and doing something.

by Firstclass | 20th Feb 24, 4:18pm 1708399136

One instance I would say ok they dropped the ball but we see multiple instances.

This is disappointing as it displays 3rd world hygiene standards.

by JimboJones | 20th Feb 24, 4:31pm 1708399875

There will always be the odd slip up somewhere, its just the media thinks its cool atm.

I doubt any supermarket would want this bad press, they would avoid it if at all possible. That Dunedin one will lose a lot of money!

TBH I would be more worried about food coming from places with much lower standards than us (e.g. China). We avoid it wherever possible.

by Te Kooti | 20th Feb 24, 5:00pm 1708401632

Yeah Jimbo I'm not buying that.

There would have been evidence of rodents that should have prompted an immediate closure by the store rather than shoppers watching rats run over the food. I mean, if you can spend $400m on rebranding then you can afford to catch a few rats in short order.

It's seems an appropriate metaphor for our economy though.

by HouseMouse | 20th Feb 24, 5:34pm 1708403662

Yep. Totally inexcusable.

by IT GUY | 20th Feb 24, 5:40pm 1708404021

They missed a trick rebranding Woolworths not a Wokey modern multicultural name.....

by JimboJones | 20th Feb 24, 6:50pm 1708408206

Woolworths is a pretty crap name, hard to know why you’d spend $400 million changing to it. I don’t get why anyone shops there, it’s a lot dearer than pak and save or new world.

by IT GUY | 20th Feb 24, 8:58pm 1708415934

I really hate countdown its expensive, add 60-80 cents per item vs pak and save for every item, New World is even more expensive but if you are after cakes or fancy breads they are often best, pak and save warkworth bakery is to DIE FOR amazing

by Nzdan | 20th Feb 24, 9:06pm 1708416398

I drive out of my way to either New World or Pak N Save. Ever since they announced their $400m rebrand, nope not once have I gone back.

by Flying high | 21st Feb 24, 6:38am 1708450709

Watch the pennies.... and all that penny pinching. Id rather shop wherever is most convenient and sometimes that's at the corner superette where I make sure I buy extra to help out the little guy

by JimboJones | 20th Feb 24, 6:51pm 1708408314

Are you saying they deliberately let rats run around and did nothing? If so that’s very poor management, it will cost them dearly: store closure, loyalty and brand image.

by EdwardD | 20th Feb 24, 7:43pm 1708411399

Absolutely. They can rebrand as much as they want. I won't be shopping there again until all their stores have have been shut and an exterminator called in.

by pacifica | 21st Feb 24, 2:57am 1708437446

Actually the staff had been reporting the rodents to management for months and nothing was done except to try to hush it up. Staff went to media because of public health hazard and immediately management starts a witch hunt to take scalps. Not exactly an attitude towards health and safety or quality and hygiene that ever should be seen in management. It is an appalling and dangerous attitude to have.

by JimboJones | 20th Feb 24, 4:16pm 1708398991

That soil moisture chart is interesting. Quite the change from last year...

by J.C. | 20th Feb 24, 4:20pm 1708399258

There were more half year updates released today. Kathmandu (KMD Brands) disappointed with weak sales and earnings, whith their shares dropping almost -10% in NZ and almost -7% in Australia

The woke stunt for the Rip Curl brand (woman surfer having to be a transgender woman or man) were unnecessary, unoriginal, and stupid. No doubt has impacted sales in the short term.

by David Chaston | 20th Feb 24, 4:26pm 1708399589

Rubbish. There will be a real reason.

by J.C. | 20th Feb 24, 4:35pm 1708400125

You think so? Rip Curl’s sales are down 5.7 per cent while sales for Oboz have dropped 18.2 per cent.

Even after a Black Friday boost. You don't make money through low-freq purchases.

"Stunt was unoriginal". Would like to know why you think it wasn't.

https://www.smh.com.au/business/companies/kathmandu-rip-curl-sales-tank…;

by Te Kooti | 20th Feb 24, 5:12pm 1708402323

This does feel more about management signalling their "virtuousness" rather than targeting an under-served niche (being trans-surfers). It's been a tough slog for the girls to get respect in the surf. Not sure how many have spent any time out the back at Indicators, Manu Bay or Piha Bar but they are not inclusive places. All love to trans people though.

by J.C. | 20th Feb 24, 6:54pm 1708408497

This does feel more about management signalling their "virtuousness" rather than targeting an under-served niche (being trans-surfers)

Rip Curl management took the campaign off social media after backlash. So yes, I agree with you. It's virtue signaling. Nothing more, nothing less. It they truly believed in trans representation and that they are connecting with people, they would have held their position. They look weak and inauthentic.

by Baywatch | 20th Feb 24, 4:44pm 1708400670

JC never misses a chance to keep us updated on the wokeism all around us - Cindy probably played a hand in the results as well?

1H FY24

Rip Curl -9.2%

Kathmandu -21.5%

Oboz -20.0%

Group -14.5%

by J.C. | 20th Feb 24, 4:47pm 1708400827

Those decisions are made by CEOs and CMOs / brand strategists. From a business POV, it could very well be that short-term sales are impacted by woke messaging from brands.

I don't know about you, but I would buy a wetsuit based on perceived quality. If the brand supports women's surfing, that's a good thing (to me). But don't be surprised if the transgender stunt is seen as unnecessary and unoriginal. I would also say 'stupid' if KMD has not done any research to understand if the stunt negatively impacts short-term sales at a time when sales are important for the business.

by Crazylekiwi | 20th Feb 24, 4:51pm 1708401118

KMD Brands has morphed into a bizarre corporate woke activist. They used to use staff and passionate customers in the marketing collateral and focus on product quality with real sustainability credentials. Now, it’s all about the alphabet club…..not sure many of them are big on an outdoor lifestyle.

by J.C. | 20th Feb 24, 4:55pm 1708401330

Brands like Patagonia have long supported the environment and sustainability. They don't need to virtue signal. Their values are in the business and brand DNA.

by Te Kooti | 20th Feb 24, 7:48pm 1708411691

Agreed. I followed the bud light drama with some interest. They appointed a young female as brand director and gave her free reign. She trampled over their brand values and insulted their customer base, calling them fratty. What I find most insulting is that marketing is a science discipline. It’s not some airy fairy arty exercise. It’s phd level statistics and lots of research. They must have thrown it all away because this was so predictable and they deserved to lose billions and she was fired.

by ChrisOfNoFame | 20th Feb 24, 5:30pm 1708403422

Golly. And there's the real reason.

The brands all appeal to the young. And at this stage of the economic cycle it is the younger members of our society that have the least disposable income while the older, and with small or no mortgages, that have the most.

Maybe an ad with surfing retirees would have worked better, ay JC?

(Cyclical stock are all being hammered at the moment. This is just the stage of the cycle. The wise were out 12 months ago and the wise will be back in 12 months. Some of the safest plays on the share markets.)

by J.C. | 20th Feb 24, 5:41pm 1708404114

OK. Perhaps the Rip Curl campaign is brilliant because it connects with the idea that "young people are influenced by brands that pay respects to the trans community." I entirely get this.

What do you think happens now? Rip Curl moves to the top of the consideration set of potential buyers that fit within this target segment?

Quite possibly. I'm sure KMD has a good handle on this. If it were me, I would think that the Rip Curl brand might be better off trying to position their brand on a value proposition - the best price-value proposition at a time when people are looking for exactly that. Doesn't matter which gender or gender preference group you attach to.

by Hamish | 20th Feb 24, 6:28pm 1708406889

Is the whole BNPL model maxed out?

by IT GUY | 20th Feb 24, 4:48pm 1708400888

Never hurt Bud Light.... wait a minute.

Will go down as one of the dumbest marketing stunts in history.

by TommyYank-old | 20th Feb 24, 8:21pm 1708413682

You are probably right about that not being the real reason here in NZ , but just ask Target Corp & Anheiser Busch. America's leading brewery founding family sold out to the Belgian's years ago so then they brought the whiz kids in and rebranded Budweiser as "America's Beer". But the Whiz kids threw them to the mat with their Transgender stunt last year and their market share has subsequently torpedoed-from 1st place to 10th place, and Target the 2nd leading retailer has lost billions in stock value for its promotion of transgender clothing for tots and young kids.

by Poppyc | 20th Feb 24, 8:34pm 1708414455

And now the best selling beer in America is Modelo Especial, which is brewed in Mexico and is actually a pretty decent drink

by pacifica | 21st Feb 24, 3:16am 1708438603

Ironically there was room for multiple brand champions (this is what happens in gaming) the more the merrier (and the more weird niches you can fit in). But they screwed up as well by canning the women amputee brand champion for the trans women champion which also set in play the whole unobtainable body stereotype for women argument and kind of messed in with the war on trans culture trope of 'replacing other women in fields' which hit the US and Aus. If they just kept both there would have been no issue and they could even have accommodated both sides of the US and Aus culture war at the same time.

However there are known issues that when a company goes into any culture war it needs to address a level position from the outset or be prepared to lose customers no matter what. Some companies are fine with dropping customers but not all do well out of it. A certain games company told its neo nazi buyers to f off and since that was a much smaller niche in the scifi and fantasy groups, (which are normally less nazi loving geeks and more nazi hating geeks who just really love roleplay armies), it did ok.

by J.C. | 20th Feb 24, 4:28pm 1708399726

56% of Asia Pacific fund managers are overweight Japan, followed by India and Taiwan (both 19% overweight).

YTD in USD,

MSCI Japan up 10.9%

MSCI Taiwan 6.4%

MSCI India up 4%

Buffett's mid-2020 purchase of all the major Japanese trading companies (financed with low-cost JPY bonds) easily one of the best trades made.

by IT GUY | 20th Feb 24, 4:46pm 1708400791

Thats a smart trade, stepping in front of the coming freight train of coming liquidity, love those trades... especially if via cheap out of the money calls. Do you know that Ron (yeah that Ron) Brierley once tried to buy BNZ with BNZ to issue the finance for the trade,,,,, on paper it looked the perfect trade, but the finance minister of the day said ... wait a minute.

Rich Chinese are becoming increasingly worried about their local finances, and are trying to get money out while they can and before the currency falls or windows of exchange close.

by nz-it-worker | 20th Feb 24, 4:58pm 1708401480

And the PSA today lambasted the new government for disestablishing the Productivity Commission. But the criticism rings a bit hollow. No government (National nor Labour) has ever listened to their advice, making their reports (as valuable as I thought they were), essentially irrelevant.

Watch out Treasury, you'll be next.

“The lack of a comprehensive capital gains tax restricts the ability to manage gaps between company rates and personal rates and increases costs of income taxation. It has also contributed to higher house prices.

“Based on principles such as sustainability, efficiency and fairness, our first best advice is to address these two structural issues,” Treasury said.

https://www.stuff.co.nz/business/350167952/capital-gains-tax-could-help-balance-govt-books-treasury

by False economies | 20th Feb 24, 4:35pm 1708400114

Yesterday we reported very low births. Today we can report that the sale of tractors were also unusually low

Are these 2 things connected?!

by nz-it-worker | 20th Feb 24, 4:40pm 1708400456

Definitely effects the sales of Remuera tractors.

by ChrisOfNoFame | 20th Feb 24, 5:32pm 1708403571

Humor. (Swoosh! That was it passing over your head.)

by False economies | 21st Feb 24, 8:24am 1708457090

Swoosh back at ya! 😁

by IT GUY | 20th Feb 24, 5:51pm 1708404675

Girls love the new tractor smell

by Yvil | 20th Feb 24, 4:56pm 1708401392

The Chinese party boss doesn't seem to understand you can't just dial it up by forcing people to 'smile'

What do Putin, Xi and Netanyahu have in common ?

They don't need to flush the toilet, they just scare the sh!t out of it !

by IT GUY | 20th Feb 24, 6:48pm 1708408130

It works in Tibet and the Uygurs of Xinjiang, next up Taiwan.........

by blobbles | 20th Feb 24, 5:23pm 1708402997

No government (National nor Labour) has ever listened to their advice, making their reports (as valuable as I thought they were), essentially irrelevant

Not irrelevant at all. If they are pointing out what the government has done wrong and what it should do to fix it, thats definitely not irrelevant. Now who will be issuing formal reports telling the government how to increase productivity? Maybe the OECD? Instead we will just get Luxon telling us that beneficiaries are what is causing our unproductive economy and nobody will have any official report to tell him that isn't the case. A worse situation for sure.

by HouseMouse | 20th Feb 24, 5:55pm 1708404908

Not irrelevant, but certainly not impactful at all.

David is right, the majority of their recommendations have been ignored. So what’s the point?

by blobbles | 21st Feb 24, 8:47am 1708458474

The point is that before we know what we have done wrong. Now we have no idea, nor what we should do to fix it.

Its like the argument of why the media shouldn't just put out press reports from the current government and not ask questions or investigate. The less questioning of the governments actions, the more likely we will tend towards autocracy. Now we won't have anyone with economic nous to question the only thing that matters in the long run (productivity), all we have is Nicola Willis telling us what productivity improvements entail. Which according to her is "getting rid of rules and regulations".

If you are happy with that situation then you really aren't thinking about the long term future of our economy.

by JimboJones | 20th Feb 24, 5:29pm 1708403355

Average Auckland household facing extra $613 for rates and water bills: https://www.nzherald.co.nz/nz/average-auckland-household-facing-extra-6…

With Watercare restricted in how much it can borrow for a $13.9 billion capital programme over the next decade as a result of the Government abolishing the Three Wates reforms, water bills are proposed to rise by 25.8 per cent this year.

I have a feeling this will push our water pill to a similar level as our power bill. A few decades ago there was a gulf between them.

by nigelh | 20th Feb 24, 5:45pm 1708404328

Seem to recall Watercare's borrowing is limited because of their attachment to Akl Council. Article by the previous CEO, departed a year or three ago outlining this.

Not sure if Watercare some how wanted to detach from Akl Council.

by IT GUY | 20th Feb 24, 5:59pm 1708405185

Well it may well be that Watercares total debt rolls up under ACC in the event of default, therefore increased debt in Watercare (even though well warranted and required), may push ACC over ratios that will cause a downgrade or increase there cost of funding on ALL the existing ACC Debt..... oh what a web we weave.

I have a lot of time for Brown, we need more engineers in power, he calls a spade a spade and a shovel a shovel and a shambles a shambles .... this next election I will also note what councillors to vote for on the right....

WGTN - all hope is lost all thee who enter.

by HouseMouse | 20th Feb 24, 5:57pm 1708405022

You did well to get away from all this sort of nonsense IT Guy (I assume you source your own water l).

by IT GUY | 20th Feb 24, 6:05pm 1708405539

I have 80,000L in tank water and serve stock off dam water, at the moment I have 55,000L so i pay no water bills and no wastewater but have to service my own dripper line waste system (2 years old). I have to pay for rubbish PER BAG (WTF) and pay 5k for next to nothing.... oh yeah plus 20c per L fuel tax.....

Brown is a fair man calling out waste where he can but we are going to need more on council on the RHS for the change we need

by tis i | 20th Feb 24, 9:00pm 1708416052

They’ll find a way to charge us. Just you wait.

by Nzdan | 20th Feb 24, 9:07pm 1708416449

They'll do what happens in Masterton with swimming pools. Send someone around for an "annual inspection", send you a $160 bill.

by Flying high | 21st Feb 24, 6:54am 1708451659

21 dollars gst, 80 dollars for wage and worker benefits, a bit more for the EV depreciation and financing costs, not much left for overheads.

Everyone says they want freedom without the bureaucrats until one little mishap and then all the moaners come out of the woodwork

by pacifica | 21st Feb 24, 3:34am 1708439669

Wellington still does not meter water. They have no clue where they are losing it but I would guess they are losing their minds by still Not Metering Water. By doing this they are literally hiding leaks and pandering to high water wastage users, mostly companies who use tons more then everyday families but get the everyday families to pay for the wastage. How clueless are they, it is like they saw the sustainable resource management options and decided to do exactly the opposite while marketing themselves as "green". They are the least green and the least sustainable council in NZ and while there are few councils it is saying a lot that the one run by the greens is still going against all engineering sense and funding more artsy luxuries no one needs instead of doing the basics in sustainable resource management 101.

by pacifica | 21st Feb 24, 3:42am 1708440123

Ironically I did a test of a few councils, Auckland was the best for water resource management (including needing new builds to have storm water capture & storage which can be used for gardens & flushing). If you have a small internal leak in your house plumbing you find out about it quick with metering, you can get bill increases forgiven for a short period, fix the leak and back to normal. Like Wellington though the property next door to us had its internal pipes burst and was leaking water for over a year and the owner was clueless. Whole place now needs to be demolished due to the structural damage. What a waste of both water and housing.

It was the equivalent leak to leaving 4 household hoses running at full bore out under the home. But no metering, no record, no care for the water wasted during a summer drought when people are told they cannot even water their veges or take longer showers. It is this level of inept water wastage in tracking Wellington is facing. If there is absence of testing and tracking it does not mean there is absence of issues. Not testing does not make a problem go away, it makes it harder to manage sustainably and mitigate problems.

by RickStrauss | 20th Feb 24, 6:18pm 1708406330

Probably fair enough. Our sprawl is very expensive to manage and maintain.

by JimboJones | 20th Feb 24, 7:00pm 1708408825

Houston we have a problem

by Squishy | 20th Feb 24, 7:36pm 1708411019

...the PSA today lambasted the new government for disestablishing the Productivity Commission. But the criticism rings a bit hollow. No government (National nor Labour) has ever listened to their advice, making their reports (as valuable as I thought they were), essentially irrelevant. And then the Labour government appointed its own favoured economist from the economic consultancy it prefers (BERL) to lead the Commission.

...And even then they ignored the productivity commissions advice.