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.
THE FUTURE LOOKS BRIGHTER
Although dairy prices rose a modest +0.5% today from two weeks ago, those looking ahead see a track higher. Chinese buyers returned and Chinese demand is creeping up to long term averages. We have previously noted the pullback in exports from Australia, with more imports likely from them. And environmental regulations have driven a substantial drop in European milk production recently. These are among the factors that has brought the first estimate for 2024/25 farmgate milk payout estimate - from Westpac who see an $8.40/kgMS. Given that on-farm cost pressures are receding (below), that should enable more farmers to do better than break-even in the upcoming season. $8.40 would be the third highest (equal) price ever.
THE PRESENT IS GOOD FOR SOME TOO
Locally-owned insurer Tower says it is benefiting from strong growth. It says gross written premium was up +21% in four months, and expects full-year profit of between $22 mln and $27 mln.
COST PRESSURES EASE ...
Producer price increases were modest in the year to December. They rose +1.91% for producer inputs, and +1.97% for producer outputs. Producer margins improved. Those margins improved every quarter in 2023, but they really are only recovering reductions of the same amount in the 2022 year. StatsNZ helpfully compared these 2023 PPI changes with changes in wages (+4.3%) and the CPI (+4.7%).
... INCLUDING ON THE FARM
Farm operating expenses (excluding livestock costs) rose just over +1.85% in 2023. But that masks some large changes. Fertilizer fell -12.4% as oil prices eased. Insurance costs however rose 12.5%, vet costs were up +5.7%, and interest costs rose +16.1%. Fuel fell -4.7% in the year.
CAPITAL GOODS INFLATE
The business capital goods price index rose +3.7% in 2023. The cost of new investment is rising faster than either inputs or outputs.
AN IMPORTANT EXPLAINER
We have released a comprehensive review of MFA, or multi-factor authentication, which has become easier to use. It will be useful for newbies, and for people with high security needs. You should secure your digital life with it, Juha Saarinen says.
MASSIVE DEMAND
The Government debt manager will issue $4 bln in 30-year bonds after attracting a massive and record $19+ bln interest in the issue. (You have to wonder where the unsatisfied $15 bln will end up.) This new bond will yield 5.09% to maturity in May 2054.
MONOPOLY vs MONOPOLY
No sooner had Air New Zealand called for an inquiry over Auckland Airport's "over spending" on redevelopment it says will push up domestic aeronautical charges, than Auckland Airport was hitting back, saying NZ has the world's most concentrated domestic airline market. The airline has made an official request to Commerce & Consumer Affairs Minister Andrew Bayly saying the airport's up to $8 bln development over 10 years will be paid for by airlines via higher aeronautical charges, forecast to rise from $9 per domestic passenger today to $46 in 2032, leading to unaffordable airfares for some Kiwis, without delivering a new runway and little increase in airside capacity. In response the airport says NZ has the most concentrated domestic aviation market in the world, with Air NZ having 86% of seats whilst it's subject to no economic regulation. Air NZ, Auckland Airport says, has strong commercial incentives to oppose airport investment because this creates additional capacity enabling airline competition. Watch this space.
AUSSIE WAGE COSTS UP
In Australia, wages rose +0.9% in the December quarter, and +4.2% for the full year, (marginally more than the CPI rise of +4.1%). That's its highest growth since 2008.
JAPAN SHINES
Sharply lower oil prices, and exports at a 14 month high have combined to deliver Japan a sharply lower January trade deficit. Those exports were on the basis of good demand from both the US and China.
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 still unchanged at 5.71%. The Australian 10 year bond yield is up +1 bp at 4.21%. The China 10 year bond rate is down -2 bps at just under 2.43% which by our reckoning is its lowest ever. And the NZ Government 10 year bond rate is down -8 bps to 4.87%, while the earlier RBNZ fixing was at 4.85% and down -4 bps from yesterday. The UST 10 year yield is now at 4.28% and down -3 bps from this time yesterday. The UST 2yr is now down to 4.60% and so that key inversion is little-changed at -32 bps.
EQUITY WINNERS & LOSERS
The tables are turned today with the NZX50 essentially unchanged in late trade while the ASX200 is down -0.7% in afternoon trade. Tokyo has opened down -0.3%. But Hong Kong has opened up +1.3% and Shanghai has opened up +0.3%, both building on yesterday's late rises. Singapore has opened down -0.3%. Earlier today, Wall Street closed its Tuesday session down -0.6%.
OIL SOFT
Oil prices are down -US$1.50 to just over US$77/bbl in the US while the international Brent price is down at just under US$82/bbl.
GOLD MOVES UP
In early Asian trade, gold is now at US$2026/oz and up +US$10 from yesterday.
NZD FIRMS
The Kiwi dollar has risen +½c this time yesterday, now at 61.8 USc. Against the Aussie we have firmed further to 94.2 AUc. Against the euro we are also firmish again, at 57.1 euro cents. That means the TWI-5 is up at 71.1 today.
BITCOIN FIRMS
The bitcoin price has moved up today, now at US$52,101 and up a bit less than +1% from this time yesterday. There's been moderate volatility over the past 24 hours of just on +/- 2.2%.
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