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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41 Comments
Yes, exactly, as someone only slightly older than me I felt that. I didn’t particularly care for him, and he’s just one human among many who passed today, yet he deserves a dignified response in parliament.
I find it sad that the comment made at the top of this thread has several likes…
Ok, I thought Flying was exaggerating, and turning a day off into one week. I have gone back to the Herald and yes I see they are indeed taking a week off…. So I take back what I said. Apologies Flying, and I agree, that’s quite obscene actually. And detracts from the dignity he deserves
Parliament was scheduled to sit tomorrow
https://www.parliament.nz/en/get-involved/features/sitting-programme-co…
Petitions committee only .
https://www.parliament.nz/en/calendar
Maybe we can just agree parliament is not taking a whole week off.
BS = Barry Soper, is far from right wing, Barry came out hard on this. The pollies should have had two full sitting days Wednesday and Thursday, initially they were just going to skip oral questions, Monday is cabinet and press conference, so what changed that they staged a walkout. I wouldn't have these people anywhere near my production line.
Efeso was a truly beautiful person, he has made a positive difference and that counts.
BTW do you mind not turning discussions into a race issue
I remember Infratil talking about their Wellington Airport stake. It was beautiful for them as they could spend large quantities of money on improvements and virtually guarantee a return through the monopoly pricing. Nothing spectacular, but it gave them somewhere to invest excess cash. I guess Auckland Airport have cottoned on but done it all in one big burst that draws attention, rather than trickling the improvements through under the radar.
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.
On the surface, looks good.
In reality, the Australian national accounts (ABS) showed real household disposable income per capita collapsed by around 6% in the year to September 2023 to be tracking at around 2012 levels.
Australia’s decline in real household disposable income per capita was the largest in the year to September, some 7.8% worse than the average gain of 1.7% across the OECD.
Maccy B on top of it and the AFR tells the story. Living standards are collapsing.
https://www.afr.com/policy/economy/household-income-pain-to-last-until-…
Perhaps because the Oz Labour Govt is now collecting a lot more income tax - a record amount as a share of household income
https://www.abc.net.au/news/2024-02-21/fact-check-angus-taylor-27-per-c…
Partly. Inflation + popn growth + taxes + Ponzi payments. It's suggested that Australia’s real household disposable income per capita won’t recover to 2015 levels until 2026.
“In the current environment, real household disposable income per capita is one of the best measures of how Australian households are feeling”,
“It calculates income after taking account of inflation and population growth, and after taking account of taxes and mortgage payments”.
“Households have been dealing with the cost of living challenges that elevated inflation and rising interest rates impose”.
“At the same time, bracket creep is ratcheting up the average rate of tax paid, while aggregate measures of income and economic growth are being driven by population growth, not productivity”,
- Deloitte Access Economics partner Stephen Smith
“In the current environment, real household disposable income per capita is one of the best measures of how Australian households are feeling. It calculates income after taking account of inflation and population growth, and after taking account of taxes and mortgage payments,” he said.
From AFR article.
Wolfie Richter reckons that the problems in US CRE are isolated from residential property for now. He suggests demand for higher-end apartments continuing to grow because house prices are too high.
But Wolfie steers clear of the rainbows and lollipops narrative. Still a potential house of cards.
Retail and office CRE, in addition to higher mortgage rates, also face devastating structural issues, some of which will have to be dealt with through demolition and redevelopment of the properties into residential. This is more likely to happen – is more likely economically feasible – after a developer buys the property for cents on the dollar, essentially for land value, such as in a foreclosure sale, hitting lenders with huge losses, and there have been some already.
https://wolfstreet.com/2024/02/19/49-small-banks-are-heavily-exposed-to…
ah land value thats coming for old resi shiters in NZ as well, except at the top they where paying $4000 a sq m.... so at the bottom what is townhouse land worth - what do you reckon HouseMouse? I think its at 2-2.2k currently but will bottom about $1850 a sq m for Glendowie etc
That’s my estimate for low end suburbs, south (eg. Manurewa) and west. But that would be for better sites in those low value locations eg. Flat, corner sites, good infrastructure, no flooding etc.
Those locations were more like 2.5-3k per sq m at the peak of the nonsense in ‘21.
I think places like Glendowie have probably bottomed out. I think it’s crappier locations where there might still be a bit of a drop
If you are investing in a bank or insurance company, you really want one that spreads the risk: different types of lending, different types of debtors, different locations, etc. In a way we are lucky we have national banks and insurance companies (with AU backing too). AMI was a Christchurch company and failed.
US commercial real estate valuations dropped 42% on average in 2023.
The sheeple don't even blink.
https://commercialobserver.com/2024/02/cre-valuations-dropped-42-percen…
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