What happened Monday

Economy / news

A review of things you need to know before you sign off on Monday; most companies are tiny, many house auctions modest sales, 4 things to watch, NZGB trading modest, swaps stable, NZD holds, & more

25th Mar 24, 3:59pm 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).

MORTGAGE/LOAN RATE CHANGES
WBS trimmed its 2 year rate slightly today (-5 bps). Nothing else to report.

TERM DEPOSIT/SAVINGS RATE CHANGES
None here either.

MOST BUSINESSES <20 EMPLOYEES
New data out today shows that almost three quarters of all the 49,000 businesses with six or more employees have less 20. But regulators assume they are like the 4% who have 100 or more. (That is probably because the regulators themselves are very large organisations and assume everyone is like them.) The only industries where more than 10% are "large" (ie 100+ employees) are the utilities, financial services, and "Administrative & support services" (lawyers, accountants & consultants)..

LOTS AVAILABLE, FEW BUYERS
Auction rooms just had their third busiest week in more than a year last week so there were plenty of properties on offer. But still only a third sold under the hammer.

WE NEED YOUR HELP
This is the last week you can take our insurance survey. We are very keen for you to participate if you can and haven't already. More here.

UNLIKELY TO WIN
The Insurance Council wants you to know that they are upping their game on 'transparency'. Of the 1.2 million claims made each year, only around 150 complaints are referred to external dispute resolution schemes to make a decision, they say. In 2022, only five of 143 complaints were upheld in the dispute resolution processes in the customer's favour.

YOU ONLY NEED TO WATCH 4 THINGS
Measuring inflationary pressure from the labour market can be improved by watching a narrow set of four high-quality indicators, an RBNZ research paper shows. They are: 1) the job transition rate (the share of workers switching between jobs), 2) the job vacancy-to-unemployment ratio, 3) the unemployment rate, and 4) a survey measure of labour as a limiting factor for business production.

HOLDING FAVOURED
Despite relatively high issuance and holdings ($191 bln), trading in NZGBs is modest, averaging less than $30 bln/week. That is in contrast to the over $40 bln/week traded early in the pandemic, and $50 bln/week in October/November 2022.

SWAP RATES LITTLE-CHANGED
Wholesale swap rates are likely to be little-changed today. Our chart below records the final positions. The 90 day bank bill rate is down -1 bp to 5.63%. The Australian 10 year bond yield is unchanged at 4.02%. The China 10 year bond rate is unchanged 2.32%. The NZ Government 10 year bond rate is down -4 bps from this morning at 4.60% and the earlier RBNZ fix was at 4.55% and down -6 bps. The UST 10yr yield is little-changed at 4.21%. Their 2yr is now at 4.60%, so the curve is now inverted by -39 bps, little-changed.

EQUITIES RISE LOCALLY
The NZX50 has followed up last week's good gains with another +0.7% in late trade today. KMD, FPH, AIA and FBU are all booking outsized gains. The ASX200 has started its week up +0.7% in afternoon trade. Tokyo has opened down -0.7%. Hong Kong has started up +0.2% while Shanghai is down -0.1% at its open. Singapore is down -0.3%. The S&P500 futures suggest that Wall Street will open little-changed from Friday's close.

OIL PRICES FIRM
Oil prices have risen +50 USc today to US$81/bbl while the international Brent price is now at US$85.50/bbl.

GOLD FIRMS
In early Asian trade, gold is up +US$9/oz from this morning at US$2174/oz.

NZD HOLDS
The Kiwi dollar has firmed slightly since this morning's open, now up to just over 60 USc. Against the Aussie we have stayed down at 91.9 AUc. Against the euro we are unchanged at 55.5 euro cents. This all means the TWI-5 has remained at 69.3.

BITCOIN FIRMS
The bitcoin price has firmed since our morning open, now at US$66,671 abd up +1.9%. But volatility of the past 24 hours has been high at +/- 3.0%.

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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42 Comments

by IT GUY | 25th Mar 24, 4:07pm 1711336077

The red tape and bureaucracy lumped on these small businesses is a massive burden, DS needs to get rid of this management overhead.

Re Housing, the market is trying to form a base, but buyers not prepared to make an offer unless its under their terms, I cannot understand why more property is not traded in chains like the UK..... It may well become a more common form of sale, that said not much is actually selling...

Given the lack of agreed value (ie sales), perhaps actually a lack of purchasing ability (ie ability to finance at 9% test rates), the base may well be lower then current stats suggest (ie the crash continues).

by solardb | 25th Mar 24, 5:35pm 1711341359

My experience is that the insurance companies and big suppliers put more red tape etc on small businesses than the govt does.

by Averageman | 25th Mar 24, 7:39pm 1711348750

Greed is building up pressure behind the dam. How much more weight of unsold listings, underviced debt can it take. Which bank will move first to open the floodgates and

start to flush the greedy....?

by J.C. | 25th Mar 24, 4:31pm 1711337460

The mighty Chris Joye on how central banks delayed rate increases after the pandemic on the basis they could not forecast the future, but now use rubbery projections to rationalise rate cuts.

Well worth a thorough read. Few easily digestible snippets:

And I get it: there are many folks who drank the low-rates-for-long Kool-Aid – zombie borrowers and investors in growth equities, venture capital, private equity, commercial real estate, private debt and junk bonds – that are petrified by the high-rates-for-long alternative that is becoming an ineluctable reality.

There are few credible arguments as to why rates here [Aussie] should be much lower than our peers, such as Britain, Canada, New Zealand and the US, other than a dovish desire not to offend the sensibilities of those who seek unnaturally low unemployment.

The concern is that history rhymes, and we find that central banks have once again underestimated the durability of this inflation cycle with adverse consequences for many assets.

https://www.afr.com/wealth/personal-finance/central-banks-may-be-repeat…

by HouseMouse | 25th Mar 24, 4:31pm 1711337468

Lol

no credibility. It’s just a game, that’s loaded in favour of certain interests

by J.C. | 25th Mar 24, 4:43pm 1711338234

Fit the narrative and the data to the institutional behaviors that the sheeple want.

Mind you, any sane Australian should be outraged what Mad Albo is doing with migration. People are too busy to do anything about it. Pauline Hanson seems to be the only person making any sense.

by IT GUY | 25th Mar 24, 7:30pm 1711348251

Joye is one of the few commentators that understands the harsh reality of high interest coupon payments on a highly leverages borrower... and having a mis-matched cashflow to support said payments.... it always ends badly as the buyer of the asset wants positive cashflow, ie 35-50% asset price reduction.

by J.C. | 25th Mar 24, 7:00pm 1711346456

Joye is a fierce intellect. We don't really have anyone similar. Most NZers would have no idea who he is.

by Averageman | 25th Mar 24, 7:23pm 1711347793

Agreed. Those slowly waking from their drunken debt binge are about to find that "Catching Fire" is not just a movie. Talking to several accountant friends over the weekend. They both mentioned that their respective firms had groups of property developer clients that are a less polite word for... "buggered".

Cash is about to be king again...finally.

by Speedmax | 25th Mar 24, 9:22pm 1711354947

The last time Pauline Hanson made sense she was selling fish and chips

by Pa1nter | 25th Mar 24, 5:40pm 1711341651

It’s just a game, that’s loaded in favour of certain interests

Exactly.

But only if there's enough willing players.

by IT GUY | 25th Mar 24, 7:32pm 1711348337

Normally last in, gets proper f^%^ed

We teach our kids this with musical chairs, also known as Trip to Jerusalem. Not sure why its also called this, maybe its the Come to Jesus moment..... when you realise there is no chair left. Or no one turned up to your auction / open home !

Only 30% sales is one thing, many had a single bid to sell, but the number of properties which got no bid NOT EVEN A CHECKY LOW ONE shows the market is doomed to gap lower.

by Pa1nter | 25th Mar 24, 6:46pm 1711345579

This time a year ago, the same auction success rate was being witnessed, but currently 25% more are selling above valuation (don't know why we need to put things in bold, makes no difference if you're shouting the words or saying them).

Thats not to say there's no dip coming, because we don't know how bad the recession we're entering is, or how long.

But there's also trying to overlay each and every headline with what you're wishing will occur.

by Averageman | 25th Mar 24, 7:20pm 1711347642

When enough accept the true market price all the algorithms ratchet lower, just like the ponzi fuel of low interest rates did on the way up.

Some popcorn will get burned

⛽️ + 🍿 = 🔥

by Pa1nter | 25th Mar 24, 9:34pm 1711355651

At this rate, most of it's past it's expiry.

by IT GUY | 25th Mar 24, 7:35pm 1711348551

just a while back you would not even acknowledge a recession was possible

Welcome to the red pill world..... what happens if mortgage rates stay above 5.85% for a long time ?

by Pa1nter | 25th Mar 24, 9:33pm 1711355581

Actually from day dot, while the masses here were thinking high rates would instantaneously cause prices to crash (highly improbable), I attested we'd get a bad recession first. At no point have I ruled out a recession, I've been claiming the exact opposite.

We now have the recession before we've seen a significant fall in prices. Just as I said. Once sales, margins and jobs erode enough, house prices will follow.

The high rates are there to destroy demand, and kill off the marginal borrowers across the entire economy. A better question for you would be how long a recession do you think we'll have, while retaining the high cost of borrowing? Years?

by IT GUY | 26th Mar 24, 7:09am 1711390148

We will follow China, as they dominate our exports and also impact Aussie, we will be flat for about 6-8 years, we will need to reform tax to reallocate money into productive enterprise from land banking.

by HouseMouse | 26th Mar 24, 7:15am 1711390541

Of course that’s what we should do, or should I say should have done (long ago). Labour had their big chance and wasted it. Hipkins ranting on NOW about tax reform really annoys me.

I think it’s unlikely over the next few years, but if things really turn bad you never know

never waste a crisis

by Audaxes | 25th Mar 24, 5:10pm 1711339828

Despite relatively high issuance and holdings ($191 bln), trading in NZGBs is modest, averaging less than $30 bln/week.

RBNZ has pre-extinguised $879 million ahead of the imminent redemption of the $13.950bn 0.5% 15/05/24 issue.

Link - Government bond repurchases.

by HouseMouse | 25th Mar 24, 7:02pm 1711346564

There’s an excellent article in The Listener about MBIE, about its ridiculous bloat and innovation-killing culture (ironic that ‘innovation’ is in its title), and the power games that the senior bureaucrats play.

by HouseMouse | 25th Mar 24, 7:11pm 1711347097

Some good observations from former employees

In his experience, employees had to ‘stay in their lane’. Suggestions or contributions beyond that were generally unwelcomed.

’Increasingly, staff are managed by people calling themselves’leaders’ who only want the outcomes that have appeared in previous documents. Senior leaders are often not interested in good ideas, connections to other issues or innovative thinking’.

Not often I agree with Steven Joyce, but I agree staff numbers there should be halved

by IT GUY | 25th Mar 24, 7:37pm 1711348671

Thought Leaders are rarely capable of thinking on their own HM

by IT GUY | 25th Mar 24, 7:47pm 1711349225

Thought Leaders are rarely capable of thinking on their own HM

FFS Like I need someone to lead how I am thinking least I disagree with their ideology or thinking...... normally they have no domain knowledge either.....

I cannot imagine how many people NACT need to remove from MBIE to restore health to that operation.

by HouseMouse | 25th Mar 24, 8:24pm 1711351460

Agree, and it’s a really w#%^y term. Almost always ‘thought leaders’ are anything but. Usually charlatans. Kainga Ora is full of them…

by Te Kooti | 25th Mar 24, 8:05pm 1711350340

You've described the culture of just about every large organisation on the planet. What get's measured get's done.

We can take this offline House Mouse, you're not in the wheelhouse so don't know the painpoints. I'm happy to whiteboard it with you but there are a lot of moving parts so please stick to the low hanging fruit.

by HouseMouse | 25th Mar 24, 8:25pm 1711351510

Haha nice one

by kiwikidsnz | 25th Mar 24, 9:45pm 1711356349

I have heard that said before more than once !

by Nzdan | 26th Mar 24, 12:09am 1711364999

Many Government organizations are suffering from mission drift. They should really have a deep dive into their core competencies and focus on rightsizing their models. Drilling down into these pain points can ensure they're addressed effectively and these organizations should leverage their synergies to help move the needle.

Corporate buzzword bingo never gets old.

by HouseMouse | 26th Mar 24, 7:06am 1711390016

Lol

Downsizing numbers and operating a much leaner model can assist recalibrating mission and ensuring a more nimble organisation

by HouseMouse | 25th Mar 24, 7:14pm 1711347297

Got an email today from BNZ about my mortgage renewal. Saying they are offering discounts on the advertised mortgage rates. Anyone know what they are offering. I need to call them to find out.

by solardb | 25th Mar 24, 7:57pm 1711349868

Have you tried your internet banking ? renew under your bank loan . Should give you a range of rates.

by HouseMouse | 25th Mar 24, 8:25pm 1711351559

Thanks, will have a look and report back

by HouseMouse | 25th Mar 24, 8:28pm 1711351739

Offering 0.4% off on advertised 12 months rate. No cash back offer. Look elsewhere?

by ChrisOfNoFame | 25th Mar 24, 10:32pm 1711359170

I would be.

Many banks are offering cashbacks on re-fixing. And most banks would be delighted to offer a better rate. Talk to them first and then get back to your bank. If they don't undercut the other offers - your bank is treating you with contempt.

by ChrisOfNoFame | 25th Mar 24, 10:29pm 1711358952

Check very carefully that the email is genuine.

Absolutely do call them but using a number from their main i-net page and not from any number in the email.

If the email contains a link to the bank's web site - do not click on it - unless you've ICT savvy enough to pre-check where it is taking you.

Even if you're ICT savvy and the link takes you to a logon page - be extremely suspicious - and do not log on.

Banks should be providing access to the functions you require once you've independently logged on from their main i-net page.

by Rampart | 26th Mar 24, 6:41am 1711388473

ASB gave my friend 6.99% for 6 months in March

by HouseMouse | 26th Mar 24, 7:17am 1711390654

BNZ are offering me 6.89 for 6 months and 6.85 for 12 months

by HughJorgan | 25th Mar 24, 7:25pm 1711347900

Missed this the other day. House builder Selah in liquidation. I don’t buy that’s it’s a health issue as you’d surely finish what you had started.

https://www.stuff.co.nz/nz-news/350220022/upmarket-building-company-fails-leaving-homes-unfinished

by HouseMouse | 25th Mar 24, 8:05pm 1711350352

Small fry

by HughJorgan | 25th Mar 24, 8:16pm 1711350966

Yes, but to buys who should be better able to absorb increase.

indicates there is not development margin in the higher end stuff either.

by Pa1nter | 25th Mar 24, 9:31pm 1711355481

Architectural builds are the least profitable house building work you can do. Often bespoke, using exotic materials, trying to deploy crazy designs, with processes that don't flow at all.

Much of it ends up getting done as labour and materials.