What happened Tuesday

Economy / news

A review of things you need to know before you sign off on Tuesday; housing market's unsold inventory swells, Synlait in trouble, Rabobank in good shape, car sales sluggish, swaps up, NZD stays low, & more

[updated]

2nd Apr 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
No changes to report today. Update: Westpac has cut -14 bps from its two year fixed rates, taking its 'special' to 6.75% and lower than all its main rivals.

TERM DEPOSIT/SAVINGS RATE CHANGES
Kernel's 34-day 'Smart Saver' notice saver has had its 5.50% return rate reduced to 4.80%.

HIGHEST SINCE 2015
The housing market is heading into winter with a shed load of unsold properties looking for buyers, in fact, total unsold housing stock on the market is now at an almost nine year high.

PROFITS VANISH
We are reviewing the delayed Synlait results, finding a once high-flying company in deep trouble. There are active going-concern issues. Keith Woodford's analysis is here.

PROFITS RISE FASTER THAN LENDING
Rabobank posted its 2023 financial results with its food and agri lending book growing by +$500 mln or +3.3% to $16.6 bln. Its net profit after tax rose to $218.5 mln, up by +$25.1 mln on the prior year, up by +13%.

SUBDUED IN MARCH
Infometrics reports that there were 30,499 new car registrations in the March 2024 quarter, a +12% pa increase, following two quarters of declines. However, this growth was entirely due to an +84% pa increase in January 2024, with February and March 2024 new car registrations lower than the same months in 2023. But "on a monthly basis, March 2024 saw registrations of both new and used cars down compared with the same month in 2023. This recent weakness is perhaps a sign that the wider economic slowdown and continued softening in household spending is subduing sales across the market." And some of this weakness is due to the removal of the Clean Car Discount distortion.

EYES ON DAIRY PRICES
Since its peak at the February 6 Global Dairy Trade auction event, the WMP price has fallen -11% to its last Pulse event on March 26. There is another GDT auction tonight, so all eyes will be on whether this slide extends, or the improved China economy is real enough to generate added demand and rising prices. The situation with SMP is similar, although the recent peak was later and the fall-off since has been sharper.

DROP IN SCAM REPORTED CLAIMED
The Department of Internal Affairs said that scam reporting is down by -80% after commencing an operation against a criminal network of text message phishing scammers. In 2023, through the first operation of its kind ‘Operation Cargo’, which uncovered a transnational criminal network of scammers which can be held responsible for most SMS scams in New Zealand in 2023. The SMS scam disruption operation comprised 12 search warrants in 2023 during which DIA seized over 4,000 items being used by scammers, including over $35,000 worth of SIM cards and hardware, almost $10,000 worth of luxury items including a designer handbag and skincare products, and over $56,000 cash.

LOWER PRICES
In Australia, iron ore exports are up and prices are falling, all because China can't absorb what is being shipped.

SWAP RATES FIRM
Wholesale swap rates are likely to be a little higher today on global (US) influences. Our chart below records the final positions. The 90 day bank bill rate is down -1 bp at 5.63%. The Australian 10 year bond yield is up +6 bps at 4.06%. The China 10 year bond rate is unchanged at 2.31%. The NZ Government 10 year bond rate is up +5 bps from this morning at 4.69% and the earlier RBNZ fix was at 4.67% and up +8 bps. The UST 10yr yield is down -2 bps from this morning at 4.31%. Their 2yr is now at 4.69%, so the curve is now inverted more, now by -38 bps and similar to where it was on Thursday before the holiday weekend.

EQUITIES MIXED
In late trade today, the NZX50 is -0.4% lower to start the short week. The ASX200 is unchanged in early afternoon trade. Tokyo has opened its Tuesday session up +0.6% and recovering some of yesterday's drop. Hong Kong is up a very strong +2.7% (it didn't trade yesterday when the good China PMIs were released). Shanghai has opened up another +1.2%. Wall Street ended its Monday session down -0.2%.

OIL PRICES SOFTISH
Oil prices have eased back -50 USc today to US$83.50/bbl while the international Brent price is now at US$87.50/bbl and little-changed.

GOLD FIRMER AGAIN
In early Asian trade, gold is up +US$10 from this morning, now at US$2250/oz.

NZD HOLDS SOFT
The Kiwi dollar has essentially held its lower level of this morning, now at 59.5 USc. Against the Aussie we have stayed down at 91.7 AUc. Against the euro we are little-changed at 55.5 euro cents. This all means the TWI-5 has remained just on 69.

BITCOIN SLIPS BACK AGAIN
The bitcoin price has softened, now at US$69,407 and down -0.4% since where we opened this morning. Volatility of the past 24 hours has been moderate at +/- 2.2%.

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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58 Comments

by Audaxes | 2nd Apr 24, 4:07pm 1712027275

Launch of 15 May 2035 Nominal Bond Announced

by J.C. | 2nd Apr 24, 4:28pm 1712028498

We are reviewing the delayed Synlait results, finding a once high-flying company in deep trouble. There are active going-concern issues.

Yes there are. Incidentally, met people from a British infant formula company Kendamil who I'd never heard of. Stunned me by telling me they filled a hole in the US market shortage back in 21 and have never looked back. Now hold #4 mkt share (unclear as to whether or not that's total category or some other classification).

Reality is that a NZ mnfer or brand didn't do this. And to some degree, this is what we're supposed to be good at.

by Foxglove. | 2nd Apr 24, 5:15pm 1712031314

Not ideal tidings of late from the primary production sector. Synlait for one. Silver Fern Farms not as bad as Alliance admittedly , but $24 mill in the red nevertheless serious given the high need and/or cost of maintenance always ongoing. Unwelcome shadow perhaps, re the prospects of the farming industry coming to the rescue as said in bygone years?

by J.C. | 2nd Apr 24, 5:36pm 1712032585

. Silver Fern Farms not as bad as Alliance admittedly , but $24 mill in the red nevertheless serious given the high need and/or cost of maintenance always ongoing.

The SFF 'Net Zero by Nature' marketing campaign annoyed me. Nobody in North America knows what it means.

by redcows1 | 2nd Apr 24, 6:19pm 1712035148

I'd be very surprised if any NZ company was allowed into the US with infant formula. At least not without tariffs. Synlait were set to partner there with someone but the authorities unceremoniously kicked them to touch.

by J.C. | 2nd Apr 24, 6:23pm 1712035398

I'd be very surprised if any NZ company was allowed into the US with infant formula.

And why would a British company be allowed?

https://www.nbcmiami.com/news/national-international/uk-formula-brand-k…

by redcows1 | 2nd Apr 24, 6:43pm 1712036630

No idea.

But when it comes to dairy into the US to us the term, it's complicated , doesn't even begin to describe the relationship. Just be assured that the US is not our friend.

by Foxglove. | 2nd Apr 24, 7:09pm 1712038158

In reality should NZ disappear into the vortex of a great sink hole, the only parties in the USA that would miss NZ’s produce are those that can still make money out of trading it.

by Justa comment | 2nd Apr 24, 7:18pm 1712038702

especially if Trump gets back in........

by Pa1nter | 2nd Apr 24, 9:50pm 1712047832

I wonder if anything happened to fundamentally alter who England can viably trade with that may have born some influence.

by K.W. | 2nd Apr 24, 9:07pm 1712045227

A2 Milk did get FDA permission to supply infant formula during Operation Fly Formula, but they got it so late that the crisis was over by then and they didnt end up sending any. However the permission still stands and they are working through FDA licencing for permanent market access while supplying formula via the Amazon online store. Fonterra decided it was all too hard and just gave up on the opportunity.

Auustralian manufacturers were the biggest winners, namely Bellamy's and Bubs. Bubs is also not looking back, as they are now expecting their first ever profit as a result of their new American business, having doubled production capacity at their manufacturing plant. This is important as the Chinese market shrinks due to declining births and increased domestic production of infant formula. Because Bubs was one of the first to send formula to the US they also have a physical distribution network of over 5000 supermarket stores in the US, including Walmart. A2 Milk does not. Interestingly Bubs has chosen to dump its A2 infant formula in the US, in favour of a "grass fed cows" version, alongside their standard goats milk formula.

Most of the big European formula manufacturers got permission as well, along with some of the specialty players. Danone got permission to export NZ made Aptamil to the US. Kendamil is one of the few manufacturers certified as vegetarian, Halal and Kosher, which is what got them access.

by J.C. | 2nd Apr 24, 11:46pm 1712054819

Superb explanation. Re Bubs, sounds like they're in an excellent position with physical shelf distribution. Walmart has an excellent Ecommerce proposition so channel strategy looks exciting.

by Wrong John | 2nd Apr 24, 4:29pm 1712028592

Has the Kiwi landed?

It starts with a 5 which is not great news.

Heading to the 4's?

by TronMVP | 2nd Apr 24, 4:38pm 1712029081

The only thing heading to the 4s is the 2 year swap rate :-)

Kiwi dollar will toy with the 0.59 mark, then go back over 0.60.

by Blackdog | 2nd Apr 24, 4:38pm 1712029093

^{80c to AUD will be good for exports}

by Justa comment | 2nd Apr 24, 7:21pm 1712038879

80c AUD very unlikely with todays hews that they could now even raise the OCR and cuts this year now unlikely. Many predicted this for Oz who never went high enough.

by redcows1 | 2nd Apr 24, 6:20pm 1712035225

Hope so. That's where it should be with our trade deficit.

by J.C. | 2nd Apr 24, 4:35pm 1712028914

Media getting all jumpy about why the gold price is spiking (charts on silver also looking deliciously historic).

However, is the recent rally anything to do with rate cut expectations? Or is it something much bigger?

Like the West losing its pricing power in gold and China / BRICS setting the price.

“I think it’s a really exciting moment in gold,” said Joseph Cavatoni, market strategist at the World Gold Council, told CNBC on Monday. “What’s really driving it is, I think, many market speculators really getting that confidence and comfort [in] the Fed cuts,” he said.

https://www.cnbc.com/2024/04/01/gold-prices-hit-new-record-high-on-fed-…

by lonewolfnz | 2nd Apr 24, 4:44pm 1712029446

Nice day to have sold most of my BTC on Sunday :)

NZD starting to arrive in my ASB account.

by J.C. | 2nd Apr 24, 4:53pm 1712029998

Like losing a kindred soul Wolfie.

You given up the degen space as well? Will we see you in 2027/28?

by lonewolfnz | 2nd Apr 24, 6:42pm 1712036541

I still hold 1 BTC in IBIT / FBTC. That is a life time thing.

Setting up trust funds for my kids. Each will be allocated 2% to btc.

And I have some very degen stuff, like this thing lol

https://www.coingecko.com/en/coins/degen-base

by printer8 | 2nd Apr 24, 4:53pm 1712030000

I note a small businesswoman was sent to prison today for 2 1/2 years for tax evasion. Not declaring all income, overstating some expenses, and not forwarding Paye deduction's on employee pay.

Should be a warning to those that do cash jobs and/or pay employees under the table. Now high risk with IRD now a lot more efficient with computer upgrade a couple of years ago and data sharing

by Baywatch | 2nd Apr 24, 4:58pm 1712030330

Have they upgraded to windows 11? Wait till AI takes over...no where to hide.

by False economies | 2nd Apr 24, 5:07pm 1712030864

Some of you might like this article which is an extract from a book

https://www.theguardian.com/books/2024/apr/02/outdated-and-misleading-is-it-time-to-reassess-the-very-concept-of-money

by Jonny.Foe | 2nd Apr 24, 5:14pm 1712031296

This is a really clear article. A statement of the hard truth that people will no doubt still strawman and criticise!

by Audaxes | 2nd Apr 24, 7:58pm 1712041106

Are you sure?

As with money created through bank lending, money created through government spending does not persist and circulate indefinitely through the economy. The slightly shocking and dispiriting reality is that, when you pay your taxes, the money doesn’t go into an account or a vault. It is vaporised. The tax payments cancel out the money that was created at the time of the original government spending.

Money the government borrows from banks is extinguished when government debt is redeemed.

This undertaking is one such instance.

There is already an abundance ($30.692bn) of unspent bank credit lodged at the Crown settlement accounts.

by Jonny.Foe | 2nd Apr 24, 10:03pm 1712048616

You always start the sequence in the wrong place. Govt creates money when it spends. This debit (credit to the private sector) is counted on the CSA. Taxes destroy money, causing a debit on the CSA. Obviously to accept this, you have to recognise that Treasury and RBNZ are consolidated.

by Audaxes | 2nd Apr 24, 10:10pm 1712049015

We (RBNZ) increased the Crown overdraft facility to assist with the potential for larger-than-usual fluctuations in Crown cash flows

We provide a Crown overdraft facility to help the Government manage short-term fluctuations in its cash flows. We temporarily increased the overdraft from $5bn to $10bn for a three month period to 1 July, to assist with the potential for some larger-than-usual changes in cash flows. The overdraft facility was utilised for a short period coinciding with the Government’s April 2020 bond maturity, and the account has since been replenished following the issuance of additional bonds and Treasury bills. Link

by ChrisOfNoFame | 2nd Apr 24, 5:19pm 1712031586

The standard view dominates the politics of taxation and fiscal responsibility. It also prevails in sections of the academy, where some economists are wedded to the idea of money continually circulating through the economy as a persistent element in a closed system. In reality, money is regularly being created and destroyed, and economic models that don’t reflect that fact are not even slightly useful.

Agreed.

by Jonny.Foe | 2nd Apr 24, 5:32pm 1712032371

That's right. I have spoken to Treasury officials who looked confused when I pointed out that their models were producing impossible forecasts - stable Govt debt, continued current account deficits, and interest rates at levels that would clearly constrain increases in private debt.

They appear to have zero clue about the stimulatory role of private credit - perhaps because their models assume that money is borrowed from other people who are then unable to invest it? Loanable funds theory?

by J.C. | 2nd Apr 24, 5:44pm 1712033082

They appear to have zero clue about the stimulatory role of private credit - perhaps because their models assume that money is borrowed from other people who are then unable to invest it?

Nod to or related to the underpinnings of a Minsky Moment?

by Jonny.Foe | 2nd Apr 24, 10:04pm 1712048663

Yep, exactly

by ChrisOfNoFame | 2nd Apr 24, 5:09pm 1712030956

NZD taking a hammering. Anticipating an earlier than expected OCR cut? Or maybe a larger one? 55c here we come. Not good for new car sales ;-)

by IT GUY | 2nd Apr 24, 5:54pm 1712033663

Who could POSSIBLY see this coming.......... ????

by Justa comment | 2nd Apr 24, 7:23pm 1712039005

then get ready for $3 gas again

by E46 | 2nd Apr 24, 8:42pm 1712043729

I'm shocked I tell you, absolutely shocked.

by Solid_Granite | 2nd Apr 24, 5:48pm 1712033295

What's with the swap rate graph only going back 8 months? It used to go back ~5 years

by IT GUY | 2nd Apr 24, 5:57pm 1712033876

A Lot of Real Estate Agents going to be having difficult conversations with their vendors next few months, the "Do you really need to sell this?" type conversations... I know that the offers are 10% below ask......

Hence I am so sure of a 10% drop by xmas because thats where the offers currently sit.... once we are approaching that level the offers will naturally pull back, once again after a better deal.

So do you really need to sell it ?

by NZGecko | 2nd Apr 24, 6:23pm 1712035423

Yep the OneWoof Village idiot, aka the Comb.....will have a new lot of egg dripping from his curly locks come 2025, when his "10% GAINS FOR 2024" inverts very badly for this "once was a soothsayer" of the Housing market.

This nefarious rooster, does not appear to understand, that his words cannot reanimate an exposed and dieing ponzi......

Or that his totally bad calls and market prognostications from 2021, 2022, 2023........will be even worse in 2024 and 2025.

by J.C. | 2nd Apr 24, 7:07pm 1712038021

Uber Eats in NYC just got more expensive. The City Gov has now guaranteed app-based delivery workers a minimum pay rate of $19.56/hr - it's reported that some delivery workers have been paid a min of $5.39/hr.

While I personally have no issue with this, the cost of food delivery will likely become prohibitively expensive.

I do not do food delivery. I think it's lazy, slothful, and a waste of money. I've had lunch delivery in Singapore though.

https://www.cbsnews.com/newyork/news/watch-live-nyc-mayor-eric-adams-ma…

by solardb | 2nd Apr 24, 6:53pm 1712037193

Would be interesting to ratio $5.39 to apartment rent in New York . they probably live in their cars.

by Waikatohome | 2nd Apr 24, 6:51pm 1712037102

Has anyone else seen an increase in crime recently. Had my car broken into in town on Saturday morning and then witnessed three women leaving the supermarket with full trolleys without paying this evening . It’s like Northern England in the 1990s. Not what I have experienced in NZ before. The recession is already here. It’s going to be grim.

by solardb | 2nd Apr 24, 6:55pm 1712037356

I don't get the supermarket thing going on . surely it would pay them to have security guards , or a trolley lock system.I'm not sure police should be responsible for this, if the business's are going to let them walk out with trolley loads of food.

by Waikatohome | 2nd Apr 24, 6:59pm 1712037593

The staff are told not to stop them. They just take a photo of the number plate. They all had fairly distinctive tattoos. Probably known to the authorities but don’t fear the consequences.

by solardb | 2nd Apr 24, 7:23pm 1712039026

Car will be used by multiple people , no point in that.

They need security. I was in Tauranga pak n save , and somebody walked out with a single item , and was surrounded by security and workers. Pick your battles i guess.

by kiwikidsnz | 2nd Apr 24, 7:40pm 1712040044

Don't try that in New Mexico

https://youtu.be/Mg1L1zHkAqE?feature=shared

by Pragmatist | 2nd Apr 24, 8:27pm 1712042878

Security can't do anything, not allowed to touch them. All they can do is try to shame them, and record them on their phone.

by MLSmith1 | 2nd Apr 24, 8:23pm 1712042583

The Covid economy and Labour’s laissez-faire attitude to law n order is to blame….

We reap what we sow. Time to change the crop and hopefully learn from our mistakes

by Baywatch | 2nd Apr 24, 9:43pm 1712047394

Hang on National promised to be tough on crime...are we not on the right track yet...?

by K.W. | 2nd Apr 24, 9:16pm 1712045783

There is absolutely zero punishment for committing crime these days, and the criminals know it. A friend of mine was at a McDonalds the other day and saw a couple of guys sitting in the restaurant area brazenly selling about a dozen meat packs from the Countdown across the road. They record themselves doing all the stealing and post them to Tik Tok, like its something to be proud of.

by solardb | 2nd Apr 24, 9:31pm 1712046707

They usually trespass them from the supermarket or shop, which is more easily enforced , and can be acted on before the shoplifting occurs again.

by kiwikidsnz | 2nd Apr 24, 9:59pm 1712048343

" when you choose the behavior you also choose the consequences"...

"223Punishment of theft

Every one who commits theft (except under section 220A) is liable as follows:

(a)

in the case of any offence against section 220, to imprisonment for a term not exceeding 7 years; or

(b)

if the value of the property stolen exceeds $1,000, to imprisonment for a term not exceeding 7 years; or

(c)

if the value of the property stolen exceeds $500 but does not exceed $1,000, to imprisonment for a term not exceeding 1 year; or

(d)

if the value of the property stolen does not exceed $500, to imprisonment for a term not exceeding 3 months.,"

https://www.legislation.govt.nz/act/public/1961/0043/latest/DLM330209.h…;

by solardb | 2nd Apr 24, 11:15pm 1712052956

If you have been trespassed , it is automatically upgraded to burglargy , and it removes most defence lines . i forgot to pay etc .

by agnostium | 2nd Apr 24, 7:03pm 1712037792

"Consultation is proposed to run from that day to April 26, with feedback collated and final decisions to be made by June 30.“ It is expected a new organisational structure will be stood up in August"

As I've said before, expect very little if anything productive to happen from now until August. Then give it another 3-5 months for the new structure to bed down and you've lost a year of any productive work in the Ministry. I predict that after this period of no productivity, the Ministry will hire back the most experienced back as consultants at x3 the cost. The senior roles within the new structure will have been filled by the junior people that didn't jump ship and take their redundancy payoff. So those junior people will now be earning senior manager salaries and the senior managers will be on consultant rates.

As usual the cack-handed "cut roles based on an arbitrary number" will end up costing taxpayers more in the long-run. Rather than work with the Ministry to tighten up deliverable expectations and set clear targets we just have cut jobs. No ministerial accountability at all. UK Tories 101. Great time to be a big four HR consultant.

https://www.nzherald.co.nz/nz/public-service-agency-cuts-ministry-of-he…

by KH | 2nd Apr 24, 7:48pm 1712040490

Another post defending the public service and decrying the new government. Must be Agnostium I thought. And it was.

Now to the subject, the Ministry of Health, which I know something of.

Arguably, the Ministry of Health could be eliminated. Because we now have the nationwide Health New Zealand.

Maybe map about twenty five roles over to HNZ, and close the rest of the MoH down.

Same thing back in the 90s, when the RHAs came into being and the MoH was supposed to shrink to about 25. Long story short, MoH kept several hundred staff, epic Wellington infighting for five years and the RHAs were eliminated.

As for consultants at 3x previous dollars. That is a problem agnostium But actually proves how incompetent these people and these cultures are.

Easy solution. Don't do it. No downside with that.

by agnostium | 2nd Apr 24, 8:09pm 1712041742

I'm not defending the public service, I'm criticising the approach to fixing it.

Setting arbitrary head count cuts doesn't work. A government who has been in for 100 days mostly just cancelling stuff with no regulatory impact statements has no idea what's going on in the Ministries themselves. It's knee-jerk ideologically driven and intended to weaken the state apparatus regardless, and not bothered whether the bits being cut are doing a good job or not.

I've worked in many public organisations that had a lot of fat to be cut. A headcount restructure did not achieve any fat cuts. It ended up chopping off the legs and the brain and you're left with two fat arms flailing around.

If National and Act were serious about reforming the public service they would work on cross party consensus on priorities.

They would try to move away from the swings of adding staff during Labour to rebuild after National cuts. The public service used to be much more efficient and deliver because they were set clear priorities by ministers who listened to what was realistically achievable and were then given reasonable autonomy to execute.

I'm also not saying Labour are guilty of the same ideological approach, but Labour are not in power now and National are, hence the criticism. And it does seem that National's approach is fundamentally more ideologically driven and less evidence based.

by JimboJones | 2nd Apr 24, 8:17pm 1712042222

I’ve noticed more price increases at the supermarket recently. And petrol is getting expensive again too. Low NZD won’t help import prices.

I don’t think we’ve got inflation beat yet, not sure that we’ll see a rate decrease this year.

by IT GUY | 2nd Apr 24, 9:21pm 1712046066

Not until FED cuts and The US markets starting to unwind all rate cuts THIS YEAR.....