What happened Wednesday

Economy / news

A review of things you need to know before you sign off on Wednesday; no retail rate changes, no OCR change, more here on work visas, job ad levels ease, consumer card activity soft, swaps soft, NZD firm, & more

10th 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
Nothing to report today - so far at least.

TERM DEPOSIT/SAVINGS RATE CHANGES
Nothing here either.

VERY BRIEF, BUT TO THE POINT
When the RBNZ held its OCR level at 5.5% earlier today, it said that level will be needed 'for some time', but it will get inflation back down to the targeted range of "between 1% and 3% over the medium term, with a focus on keeping future inflation near the 2% midpoint". This is largely as expected and little-changed even though many indicators are flashing 'recession'. The NZD rose but not by a lot. Benchmark bond yields held little-changed, and then softened. The NZX50 was rising before the announcement and showed no immediate reaction.

HERE FOR WORK
More than 50,000 people arrived through the border on work visas in the Q1-2024 taking the total here on work visas to almost 200,000. (Just for reference, that is the population of one of Gisborne, Whanganui, or Queenstown here to work in just 90 days. Now there are more here on work visas than the whole populations of one of Hamilton, Tauranga, Napier+Hastings, or Dunedin+Invercargill.)

FALLING IN 2024 AS FAST AS THEY ROSE IN 2021
The latest BNZ-Seek job ads survey finds ad levels eased in March, but at a slower pace. But applications per job ad more than doubled from year earlier levels. All regions saw a drop in job ads compared to year-ago levels with the biggest falls in Wellington. But if you are in the legal 'profession' you are in one sector where demand is rising.

NORMAL
Transpower reports that hydro storage is above normal in the North Island storage lakes and below normal in the South Island storage lakes. Meanwhile Auckland water storage levels are at 75%, almost exactly on 'normal' for this time of year (74%).

NO LONGER FALLING
The overnight GDT Pulse dairy auction for WMP and SMP (which happens in the weeks when there is no full GDT event), brought a satisfying confirmation that the recent rise in price for both commodities is sticking. The WMP price held at US$3241/tonne, a satisfactory level but not 'high'. And the SMP price held at US$2550/tonne, a lowish level but above levels it sank to a few weeks ago.

2 MLN HOUSEHOLDS
StatsNZ released its quarterly dwelling and household estimates to March 2024. There were no surprises but it might be worth noting that for the first time, the number of households exceeded 2 mln as at March 2024, 64.5% of them in their own home, 32% in rented accommodation, and a small fraction (4.5%) in free housing. The average household size in unchanged at 2.65 people.

THE 'ONE PLAN' PLAN
The Government today announced an intention to integrate the various 'farm plans' into a more coherent system. They say there will be less of a 'national' approach, more of a local approach to risk assessment. Local Catchment Groups may co-ordinate what is required. This new approach is intended to bring existing environmental work into these assessments, bundling up freshwater plans, stock exclusion plans, winter grazing plans, local consent requirements, farm environment plans, industry assurance programs, and the like into one set for each farm that recognises its local topography, needs and risks - and the work that goes on on-farm outside the centrally-mandated regulations.

'NOT GOING AWYWHERE FAST'
ANZ said its card activity is revealing that annual growth in total spending in March was only +2.5%, lower than last month and well below where the rate of inflation. Durables and discretionary spending like clothing continue to be particularly exposed to more caution on the part of consumers, they say. The bright spot is tourism-related spending, up more than +6% from a year ago. "But now the summer season is behind us, that annual change is much less meaningful in terms of revenue growth," they observe.

WHY GOOD WI-FI REALLY, REALLY MATTERS
We have just released a review about Wi-Fi. As the tech improves, and bandwidth gets used up, it has become an issue you need to pay attention to. And that is where our latest explainer can help.

CAN YOU SUPPORT US?
If you missed our appeal for support yesterday, can you action it today? We want all our resources to be available free for all, but this can only be sustained if those who can, support us. (You choose the amount, reflecting our value to you.)

SWAP RATES IGNORE OCR FOLLOW GLOBAL TRENDS
Wholesale swap rates are likely to be slightly softer today after the no-change OCR. Our chart below will record the final positions. The 90 day bank bill rate is unchanged yet again at 5.63%. The Australian 10 year bond yield is down -11 bps at 4.13%. The China 10 year bond rate is up +1 bp at just on 2.31%. The NZ Government 10 year bond rate is down -9 bps from this time yesterday at 4.75% and the earlier RBNZ fix was at 4.73% and down -2 bps before the OCR. The UST 10yr yield is down -5 bps from this time yesterday to 4.36%. Their 2yr is down -5 bps at 4.74%, so the curve is still inverted by -38 bps.

EQUITIES MIXED
In late trade today, the NZX50 is up +0.4% and had virtually no reaction to the 2pm OCR review. The ASX200 is up another +0.5% in early afternoon trade. Tokyo has started its Wednesday session down -0.3% in a breather. Hong Kong has started today up a strong +1.7%, but then Hong Kong is often volatile. Shanghai opened down -0.4%. Singapore is closed for a holiday today. The S&P500 spent most of its Tuesday session lower but Wall Street rallied near the end to finish up a minor +0.1%.

OIL PRICES FALL
Oil prices have fallen back -US$1.50 to just over US$84.50/bbl in the US while the international Brent price is now just over US$89/bbl.

GOLD UP AGAIN
In early Asian trade, gold is up +US$6 from this time yesterday at US$2350/oz and back near another new all-time high. Silver is now over US$28/oz and approaching its 2020 highs (but is still a long way below its ATH set in 1980, or even its 2011 peak).

NZD IN NET GAIN
The Kiwi dollar has risen nearly +½c to 60.8 USc post the OCR decision. Against the Aussie we are a touch firmer too and back up at 91.7 AUc. Against the euro we are also firmer at 55.9 euro cents. This all means the TWI-5 is now up nearly at 69.8 and up +30 bps from this time yesterday.

BITCOIN FALLS
The bitcoin price has fallen today to US$69,087 and down -3.4% from where we were this time yesterday. Volatility of the past 24 hours has been moderate at just under +/- 2.5%.

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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33 Comments

by Foxglove. | 10th Apr 24, 4:25pm 1712723112

Very brief, but to the point, as captioned above. Look appreciate another column deals to this alongside but to put it simply is it not that supposedly in response to the pandemic the RBNZ wilfully printed money and the sixth Labour government wilfully spent it? Now New Zealand might not have been exactly as the Weimar Republic but nor was it exactly a surging strong economy either and history tells us time over time that governments that print money and then indulge in indiscriminate spending, invite rampant inflation. Other countries are recovering but New Zealand falls short of an economy of the same size(s) and therefore has not within that same resilience built in. Consequently those decisions by Messrs Orr & Robertson and associates have been devastating and are continuing to be so. Thanks for the opportunity to vent!

by Audaxes | 10th Apr 24, 4:47pm 1712724447

Liquidity is going up, liquidity is going down, liquidity here, liquidity there. Sure: but what is ''liquidity''?

by lonewolfnz | 10th Apr 24, 4:10pm 1712722214

"The Kiwi dollar has risen nearly +½c to 60.8 USc post the OCR decision" - first time ever more than half my investments are in NZD (at least until I sort out all this AML / KYC stuff). Adrian needs to pump this coin for me. Maybe announce an airdrop or something.

by IT GUY | 10th Apr 24, 4:20pm 1712722826

These cuts to staff at gov departments are not even taking staff levels back 6 months WTF?

Did they hire more knowing they would have to lay off

by KH | 10th Apr 24, 4:39pm 1712723963

Then let's tell them another 10 % off costs in Q3 and another 10% in Q1 of 2025.

It's important the management's make the arrangements. They know (or should know) what the job of the department is. And how to get there.

The rest of us know what we have to achieve, and we have to do it with what we have got. The civil service need to learn realities.

by dumbthoughts | 10th Apr 24, 5:39pm 1712727578

Is that not at least a very little bit irresponsible? ... expanding headcount when in the runup to the election there was a strong chance (which came to pass) that a government would be formed where parties campaigned on reducing public sector spending/headcount, and this was also then indicated as part of the coalition government policy. Seems like a great way to cause collateral damage.

I feel sorry for the staff affected, as at the end of the day most people just apply for the best job for their requirements/circumstances and you can't blame people for taking a government job if one is offered. However, it seems very poor form of the management of these organisations to be hiring knowing there would be a very high likelihood that cuts would then need to be made.

On a related note - hopefully the brains trust here can answer - let's imagine for a second that the government wanted to be more targeted with cuts, e.g. focusing on reducing upper management roles and salaries. Is a minister/government permitted to somehow instruct the nature of spending or is that totally left up to the department? In other words, it seems like the well-remunerated upper managers are insulating themselves from damage at the expense of others, maybe having to do something really drastic like fly premium economy only and not business ... could the government (if it really wanted to) say 'no you have to cut elsewhere'?

by IT GUY | 10th Apr 24, 6:23pm 1712730214

No Ministers cannot interfere in operational matters, but they can ask for further cuts.

by dumbthoughts | 10th Apr 24, 8:33pm 1712737985

Thanks. That's what I suspected but wasn't sure.

by Mr_Jolly | 10th Apr 24, 5:35pm 1712727334

Yup. Politics 101. Hire indiscriminately in the public sector with no regard to output, then squeal "slashing public services!" to scare old ladies when the good guys come in to clean up the mess.

by Beanie | 10th Apr 24, 10:04pm 1712743482

They certainly did according to this recruitment agency. Heads need to roll for this.

https://www.rnz.co.nz/national/programmes/morningreport/audio/201893362…

by J.C. | 10th Apr 24, 4:22pm 1712722970

Silver is now over US$28/oz and approaching its 2020 highs (but is still a long way below its ATH set in 1980, or even its 2011 peak).

Really happy interest dot co pointed this out. Things are somewhat different in 2024. For ex,

India's silver imports surged by 260% in February to a record high, as lower duties encouraged large purchases from the United Arab Emirates (UAE), government and industry officials told Reuters, adding they were on track to increase by 66% this year.

https://finance.yahoo.com/news/indias-february-silver-imports-hit-20514…

by J.C. | 10th Apr 24, 4:45pm 1712724319

China's credit rating downgraded by Fitch. Remember Japan was downgraded to the same credit rating as Botswana in the 2000s, even though Japan was providing aid to Botswana. Even then, Japan was the largest owner of US debt in the world.

Ratings agency Fitch revised its outlook on China’s sovereign credit rating to negative on Tuesday, citing risks to public finances as the economy faced increasing uncertainty in its shift to new growth models.

https://www.cnbc.com/2024/04/10/fitch-downgrades-outlook-on-china-to-ne…;

by Audaxes | 10th Apr 24, 6:53pm 1712732008

Fitch forecast China’s economic growth would slow to 4.5% in 2024 from 5.2% last year, in contrast to Citi and the International Monetary Fund, which both revised up their China forecasts. Hmmmm...

US Will Not Accept Another "China Shock", Yellen Says

US needs to reduce employer costs to hire because of the FIRE sector.

RADHIKA DESAI: If I may just interject, this is the percentage of households who spend more than 30% of their income on housing. Overall, 30% of all US households are spending more of their housing, but among renters, this ratio goes up to 50%, while among owners, it is 21%. You can see that those who are wealthy and relatively better off who own their own homes are penalized less than those who are relatively worse off.

You see here, again, another really shocking statistic. This chart goes back to 1960. You can see that the ratio of house prices to the median household income went down after the 60s and remained low right into the 1980s, but from about 2000 onwards, basically coinciding with the easy money policy of the Federal Reserve, house prices as a proportion of median income has risen, and although they again fell after the 2008 housing bubble burst, they began rising again, and today they are even higher than they were in 2008.

MICHAEL HUDSON: The situation is actually much worse than that chart says, because not only have housing prices gone up, but the mortgage rates have gone up. They’ve doubled from about 3% to almost 7%. Now, if you have a mortgage, you want to buy a house, you don’t want to be a renter, you want to escape from being a renter, you buy a house, and your mortgage has to be 7%. That means the entire price of the house, the mortgage that you’re paying, doubles in 10 years, and if it’s a 30-year mortgage, it doubles again and it quadruples in 20 years and multiplies eight times by the end of the 30-year mortgage, so that the bank will get eight times as much for the house you buy as the person who sells the house to you. The mortgage rate and the debt attached to the house is expanding even more rapidly than the housing prices.

That’s what debt deflation is, and that’s part of why the economy is being malstructured.

So what voters are seeing is not simply the economy’s getting worse, but the whole way in which it’s structuring and the direction it’s going in, financialization and the whole neoliberal plan makes them want to throw the rascals out of office.

RADHIKA DESAI: Indeed, the approval ratings figures are showing exactly that. Link

by J.C. | 10th Apr 24, 5:09pm 1712725763

My mind was questioning this as well. Yellen just arrived back from China.

by Threecents | 10th Apr 24, 7:41pm 1712734876

Golly, Yellen is just embarrassing. The US let jobs go as global trade was encouraged so company owners could make bigger profits with cheaper overseas labour/materials. It’s a bit late now..

by meh | 10th Apr 24, 8:15pm 1712736901

Was just reading the China Shock article and about to post it here.

It appears most of the commentators see through the BS.

In relation to the debt deflation/FIRE issues it would appear we're still blind to it here in lil ole NZ.

https://www.wsj.com/real-estate/blackstone-making-10-billion-multifamil…

https://www.zerohedge.com/markets/blackstone-makes-10-billion-bet-multi…

Couldn't possibly happen here.

Corporations say they were forced to raise prices. But profits increased at a faster rate than costs — and hit a record high in 2023. News flash: Corporations are using inflation as cover to get rich. FUBAR. Nearly all brands in our supermarkets are subject to the same gouging. We have local alternatives but because of smaller economies of scale they can't compete on price.

https://twitter.com/RBReich/status/1777833872853807331?ref_src=twsrc%5E…

by J.C. | 10th Apr 24, 5:07pm 1712725626

Aussie boomers splashing out on luxury cars. I've seen a correlation between house price growth and luxury car sales volume. Quite a strong fit. Obviously Aussie property market going gangbusters.

Maccy B brings out the DGM

Most baby boomers do not experience rising rents or mortgage payments because they own their homes outright.

Most boomers are also earning higher interest rates on their savings while being insulated from rising income tax payments.

The reality is that baby boomers are the only cohort with the free cash flow and savings to binge on luxury cars.

The rest of us are just trying to financially keep our heads above water.

https://www.macrobusiness.com.au/2024/04/baby-boomers-spend-big-on-luxu…

by Blackbeard | 10th Apr 24, 5:53pm 1712728385

And there lies the problem - next generations aren’t going to be buying BB assets at current levels. We can see this effect happening now in NZ with RE unsold stock rising.

Caramel popcorn.

by J.C. | 10th Apr 24, 6:56pm 1712732164

And there lies the problem - next generations aren’t going to be buying BB assets at current levels. We can see this effect happening now in NZ with RE unsold stock rising.

Caramel popcorn.

Bingo. The boomers either don't give a rats or are cutting their own throats.

by IT GUY | 10th Apr 24, 7:14pm 1712733269

next gen are buying gold

by Frank Sobotka | 10th Apr 24, 8:53pm 1712739212

Why would they care what happens to their toys when the are gone? They don’t even care about their kids and grandkids health and education (on a macro level)

by JimboJones | 10th Apr 24, 7:19pm 1712733556

Smart boomers already got out into TDs. The rest were waiting for National to save the day, now waiting for RBNZ to save the day, but maybe those days are over.

by IT GUY | 10th Apr 24, 7:22pm 1712733738

Many are looking at the strip of land between Sydney and Brisbane and asking hard questions.

by Beachbreak | 10th Apr 24, 6:18pm 1712729917

With so many work visa arrivals on top of several hundred thousand other arrivals could one expect credit card expenditure to grow or car sales or expenditure. Does this imply a booming cash economy??

by IT GUY | 10th Apr 24, 6:25pm 1712730326

Everyone likes Charlie

by kiwikidsnz | 10th Apr 24, 6:33pm 1712730836

Tradies looking at Oz...

https://www.abc.net.au/news/2024-04-10/qld-bpic-agreement-between-queen…;

by JimboJones | 10th Apr 24, 7:21pm 1712733677

Yeah but they get a $20 a week tax cut here - maybe someday.

by IT GUY | 10th Apr 24, 7:23pm 1712733826

its so crazy how much a stupid $20 tax cut is going to cost vs the ever increasing cost of everything around us.

In AKL if you have a kids AT Hop card it beeps twice, I reckon 60% using kids passes.....

by Frank Sobotka | 10th Apr 24, 8:51pm 1712739101

Franks noticed that half the folks don’t seem to pay.

Also now 5 year olds must pay, so boomers can continue to travel free

by tis i | 10th Apr 24, 8:10pm 1712736623

Not spectacular money.

by kiwikidsnz | 10th Apr 24, 9:50pm 1712742636

If you say so: $100k pa + $13k pa travel + $50k pa remote allowance + annual increases for the next 5 years...

by tis i | 10th Apr 24, 10:09pm 1712743764

That’s adding a heap of stuff onto the base rate. So if you qualified for all that it’s up there.

But the base rate of $50/hr $100k pa isn’t huge.

by Kate | 10th Apr 24, 9:31pm 1712741466

THE 'ONE PLAN' PLAN

Okay, so that's the pitch - sounds good, indeed great, to me.

But they need to tie it (on an individual farm basis) to an incentive structure as well (i.e., payment for ecosystem services) - which are aligned to measured, quantifiable environmental improvements (low impact farming)..

It will need an army of on-farm inspection officers, but hey, we have armies of building inspection officers out there, and I'd say that making agriculture cleaner, kinder and more profitable all at the same time would be seriously worth it.