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
None here today,
TERM DEPOSIT/SAVINGS RATE CHANGES
None here either.
ADS SLUMP, APPLICATIONS SOAR
Job ad numbers were down -30% in April from February as applications soared in the month, almost doubling.
DECLINE INTENSIFYING
Residential construction in Auckland will start a steady decline next summer, likely by more than -25% over the next two years.
SLOPPY CHECKING
A proposed $4.2 mln settlement has been reached between the regulator, Department of Internal Affairs, and SkyCity Casino over the civil proceedings against SkyCity for breaching its Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) obligations. This is a penalty (pending the Court's agreement) for important procedural breaches. DIA is not alleging there was evidence to suggest that SkyCity was directly involved in money laundering or the financing of terrorism..
CARBON PRICE SLUMPS
The price of a NZU (one tonne of carbon equivalent) has slumped to $47/tonne, its lowest in more than a year. And recall it hit $87/NZU in late 2022.
A BORING SEGMENT
Amounts billed to credit cards were weak in April, down -0.6% from a year ago and down a rather more concerning -2.0% from March. That is because these changes are not inflation-adjusted. Balances outstanding on credit cards were little-changed in April from a year-ago, also reinforcing the inflation sag. All this suggests pressures on consumers, but in fact the proportion of these balances that incur interest is low and little-changed, and stable compared to the same month a year ago.
PROBLEMS AHEAD?
The Tiwai Point aluminium smelter near Bluff is at risk. It imports alumina and processes it into primary aluminium from refineries in Queensland and the Northern Territory. But gas shortages at those refineries are causing shutdowns and Rio Tinto has reportedly declared force majeure on its supply contracts. Turning off smelting pots can be a very costly exercise. It all hinges on whether NZAS (a Rio-Sumitomo joint venture) is considered an in-house customer or a third-party customer.) Around 90% of the aluminium produced at Tiwai Point is exported, mainly to Japan.
FAT GAINS
In Australia, the expanding labour force (up +2.5% in March from the same month in 2023) is behind a +7.1% rise in total labour compensation in March 2024 from the same month in 2023. That means in April 2024, total wage and salary compensation will have pushed on up above AU$100 bln in the calendar month.
SWAP RATES FIRMISH
Wholesale swap rates are likely to be firmer today but not by much. Our chart below will record the final positions. The 90 day bank bill rate is unchanged at 5.61%, a level it has hovered around for more than 70+ days. The Australian 10 year bond yield is up +4 bps to 4.31%. The China 10 year bond rate is now at 2.33% and little-changed. The NZ Government 10 year bond rate is up +3 bps to 4.70% from this time yesterday and the earlier RBNZ fix was at 4.64% and up +2 bps from yesterday. The UST 10yr yield is unchanged from yesterday at 4.45%. Their 2yr is now at 4.85%, so the curve has shifted in marginally to -40 bps inverted.
EQUITY MARKETS SOFTEN
The NZX50 is ending today down -0.5%. The ASX200 is down -0.2% in afternoon trade. Tokyo is up +0.2% in late morning trade. Hong Hong has slumped -2.1% and Shanghai is down -0.3% in opening trade today, all on the realisation that the Chinese property rescue effort is probably not going to achieve anything meaningful. Singapore is unchanged. Wall Street ended its Monday session little changed, after some good intra-day gains that weren't held.
OIL SLIGHTLY SOFTER
The oil price is -US$1 lower from this time yesterday, now just under US$79/bbl in the US, while now also now at just on US$83/bbl for the international Brent price.
GOLD FALLS
In early Asian trade, gold has fallen -US$16 from where were yesterday, now at US$2416/oz and off its record high. Silver has retreated too.
NZD EASES BACK
The Kiwi dollar has fallen back -40 bps to 60.9 USc today. Against the Aussie we are slightly firmer at 91.6 AUc. Against the euro we are -30 bps softer at 56.1 euro cents. This all means the TWI-5 is now down under 70 again..
BITCOIN JUMPS
The bitcoin price has risen to US$71,149 and a very sharp +6.8% jump from this time yesterday. Volatility of the past 24 hours has been high at +/- 4.2%.
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37 Comments
Fun fact on carbon unit accounting. Govt's operating balance (spending money) does not actually increase when it auctions off carbon credits (ETS NZUs). The revenue from the auction is only recognised when the carbon unit is 'surrendered' (when one tonne of carbon is emitted and declared).
The revenue is recognised at the market price of the carbon unit when it is surrendered. So, Govt might have auctioned off millions of tonnes of carbon units at $80+ per unit, but they will only get $47 (currently) added to their operating balance when each of those units are surrendered. Thus, the low carbon price will reduce Govt's forecast spending money this year by as much as $1 billion. Ain't life grand?
For the real Govt finance geeks, the NZ Carbon Units are like Govt Bonds with a fixed 'carbon' value but a floating market value. Govt issues carbon units (via auction) just like they issue Govt Bonds via auction. Both become Govt 'liabilities' held by the private sector.
When Govt receives money from selling credits at auction, there is a reduction in commercial banks' reserve accounts (institutional settlement accounts). Commercial bank settlement account balances are part of the Govt debt, so if Govt sells a carbon credit for $100, Govt debt reduces by $100. Exactly the same happens when taxes are collected or bonds are sold.
However, as with bond sales, when Govt sells a carbon credit, they issue a new liability (the carbon credit), which at the time of issuance is worth however much the buyer paid for it. Cunningly, Treasury have decided that this new liability shouldn't be included within Govt's net debt definition. So bizarrely, when Govt sell carbon credits, Govt net debt goes down, but their net worth stays the same!
When carbon credit owners surrender credits, Govt's net worth is increased because the revenue is recognised. However, it is only recognised at the value of the carbon credit at the time.
It's all a bit of a game eh?
Exactly the same happens when taxes are collected or bonds are sold.
When the Crown sells bonds, what banks owe the government is credited to the Crown Settlement Account at the RBNZ, while Bank Settlement Accounts are debited the same. State transfer payments to individual bank accounts cause Bank Settlement Accounts to be credited the same. Tax collected by the Crown is lodged at the RBNZ Crown Settlement Account and Bank Settlement Accounts are duly debited. But outstanding government bond issuance (debt) remains the same until the redemption date.
Yes, with a little help from you over the years, I understand this. I think where we differ is that I always view RBNZ and Treasury as part of a consolidated Crown. They coordinate their actions, share a single owner etc.
What this means is that the Crown Settlement Account is always worth zero. The balance of the account is a liability of RBNZ and an asset of the Treasury. It is therefore worth nothing to the Crown overall. Indeed, there could be -$20bn, $0, or $100bn in the Crown Settlement Account and the Crown's published net worth would be the same.
The bank deposits (asset) sitting in the Crown Settlement Account and the portion dispensed to the banking system are the offset to the government bond liability to banks.
Check the adjustment on RBNZ's R3 Our analytical accounts - asset ledger.
So effectively they have created a new speculative market for punters to gamble on with the goal of profiting, and tweaked the rules to make their books look better to the uneducated public and on the world stage. Is it just me, or does it just feel like ever since dropping the gold standard, and the increased influence and prevalence of the financial sector in the global economy, has this ethic of introducing new bits and pieces the tweaking as it suits them, been the main 'grand saviour' of every economic downturn? One key example being the introduction of derivatives.
job applications soared in the month, almost doubling
Not a real cause of celebration I suspect. Volume is irrelevant anyways in areas of genuine skill shortages (not labour shortages).
I've been arguing at my industry association (subfield of engineering) forums that the quality of applications hasn't meaningfully improved since the borders reopened almost 2 years ago. On the contrary, demand for existing workers and cost pressure have both grown to a level that many capital projects will become unviable in the near term.
Many with the necessary skills but currently overseas may look at the quality of the salary being offered in New Zealand vs their current location, and determine that the quality and quantity of that NZ salary hasn't improved for many years.
STEM jobs in NZ are just not on the international pay scale.
No arguments there.
I also put this down to the lack of competitive edge in most of our markets run by oligopolies who are in no rush to innovate or improve products/processes, which means they can make do with mediocre workers on low pay across the board.
We do have good mechanical engineering programmes here in NZ for example, but most grads end up working as overqualified sales technicians due to lack of decent opportunities.
I am replacing the timber fencing on a deck with a glass balustrade proving yet another insight as to just how extorted Kiwi's are. A single spigot is $172 at one of the big 2. The same spigot is $62 in an Australian retailer and $22 on Ebay Australia. I need 40 and will fly to Australia and bring them back. 1.15kg each.
As my builder said, at this point NZ is just a social experiment to see how much a nation can bear before it revolts.
It’s just disgusting. There are just far too many examples of this.
One thing they could do is ban exclusive rights for distribution. At the moment companies are bringing them in, selling stuff all at high volumes and creaming it. In many cases they are inferior products too.
Does seem a little strange that as of this hour NZers can read the PRC Ambassador’s speech to the China Business Summit held in Akld yesterday but not that of our own Prime Minister. https://beehive.govt.nz/minister/rt-hon-christopher-luxon http://nz.china-embassy.gov.cn/eng/zxgxs/2024 Link Edit: PM speech just posted.
It's looking more and more likely that the ETH ETF's will be approved later this week. +20% price movement today based on the rumour (after months of every man and his dog saying 'no chance'). Imagine what the action the news will deliver. Massive moment for Ethereum and the crypto industry.
Property apocalypse on steroids. WSJ finds that US investors want their money back.
No worries down under. Ponzi firing on all cylinders they say.
The $10 billion fund from Starwood Capital Group has been trying to preserve its available cash and credit by limiting investor redemptions. In the first quarter, the fund was hit with $1.3 billion in withdrawal requests but satisfied less than $500 million of them, according to regulatory filings.
The fund could sell assets. Sreit owns hundreds of properties throughout the country, mostly warehouses and rental apartment buildings in the Sunbelt. But the value of most commercial real estate has been hammered by high interest rates, which drive up costs in the high-leverage business. Rental apartments have also been hurt by overbuilding in many markets.
https://www.wsj.com/real-estate/commercial/starwood-capital-group-real-…
So education is a $48b "export" in Aussie, but all the universities in NSW are losing money except Sydney University.
"The University of Sydney is edging closer to becoming a majority foreign student university as its latest figures revealed 46 per cent of enrolments are from overseas."
https://www.smh.com.au/national/nsw/nearly-half-of-sydney-uni-s-student…
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