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 again today,
TERM DEPOSIT/SAVINGS RATE CHANGES
SBS Bank has launched a new 6.40% nine month term deposit effective tomorrow. That is up +35 bps from their prior nine month rate and is the highest carded rate from any bank for any term (although PIE rate offers may give you higher effective comparable yields). We are expecting more rate rises on Monday too.
FHB PROSPECTS IMPROVE
Home loan affordability is slowly but steadily improving for first home buyers. That is because of small declines in mortgage rates, static house prices and rising incomes. If there are tax cuts next week, they will help too.
WEAK SENTIMENT BRINGS LOWER INFLATION EXPECATIONS
The ANZ-Roy Morgan consumer confidence survey lifted slightly in May. As they said, " ... perhaps as the shock of the “recession” headlines wore off somewhat. That said, 84.9 is a very weak level, with the historical average sitting above 110. Possibly also contributing to the lift in confidence, inflation expectations eased from 4.4% to 3.8%, the lowest read since October 2020. Expected house price inflation eased from 3.5% to 3.2%."
STILL FALLING HARD
The carbon price is now down to NZ$45/NZU, a -38% drop in a year.
TWO NEW DIRECTORS FOR HEARTLAND
Heartland Group Holdings, which recently completed the acquisition of Australia's Challenger Bank, has named two new independent directors. The first is Robert Bell, the founding CEO of digital bank 86 400, who has also worked at Cuscal, Australia Unity Bank and ANZ, and is a director of HFC Bank. The second, Simon Beckett, has worked for Wells Fargo, GE Capital and Cerberus Capital and is a director of ORDE Financial. He's described as having "deep M&A experience."
NO MATERIAL PROGRESS
April exports fell faster than April imports, but we still managed to post a goods trade surplus - of a tiny +$91 mln for the month. But that was less than half the April 2023 level, which itself was less than half the April 2022 level. So the track is all wrong. For the year to April, the trade deficit in goods was -$10.2 bln, only exceeded by the equivalent 2023 result (which was a massive -$17 bln deficit). In the five years prior to the pandemic, these annual deficits averaged just -$3.8 bln, so we are not making any progress in paying our way in the world. Until we can achieve that, resource allocation in New Zealand will be a zero-sum game. And fewer winners, more losers.
CLEANOUT
The Climate Change Commission Chair, Rod Carr will retire at the end of his term later this year. Commissioners Catherine Leining and Professor James Renwick will also leave the Commission this year at the conclusion of their terms, which have been extended until appointments are made. There are currently eight Commissioners.
STABLE BORROWING
14.5% of the 15,722 new mortgages in April were to first home buyers, about the same level in each of the first four months of 2024, similar to the average for 2023, but much more than the average in any period prior over the past ten years. 13.8% of them were to investors, a rising level and back to early 2021 levels. The average mortgage for FHBs was $555,000, roughly the same as it has been for three years now. For investors, the average loan size is $545,000.
STABLE BORROWING PURPOSE
One in eight of these new mortgages were where the borrower changed banks. That is the recently stable level. Top-up mortgage lending generated 43% of loan transactions and that level isn't out of the ordinary. Top-up borrowing averages $103,000 per loan. Borrowing for a new home purchase overall now averages $558,500 which is also historically unremarkable.
INFLATION'S RISE TAILS OFF
In Japan, their inflation rate fell to 2.5% in April from 2.7% in March. Their core inflation rate dropped to 2.2% from 2.6%. While these falls were not unexpected, they are the lowest levels since January.
THE DAY-THREE REACTION
The unexpedly hawkish RBNZ MPS has seen some investors re-evaluate their positions and assumptions, especially offshore investors. Three days after the event is starting to give some signals about the drift of those reassessments. Three days after the May 2022 and November 2022 RBNZ decisions which brought chunky rate hikes (+50 bps), investors took the signals and started bidding up one year swap rates. They did something similar after the February 2023 and April 2023 rate hikes. This time of course there has been no rate hike, but they have started bidding up one year swap rates anyway, approaching +20 bps. They seem to be accepting rate cuts are not necessarily the next RBNZ change. Similarly, money markets have scaled back the expected two 2024 rate cuts to now just one at the last meeting of the year. That move has been quick, so after today even that may not be there.
SWAP RATES RISE & QUITE QUICKLY
Wholesale swap rates are likely to be firmer yet again today with echoes from the surprisingly hawkish RBNZ MPS still motivating offshore investors. Our chart below will record the final positions. The 90 day bank bill rate is still little-changed at 5.62%, a level it has hovered around for more than 70+ days. The Australian 10 year bond yield is up +4 bps to 4.35%. The China 10 year bond rate is now at 2.32% and little-changed. The NZ Government 10 year bond rate is up +3 bps to 4.83% from this time yesterday and the earlier RBNZ fix was at 4.78% and up +3 bps from yesterday. The UST 10yr yield is unchanged from yesterday at 4.47%. Their 2yr is now at 4.92%, so the curve has shifted out marginally to -45 bps inverted.
EQUITY MARKETS RETREAT
The NZX50 is ending today down a full -1.0% and if it holds that, there will be no gain for the week (or loss). The ASX200 is down another -1.1% in afternoon trade and heading for a similar weekly retreat. Tokyo is down -1.2% in late morning trade. Hong Hong has retreated again, down another -1.1% and Shanghai is unchanged in early trade. Singapore has opened down -0.5%. Wall Street ended its Thursday session down -0.7%.
OIL EASES SLIGHTLY
The oil price is a touch lower from this time yesterday, now just under US$77/bbl in the US, while now also now at just over US$81/bbl for the international Brent price.
GOLD RETREATS FURTHER
In early Asian trade, gold has retreated another -US$34 from where were yesterday, now at US$2334/oz.
NZD HOLDS
The Kiwi dollar has slipped -10 bps to 61 USc today as things settle further. Against the Aussie we are firmer at 92.4 AUc. Against the euro we are unchanged at 56.4 euro cents. This all means the TWI-5 is now at 70.3 and little-changed.
BITCOIN EASES FURTHER
The bitcoin price has slipped again, now to US$67,741 and down another -2.9% from this time yesterday. Volatility of the past 24 hours has been moderate at +/- 2.7%.
Daily exchange rates
Select chart tabs
Daily swap rates
Select chart tabs
This soil moisture chart is animated here.
Keep abreast of upcoming events by following our Economic Calendar here ».
81 Comments
A lot has happened, the fog of mystery has been removed from the near future for NZ Housing....
There are now crickets where once stood proud Spruikers....
And the Canes are going to beat the blues in a surprise (to some) upset..
I cannot wait to get my $28 a week tax cut
They were false tips IT GUY, I thought I could trust you. Lucky no one took your advice and sold stocks or shorted the index eh
Yeah I agree its a rough decision. The bonus gone by lunchtime and forgotten by next month or two IMHO. Ive never had a govt handout for housing and still managed to buy my properties. Properties all sold since :)
Its Friday.. I predict Housemouse will show up bemoaning the NZX having a sh1t performance and will gabble on that FBU were down 5 percent on the day (wont mention they were up 10 percent yesterday though ... as not expecting a change in direction for another two years)
Strange reaction from Mousey, eh? Commenters mentioning you is a good thing in my book. Shows they're reading your comments. He's obviously not having too much fun in Shanghai otherwise he wouldn't be commenting now. Also, he's off my Christmas card list for insulting NZ and its people. Why don't you just stay in Shanghai Mousey.
"Wellington Water has admitted overlooking a budget error that has resulted in an extra last-minute bill for councils of $51 million over three years"
"We need to start building that credibility again and we will." 🤣
https://www.rnz.co.nz/news/national/517723/wellington-water-admits-over…
<sarc on> Bundling services together in a larger entity will make them more efficient, the concentrated expertise delivering better performance <sarc off>
The squeeze on councils is ramping up. Next elections are going to see a shift in the philosophies around the table that we haven't seen for quite a while.
A bit of Friday evening pessimism:
Noticed how tech spokespeople tirelessly pat themselves on the back for their sector being one of the fastest growing in NZ.
You could say that literally for all Western countries and most developing nations, given how much tech has permeated into our lives and economies.
Looking at 2-way trade (as one should), we are a net importer of tech services by a long shot. That's a result of having high wage costs and low R&D/commercialisation.
China is dumping the US dollar and buying massive amounts of gold.
China is preparing for something big, but nobody in the West cares.
-
China sold a record $53.3 billion worth of Treasurys and agency bonds in the first-quarter, Bloomberg reported.
-
It previously unloaded US debt to prop up its yuan, which has again grown weak against a rallying dollar.
-
The country is piling into gold, which now makes up the highest share of its reserves since 2015.
https://finance.yahoo.com/news/china-ramps-dollarization-efforts-dumpin…
The US have demonstrated several times in recent history that they are willing to renege on their debts (Russia, Afghanistan etc). China and other big players clearly have a pact to gradually dump their stock of US Treasuries (debt). However, they need to watch the pace, because they don't want to devalue their holdings.
My feeling is that this is potentially the nail in the coffin for the careers of Pocahontas Warren and Gary Gensler. They only have themselves to blame. As I read earlier, the Biden administration will now pivot to aggressively taking credit and pretending they have been fair and reasonable with American crypto investors and related businesses.
You can expect plenty of gaslighting. My advice to those holding related cryptos is to stay humble and keep an open mind.
F'more, the way I see it is that the banksters told Gensler "we wear the pants and it's time for you to go." Banks are not making money from bonds and will be biting at the bit to get amongst the sh*tcoin ETFs and make out like bandits.
Some praise for the RBNZ and I have to agree with him
https://www.afr.com/wealth/personal-finance/kiwis-outplay-aussies-in-mo…
That trade balance gets worse when you look at the whole picture. We are being absolutely milked here - with dividends, licencing fees, and other income etc flowing abroad through multi-nationals and tax havens and to global shareholders. We now have an outflow of $2bn of NZ dollars per month all in. Obviously this imbalance has to be balanced - and we do this mainly by 'exporting' Govt Bonds. In the last three years, offshore ownership of NZ Govt Bonds has gone from $40bn to $90bn meaning just under 60% of our Govt bonds are held offshore.
Obviously, this isn't a fiscal sustainability problem - we can always pay interest and debts in NZD. But, the growing offshore Bond ownership perhaps explains why RBNZ appear so determined to wait for other central banks to ease their interest rates. If RBNZ lowered first and triggered a bond sell-off, we would end up in a real scrap to protect the NZD. My view is that RBNZ would have to do a BoJ (or post-Truss BoE) and guarantee to buy any NZ Govt Bond at floor price. They will not want to do that... at all.
nah we will be fine - until suddenly we aren't - surely we can just print some more money and it will just go away
I remain surprised at how little notice is being taken of our BOP deficit -and nothing on the horizon that says it will get better any time soon -in fact the opposite more likely
I suppose if its the young going to Aus. they can send monthly remittances home to support the elderly
Agree. But if RBNZ guarantees debt this simply leads down the path the Irish took in 2008 by guaranteeing their banks, and ends with bankrupt government being effectively replaced by IMF technocrats. In their case the short term aftermath was hugely painful, but medium and longer term benefits substantial. Sometimes (just about always in NZ) elected politicians are completely incapable of making the necessary tough decisions which the IMF suits sort out then quietly leave
The guarantee I was referring to was the QE-style guarantee to buy any and all *govt bonds* at a fixed floor price (which determines the yield / interest rate). When a central bank does this, the market price for the govt bonds immediately becomes the floor price the central bank has set. This is how BoE instantly stopped the run on UK Bonds after the Truss debacle.
I wasn't talking about guaranteeing commercial banks.
Auckland Council General property revaluation
A rating valuation is a three-yearly assessment of a property's value and is determined by house sale prices on a specific date. We use these valuations as a guide for setting your rates.
You should know
Our next property revaluations will be carried out in 2024. We expect valuation notices to be sent to property owners towards the end of the year.
Going to be real real real interesting isn't it..... I suspect a lot more property may soon be selling only a few % points away from CV... No recovery required.
They should be since they are a desktop market price estimate at a point in time.
Be interesting to see if any Councils busy revising the rates splits on capital vs land values due to the significant changes last round of RVs will be get in a tangle again when the next round of RVs shake out.
I can't speak for other councils however Wgtn valuations are from QV. Over the years I have twice obtained out of cycle revaluations that have then flowed through into updated CV (one was a new build & the other we were selling just before the 3yr council update). Cost approx $250 however QV required a reason to do it.
Not sure we can afford bill english at $ 2500 per day.
https://newsroom.co.nz/2024/05/23/govt-paid-kainga-ora-reviewers-out-of…
"The Climate Change Commission Chair, Rod Carr will retire at the end of his term later this year. Commissioners Catherine Leining and Professor James Renwick will also leave the Commission this year at the conclusion of their terms, which have been extended until appointments are made."
Good riddance to Renwick, a climate alarmist. Attributed to him as a reply to another
Professor-emeritus Guy McPherson of University of Arizona, speaking in New Zealand, thinks we don’t have to worry about climate change, because the “6th mass extinction” will finish us all off in the next 10 years. ...............
But Professor James Renwick, a climate scientist at Victoria University, says people should not use his words more as an excuse to give up. While he agrees that climate change is possibly the “biggest issue humanity has ever faced”, he says “giving up is not really helpful”. Instead, Prof Renwick says he hopes Prof McPherson’s 10-year claim will encourage people to take action.
Ms Leining, trained as a Climate Leader under The Climate Reality Project launched by Al Gore. Good riddance as well.
The others they need to get rid of are Judy Lawrence, a Renwick cohort. They might keep Lisa Tumahai as a Maori representative just to keep the Maoris quiet.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.