What happened Friday

Economy / news

A review of things you need to know before you sign off on Friday; more retail rate cuts, credit cards used less, CTRL censured, hard-sell development selldown, swaps lower, NZD stable, & more

19th Jul 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
There were home loan rate changes from BNZ, Kiwibank, Bank of China, and Heartland Bank today. More here. We are pretty sure there will be more cuts announced on Monday. All rates are here.

TERM DEPOSIT/SAVINGS RATE CHANGES
Heartland Bank trimmed its term deposit offers today. AMP followed in tandem. Kiwibank said it will be cutting its rates on Monday. All rates less than 1 year are here, for 1-5 years, they are here.

LEAVING THEM IN THEIR POCKET/PHONE WALLET
Credit card usage activity in June was almost all negative, with cardholders increasingly reluctant to use them. This isn't surprising given what retailers report. Total credit card billings were down -3.1% from the same month in 2023, down -4.2% for cards issued in New Zealand. Local billings on overseas issued cards was down more than -10%. Credit card balances were little-changed, and credit limits are $21 bln, and the very small slip in June meant that it is now at its lowest level since January 2015. The rise in BNPL will have had some impact, but overall it seems safe to conclude the use of credit cards isn't a priority for holders in this economy.

CTRL CENSURED
The FMA has censured CTRL Investments for breaching the obligations of its Derivatives Issuer licence. CTRL failed to meet its minimum Net Tangible Asset (NTA) requirements between 31 March 2023 and 29 March 2024. It also breached other obligations.

HARD-SELL PENROSE HOTEL APARTMENTS TO FOREIGNERS
Click this link, then right-click to "Translate to English". This is how some developers sell down their New Zealand projects. It's industrial Penrose really.

GENESIS QUARTERLY UPDATE:
Due to limited gas and low hydro storage, Genesis Energy says its Huntly power station needed to generate more electricity in the last quarter of the 2024 financial year, increasing output by 638 gigawatt-hours compared to last year. To handle ongoing energy shortages, Genesis is running three Rankine units starting in July. Rankine is a thermodynamic cycle used in power generation. Fuel supplies at Huntly dropped to 231 kilotons, but more coal was brought in starting July 2024 to keep a stockpile of around 350 kilotons. Genesis’ retail business grew, selling +3.5% more electricity and gaining more customers. The first stage of its review into its retail operating model was also finished in the quarter which led to the cutting of 130 full-time roles. Genesis says the company is still on track for a reduction of 200 full-time jobs “in core business positions” by the 2026 financial year.

TOUGHER TRADING
Listed cooperative rural sector business LIC reported a big profit drop today, earning just $7.7 mln tax-paid in the year to May, compared to $27.4 mln in the same May year in 2023.

JAPAN HAS ABOVE-TARGET INFLATION
Japanese inflation stayed at 2.8% in June, well above their central bank's upper target range. It has been consistently above 2% since April 2022. Food prices rose 3.6% in June although that was lower than the May 4.1% rate. Energy prices were up 2.4% but that is somewhat artificially high because fuel subsidies ended in May. These levels are marginally lower than analyst expectations.

BE SCEPTICAL OF THE TALKING HEADS
And perhaps we should note that French President Macron has pulled off his latest characteristically risky move in French politics. His decision to go to early polls in the face of sharp far-right local election gains recently has paid off. Conventional chatter was that the far-right National Front would win on their momentum. They didn't. Macron's center alliance teamed up with the far-left parties, easily overcoming Le Pen and her allies. Now Macon's party alliance has stared down the far-left, and a center politician has been re-elected as their parliament's speaker.

WELCOME TO OUR NEW READERS
In the first half of 2024 (through to mid-July) we have welcomed +30% more unique active readers (per GA4) than in the same period in 2023. And the momentum is really building in June and July. We appreciate your company for the data and news style we deliver. Support us if you can. We always want to be a free service to all-comers, explaining the New Zealand economy to Kiwis. The surge in readership isn't resulting in a similar rise in ad revenues, so reader support is critical for us.

SWAP RATES SOFT
Wholesale swap rates are likely to be a little lower again today. Our chart below will record the final positions. The 90 day bank bill rate was unchanged at 5.54%. The Australian 10 year bond yield is up +5 bps from this time yesterday at 4.34%. The China 10 year bond rate is little-changed at 2.27%, locked down by Beijing. The NZ Government 10 year bond rate is down -1 bp at 4.41% and the earlier RBNZ fix was at 4.35% and also down another -1 bp from yesterday. The UST 10yr yield is up +5 bps at 4.22%. Their 2yr is now at 4.50%, so that curve is now inverted by -28 bps.

EQUITIES RETREAT EVERYWHERE
The NZX50 is down -0.5% from yesterday in late trade. The ASX200 is down -1.1% in afternoon trade. Tokyo has opened its Friday trade down -0.4%. Hong Kong is downj a sharp -2.0% and Shanghai is down another -0.3%, and Singapore is down -0.8. Earlier, Wall Street fell another -0.8% on the S&P500 as political risk rose.

OIL REVERSES
The oil price is down -US$1 at just under US$81/bbl in the US, and now just under US$84/bbl for the international Brent price.

GOLD DOWN
In early Asian trade, gold is down -US$38 from this time yesterday at US$2427/oz and now well off its all-time high.

NZD RETREATS
The Kiwi dollar is back down -½c today at 60.3 USc. Against the Aussie we are down -¼c at 90.2 AUc. Against the euro we are down -20 bps at 55.4 euro cents. This all means the TWI-5 is now just on 69.2 and -30 bps lower.

BITCOIN SLIPS SLIGHTLY AGAIN
The bitcoin price is down -1.4% from this time yesterday at US$63,760. Volatility of the past 24 hours has been modest also at just on +/- 1.5%.

Daily exchange rates

Select chart tabs

Source: RBNZ

Source: CoinDesk

Daily swap rates

Select chart tabs

Source: NZFMA

This soil moisture chart is animated here.

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71 Comments

by bw | 19th Jul 24, 4:05pm 1721361916

And in the grand scheme of learning something every day, further to a conversation on here earlier re ” One Swallow doesn’t a summer make”. What is the collective noun for the bird that nests in the riverside bank, a Bank Swallow? A Foreclosure….

by solardb | 19th Jul 24, 4:03pm 1721361798

clusterf**k???

by IT GUY | 19th Jul 24, 7:05pm 1721372704

Don't worry another boom will be along anytime soon.......

or a flood that will wash all the nests away

by solardb | 19th Jul 24, 4:11pm 1721362297

Harris 1% closer to Trump than Biden. CBS news poll.

by Foxglove. | 19th Jul 24, 4:28pm 1721363291

Likely she would do better than Biden, but then so could anybody. The Dems have been myopic, obdurate and limp and they are about to lose the Presidency and control of both houses. A fresh, energetic and charismatic contender such as Newsom, nominated early enough could have carried it but the opportunity is gone. Newsom or any viable alternative, are not going to risk their future prospects by taking a towelling, being a loser, in November.

by Blackdog | 19th Jul 24, 5:23pm 1721366604

Have you heard Harris speak? What can be, unburdened by what has been. The debates will be hilarious.

by Time Lord | 19th Jul 24, 5:43pm 1721367814

What can be, unburdened by what has been.

by K.W. | 19th Jul 24, 7:01pm 1721372489

“It is time for us to do what we have been doing. And that time is every day.”

"We will work together, and continue to work together, to address these issues…and to work together as we continue to work, operating from the new norms, rules, and agreements, that we will convene to work together...we will work on this together."

by Foxglove. | 19th Jul 24, 7:22pm 1721373728

That sort of reminds me of an ill fated Minister of Police in the last government here, proclaiming that they were working on the work of it.

by Flying high | 19th Jul 24, 10:48pm 1721386139

Nearly the whole labour ticket had a spin at being police minister

by Zachary Smith | 19th Jul 24, 4:15pm 1721362526

NZX50 up 5% over the last month.

by Mountie | 19th Jul 24, 6:42pm 1721371362

Yes, finally a good run. Anyone else buy into the IFT offer? We got what we asked for.

by General Comment | 19th Jul 24, 8:32pm 1721377943

I did, barely got 30%.

by solardb | 19th Jul 24, 4:24pm 1721363054

Genesis showing the problem with relying on the market to set carbon prices.

by Te Kooti | 19th Jul 24, 4:27pm 1721363261

I notice the founder of Just Stop Oil, together with 4 other supporters, received a 5 year jail sentence today.

I guess we can refer to Net Zero activists as terrorists now?

by Foxglove. | 19th Jul 24, 4:39pm 1721363946

Well recall some of the same sort of protestors, including New Zealanders, were arrested in Russia for boarding an oil rig and were jailed on charges of terrorism. They may have been lucky at that. Cold water in the Arctic Circle to fall into.

by solardb | 19th Jul 24, 4:44pm 1721364275

And???

by powerdownkiwi | 19th Jul 24, 9:07pm 1721380071

The System destroys that which threatens the System.

The joke being, the System is faltering, and near-term doomed.

What comes next? Is the only question in town.

By we're still bombarded with System-fixated dross (like the Coleman stuff, currently).

by Peter M | 19th Jul 24, 6:36pm 1721370972

Yes, Genesis is in a strong position.

by Pa1nter | 19th Jul 24, 4:25pm 1721363122

Under some illusion they gave up slavery for morality?

They did the maths.

If you keep a slave, you have to feed it, clothe it, house it, look after it, and transport it.

We're worked it out, just give em two bucks fifty an hour and tell them to take a jump.

See you guys back here Monday 8am.

- Steve Hughes

by ChrisOfNoFame | 19th Jul 24, 4:57pm 1721365073

Re HARD-SELL PENROSE HOTEL APARTMENTS TO FOREIGNER

This is fairly common sales pitch in mainland China. I'm surprised you're surprised. Kiwis are a fairly reserved bunch and most would be quite shocked at how things are advertised / pitched in other countries, especially non-English speaking ones. (Some Italian channels later in the night used to be advertising soft porn fests. Think it's been cleaned up a bit now Silvio's gone.)

by HouseMouse | 19th Jul 24, 5:05pm 1721365533

Not convinced the studios will rent for $460 pw, nor the one beddies for $640pw. Nice and new, sure, but those rents in that location?

https://safarigroup.co.nz/ellerslie/#scroll-down

by HouseMouse | 19th Jul 24, 5:10pm 1721365804

The two years rent guarantee sounds like they are getting a bit desperate

by chemistpeter@g… | 19th Jul 24, 5:13pm 1721366000

Are they freehold?

by HouseMouse | 19th Jul 24, 5:27pm 1721366840

I think so

by cantab | 19th Jul 24, 8:15pm 1721376908

I’d love to know how many such developments have gained an exemption allowing overseas buyers to invest.

by HouseMouse | 19th Jul 24, 8:10pm 1721376632

I think it’s only the ‘hotel units’ that are available to foreign buyers?

by pacifica | 20th Jul 24, 5:29am 1721410173

Wait what Penrose?! Was there no more land left that was not leasehold. Hmm on second thoughts since Auckland's idea for a convention center is still moronically up in smoke in the CBD and the Mt Smart stadium still sees large scale events (but sans any Auckland transport coordination), it might be more useful to have more proximity to the locations that have more functional large scale events then the current more central financial failures that have even less transport connections and far less accessibility.

by ChrisOfNoFame | 19th Jul 24, 5:02pm 1721365379

re ... MORTGAGE/LOAN RATE CHANGES

Que the breathless spruiking from property pundits pushing FOMO.

The RBNZ better adjust LVRs and DTIs when they cut the OCR. If they don't - once again I'll be saying they're asleep at the wheel.

by Jonny.Foe | 19th Jul 24, 5:38pm 1721367497

I find the language used by the media and bank economists slightly odd when it comes to consumer spending. It is so often 'people are keeping their cards in their wallets', or 'consumers keeping their powder dry' etc. The reality of course is that households are not homogenous. The people with money are still doing what they have always done - eating out, popping over to fiji, etc. But, there is a large chunk of the population that have lost a huge amount of purchasing power. They aren't spending, because they can't afford to. That's also why the dole queue is going gangbusters.

Remember that households and businesses are handing over $42bn per year in interest payments to the banks, who are paying billions out to shareholders and savers. A couple of years ago the transfer from debtors to creditors was less than half what it is today.

by HouseMouse | 19th Jul 24, 6:30pm 1721370633

Yet, only about 30-35% of our population have a mortgage. Probably only 15-20% have a large mortgage with a significant financial burden when re-mortgaging at higher rates.

So…why is spending so sickly?

for the large majority who are not slaves to big debt, what’s holding them back? Yes inflation has been high the past few years but so has wage growth.

Maybe it only takes 15-20% of the population to pull back their spending a lot to have an outsized impact?

by Foxglove. | 19th Jul 24, 6:48pm 1721371732

Some sort of psyche that has been overlaid onto society generally that it is a time to be prudent and not imprudent with the household budget and more. You would have to then reflect that this scenario was set up by covid, the lockdown and aftermath. You can see it and hear it on any visit to the supermarket where shoppers have not only been encountering ever increasing prices but scarcity of product choice. The whole nation was shut down, clamped down and the population had barely emerged from that to be faced with a recession and folk losing their employment street by street. So is it any wonder the market, so to speak, is subdued. It might not be a depression but bet you there is a hell of a lot more depressed citizens now than pre-pandemic.

by Grattaway | 19th Jul 24, 7:26pm 1721373968

possibly - I know the 1930's depression was savage but my grandparents never forgot it and it influenced the way they lived for the rest of their lives - I think for the better

and it was tough - the bank wanted to "foreclose" on their farm and grandma said to grandad tell them we are not going anywhere - every penny they earned went to the bank and they lived on cabbages, potatoes and mutton with kids clothes made out of flour sacks

and I'm not quoting monty python

by cantab | 19th Jul 24, 7:45pm 1721375130

Agree with this, what I remember most about my partner’s Grandfather was that he never left a single crumb on his plate. Even gristle would be cleaned from the bones. It’s a lost wisdom from tougher times.

We would be foolish to assume that abundance is the norm. For most of humanity, scarcity was the norm. The energy abundance from fossil fuels has afforded great luxury in modern times. But this is changing, and we’re seeing the first signs of it reflected in financial markets. Welcome to the new normal.

by HouseMouse | 19th Jul 24, 7:08pm 1721372921

I guess one can add:

-SME owners many of whom may have struggling business

-Professionals not getting the same sort of bonuses anymore

-People losing jobs or fearful of losing jobs

-People who are underemployed

adding all those in may take us up to 30-35% of the population

by Grattaway | 19th Jul 24, 7:33pm 1721374394

one reason spending is sickly is that value for the spend is rubbish - over priced eating out experiences, over priced clothing, over priced hardware etc etc.

We have become a high cost low value economy and if it doesnt look like value for money the credit card stays in the pocket

Even from a business perspective I can get much better value for money from international suppliers than those here in NZ so I will arrange my own imports -it is pretty straight forward

by HouseMouse | 19th Jul 24, 7:57pm 1721375843

So many people I know have travelled to Japan over the past two years and so many seem to have loaded up on uniqlo. And I am one of them. I have hardly bought any clothes in NZ since start of 2023

by J.C. | 19th Jul 24, 8:29pm 1721377762

So many people I know have travelled to Japan over the past two years and so many seem to have loaded up on uniqlo. And I am one of them. I have hardly bought any clothes in NZ since start of 2023

Uniqlo is everywhere, except NZ. .

by HouseMouse | 19th Jul 24, 8:42pm 1721378553

True, people can stock up on a trip to Aus. I got a few items in China

by Foxglove. | 19th Jul 24, 7:37pm 1721374660

Best not then consider what percentage could be accorded to those who were suckered into the mantra of “borrow to spend to save the economy” that those unnecessarily bottomed out credit rates were enticing like the proverbial Sirens and now have an unwelcome reality check on their hands.

by Jonny.Foe | 19th Jul 24, 7:53pm 1721375626

My guess is that a crash only takes 10% to 20% of the population to reduce demand a lot (because their money is going elsewhere). Other issue of course is that the slump in lending has taken a lot of stimulus out of the economy.

by IT GUY | 19th Jul 24, 7:55pm 1721375749

Cam Bagrie used to call it the multiplier effect as well, if your house goes up 50k a year you are happy to spend most of what you make, jet skis, eating out, Fiji every winter.... not so much if your house is losing $$$ each week... and you have low kiwisaver.

by HouseMouse | 19th Jul 24, 7:58pm 1721375925

Good point

by IT GUY | 19th Jul 24, 8:07pm 1721376462

And your mortgage fix is 7 not 3.5%

I think its a lot more the 10-20% having a hard time

by ChrisOfNoFame | 19th Jul 24, 8:01pm 1721376117

JFoe's not wrong. Averages and aggregate lie about things as Jfoe is saying.

Good example here: https://www.stuff.co.nz/business/350348374/property-investors-rake-500-…

Many of the early property investors will have very small, or no, mortgages. And they'll be doing fine cashflow wise. And have probably not changed their spending habits much at all.

by Rampart | 20th Jul 24, 6:50am 1721415003

You’re smart enough to know rents go hand in hand with high interest rates the landlords pass on. Then there’s high business costs being passed on too. The every day kiwi is being hit from 6 different angles at the moment. Unfortunately I can’t see a way out of this mess anytime soon.

by gnx | 19th Jul 24, 6:37pm 1721371077

You sound stressed about this jfoe

telling stories in your head

a chip on your shoulder,maybe about those that have saved

by Jonny.Foe | 19th Jul 24, 7:38pm 1721374684

Lol, I would strongly advise against a career in fortune telling.

by ChrisOfNoFame | 19th Jul 24, 8:04pm 1721376246

So the growing gap between an increasingly smaller number of rich and an ever increasing number of poor is no cause for concern then?

by Jonny.Foe | 20th Jul 24, 6:56am 1721415408

Zero concern, those that have the means can simply move into gated communities and hire security guards.

It's incredible isn't it - how people fail to recognise that their quality of life (and that of their kids) relies on greater equality? Just nuts.

by Let me be Frank | 19th Jul 24, 7:58pm 1721375891

Eventually the message is received ....though not always accepted.

by ChrisOfNoFame | 19th Jul 24, 8:03pm 1721376219

Once the guillotines start singing - the message becomes crystal clear.

by IT GUY | 19th Jul 24, 7:11pm 1721373077

Its clear most have been taught a good lesson here, for some it will be a very hard lesson. Cuts in Nov 24 most of NZ getting them Q1/Q2 2025 due to fixes.... so it will not be till the tail end of 2025 that most see a 5.5% 1 year fix... cut impacts will be very laggy

by Jonny.Foe | 19th Jul 24, 7:45pm 1721375127

Last time RBNZ cut really hard (mid 2008 from 8 to 2.5 in 12 months), it was 6 months before interest payments started to reduce, 12 months before interest payments found their floor, and 18 months before unemployment rates stopped going *up*. There is a real risk we are about to repeat that terrible mistake.

by HouseMouse | 19th Jul 24, 8:04pm 1721376268

Yep.

The mantra ‘survive till 25’ is wrong.

It should be ‘survive till ‘26’

But that doesn’t rhyme

by IT GUY | 19th Jul 24, 8:15pm 1721376950

Easier to sell hope then doom

I bought a house for myself in Sept 2009.... it was the bottom, they started cutting in Jul 2008 so 15 months after the 1st cut the market started to rise based on an OCR of 2.5% (was 6.5% at peak), I think Lehmans collapses around Sept 2008

so if our market behaves like the GFC the bottom maybe Feb 2026? very different market though and OCR may not go down to 2.5

by HouseMouse | 19th Jul 24, 8:14pm 1721376863

Good ole Liam tries to pump out hope. After all his rag relies on prosperity, especially property prosperity. But even he can’t hide the gloom:

https://www.nzherald.co.nz/business/hospitality-in-crisis-desperate-ple…

by HughJorgan | 20th Jul 24, 12:17am 1721391423

There is simply not the same financial cushion now when compared to the GFC. Think of all the corporates in 2009 with a weighted cost of debt in the 9’s and full of swap contracts in the 8’s.

We will really struggle to knock even 100bps of the current rates without encouraging behaviour in resi that is unwanted.

We really are in a pickle.

by Rampart | 20th Jul 24, 6:57am 1721415447

Exist til 26’

Because for a lot out there it’s hard to thrive

by interesting1234 | 20th Jul 24, 9:55am 1721426143

No need to worry folks, we can all stay positive and get in shape on the benny-fit programme run free by the Ministry of Social Development.

by justaminute | 19th Jul 24, 6:20pm 1721370029

Anyone impacted by this Microsoft outage? Seems quite substantial across A&NZ.

by Mountie | 19th Jul 24, 6:45pm 1721371538

Sort of. Was meant to get a fairly decent mileage claim paid out by my employer today. Just got told there's an issue with the finance software being run out of the US.

by justaminute | 19th Jul 24, 6:47pm 1721371675

Looks like it’s an issue with a Crowdstrike update

by Nifty1 | 19th Jul 24, 9:09pm 1721380198

Update issue... yeah right

by interesting1234 | 20th Jul 24, 6:21am 1721413263

A great reminder to always keep some cash handy. Several stores closing for the night last night or cash only from the disruption.

by finite | 19th Jul 24, 6:43pm 1721371423

"Credit card usage down".

I'm part of that. I used to put all my purchases on credit cards. Now it will cost me 1-2% more because just about all retailers charge a surcharge. Now I just uses EFTPOS.

by Baywatch | 19th Jul 24, 6:43pm 1721371393

And many pixels

by IT GUY | 19th Jul 24, 7:22pm 1721373726

Sounds like a CrowdStrike update is creating carnage....

by Audaxes | 19th Jul 24, 8:34pm 1721378060

“Why should you trust us? Well, as an institution, we’ve been issuing money that people have trust and confidence in since 1934.” (Ian Woolford, RBNZ Head of Money and Cash) Link

I cannot afford to work.

by J.C. | 19th Jul 24, 8:54pm 1721379270

A global payments issue is affecting the Bank of England's CHAPS service and delaying some high value and time-sensitive payments, including some house purchases.

Bitcoin keeps ticking along.

https://www.bankofengland.co.uk/news/2024/july/chaps-payment-issue?sf19…

by pacifica | 20th Jul 24, 6:45pm 1721457918

Except people cannot access their bitcoin if they use the security services of Crowdstrike either. Much like the money in banks the money in bitcoin is still there but you still need devices and terminals to be able to access and transact with it. Those devices and terminals still have security software running updates. Just saying the money keeps ticking along is meaningless when most the larger customer base and critical services are shutdown. But sure the army of bots, and scammers tick along fine. Tell me what security compliance do they follow to protect their customers? How about private computers with no proper security systems? Are they as safe as the corporate ones or is it much like most systems managed by the public; they are already part of a botnet and they do not realize it.

At least most linux and Mac systems were ok but the lost of connecting service clients & suppliers can be a real stick in the gears.