What happened Wednesday

Economy / news

A review of things you need to know before you sign off on Wednesday; labour market weakens, Woolworth profit drops, RBNZs FX intervention capacity at record high, swaps stable, NZD firm, & more

28th Aug 24, 4:00pm 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. All rates are here.

TERM DEPOSIT/SAVINGS RATE CHANGES
Xceda Finance changed its TD rates today. All updated rates less than 1 year are here, for 1-5 years, they are here.

LABOUR MARKET WEAKNESS SHOWING THROUGH
Stats NZ released its monthly jobs data based on the IRD's PAYE system. That showed a fourth consecutive monthly fall in filled jobs, pointing to further rise in unemployment. Employment is in its weakest period since the Global Financial Crisis with the number of filled jobs down -0.5% on the same time a year ago

NO PROBLEM FOR NOW
The latest quarterly Reserve Bank figures show that now the long-expected DTI limits are finally with us, we can actually forget all about them - for the moment. These debt-to-income ratios have plenty of room to move before they become a real issue.

SALES UP, PROFIT DOWN
Local supermarket operator, Australian-owned Woolworths NZ said its annual profit fell -56% despite booking rising revenues that topped $8 bln food sales, up +3.2%. It said the profit fall was due to ‘competitive market’ pressures making it a "challenging year".

NZX EQUITY MARKET UPDATE
Check out our new quick update of how the NZX is faring today, as at 3pm. We welcome comments on that update story. Updates to annual results were released today for Meridian and Precinct.

IT IS NEVER EASY AT SYNLAIT
Synlait's dramas have taken a new twist. Former CEO John Penno has challenged the right of both Bright Dairy and A2 Milk to vote on its capital raising plan. Penno owns 2.3% of Synlait. He left his roles with the company in May 2024. Here is his latest rationale.

STUDHOLME/WAIMATE UPGRADE
Meanwhile, Fonterra says its South Canterbury site will be expanded with a $75 mln upgrade as a hub for high value proteins. These are used in products of medical and high-protein sports nutrition customers.

MORE CAPACITY
The central bank's foreign currency intervention capacity, while modest at $22.3 bln, rose more than +$1.3 bln in July from June, the largest rise that didn't involve a direct purchase/sale. (The July fall in the NZD might have accounted for about half of the rise because it is valued in NZD. The recent rise in the NZD has all happened in August.)

MARGINALLY LOWER, BUT STILL ABOVE TARGET
Australia released their month CPI Indicator today. It rose 3.5% in July from a year ago, down from June's 3.8% but above consensus of 3.4%. It was the lowest figure since March, as electricity prices fell sharply following the extended Energy Bill Relief Fund rebate. Inflation remains outside the RBA’s target range of 2-3% and that electricity component is hiding some of the higher prices elsewhere. Don't expect Aussie rate cuts any time soon. (Their policy rate is 4.35% with financial markets pricing in one -25 bps cut in December but with low conviction; ours 5.25% with markets pricing in -75 bps of cuts over October and November.)

SWAP RATES STILL LITTLE-CHANGED
Wholesale swap rates are probably little-changed again today. Our chart below will record the final positions. The 90 day bank bill rate is unchanged at 5.22%. The Australian 10 year bond yield is up +4 bps at 3.97% after the high inflation reading. The China 10 year bond rate is up +1 bp at 2.18%. The NZ Government 10 year bond rate is up +5 bps at 4.31% and the earlier RBNZ fix was at 4.25% and up +8 bps from yesterday. The UST 10yr yield is down -2 bps from yesterday at 3.79%. Their 2yr is now at 3.90%, so that curve has now tightened up, inverted by just -11 bps.

EQUITIES MOSTLY LOWER AGAIN
The NZX50 is down -0.3% in late Wednesday trade. The ASX200 is down -0.4% in afternoon trade. Tokyo has opened down -0.2%. But Hong Kong is down a full -1.0% at its open. Shanghai is down -0.2%. Singapore is down -0.4%. Wall Street ended its Tuesday trade up +0.2% to buck the trend.

OIL DOWN
The oil price is down nearly -US$1.50 from yesterday at just under US$75.50/bbl in the US, and at just over US$78.50/bbl for the international Brent price.

CARBON PRICE HOLDS
Today the carbon price is only marginally firmer today at $60.70/NZU. See our new daily chart tracker of the NZU price for carbon, courtesy of emsTradepoint.

GOLD FIRM AT ITS HIGHS
In early Asian trade, gold is up +US$5 from this time yesterday at US$2514/oz.

NZD TURNS HIGHER
The Kiwi dollar is up +30 bps from this time yesterday, now at 62.4 USc. Against the Aussie we are up +20 bps at 91.8 AUc. And against the euro we are up +30 bps at 55.9 euro cents. This all means the TWI-5 is now at 70 and up +30 bps.

BITCOIN DROPS SHARPLY
The bitcoin price is down -5.7% from this time yesterday, now at US$59,374. Volatility of the past 24 hours has been very high at just on +/- 4.3%.

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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66 Comments

by Zachary Smith | 28th Aug 24, 4:14pm 1724818490

We need to drop interest rates again to get that exchange rate a bit lower.

by DonKerrBab | 28th Aug 24, 4:22pm 1724818933

There's 25 points (1/4%) of easing priced into every meeting until December next year so rates have and are falling. The NZD going up is in fact the USD going down. And when you get a fundamental shift in the USD, the NZD move tends to get exaggerated because we are a small and relatively illiquid currency compared to other highly traded ones.

by ChrisOfNoFame | 28th Aug 24, 4:17pm 1724818651

A word from the wise? ... short swaps continue to fall fast. Do the maths. Re-fixing very short looks sensible.

USA Inc? Ignore the election. Wall Street says what will happen next. (And just quietly, it ain't looking good for World Inc.)

by Zachary Smith | 28th Aug 24, 4:25pm 1724819127

World Inc?

by TronMVP | 28th Aug 24, 7:28pm 1724830106

Chris, why are 6 month mortgage rates still relatively high?

by MLSmith | 28th Aug 24, 8:05pm 1724832336

Too strong demand… the delta on 6-12 months to break even is 1% point.. that is, you’re betting rates will drop from 6.35 to 5.35 in 6 months time.

I’m betting RBNZ will be cautious in dropping too much too soon to reduce risk of having to increase rates again

by Jonny.Foe | 28th Aug 24, 4:22pm 1724818929

... electricity prices fell sharply following the extended Energy Bill Relief Fund rebate. Inflation remains outside the RBA’s target range of 2-3% and that electricity component is hiding some of the higher prices elsewhere.

Remember folks

Govt action to prevent the high price of electricity feeding through to other prices - very bad
Central banks increasing unemployment to hold wages below the cost of living... to prevent higher wage costs feeding through to other prices - excellent monetary policy in action

by Advisor | 28th Aug 24, 4:46pm 1724820406

I don't understand the need for NZ governments to look appealing to businesses so as to not spook investors. FDI as a percentage of GDP in NZ has been in steady decline since the turn of the century and gross capital formation outside of buildings has also lagged since the GFC.

For reference, I say NZ governments [plural] because Cindy appeared as weak against the will of big lobbies in NZ as the current lot does. Remember the PM Cindy's Business Advisory Council chaired by Luxon.

by kiwikidsnz | 28th Aug 24, 4:59pm 1724821166

“Labour has increased spending by 80 per cent and caused debt to blow out from $5 billion in 2019 to $104 billion in the PREFU forecast." For no noticeable improvement.

And National's current budget recovery plan requires even more debt in the short term.

"NZ governments [plural]" have an economic fundamentals credibility gap that Labour last effectively addressed in the 1980s, National in the 1990s. That's an generation or 2 of learning experience removed from their current policy incumbents.

by JimboJones | 28th Aug 24, 4:59pm 1724821143

Yes government intervention would be very bad. Would you invest huge amounts into an industry that the government messes with?

by Jonny.Foe | 28th Aug 24, 7:00pm 1724828402

Do you have any defence companies in your investment portfolio?

by J.C. | 28th Aug 24, 4:59pm 1724821151

Local supermarket operator, Australian-owned Woolworths NZ said its annual profit fell -56% despite booking rising revenues that topped $8 bln food sales, up +3.2%. It said the profit fall was due to ‘competitive market’ pressures making it a "challenging year".

Kroger (American company that operates supermarkets and multi-department stores) has a net profit margin of 1.43%. It has been operating on razor-thin profit margins for the past 30 years.

Walmart’s profit margins are about 3%. They could lower prices that much if they made zero profit.

Producers of food products typically have margins in the single-digit to low-double-digit range, which is normal for a business, and similar to what they were a decade ago.

Let's say the money supply increases by 50% within a few years, why would you expect prices not to increase throughout the supply chain?

by solardb | 28th Aug 24, 5:11pm 1724821908

What the hills going on in health? We have whole regions lacking after hours doctors, and student doctors graduating with no job prospects.

Surely a junior doctor is better than no doctor???

by Middleaged | 28th Aug 24, 5:57pm 1724824636

Years of failing to pay our health professionals properly. It's only a problem when too many take off overseas to pay their student loan off.

by agnostium | 28th Aug 24, 6:28pm 1724826488

complete the Health Sciences First Year programme at University of Otago, or the first year of either the Bachelor of Health Sciences or Bachelor of Science in Biomedical Science at Auckland University
complete a five-year Bachelor of Medicine and Bachelor of Surgery (MBChB) degree at Otago or Auckland
work for two years as a house officer (supervised junior doctor) in a hospital
Cost of degree study approx. 140K
After 6 years of intensive study and training salary range of: 80k to 140K
The Resident Doctors' Association reports working hours for doctors, in New Zealand, average between 55 and 60 hours a week and up to 12 days in a row without a break
Then complete another six years of specialist training and examinations to become a Fellow of the Royal Australasian College of Physicians

Or become a real estate agent, no training, put up some "for sale" signs and start earning....

by HouseMouse | 28th Aug 24, 6:32pm 1724826766

Yep.

And on top of that try to live and buy a house in cities with astronomically high house prices.

by dumbthoughts | 28th Aug 24, 8:04pm 1724832274

It's actually crazy, when you think about it, that anybody commits so much of their life to training in this manner (surgeons are even more absurd, isn't it like 13-15 years' total training for some specialties?).

A great deal of respect is owed just for that dedication alone, and I doctors/surgeons/medical specialists I have no issue whatsoever being paid big bucks in order to encourage people to train, and to attract 'imported' talent, and to retain staff. I have less issue with some specialist surgeon raking in a milly a year plus, than I do with some exec at the Christchurch City Council pulling in $350k to sit around in meetings and sign us up to unnecessary stadiums.

I do think we should put on our big boy pants as a society and develop schemes to fund the entirety of training for aspirant doctors, surgeons, nurses and other essential health professionals - perhaps with some kind of bonding system so they can't just up sticks and leave within a year of qualifying. We'd presumably get a wider, more diverse pool of prospective medical professionals and based on population projections etc be able to map out a sufficient funnel of trainees. Cancel free fees for less useful degrees such as BAs and funnel it all into paying for properly funded training for critical healthcare workers.

Of course that takes years and years, so in the interim we need to up the pay and then do what everybody else does and try to poach from overseas.

In the meantime, don't get sick or injure yourself! Maybe I'll trade in the motorbike for a Volvo SUV.

by russellj | 28th Aug 24, 8:27pm 1724833667

Is it time the whole training system for doctors is overhauled. If the doc is going to be say a knee and hip surgeon why not just train in that specialty right from the start say after year 1 of med 101 general intro to medicine. Also the working hours in hospital are plain stupid. It’s the medical council view of “ we did it that hard so should you”. Irony is they are happy to support safe working hours for other industries eg truck driving, but not their own.

by makechange | 28th Aug 24, 7:43pm 1724830980

Read in the papers. They stopped paying locum doctors such high rates (1.5x + standard rates) to provide relief, so they don't bother turning up or head overseas. It's a kind of like a quiet strike

There's probably job prospects once HNZ figure out their actual financial position and a realistic budget.

Unfortunately HNZ's finances probably won't satisfy everyone's expectations or targets, so finances will dictate either harbouring more and more risk by sweating assets and people or reducing services. I suspect it'll be both, much to the chagrin of the Commissioner

by J.C. | 28th Aug 24, 5:13pm 1724822019

France just lost $10B in one day as the UAE has just reportedly put an order of 80 jets on hold (reported through Al Jazeera) because of Telegram's Pavel Durov, a UAE citizen with UAE passport.

This is possibly just the start of the capital strike that Macron has brought on France.

by Zwifter | 28th Aug 24, 5:30pm 1724823032

The recent French election was as rigged as it gets so I guess you get the outcome you deserve, its a total mess over there.

by 26@Main | 28th Aug 24, 5:49pm 1724824180

What's your source for the rigged election?

by mfd | 28th Aug 24, 6:12pm 1724825542

Perhaps he means the various left wing parties combining forces and deliberately not running against each other to better compete with the right wingers?

If so, that's not rigging, just politics.

by Zwifter | 28th Aug 24, 9:53pm 1724838824

Its rigging when you pull like 200 people off the ballots nationwide and the whole election is only about keeping the right out as none of the other parties have a thing in common so when it comes time for them to take up the reins its a total mess. That's not politics its rigging an election.

by mfd | 29th Aug 24, 6:40am 1724870420

It's just like how national would stand aside and let Seymour win his seat. Candidates deciding not to stand and then allowing the electorate to vote freely is absolutely not rigging.

by Zwifter | 29th Aug 24, 9:30am 1724880610

That's 1 seat not 200

by Independent_Observer | 28th Aug 24, 5:48pm 1724824100

Yes and I see Zuckerberg has admitted that the Democrats forced Meta to censor speech regarding Covid-19.

https://www.foxbusiness.com/politics/meta-ceo-admits-biden-harris-admin…

by J.C. | 28th Aug 24, 6:15pm 1724825734

I know. The pro-Covid community is ignoring this.

by IT GUY | 28th Aug 24, 7:03pm 1724828628

I read the truth about Wuhan flu on Zerohedge on week 2 , that why they where banned on social media

by tis i | 28th Aug 24, 7:56pm 1724831803

Just pick a truth you’re happy with and roll with it.

by Zwifter | 28th Aug 24, 9:58pm 1724839119

Yep the truth was out before they could supress it. Quite a few people "disappeared" after that. People need to start thinking for themselves and not just believing the state. I still feel for people that were basically forced to take the vax or lose your job.

by J.C. | 28th Aug 24, 5:41pm 1724823715

The bitcoin price is down -5.7% from this time yesterday, now at US$59,374

Ethereum dumped heavily last night. Mentioned to my water cooler mate he responded "glad I didn't buy any of that crap."

Getting the feeling that "crypto" is currently at the "sell your house to buy more" level. Feels like that time back in 2020 just before the price went vertical from 10k to 60k in 6 months.

by EdwardD | 28th Aug 24, 6:00pm 1724824822

Agree. I bought more in 2020 and I'm leaning the same way.

by J.C. | 28th Aug 24, 6:12pm 1724825560

Funny how you get these vibes. Of course, the sentiment may be entirely different to the actual outcome.

Q1 2019-Q1 2020. What a time to go all in.

by IT GUY | 28th Aug 24, 7:04pm 1724828689

are some selling some crypto buy a bit of the shiny metal

by Rampart | 29th Aug 24, 7:10am 1724872203

You first

by J.C. | 28th Aug 24, 6:27pm 1724826455

Downtown San Francisco studio condo sale in the SOMA (wonderful area) neighborhood. Purchased in 2019 for $450k Just sold for $235k.

Nice gaff if you ask me. No way you could pick up something like this up in one of Aotearoa's metropolitan areas.

https://www.redfin.com/CA/San-Francisco/195-7th-St-94103/unit-302/home/…

by agnostium | 28th Aug 24, 6:31pm 1724826705

Rental estimate $2,231US per month!

by Te Kooti | 28th Aug 24, 6:33pm 1724826823

Are you aware what has happened to Downtown SF? It's ground zero for progressive liberal policy, most businesses have shuttered and left.

by J.C. | 28th Aug 24, 6:47pm 1724827673

Yes. The Tenderloin district is the worst for homeless people.

by IT GUY | 28th Aug 24, 7:07pm 1724828829

nothi9ng a decent handgun will not sort once they firehouse the dead bodies from fentanyl away ... remember the spruiker rule is to buy while people are puking... on your doorsteep., or fear or something.

by dumbthoughts | 28th Aug 24, 7:32pm 1724830330

Never mind dodging dog $hit, I hear you have to watch for actual Randy Marsh-esque human turds.

TBH I've encountered that on a few recent trips to Sydney. Some real toilet pythons hanging out on the concrete

by agnostium | 28th Aug 24, 9:43pm 1724838211

It's ground zero for progressive liberal policy

Nice story bro. Nothing to do with it being home to tech companies that

1. Have made massive lay-offs

2. Were are the forefront of remote working movement during the pandemic which led to massive exodus of workers escaping high rents and property prices

Unless you're saying it's progressive liberal policy to lay people off and encourage remote working.

by Zwifter | 28th Aug 24, 10:09pm 1724839740

You realise that's only 30sqm in size right ? That's smaller than my double internal garage. Still the rent looks pretty cheap if you are a drug dealer. If its cheap, its always cheap for a reason.

by J.C. | 28th Aug 24, 6:39pm 1724827178

Ukrainian debt is now apparently a lucrative and highly profitable asset for speculation.

A British investment fund stated that Western investors and funds are making significant profits from Ukraine's "junk" bonds. Bonds from "Naftogaz," "Ukrainian Railways," and "Metinvest" have yielded returns of 73%, 52%, and 19% respectively for investors.

According to the British fund, the high returns are due to the fact that these debts are paid off with financial aid from Europe, making them, despite their junk status, very reliable and profitable.

In essence, German taxpayers are funding aid to Ukraine, and this money ultimately ends up in the hands of British funds that effectively own Ukraine.

Wonderful.

https://www.bloomberg.com/news/articles/2024-08-22/fund-beats-99-of-pee…

by IT GUY | 28th Aug 24, 7:07pm 1724828864

betting on a ceasefire re rating?

by IT GUY | 28th Aug 24, 7:09pm 1724828959

Last call for drinks at the REINZ August session, get your beers now bar closes in 3 days

by IT GUY | 28th Aug 24, 7:28pm 1724830125

I have a good relationship with my boss, if they ring after hours I answer it... if I am out the back of barrier its bad luck... its my time, On call is on call the rest is best efforts on my side but no obligation ....

London | Britain’s Labour government is watering down ambitions to give employees a legal right to ignore work demands outside office hours, favouring softer rules that had limited impact for workers in Ireland.

Rather than seeking legislation for the “right to switch off”, ministers instead will push for a code of practice for businesses, according to people familiar with the matter who asked not to be named. The government is modelling its approach on Belgium and Ireland, which have guidelines on out-of-hours communications, and in contrast with France and Portugal, where the right to disconnect is enshrined in law.

by dumbthoughts | 28th Aug 24, 7:45pm 1724831148

This new UK government seems like such a flop already. I was in the UK when the campaign was on and during the initial post-election period. People were going around playing the 'things can only get better' song from when Labour got elected in the 90s under Blair. Jesus healing the sick and restoring sight wouldn't rate compared to some of the miracles people seemed to be proclaiming would occur the nanosecond Starmer got into No 10.

Fast-forward a few months and he's up on stage declaring that things will have to get very much worse before there is any chance of getting better. But at least "those with the broadest shoulders will carry the greatest burden". In other words RIP whatever is left of the middle class.

The only good news I've seen from the UK in the last few months is Oasis getting back together. Maybe a resurrection of the 'Cool Britannia' movement will save the day.

by kiwikidsnz | 28th Aug 24, 7:53pm 1724831612

Oz legislation in force Monday

https://www.abc.net.au/news/2024-08-26/what-right-to-disconnect-from-wo…

by IT GUY | 28th Aug 24, 8:31pm 1724833901

How many workplaces have new overtime policies coming into place.....

employees thus have the right to be out the back of barrier as often as they choose

by Kate | 28th Aug 24, 8:08pm 1724832509

I get the feeling that Woolworth's is uncompetitive as it doesn't re-invest enough capital in improvements. All their stores look tired in comparison to New World - which is more their competitor than Pak 'n Save to my mind.

by Pa1nter | 28th Aug 24, 8:15pm 1724832906

Woolworths are currently going through a rebrand that will probably end up refurbishing all of it's stores.

It's just super slow, maybe 4x longer to renovate a store that's still operating than one that's closed.

by IT GUY | 28th Aug 24, 8:33pm 1724834021

my family shop pak n save for cheap and NW for Quality, countworths is just high priced low quality...

there is no future in the middle

as we process our own sheep and beef its just chicken and baking prods we hate the sugar loaded crap.

I just do not rate them as worth visiting, on a cost per item basis for product I can buy cheaper at pak and save, unless they are the only shop in your town I do not understand their existance

by Pa1nter | 28th Aug 24, 8:50pm 1724835032

I think a bunch of their traffic is people who shopped at Foodtown 40-50 years ago.

The rebrand from Countdown to Woolworths makes me think they're trying to ditch any perception they're affordable.

My local one sells a coconut cream no one else does. Otherwise I'd never go in there.

by Zwifter | 28th Aug 24, 10:04pm 1724839449

That would have to be the "Kara" one right ? Sometimes its a pain when you have good taste.

by Pa1nter | 28th Aug 24, 10:13pm 1724840017

Yup. Kara is 99% Coconut Cream. The UHT one anyway.

Most anything in a can is watered down.

by IT GUY | 29th Aug 24, 7:03am 1724871783

Try the Fia Fia one. Though I only by milk not cream.

by agnostium | 28th Aug 24, 9:37pm 1724837825

All their stores look tired in comparison to New World

Personally unverified but reputable source fun fact, Pac n save pay more for their concrete floor than tiles because it makes them look cheap. Keeping the roof tiles off is also a strategy to make things look wholesale.

by Pa1nter | 28th Aug 24, 9:41pm 1724838112

This is correct. A quality polished floor is more expensive than tiling over an average one.

Not having ceiling tiles is cheaper. You have to spend a bit more on all the fit and finish of your services though (Aircon ducting, cabling etc).

by agnostium | 28th Aug 24, 9:46pm 1724838372

Thanks for confirming, it sounded right but wasn't sure.

by Pa1nter | 28th Aug 24, 9:51pm 1724838671

If it's a floor you have to see, it's usually got a more expensive aggregate in it to look nice, needs more expansion joints to prevent cracking, generally way more work.

The shabby chic industrial look can ironically be much more expensive to pull off.

by makechange | 29th Aug 24, 6:59am 1724871566

Operational bonus is that it's trafficable with forklifts and elevated work platforms, meaning more storage space available at the top

by Independent_Observer | 28th Aug 24, 9:27pm 1724837241

US stock market concentration is getting worse..top 10 stocks now make up 38% of S&P500 market cap.

The market is being held together by only a handful of companies (or investors speculating about the valuation of those companies..)

https://x.com/kobeissiletter/status/1828418181678932215?s=46&t=MUwQeKa7…

by Pa1nter | 28th Aug 24, 9:39pm 1724837958

Most of those companies have higher P:E ratios than the average for the S&P 500.

Although Google and Meta's is lower than the average.

So I guess it's a mixture between these businesses just being that much larger than many, but then some of those are also over valued. For "reasons".

If Elon can't pull a rabbit from a hat I think he could be in for a bitch slapping.

by IT GUY | 29th Aug 24, 7:05am 1724871916

US stock market concentration is getting worse: The top 10 stocks now reflect ~38% of the S&P 500 market cap, near the all time high of 39% seen in June. Over the last decade, this share has more than DOUBLED. To put this into perspective, in 2020, the top 10 companies accounted for just ~25% of the S&P 500. Now, this percentage even exceeds the 2000 Dot-Com bubble levels by ~12 percentage points. A few key stocks *are* the stock market.