Here's our summary of key economic events overnight that affect New Zealand with news both China and the EU seem to be facing banking & debt pressures, different of course, but each challenging in its own way.
But first in the US, mortgage applications edged slightly higher last week from the week before to be -30% lower that at the end of September and about the same weak level as a year ago. Rising mortgage interest rates are holding them back with the latest rise to 6.90% the fourth week in a row and the highest since early July. Trump and market expectations that the new Administration policies will be inflationary, is getting the blame for the higher interest rates.
Yesterday we noted the bullish outlook for Walmart, as part of stronger American retail activity. But today we also need to note the downbeat assessments from another major retailer, Target.
After the unexpected September dip, Japanese exports rose again in October even if the rise of +3.1% from a year ago was less than the rises they had in 2024 to August. Imports rose too, but even more modestly (+0.4%).
Taiwanese export orders remain very buoyant, up +4.9% in October from a year ago and a rising pace. The rise was mainly driven by increased export orders for electronic products.
The Chinese central bank left its November Loan Prime Rates unchanged at the new lower October levels of 3.10% for the one year LPR, and 3.60% for the five year LPR.
And chickens are coming home to roost for Chinese banks that went along with emergency lending during the pandemic. A government-encouraged surge in lending designed to be a lifeline for small businesses during the pandemic has started to worry their banks, as misappropriation has caused the loans to go bad at an increasing rate due in part to China’s stubborn real estate slump. The official response to the problem? ease back on lending standards.
The Indonesian central bank reviewed its policy rate yesterday and left it unchanged at 6%, as expected. Although they trimmed -25 bps in mid-September, they haven't really started their easing cycle yet. Inflation is running at a very low +1.7% pa, and within their policy target band so they must be close. But a big factor for them in currency stability and a high real interest rate is keeping the rupiah from depreciating at a faster rate. Global tensions, both trade and geopolitical tensions, are the main factors here.
In its latest financial stability review the ECB is warning that the combination of low growth and high debt is about to play out there with some severe economic stress.
In Australia, employers paid more than AU$103.7 bln in wages and salaries in the September month, up +6.3% from a year ago, and the first time it has exceeded AU$100 bln any month. It is part of a longer trend and is up +14.1% from September 2022 levels.
The UST 10yr yield is now at just on 4.41% and up +2 bps from yesterday at this time. The key 2-10 yield curve is now positive by +10 bps. Their 1-5 curve inversion is now inverted, by -10 bps. And their 3 mth-10yr curve inversion is also still inverted, now by -18 bps. The Australian 10 year bond yield starts today at 4.64% and up +5 bps. The China 10 year bond rate is up +1 bp at 2.10%. The NZ Government 10 year bond rate is unchanged from this time yesterday at 4.69%.
Wall Street has started its Wednesday down -0.5% on the S&P500. European markets were down about -0.3%. Tokyo ended its Tuesday session down -0.2%. Hong Kong ended up +0.2% while Shanghai was up another +0.7%. Singapore was down -0.4%. The ASX200 fell its own -0.6% and the NZX50 matched that with its own -0.6% retreat.
The price of gold will start today at US$2649/oz and up another +US$26 from this time yesterday.
Oil prices are little-changed, still just over US$69/bbl in the US while the international Brent price is still just over US$73/bbl.
The Kiwi dollar starts today at 58.7 USc and back down -30 bps from this time yesterday. Against the Aussie we are -10 bps lower at 90.4 AUc. Against the euro we unchanged at 55.8 euro cents. That all means our TWI-5 starts today at just over 68.5, and down -10 bps from yesterday.
The bitcoin price starts today at US$93,816 and up +1.6% from this time yesterday. Volatility over the past 24 hours has again been modest at +/- 1.9%.
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41 Comments
Starting to think next years ocr cuts are a bit more doubtful now very surprised Indonesia so worried about currency
still think 50 on next Wednesday nz needs a boast going into Xmas
BNZ was cutting its standard 6-month fixed home loan rate to 5.99% pa, down from 6.49%, effective immediately, giving it the lowest advertised 6-month rate of the five major banks on Thursday.
https://www.stuff.co.nz/money/360494332/bnz-cuts-home-loan-interest-rat…
I wonder how much future OCR cuts have been baked into the current mortgage rates? If we see the OCR dropping 1% over the coming reviews, how much of that will flow through to 1-2yr mortgage rates? I suspect a lot less than 1%
Historically, the major banks seem to try to maintain not less than ~2% margin between OCR/TD & average mge rates. At lower interest rates their profit margins are proportionally higher (& lending volume increases)
Thats a margin on funding costs, not actually OCR, the international funding costs longer term have gone up, in the USA right now
Current mortgage and refinance interest rates below, NZ is actually cheap right now
ProductInterest RateAPR
30-Year Fixed Rate6.92%6.97%
20-Year Fixed Rate6.73%6.79%
15-Year Fixed Rate6.25%6.32%
10-Year Fixed Rate6.28%6.35%
I suspect that is more the case for the 6mth rate. The two year rate would be more influenced by swaps though?
50bps cut is just another 5 minutes of drugs for the Ponzi addicts.......then up the rates go again and bigger housing drops in 2025/2026
Interest rate cut 0.5% today, but you keep believing what you want.
Whats the go with 18m to 24m + buddy???........HFL all the way:)
If kiwis want to risk the BIG, LONGTERM DDDebt at short fixes (this risky short fixes, contributed to the GFC in the US).......that will burn big.
Since you seem to have missed the point of my post, here it is again:
Interest rate cut 0.5% today.
BNZ now has a 4bp spread between its 6- and 12-month fixed rates. Doesn't that suggest that BNZ's 12-month forward outlook is that rate cuts may no longer as deep as previously expected.
Maybe I am reading too much into one move by a single bank, but developments over the next week will confirm if this outlook is broadly shared by the market.
Needs a boost or needs to boast or maybe they need a roast ?
IT GUY: "Starting to think next years ocr cuts are a bit more doubtful now ..."
So you're effectively saying you expect NZ Inc is going to trucking along nicely in six months time?
Or are you saying imported inflation can be mediated by keeping the OCR high?
'The official response to the problem? Ease back on standards.'
You're describing the Local Government Minister.
"Increase debt" (translated: keep the show on the road for another term, please)
You should know by now PDK that when things get serious they just have to lie.
Perpetual growth is the lie... its why bitcoin and gold are doing ok, they cannot magic them up or down.
I’m not so sure things are going to be rosy next year. We are only really seeing unemployment rise now and the feedback loop is yet to begin. Kinleith yesterday announced closure of its paper production on top of an earlier closure in Raetihi. This along with the likelihood of Whakapapa not opening next season the middle of North Island economic activity is being scraped out. These things have widespread impact on communities as their spending declines which in turn causes more closures. Fiscal austerity will remain as the governments deficit will rise through lower receipts and higher welfare etc. For GDP to kick up as immigration shrinks rapidly is too far a stretch with GDP/capita having to do the hard lifting (and it’s currently around -3.5%). Let’s hope lower mortgage rates and the dairy community can offset at least some of this rolling maul.
Whakapapa needs to return to its club field roots.
Iwi and liability probably preclude this, whistler and Japan beckons
It also needs snow...
Yes, same happened in UK in 2010s, Govt responded to economic decline, falling tax revenue, and an increase in Govt debt after GFC bailouts by cutting spending in an attempt to return to budget surplus. Sound familiar? Osborne choked the economy and UK Govt debt marched on up regardless.
This reinforces my view that many of the brit immigrants that come to NZ do so because they think it's like the UK used to be, it's one of the reasons I hear people wanting to come here.
Unfortunately, quite a few of the people coming are the same ones that voted for the policies that wrecked the UK economy and now they want to do the same here.
You can spot them here by their constant cry of wokeness as a criticism to anything progressive, even if it is backed by evidence, criticism of the 'liberal left media', and their folksy wisdom, 'common sense', and TalkBack radio talking points for economics and politics.
Back in the UK the f***its used to frame it as political correctness and human rights gone mad. They use the same arguments, same media strategies, propose the same policies and we will get the same results.
We are entering the equivalent of the UK Tories austerity era, it's the only path Luxon is capable of imagining.
A capital gains tax is the only tax base-broadening measure likely to raise a significant amount of revenue, Treasury has told the government.
Treasury and Inland Revenue have this year highlighted the potential need to rethink New Zealand's tax system.
"If we run out of net payers of taxes we'd better have a plan."
[To the hammer, everything else is a nail]
https://www.rnz.co.nz/news/business/534377/capital-gains-tax-the-best-w…
They need to
- Make kiwi saver compulsary NOW
- Means test NZ Super from NOW
- Introduce Capital gains tax NOW
- Introduce first 15-20k no tax NOW
- Stamp Duty on all property transactions above 600k sliding scale NOW
- Let people subdivide land freely even in rural areas
- Tax rebate on solar investment on private roofs.
We need change urgently, and another house building expansion will not cut it, people cannot afford new builds now.
You can buy solar panels cheap and China wants to dump them, make hay while the sun shines
Kiwisaver. Yes. Compulsory.
National Super. No. Get rid of it completely.
Probably the last rung the Boomers pull up before they expire (Nat Super)
DP
Kiwisaver is ultimately a Ponzi scheme - promises that can never be kept. Retirement is doomed to be retired
So no, best if people spend now to keep the Ponzi going a little longer
Which tracks in nicely with the compulsory euthanasia at 70 policy. Thank you.
Damn! And to think I gave up smoking & day drinking so I'd see my 80s. Silly me.
This plus I'd probably gut working for families and provide child tax credits for children.
Add gift / inheritance taxes to that list as well
- Introduce Capital gains tax NOW
LVT please, think of it as a small annual CGT but with benefits of predictability and unavoidability (assuming your CGT only applies at sale time).
This!
IT Guy is in a good position if all these measures are introduced.
With the much loved US30yr mortgage now tracking back to 7%.....HFL is here to stay. NZ will see much high rates than that of the US.
Its just a matter of time before the 18m/2 year plus NZ mortgage market rates start the rising again.
Just as the NZ Housing Ponzi was coming out off the ropes, very Punchdrunk.......economic realities gives it the killer uppercut.
Watch as the market sees REAL declines of -50 to -60% by the market lows in 2026/2028.
2012 to 2015 prices are coming back!!! Fantastic
Buyers should wait longer, if possible, much better and much LOWER prices are ahead!
Not to mention the empty houses from everyone bailing NZ...
I think one of many problems in the pipeline is Boomers trying to cash out ... of businesses / houses / boats / baches .... and their expectations of what their nest eggs are worth
There may some be some panic as everyone rushes to the door with a dwindling buyer market and ever weakening world economy over the next few years
The New Zealand population is still increasing not decreasing. People with mortgages will just fix long early next year, everyone is not running down a 6 month fixed so you will have an opportunity to go for a 5 year and negate any effects of higher rates.
Population ponzinomics works (ignoring infrastructure load of course)... as long as those newbies are cash "abundant" enough .... so depends on wages and how many you are willing to stuff into a house (...which completely exacerbates infrastructure load)
Still unlikely to address the Boomer cashing out issue
I wonder long these UST10yr gains will hold? I suspect that as people digest what a Trump presidency actually means, they will start dropping again
Not sure, it appears we departed/broke from a 4 decade long downtrend a few years ago in the US 10 year yield. It’s possible we never again see the lows in interest rates we’ve experienced again in our lifetimes.
It seems to me that Covid (and the subsequent effects) were what broke that trend. How will it respond now that those effects have mostly flushed through the system?
NZGecko: "HFL is here to stay. "
It always makes me chuckle when I read this.
Mortgages & loans now have an extra zero at the end of them from 30 years ago. Thus, much smaller changes in interest rates have the same effect as large ones did many years ago when people needed their disposable incomes reduced.
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