What happened Friday

A review of things you need to know before you go home on Friday; many rate changes, consumer confidence up, debt growth 'normal', deposit growth also 'normal', swaps rise, NZD firm & more

28th Jun 19, 3:59pm by David Chaston

Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
Late yesterday Westpac reduced its one year 'special' from 3.89% to 3.95%. It has also ended its 4.09% 18 month 'special', reverting for that term to its standard 4.79%. TSB has signaled that its own two year fixed mortgage rate offer will fall to 3.85% from Monday.

TERM DEPOSIT RATE CHANGES
Westpac cut all its term deposit offers for terms 9 months and longer to 3.00% even, all the way out to five years. BNZ has taken -20 bps off its Rapid Save bonus saver, taking the potential rate down to 1.90% pa.

ABOVE AVERAGE
The ANZ-Roy Morgan Consumer Confidence Index rose +3 points to 123, unwinding most of last month’s fall to sit a bit above its historical average. Consumers’ perceptions of their current financial situation lifted +5 points to a net 15% feeling financially better off than a year ago. Consumer confidence has proven resilient in the face of housing market softness in Auckland and Christchurch. A still high proportion of people still think it’s a good time to buy a major household item.

DEBT GROWTH ROLLS ON
The growth of debt continued at the same pace in May, according to the latest RBNZ update. Housing debt rose +6.2% pa, consumer lending by +1.7%, rural by +4.0%. Only business debt growth sagged, up only 4.7% which was a lot lower than the +6.1% rise in April. Total customer debt to the banking sector now exceeds $461 bln.

HOUSEHOLD DEPOSITS STILL GROWING FAST
Total household deposits exceeded $180 bln for the first time ever in May. That is +6.0% higher than a year ago. This level of deposit growth has been recorded for more than a year. Total customer deposits in the banking system now exceeds $350 bln from households, businesses and the public sector. That is 76% of the total bank debt and that has been stable at that level since December 2016 when the S40 deposit series started.

A VERY PROFITABLE SUBSIDIARY
ANZ's wholly-owned finance company UDC has reported that its lending grew to $3.3 bln in the half year to March, with six month revenue up +11% to $73.4 mln. Half year after-tax profit was almost half of that at a remarkable $34 mln. They say they still see strong demand for their type of asset financing.

AFFORDABLE FOR YOU?
Falling prices made home ownership more affordable for first home buyers on Auckland's southern flank in May, according to our homeloan affordability review. We released updated affordability results for all urban centres today, not only for first home buyer householders, but households buying median priced houses as well. These reports also show where it is too tough to save a 20% deposit.

STILL PROFITABLE
Statistics NZ released its annual "enterprise survey" for 2018 today. That shows revenues for all industries increased +7.1% to $691.9 bln. SME's accounted for a quarter of that. Costs rose +6.7% and operating profits rose +7.4% to $5.9 bln. Businesses made a +4.8% return on assets, up from 4.4% in 2017. Almost 12% of all operating profits were earned in agriculture (and yes, 88% weren't), compared to almost 14% of all revenues that were in agriculture.

SWAP RATES FIRM
Local swap rates are up +1 bps across the curve today. The UST 10yr yield is back down -5 bps from this time yesterday at 2.01%. Their 2-10 curve is a 'positive' +26 bps while their negative 1-5 curve is narrower at -16 bps. The Aussie Govt 10yr is down -6 bps to 1.31%. The China Govt 10yr is up +2 bp at 3.30%, while the NZ Govt 10 yr is down -2 bps at 1.60%. The 90 day bank bill rate is up +1 at 1.64%.

NZ DOLLAR SOLID
The Kiwi dollar is holding at at 67 USc which is where it was when we opened this morning. On the cross rates we're firm at 95.6 AUc. Against the euro we are up to 58.9 euro cents. That moves the TWI-5 up to 71.5.

BITCOIN IN EXTREME VOLATILITY
Bitcoin is still hugely volatile. It is now at US$11,370, up from a 24hr low of US$10,315 at about 8:30am this morning so that is a +10% gain from then. But it is down from yesterday's US$13,879 high so a -18% slump from then. It is extreme +/-17% volatility. This price is charted in the currency set below.

This chart is animated here.

Daily exchange rates

Select chart tabs

Source: RBNZ

Source: CoinDesk

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14 Comments

by Joe Wilkes | 28th Jun 19, 4:29pm 1561696181

https://mobile.abc.net.au/news/2019-06-28/baoshang-bank-collapse-hits-l…

First Chinese bank collapses.

by Fritz | 28th Jun 19, 5:26pm 1561699592

Interesting times. Don't worry, they will be bailed out. But regardless, the days of 7+ % growth in China are well and truly over.

by Fritz | 28th Jun 19, 5:27pm 1561699652

Interesting times. Don't worry, they will be bailed out. But regardless, the days of 7+ % growth in China are well and truly over. The highly leveraged should be very worried.

by Withay | 28th Jun 19, 4:33pm 1561696421

“DEBT GROWTH ROLLS ON“ - and thus our economy is still ok, for now at least.

by Joe Wilkes | 28th Jun 19, 5:29pm 1561699749

Perhaps we should add mortgage brokers to the essential migrant category to keep the economy ‘bubbling’

by Nzdan | 28th Jun 19, 8:39pm 1561711151

Maybe every child born New Zealand can be issued a Klever Kash account through ASB, but instead of teaching them about savings they can show them the power of borrowing. Have them sign the loan docs with a hand/footprint clay mould, start them off with $10k but index the value inline with inflation until they hit 18.

by Joe Wilkes | 28th Jun 19, 9:09pm 1561712984

Great way of boosting the economy Nzdan. It should contain immediate parental access to the account and an interest only period after birth of at least 24 months... it’d be unfair to have interest accumulating before kids can actually walk and talk.. (reckon the UN would take umbridge at 12 months).

It could be like a rescue package for the X-ers that student loans were for maintaining debt, I mean demand for the Boomers.

Brilliant, crisis solved for another 10 years.

by Uninterested | 28th Jun 19, 4:45pm 1561697124

Do those household deposits incl Kiwisaver?

by lonewolfnz | 28th Jun 19, 5:07pm 1561698440

This is a fun ride.

by Cowpat | 28th Jun 19, 5:37pm 1561700265

Lonewolfnz, I am not a financial advisor but why not take the investment or a chunk of the profit off the table and let the rest ride. Its clear that you have immense faith in Bitcoins outlook .You have done well to stay the course.That is commendable Undoubtedly some 'investors' in the past 24 hrs will never look at it again By being more detached from your investment ,you may forgo some profit but you may be provided with further opportunity down the road.

by lonewolfnz | 28th Jun 19, 6:00pm 1561701611

Yes I should start taking profits you are correct :) I should start doing that indeed. Will do next swing up :)

by lalaland | 28th Jun 19, 7:39pm 1561707587

Nobody else finds it strange that despite tons of volatility in the real economy, pessimism in households and businesses, confidence collapsed, interest rates sagging, ocr being cut.

But despite all that, 6.2% credit growth rolls in like clockwork, just the same number comes out every time so consistently.

by Joe Wilkes | 28th Jun 19, 8:37pm 1561711045

Hi lalaland

Think of NZ housing and credit growth like a company. Let’s call it Vodafone. They kept on borrowing against the increase in market capitalisation and continued to pay market beating dividends. The banks kept lending.. whilst the market capitalisation kept going up. What no one mentioned was that the borrowing was funding the dividends, not the profits generated by the business. Then the Vodafone boss left, (in Property terms consider that the exit of those that control the media narrative, politics), the lie was finally exposed . Once the mirage was lifted, The Vodafone debt became an big issue to the market, the share price collapsed (nearly 50% over the last 12 months) and the dividends, still funded with borrowing have now reduced by 35%. And they are selling good assets (NZ arm wasn’t a bad gig compared to other ventures rhey’ve Borrowed for). Same story applies to Fonterra.
Households in NZ are still leveraging up off an index (that isn’t real because it fails to mention the collapse in top end sales volumes) but previous expectations that it always goes up will suck a few more in before Ireland 2.0. But the banks need lending, de-leveraging destroys money in the economy and their balance sheets.
The figures on lending, average loan sizes etc are bunkum, as are the reports published by REINZ which hide the real issues at a top end collapse (sales volumes in Auckland upper end are horrendously down) but they continue talking up Gisborne?

Either we have an ‘everything is awesome’ affliction or ‘Are New Zealanders being kept in the dark’ (worth a google)

by Nzdan | 28th Jun 19, 8:50pm 1561711828

Unsure where the 6.2% figure ties in with everything, but credit growth is a funny thing.

Auckland house prices have consistently gone up in value until recently, and arguably are now stable. Credit has grown off the back of that, or driven house price inflation, who knows?
Following that, the regions are going up in value and presumably credit growth is continuing due to that.

Are house prices/housing demand the driver of credit growth or is credit growth driving house price inflation?