A review of things you need to know before you go home on Friday; some key rate drops, policy uncertainty raises power prices, building consents jump, online retail strong, swaps unchanged, NZD softer & more

A review of things you need to know before you go home on Friday; some key rate drops, policy uncertainty raises power prices, building consents jump, online retail strong, swaps unchanged, NZD softer & more
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Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
Kiwibank launched sub 4% rates all the way out to 5 years. Later, ASB responded with lower rates of its own.

TERM DEPOSIT RATE CHANGES
Reductions in savings rates were announced by ANZ and BNZ. Essentially they cut bonus saver rates by -40 bps or -50 bps respectively.

POLICY CHANGES & UNCERTAINTY HOLD UP ELECTRICITY PRICES
The country's lakes have been topped up and the main gas field is back in action, but electricity prices have settled at an elevated level and aren't expected to fall. We look at what's going on.

BIG RISES
The residential building boom continues with new dwelling consents up +24% in July from a year ago. The number of new dwellings being consented in Auckland has doubled over the last five years.

ONLY SLIGHTLY UNDER PAR
Consumer confidence lifted +2 points in August to 118, slightly below the historical average. The Current Conditions Index rose +1 point, while the Future Conditions Index lifted +2 points. The proportion of households who think it’s a good time to buy a major household item was unchanged at a respectable +39%.

NEW SME LENDER
Aussie small business finance specialist Prospa is big in Australia and is now expanding in New Zealand. While it only has $45 mln in funding here, it has increased its maximum loan size from $150,000 to $300,000 in a push to grow locally via the broker channel. Instead of interest, Prospa charges an origination fee, plus a "factor" rather than "interest". An example they give is: "Take a loan of $10,000 with a $250 origination fee (2.5%) and factor rate of 1.20. You would pay back $12,300 over the loan term. ($10,000 + $250) x 1.20 = $12,300." You can work out the effective cost of credit using this tool. If their example was over 24 months, the effective cost of credit would have been 18.0% pa.

ONLINE RETAIL GROWS STRONGLY
New Zealand’s total online retail spending in July was +9% higher than a year ago, according to the latest BNZ/Marketview analysis. Spending at local online sites was exceptionally strong - up +18% on July last year. This is continuing to be heavily driven by Food and Grocery categories. Spending growth at offshore sites fell slightly in July, with online spending down -3% on July last year.

BOUNCE-BACK?
After a couple of months of disappointing results, non-residential consents grew +27% pa in July, with total consents worth $141 mln more than a year prior. However, Infometrics says it is important to note this result is down -1.9% from June. Most of this growth came in Christchurch, where consents were $89 mln higher than a year prior. The strong growth in the Garden City was due to a $39 mln university student hall and a $33 mln prison consent. The non-residential construction sector is not in a great situation at present and the fact that this bounce-back is primarily only from large taxpayer-funded projects reflects the funk.

BNPL EATS PERSONAL LOAN SECTOR
July home loan balances outstanding rose +6.3% in the year to July, according to the latest RBNZ update (C5). This is actually the fastest rate of housing debt growth since September 2017 (when the current Government was elected). Business debt growth rose at +7.7% pa and its fastest since October 2016. Rural debt growth was at a timid +2.8% annual rate. But the stand-out change was for personal debt which didn't grow at all, basically unchanged in a year. This could be reflecting the surge in buy-now, pay-later (BNPL) 'lending' which isn't captured by the RBNZ data. Given that credit card balances grew a very low +0.6% in the same period, we can see that the BNPL sector is hitting the personal loan market even harder. Together, this is a $16.6 bln sector and it is now facing an uncertain future.

GRIM READING
In contrast to the New Zealand housing sector, the data in Australia for residential consents in July was quite grim. Overall, residential consents fell by -26%, but apartment consents were down-44% year-on-year and on an annual basis you have to go back to 2013 to find a lower level.

SWAP RATES HOLD
Wholesale swap rates are unchanged today. The 90-day bank bill rate is unchanged at 1.19%. Australian swap rates are down -2 bps. The Aussie Govt 10yr is up +2 bps at 0.89%. The China Govt 10yr is down -1 bp to 3.07%, while the NZ Govt 10 yr unchanged at this time at 1.10%. The UST 10yr yield is up +7 bps to 1.52%.

NZ DOLLAR SLIDES
The Kiwi dollar dropped today and is now under 63 USc. Against the Aussie we are down to 93.8 AU cents. Against the euro we are softer at 57 euro cents. That puts the TWI-5 down to 68.4.

BITCOIN DROPS FURTHER
Bitcoin is tumbling today and is down another -6.4% to US$9,467. The bitcoin price is charted in the currency set below.

This chart is animated here.

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Source: CoinDesk

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11 Comments

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The Kiwi dollar dropped today and is now under 63 USc.

Thanks Mr Orr for making everything imported that much more expensive. And holidays.

Fortunately most of our imports come from Oz and China, and their currencies have also depreciated against the USD. If that wasn't the case the imported inflation would be killing the everyone on an average wage.

Welcome aussie builders and tradies. Building rate to double..

Dollar dropped to US$.

it'll be cheaper to buy back the $20 Billion NZ$ dividends per year taken offshore by Foreign Owned Investors.

Be easier to just stop them taking as much from NZ in the first place. Have we got 40 years worth of Fonterra profits in NZ each year to let them have ?

More asset sales anyone. Ports ? Airports? Shirt off our back ? Health Care ? Going cheap.

Jim Bianco

Why would anyone in their right mind buy a neg yld 50yr bond?

Because its price (orange) is up 36% YTD!

July 24 is the day its yld went neg, a month ago. Why own it then? Because it's up 18% in a month!!

This is what happens with neg ylds, booming prices.

This is critical to understand about negative rates, European bond managers are making tons of money and having a career defining year.

Sure it may end in tears, but that might be a few years away, or next month.

https://pbs.twimg.com/media/EDL5h5cXoAA_b3f?format=jpg&name=large

China Imposes New Capital Controls, Targets Foreign Real Estate Purchases, as Yuan Falls to 11-Year Low

https://wolfstreet.com/2019/08/30/china-imposes-new-capital-controls-tar...

This Brexit is just a mess and I wish Boris J the best of luck

In 2016 17.4-million Brits voted to leave. That’s 52% of the 72.2% who turned out to vote, the highest voter turnout in the UK since the 1992 general election; it is far more than voted for Maggie Thatcher in 1979 or Tony Blair in 1997.

The margin of victory might look slight to the “remainers”, but it was a bigger margin than in nine of the 20 postwar general elections. And how patronising is the idea that a chunk of the 17.4-million Brexit voters were swayed by Russian trolls while every one of the “remainers” were independent thinkers?

Boris must do what the People voted for , Parliament rejected 3 deals , and the EU wont budge

The UK’S EU partners enjoy a trade surplus with the UK.

Does anybody think they will easily abandon this on November 1?

BJ has no option ...........he must just do it

lol

BJ has no option.... he just can't do it.

Mr Orr has just come back from his conference in US with his instructions. NZ is doing perfectly okay, which of course must be stopped. Our government has been told to borrow heaps to build infrastructure to look after the freeload tourists and the new immigrants. They must not pay for their expenses themselves. Once the government does that, there will be a global collapse, interest rates will shoot up, and we can take part properly, like every other small, easily bullied country.

Yes, a similar modus operandi when R Douglas electrified railways for the new American owners coming after Fay Richwhite.

And BNZ tidied up nicely before Foreign owner sale. Telecom, meta experts, petrochemical, Towson point, narsden oil refinery.

All set up nicely.

Now we hand $20 Billion a year profit to foreign owners.

I watched a young policeman interviewed with a brain tumour desperate to live for his wife and family and job.

But alas no funding for the medication needed to shrink the tumour.

But $20 Billion profit to foreign investors rorting NZ.

Lack of funding for who !