What happened Thursday

A review of things you need to know before you go home on Thursday; big banks cut TD rates, eyes on Fonterra tension, Crown to appeal SR decision, inflation up, bond demand down, swaps & NZD firm, & more

12th Sep 19, 3:59pm by David Chaston

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

MORTGAGE RATE CHANGES
Bank of China NZ has changed their offer card, separating out their Standard rates from a new set of 'Special' rates.

TERM DEPOSIT RATE CHANGES
ANZ cut many rates.ASB has as well. Details are here.

WHO USES BUY-NOW, PAY-LATER SCHEMES
A new report puts some meat on the bones of the New Zealand buy now, pay later market with women its biggest customers.

'CORE TENSION' CHOICES
S&P Global Ratings sees Fonterra's flexibility over setting the milk price paid to farmers as giving the dairy co-operative a higher debt capacity. They say Fonterra is 'willing and able' to adjust the milk price to strengthen its balance sheet.

CROWN TO APPEAL SOUTHERN CROSS CASE
Grant Robertson, as Minister Responsible for the Earthquake Commission, says the Crown via Southern Response will appeal the High Court decision in the K. & A. Dodds v Southern Response Earthquake Services Ltd case. The Government, Robertson says, wants to find a fair and enduring resolution for the outstanding Canterbury earthquake claims, and is committed to doing what is right and ensuring people are paid what they are entitled to. The judgment left some important unanswered questions, he says, thus the Crown wants more certainty for other claimants and for Southern Response. Karl and Alison Dodds, the couple who defeated Southern Response in the High Court, recently told RNZ its deceptive actions were nefarious and they want an apology and inquiry.

STIMULUS, NZ-STYLE
Ratings agency Fitch says that "a markedly looser monetary policy stance" from the RBNZ and a positive outlook for the rural sector, "will lend support to banking sector loan growth over the coming quarters". However they think consumer spending is likely to remain weak as the overall economic outlook remains uncertain. They have revised their loan growth forecast up to +5.1% in 2019, from +4.8% previously, reflecting the looser monetary conditions.

UPSIDE INFLATION RISK
ANZ's monthly inflation index reached 1381 in August, almost +3.1% higher than the 1340 in August 2018. They say "recent strength in domestic non-tradable inflation is holding up and implying some upside risk to our near-term inflation forecast".

FOOD INFLATION UP
Food prices rose +2.1% in the year to August, their largest year-on-year rise in 15 months. That is essentially driven by fast-rising meat prices which are up +8.0% in a year. Beef and port prices are up +8% and lamb prices are up +10%. The world's meat prices are being roiled by China's ASF virus and the impacts are flowing out over all meat products - and the impact is reaching New Zealand. In contrast, fruit & veg prices are down -4.6% in a year.

SURPRISINGLY SHUNNED
The latest Government bond tender was surprisingly poorly supported today (relatively, at least). $250 mln was offered and only $330 mln was bid, giving the lowest coverage ratio for this April 2029 nominal bond ever in the seventeen times it has been offered since July 2018. And that poor demand was reflected in the yield which at 1.29% is the first time it has risen from the prior tender since November 2018. The yield at the August 8 tender was 1.12%.

RENTS RISE FASTER
Rents for properties changing tenants in August were up +4.3% from a year ago on a national basis. But this masks some substantial regional variation. In Auckland the increase is +2.7% and rising. In Wellington it is +6.8% and th fastest pace if increase in 2019. In Christchurch it is up +1.6%. Regional North Island rose +6.9% and regional South Island rose the most of all, up +7.1% and its fastest pace since 2016. Rent rises for properties that didn't change tenants isn't as aggressive.

CLUTCHING
Earlier today, Wall Street rose strongly on trade-war pull-back signals from both the US Administration and Beijing, delaying when the next round of tariffs take effect, and exempting some products. The S&P500 rose 1.1% on the news. But subsequently, other equity markets haven't found the same enthusiasm, most trading flat, including our own NZX which is barely higher near its close.

UP BUT NOT ENOUGH
Synlait today disappointed markets with its +10% profit rise, investors reckoning the company had suggested it would be more. Their share price fell -10% and dragged a2 Milk a little lower too. But the annual results released today also showed it paid its farmer suppliers $6.58/kgMS in the 2018/19 season, and that will be well above the final that Fonterra set when they finally release thier accounts (sometime in the next two weeks).

SWAP RATES FIRM
Wholesale swap rates are up just +1 bp across the board today, holding on to recent gains. The 90-day bank bill rate is down -1 bp to 1.14%. Australian swap rates are unchanged. The Aussie Govt 10yr is up another +3 bps to 1.16%. The China Govt 10yr is up +3 bps at 3.08%, while the NZ Govt 10 yr is up another +4 bps to 1.31%. The UST 10yr yield is at 1.76% and also up another +5 bps in a day.

NZ DOLLAR FIRMS TOO
The Kiwi dollar is little-changed at 64.3 USc. Against the Aussie we are also slightly lower at 93.5 AU cents. Against the euro we have firmed to 58.4 euro cents. That puts the TWI-5 firmer at 69.7.

BITCOIN HOLDS
Bitcoin is at US$10,104 and little-changed since this time yesterday. The bitcoin price is charted in the currency set below.

This chart is animated here.

Daily exchange rates

Select chart tabs

Source: RBNZ

Source: CoinDesk

Daily swap rates

Select chart tabs

Source: NZFMA

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50 Comments

by Kezza R | 12th Sep 19, 5:17pm 1568265454

Just searched NZ gold reserves.
Nothing, zip, the cupboard is bare.
I'm more than a bit taken back by that news.

by frazz | 12th Sep 19, 4:42pm 1568263378

We swapped it all for Bitcoin ..te hehe

by scarfie | 12th Sep 19, 7:23pm 1568273027

As a satellite of China we have their backing us.

by linklater01 | 13th Sep 19, 7:18pm 1568359130

Mezzanine R,

The RB has not held gold since 1991. They confirmed that to me in an email several years ago.

by printer8 | 12th Sep 19, 4:26pm 1568262419

"Rents for properties changing tenants in August were up +4.3% from a year ago on a national basis."
This above both the rate of inflation and wage increase, however it is not surprising.
This is most likely to reflect catch-up for the currently low yields on rental properties.
I have previously posted that there will be increasing rents due to the poor yields and I consider that the cost of rental to be the next housing affordability issue.

by Advisor | 12th Sep 19, 4:46pm 1568263568

Next crisis? MSD and other government organisations spent nearly $1 billion last fiscal year in keeping poor families in temporary accommodation. This amount is growing at a rapid rate.

A recent report says if the government had enough state housing assets, we could have housed all those people for less than a-fourth of that expenditure. The amount saved could probably go to building yet more market and state houses.

by Roger Witherspoon | 12th Sep 19, 5:00pm 1568264430

Is it all a cunning plan? Bring in 50,000 people a year as new residents, and 50,000 a year (or whatever the number really is) on "temporary worker" visas, and more tourists than you can shake a stick at (we are not quite at the backlash stage, but we are close). Create a housing shortage so the ploticians and bureaucrats can solemny intone "Something must be done to solve the housing shortage" so they can increase their personal power and wealth?
"More underlings, cool. More taxes, cool. More votes, cool. More regulations, cool. More money, yay."

by RickStrauss | 12th Sep 19, 5:09pm 1568264960

3.4 houses per National MP under the last government. No wonder no housing crisis was acknowledged to exist after their campaigning on the housing crisis to get in.

by Kezza R | 12th Sep 19, 5:13pm 1568265237

Motel owner I met.
Didnt want to rent out to emergency housing.
The final deal cut is full occupancy, at full room rate, every day of the year.
Sould have asked him if he had a full repair / reno agreement in place but I'm sure he would.

by rastus1 | 12th Sep 19, 8:18pm 1568276332

Ever wondered why these people are in motels when rentals are available? A few reasons,one being their track record as a tenant.Another is they pay no rent or pay any outgoings such as power,phone or sky.

by Fritz | 12th Sep 19, 5:17pm 1568265443

Exactly. One of many side effects of our disastrous experiment with neo-liberalism.
I often walk past 20-30 homeless people on the streets of central Auckland every night on my walk to Britomart.
As a nation, we should be DISGRACED.
There should be protests on the streets. But there aren't.
It's all sounding very 'Brave New World' isn't it?

by Pragmatist | 12th Sep 19, 5:57pm 1568267835

"I often walk past 20-30 homeless people on the streets of central Auckland every night on my walk to Britomart.
As a nation, we should be DISGRACED."

We should be disgraced that we, like every other western nation has a tiny portion of the population with severe addiction issues, or/and mental health issues?
Hate to break it to ya, but every city in Europe that I visited had beggars and homeless people too.

by Fritz | 12th Sep 19, 6:40pm 1568270449

Thousands of people in motels too?
Btw just cos something is prevalent, doesn't mean it's right.

by Pragmatist | 12th Sep 19, 9:38pm 1568281082

Indeed, but short of handcuffing them and leading them away there is often nothing you can do. Have an uncle who was very close to that lifestyle, even tho he had no financial need to be. Mental health problems are a mine field, if they don't hurt or threaten anyone, and they choose that lifestyle, there is nothing you can do, you can't force them into treatment.

by Ngrrk | 13th Sep 19, 6:39am 1568313592

"Mental health problems" doesn't explain the massive increase in homelessness.

by Pragmatist | 13th Sep 19, 9:03am 1568322217

95% of those Fritz sees in the city centre will either be substance abusers, or have mental health issues that need resolving. Usually both.

If you are talking about those living in cars etc, then I agree, there are many other causes, and the increasing inequality is one. Even though I didn't vote for them I had some hope this govt would improve things, and they've made some small steps in the right direction, but not enough.

by Ngrrk | 13th Sep 19, 6:45am 1568313950

by BeSensible | 12th Sep 19, 5:39pm 1568266748

Auckland up 2.7%, this is post Healthy homes bill..
What happened to the hyper inflation you'll were talking about?

by Advisor | 12th Sep 19, 4:46pm 1568263613

The world's meat prices are being roiled by China's ASF virus - and the impact is reaching New Zealand

So what if food is grown in our backyard, we still pay "global prices". What's the point of suffering through all that biosecurity in NZ when a virus outbreak elsewhere forces us to pay ridiculous retail prices here?

by BeSensible | 12th Sep 19, 5:35pm 1568266545

its called Globalization

by youngdumbandbroke | 12th Sep 19, 8:35pm 1568277347

Unfortunately we pay market price. If we didn't want to pay, another country would. That's why dairy products are expensive here even though there's plenty locally produced. Market price is set by global supply and demand

by Boatman | 12th Sep 19, 5:11pm 1568265071

Just read the Herald's "hard hitting " piece about 3000 families living in motels .

So the Minister in charge of the using the "past nine years ' as an excuse now has more ammo , which he will fire at National

Conveniently forgetting the reason we dont have enough houses is we are bringing in 100,000 new faces a year , around 60,000 are net stayers and we have been building just 5,000 houses ...........

Do the sums you fools .

Running out of houses was inevitable

And just for the avoidance of doubt the lax immigration rules were actually in place during the Clark years in office , and that's when the number started heading into the heavens

by Fritz | 12th Sep 19, 5:18pm 1568265531

Who's the greater fool?
Whether Red or Blue, they are all useless and deceitful.

by Independent_Observer | 12th Sep 19, 5:24pm 1568265843

Who will pay for your super Boatman if we cut immigration? Or what do you think will happen to our GDP if we cut immigration? Or what do you think will happen to the housing market if we cut immigration?

Which of these is a good result from your perspective?

by bw | 12th Sep 19, 5:31pm 1568266293

GDP per capita, the only measure that really matters, rises with a fall in immigration?
Super is indexed to average wages, and those rise, as will Super, with fewer people competing for what jobs there are?
Housing prices, of course, bear the brunt, as it has been the only 'real' driver of our economy - as it is pretty much everywhere.

by loveyourwork | 12th Sep 19, 5:45pm 1568267154

Exactly

by GGP | 12th Sep 19, 8:00pm 1568275245

"GDP per capita, the only measure that really matters, rises with a fall in immigration?"

Only if you assume every immigrant produces less than the average, which is a stupid assumption. I am an immigrant, and I can assure you I do not fall below the national average.

"Super is indexed to average wages, and those rise, as will Super, with fewer people competing for what jobs there are?"

Only if you assume immigrants never become employers themselves, thus increasing the pool of available jobs. Not to mention that they increase local demand for goods and services, which also increases the demand for jobs. Again, a stupid assumption.

Which is why, if you actually look it up, NZ's GDP per capita has increased pretty steadily over time regardless of how much immigration there was.

by Lapun | 12th Sep 19, 8:45pm 1568277929

It has increased. Using the Maddison Project Database from 1950 to 2016 NZ GDP per capita has increased 246% which is not bad but is far worse than every country you are likely to compare NZ with.
CHN 1973%
DEU 570%
FIN 541%
FRA 435%
GBR 344%
IND 743%
ITA 743%
JPN 1239%
NZL 246%
TWN 3112%
USA 348%
70 years of high immigration; whether from UK or Asia; whether National or Labour; same result - steady decline in our wealth compared to other countries. That was just a sample of the 170 countries.

by GGP | 12th Sep 19, 9:18pm 1568279925

New Zealand hasn't had high migration rates for 70 years. We were near negative numbers, if not well into them, until the 2000s.

I got no idea how to use that database, but I would really like to know. Is there somewhere I could find a "how-to" for dummies on that?

by Lapun | 12th Sep 19, 9:51pm 1568281902

Fairly easy to use spreadsheet. I just used hide to leave out most of the minor countries (somehow missed S.Korea) and chose the starting point at 1950 because many countries had no data before that.
I believe NZ has had a consistantly high immigration rate but you have a sensible point if you mean 'net migration'; certainly NZ lost population to emigration. I arrived in 2002 and back then the newspapers worried about Kiwis leaving. It would be interesting graphing house prices as a multiple of median wage against net population change. I suspect rapid population growth matches house price inflation. Of course that is mainly Auckland since worldwide legal immigrants head to the big cities - it is noticeable that NZ like other countries has many small zombie towns.
https://www.rug.nl/ggdc/historicaldevelopment/maddison/releases/maddiso…

by Lapun | 12th Sep 19, 8:51pm 1568278294

It depends on the quality of the immigrant. Most of us know a few high powered immigrants (in my case doctors & surgeons) and we all meet some low paid immigrants driving Uber, supermarket checkout, etc. The former help raise our wealth (GDP per capita) and if our economy keeps declining there is a danger they might chose to move to wealthier countries.

by GGP | 12th Sep 19, 9:26pm 1568280415

My dad got one of those "low paid" jobs you look down on so much. My mum did the same. It allowed them to put food on the table for my brother and I, and put us both through University. I alone pay about $50,000 a year in income tax now. We would have never gotten a fraction of the opportunities if New Zealand didn't let us come here. I've never been tempted to move to any other country other than when I read the xenophobic messages on this website.

by Lapun | 12th Sep 19, 10:27pm 1568284032

I don't look down on them; my children are doing those low paid jobs in competition with desperate 3rd world immigrants.
Is immigration good for NZ and for our low-waged and unemployed? I say it isn't.
If you find me xenophobic I'm sorry - I have a visible immigrant family who have experienced the minor racism found in NZ. Do you want an open door? Probably not so there has to be a quota and also some form of selection.
Since reading prof Stringer's report on worker exploitation (dec 2016) I have been against low-wage immigration; it is a recipe for corruption and that applies even if your Dad wasn't exploited and had an honest employer.
I'd be quite content if NZ immigrant quota was the same as average OECD countries.

by GGP | 12th Sep 19, 10:41pm 1568284917

I consider it xenophobic to worry only about people that happened to be born here, purely by luck, at the expense of anyone that wasn't. For that reason alone, an open door would be a far better policy than the current one.

If you were actually concerned about immigrant exploitation, the last thing you should want is a policy that only allows in high-earning immigrants. The simple truth is that any employee can suffer exploitation, local or foreign. The only difference is that onerous visa policies mean that foreigners have an incentive not to report their own exploitation because, once they do, they're on the first plane out of the country.

New Zealand has far, far more empty space than any other OECD country. It is one of the least populated countries in the world. Its immigration rate SHOULD be way higher than the OECD average. If you're just talking absolute values (which is really what you make it sound like when you say "quota", then note that NZ is one of the lowest countries. 50,000 is lower than Norway, Denmark, Korea, Japan, Belgium, Austria, Switzerland, Sweden, Netherlands, Italy, Spain, Australia, France, Canada, the UK, and then the big boys: Germany and the USA, both of which have over 1 million net migration.

by loveyourwork | 12th Sep 19, 11:57pm 1568289440

"an open door would be a far better policy than the current one."

Awesome you have an opinion however I'll be grateful if you don't take up a career in politics.

by Pragmatist | 13th Sep 19, 12:23am 1568290983

If you're just talking absolute values (which is really what you make it sound like when you say "quota", then note that NZ is one of the lowest countries. 50,000 is lower than Norway, Denmark, Korea, Japan, Belgium, Austria, Switzerland, Sweden, Netherlands, Italy, Spain, Australia, France, Canada, the UK, and then the big boys: Germany and the USA, both of which have over 1 million net migration.

Norway, population 5.4m a bit more than NZ, immigrant arrivals 52,500, net immigration 19,000 (so both numbers about a third of NZs immigration figures..)

Denmark, population 5.8 million, Immigrant arrivals 87716, Emigration (departures) 68990, Net 18,726 (2018)

So far you are nought from two from two countries with roughly similar population.

Korea has 10 times our population, net migration 107,000 in 2017, just over twice the immigration with 10x population, so about 1/5th on a per capita basis.

Japan, population 126 Million, Net Migration 169,543.. 25 times our population, , and still they only accepted just over three times the net migration. so less than 1/8th the per capita rate. And thats with a declining and aging population.

Belguim: Population 11.3 million, net migration.. 50,180 (https://statbel.fgov.be/en/themes/population/migration).. well bugger, less than half the per capita migration of NZ.

Sorry kid, we're taking far too many already. Lets aim for net migration figures like Norway and Denmark.

by Lapun | 13th Sep 19, 7:29am 1568316592

Thank you for digging out the stats. I had just started to look up Norway when I realised you had done the work for me. Norway has 16% born overseas and NZ has 25%. Norway is massively wealthy with its oil. We have milk.

I totally echo your comment "" Lets aim for net migration figures like Norway and Denmark"".

by Nzdan | 13th Sep 19, 6:20am 1568312407

How many high earning immigrants (such as doctors or dentists) suffer from exploitation? I don't have any figures, but I think it's safe to assume exploitation happens in the lower wage earning jobs. So a policy that only allows in high earning immigrants, if effective i.e. those high earning immigrants stay high earning, then naturally there will be a massive reduction in worker exploitation.

by GGP | 13th Sep 19, 6:51am 1568314306

I dont think you understand how the exploitation takes place. The employer and the employee both tell Immigration that the employee makes X amount. They usually say X is well over the minimum wage because this allows for a longer work visa. The employer then actually pays X divided by 3 or just fucking nothing at all. He gets away with that because the employee can't actually report it. If he does, he gets sent back home because his wages are below what the work Visa states.

Get rid of the fear of deportation and immigrant employees would actually report when they are getting less than minimum wage. That would reduce the exploitation problem significantly itself.

by Lapun | 13th Sep 19, 7:32am 1568316732

We should be rewarding immigrants who blow the whistle on exploitation not deporting them.

by GGP | 13th Sep 19, 7:46am 1568317582

I agree with you on that one. That's certainly not what we're doing, though.

by Lapun | 13th Sep 19, 7:31am 1568316671

Simply can't agree with you. Do you carry your open door policy into your own house and share each and every mouthful of food with any stranger who wants it?
My perspective is everyone who is a citizen is a Kiwi - doesn't matter what they look like or if like myself they have spent 75% of their life in other countries or even if when I meet them I hate them. It is like membership of a club - members are in and non-members have access by permission and must leave when asked. You can argue about membership rules but once in you are in. It seems to me that your distinction between those born here and those who weren't is far more racist than mine.

by GGP | 13th Sep 19, 7:43am 1568317432

"It seems to me that your distinction between those born here and those who weren't is far more racist than mine."

You are the one making this distinction. You give membership to the club only if someone is born here. If they weren't born here, they have to earn it, and the way you decided they should earn it is by being 3 times better than anyone already in the club.

I have no idea what you think the similarity is between a country and my house. Nor with the idea that anyone is getting free food. Maybe a closer comparison would be a city. I, for one, have no problem with people moving freely between Wellington and Auckland, or between the South Island and the North Island. How about you?

I know my ideas about immigration aren't popular. I'm getting far too many responses now and they are starting to require increasingly more research. So this will be my last post on this article; you all win.

by Lapun | 13th Sep 19, 10:19am 1568326752

I think there is a misunderstanding. I am a Kiwi. Not born here. But I have a certificate to prove it. So I am a member. So is every other immigrant who has chosen to take up citizenship. The laws of the land and our responsibilities and duties as citizens (voting, IRD, passports, jury duty, etc) are just the same as those Pakeha who were born here and those Maori who were born here. There is no distinction between us except it seems in your mind.

I certainly concur with the problem you have when taking an unpopular attitude on immigration - it does make you a target for every nutter - but some who disagree are just level headed people with a different opinion.

The current law says citizens can move wherever they like in this country (within restrictions for private property, maori land, defence force land) and I obey the law. You might find problems if you go to move to China and want to reside there - that is their laws. It is what being a citizen of a country means.

by Camel's back | 12th Sep 19, 5:53pm 1568267580

Bring it on... call time on this BS... We cannot look after all the citizens we have already, bringing in more does not improve poor New Zealanders lot at all.
When things go pear shaped (and they will) having more mouths to feed is pure folly. Like the single mother with no means of support that has 8 children... These people are not going anywhere, you cant sweep them under the rug... you have to educate and train everybody.
Its lazy economics... they did it because no-one stopped them and higher house prices and low wage inflation is a good problem to have.

by scarfie | 12th Sep 19, 7:34pm 1568273680

One way this plays out is mum and dad property investors end up with their kids renting off them. The kids then lose their jobs in the depression, and there isn't any work for them, so they can't pay the rent.

If you think low interest rates don't mean low yields follow on all assets you deserve what is coming. And interest rates will keep dropping until they are zero, or negative.

by bw | 12th Sep 19, 5:43pm 1568267032

Every politician on the planet has been schooled at the same 'growth is good; more people is better' university - except one; and he isn't a politician.

And, just for fun:
"The average of our top three models suggests a 30 per cent probability that the New Zealand economy entered recession during the June quarter," ASB's JaneTurner said.

by Fritz | 12th Sep 19, 7:28pm 1568273296

They really have no idea do they.

by scarfie | 12th Sep 19, 7:20pm 1568272821

Isn't it funny that in a capitalist economy Fitch think loan growth is paramount?

by The Person | 12th Sep 19, 8:02pm 1568275336

Whadont think southern Cross has anything to do with earthquake claims