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A review of things you need to know before you go home on Friday; no rate changes, good time to buy, housing debt grows faster, rural debt growth stalls, swaps slip, NZD weakens, & more

A review of things you need to know before you go home on Friday; no rate changes, good time to buy, housing debt grows faster, rural debt growth stalls, swaps slip, NZD weakens, & more
31st Jan 20, 3:59pm by David Chaston

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

MORTGAGE RATE CHANGES
No changes to report again today.

TERM DEPOSIT RATE CHANGES
No changes here either.

BETTER DATA THAN JUST 'CHINESE-SOUNDING NAMES'
There were 39,381 property transfers involving a home New Zealand in the December 2019 quarter (up +3.8% from the December 2018 quarter). Of the buyers, 81% were to at least one NZ citizen (but only 71% of sellers were NZ citizens), 10% were to corporate entities only (these could have NZ or overseas owners) although 17% of the sellers were in this category, 8.2% were to at least one NZ-resident-visa holder (but no citizens) compared with 4.5% of the sellers, and 0.4% were to buyers who were neither NZ citizens nor resident-visa holders (down from 2.3% in the December 2018 quarter) and 0.8% of the sellers were in this category. In some parts of Auckland, more than 20% of buyers were resident visa holders (Upper Harbour, Howick, and Papkura). Despite all this, there are just too many places to hide beneficial ownership in the way Stats NZ collects this data.

'A GOOD TIME TO BUY'
In the latest update to consumer confidence, the ANZ-Roy Morgan survey was essentially unchanged in January, holding onto its recent gains. The Current Conditions Index fell -2 points to 130, while the Future Conditions Index was unchanged at 118. Significantly, the proportion of households who think it’s a good time to buy a major household item lifted another +5 points to 49%. It mirrors a similar sharp rise in house price expectations.

WARY OF AGGRESSIVE KNOW-ALLS
Farm confidence rose at the end of 2019 but concern about compliance costs runs deep among farmers. Livestock farmers are the most optimistic, cropping farmers the most pessimistic in the latest farm confidence survey (despite the plant-meat fads) but all fear urban prejudices and policy impositions

FASTER GROWTH I
The growth of housing debt continues to rise, up +6.9% in the year to December 2019 and that is the fastest growth rate since mid 2017. Total housing debt is now $276.7 bln and 99% is owed to banks.

NO GROWTH I
But there is no growth in other personal debt. BuyNow, Pay Later schemes are eating into these balances and BNPL debt is not being counted by the RBNZ. And a close analysis shows that credit card debt is unchanged in a year, but personal loan balances are now starting to atrophy, down -1.3% in a year.

NO GROWTH II
Growth is evaporated from rural debt as well. December was the first month since 2012 when rural debt essentially didn't grow on a year-on-year basis.

FASTER GROWTH II
But bank lending to other businesses is rising at a faster clip, up +6.2% year-on-year and about the same rate for all of 2019. In 2018 this growth averaged +4.9%.

OK BEFORE THE CRISIS
China's official survey of its factory sector (a 3000 firm sample) reported its January factory PMI turning lower to be neither expanding nor contracting. It's larger 4000 sample survey of its services sector shows business expanding faster at 54.1 and above the 2019 average. But both survey were carried out in early weeks if January before the Wuhan emergency started to grip.

LOCAL SWAP RATES STAY DOWN
Wholesale swap rates are staying down today, dipping -1 bps for all tenors. The 90-day bank bill rate is unchanged at 1.26%. Australian swap rates are up +1 bp across the board. The Aussie Govt 10yr is up +3 bps today to 0.98%. The China Govt 10yr is holding at 3.03%. but of course Chinese markets aren't trading this week. The NZ Govt 10 yr yield is unchanged at 1.32%. The UST 10yr yield sank lower to under 1.54% after Wall Street closed, but since then it has recovered back to yesterday's 1.59% level.

NZ DOLLAR SOFTER
The Kiwi dollar is still slipping and is now at 64.9 USc. And we have started slipping against the Aussie as well, now at 96.5 AUc. Against the euro we are down to 58.9 euro cents. That means the TWI-5 is back down to 70.4 and that is a -2.4% devaluation since the start of the year.

BITCOIN UP
Bitcoin has resumed rising, up +2.5% to US$9,235. The bitcoin price is charted in the currency set below.

This chart is animated here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

Our exchange rate chart is here.

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30 Comments

by  Yvil  |  31st Jan 20, 4:09pm 1580440162

Hi DC, given the big movements in swap rates, could you please include their graphs as you used to do? Many thanks

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by  Pragmatist  |  31st Jan 20, 4:18pm 1580440714
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by  Andrewj  |  31st Jan 20, 4:15pm 1580440509

I have friends who have been borrowing recently to buy land, i think they need their heads examined. Lending looks to have flattened out across the board
https://www.rbnz.govt.nz/statistics/c5

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by  Becnz  |  31st Jan 20, 4:23pm 1580441006

I am waiting for repeat of 2008 when many sections went receivership sales for next to nothing. People have short memories with what happened not that long ago when banks stopped lending easily to high risk people and land developers managed to reduce section prices overnight to meet the market.

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by  Kezza R  |  31st Jan 20, 5:47pm 1580446063

I'm holding off as well, especially with this virus thing. It will be at least two weeks before we have a better idea of what is going on.
I have been getting anxious lately and have looked at a couple of 'do'er uppers'. That happened last time and I did buy and that is when the market went Sth.

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by  Becnz  |  31st Jan 20, 6:48pm 1580449716

Yeah I have sold out of all property and am waiting for things to head south might be sooner than we all think the only thing I am holding is precious metals Gold/Silver they look like a good option as our dollar gets hit.

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by  Kezza R  |  31st Jan 20, 7:10pm 1580451047

I did a subdivision and then bugged out of Wellington two years ago and came to Dunners. Best move ever, no chance of looking back.

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by  Becnz  |  31st Jan 20, 4:17pm 1580440668

How far will will we slip versus USD since start of Jan the chart is all one way down.
The Coronavirus seems to be having an effect on tourism NZ already I have had a few emails offering discounts for hotels and activities that I have never had sent to me before seems they are looking for locals to help fill the gaps.
Not looking good

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by  Andrewj  |  31st Jan 20, 4:22pm 1580440933
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by  Andrewj  |  31st Jan 20, 4:24pm 1580441086
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by  Kezza R  |  31st Jan 20, 6:54pm 1580450040

I was in a couple of tourist towns in central Otago a couple of weeks back and they were quiet then. One tourisium operator told me it is the worst January he had ever seen. That was before any lock downs, global fear and people looking at their finances and what the virus will do to the markets.

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by  Becnz  |  31st Jan 20, 6:54pm 1580450060

Sounds like what I just saw early Jan before virus hit on the West Coast the accommodation was empty most nights and owners said same thing very quiet this year makes me wonder how long till this flows to official figures and people start to wake up that maybe things are not so good as we are being lead to believe.

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by  Andrewj  |  31st Jan 20, 6:56pm 1580450211

I have had special offers on the ferry, started a couple of weeks ago for Feb travel.

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by  J.C.  |  31st Jan 20, 5:33pm 1580445211

Good day for OceanaGold share price (operator of Waihi and MacRaes mines) with a 20% increase in production in Q4.

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by  Andrewj  |  31st Jan 20, 5:51pm 1580446308

Corona bites farmers

Alliance
CORONAVIRUS UPDATE
Since the end of December, we have seen significant disruption in global protein markets predominantly led by events in China.

The coronavirus situation is evolving quickly. We are actively monitoring the situation and taking steps to optimise the position for our farmers and the co-operative. Coronavirus has today been declared a Global Health Emergency by the World Health Organisation. At the time of writing, the South China Morning Post reports there are approximately 9500 cases in China and the virus is spreading to other countries.

The outbreak coincided with China's biggest holiday period - Chinese New Year. The cancellation of festivities and the extension of the New Year holiday by the Chinese Government as a quarantine measure has seen restaurants and markets close across the country. This has created an immediate reduction in the demand for red meat.

The supply chain for food has also been impacted by port congestion and Government measures to limit the spread of the disease, with many employees staying away from work. There are forecasts that next week the internal distribution network will be running at 40% capacity.

Global markets, and in particular the US beef market, have responded to the unfolding situation in China and have reduced their purchase prices considerably.

The environment is continuing to change by the day, and understandably it creates a high level of uncertainty for you and your farm business. In the face of this, we are taking a responsible and measured approach and actively managing the impact of the situation.

In the months leading up to these events, we have been driving our sales velocity to reduce our inventory risk, and as such, our inventory profile is significantly better than at this time last year. This means our ability to process livestock is not currently constrained by our inventory position. Our sales team continue to do a great job of maintaining sales velocity by diverting products to other markets.

As a responsible co-operative, we need to ensure our livestock prices reflect global market conditions. With the downward pressure on market pricing and demand, we have had to make some decisions around the current level of the livestock price schedule.

This has resulted today in a significant reduction across all species. This is not a decision we take lightly, and we recognise the impact this has on our farmers.

However, at times like these, we need to make difficult choices to strike the right balance between maintaining a sustainable co-operative and returning as much value back to farmers as the current conditions allow. At the end of the period, if we have been too aggressive, this money will be returned to farmers through a profit distribution.

The situation remains fluid but in the short term we anticipate a likely further deterioration of global prices, that will result in further schedule reductions in the coming weeks.

It is uncertain how long this state of play will continue but the long-term outlook for protein remains strong. While there have been significant reductions over the last month, it is important to recognise that prices are still largely favourable compared to the same time last year.

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by  Andrewj  |  31st Jan 20, 6:19pm 1580447987

Just talked to local farmer who told me Affco have sent stock home today as freezers are full, just waiting for confirmation.

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by  Becnz  |  31st Jan 20, 6:55pm 1580450146

Sounds like what i have heard they are stock piling milk powder as to much supply.

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by  Andrewj  |  31st Jan 20, 6:57pm 1580450271

we don't have resources to handle this, what are we supposed to do, dry off cows?

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by  Henry_Tull  |  31st Jan 20, 6:58pm 1580450307

Who is they, us or china?

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by  Foyle  |  31st Jan 20, 6:32pm 1580448755

GDP growth was already trending downwards badly, this won't help. Had been looking like this would be the first Labour Govt in 50 years not to leave NZ in a recession, but this could be the Black Swan that turns the global economy. On upside an economic shock would probably see end of Trump.

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by  Audaxes  |  31st Jan 20, 7:00pm 1580450405

The growth of housing debt continues to rise, up +6.9% in the year to December 2019 and that is the fastest growth rate since mid 2017. Total housing debt is now $276.7 bln and 99% is owed to banks.

By around one third of households, which averages out to ~$465,986 each.

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by  Kezza R  |  31st Jan 20, 8:17pm 1580455038

Over $450,000. Wow that is frightening.

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by  Andrewj  |  31st Jan 20, 7:16pm 1580451409

and thats still an average

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by  Henry_Tull  |  31st Jan 20, 6:56pm 1580450194
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by  Andrewj  |  31st Jan 20, 8:39pm 1580456381

"Coronavirus quarantine blocks feed to poultry farms
Poultry farmers in China's Hubei Province claim they are running out of feed due to transport restrictions imposed to prevent the spread of coronavirus. Hubei Province, the epicenter of China's coronavirus epidemic, is under strict quarantine. On January 28, 2020, the Hubei Province poultry farming association issued an emergency appeal to the national feed industry association requesting 18,000 metric tons of corn and 12,000 metric tons of soybean meal--a 10-day supply--to aid the survival of poultry producers. According to the letter, most of the province's "scale" poultry farms are running out of grain due to public health emergency measures that include road closures and limits on transportation to control the spread of the coronavirus. The letter said farms are facing irreparable economic losses and asked that feed companies with production capacity and transportation channels sell the feed ingredients at recent market prices and deliver the feed to Hubei.'

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by  Fritz  |  31st Jan 20, 9:02pm 1580457752

A potentially deadly virus has infected 15 million Americans.

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by  fat pat  |  1st Feb 20, 2:48am 1580478501

The MSM seems to be downplaying the severity. I like this medcram youtube channel because he's up to date and he sticks to peer-reviewed medical journals. This is really interesting about the incubation period -> https://www.youtube.com/watch?v=nW3xqcGidpQ

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by  Kauri  |  1st Feb 20, 7:30am 1580495444

If Singapore is doing this, maybe they know something we don’t.
https://www.scmp.com/week-asia/health-environment/article/3048441/singa…

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by  Henry_Tull  |  1st Feb 20, 7:49am 1580496550

USA airlines stop flying to China

https://youtu.be/lgnK_-Wu-9I

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by  Andrewj  |  1st Feb 20, 8:40am 1580499658

out of control we are going to face being shut down
https://www.youtube.com/watch?v=Nmrm0mk5928

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