Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
None to report today.
TERM DEPOSIT RATE CHANGES
None here either.
EXTREME FEAR
Today's big background influence is the -4.4% drop on Wall Street, eclipsing Europe's earlier -3.3% retreat. Markets are in full fear mode. All Asian markets are also down sharply in early trading. The ASX200 is currently also being thrashed just as hard, down -2.6% so far and the NZX50 is currently down -2.3%. That means we are heading for a -7.5% drop for the week. If it ends like that, we will have gotten off lightly compared with other markets. In four days this week, the S&P500 is already down by -10.8%. Bond markets are in fear mode too. See note below.
TAX TAKE STILL VERY HIGH
The Crown's OBEGAL ('profit'?) rose to +$1.4 bln in the seven months to the end of January. But its more pure accounting result (using proper accounting standards) shrunk to +$2.2 bln as some large asset valuations were required to be reversed. The OBEGAL gains were the result of still-impressive year-on-year gains in taxes on individuals (+6.2%), on companies (+23%) and GST (+4.2%), all of them much higher than GDP is growing. Treasury is preparing for a sharp reversal.
CONSUMERS OBLIVIOUS
"The ANZ-Roy Morgan Consumer Confidence Index fell just a smidgen in February, and is still solid. Households are feeling pretty good about life. A net 41% think it’s a good time to buy a major household item, down 8, but still strong. The bullish housing market will be supporting this result."
IMPORTANT DEBT MOVES
Mortgage loan balances are up +7.1% in January from the same month a year ago, the highest rise in more than 30 months. Personal loan balances fell -0.6% and that is the largest fall since February 2012 (and has a lot to do with BuyNow, PayLater schemes not required to report their balances). Business lending growth is stable at +6.3% pa but rural lending is now declining, down -0.3% year-on-year and that is the first time these balances have fallen in eight years. It is hard to know whether this is because farmers are taking debt reduction action, or banks are requiring less exposure.
WEAKER DEPOSIT GROWTH
Household bank deposits rose +4.3% in January from a year ago and now total $184.0 bln. This growth is slowing and the January rise was the weakest since October 2010. Also, see this.
UDC TO LINK UP WITH US LIFE INSURER & ANNUITIES FIRM?
The Australian Financial Review reports US investment firm Apollo Global Management may bid for ANZ's UDC Finance with the help of its portfolio company Athene, which is an acquisitive American life insurer and annuities company. Apollo’s plan is to bankroll its UDC bid with cheap funds from Athene, the AFR says. Apollo's up against US private equity group TPG Capital with bids due in the second week of March, the AFR says.
JAIL FOR RESTAURATEUR
A co-owner of the Masala Restaurant chain has been jailed for hiding millions of dollars in cash sales and laundering large amounts of it. Rupinder Singh Chahil was sentenced today at the Auckland District Court to three years and two months in prison, plus a $50,000 fine, on nine money laundering charges and 34 tax evasion charges.
CORONAVIRUS UPDATE
The latest compilation of Covid-19 data is here. There are now 4262 cases outside China, a rise of +930 in one day. A week ago that number was 2200 so it has nearly doubled in one week. South Korea reported an additional +505 cases since yesterday, Ital reported +202 more, and China reported +742 more.
'GOOD, BUT GET THE DEBT DOWN'
Ratings agency Standard & Poors has affirmed its AA foreign currency rating for the New Zealand Government, with a 'positive' outlook. A positive outlook suggests that an upgrade is possible with the next 24 months. Risks around the country's high external debt are the main inhibitor of an upgrade. (Ironically, Kainga-Ora got the same rating from S&P. It is an agency committed to borrowing a lot more in the immediate future.)
FORCED BREAKUP
In the UK, their regulator has written to the major accounting firms, expecting progress on them 'ring-fencing' their audit practices. It is widely anticipated that this will see these firms broken up so that they can meet their obligations on audit quality, independence and transparency.
LOCAL SWAP RATES DOWN HARD AGAIN
Swap rates are down sharply today, and are flatter too, with the two year down another -7 bps, the five year down -6 bps and the ten year down -5 bps. The 90-day bank bill rate is also down -2 bps to 1.06%. In Australia, their swap rates are also down but a little less than us. The Aussie Govt 10yr is soft at 0.86%, down -4 bps. The China Govt 10yr is also soft at 2.81% and down -5 bps. The NZ Govt 10 yr yield is lower too, down -7 bps at 1.07%. And the UST 10yr yield has reached a new record low, now at 1.26% and a -6 bps fall from this time yesterday.
NZ DOLLAR STILL QUITE SOFT
The Kiwi dollar has slipped further, now at 62.9 USc. Against the Aussie we are firmer at 96 AUc. Against the euro we are softer too at 57.7 euro cents. That means the TWI-5 is now lower at under 68.9.
BITCOIN BOUNCES
Bitcoin is up +3.2% today at US$8,879. 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 ».
58 Comments
If true, Labour's a gonna.
Everyone knows Iran is rife with the virus. How the hell did anyone from Iran reach NZ. Somebody's got to fry for this!
Update: 10.29pm: the government introduced a ban on travelling TO Iran today.......but no ban travelling FROM Iran, with the potential dire consequence we have seen today. If you've read my previous posts you'll see I've given countless warnings that something like this would likely happen because we're so bl...dy stupid.
I would add that National and NZF would be equally hopeless.
Minister of Health Clark needs to resign at once!
I don't want to see another photo of Ardern in the media before the election....she needs to be at the coal face 24/7 getting her hands dirty.
Prag, that's a reach, a terrible comparison.
If you like Labour and don't like national just say so.
Connecting the virus to a politican party not in power, not in Government is crazy stuff.
Everyone has to pull together now, unfortunately the planning, systems and people in power & admin are who they are. It is what it is.
My view is the government is a dollar late and a dollar late. Compared to Australia, Singapore and Sth Korea. Their comms and public health, community testing better than here. Simple contrast.
We should have had observers in Singapore and Australia for a couple if weeks (the med association's are often ANZ).
Prag if you are up set about the virus, let the MoH know how you feel.
Lol, hilarious. No, i'm not upset about the virus.
1) its only suspected.
2) it was inevitable, the virus escaped Asia and from that point it was a case of when, not if.
Sorry if I give the average punter slightly more credit for intelligence than youngdumband broke, But I find it hard to believe anyone thats not a blue tie wearing National fan would honestly believe that a National led govt would have put more restrictions in place.
I think it is OK to blame the Govt, they have only just announced a travel ban. After the first case from Iran.Why not Italy et al? Why not before?Don't they watch Al Jazeera?
Director General of Health Bloomfield needs a few brickbats for "monitoring" the situation and doing virtually nothing else; almost seems to want the bug here so "they" can"swing in to action" and be bug fighting heroes.
We've known of huge outbreak in Iran for more than a week, should have been automatic quarantine. I've mentioned it lots on this site. Aren't MoH keeping track? They are gambling with tens of thousands of lives with their lack of universal quarantine for inbound travellers.
Another failure by Jacinda. Now 2-3% of New Zealanders, most likely older people will die, just because she was scared to be called xenophobic or racist? My father has emphysema and if he gets it he WILL die. Remember who failed to act when your elderly parents and grand parents are struggling to breathe. Absolute disgrace!
Don't forget the lies - they are still going on. The Chinese response has been beyond pathetic. It really shows how bought out the UN and WHO are that they are not actively criticizing them.
To put it into perspective. They have isolated nearly 1 Billion people. Yet only 70k have the virus or 0.007% of their population. That is the same as shutting down all of NZ because 350 people are sick. The recent measles "epidemic" in NZ had/has 2,193 confirmed cases.
New Zealand's first suspected case of novel coronavirus being tested https://www.stuff.co.nz/national/health/119899280/ministry-of-health-gi…
Or if you're referring to forex rates:
That's the worse case scenario.
https://www.reuters.com/article/dentsu-stocks/dentsu-shares-slide-on-ol…
Judging by the photo and his name he is a Kiwi of Indian origin. He owes IRD $700k so goes to prison but at my local Birkenhead Indian restaurant he was paying staff under $3 per hour. ""... Chahil was sentenced to six months' home detention and ordered to pay $2500 in reparation for immigration and exploitation offences."" That was 2016. INZ is just so naive, they only started increasing their labour inspectorate in 2019.
Quoting my friend Bushan about Immigration NZ and low wage jobs held by immigrants - they chose the wrong Indians.
The NZ Govt 10 yr yield is lower too, down -7 bps at 1.07%
CPI last seen at 1.90% - a bank initiated monetary contraction surely lies ahead for the not so wealthy - surely the majority of Kiwis?
The neutral interest rate ideologues will be banging the drums that short rates must surely be in negative territory and due some central bank TLC. Even though enough is never enough.
The Reserve Bank cannot (especially after a decade of persistent forecast errors) have any great confidence in any particular view of neutral interest rates for New Zealand. With inflation still persistently below target and (as the Governor and Assistant Governor have recently highlighted) falling survey measures of inflation expectations, there isn’t a compelling case for the Bank to have lagged so far behind the market, allowing short-term rates to rise further relative to long-term rates.
The policy dilemma is whether to keep rates low and risk a balance sheet recession/depression down the road because domestic households did not heed the central bank advice to be prudent in taking on debt and buying assets when real interest rates were low or negative, or take the consequences of tightening and watching your currency strengthen.
From a policy perspective, the question is not which is the best policy under a reasonable baseline, but which policy mistake will be easier to fix if it turns out to go wrong. Despite the focus on the exchange rate, the risk that excess domestic asset price appreciation carries may be the harder to fix .
Low rates are *not* stimulus, they are what happens when stimulus isn't stimulus.
The USD is on an upward tear despite three recent Fed interest rate cuts and a non-QE securities purchase program. It's basically an international shortage of eurodollar credit creation playing out in the currency markets.
Commendations to the Police for handing the election expense returns of Mayors Goff and Dalziel to the Serious Fraud Office, and for the SFO for picking up the cases. The health of our democracy depends on investigating every taint of corruption and taking a scalpel to such infection in our political class. It's time for fundamental reform of allowable financing and disclosure in national and local government political funding, time to close the door for good on CCP/United Front agents and fellow-travellers and their money, and time to get these duplicitous figures out of the parties and Parliament.
If you are a property investor with big debt your time has come. All capital gains are about to be wiped. If you own a business selling so called luxury items you had better have not taken on big debt because if you have you are a goner. If you own a b & b or hotel times are just about to get very hard. Pay back all debt now if you can. Recession is coming.
Large price falls will change that underlying belief. Seen that in other real estate markets where prices fell substantially and people reset their expectations.
Many people in NZ have set their future price expectations by looking in the rear view mirror and extrapolating historical prices for the past 50 years.
In addition they have leveraged up, and further leveraged up on property price gains to buy even more property using deposit recycling/ equity release techniques. Those highly leveraged property investors might learn that leverage is a double edged sword.
The transfer of power from the people is complete. Activist judiciary, Greenpeace and the CO2 cult now run UK business. Net zero foresight from the blue-green Tories. No more new roads for NZ.
Donald "Like hell it’s non-binding" Trump was right about the Paris Accord.
"Three judges found that legislation that granted Heathrow the green light ignored climate change commitments under the UN’s Paris agreement, which came into force in November 2016 and commits signatories to taking measures to limit global warming to well below 2C."
https://www.thetimes.co.uk/edition/news/heathrow-runway-plan-in-ruins-a…
Got no time to worry about a virus, the dry might get me first ... My pastures are now weeds and cracked earth, all last years plantings are wilting and the sheep are bitching at me every time i pass. If the bore goes dry its all over. Think we need a water pipe from Fiordland all the way to Cape Reinga.
Might be dollar in nuclear shelters?:
Turkey has reached out to NATO and the US following the deaths of its troops in Syria’s Idlib province, fueling speculation that it might invoke Article 5 and get the alliance involved in a shooting war with Damascus – and Russia.
“An attack on Turkey is an attack on NATO. We expect that certain steps will be taken to [create] a no-fly zone” in Idlib, spokesman for the ruling AKP party, Omer Celik, told reporters in Ankara early on Friday. Link
Maybe I should refrain from gallows humour
Looks like the Chinese “home team” have thrown in the towel today and letting the Shanghai index get about the business of plunging in line with other markets.
Even with the might of the CCP behind them it's only so long the Chinese smoke and mirrors brigade can obscure the reality.
Problem for highly speculative markets is when 100% perfection is baked in, and not delivered – any failure is hit extremely hard.
In the short term it’s the share market/debt/currency markets which react violently – longer term could be residential/commercial property – it would be hard to argue that those markets don’t have 100% perfection baked in as well – but although under the hood it may react quite violently, on the surface it takes quite a while for it to become apparent.
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