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A review of things you need to know before you go home on Thursday: more retail rate cuts, inflation is dead, eyes on 2020 Budget and move to L2, huge Govt bond demand, swaps firm, NZD slips, & more

A review of things you need to know before you go home on Thursday: more retail rate cuts, inflation is dead, eyes on 2020 Budget and move to L2, huge Govt bond demand, swaps firm, NZD slips, & more
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Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
No changes here today.

TERM DEPOSIT RATE CHANGES
TSB has cut a range of term deposit rates out to 12 months, some by as much as -25 bps.

INFLATION IS DEAD
At least, inflation expectations are, according to the RBNZ survey of consumers who now only see an annual rate of 0.7% in one year from now, and just 1.2% in two years from now. These are huge retreats since the last quarterly survey and are record lows for this survey.

PRIVATE DEBT DEMAND DIVES
Consumer credit demand fell by up to -70% and commercial credit demand dropped by up to -63% during the Covid-19 Alert Level 4 lockdown, credit bureau Equifax reported.

BACK TO THE FUTURE
According to information released by the Finance Minister, next week's Budget is to focus on strengthening the public sector, providing increasingly targeted support for households and businesses and rebuilding 'a new-look economy'.

GETTING THERE IN SMALLER STEPS?
The Prime Minister has signaled the the move down from L3 could be phased in. All mass gatherings will be limited to 100 people. Domestic travel will be allowed. Retail, hospitality and beauty businesses can open under new restrictions.

PUBLIC DEBT DEMAND LEAPS, $2.2 BLN MISSED OUT
The Treasury today tendered another $1.05 bln of new Government Bonds. There were three tranches. The April 2025 bond was for $500 mln and achieved an average yield of just 0.28%. The April 2027 bond was for $350 mln and achieved an average yield of 0.48%. The April 2033 bond was for $200 mln and achieved an average yield of 0.90%. All up, $3.257 bln was bid for the $1.05 bln offered.

PLANNING CASH FLOWS
The government’s small business support service has launched a new tool to help New Zealand’s small businesses forecast their cash flow and plan for the future. It is a very basic tool unlikely to address the varying needs of most businesses. It sort of 'proves' Government departments have a very superficial and simplistic understanding of small businesses.

THE RBNZ IS HIRING
It is looking for a 'leader' for a new section to manage "all things Money and Cash, past and future, physical and digital".

AUCKLAND GETS WATER RESTRICTIONS
New Zealand's largest city is going on water restrictions, effective Saturday, May 16. 2020 has been the driest in Auckland's history, with water storage lake levels falling below 50% for the first time in 25 years. They are currently at 46%. Recent rain has alleviated nothing.

HIGHER COMMODITY PRICES
Iron ore and coking coal prices are both moving higher based on Chinese demand. Earlier in the march quarter, shipments of these commodities to China has delivered a record trade surplus for them of AU$10.6 bln in March alone. Ans 7,000 square kilometres of land will be released for coal and gas exploration as part of a raft of measures to ensure the survival of the resources sector through the coronavirus pandemic, the Queensland Labor Government has announced.

LOCAL UPDATE
There are 1489 Covid-19 cases identified in New Zealand, with one new case today, down from two yesterday. Twenty-one people have died, unchanged yesterday, almost all geriatric patients. There are just two people left in hospital with the disease (unchanged), and none are in ICU. Our recovery rate is now up over 89% and still rising.

AUSTRALIA UPDATE
In Australia, there are now 6875 cases (+26 since yesterday), 97 deaths (+1) and a stable recovery rate of just on 87%. 62 people are in hospital there (-4) with 27 in ICU (unchanged).

GLOBAL UPDATE
The latest compilation of Covid-19 data is here. The global tally is now 3,753,800 and up +92,600 from this time yesterday which is a rising level of growth. Now, just under 33% of all cases globally are in the US, which is up +24,300 since this time yesterday taking the total to 1,228,200 and the only country to exceed 1 mln cases. This is a stable level of increase. US deaths now exceed 73,000. Global deaths are about to exceed 264,000. The infection accelerations in Russia, Brazil and India are looking very grim indeed.

EQUITY UPDATE
The NZX50 Capital Index is up again today, up a modest +0.4% so far. But almost every other bourse we follow is either flat or lower today, although none of the falls exceed -1%. The S&P500 fell -0.7% earlier, sinking quite fast at the close after the terrible ADP Employment report was released. The ASX200 is also lower despite that record high trade surplus in March.

SWAP RATES UPDATE
Yesterday, wholesale swap rates firmed again in a minor way. We don't have wholesale swap rates movement details today yet. We will update this later in the day if they show a significant change. The 90-day bank bill rate is unchanged at a record low 0.26%. The Aussie Govt 10yr is up +3 bps to 0.93%. The China Govt 10yr is up +1 bp to 2.56%. The NZ Govt 10 yr yield has turned back down, down -4 bps to 0.63%. The UST 10yr has firmed slightly today to 0.69%, another +3 bps rise.

NZ DOLLAR SLIPS
The Kiwi dollar has stayed down after last night's small fall and is now at 60.2 USc. Against the Aussie we are also down, to 93.8 AUc. Against the euro we are holding at 55.7 euro cents. That means the TWI-5 is softer at 66.3.

BITCOIN FIRM
The price of Bitcoin is up another +3.8% from this time yesterday to US$9,339. The bitcoin price is charted in the currency set below.

This soil moisture 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 (including bitcoin) is here.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

50 Comments

I still struggle to understand why 46% capacity is a concern? We all know winter is on the doorstep, and getting to end of summer, longest drought ever, and having half capacity left seems like a win!

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because our dams are not big enough for the population, that is why we take water from the Waikato (yuk) and they have been fighting to get resource consent for ten years to up the amount we can take

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Golly, unintended consequence of bringing in an extra 500,000 or so people to live in Auckland. Who could have known?

No one (bureaucrat or ploitician) saw that coming.

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Its a vicious cycle. That also means stuff coming out the other end from an extra 500,000 people.

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I believe WRC have the consent application at the bottom of a large pile, maybe the person whose office its in left a few years ago or it's got put in a storeroom by mistake. Or maybe Waikato thinks Auckland should get its own river and leave ours alone.

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Weird isn’t it. If we only used 54% of our water over that long dry summer it just doesn’t seem remotely possible that we could use the remainder over winter.

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Up in Whangarei we have the same issue, have only just dipped below 50% capacity.
I want to start a round of applause for the Engineers who over 60-70 years ago designed these dams in what modern day bureaucrats would say is an outrageously overly conservative way, with far too much reserve for what the population was ever predicted to need. Here we are 60 years later and still only just starting to heed to think about possible options for future supply. Credit where credit is due.

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So the RBNZ are looking for someone to manage cash....is that because they have been caught with their pants down with the "unprecedented" and "very significant" run on cash leading up to the lockdown? They say they are expecting most of the cash to come back after the pandemic...when will that be? I can't imagine they can get more from the printer in a hurry during the pandemic.

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As someone noted the other day, there was also a run-on toilet paper at the same time as well; probably by the same people buying it with the cash they'd just withdrawn! So it's not the RBNZ that's' been caught with its pants down.....

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There was a lot of footage and pics online of the sort of people stock piling loo roll. I can assure you, they were not the same people making large cash withdrawals.

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Judgey judgey

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Sure. I happily admit to being judgemental of the people who were videoed pulling each others hair and punching each other in the face in the supermarket isle over loo roll.

There were no reports of this behaviour at the banks.

The loo roll hoarding began far before the large cash withdrawals also.

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Agree - if you said to the loo paper hoarders that there might be a bank run, they'd probably think you're talking about some type of banker fitness regime.

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Once the RBNZ has finished doing it's thing I suspect that people may end up using currency instead of loo rolls.

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...or loo rolls as currency!

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It's tough being a whistleblower doctor in communist countries these days.

https://i.stuff.co.nz/world/europe/300007384/coronavirus-doctors-fall-f…

...not that either of the big 2 are really communist anymore.....

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you bet me to it. That must have had millions of views by now, they started banning in on youtube but it sprung up elsewhere almost instantly.

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What about the other inaccurate models that have influenced policy?
"The U.S. death toll from the coronavirus outbreak could exceed 74,000 by August, according to the University of Washington’s predictive model, often cited by White House officials and state public health authorities."

P.S the USA just exceeded 74000 deaths today.
https://www.reuters.com/article/us-health-coronavirus-usa-casualties/u-…

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Excel has alot to answer for.
Models are a point in time.
Models might get direction.
Models might identify most assumptions.

Models do not predict the future!

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And massively under reporting their deaths too

Along with Iran. Repressing the Central Registrar Office and ordering them not to publish the overall death rates in the country over the past three months.

Many countries are doing the same.
https://irannewswire.org/iran-regime-censors-covid-19-fatalities-as-dea…
https://www.bbc.com/news/live/world-52553430?ns_mchannel=social&ns_sour…

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And massively under reporting their deaths too

How would anyone know with any confidence in the largest country in the world ?

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And people are complaining about our restrictions, right or wrong I dont know,but Ifeel safer than elsewhere.

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Rat poision (Bitcoin) getting some more mainstream attention close to the halving event (or non-event as many believe).

https://business.financialpost.com/technology/blockchain/bitcoin-is-sta…

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Its funny Warren Buffet called it rat poison give the huge losses he has taken recently. As for the media, they are playing a different tune to March - what a difference 7 weeks makes (this article was when it was USD 4,000): https://www.nasdaq.com/articles/bitcoin-just-failed-the-coronavirus-tes…

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Inflation has been dead for about 2 years , and the RBNZ refuses to admit it .

Quite simply the general level of prices has been stable ( flat ) or negative .

The only fluctuations in consumer spending for my family has been as follows :-

Auckland council rates 2019 up
Diesel in 2019 up
Building insurance went up when the values changed for earthquake cover
Doctors appointments in 2018

Other than that food , clothing ,energy ( household gas and power ), alcohol , and white goods either cost the same or came down .

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Mostly agree, but food? I swear some of the meats have risen in price, not that I have looked at it scientifically...
And maybe also dining out - eg. one of my favourite kebab joints has gone from about $9.50 to $11 for a lamb kebab in the last 1-2 years.
A lot of the prices at casual Asian eateries also seem to have risen - circa $13 to circa $15-$16 for a lunch.

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You can consider yourself a step ahead of others elsewhere in the world if you can afford food.

The COVID-19 crisis has already left too many children hungry in America

Figure 1 illustrates the high levels of food insecurity observed in the COVID Impact Survey and in the Survey of Mothers with Young Children. By the end of April, more than one in five households in the United States, and two in five households with mothers with children 12 and under, were food insecure. In almost one in five households of mothers with children age 12 and under, the children were experiencing food insecurity.

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My Friday Indian curry with naan bread has been $12.00 for 3 years now

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that's decent, may I ask where?

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91 in Auckland still seems to be stuck at about $1.93/L

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Our government (grabs 54% of spend at pump) and fuel companies (33% of price) continue to blame each another for higher prices. That is when they aren't blaming commodity prices and our distance from the rest of the world for it. Funny enough, refined fuel itself makes up only 10% of price at pump with another 3% in shipping costs.

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Funny that to fix my bale feeder tyre I found a charge of 11.50 on my account for covid PPE, disposable gloves and seat. Guy took tyre of me without gloves and still struggle to place that disposable seat.

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Is that the same as Rosensteins above?

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Goneburger

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Tried to watch your feed, been canceled.

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Auckland rental properties on Trademe seem to have stabilised over the past 3-4 days at about 4800. I have bookmarked about 10 properties and none of them have been rented out over the past week.
So there seems to be a lot just sitting there.
No strong evidence of drops in rents, yet.

1300 properties available in the CBD. That sounds like a lot but I am not sure what it was in normal times.

Qtown has stabilised at about 140 properties.

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I'm watching CBD apartments under $500. My daughter and her friend rented one in February for $440. Since then the friend has lost her job and Auckland Uni is completely online, so there's no need for them to be there (In fact my daughter came home for level 4).

When they were looking there was usually around 10 available on Trade me. As of a couple of days ago there were 132. There's not much evidence of reduction in asking rents yet (about $20), but surely that will follow. At which time we will be negotiating for the girls to try and get a rent reduction.

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AFP has reported :-

As hopes of a quick economic recovery cooled, a war of words between China and the US heated up over the origins of the deadly coronavirus that first emerged in Wuhan last year.

China once again batted away accusations from Washington that the virus originated in a lab, accusing US politicians of peddling the theory for political gain.

"This matter should be handed to scientists and medical professionals, and not politicians who lie for their own domestic political ends," China's foreign ministry spokeswoman Hua Chunying said.

Her remarks come after US Secretary of State Mike Pompeo said there was "enormous evidence" the virus came from a Chinese lab, a theory President Donald Trump has also lent credibility to.

Scientists believe the disease originated among animals and jumped to humans -- possibly in a Wuhan wet market where wild animals were slaughtered and sold.

China's envoy to the UN said Wednesday an investigation into the origins of the pandemic should only be carried out once the crisis is over.

"We need the right focus and allocation of our resources," Chen Xu said. "It's not that we are allergic to any kind of investigations, inquiries or evaluations."

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To be honest I’d believe the Chinese over trump any day. This is his classic political ploy - when he stuffs up he just blames somebody else. Nothing is ever his fault. But the scary thing is that voters seem to fall for the same trick over and over. Regardless of how the virus originated it was trumps job to prevent it killing people in the US and it looks like he has failed.

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No one is to benefite from releasing a toxic virus. Once again I feel I need to remind that Europeans infected many people all around the planet in the last 500 Yrs, so Ithink we need to cool down and realize this was always going to happen.

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You're assuming that any release would be on purpose

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Of course not. Whether the virus came from china or where ever is irrelevant. Why do we have to cast accusations and blame.Whats happened has happened. Lets deal with it.Otherwise we end up with a sort of a colonization debate. And they are never ending.

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Maybe. Maybe not.
It depends on the answer to the question ‘Did the Chinese Intentionally downplay the seriousness of Covid-19 Within the first 4 weeks of its discovery’, potentially with aim of not wanting to startle the masses.

If yes, then they are culpable.
If no - it simply took time and corroboration before its seriousness could be established - then maybe you have a fair point.

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I wouldn’t.
I would put them at exactly the same levels of truthfulness.

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Head of Money and Cash
Senior thought leadership role
Manage large complex projects
Oversee policy around cash and other forms of money

The Reserve Bank of New Zealand has created a new role, focused on the future of money. This role will head a division dedicated to the stewardship of the country’s cash from a holistic and policy perspective, the physical security of cash from process, logistics and infrastructure, as well as providing thought leadership around the future of cash and money and growing trends in the online payments and digital currencies.

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Got a few buzzwords in the JD.
But omitted ‘agile’ and ‘ability to pivot’

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