A review of things you need to know before you go home on Tuesday; minor rate changes, retail update, rating pressure, commercial property watch, swaps unchanged, NZD firm, & more

A review of things you need to know before you go home on Tuesday; minor rate changes, retail update, rating pressure, commercial property watch, swaps unchanged, NZD firm, & more
ID 22702269 © Daniaphoto | Dreamstime.com

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

MORTGAGE RATE CHANGES
No changes to report today.

TERM DEPOSIT RATE CHANGES
NZCU Auckland cut most rates.

WINNERS & LOSERS
Payments platform Paymark is reporting that post lockdown, retail spending has risen. But merchant experience is very mixed. Pharmacies and fruit/vege shops representing about 5% of overall retail sales have seen a strong bounce-back to well above regular levels. Another group representing more than a quarter of retail sales also got a strong bounce but only back to just above last year levels. These include Food Takeaways, Specialised Food shops, Liquor outlets, Garden centres and stores selling Electronics, Appliances, Hardware and Floor Coverings. And another group representing almost 30% of retail sales haven't got any material impact from the easing of the lockdown. These include shops selling clothes/footwear, gifts, sporting equipment or books, plus the hospitality sector of Restaurants and cafes, Takeaway food providers, Motels and hotels. Many in this group probably won't survive, and retail strips will empty out and be replaced with"For Lease" signs. The other 40% of retail activity is accounted for by supermarkets and dairies who haven't missed a beat in any version of the lockdown. Petrol stations, on the other hand, have been down in all three levels. Full details here.

OUTLOOK DIMS
Ratings agency Fitch has affirmed the ratings for a set of second tier New Zealand financial institutions, but lowered the Outlook for all of them from Stable to Negative. They include TSB, SBS Bank, Cooperative Bank, First Credit Union, NZCU Baywide, and Wairarapa Building Society. This downgrade in outlook is consistent with Fitch's concerns about the impact huge new Government debt will have on our economy and future prospects. They now expect New Zealand’s fiscal deficit to widen to -8.7% of GDP in FY2020/21 compared to our previous forecast for -4.4%.

PRODUCER PRICES
Stats NZ released Q1-2020 Producer Price Index data today. You can find their release here, and our charts here. But events have passed the relevance of this data by. However, you might find some of these charts interesting all the same.

ALL NORMAL, EXCEPT IN AUCKLAND
The latest weekly electricity sector report finds demand rising, and hydro lakes at normal levels. The same can't be said for Auckland drinking water storage reservoirs, which are now only 44% full when they are normally 77% full at this time of year. Regional rainfall in the near term looks unlikely. Restrictions are in place in the Queen City.

LESS UGLY
In Australia, they are finding the rate of job loss isn't as high as first reported, even if these losses are running at record levels.

MORE UGLY
There are reports Aussie businesses are shifting revenues between periods in such a way that they can qualify for the public wage subsidy scheme. It's become a honey-pot. Tax audits are on the way. This type of private sector gaming is undoubtedly going on here too.

VERY UGLY
The release of the RBA's meeting minutes has revealed the regulator is particularly concerned for the commercial property development and landlord sector. This is a taste: "Rising vacancies and reduced rent would be likely to lead to lower valuations, which would pose challenges for leveraged property investors and developers. Retail property was already experiencing rising vacancies and falling capital values prior to the current downturn. The effect on retail businesses of the social distancing measures was likely to exacerbate these problems."

LOCAL UPDATE
There were zero changes again to any coronavirus infection data. That is eight straight days where there are effectively no new cases, certainly none outside the known clusters. There are 1503 Covid-19 cases identified as either confirmed or probable. (However the total number of confirmed cases has increased by four because the people who returned from Uruguay were originally counted in that country's numbers, but are now included in New Zealand's tally. All four have recovered.) Twenty-one people have died giving a death rate of 1.4%. There are still only two people left in hospital with the disease, and neither are in ICU. Our recovery rate is now just on 96% with 40 people known to be still fighting the infection.

AUSTRALIA UPDATE
In Australia, there are now 7068 cases (+23 since yesterday), 100 deaths (+2) and a recovery rate of just on 90%. 45 people are in hospital there (-5) with 12 in ICU (-4). There are now 572 active cases in Australia (-6).

GLOBAL UPDATE
The latest compilation of Covid-19 data is here. The global tally is now 4,801,282 and up +88,000 from this time yesterday. Now, just under 32% of all cases globally are in the US, which is up +22,000 to 1,508,300. US deaths are now exceed 90,000. Global deaths now exceed 318,000. There is something going very wrong in the UK. Of all European countries they are the only one where new infection levels are not decreasing (although to be fair, neither is Sweden, but their strategy is an outlier). UK current daily infection rates are twice what is being reported in Iran, which is also getting a renewed surge.

EQUITIES UPDATES
Equity markets in Australia and New Zealand are catching Wall Street's up-draught today. The S&P500 ended up +3.2% earlier and the ASX200 is currently up +2.1%. The NZX50 is up +0.8%. In early trade, Shanghai is up +0.6%, Hong Kong is up +2.1% and Tokyo is up +1.9%. Other than following a risk appetite herd rush, it is hard to know on what this is based. The S&P500 rose because of a 'positive' vaccine trial - but the trial is only of eight people. Yes, only eight. On that basis the capitalisation of the NYSE rose by almost +US$2 tln. Go figure.

SWAP RATES UPDATE
We don't have wholesale swap rates movement details today yet but early suggestions are that they are just a little bit soft. We will update this later in the day if they show a significant movement. The 90-day bank bill rate has stayed down at its record low 0.25%. The Aussie Govt 10yr is up +4 bps to 0.95%. The China Govt 10yr is also up, by +2 bps at 2.72%. The NZ Govt 10 yr yield is also up +2 bps to 0.67% and off marginally from the fix the RBNZ noted earlier in the day of +0.68%. The UST 10yr is up +6 bps today at 0.70% although at one point earlier it was up +10 bps.

NZ DOLLAR LITTLE-CHANGED
The Kiwi dollar has held on to most of its sharp overnight gain to be now at 60.4 USc. Against the Aussie we are marginally higher at 92.7 AUc. Against the euro we are firm at 55.4 euro cents. That means the TWI-5 is up at 66.3.

BITCOIN SOFTER
The price of Bitcoin is a little softer at US$9,606 and down -2.3% from where we opened this morning. 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 daily exchange rate chartis here.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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.

69 Comments

17
up

At the time of typing 5020 rental properties available in Auckland. So many have been sitting there for weeks. I guess if you are a landlord and can afford not to urgently let a property, then that's all good.

15
up

And most still with exorbitant prices... what will it take for landlords to realise that prices need to come down significantly to attract the greatly reduced tennant demand?

What is the best source of rental numbers available ?

I've been following trademe listings.

Yep

A family member just rented a house and a flat in Wellington in the weekend, both in under a week. The flat at same rent, the house at an uplift.

11
up

Yeah but that's Wellington. Still full of overpaid bureaucrats who haven't had wage cuts.
Auckland CBD is completely different. Perhaps the carnage in retail and hospo is still to come...
Several of my students were living in the CBD but have lost their part time jobs so have returned to their parents' homes.

"overpaid bureaucrats who haven't had wage cuts"

The ivory bubble tower.

Yes, it's better rental market than Auckland which I have always been wary off.

In auckland weve had one vacancy in two years. If we do we can increase rent by 50 to 60 pw from 370 to 425/430. We will take the chance to add some eye catching tiles, adds property value if we have to sell someday.

Many landlords seem to believe we are in February 2020.
Cbd apartment rents are way too high.
Landlords are going to have to accept lower.

Watch out landlords if Fritz runs for parliament, he will do what the others just talk about.

Hopefully we can return to level 1 soon given there have been so few new cases in the past week.

Keep in mind that the figures are a week and a half to two weeks behind infection rates. We may have a cluster break put at present it will not know for another week or so.

looks like we will be in level two for about a month but with less and less restrictions as the weeks go on, I expect next Monday to see even more relaxing of some rules
the main reason to stay in level two will be contract tracing and making sure when we do have a case they can jump on it and ring fence everyone in two days,

I popped into Sylvia Park for lunch. Very busy but the food court had much less business because the seating densities have been halved. That will be hitting those businesses.
I had to stand and eat my kebab...

Should’ve been open for business 3 weeks ago.
The virus reaction the past 3 weeks has been totally over the top and is crippling people financially.
Been no community transmission for weeks and this BS about stating home saving lives is just scaremongering From a control freak that has so any scared for no reason in NZ

10
up

Feels like a lull before a storm

Although a 100 billion dollars does kick the consequences can a fair way down the road.

To at least after an election the government hopes.

It is, of course, a mistake to think of a delay as a solution.

16
up
  1. Keep piling tens of thousands of water consumers into Auckland annually.
  2. Watch jaws drop in amazement as Water levels in reservoirs go south
16
up

Boomers: "You can't blame a lack of rain for our water crisis!"

Also boomers: "Climate change doesn't exist!"

should let them drink it straight from the river, it costs a LOT more to clean that water for drinking than it does from the dams,

10
up

To Pin3cone: That comment is so insulting, and stupid too. I’m not even going to try to rebuff it by pointing out that millennials and the various ‘Gens’ are the biggest consumers of the unnecessary goods that globalised factories churn out by the zillion, contributing greatly to climate change. Many Boomers are struggling to survive on a very meagre pension after having worked hard all of their lives and manage to do without the consumer crap deemed essential by snowflakes. This site is plagued with bigots, xenophobes and idiots with a chip on their shoulder.

You clearly fit right in then.

Easy does it, Pietro: argumentum ad hominem is never a good look, and as the definition notes, skates perilously close to the Tu Quoque fallacy....

My way of responding is....Just Don't. That takes the oxygen away from the conflagration.....

He's kind of right though, there is a lot of boomer this, boomer that rubbish. It comes across as resentful and lazy and, I mean, do you bring this up with your parents? If Chloe Swarbrick is your role model you need serious help (I'm not a boomer for the record.)

I commented something about xenophobia on this site earlier this week. Pin3cone’s boomer comments similarly raised my hackles and carry the same bigotry. I felt I had to respond. I am all for informed debate, but stupidity and hate, never. For the record, I wrote a piece for a major magazine alerting a then unsuspecting world to the perils of climate change back in 1990, and am largely self sufficient in power, water and vegetables. Perhaps you could say I’m an ‘ok’ Boomer.

Keep posting, you learn who has something worth reading pretty quickly and just scan for them.

Give pinecone a break he is under extreme pressure holding his breath and waiting for the elusive affordable home to appear, more elusive than a prostitute offering a free one

Tedious repetition of unsustainable assertions from the common enemy identity politics crowd who must identify a group with common characteristics to validate their oppressed /oppressor societal organisation narrative. This blame attribution mantra grandly ignores the inconvenient fact that two thirds of boomers are entirely dependent on NZ super for their no frills lifestyle. Only a relatively small minority enjoy the supposedly profligate existence that is mythically ascribed to the whole boomer cohort.

My humble apologies for the offence Pietro, my comment was intended to be tongue-in-cheek in the same way as millenials and avocado on toast are bundled and thrown around ;)

Makes one wonder why they don't sieve the Gulf for thorium, use it to power desalination.

Gotta keep that Growth going.

Does any one have any stats on working holiday and work visa numbers in Auckland?
If it was something like 100k, and that halved in 6 months, then that's much less pressure on water, transport, rental properties etc.

Dont forget the students! They get a work visa too. And the lure of residence if you pay enough "education fees".

Play around with https://mbienz.shinyapps.io/migration_data_explorer/#
Students - Auckland is about half of total but a quarter of the total is 'unspecified' so they may include Auckland too.
Work visas - unspecified wins but where known Auckland is more than every where else added together.
My gut feel - if you are from a wealthy country (eg a French friend of mine who worked in as remote a place as you could find in North island) then you come on a working holiday to work in NZs beautiful rural areas but if you are wishing to stay in NZ and therefore likely to be from a 3rd world country you head for Auckland and hope to cadge a way into permanent residency.

The only water problem existing in Auckland is that political insanity is preventing them from turning on the Waikato pipeline that can supply 100L per person per day to Auckland (~1% of Waikato flow) because of taniwhas or something. NZ in 2020

Foyle - proof that dinosaurs are still extant. Let's take even more of that water - it wasn't doing anything. And a bit more land, while we're at it. Heck, it was only growing food but the market will decide the best use. And before that it was something called biodiverse but we can get round worrying about that by denigrating 'greenies'.

Did I miss anything?

It'd take too much energy to filter the Waikato river cesspool!

Why are they worried? It basically hasn’t rained all year and we’ve only used 56%. So we must have at about another 4 months of supply. I’m sure the TAB would give you almost million to one odds on it not raining in Auckland over winter! Didn’t we get 30 days of rain in one month last year?

Not that this is a recent thing, but there are things called dry winters. These are the things where the electricity system starts throwing a wobbly because the lakes have been used up and the wind is not blowing either so expect huge amounts of coal and gas generation and even rolling power cuts.
And of course very little water in the "Watercare" water lakes.

Regarding RBA concerns about loans backed by commercial rental, that's why banks typically charge a premium for rental or commercial property lending over owner occupied. Those portfolios are intrinsically higher risk and as such should quite correctly attract a premium.

11
up

White collar crimes like gaming the system to take advantage of subsidies should end in jail time. Doubt any of them will though.

People can make very poor decisions when they are desperate.

In NZ, a leader of the Greens party thought she had done no wrong by defrauding the welfare system because things for her were really bad at the time.

Yep, Rule of Law is a luxury for the good times. For all other times there's Law of the Jungle.

Why are people needing to be finding tenants in the middle of the year?
Most of ours are all signed up until early next year which is when the demand is!
If tenants have up and gone then the landlord will have 4 weeks bond for a start and then it is to the tenancy tribunal for the rest,
This will show on the tenancy tribunal rulings and will affect future ability to rent!!

You really think tenants in a dire position of either paying for rent or food are going to care? They will up and leave and likely move in with family and friends. Or as is the case with thousands of international students, working holiday migrants, not return to New Zealand. Then there’s the accidental landlords who wanted to sell but don’t want to accept a lower offer so rent the place out instead. Add air bnbs on top of that and the thousands of new builds coming into the market and there’s your oversupply...

Albert2020. Given there are around 500K here on work visas, 300K not eligible for welfare and for whom employment prospects will be grim, the scale of your oversupply could be significant. Incoming ex pats will soak up some and their persons per dwelling ratio will be lower but it's hard to get away from the conclusion that a major hollowing out of demand is looming. As an aside, we are looking to rent a place over QB weekend in a popular holiday resort location and as you'd expect are spoiled for choice at quite reasonable prices.

Albert, they should be caring!
Firstly they will not get their $2k or so bond back.
Secondly, they will be liable for rent until the landlord finds another satisfactory tenant and that could be many thousands of dollars!
Thirdly, When it goes on their record on several sites now, they will Have a helluva hard time getting a rental in the future, so if they want that they are being fools!

While early in the year is the busiest time for rentals, you do of course, surely realise that many tenancies are also agreed to throughout the year????

If a landlord allows a tenancy to end in Winter, then they are not a very astute landlord, and maybe they should be looking at another investment.

I know three families, just left their tenancy before this crisis and went back to their countries.
I don't think they have given proper notice to landlord, they just gave up the bond and left NZ.

Newbie, what countries did these tenants go back to, are you aware of?
Sounds like they were on temporary visas, which we don’t have anything to do with as they are taking on a risky tenant as they are a flight risk!

Is that what Paul Goldsmith meant with item 4 of his alternate budget recently,innovative indeed...
Fourth, unlocking private sector investment is the key to growth and innovation.

This could make my life tough, perhaps the wife and I need to head to some tropical island?
https://www.zerohedge.com/health/sun-has-gone-lockdown-and-strange-behav...

Why, it's almost as though that Big Yellow Nuclear Reactor in the sky is a major determinant of Earth's Weather....or something.....

LOL, I've been tracking this for a while now. Check out what NASA has to say on the coming solar minimum being the lowest in 200odd years - they'll be skating on the Thames again.

Unfortunately, the message that the sun warms the planet doesn't sit well with the MSM and those insisting that human activity does it. Can't tax our sun to make it pay for daring to follow its own cycle of increasing sunspot activity (= Earth warms) and decreasing sunspot activity (= Earth cools). We're entering a cooling period that is also being influenced by the shifting magnetic fields (North and South poles heading to the equator rapidly) - but again, can't tax the magnetic poles for just following their normal cycle (which from memory is roughly a 12,000 year one).

Makes the worry over a virus seem like a childish prank.....

....or you can go full conspiracy nut and see the virus as a way for the powers-that-be to depopulate the planet ahead of Armageddon.

Sigh, choices, choices, choices....what shall I worry about next? (Insert several smiley faces here, because what the hell.....something has to kill me off at some stage.)

Really????????
NASA doesn't seem to think this is a major issue:

https://climate.nasa.gov/blog/2953/there-is-no-impending-mini-ice-age/

Kirsty. 'they'll be skating on the Thames again' ..... possibly. A very cold period from 1560 - 1630 happened during an increase in solar activity during the Grindelwald fluctuation. Natural climate variability and volcanic activity need to be thrown into the mix as well.

So when the sun returns to normal - maybe next year, maybe next decade, maybe in my grandchilds old age then the earths climate will really heat up and all those global warming disasters predicted 30 years ago will suddenly come true. I've noticed about 1 degree of warming since I've lived in NZ but that ought to be 2 degrees of absent sunspot cooling.

1. Human evolution - all of it - happened while the carbon was locked underground.

2. We couldn't have lived in the prior period when it wasn't.

2. We are busy changing condition 1 for condition 2.

4. It appears we aren't sapient enough to cease the process, before it ceases us.

Sigh, logic; wish there was a tad more around.

News out of Sweden is of course conflicting depending on which article you read. On the one hand last month they only had as many deaths per capita as they did in a bad flu season in 1990 (which I’m sure no one shut down for), but on the other hand their economy isn’t doing much better than their locked down neighbours.

I came to the conclusion a few weeks ago that we need to eliminate covid more for the good of our economy than for our health (which is almost the opposite of most other opinions). I think this is starting to be proven true.

i see a v shaped recovery now, there will be a lot of work permits in hospitality and tourism that wont be needed and a lot will go home so that will help right sizing those businesses, nz tourism will keep the money that used to go offshore here for the near term, pressure will come off rents, and when we open a bubble with Australia our tourism will start to rocket up again as they will have only us to travel to for a short while

So c'mon Brian, cheer up
always look on the bright side of life
just before you draw your terminal breath

No need to

worry about the

baggage retrieval system

They've got at Heatrow

Particularly not now......

Unfortunately holidays are a discretionary spend. I just don’t see kiwis or Aussies able to pick up the slack left by global tourism as many will be keeping their money close to their chest for fear of job losses.

Spending really starts to slow anyway a few months out from an election. This year its going to be record breaking bad. Discretionary spend just took a dive and it was impossible anyway to offset the tourist generated dollars with just kiwis travelling let alone in a recession.

Over 7000 council employees will now be worrying about their jobs.

I have been saying for quite a few years now that there were too many tourists in NZ ruining the experience with not enough infrastructure to support it. I see this as an opportunity. There are many grey hairs like myself that find this event will be the impetus to get out and see NZ more where before I was actually staying away from touristy spots because the experience was unsavory crowdedness. And some of us have saved our money by not living beyond our means and will relish getting out there and spending some money locally instead of overseas, avoiding airplanes. No point letting it all sit in the bank at this point as there is little return. Just booked a local motorhome for two weeks, owned by a NZ family business, not from an international conglomerate....do your homework before hiring to buy local...and while you're at it, check your bank to see if the profits are taken offshore. Take the responsibility.

Your access to our unique content is free - always has been. But ad revenues are diving so we need your direct support.

Become a supporter

Thanks, I'm already a supporter.