A review of things you need to know before you go home on Tuesday; job losses coming, farmer confidence low, consumer debt levels fall, TD balances rise, swaps stable, NZD stable, & more

A review of things you need to know before you go home on Tuesday; job losses coming, farmer confidence low, consumer debt levels fall, TD balances rise, swaps stable, NZD stable, & more
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Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
No changes to report.

TERM DEPOSIT RATE CHANGES
Heartland Bank has cut its online call account to 1.00%, a -25 bps reduction.

BUSINESSES CUT JOBS, MORE TO COME
Even though the ANZ is saying we are having a "normal recession" at this point, today's business confidence data isn't good. A net 26% of firms expect weaker activity for their own business, a 3 point improvement, approaching levels typically seen in a recession. Although the retail sector expected activity bounced a lot, it is the construction sector that is now the most negative as regards expected activity. Nearly half of respondents to this ANZ survey say they intend to lay off staff, and a similar proportion say they already have fewer staff than a year ago.

FEELING UNDER PRESSURE
Raobank's June survey of farmer confidence shows most still have a deep anxiety over how the pandemic will play out for them and overall confidence remains well in negative territory. If there is a 'good' aspect to this survey it is that these levels are not as negative as the March 2020 or September 2019 surveys. But as regards their own business, this data is at near record lows.

A SOUTH KOREAN MARKET WINNER
Fonterra is scoring big again with another TV/online direct-to-consumer promotion - this time in South Korea. A Daesang campaign supported by Fonterra has scored US$1 mln in sales in just 60 minutes on a Korean home shopping TV channel. 50,000 milk powder cans sold out at a rate of around US$17,000 a minute and the TV session broke a sales record. The product is called Pasture Raised/Grass fed Protein. This was the first time New Zealand provenance was put on centre stage on the prime time home shopping channel (Lotte) and three key value propositions in Grass Fed, Made with NZMP and Made with NZ Dairy captured the South Korean audience.

MARKET SHARE SHIFTS
Consumer debt levels continue to decline with borrowers pulling back sharply. Bank consumer debt (which includes credit cards) is down -13.9% year-on-year (a -$1.55 bln drop) and finance company consumer debt down -5.8% (a -$330 mln drop). Some of this - especially the bank component - will be a shift to BuyNow/PayLater schemes.

STASHING THE CASH
Total household deposits rose by $1.4 bln (+0.7%), with +$417 mln of this increase in term deposits in May from April. This was only the second monthly increase in household term deposits since Aug-19, and largest since May-19. For the full year to May, this is a rise of +$13.7 bln or +7.6% and the fastest pace of increase in 30 months. Clearly very low term deposit rates are not inhibiting savings at banks.

A QUICK +$900 MLN
Fisher & Paykel Healthcare saw their share price rise another +4.4% today, taking its June rise to +11.7% (and a +60% rise since the start of the year). More notably, this is the first New Zealand company to have a market capitalisation of more than $20 bln - and believe it or not, a +NZ$900 mln rise in capitalisation in one day!

OUT FROM THE USPP DEBT CLUTCHES
Meanwhile, Fletcher Building is about to pay off its most expensive US private placement notes worth US$300 mln. It took out this debt in 2012 to get it through the GFC. Fletcher's share price jumped +5.1% on the news. FBU's market cap is just over $3 bln.

AUCKLAND RELIEVED, BUT NATIONAL HYDRO LAKES LOW
Good recent rainfall in the Auckland region has eased the immediate pressure on the City's water supply with dam levels now up to over 55% from the 41% just a week or so ago. But normal for this time of year is 80% so the crisis hasn't passed. However, hydro lakes are now getting the focus with those now well below normal levels and at storage that we don't usually reach until October.

ENDING A REGIONAL SPAT
Environment Minister David Parker has today “called in” Auckland’s application to the Waikato Regional Council to take an extra 200 million litres of water a day from the lower reaches of the Waikato River for Auckland drinking water and other municipal uses. The call-in means the application has been referred to a Board of Inquiry under Part 6AA of the Resource Management Act 1991. “The future sources of drinking water for Auckland are a matter of national significance. The application obviously affects Auckland, but also other activities in the Waikato and the river itself,” Parker said.

IMPROVING & EXPANDING
China's official factory PMI
improved marginally in June from May and records a small expansion, now out to four consecutive months. This survey has been reporting more conservative results over the past year than the similar private-sector version.

EQUITY MARKET UPDATES
The S&P500 ended its Wall Street session up +1.5% with a late flurry. Locally the NZX50 Capital Index is up +1.6% so far on top of yesterday's +1.1%. The ASX200 is down -1.5% in early afternoon trade. In opening trade, Shanghai is up +0.4%, Hong Kong is up +0.70%, and Tokyo has rebounded by +1.8%.

SWAP RATES UPDATE
Swap rates were probably little-changed today. We don't have wholesale swap rates movement details yet but we will update this later in the day if they show a significant movement. The 90-day bank bill rate is up another +1 bp at 0.31% and its highest since Easter 66 days ago. The Aussie Govt 10yr is unchanged at 0.87%. The China Govt 10yr is up +2 bps at 2.93%. The NZ Govt 10yr yield is unchanged at 0.91%. The UST 10yr is marginally lower at 0.63%.

NZ DOLLAR HOLDS
The Kiwi dollar has softened since this time yesterday, now at 64.2 USc. Against the Aussie we are also softish at 93.4 AUc. Against the euro we are holding at 57.1 euro cents. However, the TWI-5 is little-changed overall at just under 69..2

BITCOIN ALSO ON HOLD
The price of Bitcoin is little-changed from this morning at US$9,178. The bitcoin price is charted in the currency set below.

This soil moisture chart is animated here.

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74 Comments

Eric Crampton has a weary plea for better data availability from Statistics NZ. He's trying to see the age distribution in wealth bands. SNZ's standard extracts don't have that. Throws hands in air.....because to unravel the actual effect of proposed policy like the Greens' Wealth Tax, that base data is essential. He's requested a custom data extract, but really.....

Here, I can't even tell the age distribution of the 216,000 households with net worth in excess of $1.5m - the topcode in their income buckets.
15
up

That's because the system is run by the short-term winners (boomers, in the main) to the detriment of others, particularly future generations.

Hence the creeping increase in debt; student, personal, mortgage. Boomers wanting to spend now, what the kids will pay off in the future.

It's akin to fraud, so no surprise the cover-up. Or, at least, at the failure to accurately portray.....

I'd say the lockdown falls into the same category, fat old people who have lushed it up and now the sudden early threat to their mortality beckons. It is just another transfer of wealth.
https://www.europeanscientist.com/en/article-of-the-week/covid-19-and-th...

This is what made National's outcry over "mortgaging our children and granchildren's future" so incredibly ironic.

That has been their economic policy for the last decade, and it's only now as hard times look likely to hit a wider swathe of society that they begin to decry it? Crocodile tears.

I find it hard to believe only 216,000 households have a net worth in excess of $1.5m. But I guess that's a different matter.

Globally, there are about 18 million that meet a definition of high net worth individuals - liquid assets above USD 1,000,000, excluding the primary residential property.

Thats eff all.

Ever tried to put your hands on a $million cash overnight?

I get that, 18 million is far less than what I expected.

Either way, I'm not in the club.

I'm not a hostage target then.... phew :)

Not really an apples and apples comparison. That USD figure relates to liquid assets and excludes the primary residential property - whereas (if I understand it right) the Greens policy regarding net assets includes the primary residential property, and of course, any other property holdings - perhaps even the cow shed (?) - all of which I'd have classed as illiquid.assets.

Which is why if the Greens are using the Stats NZ data, and the number of these high net worth individuals is only a bit over 200,000? Seems low to me.

But of course you do. Hard to blame the evil rich for EVERYTHING if there are so few of them .
Reality or ( numbers ) are not your forte anyway.

I don't get your point. Isn't the whole point being too much wealth has gone to too few people? As in, the 1%. Not sure how there being a small amount of them makes them blameless?

Kate - are you confusing households with taxpayers? Many well off taxpayers are married to and living with another well paid taxpayer.

Yes, I'm thinking households, potentially made up of multiple taxpayers. But I'm also thinking the number of households they are doing the numbers on is too low.

12
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You have to wonder how NZ Governments manage this country without Executive Systems
You have to wonder how NZ Greens prepared and calculated their manifesto without data

Who needs data? If you and your friends believe in something, then it must be true. Everyone knows that.

Who needs data? If you and your friends believe in something, then it must be true. Everyone knows that.

It's 'very true' in NZ. The water cooler is the fountain of wisdom.

Its Greens we are talking about here. Its not water cooler its pass the "ciggie..."

Yep...same in the states..if people had based their vote on facts instead of fiction, trump would never have been voted in. It has nothing to do with facts or reality. Look at the equity markets the last 3 months...no sane person would be investing right now at these levels with what is to come...but there they are...nasdaq at an all time high!!!!

In 2016 there were 59,000 farms in NZ. Many of those will be/must be debt-free "old-money"

Debt free? How shocking. Can't have that, now can we? Much better to have farms owned by mega foreign corporates with borrowed, freshly printed money. That is the aim of a wealth tax, after all.

Much better to have farms owned by mega foreign corporates with borrowed, freshly printed money.

And the apparent aim of the last 15 years of government and central banking, from the looks of it. Sell NZ's best off to foreign ownership for the short term sugar rush.

Have we seen more young farmers getting their own stake viably and with smaller debt during that time, or fewer?

But how many is many? How many are not owned by a household?

As Unca Scrooge McDuck would say - "countless"

How many of those 59000 farms have a net worth of under $1,500,000

Exactly. That's why I wonder whether the number the Greens are using to be too low. My understanding of the way they would apply the wealth tax for any property (farm or otherwise) would be calculated as: valuation - mortgage = net, or taxable wealth.

SAP have been around for 40 years
An executive system enables a government member to sit at a computer screen and ask
How many individuals have a gross worth more than $5 million
How many individuals have a gross worth more than $50 million
How many individuals have a net worth more than $5 million
Where are they located
What was the annual income of those individuals last year
How much tax did those individuals pay last year

Because that data is spread over a number of government depts and local bodies, the problem is combining the data into big-data and accessing it. What is not generally known is Google offers these services at a corporate level. Apparently Google has offered its services to NZ. It is understood that the NZ government declined

Huawai does this too. But the info is sent to one particular party...

Exactly.

Why are many European countries re-opening their borders?

19
up

They can no longer afford to keep them shut.

That's right but we in NZ think we can keep the borders shut

We also have many things ( like bio-security controls) they do not have in the EU and vice versa.
Does not make either approach wrong - horses for courses.

30
up

The same reason a man dying of thirst will drink seawater.

As one Homer Simpson famously quoted "water, water everywhere so lets all have a drink!"

Wait, what... isn't that he reason they are printing money.... This person is not only thirsty but hungry as well.... don't worry all good, keep lending and spending.

Apparently seawater might be a potential covid-19 treatment.

To let the chickens in.

They closed them after the horse had bolted. Now they're hoping the horse finds it way back home and puts itself back in the stall.

FPH will need to keep up growth as the PE is pricing huge future growth i.e 50 percent increase in profit year in year for a 5 years plus.
Not sure if they can but market seems to believe if not it will be punished back to low 20 dollar range.

12
up

Politicians "dumbfounded" by lack of water supply to Auckland. Must be climate change, of course. Possible link to population increase via immigration is clearly fake news and has been edited out of their briefings, presumably.

14
up

Climate Change is driven by overpopulation.

Cart meet horse.

One less baby per family equates to 80 people changing to a plant based diet.

Probably doesn't get as many instagram likes though.

China gave up it's one child policy, are you advocating something similar??

They did that because, obviously, the one child policy has seen their population starting to tank. Chinese people, by and large will still not have large families, as they now prefer to put all their energies into educating one or maybe two.

Geeeze, that baby would have been a real mutton glutton. :)

That's already happened through deliberately inflating house prices.

Now they import people instead of making it viable for Kiwis to raise children.

Where did you read that politicians were "dumbfounded" by the lack of water supply to Auckland??? I thought wveryone understood the reasons why , what to do about it another story. .

Yes, Auckland population growth, with the incredibly simple solution of taking an un-noticeable 1% of Waikato flow 10km before it goes into the Tasman through pipework that already exists. Only impediment being the world class political insanity of pandering to various self interested groups of bureaucrats and Maori intent on feathering their nests through intransigence, and a govt too lost up it's own fundament to be able to just tell the extortionists to get bent.

Nothing to do with considering Waikato te awa as a tūpuna then?

It is always a temptation to an armed and agile nation
To call upon a neighbour and to say: --
"We invaded you last night--we are quite prepared to fight,
Unless you pay us cash to go away."

And that is called asking for Dane-geld,
And the people who ask it explain
That you've only to pay 'em the Dane-geld
And then you'll get rid of the Dane!

It is always a temptation for a rich and lazy nation,
To puff and look important and to say: --
"Though we know we should defeat you, we have not the time to meet you.
We will therefore pay you cash to go away."

And that is called paying the Dane-geld;
But we've proved it again and again,
That if once you have paid him the Dane-geld
You never get rid of the Dane.

It is wrong to put temptation in the path of any nation,
For fear they should succumb and go astray;
So when you are requested to pay up or be molested,
You will find it better policy to say: --

"We never pay any-one Dane-geld,
No matter how trifling the cost;
For the end of that game is oppression and shame,
And the nation that pays it is lost!"

Wtf? There's a big difference between blackmail and honouring the treaty. Y'know, that foundational document between two cultures? That thing that says cultures are different and have different ways of knowing and being in the world?

No. In fact it has everything to do with plena stercore bovis.

The interesting thing about Latin is that it remains the structural underpinning of English, particularly in relation to its domination/subjugation of subjects. Objects in particular are not granted agency of their own as relationships are always framed with the assumption that it is humans that are doing the acting upon nature.

The tendency amongst Westerners to assume their cultural perspectives are both normal and natural is called Eurocentrism. Which is really a polite way of saying 'rascist'.

Clearly your presence on this English language blog and in particular your participation in this discussion in the language of the colonizer is racist. The shame of it.

Ha. I'm just pointing out how ironic it is to call my comment 'bullshit' in Latin without examining the cultural assumptions behind universalism.

Actually, it becomes more complex as there are limits on this. Population growth as pseudo economic policy must be questioned.

Talking to folk in the water / wastewater sector, there are limits on area for catchments and reservoirs and there are likewise limits on how much can be drawn from the Waikato river by all comers, especially if this is erroneously considered a simple answer. We will need to begin considering other options including mandating water tanks on new builds and even retro installation of tanks...but that only works when it rains so does not help during a drought. There are limits that even techno-optimists need to consider.

Population growth as economic policy is not all good.

Come on roger, are you telling me it has nothing to do with the fact it has barely rained all year? I’ve lived in Auckland for 25 years and I’ve never seen weather like this. I’m surprised we didn’t run out of water months ago.

A few months ago, time and time again the forecast said "showers". I looked at the rain radar. Showers were definitely out there but every time they speared off to the sou-west and fizzled or fell out to sea off the East Coast. Personally I think it was more just plain bad luck than "human made" climate change.

Wow, there's lots of bad luck going on at the poles too, then

Thats exactly it. So concerning.

Everyone can smell gas. Regardless of where it explodes a lot of people are going to get burnt.

https://www.visualcapitalist.com/all-of-the-worlds-money-and-markets-in-...

That graphic!..... Those derivatives, all that debt.... what could possibly go wrong? It’s as though someones plan is to deliberately cause fiat currency to become worthless so they can introduce a new type of World currency.

Its makes you a little sick in the mouth doesn't it?

Wow that's just mindblowingly bad...

The lack of issuance and supply over the last almost year or so, that’s what makes the TIC data so fascinating. And relevant, if for other reasons, too. CLO issuance, according to a bunch of sources, peaked back last June. Remember that whole “recession scare” with the yield curve last summer? It wasn’t just a scare, at least not in this one key segment of corporate credit. Link

David Hargreaves 25 June 2020
Headline - Monthly mortgage borrowing shot up 57% in May compared with the lockdown month of April - but the figure of $4.3 bln advanced .....
https://www.interest.co.nz/property/105696/monthly-mortgage-borrowing-sh...

RBNZ release today 30 June 2020
Fixed Mortgages for May went up by $600 million
Floating Mortgages for May went up by $1 billion
All up residential mortgages went up $1.674 billion
There must be a lot of reset rollover activity going on
https://www.rbnz.govt.nz/statistics/s33-banks-assets-loans-fully-secured...

I am confused by the heading: Banks: Assets – Loans fully secured by residential mortgage by repricing ($m) - S33

Surely, the loan and the residential mortgage are one and the same and the security is the lien on the residential property? Any pointers welcome.

Common mistake. Many refer to the loan as the mortgage, but the mortgage is actually just the legal document for an institution to take an interest in the security. The loan is secured by the mortgage.

So what is the bank purchasing (customer IOU/ mortgage/asset ) with it's IOU (deposit/loan)? More importantly, deposits/loans are unsecured bank liabilities.

1) David misunderstands the C-30 data. This is loan commitments. Some won’t have settled yet (there’s a lag) and some will be revolving credit limits. There will also be sales, where one loan is written and another repaid, and refinances where the same loan moves from bank to bank

2) s-33 data based on actual outstanding balance, so the total debt excludes revolving credit unused limits, it won’t be affected by refinances unless the loan increased and ditto for sales. Of course, loans repay over their life too through normal amortisation, lump sums and sales. Pretty typical to have this difference