What happened Friday

A review of things you need to know before you go home on Friday; more rates cuts, more bounce-back data, Crown accounts further in the red, auction market buoyant, swaps hold, NZD unchanged, & more

10th Jul 20, 3:59pm by David Chaston

ID 22702269 © Daniaphoto | Dreamstime.com

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

MORTGAGE RATE CHANGES
BNZ has now also matched ANZ and Westpac at 2.55% for a fixed one year 'special' home loan rate.

TERM DEPOSIT RATE CHANGES
Heartland Bank has announced rate cuts across the board. BNZ also cut all TD rates of 1 year and longer.

THE GOOD NEWS BOUNCEBACK STORY CONTINUES, FOR NOW
Retail spending bounced back strongly in June from a very weak May. In fact, it was up +4.2% from June 2019. Some of the recent strength in household spending is likely due to pent up demand after the lockdown, which might not be sustained. And analysts say we should expect some easing in spending later this year as the Government’s wage subsidy schemes come to an end. Even so, the recent strength in household spending is an encouraging sign.

DEEPER IN THE HOLE
The May Crown Accounts revealed another -$3.2 bln OBEGAL deficit for the month, and a -$4.5 bln monthly operating deficit. No-one seems to care about deficit spending anymore; it is helping prop up our economy. But it is mounting and cumulative. The May result was the third highest monthly deficit in history (beaten by April 2020 and June 2011) and takes the total deficit for the past year to a massive -$26.9 bln on a full operating basis. That is -8.6% of GDP and clearly on the way up fast.

A ZIPPY DASHBOARD
All that deficit spending does seem to be aiding the economic recover. Treasury has updated its zippy Dashboard which shows us recovering but settling into a domestic economy that is about -20% lower than the average in January and February, even though traffic levels have returned to 'normal'. Export trade details are not covered in the Dashboard, but are likely to have performed better.

GST SINKS
Part of the fast rising deficit is that taxes, especially GST, is falling fast. In fact in May 2020 it dropped -29% year-on-year, only beaten by the October 2008 GFC collapse of -43%. Every month in 2020 has recorded a decline year-on-year. However there is every expectation that it will recover in June

BUOYANT AUCTION MARKET
More than twice as many homes were sold at auction in the first week of July as in the same week last year. 57% of them sold.

CHEAPER DEBT
The interest rate payable on Fonterra capital notes has been reset from 3.385% per annum to 2.47% per annum.

CRISIS COMING IN AUSTRALIA
Australia is struggling with its pandemic response. Stupidity is rife in Victoria attempting to subvert their lockdown. There were 288 new cases there today. And Queensland is opening its borders today to try and save their touism industry - to everyone except those from Victoria. We have a dangerous situation building at out cousin's place. State government chequebooks are open to stave off an economic shudder. And Australia may close its borders soon to all returnees. Most worryingly, the ICU bed occupancy is nearing capacity - and the next wave of COVID-19 patients are just about to arrive.

EQUITY MARKET UPDATES
On Wall Street, the S&P500 ended down -0.6% on the day. If it is unchanged tomorrow, it is heading for a flat result for the week. Shanghai has opened down -1.2%, to trim the strong gains earlier in the week and at the current level will end the week up about +8%. Hong Kong is also down -0.6%, and Tokyo is down -0.2% in early trade. Both the ASX200 and NZX50 Capital Index are both down -0.2% so far today, heading for a weekly change of -1.7% and -1.3% respectively.

SWAP RATES UPDATE
Swap rates are probably unchanged again today. We don't have final 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 unchanged at 0.31%. The Aussie Govt 10yr is softer by -2 bps to 0.88%. The China Govt 10yr has softened by -5 bps to 3.14%. The NZ Govt 10yr yield is up +1 bp at 0.99%. The UST 10yr is down -5 bps at 0.61% and all of hat move came in the Wall Street session.

NZ DOLLAR UNCHANGED
The Kiwi dollar is marginally softer today, now at 65.6 USc. Against the Aussie we are firmer at 94.4 AUc. Against the euro we are firmer still at 58.2 euro cents. And that means the TWI-5 is holding at 70.3.

BITCOIN LOWER
The price of bitcoin is lower since this time yesterday, down -1.7% to US$9,229. 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 ».

Daily exchange rates

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52 Comments

by bw | 10th Jul 20, 4:14pm 1594354444

The risk of letting Covid get out and about again. (From Australia). Queenstown might consider themselves lucky....
"Falls Creek and Hotham ski fields shut down due to COVID-19 lockdown. They only started operations on Monday; that's a four-day snow season. Mount Buller opened in late June and will continue to operate its lifts and ski and snowboard school until at least Sunday, to allow guests already in the resort to complete their stay."

by Richardfromauckland | 10th Jul 20, 10:24pm 1594376673

Southern nz ski fields reported to have turned away punters today due to capacity being reached. As a great man once said 'we don't know how lucky we are'.

by Henry_Tull | 11th Jul 20, 8:07am 1594411673

School holidays.
What do you think of Quarantine Hotels in Queenstown?

by sit23 | 11th Jul 20, 10:24am 1594419894

Been at Remarks 4 days last week. Pumping. Sitting with families, all from Auckland. All say a bit expensive, but kids are having far more fun than on Gold Coast or Pacific Island, and well worth it, especially for family having fun together.

by Kezza R | 10th Jul 20, 4:37pm 1594355842

61k infections and 960 deaths in the US in the latest stats. The increased death numbers are starting to come in line with the increased infection rate from three weeks ago. There was a great deal of talk on here yesterday that the virus was all but over it had done its dash. The figures are indicating otherwise.

ICU beds may soon be full in Victoria, is very concerning. The Ozzy public will not take unavoidable deaths on the chin well.

by King of the whiners | 10th Jul 20, 4:47pm 1594356455

Absolutely correct. US hospitalization rates are soaring and death rates follow - then there is increasing evidence of the negative health effects in significant numbers of individuals who were diagnosed with 'mild' disease. The economic costs of this associated morbidity will no doubt be substantial as the virus continues to burn seemingly unchecked in the shambles arising from a premature re-opening etc. Fauci reckoned they might see 100,000 cases a day eventually - and come autumn (with a con-current flu season) that might just happen. It's bizarre that several posters on here constantly try and minimize the health impact of the virus in the US (actually perhaps not that bizarre if you look at their track record in posting on climate change denialism and other right wing tropes).

by Kezza R | 10th Jul 20, 5:35pm 1594359300

Not far away from the time when the truth is unavoidable and the markets reflect that.

by MLSmith1 | 10th Jul 20, 7:40pm 1594366858

Just seen Aljazera report from Oxfam stating more people are dying from hunger relating to Covid economic hit than those direct from the disease

by Kezza R | 10th Jul 20, 7:45pm 1594367152

The health effects won't be the only effects felt. In the west, we will feel the pinch more in the pocket.

by sit23 | 11th Jul 20, 10:26am 1594419985

A lot of countries, a pinch in the pocket means starvation. We are so lucky in NZ.

by Foyle | 10th Jul 20, 8:28pm 1594369689

https://www.visualcapitalist.com/history-of-pandemics-deadliest/
Wuflu deaths are about half of the Asian flu epidemic of 1958, about half of the Hong Kong flu epidemic of 1968, and only about 3x the Swine Flu epidemic of 2009 that passed most of us by unnoticed. And of course so far only abut 1% of death toll from 1918 Spanish Flu.
That said only about 1-2% of world population have been infected so far, it is possible that it will eventually get 10x as big as it spreads through (mostly youthful) 3rd world.

by sit23 | 11th Jul 20, 9:49am 1594417762

You were doing quite well until you mentioned Fauci. No credibility after that. The economic costs do not come from morbidity. They come from governmental reactions to past, present and perceived future morbidities. Anything quoted by Fauci, Ferguson or WHO is immediately suspect.

by Foyle | 10th Jul 20, 8:19pm 1594369157

Daily US deaths are now same as a month back (less than half of peak, and about 50% up on the minimum of a week back), but case numbers are up 3x since a month ago. So CFR is about 1/3 of what it was - pointing to more testing or younger/healthier people catching the bug. This is by no stretch of the imagination good, but not nearly as cataclysmic as the sharp rise in case numbers suggests. US data shows about a 2week lag between peak in cases and deaths for first surge, suggesting daily deaths might rise another 50% over next week, but perhaps not any further than that given new cases look to be nearing peak.

by Kezza R | 10th Jul 20, 8:55pm 1594371324

Mate you can keep guessing at this stuff as people have been doing for the last few months now but they stats keep cranking up there despite all the guesses. Maybe a few less deaths this time arround due to being more experienced but that could be off set by economy and hospital issues.

by Foyle | 10th Jul 20, 8:55pm 1594371329

People modify their behavior by choice in response to perceived risk, many had relaxed owing to diminishing risk before this latest rise. Now mask wearing in USA is becoming more pervasive and accepted. New cases have only risen about 6% in last 7 days so seems they are near top of current surge.

by Kezza R | 10th Jul 20, 9:04pm 1594371879

The slow increase lately is due to a lack of testing over the holiday period. 55k one day 45k the next???

by VictimOfOCR | 10th Jul 20, 4:55pm 1594356920

Where did you get the 288 new Aussie COVID cases figure from?

I’m seeing 182:

https://www.health.gov.au/news/health-alerts/novel-coronavirus-2019-nco…

by Pragmatist | 10th Jul 20, 5:20pm 1594358441

Herald is reporting 288 as well, and news.com.au has a video link to the Victorian Premier announcing it. That webpage has not been updated yet would be my guess.

by J.C. | 10th Jul 20, 5:04pm 1594357472

Over in Straya

New lending by both owner occupiers and investors has recorded the biggest monthly fall on record, but Prime Minister Scott Morrison says it's still too early to make any calls on any house prices.

Scomo is a master of diplomacy.

https://www.afr.com/policy/economy/home-lending-worst-on-record-but-pm-…

by Henry_Tull | 10th Jul 20, 5:12pm 1594357976

We need value for $ from universities & ITC.
Bring back exit exams, see what's what.

by Foyle | 10th Jul 20, 9:01pm 1594371669

and about 10% as many useless Marxist ideologues being churned out by Humanities Depts would be a massive boon for the country over the next couple of generations. The country gets nothing from their creation but ever more hands grasping for tax dollars and seeking to destroy our economy with non-productive overheads added to every activity.

by Fritz | 10th Jul 20, 5:38pm 1594359485

I'm so glad I was wrong about Lockdown. NZ is blessed, now. Relatively speaking, of course (tourism is obviously screwed, indefinitely). And provided we keep the idiots in check.

by MortgageBelt | 10th Jul 20, 5:50pm 1594360210

Can the 14 day hotel isolation in NZ keep back the tide of the Sars2 indefinitely?
The constant arrivals, the accumulation of hotel incubation, the number of daily escapees, threatens to break NZs elimination.

by oldbloke1 | 10th Jul 20, 6:40pm 1594363208

How many escapees? Daily? Just a bit of hyperbole there, old chum. And just think - you could have had the National party running this - and they can't even get their dirty politics campaigns right.

by Kezza R | 10th Jul 20, 8:07pm 1594368450

OB1, you don't loose your pension if you say anything against Labour.

by MortgageBelt | 10th Jul 20, 8:32pm 1594369921

Is this border control enough? And is it working?
Border control measures

Only New Zealand residents and citizens (and their children and partners) are permitted to enter New Zealand. This includes the Realm countries (the Cook Islands, Niue, Tokelau), Australian citizens and permanent residents ordinarily resident in New Zealand.

People from any other countries can’t enter New Zealand at this time, unless they have specific grounds for exemption, such as being essential workers or for medical reasons. These people will need to apply to Immigration New Zealand for an exception to the border closure.

Airline and marine crew are exempt from managed isolation in some cases.

Apply to Immigration for an exception to the border closure

Under the Air Border Order, people entering New Zealand from another country must remain in managed isolation or quarantine for at least 14 days. This measure is key to preventing the transmission of COVID-19 into our communities.

The Air Border Order was updated on 22 June 2020 to further strengthen the management of public health risk from residents returning to New Zealand from overseas. It clarifies requirements around medical examinations, testing, and isolation and quarantine. It also clarifies which groups of people the Order doesn’t apply to.

by MortgageBelt | 10th Jul 20, 8:42pm 1594370546

Sounds like Residents (of which there are many) are permitted as well as Permanent Residents.
.
Look at where the latest cases are from. Keeping in mind Australia is often a transit destination.
https://www.health.govt.nz/our-work/diseases-and-conditions/covid-19-no…

by sit23 | 11th Jul 20, 10:07am 1594418833

Most of them have travelled from Hamish's countries haven't they? No particular race, just from those countries. Some of us don't get Nationalities deliberately confused with races for cheap, easy political gain.

by alittle | 10th Jul 20, 5:48pm 1594360092

GST SINKS
Part of the fast rising deficit is that taxes, especially GST, is falling fast. In fact in May 2020 it dropped -29% year-on-year, only beaten by the October 2008 GFC collapse of -43%. Every month in 2020 has recorded a decline year-on-year. However there is every expectation that it will recover in June

In May many companies did not raise invoice but delayed for June to avail second round of wage subsidies though had good demand/sale in May so in June the number should jump and the reason will not be demand but manipulation to reflect May sale in June.

by Henry_Tull | 10th Jul 20, 7:13pm 1594365194

NSW now on high alert.

ABC News
https://youtu.be/2lC9UKYYQWA

Kiwi lessions: Quarantine wanders, superspreaders.

by Alter Ego | 10th Jul 20, 7:31pm 1594366260

https://www.nzherald.co.nz/world/news/article.cfm?c_id=2&objectid=12347…

Deadlier than Covid...Read it...It may Herald a new problem...And China has warned us.....

Covid 19 coronavirus: 'Unknown pneumonia' deadlier than coronavirus sweeping Kazakhstan, Chinese embassy

warns...Russia reported spike.....WHO involved too...So may be accurate.

by Fritz | 10th Jul 20, 10:08pm 1594375687

Just sensationalism. 'Journalism' cashing in on fear.

by Kezza R | 11th Jul 20, 12:44am 1594385041

I remember that kind of comment at the start of this.

by Alter Ego | 11th Jul 20, 9:19am 1594415971

Spreading the word is better than not knowing owt about it......Then maybe the Pneumonia is not spread. ...Like Covid.
Papers do some good...but then so does the Internet to spread the Word about issues...it ain't all lies, but ill prepared is more likely to spread the Illness......just like Covid did. Cashing in is better than Dying out.....as half a million Covid who died would portray.

by sit23 | 11th Jul 20, 10:10am 1594419012

For crying out loud. Kazakhstan, Russia, China, WHO. So therefore a pack of obvious lies. Unless you are winding me up. In that case, well played.

by streetwise | 10th Jul 20, 8:02pm 1594368135

When the chips are down there's no doubt about it.......you're better off with a left of centre government; they look after all citizens, not just the elites.
Look at the mounting chaos and absolute bedlam when the tide goes out in USA, UK, AUSTRALIA, CANADA, BRAZIL.........all have right-wing neo-liberal governments scrambling and floundering ineffectually. They will only be wanting to look after the corporates who contribute to their party coffers, until it suddenly dawns that the citizens have turned on them.

by Foyle | 10th Jul 20, 8:38pm 1594370298

The problem with left wing vote-buying govts is that eventually they run out of other people's money, at which point you get to suffer through generations of squalid stagnation and misery. See: Greece, Argentina, Venezuela, Zimbabwe, South Africa and soon most of OPEC. The more left wing your govt the more your country will lag behind the growth and prosperity that less left wing countries enjoy (see EU for myriad examples).

by Kezza R | 10th Jul 20, 9:06pm 1594371964

Come on let's not let have the truth be spoken about how inefficient socialist Govts are. They must be held up as shining examples of everything good.

by Foyle | 10th Jul 20, 9:07pm 1594372032

7 things every kid needs to hear from loving parents:
1: I love you
2: I'm proud of you
3: I'm sorry
4: I forgive you
5: I'm listening
6: Communism has failed every time it was tried
7: You've got what it takes

by Kezza R | 10th Jul 20, 9:14pm 1594372489

Green, Left then Right as your brain expands and has to deal with the real world instead of the pie in the sky.

by JimboJones | 10th Jul 20, 9:39pm 1594373975

I doubt anyone is pushing communism. The extreme of any political leaning fails every time. There is a sweet spot somewhere in the middle, it’s just about finding where that middle is.

by Fritz | 10th Jul 20, 10:28pm 1594376906

Right wingers love to decry anything left of centre as communism. One of the oldest tricks in their book, and totally disingenuous.
It's like calling anything right of centre fascism.

by JimboJones | 10th Jul 20, 9:34pm 1594373667

If you only look at the capitalist democratic countries I think big government tends to work better than small government. Look at the US for example; the best country in the world is failing in so many ways because of their every man for themselves philosophy.

by Lanthanide | 10th Jul 20, 9:05pm 1594371932

Canada doesn't have a right wing government.

by Kezza R | 10th Jul 20, 9:09pm 1594372153

What about the NY Dem (socialist) Mayor? Lots of needless death in his hands.

by JimboJones | 10th Jul 20, 9:43pm 1594374182

But still a much better city than the right wing US cities, both in terms of finances and just being better.

by Kezza R | 10th Jul 20, 9:56pm 1594374995

He made a major hash of virus control.

by Plutocracy | 11th Jul 20, 8:16am 1594412213

You do realise the Democrats would be considered a right-wing party in almost any other country in the world right?

by Kezza R | 10th Jul 20, 9:20pm 1594372827

The quarantine guards in Melbourne were being way too social.

by Fritz | 10th Jul 20, 10:09pm 1594375790

Big strong men.

by Kezza R | 11th Jul 20, 1:08am 1594386522

Don't know if it is out yet if all of them were men.

by Squishy | 10th Jul 20, 9:09pm 1594372158

If we have any capacity to assist Australians in the event their medical system is overwhelmed I think it behoves us to do so. They haven't really been blasé about the virus but have had a bad run of luck.