A review of things you need to know before you go home on Monday; TD rates fall further, rents start to dip, recovery stronger than expected, swaps unchanged, NZD hold firm, & more

A review of things you need to know before you go home on Monday; TD rates fall further, rents start to dip, recovery stronger than expected, swaps unchanged, NZD hold firm, & more
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Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
Bluestone cut all their rates, including their floating rate.

TERM DEPOSIT RATE CHANGES
Treasury halved the interest rates on its Kiwi Bond offers. More here. NBS also raised their rates again. Heretaunga Building Society cut both their term deposit rates and their savings account rates.

FAST RISING FOOD PRICES, BUT THERE ARE OPTIONS
Food prices rose +4.1% in the year to June, much faster than the +2.9% rise in the year to May. However, that was slightly less than the +4.4% rise in the year to April. These are all elevated levels and the highest set in almost nine years. Food prices seem to rise sharply in an economic crisis. This time around it is being driven by vegetable prices which jumped overall by +18% in a year, and they were up more than +7% in June from May. The jump was all driven by lettuce, broccoli and tomatoes. Staples like potatoes, cabbage and carrots eased. Food prices will feed into the CPI result for the June quarter, which is due to be released on Wednesday. Analysts are not united on what to expect, but somewhere between +1.3% (RBNZ) and +1.5% (Westpac). Today's food jump might have them rethinking things slightly.

TWO SPEED RENTAL MARKETS
There were two rent measures for June out today. First, the StatsNZ index says overall rents were up +3.4% in the year on a stock basis (all rental properties including those that didn't change tenants). On a flow basis, they report a rise of only +0.2% for the year. The flow basis reports on rent changes for properties that did change tenants. The falls reported in earlier months in Auckland seem to have ended. But rental price falls in Christchurch are picking up steam, and they are particularly fierce in the rest of the South Island. In fact, Stats NZ reports a -2.5% June monthly fall on top of an -8.6% May monthly fall. These rest-of-SI drops have mounted to almost a -10% year-on-year retreat. Rent rises are especially focused on Wellington, up +6% in the year to June.

SOME LANDLORDS FACE FALLING RENTS
Secondly, MBIE tenancy bond data for June gives some more detail on rents. A three bedroom house in Wellington is in a market where the median rent is $655/week and that is +4% more than a year ago. But it is also -$35/week less than the peak in March. Similarly, 2 bedroom flat rentals have fallen too in the Capital and rather sharply. In March they topped $515/week but they are now back to $460/week median. Three bedroom house rents have stayed high at $680 in Auckland, which the same median rent level. For Christchurch they are still at $450/week and at its all-time high (up +3.4% in a year). But Christchurch 2 bedroom flats have suddenly fallen out of favour. Median rents fell from $350/week in March to just $320/week in June, an -8.6% dump. For the year they are down -3.0%.

'WE WERE ALL TOO PESSIMISTIC'
Westpac economists say we are on track for a v-shaped recovery which is better than many were assuming. They say that is because our economic downturn will be 'at the more moderate end of expectations'. Perhaps we all overlooked the impact the money were used to spend on overseas trips is having on the domestic economy now that it is 'trapped' here. Those funds are being spent in many ways, but surprisingly July car sales seem to be stronger than dealers were assuming - there are anecdotal reports of some models being in short supply.

PAYING SENIORS TO SPEND
Australia is rolling out its second tranche of AU$750 coronavirus emergency support payments. The first tranche in March went to 6.6 mln people. This second one is to go to a slightly limited 5 mln people. The first set cost AU$5.6 bln and this second set will cost AU$3.8 bln. Half of all the money goes to seniors who qualify for their means-tested pension.

LOTS OF EMPTY SPACE
And staying in Australia, JLL is reporting that retail shopping center vacancy rates are rising quite fast. The national average is now over 5%, up from under 4% six months ago. In some major CBD destinations it is now over 10% vacancy. In major malls it averages over 6% now.

EQUITY MARKET UPDATES
The futures market is signalling that the S&P500 will rise by a bit more than +1% when it opens tomorrow. The Wall Street earnings season kicks off this week sometime, with the major banks first to report. Shanghai has opened the week up +0.8%. Hong Kong is up +0.6%. And Tokyo has started very strongly, up +1.7% in early trade. Locally, the ASX200 is up +0.9% in early afternoon trade, and the NZX50 Capital Index is heading for a +0.6% rise today to start the week off on a positive note.

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 up by +2 bps to just over 0.90%. The China Govt 10yr is also up by +2 bps to 3.16%. The NZ Govt 10yr yield is up marginally at 1.00%. (All shifts are from this time Friday.) The UST 10yr is still at 0.64% where it was at the end of last week's Wall Street session.

NZ DOLLAR UNCHANGED
Although analysts don't think it will last, the Kiwi dollar is firmer again today, now at 65.8 USc. But not against everyone. Against the Aussie we are holding at 94.4 AUc. Against the euro we are firmer still at 58.1 euro cents. And that means the TWI-5 is holding at 70.3.

BITCOIN ON HOLD
The price of bitcoin is little-changed at US$9,282. 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 ».

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56 Comments

Its now cheaper to own a home in a middle class area such as Glenfield or Birkdale , than rent the same property , rents had to start adjusting

It might be if you have a decent deposit, but by the time you pay the interest, rates, and insurance, and repairs, I find your statement hard to understand when you consider a specific house. It might apply, if you rent a better house, one with good heating systems, and insulation, compared with owning something needing a reno job. On top of that you have capital repayments, which are a kind of compulsory saving, BUT it also has to be paid out of your meagre income.

Well if you ask for an interest only arrangement for say 24 months , then its way, way cheaper than renting .

On the surface of it , it looks like a no brainer if you have the deposit , you need to buy , but the gap will close soon enough ..................or maybe not

Yep if you have the deposit (the biggest 'if') and if you have good job security (a smaller 'if')

And if interest rates stay low for a long time. Like years, even decades. But will they?

They have to stay low there's no other alternative at this point

I stand by my earlier statement, I wasnt specifically referring to two suburb's in Auckland, more of a general observation, as a landlord with a number of houses spread around the country in both islands.

What about the shower that needed replacement yesterday, cost $1000, what about the roots in the sewer last week , cost $250, that one seems to pop up every two years.
One needs to anticipate some capital gain, either by the result of good buying , or doing catch up on deferred maintenance to make ownership worthwhile

exactly why there should be CGT

Fair call for now, in Glenfield.

Median rent is $585 for 3 bedder. Did a few checks on trademe and valuations show these to have vals around $800k. EG https://www.trademe.co.nz/a/property/residential/rent/auckland/north-sho...

So if you have $160k depo (which by the way is the main thing stopping renters) then $314 per week in interest @ 2.55%. Remembering of course it is dangerous to assume always low. Of course, the $160k would have earned returns, say at ~1.60% that's still $33 after tax p/w, so adds that as a cost. Now $40 p/w in rates and something similar in insurance takes us to ~$430 then add maintenance provisioning (expect to spend some on old houses ) and might take that to $500 p/w. So lower, yes. Of course, you need to afford principle as well, which would take it over $585 but can understand argument that is forced savings.

Of course numbers look worse when house price is over $1m... in that segment, the rent is a whole lot more, but the payments certainly are.

Yes. Owning a home is expensive in terms of those costs. On the other hand, what will interest rates look like at the end of the year? Could it be close to 2%? At that point unless rents are plummeting, the owning option is cheaper (assuming of course you can get a deposit)

And then you need to re roof and a $15k unexpected bill. Whoops... not so cheap now.

12
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Dyed in the wool National party supporters whinging about the inevitable effects of running one of the most aggressive population growth strategies in the developed world, a policy their party wrote the blueprint for.

https://www.rnz.co.nz/news/national/421087/urban-spread-farmer-accuses-c...

25
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you can vote for any party you want, you are going to get the same gov't. They know what's best for you.

Exactly. Particularly under MMP. The bureaucrats can indulge in their groupthink to their hearts content (or should that be to their intellects' delight, all that dopamine flowing freely and all). Resistance is futile. Until it isn't, of course.

Quite possibly. It would be good if all those people advocating shoe-box living as a solution would disclose their own personal accomodation situation. I suspect most of them live in free-standing houses with quarter-acre sections.

Great link, thx.

The Mayor kicking for touch - hilarious.

12
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This red vs blue nonsense is rather amusing when the outcome is the same.

It is and then we have the Trump is bad and the other guy is good mindset. Lol
FYI. They are politians, untrustworthy liers, that will never change.

To compare trump to a normal politician is a great insult to those other politicians..... trump is one of the most despicable, lying, uneducated, disgusting characters to have ever been voted in as president of the USA. Not trying to shore up the reputation of politicians, but you have really hit below the belt by comparing them to trump.
In NZ you should be thankful...it is obvious that you have a person in charge there that is basically honest and has the countries best interests at heart. It may just not be the same beliefs as all the extreme right wing nut cases out there. So be it.
All politicians have to lie at some point. Often they just simply dont know the facts or have been informed incorrectly by their ministers...trump on the other hand lies over 75% of the time (independent fact checking), has only his own interests, his ego and that of his rich cronies on his mind and cares not one iota for the environment or the life of people who live within the USA. He is the most corrupt, lying piece of crap you will see in a long time in ANY political circles.

Yes , a lot of money was leaving the country for cruises and overseas holidays. Now been spent here.

But it's just replacement money, not additional money?
'We' went there to spend our money, and 'they' came here to spend theirs. (Multi-lateral International Tourism, in other words)
Now it's 'the same' money being spent in both home countries. There is no more additional spending; it's just the same money that's been reallocated to a different location. (Domestic Tourism that's just replaced International)
In fact, given that 'we' spend less than 'they' spend in New Zealand, the net effect may be less?

Does it count as additional money if a lot of it is sourced from QE and borrowing? (as in the wage subsidies, grants etc)

True.
Although I suspect that NZ tourism will be at a lower level than the foregone NZers int'l tourism, so there may be a bit of dosh flowing into savings and other random purchases.

NSW not looking good.

https://www.smh.com.au/national/nsw/covid-19-community-transmissions-ris...

Now something at the casino.

The casino is open?

For about the last two weeks. Not for general public though. Only for their members with a plus one.

Yep. Star
ABC is live
https://youtu.be/3YyVIl97CFM

Of the pub cluster 21.
And one case is, a close contact of a close contact (a 2nd derivative).

I suspect the social distancing, and venue recording of patrons will be reviewed to be brought back here. And more focus on MoH technology, the tracing APP.

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A very divisive thing is happening right across the planet. The haves are scrambling to look presentable as the have-not numbers rise in huge numbers, even in civilised countries like Europe. Big economies like Germany are struggling to find enough jobs for its own people with their world leading auto-manufacturing industries laying off huge numbers, on top of their bailing out of their once famous airline companies. Sound familiar? Too much debt is like too much food or too many drugs, they're ultimately not very good for your health. And all the political elites can do to address the issues is create more debt. This is also happening right here in NZ. Our leaders have failed us, Big Time. They have no answers. They have no solutions. They have no ideas. They have no idea of what they're doing. It is carnage on a global scale & it comes from the greed of our so-called leaders. I will write more later but suffice to say, I believe we are watching the greatest failure of global leadership ever staged.

And as the game winds down, the inevitable happens...
"Retail investors pile in as professionals exit"
Guess who gets to pay for all the costs of the last 40 years?!
https://www.afr.com/markets/equity-markets/retail-investors-pile-in-as-p...

LongJohn
"the greatest failure of global leadership ever staged"

Led by a Muppet with goldilocks comb-over and twitter fetish

If it wasn't him it would be someone from the Dem's with a mass media fetish.

You seem a bit of a Trump apologist Kezza?
I am not saying the Dems are much better, but surely Biden as president would offer more stability and diplomacy, both domestically and internationally.

More like the biden ? Vice president.

10
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Trump is a nutter, unfortunately Biden is just as much of a nutter. I dont get the point of yapping on about Trump when the next sharpest tool in the box is a screw up as well.
G W was a shocker, Obama was useless, Trump is crazy, Biden will be be equally as bad if he gets in.
It's a waste of breath pointing it out. It's like saying 'the sun came up this morning'.

17
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Who do you blame more for the state of American society?

- Nancy Pelosi. 33 years in politics.
- Bernie Sanders. 39 years.
- Joe Biden. 47 years.
- Donald Trump. 3 years.

People vote Trump because anything else is more of the same. Its nothing to do with left vs right, red vs blue or black vs white. Its Trump vs the machine that has slowly got us to this point over the last 40 years.

Its a big club, and we aint in it.

But Trump has been a big benefactor of the machine, right? So I don't really buy that narrative of 'Trump versus the Machine'. He's simply an idiotic shock jock, fits right into the 21st century mentality perfectly.

12
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So much so that he cannot be bought. Thats their issue.

Nice one Masher.

It must be nice to so perfect kezza...so America became one of the most powerful countries because all presidents were a piece of crap according to you? Your trump support just goes to show that the education system in NZ is just as bad as the USA in that it doesn't allow critical thinking.
Sounds like no one would ever be as good at everything that you obviously think you are..... Slow clapping.....write whatever you want...i dont come back and read threads...Im not like kezza and trumpy dumpty where I have to watch my ego all day. Drone on to your hearts content.

Ok, so what's the solution?
Basically, I see two. Firstly, a very redistributive approach (well left of centre). Or secondly, the opposite - neoliberal austerity.
Personally I know where I stand - the first option. It's also much more politically achievable, not that I think Labour have the balls to do it.

14
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The problem is that we've run up against the Limits to Growth. Damned if I know how many times I've pointed this out. It's not the leaders incumbent when it happened, nor really is it the elite - both were inevitable since the early 70's (when the beginnings of scarcity started the neoliberal putsch).

The solution leadership-wise is a Fireside Chat - telling the truth about overpopulation, depletion, pollution, debt and the ponzi scheme we've been running.

The solution societally is a move towards egalitarian sharing, a move to lower/limit population, a move to recirculation of all things (material and nutrient), a goal of no waste and no draw-down. It will include drastic triage, much moaning from the reigned-in, and re-purposing like you've never seen.

Those 1970's inevitable "beginnings of scarcity". Maybe next year? "FAO’s forecast for world cereal production in 2020 has been revised upward by 9.3 million tonnes this month and now stands at almost 2 790 million tonnes, with the global output set to surpass the record-high reached in 2019 by as much 3.0 percent (81.3 million tonnes). "
http://www.fao.org/worldfoodsituation/csdb/en/

Just sprinkle your cereal with a lovely new virus ..viola granola

Talk to us more when you realise the crops you are looking at require ever larger amounts of inputs by area. And when you realise those inputs are also rapidly depleting scarce resources including the soil. Nitrogen from natural gas, phosphorus from mining sea floors, potassium from crushing potassium chloride mineral deposits, also mined. All done using energy used from prodigious amounts of oil...

Coming round a bit to your thinking, but more from a social as compared to environmental perspective. As a part time lecturer, I am really seeing how fragile young people are today. That was exacerbated by lockdown.
Chatted to a psychologist friend today, she has seen a huge lift in young people with mental issues. It was a big trend anyway, even before covid.
Younger people just aren't resilient as they used to be.
As a society, we are going to have to support one another more, moving forward. Most of my students and my son and his friends, are despairing of their job chances.
This is a really big issue.
My friend said she was delighted to see a government announcement yesterday targetted at mental health issues of students.
She basically said that 'we' as a society, and 'we' as parents, have been failing our youth. It's a very widespread societal thing, it can't be pinned on bad parenting here or there.
Rather depressing, but also a wake up call.

"Younger people just aren't resilient as they used to be."

I'd absolutely challenge that. I believe that a lot of the older generation, right through to todays, had pretty much the same share of torment/mental health issues/whatever.

The difference now is that it's more acceptable to share it, or seek help for it. Wasn't it 2 generations ago that being depressed got you into the loony bin so burying it was the done thing?

I think you are right up to a point. But I still hold the view that young people today - overall - are less resilient to deal with despair and torment, which is obviously central to the human condition in any era.

That's just my view anyway (and the view of my psychologist friend), having observed my children and their friends, and my students.

It's pretty clear why. Young people are screwed every which way they turn. Screwed with insecure jobs on zero hour contracts (still in high use), most I have talked to laugh hysterically when you suggest home ownership, some with tears in their eyes. The only ones able to own assets are the lucky ones, usually with mom and pops help. We are building a society of landed gentry all centred around older people, who keep voting to crush the young, keep them poor and don't give them any hope.

And that's the biggest thing I have noticed with young people these days - a real lack of hope. If they can never attain a better future, no matter how hard they work, they don't see life worth living. Which is fair enough. As I have said before many times, the richer older generation are screwing the young.

Pretty much every day I ask young people how they are going. Today a grad at my work (in IT!) said with rather distressed eyes "will never be able to save for a deposit" because she has to pay exorbitant rent for a s&*t box draughty house. She looked up it's value yesterday and saw it was a million plus and shook her head disgusted.

If the older/richer generation don't change, the world will change for them. And they can expect serious retribution in the future.

Yep lack of hope is a devastating thing. Lack of hope of home ownership and financial comfort. And currently for students at uni, lack of hope for many of landing a job in their academic field. They are also staring down the barrel of climate change.
Mind you to come back to Officebound's point, older and previous generations have of course faced bleak employment prospects from time to time, and in the past feared nuclear annihilation rather than climate change...
But I do think our crazy house prices are pretty bleak for many young people, something not faced so much by previous generations. Pity, as there are plenty of things the government could do to meaningfully address this, but don't...

",,,re-purposing like you've never seen." so it will not get done.

you seen a little tense?

Treasury halved the interest rates on its Kiwi Bond offers.
Setting the tone for tomorrow.?

The Treasury announces the launch of a new 1.75% coupon 15 May 2041 nominal bond. Given the timing of the launch, the Treasury also announces the cancellation of the tender scheduled for 16 July 2020, which included the 15 April 2025, 15 May 2031 nominal bonds and 20 September 2040 inflation-indexed bond.

The Treasury expects to issue at least $2.0 billion of the 15 May 2041 nominal bond. Initial price guidance is 29 to 36 basis points over the 15 April 2037 nominal bond.

The issue will be priced on Tuesday 14 July 2020, and further issuance of the new bond will not occur prior to October 2020. Link

Although Monsieur Chaston should note that Treasury did not halve the 2 or 4 yr Kiwi Bond interest rates.
In my opinion you would be mad to put money on the 6mth or 1 yr terms if its for long term savings. 4 yrs is better....

https://www.tvnz.co.nz/one-news/new-zealand/amy-adams-apologises-incorre...

Could have been worse - might have accused her of being from Auckland.

Here is a mind bending presentation regarding Sweden.
Comment on antibodies & T cell protection.

https://youtu.be/CwQpg62Kflg
UnHerd.

No quarantine running rounds in Sweden.

Yes very interesting. NZ looks to have done the right thing so far but that could all change very quickly if herd immunity is possible without too much fatality. We may have spent a lot of money just to delay the inevitable.

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