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A review of things you need to know before you go home on Thursday; Westpac cuts TD rates, fruit & veg prices jump, rent pressure uneven, online shopping pace slackens, swaps fall, NZD soft, & more

A review of things you need to know before you go home on Thursday; Westpac cuts TD rates, fruit & veg prices jump, rent pressure uneven, online shopping pace slackens, swaps fall, NZD soft, & 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 today.

TERM DEPOSIT RATE CHANGES
Westpac took -10 bps off their TD offers today. And this review might be useful.

FRUIT & VEG IS SHARPLY MORE EXPENSIVE
Food prices rose +4.2% in the year to July. This is faster than the +3.9% we have had as an average over the past four months, and faster than the average +2.9% in all the last twelve months. The rise in fruit and vegetable prices in the past two months has been extreme. Fruit and vegetable prices were up +9.8% in July 2020 from June, and were up +3.9% in June from May. That means year-on-year they are up +19%. Eating 'healthy' is getting expensive fast. In contrast, meat prices are only up 1.7% in a year, grocery prices only up +1.3% in a year. The cost of eating out is up +3.9% in a year.

MORE SOUGHT, OVERBID, AND SHARPLY LOWER RATES
There was $1 bln in new government bonds tendered today in four separate tranches. The April 2025 bond sought $450 mln and received $1.535 bln in bids. It was won with a yield of 0.26%, sharply lower than the 0.37% at the previous tender. $350 mln was sought for the May 2031 offer and that received $944 mln in bids. It was won at 0.69% compared to th 0.81% at the previous equivalent tender. The April 2037 sought $150 mln and received $410 in bids at 1.03% compared to the 1.25% in the prior tender. And finally there was an inflation adjusted tranche seeking $50 mln for a September 2040 bond and it won bids worth $148 mln. It was won at just 0.05% plus CPI. The previous equivalent one was at 0.35% plus CPI.

RENT PRESSURE UNEVEN
Stats NZ's rental price indexes are out for July today showing rents up just +1.3% on properties that changed tenants in July nationally. In Auckland there is zero rent pressure and over the past four months asking rents has actually dropped -0.5%. In Wellington over the same period they are flat too, but in July rent pressure returned with a +2.3% rise. Canterbury rents rose +3.6% in July from a year ago. Nationally, Stats NZ is reporting that across new and existing rented property, residential rents are rising +3.3% pa.

STRETCHING
The latest Reserve Bank figures on household debt-to-income ratios show that still more house buyers are borrowing more than five times their annual income.

ONLINE SHOPPING PACE SLACKENS
Market view is reporting some unusual changes in our online shopping habits. "Online spending was up just +2.8% over the same month last year. While still an increase, it is the lowest monthly growth rate since February this year, which was incidentally the last full month before Level 4 Lockdown in March. It is also interesting to see the growth at physical retailers this month (+9.9%) outpace online spending. That hasn’t often been the case over the last couple of years. That said, online spending is still solid, with the domestic online offering up +16.2% compared to July 2019. When comparing July 2020 to June 2020, online spending was down -7.3%. This is the second consecutive month where spend online has shown a decrease when compared to the previous month. In a way it's not too surprising given the heights of online spending in Lockdown."

MORE JOBS, BUT THEY ARE PART-TIME
Australia's jobless rate rose marginally in July, but employment grew more than expected. But two thirds of the growth was in part-time work. This data is before the Victorian lockdown. There are now 1 mln Aussie workers jobless.

EQUITY UPDATES
The S&P500 ended its session up +1.4%, the level it maintained all day. Shanghai and Hong Kong have opened flat, Tokyo is up almost +2.0%. The ASX200 is down another -0.6% in early afternoon trade. The NZX50 Capital Index is up +0.3% after yesterday's big fall.

SWAP RATES UPDATE
Swap rates fell sharply yesterday, but we don't have today's change yet and will update it here if it is significant. They probably didn't move much today however. Update: Well, we got that wrong! Swap rates fell sharply again today with the two to seven year rates down -4 or -5 bps and the ten year down -6 bps. The 90-day bank bill rate is unchanged at 0.29%. The Aussie Govt 10yr is down -3 bps at 0.89%. The China Govt 10yr is marginally softer at 2.98%. And the NZ Govt 10yr yield fell -5 bps to 0.73% following the MPS and following overnight trading signals. It is still under pressure and has since fallen another -7 bps to 0.66%. The UST 10yr is holding unchanged from yesterday at 0.66%.

NZ DOLLAR SOFTER
The Kiwi dollar has stabilised after the lockdown news and is now marginally firmer today at 65.7 USc from this time yesterday. And against the Aussie we lower at 91.6 AUc. Against the euro we are lower at 55.6 euro cents. And that means the TWI-5 is softer at just under 68.9.

BITCOIN FIRMER
The price of bitcoin is marginally firmer today, now at US$11,571. 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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62 Comments

FRUIT & VEG IS SHARPLY MORE EXPENSIVE
Didn't we have flooding issues last year that pumped our veg prices higher? $8 cauliflowers etc.

12
up

Winter prices always spike , but the duopoly in the retail food stores are to blame for a lot of the price rigging .

We dont have a genuine fresh produce market here like we see in Europe , Asia , South America and elsewhere , places where anyone willing to get up at 4 am can buy produce direct at the auctions starting at sunrise .

Instead we have a cozy contract -buyer arrangement between the farmer and the supermarket chain , but lets have little doubt who the dominant party is in this arrangement

Fairly sure we had an extra high spike last year either flooding or wet planting season issue.
Turners and Growers (75% German owned) is a big player in the fruit sector.

Thank the old Coles Myer board in Oz for their policies on screwing down on their suppliers...I would not want to be a farmer here or in Australia.

Come on Aldi come on over plenty of empty prime sites and rents will be dropping and the bonus Kiwis are living on the edge of a major debt cliff and would be very keen to save 20-30 maybe even 40 percent compared to current prices we have to put up with.

Aldi is amazing. Half price in Europe.

Jeepers Kezza this can't contnue. I agree with you again (twice out of a hundred though). Aldi is a great alternative in Europe. We (used to) hang out in France for a couple of months every winter and Aldi prices are generally best. Selection is not as good tho, nor location.

I miss Lidl cheese selection

I used to shop at Aldi in Germany in the 90's, $100DM for a chockablock trolly, not picking and choosing just throwing in what we wanted. I would come back to NZ and drop and $100 and a quarter of a trolly.
Selection didn't really bother me. Most of the stuff in there are the biggest and best brands repackaged for Aldi. Even had NZ lamb (also cheaper than Kiwi prices).

Swaps fell sharply again today, the 2 and 3 yr have fallen by 50% in 2 days. One more day of this and forward starting swaps will be negative.

Correct. I got that wong in version 1. Updated now. It was a big move for a second day.

Whats the reason for the drop in Auckland rent, I thought all these returning kiwis were going to lead to increased demand and rising rents?

@Albert ... Would you let your investment property to a returning Kiwi with no job ?

Didn't you hear.... they are buying up all the 1 to 2 million dollar houses even though they had to leave Oz because they had no job and were not entitled to jobkeeper?

Add to that the demand for million-dollar homes from Kiwis being deported out of Oz.

Surely the Aussie police allows 501s to carry their drug money across the Tasman at the end of their sentences for them to buy up premium real estate in Auckland.

more empty AirBnB's?

Its winter , tomatoes go from $1,99 a Kg to as much as $8,00 a Kg .

For the life of me , we import bananas from the Philipines and the price is stable at under $2 /kg , why not do the same with tomatoes in winter

Easy. Canned tomatoes from Italy 70 cents.

Ever wondered how supermarkets in NZ are able to sell tomatoes sourced from southern Europe at less than NZ 70c a can landed plus retail margin and GST.
The answer won't surprise really anyone.

Kiwifruit growers in Te Puke had their own 'cheap' labour sources until a couple of years ago. No wonder business confidence has taken a nosedive ever since this lot took office.

Because the mafia run it and they exploit migrant labour.

We need cheaper international air freight. That could (and will eventually) be done with drone aircraft (gliders) for as little as 30% of conventional airfreight prices and would be hugely beneficial to NZ horticultural and sea food exports (and winter imports of reasonably priced produce). Would be a good investment for NZ to develop it as potentially worth billions a year to us.

NZ is worried that we can't get in enough qualified people to build the roads.

Solid gains in AUD and NZD for silver and gold today. Interesting to note that when the ASX shut yesterday after the bloodbath on price, USD futures on gold and silver took off. This happened almost instantaneously. Now I'm no Brownlee-type conspiracist, but if anyone asked the question as to why, then I understand. The gold old-timers will understand what's going on with our friends over at the investment banks.

A chunk of that extra Orr funding needs to be allocated to physical PM's. Sitting on zero holding when other reserve banks have been buying up for a couple of years is concerning.

I thought central bankers had to swear 3 times that gold is a worthless relic as part of their initiation rites? Unless they want to be seen to be trying to undermine the one world order and not get invited to the parties at Jackson Hole and so forth. Another way of putting it, is it would be a dangerous career move. The groupthink is strong in those who know best.

I thought central bankers had to swear 3 times that gold is a worthless relic as part of their initiation rites?

Maybe Alan Greenspan did to get control of the Fed. And he's generally known as the Grand Poohbah of central banking.

How things have changed. Quoting the great man (in 2017):

"Today, going back on to the gold standard would be perceived as an act of desperation. But if the gold standard were in place today, we would not have reached the situation in which we now find ourselves."

https://www.cmi-gold-silver.com/the-new-alan-greenspan-on-gold/

Through to Q2, the only demand keeping gold up is ETF buying. According to the WGC data, every other category is shedding demand - jewellery, coin&bars, central govt buying. It's only ETF buying that is going crazy (and it is substantial). ETF buyers are highly speculative and past buying surges have been followed by selling plunges. It is interesting the autocrat Governments (the only prior buyers) turned net sellers in Q2. Of special note is that the China market was particularly weak, matching India.

Thanks David. The format to watch going forward will be gold-back digital tokens. This opportunity is massive and potentially has the opprotunity to supplant ETFs. We're talking about not just an investment, but a store of value and also as a means of exchange.

Didn't Chinise banks say 'no more PM trading'.
Selling in Q2 may have been due to a lack of money.

RW.
They say they are not buying gold but their holding show they have been buying since 2018.
If we had grabbed a good pile in 2018 at US $1200 we could have sold now at US $1950.
Yes the group think is strong, a pity that the leaders of this country of all Parties are thick.

A chunk of that extra Orr funding needs to be allocated to physical PM's. Sitting on zero holding when other reserve banks have been buying up for a couple of years is concerning.

Wouldn't that be kind of be admitting defeat?

You have insurance, are you asking for a house fire?

Maybe they are buying the producers in Australia so knockdown the cfd for gold for a few hours to shake out weak hands who are holding producers that will rocket in price if gold keeps heading up to a level that will make it look very cheap today.
Australia has many of the best companies and gold reserves which big money will be wanting more of in todays environment.
I am not falling for it and will sell when I am ready.

Crypto is having a bit of a "defi" bubble like the 2017 ICO bubble. For example, one defi coin went up x1000 in a week, and now has value of $6k per token, despite the creator saying they are worthless. And then we have Yam. A 1 day old token, based on a meme, with no smart contract auditing - it already has $460 million invested into it - and it turns out there is a bug so the whole thing might die! https://www.coindesk.com/deposits-in-monetary-experiment-meme-token-yam-...

The defi bubble is kind of old news. If you follow Alex Saunders in Australia, here is his take:

"Within 24 hours the hottest coin goes from $YAM to $BASED as parameters are tweaked. It's about as high risk, highly speculative as it gets, but if it's the narrative that ppl are chasing & we've seen 1000x in 7 days."

"Make no mistake, we are in a bubble."

Just had a friend called up to be a relief teacher as another relief teacher canceled due to testing positive to CV19 Dunedin.
Two more second hand messages from hospital staff, 'do your supermarket shopping'.
No I'm not on FB or any other social media BS spinning sites.

I really hope that's not the case. If not we are probably back at L4 tomorrow.

so managed herd immunity it is. It cost a hell of a lot of money to get back to where we started.

I think opinions are changing. All the people I have talked to in the last 2 days think that is how we should play it. Most of them strongly supported the lockdown first time round.
This is a pivotal moment for Labour especially as it is rumored the latest infections might have come from a quarantine breach....

10
up

This.

Maybe the penny hasn't dropped yet for some people. But eradication failed. The lockdown destroyed a lot of livelihoods, blew out the national balance sheet and only bought a few months of pseudo normality.

It is insanity to do it again. For what, another few months?

This mindset of New Zealand exceptionalism is going to be the ruin of the country. We are the same as any other country and are going to have to learn to live with it like everybody else already has.

Labour is running the ship. We will get what is the best for those at risk and the cost dose not factor into that.
Leave no one behind will always rule with this crew.

This.
Despite my reservations about Labour, I have held Ardern in high esteem.
That view might be demolished tomorrow.

Agreed but Jacinda will not like to admit they failed and will blow large amounts of money to try and do the impossible.
Just look at news in China about people falling ill again from virus that has been dormant for a few months and then bam they have it again maybe that is now happening here.

Not good but was always going to happen but to lock everyone down is going to destrong NZD and many businesses and increase tax payers future liabilties.
I hope when we finish this second lockdown we limit how we travel in NZ as it was a free for all with not a worry in the world when we need to break country down and treat each area as a seperate state like Australia and have much better tracking to prevent this happening again.
Ask anyone what they were doing 2 weeks ago and you will see most people will not remember hence why this is not going to end well.

We can't eliminate wallabies, possums, rabbits, wild pigs..........etc....... but we can eliminate a 0.12 micron sized virus ?

Better chance to win powerball than eliminate covid in my view

God this is depressing. It's not like we didn't have lots of near misses and warnings and time to get it right over a seemingly charmed 3 month clear run, but in the end this is what happens when you elect incompetents.

It is depressing indeed.
But is it really systemic incompetence, or just 'mission impossible'?
It only takes small elements of human error for this to happen.

Yeah, I think we're dreaming given National were already clamouring to open up to wider inflows. This could have had an even more negative effect.

But we're also dreaming if we think a few different MPs at the top have changed much about the conditions and skilled or unskilled resources at the bottom, and the many potential vectors and unknowns. A few different MPs at the top would not have made MoH instantly more well-equipped or less susceptible to flaws.

Seems highly unlikely, if someone tests positive in a school they close it, not call for relief teachers.

I am hearing some credible rumours. I suspect tomorrow we will hear there are at least 40 cases in Auckland.

Lets get New Zealand moving again equals lets spread covid far and wide and to top it of Labour has not offered any good contact tracing system.
Back in April they said they would have something soon but just like most things they say it never happens.

Those Jacinda mania soccer mums will turn on her fast.

I am not sure how much compliance they will get on another lockdown. I don't think I will comply with it.

2 friends I know 1 police and 1 army have been busy since last week preparing for something so maybe we will be less trusted this time.
I also will be against it as we did everything last time only to have them screw up on the border controls time and time again.
I feel sorry for all small business owners etc who have to make some tough decisions very soon and this will just be the last straw for many.

Yeah the govt will need a big stick this time round. I saw two families in auckland at my local playground today, 1st day of lockdown. level 3/4, last lockdowm never saw anyone on the playground for the 7 weeks.

People will only tolerate draconian lockdown for so long, especially if they see it's ultimately futile.
It's bought us some time now it's time to live with the virus.
But I can't see anything other than lockdown coming tomorrow...

Frozen Food, yeah right (shoutout Tui).

https://www.newshub.co.nz/home/new-zealand/2020/08/nearly-two-thirds-of-...

The Prime Minister says all staff will now face compulsory tests, but a public health expert says it beggars belief this wasn't already happening.

They're part of our most high-risk group: airport staff like Customs and Immigration, hotel workers like security.

Stunning that no one will get the chop for this untill or becomes an issue.
Reactionary, never protacive.

So many clueless idiots queuing up for tests, with no symptoms.

So it seems like another lockdown is coming. And so is economic disaster.

Days to the General Election: 26
See Party Policies here. Party Lists here.