Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
No changes today.
TERM DEPOSIT RATE CHANGES
BNZ is the latest bank to cut term deposit rates. SBS Bank and the NZ Firefighters Credit Union also cut rates, including some savings account rates.
REALITY BITES
The latest ANZ RoyMorgan consumer confidence index shows a small slip in confidence, and it remains well below its historical average. We are back to 2009 levels. But given we went into L3 in Auckland this month, maybe this result was better than you might have expected. Still, by any measure sentiment is low (despite the house price bubble) and the view on whether it is a good time to buy a major household item is now negative.
UNCHANGED LEVERAGE, LOWER RETURNS
We have updated our bank leverage page, adding the June data from the RBNZ Dashboard. Bank shareholder returns have slipped below 10% for the first time since June 2011 as annualised profits have fallen to just on $4.0 bln, down from $5.8 bln at June 2019, so a -30% fall. Bank capital is rising and now at a record $44.5 bln (+5.6% pa) but their balance sheets are growing faster (+8.9%).
RURAL BOLTHOLES POPULAR
Lifestyle block sales in July were +43% higher than in July last year, the Real Estate Institute of New Zealand says.
GOVERNMENT & HOUSEHOLD ASSETS GROW, BUT BUSINESS LANGUISHES
Statistics NZ today released the national balance sheet for 2019, showing all assets in New Zealand are now worth $5.7 tln. Of these "non-produced non-financial assets" (that is property values) represent 21% of our asset base, up from under 19% ten years ago. The only financial asset rising faster than trend are our retirement savings. In the ten years to 2019, our collective assets rose +4.4% pa, of which property prices were up +5.7% and our retirement savings were up +9.4% pa over that ten year period. The growth of our business enterprises languished at just +3.5% pa. But central government assets rose at the rate of +5.1%, local government at +4.4%, and households at +6.4% - and within that their real estate component was up +7.9%. It hasn't been a friendly place for businesses to grow.
INVESTING AT HOME
June 2020 KiwiSaver assets almost hit $69 bln, a rise of nearly +16% in one year. Those assets are invested 52% in New Zealand and 48% offshore. The New Zealand portfolio rose +20% in a year, the offshore portfolio rose +11%. This observation wasn't in the data release, but the shift to more defensive investments over the year would probably have driven a move into bonds, including NZ Govt bonds (and as interest rates fell, there were capital gains to be had).
EXPECTED CREDIT LOSS PROVISION HELPS PUSH HARMONEY TO $15M LOSS
Harmoney, the licensed peer-to-peer lender turned on-balance sheet online lender, has posted a -$15.4 mln net loss for the 15 months to June 30 after shifting its balance date from March. Harmoney's impairment expense surged to $8.899 mln from just $830,000 in the March 2019 year, largely driven by an increase in its expected credit loss provision, made under IFRS-9 requirements, due to the impacts of COVID-19. Harmoney said it ended the 15 month period with finance receivables of $129 mln, cash of $35 mln and net assets of $29 mln. For the March 2019 year Harmoney posted a maiden after-tax profit, helped by adoption of a new accounting standard that boosted its after-tax earnings by $7.5 mln.
TEN MONTH SALES EXCEEDED 12 MONTHS IN 2019
Retailer Harvey Norman said its sales in New Zealand rose +2.7% in the year to June, despite a weak April-June quarter when stores were closed for almost two months.
CLAMPING DOWN HARDER
China has banned imports from another major Australian meatworks after relations between the two countries continue to deteriorate. That takes the total to five Aussie meat processors banned, plus the Chinese actions on barley and recently, wine. China has a wolf warrior ambassador in Canberra who whines loudly that Australia isn't kowtowing to Beijing in the right way. Expect more. The "lessons" being imposed on Australia are also intended for New Zealand. Meanwhile, the Chinese foreign minister is in Europe, and earlier today was in Norway trying to prevent the awarding of the Nobel Peace Prize to the Hong Kong protesters.
EQUITY UPDATES
Earlier today in New York, the S&P500 closed up a bit less than +0.2%. Shanghai has opened up +0.4%, Hong Kong has opened +0.9%, and Tokyo is up +0.4%. The ASX200 is down -0.6% and heading for a small weekly loss. The NZX50 was closed earlier for a fifth day as it battles a DDoS attack. But it is back up now although down a marginal -0.1% on the day. But it is heading for a weekly rise of +1.6%.
SWAP RATES UPDATE
Swap rates gave up some of the prior day's gains yesterday but it was a modest correction. Today's swap rates aren't available yet. We will update this note if there is a significant movement. The 90-day bank bill rate is up +1 bp at 0.29%. The Aussie Govt 10yr has shot up +10 bps today to 1.02%. The China Govt 10yr is up +1 bp at 3.08%. An the NZ Govt 10yr yield is also back up by +1 bp to 0.59%. The UST 10yr is up a very sharp +10 bps at 0.78%.
NZ DOLLAR FIRM
The Kiwi dollar is firmer at 66.6 USc as the greenback sinks. But against the Aussie we slipped to 91.4 AUc. Against the euro we are now at 56.3 euro cents. That all means our TWI-5 is up to 69.5.
BITCOIN HOLDS
The price of bitcoin is little-changed today at US$11,396. 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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41 Comments
norhtman
Yes, NZ QE and OCR cuts are having similar significant effects on NZX and housing and to date have negated impacts of Covid.
The RBNZ and government action has also so far minimised the impacts of Covid on the wider economy and consequently jobs as intended.
Good article on what's happening in the trenches of consumer spending and how Foodstuffs’ store owners have narrowed the range of products sold. The real damage is going to be done for trade-up FMCG.
https://thespinoff.co.nz/business/28-08-2020/how-supermarkets-chopped-p…
JC What the article didn't comment on is one of the consequences of reducing consumer choice on the supermarket shelves. Many product lines have had branded choices removed and your only or main option is a house brand.
This is significantly changing the power dynamic between supplier and retailer and removing their relationship with the consumer.
The future is clearly putting the supermarket groups in control of the supply chain.
Great stuff Wilco. You get it. The fastest growing FMCG brand in the U.S. is Kirkland, which is owned by Costco. The easiest way for a manufacturer to get into Costco is to manufacture the Kirkland brand, effectively cannabilizing your own brand. The Costco channel is so valuable that manufacturers are happy to do so just to please Costco.
Any reference to the sku's numbers they are dealing now?
Premium supers have high Aldi etc fewer.
Their trick will be they have taken cost out of the back end - running Ike an aldi, but punter prices remain premium high.
Pity the forgotten supplier, their trade goes to nothing.
The king making ability of the super, is super.
The left of centre government waves it through.
Food banks never more needed.
You need to get your text books out. A monopsony isn't a single buyer, rather a marketplace where a buyer faces little competition. Costco isn't only a supermarket, but it's a big part of their model. They aren't really channels either - I mean it's not like your'e are buying your groceries through a third party is it?
"The "lessons" being imposed on Australia are also intended for New Zealand."
You'd have to suggest that we are being taught one right now - the NZX DoS attack.
"We can do this to your bourse. Imagine what we could do to your economy anytime we choose". But that's all speculation of course.....New Zealand's favourite pastime.
As usual frazz you are well off the mark. Anyone who has a Kiwisaver account was affected by the NZX outage, as was the NZS fund. You really need to do some research before shooting your spudgun from the hip. Given that, I suppose you provide entertainment so I guess all is not lost
Given the parlous state of the real underwrite, please realise that you provide equal amounts of entertainment, oh bent fellow.
The joke has long been that kiwisaver, pension 'funds', ' investments' et al, are well overshot of their underwrite.
Few get it, but fewer are going to get it.....
"An the NZ Govt 10yr yield is also back up by +1 bp to 0.59%"
I think you will find it's a bit more than that.
The interesting point tho is the now run of the mill knee jerk price moves we are seeing following the US treasury moves. It's been like this for at least 12 months to the point where NZ QE is almost subservient to the latest US long bond moves.
Perhaps it's the nature of global markets being so interconnected but I get the feeling price distortion from following international trends is now becoming increasingly pronounced.
Reserve Bank assistant governor in comments today, sees RBNZ policy settings inline/parallel with the new Fed Reserve goals, indicating a overshoot in inflation acceptable after period of weakness.( whatever that "period "may be)
If that is the case, the RBNZ should be chopping the OCR further without the nonsense of a delay, as all will embrace the same approach at some point. Overpaid monkeys
Winklevoss twins lay out case for USD500k price of a bitcoin. That's more than the value of the median house price in NZ.
Dan Breznitz, prof. at uni of Toronto, explains why the US isn't going to reshore manufacturing, particularly from China anytime soon.
efforts to rebuild manufacturing capacity outside China would ultimately require concerted action by groups of companies investing billions of dollars over multiple years just to get up to speed
I suspect even some like Bernie Sanders with a Democrat senate, supreme court and house majority wouldn't be able to get institutional investors and private equity firms to forgo fat profits on their majority holdings in large corporations for a few years in an attempt to stave off growing Chinese dominance and rebuild the American middle class.
https://www.eetimes.com/pandemic-renews-calls-to-revive-u-s-manufacturi…
Any farmers on here? Just spotted this in twitter. https://auckland.au1.qualtrics.com/jfe/form/SV_2fpwyJCUp4sPhUV
Research on managing extreme weather events.
That prat wasn't researching the reaction by farmers to extreme events.. he was researching social media's reaction to how farmers react. Farmers react to extreme events every year.. it's called farming. I'll give you a heads up.. farmers don't give a fat rats @rse about social media's opinion because they are too busy trying to earn a living and look after their animals. BTW the recent footage on Stuff was reprehensible and indicative of the sort of people that need to be flushed from the industry, it certainly isn't representative of mainstream farming. I'm not normally a supporter of SAFE but the person responsible should be charged with ill treatment.. no questions or excuses
It was always going to happen, they've just taken longer to get there than originally planned. Just the same way civil rights are taken away, little bit at a time. We can generally cope with small changes with only a little bit of whinging and whining, but most capitulate.
However part of the same strategic goal was to get road deaths under 300 per annum.
Robertson to shove ahead with private green school windfall.
https://www.newshub.co.nz/home/politics/2020/08/nz-election-2020-multi-…
But Finance Minister Grant Robertson confirmed on Friday the funding will still go ahead despite the backlash because he believes the Government should keep its word.
"I can understand that there are people who perhaps don't like it or would rather the decision was changed. But I think the Government's got to act in good faith here with an applicant and so I've got no intention to do that," Robertson said.
Why not, pause, pause to check everything is in order. A pause is in order.
While Shaw was super pumped, who really drove the approval.
Doubtless there will be no meat lunch Mondays menus all round.
# left of centre governments suck
It get's worse when you read why the NP mayor supported it. Basically it is a local (rich) family and it attracts foreign students. Exactly the two groups who need support the most.
https://www.stuff.co.nz/taranaki-daily-news/opinion/300094305/new-plymo…
Sorry Kiwi kids, you just don't stack up for Jacinda, James, Winnie, and Neil.
The way the COL members are acting, this being a greens project, how can/ do we see the project list by
Greens project for funding
NzF projects for funding
Labour projects for funding
Robertson's reason to press on is becoming more & more a fake because.
# building political infrastructure
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