What happened Wednesday

A review of things you need to know before you go home on Wednesday; minor retail rate cuts, RBNZ to roll out bigger gun, population approaches 5.1 mln, BI back in play for COVID, bond yields fall, NZD soft, & more

23rd Sep 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
Christian Savings cut its floating, one and two year fixed rates today.

TERM DEPOSIT RATE CHANGES
Christian Savings have also cut TD rates for all terms 6mos and longer.

RBNZ SEES A LONG DARK TUNNEL
In its September review, the RBNZ Monetary Policy Committee affirmed it prior guidance to hold the OCR at 0.25% until March, but says a Funding for Lending Programme would be ready before the end of 2020. And that date is new. They now expect "... a rise in unemployment and an increase in firm closures, as resource reallocation continues. Members agreed that monetary policy will need to provide significant economic support for a long time to come to meet the inflation and employment remit, and promote financial stability." More here.

HIGHER FARMGATE MILK PRICE
With global dairy demand holding up surprising well throughout the course of the Covid-19 pandemic and the food service sector now beginning to recover as more regions move out of lockdowns, Rabobank has increased its farmgate milk price forecast by +40 cents to $6.35 kg/MS for the 2020/21 season.

POPULATION DATA UPDATE
The population of New Zealand is approaching 5.1 mln. and will probably do so by the end of October. Data for June 30, 2020 was out today and that showed there are 1.1 mln (21%) people who are 60 years and older. The median age is little-changed at 37.4 years and back to the level it was in 2015. In between it fell to 37.1 years. It was under 26 in 1970. It has been about 37 years since 2008 despite the rising numbers of over 60s. But without migration it will now start to rise quickly, generating a Japan-like shift. Our population reached 1 mln in 1908. It took 45 years to reach 2 mln, another 22 years to reach 3 mln in 1973, then 29 years to 4 mln by 2003. It took less than 17 years to reach 5 mln.

BI INSURANCE MAY APPLY
Chapman Tripp is reporting on an English court decision that has ruled largely in favour of the insured parties in an important COVID-related business interruption insurance test case brought by an English regulator. They say the decision will be influential here. Aussie insurers are scrambling for local "clarity".

CASH HOARDING STILL POPULAR
Despite the almost universal shift to electronic payments, for some reason currency notes in circulation are still very high and going higher. Hoarding is clearly still an issue, despite the RBNZ having expected it to have faded by now.

END OF THE BOUNCEBACK
The Australian statistics agency is reporting that retail sales fell rather sharply in August, reversing the May, June and July bounceback after the April crash. It was an unexpectedly large dip.

GOLD PRICE SOFTER
The gold price is soft in Asian markets. Last night it closed lower in London at US$1906/oz and down -US$3 on the day. It fell further by -US$6 in New York to close there at US$1900. But in open trading on Asian markets it is now slightly firmer at US$1903. Silver has had a softer ride, and not showing any rise in Asian markets.

EQUITIES UPDATE
At the close, the S&P500 ended up +1.0% on Wall Street. Shanghai has opened flat, Hong Kong is -0.1%, and Tokyo opened down -0.6% after the two-day break having missed this week's retreat. The ASX200 is up +1.8% in early afternoon trade. The NZX50 Capital Index is up +0.6% in late trade.

SWAP RATES LITTLE-CHANGED
Update: Swpa rates for tenors 5 years and longer fell today after the RBNZ announcement are now all at record low levels. ~~We don’t have the final data for today yet and if it is significant we will update it here~~. The 90 day bank bill rate is unchanged at 0.30%. The Australian Govt ten year benchmark rate is down -5 bps at 0.86%. The China Govt ten year bond is little-changed at 3.12%. The New Zealand Govt ten year is down -2 bps at 0.49% and below the earlier RBNZ-recorded fix of 0.51%. And the NZGB five year is even more negative at -0.06% pa now. The US Govt ten year is unchanged at 0.67%.

NZD LOWER
After the RBNZ review the Kiwi dollar down another -½c at 66.2 USc. Against the Aussie we are actually firmer at 92.8 AUc. Against the euro we are unchanged at 56.7 euro cents. That means our TWI-5 has fallen to 69.4. (Also note that the feed for our 'live currency charts' has gone down. We are working with the supplier to get it back up now.)

BITCOIN FIRM
Bitcoin is little-changed today and now at US$10,526 (+0.7%).

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

Select chart tabs

Source: RBNZ

Source: CoinDesk

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45 Comments

by rastus1 | 23rd Sep 20, 4:03pm 1600833800

What a fantastic country it was when under 3 mill. But apparently more and more and more and more are needed and then it will be really really really good.

by Kauri | 23rd Sep 20, 5:12pm 1600837940

It's the only way our useless successive governments know to grow GDP. Also known as colonisation. More people = more stuff. Too bad that GDP per capita has barely grown and productivity growth is rubbish. I think quality of life in Aotearoa peaked at about 3 million - although that is subjective opinion.

by Advisor | 23rd Sep 20, 5:32pm 1600839131

Too bad that GDP per capita has barely grown and productivity growth is rubbish

Despite a higher GDP from population growth over the last few decades, public funding on core services and infrastructure as well as private investment in capital has fallen per capita (in real terms).

The period of population-led economic growth has left our DHBs, local councils and public agencies in larger deficits than ever, struggling to provide essential services. Meanwhile, some of our well-performing businesses fell into the hands of foreign interests.

Success!

by Kauri | 23rd Sep 20, 6:06pm 1600841208

Well I guess those are good non-subjective quality of life indicators. I was more thinking along the lines of having to put up with more crowded beaches when surfing :)

by Narrabeen Boy | 23rd Sep 20, 6:13pm 1600841617

Yeah imagine how uncrowded Outsides and indicators was back in the sixties!!!!!

by Uninterested | 23rd Sep 20, 8:07pm 1600848424

Take up windsurfing on harbour chop. No crowds ever...

by bw | 23rd Sep 20, 4:13pm 1600834381

"RBNZ SEES A LONG DARK TUNNEL"
And given the performance of the RBNZ over the last decade, it's going to get darker and longer.
At what stage do they see their policies don't work? When the country is broke? Probably already too late for sense to prevail, I guess....But at least most sensible citizens know what's coming - "CASH HOARDING STILL POPULAR."
The lower you go, the more people will save, Adrian. Surely even you can put 2 and 2 together?

by tim52 | 23rd Sep 20, 4:19pm 1600834784

If your feeling even more bearish get some long bonds (10+ years). Since we are following the BOJ and ECB play-book these can only go one way.

by J.C. | 23rd Sep 20, 4:20pm 1600834841

At what stage do they see their policies don't work? When the country is broke? Probably already too late for sense to prevail, I guess....But at least most sensible citizens know what's coming - "CASH HOARDING STILL POPULAR."
The lower you go, the more people will save, Adrian. Surely even you can put 2 and 2 together

The RBNZ doesn't have any behavioral economists I understand. Not even one. Would love someone to prove me wrong there.

by Independent_Observer | 23rd Sep 20, 5:21pm 1600838480

Yip - the more this plays out, the more that I realise the central banks are flying blind - or in NZ's case we have an Orr but no rudder.

by waymad | 23rd Sep 20, 4:07pm 1600834033

I like the addition to the charting that links Interest stories to certain points on the FX rates (the black triangles and mouseover text). This is Innovation.

by youngdumbandbroke | 23rd Sep 20, 4:10pm 1600834204

"Despite the almost universal shift to electronic payments, for some reason currency notes in circulation are still very high and going higher. Hoarding is clearly still an issue, despite the RBNZ having expected it to have faded by now."

Economic conditions as bad as they've been since ww2 and RBNZ has expected people to return to normal ?
the RBNZ is as thick as a bowl of oatmeal

by Rosenstein | 23rd Sep 20, 4:59pm 1600837153

Those guys just don't get out much do they?

by tim52 | 23rd Sep 20, 4:12pm 1600834363

The NZGB five year yield is starting to look scary. Why do the banks and RBNZ want to push this down so its flat with the three (2.5) year? Is this not anticipating 4 years of negative rates?
No V shaped recovery here. Even the seven is down to 0.13%.

by realterms | 23rd Sep 20, 4:21pm 1600834885

Does anyone have historical data on the variation of the carded mortgage rates? Seems a bit odd to me that almost everyone is offering 2.55 for 1 year, or very close to it.

by Squishy | 23rd Sep 20, 4:43pm 1600836218

The carded 1 year rates are 20-30bps than the rates you'll get quoted if you shop between banks anyway. Everyone is being cautious with pricing because risk is so heavily dependent on how stable and persistent your income will be over the next couple of years.

by waymad | 23rd Sep 20, 4:39pm 1600835960

Cactus Kate has her characteristically caustic take on 'skilled immigrants' and the admissions hierarchy We, the People, should be demanding be applied....

by J.C. | 23rd Sep 20, 5:20pm 1600838401

Not her best but she makes some good points. There are some foreigners in NZ who were basically conned and extorted through no real fault of their own.

by Advisor | 23rd Sep 20, 5:36pm 1600839415

I don't know where the element of surprise is coming from when the message from Immigration NZ is loud and clear: you qualify to migrate here permanently provided you can land a job making median wage.

We're not exactly aspiring for tech gurus, doctors or engineers by setting our requirements so low on the residency points and wage threshold.

by Andrewj | 23rd Sep 20, 5:56pm 1600840609

I had lunch today at a new restaurant, run by Cambodians, great lunch for twelve bucks. I asked who the couple worked for and it took some getting out of them, a guy in Auckland.
I bet this couple is on a salary based on a 40 hour week working 60-70 hours just to get residence. Its a scam, it's all over the place and the Govt turns a blind eye.
I talked to a friend from vanuatu, he works here for 7-8 months and takes home 10k after costs deducted. Big blind eye.

Talked to a mate in retail, he said " walk down town and look around , because in 4 months time %30 of these shops will be gone'. Big blind eye.

by powerdownkiwi | 23rd Sep 20, 6:13pm 1600841615

Maybe the lunch should have cost more than 12 bucks.

It's all about price makers and price takers. Or as Leonard Cohen put it

'the homicidal bitchin'
that goes down in every kitchen
to determine who will serve
and who will eat'

by Henry_Tull | 23rd Sep 20, 7:51pm 1600847469

The going rate in Auckland was approx. $8,000, payable by the working holiday visa holder, to claim the restaurant job.
Some were against it so xame south to find work.

The path to residency has been monetized.
Thats not counting the mall based educators too.

by sharetrader | 23rd Sep 20, 6:40pm 1600843230

she is just pointing out what we all know, the whole point of the nine years of national growth was to import people, more people need more goods and services, but keep the public service at the same level and only increase by inflation , very short time thinking, reminds me of management that come in slash and burn make the books look good then jump to another position and leave the problems kicked down the road for the next guy

by hemihua | 23rd Sep 20, 10:29pm 1600856949

Then the next guy who promised to fix it proceeds to do... nothing.

by 1986 | 24th Sep 20, 12:13am 1600863209

maybe an unhindered government will bring down the house of cards with the idea to rebuild better? Is it worth the short term carnage? Is there a proper plan?

by Andrewj | 23rd Sep 20, 5:24pm 1600838685

The insolvency phase

https://twitter.com/RealVision/status/1308164258371440640

by J.C. | 23rd Sep 20, 5:33pm 1600839235

Reddell takes on Ardern and the ruling elite about house prices.

And that’s just a disgrace; a shameful reproach on both major parties (and their sidekicks) – but it is Labour which has been in government these last few years and almost certainly will be for the next few. It is inefficient and discourages inter-city labour mobility, but – more importantly to me – it is simply deeply unjust, with the burden falling most heavily on the young and the poor (in New Zealand that means disproportionately Maori), on new arrivals, and on those without wealthy parents, or even just on those who value self-sufficiency and earning their own way in life.

https://croakingcassandra.com/2020/09/23/house-prices-2/

by Audaxes | 23rd Sep 20, 6:53pm 1600844032

Another disgrace:
Banks extending 60 % of their lending to one third of already weathy households to speculate in the residential property market because the RBNZ offers them an RWA capital reduction incentive to do so.

And another :
RBNZ cutting OCR in half five times since July 2008, causing the rich to capitalise rising discounted present values of future asset cash flows.

by Independent_Observer | 23rd Sep 20, 7:21pm 1600845684

Its insane eh. At some point its all going to come detached...undone...deleveraged.. and all hell will break loose. And we will wonder how and why were so small minded as to create this mess.

by Apex Andy | 23rd Sep 20, 7:29pm 1600846181

Adrian Orr is absolutely destroying NZ (for the young and poor)

by Independent_Observer | 23rd Sep 20, 8:07pm 1600848438

Yes but its a common theme among the central banks of anglo-saxon/english speaking countries. Orr isn't acting in isolation.

Everyone is just following the Feds lead in my view - sheeples.

by Justa comment | 23rd Sep 20, 8:20pm 1600849206

The intention to join the debt laden western worlds central bankers plan to devalue cash debt and increase asset values to protect them was signaled by Orr before covid, he had already decided to join the club.

by Independent_Observer | 23rd Sep 20, 8:27pm 1600849642

No choice but to join unfortunately - its a race to see who can devalue their currency the most, adding money supply, preventing deflation, protecting asset prices/high debt levels while avoiding runaway inflation! What cluster...honestly. Wonder how many more balls central banks can juggle before one falls, then another?

by Fritz | 23rd Sep 20, 9:13pm 1600852380

I have thought for at least a year that there will be a financial crisis by the end of 2022 that will crash things. Given the post-covid financial silliness, I am even more convinced this will happen.

by Audaxes | 23rd Sep 20, 6:10pm 1600841406

Despite the almost universal shift to electronic payments, for some reason currency notes in circulation are still very high and going higher. Hoarding is clearly still an issue, despite the RBNZ having expected it to have faded by now.

Why would Australian 4 pillar banks capitalise potential asset write downs when they are unable to claim dividend cash flows from their wholly owned NZ subs ?

Why would NZ depositors not expect a potential OBR event given recent RBNZ hyperventilating in response to adverse economic outcomes?

by Andrewj | 23rd Sep 20, 6:17pm 1600841860

Those Aussie banks will be looking for an exit.

by Apex Andy | 23rd Sep 20, 8:02pm 1600848169

Haha... we are being spruiked people!!!!!!

Look at how the agents are only releasing prices on the high profit sales.

https://www.trademe.co.nz/property/insights/map/tauranga

by Henry_Tull | 23rd Sep 20, 8:45pm 1600850701

See how NZ compares, compares poorly to Austrslia (bar Dan and his industrial scale incompetence).

The health outcomes Aus better.
The economy terrible, terrible.
Terrible border management.

Debunks the COL & PM claims.

https://youtu.be/4Ld86BHML5s
Menzirs Research

by sharetrader | 23rd Sep 20, 9:31pm 1600853462

that is a very right wing piece, cherry picking stats to back up your argument, why leave out victoria they are part of australia, why dont we leave out auckland in our stats to make our figures look so much better.
also talking to the NZ institute is about as far right as you can go.
if you have watched any of the news over there you will see they are far from unified as a country on how to handle. victoria and queensland are fighting with the federal government over strategy whom is being backed by NSW, but NT, TAS, ACT have been left alone, the government backed a court case against WA over borders than changed its mind
in short they are a mess, australians can not get back to australia as no places to take them which they have to pay for, yet students can come in, the police forces are fining people thousands for breaking rules.
NSW is on a knife edge daily with cases like below to me the only reason they have no had a victoria type breakout is just pure luck, the daily places added to the list of check if you went here or isolate for 14 days is quite high, NSW contact tracers are racing to identify anyone who may have been infected by a Sydney a taxi driver who worked for nine days while he had COVID-19
https://www.nsw.gov.au/covid-19/latest-news-and-updates#self-isolate-an…

by blobbles | 23rd Sep 20, 11:15pm 1600859756

What a completely ridiculous piece.

"If you take out Victoria..." ?????

If we take out Auckland, our stats look a lot better as well! Absolute fail, what a complete retard, if you actually listen to this, I feel deeply sorry for you. You are being brainwashed by idiots who wear suits to look intelligent.

by Glitzy | 23rd Sep 20, 10:14pm 1600856040

The Greens announced their Wealth Tax is requirement to forming a coalition with Labour.

Are they barking mad ? They have a golden opportunity to get some good stuff done on a raft of issues and they decide that their red line is a socialist agenda with a threshold so low that anyone with 1mm net worth would be stumping up 10k a year.

Shockingly naive.

by Pragmatist | 23rd Sep 20, 10:17pm 1600856252

Shockingly naive is a good way to describe your understanding of the proposed wealth tax. If you have a net worth of exactly $1m.. you'd pay nothing.

by Glitzy | 23rd Sep 20, 10:43pm 1600857818

From the Herald...

"The Greens' election policies include a plan to make Kiwis with a net-worth greater than $1 million, pay 1 per cent of their wealth to the Government as a tax.

Those worth more than $2m would pay out 2 per cent of their wealth as tax."

So technically you are correct, but lets say you were worth $1,000,001 ~ you get a bill for 10k each year no ?

Maybe it's a cunning plan to get the population back to 3mm...

by blobbles | 23rd Sep 20, 11:18pm 1600859922

I think you will find you will get a bill for 1c (10% on your wealth over $1m). That's the way I read it anyway.

by GV 27 | 24th Sep 20, 6:54am 1600887284

This is correct. Couples are $2m for jointly owned property like a family home - but trusts are captured at $1m , so any family home owned by a trust valued at over $1m means more tax to pay. Notice word 'valued' there - the same governments which can't be trusted to supply the housing market with land or functioning planning/materials is now going to benefit from increasing prices of housing. That should be ringing huge alarm bells for everyone.