A review of things you need to know before you go home on Tuesday; Heartland signals TD drop, house prices jump, retail spending rebounds, insurance financials released, swaps stable, NZD holds, & more

A review of things you need to know before you go home on Tuesday; Heartland signals TD drop, house prices jump, retail spending rebounds, insurance financials released, swaps stable, NZD holds, & more
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Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
None to report today. Yesterday was dramatic enough.

TERM DEPOSIT RATE CHANGES
Heartland Bank said it will reduce its term deposit rates tomorrow.

BOOM MODE, GRAVITY DEFYING
The REINZ data for September shows the housing market rocketed into boom mode. It was the best September housing sales volumes in 14 years, and there were record median prices in nine regions.

SPENDING REBOUND
Retail spending as recorded by electronic card transactions, jumped almost +25% in the September quarter from the June quarter, likely helping to drive a strong recovery in Q3 GDP. After a stumble in August, the September month activity was +3.2% higher than the same month a year ago. Durables retail has remained the standout, while hospitality is a real laggard.

ONLINE TURNS LOCAL
The same strong rebound is recorded in the Marketview online sales tracking with the Furniture, Housewares and Hardware category recoding +50% higher sales online that for September 2019. Maybe somewhat surprisingly, Kiwis spent less on international ecommerce platforms in the month than the same one last year.

JOB ADS RECOVER
Update: The BNZ-Seek job ads review recorded a recovery in September, led by Auckland, and with encouraging gains in hospitality and tourism.

MORE KIWISAVER FLEXIBILITY
A new option now opens the possibility to invest in multiple KiwiSaver schemes. A new option is via financial supermarket InvestNow allowing the spreading of investments between different fund managers.

EARLY IS MORE POPULAR
As at the end of Monday, there have now been more early votes cast that for early voting in all of the 2017 election.

ELECTION POLICY COMPARISONS
Check out our election policy pages here where you can compare where the parties stand of a very wide variety of issues.

INFOMETRICS ASSESSES GREENS KEY POLICIES
The Green Party has commissioned Infometrics to assess the effect of its six policy priorities on the Crown accounts, using the Treasury’s Pre-Election Fiscal and Economic Update (PREFU) as a baseline. The Greens' six priority policies are; a poverty action plan, a clean energy plan, homes for all, farming for the future, thriving oceans, and the party's future of transport plan. Infometrics says over the four-year forecast period the policies would be expected to raise revenue by $30 billion above PREFU 2020, primarily due to income tax changes and the introduction of a wealth tax. And expenses are expected to be $22.6 billion higher than in PREFU 2020. 

AS PROFITABLE AS BANKS
Corrected: The latest RBNZ monitoring of the insurance sector shows year-on-year tax paid profit for the industry were $0.9 bln in the year to June 2018, rose sharply to $1.2 bln in the year to June 2019, and then fell back slightly to $0.9 bln in the year to June 2020 after a tough March 2020 quarter. This was after net earned premiums fell rose just 1.2% in the year to June 2020. Life sector premiums fell, but there were strong 4.4% rises in net earned premiums for the non-life insurers. It is an industry that still achieves a 13.8% return on net assets, and is still managing a 5.0% return on its investments of $16.7 bln.

GOLD PRICE MIXED
The price of gold is now at US$1921/oz in early Asian trading, and down -US$7 from this time yesterday and similar to the closing price in New York. The London afternoon fix was at US$1925.50.

EQUITIES UPDATE
Wall Street ended its session up +1.6% for the S&P500 earlier today. Shanghai has opened down -0.5% after yesterday's strong showing. Hong Kong seems to be closed as the city is on typhoon alert (Nangka). Tokyo is down -0.2% and adding to yesterday's drop. The ASX200 is up +1.1% in early afternoon trade. The NZX50 Capital Index is up +0.7% in late trade.

SWAP & BOND RATES STABLE
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 today to 0.28%. The Australian Govt ten year benchmark rate is down -1 bps at 0.84%. The China Govt ten year bond is down -1 bp at 3.21%. Meanwhile, the New Zealand Govt ten year is up +1 bp at 0.59% and above the earlier RBNZ-recorded fix of 0.58% (+4 bps). The US Govt ten year is down -2 bps at 0.76%.

NZD BACK SOFT
The Kiwi dollar is softer today at 66.3 USc but really, it is little-changed. Against the Aussie we are also little-changed at 92.4 AUc. Against the euro we are holding at 56.2 euro cents. That all means our TWI-5 has slipped marginally to 69.5.

BITCOIN FIRM
Bitcoin is just a little stronger in today's trade, now at US$11,483 and up +0.9% from this time yesterday. The bitcoin rate is charted in the exchange rate 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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36 Comments

House sales and values, retail sales, online transactions all up, up, up & up. It doesn't feel like NZ is suffering that much, has the RBNZ gone too far with stimulus?

21
up

Gone too far? It's just getting started!
I reckon a trillion dollars worth of debt is as good a target as any for them. None of this mucking about with a measly $100 billion. Ship in another 5 million consumers to pay it off; make it 10 - there's heaps of spare room. That's the New Zealand they are all aiming for.....

So are you finally retracting your multiple posts of imminent house price deflation?

Not at all! Sarcasm always gets missed from time to time.
But I will add that I looked at, and test-lived in 4 countries; South Africa, UK, Australia and NZ before deciding "NZ is it". And I have to say, RSA is looking a better alternative by the day.....

I'll contribute to any departure fund if it will speed things (i.e. you) along.

I think your sarcasm meter is off......

There needs to be an insurrection against the RBNZ.

I still find it hard to believe Heartland got a banking licence

Any of them.

This is the biggest ponzi NZ has ever seen, and it reflects the biggest ponzi the planet has ever seen. There's nothing that can physically underwrite this doubling (for any newbies here, exponential growth always doubles, then doubles again, the graph trending vertical. No vertical graph lasts long). So this one is virtual; upping numbers against static items (actually, decaying items, in the long measure). Those numbers have been 'upped' so much, it's hard to see where the floor is.

But the readjustment will make 1929/33 look like a great time to be alive.

That's what worries me, the correction knocking us back to the dark ages. However I see Elon Musk has a much improved auto steer coming out that can read red lights etc. So while we go to hell in a handbasket it could be on 'handsfree'.

'10) It was not “bankruptcies and bank failures” that contributed to the Great Depression, but rather “disorganized and piecemeal bankruptcies and bank failures.” What happened in the Depression was that bank depositors had no insurance, nor was there an FDIC to ensure rapid purchase-and-assumption of insolvent banks. So instead, the insolvent banks tried to call loans in, leading to a domino-like chain of disorganized failures and bank runs by uninsured depositors. It is not bankruptcy, but disorganized and piecemeal bankruptcy, that causes dislocations.'
https://www.hussmanfunds.com/comment/mc200518/

Because...?

12
up

BOOM MODE, GRAVITY DEFYING
The REINZ data for September shows the housing market rocketed into boom mode. It was the best September housing sales volumes in 14 years, and there were record median prices in nine regions.

Another reason why the citizens should never let government apparatchiks play around with the cost of money - they clearly seem not to be aware of the consequences of their actions upon society.

'Understand this. The more glorious this bubble becomes in hindsight, the more dismal future investment returns become in foresight. The higher the price investors pay for a set of future cash flows, the lower the return they will enjoy over time. Investment is not independent of price. Whatever they’re doing, it’s not “investment.”'

Investors should not imagine that inflation would improve the situation. Historically, the first casualty of inflation is market valuations. With the most reliable measures of market valuation presently between 2.7 and 3.2 times their historical norms, the CPI would have to roughly triple before the beneficial effects of inflation on nominal growth would outweigh the negative effects of inflation on market valuations. Until that happens, higher inflation will only make matters worse for investors.

The fact is that cash – short-term interest-bearing liquidity – has clearly outperformed the stock market during periods of rising inflation. Indeed, when the rate of inflation is rising, higher rates of inflation are typically associated with poorer stock market performance until market valuations are driven to historically depressed levels (after which the effect of inflation on nominal growth finally dominates).

https://www.hussmanfunds.com/comment/mc200130/

Have you ever looked at Shillers CAPE model Andrew?

no, is it depressing?

Your comment is similar to his work on an adjusted P/E ratios and subsequent returns. So if you think your own comments are depressing, yes it will be depressing. Otherwise you might quite like it.

https://en.wikipedia.org/wiki/Cyclically_adjusted_price-to-earnings_ratio

I love the word apparatchik. What I have noticed is that they're quite circumspect about what the outcomes will be with the latest tinkering. They also seem reluctant to share the workings of their fancy pants models.

Indeed.

Here’s a recent study published by the Federal Reserve about the Fed’s infatuation with the Effective Lower Bound (ELB) and thus QE’s role in circumventing it especially when this ELB is down close to the ZLB (Zero Lower Bound). Published at the end of August concurrent with the updated inflation targeting nonsense, author Michael Kiley sums QE up this way:

"Within the DSGE model, QE stabilizes markets through relaxation of financial constraints facing financial intermediaries, in a manner akin to the mechanisms that appear to have motivated Federal Reserve actions."

Catch that? That second clause is a doozy, a true beauty of a dodge. How does QE work? What Kiley is saying is that they don’t really know, but QE just fixes whatever is wrong; “in a manner akin to the mechanisms that appear to have motivated Federal Reserve actions." Link

Bitcoin price has crossed its 50 day moving average. Relevance? The last three times did this, the outcome was an average rally of 42%. Now, this doesn't necessarily mean that history repeats, but if it does, it could mean USD15,500 by late November.

Anyone else sick of the myth of the 'cashed up returning expats' that is being thrown around by all and sundry???

Well, I know of two. One has returned to his legal practice in SEA after 6 months in Q'town. The other is leaving HK with family. They have a home in Mission Bay that I saw was available for rent at $3,000 p.w. Not sure if NZ is his destination.

Sure it is happening but it's being totally exaggerated to suit a certain narrative. And it's not just REINZ, I have heard it two other times today, including on Radio NZ....

Well I can tell you the mood has definitely soured for expats in S'pore across a range of industries. Quite a few have to move on. Not a cheap place to be drifting along waiting for thing to get better.

Decreased overseas online spending is hardly surprising, many major markets still struggling with courier and/or inventory availability plus increased GST restrictions on trade since late last year.
https://www.westpac.co.nz/rednews/business/how-new-gst-rules-could-affec...

Tasmania will open its border to all Australian states and territories, except Victoria and NSW, on October 26.
all the other states have no community transmission so lets open the bubbles with them
https://www.health.gov.au/news/health-alerts/novel-coronavirus-2019-ncov...

Latest UMR poll
Labour: 50%
National: 29%
ACT: 7%
Greens: 6%
Winston First 2.7%

Is this when we start seeing another round of 'Judith at the altar' photo's...

She's gone for the kill this evening, basically saying Ardern is a liar.

shes gone period, the time after the election will be interesting, maybe they will bring simon back,
national have needed a refesh for awhile now they have waited to long after BE and JK left to clean the decks,
GB and NS need to be moved on
i hope mark mitchell is next leader

Isn't he the male hair gelled guido version of crusher? (as in viewed with the same distrust as Judith?)

You're right though, it will be interesting.

Will the likes of Mark Mitchell and Christopher 'you must call me by my full first name' Luxon want to put their hat in the ring straight away?

Luxon esp seems like he'd be happy to hang in waiting for a couple of years and if the opportunity presents itself go all Muller on the leader if they aren't polling well.

To be fair to Collins, that may be the only thing she ever gets right.

This year reminds me, when you have to select (vote in this case) a fine dining restaurant between establishments like McDonald's, KFC, Burger King and Carl's Junior. Whatever you select you will not get it right.

NZ First be Georgie Pie.

the greens would be habitualfix, only people that go there pay a fortune because they think its good for you and are still hungry afterwards

IO thanks for the laugh.
A joke for us oldies who remember Georgie Pie.

National seem more like dominos at the moment.