A review of things you need to know before you go home on Wednesday; concrete production rebounds, LVRs about to be reimposed, the MPS signals a $28 bln FLP, swap rates rise, NZD rises sharply, & more

A review of things you need to know before you go home on Wednesday; concrete production rebounds, LVRs about to be reimposed, the MPS signals a $28 bln FLP, swap rates rise, NZD rises sharply, & more
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Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
No changes today.

TERM DEPOSIT RATE CHANGES
NZCU Auckland trimmed TD rates. SBS Bank also trimmed its TD rates.

SOLID STATS
Before we get to the RBNZ stuff, there was some interesting data released today. Ready-mixed concrete volumes recovered sharply in Q3 from Q2 and came in +4.4% higher that in the same period in 2019. The main reason for the annual gain was the rise in Wellington. Auckland volumes were unchanged on a year ago, Christchurch volumes were down almost -10% over the same period, but Wellington volumes rose more than +11%. The chances are that Q4 numbers will be quite strong, mainly because Q3 was hampered by the second Auckland lockdown that started on August 12.

NEW LVR POLICIES COMING
The Reserve Bank made a surprising announcement on a move to reinstate LVR lending restrictions in face of the searing housing market - but they won't start until March 2021 leaving a lot of time for FOMO to build. It also announced further a delay in introducing new bank capital requirements till 2022, but no letup on the restriction on bank dividends. The Finance Minister came out in support of the policy shift, and he may have been behind the policy switch which some see as damaging the RBNZ's credibility.

A HESITANT MPS
In its Monetary Policy Statement, the RBNZ has not changed any existing settings, but has given more detail on its Funding for Lending program - even if it is a bit obtuse. It is a program that will offer banks funding at the OCR, at whatever rate that is at the time, for up to three years. The amount available isn't directly stated but could be up to $28 bln based on current qualifying loan levels. It will start in December 2020.

SOME DATA BEHIND THE RBNZ MPS
Data released with the MPS shows that the RBNZ estimates house prices are rising at close to a +10%pa rate at present, but they expect that to fall back to +2% by the end of 2021. Other data shows they expect the unemployment rate to now peak at 6.4% in mid 2021 (and up from 5.3% now). Inflation is expected to move down from the present +1.5% to just +0.5% in Q1-2021, and then move back up to +2% by 2023 in an uneven rise. And they don't see real GDP recovering to Q4-2019 levels until Q1-2022 but then by 2023 we may get +4% real growth, according to this data.

BACK TO NORMAL?
In Australia, the latest consumer sentiment survey is very positive, pointing to a 'normal' end-of-year holiday shopping season. It's a type of covid complacency, prevalent in New Zealand too, that could trip them up badly given how the virus is raging in Europe and North America.

LOWER CBA PROFIT
CBA has posted a cash profit of AU$1.8 bn for the first quarter as growth in home lending, business lending and deposits helped to offset margin pressures. This is -16% lower than the same period in 2019. No mention was made in this update of ASB.

GOLD PRICE HOLDS
The price of gold has bounced off its low in Asian trade, now at US$1877/oz and up by +US$6 from this time yesterday. The closing New York price was US$1878 and this was -US$1 less than the afternoon London fix.

EQUITIES UPDATE
The S&P500 ended its session earlier today down -0.1% and so embedding all its recent record-high gains. Shanghai has opened today flat, Hong Kong is up +0.2% and Tokyo is up +1.2%. The ASX200 is up +1.4% in mid-day trade while the NZX50 Capital Index is up +0.4% in late trade.

SWAPS AND BOND YIELDS MUCH HIGHER
Update: Wholesale swap rates rose sharply today. The 2 year was up +12 bps to 0.21%. The 3 year was also up +12 bps to 0.23%. The 5 year was up +13 bps to 0.37%. The 90 day bank bill rate was unchanged at 0.29%. The Australian Govt ten year benchmark rate is up another +5 bps to 0.96%. The China Govt ten year bond is down -1 bp at 3.25%. And the New Zealand Govt ten year is up another +11 bps at just under 0.83% and above the earlier RBNZ-recorded fix of 0.76% (+6 bps). And the US Govt ten year is back up another +4 bps to 0.96% in the ongoing US election shadow.

NZD MUCH HIGHER
The Kiwi dollar initially fell on the RBNZ MPS release but rose back quickly and is now higher than this time yesterday at 68.8 USc and its highest against the USD since March 2019. Against the Aussie we are up at 94.3 AUc. Against the euro we are firmer too at 58.2 euro cents. That all means our TWI-5 has risen to 71.6. The currency rose continuously during the RBNZ press conference.

BITCOIN HOLDS
Bitcoin is up +0.6% from this time yesterday at US$15,448. 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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29 Comments

43
up

My optimism that Robertson and Orr might have realised what they have done to the economy and the social structure of New Zealand has evaporated over the course of the afternoon.
I’ve always written that if "Things don’t change if Labour is elected, then I will acknowledge that my expectation of a recalibration of asset values was mistaken; wrong.” And so that happens today, with all that we have read. I was wrong.
I’m beyond caring now, which is sad.
I came to New Zealand because it was the best place on the planet. Peter Thiel thinks so. So does Shania Twain and others who would now be my neighbours if I was still pretending to be a farmer. My old 100 acre ‘farm’ is now a private golf course instead of the 2 holes of chip-and-put I’d mown out of the grass; only selected guest allowed. At least its owned by a New Zealand sportsman.
As I said. I’m beyond caring. Net Worth up just because I own my home, but trust in the authorities of this country to understand what it’s doing or to protect its people is at rock bottom.
Good luck, all.

22
up

well said - we won't be left with a productive economy, but just with a giant housing Ponzi.
Bravo Orr.

RBNZ delivered a bit of a death blow for us. Taking advantage of the rise in the dollar and getting our savings out. We'll finish up our contracts and then it'll be time to leave. I wonder if any other young professionals will do the same.

Where are you headed? Any suggestions? Seriously considering a move as a professional looking at starting family...

12
up

A colleague went to Spain a few years ago, for 9 months first, then back to sell up and he and wife never looked back. When looking for apartments to rent at first, shocked because nothing in their range. Then realised reason. Used to NZ prices, everything was much, much, cheaper than they expected. They weren't scrimping but slashed what they thought was reasonable, for a step up in luxury to boot. Ditto shopping. And building. An architect relative there was blown away by NZ equivalents. Many people overseas have a view of NZ without knowing housing is wildly out of step, and food (in a food-basket country), and building materials. I love NZ, but increasingly feel we're the slow boiling frog, not noticing what's happening, until it happens, 'unexpectedly'. Today that feeling seems to have deepened for many people based on comments here.

bw, well done for your admission on being wrong for calling house prices to "deflate" (as you used to put it)

That's not you is it John, beside the Jeweller?

That's an interesting thing. What happens to Orr with 2 degrees of separation?

It’s every central bank in every country in the world. They are all playing follow my leader, with the IMF and the WEF being the leaders with their vision of the new improved world. YOU WILL OWN NOTHING..... hope everyone is talking about this with their family and friends and that the impact of those IMF and WEF videos are being actively discussed around the dinner table and water coolers. Their vision of a bright new world should send shivers down your spine!

17
up

In summary, what happened today is:
1) the RBNZ said it would reinstate LVR "as soon as possible" being several months away next year
2) the RBNZ said it would setup a LFP with clear purpose of lowering interest rates, this being done right away, this year, in a few weeks.
Outcome: cheaper money to continue to fuel the real estate market way higher than it is now!

Just imagine if you had held onto that property Yvil? My tech stocks are going gang busters!

I prefer to think about the others I still have

I think the task was to keep house prices stable. A 10-15% rise in house prices where they are 6 to 8 times income is a FAIL for RBNZ. A 1 million median Auckland house price is not a problem of course if we all earn over 100k. Unfortunately the median income in NZ is 54k.

Of course the assumption is two people will work. MEdian household income is thus a better measure. It is $102,613, which still puts a median Auckland house at 9.5x household income

16
up

Well, that was depressing viewing of RBNZ press conference. Orr really doesn't care about house price inflation - after all 'it's not his mandate'. Actually don't even ask him about it, he's getting furious that it's being suggested his actions are having an impact on house prices.

Spot on. Had exactly the same impressions.

He's a dork. And a destructive one at that.

Don't know these guys but interesting take on China
https://www.youtube.com/watch?v=7_A9dVulOMc

Yes, very interesting. Looks to me like made by these guys (New Tang Dynasty Television): https://en.wikipedia.org/wiki/New_Tang_Dynasty_Television
Founded by the oppressed Falun Gong religious group.
Vid mentions at 8.30 a call for Helen Clark to get out of WHO because of her links to China.

Here's something. People often say that Japan's QE hasn't help its stock market. However, as soon as the BOJ's balance sheet went parabolic in late 2012 (and hasn't stopped), Japan's stock market ended a 20+ year bear market and has gone up ever since. Up now approx 120%.

Get this - my wife and I are about to settle in a property on the Thames Coast. After doing a pre purchase inspection last weekend I quizzed the agent about the current market, amongst others things he clearly indicated that we’d be looking at $30K increase - that’s in just 2 months! It’s further evidence that Central Banks the world over are singing from the same ponzi song sheet to keep it going.

They have no knowledge of what is happening, and there are only local, historical precedents; nothing they teach in economics textbooks.

And they only have one tool - the issuance of forward bets in digital form.

Such a beautiful drive up that Coast road

Beware of sea level rise and storm surges on the Thames coast. Good money after bad

New Zealand Govt ten year is up another +11 bps at just under 0.83% and above the earlier RBNZ-recorded fix of 0.76%

by Audaxes | 11th Nov 20, 1:58pm
US bond market derails the RBNZ's LSAP (QE) lower term interest rate intentions in a matter of days - evidence-check 5D tab. A move from a low of 0.533% 10 yr yield last Thursday to 0.88% is a significant 65% increase and in terms of DV01 expensive for investors.

Banks have cause to be pleased if they swapped volatile fixed rate term market government debt at higher prices for short term floating rate (OCR) government debt, parked at the RBNZ.

You're ALL so depressed .. maybe slightly awakened. Even the devil is hopeful though.

You have said your regrets now you must cheer up. The fact you're reading this blog means there's hope for you wee chickens yet lol.

Be good to the neighbors you have, save broadly [KiwiSaver, Equities, Deposits] and understand there is more to life than the RBNZ

BUY Bitcoin yo'!! :-p
Prescription: BTC

It's been said that Orr's actions are 'fueling' the rise in housing prices. This is incorrect.

It's this miss definition that has given us the problem of rising housing prices, as until people correctly address the issue, the solutions are not only ineffective but worsen an already bad situation.

Houses are the fuel.

Restrictions that prevent supply from equalling demand are the ignition that starts prices rising.

Other things like high immigration, low-interest rates, high LVR's etc. are accelerants.

That is, without the fuel already burning by the ignition caused by the restrictions, then accelerants like low-interest rates don't work to cause price increases.

You can pour as many accelerants as you like on the fuel, but if it wasn't already lit, it won't do anything to make the fuel burn.

Orr needs to take some lessons from that great economist and singer/artist David Bowie, and stop trying to 'Put out the fire (fuel that has been ignited) with gasoline(an accelerant).'

But the real culpability lies with this now Labour Government for allowing and even promoting the restrictive arson ignition of the housing fuel.

And until this first principle is understood by Govt. Orr and others, then we will continue to get what we have got.