A review of things you need to know before you go home on Tuesday; HUGE policy shift, dodgy developer fined, insurers settle up, bank margins improve, swaps jump, NZD jumps, & more

A review of things you need to know before you go home on Tuesday; HUGE policy shift, dodgy developer fined, insurers settle up, bank margins improve, swaps jump, NZD jumps, & more
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Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
None here today.

TERM DEPOSIT RATE CHANGES
The Heretaunga Building Society has cut TD and savings account rates.

HUGE POLICY SHIFT
The Finance Minister has written to the Governor of the Reserve Bank saying he wants the Monetary Policy Committee to avoid unnecessary instability in house prices. This is huge. Targeting inflation, was widened by Robertson to include targeting employment, and is now to be widened further to target house prices. What's next? Exports? Markets are shaking their heads, and driving the exchange rate up. Benchmark bond rates have risen as well, as have swap rates (below).

FINE FOR DODGY CONVERSION
The Auckland District Court has fined a developer John Liong Kiat Wong who illegally built unsafe apartments. He was fined $80,750 relating to four charges, after the Court found he illegally turned a warehouse in Eden Terrace into a building with offices, car parking and residential apartments. The illegal building work was discovered in 2018 when a large concrete block fell from the top level of the converted building and onto a neighbour’s roof, narrowly missing a skylight.

A DECADE LATER ...
New Zealand’s largest general insurer, IAG (trading under the brands AMI, State, NZI, NAC, Lumley and Lantern), and the Earthquake Commission have today reached an agreement to resolve the division of costs for claims resulting from the 2010 and 2011 earthquakes in Canterbury. Their press release says, “We are pleased to have negotiated a settlement with EQC in a constructive and timely manner which has avoided the need for costly and protracted court proceedings." There are now different processes in place for natural disaster insurance claims, said to be "more streamlined for customers". Tower and Suncorp have also done their deals with EQC. More here.

BANKS IMPROVE MARGINS
Overall, New Zealand's retail banks have managed to arrest their margin compression. In the June quarter it had fallen to 1.82% and a record low in a track that goes back 30 years. However in the September quarter it recovered slightly to 1.85%. Savers may know why. The bank's after-tax return on equity, which had fallen to +7.3% in the June quarter, rose to +9.2% in the September quarter. (It did reach 30% in 2002 and prior to the pandemic, it had averaged 12% since the GFC.) We will get more granular visibility on Thursday when the RBNZ Dashboard update is released.

A ONE TRICK EXPORT PONY?
In Australia, their October merchandise trade surplus rose to +AU$4.8 bln to AU$30.5 bln for the month, up from +AU$4.0 bln in October 2019. But October 2020 exports declined -AU$0.9 bln (or -3%) on October 2019, driven by gas, down -AU$1.7 bln (-43%), coal down -AU$1.2 bln (-27%) and petroleum down -AU$0.6 bln (-52%). A big increase in iron ore exports saved the day, rising +AU$3.6 bln or +37% year on year. (All Aussie rural exports amounted to AU$3.3 bln in October, down -15% y/y.) Meanwhile, their October imports fell -10% or down by just under -AU$3.0 bln to AU$25.7 bln. (New Zealand's October trade result will be released on November 26.)

STUBBED OUT?
In South Korea, consumer confidence is rising - or at least was in October before the November surge in the coronavirus and the impending restrictions.

EVERYONE'S FAVOURITE
Everyone from Wall Street to the progressive left of the Democrats is applauding Joe Biden's reported choice of Janet Yellen as Treasury Secretary.

GOLD PRICE FALLS SHARPLY
The price of gold has fallen in Asian trade, now at US$1827 and down by -US$47 from this time yesterday and down -US$10 from today's closing New York price. The New York price was -US$3 lower than the afternoon London fix.

EQUITIES UPDATE
The S&P500 ended up +0.6% at its session close today. The ASX200 is up +1.0% in early afternoon trade, while the NZX50 Capital Index is up +0.3% near its close. Tokyo has opened up a very strong +2.6% after yesterday's holiday, but Hong Kong has slipped -0.1% and Shanghai is down -0.3%, all in early trading.

SWAP & BOND RATES JUMP
Swap rates rose sharply today with the two year up +5 bps, the five year up +6 bps and the ten year up +7 bps just after the Robertson announcement. Update: In the end, the two year is up +8 bps, the three year is up +9 bps the five year is up +11 bps as is the ten year, also up +11 bps. The 90 day bank bill rate is unchanged today at 0.25%. The Australian Govt ten year benchmark rate is up +3 bps to 0.90%. The China Govt ten year bond is unchanged at 3.32%. And the New Zealand Govt ten year is up +11 bps at 0.91% and far above the earlier RBNZ-recorded fix of 0.81% (+1 bps) which was fixed before the Robertson announcement. And the US Govt ten year is down -1 bp to just on 0.81%.

NZD RISES TOO
The Kiwi dollar has risen on the same news today and is now up where it was this time yesterday at 69.8 USc and canceling out the greenback's rise. It is the same on the cross rates with the Kiwi firmer against the Aussie at 95.4 AUc. Against the euro we are up at at 58.9 euro cents. That all means our TWI-5 has risen to 72.6.

BITCOIN FIRMS
Bitcoin is up +1.6% from this time yesterday, now at US$18,461. The bitcoin rate is charted in the exchange rate set below.

This soil moisture chart is animated here.

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29 Comments

There is only one story today:
"G Robertson asks Orr for suggestions to control the housing market."
A Orr's reply will be the next most important piece of news, meaningless fluff or dynamite?

Yvil
The other newsworthy story today (breaking news only in the past hour) is that the USA General Services Administration has informed President-elect Joe Biden that the Trump administration is ready to begin the formal transition process, according to a letter from Administrator Emily Murphy sent Monday afternoon and obtained by CNN.
Trump has tweeted that he supports Murphy and is showing some openness to the transition although possibility still perusing further challenges.
https://edition.cnn.com/2020/11/23/politics/transition-biden-gsa-begin/i...

Yes Orr has nowhere to hide now. Housing and rent costs are the main reason for the necessity to increase the minimum wage and accomodation supplements. This is core to NZ families financial hardships and a future generation locked out of the housing market. We need investment balance, now.

13
up

I'm going with meaningless fluff.....

Just read Orr's early reply, indeed looks like meaningless "leave me alone, I won't change anything"

Robertson is just trying to look like he's doing something. Pretty pathetic.

18
up

only an 80k fine for dangerous apartments? Outrageous

yep, my first thought was - are they still being lived in? (happy to be proven wrong but it seems highly likely).

Kinda like when the Chow brothers ruined that heritage building in the cbd and it fell down. Quick slap with a wet bus ticket and on they went.

Oh, how valuable our immigrants are!

There are shysters everywhere. This more reflects on the patheticness of the courts and the law they are constrained to operate within. This case blatantly shows you are better off doing what you want and accepting the circumstances way down the road than following the building laws as the fine is pathetic compared to the money they would have made by doing this conversion.

Maybe Orr can write back and suggest the government break the building supplies cartel, improve the Brandz process, streamline resource and building consents ?

It would be great if Orr responded enthusiastically to Robertson's letter with a whole shopping list of proposals, from council reform to tax changes to monetary policy tools... put the pressure back on him to deliver! A boy can dream...

Dear Mr Roberston, it is not my mandate to reply to letters. Yours sincerely, Orr.

Huge crypto news. ETH 2.0 has enough validators (500k ETH) to launch! We are liftoff, and the ETH price has not disappointed with a +10% rally to $618. It seems this is rising all tides, with a large number of cryptos up around the 10% to 50% range today. Bitcoin has falling asleep but when the King awakens from his slumber, ruin will betide all shitcoin holders.

BTC will prevail - all others are just fluff

Big day for crypto technology indeed, let's hope for a smooth launch in 7 days time and quick progress through the subsequent phases of eth 2.0 development. Also, to the moon!

Not often mentioned but NZD up 8% against USD year to date and up approx 20% since the 'crash' in March. NZD has performed as well as gold in 2020 at least since the 'crash'.

Oh yes. Its annihilating the NZD value of my US stocks! (and gold)

Think of the house prices denominated in USD. Do NZers think like this or is that a bit of a stretch? Would be good for the wealth effect.

Re: A ONE TRICK EXPORT PONY? Perhaps not for much longer. The country could finally be raking in more value from its lithium exports.

A new $28 million battery manufacturing facility in Australia has been announced. It will have an initial battery production capacity of 66MWh per annum, with plans to scale its Australian operation to 5.3GWh of energy storage per annum with an additional investment of more than $200 million.

"Over 1,700 direct jobs will be created during the construction and operational phase and another 6,500 indirect jobs will be generated."

Two one trick ponies - iron ore and lithium – you get heavy exposure to both with Mineral Resources – ASX:MIN.

I’ve had a good run with them – though price might be a little toppy at current levels.

Slightly counter intuitive that rates are rising today.

If Orr actually does dampen demand/prices in the residential housing sector we are surely going to have lower rates for a lot longer because our economy is going to be getting the stuffing kicked out of it.

Realistically the only thing he can do is bump the deposit requirement for residential investment, anything else would be a sharp kick in the teeth for all the first time home buyers who have bought in the past 12 months.

Glitzy... you don't enter a casino and complain when you lose. Them's the risks and plenty on here have been trying to stress they are very real.

XRP now up 149% in the past month denominated in JPY. Japan and Korea seem to be big centers of buying. Ripple has strong backing in Japan within the financial sector with SBI.

It's going mental. 4,000 new account activations each day at present.

It reminds me of December 2017. My siblings loved their Xmas presents that year.

I'm not sure I agree with this, David: "This is huge. Targeting inflation, was widened by Robertson to include targeting employment, and is now to be widened further to target house prices. What's next? Exports? Markets are shaking their heads..."
Why shouldn't house price inflation be included in the Reserve Bank's inflation targeting, just as much as the so-called consumer price inflation? It's just another price that everyone has to pay (at some point, in some way), unless they live under a bridge...
To me, we've had house price inflation, precisely because it's been excluded from the CPI, so Reserve Bank has been able to set interest rates while pretending that house price inflation didn't exist because it wasn't included in their narrowly defined, technically defined CPI target.
Now, Orr's response may not be to suggest a revamp of the definition of CPI, I'd be astonished it it was.
But we've got house price inflation because we thought our speedo was in kilometres per hour. Now, we've discovered that it is in fact in miles per hour, and we are way over the speed limit and the siren is sounding behind us ...

Also, the RBNZ have a financial stability imperative. Runaway house prices are perhaps not the best thing in terms of financial stability...

Another year of desert island disc's

https://www.odt.co.nz/star-news/star-national/herd-immunity-restrictions...

But that may still be a long way off - the Minister of Covid-19 Response Chris Hipkins said some travel restrictions would likely remain in place for another 12 to 18 months.

https://www.youtube.com/watch?v=gJoa40JAIYY
Tom on DID.

So swap rates are already starting to rise. Not sure how many on this site remember how quickly rates can drastically change and how hard it can be to predict these changes.