Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
Bluestone has reduced all its fixed rates, and now has one (2yrs) below 3%.
TERM DEPOSIT RATE CHANGES
Rabobank, Kookmin Bank, Wairarapa Building Society, and the NZCU Central/Baywide/South/Aotearoa group all trimmed term deposit rates today. Kiwibank cuts its savings account rates.
RIP CUSTOMER INTEREST
The RBNZ has released its Funding for Lending terms. More here. FLP starts on Monday, December 7, bringing OCR cost funding to banks. RIP TDs.
LITTLE COST IN EXTENDING A LITTLE-USED SUPPORT SCHEME
The Government has extended its business debt hibernation scheme for ten months to October 2021, despite the wage subsidy and other support measures only seeing 15 firms use the relief in full.
STRONG & CAUGHT UP
The latest Retail NZ Sales Index, shows that spending through November remained strong, and that total spending since March is now ahead of last year. Singles Day, Black Friday and Cyber Monday shopping events will have contributed to the strong November result. (This is an index based on data from retailers who bank at Westpac.)
SUMMER READING
The NZIER has issued its 2020/21 "Summer Reading List for the Prime Minister". The list includes: Calling Bullshit: The art of scepticism in a data-driven world, Carl T. Bergstrom and Jevin D. West, 2020; Not in Narrow Seas: The economic history of Aotearoa New Zealand, Brian Easton, 2020; Precarity: Uncertain insecure and unequal lives in Aotearoa New Zealand, Shiloh Groot, Natasha Tassell-Matamua, Clifford Van Ommen, Bridgette Masters-Awatere, 2017; Rebuilding the Kāinga: Lessons from te ao hurihuri, Jade Kake, 2019; Radical Uncertainty: Decision-making for an unknowable future, John Kay & Mervyn King, 2020; Whāriki: The growth of Māori community
SMALL EXTENSION
Allianz Partners NZ has today introduced "leisure and business travel insurance for international travel" with selected cover for epidemic and pandemic diseases. It does come with exclusions. This extension is designed to cover a Pacific bubble. The pandemic cover is like this: i) if you are diagnosed with an epidemic or a pandemic disease and cannot commence or complete your travel; or ii) you are specifically designated by name in an order or directive to be placed into mandatory quarantine or isolation by the Government; or iii) your travel is disrupted by being denied boarding because you have an epidemic or pandemic disease and you incur costs for additional accommodation and meals as a result. The most paid for any claim under part iii) is $200 per day up to a maximum of $1,400. There is no cover for claims arising from any lockdowns, changes in government alert levels, quarantine or mandatory isolation that applies generally.
AUSSIE REGULATOR'S ENFORCEMENT ACTION ENCOMPASSES WESTPAC NZ
APRA has moved against 'material breaches of prudential liquidity standards' by Westpac, including in relation to Westpac NZ. More here.
MIXED IN AUSSIE FACTORIES
PMIs for Australia were released today. The AIGroup one fell back from a strong expansion in October to a weak one in November. But the Markit one moved to a stronger expansion from an already good level and now at a three year high.
MORE AUSSIE DATA
Building consents for houses rose for the fourth consecutive month in October and are at the highest recorded level since February 2000. Their balance of payments on goods and services was a surplus in the September quarter of +AU$13.6 bln, lower than the +AU$22.3 bln June quarter surplus, but better than expected. Exports fell -6% and imports rose +3%.
GOLD PRICE SLIPPING
The price of gold has slipped further today. In Asian trade it is now at US$1778 and -US$4 lower than yesterday. But at least it is +US$2 higher than the Wall Street close and that was +US$13 higher than the afternoon London fix.
EQUITIES UPDATE
In a reversal of yesterday movements, the NZX50 Capital index is lower in late trade by -0.2% while the ASX200 in early afternoon trade is up +1.2%. Shanghai has opened flat Hong Kong has opened up +0.2% and the large Tokyo exchange is up +1.4% in early trade today. The S&P500 ended its Monday session down -0.6% but that caps a huge monthly gain of +10.5%, and the best month in more than 30 years.
SWAP & BOND RATES MOVE LOWER
Yesterday swap rates slipped a couple of bps across the curve. If there are material changes today when the end-of-day swap rates are available, we will update them here. The 90 day bank bill rate is unchanged today at 0.25%. The Australian Govt ten year benchmark rate is up +2 bps at 0.92%. The China Govt ten year bond is down -2 bps at 3.30%. And the New Zealand Govt ten year is also down -2 bps at 0.855% and just above the earlier RBNZ-recorded fix of 0.85% (-2 bps). And the US Govt ten year has firmed marginally to just under 0.85%.
NZD HOLDS HIGH
Against the US Dollar, the Kiwi dollar is now at 70.2 USc and just marginally lower than this time yesterday. And on the cross rates it is up against the Aussie at 95.5 AUc and against the euro we are holding at 58.8 euro cents. That all means our TWI-5 has held at 72.7.
BITCOIN IN RECORD TERRITORY
Bitcoin is now at US$19,471 and +5.5% higher than this time yesterday. In between, it hit a new record high of US$19,830. 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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44 Comments
Spot price of carbon credits in NZ reaches new high soaring by more than 50% since March 2020.
https://www.commtrade.co.nz/
BTC all time high is slightly ahead of schedule. Wasn't expecting it for another couple of weeks https://pbs.twimg.com/media/EoHD7LtXIAcgpH1?format=png&name=4096x4096
What he mean is, we knew it was coming at some point this year, but not quite this soon. Keep hodling, we are only just getting started. Still hasn't been any media coverage really, this has been institutionally driven so far.
50k target at min, easily over 100 IMO (USD, already at 28k NZD)
I fully expect another 80% retrace after reaching new levels. BTC runs on a 4 year cycle determined by the halving. Halving, 12-18 months new ATH, then a quiet bear market for 2.5-3 years with 80-90% retrace before repeating.
But with institutional money coming in and BTC being used as a treasury reserve asset, I think that will start to dampen the down swings, so maybe only a 70% retrace.
Yes I'm a little frustrated as the price has really gone up faster than I could accumulate bitcoin. My ideal portfolio is still $300k more than my current holdings, and I am starting to accept that I am never going to reach my bitcoin goal. Still, I upped my bitcoin holdings 65% this year so maybe I'll get there through some alt coins or ETH blowing up.
Yes I'm a little frustrated as the price has really gone up faster than I could accumulate bitcoin
This is why preparation is important. The best strategy for accumulation is really about higher frequency, which means that you need an exchange that can deliver in terms of cost effectiveness and depth. Bitbank in Japan is by far the best in terms of this IMO.
What I don’t think a CGT will do is lower house prices or even stabilise them, RH 1/12/2020
Happy readers have seen how easily the myth that capital gains tax will halt/relieve the housing crisis is debunked.
Its easily debunked by looking at Australia's CGT commenced in 1985, and the great property bubbles in Australia since that date.
Now the debunk is fully supported by ace leftie politian Richard Hills (he of Auckland Council, the Super City).
https://mobile.twitter.com/richardhills777/status/1333494834032570369
I support a CGT because it taxes income fairly like we do for wage & salary earners & business owners.
What I don’t think a CGT will do is lower house prices or even stabilise them. As seen overseas with a CGT.
Apart from supply of affordable homes I’m not sure what fixes this?
Great to see the Left, a great voice of the Left confirm the thinking that CGT has not influence on housing bubble.
Question: Who is going to tell Our Lady of the Lockdown now?
Richard is right to an extent (I share that sentiment).
However I always think you can prove a theory by looking at the extremes. What if the government enacted a 100% CGT on all property tomorrow? Surely that would have an effect, right? Likewise a 30% CGT on all properties would have less effect, and a 15% CGT on investment properties only even less. What if they enacted a -100% tax (they pay you to make a profit).
It is not a binary question, it would definitely have an effect, the question is whether it would have enough effect at the level they would impose.
Fritz, you will love this, it turns out that Marx was going full rage, full rage before he came across capitalism.
https://youtu.be/ZoOH8Q5VAcI
Tom Sowell - speaking as a past Marxist.
Henry, you really need to separate your 'bile and spittle' urges from your more lucid comments.
You make some great points that are supported by evidence - CGT is not a panacea to the housing crisis, and capital gains are part of the wealth creation game and should be treated as such in an equitable taxation environment.
I'm more of a moderate than a leftie, and yet I agree with you on these points. What I don't agree with is your carping on about how unfair Labour, and somehow leaping to a conclusion that it is all the fault of a far from perfect PM. Is it because they/she had the temerity to make hard decisions about the nation's health and wellbeing that may have had a very small impact on you.
If your inner beliefs (i.e. not empirically-derived conclusions) are based on such a shallow weltanschauung and old boy sexism - keep it to yourself eh?
The retail apocalypse should be in full swing in NZ at some stage.
Arcadia Group, the retail empire of British tycoon Philip Green and parent company of fashion chain Topshop, has gone into administration, the British equivalent of bankruptcy, creating a dire situation for some 13,000 workers whose jobs are at risk. The company is not announcing any layoffs yet, and its brands, which include Topman, Miss Selfridge, Dorothy Perkins, and more, will continue to operate while it seeks buyers for all or some of its assets
https://qz.com/1939543/topshops-owner-arcadia-group-is-on-the-brink-of-…
Implementing the FLP will not achieve the RBNZ's mandate of providing stability to the NZ economy, the vast majority of ultra cheap lending will go into housing thus exacerbating house prices much more. If you think houses are expensive today, you've seen nothing yet, just wait till mortgage rates hit 1.75%
If you think houses are expensive today, you've seen nothing yet, just wait till mortgage rates hit 1.75%
This is like arguing that the natural limit of house prices is what can be afforded on an interest rate that is commensurate to a proportion of household income without ever paying off the principal. It's not outside the realm of possibility, but it also means that the value of the currency is going to so fragile that it's not even worth owning.
People are living in a Covid-induced fantasy.
Hasn't currency been one of the worst investments in recent times anyway? If you put $100 under the mattress 40 years ago you would be pretty disappointed with what you could buy today. It was once a weeks wages so it has always been fragile. It's not meant to be stored, its meant to be spent or invested.
That depends if 'sound money' is important to society. Given that the price of labor is denominated in the currency, this is important. If you're an old fart, you may not care about the value of labor, but it's very important for young people and the unborn. The old farts and the ruling elite need to consider this.
But not to be accepted in return for personal effort expended - fiat currency has no value, or more correctly no term purchasing power for the employed. I understand all too well - I retired at 45 in 1998 - because I was not being rewarded correctly at the bank where my team and I made obscene profits buying term US bonds and their futures equivalents when they had 15% coupons as far back as 1982. I have lived off unearned income since. Life spans are too short to be exposed to this nonsense for the majority.
A basket of goods and services that cost $1.00 in quarter 2 of 2008 would have cost $1.21 in quarter 2 of 2020 - compound average annual rate 1.6% - courtesy of RBNZ inflation calculator.
And let's not discuss asset price inflation.
Fiat money:
We start with the idea of credit creation, specifically a swap of IOUs between a bank and myself involving a bank loan that is my IOU and a bank deposit that is the bank’s IOU. Nothing could be simpler, and yet the mind rebels, especially the well-trained economist’s mind, because this simple operation increases my purchasing power without decreasing anyone else’s. It seems like alchemy, or anyway a violation of some deep conservation law. Real productive resources are the same as they were before, and the swap doesn’t change that, does it?
Spending of the new purchasing power adds another layer of perplexity. If spending increases but real resources do not, then it seems logical that the increased spending must exhaust itself in higher prices—that is the intuitive appeal of the quantity theory of money. My purchasing power may increase, but everyone else’s decreases because their money balances buy less. From this point of view, the alchemy of banking seems like a kind of theft, something to be deplored in the name of economic science and if possible outlawed in the name of the general good. Link
Yeah but that's not "no value". We can agree that it is declining in value, if only in relation to property and other assets, hence why I wrote it should be spent or put into property or shares. What would a dollar put into property or the NZX50 in 2008 be worth now?
I so regret keeping cash reserves. Everything should have been put into property or shares and I should have lived off revolving credit.
Swapping IOUs has no intrinsic value other than a person offering to liquidate the debt via personal labour, which is always losing buying power as my definition of fiat money maintains, because the cost of labour never exhausts itself in a higher price to compete with asset and liability cost appreciation.
But if he converts the money from personal labour into property or shares it wont lose its buying power hence why I wrote this money should be immediately converted into property or shares. Most people have done this by buying a house. Excuse me if I am getting a bit lost as I don't quite understand what the problem is.
Swapping IOUs has no intrinsic value other than a person offering to liquidate the debt via personal labour, which is always losing buying power as my definition of fiat money maintains, because the cost of labour never exhausts itself in a higher price to compete with asset and liability appreciation
Well said Audaxes. I personally believe that the destruction of money through monetary inflation has now hit a crisis point. There is little incentive for younger generations to play the ladder climbing game that the old farts need them to participate in to maintain their asset prices (not value).
Haven't a lot of young-ish people discovered that their KiwiSaver balances have become quite healthy and are now converting those profits into a deposit on a property investment? I don't really understand what problem you have with this. The destruction of money is not instant but gradual. It has to be shifted as soon as possible into assets.
KiwiSaver is a retirement savings plan, not a prop for the housing bubble. And no, the destruction of money is not gradual. That is why real incomes have gone nowhere for 20 years in the U.S. The U.S. money supply has expanded 20%+ in 2020 alone.
https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-re…
Millions of Americans expect to face eviction by the end of this year, adding to the suffering inflicted by the coronavirus pandemic raging across the U.S.
About 5.8 million adults say they are somewhat to very likely to face eviction or foreclosure in the next two months, according to a survey completed Nov. 9 by the U.S. Census Bureau. That accounts for a third of the 17.8 million adults in households that are behind on rent or mortgage payments.
https://www.bloomberg.com/news/articles/2020-11-23/millions-of-american…
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