What happened Friday

A review of things you need to know before you go home on Friday; BNZ cuts TD costs, sellers housing market, RBNZ responds, PMI rises, car waiting lists, rents soft, swaps soft, NZD firm, & more

11th Dec 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
There are no changes to report today.

TERM DEPOSIT RATE CHANGES
BNZ cut its TD and term PIE rates today, all to near lowest levels for any bank. But these 'costs' are still ~50 bps higher than what the RBNZ is offering banks for FLP money.

A SELLERS MARKET
The housing market is booming as prices and sales volumes set new records in November according to the latest REINZ report. The national median house price increased by $24,000 last month and is now at $749,000 and for Auckland it is up to $1,030,000. The only places where median prices fell in November from October were Northland, Gisborne, West Coast and Otago.

'YES', BUT ON OUR TERMS
The RBNZ has replied to the Finance Minister's 'request' to add house prices into their policy mix considerations. They have asked for debt-to-income ratio tools (again) and oppose change to the monetary policy remit.

'A STRIDE FORWARD'
New Zealand's manufacturing sector experienced a pick-up in expansion during November, according to the latest BNZ-BusinessNZ Performance of Manufacturing Index. Although new orders slipped slightly, the other measures rose strongly and the overall index shows a healthy but not excessive expansion underway. However the Wellington and Canterbury expansions are particularly positive.

FOOD PRICE DISRUPTION
Food prices increased +2.6% in the year ended November 2020, (but fell from October). But that rise is driven by fruit and vegetable prices which rose almost +10% in the same period. However, some fruit prices have collapsed recently as growers don't have the staff to harvest, and product that is overripe is rushed to local markets causing oversupply.

BNZ WON'T REPLACE DEPARTING EXECUTIVE
Gerald Mackenzie, BNZ's executive for transformation and strategy, will leave the bank on December 18 and isn't being replaced. A BNZ spokesman says with the bank's strategy set, and focus on delivery, "we can achieve our objectives more efficiently by absorbing strategy and transformation into other teams within our business."

NEW LONG WAITING LISTS
Toyota is saying that although orders for new Toyota vehicles are growing due to consumer buying confidence and new model launches, delivery times are being delayed by a range of supply issues overseas. Delivery of certain models are delayed by an average of six weeks due to production and international shipping constraints. Parts deliveries are also delayed. That means more than 70% of the vehicles that arrive have been pre-sold. Dealer have turned into order-takers so price competition has vanished.

RENTS SOFT
Rents are falling everywhere except in the lower half of the North Island. Updated data for November from Statistics NZ. Rents have fallen in Auckland for five of the past eight months. In contrast, they have fallen in only two of the past eight months, and not al all in the rest of the North Island. In fact, in regional North Island since 2016, rent increases have averaged +5.6% pa.

UGLY TRIAGE
In Sweden, after making an emergency u-turn from their disaster herd-immunity strategy, things have turned gruesome. Stockholm was reported today to be running ICUs at 99% capacity. Now, 80-89 year olds are not being admitted to ICUs any more. These folks are just denied care and are being left to fend for themselves. They have run out of options given the surge in serious cases, and the age limit is likely to be lowered progessively to ration ICU bed availability.

GOLD PRICE HOLDS
In Asian trade, the price of gold has risen +US$2 from the ending New York price and is now at US$1838/oz, the same as at this time yesterday. The New York price ended at US$1836/oz and was -US$8 lower than the afternoon London fix.

REGULATOR POINTS OUT THE OBVIOUS CASINO RISKS
In Australia, AML regulator AUSTRAC says Australian casinos have been exploited or infiltrated by criminals and even foreign agents.

EQUITIES UPDATE
Wall Street ended its session today down by -0.1% and adding to weakness earlier in the week. The ASX200 is trading down -0.3% in mid-day trade and heading for a +3.8% weekly gain. The NZX50 Capital Index is up +0.2 near the end of today's session and heading for a +2.1% gain for the week. Meanwhile, the very large Tokyo market has opened today down -0.5% in early trade. Hong Kong has opened up +0.5%, while Shanghai has opened flat in early trade today.

SWAP & BOND RATES SOFT
We don't have todays swap rate movements yet. If there are material changes when the end-of-day swap rates are available, we will update them here. The 90 day bank bill rate is unchanged today at 0.26%. The Australian Govt ten year benchmark rate is down -2 bps at 0.99%. The China Govt ten year bond is up +2 bps at 3.32%. And the New Zealand Govt ten year is down -5 bps at 0.88% and marginally below the earlier RBNZ-recorded fix of 0.89% (-2 bps). And the US Govt ten year is down -2 bps today to 0.91%.

NZD RISING
Against the US Dollar, the Kiwi dollar is up sharply from this time yesterday and now at 71 USc, a gain of morte than +¾c. But on the cross rates we are down further against the Aussie to just under 94 AUc and against the euro we are a little firmer at 58.4 euro cents. That all means our TWI-5 has risen to 72.8.

BITCOIN DOWN
Bitcoin is now at US$17,972 and down -2.7% 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 ».

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

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57 Comments

by oldbloke1 | 11th Dec 20, 4:03pm 1607655834

Will those who championed the Swedish approach to covid now admit they were wrong?

by scarfie | 11th Dec 20, 4:27pm 1607657249

How about a word from the young on this, who are also affected. I've a highly astute cousin once removed, in her 30's. She said to me the only way to solve Covid is for fat wrinkly grey people to change their lifesyle (with the implication they won't, and Covid won't be solved).

by realterms | 11th Dec 20, 5:18pm 1607660304

I don't follow your point. My observation is that the older people are more likely to have altered their behaviour than the younger ones.

by scarfie | 11th Dec 20, 5:21pm 1607660504

By lifestyle she doesn't mean emergency response that drags other people into the mix, she means personal choices to eat better, lose weight, and get some exercise.

by realterms | 11th Dec 20, 7:00pm 1607666424

OK thanks for clarifying but not sure I agree. Plenty of obesity in the young, too.

by youngdumbandbroke | 11th Dec 20, 4:32pm 1607657561

On one condition - you admit that Jacinda and John Key are one in the same

by realterms | 11th Dec 20, 5:17pm 1607660236

... what on earth does this have to do with the first thing?

by oldbloke1 | 11th Dec 20, 6:48pm 1607665703

You have a very simplistic view of life...

by youngdumbandbroke | 11th Dec 20, 6:51pm 1607665876

Ironic lol

by eskyrider | 11th Dec 20, 4:39pm 1607657960

Yes I admit I was wrong. As a punishment I banged my head while putting the shopping away and I have blood on the pillow.

by northman46 | 11th Dec 20, 5:24pm 1607660640

"80-89 year olds are not being admitted to ICUs any more."

Love to gloat and say "we told you so", but holy crap this is awful.

by Hook | 11th Dec 20, 6:27pm 1607664458

Haha.. they're not being admitted to the ICU because they're going straight to the mortuary perhaps? Ever heard the saying regarding eggs and omelettes? You're watching it unfold in real time now

by Fritz | 11th Dec 20, 5:25pm 1607660742

Yes I renounced my sins months ago.

by Uninterested | 11th Dec 20, 8:38pm 1607672282

Doesn't work, you have too many...

by Old China Hand | 11th Dec 20, 5:54pm 1607662442

Spoke with a friend in Sweden last week, she informed me it wasn't a govt decision per se. The Swedish constitution or Basic Law or whatever they have does not allow the government to shut down society, regardless of what comes. It would be illegal and unenforceable. Very tragic to read this.

by sit23 | 11th Dec 20, 8:37pm 1607672229

Best you check actual facts instead of made up rubbish.

by Officebound | 11th Dec 20, 4:28pm 1607657337

I'm not hearing about the price of anything going down (except rent mentioned above)

I'm hearing heaps about the price of things going up, or discounts ending.

Also hearing heaps about things that will cause prices to go up (lack of supply due to POA being useless being a key one).

We're running a factory to make the ink for the money we're printing.

I can't shake the feeling 2021 will be the year inflation kicks in, and the RBNZ is hamstrung between it's dual mandates...

by blobbles | 11th Dec 20, 4:37pm 1607657855

Both the FED and Aus have now come out saying they are going to be flexible on their inflation targets when (if?) it arrives. Expect the RBNZ to follow suit. I expect if inflation actually arrives, they will let it run at 5-10% a year without changing interest rates for a few years to try and inflate away debt. Wages should follow. Of course if we open the flood gates on immigration to cheap labour countries, wages will not increase significantly.

by realterms | 11th Dec 20, 5:19pm 1607660351

I think they (RBNZ) already did.

by redcows1 | 11th Dec 20, 5:03pm 1607659416

There's been a disconnect between the CPI and what most of us seem to see/pay for some time so a simple change to the calculation is probably all that will/has happened.

by Kate | 12th Dec 20, 12:03am 1607684608

I worry that in 2021 we're going to look back at 2020 as the good old days.

by KH | 11th Dec 20, 4:20pm 1607656852

Rents going down in Auckland. Very interesting. It is an actual market, one of the few real markets we have.

by Advisor | 11th Dec 20, 4:48pm 1607658530

A real market for now - until we reopen our borders to inflate demand for rundown houses, worthless degrees and low-skilled jobs.

by Fritz | 11th Dec 20, 5:56pm 1607662596

On another thread I have rather perversely (for me) suggested investors may be our friend rather than our enemy.
A lot of the new townhouses in Auckland are being bought by investors and there's big supply coming on line.
Without investors as well as FHBs buying off plans these developments won't keep happening.
I mean affordability for .middle income FHBs has long since gone, so maybe the focus should be on stabilising rents and improving choice and supply.

by Officebound | 11th Dec 20, 6:12pm 1607663558

Yes, these modern developments in Auckland where they take 1 place and turn it into 4-15 is interesting, tons in progress, feels like only the first few batches have hit market so far.

Might become a drag on the overall market, or become a soft niche like shoebox apartments. Looking forward to seeing it play out.

by Fritz | 11th Dec 20, 6:23pm 1607664235

Yeah there's heaps in progress, which is a good news story.
Hopefully pressure on renters eases a bit in terms of finding places and also costs.

by paashaas | 11th Dec 20, 7:19pm 1607667592

How awful .. #RENTCONTROLS NOW !!!!!
Where is Kate when you need her ?!

by Kate | 12th Dec 20, 12:10am 1607685031

Here in Welly where they're climbing fast.

by Kate | 12th Dec 20, 12:27am 1607686065

Check out the rise in rents in Manukau;

https://www.interest.co.nz/charts/real-estate/median-rents-auckland

From a $550 median in Oct 2019 to a $590 median in Oct 2020. That is a 7.3% increase yoy. It is the lower quartile of households that are getting hit hard and that seems to be the case nationally - i.e., as stats reports regional NZ has had the highest rental price rises.

Which is why we need #rentcontrolnow - otherwise we face much higher welfare and accommodation costs.

by scarfie | 11th Dec 20, 4:33pm 1607657639

This is a cut and paste from what a FB friend has posted, doesn't bode well whatever the outcome. You can guess his slant:

Fireworks in the US Supreme Court!
Not only have the four defendant states (Pennsylvania, Georgia, Michigan & Wisconsin) filed their responses, 22 other states and territories have also filed briefs in support of the defendant states (Washington DC, California, Colorado, Connecticut, Delaware, Guam, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Rhode Island, Vermont, Virginia, US Virgin Islands and Washington).
That puts these 26 states & territories up against the 18 states (including Texas) that support this case.
Meanwhile, Missouri, Arkansas, Louisiana, Mississippi, South Carolina and Utah have formally joined Texas in suit (not just as amicus briefs).
A whole bunch of other individuals and groups are also filing briefs and want to be heard on this case.

And this also:

I've read Pennsylvania's response. It has a bunch of technical arguments asserting the US Supreme Court shouldn't even look at the case. It also denies any widespread electoral fraud occurred and cites as evidence of that proposition a series of court cases In Pennsylvania.
As far as I'm aware there hasn't been any significant evidential hearings of electoral fraud in Pennsylvania. Rather cases have been thrown out on technicalities (eg standing or the plaintiffs or being too early / too late to bring claims).
To resolve this the Supreme Court may have to do what it prefers to avoid: hear evidence of fraud. They usually prefer to resolve questions of law rather than questions of fact. That isn't out of the question in cases between states.

I've also read the brief by the Defendants' 22 "friendly states".
They basically argue that:
1. individual states can run their elections as they see fit and their courts can adjudicate as they please;
2. they denied that widespread fraud occurred as a result of "common sense" changes to the electoral rules in those states.
The problem I see with the first argument is that is fine in most cases, except where their conduct affects the outcome of the Presidential Election (which affects all the other states).
The problem I see with the second argument is how are these other states in a position to assert that widespread fraud didn't occur in the Defendant States?

by realterms | 11th Dec 20, 5:20pm 1607660455

Yawn. Yes we can guess the (your) slant. It's not a vote of the states, and this case is going nowhere, just like all the rest of them.

by scarfie | 11th Dec 20, 5:26pm 1607660763

My prediction was this would not be decided on election night, it woud drag on and end up in court. I've been right so far. Predictive value is everything.

by Henry_Tull | 11th Dec 20, 7:02pm 1607666537

scarfie, interesting view.

Here is M Malice & M Cernovich.
https://youtu.be/4aI-ftsbkKU
Pragmatic stuff

by realterms | 12th Dec 20, 3:11pm 1607739077

... you were saying something about predictive value?

by Kate | 12th Dec 20, 12:40am 1607686830

2. they denied that widespread fraud occurred as a result of "common sense" changes to the electoral rules in those states.

As I understand Texas' case - the changes may have been "common sense" but the question is were they carried out lawfully - in other words did the state legislatures in question lawfully amend/change their election procedures before taking these "common sense" approaches to absentee (i.e., mail in) ballots?

It's a bit like the first of the NZ lockdowns that was challenged here - they didn't get all their ducks-in-row lawfully before taking the action.

I'm not surprised the Defendant states used the word "common sense" - I think they know they put the cart before the horse.

It will be fascinating.

by Cowpat | 11th Dec 20, 4:45pm 1607658352

The role of the media . Much has been written , almost relentlessly of the 2020 'booming' housing market. 2019 saw the third lowest sales volumes in thirty years, only surpassing 2008 and 2010 in total sales. In 2020, the total number of residential sales across New Zealand as noted by REINZ is only 4854 ahead of comparable 2019 sales, almost exclusively driven by the Auckland region. ,a portion of those sales, by necessity have been driven by Covid issues .These are unadjusted numbers for any increase in housing stock. When compared to housing stock the turnover ( sales) is historically very low.

by J.C. | 11th Dec 20, 6:26pm 1607664397

Yes. There's a lot of emotional hooplah about the bubble. It could easily turn on a dime. Doesn't matter how much credit there is and how cheap it is.

by Cowpat | 11th Dec 20, 6:59pm 1607666392

'That means the national median price rose 18.5% year-on-year.' because so far we have managed to sell an astonishing additional 408 residential properties nationwide ex Auckland thru 2020 when compared to 2019.

by mikekirk29 | 11th Dec 20, 7:54pm 1607669695

Glad to see someone else saying it!

by Believer1980 | 11th Dec 20, 8:03pm 1607670221

What are you saying? that there are many houses that are not selling? or people or simply not putting their houses for sale? they are very different things. A low turn over while a very high stock for sale very strongly indicates falling prices. Fast turn over of very limited stock does the opposite.

by mikekirk29 | 11th Dec 20, 7:54pm 1607669652

Great contribution, thanks Cowpat. Good to point out that the booming late 2020 market is not, in context of a cycle.
Indeed in last 4 years in Auckland 17%fewer sales than in prev 4 years, despite much lower interest rates and extra 200,000 persons in the city as well as 13% more stock than in 2013.

by muzled | 11th Dec 20, 5:38pm 1607661527

How much do labour costs add to fruit/veg? Does anyone have any numbers?

Say if you went from paying min wage to whatever those folks that came in which was $2-$3/hr above that.

Seems to me that even if you went from paying $17.70hr to something that is quite attractive, maybe $25/hr which is a big percentage jump that that actual price of an apple isn't going to jump the same percentage.

Or am I deluded?

by Fritz | 11th Dec 20, 5:58pm 1607662691

We are enjoying going to farmers markets. Cheaper than supermarkets and better quality. Plus a nice couple of hours out browsing and tasting

by Hook | 11th Dec 20, 6:34pm 1607664842

muzzled, you won't as a consumer pay any more. What will happen is the growers margins will be squeezed even further to the point they'll just shut down. This is an underlying fact most advocates of higher wages are missing.

by redcows1 | 11th Dec 20, 7:22pm 1607667748

You forget there is one part of the chain that could absorb the cost by cutting their massive margin easily. Our supermarket duopoly.

by Justa comment | 11th Dec 20, 6:00pm 1607662834

RBNZ asks for debt to income tool. I bought my house in 1997 at 3x household income. What would they ask for now ? 10x ? Better get a move on before its 12x lol.

by Ryu | 11th Dec 20, 7:24pm 1607667846

Don't worry, there will be inter-generational mortgages soon. Inheritance of wealth will turn into inheritance of debt. DTI over on a mortgage over 100 years will be easily serviced per generation. Penalty for having no kids to pass debt to would be euthanasia at 65!

by Henry_Tull | 11th Dec 20, 7:15pm 1607667335

Buyers remorse

https://nypost.com/2020/12/09/the-biden-family-put-national-security-at…

by Rhumline | 11th Dec 20, 8:58pm 1607673508

Wow Henry, you really are just a mouthpiece for disinformation aren't you.

by Henry_Tull | 11th Dec 20, 9:39pm 1607675977

From the article what element do you think Miranda has got wrong?

Is this first time you have heard about Hunter's running around?

by J.C. | 11th Dec 20, 7:36pm 1607668594

Granny Herald does Bitcoin. Actually, it's not a bad listen.

https://www.nzherald.co.nz/business/cooking-the-books-podcast-are-alter…

by Ezy | 12th Dec 20, 8:19am 1607714383

"and how it compares to other speculative investments like gold"

My understanding of investment is quite different to the 'experts'. I was always told to keep 5% of my portfolio in gold as a hedge. If you're speculating on gold, you're doing it wrong.

by mikekirk29 | 11th Dec 20, 7:56pm 1607669771

DTI tool eh?
Ha. Auckland at 11.5 time median. So is Mr Orr going to use couples income and put DTI at 6?

Don't hold breath.

by Fritz | 11th Dec 20, 8:25pm 1607671506

The excellent Macrobusiness on China's dumb foreign policy and economic moves:

https://www.macrobusiness.com.au/2020/12/stupid-china-declares-trade-wa…

by sit23 | 11th Dec 20, 8:35pm 1607672109

My report says Sweden has 666 ICU beds with ventilators. 464 occupied. 237 of these occupied by Covid patients. Crisis....What Crisis?

by Rhumline | 11th Dec 20, 9:00pm 1607673600

Good to see a blatherer with nothing to do but sit in front of a (NZ) computer all day has their finger on the pulse of a nation far far away.

by Zachary Smith | 11th Dec 20, 10:39pm 1607679565

Sit123 is actually on topic, you not so much.
When I read the article I suspected the news about Sweden was overblown. Sit123's comment prompted me to search for the real news and he is quite right, the situation is not that dire. Even in NZ we didn't put very old people on ventilators.