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
There were none here today either.
MORE SPENDING, BUT LOWER BALANCES
Credit card balances are now -12.4% lower in November 2020 than in November 2019, continuing the atrophy we have been seeing in this market. It is assumed that BuyNow/PayLater schemes are largely responsible. However, transactions running through these credit car accounts were up +4.3% year-on-year, the fastest growth since August 2019. Now, less than 57% of all balances incur interest, a record low. These trends will annoy banks (who pay tax) because it is the core reason they are in this business, but it won't annoy Visa or Mastercard (who cleverly avoid paying any tax in New Zealand) because they clip the merchant transaction fees and shelter all those earnings in Singapore.
LOWER LAKE LEVELS
Hydro lake storage and lake inflows are falling below long-run averages now. Auckland's drinking water reservoirs are now just under 71% full, a fairly static level. These dams supply 54% of the current use, the Waikato River 40%, and the other 6% comes from local aquifers.
BEFORE THE $100,000 FREE MONEY ISSUE
The Department of Internal Affairs has issued a penalty of $30,000 to Greenback Ecommerce Limited (trading as The Safety Warehouse) for breaching the Unsolicited Electronic Messages Act 2007. The Safety Warehouse was investigated after DIA received complaints from the public about receiving unsolicited commercial SMS text messages. These SMS messages took advantage of the second COVID-19 outbreak to sell face masks and failed to provide an unsubscribe facility. This is not the first time enforcement actions have been taken against The Safety Warehouse.
THE SUN IS SHINING BRIGHTLY IN THE HAWKES BAY
Westpac's regional confidence survey shows regional economic confidence bounced higher over the December quarter. Optimists now outnumber pessimists in most regions of the country. Households in Gisborne/Hawke’s Bay, Taranaki/Manawatu-Whanganui, and Nelson/Marlborough/West Coast are the most optimistic. Households in Northland, Otago and Southland are the most pessimistic.
UNDER REVIEW
Ratings agency AMBest has put Partners Life on review following its agreement to buy the life insurance business of BNZ. Partners Life currently has a rating of A- from AMBest. The $290 mln purchase is a major transaction for Partners Life, a company with a shareholder fund of $154 mln. It seems likely that the company will seek to list in the foreseeable future.
HUGE DOWNGRADES
Synlait Milk (SML) has had to halve its 2020/2021 profit guidance following the A2 Milk (ATM) downgrade. ATM is a cornerstone investor in SML and a key customer and SML now expects their demand in the new year to fall by -35%. ATM's downgrade took -$2.2 bln off its capitalisation last week alone, and from its peak on October 16, it is a -$3.5 bln drop. SML's capitalisation is fallen -$100 mln from early October until now.
VISA EXTENSIONS TO ALLOW MIGRANTS TO FILL LABOUR SHORTAGES
The Government has extended many working visa conditions and these changes have been welcomed by industry, especial the rural industries. They include a six month extension for employer-assisted work visa holders, postponing the stand down period for low-paid Essential Skills visa holders, retaining the 2019 median wage of $25.50 per hour for immigration settings until at least July 2021, and extending the Working Holiday visas by 6 months.
SPLIT FORTUNES
Data released by the RBNZ for the year to September for the insurance industry shows that their investment earnings halved to $736 mln, compared to the $1.45 bln in the same period to September 2019. Life insurers saw their premiums fall a massive -19% over this period while for general insurers, premiums rose +1.8% in this period.
WORRYINGLY CLOSE NOW
The NSW Health Department is reporting that travelers incoming from England into their hotel quarantine facilities are testing positive for the British super strain of COVID. (No-one in their Avalon Beach community outbreak has that; they have the US strain.) Official NZ notes are here.
UNDERWAY
In the US state of Georgia where there are two unusual Senate election races underway, early voting has begun. And so far 1.1 mln people have voted out of the expected almost 5 mln. The turnout so far exceeds that for the November General Election at the same stage. Results will be known on January 6, 2021 (NZT) and will determine the US Senate makeup.
EQUITIES UPDATE
The NZX50 Capital Index is down -0.3% in late trade today. The ASX200 down -0.5% in early afternoon trade. The Shanghai exchange has opened down -0.1%, Hong Kong has also opened down -0.8%, and the large Tokyo exchange has opened down -0.7%. The S&P500 futures index suggests Wall Street will open lower after rising +1.1% last week.
SWAP & BOND RATES MOVE IN TIGHT RANGES
Yesterday swap rate curves steepened with long rates rising. 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 up +2 bps at 0.27%. The Australian Govt ten year benchmark rate is down -1 bp at 0.98%. The China Govt ten year bond is also -1 bp lower at 3.31%. And the New Zealand Govt ten year is down -2 bps at 0.955% and very similar to the earlier RBNZ-recorded fix of 0.96% (+1 bp). The US Govt ten year is the same at the opening rate this morning of 0.94%.
NZD SLIPS
Against the US Dollar, the Kiwi dollar is down at 71 USc and nearly a -½c fall from where it was at the start of business today. On the cross rates we have also fallen against the Aussie although not be as much, now at 93.5 AUc. Against the euro we have dipped to 58.1 euro cents. That all means our TWI-5 is now at 72.5.
MORE BITCOIN FOMO
After hitting US$24,273 earlier this morning (NZT), the bitcoin price is currently US$23,738 and close to that high. The current price is almost the same as where it opened here this morning.
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25 Comments
The downside of the economic upturn in places like Hawke’s Bay & Gisborne etc is escalating house prices - RVs doubled in some cases, houses 800k to 1.2m in leafy suburbs, lack of rentals and going for $500-800pw, and motels full of emergency housed families.
Too many Aucklanders moving in! Back to the 60s.
Yep, the property market is out of control in Napier....but then it's the same most places, isn't it? Currently there are just 86 properties listed for sale in all of Napier on TradeMe - and that encompasses everything from sections, apartments, townhouses and houses.
Thank you MortgageBelt & EarlyRiser. I was beginning to think I was the only person in Napier who thinks the market has gone nuts. Comfortable houses on small sections around me selling in a heartbeat for $1.5m+. Not only house prices but the noticeable increase in expensive metal being driven around here is making me feel like a pauper and very nervous. It's been a party here since the end of lockdown.
Data released by the RBNZ for the year to September for the insurance industry shows that their investment earnings halved to $736 mln, compared to the $1.45 bln in the same period to September 2019.
How can a decrease in the rate of interest have the effect of destroying the capital efficiency of cash flows? Well, the present value of the cash flow is just the price one must pay when buying it. Paying a higher price for the same cash flow is a clear indication of the decrease in the efficiency of the purchase. It shows that the terms of trade of the purchaser has deteriorated. In spite of the utter simplicity of this concept it has been the source of great confusion and theoretical errors.
In each instance the capital efficiency of the float has been seriously undermined. As a result the ability of the insurance companies to increase their capital base has been destroyed. The diagnosis is that the industry is a dead man walking. The prognosis is 'sudden death syndrome'. When it becomes known that it has been denuded of capital, the industry will follow Lehman Brothers to Hades (where the god of the dead, Hephaistos, reigns).
An ad hominem argument can be made that this scenario is indeed inevitable. The rate of interest is reduced through Fed open market purchases of government debt. Thereafter the account carrying insurance premiums will be compounding at a reduced rate. It will increase more slowly. In addition, the capital efficiency of the industry is ruined. It has to pay more for generating the same premium-income while getting no relief in the form of risk reduction. In effect, the insurance industry is forced to shoulder ever more risks without the possibility of increasing premium income. Insurance companies are forced by Quantitative Easing, so called, to take ever greater risks just to keep abreast. But there is a limit to this imprudence. At one point the industry will find that it could no longer meet claims. Under ZIRP insurance companies are deprived of any return to assets with no compensation in the form of a reduction of liabilities. Link.pdf
The RBNZ has cut official interest rates in half five times since July 2008.
ACC announces $8.7 billion deficit for year as interest rates plummet
ACC has posted an $8.7 billion deficit for the year, with record-low interest rates taking a major chunk of out its long-term forecasts.The corporation presented its 2018-19 financial results to Parliament on Wednesday, with a huge increase in its "outstanding claims liability" (OCL) producing its highest-ever deficit and overshadowing other results.The OCL is the amount of ACC estimates all its current claims will cost over the next 100 years. Lower interest rates mean the fund has to invest more now to cover costs down the track.
We need something more constructive than repeatedly resurrecting QE programmes that fail to conquer the deflationary elements overwhelming global economic growth. The collateral damage of falling interest rates is clear for all to see.
Iron Ore up another 6 percent in the weeks first session , almost doubled in price for the year, certainly showing if your are a trader there are many many options , not only bitcoin or A2 Does the price run another 10 percent or will a large Chinese newly minted hammer crush the price and holders, as often historically has been the case.
It's a nice one Yvil :).
But remember, at least in terms of house prices, for people who don't own, a house price crash (provided they have secure jobs) is an optimistic view.
So it can depend on your position whether you are in fact an optimist or pessimist. Don't you think?
DH
Have the banks taken advantage of FLP yet?
I understand that they have plenty of cash and seem to be tightening up on lending - no only with self imposed LVR but also being a lot more picky in their lending and very very slow in approving applications especially through brokers.
BREAKING NEWS -The Warehouse Group to repay $68m wage subsidy
https://www.msn.com/en-nz/news/national/the-warehouse-group-to-repay-do…
As far as $NZ dropping vs $US, I was hoping the continued conspiracy election denial and suggestion of martial law by a mentally delusional trumpty DUMBty would outway their new stimulus package, with some positive news on trade figures for NZ etc...temporary? and a rise back up towards .75 as Jan 20th gets closer????
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