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A review of things you need to know before you go home on Monday; risks rise from inbound UK-variant travellers, service sector struggles, Auckland auction activity doubles, swaps and NZD hold, & more

A review of things you need to know before you go home on Monday; risks rise from inbound UK-variant travellers, service sector struggles, Auckland auction activity doubles, swaps and NZD hold, & more
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 here.

TERM DEPOSIT RATE CHANGES
The NZCU Baywide set of credit unions have cut their term deposit rates.

PUTTING US ALL AT RISK
It has now been determined that the South Auckland mother and daughter at the centre of the current outbreak have the UK variant of COVID-19, and a previously undetected version in NZ. They are victims contaminated by a traveller arriving by air and contaminating aeroplane laundry like a passenger pillow or crew uniforms. Clearly, pre-testing and a negative result before flying is little defense especially against UK related passengers. Australia has now suspended their travel bubble with New Zealand.

REGULATING THE LOCKDOWN
The FMA has issued a 13-point set of guidelines for financial firms working under Level 3 lockdown. They have a six-point set for those in Level 2.

ALL IS NOT WELL
Consistent with the renewed lockdown in Auckland, and Level 2 elsewhere, the January services activity survey (PSI) is an unfortunate metric. It shows a sector contracting sharply before the lockdowns, so this latest event will compound the problems. Much of the hurt is in the hospitality sector, and much of that is in Central Otago / Queenstown / Wanaka region. It is grim for them with little prospect of improvement. There will be many businesses that will fail there now, especially as there is now almost a zero likelihood of even a trans-Tasman bubble opening in 2021.

AUCTION ACTIVITY GATHERED PACE
Prior to the L3 Auckland lockdown, last week there were sales on two thirds of the properties at Barfoot & Thompson's auctions, with a Great Barrier Island bach selling for $1.56 mln. Overall there were double the auctions than for the equivalent week a year ago.

HANGING IN THERE
Auckland's water storage dams emptied by a sharp -1.4% last week and are now barely 60% full after a longish run of superb fine weather. (It is raining today however, but not heavily so the recharge is unlikely to be significant.) However, relatively low water consumption this summer probably means the city will get though this water stress without too many more issue before winter rains return.

NOT AS RESTRAINED AS EXPECTED
Japan has surprised analysts with a much better Q4-2020 economic performance than expected. There was growth (actually) when a decline was expected. More interesting was that private consumption grew well and didn't fall away as much as expected from the strong Q3 jump. Overall, these are quite encouraging results for the world's third largest economy. (The world's fourth largest economy, Germany, didn't bounce back quite as robustly as Japan, so slipped on a relative basis.)

GOLD PRICE HOLDS
Gold is trading in Australia, and soon in Asian markets. So far today it is at US$1824, unchanged from this time on Friday, and very little changed from where it ended in New York last week.

EQUITIES UPDATES
The NZX50 Capital Index is down -0.5% so far today. Earnings results are weighing on the local exchange. The ASX200 is up +0.9%. Shanghai and Hong Kong are closed for Spring Festival. Tokyo has just opened as is up a strong +1.2% in early trade (see above). The S&P500 futures trading suggests New York will open up marginally tomorrow (+0.3%).

SWAP & BOND RATES
Update: Long swap rates resumed their sharp climb again today, with the 10-year now its highest since February 2020. The 90 day bank bill rate is up +1 bp to 0.30%. The last time it reached this level was at the end of September 2020. The Australian Govt ten year benchmark rate is up a strong +8 bps to 1.29%. The China Govt ten year bond is unchanged at 3.26%. And the New Zealand Govt ten year is up to 1.36% (+4 bps) and now above where the earlier RBNZ fix was, at 1.34% (+3 bps). The US Govt ten year is up +5 bps from this time Friday at 1.21%.

NZD HOLDS
The Kiwi dollar isn't going anywhere today and is now still at 72.2 USc. On the cross rates we are have slipped slightly against the Aussie to 93 AUc. Against the euro we are unchanged at 59.6 euro cents. That all means our TWI-5 is still just on 73.6.

BITCOIN UNDECIDED WHERE TO NEXT
The bitcoin price has made a couple of runs at US$50,000 and pulled back each time. It is now at US$47,056 and below this time on Friday. It's record high reached over the weekend is US$49,716. Volatility over the past 24 hours has been +/- 2.5%.

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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End of day UTC
Source: CoinDesk

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34 Comments

Do we know how many more people have been contaminated in NZ by this more infectious UK variant of the virus?

It is severely underperforming. Considering the hype. It's like Sonny Bill Williams in Canada.

Or global GDP since 2008

Or sea level rise since the 70's

Expect extreme vitriol from the left...

I seek it out

Yvil
Bloomfield 4pm says testing to determine what is happening - currently it seems lots of uncertainty as to both origin of infection, and who is and extent of any infection (e.g. hence Papatoetoe HS testing today).

I am confused. David's comment above says that the mother and daughter were infected through contact with infected laundry. Media darling Michael Baker said earlier in the day this is highly unlikely...

13
up

Perhaps that's the difference between a business website editor and an epidemiologist.

Fritz
I agree; my understanding from PM 4pm conference was that the origin was still uncertain and was to “leave no stone unturned” to determine the source.

Re Queenstown etc, there was an excellent article by Bruce Cotterill in the Herald in the weekend. He fairly outlined how this is very much a big, unanticipated whack to businesses down there, but he also conveyed how many businesses down there had become so complacent and lazy.

13
up

The Queenstown ski field operators were certainly treating their NZ customers arrogantly. They had sold season passes for 2 mountains - they closed Remarkables for 4 days every week once the school holidays were over, meaning everybody was crammed into Coronet - there were huge queues and delays on any decent day. They undserstaffed (and from the accounts I heard treated their casual staff very poorly ) and in general were much more interested in managing their cost rather than providing a positive customer experience.

We were some of the many kiwis who went down to central(twice) last year to enjoy domestic tourism. Some fantastic businesses there, but also some very overrated and complacent ones.

Exactly. I have had quite a lot to do with Queenstown over the years and complacency, conservatism, laziness and arrogance is quite common in businesses there.

The qtown ski fields were miles ahead of ruapehu in the winter just gone. We really enjoyed the former and had an absolutely miserable time at the latter.

Were you in qtown early in the season? They were a bit caught out early on I gather, but had certainly put it right by the time we got there later on.

How about service in town? Was it provided as if their lives depended on it?
Mine was really patchy the two times I was down last winter.

Pretty good on the whole. Maybe not quite like you put it, but I wouldn't have expected that -- I'd expect more of an existential crisis for the owners than for the frontline staff.

Queenstown is a dump. Magnificent natural resources, but they managed to screw it up.

Town is a dump ??? Please name other NZ towns that are more attractive in your eyes

Wanaka! Mind you they are doing their best to screw it up too.

The landscape is amazing, but the urban form and architecture of the township is very average.

They've still got the property bubble though. To be honest, you would think that the business outlook is dire and properties would be dumped.

Anyway. Famous winter resorts like Niseko and Hakuba got a pounding after the end of the Japanese bubble. Recovered when the world outside Japan discovered them. Still wonderful places, but also struggling with no international tourism.

There must be a deal to be done with Queenstown / Wanaka. Something like a 0.5% property tax starting in 2023 on all homes that are not someone's primary residence, in exchange for a *massive* grant for new infrastructure and public realm projects to be canvased and prioritised by local leaders (thus providing work opportunities pending the resumption of hopefully higher value tourism).

Good idea. Give, and take

Why the expectation that it will come back?

Why jfoe.?? If the tourism actually made money they could afford the infrastructure.
Or - is it you want the public to pay for the infrastructure, so that business can keep the profit?

Fair challenges all. I guess the question is whether you let the town and its people go to the wall, lose the infrastructure needed to sustain a tourism industry, stand by whilst the houses and streets fall into disrepair? Or do you underwrite a forward medium term strategy that keeps the infrastructure on ice - maybe even improves it, and changes the game so that the benefactors of future success pay their way? My view is that for NZ to be successful, every town in NZ has to be successful. The invisible hand of the market won’t make that happen and if we can’t find a recipe for Queenstown’s success, what hope have we got for anywhere else?

Them thar 'local leaders' you speak of are too busy feathering their own nests to be bothered about the well-being of Queenstown as an entity. Where do you think the last $65 million went (or whatever the amount turned out to be)?
Labour and patronage comes (or used to!) via a never ending stream of tourists, who want to stay for 6 months as part of their OE and would work for rock bottom wages just to pay for the ski passes and drinks in one of the bars. Pack themselves in 7 to 10 per 4 bdrm rental property, and with any luck the owners didn't have to renovate after they'd left, leaving crampon marks on the walls where they'd practised their rock climbing skills after a night of Shooters and Fergburgers. And wealth comes via a never ending stream of those who've 'made it elsewhere' who get off their Air NZ flight thinking they've arrived in Paradise; fodder for the RE, legal and property developer industries. Those who later realise what scam the place is and leave after one season of doing everything there is to do in a tiny 'city' at the back end of nowhere, leaving the scam artists to prey on the next season's worth of plane arrivals. Stay any longer and risk becoming one of the vultures looking for new prey.
The whole place needs the shake up they don't feel they deserve to have coming. As does the country.

Love it bw. Went to school with a QT slumlord and know one of the absent property owners who barely spends any time there and lives offshore.

Ha ha nice. There are a lot of dickheads in that town.

Great response. So what would you do?

I see the mayor of Queenstown is squealing at every opportunity to get the govt to bail them out somehow. I'm under the impression that visitors visas with some sort of work option provided the Queenstown hospitality work force. Maybe the owners of these places can do some the workthemselves that was previously done using cheap visitor labour. Certainly council revenue will be hit. Cut back on the vanity projects and cut their coat according to the current cloth. Mind you that could be said for many Councils.

To be fair, I guess he's only squealing as he should, as an advocate for his constituents.
I don't have a problem with him, it's more like his constituents that I do...

QT needs its slaves to operate. Like Dubai.

This is the inconvenient truth in EVERYTHING. People don't want to see it though, because they love cheap electronics, clothes, and knick knacks too much.