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A review of things you need to know before you go home on Thursday; a mortgage rate rise, GST tax take jumps, Synlait stutters, Xero buys, NZGB yields jump, swaps up, NZD soft, & more

A review of things you need to know before you go home on Thursday; a mortgage rate rise, GST tax take jumps, Synlait stutters, Xero buys, NZGB yields jump, swaps up, NZD soft, & more
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Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
The Cooperative Bank has raised its four and five year fixed rates by +20 bps.

TERM DEPOSIT RATE CHANGES
The Cooperative Bank has raised its 4 year TD rate to 1.55%.

TAX COLLECTIONS FLOOD IN
The January 2020 seven month Crown Accounts on the surface don't look too exciting. The Operating balance rose +$77 mln in January to almost +$3.3 bln for the seven months of this fiscal year so far. The OBEGAL was a deficit of -$469 mln, taking the year to date deficit to over -$4.4 bln. (The difference between the two are the revaluation gains on marketable assets.) But a closer look does reveal a notable event. In January, the Government took in almost $2.5 bln in GST and that is a record high for any month, ever. Usually the peak month of GST collection is a May, but not this year. In the seven months to January, they have raked in $15 bln in GST, more than twice as much as for company taxes, and +10.6% more than in the same seven months in 2019/2020 (which was before any lockdowns). In the same period, personal income taxes collected were up +5.7% on the same basis. Consider, our economy is flat-lining economically on a 'real' basis while the Government is sharply increasing its tax take from this flat environment. The Q4-2020 GDP data is due to be released on March 18. GDPLive suggests it won't be that flash.

WAGE SUBSIDY APPLICATIONS NOW OPEN
The Wage Subsidy March 2021 is a payment to support self-employed people and employers, to continue to pay employees and protect jobs for businesses affected by the rise in alert levels. You need to declare you will have at least a 40% decline in business. You can apply to cover the wages of employees over a 2 week period. Self-employed people can also apply for this. Application is now open and payments will start from Monday 8 March 2021. The subsidy will be paid at the rate of $585.80 a week for each full-time employee retained (20 hours a week or more), and $350 a week for each part-time employee retained (less than 20 hours a week).

A DAIRY STUTTER
Dairy company Synlait (SML) says it is continuing to experience significant uncertainty and volatility within its business and has withdrawn its earnings guidance for the current year. Synlait is closely aligned to a2 Milk (ATM).

NEITHER REALLY TOOK OFF
The peer-to-peer lending (P2P) and equity crowdfunding sectors experienced steady growth in the last year to June 30, according to data from the Financial Markets Authority (FMA). But both are still tiny financial sectors with $624 mln in loans in the P2P sector and just $16 mln raised on crowdfunding platforms. And the P2P sector will likely shrink this year because Harmoney has converted itself into a regular finance company and withdrew from accepting retail lenders in April 2020. They were more than half the P2P sector.

HIGHER DEMAND, HIGHER RATES
$500 mln in four NZ Government bonds were tendered today where demand was strong but the resurgent upward yield pressure was very evident. $1.572 bln was bid, leaving $1.07 bln unsatisfied. The $200 mln April 2025 tender resulted in a yield of 0.87% pa, well up from the 0.6% pa two weeks ago. The April 2029 tender resulted in a yield of 1.58% pa, also well up from the prior 1.25% pa. The April 2033 tender resulted in a 2.02% pa yield, up from 1.67%. Finally, the small $50 mln inflation adjusted bond commanded a yield of 0.96% pa plus CPI, sharply higher than the prior 0.23% plus CPI.

LESS DEPENDENT ON CHINA
Australia posted a trade surplus of +AU$9.3 bln in January 2021 (a record), comprising of a goods surplus of just under +AU$8.0 bln and a services surplus of under +AU$1.3 bln. These 2021 levels compare with a January 2020 surplus of just +AU$2.4 bln where the goods surplus was AU$2.9 bln and a services deficit of -AU$0.5 bln. Their goods surplus with China is now +AU$5.5 bln in January 2021, compared to +AU$3.8 bln in January 2020. That indicates Australia has become less dependent on China for its trade, not more (even though they are still way more dependent on the Middle Kingdom than New Zealand is).

ACQUISITIVE NOW
Xero has acquired European workforce management platform Planday in a deal worth more than NZ$300 mln. Xero now has a market capitalisation of NZ$18.3 bln.

DAVID SMOL JOINS CO-OPERATIVE BANK BOARD
The Co-operative Bank has appointed David Smol as a director effective March 4. Smol was previously head of both the Ministry of Business, Innovation and Employment and the Ministry of Economic Development. Co-op Bank says Smol will bring many skills to its board including strategy development, commercial and financial analysis, regulatory compliance and risk management.

GOLD LOWER
Gold is trading in Australia, and soon in Asian markets. So far today it is at US$1716/oz and down -US$18 from where it was at this time yesterday. At the close of New York trading earlier today this price was at US$1711/oz, while in London it had also closed earlier at US$1711/oz.

EQUITIES SHARPLY LOWER
The S&P500 ended today down -1.3% with a further retreat on top of yesterday's. Reflation fears hit stocks, especially the NASDAQ. At its opening, the very large Tokyo market is down -1.5%. Hong Kong is down -1.2% and the Shanghai exchange has opened down -0.9%. The ASX200 is down -0.7% today in early afternoon trade and giving up all of yesterday's gain, while the NZX50 Capital Index is down -0.9% in late trading.

SWAP & BONDS RATES RISE SHARPLY
Update: Swap rates rose sharply today across the curve with the two year up to its highest in nearly a year, and the ten year up to near its highest in 20 months. We don't have today's closing swap rates yet. If there are movements today, we will note them here later when we get the data. Today the 90 day bank bill rate is unchanged at 0.31%. The Australian Govt ten year benchmark rate is up +8 bps at 1.78% as the reflation trade gets going again. The China Govt ten year bond is unchanged at 3.28%. But the New Zealand Govt ten year is also up +8 bps at 1.84%. And that is above the earlier RBNZ fixing at 1.80% (+7 bps). The US Govt ten year has also risen sharply in the past 24 hours and is up +7 bps at 1.48%.

NZD SOFT
The Kiwi dollar is down to 72.6 USc. On the cross rates we are little-changed at 93.3 AUc. Against the euro we softer to 60.2 euro cents. That all means our TWI-5 is lower at under 72.2.

BITCOIN FIRMER
The price of bitcoin is rising today, now at US$50,713 and up +4.2% from this time yesterday. Volatility over the past 24 hours has been a high +/- 4.3%.

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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47 Comments

GST is up because we are spending up a storm out of savings.

Sign of the times. Auction today:

https://www.barfoot.co.nz/property/residential/auckland-city/greenlane/h...

CV of 2.450M

Went on the market which means the sellers reserve price at 3.400M
Sold under the hammer for 4.460M

That's over a million dollars above reserve for a fairly unremarkable house.

Subdivide 701sqm?! Into what, car parks? City folk be crazy.

10
up

Improvements value is 400k so the land value is 4.060M for 701 sqm which is $5,791 per sqm. That's got to be some sort of record.

Where is that sort of money coming from? Even I'm starting to see tulips now!

Think about it...it went up more than a million dollars after it reached reserve. That should be on the news.

As a knockdown its $6362 per square metre land value only

It's a planning gain. We really need legislation (preferably through amendment to the Ratings Act) that deals to both planning gains and losses.

Property is like Bitcoin, it doesn't *do* anything and is infinitely subdividable!
Trying to put a value on Auckland property based on its utility is dinosaur thinking.
-------
In all serious, the listing itself suggested land-banking as a good use for this property. Maybe you could squeeze 3 townhouses on it, and sell them for... $1.5m each, to make a... to almost make a profit..?

At $1.5m you be losing money as that isn't even factoring construction costs.

Don't think you can subdivided the current property without knocking down the current house.

The only rationale way this makes sense is that if the new owner owns neighboring properties and is planning to put something like 10 townhouses down.

Tawera road isn't what I would call glamorous

Even if the new owner does own neighbouring properties, someone else was prepared to pay a thousand or so less! Unless they were neighbours too.

There are 5 town houses on the property next door. So I guess the same will happen to this property. The house will be bowled over.

At almost a million per section you’d have to sell those townhouses for a fair amount to make a reasonable return on investment.

Property Sales are not always about 'the property', are they?

Let's say you do someone a good turn, and they owe you a dollar or two, and you own a house in, say, Parnell GreenLane, and sell it for an overvalued price, you get paid for the value of the property and a clean payment for whatever amount was due for services rendered.

Has John key processed the title change when he sold his house....or are we still waiting to find out who bought it?

Wow! And the washing machine goes round n round....? Gosh since the casino is closed to fx, maybe yeah, launder via ponzi, sorry, property?

Can you make a guess as to who was bidding it up? All investors? Phone buyers?

There must have been quite a bidding battle. It must have been over the phone as Auckland is in lockdown.
That house went up in value by over $4000 a week, every week, since the owner bought it in 2003.

That house went up in value by over $4000 a week, every week, since the owner bought it in 2003.

This sounds like it could be a story from Zimbabwe. But it's NZ.

John key reckons it’s a good thing, maybe he’s a good friend of Mugabe?

I’m guessing it was one of those likeable young couples from the bank ads, taking their first step onto the property ladder. Soon they’ll have dog and a toddler, and they’ll spend their weekends with a paintbrush doing the place up. That is something that real-live young people get to do in Auckland, honest.

Can you make a guess as to who was bidding it up? All investors? Phone buyers?

Well the 1% (before costs) rental yield doesn’t sound that attractive.

People don't seem to pay much attention to what I say on this but this is happening because of the higher density zoning. We will see a lot more of this silliness after the council rezones a lot more land for high density housing.

That makes sense

Yep, a planning gain.

It won’t continue too long; can’t turn one house into five too often before we have way too many houses.

That's the one problem the government knows how to solve.

I think you might be surprised.

You see a lot of this on the north shore (before albany). It's becoming a bit troublesome if you are looking to buy a standard freestanding property. You need to ensure the properties next to you are not going to be turned into townhouses.
If you are buying to live in a house in auckland choose wisely if you value your privacy...

Hardly anyone pays any attention to that when buying , then they whinge when the apartments rise next door... I once tried to develop a little business doing reports on this stuff for prospective purchasers, but in terms of due diligence there seemed to be very little interest...

Check out 54 Pohutukawa Ave Red Beach CV 1.335m pre auction offer accepted 2.650m sold 15mins later 3.410m so now the rest of the street will expect a price like that. Madness.

Can a country with miserable productivity and soaring consumptive debt escape impoverishment? Find out this season on "Keynesians vs Reality: Kiwi edition"

And similarities in Greater Vancouver, with their February report.( mortgages are a little lower in Canada)
https://www.rebgv.org/market-watch/monthly-market-report/february-2021.htm
1084000 is the average composite benchmark for Greater Vancouver.
Average Barfoot February sale price is 1075000. Come on Kiwi .

Here's a better link:
http://members.rebgv.org/news/REBGV-Stats-Pkg-February-2021.pdf
They're blaming it on low interest rates.

Thanks for that Mr Smith. I will pass by later with trailer and spades to gather some Greenland dirt.

Meanwhile, ASB chief executive Vittoria Shortt told the conference financial strains were starting to show with some customers, who were struggling to make payments and had dwindling cash.

"Fewer customers have what we would describe as 'a rainy day savings fund' of $1000 or more, which is a pretty low bar," she said.

Would have been nice to get some context here. I wonder what the actual proportion is for those who have the $1000 rainy day fund.

https://www.rnz.co.nz/news/business/437647/reserve-bank-governor-adrian-...

13
up

What is wrong with this country?!
TVNZ News, this evening:

"Communities on the West Coast are having a different experience of COVID-19. Franz Joseph is on its knees as tourist number plummet, yet Buller a mere 300 kilometres up the road is booming, because house prices are skyrocketing!"

There is no hope.....

We are seriously f$%$ed even though things seem ok on the surface.
A whole generation of governments have let us down, in the name of short termism. But we only have ourselves to blame, they are a reflection of us.
Ps. Better to ignore mainstream media BW. I only watch the tv news if there is a major news event. It's a pile of .....

The answer is obvious and simple.

1. Just keep injecting debt, exponentially-increasingly.
2. Keep pumping house prices with it, especially where tourism has vanished, or where child poverty is observed.
3. Keep buying shyte from overseas, levered on said ponzi.
4. -blame-shift everything; Greenies, terrorists, communists, lefties, whateveries..... they're obviously to blame (we aren't - we believe, you see; they don't).
4. Repeat.

What could possibly go wrong?

I don’t think they care what could go wrong, it’s more about when it goes wrong. As long as it’s long after they have made their fortune then it’s fine.

You forgot name calling, bloody luddites.

Tbf one relies solely on high spending international tourism the other on average tourists/kiwi mtbs and he like and also has other productive stuff. One has been able to adjust, the other doesn't appear to want to or able to.

They went though this a generation ago, reinvented with wooden toys, spinning-groups in all directions. We have one of said wheels, inscribed: Pres. to Woolly Westcoasters by Greymouth Lions, 1976.

reinventing the wheel, so to speak.....

I drove the west coast last year after lockdown.

Most of the town shops close at 5pm, motels are not on Booking.com or similar so arranging accomodation on the road is not easy,all the food can be described as a burger and large plate of McCain potatoe fries for twenty five bucks and the operators like something out of the 60’s.
There are some highlights but you have drive along way in tween to see them.
I really felt that Tourism New Zealand needs to run a roadshow where they visit the towns... and do some training on how to go digital for bookings, and teach the chefs/cooks what people want today. The whip around the plate with a bit of reduced balsamic doesnt really cut it today.
They need to get real really fast!

Consider, our economy is flat-lining economically on a 'real' basis while the Government is sharply increasing its tax take from this flat environment. The Q4-2020 GDP data is due to be released on March 18. GDPLive suggests it won't be that flash.

Hmmmm ... Why is the government sitting on inert bond and tax proceeds parked at the RBNZ, to the value of $36.434 billion, rather than deposit them into the economy, via the banking system, to spark inflationary spending or more hopefully expanded productive capacity?

Don't know if you read this, Audaxes, I've posted it before (and it's the answer to your question):

https://surplusenergyeconomics.wordpress.com/

" If investors were to factor higher inflation into their calculations, we would expect them to favour those asset classes (such as equities and property) which could be counted on to – at the least – ride the rising inflationary tide. They would steer clear of cash, and be wary of bonds, because, in an inflationary climate, interest rates might rise enough to drive bond yields upwards (though not by enough to make cash a viable preference). They might look favourably on assets such as cryptocurrencies and precious metals which could be perceived as hedges against inflation.
This, by and large, is what has been happening. Markets, it seems, are expecting policymakers to ‘talk hard and act soft’, combining hawkish homilies about debt and inflation with a continuation of generous support for households and businesses.
This stance echoes the prayer of St. Augustine, who called on the deity to make him virtuous – “but not yet”.
Furthermore, investors, no less than the authorities, must be aware of the delayed price-tags attached to some of governments’ covid response initiatives. For instance, granting interest and rent “holidays” has inflicted substantial losses on counterparties such as lenders and landlords, and these costs must in due course be made good, unless we’re prepared to accept failures in counterparty sectors.
We should, then, anticipate some virtue-signalling tax rises which, in sum, amount to little more than small down-payments on the enormous costs of combating the pandemic. Not for nothing has inflation been called “the hard drug of the capitalist system” – it offers a beguiling short-term alternative to painful and unpopular adjustment to economic stresses."
"Guided by conventional interpretation – whose faith in ‘perpetual growth’ is, as yet, unshaken by events or anomalies – governments and investors alike believe that there exists a ‘promised land’ which, if we can once reach it, combines real growth of at least 3% with inflation of less than 2%.
The fatal error on which this supposed nirvana is based is the belief that economics is nothing more than ‘the study of money’, such that energy and broader resource limits to material prosperity do not exist."

The simple answer is that there is no physical home for them, so it would only add to the ponzi, surely?

Maybe New Zealand has been told by the big four... Australian banks... well actually really US banks.... that we need to increase our capital.
Maybe the time has come that the banks will say we won’t lend any more... not yet but maybe closer than you think.

Ads becoming more obnoxious on Interest.co, but I understand. Wish I could use my cap gains to pay for ad free.
I come here for the 'litmus' test comments. One thing the 'lever pullers' will never have on their side is peer-review.

Shine on you crazy diamonds.