Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
Nothing here today.
TERM DEPOSIT RATE CHANGES
Treasury has raised its 4 year rate for its Kiwi Bond to 0.40% from +0.20% today. It didn't change the rate on any shorter term. The Cooperative Bank has trimmed its Step Saver bonus saver account by -10 bps to a maximum potential rate of 0.25%.
FEWER NEW CITIZENS
New Zealand welcomed 31,870 new citizens in 2020, down from 44,413 in 2019 and . 11,436 were by descent, down -15%, and 20,434 by grant, down -34%. Australia is still the most common country of birth for people born outside New Zealand to gain citizenship. Just over 5,200 Aussies became Kiwis in 2020, either because they had a parent who is a citizen or they migrated to New Zealand. The United Kingdom comes second, with 5,199 new Kiwis, followed by India, with 2,970. From the USA it was 1825 and from China 1019.
GETTING OUT WHILE MULTIPLES ARE HIGH
The Canadian/American owners of 2Degrees are moving to float their New Zealand business. They control 73% and in their latest three month period reported to September 2020 they reported a growing loss of -NZ$42 mln. But they do have a positive EBITDA for the year to December 2020. And they say with equity markets strong globally, telecom valuations are attractive, "and the New Zealand dollar is at a multi-year high ... now is an opportune time for the shareholders of 2degrees to explore a partial listing of the business". That would "raise primary capital to accelerate growth initiatives at 2degrees as well as enable Trilogy to reduce the debt it incurred while building the 2degrees business." (Their only other operating subsidiary is in Bolivia, where they are breaking even.)
KIWIBANK CONFIRMS CLOSURE OF 7 BRANCHES
Kiwibank has confirmed plans to close seven branches between April and December. The branches are located in Balclutha, Gisborne, Matamata, Onehunga, The Palms - Christchurch, Waihi and Waipukurau. Kiwibank says the closures come with an increasing number of customers using digital services and fewer visiting branches. In terms of staff at the branches, a Kiwibank spokeswoman says; "We are committed to working through options with our teams between now and when branches close, including redeployment opportunities."
POSITIVE TRADING
The Warehouse Group (WHS) has reported half year revenues up +7.4% to $1.8 bln, and NPATx of $55 mln (up +89%). (The Warehouse Group is not part of the NZX50 because it is not widely held. Two parties control almost 70% of its shares.)
LIFELINE
Three out of four firms received COVID-19 related financial support from the government in 2020, Stats NZ said today. Almost half of all businesses qualified as "essential services". Those who couldn't operate tended to be SMEs. “Government assistance offered during COVID-19 restrictions, including wage subsidies and business loans, was one of the key things businesses used to help stay afloat last year,” business statistics manager Geraldine Duoba said. The size of a business (measured by its number of employees) was not a major factor in whether that business took the opportunity to better manage its finances.
ANOTHER NEW HIGH
Yesterday we noted a new high for wholesale electricity prices. Today they are higher again. The benchmark Harwards price is over $497/MWhr up in one day from $437/MWhr. These are very high levels indeed. The average for the past year, including the occasional spikes, is $133/MWhr. The minimum was just $13/MWhr. The Otahuhu price got up to $517/MWhr.
BIDDING HIGHER FOR LOWER YIELDS
Today's NZGB bond tender saw $450 mln offered and $1.182 bln bid. Yields fell from the prior equivalent event. The May 2024 $200 mln offer had 4 winning bidders who were prepared to go down to 0.39% pa, far lower than the prior 0.57% pa. That left 22 others empty. The April 2027 $150 mln went to 9 winners leaving 14 empty. The winners bid 0.95% pa, down from the prior 1.18% pa. The May 2041 $100 mln was won at 2.43% by 10 of 27 bidders, also lower than the prior 2.58% pa.
REGIONAL GDP REVEALED
According to a Stats NZ release today of regional GDP, in the year to March 2020, New Zealand’s total GDP was $323.1 bln with the North Island generating 78% compared with 22% for the South Island. Taranaki had the highest GDP per capita, at $76,715, followed by Wellington ($74,785) and Auckland ($71,978).
GOLD FIRM
Gold is trading in Australia, and soon in Asian markets. So far today it is at US$1,34 and up +US$8 from this time yesterday.
EQUITIES MIXED
The S&P500 fell away sharply at the end of trading today ending down -0.6%. The Tokyo exchange has opened up +0.5% with a recovery from yesterday, while the Hong Kong Exchange has opened down again, this time down -1.4%. The Shanghai exchange has opened down -0.5%. The ASX200 is up +0.3% in early afternoon trade and the NZX50 Capital Index is matching that, up +0.3% near the close.
SWAP & BONDS HOLD
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. They probably held after yesterday's big drop. The 90 day bank bill rate is unchanged at 0.34%. The Australian Govt ten year benchmark rate is up +4 bps at 1.71%. The China Govt ten year bond is also lower at 3.22% and a -2 bps slip and this is compounding now. And the New Zealand Govt ten year is up +5 bps at 1.58% and above the level of the earlier RBNZ fixing at 1.54% (-3 bps). The US Govt ten year is currently up +2 bps from this time yesterday at 1.62%.
NZD LOWER
The Kiwi dollar has now dipped well below 70 USc and is now at 69.7 USc. On the cross rates we are holding lower at 91.8 AUc. Against the euro we soft at 59 euro cents. That all means our TWI-5 is now marginally lower at 72.2.
BITCOIN DECLINES YET AGAIN
Bitcoin has fallen to US$52,333 which is another fall, this time of -2.6% from this time yesterday. Volatility over the past 24 hours has been very high at +/- 5.3%.
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41 Comments
“New Zealand welcomed 31,870 new citizens in 2020”
Well – lucky, lucky us?!?
My understanding is there are still 10’s of thousands waiting in the wings to claim citizenship – and certainly in no hurry or mood to leave the ship.
Might be wrong but I think immigration is chugging through at around 3,000 a month – currently something like a year or two wait to simply process the current backlog – ie no one else joining the queue.
Then there seem many others happy enough with just residency – which I think confers a lot more rights than other countries offer.
Many countries, Korea for example, don't allow dual citizenship. I'm sure this is in part why some are happy to stick with residency. The perk of NZ residency, unlike Canadian residency, is it won't be revoked if you leave the country for a long period. Of course those rules can be changed at any moment. NZ citizenship is also an Australian gateway, unlike NZ residency.
Worth remember those new citizens were already here and not new arrivals. It takes 5 years from residency until citizenship.
"Three out of four firms received COVID-19 related financial support from the government in 2020"
Easy to slag-off the Government but on average 75% of jobs - including the jobs of those posting on this site - were at less risk because of Government support. I don't think we really appreciate that.
We must immediately close Huntley Power station. Its burning either dirty coal or gas. I think its coal currently. This should increase the price the wholesale price much higher than the figures mentioned in the article. It won't ripple through for a while into retail as I understand most retail users will be on some form of contract. To force the price down the EA/ComCom/govt can institute rolling blackouts affecting both businesses and consumers. This will give a taste of the Greens policy now and to a lesser extent Labours which is to be roasted slowly rather than be grilled with the Greens.
Who are you asking to do this? The majority holder of HLY is the govt.
Are you suggesting that the solution then would be fast track hydro? Or wind? Or solar or geothermal? The Greens do not like hydro.
Power stations take ages to investigate, consent and build. Transmission lines need to be built, transformer and CBs need to be purchased and installed.. Consultation is required. And when this happens people object. Protest. Police get involved.
Its all a nightmare these days. Best to not be in that business. Like local govt, its now very toxic.
It's happening as we speak .Tilt/Mercury are building a wind farm right now and have more consented in the pipeline, Contact have raised funds for new geothermal to be completed 2023 and teamed up with "wind generation exports' Roaring40s, Meridian will soon start building their new wind farm. Huge investments are rolling on now thanks for Government and market direction. The big gentailers have a range of other consented power plants waiting in the wings - mostly wind. Exciting times.
Meanwhile, the rising price of carbon has doubled the cost of coal, further pushing out the non-renewables. Huntly will not be around too much longer, although it still has a role especially in winter at the moment.
Huntly is essential as a contingency against a dry winter (=not enough water behind the hydro dams). The only alternatives would be major new geothermal, or storage technology which doesn't currently exist.
It's also a bit of a red herring at the moment. There are much better gains to be made in other areas than obsessing over the last bit of carbon in the electricity generation mix.
Significant storage tech might not be too far away...https://www.stuff.co.nz/business/green-business/124428462/the-bold-drea…
Down seasons are only a problem for those arrogant enough to think it somehow has immediate rights, no matter what.
Others of us live with what we get. I've been off grid more than 20 years, cumulatively, 17 continuously. You do what you can when you can, and don't when you can't.
Spot price power has the same effect combined with load shedding.
The spot price co's however provide no tools for that at the consumer level. I built my own but then abandoned spot power when it became obvious it didn't behave in a sensible way.
Making the price data available free and live is what the govt needs to do to right now.
I was interested to see how the auctions would go today. Would the new rules have a dampening effect?
I think the sales rate will be down. It appears at the Shortland St afternoon auction 15 properties were offered for sale and 8 were passed in. A 47% success rate.
One property looked interesting. A typical nice rental in a good location:
https://www.barfoot.co.nz/property/residential/auckland-city/one-tree-h…
RV 970K - Passed in at exactly 1M
You could possibly rent this out for $600 per week. If you did buy it for 1M and put in 200k and raised 800k mortgage the dollar return after expenses and tax would have been something like $4600. That's accounting for 6K in rates/insurance/management and a mortgage at 2.29%. A net yield of 2.3% on your 200K.
However with the new rules the "return" would be -$1370. (negative 1370)
Time will tell whether the seller should have accepted 1M because at that price it doesn't seem to generate any income for an investor. Someone with 200k deposit who wanted to have it as their home would be paying about $700 a week in mortgage (cap+int)
Yes, my interest is purely "academic".
Although when I think about it it has always been fairly bad in Auckland. In the old days you would expect to be negatively geared on a property like this. If you were after capital gain then it could be worth it. Even a 4% gain would turn that 200k into 240k in just one year as the gain is on 1M. Maybe recent low interest rates have just spoiled people into thinking you have to be positively geared? If you were confident of capital gain then this would be a good an excellent buy at that price with only small outgoings. It may still be worth a gamble. Except they probably want more than 1M.
Zach..who knows. It may be worth a gamble but not one I would take right now. Not sure why people seem concerned about being negative geared. The real money in NZ property has been loading up on houses and waiting for the guaranteed appreciation (capital gain). I was negatively geared for over 20 years and had not a care in the world. Just took a 3 month rent holiday almost every two years to pay the shortfall. Making or losing a hundred bucks a week or so (on each property) is neither here nor there. It is all about the (possible) capital gain or going forward maybe even about the capital loss.
Certainly negative gearing is a legitimate way to get into landlording. As time passes, rents go up, salaries go up and you can enter retirement with properties that are cash flow positive. Many businesses require extra money in their early stages.
Kind of the point of my last comment was that things were temporarily a bit unusual before Labour changed the rules. In general, in Auckland, it hasn't been easy, even nigh on impossible, to straight out be in positive territory. Labour have returned things to how they were in a strange way. This mess is all the fault of exceptionally low interest rates.
No, the mess is because of what is forcing the low interest rates. This is where DC drops the ball too, on the Bond thread.
This is a one-off, never to be had again, global reversal. Can't be anything else.
Which sort of suggests that your historical observations are inapplicable, too.
Re the decline of the NZ and other dollars relative to the US$ are discussed in the FT - which is behind a paywall. "What a stronger dollar means for the world"
https://www.ft.com/content/590c6ed8-5fb7-4d34-ad93-da9e66649984
It includes:
Over the long term, the twin deficits should put downward pressure on the dollar, but the very reasons they are rising will overwhelm those structural issues for now. The dollar’s turnround began as the Biden administration pushed through the whole of its $1.9tn American Rescue Plan. At the same time, it significantly ramped up the pace of vaccinations, from about 900,000 a day to almost 3m.
Now the US economy looks set to outperform. According to the OECD, the rescue package alone should add 3 to 4 percentage points to 2021 GDP. Wall Street economists see GDP growth of as much as 8 per cent. That will mean higher sales and profits for American companies, inviting investments by foreigners, who will need dollars.
Hospitals at bursting point in SUMMER for heaven's sake.
Slash immigration now, the country is overloaded. I am essentially leftist but I am feeling a bit rightist on this. Enough is enough.
https://www.nzherald.co.nz/nz/nz-hospitals-in-crisis-after-biggest-janu…
I think it might have been David Hargreaves that wrote a piece a few months ago – all the government really has to do this term is focus on 3 things – Housing / Immigration / Infrastructure.
Sort those 3 and you’ll actually start fixing other underlying concerns by default.
This has to be rammed home to a government that after nearly 4 years has apparently only just realised they are in fact in government – and do actually need to govern – because governing and tough decisions just don’t happen on their own.
Yes, well put. I am getting increasingly focused on immigration, our services and infrastructure are at breaking point.
If we are starting to address one sacred cow (housing) why can't we address the other (immigration).
Unfortunately I think the barriers to addressing immigration are even greater than housing. Labour don't take it seriously because as woke social liberals they think it's xenophobic to significantly cut immigration, while National as economic liberals love immigration because it keeps labour costs down for business.
And all parties love it because it boosts GDP (but not on a per capita basis...)
Worth a read.
https://www.zerohedge.com/markets/jpmorgan-clients-are-worried-ramp-cap…
What is troubling is that the last time we saw a similar divergence was into the covid crash, and only the subsequent plunge in the S&P reversed the trend of "smart money" EOD selling. Will the S&P suffer a similar fate as last March if the Last Hour indicator continues to diverge from the broader market?
From Facebook:
[name redacted] > Property Investors Chat Group NZ
Government has removed the ability to offset interest expenses against rental income when calculating tax, is this even legal?
Here we go folks, the mentality of what I imagine is the majority of residential property investors in New Zealand.
Well of course they can question something the Government does, but to question the legality? Pro-tip: Governments make the laws.
While the lobby group is wasting their time taking this tax deductible law to court they should also discuss the depreciation law change from 2011.
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Who's the next Speaker of the House?
I think James Shaw would do well. Green Party leadership arrangements might need to be rejigged.. he would be a crowd pleaser. Drag him up there u reckon?
Guess they might go with someone that already has experience acting in the roll? You guys will definitely have better suggestions I'm sure.
It's like a game of "Guess Who?".
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