What happened Friday

A review of things you need to know before you go home on Friday; workers unconfident about their jobs, Govt to spread its banking favours, eyes on net worth, swaps stable, NZD stable, & more

26th Mar 21, 3:59pm by David Chaston

Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
Nothing here today.

TERM DEPOSIT RATE CHANGES
No changes here either.

STUCK IN A LONG TERM FUNK
Employment confidence eased higher in the March quarter, even if it is still in a quite low post-pandemic funk. In fact it is still at levels we had in the post-GFC retreat. Pre-2008 job confidence is now a distant memory. Workers reported a small increase in earnings growth over the past year, and were a little more confident about their future earnings and job security. However, the earnings measures remained on the soft side. The more you make, the more confident you are, but there is no news in that.

DIVERSIFICATION
The Government says it wants to consider further diversify who provides the government with banking services. That means a shift away from Westpac for some services. Major contracts up for renewal in 2023.

NET WORTH RISING FAST
Australian household net worth hit a new record high in Q4-2020 according to official data. It was pushed up by property prices and their superannuation accounts, rising +AU$½ tln in just three months to AU$12 tln and an average of NZ$510,000 per person. Obviously, it is not evenly spread. Household assets values rose +5.3% to AU$14.6 tln but liabilities only rose +0.9% to AU$2.5 tln. New Zealand's Q4-20 household net worth will be reported by the RBNZ on Tuesday, March 30, 2021.

YOU CAN STILL BET ON CHINESE STEEL
ANZ analysts say they expect Chinese steel output to rise slightly by +2.3% in 2021. With demand for steel moderating, the risks of over-supply are rising. As a result, steel prices may face a soft patch following the current boom. Over the longer term till 2025, China’s intention to consolidate the steel industry capacity and to increase self-dependency for iron ore will pose downside risks to its iron ore imports, but the impact will be gradual. Current iron ore prices are holding high.

GOLD SOFT
Gold is trading in Australia, and soon in Asian markets. So far today it is at US$1,728 and down -US$6 from this time yesterday.

EQUITIES GENERALLY FIRM
The S&P500 firmly at the end of trading today ending up +0.5%. The Tokyo exchange has opened up +0.9% with an extended gain from yesterday, while the Hong Kong Exchange has opened up +0.5% and ending their run of recent losses. The Shanghai exchange has opened up +0.4% and reversing yesterdays dip. The ASX200 is up +0.4% in early afternoon trade and heading for a +1.6% weekly rise. The NZX50 Capital Index is down -0.2% near the close. And that means it is heading for a -1.3% retreat for the week.

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 firmed somewhat. The 90 day bank bill rate is unchanged at 0.34%. The Australian Govt ten year benchmark rate is down -5 bps at 1.66%. The China Govt ten year bond is unchanged at 3.22%. And the New Zealand Govt ten year is up +7 bps at 1.65% and now above the level of the earlier RBNZ fixing at 1.62% (+8 bps). The US Govt ten year is currently up +1 bp from this time yesterday at 1.63%.

NZD LITTLE-CHANGED
The Kiwi dollar is unchanged from this time yesterday at 69.7 USc. On the cross rates we are holding at 91.8 AUc. Against the euro we holding at 59.2 euro cents. That all means our TWI-5 is now marginally firmer at 72.3.

BITCOIN DECLINES YET AGAIN
Bitcoin has fallen slightly to US$52,137 which is minor fall of -0.4% from this time yesterday. Volatility over the past 24 hours has been very moderate at +/- 2.8%.

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

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48 Comments

by Gummy Bear Hero | 26th Mar 21, 4:10pm 1616728237

The Te Huia express Kiwi bullet train launched today ... it's a mere 2 and a half hours for commuters to zap from Hamilton to Papakura in Orc Land ... $ 80 million well spent , huh ... nearly as fast as a Trabant could do ....

.... ummmm , for us southerners , Papakura is in the heart of the city , isn't it ,

by Zachary Smith | 26th Mar 21, 4:20pm 1616728849

Hour and a half to Papakura I heard.

https://www.tehuiatrain.co.nz/timetables/

by Gummy Bear Hero | 26th Mar 21, 5:05pm 1616731528

... my bad ... you're correct .... 90 minutes into the throbbing beating heart of the city ... Papakura ... the bright lights . ...

by Dale Smith | 26th Mar 21, 10:28pm 1616750897

Woo hoo, only 1 1/2 hours rather than 2 1/2 hours. The same type of good news when you learn you got life imprisonment rather than the expected electric chair (you're innocent of course).

And the final sweetener, 90 minutes sounds so much shorter than 1 1/2 hours.

by bw | 26th Mar 21, 4:19pm 1616728795

That makes the idea of the Rolleston - City - Rangiora intercity commuter look feasible (and just as practical)!

by Roger the dodger | 26th Mar 21, 4:51pm 1616730701

2.5 hours will include the second leg into the cbd. Big fan of a real bullet train up the country, but this ain't it.

by Gummy Bear Hero | 26th Mar 21, 5:08pm 1616731702

... an actual bullet train linking Whangarei to Orc Land , onto Hamilton , and a Tauranga - Orc Land link , WOW ! .. . that'd be transformative for the nation's economy ....

by frazz | 26th Mar 21, 5:15pm 1616732142

Then we could walk across the bridge...oh no not yet its engineering is very complex apparantly?

by Uninterested | 26th Mar 21, 6:10pm 1616735420

If it went to Wn, the Raurimu spiral would be so much fun at speed!

by Fritz | 26th Mar 21, 5:55pm 1616734501

Yes, I kind of thought it was a debacle when it was first announced, and kind of still do, however having driven on the southern motorway a fair bit recently I am not so sure. An hour from cbd to Manukau is common these days, even outside rush hour.

by Gummy Bear Hero | 26th Mar 21, 7:19pm 1616739585

... and , they named it after a native bird which is as dead as the dodo .... you gotta larf , dontcha ... another $ 80 million of taxpayers' money pissed down the drain ....

by Fritz | 26th Mar 21, 8:40pm 1616744446

Haha

by Fluffybunny | 27th Mar 21, 7:41am 1616784112

Imagine, instead of using household debt and increasing house prices to drive gdp growth. We kept that reasonable and invested in non rubbish infrastructure instead. Bold ideas eh?

by alittle | 26th Mar 21, 4:28pm 1616729289

This sums up the type of society we live in :

https://www.act.org.nz/brightlinetest

When Measures are announced, just on doubts doubts that house price may fall - No sound

AND

When measures are announced, not on doubts but when house prices are actually jumping by double digit on a monthly basis - Everyone is ready to reviolt and come out on road to revolt.

Time to change. Jacinda should continue, What has just been started as will be good for future of Kiwi. Time we Kiwi move about housing fixation as just asset or commodity but as a Home - basic necessity of each and every Kiwi.

Any change in status quo will face resistance but true leaders .......

Also time for RBNZ to act soon instead of waiting till May as have opportunity to undo the dangerous undesired consequence of low interest rate by targeting speculators through IO loan as by targeting IO loan, it is only speculators who will be effected ( is this not what the government targeting) and will benefit FHB by reducing evenif cannot remove fully speculative demand.

by alittle | 26th Mar 21, 5:54pm 1616734443

by streetwise | 26th Mar 21, 5:24pm 1616732659

ACTion Mouse and his ACTion mice are at it again. Nothing positive about this lot; they're bent on keeping the Housing ponzi going. Just ensuring they keep on side with the disaffected voters they snatched from National. Good for Labour that they have created a schism in the right wing vote though.

by custard | 26th Mar 21, 5:02pm 1616731360

I continue to think the financial world is underestimating just how fast and how strong the US economy will come back post Covid – with all that it entails.

NZ and Australia have given us a clue – and we are, on a very good day, a mere blip.

To be on the wrong side of the bet in Bond Land may ultimately be a very miserable place to be.

by Carlos67 | 26th Mar 21, 5:07pm 1616731631

I happened to wake up early this morning and watched Bidens first press conference that went on for an hour. Some of what he said about the state of their infrastructure was plain shocking, some people are still getting their water via lead pipes for example. Sorry but I don't see the USA coming back fast post Covid, its been on a downward trajectory for decades and it will continue. What was clear is that the USA is really really stressing about China becoming the new world power and rising to the number 1 position.

by Gummy Bear Hero | 26th Mar 21, 5:12pm 1616731931

... China / America , pah ! ... I'll wager you that in 25 years time the worlds biggest economy will be .... ... ( drum roll for effect : ta da da da da da ) ....

India !

by keithwoodford | 26th Mar 21, 10:09pm 1616749748

GBH,
I assume you are joking. The GDP of India is about one fifth that of China at nominal exchange rates, and less than half that of China at PPP (purchasing power parity). Export of India are about one sixth those of China. The population of India is rising at about 1percent per annum and the population of China is close to reaching zero growth rate.
Here is the comparison: https://www.nationmaster.com/country-info/compare/China/India/Economy
KeithW

by Fritz | 26th Mar 21, 11:04pm 1616753080

Well 25 years is a long time,and Chins faces some headwinds including demographic ones as you allude to. Not to mention geopolitical headwinds

by Gummy Bear Hero | 26th Mar 21, 11:52pm 1616755946

China's demographics are awful ... they're aging fast ... their population is likely to have halved by year 2100 . .. India is a youthful land ... by 2100 their pop. will be 3 times China's .. they're well educated , the worlds largest democracy .... and the best cuisine bar none ... Keith can have Chinese , make mine Indian , please ....

by keithwoodford | 27th Mar 21, 10:47am 1616795245

GBH'
India may well face its own demographic challenges with fertility now down at close to 2 children per woman and continuing to drop steadily
In relation to population decline, Japan is the country to watch.
India has only about 75% literacy rate with many educated only to primary level.
India's democracy also has its own challenges to face. It's best not to be a Muslim in India.
KeithW

by custard | 26th Mar 21, 5:29pm 1616732999

I’ve spent some considerable time there (perhaps you have?) – for better or worse, it’s just one massive economic machine – and from a NZ perspective, the scale is just incomprehensible.

Like it, love it or hate it - as Warren Buffet has said “never bet against America”.

by Jonny.Foe | 26th Mar 21, 5:24pm 1616732690

Biden is going to spend very large amounts of newly created Govt dollars on repairing and creating infrastructure (inc green infrastructure) in areas with lots of labour slack. I didn't think he had it in him, but it's such a smart move. Their economy will be running good and hot soon enough.

Competing with China is a lot easier if you (i) have an economic / industrial strategy and (ii) you accept that 'coaxing' the 'market' to deliver that strategy is hugely ineffective.

by blobbles | 26th Mar 21, 6:29pm 1616736554

If he does it, look out. It's exactly what America needs to compete again. They still lead (mostly) technology wise, so they could come out very, very strong if they get the infrastructure rebuild right. If they don't... well, China will easily take over.

It amazes me that the country has printed vast amounts of money to prop up it's financial system over the past decade or so, yet has not printed vast amounts to invest in it's core economic drivers. If that flips around, the US will be in a very strong position going forward.

by Jonny.Foe | 26th Mar 21, 6:50pm 1616737804

I could argue about ‘printing money’ but our conclusion is the same - countries that want to be successful need to invest strategically in the drivers of that success.

by blobbles | 26th Mar 21, 6:56pm 1616738192

Which shows you how pathetic our own country is. $3.8b to build infrastructure when the latest report shows we have a $100b water ONLY infrastructure deficit... although in saying that the 10's of billions worth of infrastructure projects announced over the last 10 years or so appear to be endless money pits (Transmission gully and Kapiti Expressway, Auckland CRL) or never get off the ground (LGWM, light rail in Auckland). We can "build" slow trains apparently, but anything requiring real work and it shows up how poorly equipped we are to organise and build it.

by Rosenstein | 26th Mar 21, 8:04pm 1616742299

Small Business doesn't have the same lobbying power as say... Raytheon.

by Firstclass | 26th Mar 21, 6:25pm 1616736316

In 2021 we build a slooow train, wow, going backwards now ?
How about a truly fast train, you know the one that exist in many other countries for decades now.

by Gummy Bear Hero | 26th Mar 21, 7:27pm 1616740024

.. oh you , silly billy ... this is NZ ... Godzone ... we've built a train set that makes a Nissan Leaf look like a Ferrari .... gives me the warm EV fuzzies to think about it .... rocketing along at an environmentally friendly 72 kph ...

by JimboJones | 26th Mar 21, 7:28pm 1616740112

We do only have 5 million people, a difficult geography, and cities with very little connecting PT services. Really need tens of thousands using it every day for any kind of fast rail to make sense.
Need to get decent PT in the cities before we even start thinking regional IMO.

by Rosenstein | 26th Mar 21, 8:06pm 1616742370

Heaps of Taniwhas too.

by Fritz | 26th Mar 21, 8:42pm 1616744538

Exactly. The notion of a viable fast train between the Tron and Auckland is a nonsense.

by Fluffybunny | 27th Mar 21, 7:48am 1616784517

No it's not. You build it with the expectation of the type of connection you need in 30 years time. This type of investment should not be about the present needs.

If you build this stuff for the present its too late.

by Gummy Bear Hero | 26th Mar 21, 7:56pm 1616741761

I do wonder what the wider business community think after Robbos brain fade yesterday , when without warning nor consultation , he removed a legitimate business expense ( no , its patently not " a loophole " ) from property investors ...

.... this government has form in this , having destroyed our offshore natural gas industry in 2017 , even though it wasnt mentioned prior to the election : again , no warning , no consultation ... and now , we import dirty Indonesian coal to make up the shortfall ...

by bw | 26th Mar 21, 8:46pm 1616744774

Do these legitimate property business you speak of pay things like ACC levies; provisional tax or business lending rates of interest for their debt?
Maybe they do. Like the GST rebates I'm sure they benefit from. Nothing like getting that driveway at home repaved and chalking it up to the old business property portfolio. But again - just perks of a legitimate business I guess.

Personally, I'm looking forward to a few more of Robbo's property market brain fades.
As the BNZ warned its customers yesterday the Government is not going to lose this battle - "Whatever it takes".

by Dale Smith | 26th Mar 21, 11:59pm 1616756374

Whatever happens, a viable business model has to exist for landlords, and it makes sense to rent at certain times of your life.

So if we are going to have no more capital growth greater than the rate of inflation then value has to come way back eg, 50%, while rents only come back say 30%, so while still cheaper than present allow a higher yield as a % on the new value. IE the only return on a rental now will be via yield.

Plus the homeowner, now not getting any capital growth, must also carry less debt (hence the lower price) because they need more net disposable income to either save or invest in other investments (eg double the amount you put into Kiwisaver) otherwise, where does the replacement return come from, that they will need for all the things they use to purchase (or use for business investment) from their properties capital gains growth. This also applies to long-term renters so they can also save extra as well.

Just like we don't want a boom as we have had for many years (and getting worse) we don't want a bust too quickly to get to that new lower house price reset. Question is, 'If we didn't have any control when it was going up, will we have any control over how fast it falls?'

Funnily enough, this is exactly how it works in jurisdictions that already have affordable housing, ie lower stable house prices with both owners and renters having more disposable income. The advantage they have, is they never let it boom, so they have not had any bust.

by JimboJones | 26th Mar 21, 8:37pm 1616744232

Buying an existing profitable business and loading it with debt to avoid tax should not be a legitimate business expense so good on him. I sure hope Grant looks for other businesses that don’t pay much tax despite being obviously profitable and changes their rules too.

by dago | 26th Mar 21, 8:55pm 1616745351

Wages are only marginally relevant nowadays. ROI on rental portfolio is the economy. Wages are for peasants and should be just enough to pay rents, so must only go up just enough to keep property investors in the manner to which they've become accustomed AND NO MORE! Property investors are struggling, and being brutalised. If you see a landlord on the street, dejected and with a cardboard sign "need a rent increase" please donate generously. I am going tin-rattling on their behalf this weekend and virtue signalling for their rights

by alittle | 26th Mar 21, 10:26pm 1616750787

If you see a landlord on the street, dejected and with a cardboard sign "need a rent increase" please donate generously. I am going tin-rattling on their behalf this weekend and virtue signalling for their rights

Definitely dago and if you see a FHB on the street, dejected and with a cardboard sign " need money to buy ever growing house price increase" please donate generously and also go tin-rattling.....

Even Lanlords whose house price has doubled and tripled can donate generously and smiling on their good fortune that they not only have a home but also investment property.

by alittle | 26th Mar 21, 10:33pm 1616751233

Even property investor Nick Gentle is suggesting to ban interest Only loan. Suggestion is comming only now when their sensitive nerves were pressed - Happy realisation and RBNA and Jacunda Arden who are planing in May, should oblige and do as soon as.

"Gentle said the Government would have been better to require a larger deposit or ban interest-only loans if it was concerned about borrowing."

by Essen | 26th Mar 21, 11:08pm 1616753323

Genuine property investors in for the long haul rarely, if ever, go interest only. Graeme Fowler has plenty online about the importance of P&I. I think there are many recent speculators who think they are investors and they will get burned, but some of the old school, savvy investors with healthy cash flows will collect their stock.

by richard1965 | 26th Mar 21, 11:58pm 1616756297

For that very same reason banning Interest Only Loan is mist and apt as will effect speculators and not genuine investors and FHB.

by Fluffybunny | 27th Mar 21, 7:51am 1616784667

Personally I'm holding minimum debt on my portfolio. Just waiting. Collecting yeilds.

by dago | 27th Mar 21, 8:23am 1616786588

Labs fiddled and declared climate emergency while housing boomed. Cant tell me they care about poor let alone working class. Last election I voted a small party Im glad to say. Next election will for most marginal party possible, whatever todays equivalent is of the McGillicuddy serious party.. Probably Billy T K. At least they are open and honest clowns. Lab and Nats utterances are considered lies from the second their mouths open

by stuart786786 | 26th Mar 21, 11:14pm 1616753677

Two article in newshub on same day next to each other with contradicting view :

https://www.newshub.co.nz/home/politics/2021/03/spooked-investors-devel…

And

https://www.newshub.co.nz/home/new-zealand/2021/03/change-to-bright-lin…

by VeryInterested | 27th Mar 21, 7:20am 1616782856

Btc $53531 by Sat morning so it looks like downward trend is reversing..... Again.