What happened Tuesday

A review of things you need to know before you go home on Tuesday; building consents falter, another FLP draw, household net worth up, gold down, swaps & bonds up, NZD flat, & more

30th 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
Christian Savings raised its offer rates for 1, 2 and 3 year fixed terms.

FALTERING
There were almost -5% fewer dwelling consents issued in February 2021 than in the same month in 2020. Fewer apartments, stand alone houses and retirement village units were consented in February but more townhouses and home units. Even though most analysts expect 2021 consenting to pick up, recent supply disruptions and policy changes have clouded the outlook. Infometrics noted that the expected favourable treatment of newly built investment property, compared to existing houses, will encourage investors to consider new builds and could push demand in this direction.

HIGHER MINIMUM WAGE COMING
Prime Minister Jacinda Ardern has indicated there will be a minimum wage hike next year (2022) above the $20/hour about to come into effect on April 1, 2021.

TAILING OFF
The latest Xero SME report shows a steady decline in revenue growth - not large month-by-month, but relentless since the pandemic bounce-back in June 2020.

ANOTHER FLP BITE
For the record, another bank has drawn $100 mln in the Funding for Lending program offered by the RBNZ. Actually, this latest drawdown was last Thursday. For an amount that small, it is unlikely to be one of the four big Aussie banks. We don't [yet] know who this latest borrower is. The last time $100 mln was drawn (on January 28), it was by Kiwibank. The total drawn on the FLP is now $1.74 bln. The RBNZ has allocated $28 bln to the program which started on December 7, 2020.

PROSPA GETS ACCESS TO BUSINESS FINANCE GUARANTEE SCHEME
Small business lending specialist Prospa says it has received access to the Government's Business Finance Guarantee Scheme. Prospa says it has received an allocation that can be applied to all eligible new Prospa loans before June 30.

HOUSEHOLD NET WORTH UP +4.2%
In 2020, New Zealand's household net worth (financial assets - which doesn't include housing) less financial liabilities (which do include housing mortgages) rose to $939 bln, a rise of +4.2% despite all that pandemic volatility. Recall this net worth actually fell from December 2019 to March 2020, but it has risen strongly since, although most of the recovery happened between June and September 2020. Among household assets, currency holdings rose +15%, bank account balances rose +9.8%. Growth in listed equity holdings was weak, although growth in "superannuation" (KiwiSaver) was strong. Among household liabilities, housing loans rose +7.6% in teh year, but student loan liabilities rose a mere +0.6% in the year.

HOUSEHOLD DISPOSABLE INCOME UP +3.1%
While we are at it, the same RBNZ data shows household disposable incomes rose +3.1% over all of 2020. In 2019 it rose +4.8%.

HOLIDAY SURCHARGES
As Easter approaches the Commerce Commission is reminding businesses that any surcharges added must be clearly disclosed and the reasons for the surcharge accurately described, to avoid breaching the Fair Trading Act 1986.

TRIGGER
The head of Aussie prudential regulator APRA says they are watching how "housing credit growth is picking up, and likely to outpace income growth", and this is a marker for them for macro policy action.

GOLD SOFTER
Gold is trading in Australia, and soon in Asian markets. So far today it is at US$1,713 and down -US$17 from this time yesterday.

EQUITIES MIXED
The NZX50 Capital Index is up another +0.4% in late trade today. The ASX200 is down another -0.5% in early afternoon trade. At their session opening, Tokyo is down -0.2%. Hong Kong is up +0.5% and Shanghai has opened up +0.2%. The S&P500 ended on Wall Street flat (-0.1%) earlier today.

SWAPS & BONDS FIRMER
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 are slightly higher. The 90 day bank bill rate is up +1 bp at 0.35%. The Australian Govt ten year benchmark rate is up +13 bps from this time yesterday at 1.78%. The China Govt ten year bond is up +1 bp at 3.23%. And the New Zealand Govt ten year is up +8 bps at 1.77% and above the level of the earlier RBNZ fixing at 1.71% (+4 bps). The US Govt ten year is currently up +8 bps at 1.74%.

NZD LITTLE-CHANGED
The Kiwi dollar is marginally firmer from this time yesterday at 70.1 USc. On the cross rates we are also a little firmer at 91.8 AUc. Against the euro we up at 59.5 euro cents. That all means our TWI-5 is up to 72.6 although that is little-changed from where we opened this morning.

BITCOIN RISING
Bitcoin has rises +4.4% from this time yesterday to US$57,535. Volatility over the past 24 hours has been moderate at +/- 3.1%.

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

Source: CoinDesk

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24 Comments

by sparrow | 30th Mar 21, 4:07pm 1617073650

Torrential rain here in the Waikato, the soil moisture map should start to look better.

by bw | 30th Mar 21, 4:21pm 1617074476

You just can't help wondering if the tide is turning, and how many more like Bill Hwang there are out there, emboldened by virtually free money.
Gold down another 6 bucks from when David wrote his piece. Gold doesn't like higher interest rates. What does? (I know; savers)
https://www.afr.com/markets/equity-markets/how-bill-hwang-got-back-into…

This is why the big banks all blew themselves up in 2008 – over-the-counter derivatives with leverage via a prime broker. Prime brokerages may have not been aware of the extent of their own exposure to Archegos or being racked up at rival banks. Fewer than 10 banks racked up more than $US50 billion of credit exposure to Archegos

by rastus1 | 30th Mar 21, 4:22pm 1617074559

Cover your bets. With such massive money printing what would you want to own...gold or counterfeit?
Turkey provides an insight as to where fiat currency is heading - the Turks are buying up gold as the currency falters.
You savings are about to be inflated away.

by bw | 30th Mar 21, 4:27pm 1617074864

Could be.
But to be honest, that's not my view. I see the current fear being instilled into everyone summed up by:

“Middle-class Aucklanders go home, and they look at how they can leverage their equity in their expensive house into a more expensive house or even more into a beach house in Mangawhai, and those things are compounding the problems we have.
“There are many challenges in this country, but in my mind house prices are the most obvious one and the most direct lever that we can push.”

Or, Quick! Spend it before it become worthless. Even better - borrow more and spend it.
What happens when that's all been done?
I guess we'll both know at some stage.
https://www.stuff.co.nz/business/124697678/high-house-prices-are-the-bi…

by fortunr | 30th Mar 21, 5:09pm 1617077371

A properly diversified investment portfolio is designed to properly take into account inflation risks.
Only over-weighting to inflation-exposed assets (including cash instruments) runs an appreciable risk of sudden bouts of inflation significantly eroding the value of "savings" (whatever form they may assume).

by Audaxes | 30th Mar 21, 4:50pm 1617076221

Gold prices had risen as UST demand had in the disinflationary/deflationary period up to March 2020, both for the same reasons; things going wrong for Jay Powell’s inflationary bias rather than right along his hawkish stance. Since yields bottomed out last August gold has still marched in inverse lockset with the reflationary reset across the note-end of the Treasury curve – because it only means a slightly better, less awful future scenario.

Modest reflation fits with gold coming down from a high degree of realistic fear over big (deflationary) errors that it priced at its last August high. After all, 2020 had been and remained a historic mess despite all the flood myths and ten-figure government interventions (in fact, because of those and the lack of results).

Let’s face it, gold’s still ~$1700 and UST 10s still yield around what would’ve been a record low before last year. Just how much have things improved given those corroborated signals? In other words, let’s not get carried away and retain some needed perspective that you won’t get from the exact same “too many” Treasuries arguments. You see this exact same thing in TIPS; while inflation expectations (breakevens) are up, they aren’t really up all that much and they are more importantly overshadowed by real yields that indicate almost nothing good from the real economy.Link

by Hummy | 30th Mar 21, 4:25pm 1617074707

Did hear today suggestion to help jacinda closing the gap, we should lift only minimum wages.

by stuart786786 | 30th Mar 21, 5:13pm 1617077611

https://www.stuff.co.nz/business/124697678/high-house-prices-are-the-bi…

And....Jacinda and likes says that house price should always go up.

by CWBW | 30th Mar 21, 5:17pm 1617077871

Let's hope Labour raise the minimum wage to $21.90 or more- it'll be good for everyone.

by JimboJones | 30th Mar 21, 6:39pm 1617082744

It’s gotta cause inflation eventually doesn’t it? Which would be good as then the RBNZ will raise rates.

by Lapun | 30th Mar 21, 7:13pm 1617084793

Why stop at $21.90? Seriously what are the +ve and -ve consequences that balance at that point?

If the aim is to reduce poverty then it only applies to those who are working fulltime but about one in eight are under-employed or unemployed. A wiser system would be universal benefits and to tackle child poverty try universal child benefits. Not minimum wages.

by blobbles | 30th Mar 21, 10:21pm 1617096072

May as well put it up to $50 an hour. It would solve poverty overnight!

These idiots really don't understand what they are doing, which is simply making the country more and more high cost. Without PRODUCTIVITY gains, putting up minimum wage increases costs of living across the board, while essentially de-valuing more highly productive workers and especially those who are just above the minimum. A graduate nurse in this country makes $26 an hour... what was the point of 4 years of study? And at just over $23 a full time worker is into the 3rd tax bracket, making just over $48k per year. Does that not seem crazy? Oh, you are on minimum wage, then according to the tax system, you are considered a middle class worker.

These people think like 3 year olds, they really have no idea what they are doing, making isolated policy decisions while not considering the implications. I can just imagine a 3 year old saying "Buuut if people get paid a bit more mum... everyone will be rich!". Wait, maybe Jacinda is starting to take policy pointers from Neve. I would not be surprised in the slightest.

by Zack Brando | 31st Mar 21, 12:20am 1617103258

@blobbles

You decry NZ's productivity and sight NZ's high cost-of-living.. yet have a go at minimum wage.

Could minimum wage increases drive zombie companies out and/or encourage productivity? Wouldn't increased wages promote spending in the domestic economy?

Just because someone is skilled/qualified doesn't mean they should earn more than someone deemed 'unskilled' or 'unqualified'. I'm not suggesting people put a shingle out front and start practicing heart surgery - there should be higher remunerations for people performing such services. I AM suggesting terms like 'skilled' are antiquated vestiges of the pre-information-age/pre-glass-age.

By the sounds of it houses earn more than nurses and houses are hardly skilled workers. Western countries are highly financialized, unless this changes, minimum wage MAY head towards $50. To blame/claim inflation on minimum wage is a bit myopic.. zoom out and view the bigger situation.

Not trying to put words in your mouth, I just think you're points are a bit tired. Nurses should be paid more.

by blobbles | 31st Mar 21, 9:16am 1617135404

No Zac, your points are the tired ones. Ask yourself why the minimum wage keeps having to increase yoy? It is because such an increase has zero effect at doing what the government wants. With each increase there is another round of rent increases and food price increases. Ask yourself - have the minimum wage increases solved poverty yet? Have they had any effect? No? Because all stats show that poverty is STILL INCREASING despite the increases.

You need to think why that is. Essentially without productivity increases, its a zero sum game, where all costs rise to account for the increased wage. This should be blindingly obvious to anyone who thinks about it for 5 minutes. But its worse than zero sum, because it essentially flows more money to the financialised parts of the economy (as you state) while makimg the wages of those in the middle LESS VALUABLE. It's part of the problem why our middle class is/has disappeared AND disencourages people to take up higher skilled work and training. Essentially it's just another way to kill productivity and doesn't address the underlying issues about why people cannot live on the current minimum.

Once again the government is targeting the wrong thing and wonders why why it gets the wrong result. Then keeps making the same mistake to try and get a different result. Very much like the RBNZ looking for inflation by lowering rates and finding that didn't work, so doing it again and again.

To answer your questions - zombie companies will just get bigger handouts so no. No it doesn't drive spending in the economy because it doesn't increase the number of transactions. Essentially the value of transactions goes up, but we will all be getting the same thing, just paying more for it. Without tax bracket increases it essentially lowers the value of all non minimum wage workers. And at the same time house prices keep booming as you state...

by RickStrauss | 31st Mar 21, 10:09am 1617138583

Indeed... the only way we'll get more productivity is by encouraging people to invest in business instead of property.

Property has been easy subsidised and protected money. If we were really serious we'd lower company income taxes (75% of which are worn by employees in the form of lower wages) and raise a land value tax.

by rastus1 | 30th Mar 21, 9:24pm 1617092666

Not good if you are unskilled and that rate is above your productive output - you will be unemployable!
Socialist nonsense.

by Zack Brando | 31st Mar 21, 12:45am 1617104712

By that logic bank-security-guards should earn near zero dollars OR be unemployable. Not every job has a measurable 'productive output'. Many jobs have an imputed value. 'Unskilled' is a fuddy-duddy term to use in the information age.

This 'old think' which is often divorced from wisdom.. it's why fruit rots on the ground and zombie businesses carry on.

by AKLCrusader | 31st Mar 21, 8:35am 1617132946

It's OK, Cindy will raise benefits too....we're already seeing union demands for wage increases to keep the gap to the minimum wage. We can't lift wages 27%........

by Nzdan | 30th Mar 21, 7:24pm 1617085444

11,345 Arrivals vs 13,404 departures for March 2021 = 2k net loss out of the country. Still 1 more day to go.

Prior 12 months = 124k. A little over half that amount (63k) was in March 2020. The drain is slowing, but it's still there. 2k people = 526 Rentals or 588 Owner Occupied properties.

by bw | 30th Mar 21, 8:01pm 1617087689

And as the outbreak in Aussie might remind us, The Bubble and any other form of entry to NZ is a lot further away than many think.

by Nzdan | 30th Mar 21, 8:18pm 1617088714

"But surely if everyone is vaccinated then the virus will go away, we can open the borders and carry on like pre-covid".
"We just need to make sure people prove they have been vaccinated before they come here, in the same way they show evidence of University Degrees, can even be on the same template".

Maybe we will just ignore community outbreaks so we can fill the houses we keep building and reverse the outward flow of residential livestock.

by AKLCrusader | 31st Mar 21, 8:40am 1617133200

I wonder if Ardern gets the difference between occupation levels in rentals and owner occupied. By 'tilting the balance' without building, she is making housing shortages even worse, and that is before the increased rents.

by Nzdan | 31st Mar 21, 11:04am 1617141883

Can you cite a reliable claim for this source, with data to back this up? According to page 25 of the following, larger households were more likely to be renting. I.e. large families etc. Occupancy levels should not be looked at strictly on head count.
https://d39d3mj7qio96p.cloudfront.net/media/documents/ER22_The_New_Zeal…

Larger households were more likely to be renting than were smaller households, though two-person
households were least likely to rent overall, followed by four-person households; one and threeperson households were roughly as likely to rent as five-person households (see Figure 5). For all
households with six people or more, more than half of households were renting.

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