What happened Wednesday

A review of things you need to know before you go home on Wednesday: RBNZ holds the line, get in quick for Kiwibank's term deposit rate increase, FMA spotlight on fees

14th Apr 21, 4:00pm by Gareth Vaughan

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

MORTGAGE RATE CHANGES
There were no changes today.

TERM DEPOSIT RATE CHANGES
Kiwibank increased four month rates, albeit there's a catch. The increases only run from Wednesday until Sunday, reverting to the old rates from Monday, April 19. The bank has increased its four-month rate for investments of $10,000 and higher by 55 basis points to 1%. It has lifted its four-month rate for investments from $5,000 to $10,000 by 55 basis points to 0.90%. The changes apply to business, PIE and retail term deposits.

RBNZ HOLDS THE LINE
As expected the Reserve Bank kept the Official Cash Rate at its record low of 0.25%, and maintained the current settings on its Large Scale Asset Purchase and Funding for Lending programmes. The Reserve Bank noted temporary factors such as disruptions to global supply chains and higher oil prices are leading to specific near-term price pressures, but believes medium-term inflation and employment are likely to stay below its remit targets without prolonged monetary stimulus.

KIWISAVER FEES TO FALL?
The Financial Markets Authority has released guidance to help fund managers and supervisors demonstrate how they're meeting existing obligations, statutory duties and conduct expectations when it comes to fees. Fees on some investment funds, including KiwiSaver funds, are thus expected to fall.

NZ TO END LIVESTOCK EXPORTS BY SEA
New Zealand will stop exporting livestock by sea after a transition period of up to two years, Agriculture Minister Damien O’Connor says. Upholding NZ’s reputation for high standards of animal welfare is a key driver behind the decision, he says. According to the Government, live exports by sea represent about 0.2% of primary sector exports revenue since 2015.

MIGRATION DRIVEN POPULATION GAIN TUMBLES
Unsurprisingly the latest Statistics New Zealand figures show a big drop in population growth from migration this February compared to February 2020. A net migration gain of 674 in February 2021 compares to 14,874 in February last year. That's a drop of 95%.

NZ DOLLAR STRONGER
The Kiwi dollar has strengthened since this morning, post the Reserve Bank Official Cash Rate announcement. At the time of writing it's at US70.83 cents, AU92.47c, and €59.22c.

EQUITIES HIGHER
At the time of writing the NZX50 is up 0.29%, and the ASX200 is up 0.70%, reaching a 13-month high.

BITCOIN
Bitcoin was latterly at US$63,099, down a little from the record high of US$63,707 reached in the early hours of Wednesday morning.

This soil moisture chart is animated here.

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Daily exchange rates

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Source: RBNZ

Source: CoinDesk

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36 Comments

by Justa comment | 14th Apr 21, 4:06pm 1618373207

From Richard Prebbles Herald artilce today
Economics professor Robert McCulloch observes in his blog: "The RBNZ's poorly judged, over-the-top, $100b "quantitative easing programme" has caused wealth inequality to rise by increasing house prices … it's hard to see how adding a few more dollars an hour to the minimum wage and some tinkering with the benefit system can offset the other powerful forces at work in NZ that are impacting inequality".
Agreed. This RBNZ is not 'balancing'.

by J.C. | 14th Apr 21, 4:29pm 1618374593

Oh. Blind Freddy could have told you this. Don't need Richard Prebble. In Orr's defense, he's just a bureaucrat with a limited bag of tricks who's as programmed by the dogma as the govt and the banks.

by Jonny.Foe | 14th Apr 21, 8:27pm 1618388842

Any economist who says QE causes house price inflation should be forced to go back to school. House prices are rocketing because of very low interest rates, buyer confidence, and encouraging tax and policy settings. QE is used to hold interest rates down - but blaming QE for rising house prices is like blaming the getaway car for the bank robbery.

by Lanthanide | 15th Apr 21, 3:24am 1618413844

A getaway car may not be causal to a bank robbery, but it is a practical necessity.

by MLSmith1 | 15th Apr 21, 6:25am 1618424756

Chicken and egg really.

by Justa comment | 14th Apr 21, 4:09pm 1618373376

Quick, rush to kiwibank for a 1% TD, only available until monday!!. Sorry, Im not excited lol.

by Tom Valen | 14th Apr 21, 4:19pm 1618373990

Isn't it pathetic mate. What a world the banksters have created.

by Rosenstein | 14th Apr 21, 4:35pm 1618374911

And if you don't they'll just FLP you the bird. Who needs peon deposits when your RB mates lend you big money for free.

by Tom Valen | 14th Apr 21, 4:40pm 1618375228

The banks better think about the consequences of increasingly being funded by the state rather than 'private' depositors. It's hardly a recipe in line with free market capitalism. That which accepts the largesse of the state in ever growing dollops risks eventually being subsumed by the state.

by Ezy | 14th Apr 21, 5:08pm 1618376909

The banks days are numbered, and non-custodial blockchain based financial solutions are coming that will completely undermine their entire business model. The delay of this hostile takeover is adoption, as just 2.5% of the worlds population currently own crypto meaning we've just entered the early adopter phase of the technology. But if you look at the countries where adoption is highest, its where free market capitalism is the most abundant with an impotent CB and a high amount of un-banked population necessitating peer to peer transactions with real world value. Once mainstream solutions catch on that lower the entry barrier, the financially prudent can get a guaranteed low-risk 10% year on year return through providing liquidity, and retail banks start getting into trouble with their liabilities enacting the likes of the OBR, we're going to move very quickly along that adoption curve.

by J.C. | 14th Apr 21, 5:07pm 1618376876

as just 2.5% of the worlds population currently own crypto

Not sure where you sourced this from. Approx 197 mio people own crypto. Really?

by Rosenstein | 14th Apr 21, 5:13pm 1618377212

Well, someone has been buying like a mofo lately. Walmart?

by Ezy | 14th Apr 21, 5:19pm 1618377558

Well it's obviously a ballpark estimate based on the tech adoption curve position, but given the crypto.com report said 106M hodlers in January and institutions have been piling in it's a fair ballpark estimate.

Pretty nit-picky J.C. 100m or 200m is innovator to early-adopter phase transition given not all 7.7B people in the world transact financially.

by J.C. | 14th Apr 21, 5:21pm 1618377688

Pretty nit-picky J.C.

I'm a data-focused person and apply sniff tests.

by Ezy | 14th Apr 21, 5:25pm 1618377945

Fair enough I suppose

by J.C. | 14th Apr 21, 5:20pm 1618377604

The research you're referring to is completed by Statista. No problem there. However, the data collection is done by Cint. Should raise alarm bells about the robustness of the data.

by Pacman_46 | 14th Apr 21, 6:36pm 1618382212

Imagine when a future iOS update includes an apple crypto wallet similar to say Exodus. Adoption would explode.

by Jonny.Foe | 14th Apr 21, 8:33pm 1618389197

I would strongly suggest you read this paper: https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creati…

Banks are and always have been agents of the state - licensed by the state to create credit money for borrowers and able to make a profit on the productsand financial assets they sell and trade. Banks have not relied on 'private depositors' for many decades - and they have not been reserve constrained since the days of the gold standard.

by MisterB | 14th Apr 21, 9:18pm 1618391884

Yes, they create the money via the loan contract, but they don't keep the other side of the transaction - that goes to the vendor. In order to balance the books they still need to attract a deposit, as there are depo to asset ratios to maintain under RBNZ rules. People often forget that when quoting the BOE article.

by Jonny.Foe | 15th Apr 21, 7:28am 1618428532

Firstly, no banks are anywhere near reserve ratio constraints as QE. Secondly, banks can use a range of assets and borrowing from RBNZ or other banks to boost their reserves. As a result no bank in NZ has been anywhere near ratio limits for a decade or more - the only limit to bank lending is the creditworthiness and willingness of borrowers. ‘Depositors’ play no role really - and the banks make next to nothing from them (in fact many lose a bit)

by MisterB | 16th Apr 21, 4:33pm 1618547624

Your comment is still misleading - banks still require a deposit/liability on their balance sheet, regardless of source. It is widely accepted that customer deposits are the most stable source. It's not just about reserves necessarily, but about loan to deposit ratios which are important for securing offshore funding and swap contracts etc. You make it out that banks dont need deposits, when they clearly do, or they would not get them (esp as you say they lose money on them v other sources)

by Justa comment | 14th Apr 21, 5:34pm 1618378495

Yep they can get play-money from RBNZ for 0.25%

by MisterB | 14th Apr 21, 9:22pm 1618392154

The value available to Kiwibank is through initial FLP is up to $1.4b (4% of assets)... they have $21b in depos, so while I am sure it is helpful, it doesn't replace deposits. Must be the shortest ever TD special though, seems odd!

by Audaxes | 14th Apr 21, 4:16pm 1618373796

The Reserve Bank noted temporary factors such as disruptions to global supply chains and higher oil prices are leading to specific near-term price pressures, but believes medium-term inflation and employment are likely to stay below its remit targets without prolonged monetary stimulus.

“MR. HENSARLING. And so I am trying to figure out, what is it that--on the Federal Reserve menu, what would two more Operation Twists and two more QEs, even if you supersized them, achieved that haven't already been achieved?”

That’s what science is; you try something and if it doesn’t produce the desired results you know it didn’t work. You stop doing it. In terms of QE, a third go-round would’ve at least proved it couldn’t have been “quantitative.”

Bank reserves at any level, Bernanke replied, “are not the issue.”

“CHAIRMAN BERNANKE. The issue is the state of financial conditions. And we are still able to lower interest rates, improve, broadly speaking, asset prices, and that provides some [stimulus] incentive.” [my emphasis]

In the textbook everyone uses, lower is always better where interest rates are concerned. It is the central basis by which all of this madness continues. We hear it over and over, the lie repeated ceaselessly by officials and then regurgitated by the financial media which betrays the decency of its audience swallowing it and repackaging it for them wholesale. Link

by Tom Valen | 14th Apr 21, 4:24pm 1618374251

"House prices have risen by nearly 25 per cent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals."
Ben Bernacke, 20 October 2005

"With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly."
Ben Bernacke, 15 November 2005

by Justa comment | 14th Apr 21, 5:39pm 1618378741

Classic. We obviously have some very sophisticated leaders at RBNZ right now lol.

by alittle | 14th Apr 21, 5:22pm 1618377774

On RBNZ, had posted in other article but will like to add here as well as anyone following Mr errOrr can predict what he will be announcing on 5th May and as we all know the outcome, why wait and not announced it today itself

1 : Today Mr erOrr was dead drop silent on DTI and Interest Only Loan, may be today was not the day to speak on it but am sure when he does speak on 5th May - his excuse will be wait and watch as below was mentioned last time and also now, so is preparing his excuse.

"It expected the Government’s new housing policies to dampen house price growth. But it said it would take time for the impact of these on inflation and employment to be seen.

The Committee also maintained the net effect of the trans-Tasman bubble was yet to be seen"

========================================

2 : "It reiterated it was taking a “least regrets” approach .................."

Another highlight, when it comes to supporting the ponzi, is taking the 'least regret approach BUT when it comes to controlling the ponzi it follows ' Wait and Watch" approach.

Does it not exposes them ???

If least regret approach is for overall economy and do not want average Kiwi and FHB to be collateral damage ( already been) than why not take counter measure by stopping Interest Only Loan....why wait and watch attitute.......

It is and has been very evident that Interest Only Loan, not only gives undue advantage to so called investors over FHB but also a right step in curbing speculative activity, more than tax change ( though even that was good but that may affect all investors but stopping IO loan will target future speculators by squeezing easy and cheap money).

Can hold me if am wrong as Mr Orr is bound to come out with wait and watch attitude as if rampant rise in last few months, not enough to act as both Politicians and bureaucrats and reserve bank though may anything but in reality has no interest to control the ponzi.

by Foxglove. | 14th Apr 21, 6:31pm 1618381888

If it was Rome 100 BC and on, you could say that we, the common folk of NZ, are being treated as plebs by those in power. It’s moments like these you need a Caesar (not salad.)

by J.C. | 14th Apr 21, 5:09pm 1618376956

Promoters are in Otago selling investments in a Russian-based, multilevel marketing company the Financial Markets Authority is investigating. Tens of thousands of people throughout New Zealand appear to have put money in to Evorich, which promoters say is a legitimate company about to transform the cryptocurrency world

They're holding presentations in pubs.

https://www.odt.co.nz/lifestyle/magazine/russian-scheme-luring-kiwi-inv…

by Ezy | 14th Apr 21, 5:22pm 1618377753

I briefly joined the NZ Crypto Facebook group, and I've never seen such a bunch of swindlers and crooks in my life. Wherever there's money to be made there's snake oil salesmen.

And lets be clear, Bitcoin is the best thing since Bitcoin. Everything else is a punt.

by Pacman_46 | 14th Apr 21, 6:32pm 1618381948

I thought the same. I lasted about 2 days on there, and then left the group.

by richard1965 | 14th Apr 21, 6:31pm 1618381883

https://i.stuff.co.nz/life-style/homed/housing-affordability/300273507/…

by Jonny.Foe | 14th Apr 21, 8:26pm 1618388779

by MisterB | 14th Apr 21, 9:27pm 1618392449

I think your analogy is all wrong. QE is the submachine gun the robber (RBNZ) uses to rob the bank (depositors and FHBers). Rising house prices are the insurance premiums after the robbery.

by Jonny.Foe | 15th Apr 21, 7:32am 1618428721

I disagree but I like the analogy! But then I would scrap bonds altogether - UBI for banks.

by Squishy | 15th Apr 21, 8:43am 1618432998

How is our vaccination program going, are we on track for reopening our little Sakoku of the southern seas? :-)