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A review of things you need to know before you go home on Thursday: House prices in the stratosphere as S&P sees an orderly unwinding, ASB restates capital ratios, Westpac's windfall & more

A review of things you need to know before you go home on Thursday: House prices in the stratosphere as S&P sees an orderly unwinding, ASB restates capital ratios, Westpac's windfall & more

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
There were no changes today.

HOUSING MARKET ON FIRE IN MARCH
The latest monthly Real Estate Institute of New Zealand figures show the national median price increased 24.3% in the March year. New price records were set in 12 of the REINZ's 16 regions. Sales volumes were also strong, with the highest number of March sales recorded in 14 years.

AN ORDERLY UNWINDING OF PROPERTY PRICES?
S&P Global Ratings says the downside to economic risks facing New Zealand financial institutions due to the COVID-19 pandemic and government containment measures is receding. The credit rating agency says it expects NZ financial institutions' credit losses over the next two years to remain relatively low at about 0.30% of their gross loans and advances. Thus S&P's making no changes to its credit ratings or outlooks on the NZ banks and non-bank financial institutions it rates. Meanwhile, S&P says the return of loan-to-value ratio restrictions and the Government's recently announced housing policy package, will support "an orderly unwinding of property prices."

ASB RESTATES CAPITAL RATIOS, LOWER
ASB says it has identified "certain specialised lending exposures" it previously incorrectly classified as corporate lending exposures. This error resulted in an understatement of ASB’s total risk weighted assets by $3 billion in its general disclosure statement for the six months to December 31, 2020. The bank has thus recalculated its capital adequacy ratios as of December 31, outlined below. The new lower ratios remain significantly higher than the bank's minimum regulatory requirements.

Common equity (CET1) ratio 11.6% (-0.6%)
Tier 1 ratio 13.2% (-0.7%)
Total capital ratio 13.9% (-0.7%)

JOHNSON & JOHNSON COVID VACCINE APPROVAL ON HOLD
The Ministry of Health says Medsafe has requested additional information from Janssen, ahead of making a decision about whether to approve the pharmaceutical company’s (Johnson & Johnson) COVID-19 vaccine. After receiving information from the US Food and Drug Administration about cases of blood clots reported in the US, Medsafe has issued a number of additional requests for data from Janssen, the Ministry of Health says. The pause of the rollout in the US and Europe has also been discussed with Janssen, and Medsafe expects to provide an update on the Janssen approval process in the next two to three weeks.

STATISTICS NZ I
Statistics NZ released its latest rental price indexes, measuring the changes in prices households pay for housing rentals. In March 2021 compared with March 2020 the index for the stock measure of rental property prices increased 3.1%, and the index for the flow measure of rental property prices increased 1.6%.

STATISTICS NZ II
Statistics NZ also says that, overall, the cost of food in March was the same as in February. However, this doesn't mean there weren't price movements. Prices for 53% of items rose and 47% fell, with a net effect of no overall movement. There were normal seasonal movements in fruit and vegetable prices, with cucumbers up 51% and apples down 16%, Statistics NZ says.

LATEST BENEFIT FIGURES CHEERED & CRITICISED
The release of the latest benefit statistics from the Ministry of Social Development saw the Minister for Social Development and Employment Carmel Sepuloni triumphant, and National's Social Development and Employment spokesperson Louise Upston critical. Sepuloni highlighted that at 32,880, a record number of people moved off a benefit and into employment in the March Quarter. Upston, however, said the number of long-term beneficiaries is increasing with 119,073 people on Jobseeker having been on the benefit programme for more than 12 consecutive months. 

AUSSIE UNEMPLOYMENT DROPS
Australia's official unemployment rate fell to 5.6% in March from 5.8% in February. Unemployment in the Lucky Country is now just 0.4% higher than it was before the COVID-19 pandemic was declared last year.

NZ DOLLAR LITTLE CHANGED
The Kiwi dollar is little changed from this morning against three key currencies. At the time of writing it's at US71.40 cents versus US71.50 this morning, at AU92.59c versus AU92.50c, and at €59.63c versus €59.60c.

BITCOIN LOWER; AUSSIE BANK WINDFALL FROM IPO
At the time of writing Bitcoin's at US$63,053.25, down 1.24% over the past 24 hours. Meanwhile, with cryptocurrency exchange Coinbase listing on the NASDAQ, Westpac, via its venture capital fund Reinventure, is set to pocket a windfall of up to A$300 million, The Sydney Morning Herald reports.

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Source: CoinDesk

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33 Comments

Looking at RBNZ M10 data released on Monday, prior to the OCR announcement and taking into account todays news , the value of New Zealand's housing stock has surged to 1.53 trillion , an increase of some 308 Billion over the year, roughly equivalent to the nations (wellbeing) GDP and 5 times the outstanding mortgage debt. For those in the renting team their increases have been somewhat more modest, but nonetheless part of the overall team economic effort.

Team of 5 million punching about its weight with #8 fencing wire.

18
up

"Kiwis should be proud on the achievements of the Reserve Bank over the last 30 years. New Zealand experienced high inflation rates during the 1970s and 1980s. But, since the introduction of the Reserve Bank of New Zealand Act 1989, which established operational independence for the Bank and specified that price stability is the single policy target, New Zealand has seen stable and low inflation rates."

New Zealand has seen stable and low inflation rates [but hyper-inflation in the biggest purchase you'll ever make].

Operationally independent does not mean unaccountable.

It's easy to have low inflation when the price of everything is falling thanks to China, consumer goods and oil prices falling and while house prices are not included. The 1970s were the period of the oil price shocks which had serious effects on the world economy.

I was going to post this, good one mate.

Sounds like Dr Dennis is a dyed-in-the-wool Keynesian. How appropriate he's working at a NZ university.

Dr Dennis is in need of Richard Werner's insight

I'd like to be independent of the RBNZ.

In March 2021 compared with March 2020 the index for the stock measure of rental property prices increased 3.1%, and the inde x for the flow measure of rental property prices increased 1.6%.

Intuitively, the 1.6% increase will not make any sense to most people. Nevertheless, Jacinda and Grant can bandy it about in speaking engagements if they wish. Both of them will have no idea how it's constructed.

What is an orderly unwinding of property prices. They are going to drop?

Year on year price growth unwinding from 30% to more stable levels around 15%.

It's a term used to not frighten the sheeple. 'Not too hot, not too cold' kind of thing. Kind of thing Jacinda would say.

It means greedy vendors passing in at 100-200k over what the house was worth 1 year ago are going to be kicking themselves in a few months when the only open homers they get are the neighbours

An orderly pricking of the bubble. I like their optimism.

A significant part of the crypto community is becoming not unlike the foot soldiers of the Church of Scientology. Their stock phrase 'have fun staying poor' as a rebuttal when challenged in arguments is childish. It's all quite disappointing.

Show me the money !!! (Tom Cruise)

10
up

I thought that was the Reserve Bank Governor's response to wage earners

https://i.stuff.co.nz/life-style/homed/real-estate/124843658/no-let-up-i...

After 20% increase till January and than in just month 10% and now in March another 5% increase is not enough as experts are expecting rise in coming month though at slower pace but still a rise, which from this level is too high despite increase in LVR and housing announcement in March - as per expert.

Now again will wait and watch Mr Orr, wait for what, another rise and watching for another rise.

20
up

Poor old Ardern, all in a tizzy over someone lying – well, maybe time to have a look in the mirror.

She might now understand how some of us feel – with immigration “promises” in particular.

Back in Oct 2017:

“Prime Minister-designate Jacinda Ardern was firm last week in stating Labour would be sticking with its own immigration plan of reducing net migration by 20,000 to 30,000, and repeated it in the announcement of Labour's deal with New Zealand First”

And what did she achieve – an actual increase of around 35,000 – a net failure of around 50 or 60 thousand – in the real world you’d be fired for such incompetence.

Annual Net Migration: October 2017 - 55,353 March 2020 - 91,132

I agree

But what will National do .... or Act...close their eyes and hope for the best?!

The easy decisions that we skipped on years ago are now becoming the hard decisions to face today

10
up

Therein lies the rub – doubtless National and Act would be just as bad – except they’d probably be outright enthusiastically cheering the madness on.

We’re stuck – however I think the answer lies with Labour – they just need to cease listening to the endless baying of vested interest groups and think more about NZ’s long term interests.

What about reining in out of control immigration, developing/implementing a soundly based population policy– and as a consequence possibly finding that other pressing issues become more manageable.

Labour need to think and act a whole lot better because Covid won’t save them from an election loss next time around.

Agree. Jacinda Arden has an opportunity of a life time to rise as a leader but will she.

She will have to shun the vested biased experts and advsiors surrounding her and have to look beyond their........

Therein lies the rub – doubtless National and Act would be just as bad – except they’d probably be outright enthusiastically cheering the madness on.

Oh for sure. The rhetoric would be nauseating.

S&P forecasts "an orderly unwinding of property prices."

Just remind me how many market crashes S&P have forecasted.

Same crowd that gave subprime mortgage funds AA+ ratings in 2007.

Pressure Tactics and reasoning in trying to manipulate Mr Orr's decession ( which already is in their favour as Mr Orr is on their side and even slight reason will give him an excuse to avoid or delay). Even otherwise, Mr Orr has already decided that will go for wait and watch approach

https://www.newshub.co.nz/home/money/2021/04/growing-hesitancy-in-housin...

And so he should. No matter which way he jumps he will be wrong

I'm trying to turn the words "orderly unwinding" into numbers.

Lets assume 1% of home owners have 10% equity, they bought since Christmas, and borrowed the max they could.

Now lets assume houses drop by 15%, we will have 20,000 home buyers "under water". Some will get family bailouts, some will cut out the $10 a day coffees, and save harder, and pay down their loans ASAP, and some will sink.

If that's what you call orderly, I'd hate to try and imagine disorderly unwinding.

DIYman, nothing actually changes if their house goes down by 15% because its just numbers on paper and not relevant unless your forced to sell. It only matters if you loose your job or interest rates start to rise and it affects your ability to pay the mortgage. What you do is sit tight and keep paying the mortgage because you know that in 2 years or less prices will have recovered. Seriously price increases have been so nuts that even an annual house price increase now of "Only 10% PA" will look like an orderly unwinding.

I like reading Dr Doom but he's the ultimate 'eventually right' guy. Thanks for the link.

Does Statistics NZ have any credibility any more (remember the last census and then how they miscounted net immigration figures a year or two back)? Just because food prices for 53% of items went up whilst 47% went down giving at face-value very little change, what if the 53% all rose by substantial amounts but the 47% drops were minimal then the overall effect is not neutral. There are a heck of a lot of contenders for the worse performing government department these days but Stats NZ must be right up there in my view.