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A review of things you need to know before you go home on Wednesday; rate changes, houses and housing regulation, banks and profits, dairy matters, swaps stable, NZD shifty, & much more

A review of things you need to know before you go home on Wednesday; rate changes, houses and housing regulation, banks and profits, dairy matters, swaps stable, NZD shifty, & much more

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

MORTGAGE RATE CHANGES
Westpac trimmed its one year special by -4 bps to 2.25%. Then BNZ did the same, plus it raised its 4 and 5 year rates.

TERM DEPOSIT RATE CHANGES
Westpac has raised many TD rates. It raised its 2 and 5 month rates by +5 bps, then all rates from 9 months to 5 years by between +10 bps to +70 bps increasing as the term lengthens.

DISCOUNT MORTGAGE AS A MARKETING ENTICEMENT
Simplicity is offering all first home buyers its 2.25% floating rate mortgage if they switch their KiwiSaver account to them. Previously only Simplicity members who had been with them for 12 months were eligible, and via a ballot. The Simplicity 2.25% is a floating rate that could change at any time, unlike the 2.25% one year rate offered by most banks for a fixed one year term.

ANOTHER RIPPER MONTH ALL ROUND
Auckland realtor Barfoots had its best April sales month since 2002 with their average selling price above $1 mln for the seventh consecutive month. Their average prices are up +16% in a year. The April CoreLogic review claims house prices rise +18.4% in the year to April. That is the fastest year-on-year rise since 2004, bested by the +25% rise in 2003 and the +22% rise in 1987.

"APPROACHING MAXIMUM SUSTAINABLE EMPLOYMENT"
Statistics New Zealand says the unemployment rate dropped to 4.7% in the March quarter from 4.9% in December - beating market expectations. It was a positive result that moved our currency higher. Not only are the more jobs than a year ago which is the first time since the pandemic, there are now more part-timers looking for full-time work.

STAYING UP
Today's dairy auction resulted in a flat overall result, but the milk powers rose in price, whereas butter and cheese fell. It was a result that will keep payout forecasts unchanged at their current high level.

REFORM ATTEMPT #23
Fonterra put its shares into a trading halt today, ahead of a major announcement on its capital structure tomorrow. The trading halt won't end until Friday, allowing the market time to absorb the ramifications of what it is about to announce. Fonterra has this endless issue with its co-op structure, made worse by its farmer shareholders wanting the milk payout to be maximised, and keeping the company forever capital constrained.

ALL ABOUT HOUSING
In its semi-annual Financial Stability Report, the RBNZ today warned it could do more to restrict mortgage lending. It also said it favours DTIs over restricting interest-only mortgages. "If required, we are prepared to further tighten lending conditions for housing using LVR requirements or additional tools that we are assessing." Sadly, because the New Zealand economy is essentially only a housing market with a few much-smaller other industrial sectors, financial stability is now only ever about housing.

SMALL BUSINESS SMILING AGAIN
Xero's SME Insights report reveals a major jump in conditions to its highest in the survey history. It assesses four aspects, sales, jobs, time to be paid and wages. In each there were good gains.

PROFITS UP
ANZ Group released is half-year results today, and ANZ New Zealand featured prominently. The local bank reported half-year profit up +18% helped by a turnaround in credit impairment charges and the red hot housing market. It is a turnaround from a declining track of profitability since late 2018. The Group CEO said the NZ division is 'an important part of our overall portfolio'.

"WE NEED TO RAISE MORE"
The 72 Councils that own the LGFA have loaned $12.6 bln to 67 of them via its bulk funding mechanism. Demand for funding is high as central government places increasing pressure to renew and invest in new infrastructure. the LGFA is now signaling it will be going to the bond market to raise more funds soon.

A RECORD HIGH
The ANZ World Commodity Price Index lifted +2.3% month-on-month in April to extend its record high. It is now +24% higher in a year. The lift in the index was driven by stronger prices for beef, lamb, logs and aluminium. In local currency terms the index gained +2.2% m/m, although only +6.9% up in a year in local currency terms.

LETTING THE FACTS GET IN THE WAY OF A GOOD MYTH
Regular readers will know that we have been monitoring grocery prices weekly for a long time (actually since 2011). Local supermarket prices are unremarkable, but our mirror monitoring of equivalent Australian grocery prices are actually quite remarkable. Since March, this standard basket has risen +14% over there, to record high levels in AU$. For this healthy foods list, it is still cheaper in New Zealand (which belies the standard unscientific barbeque conversation).

WESTPAC HIT AGAIN
In Australia, Westpac is facing another lawsuit for historical misdeeds. ASIC alleges that Westpac traders engaged in insider trading in the hours before the AU$16 bln Ausgrid privatisation by the NSW Government was announced in 2016.

GOLD RETREATS
The gold price fell last night in New York after nearly hitting US$1800/oz in London. Although it is rising again in local trade, it is still a net -US$9 lower than this time yesterday..

EQUITIES MIXED
On Wall Street, the S&P500 ended down -0.7% in today's session. Shanghai and Tokyo are both closed again for respective holidays, but Hong Kong is trading and is down -0.1% in opening trade. The ASX200 is up +0.7% in mid-day trade, while the NZX50 Capital Index is down -0.6% in late trade.

SWAPS & BONDS STABLE
We don't have today's closing swap rates yet. If there are significant movements today, we will note them here later when we get the data. They are probably little-changed. The 90 day bank bill rate is still unchanged at 0.36%. The Australian Govt ten year benchmark rate is unchanged at 1.68%. The China Govt ten year bond is unchanged at 3.19%. And the New Zealand Govt ten year is unchanged at 1.69% (+1 bp). The US Govt ten year is down -2 bps at 1.59%.

NZ DOLLAR UNCHANGED DESPITE INTERIM SHIFTING
The Kiwi dollar is now at 71.8 USc and little-changed from this time yesterday. In between it fell on the international risk aversion mood, but has made it all back following the better-that-expected jobless numbers. Against the Aussie we are also little-changed at 92.8 AUc. Against the euro we are stable at 59.7 euro cents. That means the TWI-5 is still at 73.7.

BITCOIN VOLATILE
The bitcoin price is now at US$55,216 and only marginally lower from where we were at this time yesterday. Volatility however has remained high at +/- 3.5%.

This soil moisture chart is animated here.

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End of day UTC
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51 Comments

28
up

Fancy that, restrict the influx of new migrants and the unemployment rate improves. Who'd a thunk?

LOL - did wages improve?

not for the public service

They should try working in the private sector. No yearly pay rises out in the real world.

By the whining from hort and others it'd be fair to assume yes.
My contract increases 15% on june 1st, and I expect my wages bill to increase.

The Hort guys whine endlessly. Locally they issue press releases about staff shortages on the same day they discharged staff.
Wages rises unlikely there.

Most immigrants who arrive in the country will actively look for a job which contributes to the unemployment data, without them of course unemployment rates goes down. On the other hand, Kiwis who aren't looking for a job are not considered as unemployed in the computation of unemployment.

Less migrant to look for jobs & more Kiwis not looking for one = lowered unemployment rate.

Kate you simply cannot expect simpletons to understand simple thingys.

But you did?

"Sadly, because the New Zealand economy is essentially only a housing market" House building is going gangbusters it employs lots of people including across the supply chain

Cool, so at what point will the property industry / lobby quit with their "there's no supply!!" nonsense?

Digging holes and filling them up again

She was told in no uncertain terms to withdraw and retract, I am sure.

"For this healthy foods list, it is still cheaper in New Zealand (which belies the standard unscientific barbeque conversation)." - sigh if only my NZ pay-packet matched the OZi one for the same job..

13
up

Hmmmm - the global shopkeeper given a free pass - Amazon had sales income of €44bn in Europe in 2020 but paid no corporation tax
"Rules based International order". What a joke

12
up

I'd have said what a crime, but yes, the disgust is the same.

"which belies the standard unscientific barbeque conversation": my BBQ conversation was always about UK food prices, not AU (which also is very much a duopoly). I did a simple search of some random common items on the Tesco website:
Broccoli: £ 0.49
Milk: £ 1.09 (2.272l)
Garlic Bread 2 pack: £ 0.69
Lettuce: £ 0.43
Tesco Pure Orange Juice Smooth 1 Litre: £ 0.90

NO broccoli available yesterday in my supermarket. A few products sold out tbh.

There is nothing to stop you parallel importing. Apparently a way to make a fortune given the price differences. The Warehouse tried, but couldn't make groceries work. Your turn?

Didn't the duopoly threaten their suppliers to not supply the warehouse?
It's a very hard market to enter: you need good locations (which I hear the duopoly buy up and put covenants on) and a big customer base to be able to get the best prices from suppliers. Hence why they should never had allowed the duopoly to occur, that was just crazy.
But I must admit it has been a lot more competitive over the last few years: the UK does not seem as ridiculously cheap as it once did.

Aldi is the best and cheapest supermarket in australia and now has 12.5% of the market,woolworths and coles share about 50% and IGA and others make up the rest.so no longer a duopoly.

Its probably a bit like our fuel market: Coles and Woolworths only compete only if there is an Aldi nearby (just like the Gull effect).

The UK is a huge market with the benefits of a massive supply chain across the Euro region for goods, fruits veges etc

Inflation is coming and property will weather all storms.

Be quick!

did you forget /s ?

If inflation is coming, higher interest rates are coming. I wouldn't rush out and load up to the gills on debt right now on that forecast.

That depends on rates of change. If you work out a tri-factor analysis of changes in interest rates, inflation and property prices, you'll still come out a winner with the property.

Calling all lemmings. CWBW needs you.

Let me guess: the magic of your tri-factor analysis also says that property is a sure fire winner in falling and flat rate environments.

In short, the answer is yes, in particular this country.

Do you really believe that residential property prices can continue to rise faster than wages indefinitely?

Yes. Wages are are only a subset of income and income isn't equal across population. My dollar bought more 20 years ago than today.

So your endgame is a capital owning class owning all property, the price of which is completely disconnected from wages.

That does not strike me as politically stable.

I think you got it the other way round.

We provide them shelter.

Gimme Shelter.
Renters need to remember....you can't always get what ya want

Quite a bit of grumbling across the public sector today after the pay freezes. I remember after the GFC on business trip in the U.S. Our daily stipend was cut from $200 to $50.

https://www.newshub.co.nz/home/politics/2021/05/government-freezes-pay-o...

Public servants thought they were immune to the plight of the private sector lol

The Gliding On set are not really prepared for disruption. Robbo and Mallard are OK though.

Workers unhappy with the pay freezes will simply move to a different department for a higher salary.

The ones cashing in big time from this announcement will be headhunters based in Wellington!

Workers unhappy with the pay freezes will simply move to a different department for a higher salary.

I think Auckland City Council used to pay for lunchtime yoga sessions for the staff in the Takapuna offices (relieve all the stress).

Immune yes. How many lost jobs because of covid?

Quite a few at auckland council, no?

The issue is it goes against the governments policy of lifting wages. I suspect private sector productivity will be quite poor moving forward and It may also mean those safe labour seats in Wellington are not so safe anymore.

From Interests charts, the current weighted average of the one and two year fixed mortgages, has never been lower. Any homeowner resetting their 2 year rate today, on similar terms would be better off by 146 bps, resetting a three year 220 bps and a five year , who may of thought interest rates would be higher (now) back in 2016, would be very agreeable with any reset. These are powerful drivers of the housing market.

"The cum rocket price is now at US$0.204 and notably higher from where we were at this time yesterday. Volatility however has remained high at +/- 154%" (I would have mentioned Doge at +60% but the name of this coin is more funny)

"Sadly, because the New Zealand economy is essentially only a housing market with a few much-smaller other industrial sectors, financial stability is now only ever about housing."
Nicely characterized.

With some timely reforms, we could've gradually built our way out of a recession with local industries (materials manufacturing, construction, etc) supporting it but we doubled down on our existing stock instead.

Sadly this is the case and will be until Keynesian economists are put out to pasture or are exiled to the Chathams where they can serve the rest of their days making cute decorations from shells.

All economists.

The exceptions being Soddy, Galbraith, Georgescu-Roegen, Daly, Keen.....

David, if everyone was eating only from that healthy foods list then we wouldn't be having problems with Covid. I'd still take out the wheat products, ice cream and yoghurt (a kilo of sweetened yoghurt will have 110g of sugar in it) to really be eating quite well.

What is the real cost associated with that grocery list?

Re Aus vs NZ costs, that surprises me.
However, there's a gap of circa 17k in the gross median household income, which far outweighs those still fairly small cost differences on groceries (10% difference in grocery costs equals $30 on a $300 pw grocery bill)
Also many other things, like fuel, are way cheaper in Aus.