What happened Wednesday

A review of things you need to know before you go home on Wednesday; a good TD rate rise, dairy price slip, Barfoot's data strong, retail sector nervous, swaps and NZD ease, & more

2nd Jun 21, 3:59pm by David Chaston

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

MORTGAGE RATE CHANGES
No changes to report today.

TERM DEPOSIT RATE CHANGES
Heartland Bank raised some term deposit rates quite aggressively (for this environment) and had them apply for six and 12 month terms, ones that savers would actually apply for.

A THIRD GONE
Prices slipped at today's dairy auction, the fifth small fall in the past six auctions, and together they have taken -5% off the +14% jump at the March 2, 2021 event. Most changes were small, except for butter which fell -5.4% today.

HARD HIT, BUT RESILIENT
Quarterly data for our international trade exposes how hard our services exports and services imports have been hit by COVID - and how resilient our merchandise exports have been. Services exports make up 19% of exports now, but last year they made up 33%. Of course, tourism and education services are the two biggest services exports. Still, while those two have been devastated, it it actually impressive we still have almost 20% of them left.

THE COST OF DISTANCE
Other trade data services for imports shows how much more we are paying for shipping costs. In a year these costs have risen a remarkable +88% - with most of it happening in the March 2021 quarter, +52%. By any measure, these are huge changes.

WHERE THE ACTION IS
Real-world trade may be buffeted, but our (untaxed) housing markets aren't. Barfoots reported strong May activity with sales volumes up +46% compared with May 2019 volumes (year-ago comparison makes no sense given we were in lockdowns), and median prices up another +2.2% in May from April resulting in a +$159,000 annual rise, or +17.4%.

"HOLDING PATTERN"
The residential real estate market appears to be in a "holding pattern" according to the latest monthly survey of agents by economist Tony Alexander and the Real Estate Institute of NZ. The previous two surveys recorded sharp declines in most measures of market activity following the re-imposition of LVR restrictions on new mortgage lending and changes around interest deductibility for investors and the Bright Line Test. The latest survey notes that some buyers are still motivated by FOMO and most agents feel that prices are still rising, but that interest from overseas buyers is waning and investors remain in wait and see mode. "On the basis of our many indicators it is difficult to say anything other than that things still seem to be in a holding pattern, perhaps as clarification is awaited on the rules surrounding definition of a new build in particular, as winter is now upon us and as many people perhaps simply take a breather after the frenzy between August and March," the report said.

LONG SERVING TSB CFO DEPARTS
Roddy Bennett has retired as TSB's chief financial officer after more than 25 years at the bank. Brendon Roche is TSB's acting general manager of finance until a permanent appointment is made.

FE INVESTMENT DEPOSITORS HAVE GOT 13.8% OF THEIR MONEY BACK SO FAR
The third FE Investment receiver's report shows to date depositors have received total distributions of 13.8% of the amount due at the date of receivership. There were 1,234 individual deposits totalling $54.6 million when receivers were appointed on April 1 last year. Interest continues to accrue.

RADICAL CHANGES
The retail sector is reporting buoyant demand, but also that their sector is fracturing in some areas. The are also warning that major price increases are coming, based on three strong forces. Manufacturers are raising prices, often sharply, shipping costs are rising, even more sharply, and Government changes are raising the cost of staffing which will hit bricks and mortar stores significantly more than online retailers. Already they report that city centre retailers nationwide are in a fight for their lives, one they may well not win.

GAINS RETIRING
One of the worst performing sectors last week on the NZX was the retirement home sector. It's capitalisation fell -3.2% in the week, wiping out almost all the prior month's gains and trimming its rise from September 2020 to +6.1%. Still that is a better net longer term rise than the overall market (+2.5%) and for the other property-related sectors (+1.1%). You can find details of the NZX50 capitalisation ranked here.

AUSSIE GDP IMPRESSES
The Australian economy is now back with a year-on-year rise in economic activity to the end of March 2021. The quarter-on-quarter gains are very strong and have been now for three consecutive quarters. This was a better result than most analysts were expecting and takes them above pre-pandemic levels. Consumer spending grew despite the ongoing constraints of state lockdown, housing activity shone bolstered by excessive monetary stimulus, business investment was better than expected, and inventories are being rebuilt. The June annual growth result will be impressive once the June 2020 dive quarter is behind them. The New Zealand GDP result will be known on Thursday, June 17, 2021.

A GROWING WORRY
Unexpected detections in tier two exposure sites have triggered Melbourne's lockdown to be extended by another seven days - in fact for all of Victoria. One in ten of their new infections are triggered by strangers, not close contacts. On this side of the ditch, Ashleigh Bloomfield is saying we are probably not even halfway yet through this global pandemic.

GOLD SOFT
The gold price is now at US$1897 and down -US$10 from where it was this time yesterday. The New York market closed at US$1899/oz and the London market closed at $US$1899 also.

EQUITIES STILL MUTED
Wall Street closed little-changed in its first session back after their long weekend. And that was a disappointment because the session started out with a good gain. The NZX50 Capital Index is down -0.4% in late trading today. The ASX200 is up +0.8% in early afternoon trading on the better-than-expected GDP result. Shanghai has opened down -0.8%, Hong Kong is down -0.5% at its open, but the very large Tokyo market is up +0.5% in morning trade.

SWAP & BONDS YIELDS EASE BACK
We don't have today's closing swap rates yet. If there are significant changes again today, we will update this item. The 90 day bank bill rate is unchanged at 0.32%. The Australian Govt ten year benchmark rate is little-changed at 1.65%. The China Govt ten year bond is also little-changed at 3.10%. The New Zealand Govt ten year is up to 1.76% and is now well below the 1.74% in the earlier RBNZ fix (-6 bps). And the US Govt ten year has slipped -1 bp to 1.61%.

NZ DOLLAR SOFT
The Kiwi dollar has slipped to 72.7 USc from this time yesterday although that is a recovery from this morning. Against the Aussie we are have eased back slightly to 93.6 AUc. Against the euro we are soft at 59.4 euro cents. That means the TWI-5 is now down at 74.1.

BITCOIN ALSO SOFT
The bitcoin price is now at US$36,502 and down -1.7% from where we were at this time yesterday. Volatility in the past 24 hours is a moderate +/- 2.4%.

This soil moisture chart is animated here.

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26 Comments

by fortunr | 2nd Jun 21, 4:18pm 1622607503

1.35% for a 1-year term deposit is still below inflation rate.
Moving in the right direction, yes, but still not appealing enough as a meaningful investment.
It is time that banks took into full account that we are in a regime of slowly increasing rates, and correspondingly start increasing mortgage and deposit rates to a more meaningful extent.

by Carlos67 | 2nd Jun 21, 4:40pm 1622608851

Pretty happy to see upward movement here my 12 month TD at 1.55% is due out in August. I hope the rest of the banks follow suit. Current inflation is irrelevant if your a home owner with cash in the bank. Your only worry becomes the banks going tits up.

by EdwardD | 2nd Jun 21, 5:56pm 1622613362

For me, the only brightside of low TD rates are - I received a large tax refund for the 1st time in decades; have diversified from the bank (not where Mr Orr wanted, ie NZ shares), into gold, crypto and my lovely GME). It will be hard going back to the bank now. Thanks Mr Orr.

by J.C. | 2nd Jun 21, 4:48pm 1622609306

The Aussies do a great overview of the Zespri disaster that the NZ media seems to have missed in terms of its potential negative impact. Very well done. TBH, this is huge and word has it that the bureaucratic nature of Zespri and the govt hasn't helped at all.

https://www.abc.net.au/news/2021-06-02/china-new-zealand-kiwifruit-trad…

by Foxglove. | 2nd Jun 21, 4:52pm 1622609572

There is no shortage of international outcry concerning China’s blatant thieving of intellectual property. Anyone doubting that just needs to read that article for a start and as the injured party is actually of New Zealand, then the message might just sink in. Not much can be done about it though except to consider more honourable trading partners firsthand. In words learnt by my father from WW2 marines - no use farting at thunder.

by J.C. | 2nd Jun 21, 5:00pm 1622610011

There is no shortage of international outcry concerning China’s blatant thieving of intellectual property.

The Chinese may have scant regard for what Westerners see as right and just. Personally, I think the ideas that Zespri can whack on a 'Grown in NZ' sticker or position the NZ grown brand at a higher price are a bit naive. At the end of the day, there is nothing to stop someone copying the sticker as well.

by Theoracle | 2nd Jun 21, 8:54pm 1622624067

New ID technology has been developed to counteract counterfeit products so every single one, every single kiwifruit can be uniquely identified.

Leaves barcodes in the dust as old news. Barcodes can be duplicated and hacked. The technology is from Australia and the company name is Lava. It uses a unique fingerprint which can be fashioned into a logo, for example the Kellogs K. Every single cereal box can then be identified as the real deal.

Fancy catching a plane with a counterfeit Chinese Rolls Royce engine? That is what is happening. The Chinese copies of high end products are so convincing.

Don't think Lava has listed yet but I'll be in if it does.

by J.C. | 2nd Jun 21, 9:13pm 1622625184

New ID technology has been developed to counteract counterfeit products so every single one, every single kiwifruit can be uniquely identified.

Doesn't matter. Outside and inside the modern trade, if vendors can sell kiwi at a premium because of the Zespri label, some will not give a rats about whether its authentic or not.

by frazz | 2nd Jun 21, 5:16pm 1622610999

Feijoas are native to Brazil, Uruguay, Paraguay, and Argentina - don't see them complaining?

by Foxglove. | 2nd Jun 21, 5:59pm 1622613570

Well then in terms of historical balance let it not be overlooked that the British, mid 19th century, cunningly swiped tea plants from China and set same up in India & then Ceylon, production therefrom soon eclipsed that of China. Kiwi fruit very small fry in comparison then.

by Rosenstein | 2nd Jun 21, 6:14pm 1622614477

Oof right in the hypocritical kisser.

by Advisor | 2nd Jun 21, 5:01pm 1622610074

This is a product of our own doing - by offshoring production mostly to China incrementally over the past few decades, much of the West (more so the Anglosphere) has lost the ability to take a stand on such geopolitical issues.

Do we learn? No, we sit by quietly while overseas investors are about to pull the plug on the last of our refining operations for a source that fulfills a-third of our total energy needs on this remote island.

by nigelh | 2nd Jun 21, 10:48pm 1622630890

Ah but Woods said "Woods has told the company about the strategic importance of the refinery. " ...."Officials have also raised questions about 320 jobs being on the line, and about cleaning up the contaminated site."... (Stuff article)
Strategic importance to the country is for the the govt. to decide, not private companies.
What's the problem with the jobs. Most highly skilled so should be no issue there. Can obtain employment elsewhere.
Woods making statements again without being able to do anything about it.

by blobbles | 2nd Jun 21, 5:01pm 1622610089

We should simply out quality them. China produces a hell of a lot of milk, but locals trust NZ milk far and away more than the generally inferior Chinese milk. That's because we have a slight quality edge.

Chinese consumers are some of the most intelligent in the world, they really look at the quality of the stuff they buy and where it comes from. Half of this is because they want to eat only the best, half because of "face". If Zespri protect their branding and continue to improve and innovate on quality, they can't go wrong as Chinese consumers will likely learn quickly and pick up the higher quality one. Licensing the Chinese growers is a totally bad idea, just ask Fonterror. You want to keep as much of your production chain out of China as you will get tarnished with the same brush when the Chinese screw the pooch somewhere in their own production chains (probably in the sprays they use or similar).

(I know they are higher quality first hand after trying both in China, the NZ one was so much better. Much like the traditional variety of kiwifruit, ours are way better still).

by J.C. | 2nd Jun 21, 5:16pm 1622610969

China produces a hell of a lot of milk, but locals trust NZ milk far and away more than the generally inferior Chinese milk

Don't be so sure about that. Chinese dairy producers have come a long way. Furthermore, Chinese dairy companies are far more innovative than Fonterrible.

by lowercase capitalist | 2nd Jun 21, 6:00pm 1622613632

True, juicing protein readings by adding melamine is quite an innovation.

by Groat | 2nd Jun 21, 5:14pm 1622610862

Perhaps NZ could pay China a small fee for every Kiwi fruit produced since the fruit was originally stolen from China. Orr could just print the money, its the answer to all our future troubles....easy.

by Rosenstein | 2nd Jun 21, 6:15pm 1622614543

If we grow Chinese gooseberries, is that cultural appropriation?

by DIYman | 2nd Jun 21, 5:27pm 1622611622

Sounds like a total mess, circus, whatever you want to call it.
End game is they don't buy our kiwifruit, as they produce enough themselves, it keeps very well in a cool store, so not off season advantage.
Get what you can now out of them, and start looking for new markets, and learn a lesson not to licence anyone by the name of .Gao to grow it here either.

by Fairlyfrank | 2nd Jun 21, 5:50pm 1622613010

I believe Zespri have licensed italian growers to produce gold kiwi in northern hemisphere why should the Italians pay a fee to zespri when the Chinese aren't also I think I read the Italians export to China if I was an italian growers it would be up for negotiations

by J.C. | 2nd Jun 21, 4:55pm 1622609721

Some very positive news about NZ trade to Japan that seems scarcely believable but published by NZTE so must be true. Sounds like exports are booming.

Food and beverage continue to be our main exports to Japan, making up around 60% of exports from New Zealand and worth over NZ$2 billion in 2020 alone.

2020 saw gains in kiwifruit exports (+19%), pumpkins, squash and gourds (+51%), and apples (more than doubled). Dairy was the second largest sector in terms of value at $760 million — the highest on record since 1997 — while meat and meat products increased 11% to $396 million.

The honey category almost doubled in size over the year to $71 million, although the industry has faced challenges because of the pandemic - both a drop in demand from the food service industry and supply challenges caused by long haul cargo space scarcity. Despite this, our trade relationship has remained strong, and some sectors managed to see substantial growth, particularly in horticulture.

by Groat | 2nd Jun 21, 5:04pm 1622610298

Why bother producing stuff when you can just print more money and claim the economy is booming? The old normal no longer applies, Orr has shown us the new better way.

by Uninterested | 2nd Jun 21, 7:01pm 1622617283

Sounds like Auckland CBD will become a ghost town. Except for the huge Ak council building/staff. Basking in its self proclaimed glory. Walking out of their office at lunch time to a deserted street lined with beggars.

by Foxglove. | 2nd Jun 21, 7:24pm 1622618685

Christchurch heading the same way regret to say. Still plenty of places to park your bike so that priority has won the day. Didn’t see many of those out and about last weekend though. Wonder why.

by powerdownkiwi | 2nd Jun 21, 9:18pm 1622625531

a deserted street lined with beggars

I like it.

Right up there with spending debt

by The Person | 2nd Jun 21, 9:23pm 1622625787

suggest you take a trip to this 'ghost town' and see for yourself. Still by far the largest residential neighbourhood in NZ and also home to 15% of jobs, or 25% if you include city fringe, grafton, ponsonby etc. MIght not be quite as busy, foot traffic down 10% vs pre covid, but that only takes us to levels seen a couple years ago.
https://www.hotcity.co.nz/city-centre/results-and-statistics/pedestrian…