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A review of things you need to know before you go home on Tuesday; 'obscene' house price jumps, food prices stable, moderate rent rises, RBA grumpy, swaps stable, NZD holds, & more

A review of things you need to know before you go home on Tuesday; 'obscene' house price jumps, food prices stable, moderate rent rises, RBA grumpy, swaps stable, NZD holds, & more

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

MORTGAGE RATE CHANGES
No changes to report here today.

TERM DEPOSIT RATE CHANGES
The Bank of India has launched a 4 and 5 year TD offer at 1.60%. Also, BNZ is advising that they are closing their personal on-call account as at June 30, 2021. It is not surprising as they only offer 0.05% pa interest on that account.

'BUOYANT' RUN CONTINUES
The housing market had its best May sales volumes in three years with Auckland having its strongest May sales in five years, according to the latest REINZ data. National median prices are up a massive +32% in a year, Auckland median prices are up +27%. Never has money fallen out of the sky so fast for homeowners as in the past 12 months. There has never been anything like the +$200,000 annual gain for the national median over the past year, nor the +$243,000 gain in Auckland. It has been called 'obscene' by Infometrics. Much of rise is because housing supply is so low. at a time when demand is so high (The 'war on poverty' is being lost at a remarkable rate.)

FOOD PRICES RISE MODESTLY
Food prices are stable. They were +1.8% higher in May from a year ago, and this rate of increase continues a pattern of smaller increases in 2021 than 2020. The only category of food where there have been significant rises has been for eat-out meals (+12.3% pa).

RENTS RISING
Rents are rising faster than food, but nowhere near as fast as house prices - at least according to Stats NZ's rental price indexes. They peg the national increase at +4.5% pa (the fastest rise in more than two years) and the Auckland increase at just +2.5% in a year (and the fastest rise in 18 months).

TOP RANK?
Recruiting firm Randstad surveyed 4000 applicants to find that the top ranking employers in Banking/Financial Services were Kiwibank, BNZ, then ANZ. For professional services the top raking was KPMG, then Deloitte followed by PwC.

AUSSIE HOUSE PRICES RISE
There was housing data out as well in Australia today, but only for March. These official stats show their indexed house prices rose +7.5% over the past year with Sydney up +8.0%, Melbourne up +5.9% and Brisbane up +7.5%. The total value of all their residential dwellings is now AU$8.2 tln, a massive +AU$1 tln in twelve months or a +14% rise in a year.

HOLDING BACK
The RBA released the minutes of its dull June 1 meeting. But there was an interesting tidbit in this record of those discussions. The RBA wants to see quicker wage growth to help spur inflation towards target. But they are seeing firms acting to not raise wages by adopting non-wage measures to attract and retain staff, such as one-off bonuses and more flexible working arrangements. Some firms were also opting to ration output because of labour shortages, rather than pay higher wages to attract new workers, they said.

GOLD SOFTISH
Compared to this time yesterday, the gold price is down -US$3 and now at US$1863/oz in early Asian trading. It closed in New York earlier today at US$1866/oz and in London at the same level.

EQUITY MARKETS FIRM
The S&P500 closed with an end of session firming, up +0.2% after being lower for almost all the day. Tokyo has opened with a +0.7% rise in early trade, but Hong Kong has returned from is holiday weekend in a bad mood, down -1.1%. Shanghai's mood isn't much better, down -0.8%. The ASX200 is also back from holiday and in early afternoon trade is up +0.9%. The NZX50 Capital Index is up +0.7% in late trade. Heavy-hitter FPH is up +5.6% today, and ATM is recovering +5.6% as well. NZM is sinking +2.7% today as one of the largest decliners.

SWAP & BONDS YIELDS STABLE
We don't have today's closing swap rates yet. If there are significant changes again today, we will update this item. They probably held. The 90 day bank bill rate is unchanged at 0.32%. The Australian Govt ten year benchmark rate is down -1 bp at 1.45%. The China Govt ten year bond is up +1 bp at 3.16%. The New Zealand Govt ten year is unchanged at 1.65% and now below the earlier RBNZ fix of 1.67% (+1 bp). And the US Govt ten year is up +2 bps to 1.48% but was unable to hold 1.50% earlier.

NZ DOLLAR UNCHANGED
The Kiwi dollar is still holding at 71.4 USc. Against the Aussie we are little-changed at 92.7 AUc. Against the euro we are still at 58.9 euro cents. That means the TWI-5 is still at 73.2.

BITCOIN STAYS UP
The bitcoin price is still rising and is now at US$40,250 and up another +2.6% from this time yesterday although most of that happened last night. Volatility in the past 24 hours has been high at +/- 3.0%.

This soil moisture chart is animated here.

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Daily exchange rates

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End of day UTC
Source: CoinDesk

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59 Comments

We dropped interest rates and got super rich. Why didn't we do that before?

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We did. Steady downward trend since the GFC. The GFC never finished.

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More like steady downward trend since 1980....(don't forget the nearly 3 decades of falling rates before the GFC)

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I thought that interest rates rapidly dropped in 2008/2009... didnt house prices fall?? Please correct my understanding

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No point correcting the cup that is already full and overflowing.

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You dont need any encouragement to put others straight :)

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Nor do you need any any encouragement to lead others astray :)

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Hey mate, at least I put my money where my mouth is, not like you though

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I get the feeling I'm not really your 'mate' and I also know that you have no idea at all what I do with my money :)

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Oh buddy, you have boasted of having property investments, so yes I do. I suppose you are going to deny that.

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I thought I was doing better as your 'mate'. Guess 'buddy' will do.

I'm glad you're keeping a close track of my investments - sounds like you've got a better handle on it than I do!

So if I am heavily leveraged against NZ property and its just gone up 30% I must be a genius, or if I'm not and have missed out on that capital gain am I a fool?

I can't be both and you're telling everyone that I'm boasting about my property investments...so I must be a genius just like TTP. I'll take it - thanks.

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Hey Rosenstein, I missed you last Thursday when you said you'd join me at the Community Hall on 67 Great North Rd to help feed the homeless and bring some clothes and blanket, what happened ?

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He was there Yvil... one of the homeless! Probably faking it. Good on you for doing the charity work Yvil

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I don’t know how I feel about someone boasting about charity work. Kinda seems like a vanity project to me.

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Top notch blanket!

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Interesting. It seems that gold and bitcoin are now negatively correlated. How to trade that ratio? i.e. on the basis that when gold goes up, bitcoin falls and vice versa

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Everything has a correlation. The idea that if gold rises, BTC falls is meaningless and has no validity as a causal relationship.

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Not everything has correlation.

Debt is being issued with no check on the underwrite-capability, beyond that inexorably falling interest-rate. If we actually correlated debt with 'GDP', interest would be in well into negative territory, or we'd have had a fear-driven cascading bank-run.

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Not everything has correlation.

Mathematically it does.

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Not if you filled in the other side of the equation correctly.

:)

Fiat debt, and all it's bubbles like house-'prices', is as unattached to reality as share 'prices' and bitcoin 'values'. They're all on one side of the ledger; all forward bets. I study what they're betting on............

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Nothing to do with correlation my friend.

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define 'fiat debt' - what do you mean?

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At least people are starting to appreciate that New Zealand has a supply side problem zoning land for residential dwellings and then building affordable housing. Eliminating the foreign buyers and immigrant aspect has probably advanced the conversation several years by eliminating those as probable causes.

If you can identify a problem you can fix it.

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We certainly do have a supply-side problem; but fixing that wouldn't be enough to solve the current crisis. There's an infinite supply of credit currently offered for buying (competing for) property, *if* you have collateral in the form of other property. We could double or triple supply without affecting prices while that holds. Thus I still don't think we have any idea how much of our housing problem is real vs artificial scarcity. If anyone were competent to count how many untenanted homes there are in Auckland...? Going strictly anecdotally from what I see wandering around, I think it's vastly understated.

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Squishy, agree. However, only if the Govt want to fix it. They've been looking for the silver bullet but they haven't found it yet. Govt needs to start building and fast and good, i.e. good quality pre-fab housing.

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The government were never looking for the silver bullet they have been busy stealing the silverware.

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Yes like the mixed ownership model, private/public homes in the new mangere development by Kainga Ora... will be super, living amongst rival gangs

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Fairly normal in the UK to have areas of state housing intermixed with private housing - in fact I was brought up a few hundred metres from an area of state housing. Works absolutely fine there. Perhaps there's even some benefits to society mixing rather than having gated communities on one hand and slums on the other.

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It operates like this in nz, where those in the private homes head off to work and shortly after those in the state houses check what the first group own that they would like for themselves. All are funded by the tax dollars of the hard working yet naive private owners who pay for their own mortgages, rates and insurances as well... without handouts

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Those communities have been wronged by colonialists. Think of these as reparations, mate!

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This is not a race thing by the way! Let those in state housing choose to remain as an underclass.

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There is still one variable: internal reproduction.

:)

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No-one can afford to have kids anymore so it will keep falling.

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A new low for one of NZ's top ranked institution.
Failure at this level and to think a while ago, National and ACT joined lobbyists in calls for the government to allow unis to run their private MIQ facilities.

https://www.stuff.co.nz/national/education/125446491/student-alleges-wi…

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It won’t matter, there will be droves and droves of students coming in just for the post study work visa and they will do it at any cost. They are here not to study at all, just here for the visa and to stay permanently.

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Your basis for that claim being what, exactly? It certainly isn't borne out by the statistics.

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Well I’m happy to be shown any statistics on it and will happily change my opinion. I don’t have to look past Jacinda’s social media pages to see how many ‘students’ who went back home for a holiday demand to have their post work visa to be extended. There are droves of comments on how they expected post work visa to residency and that they have been deceived. They would have never spent money on NZ education if they didn’t get the door to work then residency and how NZ has schemed them out of pocket. From Pleading to abuse. They have their qualification but that doesn’t matter.

Again I am very happy to be shown statistics to state otherwise and will happily retract my sentiment. I am basing it on what I see. I have personally worked in hospitality where I have witnessed this restaurant hire multiple shift managers who have done a 1 yr hospitality course and gained residency. Definitely a skill that we cannot find in NZ I believe.

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I have some knowledge of lower level colleges, and those claims are valid. It’s a dodgy business with little real benefit for New Zealand. Many institutions are effectively owned by non residents and much of the fee revenue is repatriated.

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NZ top of the world! In the housing bubble stakes...
Another proud achievement.

https://i.stuff.co.nz/business/125452535/nz-has-most-bubbly-house-marke…

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No such thing as a housing bubble in NZ, and if you think there is one you're labelled a doom gloom merchant who need to be silenced because you might scare off the first home buyers.

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Ha!
Rather than go off the island mentality rhetoric, I will go off objective international assessments.

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That's one of the big problems though - those who haven't seen the downside of a property bubble (and I'm not sure if the world has seen one the size of what we appear to have here in NZ...), seem to have the biggest microphones influencing the FOMO.

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"There has never been anything like the +$200,000 annual gain for the national median over the past year, nor the +$243,000 gain in Auckland. It has been called 'obscene' by Infometrics. Much of rise is because housing supply is so low. at a time when demand is so high (The 'war on poverty' is being lost at a remarkable rate.)"

Realisation is good but is anyone SERIOUSLY doing anything except lip service.

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There are 3 options to stop the frenzy
1. Capital gains - stopped by NZ First (kicked out next election)
2. Increase interest rates (stop subsidising home loans to investors with artificial low rates)
3. DTIs (Govt passes to RBNZ who pass back to govt. Orr says its hard to do yet England, Ireland did it.)
So with 1. ruled out by election promise, it has to be 2. or 3. Increasing supply wont happen because councils wont release land and govt wont build roads.
I would do OCR 1.25 immediately, and DTIs of 4.5 for investors.
But hey thats too easy and it would work immediately.

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Robertson will stroke his chins for a year or two about DTIs.

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We need DTIs for first home buyers to to protect them from paying too much. If people stop paying the crazy high prices, then house prices have to drop.

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We need to ask though why is demand so high? I am just curious.
1. Listening to RNZ today, bus operators want immigration to open as they need bus drivers.
2. IT firms (even though they tout themselves as anyone can work remotely) wants immigrants into the country yesterday to work
3. Hospitality needs immigration to open for workers
4. Ski resorts needs immigration to open
5. Orchids need immigration to open
6. Dairy farms needs immigration to open
7. Trucking companies need immigration to open
8. Universities want immigration open

It makes it sound like NZ is full of either infants and school aged children or all retired people. No working population as everyone wants immigration. How have we survived this long without self sustainablity? Seems like our children never grow up and our elderly don’t ever age.

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Immigrants = cheap labour

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We need to wean ourselves off immigration. The vast majority of people are against it. Companies need to attract local labour, and local labour needs to be motivated. It will work itself out.

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Fear of missing out. Inventory was 60k a decade or so ago on Trademe. Now it is15k, even though there are more houses than ever. So why are houses being withheld from being sold?

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Surely OCR increases are now justified? Most of the economy is running pretty hot.
Doubt they will happen, though.

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All a bit odd really – Orr seems determined to carry on fighting a war that finished some time ago.

He appears glued to .25% for another 12 months - no matter what damage or madness ensues in the meantime.

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How long has he got to let house price growth reach zero before he will do anything? House prices do the opposite of what the government say they will do. Still many investors are still buying houses at the moment.

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I read that J.P. Morgan is stock piling cash as the boss says they will take advantage of rising interest rates over the next 9 months or so.

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Link please. I smell spin; the system cannot cope with interest-rate hikes; the best they could do is short-term, which would drop the poor off the ladder while the Elite hang on.

But they couldn't do it for long, the EROEI of our society, currently, is too low for real growth to occur. And it's getting lower. How long unassuagble debt is mass-cranially-accepted, is the $64,000 question. No bank move can alter the physics - but you can bet they'll try and stay in the game longer than the rest of us...... hence the removal of cash.

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Smart money looks forward and some inflation and more expensive debt has been priced in. Inflation is the result of growth, which means higher earnings.

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https://www.cnbc.com/2021/06/14/jamie-dimon-jpmorgan-is-hoarding-cash-b…

“Jamie Dimon says JPMorgan is hoarding cash because ‘very good chance’ inflation is here to stay”

In a somewhat smaller way (-: I’m doing the same – I’ve seen a few unexpected blow-ups in my time, and unbelievable opportunities can present themselves.

But only if you’re brave – act when others are fearful etc etc - although from experience it's much easier said than done.

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Just remember that in the mean time, while you are sitting in cash it is losing 5% MINIMUM of its value every year (realistically somewhere around 10-15%).

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Yes, cos we all know the CPI is BS

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