What happened Thursday

A review of things you need to know before you go home on Thursday; many retail rate changes, jump in building consents, surge in tax collections, swaps stable, NZD unchanged, & more

1st Jul 21, 3:59pm by David Chaston

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

MORTGAGE RATE CHANGES
HSBC cut its one year fixed Premier rate to 2.09%, and raised all fixed rate for 2 year and longer. More here. Nelson Building Society (NBS) also cut its one year fixed rate.

TERM DEPOSIT RATE CHANGES
Rabobank raised most rates for term deposit terms of 15 months and longer. Christian Savings also made changes.

MOMENTUM BUILDING
The building industry is powering on with 43,466 new dwellings consented in the May year, up more than +15% from the same period a year ago. More home units and townhouses are being consented but the number of apartments being consented has taken a dip.

MOMENTUM SLOWING
Although the average value of all New Zealand homes tops $900,000 for the first time, CoreLogic says average house values is now slowly losing steam.

UNEXPECTED RESULTS
Surging tax collections and spending plans that haven't yet gained any momentum are resulting in enormous changes in the Crown Accounts results.

-15% SMALLER, RULE CHANGE
ANZ is reducing the apartment size at which it will require customers to have a higher deposit. Under its new rules, customers only need a 20% deposit for freehold, standard apartments that are 38 m²or larger. Also a standard apartment must have a bedroom separate from the living area. Previously, any apartments smaller than 45 m² required a 50% deposit.

PRICES UP ON COST RISES, EMPLOYMENT CUT BACK
68% of Retail NZ members are expecting prices to rise over the next quarter on the back of increased costs. 54% of them cut back on hiring or conditions following the rise in the minimum wage, according to the Retail Radar Report.

YIELDS RISE, MOSTLY
Treasury offered $500 mln in three separate bond issues today. The May 2024 $100 mln attracted $380 mln in bids and the average yield was 0.74% pa, up from 0.55% pa just two weeks ago. The May 2028 $100 mln attracted $410 bln in bids with a yield of 1.54% and up from 1.43% two weeks ago. The April 2037 $100 mln attracted $254 mln in bids but this had a yield of 2.29% pa which was -5 bps less than the prior tender two weeks ago.

NO GOOD OPTIONS
The RBNZ is calling on New Zealand banks to "show courage" and keep their banking services in the small island nations of the South Pacific - even in the face of tough and expensive regulatory requirements for AML/CFT. The options are tough for everyone concerned.

CHINA GROWTH WANING
In China, the Caixin PMI dropped back last month and adds to signs from the official PMI released yesterday that momentum in industry is waning. The surveys point to a levelling off in demand and easing of price pressures, even as supply shortages continue to constrain output. This was a larger decline than the fall in the official survey released yesterday. The average of the two continues to point to a timid expansion in industry, now at its lowest since February.

AUSSIE TRADE SURPLUS SWELLS
Australia's trade balance for both goods and services was AU$9.8 bln in May and has been in surplus for 41 consecutive months, from the start of 2018. The annual surplus has swelled from +AU$23 bln for 2018 to +AU$74 bln for 2020 - with rising commodity prices the key driver of the improvement. Their trade surplus is expected to widen further in Q2 2021 on still higher commodity prices.

BAH! YOU CALL THAT A BIG RISE?
Australian dwelling values rose +1.9% in June from May, taking annual growth to +13.5%. This was led by houses, which rose +15.6% over the year, compared to a +6.8% lift in unit values. (For the year to June, New Zealand dwelling values rose +22.8%.)

GOLD FIRM
Compared to this time yesterday, the gold price is up +US$6/oz to US$1770/oz in early Asian trading.

EQUITY MARKETS MARKING TIME
The S&P500 ended its Tuesday session flat. The very large Tokyo equity market has given up some yearly gains in mid-morning trade to be flat. Hong Kong has opened flat too while Shanghai is up +0.3% in early trade there. The ASX200 is up +0.6% in early afternoon trade, while the NZX50 Capital Index is flat in late trade.

SWAP & BONDS STILL TRACKING SIDEWAYS
We don't have today's closing swap rates yet. If there are significant changes again today, we will update this item. They are probably unchanged. The 90 day bank bill rate is up +1 bp at 0.36%. The Australian Govt ten year benchmark rate is down -1 bp at just under 1.49%. The China Govt ten year bond is down -1 bp at 3.10%. The New Zealand Govt ten year is unchanged at 1.79% and above the earlier RBNZ fix of 1.77% (unchanged). The US Govt ten year is down -1 bp at 1.47%.

NZ DOLLAR STABLE
The Kiwi dollar has slipping slightly, now at 69.8 USc. Against the Aussie we are firm at 93.3 AUc. Against the euro we are marginally firmer too at 59 euro cents. That means the TWI-5 is unchanged at 72.6.

BITCOIN SOFT
The bitcoin price is now at US$34,912 and down-2.3% from where we were at this time yesterday. Volatility in the past 24 hours has been moderate at +/- 2.7%.

This soil moisture chart is animated here.

Keep ahead of upcoming events by following our Economic Calendar here ».

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

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59 Comments

by GV 27 | 1st Jul 21, 4:12pm 1625112728

C/o Stuff:

House prices nationally are now 12.4 times the average wage due to a drop in home affordability in recent months, new Massey University analysis reveals.

Please, someone tell us all about the brief period where interest rates were 22% and how that's worse that this, and how your perception of how hard you had it trumps objective economic statistics.

by MortgageBelt | 1st Jul 21, 4:19pm 1625113165

Our first mortgage on our first house was actually a little lower at 20.5%. After saving for 4 years for a deposit of 30%.
This took one entire wage to pay. While we lived on the other.
Lived in a shell, while finishing the kitset house.
Its all relative, every time period has its barriers - its always possible to find a way to home ownership if you save, sacrifice & look for alternatives.
People don't live in or by statistics, they seek opportunities - formulas about wages/houses are meaningless.

by northman46 | 1st Jul 21, 4:46pm 1625114765

"Its always possible to find a way to home ownership..."

Yup. Leave NZ.

by Pragmatist | 1st Jul 21, 4:58pm 1625115509

Go for it, it'll help fix the ratio of houses to NZers.

by northman46 | 1st Jul 21, 5:10pm 1625116201

I shall be next year. And my comment comes from a positive point of view, almost hopeful, about the future for our youth. It's NZ's future that I'm less positive about, to put it mildly.

by Li quid | 1st Jul 21, 10:27pm 1625135259

Hear hear. I have finally escaped the hell hole of the pacific. A commenter on here a while back said a comment to the effect of "a weight lifted off my shoulders when leaving NZ" and I can say my experience is the same.
Interestingly, talking to people this week lead me to dig up the stats on the average wage difference between NZ and Australia, from their own statistics websites. Average wage difference is 173% just for moving countries to Aus. What a deal! Did someone say easier work for more pay?! And cheaper housing? And $1 avocados at the super market in Winter?!
It is in young peoples best interest to protest or leave the boomers to their Gormenghast.
Another (young) academic signing out of NZ.

by refactornz | 2nd Jul 21, 8:53am 1625172811

Except that's nonsense. Average wage difference is not 173%.

by Li quid | 2nd Jul 21, 10:08am 1625177288

And where is your maths?
Stats NZ average wage (June 2020) $55,120 NZD.
Stats Aus average wage (November 2020) $89,003.2 AUD.

Exchange rate used; 0.931.
So looking in NZD, Aus average wage is $95,599.57 NZD.
Difference is $40,479.57 NZD.

Now if you divide $95,599.57 by $55,120 = 1.7344.

Multiply by 100 and you get 173.44%.

What B$ are you trying to peddel?

by refactornz | 2nd Jul 21, 10:35am 1625178928

From the Australian Taxation Office:
https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Taxa…
Table 3: Individuals – median and average key items
Average taxable income ($) 62,549
Median taxable income ($) 47,492

by Li quid | 2nd Jul 21, 11:56am 1625183808

https://www.abs.gov.au/

Front page of the ABS, average adult wage Nov 2020, $1,711 AUD weekly, multiply by 52 gives my figure.

by Li quid | 2nd Jul 21, 11:58am 1625183910

Your data was for 2017, 2018 etc.
Alot of inflation since then. And you also sound like you have a prerogative.

by refactornz | 2nd Jul 21, 2:01pm 1625191301

The average hasn't gone up 42% in 2 years. The numbers are different because they're different data sets.

If you're comparing Australian "Average Weekly Earnings", "for full-time adults" then you should use the same data for NZ.

Those NZ numbers are for "Median Earnings", include part-time work, and not only adults.

Prerogative?
I just don't like sensationalist comments based on incorrect data.

by J.C. | 1st Jul 21, 5:57pm 1625119040

This took one entire wage to pay. While we lived on the other.

Pot noodles breakfast, lunch, and dinner. No Xmas presents for 10 years.

by Squishy | 1st Jul 21, 4:31pm 1625113878

12? I'm picking we can go to at least a ratio of 18 because that's what it is in Hong Kong.

by realterms | 1st Jul 21, 6:58pm 1625122733

12 nationally. How much worse in AKL? Probably have to confine yourself to a city of you want to compare with HK.

by David Chaston | 1st Jul 21, 4:51pm 1625115117

I think the relationship between house prices and wages is only for general journalists. The real relationships that matter are a) the ability to save a deposit from household incomes, and b) the ability to pay the mortgage from incomes. The first one is a growing problem but because the FHBs are taking an increasing share of all home loan transactions it clearly isn't a killer problem yet. The second one is a serviceability measure, and that has never been easier according to the RBNZ data on that.

Hardly anyone saves up the full purchase price of a house and then makes a debt-free purchase. And that has never happened, ever (unless you are uber-wealthy). So why some people are obsessed about the price-to-income relationship beats me. Houses have never been 'affordable' on that basis. Real people save a deposit, then use their income to make home loan payments. Those are the metrics we should follow.

by the Joneses | 1st Jul 21, 5:09pm 1625116159

Because the end goal of home ownership is to own 100% of your house, so you have more expendable income and a break from your home ownership status being wholly dependent on you being able to bring home a good income every week. The higher the house price, the less of your life you get to enjoy as a 100% home owner.

by Rob Reid | 1st Jul 21, 5:29pm 1625117348

And the "rates are low so I can afford it" thinking does not account for the risk now unfolding…rate rises

by Pragmatist | 1st Jul 21, 6:20pm 1625120446

Nope, low house price and high interest rate (which other than somehow having a significant oversupply of houses is the only way you will get low prices) just means it takes you the same amount of time to pay down a much smaller amount of principal.. A 30 year mortgage is still a 30 year mortgage regardless of how much of the weekly payment is going to principal and how much to interest.

by the Joneses | 1st Jul 21, 6:36pm 1625121399

Mortgage rates have dropped over time meaning people historically didn't actually take 30 years to pay it off, as the principle was quickly paid off when lower rates kicked in. Buying now means you are betting huge real sums of future income on interest rates not rising in 30 years from the lowest 'crisis' levels they have ever been set at. Even if the rates did drop to zero you still have the huge principle to pay off that is not going anywhere. This idea that things aren't that bad now is ridiculous.

by Hardly | 1st Jul 21, 6:48pm 1625122113

This is a very important point. Past generations have had the tail wind of reducing interest rates. Future generations might have a head wind.

by Pragmatist | 1st Jul 21, 7:24pm 1625124259

Sure, but when they signed up for it they didn't know rates were going to drop, they got lucky. Same now, we don't know which way rates are going to go, but the idea they can only go up rapidly is bollocks, if they do, (unless they are accompanied by large wage inflation) the economy will crash, and in comes the RBNZ & Govt to give the economy another dose of stimulus, i.e smash the rates back down. Interest rates are going to stay low unless wage inflation is allowed to run. Either way the real cost of servicing a normal mortgage are going to be pretty much on par with paying rent.

by Rob Reid | 1st Jul 21, 8:36pm 1625128578

"the real cost of servicing a normal mortgage are going to be pretty much on par with paying rent" is not right. For several years now I've been paying considerably less rent than servicing a mortgage on a similar house, and I didn't blow a big deposit on top of that.

by Pragmatist | 1st Jul 21, 9:14pm 1625130860

Interest costs on a $800k mortgage are under $400/week, bet your dead money rent is higher than that. I consider the principal part of the payment is more savings than an expense, but sure the upfront $ you pay weekly might be lower, but doubtful by much. The last place we rented was back on trademe last month, rent was up $50/week from when we were there, so now $630/week. Our mortgage refixes next week, and if we had gone for minimum payments we'd be paying $600/week on the mortgage.

And of course in max 30 years (we're aiming for 15 all up) the mortgage goes to zero, meanwhile rent is likely to increase at about the same rate as wage inflation.

by Hardly | 1st Jul 21, 9:25pm 1625131541

Don’t forget maintenance, rates and insurance. I find I spend about $10k on maintenance and improvements a year (not every year but averaged). Add your rates and your insurance and you are up around $15k or $300 a week before you’ve even paid your mortgage.

by Pragmatist | 1st Jul 21, 9:32pm 1625131946

Sure, but you also get security of tenure, asset price appreciation (which I expect to be low for the next decade, but not zero forever), and the benefit of those improvements, which most landlords won't be providing.

by Rob Reid | 1st Jul 21, 9:35pm 1625132136

I'm pretty sure the bank wants the principal back too. The grossly over inflated principal.
Then the council wants their rates, and an old place like this wants a new roof, + insurance.

by Pragmatist | 1st Jul 21, 10:21pm 1625134870

Sure, and the home owner gets to keep the asset price appreciation, gets to choose their own carpet, wall paper and pets. We'll see in a decade whether you wasted a decade paying someone else mortgage off or your own. Median Auckland rent for a 3 bedroom house in a decade. I'll take a guess at $950/week.

by Li quid | 1st Jul 21, 10:33pm 1625135605

If the situation isn't corrected from its current trajectory, I smell a serious uprising & revolt.
If the numbers are large enough and the tide keeps rising, taken at the flood, you won't have security unless you can defend it.

by Pragmatist | 1st Jul 21, 10:57pm 1625137050

Now that's a hilarious thought. Millenials on the rampage.

by Li quid | 1st Jul 21, 11:11pm 1625137888

& jacked to the eye balls

by Carlos67 | 2nd Jul 21, 6:05am 1625162737

You had better come knocking with more than a pitchfork at my place.

by Carlos67 | 2nd Jul 21, 6:11am 1625163114

by Carlos67 | 2nd Jul 21, 6:10am 1625163038

by Carlos67 | 2nd Jul 21, 6:09am 1625162966

by Albert2020 | 1st Jul 21, 5:33pm 1625117630

Your serviceability argument would hold true if we had 30 year interest terms like the USA but we don’t and as such there is a very real risk of these FHBs who have taken on huge debt being subject to higher rates from historical lows. That is why house to income ratios are important. Let’s also look at the figures of gifted money from parents to get a real idea as to how easy FHBs are finding that deposit accrual also shall we?

by Rosenstein | 1st Jul 21, 5:51pm 1625118668

So does the data show that all the FHBs saved a deposit at today's wages and purchased a property WITHOUT assistance from parental equity or cash? Because that would answer the question.

by Audaxes | 1st Jul 21, 6:14pm 1625120075

Hardly? Two thirds of households don't have mortgages according to the RBNZ back in 2019.
The already wealthy are the main participants in the current residential bank mortgage market - current low and falling borrowing costs confirm as much. The return of the money must be more important than the return on it.

by Foxglove. | 1st Jul 21, 6:26pm 1625120811

Friends of the family in their eighties rent out their 4 bedroom family home. Use that rent to pay the mortgage on a two bedroom 70s ownership flat thingy they then bought to live in. Never owned any property other than their home before and took this action only because their income from TDs etc plummeted. Actually they are now quite happy and with a much more friendly household budget than before. QED.

by Let me be Frank | 1st Jul 21, 8:24pm 1625127874

"I think the relationship between house prices and wages is only for general journalists."

And those who have to pay it.....the foundation of the whole ponzi is the ability to pay and for the overwhelming majority their income is wages (salary).

by Let me be Frank | 1st Jul 21, 6:59pm 1625122793

There was an option then that dosnt exist now....if you couldnt afford a 20% plus mortgage rate you could always apply to HNZ for refinance at around from memory 11%....how do you discount a 30 year mortgage at 2.5%?

by chebbo | 1st Jul 21, 4:18pm 1625113083

Missed opportunity for "You call that a rise? That's not a rise..."

by Squishy | 1st Jul 21, 4:25pm 1625113519

US crude storage is diminishing at record rates, the slack enjoyed in oil markets is being taken out while demand surges.

Time for a little wager on $100 oil? OPEC will know that US shale is still shy.

by Hardly | 1st Jul 21, 6:50pm 1625122242

What is stopping shale production ramping up? Isn’t that the yo-yo that has happened over the last few years? Also, I imagine OPEC would like to up production a little - lots of incentive to cheat on any deals.

by Cowpat | 1st Jul 21, 4:27pm 1625113661

Auckland median dwelling price outpaces Sydney, (1148000/ 994000) as economists in Australia see no rate rises until at least 2023 or 2024 to encourage further price increases.
https://theconversation.com/economy-will-be-weak-and-in-need-of-support…

by Brock Landers | 1st Jul 21, 7:18pm 1625123936

Auckland is very speshul.

The amazing things to see and do in Sydney, London and New York are far less desirable than rotting wooden tent in surburban Auckland.

There is plenty of room for upward valuation.

Be quick.

by Justa comment | 1st Jul 21, 7:39pm 1625125184

Exactly. Auckland 100k higher than Sydney where they earn 20k more on average.
Auckland 200k overpriced.

by Audaxes | 1st Jul 21, 5:15pm 1625116543

Surging tax collections and spending plans that haven't yet gained any momentum are resulting in enormous changes in the Crown Accounts results.

Government property revaluations were not insignificant.

by Audaxes | 1st Jul 21, 4:40pm 1625114435

Treasury offered $500 mln in three separate bond issues today. The May 2024 $100 mln attracted $380 mln in bids and the average yield was 0.74% pa, up from 0.55% pa just two weeks ago. The May 2028 $100 mln attracted $410 bln in bids with a yield of 1.54% and up from 1.43% two weeks ago. The April 2037 $100 mln attracted $254 mln in bids but this had a yield of 2.29% pa which was -5 bps less than the prior tender two weeks ago.

You need to correct some of your data.

by Pragmatist | 1st Jul 21, 4:56pm 1625115383

According to Meatloaf two out of three ain't bad... but they missed even that easy target.

by Audaxes | 1st Jul 21, 4:45pm 1625114746

5,000 Burgers Per Day: World's First Mega Lab-Grown Meat Factory Opens

by redcows1 | 1st Jul 21, 5:30pm 1625117424

Mega?
Bit of perspective, 5000 burgers/500kgs is just 4 dairy cull cows. About 1million are made into burgers in NZ alone each year.

by Audaxes | 1st Jul 21, 5:41pm 1625118090

I am sure things can be geared up in China, for instance? One step at a time.

by northman46 | 1st Jul 21, 5:43pm 1625118197

It's mega considering this technology is less than a decade old.

by frazz | 1st Jul 21, 7:26pm 1625124362

But but..the ad on TV showed the friendly farmer talking to his lovely cow who loves fresh grass? So they cull them after 6 years of forced pregnancy's and milking? How long has this been going on?

by Rob Reid | 1st Jul 21, 8:48pm 1625129319

If God didn't mean us to eat animals, how come they are made of meat?
- As a vegetarian this is one of my favourite jokes. I don't get out much.

by Henry_Tull | 1st Jul 21, 6:11pm 1625119916

When a governments actions have nothing to do with that governments policy.

In Monty Python speak Willie is arguing in his spare time.
https://youtu.be/xpAvcGcEc0k
Probably not the 5 minute one.
If its not government business, who is he working for. Who is paying the bills?

https://www.rnz.co.nz/news/te-manu-korihi/445959/next-steps-to-meeting-…

Māori Development Minister Willie Jackson has been reluctant to comment on He Puapua, saying it is "separate to government policy".

He has today announced at Ngā Whare Waatea Marae in South Auckland the next step in developing a national plan to implement the declaration will be consulting with "Māori stakeholders".

Over the next few months, Jackson said he would be working with representatives of the National Iwi Chairs Forum.

"This declaration is about indigenous peoples so it makes sense we talk with Māori first up," Jackson said.

by HouseMouse | 1st Jul 21, 11:01pm 1625137290

Here's a good article explaining what I have said for more than a year, the new zoning on it's way will push property prices higher again:

https://www.oneroof.co.nz/news/39711

by Carlos67 | 2nd Jul 21, 6:41am 1625164888

Its just disgusting prices for the location. Housing all joined together for over $1mil each in a shit hole like that in Panmure. Its no wonder people are quitting New Zealand. I wouldn't pay half of that to live there.