What happened Friday

A review of things you need to know before you go home on Friday; many big mortgage rate changes, one cut, factories expanding faster, prices rising faster, swaps up, NZD stable, & more

16th Jul 21, 3:59pm by David Chaston

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

MORTGAGE RATE CHANGES
Westpac, BNZ and then ANZ all followed ASB in hiking fixed term mortgage rates today. More here. It is almost certain the smaller banks will do so early next week, probably as early as Monday. It is worth noting that the RBNZ isn't unhappy with these moves up, seeing them as a way to suppress the frothy real estate market. BUT, Kiwibank has cut (yes, cut) their 2 year rate to 2.49%, although it raised most other fixed rates.

TERM DEPOSIT RATE CHANGES
Westpac and BNZ both moved term deposit rates up as they increased their mortgage rates. We will summarise these rises in a weekend review.

FACTORIES FEELING CHIPPER
Expansion in New Zealand's manufacturing sector picked up in June with the index over 60. That completes six months of the index being well in excess of its long-term average of 53.2. This bodes well for positive manufacturing sales and GDP in Q2-2021 when these official statistics are released over coming months – especially with production and new orders being the strongest of the PMI components recently. Most of the negative comments in this survey related to supply-side issues

INFLATIONARY SURGE
David Hargreaves called the CPI jump to 3.3% in the year to June 'a scorcher'. ANZ called it 'monstrous'. ASB noted it was 'miles above' what they were expecting. Anyway, you get the idea; today's inflation data beat everyone's expectations (2.8% in the Reuters poll. The RBNZ was expecting 2.6%). It was 1.5% in the year to March, so by any measure it is a huge move. Despite the surprise, some analysts are still thinking it is transitory. What matters is what the RBNZ thinks - and what matter more are consumer inflation expectations. The last time the RBNZ polled for that in early May, they were told 2.2%. One thing you can be reasonably sure of is that this upside surprise makes a +0.25% OCR rise on August 18 more likely - and to be followed by at least one other in 2021. Westpac sees three hikes in 2021.

NO LET UP
There were 97 new cases in NSW today and another 6 in Victoria. Niether levels give confidence the Trans-Tasman travel bubble will re-open anytime soon. The COVID crisis in Indonesia is getting really bad. And sadly, it is a spreading peoblem in all of South East Asia.

GOLD'S RISE PETERS OUT
Compared to where we were this time yesterday, the gold price is up +US$1/oz to US$1827/oz in early Asian trading. It kind of looks like the recent run-up has run out of puff.

EQUITIES GENERALLY LOWER
Earlier today the S&P500 ended down -0.3% on Wall Street. In Tokyo today, their equity market is down another -1.1% in early trade after yesterday's big fall. Hong Kong has opened down a minor -0.1% after yesterday's big rise. Shanghai is down -0.3% in their early trade following yesterdays decline. The ASX200 is flat in early afternoon trade after being lower this morning, and the NZX50 Capital Index is up +0.1% in late trade.

SWAP & BONDS RATES FLATTEN SHARPLY
We don't have today's closing swap rates yet and if there are significant ongoing changes we will note them here. They probably rose at the short end today with the 1 year probably up another +6 bps and the 2 year probably up +4 bps. The 90 day bank bill rate up at 0.43% and +2 bps. It has subsequently moved up to 0.44% in a continuing rise. The Australian Govt ten year benchmark rate is down a tiny -1 bp at just on 1.29%. The China Govt ten year bond is up +1 bp at 2.98%. The New Zealand Govt ten year is down -3 bps so far at 1.62% and now below the earlier RBNZ fix of 1.67% (+3 bps). The US Govt ten year is down -2 bps from this time yesterday at 1.32%.

NZ DOLLAR STABLE
The Kiwi dollar has eased from its overnight high to just on 70 USc and notably, the CPI surprise did not move the currency either way. Against the Aussie we are up at 94.3 AUc. Against the euro we are little-changed at 59.3 euro cents. So the TWI-5 has barely changed from where we were this time yesterday at just under 72.9.

BITCOIN SLIPS
The bitcoin price is now at US$31,818 and down -2.9% from where we were at this time yesterday. Volatility in the past 24 hours has been moderate at +/- 2.9%.

This soil moisture chart is animated here.

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65 Comments

by Audaxes | 16th Jul 21, 4:05pm 1626408337

David Hargreaves called the CPI jump to 3.3% in the year to June 'a scorcher'. ANZ called it 'monstrous'. ASB noted it was 'miles above' what they were expecting.
Everything Will Go To Zero" - Macquarie Strategist Envisions Era Of Tech-Driven Deflation

by Foxglove. | 16th Jul 21, 4:18pm 1626409105

The wolf is no more on the fold. It is in from the cold, through the door, hungry and ready to eat everything in sight. But sleep little sheepies, sleep. And Grandma Robertson closed that little book of rhymes and fables, blew out the candle and said “how the F#(! did that happen.

by Audaxes | 16th Jul 21, 4:27pm 1626409638

Inflationary potential, real inflationary potential, never really got very high to begin with at any point. Sure, the media spun the last reflation selloff as “historic”, but it was nothing of the sort.
Link

by Roelof | 16th Jul 21, 5:23pm 1626413028

If the FED is manipulating the bond mkt, then why would u use the bond market as some kind of chrystal ball , to predict that inflation is just a transitory blip ?
Beats me.
https://fred.stlouisfed.org/series/TREAST

by Audaxes | 16th Jul 21, 10:35pm 1626431751

The deflationary potential of a serious collateral scarcity, so scarce even Jay Powell said it out loud, simply overwhelms the current levels of “inflation.”
Link

by linklater01 | 17th Jul 21, 8:10am 1626466249

Foxglove,
Very good fairytale, but that's all it is -a fairytale. Presumably the wolf is inflation and given the global supply chain disruption, it's not much of a surprise is it? More pertinently, is it temporary or permanent? My bet is that much of that disruption will disappear by mid to late 2023. The structural issues which have given us low inflation for many years will reassert themselves.

by Cowpat | 16th Jul 21, 5:29pm 1626413383

And of course Japan, in todays July policy meeting, its central bank ,rolled their eyes and kept everything the same at -0.1 percent

by Belle | 16th Jul 21, 4:23pm 1626409384

What else happened today? Rural NZ revolted.

by youngdumbandbroke | 16th Jul 21, 4:27pm 1626409660

The bureaucrats can’t hear them in the ivory towers of Wellington

by J.C. | 16th Jul 21, 4:37pm 1626410264

Ms Ardern is down in the bunker under the Beehive

by JimboJones | 16th Jul 21, 4:43pm 1626410617

Yep, paying 3k extra for your brand new gas guzzling carbon emitter is really worth crying about. I thought farmers were meant to be tough?

by Galloleous | 16th Jul 21, 4:59pm 1626411544

This is just the straw that broke the camels back. You obviously have little idea of the raft of other shit policies that are being pushed through: NPS-IB, NPS-EF, SNA's, the new RMA, Council rate rises of 20% or more...the list goes on.

by Rosenstein | 16th Jul 21, 5:02pm 1626411745

Hold that thought. I got a pub in Taihape I want you to run that by.

by JimboJones | 16th Jul 21, 7:38pm 1626421108

The one with all the brand new rangers parked out front?

by profile | 17th Jul 21, 12:00am 1626436841

The team of $55 million have you right where they want you. It's all about the ute tax bud.

by Nzdan | 16th Jul 21, 5:17pm 1626412623

Displaying quite an array of brand new utes and $200k tractors too as they protest.

by Pacman_46 | 16th Jul 21, 5:27pm 1626413273

They’re work tools, not fashion accessories.

by rastus1 | 16th Jul 21, 6:53pm 1626418435

Just like tradies... many years ago work vehicles were rough second hand work horses. Nowadays everyone seems to have brand new.

by Nzdan | 17th Jul 21, 8:36am 1626467782

Brand new with 22 inch mag wheels, to navigate the tricky terrain on those greenfield job sites.

by solardb | 16th Jul 21, 6:42pm 1626417734

But short on facts though. Or maybe they only listen to National party misinformation.

by Galloleous | 16th Jul 21, 4:57pm 1626411449

Honestly this is still no where near enough with the load of shit they are pushing onto rural NZ.
Groundswell could come to be a large pain in the be(hive)hind if the the bureaucrats dont come out of their bunkers into the real world and see what is actually happening.

by powerdownkiwi | 16th Jul 21, 5:17pm 1626412670

Blameshift is ignorant. Always.

This isn't any sector's fault. Here's the why of everything:
https://www.youtube.com/watch?v=qYeZwUVx5MY

And if you want it in written form: https://www.goodreads.com/book/show/48866273-blip you can get it from fishpond. Everyone will be annoyed from here on; the need is to realise that the problem was we chose to ignore the repercussions of what we were doing.

by KH | 16th Jul 21, 5:41pm 1626414108

The Wellington civil servants will not have noticed the farmers.
So many civil servants there, and increasing rapidly, there is no need to be in contact with the real world. Just talk to each other.

by Advisor | 16th Jul 21, 5:52pm 1626414720

The public sector has been on a hiring spree for a while, sucking up skills already in short supply.
Now we also have Aussie companies into the mix of deep-pocketed employers lining up to grab the best of skills.

by Alter Ego | 16th Jul 21, 7:04pm 1626419063

Inflating stupidity is the new mandate...It is so stupid, it must be even more Inflationery than ever. Politicians please note, we cannot afford to repay what you Borrowed already, so Stop or we will vote you all......OUT.

We do not have "common sense" left........so maybe we should bring back """THE RIGHT"""

Grow food, not Stupidity...".Farm sensibly." is my motto....not steal Politically.

by finite | 16th Jul 21, 5:35pm 1626413730

The current raft of policy initiatives would be prety much the same under a National govt. (Except maybe the ute feebate).
Anybody with half a brain would have seen these chages coming 6 years ago.
Yet farmers continue to pay ridiculous prices for farms and have huge debts to service - buyer beware.

by Belle | 16th Jul 21, 6:40pm 1626417601

Last year I could have got a nice 300ha for 3.3 mil. The price of a not that fancy house in Auckland. From which I could have fattened 500 heifers and 1000 lambs per year easy. Ridiculous prices. I dont think so. City people want meat still whether you like it or not. But our government is doing their darndest to stop us producing any type of food.
I notice my Ambrosia apples are awful this year. Picked too late I gather. Probably lucky to be picked at all. So whats going to be missing from your table next year at the rate we are going?

by Macawsley | 16th Jul 21, 6:52pm 1626418355

Sorry I missed the bit where this government is stopping you producing any type of food.
Imo just about all farmers tensions are based around money /debt due to land prices .

by redcows1 | 16th Jul 21, 6:01pm 1626415300

Revolted by driving fossil fuel guzzling Utes and tractors to town showing how deeply they care for the environment.

by Belle | 16th Jul 21, 6:26pm 1626416783

Oh ffs we live in the wops. How the hell are we supposed to let the govt know we are pissed. Somehow having the hunterway woof from the nearest hill just wont be heard in Welly no matter the depth of his bark.

by redcows1 | 16th Jul 21, 7:00pm 1626418812

Not by brandishing some of the childish signs that are on social media. Utes with Cindy and stalin, bitchrule,black Utes matter !
Thankfully the newshub item didn't run with any of those and remained balanced.

by muzled | 16th Jul 21, 8:24pm 1626423854

Haven't seen a single thing about it as I don't read stuff or harold, but if that's the case some people really need to get out of dodge a little more often.

by Casual Observer | 17th Jul 21, 11:24am 1626477853

If you believe that this was just about environment regulations redcows, you really don't understand your rural community. You don't use fossil fuels in making your living? But then again as a contracted farm employee you are pretty much excluded from the issues farm owners are concerned about.

by Nzdan | 17th Jul 21, 2:02pm 1626487374

Judging by the content of the various placards, I'm not entirely sure even the farmers know exactly what they're protesting for. They saw the nurses screeching for attention and didn't want to feel left out.

by Squishy | 16th Jul 21, 8:24pm 1626423894

Revolted? They had a little protest. If I was in that industry I'd be pushing much harder.

Take inspiration from the French on protesting, block major roads with slow moving farm vehicles in rush hour and leave manure outside your local MPs office and parliament. If you go easy on then now they'll sense your weakness. They have to believe you'll gladly use disproportionate force.

by Millennial_Woman | 17th Jul 21, 8:19am 1626466763

The way the French protest is outstanding. I thibk farmers also need to remember that we are also still seeing school strikes for climate. A balance needs to be reached where we can save what remaining natural environment we have remaining and improve emissions while improving our economy.

by Millennial_Woman | 17th Jul 21, 8:19am 1626466766

by custard | 16th Jul 21, 4:25pm 1626409528

Watched a press interview of Robertson earlier today – let’s just say his feet appear to be firmly in the transitory/look-through camp – probably no surprises there.

He also seemed to imply that the RBNZ should wait and look at both the June quarter and September quarter before making any decisions – was this some sort of vague directive?

If he and the RBNZ are wrong then delay will help nobody – it’ll just create a bigger mess.

by J.C. | 16th Jul 21, 5:27pm 1626413232

The words I would use to describe my feelings about Robbo would not pass the interest dot co moderators' guidelines and rules. Therefore, I will not drag the comments section into the gutter.

by custard | 16th Jul 21, 5:50pm 1626414634

“Government temporarily doubles the duration of the Essential Skills visa to two years for migrants with jobs that pay less than the median wage”

Well then, bearing your thoughts in mind, I think it’s best I don’t mention that during the interview he threw in Faafoi’s genius initiative above as a real positive.

by J.C. | 16th Jul 21, 6:21pm 1626416482

Ensuring the slave trade continues as much as possible

by fortunr | 16th Jul 21, 5:41pm 1626414119

Not raising interest now will simply force the RBNZ to raise it at a higher level later on.
They can keep their heads in the sand as much and as long as they want, but reality will hit them anyway. The longer they do it, the bigger the wake up call.

by alittle | 16th Jul 21, 4:24pm 1626409493

How RE Agents trying to stir FOMO :

EMAIL :

New Capital Values (CV) are Coming
After delaying the triennial revaluation of Auckland’s 560,000 plus properties due to Covid limitations for accessing the data last year, the Auckland Council have announced that they will be released now in October 2021. Sometimes controversial and always eliciting a response in one way or another from homeowners selling and buyers needing to accurately determine their required borrowing, these new figures are keenly anticipated. This may be a good time to get an updated appraisal done prior to the spring figures release as a way of benchmarking your current market value before the new CVs make an impact. Those who have bought a new build or built since the last CVs were struck in 2017 will be particularly interested to see a baseline for their property value at last.

Coming Attractions
We have a number of listings just in the process of campaign preparation with final touches to the home’s presentation and staging, ordering documentation, photography, and marketing tasks. We’re so excited to be getting ready to push the launch button but if you’re a red-hot buyer who want to know more detail of what’s in the pipeline then please give us a call for a chat – particularly if you are needing to sell to make the next purchase happen.

by fortunr | 16th Jul 21, 5:44pm 1626414270

I give absolutely zero weight and zilch credibility to any claims by real estate agents and housing specuvestors.

by JimboJones | 16th Jul 21, 4:40pm 1626410433

Wow, a lot happening in one day!
I don't think 3.3% could be called a scorcher or monstrous, 15 years ago that was probably below par. But a rate cut at the next RBNZ meeting just got a lot more likely, and this year is definite unless something major happens.
Not sure what Kiwibank are thinking, interest rates are almost definitely going up and they are cutting!

by Galloleous | 16th Jul 21, 5:00pm 1626411653

There is still the cheap money at 0.25% available for them to use. Even if they take a large chunk of that now and use it to hold them over for the coming years. They dont have to buy money at the swap rates if they dont want to.

by CapitalNone | 16th Jul 21, 6:18pm 1626416296

Yeah, but to what exactly do you think RBNZ will raise rates to at the next meeting... a whopping 0.5%? I'm sure Kiwibank won't be too fussed.

by MortgageBelt | 16th Jul 21, 4:41pm 1626410460

NZD shooting for parity with AUD.
Australia in no hurry to hike interest rates.

by JimboJones | 16th Jul 21, 4:45pm 1626410737

Yep all the other central banks are talking about rises in a year or two so NZD is going to go to the moon. But I think they will be raising a lot quicker than they think.

by Carlos67 | 16th Jul 21, 4:50pm 1626411054

Yep and if NZ was really smart we would swap to the AUD the second it happened. Lock step with a stronger currency that would help both countries.

by Millennial_Woman | 17th Jul 21, 8:24am 1626467089

Yeah koz that worked out really well for Portugal Italy Greece and Spain?

by Cowpat | 16th Jul 21, 5:14pm 1626412485

Probably more important than the M13 data,( which forecasts with little accuracy) is the RBNZ own sectoral inflation numbers M1 which came in at 2.2 percent today, up from 2.0 percent in the previous quarter, warm but not scorching.
The M1 data also showed the last two quarters in the property index were the fastest q/q since their records began.

by custard | 16th Jul 21, 5:11pm 1626412282

“RBNZ isn't unhappy with these moves up, seeing them as a way to suppress the frothy real estate market”

Well I for one wouldn’t mind seeing a bit of new found froth in TD rates while we’re at it – I know savers are considered just poor unwanted trash in this environment but can we at least get a chance to climb out of the gutter.

by Officebound | 16th Jul 21, 5:13pm 1626412422

The RBNZ was expecting 2.6% annual inflation.

The last 3 quarters were 2% (average .666% each), with a -0.5% in the quarter before that.

Did they really think inflation was lower in the last quarter than the 3 before?

by Nzdan | 16th Jul 21, 5:21pm 1626412875

Image stolen from Facebook, quite the protest it seems:

https://ibb.co/kKWDf59

by lowercase capitalist | 16th Jul 21, 5:33pm 1626413606

This one was doing the rounds on reddit.

https://preview.redd.it/inn4laeoahb71.jpg?width=1083&format=pjpg&auto=w…

I have questions.

by solardb | 16th Jul 21, 6:51pm 1626418287

Its actually a bit disturbing. Not so much the apparent issues , but the lack of factual statements , and the over dramatization . It seems Trump stlye lack of the former , and plenty of the latter is catching on with some of these groups .
I would think the image that urban NZ came away with from some of these protesters was not what the average farmer was hoping for . And then Collins tried to make hay with" in the behind",??? If thats the best they can do , it 3 more years Labour.

by muzled | 16th Jul 21, 8:30pm 1626424214

my guess is the farmers are used to having the boomers as the voting majority their whole lives and now they're not they're extremely concerned that the world is changing and leaving them behind?

by Belle | 16th Jul 21, 9:05pm 1626426338

I guess we are pretty plain people. We dont know how to dandy up the language. When you live life mostly working on your lonesome in all manner of weather, dealing with all kinds of problems on your own, cos its an hours drive and a $300 minimum travel fee for anyone to come fix any thing for you, you just see life differently.
The guy that talked about suicides in the rural community was on point. Farming can be a lonely demanding crushing and rewarding way to live. How many times I have hopped in the car to head out and the water just stopped. It could be a million things and suddenly I have to find what the problem is and forget about going anywhere.
Water. Townies turn the tap on and its always there. Such a basic thing. Yet the bane of most cockies lives.
Just think for a minute, there you are in your comfy bungalow in a comfy town with your supermarket a km away. A dairy on the corner. School at walking distance.
Or Mrs Farmer, an hour on a gravel road just to get to the highway.
Its what we choose, but its not easy.

by Officebound | 16th Jul 21, 9:19pm 1626427189

So, do you think
1) The free market will sort it out?
2) Change isn't needed
3) You should be garnered a favour by politicians
?

by Casual Observer | 17th Jul 21, 12:17am 1626437839

If you were able to listen to what Groundswell and some of the speakers said, the lack of genuine consultation with rural NZ underlines a lot of their concerns. It was not just farmers (cross sectors), but also rural support industries - SMEs - rural non farming community members taking part in the protest today. Also noticeable in our area was that the majority of those protesting were not older farmers, but younger farmers.
I have yet to meet a farmer that doesn't believe that some change is necessary and many have, and are, making change.
If govt had bothered to consult with farmers on the low slope maps they would have had it explained to them why it would be a folly to use the maps they did. But no, govt knows best - until they don't. And now they are backtracking because they have realised what a folly it was to use the maps. But the cost to rural wellbeing over the regulation around that folly, has been not insignificant.
The proposed regulation around SNAs is insidious. There are likely ways to achieve what the believed intention of govt is, but the proposed regulation will be another 'slope map folly'. But hey the govt doesn't appear to care about the effect on rural wellbeing this results in. SOme Councils recognise the potential wellbeing issues and are not buying in to SNA Maps. https://www.stuff.co.nz/waikato-times/news/300358013/two-greater-waikat…
Likewise the recent announcement on asking farmers to submit on content for a National Farm Plan. Govt have been told a one size fits all won't work, but again - they know best. Until they realise they don't, and then ask for farmer input, while staying with the unworkable 'one size fits all'.
All sectors of primary industry have been asking for visa extentions for staff on essential skills visas. Is it just a coincidence that Kris Faafoi announced extensions to the essential skills work visas the same day as all sectors of primary ag were taking part in protest action.
FYI here's the link to the Groundswell position statement read out at all of todays meetings. https://groundswellnz.co.nz/wp-content/uploads/2021/07/GROUNDSWELL-posi… While not all parts of it may resonate with all rural communities, the sentiments behind it would be understood.

by blobbles | 16th Jul 21, 11:47pm 1626436049

Absolutely agree, there really should be some wrap around services for the farming community that just aren't there. And I think the farming community have a right to feel neglected in many ways.

But at the same time, we are now getting really frequent severe weather events. Right now we are having what looks like a one in a 100 year event on the West Coast of the SI, but we had another one of those down there just a couple of years ago. And a few months ago we had the same on the East Coast of the SI. It's time to start linking things up, more energy in these systems due to more heat in the atmosphere. And unfortunately, a big part of that is due to our over grazed farms producing a lot of methane. Us townies need to suck it up too and many of us are, changing our diets away from milk and meat, ramping up the costs of anything that is carbon intensive (if we aren't doing it already, we should be), less/no flying, increasing congestion charges etc. IMO, us townies haven't ramped these costs up enough to really create change, we definitely should though.

At the same time, it's a tough pill to swallow for farmers, but the world is changing for the worse and we all have to do our bit. The SNA's, carbon pricing, ute tax are all part of it. But I think it is remiss of the government to not ramp up services to farmers at the same time to help them transition. For that reason I totally support the farmers protests, they are really calling out for help. The government should be listening, not changing these policies too much (which IMO are necessary to start reversing course on human induced climate change), but providing much better services than those currently on offer. Subsidised visits from doctors/mental health professionals, the ability to claim back many of the costs Belle talks about which just make farming hard. And setting up a group with real power, run within federated farmers, tasked with making farming more efficient, easier and more productive.

by linklater01 | 17th Jul 21, 8:32am 1626467534

Belle,

I have no connection to farming, but am certainly not anti-farmer. However, it does seem to me that the disconnect between town and country is growing rapidly and many farmers are slow to recognise that they no longer enjoy unqualified public support. Your social licence is under threat.
Why do NZ farmers still use so much fertiliser? Why are so many waterways dirty? Is it acceptable to separate calves from their mother within days of birth and send them to the slaughterhouse? The world is changing rapidly and in my view, many NZ farmers risk being left behind.

by youngdumbandbroke | 16th Jul 21, 7:46pm 1626421593

Stagflation , protests and a pandemic - it’s going to be a hell of a ride team buckle up!

by Squishy | 16th Jul 21, 8:11pm 1626423096

I'm actually surprised that the rate of inflation wasn't higher.