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A review of things you need to know before you go home on Tuesday; Barfoot sales stutter, business confidence 'bizarre', dairy prices in focus, NZX's property sector loses some shine, swaps stable, NZD stable, & more

A review of things you need to know before you go home on Tuesday; Barfoot sales stutter, business confidence 'bizarre', dairy prices in focus, NZX's property sector loses some shine, swaps stable, NZD stable, & more

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

MORTGAGE RATE CHANGES
No changes today.

TERM DEPOSIT RATE CHANGES
None here either.

FIRST SIGN OF WEAKNESS?
Auckland's dominant realtor reports the average selling price for properties traded in September fell -$51,000 from its July peak. Their September sales volumes were down -40% on September last year.

'SPRING BOUNCE'
The ANZ World Commodity Price Index lifted +1.5% in September, partially unwinding the previous month’s fall. Dairy and forestry both regained some ground and aluminium and meat prices (particularly lamb) were strong. But this gain was suppressed in NZD terms as the local currency appreciated in the month.

CURVE BALL?
The results of the NZIER Quarterly Survey of Business Opinion wasn't quite what many experts were expecting. BNZ sums it up this way: "Today’s NZIER Quarterly Survey of Business Opinion produced a set of results that can be best described as bizarre. On the one hand the survey tells us capacity constraints are extreme and the labour market is stretched to breaking, demanding an immediate response from the RBNZ. On the other hand, it would appear businesses have no intent to raise prices, cost pressures are under control and inflation threatens to drop to the lower end of the RBNZ’s target band." But demand is holding up, so the RBNZ is still expected to raise the OCR tomorrow.

SFO BROUGHT IN
The Serious Fraud Office has opened an investigation into Options Trading and Investments NZ Limited (Options Trading), now in liquidation, and Tiavare Richard Curtis Joseph, also known as Ritchie Wineera. Damien Grant is the liquidator and probably initiated the action.

FISHER FUNDS BUYING AON'S SUPER BUSINESS
Fisher Funds says it has reached an agreement to acquire Aon New Zealand’s superannuation business, which includes the Aon New Zealand KiwiSaver scheme and Master Trust.

DIGITAL WALLET APP DOSH LIVE
Dosh, a digital wallet app, is now live. It's available on the Apple and Google app stores and enables people to send money to each other at any time of any day of the week. Small business owners can now instantly accept payments via QR code with Dosh. Westpac subsidiary Red Bird Ventures is also launching a payments app called Buck.

ALL SIGNS SUGGEST A MODEST RISE IN DAIRY PRICES
There is another dairy auction tomorrow morning, and the derivatives markets suggest the WMP price will rise +1.5% and the SMP price will rise +2.5%. If that eventuates, it will be the fourth consecutive rise. It will be aided by a -0.6% devaluation of the NZD since the prior event.

QUITTING AUSTRALIA?
In Australia, there are swirling rumours that Fonterra is about to sell its operations there to Bega. Fonterra has also been mulling quitting it via an IPO.

PROPERTY'S SHRINKING INFLUENCE
Last week on the NZX50, the property sector suffered a much larger retreat than the overall market. The eight companies in that sector fell -2.2% in capitalisation in the week, compared to the overall hold. These companies are now worth 8.9% of the overall market. A year ago they represented 9.1%. Last week, the largest fall was by Goodman Property (GMT, #15) who lost -4.7% in the week.

MARKETS EXPECT THE SIGNALED RISE
The RBNZ will review its OCR rate tomorrow and it is widely expected to go from 0.25% to 0.5%. Markets have price that in. If they don't shift higher, market reaction will be intense and swift. The RBA reviewed its settings at 4:30pm today. No change was expected over there, and none happened.

BIG BOOST TO SHARE EQUITY OPTIONS
Kāinga Ora has launched a share equity scheme to help those with low deposits into home ownership. The make-up of shared ownership will be determined by several factors, including: how much of a deposit you have, how much a participating lender is willing to lend you, and how much contribution Kāinga Ora will make towards purchasing the home with you. For example, you may have saved 10% of the purchase price of a home and a participating bank is willing to lend you 75%. Kāinga Ora then contributes 15% to purchase the home with you in return for a 15% share of ownership in the home.

NORMAL RETURNS
All the talk earlier in the year about droughts and 'water crises' have now vanished. Lakes and reservoirs are now all at 'normal' or fuller now. In this case 'normal' means the long term average (over 90 years).

ANOTHER RECORD
Australia reported a record high trade surplus of AU$15 bln for the month for both goods and services. That was half as much again as analysts had expected. Surging natural gas and coal exports were very much stronger than expected.

PANDEMIC PRESSURE SHIFTED
Staying in Australia, there has been an explosion of Delta cases in Victoria with 1763 cases reported there today in a "very serious jump" all from AFL celebration parties. There are now 14,368 active cases in the state. In NSW there were another 608 new community cases reported today with another 438 not assigned to known clusters. They now have 8,553 active locally acquired cases which is lower, but they had 6 deaths yesterday. Queensland is now reporting two new cases. The ACT has 33 new cases. Overall in Australia, more than 57% of eligible Aussies are fully vaccinated, plus 23% have now had one shot so far. There were two new cases in New Zealand at the border, and 24 more in the community. So far, 49% of eligible Kiwis now have both shots, another 31% the initial shot. So far the New Zealand vaccination effort is faltering slightly (79.4% of Kiwis and rising more slowly) and the Australian is gaining new momentum with theirs now up at 79.6%.

GOLD MIXED
Compared to where this time yesterday, the gold price is up +US$3 at US$1764/oz in early Asian trade. But it is down -US$7 from where the New York market finished earlier in the day.

EQUITIES SEA OF RED EXTENDS
The S&P500 ended its Monday session down -1.3% on Wall Street. The Tokyo market has opened today down more than -3.0%. Hong Kong has opened down -0.6% after yesterday's large retreat. Shanghai is missing all this be being on holiday and won't reopen until Friday. The ASX200 is down -0.7% in early afternoon trade. The NZX50 is down -1.2% in late trade here.

SWAP & BONDS RATES MIXED
We don't have today's closing swap rates yet. They probably flattened slightly. We will update this if there are significantly different changes when the end-of-day data comes through. The 90 day bank bill rate is up +1 bp at 0.62% in advance of tomorrows OCR decision. The Australian Govt ten year benchmark rate is now at 1.51% and up +3 bps from this time yesterday. The China Govt 10yr is now at 2.89% and unchanged. The New Zealand Govt 10 year rate is now at 2.00%, unchanged, but back above the earlier RBNZ fix for that rate at 1.98% (-2 bps). The US Govt ten year is now at 1.48% and up +2 bps from this time yesterday..

NZ DOLLAR LITTLE-CHANGED
The Kiwi dollar is now back up to 69.4 USc. Against the Aussie we are holding at 95.5 AUc. Against the euro we are firm at 59.8 euro cents. The TWI-5 is now just on 73.1, and back in the middle of the 72-74 range we have been in for most of the past eleven months.


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BITCOIN FIRMS
The bitcoin price is now at US$49,185 and up +2.9% above where we were this time yesterday. Volatility in the past 24 hours has been moderate-to-high at just on +/- 3.0%.

This soil moisture chart is animated here.

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

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44 Comments

Good to see the Government coming up with new ways to give the housing market a bit of juice. And this way they take a haircut if the market goes down, and make a tidy profit if it goes up - all the more reason to keep pumping it!

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An ex agent I spoke to thinks after the 30% quick rise weve had prices could go flat for 5 or 6 years now. This will depend largely on interest rates I believe, if the RBNZ delivers the 1.5% increase to the OCR in the next 18 months or not. If they dont, I believe the Auck median will be 1.3 mill in 2 years.

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The average Auckland house price is already past 1.3m. 

https://www.interest.co.nz/property/112518/average-value-new-zealand-ho…

 

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Median is not the average 

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Yes, but I was referring to median. The average can be quite distorted in places like Auckland, I tend to find the median far more relevant to the volume.

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Or perhaps a politically palatable way of pre-bailing out first home buyer's who inevitably find themselves in negative equity in the upcoming crash.

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But demand is holding up, so the RBNZ is still expected to raise the OCR tomorrow.

RBNZ issued  $200m 4 week RB Bills at 0.43% today.

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Clearly they can't leave the punch bowl around much longer. Taking it away now could be the difference between a bad hangover and a trip to ICU for New Zealand's 'economy' (by which I mean housing market.)

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The bad hangover option terminated around 2013.

We're now headed towards mass debt defaults and a reset of the long debt cycle.

The only way I can see that we get out of this without debt forgiveness is for central banks to keep interest rates set well below the real rate of inflation for a significant period which is going to make everyone poorer as it erodes purchasing power and reduces the general quality of life for society.

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For once I can congratulate the government on policy, with it's major shared equity scheme announcement today.

Well overdue, but a major step forward. 

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Is it though? It's only for new builds, which already only require a 10% deposit. So it will only really help those people who have less than a 10% but more than a 5% deposit. 

I'm also suspicious of moves to pour more government money into the housing market - it seems likely that this will just have the effect of propping up house prices, given that there is now more money available to be spent on houses. 

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Not quite correct. By the government taking the deposit from say 5% to 20%, it makes a big difference in terms of mortgage serviceability, especially with rising mortgage rates, and especially for households on middle incomes, whom this policy targets.1

It's not perfect, and no policy ever is. But it could make a meaningful difference to the chances of middle income FHBs getting on to the property ladder. There's some hope now for my children.

Great news.

And for any one who wants to pick it apart - suggest a better policy!

 

 

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Hi HouseMouse

You are one of the better commentators on here and I think you always put forward valid and balanced opinions. I think peoples reluctancy to buy into the new housing policy stems from history. Everything Labour have promised has turned out to be catastrophicly bad... I mean like 100% fail rate! (Kiwi build, controlling house prices, addressing inequality...on and on). People view them as incompetent- thats a sweeping statement I know. 

I agree with you 100% that on paper it sounds like a brilliant idea. Anything that means my kids can stay in NZ and watch the old man grow old whilst being able to afford to live in the city they were born... absolutely great!! I really hope this idea works and it gains traction... but do this mob have a track record of getting things done? 

After all, its a popularity contest, not whats best for the citizens. They ride the fence,  nothing ever actually gets done.  

Keep up the good work mate, we all live in hope, who knows.. maybe my sceptism is misplaced. :-)

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The Victoria experience reminds me we dodged a very big bullet , with the All Black test on in Auckland the weekend before lockdown. Lucky it was only 1/2 full , and lucky nobody infectious apparently attended.

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Bloody awful haircuts. Wouldn't want to watch a minute of it....

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The ANZ World Commodity Price Index lifted +1.5% in September, partially unwinding the previous month’s fall.

Outside of energy prices, commodities are starting to demonstrate a shift from supply factors to growing and already serious uncertainty over demand. China is right in the middle of this, as is the US goods economy w/out Uncle Sam. Link

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The maximum household income on the Kainga Ora scheme is not in touch with reality in Auckland. I’d be interested in the scheme but our combined income well exceeds the limit yet we’re still moving backward on our home deposit. 

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This is shared equity crap is just another Labour party brain fart to prop up house prices.

Houses are too expensive because of excess credit.  The solution is not to pump in more credit.

 

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Houses are too expensive because of excess credit.  The solution is not to pump in more credit.

I know. Nobody talks about it--the govt, the central bank, the media, the members at the local sports clubs, etc. 

It's like it's a complete mystery, even though it's clearly obvious.  

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Mate, can't you be positive about anything?

Jesus Christ.

I agree about the massive flaws in QE, but surely this is a good thing for middle income households?

Surely????......

True story - I spoke to my 29 year old nephew today, he was literally in tears. He's gay, so no family planned or wanted, he's got about 50K in savings, not enough for a one bedroom  apartment in Auckland which is typically 650K plus.

This scheme gives him hope - the government brings him up to 20% deposit, which means he has a mortgage of about 520K, mortgage payments of about $500 pw- realistic on his 90K salary.  

At some point he can buy the government's share out.

And a big plus - security, and no more having to deal with landlords etc.

If it's bad, tell us what another solution is???? 

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$50k in cash savings puts him in the top quintile. Its purchasing power is being whittled away damn quickly though. 

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So you wouldn't do it if you were him? I would. And not just for financial reasons.

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He should move overseas and have a much better life.

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Mate, I think you need help, seriously, nothing to be ashamed of. I've had depression, and had treatment.

Every single one of your posts is full of darkness. Seriously, seek out help. 

 

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Goes for much of the commentators here. Imagine if they lived in a country with proper problems. 

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I agree with Brock wholeheartedly and I've lived in some of the poorest countries in the world. I don't hold the same standard to NZ. We are supposed to be better than that but we are rapidly heading in the same direction.

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What a bizzare thing to say.  I and many of my friends moved overseas around that age and everything was awesome.  I highly recommend doing it.  Getting out provides valuable perspective on the raw deal in this country.

Do you think he is better off sticking around here crying over government handouts and getting half a million into debt for a single bedroom?

I don't suffer from depression.  A bit of anxiety at times, perhaps.  That depression.org.nz website is enough to make you want to top yourself though.

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... agree 100 % .... it's a big beautiful world out there ... the young should aspire to be global citizens rather than be shackled to a Kiwi ideology ...

.... we're so up ourselves about how wonderful we are  , so much better to be us & to be here than elsewhere .... bollocking BS ....

.... travel ... be adventurous... live , love & learn  ... 

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I've got bad news for your gay nephew.  The price on that 650k one bedroom shoebox just went to over 750k.  That's what happens when you handout extra buying power in a supply constrained market.  Nobody is better off except the vendor getting richer and the government getting optics for "helping" even though they are doing the opposite of helping.

The solution is to RESTRICT CREDIT.  If borrowers needed a 40% down payment and could only borrow a maximum of three times their income, prices would come down and people would need less deposit and would be out of debt faster.

It saddens me that this still has to be spelled out in this day and age.

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Yes! Exactly right

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In conceptual terms you are right, but you are also over simplifying. 

There's only so far developers can push upwards in terms of price points, especially in an environment with rising mortgage rates.

 

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That "so far" gets pushed higher with subsidies. 

I said $750k because that happens to be 650k + the 13% worth of subsidy gifted to the vendor in the scenario you outlined.

We see the same thing with renting and accomodation supplement.  It just pushes everything up and sets a new price floor.  It's lunacy.

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Over simplistic.

What would happen is that people would stop selling, unless they really had to.

Sure, the market might fall, say 10-20%. But how many FHBs would be able to pay a 40% deposit on a property 10-20% less in value than present?

Very, very few. 

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Sounds like the government is extending the length of the rope so that a noose can be attached to necks on shorter bodies.

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Yes it's one of it's potential flaws, arguably the cap should be higher than 130K. There will be people between 130K and say 180K who won't get any help out of this.

Once you're over 180K it's your own fault if you can't buy, no excuses. 

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That cap was the same for years, prices went up by about 40% and it didn't move.

We neglect basic things in this country like adjusting tax rates or thresholds for assistance, or benefit levels. Set a price point one and forget about it, market conditions or the whole reason you did it in the first place be damned. 

Then people have to act shocked when it all goes tits up and be all "No one could have seen this happening" even though leaving things as they are through lazy administration is this country's way of doing business - if you can't add a 20% margin onto it and shift it, then ignore it. 

And here we are. Government departments should be legally required to adjust these things every two years at the absolute minimum. 

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Looks like the old "chaos insurance" coin might be about to pay off again....

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Hi lonewolf

Really great to see one of your regular posts - every time Bitcoin does well you regularly post without fail. :) 

Yes, that $12k purchase was the right thing . . . however not sure whether you were being  astute or just lucky. 

Trust Bitcoin keeps heading upwards.

Cheers

 

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Hi Printer 8 - hope you are well!

I don't post so much these days - as you might have noticed.  

Well, my average buy-in was 6.5k (since 2017).  Although I mostly buy other coins and do defi-stuff these days.

I actually stopped buying into crypto a while ago.  Fortunately I decided to invest into promising stocks like Facebook!  Guess I should have stuck to crypto.  Best - wolf 

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Best to you too

 Cheers

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I hear Fantasia missed a bond payment. Fantasia is far smaller than Evergrande but not the only leveraged Chinese real estate developer who might well be in trouble.

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Thanks for the heads up about dosh David. Could be a good option for our new small business.

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Beware a company that does not specify how much they charge you

There is no cost to open a Dosh account, to make payments to other Dosh users, or to utilise rewards. Payments from your Dosh digital wallet to a Bank account will incur a nominal fee.

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So why are Mansons shocked?

I've walked past one of their work sites and experienced several workers smoking pot on their 'smoko'.

https://www.nzherald.co.nz/nz/gutted-and-in-shock-mansons-director-stun…

 

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