Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
ANZ raised its floating rate by +20 bps while Kiwibank, Westpac and BNZ raised theirs by +25 bps after yesterday's +15 bps boost by ASB. There is now a spread of 84 bps between the lowest floating rate among the majors (4.25% at Kiwibank to 5.09% at Westpac). At an average for this key cohort of 4.75%, that is now almost the same as the market three year fixed rate. But in those upcoming three years, the RBNZ has signaled it will likely be raising its OCR by +1.75% in regular +25 bps increments. First Credit Union raised is 1 and 2 year fixed rates.
TERM DEPOSIT RATE CHANGES
Kiwibank and Westpac have announced +25 bps increases to some savings accounts. China Construction Bank did too.
AUGUST POWER CUTS UNNECESSARY
Report ordered by the Government finds that the power cuts on one of the coldest nights of the year 'need not have happened' as there was enough load to keep the lights on.
SOMETHING FOR NEARLY EVERYONE
There was $500 mln tendered in three maturities today in the NZGB auction. The May 2026 $200 mln only attracted $280 mln in bids but the yield slipped to 2.28% pa from 2.30% two weeks ago. 16 of 19 bidders won some share. 22 of 33 bidders won a share of the May 2031 $200 mln maturity and that attracted $560 mln, also with a slipped yield of 2.52% pa (2.60% last time). The final $100 mln for the April 2037 was surprisingly popular, attracting $226 mln in bids from 27 bidders. 13 won something at 2.82% (2.92% two weeks ago).
TAPERED OFF?
For the record, it has now been 70 days since the last drawdown on the RBNZ's Funding for Lending program and it looks unlikely banks are interested in utilising that any more. Of the $28 bln allocated, only $6 bln has been utilised.
La Niña DECLARED
In Australia, their met service has declared a La Niña event underway. In New Zealand, northeasterly winds tend to become more common during La Niña events, bringing moist, rainy conditions to northeastern areas of the North Island and reduced rainfall to the lower and western South Island. Warmer than average air and sea temperatures can occur around the country during La Niña.
THE PANDEMIC HASN'T HURT BANKS
The RBNZ's Dashboard is released tomorrow so we can then see financial results by individual banks. But today they released the S20 summary of all bank results. And that shows that in the past twelve months, profits from all banks (after tax) were $6.346 bln, a record high. Collectively they paid $2.5 bln in tax to achieve that result (also a record high). In the September quarter alone, all banks (there are 27 of them) earned 2.68% on their interest-earning assets, a record low. Fortunately (for them), they only paid 0.84% pa on their interest bearing liabilities (also a record low), so they protected the Net Interest Margin at 1.98% which was above both their September 2020 and September 2019 levels.
SPENDING (MUCH) MORE THAN WE EARN
New Zealand ran a -$1.3 bln trade deficit in October, with exports up +11.5% year-on-year, and imports surging +26% on the same basis. These deficits are accumulating and in the past three months they have grown to -$5.6 bln, an unusually large negative and representing -40% of our exports in the same period. Something will have to give.
LOCAL PANDEMIC UPDATE
In Australia Delta cases in Victoria have risen sharply to 1254 cases reported there today. There are now 10,216 active cases in the state - and there were another 5 deaths yesterday. In NSW there were another 276 new community cases reported today, and a rise, with 2,667 active locally acquired cases, but they had zero deaths yesterday. Queensland is reporting zero new cases again. The ACT has 8 new cases. Overall in Australia, just under 86% of eligible Aussies are fully vaccinated, plus a bit over 6% have now had one shot so far. In contrast, there was one case in New Zealand at the border, and 178 new community cases today (again). Now 91.7% of Kiwis nationally aged 12+ have had at least one vaccination, and the Australian rate is now at 92.0% of all aged 16+.
GOLD HOLDS
In early Asian trading, gold is at US$1792 and unchanged from this time yesterday. It closed in New York at US$1789 earlier, and in London at US$1782.
EQUITIES MIXED AGAIN
On Wall Street, the S&P500 closed up another +0.2% earlier today. Tokyo has recovered +0.9% in early trade after the prior day's solid fall. Hong Kong has opened -0.3% lower and Shanghai has opened flat. The ASX200 is on the lower side of flat in early afternoon trade. The NZX50 Capital Index is up another +0.2% in late trade.
SWAP & BONDS RATES STAY DOWN
We don't have today's closing swap rates yet. They were sharply lower yesterday as markets adjusted back to the RBNZ signals. They are probably a point or two lower again today.. The 90 day bank bill rate is down -7 bps and now at 0.80% (mostly yesterday after the MPS).The Australian Govt ten year benchmark rate is now at 1.88% and down -3 bps from this time yesterday. The China Govt 10yr is at 2.91% and down -2 bps. The New Zealand Govt 10 year rate is now at 2.53% and up +3 bps after yesterday's big fall, but well below the earlier RBNZ fix for that 10yr rate at 2.57% (-4 bps most of which happened yesterday). The US Govt ten year is moving around a lot today. It has been as high as 1.69% and as low as 1.63% but is currently at 1.64% and -2 bps lower than this time yesterday.
NZ DOLLAR NET-SOFT
The +25 bps OCR rise and forward commentary 'disappointed' markets and the NZD fell last night. But during today it has recovered some of that. The Kiwi dollar is now down at 68.9 USc and a small net retreat from where we were this time yesterday. Against the Aussie we are net-down at 95.6 AUc. Against the euro we are little-changed at 61.5 euro cents. The TWI-5 is now up at just on 73.8 and recovering.
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BITCOIN FIRMISH
The bitcoin price is now at US$57,964 and up a modest +1.1% from this time yesterday. Volatility in the past 24 hours has been moderate at just under +/-2.1%.
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35 Comments
New Zealand ran a -$1.3 bln trade deficit in October, with exports up +11.5% year-on-year, and imports surging +26% on the same basis. These deficits are accumulating and in the past three months they have grown to -$5.6 bln, an unusually large negative and representing -40% of our exports in the same period. Something will have to give.
Indeed - the sale of national treasure to foreigners.
That would be my best guess... which is the floating exchange rate version of a balance of payments crisis, like in 1984.... kinda
How soft is soft ?
Has there been a paradigm shift in Tourism, International students, immigration... ??
Our earning of foreign exchange depends , quite heavily, on these things.
NEW TAX HIKE!
https://www.nzherald.co.nz/nz/politics/government-finalises-massive-exp…
Social unemployment scheme up to $5b! Article below.
The Government will soon release its proposal for social unemployment insurance (SUI), in what could be the biggest expansion of the welfare state since ACC opened its doors in 1974.
SUI will pay people who are made unemployed 80 per cent of their income for a limited period after they're laid off. The catch is that it will be funded by a levy of between 1 and 2 cents of every dollar earned by employees and a similar levy on employers.
Finance Minister Grant Robertson announced work would begin on the scheme at the Budget in May. Since then, Business NZ, the Council of Trade Unions and the Government have been ironing out details of the scheme with the Government. Those negotiations are "largely completed", according to Robertson.
In May, Robertson acknowledged the scheme would look a bit like ACC, with employees and business paying a levy which would fund the insurance - such schemes are common overseas.
What's emerged from the negotiations is a scheme that looks a lot like ACC for unemployment, and could plug some of the long-standing holes left by ACC in the social safety net.
The Government wanted to release its ideas for consultation this year, but the latest Covid outbreak has pushed it back until next year, despite the three parties having wrapped up their negotiations. The scheme
The levy for the scheme is in the lower bound of between 1 and 2 per cent. It will offer a sort of social insurance for people who are unemployed either by being laid off, or by getting ill or injured.
Robertson said the nature of the fee could change - its currently regressive, in that you pay a fixed amount on your earnings no matter how much you earn. This could be flattened to mean that higher earners pay proportionally more and lower earners pay proportionally less.
"One of the things we will consult on is exactly how the levy will be struck because for some businesses and individuals there might be some issues there - that's one of the issues we're keen to explore," Robertson said.
The insurance will cover 80 per cent of a person's income, for a time-limited period - that period and the upper cap on cover have not yet been announced.
It is not yet clear how the scheme will work in relation to people unable to work because of mental health concerns, a long-standing complaint of the ACC system. It will not impact existing redundancy packages.
The scheme will include "active labour market" policies, which will help people retrain and rehabilitate themselves into the labour market. Fixing gaps in ACC?
Robertson said unemployment insurance was not a rewriting of ACC, but it would expand the social safety net to ensure that people who were unable to work are able to be supported.
"One of the things we've wanted for this is for it to be able to cover a range of issues that make it difficult or impossible for someone to work," Robertson said.
"Yes, there have been gaps in the ACC scheme in the past, but we are starting this piece of work from scratch, so we have the ability to cover the areas that we think are important but the detail of exactly how that will work will be in the discussion document," Robertson said.
Business NZ Manager Employment Policy, Paul Mackay, said the system was "ACC-like".
"There are three levels of it [of cover], there's being hurt in an accident which ACC takes care of now; there's being made redundant, which unless you've got redundancy compensation doesn't do much for you, and it leaves you in the dole queue; and the third one is if you get sick and you can't work there's this gap," Mackay said.
He said the discussions with the other parties had focused on how the employment scheme could help support people in the second two categories.
"That's the area of focus - the level of detail of how they will do that is what the public consultation will cover.
Mackay said the scheme could help in the future when there were "large scale areas of change" like redundancies caused by responding to climate change.
"The classic example is cancer - you have to pay expensively for cancer coverage right now and people go back faster than they probably should in order to ensure they're at work and they're bringing some income home and they're not going to lose their job," Renney said.
"This says 'here is some income' and if your employer wants to keep you on, we will pay to make sure that you get well and then you might get well faster," he said.
Renney said one of the key components of the scheme was the inclusion of active labour market policies.
Renney said New Zealand was "one of the lowest spenders in the world" on active labour market policies - policies that help people upskill and find work.
By pairing insurance with payments to help people retrain, its hoped the social unemployment insurance scheme will help people who are made unemployed re-enter the labour market in a role that is well paid and suits peoples' skill sets, rather than just taking the first job they find after they're made unemployed.
Renney thinks the scheme will also help New Zealand weather another recession. MSD reckons that at its peak, a scheme like this could cost $5 billion a year - if a lot of people lost their jobs. But that money would go into the economy, stimulating demand, acting as a stabiliser to the recession. MSD also reckons the cost could be as low as $450 million in a year when not many people were claiming.
The payments would be taxable, meaning some of the money would be recouped.
Renney said it could also do this on a regional level: if a factory closed, the region around the factory would be cushioned by unemployment insurance, stimulating demand and the economic transition.
The big political concern will be whether employers and employees can stomach what is effectively a tax hike, and whether the political left can weather what looks a lot like a two-tier welfare system.
There's also the question of why, when the Government has decided to give another form of insurance to ACC, it doesn't take up long-standing calls to expand ACC's coverage to illness as opposed to injury, an issue that re-emerged in a series of valedictory speeches at the end of the last Parliament.
One valedictory speech from Labour's Ruth Dyson recalled a "meeting with a constituent who lost three limbs to meningitis, who rightly pointed out that if she had lost those same limbs in a car accident, she would have been considerably better off financially and would have received superior treatment and support.
CTU economist Craig Renney negotiated with Business NZ on behalf of unions said the scheme would help plug existing gaps in the social safety net.
"That is impossible to justify," Dyson said.
But Robertson is happy with a limited unemployment scheme - something Dyson also mentioned in her valedictory
"There's been a bit of give and take," Robertson said, of the negotiations.
He thinks he's hit the political mid-point, something business and unions can support.
"The great news for me is we've come to near the conclusion of that work and the three partners have got a proposal they can all endorse," he said.
If you accuse a well established govt minister of being foolish you should have a range of alternatives who are brighter - on that basis Jacinda and Grant are superb.
Well, if you look at public perception of how they're handling inflation / cost of living, only 37% of people believe they're capable of managing this issue (Ipsos). Down from 50% 12 months ago. Doesn't show much in the way of public confidence of the populist duo does it.
Interesting your should say that - Karl Popper said
"Our knowledge can only be finite, while our ignorance must necessarily be infinite."
While Mark Twain reputedly said "You think knowledge is dangerous , try ignorance"
If he doesn't know - he should find out.
Karl Popper again "True ignorance is not the absence of knowledge, but the refusal to acquire it."
I feel disparaging politicians by name on this website should be allowed. They are after publicity as individuals and also as representatives of the ruling party.
Boris and other politicians have been labelled far worse by newspapers. Perhaps interest does not want to be seen to be stooping so low and expects it commentators to do likewise.
What matters are policies and their implementation. It really doesn't matter who leads National - what does matter is what National can do about housing, inflation, immigration, reducing greenhouse emissions, etc. Similarly I never had a positive thought about Nanaia Mahuta until I saw the news tonight showing her suffering from a bad back - how is that news unless you believe her backache will change foreign policy.
Let's keep it reasonably abuse free - reserve nasty negative adjectives for policy not person.
yes... brings to mind a cartoon on this site linking Trump to the ChCh mass killings... ( I thought it was pretty low and in bad taste. )
https://www.interest.co.nz/opinion/98743/gareth-vaughan-remembering-vic…
For the record, it has now been 70 days since the last drawdown on the RBNZ's Funding for Lending program and it looks unlikely banks are interested in utilising that any more. Of the $28 bln allocated, only $6 bln has been utilised.
FLP is a floating rate repurchase agreement priced at OCR - currently on a rising trend to ~2.6%
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