What happened Wednesday

Business / news

A review of things you need to know before you sign off on Wednesday; others follow ANZ's 2yr fixed rate cut, lower dairy prices, fewer job ads, higher tax inflation, labour force growth stalls, swaps drop, NZD holds, & more

6th Jul 22, 3:59pm by David Chaston

Here are the key things you need to know before you leave work today (or if you already work from home, before you shutdown your laptop).

MORTGAGE RATE CHANGES
Westpac cut its 2 year fixed rate to match ANZ. BNZ cut theirs to go lower. More here. And the Cooperative Bank has not only cut its 2 year fixed rate (-30 bps) as well, it has also cut its 18 month rate too (-10 bps). Heretaunga Building Society raised their one and two year fixed rates.

TERM DEPOSIT RATE CHANGES
Heretaunga Building Society also raised their term deposit rates.

ANOTHER UNEXPECTED DROP
The overnight dairy auction brought lower prices again, down -4.1% in US dollar terms. These falls were not signaled in the derivatives market, so are unexpected by analysts. Butter was the big loser, down -9.1% at this auction. SMP fell -5.2% and WMP fell -3.3%. But somewhat saving the day has been a sharpish retreat in our currency, so in NZD terms prices fell only -1.0%. This is the seventh retreat in dairy prices in the past eight auction events, taking prices back to levels last seen at the start of 2022.

OFF THE PEAK, SHARPLY
Sharp falls in job ads in property-related industries sees the BNZ/SEEK Employment Report record a -2.7% fall in overall job adverts last month, down from the record high level in May.

BIG PRICE DROPS
CoreLogic says property values are falling around the country - Waiheke Island had the biggest fall of -$166,000 over the last three months. Average central Auckland property values are down more than -$100,000 in 3 months, Wellington values are also down sharply.

FIRST THE 'PARTNERSIP', NOW THE LOBBYING
Work leading up to a formal Government decision of how agriculture will be part of the legal emissions reduction structure we have legislated for ourselves continues. First, farmers decided on their preference for on-farm monitoring in the He Waka Eke Noa "partnership" proposal (which won't actually be any partnership if it is ignored). Now the Climate Change Commission has waded in with its assessment of what farmers thrashed out. They agree; "The best approach to pricing agricultural emissions would be a detailed farm-level pricing system outside the NZ ETS." From here on, its pure party politics inside Government and the lobbying will be intense. Ministers Shaw and O'Connor are required to provide a public report on what an alternative pricing mechanism for agriculture could look like by the end of 2022.

NEW POWERS
The Government is giving itself (via the Commerce Commission), new powers to require supermarkets to hand over information regarding contracts, arrangements and land covenants which make it difficult for competing retailers to set up shop. The major supermarket chains themselves have indicated they are committed to ditching restrictive covenants and leases. More details here.

RAMPANT TAX INFLATION
In May 2021, the Government collected $2.6 bln in GST. In May 2022, it collected $2.8 bln in GST in the month. That is according to the May 2022 Crown Accounts and reveals a +9.4% rise in GST collected, a rise far above inflation. The same detail shows personal income taxes collected rose a remarkable +21% in May 2022 from the same month a year ago, at $4.8 bln in the month. Inflation plus bracket creep are swelling the tax coffers fast. These collection windfalls mean that May was by far the largest month recording Government surpluses in the fiscal year, of +$4.4 bln for the Operating Balance, and +$1.8 bln for the OBEGAL.

REASONABLE GROUNDS FOR FINANCIAL ADVICE
The FMA is moving to ensure financial advisers use a professional basis when they discuss IPOs or private company share placements with their clients. Advisers are going to have to have a defendable basis for whatever is recommended.

STALLED
New data from Stats NZ shows that the labour force has almost completely stopped growing. The working aged population is now 4,116,100, a mere +0.5% larger than a year ago. Pre-Covid it was growing at +2.5% annually.

STAGFLATION'S BITE
In Australia, most banks have started passing on the RBA rate hike in full to borrowers. Public officials are calling on them to do the same for savers. But with loan demand tepid, there is little commercial motivation to do so.

SWAP RATES DIVE
Wholesale swap rates are falling hard today, following international bond market reversals. The 2 year swap could be down -13 bps before the end of trading. The 90 day bank bill rate was up +2 bps at 2.85% today. The Australian 10 year bond yield is now at 3.45% and down -9 bps from this time yesterday. The China 10 year bond rate is now at 2.85% and -1 bp lower. And the NZ Government 10 year bond rate is now at 3.60%, down -12 bps from this time yesterday and now the same as the earlier RBNZ fix for this bond which was down -9 bps to 3.60%. The UST 10 year is now at 2.83% and up +3 bps from where it opened this morning.

EQUITY PRICES RISE
At the end of trading on Wall Street, the S&P500 ended up +0.2% and that was after is was down more than -2% at its open. The NZX50 is up +0.8% in later trade today. The ASX200 is down -0.5% in early afternoon trade. Tokyo has opened down -1.3%, Hong Kong has opened down -1.4%, and Shanghai has opened down -1.2% so far. These all make the NZX50 look pretty good today.

GOLD DOWN
In early Asian trade, gold is down -US$40 from this time yesterday at US$1770/oz. Earlier it closed in New York at US$1776.oz and earlier again in London at US$1772/oz.

NZD MIXED
The Kiwi dollar is little-changed from this time yesterday at 61.7 USc. Against the AUD we are down a full -1c at 90.6 AUc. Against the euro we up +40 bps firmer at 60.1 euro cents. That means our TWI-5 is now just over 70.3.

BITCOIN HOLDS
Bitcoin is now at US$19,830 and only -0.3% lower than this time yesterday. Volatility over the past 24 hours has been high at +/-3.7%.

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

Daily swap rates

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Source: NZFMA

This soil moisture chart is animated here.

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46 Comments

by sit23 | 6th Jul 22, 4:22pm 1657081341

If there are 3million taxpayers in NZ, the Govt got $2500 per person in one month. Tax on our working. Tax on our spending. Anyone who says Kiwis are not grossly overtaxed is either insane or lying.

by OldSkoolEconomics | 6th Jul 22, 4:45pm 1657082747

Hey - its not all bad.. dont forget they are giving back $350 to the poor to middle class over three months later this year so only $2400 extra per month for those 3 months. (That'll keep the peasants quiet for a bit while we hand all their extra tax over to the needy at the big banks https://www.interest.co.nz/public-policy/114694/chris-leitch-argues-rbn…)

by Advisor | 6th Jul 22, 5:15pm 1657084534

Sure Robbo knows a thing or two about monetary policy but I seriously doubt other Cabinet ministers who signed on the dotted line still don't understand the workings and implications of QE.

Most of them want to fight ideological wars for NZers as Labour MPs, not get a weekly crash course in financial economics.

by J.C. | 6th Jul 22, 5:24pm 1657085075

Sure Robbo knows a thing or two about monetary policy

He understands only from an institutional POV and would have learnt from people in Treasury and the RBNZ. What that means is that his understanding is from those who have got us into this mess in the first place.

by Fluffybunny | 6th Jul 22, 11:02pm 1657105345

Anyone with a BCom is more qualified than robbo. Whose Degree was in political propaganda I mean science.

by sparrow | 6th Jul 22, 5:01pm 1657083664

So, we pay plenty of tax being two adults at our peak earning potential. But in our family, we have 2 getting Super ($16,000 p.a. each I believe) and both of them have had hospitalisations and procedures the last month, for a stroke and cardiac condition. Plus our daughter has been in hospital also. I doubt our family is paying its way.

If we're going to continue with universal Super and universal healthcare, probably Kiwi's don't pay enough tax.

by Nzdan | 6th Jul 22, 5:47pm 1657086449

Assuming 3 million taxpayers (according to Sit23), our $16b annual superannuation spend = $5300 per year for each and every PAYE earner.

48% of the median salary earner's ($60k) entire PAYE.

by Advisor | 6th Jul 22, 6:59pm 1657090788

The Crown accounts were estimated to be $600m better off from year-4 of removing interest deductibility on residential investments.

Mark Mitchell called this a "hidden tax" on landlords and swore to remove it when back in office. As usual, his government will find savings elsewhere, probably from cutting core service funding.

by Trickledown | 6th Jul 22, 5:07pm 1657084061

https://taxfoundation.org/publications/comparison-tax-burden-labor-oecd/

Above for a labour tax perspective proves that claim wayward - we are pretty low in NZ vs OECD. That data doesn’t appear to take into things like WFF and in work tax credit.

Assume most OECD economies have a GST equivalent too. Though I accept other taxes will have an impact like bright light etc. income tax on labour is by far the most common and largest make up of the tax take reported here.

by Pa1nter | 6th Jul 22, 5:19pm 1657084774

My advice is to book the first flight you can to a country where almost nobody pays any tax.

Come back and tell us how mint it is there for the locals.

by kiwikidsnz | 6th Jul 22, 5:34pm 1657085643

Half of NZ households don't pay any nett tax, after credits such as WFF are collected.

by Zen20 | 6th Jul 22, 5:41pm 1657086085

wow that's an outrage - can you point me to the data?

by kiwikidsnz | 6th Jul 22, 5:50pm 1657086616

I can't find the link I used to have however it was from the Cullen TWG report.

Stuff also picked it up here

https://i.stuff.co.nz/business/opinion-analysis/114628351/an-inconvenie…

by Pa1nter | 6th Jul 22, 5:51pm 1657086671

Yeah, I'm talking about almost no-one paying tax. A market driven libertaritard utopia.

by RickStrauss | 7th Jul 22, 9:40am 1657143602

There was a poster on here a while back wanting to go to Singapore for the low taxes, but then didn't want to pay the cost of private education so stayed here to put their kids through socially-funded schools.

Was like a wee microcosm of the philosophy in NZ. "Cut taxes!!!" but when it's my turn for funded services, they need to be there.

by Nzdan | 6th Jul 22, 5:54pm 1657086842

Don't worry I have a solution, raise wages. All WFF achieves is shift the cost of living burden from the employer onto the taxpayer. I frequently hear 25% of tax is paid for by the top 3%, sounds like an income distribution issue. Higher income earners keeping a bigger slice of the pie now than 20 - 30 years ago. If they don't want the horrific burden of paying 1/4 of tax, I'm sure the half of NZ households you mention won't mind if they end up crossing the threshold?

by kiwikidsnz | 6th Jul 22, 6:13pm 1657088017

75% of income tax is paid by the top 5% of taxpayers.

There's nothing fair about progressive income tax, its entirely socialist envy.

by Nzdan | 6th Jul 22, 6:56pm 1657090593

What would you propose instead of a progressive tax system?

A Flat tax like Bolivia, or Russia? Greenland has a flat tax of 45% for example, we could move to that?
Regressive? Not sure our low wage economy can support such a tax system.

I'm sure a good portion of those 5%, in fact a good portion of net taxpayers in New Zealand are probably grateful for the privilege of favorable circumstances that find them to be net contributors. I know I am, it's a shame you're not, but psychopathy is not illegal.

by Uninterested | 6th Jul 22, 8:10pm 1657095012

That last sentence is quite evil.

by Gummy Bear Hero | 6th Jul 22, 8:33pm 1657096380

... yes , it is a nasty slur ... most unbecoming amongst the gentlemen & ladies at Chaston Hall ...

by GV 27 | 7th Jul 22, 7:29am 1657135794

If you have half of all people paying nothing or negative tax after transfers and then a small group of people covering the bulk of the tax take for everyone, then people are going to get their backs up when the only administrative updates our tax system in over the course of a decade is a few slogans around campaign time and an extra bracket slugged on top.

There's probably some middle-ground between "we're too reliant on a core group of taxpayers while insisting they aren't paying their 'fair share'" and "let's give up on progressive taxation altogether".

by JimboJones | 6th Jul 22, 7:26pm 1657092360

That can’t be true. How much do they earn?

by kiwikidsnz | 6th Jul 22, 8:47pm 1657097268

https://www.kiwiblog.co.nz/2022/06/guest_post_the_tax_system_is_already…

by RickStrauss | 7th Jul 22, 9:33am 1657143236

This talking point above is very effective in keeping the plebs at each other's throat with talk of "socialist envy" while the real areas in which wealth is made in NZ skate by comparatively untaxed. Get the working plebs to fight each other with quaint talk of "socialists" so the big issue can be ignored:

"Work by the Treasury and the Inland Revenue Department shows that for a representative investor, housing marginal effective tax rates can be close to five times lower than other investment strategies such as foreign shares and domestic superannuation funds..."

The most highly earning (counting unearned income) and wealthy in society - just as in other countries - have little worry about income tax, because it's a tax that can be readily avoided. And the ability to pretend one was not buying and selling land for capital gains has been a staple tax evasion tactic in NZ for the last couple of decades.

If we are to have a serious discussion about tax imbalance then we need to leave aside yells of "socialist envy" and start looking at balancing how much tax is paid across different forms of incoming wealth. There's nothing fair about the status quo, it's just ludicrous exploitation of the middle classes.

by Nzdan | 6th Jul 22, 6:01pm 1657087279

Also it's probably because everyone over 40 believes they're entitled to "passive income", problem is the cost to attain those passive income generating assets is so high, that it's now encroaching into the host's ability to live, so the taxpayer steps in and subsidizes.

I'm sure if you said "hey no-tax paying person, if we cut your rent by the equivalent of your welfare payments, but you must forgo those payments" they'd be delighted because I'm sure a good number of these people would love to be taxpayers if at the same time they could put food on the table.

by powerdownkiwi | 6th Jul 22, 5:27pm 1657085275

Sit23 - that's incoherent.

You need to post what they got for the money - but even more important, whether what they did was future-appropriate.

by Noncents | 6th Jul 22, 4:23pm 1657081414

Taxed into Poverty. Yet people want more taxes?

"But wait..." I hear them say... "We will rebalance income tax to compensate and make it tax neutral"

Lol, good one. We can't even sort out bracket creep. There is ZERO chance any NZ Political Party or Govt Agency will be able to design a functional, equitable tax system, let alone implement it.

by Gummy Bear Hero | 6th Jul 22, 6:31pm 1657089069

.... " tax is love ! " ... James Shaw , Greens co,-leader ... feeling the glow , getting the love vibe on ... No ? ... I'll send the IRD around lickety splick ...

by paashaas | 6th Jul 22, 7:19pm 1657091946

if tax was love IRD would be ridden with nasty diseases - they do everyone.

by Independent_Observer | 6th Jul 22, 5:00pm 1657083648

Have swaps peaked....or a lull before the next leg higher? (I don't know...but its interesting watching what is unfolding).

by realterms | 6th Jul 22, 6:17pm 1657088229

Interesting times for sure. The volatility in swaps is off the charts.

by Justa comment | 6th Jul 22, 5:04pm 1657083866

I placed some funds with a big bank last week at 4.6% for 5 yrs. They may go higher but this could be near the top? The 5 yr swaps have fallen, and some mortgage rates I see. Interesting times. I will look at another in 6 months time. Oil fell a bit today to $105.

by JimboJones | 6th Jul 22, 7:17pm 1657091838

Yes if oil starts going down to more normal levels, those big inflation numbers could turn into deflation. I doubt anyone could say for sure but I reckon this could be the peak of inflation and interest rates. Wouldn’t be surprised if 2yr mortgage rates start with a 2 or 3 next year.

by powerdownkiwi | 6th Jul 22, 8:46pm 1657097163

Normal?

WTF?

Oil was a 200 year blip from start to finish. And we're halfway through, volumetrically.

It was anything but normal.

by J.C. | 6th Jul 22, 5:21pm 1657084908

Voyager Digital has filed for bankruptcy in the state of New York. https://cases.stretto.com/Voyager/

VD is a crypto platform based in the U.S. and enables trades but also lending. In terms of people affected, I cannot say but those with their assets on the platform have lost everything. Some prominent people in the industry hit. I know one person who will only say he's "lost millions".

Lesson to be learnt here is not your keys, not your coins. Even if you're a shrimp (other end to the whales), you would be better off than those on VD.

by Zen20 | 6th Jul 22, 5:30pm 1657085439

What was the lesson learnt?

by Baywatch | 6th Jul 22, 5:36pm 1657085804

Don't trust anyone

by Gummy Bear Hero | 6th Jul 22, 6:27pm 1657088854

.... use precautions , don't catch VD ...

by JimboJones | 6th Jul 22, 7:11pm 1657091464

Maybe the millions he lost were not dollars but his little guys.

by Hummy | 6th Jul 22, 6:39pm 1657089587

My advice, if you think you going to struggle paying your mortgage. Get out or lock in for long. Try to get a good rate tomorrow. We close to the last chance.

by Nifty1 | 6th Jul 22, 6:45pm 1657089922

Can you give your reasoning behind that advice? What's your background to be qualified to give this advice...

by Hummy | 6th Jul 22, 9:21pm 1657099304

No background at all. But the high fuel price pressure has not come in yet. Wages are rising fast and employment numbers are looking really good if you count people who work few hours a week. I just say don't be fooled. I can be wrong and doesn't hurt me to much. Some people are in position where risk is no go. Marked did go down on higher interest and now it's going down because of recession risk. We going to end with stagflation.

by HouseMouse | 6th Jul 22, 7:16pm 1657091808

Citi think oil could be $60 a barrel by year’s end:

https://www.macrobusiness.com.au/2022/07/global-recession-to-drive-oil-…

by Squishy | 6th Jul 22, 7:51pm 1657093861

New data from Stats NZ shows that the labour force has almost completely stopped growing. The working aged population is now 4,116,100, a mere +0.5% larger than a year ago. Pre-Covid it was growing at +2.5% annually.

We live in aging societies. More consumers and fewer workers every year going forward.

https://data.oecd.org/chart/6LgO

by Hummy | 6th Jul 22, 9:19pm 1657099179

Not only that. A very demotivating government what makes people not want to do the job. And soon we stuck with young people who can't do the job.

by RickStrauss | 7th Jul 22, 9:38am 1657143499

And the opposition is likewise demotivating...wanting to exempt property speculators from taxation and exacerbate housing affordability problems, while making the working plebs once again bear the load of paying all the taxes to fund society.

What point for young people to stay in NZ to fund such folk who seek only to bleed them dry through rent and taxes while making building a life completely non-viable for many important workers? Soon they'll leave and we'll be stuck with older folk who can't do the jobs.