What happened Tuesday

Economy / news

A review of things you need to know before you sign off on Tuesday; more retail rate changes, businesses like election result, building consents dive, lending activity tepid, swaps up, NZD stable, & more

31st Oct 23, 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/LOAN RATE CHANGES
TSB raised many fixed rates today. First Credit Union raised its floating rate, and its 1yr fixed rate. And late yesterday, Westpac raised rates. More here.

TERM DEPOSIT/SAVINGS RATE CHANGES
TSB also raised its 6 and 9 month term deposit rates. China Construction Bank also raised rates.

POST-ELECTION HIGH
The latest ANZ Business Outlook survey showed a bounce in most activity indicators. The ANZ chief economist says 'it would clearly be a stretch to argue there's been no election impact'.

MASSIVE DOWNWARD PRESSURE
The growing downturn in building consents suggests a steepening slump in construction activity. The value of building consents issued in September down -$817 mln year-on-year.

MORE DOWNWARD PRESSURE
The rural property slump deepened in September. Sales of farms and lifestyle blocks continued their downward slide.

GROWTH SLOWING RIGHT UP
Home loan balances rose just +3.0% in September from a year ago, the slowest rise since October 2012. Neither business lending (+0.9% year-on-year) nor rural lending (+1.4%) are growing fast either. Personal lending is a brighter spot but that growth is pretty modest at +4.8% and still well lower than the 2014-2018 +5.5% annual rate.

TD GROWTH RISING
Household deposits at banks rose +5.3% in September from a year ago to a new record high $236.9 bln, up +$12 bln in the year. But transaction account balances fell -$8.9 bln, savings account balances fell -$2.5 bln, while term deposit balances rose +$23.3 bln in the year. Term deposit balances now represent 51.3% of all household bank balances, the highest since July 2020. In July 2020 banks were paying savers 1.5% for a one year TD. Now they are paying 6.1%.

A BILLION HERE, A BILLION THERE ...
Morningstar's Q3 KiwiSaver review highlights that balances fell, and rather sharply - and after saver contributions. KiwiSaver assets decreased, owing entirely to market movements, ending the quarter at $96 bln, down -$2 bln for the quarter.

TWO NEW DIRECTORS FOR BNZ'S BOARD
Two new directors have been appointed to BNZ's board. Nathan Goonan, CFO of BNZ's parent National Australia Bank, joins as a non-executive director. And Emma Gray joins as an independent, non-executive director. BNZ says Gray has significant experience in data and customer insights. She was Group Executive for Data and Automation at ANZ Banking Group from 2017 until 2022, responsible for leading ANZ’s strategic use of data and driving automation. Both appointments take effect from November 1. Meanwhile Gary Lennon, NAB's Group Executive for Finance, is retiring as a BNZ director.

IN & OUT
Fonterra has today announced that Chief Financial Officer Neil Beaumont is leaving. He started in February 2023 and is out on Friday, November 3, 2023. Reasons are sparse at this time, and not revealed in the Fonterra announcement.

SWAPS TURN UP MARGINALLY
Wholesale swap rates have probably risen today but not by a lot. The real reaction will come at the close. Our chart will record the final positions. The 90 day bank bill rate is unchanged at 5.64% and now +14 bps above the OCR. The Australian 10 year bond yield is up +9 bps from this morning to 4.97%. The China 10 year bond rate is down -1 bp at 2.72%. The NZ Government 10 year bond rate is up +5 bps at 5.62% from this morning, but still above the earlier RBNZ fixing of 5.53% which was up +7 bps from yesterday. The UST 10 year yield is up +2 bps from this time yesterday to 4.89%. The UST 2yr is down -1 bp to 5.05%, so the curve inversion has narrowed further, now only -17 bps.

EQUITIES MIXED
The NZX50 is up +0.3% in late trade today, a rare gain. The ASX200 is up +0.2% in early afternoon trade. Tokyo has opened down -0.2%. Hong Kong is starting its Tuesday down -0.9%, and Shanghai is down -0.3%. Singapore is up +0.4% at their open. The S&P500 ended its Monday Wall Street session up +1.2%.

GOLD LITTLE CHANGED
In early Asian trade, gold is now at US$1996/oz and down -US$7 from where were this time yesterday. Earlier it closed in New York at US$1996/oz. And earlier still at US$1997/oz in London.

NZD ON HOLD
The Kiwi dollar has risen slightly to 58.3 USc from this time yesterday. But against the Aussie we are unchanged at 91.7 AUc. Against the euro we very marginally softer at 55 euro cents. That means the TWI-5 is little-changed at 68.4.

BITCOIN UNCHANGED
The bitcoin price is virtually unchanged today, now at US$34,476 and down just -$10 from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.0%.

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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21 Comments

by J.C. | 31st Oct 23, 4:20pm 1698722450

Over in the U.S., $672 million of office real estate loans defaulted at their maturity last month.

May seem like chump change in the scale of things. But what is interesting is that this represents 90% of commercial backed security loans maturing. The snowball effect heading into 2024 could be epic.

Water cooler crew reckon it's probably nothing.

https://www.bisnow.com/national/news/capital-markets/near-9-in-10-cmbs-…

by J.C. | 31st Oct 23, 4:54pm 1698724456

Shareholder backlash sees Unilever CEO's remuneration package to be frozen for 2 years.

Some of the company's issues include stakeholders wanting good products, not social purpose and virtue signaling.

Notice that AB InBev has got the message and forking out USD100 mio to secure Bud Light sponsorship for UFC.

https://www.investing.com/news/stock-market-news/unilever-to-freeze-ceo…;

by Audaxes | 31st Oct 23, 6:12pm 1698729145

New Unilever boss is still getting it wrong on Russia

Yet that little debate really served as an unwelcome distraction from something more important: why is Unilever still operating in Russia? Why is this consumer-facing multinational, which remains committed to the idea that it wants to create “a lasting positive impact on the world”, still prepared to pay corporate taxes to a Russian state waging a brutal and illegal war in Ukraine?

by J.C. | 31st Oct 23, 6:17pm 1698729461

Actually Coca Cola claims it has left Russia and has no connection with Dobry cola. Reality is that Dobry is made by a company that CC established.

https://www.tbsnews.net/world/global-economy/coca-cola-bottler-starts-m…

by kiwikidsnz | 31st Oct 23, 6:49pm 1698731347

Unilever has a century of experience at working internationally with a wide range of countries and regimes, through wars, civil disturbances, outlasting all politicians & governments many times over & many historical border changes.

Usually, it's internal ethos & policies are far more enlightened than many of those countries & it requires its stds to be met throughout its supply chain everywhere it operates. It also has a strong history of empowering local management and people.

Thus, it is frequently a force for good & continuous improvement globally.

So, a decision to withdraw completely & walk away from what it considers its business lifetime obligations to it's employees, customers, consumers, suppliers etc. would not be taken lightly, nor as a kneejerk reaction to a political football created through no fault of its own.

Disclosure: I worked for Unilever 26 years.

by J.C. | 31st Oct 23, 7:01pm 1698732092

Disclosure: I worked for Unilever 26 years.

I hear you. I'm generally in favor of Unilever, particularly in developing countries. They do much good. Westerners underestimate just how much good hand soap is. It doesn't even occur. Unilever was tremendous during Covid in developing countries.

I've worked as a supplier to Unilever and also P&G. I prefer the former as the latter is too much of a dog-eat-dog approach to business relationships.

by vman | 31st Oct 23, 8:26pm 1698737207

Is that you Christopher?

by kiwikidsnz | 31st Oct 23, 8:59pm 1698739186

No. Luxon was with Unilever ~18yrs, we did work in the same place for a couple of years.

Although I didn't vote for him, I expect him to do very well - but then I once said the same of Jacinda.

by Jonny.Foe | 31st Oct 23, 5:03pm 1698725038

Great pile of data out today.

Private sector debt up $2 billion dollars in the first quarter of 2023/24 and Govt spending is tracking low. So overall economic stimulus is highly contractionary. Treasury economic forecasts (no recession) were based on private sector debt increasing by about $25 billion this fiscal year. Seems highly unlikely!
NZ Activity Index (reliable barometer of economic activity) was basically flat for the first time ever (the data goes back to 2004)
Within the NZ activity index, you get Stats analysis of consumer card spending, which they sensibly adjust to reflect increased prices etc. This data shows that spending is now below 2018 levels and in free fall. But, sure, high prices are caused by too much spending etc etc.
Building consents also in freefall - as David notes above.
Benefit claims ticking up nicely as more people lose their jobs and can't get back into new ones.

All looks a bit grim to be honest. But, at least businesses are excited about the new Government. Let's see how that plays out as we stumble into this self-induced downturn.

by J.C. | 31st Oct 23, 5:15pm 1698725756

Within the NZ activity index, you get Stats analysis of consumer card spending, which they sensibly adjust to reflect increased prices etc. This data shows that spending is now below 2018 levels and in free fall.

Consumer spending is your engine room for GDP. If that card spending is nominal, that's a very bad indicator given that our economy is supposed to be based around the 'wealth effect' from the property ponzi.

by Roelof | 31st Oct 23, 6:36pm 1698730577

I make a distinction between credit and debt.

Credit growth is essentially unchanged yr on yr.

So... It's even worse than jfoe suggests, in regards "credit creation" driving spending.

Look at the linked interactive chart to see when the aggregates turn -ve, ...and think about how the economy was at those times.

https://www.rbnz.govt.nz/statistics/series/lending-and-monetary/deposit…

by JimboJones | 31st Oct 23, 7:09pm 1698732547

I think we could be in deflation right now. Hard to see many business putting prices up when spending is going down. Builders must be getting cheaper, building supplies will be getting cheaper, retail will be getting cheaper, even fruit and veg very cheap right now. Even petrol seems a bit cheaper than a month ago.

If we get a negative quarter of inflation what will the RBNZ do?

by HughJorgan | 31st Oct 23, 8:12pm 1698736355

As a person that is pricing a new build it does not feel like pricing is coming down at all.

GIB still went up again a month ago.

by JimboJones | 31st Oct 23, 8:33pm 1698737624

Interesting. I doubt the monopolies will put prices down. But surely it’s easier to get tradies for a less crazy price?

by J.C. | 31st Oct 23, 5:31pm 1698726698

BOJ policy statement just got rid of any explicit upper band ceiling to YCC (“1%” ← no longer)

https://www.boj.or.jp/en/mopo/mpmdeci/mpr_2023/k231031a.pdf

by HouseMouse | 31st Oct 23, 5:49pm 1698727753

Thanks, was awaiting with interest

by MikeM | 31st Oct 23, 6:06pm 1698728767

"Home loan balances rose just +3.0% in September from a year ago, the slowest rise since October 2012"

But the banks say a 8% rise in property prices next year.

The banks' commentary is never in self interest so I don't understand. :D

by J.C. | 31st Oct 23, 6:07pm 1698728871

This headline from the AFR says a lot about how broken our financial systems are and how deluded much of the thinking of our leaders are.

What do they think? That fund managers and finance professionals are magicians?

‘Lift your game’ to help Boomers into retirement, super funds told

The Albanese government has put big super on notice to “urgently lift their game” on customer service or face a crackdown as the industry prepares for a silver tsunami of Baby Boomer retirees.

Financial Services Minister Stephen Jones will slam funds’ current customer service as “unresponsive”, “slow” and “not member-focused” in a speech on Tuesday at The Australian Financial Review Super & Wealth Summit.

https://www.afr.com/policy/tax-and-super/lift-your-game-to-help-boomers…

by Audaxes | 31st Oct 23, 7:01pm 1698732116

dp see Roelof above

by Justa comment | 31st Oct 23, 7:26pm 1698733588

Looks like the NZ 10 yr has just hit new highs.

by Te Kooti | 31st Oct 23, 7:40pm 1698734403

Since 2011, prior to that they were regularly above 6 %.

I wonder what the loss on the LSAP is now? It must be well north of $11b, although some of the bleeding is accruing away as we speak.

-$11.3b by my crude calculation, and that's not taking into account 2 years of negative accrual, of at least $1b per annum.