What happened Thursday

Economy / news

A review of things you need to know before you sign off on Thursday; REINZ December data soft, Truckometer shows weakness, inflation components stay up, benefits little-changed, swaps up, NZD lower, & more

18th Jan 24, 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
No changes to report, so far.

TERM DEPOSIT/SAVINGS RATE CHANGES
No changes to report today here either.

MORE CREDIT CARD RATE INCREASES
The Flight Centre Mastercard purchase rate has risen from 22.95% to 24.99%. The cash advance rate is up from 24.95% to 26.99%. And they also now have a six monthly fee on the card of $25.

MOMENTUM WEAKENS, SALES SOFT
House prices tumbled in December with the biggest falls occurring in Auckland. Westpac notes: "high interest rates are still acting as a brake on house price growth. That’s made serviceability tougher for first home buyers and those looking to upgrade. It also means that net rental yields are still low."

TRUCKOMETER REVEALS WEAKNESS
ANZ's Truckometer monitoring reveals tepid increases at the end of 2023 - and as they point out, that will result in negative per capita changes, which is a sign of substantial weakness.

FOOD INFLATION FALLS, BUT ...
Stats NZ said food prices fell in December for the fourth consecutive month, taking the annual rate of food price inflation down to 4.8% compared with the peak level of 12.5% seen earlier in 2023. That is consistent with the Infometrics/Foodstuffs monitoring. However airfares skyrocketed and rents keep pushing up.

BENEFITS IN FOCUS
With the release of the December "Benefit Fact Sheets" by MSD today, we now know that the number of people on the main classes of social benefits rose +24,800 in 2023. Almost +20,000 was for the JobSeeker Support (unemployment) benefit and taking this up to almost 190,000. At the same time, the total employed rose +70,500, and the working aged population rose +104,000. We should also note that the rise in the same period of those 65 and over on National Super (another social benefit) rose +22,700. There are now 2.3 National Super beneficiaries for every working aged beneficiary. (In March 2000 it was 1.2.) We have summarised this data, the changes, and the perspectives here, here, and here. There are now 1.85 workers per beneficiary (including National Super claimants). The last time that was "2" was December 2005. But to be fair, it fell to "1.6" in between in December 2011 and rose back to almost "2" by March 2018. It has slipped since. Despite the political bluster, the "benefits repair job" is pretty modest, and it it excludes National Super benefits, pretty shallow.

EMPTY HOUSES
New minister Chris Bishop released data today the shows there were 5%, or about 3900 Kāinga Ora homes unoccupied and vacant, some for more than four months.

"POTENTIAL TO HAVE CAUSED SIGNIFICANT FINANCIAL HARDSHIP"
Calling it "In its most significant action in the car finance sector to date", the Commerce Commission said will file civil proceedings in the High Court against Go Car Finance and Second Chance Finance alleging that the lenders breached the CCCFA when providing car finance to borrowers. "In our view, both lenders have not been appropriately assessing loan affordability when making car finance available." ComCom said they will be seeking pecuniary damages. Go Car finance is owned by a listed Australian firm, Solvar. And Second Chance Finance is owned by Aucklander Robert Wells.

ABOVE FONTERRA
ASB has raised its 2023/24 dairy season payout forecast by +50c to around the $7.85 per kgMS mark for the season. You can see how that compares here.

"DO A BUDGET"
Westpac NZ is encouraging New Zealanders to put together a 2024 budget, as new research shows more than one in four Kiwis expect to be impacted by a holiday spending hangover. A survey of 1,110 Westpac customers showed 27% of respondents believed holiday spending definitely or probably would cause financial stress in the new year, and 24% believed the start to 2024 would be more stressful than the same period in 2023. 20% of customers said they expect paying back holiday debt to be a big additional cost in January and February.

EMPLOYED LABOUR FORCE SHRINKS
Australia shed -65,000 jobs in December from November, with a huge -107,000 retreat in full time jobs and only +41,000 extra part time jobs replacing them.

INFLATION STICKY
Australian inflation expectations have settled in at 4.5%, the same in December as November. It has been sticky between 4.5% and 5% since March 2023 - at a level that the RBA is unlikely to feel comfortable with given their target is "between 2% and 3%" and there is no evidence they are moving toward that.

SWAPS UP
Wholesale swap rates may be quite a lot higher today. However, the key reaction will come at the close. Our chart below records the final positions. The 90 day bank bill rate is unchanged yet again at 5.64%. The Australian 10 year bond yield is up +7 bps at 4.27%. The China 10 year bond rate is down -2 bps at 2.52%. And the NZ Government 10 year bond rate is up +4 bps at 4.76%, while the earlier RBNZ fixing was at 4.68% and up +2 bps from yesterday. The UST 10 year yield is now at 4.10% and up +5 bps from this time yesterday. The UST 2yr is at 4.34% and up +12 bps, so that inversion is now -24 bps.

EQUITY WINNERS & LOSERS
The NZX50 is down -0.5% in late trade today. The ASX200 is also down -0.7% in early afternoon trade. Tokyo has opened little-changed. Hong Kong has opened down -0.2% while Shanghai is down a full -1.0% at its open as investors derisk. Singapore has opened down a mere -0.1%. Wall Street ended down -0.6% in Wednesday trade on the S&P500.

OIL RISES
Oil prices are up nearly +US$1.50 from yesterday at just under US$73/bbl in the US while the international Brent price is now just under US$78/bbl.

GOLD LOWER AGAIN
In early Asian trade, gold is now at US$2008/oz and down another -US$21 from yesterday. Earlier it ended in London at US$2038/oz.

NZD A LITTLE SOFTER
The Kiwi dollar is now at 61.3 USc and down just marginally from this time yesterday. Against the Aussie we are up +¼c at 93.5 AUc. Against the euro we are marginally lower at 56.3 euro cents. That means the TWI-5 is now at 70.1 and down -10 bps

BITCOIN SLIPS MODESTLY
The bitcoin price has eased today to US$42,594 and slipped -1.2% from where we were this time yesterday. There's been modest volatility over the past 24 hours of just on +/- 1.2%.

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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34 Comments

by HouseMouse | 18th Jan 24, 4:02pm 1705546953

‘Airfares skyrocketed’? I expect a bit better than that. That’s a seasonal change. They fell 15% YOY

by JimboJones | 18th Jan 24, 5:04pm 1705550662

Yes and I doubt it makes up much of the CPI bucket.

Rent on the other hand... I guess that is Jfoe's feedback loop at play - interest rates go up so landlords put rent up then inflation and interest rates stay high.

by M0ralHazard | 18th Jan 24, 8:57pm 1705564655

Rent going up might also have something to do with the extra 100,000 people we imported over the last year

by kiwikidsnz | 18th Jan 24, 4:15pm 1705547717

"There are now 2.3 National Super beneficiaries for every working aged beneficiary. (In March 2000 it was 1.2.)"

In 2000, around 5% of NZSuper beneficiaries were still working, now it's 25%.

by Justa comment | 18th Jan 24, 4:21pm 1705548085

Yep the baby boomers have now started turning 65 in big numbers. Time to stop paying it to those still working and earning over 80k I think.

by kiwikidsnz | 18th Jan 24, 4:38pm 1705549093

The 500% increase in working superannuitants over the last 2 decades is more likely to be because many more are struggling to make ends meet than creaming it

by Eschaton | 18th Jan 24, 5:01pm 1705550497

Fiat money debasement.

by JimboJones | 18th Jan 24, 5:39pm 1705552773

I certainly know many that worked in office jobs because they could not because they had to. Free bus ride to work, get paid $150k at your job, get the NZ super bene, and get a power subsidy because you are so poor. Flash your gold card at many retailers for a discount or freebies subsidised by everyone else. Then quit your job halfway through a tax year and get a big tax refund and holiday payout. Why not.

by Flying high | 18th Jan 24, 6:07pm 1705554450

On to a winner there, JJ

by rolande | 18th Jan 24, 6:19pm 1705555172

And rates rebate :)

by JimboJones | 18th Jan 24, 6:32pm 1705555925

Yeah that’s the worst! Is it paid back in death or something? Or just another subsidy?

by Flying high | 18th Jan 24, 6:35pm 1705556153

Much lower insurance premiums for pensioners which is strange as in my family its the over 65s that make all the claims.

by kiwikidsnz | 18th Jan 24, 8:31pm 1705563088

You need to be earning around the equivalent of a community service card income to get rates relief, not an extra $150kpa

You will also find exponential increases in medical & life insurance premiums after 60.

But, hey you believe what you want to believe to suit your agenda

by Baywatch | 18th Jan 24, 4:40pm 1705549247

Disagree - as they are own plenty of houses in NZ they will need it for the skyrocketing rates and delayed infrastructure projects coming home to roost.

One benefit of renting I suppose?? You can only kick the can down the road for so long..

by JimboJones | 18th Jan 24, 5:08pm 1705550909

It would have been a good idea for the boomers to fix that infrastructure while they were working (instead of voting for tax cuts).

by Flying high | 18th Jan 24, 6:37pm 1705556276

Nitwit Wellington Green council are the absolute worst. Get what you deserve

by JimboJones | 18th Jan 24, 5:06pm 1705550786

65 is too young these days, especially for office jobs. Make it 68 tomorrow and have a special sickness bene for 65-68 year olds that can't work.

by M0ralHazard | 18th Jan 24, 9:07pm 1705565259

Or just crank up the tax on people who receive super and earn $X+

by KH | 18th Jan 24, 5:21pm 1705551691

Kneejerk reactions here about Super. Let's try a better founded lerm term fix.

Use a muscular KiwiSaver with high level and universal contributions. Phase that in and phase super out over 30 - 40 years.

by JimboJones | 18th Jan 24, 5:27pm 1705552057

So we pay for your super while saving for our own super? Sounds super.

And it sounds like we have a lot of broken infrastructure to fix too. That is if there is any money left after spending $1 mil on an average house.

by Baywatch | 18th Jan 24, 5:34pm 1705552460

Only a Boomer would come up with that cunning plan..😳

by KH | 18th Jan 24, 5:43pm 1705552983

And this morning Jimbo you came up with this. "........the best solution would be execution at age 65 rather than decreasing fertility......"

So let's put you in the box labeled. " Less than useful solutions".

But there is redemption. If you described a useful long term workable approach.

by JimboJones | 18th Jan 24, 5:47pm 1705553232

by JimboJones | 18th Jan 24, 5:06pm

65 is too young these days, especially for office jobs. Make it 68 tomorrow and have a special sickness bene for 65-68 year olds that can't work.

by kiwikidsnz | 18th Jan 24, 6:30pm 1705555815

KISS the unecessary bureaucracy. Just enact Peter Dunnes old proposal to make NZ Super an elective between 60 - 70 years at an increasing payment rate.

by KH | 18th Jan 24, 7:50pm 1705560644

Mmmh. That is more a minor adjustment that won't make the anti super commenters here any happier. And not a long term fix.

by JimboJones | 18th Jan 24, 9:16pm 1705565819

I think it’s a long term fix. The problem with NZ super is that we keep living longer. The solution is to keep working longer.

by Nzdan | 18th Jan 24, 7:37pm 1705559867

Number of superannuitants earning over $100k = 30k. Over $200k = approx 8k.

8k x $20k p.a. = $160 million p.a.
30k x $20k p.a. = $600 million p.a.

https://www.rnz.co.nz/national/programmes/checkpoint/audio/2018735910/n…

https://www.rnz.co.nz/national/programmes/checkpoint/audio/2018810787/n…

by kiwichas | 18th Jan 24, 8:45pm 1705563907

those superannuitants earning good$ are more than paying for the Super in tax, and avoiding boredom in old age....

by Nzdan | 19th Jan 24, 8:33am 1705606396

Didn't realize it was a loyalty scheme. Imagine those "retirees" left their jobs, that would open up the potential for career progression for others. You know, the career ladder. Who's to say those currently in these roles are the best for the role anyway?

by Audaxes | 18th Jan 24, 5:46pm 1705553190

Wholesale swap rates may be quite a lot higher today. However, the key reaction will come at the close

And yet the interpolated mid IR swap rate, for today's 2.75% 15/04/37 government tender yielding 4.8628%, was minus 28.54 bps at 4.5774%.

Quite simply, it takes some financial institution’s balance sheet capacity to take on an interest rate swap (the farther the maturity, the more capacity it requires). If balance sheet capacity (the real money in the system, therefore liquidity) is systemically impaired, as in a crisis, or a crisis that doesn’t really end, then to get dealers to give up their precious balance sheet capacity and engage on the other side of a swap someone would have to pay a hefty premium to make it worth it (risk-adjusted) for the dealer to do so. J Snider

by Audaxes | 18th Jan 24, 5:33pm 1705552388

House prices tumbled in December with the biggest falls occurring in Auckland.

The cruel hoax of government sponsored central bank monetary policy is being exposed for what it is.

In March 2017, former Treasury and Federal Reserve (Fed) official, Peter R. Fisher, delivered a speech at the Grant’s Interest Rate Observer Spring Conference entitled Undoing Extraordinary Monetary Policy.

Wealth effect or wealth illusion? The other therapeutic effect of lower-for-longer interest rates is the wealth effect. By driving up the value of future cash flows with lower rates of interest, all manner of assets – stock, bonds, and houses – increase in value and, thereby, can stimulate our marginal propensity to consume. More simply put, the imperative was to make rich people richer so as to encourage their consumption. It is not so hard to imagine negative side effects.

There are the obvious distributional effects between those who have assets and those who do not. Returning house prices in California to their 2005 levels may be good for those who own them, but what of those who don’t?

There are also harder-to-observe distributional consequences that flow from the impact of lower-for-longer interest rates on the value of our liabilities. This is most easily observed in pension funds.

Consider two pension funds, one with a positive funding ratio and one with a negative funding ratio. When we create a wealth effect on the asset side of their balance sheets we also drive up the value of their liabilities. Lower long-term interest rates increase the value of all future cash flows – both positive and negative. Other things being equal, each pension fund will end up approximately where they started, only more so.

The same is true for households but is much more ominous, given the inequality of wealth with which we began the experiment. Consider two households: one with savings and one without savings. Consider also not just their legally-defined liabilities, like mortgages and auto-loans, but also their future consumption expenditures, their liability to feed and clothe themselves in the future.

When the Fed engineered its experiment to promote the wealth effect, the family with savings experienced an increase in the present value of their assets and also an increase in the present value of their liabilities. Because our financial assets are traded in markets and because we receive mutual fund and retirement account statements, we promptly saw the change in the value of our assets. We are much slower to appreciate the change in the present value of our liabilities, particularly the value of our future consumption expenditures.

But just because we don’t trade our future consumption expenditures on the stock exchange does not mean that the conventions of finance do not apply. The family with savings likely ends up where they started, once we consider the necessity of revaluing their liabilities. They may more readily perceive a wealth effect but, ultimately, there is only a wealth illusion.

But what happened to the family without savings? There were no assets to go up in the value, so there is no wealth effect – real or perceived. But the value of their future consumption expenditures did go up in value. The present value of their current and expected standard of living went up but without a corresponding and offsetting increase in assets, because they don’t have any. There was no wealth effect, not even a wealth illusion, just a cruel hoax.

by HouseMouse | 18th Jan 24, 9:51pm 1705567907

Residential construction tanking on both sides of the ditch:

https://www.macrobusiness.com.au/2024/01/australian-new-home-constructi…

by LouB | 18th Jan 24, 10:30pm 1705570245

Geez Boomers are such an easy target.

What about gen X? They are in their 49s and 50s now and IMO, a hell of a lot more of them swallowed the neoliberal happy pill than boomers did.

In my early work years, top marginal tax rate was 66% for heavens sake.

by Nzdan | 19th Jan 24, 9:26am 1705609597

Yup. And as you progressed in your career and shifted into the higher tax brackets, I imagine you enjoyed the healthy reduction in your income tax.

That top marginal tax rate was 66% when National Super was introduced by Muldoon, the very portion of "taxes" that I imagine Boomers claim fund their pensions.