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
None here today, so far.
NEW PRODUCT REVIEW
The Retirement Income Group launched its new equity release offering today, one that it says is 'debt-free'.
TERM DEPOSIT/SAVINGS RATE CHANGES
None here either.
RISKS RISE FOR BOTH
Both first home buyers and banks are taking on more risk. Banks are lending more to first home buyers with less than a 20% deposit.
BIG INCREASE
Tower Insurance premium income jumped +20% to $291 million in gross written premiums in the 2024 first-half result.
BIG DIVIDENDS
Two of the big four banks' interim dividends were more than their profits in the same period. The big four banks' combined interim dividends rose +40%, clearly suggesting comfort and confidence they will meet the increased regulatory capital requirements.
SBS BANK ANNUAL PROFIT BOOSTED BY GAIN ON ABBOTT SALE
SBS Bank has posted a +14% rise in net surplus after tax to $42.822 million. The increase was helped by an almost $13 million gain on the sale of SBS' stake in insurance broker holding company Abbott NZ Holdings. Operating income rose 6%, operating expenses rose +10%, and credit impairment losses jumped +60% to $20.330 million. Gross lending increased +9% to $5.528 billion, and the bank and building society increased redeemable shares by +6% to $4.353 billion.
DTI RULES ACTIVATED, LVR RULES EASING
The Reserve Bank says banks will have to comply with the new DTI rules from July 1, while the loan-to-value ratio restriction easing will also be applied from the same date.
FEWER AGENTS IN A SOFTER MARKET
The number of real estate agencies and salespeople is declining as the housing market cools. Real estate license holder numbers are down -8.5% since September 2022.
HIRING ACTIVITY LOSING MOMENTUM
The latest update on employment numbers from the IRD's PAYE records shows jobs continued to grow slowly in April, but falling well behind the pace of population growth. Westpac noted: "Where the jobs growth is occurring has mainly been in the 35-50 age group, which broadly corresponds with the age profile of inward migrants in the current cycle. Youth employment is well down from its previous highs, although there are some hints that this has stabilised in recent months." Infometrics notes: "We expect slower wage growth throughout the remainder of 2024 as continued dampened economic conditions limit businesses need for additional employees and less job opportunities reduce current employees’ ability to negotiate large pay increases."
MORE DAIRY PRICE SIGNALS
Looking ahead to tomorrow morning, there is another GDT Pulse dairy auction, but just for WMP and SMP. Futures pricing (which has been unreliable recently) suggests SMP will rise again (+2%) and WMP will give up some of its recent gains (-5%).
KIWISAVER TURNS SHARPLY INTERNATIONAL
The RBNZ's monitoring (T43) of the funds sector shows that total KiwiSaver assets rose to $115.234 bln bln as at March, a new record high. However there was a huge fall in assets invested in New Zealand, now under 41%. Recall it was just over 50% in December 2020, and was 60% in 2008. If it had held at 50%, that would have involved more than $10 bln more invested locally. 62% of all assets are in equities or unit trusts (19% in NZ, 43% overseas).
KEY BANK METRICS
With the RBNZ Dashboard release today, we have updated our Key Bank Metrics tool to March 2024. This tool enables comparison between banks very easy for a wide range of metrics in 19 categories, and many variants within categories. You can search back to 2018 and track changes quarterly since then.
SURPRISINGLY WEAK
Total retail sales in Australia came in at AU$34.0 bln in April, a measly +1.2% higher than year ago levels in aggregate and far less than inflation of 3.6% in the same period. Worse, their population rose north of +2% in the same period. Aussie retail sales per capita are now sagging badly. Just to stay up with inflation the April growth needed to be +$1.21 bln over the year-ago level. It was only +AU$418 mln or about a third of what is necessary just not to go backwards on a volume basis. This data turned the ASX200 from a daily gainer into a daily loser.
SWAP RATES MIXED
Wholesale swap rates are likely to be higher at the long end but maybe softer at the short end. Our chart below will record the final positions. The 90 day bank bill rate is still unchanged at 5.63%, a level it has hovered around for more than 70+ days. The Australian 10 year bond yield is down -1 bp to 4.31%. The China 10 year bond rate is now at 2.32% and a little softer. The NZ Government 10 year bond rate is up +5 bps at 4.89% from yesterday and the earlier RBNZ fix was at 4.79% and up +1 bp from yesterday. The UST 10yr yield is unchanged from yesterday at 4.46%. Their 2yr is now at 4.94%, so the curve has shifted back to -48 bps inverted.
EQUITY MOSTLY UP
The NZX50 is down -0.3% in late Tuesday trade, knocked a bit by the weak Aussie retail sales data. The ASX200 is down -0.4% in afternoon trade on the same knock. It had been up +0.2% before that. Tokyo has opened down -0.3%. Hong Kong is up +0.8%, Shanghai is up +0.1%, and Singapore is +0.2% at their respective opens. Remember, Wall Street is on its Memorial Day weekend holiday. But the S&P500 futures suggest it will re-open tomorrow up +0.4%.
OIL FIRMS AGAIN
The oil price is +US$1 higher from this time yesterday, now just over US$78.50/bbl in the US, while now also now at just over US$83/bbl for the international Brent price.
GOLD UP FURTHER
In early Asian trade, gold has risen by another +US$11 from this time yesterday, now at US$2356/oz.
NZD FIRMS
The Kiwi dollar has firmed +¼c to 61.6 USc today and its highest since mid-March. Against the Aussie we are firmsih at 92.5 AUc. Against the euro we are up at 56.7 euro cents. This all means the TWI-5 is now at 70.8 and up nearly +30 bps.
BITCOIN ON HOLD
The bitcoin price has held today, now to US$69,287 which is up just +US$169 or +0.2% from this time yesterday. Volatility of the past 24 hours has been modest at +/- 1.7%.
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31 Comments
Two of the big four banks' interim dividends were more than their profits in the same period. The big four banks' combined interim dividends rose +40%, clearly suggesting comfort and confidence they will meet the increased regulatory capital requirements.
They intend to lend less, hence lower capital demands.
Aussie in shock as the meat industry honchos explain why Aussie beef is up to 35% cheaper in Japan than on Woolies/Coles supermarket shelves. Superb article.
Unlike Australia, supermarket retailing in Japan has much more strata to it than what’s seen here – everything from premium to budget, no frills, often targeted as wholesale/retail where the main customers are small ‘ma and pa’ restaurant operators.
At least some of the example photos published below are from Japan’s Hanamasa retail network, classified as a ‘discount retailer’ in Japan. The business has been described to Beef Central as an ‘absolutely no-frills operation, akin to a chefs’ supplies business.” Nevertheless, it is open to the public for small volume retail sales.
https://www.beefcentral.com/news/comparison-suggests-aussie-beef-retail…
Ayup. Super strong correlation between the cost of goods and people's incomes.
Cheapest groceries I think I've ever found is in Malaysia. For a split second, I think "wow, we're getting shafted", then I have to stop myself and remember even though the groceries are half the price, my income would be a fraction of what it is in NZ.
Yeah, sort of like how you can often buy software in a poorer country for less.
Still not sure why you're so taken by the fact that economies with lower wages, pay less for certain consumer items. Although you only ever talk about Japan, who definitely pay more than other places for similar items.
I can see how that would be the case with hardware but for a lot of software seems like we are just getting shafted tbh. I remember when it was cheaper to fly to the States, buy Adobe CS6, go to Disneyland and then return for less than it would cost to buy here. Shipping cost is hardly a factor. There will be some administrative things but hardly enough to justify software costing three times as much.
Still not sure why you're so taken by the fact that economies with lower wages, pay less for certain consumer items. Although you only ever talk about Japan, who definitely pay more than other places for similar items.
Aussie meat producers rely on the Japan market. And you should ignore Japan at your own peril.
They're about 1/3 of Aussies beef exports. And a sliver of ours. Interesting the value relative to the volume is about par for Aussies beef exports to Japan, i.e. they're not paying significantly less than Australia's other export partners - so the lower retail cost in Japan is more reflective on their cheaper cost of retailing, than Japan wrangling a cheaper price.
AFR on why inflation will be back, sooner than you think.
This is not to say that individual central bankers are untrustworthy. The problem is that most central banks are not as independent as many believe.
In a global environment marked by political polarisation, onerous government debt burdens, geopolitical tensions and deglobalisation, central bank autonomy cannot be absolute. As unelected technocrats, central bankers may have short-term operational independence, but governments ultimately control appointments and oversee budgets. In many countries, the government also has the power to reset monetary mandates.
As geopolitical tensions spike and global growth slows, economic uncertainty is likely to remain elevated. This is partly because, despite their bells and whistles, central banks’ “new Keynesian” forecasting models are fundamentally based on extrapolation. In other words, they perform well under stable conditions but often fail to predict major turning points.
https://www.afr.com/policy/economy/why-inflation-will-be-back-sooner-th…
Roy Morgan poll update has bad news for the Coalition
"...support for the National-led Government (National, ACT & NZ First) has crashed in May, down 4.5% points to 48.5% with a narrow lead over the Labour-Greens-Maori Party Parliamentary Opposition surging to 47% (up 4% points)."
Yet, also: "...Government Confidence Rating increased 10.5ts to 96 in May as sentiment improved for a second straight month. "
https://www.roymorgan.com/findings/nz-national-voting-intention-may-202…
“The massive gender split in support continues with three-fifths of men, 60%, supporting the National/ ACT/ NZ First governing coalition compared to only a third, 33.5%, supporting the Labour/ Greens/ Maori Party – a massive difference of 26.5% points.
“In contrast, a majority of 58.5% of women support the Labour/ Greens/ Maori Party opposition compared to 39% that support the National/ ACT/ NZ First governing coalition – a difference of 19.5% points. This represents a massive 46% points difference between men and women.
Pretty crazy difference, think a similar split is happening in the States as well.
Men more selfish and individually oriented. Women more selfless and society oriented.
Reflects the policy split between the two bands. Coalition's polices put the individual person first and protects the rights of those that already have power regardless of harm to nature, society or broader economy. Pretty obvious. Same in US.
WFF usually gets a boost under Labour, who until recently had a female prime minister also, therefore it could be said that Labour may appeal more to women from being more relatable in that regard, and historically being more beneficial for women under Labour compared to National (thinking back to Bill English and the refusal to look at abortion law). Opinion only.
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