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 again today.
TERM DEPOSIT/SAVINGS RATE CHANGES
SBS Bank raised its one year rate by +10 bps to 6.05%.
ON THE BRINK
Valuation agency QV says house prices are teetering on the brink, as average values start to slide. Buyers are "spoilt for choice" with nothing suggesting house prices will take off again soon.
LOW PRESSURE ON FOOD PRICES, FINALLY
Statistics New Zealand says food prices have had their smallest increase since September 2018. Food prices rose +0.2% in the 12 months to May, with the lower food price inflation driven by cheaper prices for fruit, vegetable, meat, poultry, and fish. Fruit and vegetables prices were down -11% and meat, poultry, and fish prices were down -1.2%.
SOME OTHER KEY PRICES EASED TOO
Stats NZ data also shows that rent pressures are easing. Meanwhile fuel costs fell in May from April but were up +17% from a year ago, in part because the Government cancelled its relief package, and the NZD weakened.
GRIMMER
The May factory PMI moved into a deeper contraction, mainly because order flows are drying up. That is now 15 months of continuous contraction. This will test the resilience of employment levels, to be sure. Auckland and Otago are the toughest, Wellington and Canterbury are still expanding.
SERVICES DOWN
Eyes are on buy-now-pay-later service Laybuy, who are 'down' at the moment.
BTR GETS MOMENTUM IN AUCKLAND
The Build to Rent (BTR) sector is getting some momentum. The recently completed Kiwi Property project at Sylvia Park, Auckland, added 295 units, where rents seem to average $800/week for tenants. (Gross rent for that project before vacancies will be more than $10 mln/year.) More than 90% of all projects completed, in construction, or planned, will be in Auckland, according to Property Council data.
| BTR units | Under | Plan | Facility | |
| Completed | construction | pipeline | number | |
| # | # | # | # | |
| Auckland | 1153 | 714 | 3331 | 47 |
| Waikato | 69 | 0 | 0 | 3 |
| BOP | 0 | 0 | 45 | 1 |
| Wellington | 126 | 108 | 0 | 3 |
| Canterbury | 59 | 0 | 0 | 2 |
| Otago | 42 | 0 | 0 | 1 |
| ------ | ------ | ------ | ------ | |
| National | 1449 | 822 | 3376 | 57 |
'PROPORTIONATE TO THE RISKS'
Business groups are cheering a review of the role of health & safety regulations (and the industry that sprung up around them, especially for lawyers). Others aren't so sure. It is another area where the pendulum seems to have swung too far away from principled regulation where this started, towards prescriptive regulation (a la the UK and Australia) as offshore 'experts' were brought in to run our agencies.
GREEN POWER MOMENTUM ON THE FARM
New Zealand Green Investment Finance’s investment in Waikato-based Rural Energy is helping accelerate the uptake of solar electricity generation on farms. The $10 mln investment is to finance ‘solar as a service’ power purchase agreements for dairy farms. Almost 200 are already operating with this service in the Waikato region.
LOW PAY, BUT IMMENSE POWER
This is interesting.
SWAP RATES SOFT
Wholesale swap rates are likely to be easing again today on global influences, but only marginally. Our chart below will record the final positions. The 90 day bank bill rate is down -1 bp at 5.61%, a level it has hovered around for almost 90 days. The Australian 10 year bond yield is down -5 bps from yesterday at 4.20%. The China 10 year bond rate is still at 2.31%. The NZ Government 10 year bond rate is down -7 bps at 4.68% from yesterday and the earlier RBNZ fix was at 4.62% and down -6 bps from yesterday. The UST 10yr yield is unchanged from yesterday at 4.26%. Their 2yr is now at 4.72%, so the curve is little-changed at -46 bps inverted.
EQUITIES MOSTLY HIGHER
The NZX50 is down a minor -0.1% in late trade today and heading for an unchanged week. The ASX is down -0.3% in afternoon trade so far and if that holds it will be down -1.2% for the week. Tokyo has opened its Friday trading little-changed from yesterday, and little-changed for the week. However Hong Kong is down -0.4% at its open and looking at a -2.9% weekly dump, Shanghai is also down -0.4% today in early trade heading for a -1.3% retreat. Singapore is down -0.5% in early trade there. The S&P500 ended its Thursday trade up another +0.2% on Wall Street earlier.
OIL LITTLE-CHANGED
The oil price is little-changed from this time yesterday, now just under US$78/bbl in the US, and still just over US$82/bbl for the international Brent price.
GOLD A TAD LOWER
In early Asian trade, gold is slightly firmer, down -US$9 from this time yesterday at just on US$2306/oz.
NZD ON HOLD
The Kiwi dollar is marginally from this time yesterday, now at 61.6 USc. Against the Aussie we are unchanged at 92.8 AUc. Against the euro we are also a tad firmer at 57.3 euro cents. This all means the TWI-5 is unchanged at just over 71.
BITCOIN SLIPS
The bitcoin price is down -1.8% today from this time yesterday, now at US$66,779. Volatility of the past 24 hours has been modest at just under +/- 1.6%.
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77 Comments
Second article in 2 days from Stuff on negative equity....
https://www.stuff.co.nz/money/350310530/housing-market-drop-wipes-out-f…
They are usually in the spruiker camp but the worm is turning..........
Extraordinary really isn’t it. The management seem to be in some sort of weird self-congratulatory cocoon, thinking amongst themselves that they know best when in fact what they are publishing is worth little more than poppycock. The delusion is now so impregnated that they believe they are equipped to carry the model forward into TV.
Having lived through the GFC in the US, the real pain will come if/when unemployment starts climbing - this isn’t a certainty but a decent possibility/probability given the economic data/indicators we currently have.
Being negative equity and then you or your partner losing their job/pay reduction is a thing of nightmares and something I’ve been warning could happen here in NZ at some point (I just didn’t know the timing). Saw first hand how it impacted peoples mental health/relationships in the US. Take care out there of those who have friend/children in these circumstances. My personal view is that things are only going to get worse the next 12-24 months before they get better.
Its happening but the media is very very quiet, everyone is restructuring .... if you listen to Seek hundreds of good people applying for roles. This happens, its sad that there has to be a bust , but after a boom like this the bust will be massive, its not a disney movie
though most around the water cooler are in blissful ignorance...
I am both blessed and cursed having sat on financial trading floors for 30 years.....
I feel a couple of commentators on here talk about people sitting around a water cooler (whatever that is) like they are a bunch of baboons picking their teeth and scratching their arse. Very condescending O wise ones.
Can't understand why you look down on others as if you are all knowing and the "normies" are thick.
Maybe you have it back to front.
That and divorce. Imagine having to pay a partner to keep the house and carry on paying the mortgage instead of being paid out. That happened to a friend of mine post GFC - walked away having to pay their ex-partner $45k to agree to keep paying the mortgage. The alternative was bankruptcy for both of them.
So remember indebted homeowners, "happy wife, happy life".
'But for stories that could sow division, Stuff has instead decided to adopt a softer explainer-style approach that leads people into the most important and contentious elements of a story, including subjective takes on it, further down.'
This is a Stuff executive proudly explaining their bizarre approach to news reporting to a UK gathering.It explains a lot.
https://pressgazette.co.uk/publishers/digital-journalism/new-zealand-stuff-news-avoidance/?
Am I the only one noticing a sudden and very steep drop off in prices? Along with the news in this update, retail spending down 1.5% in a year for example. That is 5.5% real drop.
All that might hint at a sharp inflation fall sometime later this year - with a consequent drop in the NZD. Might even have a chance at the doomed NZX50.
A hard landing though. Just need to survive the fall
Just looking around, seeing some good deals in:
- Clothing and footwear, e.g. Skechers were doing three pairs of shoes for $99 the other day on their online outlet
- Electronics, particularly used
- Cars, particularly private sale where financing isn't so obtainable. Got my eye on a couple of potential "wife will shoot me if I buy it" purchases that are getting more affordable by the week.
- International airfares. Domestic, particularly regional on Air NZ is still a rort though.
- Have had some bargains on fruit and veggie at the local greengrocers, e.g. mandarins $2.50 k/g.
There are a multitude of items that have declined....but not to previous levels. Its almost as if they were testing the market for the past 12 months or so...at what level will the consumer keep buying? (and not find alternatives) and they discovered it was less than they anticipated....and that level will decline further ( and a lot of suppliers will disappear as the new level is discovered)
Much of the tradable inflation was profit seeking...some have deeper pockets than others.
Yes, seeing lots of low prices for things all over the place. Those retailers are overstocked me thinks, trying to move stock off at sometimes cost price. Food prices are down on what I was paying 6 months ago.
But this won't come through to the RBNZs decisions for ages, they are staring in the rear view mirror to decide whether they should brake or accelerate. Guess what, there's a crash coming and they won't know until the car is rolling down a bank. At which time they will suddenly realise its an emergency and act.
They rent them to immigrants who struggle to get private rental housing due to lack of credit and tenancy history. They are pretty much a captive market, so ripe for exploitation.
Like this one - 24 nationalities renting the building. https://buildingtoday.co.nz/2023/06/26/simplicity-living-begins-third-b…
The head tenant will just put up a curtain and a bed in the lounge, and rent that out too.
Tesla shareholders have backed a record-breaking pay package for boss Elon Musk and approved a plan to move the firm's legal headquarters to Texas.
The US$56B man...
https://bbc.com/news/articles/cleezyxjv4jo
Edit:
"The US has so many unsold Teslas you can see them from space"
https://www.stuff.co.nz/world-news/350309390/newsable-us-has-so-many-un…
...try to stay out of jail, and not be the new Elisabeth Holmes from all the lies told to investors.
All he is asking for is more value than all the profit tesla has ever made. Completely unprecedented crazy amounts of wealth going to one person, just to keep him 'interested' in the company. And the shareholders somehow voted for it? Amazing con job.
I can see unemployment easily going above 6% to be honest. The obvious things are we are in a recession that's getting worse by the day and we've got a far too hawkish central bank not dropping rates until at least November in a backdrop of plummeting demand across the board. Government cutting back and businesses now cutting back and finally we're seeing some inflation relief.
The main thing is though - AI. How many jobs on top of general recession cuts is this going to cause over the next 18-24 months. We should be halting migration immediately except for highly skilled people - plenty of Kiwis going to need jobs and there will be far and few over the next year.
IMHO Ai is easier to integrate into an already digital business process,
as NZ is mainly agricultural, tourism (changing bed sheets and driving things) , nail guns and taking commissions off houses.....
we may not see massive job losses to Ai in the short term.....
the businesses that takeover from this will be Ai driven and will cause carnage
The Economist: "China has become a scientific superpower" Rare for me - maybe even unprecedented - to praise the Economist but this might be the seminal article on the current status of China's scientific might. Let's take a look Link
The problem with western China discourse isn’t that China doesn’t have problems, but that people from outside China think it’s their job to morally police what goes on inside China, as if people who live in China need their moral rescue and can’t handle their own society. Link
We don’t care, we have yuan.
https://edition.cnn.com/2024/06/13/investing/us-russia-sanctions-dollar…
Immigrants who dont have a credit history, rental references or an employment history - they are a captive market ripe for exploitation. Like this one
https://buildingtoday.co.nz/2023/06/26/simplicity-living-begins-third-b…
24 Nationalities living there.
The startpoint of Ms van Velden roadshow is this: "
- Whether health and safety requirements are too strict, or too ambiguous, to comply with.
but nothing about how to stop this from happening:
https://www.nzherald.co.nz/bay-of-plenty-times/news/witnesses-sought-as…
https://www.oneroof.co.nz/news/tony-alexander-the-return-of-the-housing…
When do I think things will improve? Not until interest rates fall away.
This reliance on interest rates (which are not historically high), and not willing to admit that it's the debt levels (which are historically high), is part of the problem. This is "money" printing and is one cause of our declining monetary value.
Who's to blame? No self reflection to see that his own spruiking may have contributed to the situation. This site hasn't exactly helped with its conflation of mortgage affordability with affordable homes. Of course the RBNZ has to take some of the blame, as does Govt. policy, as does the economic narrative. At the end of it all, we have created this. The question is why, and how do we resolve it? Or maybe it's how, and why do we resolve it? Do we attempt something outside our limiting economic beliefs, or do we continue with the same thinking expecting it to be different this time?
https://www.nzherald.co.nz/business/rescuing-ryman-chairman-reveals-his…
The Ryman issue is closely correlated. The belief that inflated property prices is wealth and borrowing against it will "create" more wealth.
My view is that it will resolve itself (in the long term) and the more interventions that occur to prevent this from happening, the worse the outcome (or should I say painful for some) will be.
The fundamental truth is that we don’t have the productivity/incomes/GDP to support the amount of debt we have leveraged against our housing market at historically normal/non-emergency interest rate settings (same as Canada, same as Australia…) You can’t hide from that - it’s the elephant in the room that will trash the place while you try to avoid the fact that it is really there, doing damage. Best move is to acknowledge the problem and address it - or given how long we’ve avoided the problem - at least have a cleanup plan for after it’s left the room (restrictive DTIs, tax reform, sustainable immigration planning etc).
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