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
Nothing here today either.
LOW, EVERY WAY YOU LOOK AT IT
The Westpac McDermott Miller version of consumer sentiment, a quarterly survey, is grim reading. Their Consumer Confidence Index fell 11 points to 82.2 in June. That fall erased the gains seen over the past six months, leaving consumer confidence at low levels. Household finances continue to be squeezed by high interest rates and large increases in living costs. Households are also nervous about where the economy is headed over the coming year. That combination of factors has prompted many families to wind back their spending. And confidence is low right across the country and across all age groups
A 30 YEAR BOND COMING
Mercury said it will likely make a bond offer next week. It will be for "up to $300 million (with the ability to accept up to an additional $50 million in oversubscriptions at Mercury's discretion) of [a] 30-year unsecured, subordinated capital bond."
FARMERS SHY OF UPGRADES
May is usually a good month for tractor sales; they averaged over 200 in the month over the past ten years. But not this month. At 161 that is the lowest for any May since 2010.
OF COURSE THEY WOULD SAY THAT ...
The Aussie-dominated FAMNZ mortgage broker lobby has been ramping up its pressure on the Commerce Commission to not change anything for their industry. Their general position is that the current system is not broken so doesn't need fixing. You gotta love the hubris. Every independent agency in Australia and New Zealand who have looked at the baked-in conflict of interest in the banks-and-mortgage broking sector has recommended structural change. FAMNZ rolling out anecdotal examples of how they help some clients is just diversion from the core problem. Then again, the FBAA has been successful so far ensuring Australian mortgage brokers can maintain that conflict without sanction. And they run the FAMNZ. Don't count on change by either the FMA or ComCom.
MORE NZX50 UPDATES
For readers who use our NZX50 profiles and trackers, please note that the profiles for Ryman Healthcare (RYM, #15), Turners (TRA, #46), and Manawa Energy (MNW, #22) have been updated with their latest annual results. The full set is always up-to-date. Sector analysis is here.
EYES ON BULLOCK
All eyes are today on the Reserve Bank of Australia's monetary policy review. No-one expects them to change their 4.35% policy rate. But their signaling on how they asses progress fighting inflation will garner much interest. We will update this item after the 4:30pm NZT announcement. There is a press conference at 5:30pm NZT. Update: The RBA Statement says inflation is easing too slowly for them. "Inflation is easing but has been doing so more slowly than previously expected and it remains high." So rate cuts are likely to be pushed out. The initial reaction in currency markets pushed up the AUD.
SWAP RATES SLIGHTLY FIRMER
Wholesale swap rates are likely to be a little firmer today. Our chart below will record the final positions. The 90 day bank bill rate is down -1 bp at 5.60%, a level it has hovered around for 110 days now. The Australian 10 year bond yield is unchanged from this this time yesterday at 4.16%. The China 10 year bond rate is staying down at 2.27%. The NZ Government 10 year bond rate is up +3 bps at 4.67% from yesterday and the earlier RBNZ fix was at 4.63% and up +4 bps from yesterday. The UST 10yr yield is little-changed from yesterday at 4.27%. Their 2yr is now at 4.75%, so the curve is a bit more inverted at -48 bps.
EQUITIES BACK IN A POSITIVE MOOD
The NZX50 has recovered somewhat today, heading for a +0.7% rise. The ASX200 is up a full +1.0% in afternoon trade. Tokyo has opened also uo +1.0%. Hong Kong is up +0.3% at its open, Shanghai is up +0.4%. Singapore is up +0.4%. The S&P500 started its Wall Street week up +0.7% and at an index level of 5473, that is an all-time record high.
OIL UP
The oil price is up +US$1.50 from this time yesterday, now just under US$79.50/bbl in the US, and now just over US$83.50/bbl for the international Brent price.
GOLD A TAD FIRMER
In early Asian trade, gold is slightly firmer, up +US$3 from yesterday at just on US$2324/oz.
NZD SLIPS SLIGHTLY
The Kiwi dollar is marginally unchanged from this time yesterday, still at 61.3 USc. Against the Aussie we are marginally softer at 92.7 AUc. Against the euro we are down -20 bps at 57.1 euro cents. This all means the TWI-5 has slipped to just over 70.8.
BITCOIN SLIPS
The bitcoin price is down -2.2% today from this time yesterday, now at US$64,857. Volatility of the past 24 hours has been moderate at just on +/- 2.0%.
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89 Comments
July '25? 8.25%.
That will be after the inflationary bun fight that's going to take place in The Home of the Brave in November. And that assumes we all survive France et al, "Markets fear the French far right could trigger a financial crisis" (Today's headlines). So given NZ is a speck on the global economic map, we won't be immune.
May 2023 the OCR should have moved to 6%. Every man and their economic dog was prepared for that. We'd be well and truly into the much prayed for 'drop in interest rates' by now, as we'd have driven a stake through the heart of CPI rises. But no. We erred on the side of 'transitory' etc. So the hardest of yards are now ahead of us, all.
I am increasingly of the view that a higher OCR would have pushed inflation higher. Why?
- Most prices have simply gone up with input costs - and interest is a major cost for many NZ businesses.
- Wages have just followed household living costs (HLCPI) - and household living costs include mortgage costs
- Demand has slumped but profit margins have in the main been sustained - or even increased slightly. It is clear that most NZ prices are not demand sensitive (we pay cost + margin because our markets are barely competitive).
I never spoke about positive thinking. (Re-read my post if you can find it). Positive thinking were your words, you did not understand me.
I stated that, in order for us to make anything real happen, we must first be able to conceive it in our minds, and believe that it's possible for us to achieve that goal. So, we better be very mindful of what we belive we can and cannot do.
Adrian Orr says its likely (60%) for another OCR hike before the end of year, which is a very good move because inflation is still above our target range. Remember, the OCR needs to be considerably higher than the CPI and held for longer, in order to bring inflation down, as a lot of people on here have mentioned in the past. Personally I think the OCR should be jacked up to between 6-7. That should help inflation cool down faster.
"Remember, the OCR needs to be considerably higher than the CPI and held for longer, in order to bring inflation down, as a lot of people on here have mentioned in the past. "
No. It doesn't.
And every time 'a lot of people' mention it here they get smacked down for being woefully out of date.
Look up 'The Taylor Rule' and pay special attention to why you are misinterpreting it.
What? So you want to add another 200pts to business debt costs - that's 2% x $210bn* = $4.2 billion of extra costs per year. Who will pay those extra costs? Aliens? Japanese investors impressed by the strength of Luxon's enthusiastic handshake? Or... might businesses simply pass those extra costs through to the prices they charge in the uncompetitive markets that dominate our economy (wholesale, retail, etc)?
* I'm not including $90bn of landlord debt here given that rents can't go any higher because people need to eat and cloth themselves.
That's pretty much expected nowadays. When I was a kid my parents would hunt out the best price for appliances (newsprint, phoning around, etc.) and then go directly to that store (often a warehouse or seconds outlet). But now you use the internet to find the best price, go to any store, and start from that price. Homogeneous products like appliances - which all come from the same overseas sources - are taylor-made for such strategies.
Public service still larger than just nine months ago
https://www.kiwiblog.co.nz/2024/06/public_service_still_larger_than_jus…
https://www.beehive.govt.nz/release/latest-data-shows-size-public-servi…
Yet better economy then present 😏
The owner of Auckland delicatessen Blackforest Gourmet says he may have to shut up shop amid “challenging times”, which for small businesses like his, feel “worse than Covid”.
https://www.nzherald.co.nz/lifestyle/auckland-deli-owners-plea-to-custo…
Hells bells those were the days. The old bowser hose up and down the bar. 7or 8oz glasses, not to mention handles, swapped around each round along with each other’s germs. Take your pick, up and down the country, Lion Red, Red Band, Crown, Speights turgid, flat and soapy but sloshed out nevertheless and consumed until 6pm. And then came Lion Super and what a mess that made of the unsuspecting patrons, including me.
I couldn't help notice a few job adverts on Seek for analysts in business turnaround and restructuring.
Historically, IRD has been the biggest user of such services, appointing administrators to strip off and sell these companies for parts, so taxes and debt can be recovered for senior debt owners.
As I've noted before, producers of craft beer and artisan foods will be the first to feel the heat.
Freight and logistics are/were the first to feel the heat, because a general slowdown has a cumulative effect on their revenue.
Hence they're already leading insolvencies.
Much of the mass market craft beer is owned by large alcohol conglomerates.
It is extraordinary then isn’t it how much destruction the present government has wrought in barely 8 months especially to claim that, all those concerns were doing absolutely fine under the previous government or that impossibly, magically the adverse measures and influences of the previous government somehow immediately ceased to exist or even matter, when they lost power.
Alarming, eh?
I'd suggest that degrowth was coming, irrespective of who is in power. On that basis, it could be argued that Labour achieved the same outcome, with more people employed...
Read Tainter's: Collapse of Complex Societies' - running out of efficiencies, drives more complexity, which takes more admin (and is more fragile).
Wow, you are predicting a recession in retrospect after a mob of absolute idiots were on charge spraying money around willy nillly, with so little idea of the consequences they made up a new way to describe their hopelessness (transitionary). A recession is not degrowth, degrowth is communism.
Deindustrialisation in NZ picked up pace over the last decade and half a million migrant workers joined our workforce to work for low-value sectors, occupy overpriced houses and consume imports. All this drove productivity growth into the ground yet our GDP.
In the shadows, cheap debt, US pumping record amounts of shale oil and China flooding the world with cheap goods kept us believing we're getting richer as a nation!
To be fair to PDK, he is actually saying that the entire global debt in existence can never be repaid... I know a few credit traders at major banks who agree..... it becomes more obvious when the interest on a large portion can not even be repaid. Oh and they are adding to it ....
Ignore him at your peril, while china is producing solar panels with massive internal subsidies , perhaps pick up a few....
Given how many people exist I would have thought our sheep and beef would be better priced...... what will happen as populations fall?
Farrow was advertising sirloin at $39 a kg, I just processed a 300kg beef , got a lot of meat for my cost compared with retail (even pak n save prices not farrow), Just finished a 2kg pack of sirloin last night.
perhaps get a few cows and a few sheep, grow a vege patch, get your own tank water and waste tanks so you pay no 5 waters fees....
1. most people do not own land suitable for animal welfare
2. most people are not skilled in animal welfare and do not have the time, ability or funds for it
3. animals that are neglected, mistreated and die early are poor sources of food and often carry more diseases
4. rampant spread of diseases through poorly managed hobby farms and mistreated animals is more difficult to contain
5. the spread of such diseases and mistreatment leads to species wide area outbreaks through shared watercourses and cross infections
6. you screw up the entire food supply through a misguided notion that everyone is super wealthy to own land to farm and everyone must have the time, ability, skills and finances for animal welfare...
7. only ignorance of reality leads people to suggest everyone must be able to grow their own. The biggest ignorance being both time and medical realities of the human condition.
Don't believe me. Just ask the SPCA how well many humans care for pets (animals we ostensibly want to live as long as possible and to integrate with our lives so we have more investment in their wellbeing).
Also I take it you have never seen the true horrors of urban "farming". They are pretty bad and even with 1-2 starting animals get very horrendous and perpetuate harm to other humans pretty quickly. Hence each council has bylaws for urban animals & welfare. For instance a minimum sqm per chicken of available ground it can roam. Species lists of ones that are and are not suitable in urban environments and their minimum reqs. etc.
Nope. Behavioural science is not physics, neither is the study of plants, fungus, most species and archaeological records. Biology is more closely related to chemistry but even then it is far distant. Even chemistry uses some physics principles but there are many more attributes out of scope of each others purview.
For instance we all experience gravity yet it is not the most significant force taking birds out of the sky. Hunting (inc by predator species or targeted defensive & territorial attacks), toxic attacks on other species, removal of key resources & habitat through over subscription of demand, viral mutations & more connected environments increasing spread, evolution of survival, natural selection choices that can increase species risks or significantly change makeup and behaviour (rolling pigeons are an odd case as well as they breed & are bred to be more prone to have seizures that cause them to fall in rolls) etc.
We live in a state of punctuated equilibrium. Perhaps we just need to realize that PDK knows about as much about science as his media articles and social media tells them. It is quite tragic as this hampers real learning and real environmental progress & practices that do make significant differences. Instead PDK advocates for things that actually causes more worldwide harm.
Degrowth communism. Yip yip, that’s what it is.
https://amp.theguardian.com/environment/2023/feb/28/a-greener-marx-kohe…
Er no it is not. Please learn basic physics. This only demonstrates you missed science at school and then proceeded to miss it. Please please please stop spouting this rubbish as it only devalues what science is and makes more misinformation which only harms any attempts for consensus to sustainability. As any fool can see you are plainly lying and most people then turn away from initiatives with increasing distrust. You are causing your own initiative downfall. Try actually learning science first before making these ludicrous claims with such blatant misinformation.
You assume the smaller number of public servants was the right number, and more = bad.
In my experience the only sector that reliably circulates cash in the NZ economy is the public sector. Without public funding of large projects, companies like Fletchers would have nothing to do and engineers etc would go elsewhere.
Furthermore, if groups like dairy farmers or fishers would actually bother to meet existing regulations then a larger army of bureaucrats wouldn’t be needed to enforce them.
The public sector is there to do the things that the private sector is unwilling or incapable of doing. Again in my experience, the gap between private sector promises and capability in NZ is pretty wide, requiring constant monitoring to ensure even the basics are delivered in full, on time, to specification.
if groups like dairy farmers or fishers would actually bother to meet existing regulations then a larger army of bureaucrats wouldn’t be needed to enforce them.
You're never going to get everyone being 100% compliant.
But most people are generally well behaved, yet we have a public framework that expends vast resources proving everyone is compliant, and still, we get rascals behaving counter to the rules.
Extremely expensive, for nominal improvements.
"You assume the smaller number of public servants was the right number, and more = bad."
No, I didn't say that in my comment link.
In responding to your "experience" I will remind you that in 6 years Labour increased the public service staff by ~40%, ~18000 with no demonstrated significant improvement in public services.
Isn't that National's plan.
Make civil servants redundant, then they sign on the dole and get paid in benefits which according to many on here will be a pay rise anyway. Or maybe they don't get paid in benefits and resort to crime and then we pay even more to keep them in prison?
Great plan.
How big is the Chinese economy
China’s PPP GDP is only 25% larger than that of the US? Come on people… who are we kidding? Last year, China generated twice as much electricity as the US, produced 12.6 times as much steel and 22 times as much cement. China’s shipyards accounted for over 50% of the world’s output while US production was negligible. In 2023, China produced 30.2 million vehicles, almost three times more than the 10.6 million made in the US.
On the demand side, 26 million vehicles were sold in China last year, 68% more than the 15.5 million sold in the US. Chinese consumers bought 434 million smartphones, three times the 144 million sold in the US. As a country, China consumes twice as much meat and eight times as much seafood as the US. Chinese shoppers spent twice as much on luxury goods as American shoppers.
https://asiatimes.com/2024/06/whats-the-real-size-of-chinas-economy/
Nevermind the tractors - check out the commercial trucks. Can you tell what it is yet?
From what I have heard at the watercooler most people haven’t had any idea of whats coming. Denial reigning supreme. Oh but they were ‘positive’ and I was ‘too negative’. I would suggest I was realistic, and prepared.
Just another friendly reminder while you're crowing about your astuteness that you didn't foresee a high rise in interest rates.
There's no such thing as a "normal" interest rate. Japan shows us normal can be zero or thereabouts for decades, conversely some sort of failed high inflation state can show it in the teens or well above also.
Two things seemed likely in 2020:
- turning off industry globally was going to make things expensive
- "emergency" interest rates are likely only going to last as long as the emergency that prompted them.
So you reckon they won't fall again, once the blood really starts flowing?
they can make rates negative , negative enough and your mortgage will pay itself and you cannot default, never underestimate their F*&kery, but they can only enforce negative rates on people if people cannot withdraw their cash .. tried to take 5-10k out of a bank in cash lately......
and CBs can only do it in unison otherwise via FX funds will flee, hence QE what currency do I hide (The least dirty shirt problem, as every good drunken economist knows just before a TV interview after a hard weeks drinking)
they hate gold as it deflates their balance sheet 50 times what you convert into it...
oh and japan rates stayed low because of central bank, so what did japanese people do, borrow low and place offshore - the carry trade. Mrs Watanabi, often on margin
> There's no such thing as a "normal" interest rate. Japan shows us normal can be zero or thereabouts for decades, conversely some sort of failed high inflation state can show it in the teens or well above also.
This is not zooming out enough. Think of what a "normal" interest rate of 0 means: that there is no price to borrowing money. This can only occur in a situation where something else is deeply dysfunctional with the money supply. In Japan's case they had a massive asset bubble that crashed and heavily damaged the economy but were unwilling/unable to take other sorts of reforms in how their economy operates in order to restore consumption.
When you get to sub-2% interests rates this an economic signal that there are other areas of your economy that need to be reformed. This could include anything from taxation rules, immigration rules, approach to industrial policy etc. But when you get to a point where interest rates are that low it indicates severe economic dysfunction that needs to be addressed so in that sense is not "normal".
The use of interest rates to resolve problems that require more structural reforms/fiscal reforms only kicks the can down the road and makes the inevitable reckoning worse. Look at Japan today to see one example of this.
Yes the engineers understand metal fatigue and they are all well clear of the bridges, funny snapping sounds everywhere now.....
regarding your chart, the last boom was sustained by QE, the collapse is caused by reality - not being able to repay the cheap interest rates caused - QE then stupid RBNZ (oh and china MASSIVE QE)
I don't agree on impact of QE at all - the bounce was fiscal policy (govt deficit spending at around 6% of GDP) coupled with an increase in net bank lending driven by low interest rates and the bloody housing ponzi. If your point is that QE was used to hold rates down, then fine.
My firm view is that the economic growth between 1990 and 2010 in NZ was enabled primarily by an explosion in private debt levels (as % of gdp). Since 2010 we have meandered along because private debt levels have maxed out at around 150% of GDP. Our economy is now dependent on either Govt deficit spending or the odd house price eruption.
coupled with an increase in net bank lending driven by low interest rates
ok and these just happened because central bankers clicked their clogs, rates so low only happened because of QE
We first began using QE in March 2009 in response to the Global Financial Crisis. At that time Bank Rate was already very low. In fact, it couldn't be lowered any further at that point. So we needed another way to lower interest rates, encourage spending in the economy, and meet our inflation target.
look QE saved the world from default after the GFC as designed , it kicked the can towards the wall , especially as USA Europe and china co ordinated the response, now they all hate each other, there is no more co ordinated QE.
the can is at the wall.... QE will not work again, its default time...
in fact default is happening all over the place, its just in many major industries no one is forcing mark to market, people are defaulting as they cannot even afford the interest, let alone debt principle repayments.
By Xmas this will be clear to all, some of us have our kiwi saver in NZ cash already , if there was a physical gold option i would be there. Buy gold here
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