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A review of things you need to know before you sign off on Thursday; Westpac makes early retail rate moves, food prices fall, truckometer issues warning, NZGB demand returns, swaps eyed, NZD stops falling, & more

Economy / news
A review of things you need to know before you sign off on Thursday; Westpac makes early retail rate moves, food prices fall, truckometer issues warning, NZGB demand returns, swaps eyed, NZD stops falling, & more

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
Westpac has cut some key carded fixed home loan rates by up to -25 bps. Details here. All rates are here.

TERM DEPOSIT/SAVINGS RATE CHANGES
Westpac has cut some term deposit rates too. All rates less than 1 year are here, for 1-5 years, they are here.

FOOD PRICES FALL
Stats NZ says lower prices for tomatoes, cheese, and potatoes have driven food prices to annual six-year low while prices for petrol and tobacco climb

RENTS TOPPED OUT, SHOW SIGNS OF FALLING
Rents for new tenants fell overall nationally in June from May. For existing tenants there were virtually unchanged. Compared to a year ago, rents for new tenants are up 2.5%, the slowest pace since the start of 2023. In Auckland, that year-on-year rate is just +1.0%.

'MAKES FOR UGLY READING'
ANZ released its Truckometer monitoring for June, and it paints a dramatic picture of a fast-slowing economy. The charting is quite sobering. The commentary is too.

BURDENS, COMPARED
Some political parties have been slamming excessive regulation and its burdens. Today, the OECD released a report that included an analysis of regulatory burdens across all its members (38) allowing for relative comparisons. Mostly, we don't look good.

DEMAND RETURNS, IN SPADES
Unlike the last NZGB bond tender, demand was very high at today's three-part event. This was unexpected, as analysts had sensed this one might have been a struggle. But it wasn't. $500 was offered, $1.643 bln was bid with only 41 of the 125 bids winning a share. Yields eased in two of the tranches.

MAKING BANKS INTO POLICEMEN
Pushed by regulators to stop scans, ANZ and Westpac are two New Zealand banks that get to know their customers better with behavioural biometrics.

STUCK HIGH
Australian consumer inflation expectations barely edged lower to 4.3% in July from 4.4% in June. This is no progress because they averaged less than 4% from 2012 to 2019. They seem stuck at over 4%, well above the RBA's target range.

MISSING EXPECTATIONS
Japanese machinery orders fell in May from April when a small rise was anticipated. Japan's core machinery orders, which exclude those for ships and electric power companies, fell -3.2% month-on-month. This also missed market expectations for a +0.8% gain. The decrease in capital spending was driven by a sharp decline in the non-manufacturing sector, although machinery orders from manufacturers rose +1% from April to be +10.8% higher than year-ago levels. Orders including the big lumpy items rose sharply, however.

POORER OUTCOMES?
QuayStreet's Xavier Waterstone unpacks how New Zealand’s KiwiSaver tax and contributions regime results in poorer outcomes for retirement balances versus Australia’s superannuation system.

BENCHMARKING ATHs
You probably know that Wall Street and Tokyo have both hit new all-time record highs. So we thought we would check to see where the share prices of our four big (Aussie-owned) banks were at. ANZ is currently -19% below its all-time high in 2015. CBA however hit its ATH today. NAB is still -13% below its ATH reached in 2007. And Westpac is today -30% lower than its ATH reached in 2015. CBA is a clear 'winner' with investors.

SWAP RATES SETTLE
Wholesale swap rates are likely to be little-changed today after yesterday's falls although there is still downside risk. Our chart below will record the final positions. The 90 day bank bill rate was down -5 bps at 5.55%, and finally out of its 125 day tight range. The Australian 10 year bond yield is up +2 bps from this time yesterday at 4.42%. The China 10 year bond rate is unchanged at 2.28%. The NZ Government 10 year bond rate is up +3 bps at 4.64% and the earlier RBNZ fix was at 4.58% and down -7 bps from yesterday. The UST 10yr yield is down -1 bp from yesterday at 4.29%. Their 2yr is still at 4.62%, so the curve remains inverted by -33 bps.

EQUITIES EXUBERANT
The NZX50 is up +0.7% from yesterday in late trade, juiced no doubt by the prospects of lower interest rates. And the ASX200 is up +0.9% in afternoon trade. Tokyo is up a strong +0.8% at its open, to a new all-time high. Hong Kong is up +1.2%, and Shanghai is up +0.8% to open their respective day's trading. Singapore is up +0.3%. Wall Street ended its Wednesday trade with the S&P500 up a full +1.0% and its own new all-time high.

OIL UP
The oil price is up +US$1.50 at US$82/bbl in the US, and at just on US$85.50/bbl for the international Brent price.

GOLD LITTLE-CHANGED
In early Asian trade, gold is up +US$10 from yesterday at US$2377/oz.

NZD HOLDS
The Kiwi dollar is up +20 bps from this time yesterday, now at 61 USc. Against the Aussie we are down -10 bps at 90.2 AUc. Against the euro we are also down another -10 bps at 56.2 euro cents. This all means the TWI-5 is now just on 70.

BITCOIN SLIGHTLY FIRMER
The bitcoin price is virtually unchanged from this time yesterday at US$57,865. Volatility of the past 24 hours has been modest at just under +/- 2.0%.

Daily exchange rates

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Source: RBNZ
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End of day UTC
Source: CoinDesk

Daily swap rates

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Opening daily rate
Source: NZFMA
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Source: NZFMA
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Source: NZFMA
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This soil moisture chart is animated here.

Keep abreast of upcoming events by following our Economic Calendar here ».

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46 Comments

Synlait gets a yes vote. But where to from here?

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The same place it was going to if it had got a No vote.

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Some political parties have been slamming excessive regulation and its burdens. Today, the OECD released a report that included an analysis of regulatory burdens across all its members (38) allowing for relative comparisons. Mostly, we don't look good.

Of course not. The Poms were are the forefront of of the resource consent/management movement, and we closely mimic their approach.

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Bureaucracy has been perfected in the art of control. Public servants would be more correctly known as public controllers. Unfortunately it has got to the point that the bureaucracy believe they should not be reporting to elected government ministers; instead it they should be in control of them too. That way, they can easily carry out their other art form of being all in authority but without any responsibility. Two stark examples this month alone. The unbolted power pylon and the grounded ferry. We are not taking any responsibility for anything that is not proven and nor are we going to admit to anything.

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Looks like the US media is smoke signaling the ruling elite's readiness to respond to a property market collapse. 

US watchdog proposes requiring help before mortgage foreclosures

I reckon the US and Anglophere govts will do everything and more to prevent mass foreclosures from happening. We will never ever see again a repeat of 2008.

https://wsau.com/2024/07/10/us-watchdog-proposes-requiring-help-before-…

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A lot of 2008 problems stemmed from the CMO / MBS structures, where no real face company was driving it, people just wanted there money back ...  While the big four here use these structures for Repo operations with RBNZ etc, the banks here have a license to make huge $$$$$$$.   I suggest the regulators and the banks here will tread much more carefully here then the US in GFC.

There is a bit of stressed property on the market in Auckland now, that in past cycles would have been mortgagee sales.

People get a better result if they can do open homes.

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A lot of 2008 problems stemmed from the CMO / MBS structures, where no real face company was driving it, people just wanted there money back ..

How aboutSecurities lending practices, not trigger-happy depositors.

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As I grasp around trying to understand this it appears to me there are two monetary systems that interact but operate separately and we only ever consider the one...and by we I mean the general public, politicians and central banks....and the unconsidered system has overtaken in influence as it has outgrown the known, but remains unconsidered....however they remain mutually dependent.

A situation that cannot end well for anyone.

 

 

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So everyone is looking to Aussie as the land of milk and honey. Not according to Maccy B and the data, which suggests that real per capita household disposable incomes are in freefall.

Their Ponzi is booming while they crush load the cities with migrants. All good so it may seem. The collapse in h'hold incomes is the trade off.  

https://www.macrobusiness.com.au/2024/07/australians-suffer-worlds-bigg…

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"household disposable income" - surely a result of their huge mortgage debt (a lot like us). 

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Yes, the aussies are in the chasing pack. Cocking up your economy when you are running a current account surplus is next level incompetence.

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All this graph really says is "when housing bubble bursts, shit hits the fan". 

Unless you are the global reserve currency running wartime deficits in peacetime while operating an internationally unique 30 year fixed rate mortgage structure. Then you just get inflation and a deadlocked housing market.

I guarantee you dropping rates won't fix this, it will just trigger cascading impacts of other problems.

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No, it says that hiking rates with high and exposed private debt kills aggregate demand... I am not arguing for lower or higher rates, just stating facts. It's amazing to me that we have complex economies and problems, and people just ask, "so, should we, errrm, increase or lower interest rates?" It's stupid.

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or it could be saying that last year they had proportionally more disposable than other countries?

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RENTS TOPPED OUT, SHOW SIGNS OF FALLING

So significant tax increases and interest rate increases didn't increase rent by very much. I guess tenants really do pay what they can afford and not whatever costs the landlord incurs. 

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Correct. Noting that landlords have 75% equity on average (and that average hides huge variation).

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Dp

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They were trending up before the job market started imploding.

My guess is in such a market there's a lot of people rationalizing their living conditions (i.e. moving home/in with others).

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Yes they were trending up when people were getting pay rises. 

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Things going from bad to worse out there...spooky. Well apparently cancelling everything is required before the new dawn..(the new mantra at prayer group).

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Anyone want to see hell freezing over... rental market in Wellington commuter belt here: https://ibb.co/94ccGfz

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Wow Taupo, who would have known.

 

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Something to do with holiday homes? Looks like it had a surge around summer. 

Here in Hamilton I'm noticing quite a few drops in the advertised rents around me. A few of them on my street have signs at the gate and have dropped $20-30 off the asking price recently. 

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Yes, holidays homes etc but also kiwis fleeing Auckland as jobs dry up. 

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Fleeing to a place with fewer, and lower paying jobs?

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Where costs of living are also often lower.

And there's often shortages in certain skills.

Or you can work remotely.

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Yes, you realise that aucklanders have seen outbid for rentals in their thousands in the last year, right? Where would you rather be on the dole?

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Gee that OECD report makes for pretty ugly reading for NZ

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Have we seen a significant improvement in outcome from all the additional oversight?

In many cases it seems worse now.

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Every time something bad happens to us we demand the government fixes it. The government has now fixed bad things for us for so long now that we are incapable of fixing things for ourselves. 

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Stats NZ says lower prices for tomatoes, cheese, and potatoes have driven food prices to annual six-year low while prices for petrol and tobacco climb

This implies that these are now cheaper than 6 years ago when what StatsNZ are saying is that the decrease in prices is the biggest for 6 years. Or have i got that wrong?

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Still seems kinda weird tobacco is in the basket when it's pretty much a done deal that the tax on it will continue to rise periodically.

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Im pretty sure it was the decrease thats the lowest in 6 years

 

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Possibly contributed to John Key leaving? Nothing to do with him obviously but he understands this business and this is absolutely rancid. It's going to be deeply unpleasant at the ANZ as they have had plenty of warning shots across the bow from regulators in their Markets business

https://www.afr.com/companies/financial-services/anz-launches-investiga…

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Wouldn't surprise me!

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Swap rates are in free fall. 1 year mortgage rates will be down to 6.5% in August regardless of what happens to the OCR next month.

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So should people who have money be locking in long term deposits right now? 

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People with money would already be in higher yielding corporate bonds....  term deposits do not increase in face value as yields drop, they are a suckers game for retail muggins, but yes if you insist on being muggins

 

 

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Nikkei 225 on a tear:

YTD: +27.21%

Past 12 months: 30.81%

Past 5 years: 94.4%

 

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The one year swap rate graph is quite a sight 😳

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so where is the Friday one?

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Nothing happened today. 

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SPQR coled down, in liquidation.

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they had the friday one, just posted the thursday one on their front page instead

 

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Friday drinks

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