What happened Thursday

Economy / news

A review of things you need to know before you sign off on Thursday; ANZ drops home loan rates, BNZ & ANZ drop TD rates, our jobless claims rise, NZGB tender very well supported, swaps stable, NZD unchanged, & more

18th Jul 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
ANZ made some significant cuts today. The Cooperative Bank has made similar changes. More here. All rates are here.

TERM DEPOSIT/SAVINGS RATE CHANGES
Both ANZ and BNZ followed Westpac in cutting or trimming TD rates today. They won't be the first. The Cooperative Bank followed with its changes. More here. All rates less than 1 year are here, for 1-5 years, they are here.

EYES ON JOBSEEKER SUPPORT LEVELS
The Ministry of Social Development today released its Benefit Fact Sheets for June 2024. That showed that since this data started being released in 2008, the rise in June 2024 from March 2024 was the most ever for this Q2 period, apart from the first impact of the GFC in 2009 and the first impact of the pandemic in 2020. But of course the employed workforce is still growing, so the ratio isn't moving much. In fact if you include WfF beneficiaries and those on National Super, we still have a stable ratio of 1.85 workers for claiming beneficiaries. That is about the same level we had just prior to the GFC. It has been higher and lower and between.

HEAVY BIDDING, FALLING YIELDS
Today's three-part NZGB bond tender was very well supported with 141 bids across all three worth almost $1.5 bln. They were bidding for part of the $500 mln on offer. Each maturity was well supported and that heavy bidding pushed yields down more than -20 bps across the board. That is a lot from each of them because the last time each were tendered was just seven days ago.

A FUN THOUGHT EXPERIMENT
Zealandia, is a nearly submerged continental mass in the southwest Pacific Ocean. It is primarily composed of New Zealand and New Caledonia and is about 94% submerged under the ocean. But if it wasn't, what would it look like? Because we would be living there, here is someone's guess. Of course, it is the inverse of what is more likely to happen with rising sea levels. But continental plates are always on the move, (which is why some Pacific Islands suffer more from "sea level rise" than others).

STILL EXPANDING
In Australia, their employed workforce expanded by +50,100 in June to 14.4 mln. +43,300 of those new jobs were full-time, +6,800 were part-time. Their jobless rate rose marginally to 4.1% and their participation rate is still hovering around 67%. Their employment rate of their working-age population is 64.2%. (In New Zealand, these metrics came in at 4.3%, 71.5%, and 68.4% as at March 2024. Our June levels will be released on August 7, 2024.)

SWAP RATES HOLD
Wholesale swap rates are likely to be little-changed today. Our chart below will record the final positions. The 90 day bank bill rate was up +1 bp at 5.54%. The Australian 10 year bond yield is up +2 bps from this time yesterday at 4.29%. The China 10 year bond rate is little-changed at 2.27%. The NZ Government 10 year bond rate is down -3 bps at 4.42% and the earlier RBNZ fix was at 4.36% and down another -1 bp from yesterday. The UST 10yr yield is up +1 bp at 4.17%. Their 2yr is now at 4.46%, so that curve is now more inverted, by -29 bps.

EQUITIES MOST LOWER, SOME SHARPLY
The NZX50 is little-changed from yesterday in late trade. The ASX200 is down a minor -0.1% in afternoon trade. But Tokyo has opened its Thursday trade down a sharp -2.0%. Hong Kong is up +0.1% but Shanghai is down another -0.5%, and Singapore is down -0.6. Earlier, Wall Street fell -1.4% on the S&P500 as tech and AI stocks took some lumps.

OIL SHIFTS UP
The oil price is up +US$2 at just under US$82/bbl in the US, and now just over US$84.50/bbl for the international Brent price.

GOLD STAYS UP
In early Asian trade, gold is down -US$10 from this time yesterday at US$2465/oz and off its all-time high.

NZD UNCHANGED
The Kiwi dollar is holding up at 60.8 USc. Against the Aussie we are still at 90.2 AUc. Against the euro we are down -10 bps at 55.6 euro cents. This all means the TWI-5 is now just on 69.5 and little-changed.

BITCOIN SLIPS SLIGHTLY
The bitcoin price is down -1.7% from this time yesterday at US$64,666. Volatility of the past 24 hours has been modest also at just on +/- 1.7%.

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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27 Comments

by bw | 18th Jul 24, 4:07pm 1721275652

The Republic of Zealandia. I wonder what we'd do with all that extra land? Of course! "Population: 159.69 Million"

by Harvey W | 18th Jul 24, 4:32pm 1721277167

Hmm, time to turn term deposits into property to take advantage of the 2025 boom. Capital gains, yummy!

by J.C. | 18th Jul 24, 4:38pm 1721277495

Sounds little more than Pavlov's dogs to me but take a punt and see how it goes.

by Uninterested | 18th Jul 24, 4:54pm 1721278493

I could say what I am going to do financially over the next few years but I don't think anyone gives a rats ass... Which is how things should be!

by Retired-Poppy | 18th Jul 24, 6:34pm 1721284473

Yeah - thanks Harvey :) Right now in reality many bag holders want to convert into Term Deposits. Absent capital gains on a still out of favor overpriced asset, the risk vs yield is simply easier on the mind. Rental yields should be around 9% on average, right now - they're half that. Where Landlordism is concerned, out of ear shot, it's all about future (imminent) capital gains, around the BBQ they're all well seasoned long term investors providing a warm and cosey essential service where tenants understand the need for multiple rent increases.

by WellingtonInvestor | 18th Jul 24, 6:34pm 1721284461

Yet they usually don't pay capital gains tax, even though many of their intentions are to make a tax free profit from capital gains. Reducing the bright line test just goes to show this.

by Retired-Poppy | 18th Jul 24, 6:48pm 1721285328

Outside of Brightline, the intention clause is quite clear and informative. Due to fiscal pressure, IRD are beefing up compliance in a number of areas. From the site - "The intention rule applies no matter how long you keep the property before selling it"

https://www.ird.govt.nz/property/buying-and-selling/when-you-need-to-pa….

With todays data matching technology, I personally wouldn't risk it but many will. Now that Brightline is shortened, will IRD random sample those who list over the next year or two - we'll see.

by WellingtonInvestor | 18th Jul 24, 9:01pm 1721293264

Yes it will be interesting to see what the IRD do

by Nzdan | 19th Jul 24, 12:08am 1721304495

Especially when we've just gone through (still going through?) public sector cuts. I'm sure there'll be a few at IRD with the jitters, eager to fish out those who fail the intention rule. Get some numbers behind them for job security's sake.

by J.C. | 18th Jul 24, 4:36pm 1721277381

Reading Matt Barrie and he pointed out that Aussie hosts 12% of the global international student population (6.4 million), but the quality of the students is questionable and so is the education sold to them.

And you if believe the ABS drivel, selling visas to students now represents 42% of all service exports.

It's really $48 billion export that drains the economy with a veneer of offering something of quality. It's essentially a rort.

Maccy B gives their 5 cents and also exposes the con that the export education sector is. Nu Zillun not much different.

https://www.macrobusiness.com.au/2024/07/proof-international-student-ex…

by Let me be Frank | 18th Jul 24, 4:46pm 1721278007

"Judging by the remittance chart above, international education is just as likely to be an import, since migrants in aggregate are sending money out of Australia to their home countries."

It was never about 'education' or 'exports' but a lid on labour costs....and no political party is prepared to acknowledge the waste of resources it is.

by J.C. | 18th Jul 24, 5:00pm 1721278810

It was never about 'education' or 'exports' but a lid on labour costs....and no political party is prepared to acknowledge the waste of resources it is.

For sure. The whole issue to me is that it's destructive on many levels. Some have made out like bandits.

He's a CEO many of you have never heard of, but IDP Education's Andrew Barkla was the nation's highest-paid chief executive in the 2019 financial year, taking away $38 million — that's about 420 times the average wage.

https://www.abc.net.au/news/2020-08-07/idp-education-ceo-andrew-barkla-…

by nz-it-worker | 18th Jul 24, 5:31pm 1721280673

Each student is deemed to bring $60,000 AUD / year into Australia; money saved in their home country and spent in the Australian economy. Their third largest source country of students is Nepal, where the average wage is around $11,000 AUS / year.

Some pretty heroic assumptions going on in "export" education accounting.

by ThoughtsAndTorts | 18th Jul 24, 7:05pm 1721286328

I live in Aussie. Regularly socialise with different groups, many of which contain students. I also do doordash at times so meet other dashers when things are slow.

I personally have met many "students" who are working 40+ hours in white collar jobs. Gigs like marketing, etc. And needless to say many of the doordashers etc are strictly student in name only. They come here to work and earn money to send back home (usually India/Pakistan/Bangladesh at least visually).

You have to be blind and stupid to think the student visa racket is about anything more than undercutting local labour, lining the pockets of universities, and protecting property investors. These aren't even skilled people, they are often being upskilled in the place of a local while simultaneously driving up rents. Did I mention I also live in an apartment builidng and across from me is an apartment with at least half a dozen indian men living in it and sleeping in shifts. I have seen it with my own eyes. And it is a 2 bedroom.

I'm sympathetic that life isn't great in the places these immigrants come from and there is no work because they have deeply statist and corrupt societies as well as what are in many ways quite dysfunctional cultures. But the NZ or AU immigration policies need to serve the needs of citizens first and foremost. The setup we have had for the last 15+ years has not been doing that at all.

Visa fraud is absolutely rampant with student visas and the whole category needs to be cracked down on harshly.

by IT GUY | 18th Jul 24, 7:22pm 1721287369

I can remember Kiwis living in the cupboard under the stairs in London way back..... the great OE

Massive chunk of the education rort is then a job and visa... jobs can be arranged, seen it myself , where the student passes 50% of wages back for 2 years to get the NZ Visa.

by Murray Falconer | 18th Jul 24, 10:40pm 1721299233

All that you've said is true and it has been awful watching it unfold for the last couple of decades. I must be racist.

by solardb | 18th Jul 24, 4:37pm 1721277477

No big bump for Trump in polls (yet). 538.com

by lonewolfnz | 18th Jul 24, 4:51pm 1721278272

My understanding is that he is winning easily in the major swing states however which is what matters

by solardb | 18th Jul 24, 5:03pm 1721279012

Within 2 or 3 % in the 3 big ones. He is way ahead in Georgia.

by J.C. | 18th Jul 24, 5:08pm 1721279339

Smartshares High Div Yield (DIV) now up 3% for the month. Gross Div Yield is 6.2% with fund fees of 0.54%. Might be getting some more inflows.

by Jonny.Foe | 18th Jul 24, 5:24pm 1721280251

Worth mentioning that benefit claims and unemployment rate didn't peak in the last big recession until well into 2010. Unemployment is a seriously lagging indicator.

For example, in Sept 2008 our unemployment rate was 3.9% (actual). In March 2009, it had shot up to 5.4%, and nine months later it was 6.4%. It took about 5 years to get unemployment back below 5%.

Now, in Sept 2023, our unemployment rate was 3.8% (actual). In March 2024 it was 4.7% (actual). So, where will we be by year end? By guess is 6%+.

When you see how quickly job growth is collapsing it is scary.

by Middleaged | 18th Jul 24, 6:36pm 1721284609

Very interesting. The market sector seems steady, but the market sector has collapsed....

by Squishy | 18th Jul 24, 5:25pm 1721280315

The oil price is up +US$2 at just under US$82/bbl in the US, and now just over US$84.50/bbl for the international Brent price.

Can we just have a word with Mr. Market to keep it under $80/bbl. We are relying on commodity prices to stay subdued to facilitate rate cuts (probably next year.)

by powerdownkiwi | 18th Jul 24, 6:24pm 1721283872

Ha.

Did you see what the King (Starmer) is attempting, re 'economic growth'? Same as Western government, including our own. More GROWTH, more building, more infrastructure. That's all these sad little intellects have.

They're attempting that, exponentially of course, relative to the biggest rate of extraction/production/excretion, that the planet has ever seen. Not 3% of 1930 rates, but 3% of current. Not only madness, it's a physical impossibility. And even as they say it, the collection of infrastructure they DO have, is falling down around their ears (same for most Western countries).

So your price of oil will indeed rise - but it represent unrepayable debt, so I'm not sure what that represents. Bluff, as in poker. Sooner of later the Brics will say: "I'll see you".

by HouseMouse | 18th Jul 24, 5:45pm 1721281500

To be fair I should acknowledge the big bounce in the NZX50 over the past couple of weeks. Personally I think it’s a dead cat bounce

by Audaxes | 18th Jul 24, 6:11pm 1721283108

Each maturity was well supported and that heavy bidding pushed yields down more than -20 bps across the board.

At the most recent (today) NZDM government bond tender for the 29yr, 34yr and 37yr maturities, the associated interpolated, mid IR swaps yields were respectively -11.35bps, -25.44bps and -34.08bps.

by Audaxes | 13th Jul 24, 11:06am

At the most recent NZDM government bond tender for the 29yr, 34yr and 37yr maturities, the associated interpolated, mid IR swaps yields were respectively -10bps, -24.9bps and -34.25bp

by Audaxes | 18th Jul 24, 6:10pm 1721283037

The Global Monetary System Is Reliant on Swap Spreads (and they are doing something big)