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 change today.. All rates are here.
TERM DEPOSIT/SAVINGS RATE CHANGES
No changes today, but this review might be useful. All rates less than 1 year are here, for 1-5 years, they are here. Interestingly, there haven't been any reductions to savings account rate yet.
COMCOM EYES LOWER CARD PAYMENTS COSTS
The Commerce Commission is consulting on the costs to businesses and consumers of card payments, saying there's potential to reduce these costs by about $250 million a year. The Commission, which oversees retail payments under the Retail Payment System Act 2022, says consumers spend about $95 billion via Mastercard and Visa annually, which ultimately costs them about $1 billion through high retail prices and surcharges. Commission Chairman John Small says this cost is too high, especially when compared to international peers, meaning there's "potential to reduce these fees by more than $250 million per annum." The Commission may review interchange fee regulation with Small saying there's an "opportunity to reduce a significant component of the merchant service fee, which should in turn allow businesses to reduce retail prices as well as surcharges, for the benefit of their customers." The Commission's seeking feedback on its consultation paper by 4pm on August 20.
ELECTRICITY COSTS JUMP ON IMBALANCE, GETS DIRTIER
Earlier today, electricity stress was high. Lowish lake levels, and still conditions (no wind power) meant that coal and gas generation was unusually high to balance the loan requirements. Also, generation capacity flowed from the North Island to the South Island in a relatively rare reversal. At 6:30 am spot Haywards prices were $610/MHhr, and by 7am had risen to $662/MWhr. Prices were higher in the SI than the NI. "Worse", the fossil fuel generation spike pushed the average CO2 from this generation to 216g/kWhr. So far this year the average has been 115g/KWhr, so almost double. More background here.
FITCH DOWNGRADES TSB CREDIT RATING
Fitch Ratings has downgraded its TSB Bank credit rating to BBB+ from A-. Fitch says this reflects its view TSB's risk profile is no longer significantly stronger than those of domestic regional bank peers. It notes TSB had larger holdings of high-quality non-loan assets relative to peers, but this difference has narrowed over the last few years and it expects this trend to continue over the medium-term. Its outlook on the new TSB credit rating is stable.
FITCH UPGRADES THE CO-OPERATIVE BANK
Fitch Ratings has also upgraded The Co-operative Bank's credit rating to BBB+ from BBB with a stable outlook. Fitch says the upgrade reflects its expectation Co-op's earnings have been sustainably improved, reflected in a four-year average operating profit/risk-weighted asset ratio remaining above 1.2%, while maintaining other aspects of its credit profile.
FEWER NATIONAL EMISSIONS
Meanwhile, national greenhouse gas emissions fell -2.7% in March quarter, the largest quarterly decrease since the agency started tracking emissions in 2010. Agriculture was one of the many industries that drove the decrease. Household emissions rose. And the energy sector emissions rose sharply. Overall emissions will probably fall as economic activity eases during the rest of 2024. That our export industries are reducing emissions even if the rest of the country isn't. Also, see this.
TINDALL TO REPRISE OWNERSHIP ROLE?
On the NZX, the Warehouse Group has revealed a scheme backed by Stephen Tindall to take back control of the struggling company.
COMMISSIONER APPOINTED
Later yesterday, the Government appointed a commissioner (Dr. Lester Levy) to run Te Whatu Ora/Health NZ after sudden budget blowout of operating costs. Levy replaces the 'board', but was in fact one of the board members. Te Whatu Ora is the consolidation of the previous DHBs. The admin cost savings it was supposed to bring turned into an added deadweight cost.
DAIRY PRICES UNDER PRESSURE
There is a GDT Pulse dairy event tomorrow morning. The futures markets suggest that the SMP price should hold. But the important WMP price might be facing a -2.5% retreat. We will know soon enough.
SWAP RATES HOLD
Wholesale swap rates are likely to be little changed today on international influences. Our chart below will record the final positions. The 90 day bank bill rate was down -1 bp at 5.54%. The Australian 10 year bond yield is up +1 bp from this time yesterday to 4.37%. The China 10 year bond rate is unchanged at 2.25%. The NZ Government 10 year bond rate is down -2 bps to 4.46% and the earlier RBNZ fix was at 4.42% and up +2 bps from this time yesterday. The UST 10yr yield is up +2 bps at 4.25%. Their 2yr is now at 4.52%, so that curve is now inverted by -27 bps.
EQUITIES MOSTLY HIGHER
The NZX50 is up +0.9% in late Tuesday trade. The ASX200 up +0.7% in afternoon trade. Tokyo has opened its Tuesday trade up +0.2%. Hong Kong is unchanged. But Shanghai is another -0.5% lower. Singapore has opened up +0.5%. The S&P500 was up a strong +1.1% Wall Street in its Monday trade.
OIL DOWN
The oil price is down -50 USc at just on US$78.50/bbl in the US, and now down -US$1 at just on US$81.50/bbl for the international Brent price.
CARBON PRICE LOWER
We are going to try and track the daily New Zealand carbon price (probably the prior day's close). There are formal markets but the exchanges are very closed regarding transparency - unless you pay. We think it closed on Monday at NZ$53.08/NZU. (A NZU is the equivalent of a tonne of CO2.) Today at was at $52.30/NZU at 11am and that is down -2.6% from the same point a week ago. It is down from $74.50/NZU at the start of 2024.
GOLD EASES
In early Asian trade, gold is down -US$9 from this time yesterday at US$2399/oz.
NZD LOWER
The Kiwi dollar is down more than -¼c from this time yesterday at 59.7 USc. Against the Aussie we have slipped slightly to 89.9 AUc. Against the euro we are down -¼c at 54.8 euro cents. This all means the TWI-5 is now at 68.8 and down -20 bps.
BITCOIN SLIPS
The bitcoin price is down -0.8% from this this time yesterday, at US$67,645. Volatility of the past 24 hours has been modest at just on +/- 1.3%.
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140 Comments
Sunset beach carpark is being undermined, now closed and NOTHING apparent has been done to prevent or avert it the erosion
This isn't adaptation its just F ALL. Why aren't the carbon sales funds being used
https://www.nzherald.co.nz/waikato-news/news/sunset-beach-port-waikato-…
How much will the $NZ drop if we lower interest rates before the FED?
I dread even thinking about it - seems like there is a rush to drop rates from the usual vested interest groups to prop up the sagging housing market (who cares about tradable inflation huh?)
Interesting times ahead....
The developed world extracts resources from the less developed world. Minerals, oil, talent, and this is exacerbated by historical influence. Id be confident in saying any previous part of the british empire at it’s peak, has laws and regulations favouring british companies in it’s territory that helps allow this to continue. Consider this: if everyone was paid the same around the world for their respective work, relative to the value of their work, we could not extract from others so easily and the real cost would become obvious. Coffee would be pricey as hell for one
Inflationary or recessionary? Yes, a weaker NZD would mean imported prices would go up in real terms. This would force us to reduce spending on other things - reducing domestic demand. This would increase unemployment and our consumer economy would continue to collapse. Every which way we lose at the moment.
That's the crux.
The way out is
1. leave the ocr where it is (making houses more affordable and keeping smart young professionals here and reducing mortgage payments in the long run.
2. Target government spend (borrow) to improve infrastructure and public services based on ROI.
3. Slash low skilled immigration and target importing of high skilled professionals (teachers, rocket engineers etc).
4. Smash the banks with a serious competition proposal.
5. Give the warehouse a financial incentive to 'supermarket up' and drive competition.
Etc.
1. leave the ocr where it is (making houses more affordable and keeping smart young professionals here and reducing mortgage payments in the long run.
One issue with this is that in the short term you'd wipe out a lot of consumption, and the jobs involved within.
3. Slash low skilled immigration and target importing of high skilled professionals (teachers, rocket engineers etc).
How about we make education for all the skills on our skills shortage list free?
4. Smash the banks with a serious competition proposal.
Such as? We've had Kiwibank for over a decade, and it's still fairly unpopular.
Because they do not have the capital to issue enough loans, the only way to break open the market is
https://www.investopedia.com/articles/economics/08/fannie-mae-freddie-m…
I have said this enough times I stay away from grassy knolls.....
One issue with this is that in the short term you'd wipe out a lot of consumption, and the jobs involved within.
I think that has to happen if the object is to 'rebalance' the economy - the how would be what makes it bearable or not. At some point we have come to the conclusion that opening more stores to sell imported limited lifespan products aren't actually the jobs we need to create, reducing GDP from those areas may actually be a 'good' thing. UBI to tide us over?
How about we make education for all the skills on our skills shortage list free?
Good idea - I really like it. Bring on the free driver training so the unemployed may drive a bus and milk a cow. The bonus is we're already on the hook to pay for any family they have in terms of education and health care.
I think that has to happen if the object is to 'rebalance' the economy - the how would be what makes it bearable or not. At some point we have come to the conclusion that opening more stores to sell imported limited lifespan products aren't actually the jobs we need to create, reducing GDP from those areas may actually be a 'good' thing. UBI to tide us over?
My suspicion for quite a few years now, is that we have a debt fueled jobs program going, revolving around luxury consumption. That looks to be increasingly the case, as our exports are holding steady, while our internal consumption and appetite for debt is slowly walking off a cliff - which is fundamentally how you remain solvent, or even better, grow wealth.
One huge challenge, should we choose to walk away from that consumption system (and we really should), is that for the timebeing, much of the rest of the world will continue to play that game. So we will lose young people at an even greater rate - because they're now fairly tapped into wanting that sort of life (as are much of the rest of us).
Good idea - I really like it. Bring on the free driver training so the unemployed may drive a bus and milk a cow. The bonus is we're already on the hook to pay for any family they have in terms of education and health care.
We really need to make a hard decision about whether our tertiary education is there to supply our actual industry and economy (and therefore society), or whether we want to promote an ideal that everyone should be able to study whatever they wish. We've being doing the latter for a few decades now, it's clearly not working - for either our businesses or graduates.
100% agree Pa1nter.
We would be smart to walk away from consumption before the rest of the world does. I think the younger generations (OE's aside) are mainly leaving due our cost of land/shelter. They, like those who come here, are looking at the options and coming to a sensible choice at an individual level. Young here see no future (ability to escape renting from a landlord or bank) and those overseas rightly see our welfare/health/education/wages as attractive to compared to their home country (their children may not however, so immigration is never going to be a long-term fix).
That's the crux.
The way out is
1. leave the ocr where it is (making houses more affordable and keeping smart young professionals here and reducing mortgage payments in the long run.
2. Target government spend (borrow) to improve infrastructure, military and public services based on ROI.
3. Slash low skilled immigration and target importing of high skilled professionals (teachers, rocket engineers etc).
4. Smash the banks with a serious competition proposal.
5. Give the warehouse a financial incentive to 'supermarket up' and drive competition.
Etc.
We add more value to those two primary imports than we do most of the other crap we bring in and consume.
With the drying up of credit, we've continued to import fuel and fertilizer, cut back dramatically on consumables, and finally have a decent trade surplus after however long.
Huge news in the crypto space (well it was coming but with little mainstream media hoopla). Today, the SEC approved 9 spot ETH ETF applications and Blackrock's ETF goes live tomorrow. https://www.etf.com/sections/news/spot-ethereum-etf-approval-sec
Potentially this is bearish for ratty if capital in BTC ETFs rotates into the ETH ETF - hard to estimate but still potentially a risk. Remember, it's not that long ago you could pick up ETH between USD100-200.
Ever notice how all the news of Bitcoin advancement rarely brings any sort of sustainable increase to it's value? And most of the big value jumps aren't foreseen, and are usually down to some sort of black swan externality?
What do you expect P? BTC to 10x overnight? Aint going to happen. The 100x opportunities aren't with BTC in the near term. You have to go into the degen stuff for that.
I don't think there's many insights to be had with Bitcoin, from any source. It's now akin to the gold news cycle, an 'expert' tells you how screwed everything is, and the antidote is whatever hard currency they want you to buy.
There's almost unlimited sources for Bitcoin news, how many would you honestly say are giving you proven forecasts?
There's almost unlimited sources for Bitcoin news, how many would you honestly say are giving you proven forecasts?
None. But forecasts are not 'proven' until they are realized. This is why people like yourself are captured by the 7-10 year theory on property markets. You're shown a graph, believe it represents a 'universal truth', then extrapolate that into the future. And it's no different with BTC. Because the price has averaged 100% pa appreciation over the past 14 years is no indication that it continues like that into the future.
The most interesting forecast models - to me - for BTC's price are not published in MSM. You can even read interesting analysis from the likes of VanEck and Bloomberg Intelligence.
None. But forecasts are not 'proven' until they are realized. This is why people like yourself are captured by the 7-10 year theory on property markets. You're shown a graph, believe it represents a 'universal truth', then extrapolate that into the future
This is not what I do at all. It's rare I'm doing the same thing for more than a few years, and certainly don't rely on history repeating. Otherwise I'd still be in IT.
Publicly broadcast financial hints and forecasts are more often marketing, than information you can use to profit from.
If it's genuinely valid or profitable information, it's unlikely to be broadcast to all and sundry.
In the 6 months before Bitcoin's last all time high (2021?), how many articles did you absorb or promote alluding to new Bitcoin market breakthroughs and prospects, that weren't reflected in the following couple years of doldrums?
The market value of Bitcoin rises and falls independently of this marketed news.
Best performing asset of any type in the last 15 years.
Gone from Bitcoin White Paper in 2009 to 2 presidential candidates speaking at Bitcoin Conference in a few days (Trump & RFK Jr). VP for Republican party owns Bitcoin.
“Bitcoin Is Dead” - The #1 Database of Notable Bitcoin Skeptics (buybitcoinworldwide.com)
My prediction is Bitcoin skeptics will keep on getting wrecked for years to come.
Pa1nter time and time again is showing he doesn't understand Bitcoin and is unfortunately paying a hefty ongoing financial price for doing so.
Gold has lost 90% of its value against bitcoin over the last 5 years. NZ property too has lost plenty of value against it.
Pa1nter will die of old age watching it change finance as we know it and still be saying "it's all a joke"
Hundreds of PwC’s highest-paid are in meltdown after being told the firm botched their tax returns and they now personally face repaying bills of up $300,000 within two weeks.
Scathing and cynical account from The Australian here. PwC chief executive Kevin Burrowes looks like an angry union boss crossed with a Sopranos Captain. What a dreadful organization.
Reminds me of a bank I worked for years back, that saw a brief arbitrage opportunity for personal investors into the Government Bond market. Individuals could invest up to $250k each at, say, 7% and the Money Market desk would lend out on that at 4%. So staff were offered the option to borrow-and-lend into that lock-in. We did, of course; 300 odd of us. The full $250k each. But no one thought to mention the personal tax due next March, and also that we had to pay Provisional Tax for the next year as well.
Do these big consulting firms ever do any valuable work?
I've been subjected to the torment of having to sit in various sessions facilitated by the likes of PWC and Deloitte consultants, as well as read over strategy reports etc and I don't recall ever seeing any good insights. 99% of the time it's just 'raise prices' or 'fire staff'.
One guy I saw ragging on them on LinkedIn summed it up well when he said that the "big brand" consultants are just there to give a veneer of independent analysis to undertakings already decided by internal management, and to act as a well-paid blame deflection mechanism.
I've had a bit to do with them over the years. Below partner level invariably second rate who failed at the coal face in their area of expertise.
You are paying for the brand, almost always to cover the @rse of an executive who has to make a decision. It's the only reason they exist.
I've had a bit to do with them over the years. Below partner level invariably second rate who failed at the coal face in their area of expertise.
Even at partner level, they're more than likely have cut their teeth on dry stuff - audit, accounting, tax. That's their bread and butter. When these clowns talk about transformation and innovation, it only makes sense when talking with public sector deadbeats.
Yes that's what I tend to think (based on experience) and the crux of that comment I was referring to.
The company knows what it wants to do, but the consulting firm provides the "vessel" through which the approach can be formalised and can act as a sort of punching bag to soak up collateral damage in exchange for fat, juicy invoices going out the door.
To JCs comment, this is really talking about the strategy consulting etc (the more nebulous stuff). Presumably they are good at the more black and white accounting. Then again, remember Arthur Andersen?
Do these big consulting firms ever do any valuable work?
Not sure. Mate got roped into producing a report for KPMG. He produces content and has quite strong industry knowledge. But at the end of the day, it was all just fluff because the real insight doesn't come from the likes of KPMG. Reproducing CEO interviews has limited value in most cases.
Got an email from a client (appears to have been sent 'en masse' by their accounts team) saying effective immediately if you want to keep working with us you'll either need to accept payment terms extending out to 60 days or give us a 10% discount if you want to get paid within 30 days as had been previous standard.
To put it bluntly, I think I'll be watching my receivables with them closer than ever before!
A hundred jobs being slashed in the accounting and finance department at Fonterra, Hamilton. One NZ calling for voluntary redundancies. Things looking grim. Mind you, I wish my company would offer voluntary redundancy. It might be a good way for people to retire a little earlier. Hopefully the Fonterra folk get some redundancy?
https://www.waikatotimes.co.nz/nz-news/350352215/brutal-job-cuts-hit-fo…
What do you all think about the accounting and finance department going to India in such an iconic NZ company?
I have the same question but in a different frame, for a Spruiker at what average multiplier to earnings is the housing market overvalued (taking averages there are always special cases) ? even the biggest bulls sell out of an overcooked market, as they say pigs get slaughtered.
And as for 'swaps are down' so that's a sure sign the OCR is going to be cut etc:
"Interest rate swaps are the exchange of one set of cash flows for another......the contracts are between two or more parties..."
Two or more parties. So that means there's someone(s) with an equal, and opposite opinion of what the future holds. Just as those buying Warehouse shares last night at $1.50 ran into those selling at that price. Who is right with the current price at $1.40? Given time, maybe those selling at 93 cents last week will be....
"You never seem remotely bearish on the housing market."
I don't think that's true. However, I'm more concerned currently about the job market. For some reason I have been binge watching a lot of videos about people losing their jobs and older (and younger) workers finding it hard to get employment. I don't know why as I seem to have fluked getting through my life as a wage slave without ever getting fired or laid off. I do know people who have been let go and are finding it hard to get employment. I'm a bit worried about a daughter when she leaves university.
The world looks a bit grim for young people setting out with high house prices, high cost of living and fewer jobs. It seems weird for a NZ company to outsource its finance and accountancy positions. Few people seem concerned.
I hear ya…
Some people don’t think about the consequences of ‘working from home’… all you’re doing is telling the business your job can be done anywhere in the world.
Boom times management loves to hire… problem arises…hire someone ‘to fix it’.
When the music stops… fire someone below ya to fix it.
Aussie media smoke signaling to the RBA. Or possibly RBA sponsored this propaganda to make them appear like Mother Theresa.
More than 150,000 homeowners could be forced to sell if interest rates stay high into 2025, new research has revealed.
In the face of an uncertain Reserve Bank cash rate cut before the New Year, and more uncertainty as to if banks would pass on an interest rate cut, one in ten mortgage-bearing households might need to switch their loans to paying interest only, and 165,000 households would need to sell up, the survey finds.
https://au.finance.yahoo.com/news/chilling-effect-aussie-rate-hike-0224…
Rate cuts have a perfect 100% failure rate, yet everyone remains convinced they are powerful and effective. Why? Superstition. Seriously, that's the answer. The whole story is here: https://youtu.be/AiZOm0qMqqw Link
Te Whatu Ora is 'the weaving of wellness'. Though there can be other conceptual interpretations of the name, one context for Te Whatu Ora is found in the weaving of culture – bringing two or more strands together to weave a basket; a basket of life.
Whatever it means, it seems that its $1.4bil over budget PA.
It BS that they can cut this much without impact service delivery, but if a politician's lips are moving.....
Dont want to speak for them, but I expect they mean the use of Maori culture and language in society including governance. Rather than ignoring it and having NZ be no different in culture from any other British colony, and Maori culture and language being lost.
It has nothing to do with any particular person of Maori lineage. I would have thought this is all pretty obvious?
Fun fact.
"Dr. Jill” Biden has a doctor of education (EdD) degree from the University of Delaware and not a medical degree.... Some doctor of education degree candidates may complete a capstone project in lieu of a dissertation. Jill Biden’s 120-page dissertation, “Student Retention at the Community College Level: Meeting Students’ Needs,” is a capstone project masquerading as a dissertation."
Twice seems bit of a stretch!. I recall ~2008 I had fixed for 3 years @ 8.5%,floating was in the 9's. I wasn't paying much attention to how things worked back then but certainly noticed rates drop to the 5's shortly after. The break fees were huge so pushed on through - fortunately I had a reliable job.
This time around looks similar, but with much larger balances....and lack of job security.
On credit card fees - I think the Commission will find that many retailers are milking it when it comes to the surcharge they pass on to customers. How can it be that surcharges were 2% when interchange rates were up at 2%, and yet interchange rates have been capped at 0.8% and yet surcharges have remained at 2% post this cap. It's always very difficult to remove an income stream, even if the costs it is supposed to cover are reduced.
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