A review of things you need to know before you sign off on Monday; no retail rate changes, new building work slows fast, Govt warned its water 'reform' carries big financial risks, grocery inflation slows, swaps stable, NZD stable, & more

"Tokyo has risen +0.6% at its open." And here's me thinking it was Mountain Day today!

Shady as private equity in Aussie. Millbrook has always been a mystery to me. For ex, a loan Millbrook is advertising in Melbourne, the firm has told investors that the borrowers are worth “well over $100 million”. The $2.3 million loan, with a 15% interest rate, will give lenders a mortgage over a house in Toorak which it says is worth $21 million. The first mortgage is held by La Trobe Financial, which has advanced $12.8 million already.

Despite public declarations that overdue loans are under control, a bit of digging, the fund has AUD58 mio in loans past due date. However, they still seem to be making out like bandits.  

Despite the overdue loans, David Lyall, Millbrook’s managing director, had a successful year, according to the ASIC filings. He collected a $225,500 salary and Millbrook paid out $3.5 million in dividends to a company called David Lyall Holdings, up from $1.4 million in the same period the year before. Millbrook paid $108,525 to another company Mr Lyall controls, which it sub-leases its office from. The company’s net profit rose from $3.1 million in the 12 months to the end of March 2023 to $5.3 million for the same period this year.

The majority of Millbrook’s revenue, or $9.3 million, came from fees, compared with $1.4 million from interest payments. Of the fee revenue, about a third is made at the origin of the loan, and the rest from ongoing management fees.

https://www.afr.com/companies/financial-services/overdue-loans-swamp-pr…

"Ratings agency S&P is warning that the Government's water reform policy may weaken LGFA’s financial stability and increase council borrowing costs."

Quelle surprise.

Let's be clear here, the Nats & Act want our water supply, like our electricity supply, privatized. And the best way to do it is to load Councils with debt and then utilise the woeful local body voter turnout so a tiny number of voters can swing the result in their favor. (Same model as was used all over 'Merica and was then exported to other countries.)

Meanwhile its all TipTop in the SME space

https://www.nzherald.co.nz/business/small-business-confidence-hits-reve…

Economic pressures continue to drive unprecedented stress and burnout for small business owners while confidence declines, new research has found.

The RFI Global research, commissioned by Prospa, showed earlier post-Covid optimism was in reverse amid ongoing uncertainty in New Zealand’s business climate.

According to the research of 500 Kiwi small- and medium-sized businesses (SMEs) less than half (48%) feel confident about the future of their business over the next year, a drop from 53% in November 2023.

A total of 70% reported feeling stressed and burnt out. For retailers it was 85%.

They cited economic challenges (29%), cashflow issues (27%), and pressure/responsibilities of being a business owner (19%), as the top three reasons for stress.

 

Adrienne Begbie, Prospa New Zealand managing director, said the figures were confronting but it wasn’t surprising there was a correlation between economic challenges and the wellbeing of business owners.

“What we’re seeing are the effects of inflation and the cost of living, and the impact this has on business owners’ overall wellbeing,” Begbie said.

“Inflation and cost of living have meant that many small businesses just aren’t seeing the amount of customers that they usually would. For SMEs, any dip in customer spending is a serious issue, directly impacting their cashflow.

“What’s more, these challenges come at a time when supply chain and labour costs are also on the rise due to inflation.”

The research also showed in response to recent economic challenges, SMEs are more inclined to increase prices (42%) and use personal funds to cover business expenses (19%).

Owners have also made significant personal sacrifices for their business. More than half have had to cut back on personal expenses (51%), 36% are struggling to save for personal goals, 36% have had to postpone or cancel travel plans, 34% are sacrificing hobbies or leisure activities, and 32% are spending less time with family and friends.

“Business owners should never be forced to choose between their wellbeing and personal life, and the success of their business,” Begbie said.

“Business owners should not hesitate to seek external support – see what government grants and rebates are available, check out industry insights on how other like-minded businesses are dealing with current economic conditions, and seek professional advice from a financial adviser.”

SMEs were feeling more confident about the future of their business over the next 10 years (49%), up from 45% in November 2023.

“It isn’t the first time our country has faced a recession, and it won’t be the last. What this tells us is that we always bounce back,” Begbie said.

Begbie said rate cuts will provide some relief by easing the cost of living, but the effects won’t be immediate.

“While lower rates will help reduce the burden of everyday expenses, Kiwis still don’t have the disposable income for nice-to-have purchases, especially with other costs, like energy, expected to rise. However, the Christmas period should offer a much-needed boost for businesses.

“With rates potentially easing just as consumers naturally start shopping for the holidays, this could be a very [welcome] season for small businesses.”

Winter spending woes

All the recent data is pointing to extremely weak consumer spending appetites, making for a slow and challenging environment for businesses right now.

The tough conditions have led to a number of business closures in the first half of 2024.

Figures released from payments network Worldline last week showed consumer spending with core retail merchants (excluding hospitality) reached $2.82 billion in July, down 2.6% compared to July 2023.

“Spending across the country was down on last year in June and continued to be down in July, although there was a small school holiday effect bump seen within the month,” said Worldline NZ’s chief sales officer Bruce Proffit.

“The third week of July – the second week of the school holidays – was the worst of the month for core retail merchants in the major regions.”

Things aren’t any easier in the hospitality industry, with spending in the major regions (Auckland/Northland, Wellington, and Canterbury) and the “rest of New Zealand” down in July by 5% and 10% respectively when compared with a year ago, according to Worldline.

Retail NZ chief executive Carolyn Young said the challenge for retailers is to survive until 2025.

“Cashflow is critical and some retailers have indicated they don’t think they will have the cash to buy forward stock, putting their businesses at risk,” Young said.

Retail NZ’s latest quarterly Retail Radar, a survey of its members, showed both confidence and sales were at even lower levels in the 12 months to June than earlier in the year.

Almost 43% of respondents said they were unsure whether they will survive the next 12 months, up from 32% in the previous quarter and higher than the 36% recorded in the second quarter of 2023.

Additionally, 71% of retailers reported that they did not meet sales targets for the quarter.

Inflation was the top issue (80%) in the June quarter, up from 62% in the first quarter of the year.

Xero’s Small Business Insights data this month covering the June quarter showed sales fell 8.3% year on year, the largest monthly fall since May 2020.

This week Stats New Zealand will release electronic card spending figures for July. In June, retail spending fell for the fifth consecutive month.

A THREE YEAR LOW on still rising grocery prices.  Strange how we celebrate prices only going up 'a bit' these days.

I've switched from Nutri-grain back to no-name cornflakes. Much better as the former had loaded on the sugar content over time - very fulfilling being able to put as little or as much on as I like now :-).  Funny how we get 'captured' in expensive ruts.

Now I need to look into making my own bhuja.

SHINING A LIGHT

In Australia, access to an active ASIC investigation reveals a lot about how some in their payday lending sector operate

Mark Swanepoel was also responsible for a low income predatory lending business in NZ as well.  Pretty Penny Loans.  Tied himself in with second hand car dealers mainly around Christchurch/Kaiapoi and installed engine disabling devices to deactivate the car the second a loan payment was missed.  Charged debtors $250 a time to reactivate the car, once the loan payments were caught up. 

Interesting to see household debt servicing (as % of income) is at the same level as seen between 2012 and 2015:

https://www.rbnz.govt.nz/statistics/key-statistics/household-debt

It puts into context this nonsense about rates being too high. This is historically quite a normal level of debt servicing despite the squealing from certain bank economist. The aberration was the last decade when servicing costs collapsed.

Some people still see NZ as the place to be...(possibly until they can get into Oz)

"In the 11 months to 31 May 2024, a total of 2220 people claimed refugee status in New Zealand.

Half of these asylum seekers – 1108 people – were from a single country: India.

Before the Covid pandemic, the number of refugee claimants averaged only 400 people a year."

https://www.stuff.co.nz/politics/350366985/refugee-claims-have-exploded…

I felt quite sad to see today national going after the beneficiaries.  Obviously they are too weak to Chase corporations like the banks supermarket and petrol stations insurance companies who are all making billions of dollars but feel safe chasing the beneficiaries who have bext to nothing it doesn't a good way forward to me

Labour got turfed out for doing all the wrong things, If NAct cannot come up with something, they will get turfed out for doing nothing