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A review of things you need to know before you sign off on Thursday; retail spending shows tiny rise, price indexes confirm lower inflation, CoreLogic sees soft house prices, NZGB yields jump, swaps and NZD slip, and more

Economy / news
A review of things you need to know before you sign off on Thursday; retail spending shows tiny rise, price indexes confirm lower inflation, CoreLogic sees soft house prices, NZGB yields jump, swaps and NZD slip, and more

Here are the key things you need to know before you leave work today (or if you work from home, before you shutdown your laptop).

MORTGAGE/LOAN RATE CHANGES
ANZ has cut most fixed rates, effective today. More details here. All rates are here.

TERM DEPOSIT/SAVINGS RATE CHANGES
ANZ has also cut all its TD rates for terms of 6 months and longer. All updated rates less than 1 year are here, for 1-5 years, they are here.

GOING UP?
Retail spending using cards turned up in August after 6 months of falls, with +0.2% rise. Maybe the August tax cut effects are starting to come through?

GOING BACKWARDS?
ANZ's truckometer monitoring shows the light vehicle index rising +0.6% in August from July to be -1.3% lower than a year ago. Their heavy vehicle index flopped -0.7% in August to be -4.0% lower than a year ago. The overall signal regarding economic activity remains weak, they say. On a per capita basis, quite weak.

GOING IN THE RIGHT DIRECTION?
Statistics NZ's Selected Price Indexes show that food prices rose just +0.4% in the year to August while rent increases remained at the same level and fuel and travel costs dipped. These muted rises point to inflation heading under 3%.

GOING SOUTH?
CoreLogic sees 'further softening' in house values over coming months. The signs of a slowdown in the housing market are now much clearer, particularly in Auckland, they say.

NZX EQUITY MARKET UPDATE
Check out our quick update of how the NZX is faring today, as at 3pm. The NZX50 rises despite more decliners than gainers. The exchange itself is one of the best advancers.

$1 BLN EXCESS IN SURGE BIDDING
There were 126 bids for the $500 mln available in the three tranches of today's NZGB tenders. A huge $1.45 bln was offered, making it almost $1 bln more than what was available. All that demand pushed down yields (and pushed up bond asset prices). In fact the April 2029 went for a yield of just 3.75%, -33 bps less than the last time this was offered seven weeks ago. The May 2035 was even more popular, getting $685 mln in bids for the $150 mln available and this excess demand pushed its yield down to 4.22%, -24 bps lower than the last time seven weeks ago. If you have exposure to a fund with NZGB's it is likely to be doing better now.

STUCK IN A RUT
Updated data for July FX trading volumes show a relatively timid market, now averaging just over $10 bln per day in transactions. That is the bottom end of the range this has been in since the start of the pandemic in early 2020.

BANK SETTLEMENT BALANCES STILL TRENDING LOWER
Similarly, bank settlement balances (R3) are trending lower, back to levels first reached in early 2022, even if they did rise in August from July

A TOUGH SQUEEZE
It seems the Australian central bank is right to be sceptical inflation is trending in the way they need it to. Consumer inflation expectations are still at 4.4% in September in Australia, only slightly down from August's 4-month high of 4.5%. Perhaps the situation will turn soon. The same survey showed that respondents expected total pay was expected to grow by just +1.4% over the next 12 months.

SWAP RATES WITH SOFT TONE
Wholesale swap rates are probably eased again today especially at the short end. Our chart below will record the final positions. The 90 day bank bill rate is down -1 bp at 5.10%. The Australian 10 year bond yield is down -5 bps at 3.91%. The China 10 year bond rate is holding at 2.13%. The NZ Government 10 year bond rate is down -1 bp at 4.21% and the earlier RBNZ fix was at 4.17% and also down -1 bp from yesterday. The UST 10yr yield is up +4 bps at 3.67%. Their 2yr is now at 3.66%, so that curve is now positive by only +1 bp.

EQUITIES MOSTLY HIGHER
The NZX50 is up +0.7% in its late Thursday trade. The ASX200 is up +0.6% in afternoon trade. Tokyo has opened its Wednesday trade roaring up +2.8% at its open. Hong Kong is up +0.8% but Shanghai has opened down -0.1%. Singapore is up +0.4% at its open. Wall Street rose today with the S&P500 up its own strong +1.1%.

OIL BOUNCES BACK
The oil price is up +US$1.50 from this time yesterday at just on US$67.50/bbl in the US, and now at US$71/bbl for the international Brent price.

CARBON PRICE STAYS IN NARROW BAND
The carbon price is at $61/NZU, still in its new narrow band and with another small dip today. See our new daily chart tracker of the NZU price for carbon, courtesy of emsTradepoint.

GOLD DIPS
In early Asian trade, gold is down -US$7 at US$2512/oz.

NZD MARGINALLY SOFTER
The Kiwi dollar is down -20 bps from this time yesterday, now at 61.3 USc. Against the Aussie we are down -50 bps at 91.9 AUc. And against the euro we are unchanged at 55.7 euro cents. This all means the TWI-5 is -10 bps lower at 69.3.

BITCOIN FIRMER
The bitcoin price is up +1.5% from this time yesterday, now at US$57,935. Volatility of the past 24 hours has been moderate at just on +/- 2.6%.

Daily exchange rates

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Daily benchmark rate
Source: RBNZ
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Source: RBNZ
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Source: RBNZ
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Source: RBNZ
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Source: RBNZ
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Source: RBNZ
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Source: RBNZ
End of day UTC
Source: CoinDesk

Daily swap rates

Select chart tabs

Opening daily rate
Source: NZFMA
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Source: NZFMA
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Source: NZFMA
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Source: NZFMA
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Source: NZFMA

This soil moisture chart is animated here.

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

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Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

45 Comments

The OCR only dropped 0.25%, but TD rates from various banks seem to have dropped nearly 1% in total over the last month. Seems savers are getting a raw deal.

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It's to offset the rapid drop in mortgage rates. But what OCR is already priced in to these rates? I'd guess 4.25 - 4.5%? How much lower than that are we anticipating will be the bottom? Only then can we talk about any form of recovery.

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Th further rates fall the worse the economic conditions are going to be - unemployment, business failure, mortgagee sales. 

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You have to imagine part of the preemptive drops the banks have done to retail rates ahead of OCR cuts is to ward off (or at least reduce) risks of business failures and mortgagee sales that they're in a good position to see coming.

It's a chicken and egg cycle that can spin both ways.

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They probably would have had to start dropping rates end of last year to avoid that. Now it’s likely (in my view) a case of chasing the recession to the bottom with rate cuts. 

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Yes. Exactly 

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Agreed. November 2023 was the time to have started a gentle - and slow - easing.

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Plenty of 5.8% rates.... around today....not sure they have dropped anywhere near the seemingly 1% ...lol  Will take much much more to get them savers out bidding....extra low 'bargain house prices' might do it though...another minus 20-30% will likely stir up some punters ....lol 

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And just like that we're back over 41,000 listings on trademe.

2,000 new listings since Monday this week.

The peak listings amount for the last year was in April at just around 45,500, a long way to go yet. Or at this rate maybe it's a couple week away...

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Dovish, with a hint of " the comb" and vagrant undertones.🙄😎👀😛

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"Beware the townhouse industrial complex"  Dwight D Eisenhower....... (or something to that effect.)

High density is creating a soft market and DGM here love an overarching macro stat to bully their views on the public.  

Had a family house down our street with a sold sign 3 days after tender date. About 25 cars outside during the first open home. 3 Bed, 2 bath, 800m sq section, great school 5 mins walk away. 

Filter the data you consume to what is relevant.

 

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Fantastic let’s have another housing boom and further deteriorate financial and social instability in this country. 

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i think its just natural progression as you start building higher density, they become the new affordable and stand alone houses are more desirable. 

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Apparently such views (a micro stat) are used by the bullying doom merchant types. 

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Yup, there is no statement of intent from National as to how they are going to manage the house prices reduction they want (chris), while increasing housing stock required to fix the housing issue (other Chris).  Which isn't so much a shortage as a affordability issue.

Then  they have to keep the prices up to make the economy feel rich and start spending again, while keeping the inflation low and employment high

 

Nah .. it's a cluster courtesy of labours 6 years of over spend    and National haven't a cohesive plan to fix it 

Their throwing darts at a spinning dart board. 

Mean while over At RB central. Everything's looking like a nail! 

 

This is going to implode... And probably needs to!.

Propping up the proverbial with temporary solutions can only last so long.

 

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You forgot to mention a constrained economy, high servicing costs, inflation, high prices, high listings, business closures, job losses, and high emigration in your reasons for a soft market. Did I miss something?

I personally love the anecdotal stat to bully your views on the public.

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If data was filterable then absolutely I’d mention all of that 

But until we are able to seperate high density from quarter acre then I won’t bother.

 

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It's not the fact they are townhouses, it's the scale of the supply.  Increase supply creating downward pressure on house prices.  Good stuff, our children might have a hope of home ownership.

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Town home ownership you mean lol. But yeah the scale is terrifying. And the scale is the reason they will become (and probably already are) seperate asset classes

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We don't have the resources today that we had in yester generation. You cannot magically free up 800sq sections in central desirable locations, the natural progression of land ownership has always been to slowly cut it down and down and down for the owners to fund retirement, or simply to profit, until it is no longer desirable, profitable or able to be sliced up any further. The trade off will eventually be, like so many larger cities, to have less space as the cost of having a desirable location, unless you have sufficient wealth to purchase a standalone home with reasonable land that still stands in said location also. 

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I’m seeing similar in our area; good low end traditional houses are selling fairly well. 
It will always be the case that full sections will do well during intensification - imagine having one in London or New York or Tokyo. In fact if you rewind 70 years ago, where I live in Auckland was all farms, if someone held on to one of them it would be worth hundreds of millions. 

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Poor Tana, so crushing not to be invited to the party.

Tana felt insulted not to be invited to former leader James Shaw’s leaving function, and to find she had been removed from the Green website while suspended. “Her isolation commenced immediately... and it was severe,” Green said

https://www.stuff.co.nz/nz-news/350412873/gutted-and-betrayed-tana-figh…

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‘Recessions are usually triggered by catalysts:

1990 → Kuwait invasion and an oil shock

2000 → Tech bubble burst

2007 → Housing bubble collapse

What is it going to be this time?’

See chart:

https://x.com/gameoftrades_/status/1833915444870480104?s=46&t=MUwQeKa7M…

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Maybe ‘this time’ won’t be for a while. This is US- based of course, we have already been in recession in NZ.

I am worried about Biden’s consideration of allowing Ukraine to shoot USA supplied long-range missiles into Russia. I think that’s a pretty risky strategy, that could lead to escalation.

Having said that, there’s no good options re: Ukraine.

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I think that’s a pretty risky strategy, that could lead to escalation.

I'd have thought Ukraine invading Russia and occupying part of it's territory would be at the tippy top of escalatory actions. And Ukraine is already conducting long range strikes.

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Yes but one further escalatory action

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Russia made a whole heap of red lines that keep getting crossed, and they don't do anything.

They don't have much conventional military ability in reserve to be much of a threat, and nukes are something they'd only deploy with a serious existential threat.

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The sooner Ukraine are allowed to fight without one hand tied behind their back the sooner negotiations to end Putin’s war will start.  The west needs to give Ukraine all they need to bring Putin to the table, secure their sovereignty and Europe’s security.  

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Even without restrictions, this is likely going to be an attritional war that'll have to let the two parties slug it out until exhaustion. Whether manpower, weapons or finances.

Military sign-up bonuses in Moscow are now $60,000 USD (average wage in Russia is $15,000 USD).

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Tax cuts starting to come through? Pull the other one

minuscule increase, plus a little surge in net migration in July

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Perhaps it’s a little (tiny) bit more evidence that we’ve hit the bottom and the economy will pick up from here. Unlike most the commentators here I believe interest rates are a massive factor. There will be a lag effect, but with people fixed short I don’t think it will be too long. 

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"Unlike most the commentators here I believe interest rates are a massive factor."

Sorry, which commentators are you referring too? Almost all refer to them as being a drag. While some, like me, refer to falls in them as being very laggy with regards things like house prices.

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So you agree we are somewhere near the bottom then? I don’t expect things to get better overnight, but I don’t think they will get much worse from here. 
I’m more talking about the economy at the moment, as evidenced by a small change in direction of consumer spending. Of course that alone does not suggest we are out of the woods, but it is of interest. I also think the same for house prices too, however that has a few more headwinds. 

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Hit the bottom? Yeah, nah

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Is that because you think there will be a lag? If so how long? Or is it because you don’t think interest rate decreases will turn it around? 

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Interests rates alone will not turn the economy around, that's delusional. It has to be supported by government policies and the policies the govt is putting in place is making things worse and will continue to.

 

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Interest rate decreases will help ‘improve’ the economy. But that will take time to filter through. Yes, lag. 
I don’t think a minuscule increase of 0.2% in retail spend indicates a turnaround in the economy, at all. I also think it’s a nonsense to suggest that tax cuts might have influenced that. For high earners like me, an extra $20 pw is meaningless, and doesn’t affect my spending behaviour at all. For low- middle income earners, it doesn’t even cover cost of living increases over the past year, so is hardly likely to materially increase spend in retail etc.

It’s a mere fluctuation, that might have found some minor impetus from the little surge in net migration in July.

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And it’s ‘improve’ because it will just be a repeat of the flawed, debt-based consumption and housing ponzi...

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It's either that, or a repeat of flawed government spending programs. 

Basically there's two levers to pull to detract from the reality that the economy/country isn't capable of improving, or even sustaining it's economic position.

The only other option is to let much of it burn in the hopes of genuine creative destruction.

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That +0.2% increase was my fault.  The old Datsun unexpectedly needed a retread

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HPI seems to be getting later and later, worser and worser

The Spruikers will say the market is rocketing but the townhouse price collapse is dragging the numbers down....     I thought the HPI was designed to avoid this ?  straw clutch etc, its like saying the share market is going gang busters as long as you own the right stocks.

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Spuikers love polishing a turd, DGMs love roughing up a diamond. The real economy sits somewhere in between. 

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looks turdier and turdier to me

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It’s the DGM toilet. Some people have been stuck in the S bend for decades. 

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S peculators

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