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A review of things you need to know before you sign off on Thursday; BNZ follows with mortgage rate cuts, CoreLogic sees lower house prices, Census sees higher home ownership, big business slow payers, swaps down, NZD soft, & more

Economy / news
A review of things you need to know before you sign off on Thursday; BNZ follows with mortgage rate cuts, CoreLogic sees lower house prices, Census sees higher home ownership, big business slow payers, swaps down, NZD soft, & 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
BNZ matched yesterday's ANZ cuts but just for 6, 12 and 18 month fixed rates. All rates are here.

TERM DEPOSIT/SAVINGS RATE CHANGES
No changed here. All updated rates less than 1 year are here, for 1-5 years, they are here.

DIVERGENCE
Wholesale interest rates are on the move. With just four more business days until the next OCR decision, we look at what the wholesale money markets are signaling.

LOWER RATES BRING LOWER PRICES
CoreLogic says New Zealand's median dwelling value was down -$40,000 since February, is still falling despite lower mortgage rates.

HOME OWNERSHIP RISES
Data from the 2023 Census released today shows a first lift in home ownership in 30 years. That was due to better affordability in 2019 and 2020, according to Stats NZ.

NZX EQUITY MARKET UPDATE
Check out our quick update of how the NZX is faring today, as at 3pm. Spark, Freightways & Kathmandu recover some ground. Serko, the Warehouse, and NZX lose more.

SEASONAL RISE BUT LOWER THAN LAST YEAR
Worldline's retail tracking shows September brought the expected seasonal rise but it still lagged 2023 levels by more than -3% (and more when inflation is accounted for). Retail NZ pointed out; “The data shows us just how difficult it is in some regions with Southland down -11.8%, South Canterbury down -7.4% and Bay of Plenty down -5.5%. Our members are telling us that cashflow is tight, with many businesses not sure if they have enough cash to buy forward stock, impacting their ability to stay open.”

LATE & GETTING WORSE
Late payments cost small businesses $827 million, Xero says. It has seen an 81% spike in late payment costs for small businesses between 2021 and 2023, and says big corporations are not making prompt payments.

MOBILE & DANGEROUS
SMS Blasters for smishing have arrived in NZ. (Read the story to find out what they are.) But the Police have put paid to one smishing fraud site that was using an SMS Blaster to send fake texts purporting to be from banks.

GOOD BUT NOT GREAT
Today's NZGB three bond tenders were well supported, but not to the $1 bln+ levels of recent issues. There were 72 bids overall totalling $883 mln for the $500 mln available. The two shorter terms held their yield levels. The April 2037 one saw a +25 bps rise to 4.75%.

STRONG PERFORMANCE HESITATES IN SEPTEMBER
The ANZ World Commodity Price Index increased +1.8% in September from August as stronger prices were recorded for all major sectors except forestry. From a year ago they are up more than +14%. In New Zealand dollar terms, the index fell -0.2% in the month as the NZD Trade Weighted Index lifted 1.0%. From a year ago this index in NZD is up +10%.

STILL IN SURPLUS
Australian exports retreated slightly in August, but their imports retreated more, so their monthly merchandise trade surplus stayed at about AU$5.6 bln. But that was only because gold exports stayed strong boosted by sharply rising gold prices. Without those the surplus would have halved.

STILL BIG ISSUES TO GET ON TOP OF
The latest IMF review of Australia isn't entirely convinced they have a sustainable disinflation trend underway and they warn them to prepare to do more to get price stability. They also say Australia needs to build many more houses in its efforts to tackle unaffordable housing and its pressures.

SWAP RATES LOWER
Wholesale swap rates are probably lower yet again today. Our chart below will record the final positions. The 90 day bank bill rate is down -1 bp at 4.80%. That is -45 bps below the OCR and its lowest level in ten months. The Australian 10 year bond yield is up +5 bps at 4.03%. The China 10 year bond rate is unchanged from yesterday at 2.16%. The NZ Government 10 year bond rate is up +7 bps at 4.32%. And the earlier RBNZ fix was at 4.26% and up +6 bps from yesterday. The UST 10yr yield is now at 3.79% and up +5 bps from yesterday. Their 2yr is now at 3.65%, so that curve is still positive, now by +15 bps.

EQUITIES MIXED
The NZX50 is up +0.8% in its late Thursday trade. The ASX200 is unchanged in early afternoon trade. But Tokyo has recovered +2.1% at its open. However Hong Kong is down -2.0% in a market that probably got ahead of itself. Shanghai is closed today and will be until Tuesday next week. Mid-Autumn Festival. Singapore is trading up +0.3% at its open. Wall Street ended its Wednesday session virtually unchanged on the S&P500.

OIL FIRM
The oil price is up +US$2.50/bbl from this time time yesterday at just under US$71/bbl in the US, and now just over US$74.50/bbl for the international Brent price.

CARBON PRICE FIRMS
The carbon price is marginally firmer again today, now at $63/NZU. Volumes traded are still light. See our new daily chart tracker of the NZU price for carbon, courtesy of emsTradepoint.

GOLD HOLDS
In early Asian trade, gold is down just -US$3 from this time yesterday at US$2658/oz.

NZD LOWER
The Kiwi dollar has fallen -60 bps from yesterday to 62.4 USc although up from this morning. Against the Aussie we are down -40 bps at 90.9 AUc. And against the euro we are down -30 bps at 56.6 euro cents. This all means the TWI-5 is now at 69.5 and down another -40 bps from this time yesterday.

BITCOIN SLIPS AGAIN
The bitcoin price is down -0.7% from this time yesterday, now at US$61,067. Volatility of the past 24 hours has been moderate at just under +/- 2%.

Daily exchange rates

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Source: RBNZ
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Source: CoinDesk

Daily swap rates

Select chart tabs

Source: NZFMA
Source: NZFMA
Source: NZFMA
Source: NZFMA
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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62 Comments

not many comments on interest today, must not have been enough articles about the economy crashing.

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Everyone is off feasting on the news of the sinking property market, and the FHB share growing. Good news all round I'd say... unless you are a rookie investor perhaps.  

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Biggest news of the day is that it is only 6 more sleeps till the RBNZ announcement of a whopping 50bps reduction in the OCR.

Second biggest news of the day is that 1 year swap rates are dropping like a stone, and are now at 4%

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In other news, those swaps mean the 50bps cut is getting priced in already. And the next one… 

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It hasn't been priced into interest rates yet. The 1 year swap rate has dropped 175bps since March, compared to the 1 year mortgage rate having dropped around 75-100bps since March. The banks are still hedging their bets, and will wait till the official announcement before any big cuts.

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Yep and how much has the OCR been cut? 25bps. The rest of the market is pricing in future cuts.

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That's my point, people don't seem to comment when the news is good.

I'm doing quite well thank you for asking :)

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That depends on what one defines as good. Anything possibly positive for house price growth will always be favoured by those with vested interests in profiting from it. No slant on this comment, just observation :-)

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An article about the Economy (including house price) crashing gets a lot more interest than the article about home ownership rates increasing.

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...perhaps several regular commentators are exhausted from their incessant criticisms of the Coalition & laudations of  the Opposition 

In the interests of seeking some feedback I will repost this item from the morning:

Technical Econ Note: Does the "Gross" in Gross Domestic Product (GDP) explain the degradation of NZ's assets?

"...the "Gross" in Gross Domestic Product refers to the fact that depreciation is not deducted from the total."  

"Successive NZ governments have tricked people into thinking that because GDP has been (weakly) increasing most years, we're not doing too badly. But they've not been investing in our future. They have not been doing the necessary investments to keep the productive capacity of the nation intact. They've allowed depreciation to diminish tens of billions of value from our hospitals, schools, water supplies and more, and the public have, in a sense, been conned into thinking all was okay, since the depreciation on those assets never appeared in our national accounts. Essentially, our politicians have done the equivalent of running a business whilst falsely inflating profits, pretending the firm was doing well, until it reached the point where everything broke, and then gone and blamed the previous managers (who had done the same thing)."

Technical Econ Note: Does the "Gross" in Gross Domestic Product (GDP) explain the degradation of NZ's assets? (downtoearth.kiwi)

 

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If anyone would be exhausted of making political posts it would be you

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I regard you both as about the same - hopelessly besotted with this or that major Party. 

This coalition are demonstrably clowns - no need to help them show that; they're doing just fine on their own. And arrogant - but that goes with selfish.

The Left ignore the Limits to Growth and are therefore nearly as irrelevant. The only point I'd make, is that I'd rather they saw us through curve-ball times; they tend to think of people first, proxy second. 

And we are in for an increasing volley of curve-balls; more and more often. 

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GDP growth in NZ over the last decade or two has come largely from high net migration, i.e., increasing our working-age population.

This means we have had to sweat our asset base harder (depreciate them faster) than anticipated to achieve that weak growth.

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I think it is even worse than the Prof thinks. Gross Domestic Product is a measure of the surplus collected by firms - basically their operating income minus operating expenditure. Stats NZ add up the data industry-by-industry and then total it. NZ Inc can only generate a surplus if there is a flow of money coming into the economy that exceeds onshore and offshore savings - that's basically where the 'surplus' comes from. 

That inflow of new money comes from net increase in private debt + net increase in Govt debt. Our GDP growth has been lacklustre since 2009 because private debt maxed out at 160% of GDP back then and has bobbed around that level since. Govt has helped out since by going into debt for a few years.

Govt should have had a focused infra programme for the last 30 years - but they sold everything off in the late 80s and 90s. The companies then just milked the assets we built in the mid-20th century. Successive Govts were complicit, happy with the dividends.

It can be fixed though! We just need to move a chunk of our real resources from nice-to-have stuff to 'must have' stuff.   

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AFAIK GDP isn't just "firms" ? Last time I looked approx 40% was the Govt/public sector 

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Central and Local Govt are only about 16% of the GDP(P) (Production) measure that we tend to use as the headline GDP growth figure. Stats NZ cook up some method of translating salary costs into 'surplus'. Govt make up more of the expenditure variant obviously.

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It can be fixed though! We just need to move a chunk of our real resources from nice-to-have stuff to 'must have' stuff. 

There's an idea Jfoe. We're leaving our run pretty late aren't we?

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Interesting point re depreciation and gdp.

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All the data is telling the same story, it's getting a bit boring. Economy has dropped ~15,000 jobs this year, and our working-age population has gone up by 80,000. Meh, whatever. 

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We aren't on our own. Which is a big problem for a small economy reliant upon the larger ones.

"France must cut 100,000 civil service jobs to save economy"

https://www.telegraph.co.uk/world-news/2024/10/02/france-must-cut-10000…

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France have a few new idiots in Govt - like us. Their ideas have been recycled from the UK austerity project of 2011 - 2019, they're kinda Trussian.

The idea is that in the face of collapsing aggregate demand and low productivity, all you need to do is cull the public sector, de-regulate, and set private enterprise free. Hallelujah! Praise be!

I am not going to defend the size or effectiveness of the NZ or French Govt, but cutting Govt spending into a recession is a monumentally stupid strategy. When Govt spends less, aggregate demand in the economy falls, and the private sector suffers. Tax revenue then tanks and Govt end up spending more on welfare etc. Govt debt invariably goes up - much to the confusion of the swivel-eyed economists who argued that, this time, cutting for growth would work. A country just needs to do it... properly, and for long enough. 

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Well 'the bottom feeders' are just have to get up earlier.

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Exactly, but running a country is just like running a household: https://www.thepost.co.nz/business/350186330/nicola-willis-likens-nz-pu…

So austerity works (despite all evidence to the contrary).

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Yeah exactly 

And a ‘no hope’ austerity government 

as you say, meh

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Perhaps they have been forced back to the office?

https://www.interest.co.nz/public-policy/129872/coalition-government-wa…

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School holidays. Those actually paying net tax are away with kids vs wfh or wasting focus here.

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Based on the HSCE Index (Chinese companies incorporated in mainland China but traded in HK), China is now the world’s best-performing market this year. Funds that have no exposure to China means the risk of underperforming peers that do.

And the HSI (includes 50 of the largest and most liquid companies listed on the HK Stock Exchange) is massively outperforming the ol' rat poison in the past 6 weeks. 

And all the water cooler crew care about is bleedin' house prices. 

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but they are going up.... right?

 

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but they are going up.... right?

That's the general consensus. We just don't know when. 

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National have invited Labour to have a 'conversation' on Super, and rightfully so, the forward graph makes for grim veiwing. Surely Labour would want CGT in return. Seems like the government are targeting everything except for Housing and Capital Gains. The 3 billion Landlords tax cut might come back to bite National.  

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Both parties know that we need CGT and increased pension age, but can't afford to lose their voters so neither will happen. 

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Maybe if Labour supported a CGT and set out a compelling and achievable policy program that provided genuine hope to kiwis aged 18-30 they might be no worse off politically and quite possibly better off

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It's long been National & ACT policies to increase the age to 67. NZF stopped it from the Coalition agreement.

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Why not implement last time they were in power?

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We could have a superannuation scheme that is CGT tax free that people can use to buy assets for retirement.  Then apply a CGT to everything outside of it.  Much like Australia has (although they still apply a 10% CGT until you turn 60, then capital gains are tax free).

That way those that are genuinely saving for their retirement by investing in property or shares, get the benefits of no capital gains tax.  Those that are investing for profits that they can use as immediate income pay CG tax. 

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And Labour is against it.  Probably because it's welfare and Labour are all for giving handouts to those who don't need it.  

https://www.stuff.co.nz/politics/350439035/national-and-labours-consens…

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Yes for many if the age goes to 67 it will mean $150 a week less on the dole or sickness benefit, but still a nett saving for the government.

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Costello's independent advice is apparently 4 articles, one of them a comedy piece.

Last minute google me thinks.

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Key and Ardern would have sacked her by now. 

He who rates ability by 'wealth'- Clown1 - can't do it. 

No prizes for guessing why. 

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Who dod Ardern sack? Her ministers had a free for all while she was "boss".

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That was quick reporting by you solar, I found RNZ posted an article at 6.08pm and Herald at 6.39pm. What was your source?

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Some people on here are in the know, you can pick them out after a while. 

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Haha, I wish, but no, it was on the rnz 5.30 news, some might notice I misheard the comment article as a comedy article. 

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Let’s stop all this nonsense about minimal gains in housing affordability. It’s still dire.

We need proper policy solutions and hope. Labour need to think through a deliverable policy rather than the disaster that was Kiwibuild.

It’s not that hard. 

A good place to start would be policy providing a massive uplift in funding for community housing providers to provide a big uplift in shared equity options.

 

 

 

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Agreed, RBNZ need to hold DTI and LTV ratios right down, and Govt need to throw the kitchen sink at getting stuff built.

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Provide funding on steroids to the likes of these guys:

https://www.nzhf.org

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How much are you going to fund them? Let’s say you want them to build 50k houses, each probably costs 500k even if you give them the land, so between them and the government it’s a $25 billion investment. And 50k houses won’t achieve that much. 
The KiwiBuild model was better, right idea but the wrong time. It would be much easier to find spare capacity to build them now. 

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That’s a complete misunderstanding of how it works

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Someone has to make the investment. Isn’t it better for government to sell to the market and let the owner make the investment? 

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Just pay for them to be built and take the asset onto the crown balance sheet along with the 'debt' - all that it costs the economy is the opportunity cost of the time and materials required to build it. We used to be good at this.

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and ensure all components are sourced nationally.

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You mean from the monopoly providers who have screwed up the cost of building but are still tanking their company?

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They may also tender.....but so may anyone else who sees an opportunity of a guaranteed work stream to develop a business/product.

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Like Muldoons think big?

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Like every other social democracy building houses - we did this for decades here! The schemes and labels obscure the basic reality, but ultimately the State buys houses (or makes loans to people that do) and then the State carries the houses or loans as assets on its balance sheet. No harm done - just requires allocation of resources.

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Like we did from the 30s to the 60s?

looked like a pretty good model to me…

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And you’d only need to build 3000-4000 per year to make a significant difference - for low-middle and middle income FHBs

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https://www.nzherald.co.nz/business/mit-economist-says-ai-can-do-only-5…

could be used to generate spruiking comments as no real intelligence is required.

 

 

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Whan has that stopped the spouting of rubbish? 

All you need is an economics degree - and you're into bull--it territory. 

 

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Hmm not sure having an economics degree automatically means you're thinking is flawed. There will be some economists who are 100% on board with the limitations of economics. They are often the most effective at counter-arguing once the nonsense. 

Most traffic engineering in New Zealand is bollocks but the most effective people I know who can demonstrate this are converted traffic engineers, they can argue in the language that other traffic engineers understand. 

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Well I guess an economics degree is like all others. That is, a large chunk of the graduates don’t really ‘think’, and there’s many lecturers across all faculties who also don’t think, or stopped thinking a long time ago. It’s much easier to fall back on ideology, and binary and non critical thinking.

I have met very very few economists who I would say are unconstrained by ideology and group think.

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Dr Cameron Murray from Australia is one of the few urban economists I rate. Definitely goes against the grain of most on zoning and housing affordability, and he demolishes Eric Crampton’s views on planning, housing supply and prices brilliantly in this excellent video:

https://m.youtube.com/watch?v=wXNRoBMhRgY

 

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