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
The bank of China cut its floating rate by -50 bps to 6.99%. Both CFML and Resimac changed carded rates today. All rates are here.
TERM DEPOSIT/SAVINGS RATE CHANGES
Mutual Credit Finance has cut its 1 - 5yr TD rates. All updated term deposit rates less than 1 year are here, for 1-5 years, they are here.
HOUSING MARKET YEAR ENDING ON A QUIET NOTE
According to the REINZ's agent data for November, the housing market was quiet in Auckland, but more buoyant in rest of the country. Overall, house prices drifted sideways in the month, with sales volumes lumpy.
PROMISED SURPLUS NOT POSSIBLE NOW
The Coalition Government says it will not balance its budget within the forecast period, as Treasury forecasts a weaker economic recovery. The Finance Minister says it is not possible because of the large ACC obligations. Credit rating agencies are unlikely to be impressed.
BORROWING $20 BLN MORE
To cover its 'losses' the Government is going to have to borrow more. The forecast 2024/25 New Zealand Government Bond (NZGB) programme has been increased to $40 billion, +$2 billion higher than that published at the Budget Economic and Fiscal Update 2024. The forecast NZGB programmes for 2025/26, 2026/27, and 2027/28 have also been revised higher, by +$4 billion, +$6 billion, and +$8 billion respectively.
UPTICK
The latest SEEK NZ employment report shows a small increase in job advertisements during November, buoyed by higher job ad volumes in urban regions. It was the first time job ads rose since July.
NZX EQUITY MARKET UPDATE
Here is a summary of how the NZX equity market traded today, as at 3pm. Mercury, Kathmandu, & Channel Infrastructure are today's biggest gainers, with Tower, EBOS, Goodman Property, and the NZX leading the decliners.
CHRISTMAS GIFT FOR BUSINESS SUPPORTERS
The adult minimum wage rate will increase by +1.5% to $23.50 an hour from 1 April 2025, a +35c/hour rise (+$2.80 per eight-hour day) justified because of "considerable progress in reducing inflation". The problem is that inflation is still running at 2.2%. Household living costs are up +3.8%. The cost of living for lowest-spending households increased +4.3% in the 12 months to the September 2024 quarter.
CHRISTMAS GIFT FOR FORESTRY OWNER SUPPORTERS
The Government has today confirmed a -50% reduction to the annual charge for forest owners participating in the forestry Emissions Trading Scheme. That will reduce the annual charge from $30.25/ha per year to $14.90.
MORE OFFSHORE WORKERS
A long list of 'reforms' related to hiring within the Accredited Employer Work Visa system have been announced that will make it easier to bring in offshore workers.
A BETTER YEAR COMES AROUND
DairyNZ’s latest farm financial forecast shows a national breakeven price of $8.32/kgMS. With the average national forecast payout now sitting at $10.08/kgMS, that’s potentially +$1.76 of cream on top for farmers, which is well above the profit margin of recent seasons. More here.
NOT LOOKING AHEAD WITH OPTIMISM
In Australia, the latest Westpac-MI consumer sentiment survey shows a smallish dip in confidence with views of current conditions holding up. But consumers there have turned pessimistic again on the future outlook and those declining views are weighing on both labour market, and housing market sentiment. Another survey of businesses shows all is not so flash on the factory floor.
BREAKING THE ANTI-SPECULATION RULE
In China, they have reversed the long-standing rule that banned their commercial banks from making loans for "investment" in the stock market. It is a change that has triggered speculation that Chinese regulators are now channelling credit from the banking system into the stock market, in order to keep share prices afloat as China's economy stays under pressure.
SWAP RATES STEEPER AGAIN
Wholesale swap rates are probably little-changed again at the short end today, but the long end higher again, so the steepening is still underway. Our chart below will record the final positions. The 90 day bank bill rate was down -2 bps yesterday at 4.27%. The Australian 10 year bond yield is also down -2 bps from this time yesterday at 4.35%. The China 10 year bond rate has fallen another -1 bp to just under 1.74% and yet another all-time low. The NZ Government 10 year bond rate is up +3 bps at 4.63% while today's RBNZ fix was 4.54% and unchanged. The UST 10yr yield is now just under 4.40% and little-changed from this time yesterday. Their 2yr is now just under 4.25%, so that positive curve is still +15 bps, with little-change.
EQUITIES MOSTLY FIRMER
The NZX50 has risen +0.3% in late trade today. And the ASX200 is up +0.9% in afternoon trade. Tokyo has opened its Tuesday trade +0.4% firmer. Hong Kong is down -0.4% and Shanghai is up a minor +0.1%. Singapore is down -0.4% at its open. The S&P500 rose +0.4% on Wall Street in its Monday trade.
OIL SOFTISH
The oil price is down -50 USc from this time yesterday, now at US$70.50/bbl in the US, and now just under US$74/bbl for the international Brent price.
CARBON PRICE UP
The carbon price has been a little volatile this week but back up today at NZ$63/NZU with some better trading volumes in the market. See our new daily chart tracker of the NZU price for carbon, courtesy of emsTradepoint.
GOLD SLIGHTLY FIRMER AGAIN
In early Asian trade, gold is up +US$5 from this morning, now at US$2658/oz.
NZD FIRMS
The Kiwi dollar is up +10 bps from this time yesterday, now at 57.8 USc. Against the Aussie we are up +10 bps at 90.7 AUc. And against the euro we are unchanged at 54.9 euro cents. This all means the TWI-5 is now just over 67.8 and up +10 bps from this time yesterday.
BITCOIN FIRMS FURTHER
The bitcoin price has risen to US$106,391 and up +0.9% from where we were this time yesterday. Volatility of the past 24 hours has been moderate at just over +/- 2.1%.
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92 Comments
"What's the moral of the story? That National and Labour are essentially the same party, just run by different actors, sales folks and marketing directors who are pretending their two products are different, because they use different branding & colors. They're like Coke and Pepsi Cola."
If we are honest, there is little anyone can do.
We are highly indebted at a consumer level and reasonably so at a sovereign level. We have high energy prices which, when combined with geographic isolation, makes manufacturing virtually impossible. We have signed up to Net Zero which continues to erode our export competitiveness as we incentivise carbon capture over primary produce. We have over-priced housing relative to wages which means a high propertion of income goes on rent or mortgages and those profits ultimately are repatriated overseas.
We need to grow exports, work back from that and do whatever it takes.
Actually, I'll give the coalition credit for removing council consent on dwellings up to 60sqm.
Buy more BEVs and cut down our importation of oil?
Buy and install domestic solar (with battery storage) as well, to reduce the load on the electricity network (don't assume I'm saying everyone will be able to export their excess to the grid).
These are probably insignificant in the scheme of things. BEV buses and trains might be a (slightly) better move.
It would be lovely one day to have someone do a comprehensive budget on some scenarios.
- This much for the generation and storage build
- this much for the mass electric public transport
- this much to run and maintain it
- this much revenue
I realize sometimes this is done on a project by project scenario, but something comprehensive would be good.
We're far off from a shrinking population having added 900k people in just under a decade at an average growth rate of 1.8% per year. That puts our population growth in line with many developing countries.
Has that helped raise more funds at all for better infrastructure or put us deeper into the hole than when we started on this unsustainbly high migration journey?
That problem is some years away for NZ....not that we wont be impacted by changing global preferences.
https://www.stats.govt.nz/tools/interactive-population-pyramid-for-new-…
The repayment time on a lot of this is fairly long, so understanding when (if ever) things will be paid for is fundamental to the case.
Unless we're spending $1 to save 50 cents. Which is fine, if we're doing it for non financial reasons, but we then also need to establish how the balance is funded.
"If we are honest, there is little anyone can do.
We are highly indebted at a consumer level and reasonably so at a sovereign level. We have high energy prices which, when combined with geographic isolation, makes manufacturing virtually impossible."
Not so...we have at least 2 options that will work in the interim....increase Gov spending (preferably into critical infrastructure/services with an eye to future serviceability) or a redistribution of spending power.
Both are extend and pretend strategies however.
I saw a quote at the bottom of this website earlier, think it was Wayne Gretzky, something along the lines of "don't skate after the puck, skate to where the puck is gonna be".
If you focus on price you're always gonna be too late, you need to follow the leading indicators.
Inventory is a leading indicator. It's what people actually mean when they talk about "supply".
I remember as a young rugby player watching Graham Mourie play as AB's captain, and noticing how he was always looking where play was going to go. The old commentators would also comment how amazing it was he was the first to arrive at a breakdown , and seemed to know where the ball was going to be.
John Ashworth, Canterbury prop. Counties shield challenge. Very close. Canterbury lost a line out just inside their half and the Counties backline started flowing. Ashworth put his head down and thundered straight towards the opposite corner, try line. Got there just in time to bundle out the Counties winger. Old dogs knew all the tricks.
One of my directional barometers for China economic health is the share price of Fortescue. Down -35% YTD but has been holding up relatively well post-Covid to now.
So why Forty?
Chinese steel mills and traders often purchase iron ore not just for production but also to leverage it as collateral for securing loans. This strategy helps them obtain necessary funding while maintaining liquidity in their operations. There is a phenomenon known as "ghost collateral", where the same stockpile of iron ore is pledged multiple times to different lenders. This practice raises concerns about transparency and the potential for defaults if the market conditions deteriorate.
To cover its 'losses' the Government is going to have to borrow more.
Is that equivalent to a form of QE, or is it not, because the government is not borrowing from the RBNZ printing money (the original QE) but through Bond tenders ?
If the bonds are purchased by NZers using NZ dollars then it is not QE.
But if the bonds are purchased by foreigners, who buy the bonds in NZD, but fund the bonds using overseas funds transmitted through the foreign currency market, then things get more complex, with first and second order effects. There is still no QE as normally measured but it would need a general equilibrium model to measure the final effect on inflation.
Either way, the Government has to pay interest plus eventual repayment of the bonds. There is no free lunch.
KeithW
Currently around 60% of NZ bonds are held offshore.
"At 31 May 2023, 62% of NZGBs were held by non-resident investors. Over the past 15 years this percentage has ranged between just under 50% and 80%. Participants in the market are diverse by type and by regional location. Nominal NZGBs and IIBs are currently constituents of a number of global benchmark bond indices."
https://debtmanagement.treasury.govt.nz/sites/default/files/2023-08/nz-…
Tip Top. Forget them. Check out Joyday, an ice cream brand launched by Yili, a prominent Chinese dairy company. First started in the Indonesian market in 2018 and the first Yili ice cream brand to be introduced internationally. Yili has chosen Indonesia as its dairy production base in 2021.
Joyday has now expanded to Singapore, Thailand, Vietnam, Malaysia and has its sights on the Africa market, first in Tanzania.
Based on taste and price, I reckon Nestle and Unilever need to up their game.
If ACC is the bone of contention, perhaps it is time to take a long hard look at exactly who is covered and for what. We should stop covering free loaders who arrive in NZ without travel insurance and any other parties who can be identified as non contributors. The rest of us have no choice to opt out of the levies and obtain insurance more specific to our individual needs. Free loaders are taking the rest of us for suckers.
If we actually look at ACCs numbers, the big old white elephant in the room is elderly, having more claims for things like falls, whose treatment and care costs a lot more, and rehabilitation less "successful".
Basically, we haven't provisioned for our aging population anywhere.
By the time we work out how to deal with it, the problem would've attritioned itself away.
Pa1nter dead on the money here I think. So many of our issues appear to be at least partly if not mostly driven by demographics. Our aging population needs an increasing level of support from a shrinking pool of workers yet so much commentary seems to be focused on blaming the other team for all our problems which completely misses the point.
In fact approx a quarter of NZ Super recipients are still working, up from 5% a couple of decades ago.
https://retirement.govt.nz/policy-and-research/retirement-income-policy….
Its because most people have to survive
https://www.interest.co.nz/investing/131309/new-research-out-retirement…
Came back into Auckland and under lockdown people where meeting at the local pub on Friday nights (was shut) and drank beers on leaners outside, what a crock, cost Labour an election
Following weekend All blacks played in Cardiff, no masks full stadium... Auckland unlocked shortly after ,,, how come Welsh where not scared of Covid?
Now if I find out this was from a Lab, funded from USA do you not think I may want compensation?
Not to worry, the fast track legislation will solve all our woes!
https://www.rnz.co.nz/news/political/536961/fast-track-bill-passes-into…
That Watercare map is causing some consternation. Add that to the hikes in development contributions, and it is ‘interesting times’ for residential development in Auckland:
https://www.oneroof.co.nz/news/watercare-blindsides-auckland-developers…
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