A review of things you need to know before you sign off on Wednesday; employment confidence rises, milk powder prices hold, overseas workers & students back at pre-pandemic levels, eyes on swap rate, NZD stable, & 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
The Cooperative Bank cut its 6 month fixed rate to 5.99% today (matching BNZ) and raised its 4 and 5 year fixed rates. All rates are here.

TERM DEPOSIT/SAVINGS RATE CHANGES
The Cooperative Bank cut its 6, 9 and 12 month TD rates by either -10 bps or -15 bps. All updated term deposit rates less than 1 year are here, for 1-5 years, they are here.

BETTER JOBS OUTLOOK
The Westpac-McDermott Miller Employment Confidence Index rose in the December quarter off a recent low, mainly because of worker's perceptions about the availability of jobs. It was the first improvement in over two years. This metric joins a handful of indicators that suggest the jobs market is starting to stabilise. More here.

MILK POWDER PRICES HOLD
The overnight GDT dairy Pulse auction brought the expected changes. The SMP price extended its recent rises, and the WMP price essentially held its full auction recovery. This event didn't signal any changes or concerns.

THEY'RE BACK
There were almost 190,000 overseas workers and 59,000 overseas students in this country at the end of 2024, levels that have returned to pre-pandemic numbers.

BAD IDEA SPREADS
Good ideas have to be true. Good ideas have to work, they have to achieve their goals. Good ideas usually come with unpleasant implications. But bad ideas are not bound by any of those limitations. Bad ideas can appeal to what you want now, not what you need in the longer term. Saving for retirement is a good idea. KiwiSaver is a good idea that works. But allowing savers to raid their retirement savings to buy a house is a thoroughly bad idea. Retirement balances are always lower when you allow this. But it is 'popular' so the flaw is embedded. Now Australia is about to adopt the Kiwi bad idea of raiding superannuation balances to prop up their housing markets, because that is the new Liberal Party policy, and they are ahead in the federal election polls. Bad ideas are becoming mainstream. No need to be rigorous. Just appeal to the lowest common denominator now, for short-term gain. Aussie real estate industry people are overjoyed.

MORE PRESSURE FOR MORE SHORT-TERM THINKING
Federated Farmers today doubled down on its culture war attack on the sustainability policies of lenders, mirroring the hard-right shift of the US Republican Party. Apparently it is 'collusion' for banks to want clients who have climate-sustainable business models. Fed Farmers seem to want to avoid having to address this. (But we all know they will be first to complain when banks refuse to roll over debt facilities because their businesses are no longer profitable because "the weather changed". Just another short-term, self-centered and 'lazy' stance.)

NOT HALFWAY YET, AND ONLY 11 MONTHS TO GO
On December 7, 2020, the RBNZ opened its Funding for Lending pandemic support facility. Four days later. the Co-operative Bank was first in for a $40 mln loan, at the OCR interest rate (then 0.25%). The program was taken up by most banks and reached its zenith at $19 bln in November 2022 (the OCR was 4.25% then). Banks had up to three years to pay this funding back, and the interest rate mirrored the OCR as it changed and rose. It is now 4.25%. At the start of 2025 almost $12.3 bln is still outstanding, so banks have repaid less than half so far. The three year term applies for each drawdown. There will be a lot repaid this year when the final amounts due end the program in December 2025. Banks need to find alterative funding sources for this money that went into long-term mortgages. They will be paying much more than the OCR rate for the replacement funds. Since the start of the Funding for Lending program, banks have paid $1.5 bln in interest to the RBNZ so far. and it will probably exceed $1.7 bln by the end of the program.

PLAYING WITH FIRE
Reuters is reporting that Beijing is moving to cut the pay of employees at their central bank and two other financial regulators. The aim is to bring it into line with other public sector managers. The adjustments will be painful for those involved and basically mean senior manager pay will go from about NZ$95,000 to about NZ$50,000 per year. But they could either end up with an exodus of managers into the private sector leaving them with a much less skilled workforce, or those that remain could be very susceptible to corruption offers from institutions that are regulated. Or both. When regulators feel undervalued compared to the institutions they regulate, all sorts of distortions can occur. And it is not only a Chinese issue. There will certainly be a flood of people looking for jobs in these agencies. A record 3.4 million people flocked to the Chinese civil service exam last year, lured by the prospect of lifetime job security and perks including subsidised housing and social insurance, a major attraction for graduates disillusioned by the paucity of private sector job opportunities. But they won't come with any knowledge about the sector.

EYES ON AMERICAN INFLATION
Global financial markets are in the shadow of tomorrow's US CPI release. Markets expect an annual 2.9% rate, up from 2.7% in November. The expected month-on-month rate is 0.3%, the same as November, but this will mean the more recent pace is higher than the annual pace.

SWAP RATES ON THE MOVE
Wholesale swap rates rose unexpectedly sharply yesterday and for today, keep an eye on our chart below which will record the final positions closer to 5pm. The 90 day bank bill rate was up +2 bps on Tuesday at 4.11%. The Australian 10 year bond yield is up +1 bp at 4.69%. The China 10 year bond rate has dipped -2 bps to just on 1.64%. The NZ Government 10 year bond rate is up another +5 bps at 4.92% while today's RBNZ fix was 4.84% and up +9 bps. The UST 10yr yield is now just on 4.79% and up +2 bps from yesterday. Their 2yr is down -1 bp to just on 4.37%, so that positive curve has pushed out to +42 bps.

EQUITIES ALL ON HOLD, WAITING FOR THE US CPI
The NZX50 has risen another +0.3% in late trade today. And the ASX200 is up +0.2% in afternoon trade. However, Tokyo has opened its Wednesday trade down -0.1%. Hong Kong is up +0.1% and Shanghai is also up just +0.1%. Singapore is down -0.1% at its open. Wall Street ended its Tuesday session up a minor +0.1% on the S&P500 .

OIL DOWN
The oil price is down -US$1 from yesterday, now just over US$77.50/bbl in the US, and now just under US$80/bbl for the international Brent price.

CARBON PRICE FIRMS
The carbon price has risen today by +25c to NZ$63.60/NZU and a new five week high. See our new daily chart tracker of the NZU price for carbon, courtesy of emsTradepoint. 

GOLD HOLDS
In early Asian trade, gold is up a minor +US$2 from this time yesterday, now at US$2670/oz.

NZD SETTLES
The Kiwi dollar is down -10 bps from this time yesterday, now at 56 USc. Against the Aussie we are also down -10 bps at 90.5 AUc. And against the euro we are down -30 bps at 54.4 euro cents. This all means the TWI-5 is now just on 67 and down -10 bps from where we were this time yesterday.

BITCOIN UP AGAIN
The bitcoin price has inched up to US$97,153 and up +2.5% from where we were this time yesterday. Volatility of the past 24 hours has been modest however at just on +/- 1.4%.

This soil moisture chart is animated here.

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