New Zealand’s economic landscape saw a mixed bag of developments on Wednesday, with steady interest rates countered by rising consumer spending and significant investments in renewable energy. Across the Tasman Sea, concerns are mounting over potential interest rate hikes in Australia as inflation pressures resurface. Here’s a breakdown of the key economic indicators and events shaping the market today.
Despite ongoing global economic uncertainties, the New Zealand economy continues to show resilience. Consumer spending is trending upwards, while the housing market remains a point of caution. Simultaneously, significant progress is being made in bolstering the nation’s energy infrastructure with a focus on sustainable solutions. These developments, coupled with international economic shifts, paint a complex picture for the weeks ahead.
Interest Rates Remain Stable, Deposit Rates Rise
Mortgage rates in New Zealand held steady today, with all current rates available here. Interest.co.nz also offers a new calculator to compare mortgage offers, factoring in additional costs and cashback incentives, which can be found here. Though, savers saw a positive shift as General Finance increased rates across its 1-5 year term deposits. Updated rates for terms less than one year are available here, and for 1-5 year terms here.
Consumer Spending Continues to Climb
Data from ANZ’s card tracking indicates a 0.6% rise in overall card spending for February (seasonally adjusted), representing a 4.4% increase compared to the same period last year. Spending continues to show positive annual growth across most sectors, though housing remains a weaker area. Lower petrol prices have contributed to a slowdown in annual growth within the motor vehicles and fuel category, a trend not expected to persist.
Shift in Mortgage Preferences
Recent figures from the Reserve Bank show a renewed preference for two-year fixed rate mortgages among homeowners, signaling an conclude to the recent trend towards shorter-term fixed rates. This shift suggests a growing desire for stability in mortgage payments as economic conditions remain uncertain.
Dairy Prices Hold Steady
The overnight dairy Pulse auction showed little change from last week’s full auction, indicating that dairy prices are being maintained despite a global increase in supply. This positive outcome suggests continued demand for New Zealand’s dairy products.
Geothermal Energy Project Gains Momentum
MBIE has selected Todd Energy as the preferred lead contractor for a groundbreaking geothermal project. The initiative aims to drill the first exploratory superdeep, superhot geothermal well, potentially unlocking a significant new energy source. The well will reach a depth of at least 5 kilometers, tapping into substantial heat resources. The project has secured $60 million in funding from the government’s Regional Infrastructure Fund, aligning with priorities for a secure and resilient energy supply.
BNZ Account Block for Incorporated Societies
BNZ is implementing a temporary account block for some incorporated society customers to ensure compliance with the Incorporated Societies Act 2022. These societies must reregister with the Companies Office by April to remain legally operational. BNZ describes this action as a “proactive step” to prompt timely registration.
NZX50 Shows Strong Recovery
The NZX50 index experienced a sharp recovery on Wednesday, rising +1.3% by 3pm. Despite this gain, the index remains down -2.6% over the past five working days and -0.2% from six months ago, but is up +6.8% compared to a year ago. F&P Healthcare led the gains, rising +2.2%, while Mercury, Briscoes, and Fletchers also contributed to the positive momentum. Investore, Stride Property, Napier Port, and Vulcan Steel experienced declines.
Electricity Prices Rise
Wholesale spot electricity prices in the Upper North Island have exceeded $100/MWhr today, with Auckland (OTA) reaching $165 at midday.
Global Economic Concerns
Internationally, the European Central Bank (ECB) is emphasizing its commitment to controlling inflation through active monetary policy, particularly in response to rising oil prices. Meanwhile, in Australia, reports of panic buying of diesel fuel are emerging as farmers and fishers express concerns about supply and potential impacts on food prices. The Reserve Bank of Australia (RBA) is now being forecast by Westpac and others to increase its cash rate target by +25 bps on March 17 to 4.1% and again in May to 4.35%, driven by escalating inflation threats.
Market Data Snapshot
Wholesale swap rates are expected to remain largely unchanged today. The 90-day bank bill rate increased by +1 bp to 2.50% on Tuesday. The Australian 10-year bond yield is up +1 bp at 4.86%, while the China 10-year bond rate remains unchanged at 1.81%. The Japanese 10-year bond is up +3 bps at 2.19%, and the NZ Government 10-year bond rate is up +3 bps at 4.63%. The UST 10yr yield is up +3 bps at 4.14%. The Kiwi dollar is up +10 bps against the USD, trading at just on 59.3 USc, but down -80 bps against the Aussie at 83 AUc. Bitcoin is currently trading at US$70,019, up +1.1% from yesterday.
The New Zealand economy continues to navigate a complex global environment. Ongoing monitoring of inflation, consumer spending, and energy developments will be crucial in the coming weeks. The actions of central banks both domestically and internationally will undoubtedly play a significant role in shaping the economic outlook.
What are your thoughts on the current economic climate? Share your insights in the comments below.
