Economic Week - December 11

by Nick Clark

Bank satisfaction slipping

The results are out for Federated Farmers November 2020 Banking Survey.  The survey, which received 1,341 responses, showed a continuation of a trend of steady slippage in farmer satisfaction with bank relationships.  However, it also showed a slight easing of perceptions on bank pressure and a further drop in average interest rates for farm mortgages. 

Overall, 65.4% of farmers were very satisfied or satisfied with their bank relationship, down from 68.5% in May 2020.  Satisfaction has steadily slipped over the past three years (in November 2017 it was 80.8%).  Satisfaction was highest for meat & wool farmers (68.0%), while it was lowest for sharemilkers (56.9%)

Similarly, 61.8% of farmers felt communication with their bank had been good or very good, down from 64.9% in May 2020.  Like overall relationship satisfaction, quality of communication has steadily slipped over the past three years (in November 2017 it was 79.3%).  As with relationship satisfaction, meat & wool farmers were the most satisfied with quality of communication (63.9%) while sharemilkers were least happy (56.9%).

27.7% of farmers reported changed conditions over the past six months, similar to May 2020’s result. Of these farmers, most had seen their conditions toughen, although for sharemilkers more farmers reported easier conditions than tougher conditions.

A slightly better result was 18.4% of farmers felt they have come under undue pressure over the past six months, down from 19.3% in May 2020.  Pressure peaked at 23.2% in November 2020 but despite the recent easing in pressure it remained a lot higher than earlier years of the survey (when it ranged from 5% to 10%).  Pressure was highest for dairy farmers (24.9%) and arable farmers (23.3%), while meat & wool farmers were feeling the least pressure (10.3%).  Despite being less satisfied with bank relationships, sharemilkers’ perceived pressure is much lower than that for dairy farmers as a whole (12.8% vs 24.9%) and was also well down on levels felt in earlier years of the survey.

The average mortgage interest rate was 3.9%, down from 4.2% in May 2020 (and down from 4.6% a year ago).  OCR cuts have been flowing through to farmers, although it would seem not as quickly as they have for residential mortgages (where there is much more competition) and there is also a lag due to it taking time for reductions in rates to flow through to farmers on fixed mortgages. 90% of farmers are paying a mortgage interest rate of less than 5%.

The average overdraft interest rate was 6.4%, down from 6.6% in May 2020 (and down from 7.0% a year ago).  Overdraft rates have decreased by rather less than they have for mortgage rates.  Only 20% of farmers were paying an overdraft interest rate of less than 5%.

The average mortgage was $4.0 million, up from $3.8 million in May 2020.  However, the median mortgage declined from $2.4 million to $2.1 million.  The average overdraft limit was $200,000, down from $206,000 in May 2020.  However, the median overdraft limit was unchanged at $100,000.

60.7% of farmers had a detailed, up-to-date budget for the current 2020/21 season (fairly similar to 60.5% in November 2019), while 23.0% had a detailed, up-to-date budget for future seasons up from 21.4% in November 2019).  Sharemilkers remained the most likely type of farming to have detailed, up-to-date budgets.

Thank you to the 1,341 farmers who responded to the survey.  Without your participation we cannot do this work on behalf of all farmers.


Rural confidence improves

Rabobank’s December quarter Rural Confidence Survey has shown an improvement in farmer confidence since the September quarter, but overall sentiment remains negative.

The survey found that net farmer confidence was up to -23% from -32% recorded in the last quarter. Farmers expecting agricultural economic conditions to improve in the coming 12 months rose from 13% to 16% while there were fewer farmers expecting conditions to worsen (dropping from 45% to 39%. The number expecting the performance of the agricultural economy to stay the same rose from 40% to 44%.

Rabobank said that dairy and sheep & beef farmers are now more optimistic about the prospects for the broader agricultural economy while horticulturalists are more pessimistic.

The survey also found that farmers’ expectations for their own farm business performance were up overall. The survey found 18% of farmers were expecting their own farm businesses to perform better in the year ahead (up from 13%), 34 per cent were expecting worse performance (down from 37%), and 48% were expecting performance to remain the same (unchanged). 

The improvement in farmer expectations about their own businesses was driven by a strong jump in dairy farmer optimism, while sheep & beef farmers remain deeply pessimistic and horticulturalists are now evenly split between optimists and pessimists.

Federated Farmers’ six-monthly Farm Confidence Survey will be undertaken in January.


Traffic volumes ease

ANZ’s monthly Truckometer has shown drops in vehicle traffic in November compared to October but increases in traffic compared to a year ago.

The Light Traffic Index fell 3.1% from October to November but was 8.6% higher than it was in November 2019.  The Heavy Traffic Index fell 0.3% from October to November but it was 6.2% higher than in November 2019.

ANZ observed that the lack of international tourists is becoming evident in car traffic, while the Heavy Traffic Index is suggesting a strong outturn for September quarter GDP, but possibly negative growth in the December quarter.


Retail sales strong (mostly)

November was a good month for sales in most of retail, with Statistics NZ’s Electronic Card Transactions showing card spending in retail industries 1.4% higher than in November 2019.

By retail industry, the biggest increases in card spending were for durables (up 8.5%), vehicles (up 5.6%), consumables (up 5.3%), and apparel (up 4.3%).  However, card spending was significantly lower for fuel (down 16.6%) and for hospitality (down 8.3%).

Card spending on services and on non-retail industries were also down and this dragged total electronic card spending lower by 0.8% compared to November 2019.


Job ads up

November saw a further improvement in job advertisements, according to the latest BNZ/Seek Employment Report.  Job advertisements were up 6.9% in November compared to October to be only 5.1% below levels in November 2019.  While job ads are still below levels of a year ago, this is marked improvement compared to recent months when they were well down.

By industry, the largest month-on-month increase was for banking and financial services (up 20%) followed by call centre and customer service (up 17%), and advertising, arts, and media (up 12%).  Job ads for the farming, animals, and conservation industry were up 4%.


Manufacturing recovers

Manufacturing sales volumes in the September 2020 quarter rose to the highest September quarter level on record, springing back from the COVID-related downturn earlier in the year.

According to Statistics NZ’s Economic Survey of Manufacturing, manufacturing sales volumes (sales values adjusted for price effects) rose to $24.97 billion, up 10.4% on the pandemic ravaged June 2020 quarter and up 3.1% on the September 2019 quarter. 

By industry, dairy and meat product manufacturing had the largest increase when comparing September 2020 with September 2019, up 7.7% to $5.99 billion.  Its sales volumes were down 21.5% compared to June 2020 but declines in dairy and meat product manufacturing is typical for September quarters, with the two previous September quarters posting larger quarter-on-quarter decreases.


Building activity bounces

The September quarter also saw a strong bounce in building activity, according to Statistics NZ’s quarterly Building Work Put in Place statistics.

Compared to the lockdown-impacted June quarter, the September quarter saw a seasonally-adjusted 34.8% increase in building work.  Residential work was up 36.0% and non-residential work was up 32.5%.

Comparing the September 2020 quarter with the September 2019 quarter, there was 2.4% increase in the actual value of building work (to $6.68 billion).  The actual value of residential work was up 6.8% (to $4.37 billion) but non-residential work was down 4.9% (to $2.31 billion).  Within the latter category, work on farm buildings was down 15.6% (to $79 million). 

Although the actual value of building work put in place was up from September 2019 to September 2020, the estimated volume of activity was down 0.6% after adjusting values for higher construction costs. While the volume of work on residential buildings rose 4.2%, work on non-residential buildings fell 7.2% compared with the same period in 2019.


Next week

The main economic news next week will be the September quarter’s Gross Domestic Product.  Expect a strong bounce-back from June 2020’s big 12.2% drop.   Also watch out for the Government’s Half Year Economic and Fiscal Update, which will see a better short-term fiscal outlook, although the medium-to-longer-term outlook remains murky and risk-laden.


NIWA Soil Moisture Data

NIWA’s latest soil moisture maps (as at 9am Thursday 10 December) show soil conditions significantly dryer than usual in Northland through to Hauraki-Coromandel and the East Cape, but they were wetter than usual across most of the rest of the North Island and especially so around Wanganui and Kapiti.  In the South Island, soils in South Westland and in Southland from Invercargill to the Catlins were significantly dryer than usual while they were significantly wetter than usual in the Nelson and Tasman areas.

Exchange Rates

The NZ Dollar slipped this week, weakening 0.9% against the TWI.  It was down against all our major trading partners, including losing more than a cent against the Australian Dollar.



NZ Dollar versus

This Week


Last Week (3/12/20)

Last Month (10/11/20)

Last Year (10/12/19)

US Dollar





Australian Dollar










UK Pound





Japanese Yen





Chinese Renminbi





Trade Weighted Index





Source: Reserve Bank of NZ


Wholesale Interest Rates

Over the course of the week yields for the 90 Day Bank Bill and 10 year Government Bond were both up 1 basis point.  The Reserve Bank will next review monetary policy settings (including the OCR) on 24 February 2021.



This Week


Last Week (3/12/20)

Last Month (10/11/20)

Last Year (10/12/19)






90 Day Bank Bill





10 Year Government Bond





Source: Reserve Bank of NZ