The New Zealand dollar fell to a two-year low, joining its trans-Tasman counterpart as Australia’s federal government revealed a glut of spending off the books in its half-year update.
The kiwi fell to 57.37 US cents at 5pm in Auckland from 57.60 cents at 8am and 57.73 cents yesterday after Australia’s mid-year budget update showed the federal government will spend more than A$20 billion a year off its books and faces bigger deficits than previously predicted.
“The underlying cash balance is expected to fall deeper into the red as temporary revenue windfalls fade and the automatic stabilisers kick in, revealing the extent of the increased structural spending,” Westpac senior economist Pat Bustamante said in a note. “Total public borrowing will increase to around 6.5% of GDP in 2025-26, in line with the emergency levels recorded during the GFC.”
The Australian federal update comes after New Zealand’s half-year economic and fiscal update yesterday showed bigger deficits for longer, and the subsequent lift in borrowing, on this side of the Tasman as well. The kiwi was little changed at 90.87 Australian cents from 90.74 cents this morning.
Federal government spending has been blamed as being inflationary and limiting the Reserve Bank of Australia’s ability to start cutting its target cash rate, whereas New Zealand’s central bank embarked on lowering rates earlier this year.
Statistics New Zealand figures showed the annual current account deficit narrowed to 6.4% of gross domestic product in the September quarter.
The big show
Meanwhile, equity markets were weaker across much of Asia, including Australia and New Zealand, as investors await the Federal Reserve’s upcoming policy review, which is expected to deliver a quarter-point cut. Wall Street and European markets were weaker overnight.
The S&P/NZX 50 fell 48.75 points, or 0.4%, to 12,865.55, snapping a three-day gain, with 78 stocks falling on the main board, while 63 rose on a turnover of $123.4 million.
Kiwi Property Group led the benchmark index lower, falling 3.2% to 90.5 cents and rubber goods maker Skellerup Holdings slipped 2.2% to $5.11.
Among companies with trans-Tasman exposure, Ebos Group declined 2.4% to $36.25 and SkyCity Entertainment Group fell 0.7% to $1.40, while Ryman Healthcare rose 2.3% to $4.40 and Fletcher Building advanced 1.8% to $2.87.
Spark New Zealand fell 0.6% to $2.87, with 5.4 million shares traded. FirstCape emerged as a substantial shareholder of the telco yesterday, joining Milford Asset Management in buying into the beat-up stock.
Investore Property posted the day’s biggest gain on the NZX50, up 5.6% at $1.14.
Mercury NZ rose for a second day, up 3.1% at $6.13 after announcing plans to build a $287 million 77 megawatt windfarm in Northland. Meridian Energy fell 1.6% to $5.65, Contact Energy increased 0.2% to $9.05 and Genesis Energy advanced 0.2% to $2.155.
Fishing company Sanford rose 1.7% to $4.24 after its annual meeting, where shareholders were updated on its efforts to improve margin.
Air New Zealand was also stronger after its latest operating metrics showed increased capacity on its network and a stronger domestic performance, albeit on softer demand, while its international routes remained under pressure. The carrier rose 0.9% to 56 cents, while Auckland International Airport advanced 0.6% to $8.285.
Would-be miner jumped 7.1% to 53 cents after noting the passing of fast-track legislation, saying it plans to lodge its application early next year.
Reporting by Paul McBeth. Image from Social Estate on Unsplash