Power distributors are deferring lines charges for businesses and ACC is delaying sending $900m of invoices to employers. China’s GDP falls 6.8 percent and oil falls to a fresh 18-year low.
Lending a hand 1: Four of the country’s largest electricity distributors are planning to defer lines charges for businesses during the disruption caused by the Covid-19 outbreak. The consortium includes Orion, Powerco, Vector and Wellington Electricity. They collectively serve 60 percent of New Zealand’s electricity customers and have agreed on a plan to provide network payment deferral programmes for business customers.
Locked out: Vector CEO Simon Mackenzie, the group’s spokesman, said the restrictions posed by the national lockdown had put financial strain on business customers, many of whom were unable to even access their premises.
Lending a hand 2: ACC will delay sending out $900 million of invoices to firms and sole traders for three months to help them through the cashflow crunch caused by the Covid-19 crisis. The state-owned workplace insurer said invoices for the 2021 financial year that are usually sent from July 1 will now go out in October. Other invoices issued throughout the year will also be on hold for three months.
On hold: ACC invoices the bulk of business customers from the start of July and most payments are received in the following three to six months. It estimates about 500,000 employers and sole traders are invoiced $900m.
$10 billion dollar man: Finance Minister Grant Robertson said the Government had paid out almost $10 billion in wage subsidies since 17 March to help cover the cost of 1.6 million workers. The scheme pays employers and independent contractors a lump sum for 12 weeks, which Robertson said had been deposited into bank accounts faster than similar schemes overseas, helping to limit the increase in job seeker benefits claims to 23,000.
More if needed: The Government had previously indicated that it may provide a further round of wage subsidies if required.
Confused: Given the economy is already in a recession and experiencing one of the most challenging business environments in almost three decades, the NZ sharemarket would have you thinking this is simply a minor blip. The NZX50 will start the week just 10 percent below its all time high in February having now recovered almost two-thirds of its losses since late March.
Ballast: Two listings in particular have helped to steady the ship. Shares in A2 Milk and F&P Healthcare are both up by 20 percent since the selloff began in mid-February because the weaker Kiwi dollar is lifting export revenues.
Under pressure: It would have been unthinkable even a year ago, but China’s GDP has recorded its first contraction on record since data collection began in 1992, declining 6.8 percent in the first quarter. The figure was slightly higher than market expectations, but a dramatic turnaround from the 6 percent advance in the fourth quarter of last year. However, second quarter data will likely be even more severe given the rapid contraction of Western economies since March.
Hunkering down: Bank of America, Citigroup and Goldman Sachs took a total US$12.8 billion in charges in the first quarter for loan losses, and warned there could be more to come. The news further heightened investor fears about the toll coronavirus will take on the financial sector. The announcement from three of the biggest US banks came the day after JPMorgan Chase and Wells Fargo reported a combined US$12.3b of credit charges for the first three months of the year, as they ramped up reserves to deal with an expected rash of corporate and consumer loan problems.
Still falling: U.S. oil prices plunged a further 8 percent last Friday, ending the week at a fresh 18-year low of US$18.27 a barrel. At one point, crude dropped to US$17.33 a barrel — the weakest price since November 2001. Crude oil prices spiked to US$28.34 a barrel on April 3 after U.S. President Donald Trump signalled Saudi Arabia and Russia would make massive production cuts. OPEC+ eventually agreed to those cuts last weekend, ending a bitter price war between the two oil giants, however the lowered production was less than the crash in demand.
Weak demand: The International Energy Agency (IEA) forecasts that oil demand will plummet a record 29 million barrels per day (BPD) in April. Overall, the IEA estimates that global oil consumption will drop by 9.3 million BPD this year to an average of 90.5 million BPD, effectively wiping out a decade of consumption growth.
Almost full: As of April 10, the U.S. had 504 million barrels of oil sitting in storage facilities around the country. At the currently projected pace of inventory growth, the U.S, will run out of storage capacity by mid-May.
Holding out: It’s estimated airlines in the U.S. that have halted flights are holding more than US$10 billion in advance customer payments while offering credits for future travel instead of providing cash refunds. A group of U.S. senators accused airlines of “obfuscating” the rules to minimize how much they must pay. A bailout package finalised last month allocated more than US$70 billion in loans and payroll assistance to airlines, airports and related businesses.
‘Pay up’: The U.S. Department of Transportation has issued a reminder to airlines that they must refund the full amount of a ticket if they cancel a flight or significantly disrupt a scheduled departure.
Expensive debt: U.S. car giant Ford is set to pay interest rates of almost 10 percent to access the bond market. In a desperate attempt to raise cash quickly to combat the global shutdown resulting from the coronavirus pandemic, the company launched an US$8 billion fundraising round last week telling investors it expects to post a $2bn loss in the first quarter on $34bn in revenue.
Ouch: Ford is set pay a 9.6 per cent yield on $1bn of 10-year debt. Just two months ago the company was able to raise five-year bonds at an interest rate of just 3.5 per cent, meaning its funding costs have more than doubled since February. The last time the carmaker had to pay such onerous rates to raise debt was in the depths of the financial crisis in 2008, when it paid 18 percent to access the bond market.
