Here's our summary of key economic events overnight that affect New Zealand, with news the return of Wall Street from their long weekend holiday has been a quiet one, although Saudi Arabia greeted them back with a move that raised oil prices.
But first up, the overnight dairy auction delivered a +2.7% rise in overall prices, headlined by the +5.3% rise in the WMP price. (From the last GDT Pulse event, the WMP price rose +10% which is quite something.) This follows seven main events that recorded price declines overall so it isn't clear whether this breaks the declining pattern or not. At the same time the NZD fell too, so the rise at this event in NZD was more than +4.1%. Volumes were much higher this time at over 37,700 tonnes sold. Price movements for other commodities than WMP were modest.
US factory orders were expected to fall in July and they did - but not by as much as anticipated. And without aircraft orders they actually rise from June nicely. There had been four consecutive monthly gains in new orders prior with the last one being quite strong, so a settling was expected. Still, year-on-year these orders are still running lower than a year ago, down -1.4%, so pretty lackluster.
But there was an expansion in the US logistics sector in August, a shift up from the July contraction. Warehousing and freight activity rebounded.
In China, the private Caixin service sector PMI for August came in weaker than expected (in contrast to their factory PMI which came in better). The Caixin services PMI is at 51.8 and down sharply from the July 54.1. That is twelve straight months of expansion although the August result is the weakest in that sequence in 2023. (50 is neither expanding nor contracting.) The official services PMI for August was recorded at 51.0. But at least they are still expanding.
In the EU, producer prices fell at a record pace. They dropped -7.6% from a year ago in July but it was in line with market estimates. It was the third consecutive decline in producer prices and at the steepest pace since 2009, largely due to base effects from the surge in energy prices following Russia’s invasion of Ukraine. Hence, energy prices sank by -24% from the -16% in the previous month.
Turkish inflation, which peaked at over 85% in October 2022, and then fell to 38% in June, is moving back up strongly again. In August it came in at 59% pa. The more conventional monetary policy that was started in July hasn't had an effect on inflation yet - nor their exchange rate either it seems. Once public policy loses control of its policy levers, it is fiendishly difficult to get it back under control. Turkey (and Argentina) remain cautionary tales for most other central bankers.
In Australia, in Governor Lowe's swansong meeting, they claimed that inflation there is retreating now and left their cash rate target unchanged at 4.1%.
Internationally, global air cargo demand came in just marginally lower in July from a year ago, but continued its good recovery since February. Asia/Pacific demand was actually up year-on-year but other regions struggled to get back to the year-ago surge. However the 2023 track higher is a good sign.
The UST 10yr yield starts today up +6 bps at 4.27%. Their key 2-10 yield curve is more inverted at -70 bps. And their 1-5 curve inversion is less inverted at -105 bps. Their 3 mth-10yr curve inversion is also flatter at -113 bps. The Australian 10 year bond yield is now at 4.20% and up another +9 bps from yesterday. The China 10 year bond rate is unchanged at 2.66%. And the NZ Government 10 year bond rate is now at 5.05% and up +6 bps.
Wall Street is back from holiday and their Tuesday session is down -0.2%. Overnight European markets all slipped another -0.3%. Yesterday, Tokyo ended its Tuesday session up +0.3%. But Hong Kong fell a sharp -2.1% and Shanghai fell -0.7%. The ASX200 ended its Tuesday session down just -0.1% but the NZX50 fell -0.7%.
The price of gold will start today at just under US$1926/oz and down -US$12 from yesterday.
And oil prices are up +50 USc at just over US$86/bbl in the US. The international Brent price is up +US$1 at just over US$89.50/bbl, hitting US$90 briefly, the first time in 2023 it has done that. Saudi Arabia has extended its oil export curbs until the end of the year.
The Kiwi dollar starts today down -½c from yesterday at 58.8 USc. Against the Aussie we are +¼c firmer at 92.2 AUc. Against the euro we are down about -¼c at 54.8 euro cents. That all means the TWI-5 has slipped -25 bps to 68.3.
The bitcoin price is down -0.6% from this time yesterday, and is now at US$25,735. Volatility over the past 24 hours has been low again at just under +/- 0.7%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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135 Comments
Try looking at the bigger picture.
Same with the spouted nonsense re 'productivity' from the media, yesterday and today.
Small comes to mind; small perspectives, small timeline-appraisal, just small....
Seems the vast majority of (commenting, at least) business is small-thinking too.
In terms of dairy, the bigger picture is that yesterday the planet went through - burned - 100 million barrels of oil and maybe the same again in BOE; some drove the food-production, the rest underwrote most of the activities which 'pay' for said food.
How long (with apologies to Kipling)?
Kipling is always good over coffee. In the same vein how about something like - in the wild there is no right or wrong, just life and death. On a broader scale, ie our globe, that would fit your narrative except that along with lemmings, humans possess an extra capacity of self destruction.
Evolution is dispassionate; there are blind alleys and they can be over different timescales. One squid apparently has its anus pass through its brain, a design flaw you'd have thought, but maybe some politicians share the DNA?
Homo Sapiens (self-described) learned to lever energy, more than any other species in the history of the planet. Self-organisation is not unique to us; bees, ants, termites, pack-hunting... But bees swarm, colonies are re-started; civilisations inevitably collapse when they overrun their resource-base. This time our species is running the experiment at global scale - but thinking much smaller.
https://www.kiplingsociety.co.uk/poem/poems_longtrail.htm (good to recite at daybreak offshore; the mollymawks your audience)
Actually the lemming mass suicide thing is myth, although most if not all animal species have capacity for population overgrowth and crash, including lemming boom caused migration. Homo sapiens is unique in that he knows where this goes and has developed socialogical tools to accelerate boom and crash. That makes us the dumbest species on the planet, not the most intelligent.
I was reading the other day about how overpopulation causes individuals in some species of animals to just withdraw from society and refuse to breed, even when there's enough food. (Obviously overpopulation also causes disease, starvation and conflict as well.)
It sounded pretty similar to the antiwork and lie flat phenomena prevalent in some communities.
As I read this update, I was taken with how virtually all elements are about growth. And the message is growth is good for the world (I.e. people) decline is bad.
I reckon there needs to be a different and mainstream, commentary that focuses on the global biosphere (biological, mineral and acquatic) that can clearly demonstrate action with impact - positive and negative.
I just did a quick, simple, exercise on compounding growth - @ 3% per year (top of RBNZ target range) start point quantum doubles in 23 years and doubles again 15 years later.
At 5% growth the interval to double is 14 years, and double again is 22 years (then 11 more years to hit x3 initial quantum.
I'm no economist or mathematician, I just wanted to get a visual on how growth evolves. As a result I reckon, as a biological human species we are seriously self delusional.
Curiously not mentioned here is NewAtlas has a report that China's #1 oil company is reporting peak oil demand in China has already passed. https://newatlas.com/energy/sinopec-china-gasoline-peaked/
Chinese rapid adoption of EVs seems to be driving this. But if this is indeed the front of the wave, then the effects will be felt world wide as the oil companies try to shore up their profits. This could get interesting.
https://ourfiniteworld.com/2023/08/31/fossil-fuel-imports-are-already-c…
Enjoy the graphs Murray - another side to the story. Nobody is EVER going to admit to hitting limits; we must preserve the growth-is-possible-forever story to stay in power - whether that is the little fellow yesterday, or the Chinese leadership.
Almost a red herring PDK, but definitely a part of the conversation. Sinopec is reporting a reduction in DEMAND, not constraints in availability.
Your article talks about the supply side, but puts very little effort into understanding why. Hence my comments on the reaction of the supply side to reducing demand. But then stories have abounded for decades about the petrochemical industries suppressing alternative technologies. But now the need for those alternative technologies has become very much more pressing. Indeed if their earlier greed had not made them feel threatened by those who were tinkering with alternatives, we may have been able to ease the crisis earlier and have more time. But now that at least in one large economy that we see demand dropping, then what will the petrochemical politics be? The public discussion on climate change is now at the highest level of politics, which means the petrochemical politics will not be able to suppress it without being noticed. So what will their response be? Will they restrain production to pump the price, or will they drop the prices to undercut alternative technologies? Whatever they choose, they can no longer suppress the debate.
Oil is not running out any time soon, probably not in my lifetime, it might start to get scarce in 50 years or so.
Advances in Shale extraction technology continue, the US is now able to go back to all the old fields (it is ~1600% better than when it was introduced in 2004). It is potentially able to continue to export. https://youtu.be/fF4YTDsxcnc?t=527
I appreciate that the crisis-dejour is important to clicks but best focus on something more likely I would suggest.
I'm not disagreeing with you. I just don't know, but expect you are correct re technology. I'm not sure where you are going with your last comment?
The problem with our species is that the elites really don't tend to do anything about problems unless they are directly threatened by them, or the noise from the masses ("Do you hear the people sing, singing the song of angry men..... Les Miserables) gets to the point that they act to avert revolution. Of course problems are easier to solve when they are small (and the elites get to look like they are the saviours). But ignore them and the little problems can become big ones, and the solutions become harder when you can't afford to upset the masses either. So today we have a significant problem, that the elites have tried to ignore (possibly because in part they profited from ignoring them), and now they are conflicted between their politics, social status and their bank accounts and a climate which if it doesn't actually kill them then the masses might as it starts killing them (roll out the guillotine). But the threatened lashings of beasts, even political ones created by man, can be dangerous. So what will the vested interests do when demand for their product falls off?
Yes that is a good point, but I think the elite have the capital that will allow them to pivot to the new demands whatever they may be.
Jan 6 was a modern version of previous outpouring of domestic frustration, this seems to be getting steam-rolled so little to fear perhaps?
Whether the environment causes them to change is doubtful in mind, unfortunately they are normally too smart to get caught up, its normally retail investors in property that buy the marginal properties. Having said that as insurance starts to reduce and retract back to expensive credit-union offerings for specific essential assets this will cause them to react, to reduce these environmental losses will then make business sense. (probably too late tho lol).
Smart people can be in denial too. But are all elites smart? Think Trump. I don't think so. There is no doubt many are, but many more are just lucky in someways. But like Trump, they all tend to think they are entitled, which in the end, may be their biggest weakness.
https://www.statista.com/statistics/1291416/oil-and-gas-discovery-volum…
'Global oil and gas discoveries amounted to 4.7 billion barrels of oil equivalent in the 11-month period from January to November 2021. This was the lowest value registered in decades, with the figure representing a decline of roughly 166 percent in comparison to the previous year.'
Globally, we burn a billion barrels (oil only, not BOE) every 10 days.
https://www.iea.org/reports/oil-2021
I've always thought - having watched the propaganda-vs-reality for nearly 20 years - that the excuse would be demand reduction; that there would never be an admission that the resource was (a) finite, (b) reducing in EROEI (c) peaking, heading for reduction. The worrying reality is that renewables don't give anywhere near the bang for your bang (bucks are irrelevant here) so society(ies) will return to fossil energy every time they falter. Many will do it by default, blindly and remotely, but they won't be happy with the difference between what they've been told, and what they're experiencing. Which is a pity, because life a long way down the energy scale, intelligently organised, is a ton of fun.
That's a part of the problem in that looking for an easy solution, fossil fuels are too easy. But you're still talking supply side. The Chinese report is talking demand side reduction, as alternatives were available. Are there stats from the US on this? Is anybody tracking it there? That's a nation literally built on oil.
and in your 20 chicken little years proven reserves have gone up not down - from 300 billion when the Club of Rome was formed to 1.75 trillion today. Technology never sits still on both the demand side and the supply side.
"The world’s proven oil reserves total 1,757 billion bbl, up from 1,735 billion bbl a year earlier, according to Oil & Gas Journal’s annual assessment. Global proven natural gas reserves are now estimated at 7,456 tcf, up from 7,297 tcf surveyed last year."
https://www.ogj.com/exploration-development/reserves/article/14286688/g…
Proved reserves of U.S. natural gas increased by 152.1 trillion cubic feet (Tcf) (32%), from 473.3 Tcf at year-end 2020 to 625.4 Tcf at year-end 2021 (Table 10), establishing a new record for natural gas proved reserves in the United States.Proved reserves of U.S. natural gas increased by 152.1 trillion cubic feet (Tcf) (32%), from 473.3 Tcf at year-end 2020 to 625.4 Tcf at year-end 2021 (Table 10), establishing a new record for natural gas proved reserves in the United States.
Proved reserves of U.S. crude oil and lease condensate increased by 6.2 billion barrels (16%), from 38.2 billion barrels to 44.4 billion barrels at year-end 2021 (Table 1).
By my calculation CO² emmisions from burning all the proven reserve (0.55kg/ft³ natural gas, and 118kg/barrel crude oil) will amount to 616,508,000,000 tonnes released into the atmosphere that was otherwise locked up under the earth's surface as stored, prehistoric sunshine.
Personally, I'd prefer a lot of that was kept locked away.
There will be an important part oil derived products will contribute to the future (he'll those thin plastic bags previously available in the fruit and veg section are the bee's knees for keeping Carrots and cabbage fresh in the fridge).
I figure the challenge is differentiating what the critical products are, from the easy money wasteful, damaging ones.
See the graph here The end of easy oil: discovery and production from 1930 to 2050. Notes:... | Download Scientific Diagram (researchgate.net)
Note the increasing red line and the falling graph. This means that each year we are using a bigger % of oil relative to new discoveries and are eating our stocks at an exponentially growing rate. Even if you don't take on PDK message of EROI, this implies that the oil price will only increase and supply will at some point runout.
Also note that while EV sales of new cars is picking up speed, they make up only 1.5% of the global light vehicle fleet and near 0% of the heavy vehicle fleet.
Short Answer: they are lying:
Sinopec Achieved Good Performance in 2023 Q1 Net Profit Reached RMB 20.7 Billion (yahoo.com)
"The Company processed 62.24 million tonnes of crude oil, and total sales volume of refined oil products was 56.16 million tonnes, up by 10.1% year on year."
Here's an alternative perspective, they are not lying. They are reporting a reduction in the demand for GASOLINE, not their total turnover of oil products. Some detail in the article indicates that EVs are displacing some 15 million tons of oil product sales. That doesn't mean that there are not other areas of fossil fuel consumption in China which is absorbing the slump. I think that will happen in other places around the world too, as the fuel companies try to hold up their incomes.
So last year China added a further 19m ICE cars (this is the net number from total stock change - new EV sales) to its vehicle fleet and demand has fallen?
I agree the roughly 1 tonne usage per vehicle, so they added a net 19m tonnes from the ICE cars. If they had not sold the EVs, this would add the extra 15m tonnes taking growth to 34m.
Just came back from China. EV sales are booming, they are all over the place. Over there the fuel is like 8 RMB per litre, talking to DD (Uber) drivers, they make zero money from driving petrol vehicles. Only thing that makes sense is electric. Almost every one we got into was electric and had around 20k-30k on the clock (I made a habit of checking!). The petrol ones had between 200-300k on the clock and were obviously really old.
Hopefully with the ride share people, private car ownership will drop too, its really cheap and convenient there.
Wouldn't surprise me if gasoline demand is dropping strongly there. Powering their EV fleet will become a bit more of an issue though, lucky they are building nuclear power stations.
Before we know it we will be significantly above of China in terms of CO2 emissions per capita, and we don't even really produce anything other than milk. Once National removes the clean car discount our EV sales will dry up. No one will want to trade with a small backwater like us with high per capita CO2 emissions. But at least utes will be slightly cheaper.
Dairy prices have experienced a modest increase recently, while the New Zealand Dollar (NZD) has shown a consistent decline.
The question arises: Could these trends potentially lead to higher inflation, and might we anticipate improved economic performance over the next year as a result?
Press D for doubt on that soil moisture map.
I'm in the Waikato and even after we had that 2 weeks of fine weather it was still very wet, there's a whole lot of paddocks I can't get to except on foot.
And then of course the last couple of days it's been torrential showers and the water table is back above ground level.
Just saw Andrew Little on "Breakfast" about the immigration debacle. Being a "doer", I appreciate that difficulties and setbacks can occur, but it seems that most policies Labour have introduced turn out to have major problems. It's just not good enough, it seems that Labour are just incapable of executing anything.
Pa1nter, give thanks for all that "lazy" money sitting in bank accounts because without it, your borrowing rates would likely be 10% or above by years end↗️
What would THAT do to asset prices?🔽Anyway, we haven't had the real downturn yet and interest rates are still on the rise....
I wish that was true for industrial supplies.
Went to order some bits for work over the weekend, website was showing a 50% price rise, so held off on the order and contacted our rep, who pared it back to a 35% price rise, sat on the quote for a day and then jumped online to order and we are back to a mere 25% price rise since we last bought a couple of these 2 months ago.
Doesn't take to many of those rises to eat the entire profit margin on minor projects.
I won't be...have once...but said yesterday my children who will be first time voters, and a few of there friends all going for ACT, they seem to connect with this generation for some reason. What I do know is that not many of them think highly of Labour and still associate Jacinda with them, although she is out of the picture now. Well known among there group that she has high tailed it out of NZ while it crumbles around us.
You overlook the point that they were ill-informed. They were told the 'economics' fairy tale - by you too, from your posts. Labour weren't the problem, and if the nacts get in this time, they will do no 'better' (by your yardstick).
The problem is a Systems one, it is global, and our accounting system (blindly culminating in GDP) fails/failed to account for them. So your offspring and their peers, haven't been told the overarching truth. Entirely understandable - massed self-justification doesn't do truth well - but nonetheless that the truth of it.
She’s a flaky coward.
And don’t give me the ‘but she’s doing it for Nieve and the family’ claptrap. Her ‘feminist’ claptrap rhetoric was that motherhood does not get in the way of career, in her case prime ministerialship.
But maybe it does. Perhaps it was just more of her idealistic claptrap.
A total failure of a PM.
I think you are being a bit harsh there HM, I actually think as a young person asked to step into a very difficult and pressured role she did well, perhaps very well.
Unfortunately rather than a series of capable cabinet ministers to stand beside her she had an utter clown show.
I'm voting National as a vote against Jacinda. Policy is irrelevant, this is payback for what she did. She may be gone but she's about to get our verdict on her legacy and it's going to be damning. Perhaps no other Kiwi has had do much potential and flushed it away.
Yep - we're in for a doozy if we shut the wallet. Nationals campaign on wasteful spending and spending cutting has stirred up a lot of bottom feeders calling for a surplus. Blows my mind.
Mind you, I'm highly critical of National as the probable victor and what the country needs from them just isn't there.
We seem to keep screwing this up, spendy during the good times, stingy during the bad. I'm pretty sure QE was meant to follow with raised interest rates when the economy is strong but we never seemed to of got that. I'm still baffled why the federal reserve decided to drop interest rates in 2019 before covid hit, certainly gave them a lot less flexibility when shit really hit the fan in 2020.
I'm undecided and historically a swing voter but I'm not voting for the right block this time.
Their policies are just pumping house prices, open wide borders, flogging off NZ to the highest bidder and kicking the environmental can down the road with a nasty seasoning of racism and misinformation from ACT.
Sure.
Their promotion of organic farming which being less efficient has more carbon emissions per unit of food and would lead to global starvation. See also their anti nitrogen fertiliser policy - artificial N is responsible for 40 - 50% of the world's food production.
Their anti-nuclear stance - if the world had replaced building coal and gas fired power plants with nuclear as soon as the technology was available we wouldn't be in this climate emergency now. And if SMR's ever get to mass production replacing Huntly with a few of those would be an excellent solution for NZ.
Their anti-GM stance is totally outdated, especially regarding the CRISPR gene editing technology which has the potential to be game changing in agriculture, climate change and health.
Also going along with rapid population growth in NZ. Without that we'd be looking good to meet our emission reduction commitments.
In Australia, in Governor Lowe's swansong meeting, they claimed that inflation there is retreating now and left their cash rate target unchanged at 4.1%.
The RBA’s subsequent review will see fewer rate meetings under new Governor Bullock, who was along for the whole ride so far as Deputy Governor, and: “A clearer monetary policy framework; stronger monetary policy decision making and accountability; an open and dynamic RBA, with a more agile and empowering culture; more robust corporate governance; and steps to ensure RBA leaders drive institutional and cultural change.”
Sadly, however, the only thing that may actually change is the wallpaper. The intellectual theme song at the RBA will likely remain "I’m housing, housing, housing, housing. I’m housing, housing, housing, housing all night.”
To have really changed in a way that would allow it to not focus solely on assets as growth drivers, and to avoid future shocks when assets eventually, inevitably become unaffordable, as in China; or external shocks have like the mid-2010s, or the inflation return of 2021-22, would require a far broader spectrum of thinkers to enter the Reserve Bank than is the case so far. It would require experts on geoeconomics; on the supply side, not the demand side; on shadow banking; on national security; and those who grasp Kaleckian political-economy, not just economics. Link
Africa is home to 30% of the mineral reserves that are critical to renewable & low-carbon technologies. To truly benefit all Africans, production & trade must be sustainable, transparent & just - with maximum added value produced in African countries. Link
G20 cannot overlook that practical issues are involved. How can it behave like an ostrich, especially under India’s stewardship, without putting its finger on the root of the malaise in the Global South, namely the tragic history of colonialism? https://rt.com/india/582411-g Link
A couple of beauties there this morning :D, the first is a stars in their eyes missive https://www.youtube.com/watch?v=TL0dfzK3Aqs and the second an RT link, 5 stars...
Oil prices up, the NZD down unaffected by the 'good' result at the global dairy auction and bond yields marching on to a higher level. Gasolin RBOB is following the higher crude oil prices only modestly so most of the pain at the pump has still to come. Inflation will not fall significantly from here and is maybe in for a rebound.
Oil prices fell early this year, and that reflected slight disinflation in later CPI prints. Some cheers about the second quarter figure even.
Relying solely on prices seen at the pump, we've gone from ~$2.29 to $3.05 in 9 weeks. This includes the fuel tax. RUC higher too. From what I'm reading, we're going higher on oil still in the near term.
We have an OCR review in a month. I believe this is immediately before the third quarter CPI print. In the meantime our dollar is in decline and the FED are hawkish. High interest rates are causing domestic inflation.
What do?
Maybe it was this one.
https://www.mainfreight.com/en-nz/electric-trucks-the-way-of-the-future…
As per kiwimm way up this thread;
Also note that while EV sales of new cars is picking up speed, they make up only 1.5% of the global light vehicle fleet and near 0% of the heavy vehicle fleet.
Not suggesting that EVs are or are not the future in transport, just circulating the idea that it is not currently the transport of choice for consumables. We can travel however we like from home to the supermarket, but for example garlic has been transported halfway around the world to get to the shelf and roughly 100% of that journey has burnt oil. Regardless of the small footprint one clove makes on a ship, the percentage change in the core costs are rising dramatically again.
The proposition was the oil was going to the moon, if it goes to $4 then your diesel will be a mill-stone.
LDV have been doing an EV ute for ages, EV Ranger is coming next year https://youtu.be/-FHx2IRnKOE
The Tesla's actually hold their value quite as they seem to manage battery degradation quite well. The biggest depreciation seems to come from Leafs as they lack active cooling in their battery cells which roasts the battery and kills the usable life of the things. They are also hideous.
Honestly, though it's going to be hard to tell what depreciation on EV's is until they've been around a bit longer, I think it's too early to tell and make any firm calls either way.
https://www.drivelife.co.nz/2013/10/2013-ford-ranger-xlt-car-review-bes… $60k for the XLT
https://www.rnz.co.nz/news/political/258059/crown-to-replace-bmw-limo-f…
Ms Genter recommended the Tesla Model S electric vehicles, which is not yet available in New Zealand but which retails in Australia for $NZ101,818-$NZ134,270.
Seems about right to me if they had been available new in NZ. Don't forget the Au price would include their luxury car tax and stamp duty.
Rather than make up some reckons, I looked up the numbers. You should try it, can be quite eye-opening.
2013 Ford Ranger XLT - Car Review - Best all-rounder ute? - DriveLife
Ford Ranger XLT Dbl Cab - $59,040
Tesla Model S P85+ - Car Review - Is This The Future? - DriveLife
from $120,000
Incidentally, the prices of new Teslas have come down since 2013 whereas new Rangers have gone up.
Like many things, more expensive in the short term, potentially cheaper in the long term (though I'd challenge that with battery replacement costs).
Trouble is that much of the country are desperately waiting to get paid so they can eat this weekend. When that is your primary motive, you ain't looking for realised gains in 10 years time.
Unlikely IMO.
Inflation is reduced and/or eliminated when the economy contracts. All signs point to a contracting economy rather than a 'stagnating' one. If the contraction proves too severe - and many non-bank economists (and Kiwibank) already believe it will be - then the RBNZ will be able to drop the OCR without any fears of stoking inflation.
A falling NZD might appear likely to stoke inflation but it seldom does, and when it does its effect is quite mooted (except in the very short term). This is because the demand elasticity of imported products is considerable. Oil especially so and consumption drops dramatically when prices rise. (Oil companies hate this as once demand contracts it takes ages before consumers change back.)
There is a possibility however that holding NZD gets seen as a risky proposition and until a firm trend (in any direction) of macro economic issues like the BOP, Govt spending, etc. are established, offshore entities may demand a premium before lending, i.e. it may not matter what the OCR does, offshore interests will decide interests rates. This has happened before but the 'offshore effect' doesn't usually last more than a quarter and is usually far shorter. (The long term, i.e. 10+ years, effect can get ingrained however. We could return to consistently higher interest rates than our trading peers. Banks will hate this. They need i-rates to continuing falling to increase their profits.)
September Flurry of Corporate Debt Sweeps Global Markets
- At least 40 firms tapped high-grade debt markets Tuesday
- US companies priced $36 billion of new bonds after Labor Day
I tend to side with PDK and his world view around the limits of energy and the degrowth required by all countries to fit within the well reported carbon budgets. Except we are getting more growth and greater productivity put to the voters to appeal to their individual selfish needs. Works a treat. What circumstances would need to arise where the population would go along with ‘living within the carbon budget’? I think not until there are enough people suffering across the largest polluting countries will the political message change. Which will probably be too late as the human capacity for ignoring suffering is legendary.
I tend to agree WM. I do too. PDKs biggest shortfall is his inability to address the politics that wrap around the issues you identify. No one in NZ acknowledges that if we became Carbon Zero (literally not net) tomorrow, our total contribution is so small that the planet would not even notice. That is not to say we shouldn't be doing anything. But there is an opportunity to be smart about what we do do so we don't destroy the economy in the process. But the biggest issue is one that is not being discussed at all, and that is total population.
But war will come before substantive choices, and that might just solve the population issue.
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