Here's our summary of key economic events overnight that affect New Zealand, with news China seems to be on the cusp of bringing back its traditional stimulus play to bolster its misfiring economy.
But first up today there is more evidence US inflation isn't cooling as the Fed would want. A respected survey by the NY Fed shows that consumer inflation expectations for the year ahead increased to 3.3% in April, the highest since November, from 3% in each of the previous four months. These year-ahead price expectations rose across the board.
Canadian residential building consent levels were expected to fall in March after an unusually strong start to the year. A -4.5% pullback was expected. But in the end the retreat was much larger, down -11.7% from the February level and down almost -15% from the same month a year ago.
Indian inflation seems to be stable, but it is running high at 4.8%.
In China, we are getting new promises of "opening up". Sadly for them this is just a replay of a tired meme and is unlikely to bring the benefits promised like of the many earlier "opening up" promises made of the past decade (which got them to the current funk).
They need to something necessarily big. And something big seems to be coming. They are readying a ¥1 tln sale of very long bonds (NZ$230 bln) to fund a stimulus program. It may not be the only bond issue for that purpose.
Australia's closely-watched NAB business confidence index stood at +1 in April, holding steady for the second straight month while staying below its long-run average. Weak sentiment in retail, wholesale, and mining offset improvements in recreation, personal services, construction, and manufacturing. But the main feature is the lackluster current conditions.
All eyes will be on the Australian Federal Budget to be released later today, but actually not until about 9:30 pm (NZT). The expectation is that it will report a AU$9 bln surplus.
We should note that the copper price rose sharply again overnight, now back up to US$10,500/tonne and the peak and all-time high last reached last in February 2022. (It is likely to spike copper theft again. Be warned.) There is no evidence this bull run is anywhere near over yet. As is usual, it will attract speculators because of the confluence of bullish demand (especially from China) and tightening supply. The sky-high regulatory costs of starting new projects has discouraged miners for years who turned to consolidation until that pressure eases.
The UST 10yr yield is now at 4.49% and down -1 bp from this time yesterday. The key 2-10 yield curve inversion is marginally deeper at -38 bps. And their 1-5 curve is also fractionally deeper at -69 bps. Their 3 mth-10yr curve inversion is now at -91 bps and slightly deeper as well. The Australian 10 year bond yield is now at 4.37% and down -4 bps. The China 10 year bond rate is down -1 bp at 2.33%. The NZ Government 10 year bond rate is now at 4.79% and unchanged from yesterday.
Wall Street has opened its week unchanged in late trade. Overnight European markets eased about -0.2% across the board. Yesterday Tokyo ended its Monday session down -0.1% but Hong Kong rose +0.8%, whereas Shanghai was down -0.2%. However Singapore rose +0.4%. The ASX200 ended its Monday session unchanged. But the NZX50 couldn't catch a break and fell a rather sharp and outsized -0.9%. FBU's woes didn't help.
The price of gold will start today down -US$25 from yesterday at US$2335/oz.
Oil prices have risen slightly to just over US$78.50/bbl in the US while the international Brent price is now just on US$83/bbl. Both are minor net +50 USc/bbl gains.
The Kiwi dollar starts today little-changed from yesterday at just under 60.2 USc. Against the Aussie we are also unchanged at 91.1 AUc. Against the euro we are little-changed at 55.8 euro cents. That all means our TWI-5 starts today just on 69.5 little-changed from yesterday.
The bitcoin price starts today at US$62,739 and up +1.8% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.2%.
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67 Comments
Remind me again when Tax Freedom day was ~ 40, 50, 60 and 70 years ago?
Reading through some of the changes through the year, excess profit tax on corporates of 30%, top tax rates over 90%. Wow!
https://www.taxpolicycenter.org/laws-proposals/major-enacted-tax-legisl…
According to this source, government spending in NZ was higher for most of the 80's and 90's.
https://ourworldindata.org/grapher/historical-gov-spending-gdp?tab=char…
"As the economy grew over the 1990s, Tax Freedom Day moved forward until it reached April 11 in 2001-02. "
https://www.scoop.co.nz/stories/BU0604/S00391.htm
In the book Filthy Lucre: Economics for People Who Hate Capitalism, philosopher Joseph Heath criticizes the idea that tax-paying is inherently different from consumption:
It would make just as much sense to declare an annual "mortgage freedom day", in order to let mortgage owners know what day they "stop working for the bank and start working for themselves". ...But who cares? Homeowners are not really "working for the bank"; they're merely financing their own consumption. After all, they're the ones living in the house, not the bank manager.
Incredible chart. The growth in global electricity demand is almost single-handedly driven by China. They are shifting everything to electrical, transport first and foremost. I was listening to Macron saying it was a priority for Europe too: look at where the EU stands on the chart... If anything they're de-electrifying (and the US too). Link
Fixed it:
That's why your hear about "overcapacity": they aren't afraid that China is producing too many cars for the demand, they're afraid China is becoming too competitive. This car, the Xiaomi SU7, when released in China, sold out for the whole of 2024 in less than 24 hours. So it's definitely not in "overcapacity": it produces FAR too little for the demand it generates. Why so popular? Its starting price is less than $30k (215,900 yuan) with a better performance (and a very similar design) than a Porsche Taycan, which costs north of $100k. You're essentially buying a top-of-the-range Porsche at Chevy bolt prices... The main reason they can do it? This fully automated factory : they churn a car out every 76 seconds. Link
Do you mean this Xiaomi?
Xiaomi SU7 breaks down after 39 kilometers and cannot be repaired
That was considered 'normal' back then. It's not now, even for Mercedes Benz. I too owned serial BMWs when I lived in the UK in the 1990s. Most unreliable cars I ever owned (and I had moved from owning Fords in the US in the decade prior which were remarkably resilient, having to compete with Japanese cars). The Japanese set the reliability standards. The Chinese are just maintaining them, like everyone else.
No consumer cares about 'over-capacity' if can buy a car for less than it costs to make. Except those working for companies that must cover their costs. It then becomes a political issue - and rightly so.
Tesla received $0.4 billion of federal loans and bailout support via the Advanced Technology Vehicles Manufacturing (ATVM) Loan Program. However, that amount was repaid in full with interest, almost a decade early. The federal loan Tesla received was for $465.5 million and was granted in 2010 — the first recovery year after the 2009 financial crisis. As CleanTechnica reported in May 2013, that was paid back 9 years earlier than it had to be.
While Tesla did receive a lot of aid from taxpayers, Tesla paid us back.
Tesla’s total subsidy value according to the data is $2,441,582,590 ($2.44 billion), across 109 “awards” — 82 federal grants and tax credits as well as 27 state and local awards. Link
The trick is to give subsidies throughout every step of the supply chain rather than just the end assembler. And since when were China happy to be 100% compliant with the WTO (not as though other countries are clean). You've gone too far down the hole.
https://asia.nikkei.com/Spotlight/Electric-cars-in-China/China-gives-EV…
Among more than 5,000 mainland Chinese listed companies, five of the top 10 recipients of government grants during the first half of this year were local manufacturers of EVs or the batteries that power them, according to data compiled by Chinese information provider Wind and a survey by Nikkei Asia.
Contemporary Amperex Technology, or CATL, tops the list, having received 2.85 billion yuan ($391 million) in government subsidies for the six-month period, almost a threefold increase from the year before.
EVE Energy, one of CATL's main competitors, also made it onto the list, with a sudden increase in subsidies. The Guangdong-based EV battery maker received 1.08 billion yuan in the first half of the year, about four times more than the year before.
Sure, Tesla received post-GFC financial support, as did all the other US car makers.
Tesla actually did something useful with it and repaid it, the others did not and remain laggards in the industry.
A case of corporate welfare actually working, just like Chinese dominance of the shipbuilding industry.
I can't answer your question, but are there any vehicle manufacturers anywhere that aren't subsidised?
I don't think the Chinese are particularly concerned about how much the subsidies cost them. They had a clear strategy to take advantage of the move to electric vehicles as an opportunity to gain market share in the global market. It has worked out exceptionally well for them in that regard. Ditto the quick development of domestic chip research and manufacturing (when sanctions were applied some people thought it might take them 20 years to regain ground - it took about 2). Good luck doing that while relying only on 'the market' without top down support.
I'm no fan of one party governments, but the fact is along with all the disadvantages come some pretty substantial advantages that can't be easily dismissed. Central planning along with a market economy seems to be working out well for the Chinese (ignoring the social costs of course). Maybe there's a thing or two we could learn from them? I for one would like to see a government with the guts to actually try shaping our economy and not just taking the lazy option of 'letting the market decide'. Credit guidance / deciding on some strategically important industries that can borrow at preferential rates might be a good place to start. It could certainly have helped avoid the economic tumour that is our residential property market.
Their chip development has been greatly embellished
https://www.ifixit.com/News/95646/huaweis-kirin-9010-is-a-reality-check…
Here's an interesting response to our recent flirtation with lower cuts: why not subsidize power use? I'm sure encouraging people to use more electricity will help with our supply issues
https://www.rnz.co.nz/news/on-the-inside/516704/nz-s-big-chill-was-an-e…
Of course they should pay for everything then we could be a pacific island paradise just like Cuba is in the Caribbean
Would have to stop the residents fleeing to Aus though so travel would have to be banned - positive climate change impact
and who needs Aukus as China can become our new BF and send us subsidized Russian oil
The winter energy handout is another Govt rort - paid to the multi millionaires in the Tauranga rest homes. If it exists at all it should be targeted - same as lots of other handouts - that is why we have a scheme like community service cards ffs
There's a case to be made there for sure, but to frame it as a response to nearly running out of power supply seems crazy. As in the comment below, I'd much prefer to see heavily discounted insulation and other longer term solutions rather than literally adding fuel to the fire.
OK, imagine you're at a round-table meeting discussing how to reduce the chance of blackouts in NZ. One person proposes insulation subsidies, one recommends fast tracking new power plants, one suggests encouraging big users to be more flexible with their power demands, another suggests encouraging grid-scale batteries. Then the next says 'how about we give people a discount on their power use?'
Which one seems completely out of place for the discussion at hand?
And then after a surprised silence, the conversation moves on and the last guy interjects to ask why everyone hates poor people.
NZ has decent market incentives for rooftop solar already in place. Most banks provide interest-free top-ups on home loans to cover rooftop solar installation costs and some power retailers pay up to 17c per kWh for excess solar power generated by households.
This allows a payback period of 4-8 years depending on various factors, which is as good as it gets without taxpayers being out of pocket by millions.
Agreed, I have fixed 17c pay back with Meridian for 5 years (with reasonably competitive tariffs also fixed for 5 years, and I can break without penalty after 2 years from memory). I expect something like a 10% return, with no tax payable, with panels that should still be performing at 87% after 30 years (although there could be a new inverter or two in that time - it comes with a 10 year warranty).
This scheme has already been in effect for several years now. The website states:
more than 110,000 installations of insulation and heaters have already happened... In August 2023, the government expanded the eligibility criteria for insulation grants, meaning they're available to around 58,000 more home owners
51%
"In 2022, non-fossil fuels accounted for 49% of total installed electricity generation capacity, most of which came from hydroelectric (16%), solar (15%), and wind (14%).5"
We should note that the copper price rose sharply again overnight, now back up to US$10,500/tonne and the peak and all-time high last reached last in February 2022.
April 13 (Reuters) - The London Metal Exchange (LME) on Saturday banned from its system Russian metal produced on or after April 13 to comply with new U.S. and UK sanctions imposed for Russia's invasion of Ukraine.
The sanctions aim to restrict revenues for Russia from the export of metal produced by companies such as Rusal and Nornickel that help to fund its military operations in Ukraine.
The U.S. Treasury Department and the British government on Friday prohibited the 147-year old LME and the Chicago Mercantile Exchange (CME) from accepting new Russian production of aluminum, copper and nickel. Link
Qualcomm says it’s not expecting any revenue from Huawei after 2024
The US Department of Commerce revoked Qualcomm’s license to supply “4G and certain other integrated circuit products” including “WiFi products” to Huawei and its affiliates and subsidies.
The move comes after American firms like Qualcomm were barred from selling its 5G chips to Huawei because of the US trade ban imposed in 2019. Now, with this new ban, Qualcomm is essentially unable to provide its main products, smartphone chipsets, to the Chinese giant.
Huge organic dairy operation for sale
Expressions of interest invited for portfolio of six Southland farms.
Oz budget surplus predicted - for this year only...
...but bigger deficits for the next three years
https://www.abc.net.au/news/2024-05-13/budget-to-confirm-a-surplus-this…
As I mentioned would happen many times before:
https://www.rnz.co.nz/news/national/516717/public-sector-cuts-education…
"...how it can be cheaper for the taxpayer to pay consultants twice the rate for doing the same work as MinEd staff. Let me count the ways …
* Consultants will work for 8 hours per day.
* No karakia training, no cake Tuesdays.
* No unlimited sick leave (yep, still a thing, though covid is over).
* No departmental days in addition to annual leave.
* No paid Union meeting time.
* No projects that simply drift out in time.
And, when the project ends, the consulting fees stop."
Acknowledgement KB
How I know that’s baloney:
- I don’t get unlimited sick leave
- I don’t have karakia training
- I work 8 hours
- Not part of a union
- Departmental days are Xmas to New Year
- I don’t earn $400 an hour like consultants do
- Projects drift because private sector suppliers can’t do what they said they would do.
Agreed. You forgot to mention that deliverables coming out of a consulting shop go through rigorous but efficient review/QA processes and often go straight to decision makers on the client side.
In comparison, bureaucratic channels within the public sector include layers of middle managers with zero subject matter knowledge in the deliverables yet feel the need to chime in with meaningless inputs to justify their overpaid jobs.
Even though the houses exteriors are virtually finished, I guess by the normal 4 teams followed by film crews, WBD has decided to pull the plug on THE BLOCK
Too worried about the property market pulling another sales flop. The producers have done this to themselves by setting the reserves ridiculously high and the teams making no money for their months of effort.
On the other hand the aussie version of the show is a boon for contestants
The real value for the contestants is in the publicity. I've worked with the winners of both the Block and Masterchef in Australia to help them leverage their success with subsequent businesses. Still disappointed that one Masterchef winner didn't like my idea of pursuing something along the lines of My Food Bag when nothing like it was yet on the Australian market. Big lost opportunity there.
Something for later today Interest authors.
Real time natural language translation from GPT-4o: https://www.youtube.com/watch?v=c2DFg53Zhvw
Have for a long advocated that this would be a real game changer. Maps was right?
Meta has invested heavily and recently released their AI, Spotify is apparently doing some fantastic things for the podcast community (post production).
There are a couple of consumer earbud products on the market now, though the end-user experience varies: https://www.timekettle.co/products/m3-travel-translator-earbuds
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