Here's our summary of key economic events overnight that affect New Zealand with news the steam seems to be going out of the Chinese economy as their property sector woes just drag on and on.
[There is no video version today.]
But first, although it is still retreating, the June New York factory survey improved sharply from May, with firms there increasingly positive about the next six months.
And Canada reported a much bigger jump in housing starts in May, far above what was expected.
However, previously fast-rising Japanese machinery orders fell in April in March, but were up slightly year-on-year.
China’s new home prices fell -3.9% year-on-year in May, falling further from a -3.1% drop in the previous month. It marked the 11th consecutive period of declining home prices and the steepest since mid 2015. This is all despite more property market stimulus from the government, which clearly hasn't turned the market yet. There are no major cities reporting any gains in resold houses, with some declines now well exceeding -10% from a year ago. In the new home market only 3 of 70 major cities are reporting year-on-year gains (all tiny) and the rest are all declines.
Chinese retail sales eased higher in May, up +3.7% when a +3.0% rise was expected. April rose +2.3% year-on-year, so this May result is an improvement. But you have to say, in the context of recent Chinese history, this is a modest gain. And remember, Chinese official CPI is rising less than +1% year-on-year.
Meanwhile, Chinese industrial production fell in May from April to be +5.6% higher than a year ago. Markets were expecting that change to be +6%. April had expanded +6.7% on that basis. Tellingly however, electricity production rose just +2.3% in May from a year ago, up only +0.7% from April, staying at the lowish levels it has for the past year. The Chinese central bank kept its one-year Medium-Term Lending Facility rate unchanged in June at 2.5%.
The changed and less outlook for China can also be seen in the benchmark copper price. The February to May enthusiasm has given way to a sharpish retreat.
And here's something you may not have expected; wages are rising quite fast in the EU, up +5.5% in Q1-2024 from a year ago, a spurt higher than the already quite good +4.1% rises in Q4-2023. And it may go higher. The huge IG Metal German union is seeking 7% pay rises now.
In Australia, stories are swirling that NSW is about to raise its land tax rate. (Land tax is separate from property taxes, and does not apply to the family home, or farm. But it does apply to most other land.) NSW isn't the first to do this.
And staying in Australia, data released by their tax authorities shows that more than 40% of their income tax paid by individuals is paid by the 5% who had taxable incomes of AU$180,000 and greater. At the other end of the scale, the 42% of taxpayers earning AU$45,000 or less paid 2.3% of their income tax.
The UST 10yr yield is now at 4.28% and up +6 bps from this time yesterday. The key 2-10 yield curve inversion is still at -48 bps. Their 1-5 curve is still inverted by -82 bps. But their 3 mth-10yr curve inversion is less inverted at -107 bps. The Australian 10 year bond yield is up +4 bps at 4.18%. The China 10 year bond rate is down -3 bps at 2.27%. The NZ Government 10 year bond rate is now at 4.66% and unchanged from yesterday.
As signaled by the futures pricing, Wall Street is rising with the S&P500 up +0.9% in Monday trade. Overnight, European markets were mostly higher but with London down -0.1%, Frankfurt up +0.4% and Paris rebounding +0.9%. Yesterday Tokyo ended its Monday session down -1.8%. Hong Kong was little-changed but Shanghai fell -0.6%. Singapore was on holiday (Eid el-Adha). The ASX200 ended -0.3% lower and the NZX50 dropped a sharp -1.4%.
The price of gold will start today down -US$17 at US$2317/oz.
Oil prices are up +US$1.50 at US$79.50/bbl in the US while the international Brent price is now just over US$83.50/bbl.
The Kiwi dollar starts today little-changed at just under 61.3 USc. Against the Aussie we are softer at 92.7 AUc. Against the euro we are -¼c lower at 57.1 euro cents. That all means our TWI-5 starts today down -20 bps at just on 70.9.
The bitcoin price starts today at US$66,351 and down a very minor -0.2% from this time yesterday. Volatility over the past 24 hours has again been modest at just under +/- 1.4%.
Daily exchange rates
Select chart tabs
The easiest place to stay up with event risk is by following our Economic Calendar here ».
80 Comments
Should we plant more farmland in pine trees or just chip in and buy the Saudi's some nuclear power plants?
“It may sound counterintuitive, but if global oil demand is going to peak soon, Tesla Inc. and its EV rivals aren’t the only companies to watch. As important will be Saudi state-owned electricity and water companies.
…At its seasonal peak Saudi Arabia burns about 1.4 million barrels a day of unrefined crude in its electricity plants — equal to the total oil daily consumption of France.” Or 10x the oil consumption of NZ.
https://www.bloomberg.com/opinion/articles/2024-06-17/saudi-consumption…
Actually,
https://m.youtube.com/watch?v=-DtwweEYoHU&pp=ygUXc2F1ZGkgYXJhYmlhIGhhaW…
Getting full efficacy with the dust issue could be difficult?
They are coming down , pretty much every shipment is cheaper.
NZ retail is too small, its all about volume with China. Best bet would be for wholesalers too tag onto some of the solar farm orders, but that doesnt seem to be happening . Plus the retail panels are generally smaller, i wouldnt want to be putting some of the 2 metre long plus panels on a house roof , though I have done it . heck , years ago i said i wouldnt want to handle anything bigger than a 120 watt panel , that's tiny now.
NZ retail is too small, its all about volume with China.
This would be true if they were manufacturing a special batch to your specifications, but if you were simply ordering a stock size and spec that they keep in the warehouse then it should hardly matter at all.
I'm wondering if I might get an EV at a decent price if the US proposed ban comes in on top of the European tariffs. Watch and wait I guess.
Europe risks trade war with China by hiking tariffs on its electric cars | CNN Business
Biden urged to ban China-made electric vehicles from the US (bbc.com)
I have some sympathy for the young living in Auckland. It has to suck big time. I lived there in the mid to late 80s and it was ok then, but easy to see why the regions gave better life styles and cheaper living. There was then and possibly still is, a commercial attitude that you had to be in the big city to get ahead. There was a slow drift to Hamilton, and in later years that spread to Tauranga as acceptable alternatives. But costs quickly bled off any higher wages you gained. NZ is small enough most business's could easily be located away from the big centres.
And the deterioration; like a pustulating sore, spreads....
"Forget the weather and the economy, traffic is the talk of the town in Tauranga.“Bloody hell, what is it with all the traffic in Tauranga?” asked one resident this month after it seemed like the whole city was brought to a standstill..."
https://www.stuff.co.nz/bay-of-plenty/300909599/worst-city-in-new-zeala…
I don't think you need to be very wealthy, but yes its probably not that great on a low wage or single wage. Although that seems to apply everywhere these days, rents are not cheap in the regions either.
There are some good areas to live in Auckland that aren't that expensive, we are quite happy where we are. But the sprawl areas do nothing for me, all the disadvantages of a big city (traffic etc) without the advantages (amenities and things to do).
I said "good areas to live" and "aren't that expensive". There are parts of the central "working class" suburbs such as Avondale, Mt Roskill, Ellerslie, Panmure, GI, etc that are reasonably affordable and good to live in - there are also parts to avoid. Sure if you want to live somewhere really posh with tree lined streets and top school zones its pretty expensive (although still probably not that bad by world standards).
What is your town house worth? Obviously you shouldn't expect a detached house on a big section if you want something close to the centre.
I watched Love it or List it UK last night, a pretty average 4 bed house in a small town was $1.5 mil NZ. That made NZ look very cheap. Many parts of the USA are getting very expensive too.
I did above. Some of those suburbs are the size of many regional cities, they have their good and bad parts just like any city would. But unlike most other NZ cities, they also have good proximity to Auckland City, concerts, events, beaches, hundreds of parks and playgrounds, etc. You could probably pick up something reasonable for $900k. A similar house in say New Plymouth might be $600k, so its "not that expensive" IMO once you factor in the higher wages etc.
3 bed detached on 500m2 in good condition on our street sold for $930k. My point being that it isn't "that expensive" compared to the $700k average outside Auckland, and central suburbs don't have many of the problems associated with Auckland like traffic etc (my commute is 20 mins on a bad day).
I didn't intend to imply that it is cheap. You would need 2x above average income to live here. But you don't need to be loaded.
It’s not cheap, but a couple on $90k each could easily do it. A teacher and builder maybe, or more likely a professional working in the city and partner.
The 500k mortgage on the rest of NZ average house won’t be cheap either.
EDIT: The average NZ full time wage is $1,246.13 a week after tax, so two people on an average wage could pay the mortgage and have $1200+ a week to live on. So you probably don't even need to be above average.
I was answering in response to "One must be very wealthy to avoid the worst aspects.". I wouldn't consider us "very wealthy" but we don't have any of those problems.
Obviously I don't think houses in Auckland are anywhere near cheap or even reasonable, but that seems to apply everywhere these days. An average house outside Auckland is $700k, I personally find that more of a rip off considering the land value.
I recently sold my UK house in a city the size of Wellington/Christchurch for about $350k NZ. Two bed place with a large garden in the suburbs, good transport links and reasonable area. The show you were watching must have been near London or some other expensive market - there's a very wide range.
Yes it varies a lot in the UK. This was Stratford upon Avon.
They also spent $440k NZ on a 2 story addition, looked about 40m2 x 2 story. Not sure what that costs these days here, I suspect about the same but our finishes and fittings tend to be a much higher spec, I thought it looked pretty average at the end.
We should have built sustainable housing; passive solar, energy efficient.
We didn't, we built tract sprawl.
Which doesn't work, on beyond fossil energy. Which leaves us, before those houses have reached end-of-life.
Which proves Painter's comment on the housing thread, wrong.
Addressing how we negotiate that future, with the existing stock, is the biggest problem - not building yet-more tract or infill.
The usual failure of a posit, is failure to scope widely enough.
Normal? You mean, that temporary period from WW2 until, say, 1980?
That's like Israelis calling everything post 1948 'normal'.
Or the Western media starting the clock with the Russian counter-move re Ukraine.
Pragmatic thinking needs the widest scoping possible - regardless of whether it suits your wishes.
Last time RBNZ jawboned the hint of a raise to the OCR. It would therefore be an embarrassing contradiction for it to be reduced next time in August and ditto really anytime this year. Doesn’t mean to say it won’t happen though. The governor has proven to be as thick skinned as a rhinoceros in NHL gear, and on speed skates, to boot.
Look we are world champions! Top of the world in terms of rental payments as a % of income! Well done us!
https://www.nzherald.co.nz/business/property-insider/JPPVFAEUKJBUFAAJB7…
Luxon's weasel word salad at the time:
"I think if you're a renter, you're very grateful for the fact that actually costs that have been passed on to landlords are not being passed on to you.
"What has been utterly unacceptable was that there's been a $170 per week increase in rents under the previous government and they just kept going up and up and up.
"A big reason for why they go up is because landlords have been hit with costs associated with the removal of interest deductibility, and also the extension of the bright line test and those costs have been just passed straight through to renters with higher levels of rent"
RNZ has an article - Rental listings up 40 percent across country in three months to May
https://www.rnz.co.nz/news/national/519788/rental-listings-up-40-percen…
So who knows what is really happening.....
Good Morning from #Germany where more and more Germans can’t make ends meet as the shocks of recent years gradually work their way through Europe’s largest economy. The scale of the problem means it’s no longer just the lowest earners or people on benefits who need help, the middle class is increasingly affected. While living costs barely played any role until recently, they were mentioned by 12% of new clients in 2023 — up from 5% the year before. That factor is even more important for women. About 5.65mln people were classified as over-indebted last year, acc to Creditreform. There were 17,478 consumer insolvencies in Q1 2024, +4.9% YoY. https://bloomberg.com/news/articles/ Link
He's saying most of the right things IMO - although I doubt we will ever see density in the right areas close to the Auckland CBD where ACT voters live. Will he follow through is the question.
If there was an election right now he would tip my vote towards National, he's counteracting the other nutbar in charge of transport.
The guy literally raised the Trust rate to 39% which raises the effective company rate on a lot of small SME's to 39%. This has an adverse effect on the real economy. Further he introduced new taxes like the app tax all so he could pay for reinstatement of interest deducibiliy on residential property. This increases the attractivness of residential property to speculators and pushes up house prices relative to what they would be had he not done this.
The guy is a walking, talking joke. If he now wants to talk about affordable housing he should do so in clown garb.
Agree. I know many many people who voted for National not because they are big fans but simply to get rid of Labour i.e the least worst option. Imagine if after 3 years we are feeling the same about the current lot, what a horrific situation that would be. I really hope that’s not the case.
Its frustrating. I personally feel that National have lost the next election. They have failed to read the room. Implementing the reinstatement of interest deductibility firstly without any mechanism to pay for it (the foreign buyer tax was scrapped during coalition negotiations), secondly in this economic environment is a massive faux pas. I think it will come back to bite them as those crucial swing voters will swing back to Labour in 2026......its a shame
Nat will rise in the polls. Labour is hammered by having to rely on the hamas and race based two minor parties.
The interest deducibility, whilst sour, doesn't alter the fact that profits will be taxed (as opposed to the previous of taxing losses).
Also consider if you push landlords too hard then the dysfunctional Housing NZ outfit will need more funding.
Who is the most efficient landlord? Not Govt.
BRICS and Petroyuan aren’t driving dedollarisation. They are defensive reactions to US debasement of the dollar through excessive debt issuance, excessive financialisation, military overstretch, while deindustrialising and degrading the lives of West’s citizens. The USD debasement is domestic. The global reactions to protect themselves just makes sense. https://t.co/vlghCZcVsg Link
This question is embarrassing for post-Keynesians (nowadays rebranded "MMT"). It's premised on the false claim the CB=gov't. The answer: 1) US presidents who tried to issue state money got shot (by bond coupon rentiers. 2) So gov'ts don't issue money but borrow it at interest.
Quote Levy Institute @LevyEcon May 10
“If Government Can Print Money, Why Does It Borrow?” is a topic most economists are ill-equipped to address, according to L. Randall Wray, since very few concern themselves with the monetary operations that underlie this question. https://levyinstitute.org/publications/i Link
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.