A review of things you need to know before you sign off on Tuesday; a river of bad data and bad news, eyes on dairy auction, livestock farmers may have to wait till 2026 for better returns, swaps firm, NZD weak, & more

Private Credit has a lot of potential to blow up.... not a biggie in NZ IMHO

Everyone's scrambling to find investments to somehow insulate them from what's coming.

Most will be sad with their choice.

They are basically bankrupting themselves in order to try and win at economic attritional warfare.

They're winning so far.

With sunken demand, their higher prices may not have enough sales volume to cover the difference. So some go under, and the survivors become a little more monopolistic due to decreased competition.

End results the same though; the opposite of what central banks are claiming to be doing.

Or do they, just maybe, pass on those extra costs to their customers?

If you can. For ex, price of a Big Mac in the US has increased 100% over the past 10 years vs "actual inflation" of 31%.

I did a comparison with Japan over the past 7.5 years as I have the data and a Big Mac increased in price by approx 15% - twice the rate of inflation.  

You can only pass costs to consumers if they're willing to pay - not forgo consumption or find substitues.

In the case of Maccas Japan, market share is too important for them. And they're likely to be largely debt free and operate on razor thin margins. 

https://financebuzz.com/fast-food-prices-vs-inflation 

Yes but we’ve just had 30+ years of the reverse of this cycle where interest costs were experiencing disinflation so it shouldn’t be a problem now that we have the reverse cycle playing out should it?!  The trick was to use the low rates as an opportunity to be debt free or low debt relative to income just in case rates normalised (see history, it always happens in the long term) - but what did people do in this period? They loaded up with more debt! 

Imo inflation is locked in regardless of which way we go here. Debt is borrowing from the future. We had too low interest rates for decades, borrowed enormous sums from the future and far too much went into consumption/non-productive assets, and now many of the things that allowed for such a low inflation rate (China/Ex-USSR joining global economy, globalisation, women entering workforce, etc) have ended. So now the neutral rate is much higher meaning we are in a far more inflationary environment globally. 

Unfortunately we are now also dealing with massive debt loads on unproductive assets to go along with it. Which takes more and more money from people out of the productive economy. We could drop interest rates but it would need to be by more than 1-2% to make much of a difference. And if we do that, we experience what Japan is right now: downward pressure on the currency. Which will do what? Make our imports more expensive. Which will mean what? More inflation. 

We are in the "pick our poison" stage of things here looking for the least lethal option. Because of the nature of our economy (very dependent upon and open to trade), our economic management for decades (especially severe mismanagement of the housing market), and global conditions we don't have much choice but to follow the Fed. 

Yeah the party is really rockin tonight.....

Sony's crypto news pushed your trigger Gally? 

Wasnt "looking through" things the reason why we are where we are in the first place?

Of course. Just like the RBNZ did in 2021, when it begrudgingly raised the OCR to....ta-da...0.5%, even into the face of its own date showing CPI rising 4%. But of course it looked-through that and saw a future of 2%....But, hey. At least the driver of our economy was going gang busters - "CoreLogic’s House Price Index rose a further during the month of September, with the index rising by 27.8 percent over the year."

"The Reserve Bank expects annual inflation to increase above four percent in the near term.  Annual inflation is then expected to fall to around two percent

https://www.parliament.nz/mi/pb/library-research-papers/monthly-economi…

Yep. All in order to protect the banking fueled ponzi. How did we all get conned into to position.

Not months ago. Decades ago...and we have chosen to do absolutely nothing about it except stoke the fires of our own, now inevitable, destruction. But maybe that's being overly pessimistic. Iceland is doing ok today, after all.

Fabulous suite of stories this afternoon to be fair. Or maybe I am just relieved that more people are finally realising that the economy snapped months ago and we are now in a tailspin.

I've been saying this for a couple of years now. But the place is so fixated on the housing ponzi narrative, the wide reaching ramifications have been ignored.

We have lots of house listings, and flat prices which is what people have been waiting for. And also record insolvencies, falling consents, rising unemployment, more job competition, and shrinking sales.

great post

With people spending vast sums of time and money to meet rent obligations, there is little room and more importantly capital for an entrepreneurial culture to develop.

people do not have garage in cheap rentals they have been turned into bedrooms, you cannot learn how to do things in a workshop with your dad, if you neither the workshop.... or a dad around.

Dads letting you fail at small things when young set you up to cope with failure later when its important, and teach you its ok, you can try again.

Yes why is that. To me it is strange going unfathomable that in today’s modern society, gender would produce such a separate view of the politics on offer.

It was the Jacinda effect, old, pale and male does not appeal.

The young educated and skilled have voted with their feet and said see ya after seeing what the coalition were offering, that will impact the survey feeling.

We're undergoing a significant population change which will not be captured by the surveys. It would be great if they also interviewed people when they left to get a better handle on reasons why people are choosing to leave. We're in a global competition for talent, I'm not sure many people grasp this.

I have four daughters and one daughter in law in that age group. Not a single one support major parties. All own property and have kids but none of them work full time. Their careers, and they do have successful careers, are sorted around family which also ranks higher than their partners career. Whanau is everything.

They all consider themselves extremely lucky . They hate the main parties for the country they have created,  they hate the housing ponzi and the concentration of most on having to work long hours.

Easy answer, social benefits. Predominantly women still are raising children even in single parent households (or actually especially in single parent households). Most carer roles are not appreciated and even public health carers are also significantly underpaid. Yet women even while struggling to hold down 2 or more jobs are still required to pay for housing & essentials so benefits are a large source of income.

It is easy to draw votes when you brand yourself the giver of social benefits, and the opposition must be the one to take them away. Take for instance Labours marketing slip up when they pushed heavily that National was going to take away disabled funding for public transport (despite Labour never having provided this or even access to PT in the first place) and that National were going to cut disability benefits (despite Labour having cut the funding and reduced it below the agreed levels so they ran out months before years end so had to stop providing essential needs like wound care, food prep, hygiene & medical checks) and that National were going to can pay equity settlements (despite Labour actually having done so years before for many female dominated underpaid roles with releases that there could be no more applications or extensions far before the election with just a whisper of press release). Or that Labour had already put in place policies to cut benefits and kept systems that entrench social deprivation and discrimination in the last few years so many women who cannot work cannot even access social benefits; all while claiming it would be National to do this if elected (got to keep the threat of a sword hanging over the heads of the populace in case they don't do what you want them to). So many women are forced into abusive relationships to survive.

It is easy to paint Labour as the party of social benefits even though they are actually closer to the opposite. However it is the universal benefit above the age of 65 that is crippling the country, taking away the opportunity to fund those in need of support. It is the largest costing social benefit (compared to all other benefits combined) that is the least needed and that no party actually will touch so those currently drawing on it will ever need to worry about cuts to it. So again misinformation in marketing but effective in targeting the demographic desired as parents, especially mothers, heavily influence the votes of their children who are starting to vote.   

The Greens, NZ First etc & other parties (in fact all parties) are the same with the same corruption & fraudulent marketing. TPM was just more blatant with the vote buying. But all parties lie, National, Act, Labour Greens etc they all lie and they are all in many ways self serving and blatant in dog whistles. The difference is the marketing spin on those lies to cater to different markets and how stupid most the public is.

Sadly with dropping rates of education and less time for people to read and understand history & political vs dept branches of govt we really have a problem that all marketing and misinformation can find the NZ public easy targets. This is a problem in many ways as misinformation tactics can be used for a cause and against a cause. The more people are drawn into us vs them the less they critically think as it becomes more of a meaningless sport with artificially drawn sides to fight of evil doers and lots of dog whistles. Just replace your imagined caricatures of them for your imagined caricatures of us. Compare each sides imagined version of evil doer, they are not real people just storybook villains a party puts up to distract the general public.

No party is without marketing lies, misinformation and dog whistles in this country. The less educated the public the better for them, sadly, hence most have stuck to plans to continue to reduce education standards. The more we allow cognitive biases and lack of education in our teaching staff and youth the more we have it in our adult population as well. Sadly this trend is continued as the teacher training is lacking much of science, reading techniques, basic mathematics techniques and even general knowledge... the amount of basic education needed for teaching staff gets larger with each year we allow declining standards in primary & high school education.