Here's our summary of key economic events overnight that affect New Zealand with news the northern summer is delivering positive economic vibes.
But first up today, the expected rise in dairy prices at today's full dairy auction actually came in slightly better than expected. In USD prices were up +5.5% with the key WMP price rising +7.2% and SMP up +4.0%. Volumes sold were elevated. But in NZD the gains were not as strong, up +2.3% as the Kiwi dollar has been strengthening lately. Today's result could keep that going. China and other north Asian buyers were prominent bidders, making this the biggest rise since March 2021. But having said that, overall prices are still only back to June 2024 levels so really it is only a short-term recovery.
In the US, retail sales at physical stores were up +4.9% last week from the same week a year ago, reinforcing the rise in retail confidence.
In Canada, CPI inflation fell to 2.5% and a three year low. Actually there is no surprise here because that was what their central bank predicted for H2-2024 when they trimmed rates at the end of last month.
Taiwanese export orders rose a very healthy +4.8% in July from a year ago, up from a +3.1% increase in the previous month and exceeding market forecasts of a +2.6% rise. The increase was driven by continued strong demand for AI chips but elsewhere demand was also quite broad. There has been a good turnaround in 2024 because a year ago these export orders were retreating.
China held its Loan Prime Rates unchanged in August, as expected, after the cuts in July. The 1-year loan prime rate (LPR) is still at 3.45% while the 5-year rate was retained at 3.85%. Both rates are at record lows following unexpected rate moves down in July.
And China has approved a record increase to their nuclear power plant expansion, signing off on eleven new facilities to be built. Each one costs NZ$4.5 bln. This adds to the 55 nuclear power plants already active, not including the ten approved in 2023 and not yet commissioned. They see this as a central element of their drive for "clean and stable energy sources".
Turkey held its official interest rate at 50% in their overnight review. You may recall a year ago they had been battling ~70% inflation using an odd Erdogan-inspired approach. But that clearly wasn't working so a more conventional policy was adopted raising their policy rate from 6.5%. It is now bringing results with inflation easing from 75% in May to 62% in July in a notable drop.
German producer prices are still deflating, although 'only' at -0.8% from a year ago, half the July rate of decline. Lower energy costs are the key driver here so actually they will like this result.
Sweden cut its official interest rate by -25 bps to 3.50%, and signaled two or three more similar cuts this year are likely should inflation develop in line with the central bank’s outlook. It was the second rate cut of the cycle, easing further from the 4% interest rate first reached in September 2023.
The RBA released the minutes of its August 6 meeting (what takes them so long?) and those warned of upside risks to inflation and therefore monetary policy. The risk of inflation not returning to target within a reasonable timeframe had increased, those minutes showed. The situation came amid the slow pace of disinflation, signs that the gap between aggregate demand and supply was larger than previously anticipated, and the upward revision to the forecast for final demand. Markets didn't react immediately to the 'warning'.
The UST 10yr yield is now at just on 3.83% and down -4 bps from this time yesterday. The key 2-10 yield curve inversion is slightly shallower at -17 bps. Their 1-5 curve inversion is little-changed at -76 bps. But their 3 mth-10yr curve inversion is now at -151 bps and a deeper inversion. The Australian 10 year bond yield starts today at 3.96% and unchanged. The China 10 year bond rate is down another -3 bps at 2.13%. Beijing is struggling to keep it from falling. The NZ Government 10 year bond rate is now just on 4.24% and up +2 bps.
Wall Street is slightly softer with the S&P500 down -0.1% in its Tuesday trade. Overnight European markets were also down about -0.3%, except London which fell a full -1.0%. Yesterday Tokyo closed its Tuesday session up +1.8% in a bounce-back. But Hong Kong was down -0.3% and Shanghai down -0.9%. Singapore was up +0.4%. The ASX ended its Tuesday session up +0.2%, but the NZX50 fell -0.8%.
The price of gold will start today up +US$9 from yesterday at US$2511/oz.
Oil prices are down -50 USc at just on US$73/bbl in the US while the international Brent price is now just under US$77/bbl.
The Kiwi dollar starts today up almost another +½c from yesterday at 61.4 USc. Against the Aussie we are up +½c too at 91.2 AUc. Against the euro we are up +20 bps at 55.3 euro cents. That all means our TWI-5 starts today at 69.3 and up +30 bps from yesterday.
The bitcoin price starts today at US$58,833 and down -0.7% from this time yesterday. Volatility over the past 24 hours has been moderate at just over +/- 2.3%.
Daily exchange rates
Select chart tabs
The easiest place to stay up with event risk is by following our Economic Calendar here ».
104 Comments
The Kiwi dollar starts today up almost another +½c from yesterday at 61.4 USc. Against the Aussie we are up +½c too at 91.2 AUc. Against the euro we are up +20 bps at 55.3 euro cents. That all means our TWI-5 starts today at 69.3 and up +30 bps from yesterday.
Man, it is just getting smashed from that rate cut.
This morning when I woke, the sun was shining through the window. In the distance, a little bird was singing.
As I thought to myself, how can I make such a beautiful world better for my fellow humans? A more equitable and just society.
Should I volunteer down the local soup kitchen? Maybe I should form a political organisation and make a play to force change on government. Maybe do some mentoring for at risk youth. The possibilities seemed endless.
And then it came to me. I'll go online, and bitch about how expensive houses are. Again.
Oh dear the cynicism is high this morning isn't it?
But to be fair Pa1nter and to every other contributor here keep doing it. Change really only occurs when enough people call for it, and this site and these comment streams are doing their little bit to improve understanding of how it all works, interconnects and likely consequences. EVERYONE who contributes here learns. Even when we are wrong. We ask why are we wrong and get many telling us various reasons, some or all may be right or not. But right through out it all will be the thread of truth and understanding. Education and knowledge are our greatest tools and power and this site contributes more than most.
Who knows, there might just be some politicians or advisors who participate, and absorb what is presented and it comes to influence what is done at the highest levels. If we didn't have these discussions, nothing would be gained.
Mmm, I think the technology of the internet has allowed access to much greater understanding and transparency. You cant get decent change if you don't know (or understand) the problems.
The hurdle becomes enacting actual change. Hopefully at the rate things are going we will see someone actually pushing serious reform in coming election cycles. Probably a few away still.
Neither the Left or Right wing stances can sustain without being pro natalist.
Make houses cheaper to make, by 30-50%
Make the up front liability to a resident for a house maybe 60-70% lower than it currently is.
Make the country more about being a relatively easy place to subsist, raise a family and enjoy the environment.
People can decide whether they'd prefer that, or the dog-eat-dog system most of the world's adopted - albeit with shiny lights and nice things.
Brad Olsen said on Newstalk ZB last evening that the housing market has likely reached its floor.
IMO a price crash is not a good outcome for anyone since it will only affect the wealthy on paper but could potentially wipe out tens of thousands of well-paying jobs in construction and infrastructure.
" but could potentially wipe out tens of thousands of well-paying jobs.."
Well Hello
Asset appreciation is just money being pumped into the system at inordinate rates .... to KEEP the greater fool/ponzi scheme going ... this is the solid backing behind ALL jobs now
The problem being you dont collectively issue debt at the current rate without eventually killing a currency
Grab your MIGA hat (Make Inflation Great Again) before it becomes a sore point
"but could potentially wipe out tens of thousands of well-paying jobs in construction" Applying to residential construction, I'd say overpaid. We'll soon be back to, "We build your house in 18-24months time". Residential construction up until a year or two ago have had it far too good.
When exactly is eventually? You seem a bit vague about it
Brad should know those jobs are baked until affordable homes can be built, interest deductible has killed the build to rent market as second hand is cheaper and falling 9k a month , compounding, sine Xmas with a big 80k discount dollop on top last month…
if you want long enough they could become a two for one deal It seems like Devonport is having a Briscoe’s sale
Do you really think China is a position to pull world economic growth out of the fire like 2009?
Perhaps on planet Key
crikey
just noticed even Tony Alexander agrees with me
https://www.oneroof.co.nz/news/tony-alexander-rock-star-economy-more-li…
Looks like the easy cash flowing into Oz from red dirt exports could be coming to an end. Link
Lower for longer commodity prices could be catastrophic for their economy. The country went from having the 55th most complex economy in the world in 2000 to 93rd in 2023, currently sitting below Malawi and Pakistan on that list.
No such thing, I tell 'ee.
Resources are infinite - indeed we can conjure them up using the unlimited capacity of our brains, and all go flying high.
Oh wait - put 100 economists in a room, and they'll NEVER produce a ham sandwich.
Seriously, there's two things going on. One is that Australia has to compete with low-wage/repressed resource-sources; they've done that mainly by scale. But there comes a time when high-consumption living cannot compete with subsistence. Secondly, all sources suffer from the best-first, ever-worse-ahead syndrome, and that is multiplied by the fossil energy (doing the Au extraction) itself going from bets-to-worst. Society has gotten to a point where it can no longer afford itself (Au-level society, at least) so we've pumped debt into the widening split. Back to that ham sandwich - debt cannot create that which is not available.
No such thing, I tell 'ee.
Sure there is. It's why most petro-states are so narrow in their function. And arguably corrupt.
But there comes a time when high-consumption living cannot compete with subsistence
Inevitably true, but probably a whiles off. The market can afford me significantly more ham sandwiches than I can produce myself in the same time period.
Something quite extraordinary is happening in Australia. Over the past few weeks, many key authoritative figures - former PMs, top strategists, etc. - came out against AUKUS and US imperialism, in favor of Australian independence. A small listing the various key statements Link
Calling it right now. Household helper robots will be THE product that will symbolize China's rise to world preeminent power status, much like the Ford Model T did for the US. It's coming sooner than you think. This is the mass production version of Chinese company Unitree's G1 Robot. You can already buy this robot today for $16k. Link
The very small town of Okere Falls takes out NZ's best toastie award...AWESOME !!! ....
https://www.1news.co.nz/2024/08/21/great-nz-toastie-takeover-2024-winne…
So when the new Auckland train set opens and trains run more frequently, level traffic crossings will block flow at a much higher % then now . The necessary over passes etc forecast to cost billions and are unfunded by CRL meanwhile a new subway line opens in Sydney
who will pay to fix this ? The rate payer ….
I live close to the CBD near where the CRL Western line runs,I think there is approx 6 level xings between Avondale & Mt Eden.I have read somewhere,that with increased frequency,these xing's could be closed effectively for 45 mins out of every hour...oh how we love to do a half ars*d job in this town...
"meanwhile a new subway line opens in Sydney" - Labour were going to build one for $13 billion (LR had become metro), and National cancelled it. Then they go on a jolly to Sydney to see how they can spend much more money, and say things like "we need cross party support on transport projects".
They either need to stop rampant immigration or build the infrastructure required (and roads only won't cut it in Auckland). In fact even if they do stop rampant immigration, they still need to build infrastructure to catch up.
5 years ago they were saying we wouldn't need to build more rail as self driving cars would somehow solve the problem (when in fact they will only exasperate the problem). So were are all these self driving cars now?
Seems to be a standard playbook. Cancel the NZ battery project, then complain about high prices during a dry year.
Rule out Onslow - maybe batteries will solve it in 5 years?
Cancel the ferry terminals - maybe they think we'll have self-driving kayaks in 5 years anyway, why bother?
Yes they are all guilty of it. I guess they align with the big blocks of voters (old and anti change vs young and woke) rather than economics (conservatives vs socialists)
But to me the biggest problem our country has is infrastructure (its much more of a problem than wokeness), so that almost rules National out because they simply have no idea. At least Labour has some idea even though they take forever to do anything.
It's sort of like the Greens
Probably better at highlighting serious issues than any other party
Seemingly incapable of actually making decent solutions.
National will know the problems too, know the right answers are beyond them, so go for hacky shortcuts they can pass off to the market to try and fix.
At least Labour has some idea even though they take forever to do anything
What is your comparator to Labour? They get accused of taking ages to do anything but the alternative is National that literally do nothing? Cancelling stuff is easy which is all they seem to do.
Yeah - a goodly cohort swallowed the bunkum about unlimited economic growth.
Tended to lead to the cranial holding of a lot of other knock-on untruths.
Our last Government was attempting to bridge the widening gap between the (false) growth-forever creed/belief; and then needed replacement (how to live maintainably, long term).
They got voted out by massed ignorance. How much of that she understands, is the question?
weird , how you dont think politicians should be accountable for their "legacy"
Unfortunately we have a recent track record of politicians who seem to want to ask what their country can do for them, not vice versa
https://www.rnz.co.nz/news/national/525748/jacinda-ardern-on-us-democra…
Check out the amazing insight shes offering ...
"If there's any lesson I learned while in politics, it was that ultimately the politics of any country is for that nation to decide, and for that people to decide"
Ah
So thats why shes there!
Or perhaps its to make Biden look on to it
She left when it was obvious she couldn't hold the support of a majority of the Nation, I'm not sure why some people are so angry at her. I think she did a great job in difficult times.
I think the main legacy of COVID was that people spent more time online and got suckered in by social media agitators making them angrier and angrier and angrier.
I can't think of a single thing that this coalition is doing that isn't consistent with the things people claimed to be angry at Jacinda about (other than the obvious misogyny aspect which seems to be now increasingly targeted at Chloe and Willis), and yet those that were angry at her still seem to focus their anger at her rather than the incumbents that are literally doing the same or worse.
I can't think of a single thing that this coalition is doing that isn't consistent with the things people claimed to be angry at Jacinda about
I see National making no changes that come close to the implementation of mandates that result in the loss of staff from key sectors if they exercise their right to choose to go through with a medical procedure, which caused some to lose their jobs, homes and segregated families and friends which for some has not healed to this day. If you can't observe or recall that objectively, without emotion involved, then you may need your memory checked.
If your definition of a great job is to get everyone to cower under the bed-sheets while fire-hosing round billions on nothing, then sure, Bravo.
Ive found it incredible how seemingly intelligent people still dont recognise the obvious hangover that was always coming our way courtesy of this reckless overreach.
As for "criticism to be filed under misogyny"... its a petty cop out for the position of PM
When do we start paying back these billions that were "fire hosed" around? Because at the moment we're putting tax cuts and interest deductibility for landlords on the tab.
I suppose we will have to check with our English Lit and Journalism degree holding finance minister (no better than Grant Robertson) on when their pre-election bribes lapse. Wonder if she's yet read the PREFU and has there been an OIA release of her spreadsheet?
Yet again, he gets so close to hitting the nail...and then drops the hammer.
"Fiscal policy actions...boosted government debt over 80% - for no sustained economic or social improvements. Now, fiscal policy is having to be tightened.... This will slow the pace of growth in our economy for many years. There is more to an economy than just borrowing costs..... New Zealand has stepped down a notch or two on its underlying pace of productivity growth, its underlying pace of economic and income growth, and its overall long-term prospects..... The 80,000 Kiwis who have left this past year certainly don’t see roses just around the corner..... These things won’t stop a good recovery in the housing market from occurring"
https://www.oneroof.co.nz/news/tony-alexander-rock-star-economy-more-li…
Those that flee across the ditch expecting exceptionally lower mortgage rates are in for a surprise... affordability is out the door in many parts of OZ ... Housing is broken in both countries and we can keep playing lower the OCR to create affordability but the value spurt such causes only adds to the problem . Nice thinking the average or median values are workable but the multiplier effect just knocks everything into a new realm... 1 million turns into 2 million after its paid down that requires the next cycler to pay 2 million buy in ...then its 4 million...it just wont work.... all you end up with is 4million dollar 30 year old 2 bedders...which is pretty much where we are headed.... something significant needs to happen .... this is why many are calling it a ponzi ...wait until the prices really get blistering...folk will be calling it a tragedy. Land needs to be freed up at stupidly low prices to attract development away from traditional development zones and the regulations loosened to enable simple easy construction . Otherwise carry on with the current model...its doomed to failure....and will likely destroy larger society. Proof of this is Auckland ...its condensed living and an accepted way of life because most dont know any other life or are fearful of change....Construction costs are high because everything is at boiling point... its like a bottleneck and folk are hooked on pressured living....New Zealand doesnt have to be that way...we have plenty of land given our low population. The idea that there is no loose capital/liquidity to invest elsewhere in affordable housing keeps the values higher than they should be. Plenty of folk sitting on TD's looking for good sound value investments. Open up a block of land with 20-40,000 sections available for $1 each to those that have 300k cash (not credit attained) and clawback the land value upon sale (Crown owns the land until the clawback is paid).... something like this needs to happen ...obviously not the perfect model...but you get my drift...attract capital...instead of squeezing it. Govt could do so much more if it just got folk interested and started enabling those with capital. Far North Crown land development ? Feel free to put the boot into it...but its better than sitting around watching it all tumble down infrastructure and all in already established towns and cities... I will sit back and watch the billions get eaten up with dismal social outcomes / results.
The US Treasury has become a key driver of stocks and other asset markets through its pro-cyclical issuance of debt and the increasing depth and liquidity of repo markets, BBG's White writes in tdy's MacroScope column. Writes net treasury issuance leads global equity prices by about 6-9mths due to repo markets. The rise in the volume of collateralized lending, i.e. repo, facilitated by the increase in the supply of USTs is increasingly influential for the behavior of asset prices. Link
German producer prices are still deflating, although 'only' at -0.8% from a year ago, half the July rate of decline. Lower energy costs are the key driver here so actually they will like this result.
Good Morning from #Germany where TSMC is breaking ground on a new chip plant in partnership w/Infineon, NXP Semiconductors, and Robert Bosch in Dresden. The project represents a €10bn investment, w/Germany contributing €5bn in subsidies. The EU approved the €5bn German subsidy just in time. The German subsidy “will strengthen semiconductor production capacity in Europe, helping us deliver our green and digital transition and creating opportunities for high-skilled employment,” Margrethe Vestager, the EU’s competition commissioner, said. Link
Big company, struggled with COVID era supply and demand dynamics.
Broken production
Customers buying up in bulk - sends false demand signals
Throw money at productivity
Once supply is sorted, massive demand downturn.
Like falling out of a tree and hitting every branch on the way down.
Ok, so the last few years have been challenging, no different to any large company the vast majority of whom came out blazing post-Covid.
They have had a decade to refine their optimal supply chain and operating model. Instead of doing so, hubris saw them under-quoting enormous vanity projects and take thier off where they actually made money.
The refined supply chain and operating model was the problem.
No overhead in head count in the event all, or a great percentage of their staff were quarantined/sick. Best way to minimize labour, has no redundancy.
Expectation of fastest possible delivery times, and efficient stock control measures. Best way to minimize stock levels, also has no redundancy.
How would you economically counter that? Overstaff, and over warehouse, in case things get upended?
Instead of doing so, hubris saw them under-quoting enormous vanity projects and take thier off where they actually made money.
You're talking now about Fletcher construction? Super rare for construction companies to effectively price and complete projects in the last 5 years or so. Being a big company, amplifies the problem.
The only way I've done ok out of construction over this period was to reduce sales. Not something most shareholders would be excited about.
It's not just the last 5 years though is it? They have at worst an oligopoly and at best a virtual monopoly in building supplies and large construction capability. I'm aware of several competitors who have done very well over the past decade. I appreciate the post-covid inflation shock would have been a challenge, but that doesn't nearly cover the shareholder value destruction of a company whose share price peaked in 2007.
The Australia plumbing supplies debacle and law suits?
I'd just like to say that despite being a perpetual DGM it's a beautiful day . Infact I'm out working in warm sunshine with a stunning view of Whaakari (White island) with a beautiful plume of steam and ash.
May the house prices fall like the ash from that plume, then I might get to buy one with this view.
Edit
Wish I could add a photo , it really is stunning
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.