Here's our summary of key economic events over the weekend that affect New Zealand with news expectations of flatter demand are hurting commodity prices. And that includes some key food prices which are also impacted by healthy supply levels.
But first, this coming week will bring more attention to inflation rates. We will get monthly updates from the US, China, and India. And we will get industrial production data from India. There will also be sentiment data from the US and Australia. The ECB meets again this week and the results will be released Friday morning (NZT). Most see a -25 bps cut coming then, to 4.0%. And locally the focus will be on Wednesday's migration and tourism data.
Over the weekend the data showed the US economy created fewer new jobs in August than expected, adding +142,000 in August, and below market expectations of +160,000. July's increase was revised sharply lower. Most job gains occurred in construction and healthcare while manufacturing employment declined. But their jobless rate edged lower to 4.2% in August from 4.3% in July.
But we do need to note that the +142,000 rise is the seasonally-adjusted number. The actual rise is +263,000 from July which is pretty healthy, it must be said. From a year ago, payrolls are +2.3 mln larger. The economic impact of +2.3 mln more people employed is not insignificant. And that is after the March revision.
Weekly earnings are up +3.5% from a year ago, hourly earnings up a bit more, and that was better than expected.
The US job market is cooling, but not cracking. This fact will give the US Fed more room to maneuver at their meeting on September 19, in ten days time.
Separately, Canada said it added +22,000 jobs in August, a recovery from the small dip in July. Almost all the August increase was for women.
But their local, and widely-watched Ivey PMI fell sharply in August, down to its lowest level since December 2020. However it wasn't matched by the internationally benchmarked S&P/Markit version which reported a stable situation. One of them isn't right.
In China, the end is nigh for struggling developer China Vanke. They reported terrible July metrics, and their liquidity situation worsened notably. Not helping them, China's regional banks are moving faster to quit nonperforming real estate loans. That is leaving the majors holding the bag as the government urges them to lend more to support a weak housing market. It is hard to see how the management of their real estate crisis won't end very badly. China's neighbours are increasingly concerned.
Germany reported a very tough situation for industrial production in July, down -5.3% from the same month a year ago and worse than the June result. But at least exports are limiting the downside. These were up +1.7% from June and that was a gain that was better than expected and one that clawed back its year-on-year dip.
In Australia, home loan activity for owner-occupiers picked up in July, adding +AU$18.9 bln in the month and the most in two years. For investors the rise was +AU$11.7 bln which was an even faster rate of increase and the most since January 2022.
Prices for iron ore, nickel, cobalt, and lithium are all falling, and are all at or near their five-year lows.
World food prices actually dipped in July with declines in cereal and meat prices in the month. (Dairy prices rose.) Overall prices remain their lowest in three years. Good agricultural conditions have persisted for some time now, boosting output. Updated forecasts for global cereal production point to a weather-driven drop in coarse grains offset by expected increases for wheat and rice. So far there is no indication yet that the world can't feed itself, and more than adequately, despite some high-profile pressures.
The UST 10yr yield is now at just on 3.72% and unchanged from Saturday. That is a -20 bps fall for the week. The key 2-10 yield curve is now a positive +6 bps, the most since June 2022. Their 1-5 curve inversion is less at -62 bps. But their 3 mth-10yr curve inversion is unchanged at -144 bps. The Australian 10 year bond yield starts today at 3.90% and down -8 bps. The China 10 year bond rate is at 2.14%, down -1 bps. The NZ Government 10 year bond rate is now just on 4.20% and unchanged from Saturday, but down -10 bps for the week.
The price of gold will start today up +US$4 from Saturday at US$2497/oz.
Oil prices are -50 USc lower at just over US$67.50/bbl in the US while the international Brent price is now at just on US$71/bbl. Both are down -US$6/bbl in a week, or -7.5%.
The Kiwi dollar starts today at 61.7 USc and unchanged from Saturday. That is -¾c lower in a week. Against the Aussie we are +10 bps firmer at 92.6 AUc. Against the euro we are also unchanged at 55.7 euro cents. That all means our TWI-5 starts today at 69.7, unchanged from Saturday, but down -75 bps in a week.
The bitcoin price starts today at US$54,341 and up +1.5% from this time Saturday. Volatility over the past 24 hours has been low at just under +/- 1.0%.
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52 Comments
Offtopic: Christian leaders sign open letter asking MPs to vote no
Overjoyed to see this "It is beyond grievous that David Seymour is intentionally pitching the sacredness of Te Tiriti O Waitangi and the significance of democracy against each other. He is tricking New Zealanders into thinking that to honour our founding contract is to demerit democratic representation. This is a lie.
"As a Christian leader, I steadfastly oppose this falsity."
https://www.rnz.co.nz/news/political/527412/treaty-principles-bill-440-…
Just watching how triggered people get over what language a weather reporter uses... this bill would lead to riots.
A lot of MPs probably feel sick to the stomach that it's even going to be read out. The whole parody is ACT positioning to take a bite out of National at the next election.
If we went with "majority rule" gay people would have no rights, nor would any minority race. I voted for ACT in the past (not last election) and will never again.
https://en.wikipedia.org/wiki/Tyranny_of_the_majority
We'll see majoritarian tyranny in action at the next local-body elections, when majorities gleefully trash any restoration of Māori wards.
"Constitutional Law Expert David Round, a former Law Lecturer at Canterbury University, is highly critical of Sir Geoffrey’s legacy:
“Sir Geoffrey seems strangely unaware of the insane complexities and delays and preposterous expenses of the present Resource Management Act system, which is often little more than a gigantic racket and can easily descend into outright corruption.
...David Round believes New Zealand is now in a perilous position: “New Zealand now is at a very dangerous time. Now is about our last chance to turn the tide against the divisive racism which fanatics in the Labour Party have long been pushing, and which cowards in the National Party have for far too long been tolerating. If we do not turn the tide back now we are goners as a nation.
...“The latest news is that there has been an agreement for Meridian and Genesis Energy to pay Ngai Tahu, the Department of Conservation ‘and others’ over $180 million in return for them not objecting to applications to renew resource consents for electricity generation from Waitaki River waters. Those payments, of course, ultimately come out of our power bills.”
The reported payment of well over $100 million to the $2-billion Ngai Tahu corporation in return for resource consents is so extortionate, that an inquiry should surely be held into the deal.”
...not exactly the majoritarian tyranny Jacinda exercised trashing the peoples democratic right to vote on creating them.
Noting that while Labour had not announced any such election policy to claim a mandate for such change, the Coalition parties are delivering the policy they were elected to do.
Incorrect. It was published in their Fiscal plan before the election (=referendum).
Edit: you also failed to acknowledge that Labour didn't publish their intention to remove the long standing & hitherto legitimate business debt interest deduction before their own 2020 election.
"If we went with "majority rule" gay people would have no rights, nor would any minority race. I voted for ACT in the past (not last election) and will never again. "
Thankfully this is demonstrably false, as majoritarian democratic systems around the world have extended equal political rights and legal treatment to minority ethnic groups and LGBTQ+ groups? Bit early for the glass BBQ mate
The Treaty Principles Bill does not exist yet. It is only being written now.
But these are ACTs proposals for it.
1. The New Zealand Government has the right to govern New Zealand.
2. The New Zealand Government will protect all New Zealanders’ authority over their land and other property
3. All New Zealanders are equal under the law, with the same rights and duties.
The silly "Christian Leaders" oppose these apparently. If they oppose these they believe that. The government does not have the right to govern. We have no property rights. New Zealanders are not equal.
So ??? Really!.
1. The New Zealand Government has the right to govern New Zealand - but in partnership KH - its not your way or the highway
Although rangatira were aware that a colonial administration would require some concessions to allow it to exercise power, they were assured by officials that their own authority was left in place by Article Two of te tiriti (in the Maori-language text). This suggested that authority would be shared between the government and rangatira. This shared authority would be enhanced by the other treaty articles, to Māori advantage.
I think you make a good point Baywatch. The implication is clearly there, even in the English language version, but here's the question; what happens when that Chieftainship (Rangatiratanga) comes into conflict with the "sovereign authority"? I understand, although I may be wrong, that Maori tribal society was not what we would recognise a a democracy, but rather a feudal system of power. I'm not sure that this has been specifically settled in discussion, negotiation or the Courts. The nearest possible interpretation essentially implies another (tacit) clause defined by the modern adoption of "Partnership", which I don't believe is the same thing.
Perhaps you are rewriting that treaty Baywatch. No "partnership" in it.
Try this
https://www.bassettbrashandhide.com/post/dr-lawrie-knight-fact-checking…
LOL your ponting me to an website featuring these 3 goonies...good lord ?
Good luck with your Hobsons pledge
What part of this sentence do your not understand?
they were assured by officials that their own authority was left in place by Article Two of te tiriti (in the Maori-language text).
"Hobson's pledge" is all about how Governor William Hobson said “he iwi tahi tatou” as each of the chiefs signed the treaty. Translated as “we are now one people”. If you started a organisation that fights against a written document that was signed by naming your organisation after what someone supposedly said as the treaty was signed, then you are obviously not being honest about your intentions. They don't care what was written in the treaty, they want to focus on the 'vibe' of the thing. Nowhere on their website is the actual text of the treaty, they don't want that to be part of the discussion.
What frustrates me is that all these clever people never seem to drill down with the perpetual "why" questions. The problem is not David Seymour and his Treat policies. The problem is the nature and outcomes of economic policies put in place by generations of governments that favours wealth and political influence. They to all intents undermine democracy in this country. The policies are not racist in intent but they disenfranchise everyone in the lower middle classes and below, increasing poverty and dependence across the board. Maori are just more impacted than virtually any other group.
Further down this stream Macroview has a comment pointing to a consequence of this which is the young flight to Aussie and other places where they have better chances economically.
Echoing many comments made to the recent interest co.nz article about tax, New Zealand's continuing loss of young skilled labour is now attracting international attention:
https://www.cnbc.com/2024/09/06/economic-refugees-flee-from-new-zealand…
For anyone with the ability to move - which is anyone without commitments and a few thousand bucks to relocate (most young people) and anyone with commitments and a few more thousand bucks to relocate (many skilled workers with families) – this is and always will be a cost versus benefits question.
The degree of social benefit is a subjective and personal factor. I suggest many people are increasingly asking themselves what is most important to them, and reaching different answers from just a few years ago.
Nearly half of all households pay no net tax ex gst (a staggering statistic indicative of a very unhealthy economy), and the means to buy shelter is out of reach of many young people, and many people with families, despite their skills. So only a proportion of the productive economy is supporting the non- productive government sector and the remainder of the productive sector. The absolute level of tax here compared to other countries is less important; as our tax base is becomes smaller, the tax burden increases relative to the benefits. Those (non-social) benefits are in aggregate the relative purchasing power in nzd of salaries after tax versus asset and other local prices.
The balance is now moving well and truly out of whack. Aggregate effects can often be observed directly albeit with variable lags. A very good indication that the administrative state’s econometric based policy analysis of this sort of thing is deeply flawed, is simply the outcome. Thousands of people have left and are continuing to leave.
There are two main persistent errors: 1) a relatively small tax base and the relatively high tax burdens of relatively few residents (policy; big government), and 2) relatively high asset prices (policy; years of low interest rates).
People should, using legal immigration channels,go to where the opportunity is geographically. Most OECD countries have declining workforces and are starting to look for young, educated workers.
New Zealand is in a war for workers, if we don't offer them a better quality of life we will lose.
The previous gov spent 18 months denying the issue by pointing to the 'net migration' figure and calling it a 'net brain gain' / 'pent up OE demand'. The current gov is calling out the issue while also doubling down on all the factors causing it.
The only "bipartisan" policy response to the ongoing brain drain in NZ has been to stamp out more visas for chefs and Uber drivers, hoping such a move would balance out the skill equation.
We might be getting into a downward spiral, losing talent because of a drop in our living standards, forcing more Kiwis to leave and so it goes.
Oil prices are -50 USc lower at just over US$67.50/bbl in the US while the international Brent price is now at just on US$71/bbl. Both are down -US$6/bbl in a week, or -7.5%.
Music to my ears, the lower oil goes the more probable it is inflation will be dragged back and growth given a leg up.
Not really. Tradeable Inflation is almost at 0% (helped by oil and other matters)
Non-tradeable (domestic) inflation is still hot at 5.5%. Propped up by insurers and government / council spending which shows zero sign of even slowing. The only good news for non-tradeables is that rents are falling
"At Vertice, we have identified what we believe to be almost 10,000 Tier 1 wells that are potentially prime candidates for refracturing.
Given the fast cycle times of the shale sector, initial rates of return on refracs are also often north of 100%. With such returns, which often exceed those of new wells, refracs have increasingly become a key strategy for operators, and activity is expected to more than double this year."
https://jpt.spe.org/guest-editorial-where-are-refracs-going-and-can-we-…
Billionaire backs wealth tax:
https://www.nzherald.co.nz/business/kiwi-billionaire-backs-wealth-tax-w…
He makes a very good point, which I have raised before, around how the tax revenue is used. More tax revenue is fine, even great, if it is used well (better healthcare etc). A key issue is that the revenue is often squandered.
HouseMouse, Sorry, I need to pull you up.
"More tax revenue is fine, even great, if it is used well (better healthcare etc)."
Reconfiguring our tax system isn't about collecting more tax.
1. It is about delivering tax cuts for the bulk of the people who are currently paying tax.
2. While re-directing investment decisions towards more productive enterprise.
3. While collecting tax from people earning income from sources that are currently untaxed.
Any political party considering a tax system overhaul should be selling their changes on the points above AND IN EXACTLY THAT ORDER.
"A key issue is that the revenue is often squandered."
Says you. You are entitled to your opinion. But it is your opinion. Others may view that spent revenue quite differently. And others, like me, will accept all governments squander. As do senior leadership teams of companies big and small. Nobody gets it right 100% of the time. But if you don't try, nothing will ever get better. Grownups accept this.
The health sector also still has to roll out arrears payments for their holidays act remediation (years and years of incorrectly paying staff under the holidays act) and they have over $1B potted away for this. I have to wonder, when the govt said the health sector was found to have overspent by ~$1.3B was it this making up the most o it, or genuine overspend.
Dangerous, non-sensical drivel... (Stuff should be ashamed!)
What is the ‘magic’ number of properties I need to buy to retire comfortably?
And also absurdly hilarious:
"All of that is hard to forecast. So, I hired someone who is in the top 20 in the world at Microsoft Excel. Yes, Microsoft Excel is now an e-sport and there is such a thing as the Financial Modelling World Cup. I asked them to forecast how many properties the average Kiwi could buy if they were motivated."
Yup. I too always use programmers and application gurus to do my economic forecasting. I find them far more accurate than economists with years of study. /sarc
Over to Juha.
Tad unfair. Stuff - like all traditional media - are really struggling. When a charlatan fools them into believing the charlatan's crooked, spruiking, ponzi-fuelling 'analysis' is news worthy, we can expect the occasional oversight. One hopes Stuff will publish a counterview calling out this charlatan's bollock.
And Mr. Nicol concludes:
"A more realistic target, even for well-off Kiwis, is three to five properties over 15 years."
But Mr. Nicol does NOT provide any information on how he came to those magical figures.
Nor does he - and this is absolutely critical - identify the critical factors in the current (& future) housing market that will result in significantly lower untaxed capital gains to the gains he got as he accumulated his 40 properties (using those unsustainable untaxed capital gains to do so).
Sadly - people will listen to Mr. Nicol, and in time wonder why people who invested in other asset classes got acceptable returns - while they got next to bugger all because the past capital gains Mr. Nicol received were not repeated, nor could they have ever! (I.e. with houses still requiring huge multiples of income, the phase "you can't squeeze more blood from this stone" springs to mind.)
Just an aside: Can the FMA do anything about this b.s.?
This way of thinking is a mind virus. It does nothing to improve the individual nor society as a whole. It promotes fear and greed - neither desirable human qualities (ie ‘to be successful I must own as many houses as possible, I must buy as many as my mates own to be respected within my social circle..’)
We don’t need people aspiring to build property portfolio’s while our houses are historically (and dangerously) overpriced based upon any traditional fundamental analysis. We need people owning their own homes, paying down debt and saving for retirement - speculation with increasing quantities of debt so that you can own 3,5,10..20 homes while adding fuel to an overpriced housing market doesn’t do anyone a favour. In my view it’s just greed - the desire to have far more of something than you really need - and doing so at the expense of the financial and social stability/cohesion of the country as a whole.
But apparently viewing the world this way is an act of envy towards somebody else’s excessive greed.
Simeon Brown is "golden balls".
https://www.newstalkzb.co.nz/on-air/wellington/wellington-mornings-with…
God help us .
"Labour Leader & Former Education Minister Hipkins must be held to account for his maths mistakes & dishonesty about the economic implications of population ageing"
"Our Worst Ever Treasury Secretary, Caralee McLiesh, leaves office with a brain wave on how to improve prosperity in NZ: put up your taxes"
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