Here's our summary of key economic events over the weekend that affect New Zealand with news a risk-on shift will start the week in most major economies.
As we wind down September this week here, into both school holidays upcoming and daylight saving on the weekend, the key focus will shift to Fonterra's results on Wednesday, and local consumer sentiment on Friday.
And tomorrow the RBA will review its monetary policy settings including its cash rate target. Despite the continuing inflation pressures, no-one really expects them to alter their existing 4.35% policy rate this time. Oddly that comes a day before they release their August monthly CPI report, which is expected to slip from 3.5% to 3.1%. They hope so at least. And a day after that they release their Financial Stability Report.
In the US, the key focus will be on PCE prices, personal income and spending reports. They are expected to validate the Fed rate-cut move. And they will release their final Q2 GDP report, PMI data, consumer confidence, durable goods orders, and both new and pending home sales data too. There will be September PMI reports from many other economies as well.
Over the weekend, China left its loan prime rates unchanged in its September fixing, as expected. These remain at record lows.
And their 'youth' (16-24) unemployment rate was 18.8% in August according to official data, the highest since they changed the basis of this stat in January. They say their general jobless rate is 5.4%, and that too is its highest in a year.
And don't forget, next week is China's National Day Golden Week from October 1 to October 7. Most businesses and factories in China will be closed for the holiday. This extended shutdown will significantly impact international supply chains.
Japan reported 3.0% CPI inflation in August, up from 2.8% in the prior three months. It is their highest level since October 2023. Japanese inflation now seems well embedded, after decades of deflation.
The Japanese central bank left its 0.25% policy rate unchanged, as expected late on Friday. They said "Japan's economy is likely to keep growing at a pace above its potential growth rate, with overseas economies continuing to grow moderately and as a virtuous cycle from income to spending gradually intensifies against the background of factors such as accommodative financial conditions." But press conference remarks after the release suggests that the Bank has turned dovish, so expectations for more rate hikes are lower now.
India's economic surge is built on aggressive borrowing. Loan growth is running higher than +13% from the same month a year ago, even if that is lower than the almost 20% rate it was running in the same month in 2023.
Canadian retail sales rose more strongly than expected in July, up +0.9% from a year ago when a +0.6% rise was expected. A key driver was car sales. And these retail rises are expected to continue as a new sense of optimism grows in Canada.
Consumer sentiment in the EU continues to rise, in spite of their obvious economic struggles. In fact, it is almost back to its long-run average levels, something it hasn't managed since the pandemic period.
The UST 10yr yield is now at just on 3.74% and up +1 bp from Saturday. But that is up +8 bps from a week ago. The key 2-10 yield curve is up now +21 bps positive. Their 1-5 curve inversion is still inverted by -45 bps. And their 3 mth-10yr curve inversion is still at -102 bps. The Australian 10 year bond yield starts today at 3.93% and down -7 bps. The China 10 year bond rate is at 2.05%, and unchanged. The NZ Government 10 year bond rate is still just on 4.20%.
The price of gold will start today at US$2621/oz and up +US$1 from Saturday to near a new all-time high again. That is a +1.5% rise from a week ago when it was US$2582/oz.
Oil prices are unchanged at US$71/bbl in the US while the international Brent price is still just on US$74.50/bbl.
The Kiwi dollar starts today at 62.4 USc and little-changed from Saturday but up +80 bps from a week ago. Against the Aussie we are unchanged at 91.6 AUc. Against the euro we are still at 55.9 euro cents. That all means our TWI-5 starts today at 69.9, unchanged from Saturday but up +60 bps from a week ago.
The bitcoin price starts today at US$63,055 and +0.9% from this time Saturday. Volatility over the past 24 hours has been low at just on +/- 0.8%.
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89 Comments
Reported in Australia over the weekend that Fletchers is going to an announce an emergency share placement and raise to cope with its current woes. How does a business with a virtual monopoly position destroy so much shareholder value over the last 20 years?
Auckland airport is doing the same thing building a monument that seems to have forgotten about customers needs, Walk further, get wetter and more exposed to the winds!
We seem to need much stronger commercial acumen at the top in business and government.
"...So you're damned if you privatize in NZ, and damned if you don't. We currently face either a market failure, or a State failure. Take your choice. There are solutions to this problem, so why hasn't the army of bureaucrats in Wellington designed them? They've had 30 years since the reforms of the 1980s. What've they been doing since, apart from criticizing the 80's reformers? Here's one reason no solution has been provided: there are no longer top draw micro-economists working in Wellington with the required expertise, particularly, I believe, in the fields of "mechanism design", "procurement" & "regulation", which are hard. Instead Wellington is now dominated by a management class with little specialized knowledge who want to boss around the folks in the engine room, who they call "number crunchers" and "techs". Worse still, this class has arisen from a non-meritocratic system, where how you talk-the-talk matters more than anything. Elon Musk is a geek, number cruncher and tech. So is Jeff Bezos. They're the two richest people in the world. At least overseas, things changed long ago - now it's the geeks, crunchers and techs who are the owners & bosses & management. Lawyers & accountants are just their back-room advisers. But not in throwback 1970s Wellington. NZ needs a culture change as to which professions are highly valued."
The '80's reforms have been largely wound back by successive governments ...
... we have a massive wealth imbalance because those reforms weren't embedded and further built upon ...
Few nations are as dominated by central government and other monopolies/duopolies as we are ...
... the biggest problem is the lack of genuine competition & innovation in every sector ... farming excepted : banks / education / healthcare / fuel / insurance / construction materials ... the outcome being poorer service for citizens , higher costs , and a concentration of wealth ...
The 80' reforms saved NZ.
Roger Douglas turned NZ from a socialist state where everything was run by the government to a much more efficient economy. Who remembers the buses, the airlines, the trains, electricity, water, everything run from Wellington.
So incredibly inefficient, the railways was scaled down from 23,000 employees to the current 4,000.
"So incredibly inefficient, the railways was scaled down from 23,000 employees to the current 4,000."
Apples and Oranges. The "railways" were split into multiple parts, with parts 'outsourced'. I'd be surprised if the "railways" as they were then aren't still keeping significant numbers employed.
Good piece. We don't subscribe to the age-old wisdom of "empty vessels make the most sound".
Often top jobs are dished out to people with zero subject matter knowledge just on their ability hold themselves in multi-hour talk fests. Result: mediocre management.
Subtle racism is also rife where those with English as their first language often rising faster through the ranks than those with strong technical and managerial knowhow.
Not saying it doesn't happen, but Language is one thing that in my world is a critical requirement. Communication, interpretation, and definitions are vital. Any ambiguity or misunderstanding can sink/ruin something immediately.
Even native english speakers from UK, USA, or Australia can sometimes have trouble. English as a second, third, or even later language particularly when learning from USA (Coding dates) can cause massive problems.
The number of NZ law, business and arts graduates has dwarfed the number of engineering and science graduates for many years.
2023 Graduates (From: https://www.educationcounts.govt.nz/statistics/achievement-and-attainme…)
- Natural and Physical Sciences - 6960
- IT - 5565
- Engineering - 9500
- Architecture & Building - 5075
- Ag & Environment - 5275
- Health - 16165
- Education - 7620
- Management & Commerce - 19600
- Society & Culture - 39490 (Language and Literature - 17550)
- Creative Arts - 7695
- Hospitality - 4500
- Mixed other - 5620
Twice the number of Bus degrees and nearly twice the number of language and literature grads as engineers
Total Sciences, IT, Engineering, Architecture, Ag & Env, Health grads = 48540
Total Education, Management, Society & Culture, Creative Arts, Hospitality, Mixed other = 84525
About 74% higher non-science & tech graduates than science & tech grads, and we wonder why our productivity and GDP per capita are declining??
Also easy to see why we need to import so many IT people with 38% more creative arts grads than IT, and IT grads only making up less than 10% of the total arts, law, culture and management grads.
There is a strong correlation between the competitiveness of the market and the quality of the executive leadership.
Look at our largest companies - the ones that face little true competition (Fletcher, AIA, Banks, Insurance, Energy) are poorly led, usually by corporate climbers who have ‘topped out’ in Australia and are sent here to keep the lights on.
Why would you invest in Fletchers now? The government is planning law changes this year that will
Recognise building product standards from trusted overseas jurisdictions, removing the need for designers or builders to verify standards.
Require building consent authorities to accept the use of products that comply with specific overseas standards that are equivalent to or higher than those in New Zealand.
Approve the use of building products certified through reputable certification schemes overseas. For example, the approval of one Australian scheme, WaterMark, could immediately provide Kiwis with access to 200,000 products.
Chris Luxon is quoted as saying it was currently about "50 percent more expensive to build a stand-alone house here than in Australia".
I don't think it will make as much difference as people expect. For example during the Gib shortage, the imported products that the councils were allowing were actually dearer than Gib. Maybe 5-10% savings on a house I reckon. But then there is the risk of another Leaky Houses type issue, a pretty good chance at least one of the imported products is not good in NZ conditions.
The Aussies build a lot of cookie cutter houses on flat sections in sprawl, a bit like Flat Bush in Auckland. And they keep a good pace going, not like here with our boom bust cycles.
During the Gib shortage there was a lot of ad-hoc importing of Gib alternatives from Asia with many players in the market. But it was at a time when container shipping rates were triple or quadruple what they are now. Also Gib is not an easy product to load and unload from conventional shipping containers due to it's pack size and weight. The fact they could get close on price under those circumstances is impressive. True partnering with an Asian producer with supply and logistics at scale with automated container loading and unloading systems at both ends would put some serious hurt on Fletchers.
Fascinating watching Japan. They are basically trying to keep up with a big change in the global price level. They got 'left behind' and they're catching up. Over the last couple of years they have taken active steps to persuade companies to *increase* wages and they have done a lot of work in the bond / currency markets etc obviously. How many times a year do we hear 'oh, Japan is in troublee here' only for nothing to come of it? The commentators that cry wolf rarely get called out
Japan are very different to NZ, but if anything, as a tiny little economy blowing in the wind of global prices, perhaps we could learn something from them? When a global price level shifts happens, should we ask how we manage the transition to the new price level instead of performatively wiggling interest rates around and crashing the economy / boosting house prices? The RBNZ takes global price instability and amplifies it. What if their job was working with govt on a smooth transition?
I mean look at the journey we've been on. Could we have got to the same place without the drama?
"The World Bank confirms 150 Developing Nations are on Track to overtake NZ, as a succession of National and Labour governments have turned NZ into one of the planet's worst performing economies"
https://www.downtoearth.kiwi/post/the-world-bank-confirms-150-developin…
Even if you vote on policy, they lie and deceive you. Labour promised to reduce immigration in 2017 - yet 2019 was a record year for immigration (followed by another record in 2023). Labour promised 100,000 houses, delivered just 2% of that. Labour broke just about every election promise they made, except for banning plastic bags and straws.
I don't think it's fair to say that
The legislation was widely criticised by most planners and RMA lawyers.
That's not an accurate reflection of the broad support for replacement, the adoption of 30-year Spatial Planning requirements and streamlining of consents. Other aspects were more controversial or remained a WIP.
Far more robust and responsible approach than the current 'Fast Track Pet Projects Bill'
... we're still ahead of Equatorial Guinea & Northern Sudan : Score ! ... NZ rocks ...
So , if anyone thinks we need a 4 year parliamentary term instead of 3 , I have only one word to say to you : " Jacinda ! " ...
... another 12 months of her disastrous rule and we would've now been at the very back of the GDP pack , dead last ... dreaming of catching up with Equatorial Guinea ...
My guess is that this ridiculous episode of economic self-flagellation will be pinned more on the Nats than Labour. Choking off Govt spending into a deepening recession is a really elementary mistake. Like comically bad.
We need legislation introduced under urgency that disqualifies anyone from holding a Finance portfolio in Government if they have English Literature or Bachelor of Arts qualifications.
- Cullen - Bachelor of Arts
- English - English Lit
- Robertson - Bachelor of Arts
- Willis - English Lit
Someone doing a Bachelor of Arts at many universities can major in Economics.
Cullen, for example, wrote his Master of Arts thesis entitled Poverty in London, 1885-95. He then went on to do a PhD in social and economic history at the University of Edinburgh.
Funny how many thumbs up your misinformation collected, ay?
Right? Its like economic governance 101, government spending should be counter cyclical. Here we are and the English Lit major clearly having never opened an economic text book decides she knows better and decides pro cyclical is the way to go. We are just starting to experience the pain, its likely to get worse before it gets better.
This is the most important thing for any government IMO: government spending should be counter to private spending. Cullen was the last to get it right, paying off a ton of government debt during his government's good years. English got it totally wrong keeping his wallet closed when it should have been open (except for ChCh earthquake and South Canterbury finance), then Robertson did the opposite, racking up debt in good years (although a lot of infrastructure spending was needed).
The last one to get it right in the US was Clinton I think?
Its pretty easy to grow from a low base, they are still miles away from us. Assuming they will continue to grow at the current rate is ridiculous. If they do they will be the richer than the US soon too.
We are 28th in the world (better than South Korea and Japan), and a lot of the countries above us have a genuine reason (oil etc) https://www.worldometers.info/gdp/gdp-per-capita/
Although maybe we should consider becoming a tax haven and we can be third like Ireland...
We are 28th in the world (better than South Korea and Japan), and a lot of the countries above us have a genuine reason (oil etc) https://www.worldometers.info/gdp/gdp-per-capita/
If you look at 'real GDP growth per capita', Aotearoa is performing far worse than Japan from pre- to post-Covid.
Pandering to the wealthy will only further entrench our issues and global issues. We have gone down the track of deregulation for the past 80 years to do so, and the widening of the wealth gap has only been growing and growing. We need policy and action for the majority, not the minority. The issue being that majority vote for what they think is right for them (more so individually), and then parliament don't do as they are voted in to do, or what they promise to do. This detracts from the purpose of voting for a particular set of policies in an of itself and further lowers faith in authority.
But becoming New Zeababwe is the deliberate policy of the Left. The Right is left sticking a finger in the dike, which holds only so long until voters vote in the next Labour/Greens Govt and then NZ continues its descent into becoming a new Third World country. Leave for Australia while you still can, before the Left start confiscating your assets and land.
The last three National Govts inherited a recession from Labour (1990, 2008, 2023). Not sure how that is "better GDP growth" unless you want to separate GDP timing and attribute GDP growth to the policies that generated it (ie. account for the lag between policy implementation and outcomes). When you are constantly having to pick the country up off the floor, get it back into somewhat decent shape, only for it to be enjoyed then destroyed again by the incoming Labour Govt, your stats are always going to look slightly worse.
Lol, we switch Govts from red<>blue whenever there is a recession - or more importantly, when house prices are falling. Look at the data - it is crystal clear.
India's economic surge is built on aggressive borrowing... 13%
Funny, NZ lending rates were at or above 13% annual growth rate between 2005 and 2008 when we had strong economic growth and productivity was going great guns.
Of course, it was all nonsense - the super-charged flow of newly printed bank credit money was being gathered up by companies as profits (and by Helen Clark's Govt running surpluses). And, what happens when companies make decent profits? Well, we count that surplus as 'GDP'. And, what happens when GDP goes up? Labour productivity goes up because we calculate that by dividing GDP by total number of hours worked.
So, friends, fast forward to early-2026 when we are back bidding up the price of houses, and private loans (PPPs) are financing the building of ever wider roads. When the commentators are cooing over positive increases in GDP (finally), and pontificating on whether we are starting to see the beginnings of a labour productivity miracle, please remember it is a mirage.
And in other news, a Ferrari doing 300km/hr is a slower can than a Lada which just accelerated from 10km/hr to 20km/hr. You heard it first from www.downtoearth.kiwi
There are not many children to inherit, the one's that are are going to get not just their parents wealth, but that of their grandparents and great grandparents.
Japan imposes some of the highest inheritance tax rates in the world, with top rates reaching up to 55% for substantial inheritances.
Wealthy Japanese are quite good at skirting taxes but not illegally. Physical gold is popular among the traditionalists.
Japan and SK are not without their woes. But the fact they their economies are largely about production and innovation is not just talk. Remember both countries are directly and indirectly involved in the development of Asia. Over the weekend, I became aware of Lotte having its own start-up fund that is active globally. Could you imagine an Aotearoa company having anything similar? As I said, both countries are not perfect, but they both have invested in infrastructure. I read about the new outlet mall next to Auckland airport. Osaka has a similar outlet mall near Kansai Airport. Biggest difference is that the Osaka outlet mall (and the airport) is directly accessible by train from downtown Osaka.
Take technology out of the picture and the SP500 has lagged M2. SP500 displays 8% compound growth over the past 10 years, but M2 is > 10%.
It's all about money printing. You can verify for yourselves.
https://www.spglobal.com/spdji/en/indices/equity/sp-500-ex-information-…
Funny, the reason FBU is having to capital raise is because their customers are broke, but somehow you think those same people are going to rush into stumping up spare change to buy shares in a failing company?
There is going to be a long line of companies hitting the capital markets to raise funds to pay down debt as bankers become increasingly nervous and companies start burning cash faster than they earn it.
Christopher Luxon sells Onehunga, Auckland, investment property
Couple of observations:
1. Had the bright line test stayed at 10 years - he would have paid tax - his government it changed from 10 to 2 years
2. He made a gross annualized return of just 4.25% - way below the 7.2% for "property to double every 10 years"
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