Here's our summary of key economic events overnight that affect New Zealand with economic data is light today and we await signals from the building Wall Street earnings season. Markets seem positive about what is ahead.
Meanwhile in the US, mortgage applications fell very sharply last week from the prior week, down -17% and the most in nine years (excluding the pandemic). And that was on top of the more than -5% drop last week. The reason is that benchmark mortgage interest rates have been rising for three weeks and are now at a 2 month high of 6.52% for the standard 30 year mortgage.
Canadian housing starts came in at a 224,000 annual rate in September, 18,806 for the month, less than expected but more than in August.
Japanese machinery orders, excluding those for ships and electric power companies, fell -3.4% in the year to August from the same period a year ago. This is a large miss because they were expected to rise +3.6% on that same basis. It was the fifth drop so far this year. Orders for those excluded items (ships and electric power companies) were quite good however, mitigating the fall.
The Bank of Thailand unexpectedly cut its key interest rate by -25 bps to 2.25% during its October meeting late yesterday, marking the first rate cut since early 2020. It was a move long advocated by the government but it was still not expected. They have a sluggish economy and inflation is now below the lower end of its target range of between 1% to 3%.
Indian exports remained quite lackluster in September at US$34.6 bln and virtually unchanged from a year ago. India is no export powerhouse yet. Imports were US$55.4 bln, so they ran yet another trade deficit and they have been doing that now since 1997 (with one exception in one month in the 2020 pandemic).
British CPI inflation fell to 1.7% in September, its lowest level since April 2021. It was down from 2.2% in August. But much of this sharply lower level came from sharply lower airline ticket prices, something that may be a bit of a one-off.
In Australia, they reported an unusually low birth rate yesterday, with a record low fertility rate. (But it is similar to New Zealand's.) High housing costs are getting the blame.
The UST 10yr yield is now at just on 4.01% and down -3 bps from yesterday. The key 2-10 yield curve is positive, but tightened to +7 bps. Their 1-5 curve inversion is still inverted by -34 bps. And their 3 mth-10yr curve inversion little-changed at -78 bps. The Australian 10 year bond yield starts today at 4.23% and down -3 bps. The China 10 year bond rate is at 2.14% and dipping -1 bp. The NZ Government 10 year bond rate is just under 4.43%, down -2 bps from this time yesterday.
Wall Street has started today with the S&P500 up +0.4% in Wednesday trade. Overnight, European markets were mixed with London up +1.0% and Paris at the other end down -0.4%. Tokyo was down -1.8% yesterday. Hong Kong fell -0.2%. And Shanghai was up a minor +0.1%. Singapore was down -0.1%. The ASX200 ended its Wednesday session down -0.4% and the NZX50 fell a rather sharp -1.6% on the day with a building afternoon slump.
The price of gold will start today at US$2670/oz and up +US$9 from this time yesterday - and a new all-time high.
Oil prices are holding lower at just on US$70.50/bbl in the US while the international Brent price is still just under US$74.50/bbl.
The Kiwi dollar starts today at 60.6 USc and down -20 bps from this time yesterday. Against the Aussie we are up +20 bps at 90.9 AUc. Against the euro we have dipped -10 bps to 55.7 euro cents. That all means our TWI-5 starts today now just under 69.2, and marginally lower that at yesterday at this time.
The bitcoin price starts today at US$67,639 and up another +0.9% from this time yesterday. Volatility over the past 24 hours has been modest at under +/- 1.7%.
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61 Comments
The world adjusts to a new price level about 25% higher than 2019 while our PM brags that the mighty NZ Govt has tamed inflation.
At some point the media might start asking Govt why our inflation has just fallen with everyone else's, while our unemployment has risen so much more. Across the whole OECD, only Luxembourg and Estonia are stuffing this up worse than us, and we will probably move above Luxembourg in a month or so.
Yup. Add in ~270 more.
"The world adjusts to a new price level about 25% higher than 2019..."
So this time, it's all gone according to plan. The GFC support measures failed to launch. But the Covid experience allowed massive non-productive Private Debt to be created to get the spiral of price rises, wage rises, and most importantly, asset price rises going again. Trouble is ....there are too many mouths to feed this time. Not enough jobs; in fact less....everywhere. Nature is doing its bit - birth rates plunging across the 'developed' World - but it won't be enough to balance the equation. We know what will. The time-honoured solution to extinguishing too much Debt. Destroy both the borrower and the lender - War.
Not to worry! Lots of experts are seeing the light now. Once we get this property speculation gene eradicated from our economy, the future is actually quite rosy.
"A residential portfolio investment as a quick and easy way to make money ... the foundations of that will have been shaken....New Zealanders were starting to realise that the country was not as wealthy or well-off as it might have thought previously. Infrastructure issues particularly highlighted ...“There’s a hell of a lot of work that should be done, or we want to see done, and we don’t know who or how to pay for that."
https://www.nzherald.co.nz/business/economists-warn-of-lasting-economic…
A lot of people seem to want a CGT, and they are concerned about housing unaffordability at the same time.
So how about introducing a CGT, but only on houses, including the primary residence?
This would stop over-investment in a non-productive asset class and free up capital for investment in more productive assets. It would also constrain house price inflation.
Just as a matter of interest if a household at the present time has owned their home for say 35 years, then on its sale from what date would the calculation start for a CGT and how would the cost of improvements undertaken, say adding a bedroom & ensuite, be considered.
I guess it is a common human flaw, prevalent since the beginning of civilization, possibly earlier.
We have in built fear mechanisms. Works good when your issue is immediate, like for a predator. Problematic when trying to evaluate more complex or longer duration problems.
Look at history Foxy. It is always the politicians who start the wars regardless of their personal history and claims of higher intellect. They virtually always believe that somehow their status will make them immune from the consequences. Just as those who become 'peaceniks' and insist on believing that no weapons and non-aggression will protect them from an aggressor. Deterrence is the only approach that has proven effective at avoiding war.
MAD is almost the only way to force rabid opponents to talk.
It's mathematically correct. The reintroduction of prescription charges added 0.401 basis points to the annual CPI. The early education savings took away -0.139.
Inflation isn't some spirit waiting to pounce on an economy - it is the weighted price of stuff. The Govt can absolutely impact on that. A big investment in hydro, for example, or a subsidised public transport service. Or, a hike of GST in 2010. Etc etc.
Jfoes view brings to mind goodharts law. ( the idea that when "When a measure becomes a target, it ceases to be a good measure" )
The childcare subsidies reduced CPI by 0.139. The presciption charges added 0.401. Local Govt Rates added 0.388. Fuel costs chopped 0.292 off. Vehicle price reductions took away 0.312! Have a look at the detail for non-tradables here...
Here we go again. Listen to yourselves. Right vs Left, he said she said. It’s not working. It never has. You all get yourselves into a lather with a mass debate for 3-6 years before the other team gets another go. And on and on it has gone. It’s actually embarrassing that we put up with it. Very little is achieved, and what does get done, is never done properly.
Time to wipe the slate clean and begin a new system, and it just so happens I have the new system locked and loaded, safety off. Abolish central government. Create 4 states for NZ and each state take care of itself.
Thoughts?
Now all we have to do is tame wasteful household spending enabled by the creation of more Private Debt? Government spending is not actually the problem. Debt in itself isn't the problem - it's what we use it for; asset speculation rather than productive endeavour, that is.
You know you can just look the numbers up? This Govt has tried to wrestle spending down, but they have ended up spending more than the budget Labour set. The operating balance at year end (June 24) was -3.1% of GDP compared to the -2.7% of GDP in the pre-election forecast. That's what happens when you blunder around cutting stuff - your tax take tanks, welfare spending spirals, and you end up running bigger deficits than the last lot! Watch what happens this year - these fools are just getting started.
"they have ended up spending more than the budget Labour set"
Yes and Labour would have stuck to a budget!! Most definitely
Labour's policys were a whole of promises that werent funded ... Ah if only Grant had being voted in to sort out his own shambles
So Im confused, you go on about deficit spending as the path to riches and now you appear to want the Govt to cut spending harder?
Doesnt look you can make up your mind
Lol, Govt should absolutely be deficit spending on things we need to live better lives. Look what Key and English did in their Dec 2008 budget - they purposefully invested in the economy into the downturn. Not enough I would argue, but it helped.
This Govt is giving tax breaks to rich folks and setting up stupid private finance deals that will take 1 - 2 years to negotiate and increase the flow of our financial assets offshore. They are absolutely clueless.
The red lot wouldn't have done much different, no, neither of our main political parties have a credible economic strategy.
Totally agree the tax breaks were a ridiculous election bribe based on nothing but ideology
But you will never get consensus over exactly what " things we need to live better lives" should entail and where it ends
Its pretty clear we have an ongoing spending problem beyond our means which is fast becoming a next generation hospital pass
But you will never get consensus over exactly what " things we need to live better lives" should entail and where it ends
Or how it's funded.
Presumably you'd need some investments that are fiscally net positive to compensate for ones that are expenditure with no method of recovering funds.
Unless there's a new way a state can just keep spending without the chance of going bust. We should tell the Sri Lankans and Argentinians.
We have an under-investment problem because Govt is not performing its most basic role adequately. NZ ran like 4 budget surpluses in its first 100 years of Govt. Why? Because we were building for expansion and to make sure that the needs of our people were met in teh present and the future. Did the world end?
This Govt is giving tax breaks to rich folks and setting up stupid private finance deals that will take 1 - 2 years to negotiate and increase the flow of our financial assets offshore. They are absolutely clueless.
Yep. This is what happens when you have a media fixated on interest rates. Not even able to call out the PM's answer of "you don't tax your way out of a recession" when asked about a CG tax. That was not and never has been the point of the CG tax, but no, media (1news - forgive me I am staying with Mum) unable to call out his pathetic deflection and put it on air. Watch 1News at Six S2024E290 | TVNZ+ about 13min or 14min mark
What? You don't think health care workers, police, corrections staff, teachers and so on should get decent pay and conditions? Many of those choose not to be a member of a union (the unions are not worth the oxygen they consume) and are on IEAs and usually don't get to bargain for their pay and conditions. They are taken advantage of because of that.
Please explain yourself?
Ah Murray, i think you are putting words into my mouth.
I think a statement of how every govt employee has somehow been "universally disrespected & diminished" is one that might need a bit of explanation.
However, you might be right - given the pain working its way through the private sector, perhaps they should put some value on actually having a job
My comment was referring to yours about not believing I'd get upticks.
The frontline workers of the government are all in essential roles that can't or should not be privatised. the current government's demand for government departments to save money and return millions to the government has had a dramatic impact on the frontlines in every area. The net impact has diminished the value and demonstrated a fundamental disrespect to the people who do those functions.
Don't mistake me, I agree that there are far too many people employed in third, fourth etc line positions at national (and regional) offices that contribute very little if anything to delivering the services those departments are established for. But clearly the government was neither specific enough nor cognisant enough of how the respective leaderships would dig in to preserve their empires.
And a lot of the pain they have cause will naturally flow out to the private sector. In many respects they have pulled the plug on a lot of wages and therefore spending in the economy, even if it is in the first instance driven by government spending.
Again, you know you can just look the numbers up? It's the private sector jobs that are disappearing. Good grief.
Labour just bought PSA roles up to long-term averages - as a percentage of the population. However, that's not to say we don't have too many Departments of Funny Walks. I'd like to see a few of the business, sports, culture and arts, and picking winners related ministries wound up. Govt should concentrate on core services and fund them properly.
Just what Orr wanted, remember he said unemployment had to go up. He is a absolute disgrace, printed money like no tomorrow and then those less informed and educated borrowed that money, Labour included, and then he shifted the blame on those people and said you have to lose your jobs to pay for it. No Moral's at all.
To follow up the link above:
"House prices blamed for Australia’s lowest birth rate on record"...and have been blamed for a collapse in the number of babies born across Australia as the nation's fertility rate tumbled to its lowest level since the early days of European settlement. "
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