Here's our summary of key economic events overnight that affect New Zealand with news markets are increasingly sceptical of Chinese policy actions to turn around their economy.
But first, initial US jobless claims came in lower than last week at +225,000 although that was a lot higher than the same week a year ago. There are now just under 1.6 mln people on these benefits and that is similar to the actual level a year ago.
US retail sales came in up +1.7% in September from a year ago, a far lower gain than the +4.2% year-on-year gain in the same month a year ago. But there was a good gain in September from the prior month at about the year-ago annualised rate. So maybe that will have the Fed holding back from more rate cuts.
US industrial production came in -0.6% lower in September than a year ago, and also lower than in August. This is a weakish result for them, but the ongoing Boeing strike, and the shortish East Coast port strike may have played a part in this downbeat data.
But neither the lower production, nor those industrial disputes are distorting American business inventories.
And that softness is not universal. The Philly Fed factory survey was surprisingly positive in October, and for both current and future outlooks. This region is a core manufacturing zone.
Exports from Japan shrank by -1.7% in September from the same month a year ago. It was another big Japanese data miss because markets had forecast a +0.5% rise. Apart from the pandemic reversals, it was their biggest year-on-year fall since December 2019, and driven by fewer car exports (-9.7%) and machinery exports (-10%). It was the first drop since November 2023, with sales of transport equipment declining -7.5%, weighed by motor vehicles (-9.2%) and cars (-9.7%). Also, semiconductor exports fell -10.1%.
Yesterday at a briefing, China's Ministry of Housing said it will expand a so-called white list of property development projects, and bolster that with ¥4 tln of financing to property developers, through banks by the end of the year, to allow them to complete stalled projects. But markets thought this was a bit lame in the circumstances and they all moved lower with equity markets falling -1% and yields on Chinese benchmark bonds falling too. The yuan slipped as well. Markets haven't yet seen the policy action they want after the 'bazooka' expectations were started a month or so ago. That is not saying the market is right, or the Beijing policy approach is wrong. It is just that markets are voting actions so far 'down', with their funds-flows.
China's next step will likely be to lower their loan prime rate (LPR) at its next review.
Meanwhile Singaporean exports rose +2.7% in September from a year ago, but this too was less than the +9.5% rise expected.
As expected, the ECB cut its policy rates by +25 bps, the main one falling to 3.40% at its overnight meeting.
And also as expected, Turkey kept its policy rate unchanged at its overnight meeting, but at 50%. They are still battling inflation, and it has come down recently, but it is still running at +49% pa.
The Australian September labour market report saw jobs rise by +64,100 (their best since February) and far higher than the +25,000 expected. There was a very good rise in full-time jobs (+51,600) and also a +12,500 rise in part-time roles. Their jobless rate was steady at 4.1%. Along with their relatively high inflation (3.8%) this labour market strength may put the kibosh on a rate cut at the November 5 RBA rate review.
Global container freight rates fell yet again last week, to be +126% more than pre-pandemic levels. It is still principally outbound China cargoes that are weakening. Perhaps more telling is that bulk cargo rates were down -6.9% last week from the week before and are now -16% lower than year-ago levels. All on weak demand.
The UST 10yr yield is now at just on 4.10% and up +9 bps from yesterday. The key 2-10 yield curve is more positive, and now +12 bps. Their 1-5 curve inversion is still inverted by -32 bps. And their 3 mth-10yr curve inversion less at -68 bps. The Australian 10 year bond yield starts today at 4.31% and up +8 bps. The China 10 year bond rate is at 2.08% and down -6 bps, a big move for them. The NZ Government 10 year bond rate is still just under 4.43%, unchanged from this time yesterday.
Wall Street has started today with the S&P500 up +0.2% in Thursday trade. Overnight, European markets were higher with London up +0.7% and Paris at the other end up +1.2%. Frankfurt rose to in between these but to a new all-time high. Tokyo was down -0.7% yesterday. Hong Kong fell -1.0%. And Shanghai was also down -1.0%. Singapore however rose +1.0%. The ASX200 ended its Thursday session up +0.9% and the NZX50 rose a bit more, up +1.0% on the day with building afternoon gains.
The price of gold will start today at US$2690/oz and up +US$20 from this time yesterday - and another new all-time high.
Oil prices are holding lower at just under US$70.50/bbl in the US while the international Brent price is now just on US$74/bbl.
The Kiwi dollar starts today at 60.6 USc and unchanged from this time yesterday. Against the Aussie we are down -40 bps at 90.5 AUc. Against the euro we have risen +30 bps to 56 euro cents. That all means our TWI-5 starts today now just under 69.2, and unchanged from yesterday at this time.
The bitcoin price starts today at US$67,330 and down -0.5% from this time yesterday. Volatility over the past 24 hours has been modest at under +/- 1.1%.
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142 Comments
Genesis looking to shed up to 200 jobs of its total staff headcount, majorly from its retail arm.
Air NZ announced its plans yesterday to lay off 1460 cabin crew staff.
Fletcher announced 1500 job cuts on Wednesday.
The good times keep rolling. We've beaten inflation and the economy into the ground.
It’s incredibly grim. I now think unemployment could get to at least 7%. Exits to Australia perhaps the only thing preventing it going higher.
I was at the NZ Railways Conference dinner last night, the mood amongst engineering consultants was certainly grim, yet steadfast. Not just grim around railway work, but all manner of engineering consulting work.
It's almost like expanding the state wasn't a good idea.
"The Government has increased its spending as a share of the economy by a massive 7.6 percentage points. This is arguably the largest expansion of the state since WWII. But it didn’t result in better schools, better hospitals or less poverty – just better waste!
NZers are now paying $800 million a week more in tax than six years ago."
https://www.kiwiblog.co.nz/2024/10/the_difference_six_years_makes.html
Tax take at 29% of GDP - up from 27% in 2015. What's the big deal? The State has not got notably bigger - although like every developed country, our health costs are spiraling. The State is however having to work much harder to redistribute money because 400,000 people (and their landlords) need accommodation supplement to pay the rent, and we now have 400,000 on a working-age benefit (mostly subsidising low wages and precarious work). The economy is out of balance - rentiers are sucking all of the money out of the economy and using that cash to buy assets that enable them to suck even harder. The State needs to snap out of enabling this crap, and sort it out.
The redistribution process has got far to complex. Look at that behemoth MSD and the vast amount of differing 'assistance' available, let alone IR
Both the IR and MSD need an overhaul with respect to how redistribution works = they need looking at as a 'whole'.
Gareth Morgan had more of an answer than anyone when he wrote TOP policy.
@ Jfoe - Landlords dont get the accomodstipn supplement. It would be nice to have free money for jam from the government like some tenants get, but this is not the case. The accomodation supplement is a tenant benefit, not a landlord one. Not every tenant requires this benefit in order to pay rent either. Remove thos subsidy & private landlords will only be able to rent to tenants with stable incomes, the rest will have to jump onto the 5 year government emergancy social housong wait list, along with the other 28,000 families. To remove a tenant benefit is to make further tenants homeless, yet you advocate for this?
AS adds dollar demand to the rental market. Many landlords get their rents paid directly from MSD so the tenant never actually handles the money.
AS was introduced to support high levels of debt against residential property, not to support tenants. If it were stopped today and all of those tenants were evicted, who on earth do you think is waiting to take their place? Sorry, what money is out there untapped which can be reallocated to the rental market? Rents are flat, it's not there.
Rents to a large degree are set by peoples ability to pay,an example being student allowances,I know it happened in my sons time in Wellington,every time an allowance increased,coincidentally,rents rose by that amount at next review...and as we know of the state of student sh*tbox rentals,it wasn't raised to cover the cost of upgrades to the flat,just they knew the students had more cash..."thank you very much,we'll take that.."
For example;
https://www.nzherald.co.nz/nz/watch-focus-grossly-unfair-students-suffe…
Excerpt: “That’s not happening as a result of any special innovation or work that those landlords may have done, but simply because they know that students may have more money in their back pocket.”
Another: https://www.reddit.com/r/newzealand/comments/7kio7t/increased_student_a…
Excerpt:
o in today's Listener (pg. 29, article titled "Save the landlords"), the article author Joanne Black talks about how Wellington landlords are raising the rent by $50 per week next year to exactly match the university student allowance increase.
Save the landlords
Not a moment too soon, relief for beleaguered owners of rental properties.
My elder daughter, a university student in Wellington, has joined us for Christmas. When she returns for the new academic year, the rent on her six-bedroom, inner-city flat will have gone up by $300 a week - an increase of $50 per person, announced recently by their landlord. And she was already paying $216 a week in rent.
She and her flatmates had a farewell dinner at their flat and they invited a group of other students, who all reported that their rent, too, was going up by exactly $50 per bedroom per week from the start of their new lease period.
Coincidence? Unlikely. Landlords in university towns will know that the Government is increasing student loans and allowances by $50 a week next year, so students will have exactly that much more in their weekly budget.
I knew a few folk who had that happen to them in Wellington. Landlord raising the per room cost by $50 in a 5 or 6 bedroom flat, it was despicable as not everyone qualifies for student allowance so those on the loan were effectively screwed and those on allowance didn't notice any difference in disposable income. But hey, let's support all the landlords right (sarc)
@ Vman - Your article of evidence assumes the intention of a landlord or at least these particular landlords is conveniently increasing the cost of the service on the pure basis of the Landlords knowledge that a tenant may be coming into further fortune, and so to take advantage and capitalise on this.
Your article does little to show that a Landlords Costs have also risen significantly year on year. Every year, rates, insurance, all rise, and in particular over the last few years we've had significant rises in these areas, along with significant rises in interest & repayments as well. This is a business, not a charity. If costs to operate increase, they are past onto the consumer. Businesses dont survive by continuing to absorb constant costs. That's a charity. Your children's landlord is not a charity, he exists to make money just as any other business does.
To assume that whilst every other associated living cost is it has risen significantly year on year, yet expect that ones rent should suddenly stay stagnant, is nothing short of nieve. At best it's a speculative uneducated guess that landlords only put up rent when they get a whif of tenants incomes increasing.
@ Vman - "Given that,folk can look forward to rent decreases with the rapid reduction in interest rates..."
Why ever would that happen? Interest rates are but just one asociated cost with landlording. Has there been a significant reduction in other costs such as insurance and rates or maintenance costs? Absolutely not. Quite the opporsite actually - massive increaes. Have you paid the same price for petrol for the last 40 years? No? So Why ever would you think that tenants are just magically except from inflation hitting their pockets as well? It's a business, not a ccharity.
See all good & well to say in theory "hit the greedy property investor for everything he's got", but suddenly it's not quite so funny when it happens the other way round eh. Except he who holds the gold makes the rules. If tenants don't like it they can do what's required to own the gold themselves.
I was expecting you to come back to me with some figures showing a landlords cost increases that justifies your assumption that landlords just increase the rent "just coz they can", but I've been disappointed as these seem to have been left out?
You will almost certainly find that a landlords cost to operate has increased by significantly more than just $50 a week - insurances alone are up more than this & that is bit just one associated cost that has risen and not reduced. If your sons rent has then only increased by $50 a week, your son has the better deal. His "greedy money hungary sole eating landlord" could've past on much more of the additional increases that he now has to pay himself. Thankfully for your sons sake he seems to have a rather reasonable landlord.
Chill GWGB, you are showing signs of financial stress spilling over to your life. My example was from a number of years ago about a specific market in a University town, anecdotal or not, it was a fact at the time that rent increases matched allowance increases, not that my son was receiving an allowance, so he just got to pay extra. There also was no spreadsheet from the landlord showing how the figure of $50 p/w was arrived at on a cost increase basis, just an amazing coincidence that at the time all the students found their rents increasing by that much.
You are also making stuff up, did I say "His "greedy money hungary sole eating landlord" at any stage?
Hungary is a country, sole means single/solitary...slow down, calm down...it's Friday, the sun is shining, life ain't bad.
@ Vman - "There also was no spreadsheet from the landlord showing how the figure of $50 p/w was arrived at on a cost increase basis, just an amazing coincidence that at the time all the students found their rents increasing by that much".
Landlords are under no more obligation to show or have to prove to a tenant their financial position or their asociated operational costs anymore than an employee can request the Financials of a business from an owner to justify the pay increase or workload decrease.
For if such was to be permitted, tenants must also expect to have to prove their finances & justify what they spend their income on as well. It all breaks the privacy act for too much noseyness and intrusion. I'm sure tenants don't want landlords poking their nose into their finances anymore than they think they already do.
The suggestion is much like the tenant/landlord blacklist that tried to get up and running some time back but failed due to breaching privacy rights. These measures are deemed too intrusive, & at best biast as tenants would only want it going one way, they wouldn't want the spotlight on their own finances to have to go the extra mile to prove & justify they can actually afford the rent.
But hey, your right about the sun on a Friday & your right, life aint bad. We make what we can out it. We can agree to disagree about the rest.
You will almost certainly find that a landlords cost to operate has increased by significantly more than just $50 a week - insurances alone are up more than this & that is bit just one associated cost that has risen and not reduced.
So your expectation exudes form you to the tune of as a landlord, any increase in costs of your investment, which carries risk with it, should be passed to tenants? I agree insurance is up, mortgage rates, rates, but there's a breaking point where the tenants will not be willing or able to pay anymore. So the question is, is it fair on renters to have more and more of their disposable income sucked up, say up to 50-60% of their income, buy rent every week simply because the landlord isn't able to accept they have to cover some costs as they made a choice to invest and don't wish to carry with it any risk or costs associated. if we scrapped the accom supplement you're right, there would be a mass exodus of tenants, but eventually there'd be nobody able to pay the rents asked and the market would dictate the price as it wouldn't be artificially inflated.
@ Interesting - "is it fair on renters to have more and more of their disposable income sucked up, say up to 50-60% of their income, buy rent every week simply because the landlord isn't able to accept they have to cover some costs as they made a choice to invest and don't wish to carry with it any risk or costs associated".
Apply that to home owners, or other business owners, and try that again:
"is it fair on home owners to have more and more of their disposable income sucked up, say up to 50-60% of their income, buy mortgage repaymemts every week simply because the bank isn't able to accept they have to cover some costs as they made a choice to buy a home and don't wish to carry with it any risk or costs associated".
Does it work? Nope. One would likely say tough, the home owner signed up to this, maybe they shouldn't have got something they couldn't afford if costs go up.
What you are essentially saying is that it's not fair that tenants habe to pay so much rent. What you are then asking for is a heavy discount at the costnof someone else's financial position, in this case the landlord who is operating a business. Imagine if employees had that sort of conversation to their employer - its not fair you don't pay me enough for the value I bring, because I'm struggling to pay my bills, so you should pay me more".
Again, I'm all for finding a solution to help more tenants into homes, it's a good thing people should work towards achieving. But not at the cost of someone else. That's a charity. You expect that a landlord should have to absorb more of their increases just so a tenant can have an easier time of it. Any bank would laugh you out the door in you asked them to go easy on your mortgage & interest repayments just because your struggling to pay for other things. The world of business is harsh, you pay up or your ship out. That simple.
If tenants want charity, they have the government's emergancy social housing wait list to look forward to as another option. Tenants habe 3 options: rent privately, rent through government, do what's required to own.
Your article does little to show that a Landlords Costs have also risen significantly year on year. Every year, rates, insurance, all rise, and in particular over the last few years we've had significant rises in these areas, along with significant rises in interest & repayments as well.
It's a real shame there isn't a pathway to exit being a landlord. At least they could then have some hope of escaping from these relentless cost increases you refer to.
I imagine if anyone comes up with a solution, then they'd be able to charge quite highly for the service that relieves landlords of such pain and suffering.
@ Murray - I see what you've done there, and I can appreciate the sarcasm attempt lol.
Cost to a business operator or owner is a natural part of any business. Any knowledgeable property investor knows this. Any person who wants to invest in something with low associated costs should instead stick with stocks, bonds, mutual funds, reits, or crypto instead of property.
Though costs being a normal part of business ownership isn't what we are talking about. We are talking about rising costs, and who should pay those. Obviously tenants would like to see their landlords take care of these cost increases, rather than pass them on, which in turn increases a tenants rent, and gives them less disposable income. But that is how a charity works, and landlording is not a charity. You except to pay more for your petrol than you did 40years ago as costs have risen, this is no different.
Tenants are not exempt from cost increaes and inflation. That is not how business works. If you want cheaper rents, you don't increase operational costs, it's that simple. To claim that a rent increase is unjust & instead must reduce, you must first be able to prove that significant operational costs have not occurred but instead have reduced. There has not been a reduction of significant costs to a landlords operational costs, so a tenants rent reduction is therefore not justified just coz one may want one. Everybody pays their way, there is no free ride for tenants just because they don't own a house.
Remove thos subsidy & private landlords will only be able to rent to tenants with stable incomes, the rest will have to jump onto the 5 year government emergancy social housong wait list, along with the other 28,000 families.
Are you saying Landlords actually choose to rent to tenants without stable incomes?
If you also count NZ super, the percentage of people working will just get less and less.
Something needs to be done so the people that do bother working end up much better off than those that don't, because otherwise why work? I am not sure what the solution is, but it isn't expecting PAYE earners to subsidise everyone...
So that means you could have chosen from 4 that weren't on a benefit. Or did you choose to rent to those on stable incomes like one of the "single moms with 4 kids and two dogs all paid for by the government" that apparently wanted to rent your house?
by safeashouses | 24th Sep 24, 9:36am
@IO - I do like your points however I just don't see it that way. The property market employs 15% of NZ - that is substantial. Its not a bad investment choice - To be honest I rented a house in Te Atatu South about 3 months ago - the amount of people applying for the property was probably 60% applicants from HNZ ie single moms with 4 kids and two dogs all paid for by goverment - you over simplifying things in my opinion where will HNZ peeps live?
@ NZDan - Absolutely they do. The tenants who rely solely on government assistance to pay their rent via the accomodation supplement do not have stable incomes of themselves, but merely because the government provides it for them.
Tenants who have their accomodation supplement removed would then not have a form of stable income. Landlords would have no choice but to move these people on as the rent just wouldn't get paid.
The ones advocating for the removal of the accomodation supplement assume wrongly that almost all tenants recieve and require this benefit in order to pay their rent. These people are unable to provide the statistics that show how many tenants currently use this benefit vs how many tenants actually have a stable income that's not government funded.
When nearly half the country rent, landlords have plenty of choice of tenants. Choosing tenants who have no stable income won't be an option.
364k people in NZ receive the AS. Now this covers renters and mortgage holders, but if you assumed a conservative 50% of AS recipients were renters, that would be 182k. Chances are it's well more than half that are renters, but I don't have the numbers.
There's 510k private rental properties in NZ, so what you're effectively saying is if we removed the AS then up to 1/3rd of all tenants would need to be replaced?
- https://theconversation.com/364-000-new-zealanders-rely-on-an-accommoda….
- https://www.nzpif.org.nz/items/view/61936#:~:text=There%20are%20approxi….
@mfd - Do you think the accommodation supplement doesn't follow the same rules?
Absolutely not. Why?
Because shelter is a need. And landlords provide shelter for a fee to those who elsewise are unable to provide shelter for themselves. Free shelter is not a need, it is a want out of entitlement. One does not do what is required to own, one will pay someone else a high price to do it for them. This is business, not charity. Too many people confuse the two. Labour has decieved many.
Electric cars is need a need. It is a want. A luxury even.
The two are not even remotely comparable. You are confusing wants with needs, business with charity, and entitlement with rights. Everybody has the right to strive towards home ownership. Nobody has a right to be housed at both the cost and risk to someone else by someone else.
The electric car subsidy applied for only electric cars - again another want. If these subsidies applied for every want, it would be nice to also see luxury sports cars on thag list too.
Try again.
In a way it is kind of funny that you support what is essentially a socialist,even 'woke' policy that supports lazy ass tenants who can't work hard enough to afford a place to rent...applying your mantra,we should let the market decide,tenants sort themselves out without my taxes helping them.
@ Vman - It's a win win all round for all parties involved. I don't know how you don't see that?
It benefits Tenants: Those tenants who can't be bothered making the nesasary personal sacrafices towards home ownership can instead look forward to the government saving them from themselves by government handouts in form of accomodation subsidy to keep a roof over their heads. The rest of their disposable income they can do as they wish, without having to worry about any future maintenance costs, or insurance costs oe rates costs.
It benefits Landlords: As the government guarantees the rent will be paid via a re direction to the landlords account, meaning landlord has their rent same time every week, so the rent is reliable and landlords know this. It takes one less risk away that thee landlord considers before accepting a tenant into a rental.
It benefits government: As we've already talked about the government has proven they can't house even 28,000 families on the emergancy social housing wait list, let alone nearly half the country of renters if we just suddenly removed landlording because some people just don't like paying someone else to house them on their behalf for a fee. This is why neither Labour nor National want to remove this tenant subsidy. Labour had 6 years, & spent almost all of it playing with housing, tampering, taxing, villyfying, but the one thing they didn't do, which they could've done was remove the accomodation supplement. Doesn't take an expert to figure out why when everyone benefits.
A Rent paid = B Portion of tenants income + C Accommodation supplement
B - C < B + C
The value of landlords property depends A. B-C means A is smaller a number. How much smaller depends on how much B the tenant can commit and still survive.
But without C the rent paid WILL be less and the value of the property will be you guessed it LESS.
@ Westie - You assume that all tenants recieve this benefit - they do not.
You assume that without this tenants who have this benefit that landlords won't have any tenants to rent to. This is false. Nearly half the country rent, there are plenty of tenants to go around thag do not require the accomodation supplement benefit.
You assume all landlords have no costs to cover as they must all be mortgage free and somehow get away with paying no rates or insurances at all. Again false.
This leads to the assumption that if all landlords are cashed up with little to no costs at all, that they must surely be racking in the rent by the bucket loads. Would would of course back the fear behind the same people wrongly assuming that these same cashed up investors with bucket loads of money will now go on a massive spending freenzy of all these discounted properties as if they were going out of fashion.
https://i.stuff.co.nz/business/property/300288828/govt-crunches-numbers…
The average property investor actually only profits 14k per year. That's far less profit than the rent grab they take. If that's your idea of racking it in and creaming it off the backs of poor hard done by tenant tears, then I'd not like to see what you think a scraping by profit is.
Again, Labour has decieved you and many into believing that landlording should be deprofitized and instead ran as a charity. But not even Labour believe their own socialist mantras and buzz words. For if they did, they themselves would have removed this tenant subsidy. The non removal of this tenant subsidy by either side is a silent admission that both parties recognize the need for private landlords functioning. They don't do so by using unlimited smiles and kindness mantras as the Labour government would have you believe.
Incorrect Go Woke
Accommodation supplement is based on the amount of rent paid. No rent paid, no accommodation supplement.
The tenant is just the conduit for the payment to reach the beneficiary landlord.
Landlord's slamming tenants as beneficiaries are hypocrites.
That's extremely well put - I don't think I've seen it spelt out this way before.
Now that the tide has gone out and all is revealed, I'll look forward to landlords collectively deciding to make a stand against wasteful government spending on social welfare payments by dropping rents to a level that no one qualifies for accommodation supplements!
@ Rastus - No rent paid = no home. It's that simple.
You again wrongly assume that all tenants recieve this benefit - they do not.
Nearly half the country rent, and a good portion of those would not use or be entitled to the tenant accomodation benefit. Meaning landlords have plenty of choice of tenants if it comes down to those who can
Both governments over the years recognize that government alone cannot rent homes to the 80% of renters that live currently in private rentals. They can't even house the current 28,000 families on the governments emergancy social housing wait list, some of which have been waiting up to 5 years to be housed by government. This alone is proof that government cannot replace the private rental sector. Hence why no government will remove the accomodation supplement.
We saw further proof of an influx to government emergancy social housing wait lists when Labour removed no clause terminations, making it almost impossible to evict troublesome tenants with ease. Landlords became ultra picky of their tenant selection, and the emergancy social housing wait list grew by over 548% under their reign since.
Now if "punishing the greedy landlord" by taking away "a landlord benefit" actually worked, we would have seen landlords struggling to get tenants, but we saw the opporsite happening. Government instead struggled to cope with the influx of tenants that were removed from the private sector. Now we have motels and hotels crammed full of tenants disturbing the peace.
Your Labour lead ideology of "Let's remove further landlord benefits and see rents decrease and more tenants into homes" is a fools erin if you believe that removing the accomodation supplement and other policies that either increase a landlords risk or cost will actually achieve such.
I'm all for find a solution to assist more tenants into homes. But attempting to Rob Peter to pay Paul has proven time and time again to be ineffective at achieve such. It only creates further divide, both socially and financially. I know it, alabour knows it, National knows it, time to wake up and relize tenants aren't getting any closer to home ownership by expecting that it is their landlords job to financially assist them into one.
I will make it simple for you. In the year to January 31 2024, the government paid out NZ$2.34 billion in accommodation supplements to 364,000 people.
There are 418,000 active tenancy bonds in New Zealand. Even factoring in some instances of multiple people within the same share household receiving separate AS payments.
You could safely say that the rental market is highly dependent on AS payments to support current rent levels and therefore property values. If the AS payments were removed rents would fall and so would property values.
Those that benefitted most from the infrastructure wanted low rates so never paid the real cost to maintain them, and said maintenance therefore wasn't done in order to maintain the low rates people demanded. No w we are all faced with the real and historical costs catching up and many who benefitted most form this infrastructure no longer work and demand low rates as they can't afford them otherwise.
But all those socialists believed we could tax our way to financial prosperity. So according to them we should actually be feeling the sweet spot about now. Or is $800 million more still not enough of an increase in taxes for them? I suppose we need to tax people until there's nothing left. Profit is bad, tax is good apparantly. "Let's do this"?
Fair, the Government does receive revenue in the form of dividends, fines etc. What Jfoe has said is probably incorrect in the use of the word "tax".
His point is that a Government that spends more than it taxes or receives back in revenue, then the private sector is left with that difference as a surplus. If the Government balanced the books perfectly one year, but decided to give you $1m, the private sector (you) would be $1m "richer".
Here's the gap for the last 9 years ending June (in millions obviously).
Operating Capital (deficit spend) deficit spend as %GDP
2015 1,595 (3,422) (1,827) (0.7)
2016 3,265 (4,587) (1,322) (0.5)
2017 6,308 (3,734) 2,574 0.9
2018 7,280 (5,934) 1,346 0.5
2019 6,036 (6,746) (710) (0.2)
2020 (14,308) (9,384) (23,692) (7.5)
2021 (1,043) (12,724) (13,767) (4.0)
2022 (8,134) (18,909) (27,043) (7.4)
2023 (3,436) (22,212) (25,648) (6.5)
2024 (6,102) (13,200) (19,302) (4.7)
Joe - i think you are overlooking the whole point of tax - its actually only a (rear view) method of trying to redistribute the spoils from consumption/future consumption (read energy surplus)
You go between the Govt should deficit spend to the moon (so that the private sector has all this wealth to invest !!!...) ... to The Govt spending is of poor quality and should be trimmed/modified to lift the quality for all...
No offense intended - you know the flow of money better than anyone, but i think your thinking is a bit Silo-ed
Yes theres no limit to the "wealth" the Govt can generate by spending, but (like Grant Robertson at the buffet), eventually it catches up with the waistline
The point of an economy isnt to shuffle money around ... to quote Tim Morgan
"The real purpose of the economy isn’t to move money around, but to deliver material products and services to society. This can’t be accomplished through financial engineering, but depends on our ability to use primary energy to convert raw materials into products, and into those physical artefacts without which no service can be provided."
An economy is built off its energy surplus - thats the only wealth that can actually be distributed.
Not understanding this basic fact mortally wounds so much economic analysis.
jfoe is a crude acronym not a name!
I do not ever advocate deficit spending to the moon. I just think that we should let the deficit spending float at the level required - noting that this only works as part of a wider economic strategy that recognises real resource and energy constraints, current / trade account imbalances, levels of private savings, sustainable levels of private debt, wealth inequality etc.
How you somehow believe that taxing people more of their income, leaving them with less disposable income is somehow a good idea, and somehow benefits these people who now have less income, that somehow tax makes the world go round is beyond me. You don't by any chance happen to work in government? Or have a few good friends and family that work in government?
Somehow convincing people that they need to give up even more of their income to government, when most people already are taxed about a day and a half worth every week, seems a food erin to me. All in the name of "equality" I suppose - as long as we are all equally poor right.
that somehow tax makes the world go round is beyond me
You clearly don't understand what he is saying. The government spends money into existence, which goes to the private sector some as savings and some as spending, and tax is simply deleting some of this created money. if they spend 10bil and tax 9 then there's 1bil left in the private sector of the economy. Tax isn't a method of stealing from someone, unless you view the world as a bag of money you stored under your mattress and that your notes have some physical value. Money is simply a medium of exchange, it has no real value, simply numbers. When you look at real resources, and the link between this, and money (all money is debt, a promise to pay or a promise that the resources will be there for someone to exchange said money for), then you'll understand.
Sigh MMT mumbo-jumbo that requires politicians to act as benevolent technocratic philosopher kings that are ambivalent about the next election (yeah right).
All money is a claim on resources. It is a means of exchange. If you 'spend more money into existence (increase the money supply), without a counteracting reduction in spending elsewhere, then you create inflation.
Now MMT advocates will say to this, just increase taxes to reduce private consumption! Now you've deleted that excess money out of existence and no excess inflation! This is where the 'yeah right' comes in.
When Grant Robertson was running big fiscal deficits, causing inflation in the last term, supposedly to deal with the cost of living crisis, are you seriously telling me that you would suggest perhaps increasing the tax rate on income over $180k to 70% or something during this period, then back down again, to mute this inflationary impulse created by this additional spending?
And bear in mind you'd have to do this constantly. You'd be constantly increasing spending in some areas, while arbitrarily raising and lowering taxes for different groups to achieve your technocratic dream.
Sorry, I just don't think the voting public would ever accept this. Nor could the politicians possibly be trusted with it. They're all lawyers, nurses and teachers anyway not economists.
You seem to be arguing against points that people haven't made. The Govt finance system works as it works - Govt spend money into existence and tax it back again. Whether they spend that money well, badly, and how much they leave in circulation or in savings, or how they design taxes to retrieve some, all, or more of that money are all important points, but they don't change the mechanics.
'All money is a claim on resources'
You can increase the money supply and not generate inflation if you increase the availability of resources an equal amount.
That is why productive spending is important rather than spending on more bureaucrats. Had a portion of the Covid support money been spent on increased R & D, new industry support and frontline staff rather than employing more govt papershufflers we would have had fewer problems.
If there is a focus on increased productivity that is a plan to drive up the tools and knowledge available to the population then the economy increases over time.
The fatal entwinement of unproductive spending on politically allied interest groups followed by neoliberal restrictions on any govt spending at all just drives the economy backwards.
Sorry it’s the right wing elected now, including the far right. They are struggling to cut government spending in any meaningful way, they are just cutting the important stuff like Kianga Ora and health. If the left were overspending, you’d think the right could change that very quickly.
Jimbo the far left over spent other people's money for the last 6 years. That can't all be undone in just 11months. It's nice you give National that much credit, but they're not that good.
They're also not far right as you put, far from it. They're centre left at best. It's just that they're not extreme left enough for the diehard lefties, so they pitch them as extreme right wing. They're not even right wing left alone extreme about it. National is at best a more tamer version of what weve just had over the last 6 years. We only have to look at the last few decades of utter carnage, destruction and devide by both sides to understand that what ever wing you think each party belongs to, they both belong to the same bird.
Our government is not actually right wing enough for our right wingers, but since Nz has no proper right wing, this is about as right wing as we will get. The diehard lefties thinking we've now left 6 years of utopia can all breath a sigh of relief about that.
My issue with the current cuts is the cowardly way they are being implemented. The government are mostly not saying 'here's something we can't afford to do any more' - just taking arbitrary chunks out of departmental spending and letting the managers figure it out. In turn, they are using blunt tools like blanket reductions in budgets and voluntary redundancies.
If there's obvious cutting to be done, be open and up-front, point at the things that we were doing and won't be doing any more and count the money saved.
I admit there's a few examples of this happening, like the ferry contracts and probably others that don't come to mind.
Yeah I looked up the Air NZ one since I thought it would be bigger news and the article was from April 2020.
Could have sworn I was reading the Zerohedge comment section for a second! Endless extreme doomerism in the comment section.
I guess we had 6 years of people who didn't like the last government overplaying the negative, and now we will get 3/6/9 years (who knows) of the previous government's supporters now making everything look worse to the detriment of the current government.
Until we change governments and 'rinse and repeat'.
@ dumbthoughts - Exactly. The problem lies with accountability.
Accountability for all - poor voting choices, the government of the day, personal accountability.
If current governments cannot be blamed for current failures, and instead must be scapegoated to previous opporsition governments, then nothing gets done and we don't move forward as everyone is too busy being distracted blaming everyone else.
We had 6 years of Labour blaming John Keys 9 year government from nearly a decade ago for their current failings. Now Labours in opposition and their decieved voter base doesn't follow their own advice and instead is quick to blame National yet again, despite that they've only been governing for just 11 months compared to Labours 6 years. It's counterproductive. If the last 6 years of constant failures was all John Keys fault somehow, then the next 3/6/9 (who knows) Years of failures under Nationals reign will rightly be all Ardern & Hipkins fault.
It's the lefts odd rules not mine. Cannot have it one way and not the other. We either keep blaming the previous, which is proven to be counterproductive, or we take accountability and learn from the mistakes. Too many too busy pointing fingers to protect voter pride. No one wants to admit they played a part in slowly destroying the country and the values that it upholds.
You missed one. No matter. They're coming thick and fast now, so a tad hard to keep up.
Decision-day: Timaru meatworkers to learn fate (potentially 600)
Hey, NZGecko, I hear gross rental yields are about to rocket in Timaru. And as you say, 2015 prices will return.
Poor Timaru. It's official now. 600 jobs gone.
Alliance Group’s Smithfield plant in Timaru to close
Like I said, gross rental yields are about to rocket in Timaru (before they collapse, obviously). Meanwhile, government tax receipts will take another hit, and government borrowing will increase to pay all the ensuing benefits while people sort their lives out. And one wonders how many of those 600 will remain in NZ in a few years.
Ho Hum. "Back on track" feels pretty good, right?
Their MP is the National Party's James Meager ... Wonder if he'll keep that seat come next election ... [evil grin]
Another 20 at WorkSafe:
WorkSafe announces 20 further job eliminations added to cuts | RNZ News
They'd probably stay about the same.
My favourite line when going to a safety course is at the end, when the tutor tells you to be extra careful when you go back to work, as their stats show higher incidences of accidents immediately after attending a safety course, from false confidence.
Hooray for cash!
"...By 2023, some 85 per cent of the global population - 6.8 billion people - had a smart phone. That’s more people than have a toilet. Yet, at its peak in 2008, there were 1.3 billion landlines for a global population near 7 billion. Why did the mobile, and then the smartphone, succeed where the landline failed?
Yes, superior wireless technology made widespread coverage more possible. But there is another, simpler reason: to get a landline, you need a bank account. When more than half of the world’s population is ‘unbanked’, as it was in 2008, without access to basic financial services, telecoms companies saw no potential custom. Those companies would have built lines in the Arctic circle if there was profit to be made by it, but there wasn’t. Too many people were financially excluded. The infrastructure was never built, and people were left with fewer possibilities to communicate.
A mobile, on the other hand, you can buy with cash. You don’t need to be banked. The financial system was a barrier to progress for the world’s poor. Cash is a facilitator for them - it means total financial inclusion, a luxury the better off take for granted. Without financial inclusion - and there will always be some that, for whatever reason, often some bureaucratic quirk, won’t have it - you are trapped in poverty. Beware the war on cash."
Aussie economy adding jobs despite monetary + fiscal stimulus running below NZ (7% of GDP compared to 10% in NZ). How come? In Australia, it is spending households that are benefiting from that stimulus, whereas in NZ the net increase in govt and private debt is flowing very quickly to offshore savers and Aussie banks.
Our current account deficit is not reducing with falling demand. Why? We stopped refining our own fuel, because it was 'cheaper' to import it. But, the net impact on the current account deficit was significant - a good few billion dollars per year. We are also far more reliant now on imported digital services - we buy our advertising from global corporates, business service fees flow to Ireland, Singapore etc. Our imports have also simply got more expensive - we are not importing more, but we are paying a lot more.
What are the Govt's economic advisors in Wellington telling them? Crack on with spending restraint, let RBNZ drop rates to the floor, persuade some private financiers to take out some loans to build roads, and the economy will right itself?
Don't forget the new big boy data centers.
Tax payers paid for the dams but face higher prices as the global giants take large contracts and shorten a fixed resource pool. AWS and Microsoft will shift their profit off shore and pay nothing here, lording their green energy play globally.
Not winning.
Primary income account Jfoe....CAD is going nowhere.
This is what we wanted, our energy policies made us feel greener. We literally screamed for this, so I don't see the problem. Only a blithering idiot could not have forseen the consequences however. The smarter amongst us got assets outside the country and will continue to do so.
Another Chris Trotter corker, this time from the Democracy Project, asking "Are we the baddies?". He compares the two sides of the decolonisation/equality conversation with the North/South in the American Civil War. A smashing read.
A play on a classic skit
"Families will continue to feel poorer even as the inflation crisis that sent global prices surging comes to an end, the head of the International Monetary Fund (IMF) has warned.... the IMF, said the “global inflation wave is in retreat”.... but the higher price level that we feel in our wallets is here to stay."
Look about right. But I know! Let's drop the OCR; interest rates everywhere, and encourage households to take on even more, cheaper Private Debt to go on a spending spree to make themselves feel better. Problem solved.......(sarc/off)
Hmmm, so let them fail, and cosy up to whatever easily corruptible tyrant gets installed in the aftermath, thus winning cheap concessions to said materials and labour?
Good plan. If we make some sort of token gesture like banning plastic bags or buying expensive electric vehicles, I'm sure we can get past being the baddies.
More than likely. Then we'll get the solution from the past that if we had any sense we'd be getting on with first, before it gets really bad. (NB: And let's not get into flogging the country off via Public/Private Partnerships, either.)
"Public Works Administration (PWA), in U.S. (1933–39) designed to reduce unemployment and increase purchasing power through the construction of highways and public buildings. ... During its existence, the PWA constructed more than 70 percent of the nation’s new educational buildings; 65 percent of its new courthouses, city halls, and sewage-disposal plants; 35 percent of its new public health facilities; and 10 percent of all new roads, bridges, and subways. "
@BW - dropping the OCR doesn't nesasarily mean that everyone's going to go out with bucket loads of free spare cash all of a sudden and buy up heavily discounted property as if it were going out of fashion.
Most people have now used up their post Covid savings, and will need to replenish their accounts before they could ever look at spending up large again. What dropping the OCR does however is help relieve people's pockets a little in the interim.
Thanks for the pub-economics insights.
Now, perhaps you could look-up how many billions of $$$ are held in term deposits, and near term-deposits, and/or assets that can be turned into cash within days, and tell us what will happen at TD roll-over time as TD interest rates plummet, and/or if there's a sniff that lots of tax-free money can be made on houses.
Infometrics chief forecaster Gareth Kiernan has this to say:
“The bank [RBNZ] has already exacerbated the economy’s ups and downs over the last four years, ultimately creating more hardship for businesses and households than might otherwise have been necessary.”
source: Interest rate cuts drive economic recovery from mid-2025, latest forecast says
You know what? He's not wrong!
The quality stuff you get from non-bank economists.
The problem is, we don't know what sort of economic fallout we'd have had throughout 2020-2022 without the stimulus at the time.
I spose that's where the word "might" comes into it.
So it's a tradeoff between a massive surprise pandemic era economic downturn, and an easily predictable one we're having now.
"we don't know what sort of economic fallout we'd have had throughout 2020-2022 without the stimulus at the time..."
Actually, we do know. And a non-bank economist tells us in the article. (To add to what JFoe, myself and not a few others have also surmised, and the RBNZ themselves have admitted to already using weasel words.)
To be fair, we can model it - here's a crude output. We did not need the monetary stimulus - fiscal had it covered.
With the benefit of hindsight, we possibly didn't need as much of either.
But at the time, our central authorities didn't know what we were looking at, so just opened up the taps.
Meanwhile, in other parts of the world, people got neither, sat at home for months and years on end, and if they were lucky took on private debt at high rates, some even having to pay the government tax on the interest.
Don't you think any potential borrower, even in 12 months time, will look at lower % rates as akin to picking up a financial red-hot poker, given what's just happened? Borrow short, "Rates are guaranteed to go lower still!!!" at, say, 2.99% and then risk something totally unexpected happening, and the roll-over in 6 months later comes in at 6.99%. (NB: That's what higher longer term locked in rates are for = to lessen risk)
If we have any sense, it will take quite some time to get back to taking on more Private Debt.
No. We're stupid, lazy and gullible.
Further evidence? Exactly as you predicted, HM.
Most fast-track panellists picked by ministers, political parties
Corruption - pure and simple. (And 'jobs for the boys' is but a tiny part of it.)
Poor Timaru. It's official now. 600 jobs gone.
Alliance Group’s Smithfield plant in Timaru to close
Further thoughts (although I suspect no is listening, nor cares) ...
Alliance Group says: ""Unfortunately, we must face the reality of declining sheep processing numbers as a result of land-use change. This has resulted in surplus capacity in our plant network. We cannot maintain excess processing capacity when livestock numbers don't support it."
There's that "land-use" euphemism again.
Is it because the land that previously farmed livestock is now being used for higher value horticulture?
Or Is this another way of saying that the land is now growing trees ---> so we can meet our climate claim obligations ---> so NZ Inc. can continue burn fossil fuels --> so the Simian Brown can repay his donors?
Actually, it's a genuine question as that's not a region I know well.
We still remember the taste of our lambs ('salt' and 'pepper') as the best we've ever had.
Related to CONF's question, the 1000+ acre farm upstream of us converted from its traditional sheep to beef - following a farm advisor. The land was extremely hilly with poor soil, so at the same time they started blasting it with air-dropped fertilizer every 6 weeks. Oh, and had insufficient fencing so the cattle enjoyed the stream also. The stream ran green ever since.
But as to why they did that - with the demise of wool, there's little money in sheep. Dropping supply helps keep prices up (though, there's now no end of bobby calves from the milk units).
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