Here's our summary of key economic events overnight that affect New Zealand with news that long term benchmark bond interest rates are still rising, even if the rising trend is variable.
It is a quiet economic data day in the US, with a housing building confidence index the only release of note. The NAHB/Wells Fargo Housing Market Index rose in November to its highest level in seven months, as its gets an election relief rally of sorts, modest to be fair.
In Canada, housing starts rose back to their 2024 average level but it was a three-month high for them.
Across the Pacific, Japan's core machinery orders, which exclude those for ships and electric power companies, slipped by -0.7% in September from August, in the red for the third straight month and missing market expectations for a +1.9% gain. Year on year, these are -4.8% lower. Export orders held up relatively well, however.
Singaporean exports turned down in October. The fell by -4.6% from the same month a year ago, reversing from a downwardly revised +0.9% rise in September. It marked the first decline in since June, due to a fall in non-electronic exports. Non-electronic shipments slumped -6.7%.
In China, new Bloomberg analysis shows more detail on their population problem. Within 20 years, deaths are set to be double the number of births. The old-age dependency ratio may reach 52%, meaning there would be just two working-age individuals for every person over 65 years. The rapid aging and falling birth rate has the United Nations projecting China's population could shrink to half its current size by the end of the century - that's 700 mln people less, a decline double the current size of the US population. Even Japan's population isn't shrinking like that (although it may do in time).
In Australia, regulator ASIC has taken NAB (BNZ's parent) to court alleging it ignored hardship support for 345 "vulnerable customers" between 2018 and 2023 (about 60 per year), saying the failure to respond broke the Australian credit code. NAB has about 10 mln customers and about 35,000 staff. The chances it got something wrong for 0.0006% of their customers in a year is almost a certainty.
The UST 10yr yield is now at just on 4.45% and up +1 bp from yesterday at this time. The key 2-10 yield curve is still positive by +14 bps. Their 1-5 curve inversion is now inverted by just -4 bps. And their 3 mth-10yr curve inversion is little-changed, still by -14 bps. The Australian 10 year bond yield starts today at 4.68% and up +4 bps. The China 10 year bond rate is up +2 bps at 2.10%. The NZ Government 10 year bond rate is down -4 bps from this time yesterday at 4.74%.
Wall Street has started its week up +0.4% on the S&P500. European markets were quite varied with London up +0.6% but Paris down -0.2%. Tokyo ended its Monday session down -1.1%. Hong Kong ended up +0.8% while Shanghai was down -0.2%. Singapore was down -0.3%. But the ASX200 gained +0.2% and the NZX50 ended up +0.6%.
The price of gold will start today at US$2610/oz and up +US$47 from this time yesterday.
Oil prices are +US$2 higher at US$69/bbl in the US while the international Brent price is now just on US$73/bbl.
The Kiwi dollar starts today at 58.7 USc and up +10 bps from this time yesterday. Against the Aussie we are down -30 bps at 90.5 AUc. Against the euro we unchanged at 55.6 euro cents. That all means our TWI-5 starts today at just over 68.5, and up +10 bps from yesterday.
The bitcoin price starts today at US$92,065 and up +2.0% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.2%.
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64 Comments
It's not 'funding' that is the problem. We are an overshot species and, whether in controlled fashion or uncontrolled, our numbers will fall to sustainable levels.
The MSM - steeped in economics and therefore in energy/resource blindness - thinks labour is the important ingredient, but reduction of energy going into the system. and therefore of work being done, is orders of magnitude more important. (Essentially, economics stopped with Adam Smith).
By that metric, China doesn't have a population problem'; it has as close to a get-out-of-jail-free card, as you can get from here.
Real truths (like overpopulation and resource draw-down) have to be separated from mantra-based opinions (growth is good, more people is good, seen through a money lens).
- Pay for your parents retirement through general taxation.
- Barely cover living costs for yourself (if you ever get to buy a house or have a family)
- Like be told to pay for your own retirement with no access to Super.
Watch people fight tooth and nail for the right for people to completely opt out of any obligations in the above and tell you what a bad person you are for wondering out loud if you're being taken for a ride.
Yes GV to all those three you list.
- Pay for your parents retirement through general taxation.
- Barely cover living costs for yourself (if you ever get to buy a house or have a family)
- Like be told to pay for your own retirement with no access to Super.
It's a hard place and senseless. But to get out of it is very hard as well. No easy pass.
Phase in full Kiwisaver and eliminate National Super on a stepped basis.
Because it's been stupid we don't have to stay that way.
There's a very simple solution being adopted by the youth. Leave NZ, earn more abroad and have to sacrifice less due to higher earning potential. Hear their folks missing them back in NZ, but have little interest in returning given there isn't much of a longer term future for them given the trajectory of the country.
Exactly. Smart kids are gonna stay transient and keep on moving to the country with the best offer.
Anyone old who thinks the next generation is gonna be loyal and look after them in their retirement [after the damage the oldies did to the economy and environment] is in for a nasty shock.
Nz has little to offer anyone any more.. it's just gonna become a giant farm with unliveable crime ridden cities. Smart kids have no reason to settle here.
NZ has plenty to offer, but less so that facilitates some key milestones of life for many such as owning a home before having children, or at all in some cases. There's still money to be made in so many places, just not always in excess, and many aren't willing to sacrifice income for lifestyle e.g living back country with lower income but amazing bush, hunting, rivers, mountains, etc. I often find myself lately reflecting on how we too often think of NZ as only the major cities and forget about the life and the people in rural NZ. It's easy to think that way i you live in AKL,WLG, CHC, and It saddens me to think that there are more and more people in these places that will grow up without a connection to the countryside through family and friends.
I would give up all my wealth and more to be in my 20s again.
My graduate salary would be up 100% in 20 years. Graduates work much easier hours now and minimum wage is respected in the corporate world.
When I was young I spent years saving dollar by dollar in term deposits to buy a rental (right before the GFC ug) – lived in a moldy flat while funding the shortfall from my pay. Now I’d be jumping into ETFs, tech stocks and crypto – much easier returns than property
"When I was young I spent years saving dollar by dollar.... Now I’d be jumping into ETFs, tech stocks and crypto – much easier returns than property"
Which gives you some idea of how sustainable those easy returns will prove to be....
The savings account doesnt work, so a roulette wheel is the way forward
But would you have LIVED?
I built a boat in a Bondi backyard, financed by working nightshift. Flew hang-gliders at Stanwell Park. Ended up cruising in Queensland, flying if the flying was 'on', sailing if the sailing was 'on', in the beer-gardens if neither were on. Found my life-partner in the latter.
Put another way, I worked to LIVE, not lived to work. There's a world of difference.
But yes, the body isn't 26 anymore. :)
Definitely. Far more so than in my 20s.
People forget how brutal the corporate world was back then. 80-100 hour weeks including compulsory work / client drinks.
Now young people get the precious resource that is time AND earn more than their counterparts 2 decades ago
Heck you can work at a minimum wage role if you want and get nearly 50k a year. That's incredible
"... compulsory work / client drinks. "
God god, how I hated those. It took so long to find kindred spirits among the throngs of those acting out some crappy, fake persona of their real selves that hours got wasted. Sometime the entire night. Friggin' torture. And it was mainly friggin' men - no. fun. at. all.
I hardly agree with Yvil on anything. But connecting what makes you contributing human being (in the financial and leadership and community contributions sense of things) means how you make the financial world do more than put an xtra $$ on your self-view of influence... how you make you do more than look after yourself.
It's a good point, Tom Jones.
Back when I was in my late teens / early 20s my parents, and their parents, were / had paid way more tax than the current wealthy oldies have been paying for the last 30+ years. The changes of the 80s - thanks to Reagan & the 'trickle down' b.s. - have allowed my parents & my generation to become obscenely rich by comparison to my grandparents ... and as you point out - what my children face.
And why? Simply because those of us with middle incomes and above have paid far less tax. Thus we have been able to squirrel away huge parts of our disposable incomes into income earning and/or tax free investments. While, let's not forget, those with less than middle incomes have generally gone either nowhere or backwards as the tax burden has been shifted onto them, and/or the cost of a basic life, e.g. a home, have become more and more expensive.
For those in their 20s - who made the mistake of choosing non-wealthy parents - well, sorry, you're screwed ... No tax free inheritances for you.
Most of the gain was sort-of by not 'paying tax', but it was a housing Ponzi that the tax would have been a portion of - so what exactly, was it?
It comes down to surplus energy going into the system - after all, that's what powers the diggers etc. Reagan was an elite reaction to a surplus reduction, certainly per-head and certainly per encroaching entropy. That process has continued, increasingly.
The kids will get the dregs, measure it how you will
Chris - this says it better than I did
https://surplusenergyeconomics.wordpress.com/
So the tax may facilitate short-term equality-rebalancing, but not the major problem.
Having just visited Denmark the place is miles ahead of NZ in every metric - Unemployment is 2.6% in September 2024, unchanged from the previous month and marking the highest jobless rate since October 2021.
Wonder what ours is at the moment (I see they have stopped reporting weekly numbers)
Around 1988/89 I fell head over heels in love with a stunningly gorgeous Dane. Followed her (like a lovesick puppy) to Australia for a backpacking adventure. Her grandfather died suddenly and we caught a red eye back to Auckland and then she bolted back home. Kept in touch for a short time but never saw her again. Completely heartbroken.
Anyway I’m thinking NZ should abolish central government and invoke a national policy, looking towards going global, of compulsory euthanasia at 70 years of age.
Imagine sat in RBNZ in 2022 & 2023. You know you are going to crash the economy and send 60,000+ kiwis on the dole, but (a) you think it is necessary to tame inflation and (b) you believe in the magical powers of lower interest rates to put some life and jobs back into the economy.
Now, here we are in late-2024.
On (a), it turns out that inflation went up and down in countries regardless of monetary policy decisions. Energy and food prices spiked and then subsided. The global price level shifted up around 20%. Did we think our tiny little island could just opt out somehow? Indeed, there is reasonable evidence that higher rates sustained our inflation episode in NZ as businesses clearly passed on debt-servicing costs and workers pushed for wage rises to help cover higher mortgage costs.
On (b), the US did not get the 'austerity and higher mortgage costs are the answer to inflation' memo. So, the US economy splurges on consuming a super-sized share of our planetary resources, and the Fed can leave rates high, safe in the knowledge that Govt fiscal stimulus will keep on pumping (for now). I do not believe in the magical powers of lower interest rates to reboot an economy (that takes fiscal), but, it seems unlikely that RBNZ will have the appetite to move rates below the Fed... unless they are willing to devalue the currency?
There are signs that the recession has bottomed out, but I don't see where the stimulus is going to come from to actually pick things up again. If feels like we are repeating the mistakes most countries made in 2009 - under-stimulating and making a painfully slow recovery from the GFC. However, we are making the mistake in very limited company (with a few other idiots like Hungary, Estonia, and Sweden). How long can the Govt talk about being laser-focused on the economy while company liquidations pick-up pace, jobs evaporate, and our infrastructure falls to bits?
Enter the RBNZ and National's "phoenix" strategy. Burn everything to the ground then rise back up with something different (maybe different government?). Watch closely late next year when things start takin a better turn and the all come out of the woodwork claiming it was the plan all along, while many more lose their jobs, businesses and houses.
Per time, the chances of a 'rise back up' are dwindling exponentially (see the link I sent Chris upthread).
And I cannot see how many losing houses jobs and businesses, can sit with a 'return to growth'.
What we will see is ever-more debt, until belief evaporates.
About the RBNZ Jfoe, damnend if they do; damned if they don't. Nevertheless, what do you do if the hoi polloi are able and willing to access truckloads of credit when the cost of that credit is suppressed? I think there are limits to how much private debt accumulation can continue, but at a loss as how to quantify it. As we know, broad and base money has to continually expand or else the economy goes tits up like you've never seen before. The territory is so uncharted that we might as well be in another galaxy. And the critical thought and constructive dialogue in our government, media, and water cooler is deafening for the silence .
RBNZ be damned for sure.
My rough calcs suggest that when OCR x private debt as a percent of GDP exceeds about 5% the economy goes into recession. Basically, the effective transfer of money from spenders to savers / investors becomes too high and consumer demand slumps. We are currently at 140% private debt as a percent of GDP and 4.75% OCR = 6.65%. We could do another round of private debt led 'growth' but we would need an OCR of below 3 pretty quickly, and below 2% by 2026/27.
People do not appreciate how much of our 'growth' through the 1990s and 2000s was simply an expansion of the private sector balance sheet up to a level that can only be sustained with ultra low interest rates. We saw those low and falling rates through the 2010s of course, but what now?
Pick up some electricity in Southland for $0.29/MWh. Seems like only yesterday it was $1290/MWh.
Dig a pit uphill.
Use the power to pump water up into it.
Let the water down when you need it.
It was called Onslow. Yes, there were bigger questions to be asked (can the grid be long-term maintained) but it was ideologically canned by a doomed philosophy. Call it ignorance - there's a lot of it about,..
Question - have we moved on from think big type projects that take twice as long and cost twice as much like this - and that’s only the planning phase. I think now everyone has to have a say means these are doomed.
I am more in to householder solar/battery arrangements in the future - less overall risk and leverages technical improvements delivered by major world players, and leaves individuals in control of their own destiny.
Agile not monolithic?
Needs a bigger discussion re grid.
Yes to local solar, if we're going local (I've done 25 years, one way and another, off-grid on PV) and batteries currently (:) are fine, but not really grid-useful. So are you aiming for self-sustainability or grid-assistance? The grid needs big storage, or intelligent control of your fragmentation (who controls the load?).
Agile stand-alone is great - and simple, and cheap.
Excellent Mark.
In addition to distributed solar and storage think about some smart IT and the right legal structures.
With those our road of thirty houses could be self sufficient with smoothing demand spike on the grid, as well as contributing energy to the national pool.
Whatever. It just seems weird that people in their 20s are paying tax to cover living costs for the generation that is sitting on most of the nation's wealth and will pass it on tax-free to the next generation.
Remember a CGT won't capture inherited investment assets. I have family who inherited about $10 mil each in their 30's, parked it with a wealth manager and travel the world.
It's wild we'd start taxing families for the privellege of being able to keep their relative's stuff without talking about how government revenues are something like 70% higher than they were pre-pandemic and it still isn't enough to apparently pay for the basics.
Inheritance taxes around the world have carve-outs, rollover relief and in some cases high thresholds so that it only kicks in at stupidly high levels ($5m USD+). No one wants to mention that here; it's about snagging every dollar possible and dragging as many people into the net as they can - with no assurance that services or government will get any better or more effective. It's the ultimate "Source: Trust Us" exercise but it comes with a healthy does of compulsion.
After a lifetime of paying for everyone else's retirements, and then probably my own and having a very limited time after being able to actually retire, I fail to see why the state should be able to clip the ticket on my death to let my kids inherit my estate. Sorry, but at that point, the government has had enough out of me.
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