Here's our summary of key economic events overnight that affect New Zealand, with news China is clamping down harder on negative views about their economic prospects. Chinese economists are now required to be cheerleaders for their economy.
But first up today, sales of new single-family homes in the United States rose by +5.9% from the previous month to an annualised rate of 664,000 in November, above market expectations of 650,000. However, this just takes it back to the 2024 average level.
November durable goods orders were lower than expected, down a rather sharp -6.3% from the same month in 2023. But this is largely due to a drop in aircraft and defence orders. And non-defence, non-aircraft capital goods orders also held at the same as the year-ago level. They could be better, but there is no collapse either.
That tame result fed into the US Chicago Fed's National Activity Index which reported a small expansion, and a much better result than the prior month.
The latest estimate of the US economy has it still expanding at a +3.1% rate in Q4-2024, a strong way to finish the year.
But consumers are more wary about what 2025 will bring, no doubt hit by the unsettling signs in their national politics. The rise in consumer sentiment over all of 2024 took quite a hit in this latest December survey.
There was another US Treasury 2yr bond auction earlier today for US$70 bln and it was very well supported again and delivered a median yield of 4.29% which was only marginally more than the 4.24% median yield at the prior equivalent event a month ago.
North of the border, Canadian producer prices rose +2.2% year-on-year in November, following a +1.1% rise in the previous month. But this just returns it to the growth rate it has had for most of 2024.
Across the Pacific, Singapore's November inflation rate was expected to rise, and it did, but not by as much as was anticipated. It is up to just 1.6% from the three-year-low October 1.4%. It's core inflation rate however eased lower in a way that was not expected.
In Japan, carmakers Nissan and Honda have agreed to merge, targeting mid 2026 to get all the US$58 bln pieces together. And they are trying to get Mitsubishi Motors to join them. It would create the world's third largest carmaker. A lot will depend on whether Nissan can execute a successful restructuring of its stumbling business before the merger.
Staying in Japan, they do an annual review of their National Accounts, an that now shows that low economic growth and demographic shifts meant that per capita GDP was higher in South Korea now than Japan in 2023 (see page 17). It is close, so it may switch back in 2024 as Japan has expanded faster this year. But the rise of South Korea will come as no surprise to many even if it is a surprise they have caught up with Japan.
In China, the warnings against economists and analysts having negative views about their economy are growing more strident. If individuals have "repeatedly triggered reputational risk over inappropriate commentaries or behaviours" within a certain period of time or caused "major negative impacts," their employer must "severely deal with the person until termination of employment," they said, without explaining the definition of inappropriate comments.
They are trying to head off a noticeable "slump" in consumer spending in the icon cities of Beijing and Shanghai. If the trend is being reported there, it will be likely be worse elsewhere.
The UST 10yr yield is now at just on 4.58%, and up +5 bps from this time yesterday, its highest since the brief spikes in April 2024 and October 2023, and its highest prior to that since 2007. The key 2-10 yield curve is more positive, now by +23 bps. Their 1-5 curve inversion is +18 bps and more positive. And their 3 mth-10yr curve is also more positive at +25 bps. The Australian 10 year bond yield starts today at 4.47% and down -3 bps. The China 10 year bond rate is now at 1.71% and up +2 bps from yesterday and off its all-time low. The NZ Government 10 year bond rate is now at 4.55% and down an unusually large -10 bps.
Wall Street has started the holiday week with a +0.5% rise for the S&P500. Overnight, European markets were mixed in a +/-0.2% range. Tokyo however ended its Monday session up +1.2%. Hong Kong was up +0.8%, but Shanghai well -0.5%. Singapore rose +0.9%. The ASX200 ended its Monday trade up +1.7% while the NZX50 rose +0.7% to start its week.
The price of gold will start today at US$2614/oz and down -US$8 from yesterday.
Oil prices are down -US$1 at just on US$68.50/bbl in the US while the international Brent price is still just on US$72.
The Kiwi dollar starts today just on 56.5 USc and down -20 bps from this time yesterday. Against the Aussie we are up +10 bps at 90.5 AUc. Against the euro we are holding at 54.3 euro cents. That all means our TWI-5 starts today at just on 67 to be down -10 bps from yesterday.
The bitcoin price starts today at US$93,628 and down another -2.1% from this time yesterday. Volatility over the past 24 hours has been modest however at +/- 1.9%.
Daily exchange rates
Select chart tabs
The easiest place to stay up with event risk is by following our Economic Calendar here ».
77 Comments
NZ economy has no growth because:
ageing pop means lower consumer spending
immigration drop
housing market doldrums
government did opposite of counter cyclical spending by cutting when OCR still high
China imports down
China housing market deleveraging
world freight cost rises last 3 years
inflation exceeding wages 2021-23
inequality increasing
rent increases more than wages 2021-24
Paltry GDP is becoming norm since 2010 in OECD other than USA. Compare average GDP pa growth with 1993-2008 with 15 years since.
Also GDP growth does not benefit bottom 60% in same way as more of it goes to top 20%, reducing money circulation. Real wages purchasing power increasingly replaced by debt. When cost of debt stopped being cut, end of illusion
"RBNZ have taken nothing."
They paid the OCR interest rate on balances held at the RBNZ. That money belonged to all of us. And it was paid to big financial institution.
But the majority of the artificially raised interest went to banks and their depositors. (Which is what I expect you meant.)
Agree, that would be a massive problem for NZ. Need to get that OCR down ASAP so they have room to increase a little if needed. We only survived 5.5% due to the belief it would come down again, if we go back there any time soon, the current economy will look fantastic compared to what that would look like.
NZ exports what it can but it’s a hard sell given its distant, remote location and small size, at the south east end of the line.The previously big sheep meat & wool industry has more than halved but there is at least compensation in dairying and the associated beef production. At one stage, Clark’s fifth labour government posturing , NZ was going to be the Ireland of the Pacific. Afraid not.
NZ exports what it can but it’s a hard sell given its distant, remote location and small size
Doesn't seem to be a problem when importing hundreds of thousands of new consumers each year.
To be fair, the annual value of our exports have doubled in the last two decades, but import growth has outpaced it because our economy has increasingly moved towards low-value domestic services.
Import of such as , shoes, clothing, pots & pans all the sorts of consumer essentials which once upon a time local industry did largely manufacture. Of course the raw material for that was needed to be imported anyway. I recall wearing to work Lichfield shirts which lasted for years. My son in law, now in the same sort of office work, wouldn’t think to keep wearing a shirt for more than a year, even if it lasted that long.
Advisor,
"To be fair, the annual value of our exports have doubled in the last two decades".
Despite that, the ratio of exports to GDP has been falling since 2000. the peak was 35.75% in 2000 and in 2022 was 24.40%. This puts us at 121st out of 160 countries. if we look at the OECD, their average in 2022 was 63.93%, having risen steadily from 26.34% in 1970. Sources: Global Economy.com and the OECD Library.
Japan produces lots and has a lower GDP per capita
Japan also has a lower exports per capita than us and almost all OECD countries. Link
Yes, they produce a lot but also have a large population.
In fact, all countries with high exports per capita also have high GDP per capita. Strong correlation, don't you reckon?
I do wonder what would have happened if the Government hadn't decided on it's "austerity" policy of cutting public servant jobs - would the decline in GDP been as severe. I argue that this is a result of a realisation by the population that something is fundamentally wrong with the current system (economic, political, social)( it may not be a overt realisation but a niggly doubt in the back of people's mind's). Neither the left or the right have the answer ( no matter what they say). (as an example - China and the comments regarding economists as propagandists above - the CCP simply doesn't have a solution - the emperor has no clothes).
Correct. It amuses me how much energy is wasted in this country with left fighting right forever and a day. Boring. As you say neither have the answer so why flog a dead horse? I suspect that the majority love the tit for tat juvenile fighting (especially at election time) and don’t really care about NZ too much at all.
Just so happens I have the answer. Abolish central government. 4 states.
What public servant job cut would that be?
"...the EFT staff total in the public service at September 2024 is only 296 less than in June 2023."
https://www.kiwiblog.co.nz/2024/12/huge_savings_on_consultants.html
Not to forget that in 6 years Labour increased the public service by ~18000 / ~40% with no significant improvement in public services, including several '000s in the 6m prior to the 2023 election.
So are National going to cut a good chunk of that 18,000? Even half of it? Because that's the big scary wasteful number everybody is talking about.
The thousands just prior to the 2023 election would've been a good starting point. If they're truly wasteful, it's easy, make them redundant....
Otherwise, much like Kiwibuild, we're on track to meet halfway in 30 years at current run rate.
Largely agree.
But let's face it - GDP is a pretty terrible measure in today's world. Consider this example:
I spend $15k on a solar panel array to generate my own electricity and I consume all the electricity I produce. The array will keep producing for 20+ years. Payback period is 9 years.
Year 1: GDP goes up by some factor of $15k.
Years 2-20+: Does GDP go up? ... Or down?
You asked for someone to flesh out your case study. Savings rates for instance are heavily tied to GDP growth - because the saved money is used for investments, presumably in something productive.
Maybe a new years resolution could be to develop some big boy pants.
Here's another one ... A tad more complicated.
A major NZ manufacture is using a heat plant that burns fossil fuels to produce the heat They decide to replace it with a hybrid one that uses sunlight for some of the heat and electricity for the remainder. Let's say it's built over two years costing $10m each year, will last for 20+ years and maintenance costs are near zero. Payback period is 10 years.
Year 1 & 2: GDP goes up by some factor of $20m. Or does it?
Years 3-20+: Does GDP go up? ... Or down? ... Or stay the same?
They're both ignorantly-framed questions.
Firstly, why did you expend energy-proxy to the tune of 15k dollars? And how do you use all that? I get by on a system that took 5k in 2005 dollars, and run a house on 300 watts. Someone wasted a lot of effort...
Secondly, money - and by inference GDP - is not a measure of anything. It purposely ignores the real counts, and I wonder at those who - even when challenged - insist on measuring stuff in one or both.
Money is ultimately underwritten by energy, via work-done. Rentier pass-the-parcelling can instill a sense in some, that this is not so - but they are wrong. 100%. So the only question in the book, is: What will the supply of energy look like in 1-5-10 years?
And the overhang can be nothing but irreconcilable debt.
"They're both ignorantly-framed questions. "
Your opinion is noted. They are lifted from a set of survey questions given to graduates to garner whether the grads had an understanding of the most commonly mentioned economic terms. The results were enlightening, and disappointing, as very few could answer succinctly, or accurately, or reference the assumptions (e.g. conventional wisdoms) they used in their answers, in this case GDP. As you'd expect, economics grads did best. But close behind them were engineering grads. Sadly, science grads were quite a way down the list, as were doctors, lawyers and dentists. (There were answer like yours, too.) They didn't have access to google or an A.I., unlike the only other person to attempt an answer.
"Money is ultimately underwritten by energy, via work-done."
No. Money is ultimately underwritten by people's confidence in a currency.
There's a very simple proof for that: Bitcoin. Billions of kilojoules of energy have been consumed (wasted?) creating the coins. Can this energy ever be recovered? No. So what is its 'value'? It has value based upon people's confidence alone. Without that confidence, misplaced or well placed, it has no value in and of itself. No different to any other currency in that regard.
"And the overhang can be nothing but irreconcilable debt."
Again, wrong. History is awash with 'debt' that has become worthless as the currency the debt is held in has become worthless.
But because the debt is secured over some asset, the only thing of value that remains when a currency becomes worthless is that asset. (At this point it is worth mentioning that assets go up and down in value all the time. And yes, energy is one component that makes up how the asset is valued. But it is far from the only one as you constantly assert.) Thus, the underlying asset provides the value which can be measured in another currency, or even compared to another asset should a bartering system be used instead of a currency.
I expect you'll immediately claim that it's value is related to the energy either contained in that asset (I refer you to the Bitcoin proof), the energy needed to recreate the asset (Bitcoin proof again), or the energy that can be extracted from that asset. And once again, you'd be wrong. It will only be worth what the highest bidder will pay for it. (Worth pointing out here that the generic 'energy' you love to use comes in many forms and the relative value of each kind moves around a lot.) And once again, it comes down to people's confidence that they can extract some 'utility' from the asset that justifies what they have 'forgone' to purchase it.
Wrong. People will ultimately only have confidence in something that delivers. To deliver, money has to be physically-backed (by resources, and energy). The lack of confidence is acuse by growing awareness that there is a shortfall.
You fail to differentiate between driven and driver.
'Again, wrong. History is awash with 'debt' that has become worthless as the currency the debt is held in has become worthless'
EH? I'm pointing out that what has happened many times in the past, locally, is happening now globally - for the first and only possible time.
You don't really understand, do you? So much need to be superior, to be right, that you don't backtrack and think.
PDK - IMO you are wasting your time arguing with someone so archetypically supercilious - especially when they demonstrate repeatedly that they cannot even grasp the fundamental distinction between money and credit.
BTW, neoclassical economics ignores this too, just as governments do, which is how they continue to try to hide the fact that every single currency on the planet has lost between 97% and 99.98% of its purchasing power.
Also, in the U$ for example, buyers complain about the high cost of houses when in fact, measured in gold, they are 71% cheaper now than they were 22 years ago. This same effect is why, in real terms, petrol costs far less than it did in the 1950s.
We would all be much more informed if we measured value in commodities like oil, or even eggs, chickens, or cows than in fiat currencies. Or we could simply use real money (gold) as the frame of reference because one ounce buys pretty much the same amount of goods or services as it did 5000 years ago.
Season's greetings
Colin
I will take that one!
There’s no major growth point!
If we had some strategy, we could have really pushed the whole green economy thing. But we didn’t/ don’t.
It will be mediocrity going forward:
- there’s still some demand left in the Chinese juggernaut, just don’t expect more than moderate growth
- we will have periodic upswings in the property market and residential development, but they will be much more moderate than 2021-2022
- we will keep importing lots of lower skilled people, to give a mediocre GDP boost and to please employers
If we had some strategy, we could have really pushed the whole green economy thing. But we didn’t/ don’t.
Do we actually have any real world cases of longer term economic benefit from "going green" though? There's a big initial boost from the act of transitioning, but the case for any net economic improvement is fairly grey.
The growth points are usually fairly hard to predict, we either need a change in technology that's not really evident at this point in time, or a change in some sort of global circumstance.
A familiar theme
The Australian dollar could be heading to a 20-year low, on risks of China, Trump and slow growth
https://www.abc.net.au/news/2024-12-24/australian-dollar-china-trump-in…
Saying "corporate America" is fudging the issue a bit.
Corporate America's donations to the two main parties is quite low unless that corporate is controlled by one or more of the already politically donating billionaire(s). Further, many wealthy individuals hide inside PACs (Political Action Committees) that collect money and direct it to whichever political party - sometimes both - that best serves the PAC's 'manipulated agenda'. (By 'manipulated agenda' I mean there are many supposedly 'single issue' PACs that will back the same party regardless of whether that party actually serves their single issue better.) Corporate America does donate to specific politicians on specific issues at a lower level, e.g. Congress, when they want movement on specific issues. I.e. they want a 'congressman in their pocket'.
"merica is pretty much a Plutocracy with a big show held every 4 years and lesser show every 2 years where they pretend 'democracy' is alive and well in a two-party, first past the post, system.
There's recently been a release of years of internal docs from the Dems/white house citing issues getting Biden on point. Meetings cancelled and deferred based on whether he was having a good or bad day, heavily scripted public interactions because he's incapable of on the fly comms, and a requisite to keep briefings and meetings short to coincide with his attention span.
https://www.wsj.com/politics/biden-white-house-age-function-diminished-…
Like a sitting republican living in a aged care dementia home...but kept secret...lol
Sounds like pretty standard politics - trying to hide the weaknesses of your people and advertise the strengths.
Very different to the OPs idea that the media were hushing it up. It may be that some friendly institutions tend not to report on it much, but the same could be said for all parts of the political spectrum.
Good reporting from granny herald?
The Du Val story: What happened to the property developers who seemed to have it all?
https://www.youtube.com/watch?v=D_bU03hZVCc
Hey David,thanks so much for your diligence & commitment to bringing us the financial news which is relevant though out the year.I believe it is an unbiased summary based on the facts presented to you,& then put back to the readers in an easy to understand format (especially for me with limited knowledge)I hope you get some quality time out with family & friends & can recharge yourself for the new year & continue to offer a quality editorial of financial news.Cheers
Actually, Mr Chaston is close to the Chinese folk he disparages, and I have challenged him as to 'truth'.
Interesting that a farmer - or a political hack needing farmer support - thanks him. They are a crowd who are skewing truth, too. In their case, they turn a finite energy source into an energy source, inefficiently. Tens of calories of fossil oil, into one calorie of food. That is a temporary arrangement - the question is what comes next, food-energy-source-wise? And how too many humans will that reveal? 6 billion? 7?
But for delivering one calorie by using up many (of a finite stock), they want to avoid pollution obligations, socialise their costs, and avoid - as do the MSM - addressing the overarching predicament. Call it a truth.
pdk,
Actually, Mr Chaston is close to the Chinese folk he disparages, and I have challenged him as to 'truth'.
That comes across as just a nasty smear-the sort of ad hominem attack that you have disparaged in the past. You present no evidence as what you mean and frankly, it does you no credit.
IMO, HouseMouse's conclusion is perfectly reasonable, Chris.
Indeed, unless one resides under a rock, I would have thought that this reality was painfully obvious.
The private banking establishment and their economists cheerlead the status quo because the corporate cartel holds the monopoly on printing ~97% of the money supply (MS) in the Western-centric financial architecture - their livelihood depends on them parroting precisely that support.
This money, which is conjured into existence out of thin air, means that the placement of this credit has no window guidance, and ignores the fundamental difference between the parasitic financial economy (read casino) and the real economy.
Of course, it is largely invested in existing assets rather than in productive assets and entrepreneurial activity - hence the endless pump and dump and the blowing of asset bubbles, accompanied by plummeting real GDP.
They are what I describe as 'eCONomists' - they peddle a mystical pseudo-science that completely ignores how the vast majority of the MS is created.
This is just one of the fundamental false maxims that renders their false discipline nothing more than a propaganda tool for the global financial oligarchy.
It never ceases to amaze me that these same people choose to ignore a convergence of geopolitical/geoeconomic events that are set to turn the global economy its head in 2025.
I wrote a hypothesis on this back in April of this year - in the ensuing 9 months the situation has only become worse - meanwhile, the predominant in-house financial narrative remains very much the same old refrain.
https://globalsouth.co/2024/04/11/economics-part-v-2024-if-man-is-still…
:-) and it still hasn't sunk in has it, Chris?
I repeat - the vast majority of the MS comes from banks writing up loans out of thin air and the remainder in effect comes from coinage/bank-notes and QE, with a much smaller amount coming from fiscal injections into the economy via the Treasury - which once again is massively influenced by Wall Street and the best Congress representatives that money can buy.
#1 In 1913, Congress passed the Federal Reserve Act, establishing this nation's Federal Reserve System. This Act authorized the Federal Reserve Banks to issue Federal Reserve Bank notes. In 1914, the Federal Reserve Banks began issuing Federal Reserve notes - the only currency still being manufactured today by the Bureau of Engraving and Printing.
And who owns the Fed Chris?
Yes, 100% of the shares are owned by the private banking cartel. In the case of the New York Fed, the principal global money spigot, around 75% of the shares are owned by just two megabanks - Citigroup and JPMC.
#2 QE is a form of monetary policy used by central banks to increase MS. This is done by the Fed (that's the 100% privately owned one) purchasing T-bonds and other financial instruments such as mortgage-backed securities and in doing so, injecting bank reserves into the economy. In the U$, the Fed implements QE policy.
In terms of fiscal policy, the government can influence the MS via the U$ Treasury Dept which sends money directly, or indirectly into the economy.
The value of the M1 money supply in the U.S. amounted to 18.1 trillion U.S. dollars in 2023, which was a slight decrease compared to the previous year.
While between 2000 and 2019, the M1 money supply increased at a slow pace, there was an exceptionally sharp increase in 2020, which was the result of the Federal Reserve's quantitative easing in response to the COVID-19 plandemic (yet another rich man's trick).
The sharpest increase took place in May 2020, (the plandemic response) when the M1 money supply was increased from 4.8 to 16.2 trillion U.S. dollars.
The debt-trap debacle carried on from the 2008 GFC...
https://wallstreetonparade.com/2020/10/the-new-york-fed-pumping-out-mor…
... quoted...
"The New York Fed was in charge of almost all of the secret $29 trillion in bailouts during the 2007 to 2010 financial crisis. Congress never approved these loans or was even aware of where the money was going. After the Fed lost a multi-year court battle to keep its bailouts a dark secret from the American people, we learned that Morgan Stanley was one of the largest recipients, receiving a cumulative total of $2.04 trillion according to the audit conducted by the Government Accountability Office (GAO).
Buried deep in the GAO audit is this bombshell:
“Morgan Stanley funds include TALF borrowing by funds managed by FrontPoint LLC, which was owned by Morgan Stanley at the time TALF operated.”
TALF was one of the Fed’s bailout programs. Which means the Fed was subsidizing FrontPoint with super cheap funding as it was shorting the hell out of the very banks that the Fed was desperately attempting to prop up with trillions of dollars in secret loans.
How viable was Morgan Stanley at the time the Fed was flooding it with emergency lending? According to the Financial Crisis Inquiry Commission report, both Lehman Brothers and Morgan Stanley had reached leverage ratios of 40:1 by the end of 2007 – “meaning for every $40 in assets, there was only $1 in capital to cover losses. Less than a 3% drop in asset values could wipe out a firm.”
..................................
"Since the Fed’s inception in 1913, the statutory role of the Federal Reserve has been to serve as lender of last resort to commercial banks – so that those commercial banks could help the overall economy by making sound business and consumer loans.
The statutory role of the Fed has never been to be a lender of last resort to the trading houses on Wall Street or hedge funds. But beginning with the 2007 to 2010 financial crisis, the New York Fed has simply arbitrarily decided to provide an unlimited money spigot to Wall Street’s trading houses whenever they are at risk of blowing themselves up as a result of their own hubris.
To say that Congress has been negligent in reining in this abuse barely captures the reckless irresponsibility of what the New York Fed has been allowed to continue to do with barely a whimper from Congress or mainstream media."
https://wallstreetonparade.com/2019/11/these-are-the-banks-that-own-the…
"sales of new single-family homes in the United States rose by +5.9% from the previous month to an annualised rate of 664,000 in November, above market expectations of 650,000"
What is important to note is that the prices for these homes seem to be dropping (hence the increased sales rate I guess).
Christmas shoppers set 2024 record in rush before big day
Actual figures not as impressive as the headline suggest.
OneRoof: NZ’s mortgage-free hotspots: Where homeowners are breaking free of debt
This guff is good for talk around BBQ - but is really pretty meaningless. But what would be really interesting would be the breakdown between:
1. owner occupiers vs. landlords
2. owner occupiers vs. landlords ... by age group
Oh. .... And note for Nicola, if you want to raise more tax from those that can afford to pay it, mandate that the RBNZ tighten up on the LVRs for landlords so that they start paying tax on the rental income far sooner (rather than allowing them to write off big interest bills as expenses and accumulate losses that can be used to reduce tax bills in future periods).
Oh look. The Senate Budget Committee has claimed growing instability in the U.S. homeowners insurance markets could lead to a housing crash worse than in 2008 unless policymakers act fast.
Senate Budget Committee’s insurance probe reveals that climate change is increasing insurance non-renewals around the country and provides new evidence that a crash in property values may be looming
https://www.budget.senate.gov/chairman/newsroom/press/new-data-reveal-c…
Russia claiming to already using BTC and crypto in foreign trade. Western power being tested. Or just propaganda?
Russian companies have begun using bitcoin and other digital currencies in international payments following legislative changes that allowed such use in order to counter Western sanctions, Finance Minister Anton Siluanov said on Wednesday.
Sanctions have complicated Russia's trade with its major partners such as China or Turkey, as local banks are extremely cautious with Russia-related transactions to avoid scrutiny from Western regulators.
https://www.reuters.com/markets/currencies/russia-is-using-bitcoin-fore…
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.