Here's our summary of key economic events overnight that affect New Zealand with news the relief is palpable in financial markets today.
First up today we can report that the American CPI inflation rate came in at 2.9% in December, almost exactly as expected and shrugging off some market fears of an upside to those expectations. The monthly change came in at 0.2% and also as expected. Their annual core rate came in at 3.2% and a tick less than expected. Still these levels are nine-month highs - but markets have ignored that fact.
There were no real surprises in any of the detail and this triggered a relief rally across equity, bond and currency markets. They are hoping an interest rate cut by the Fed is back on the agenda
But there was a big surprise in home loan activity during the week, built on growing interest rate fears. Mortgage applications surged by a third last week from the previous week and erasing the declines in application volumes from four prior weeks. It was the largest increase in weekly applications since 2020. And the surge occurred despite benchmark mortgage rates pushing through the 7% threshold. Potential house-buyers attempted to lock in borrowing ahead of fears that interest rates will rise even further. Applications to refinance a mortgage, which are more sensitive to short term changes in interest rates, soared by +43% from the earlier week. But still, applications for a loan to purchase a house rose by +27%. These are enormous moves.
There was also a large surprise in the New York Empire State factory survey, and a negative one. It was the result of a set of small shifts in all the components, none of them by themselves worrisome, but together they shifted the overall index. However, firms there don't think this month's result will last.
But that isn't holding back their big banks. Overnight the first three of them, JPMorgan Chase, Wells Fargo and Goldman Sachs, announced Q4 earnings, and they were "bumper".
In Japan, some central bank remarks from its Governor are raising the possibility that their might raise their policy interest rate at their meeting next week on Friday, January 24. The current policy rate is 0.25%. His remarks indicated he liked the current round of sharp wage increases in Japan.
In Indonesia their central bank unexpectedly cut its benchmark interest rate by -25 bps to 5.75% during its overnight meeting. Markets had expected no-change. The regulator said it moved to ensure their exchange rate and related inflation rate stayed within targets.
In Europe, November industrial production data released overnight showed a small +0.1% rise from October, but that still left it -1.7% lower than year ago levels.
There was inflation data out for Russia overnight too and their war economy is becoming increasingly unbalanced. They now have a CPI of 9.5%, a falling ruble, and a central bank cutting rates on Moscow's orders when they know this is the wrong thing to do. The imbalances will only worsen.
The UST 10yr yield is now at just on 4.66%, and down -15 bps from this time yesterday. The key 2-10 yield curve is less positive, now by +39 bps. Their 1-5 curve is also less positive at +28 bps. And their 3 mth-10yr curve has flattened too, now to +37 bps. The Australian 10 year bond yield starts today at 4.68% and down -2 bps. The China 10 year bond rate is now at 1.64% and also down -2 bps. The NZ Government 10 year bond rate is now at 4.86% and up another +7 bps.
Wall Street is in its Wednesday session and up +1.6% on the S&P500 in its inflation relief rally. Overnight, European markets were all up more than +1%. Tokyo ended its Wednesday trade down -0.1%, Hong Kong was up +0.3% and Shanghai slipped back -0.4% after yesterday's big jump. Singapore also fell -0.4%. The ASX200 ended its Wednesday dipping -0.2% while the NZX50 ended up +0.5%.
The price of gold will start today at US$2687/oz and up +US$16 from yesterday.
Oil prices are up +US$1.50 from yesterday at just on US$79/bbl in the US while the international Brent price is now just over US$81.
The Kiwi dollar starts today just on 56.1 USc and up +10 bps from this time yesterday. Against the Aussie we are down -20 bps at 90.3 AUc. Against the euro we are up +20 bps at 54.6 euro cents. That all means our TWI-5 starts today still just on 67 and unchanged from yesterday.
The bitcoin price starts today at US$99,057 and up another +3.7% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.2%.
Daily exchange rates
Select chart tabs
The easiest place to stay up with event risk is by following our Economic Calendar here ».
95 Comments
Pay walled article on NZ Herald questioning how come our public service quality is so poor despite NZ boasting one of the highest per capita wealth in the world. Link
The article neither mentions however that the national wealth is majorly locked up in unproductive housing assets that in fact are a drag on the productive economy nor the fact that our financial system pumps significantly more debt into consumption than production leading to our out-of-balance economy.
NZME needs to keep the property advertiser happy by ignoring the elephant in the room and instead pin all the blame on successive governments underinvesting in infrastructure (low hanging fruit for economic commentators).
For everything produced, there is a consumer.
If you're not the latter... reminds me of Cohen: 'to determine who will serve and who shall eat'.
And infrastructure only services properties, when all is said and done. Hence the need - growth being exponential, nothing scales enough (people only having 24 hours in the day to consume, minus sleep minus screen-diversion minus eating...
And infrastructure only services properties, when all is said and done.
Hah, very true.
Houses are unproductive!
Now quick, make me some better roads and rail. To get to my house.
"infrastructure only services properties" Too shallow PDK. But on one level with an economic focus on housing assets (which produces NO economic benefit to NZ) there is an element of truth. But infrastructure provides a means for communication and transport that enables business and economic activity to take place. The big ask is can the government make that happen to the benefit of the country?
(which produces NO economic benefit to NZ)
It houses the workers that operate industry.
But infrastructure provides a means for communication and transport that enables business and economic activity to take place. The big ask is can the government make that happen to the benefit of the country?
It already happens though. While it's true you need an education system to create doctors and microprocessors, and transport networks to conduct more advanced manufacturing and trade, most infrastructure has diminishing returns. China for instance, has more high speed rail than is financially sound or even useful, and more engineering grads than it knows what to do with.
We are already developed, so introducing slightly better infrastructure than we already have, presents a tenuous business case (in general, there are likely single projects with merit).
"It houses the workers that operate industry." and that generates income for the country how?
"We are already developed, so introducing slightly better infrastructure than we already have, presents a tenuous business case (in general, there are likely single projects with merit)." The first part that "developed" measure has been acknowledged as sliding backwards. But the infrastructure supports ALL activity and without that infrastructure that activity would essentially grind to a stop. So any business case should support the creation of the highest quality infrastructure, if only to minimise maintenance costs. It has already been identified that much of the roading infrastructure is too expensive to maintain. That will be in part at least that it was built on the cheap and never up graded as the needs required.
and that generates income for the country how?
Maybe a doctor or engineer living in a tent in the sticks would be as productive as one with a decent house in a metro area.
The first part that "developed" measure has been acknowledged as sliding backwards
Many people say that. The rift between developed and undeveloped is traditionally quite large. No telecommunications, dirt roads, lack of sewage systems, that sort of thing. We are a far way down the track from there.
So the next question would be, is there a level of development significantly advanced from where we are? There's slightly better internet, faster trains, alternative energy generation, etc. it's not really flying cars and teleporting. Just slightly better versions of what already exists. How much additional productivity is that likely to unlock?
Fundamentally IMHO our roading infrastructure is crap, and made worse through neglect. I've driven in Europe and the US and their roads are an eye opener compared to ours. I suggest we have been basically lied to by generations of politicians and our transport ministry in what we need. The highest quality roads improves transport efficiency no end ( a need if we are to move away from fossil fuels, or even just reduce the reliance on them) and tie in decent rail and other transport options (coastal shipping?) and the bones on which our economy need to function properly and efficiently are there. Without them the economy will always struggle.
Our roading infrastructure is gold-plated, nay platinum plated based on our population levels. The issue is not the quality of the infrastructure but how it is managed and what alternatives to roads are provided in urban areas where roads have reached capacity at peak times.
Have you driven in Europe or the US? Your comment suggests not. Our roading infrastructure is rubbish and it might be plated but it is not gold nor platinum and over cheap nasty metal.
Did you miss the caveat about population levels. Between the USA and Europe, there's a billion people. We have 3 decent sized cities, and then a bunch of upgraded horse tracks most other places.
Something has gone wrong however in basic attention and application. For instance the the many rural roads in Canterbury require give way and stop signs at the intersections for obvious reasons. There has been thought recently an upsurge in collisions. We were the victim of one ourselves. No injuries, but lucky all the same. On that intersection overhanging foliage had mostly obscured the sign and the road markings were virtually worn off. That is hardly an isolated example.There is no excuse whatsoever for such slack administration.
Not enough money is a fairly good reason.
Glad you got out unscathed.
Back in the day (40 years ago) there used to be a man with a truck, a wheelbarrow and a shovel whose job it was to maintain the drainage ditches/culverts on the roads in his area. I don't know for a fact whether he'd also have a paintbrush and loppers, but it would have been logical.
Since then we've moved to a contractor model and all this basic maintenance has gone down the toilet because it's an ongoing cost. But at what cost? How many slips, washouts, potholes and sinkholes have been caused on regional roads because this basic maintenance wasn't done?
Back in those days we built roads to last,state houses that are still standing strong.
I am not advocating a return to the old ministry of works model but we need far more oversight and quality control over our road building
I know a couple of roading contractors and are they are making a fortune,
The roads are built cheaply and only last a few years and the contractors are off buying more luxury boats etc
In the old days if the ministry of works contracted out a road construction to a private contractor ministry of works supervisors would be on site checking quality etc
If the road didn’t last the contractors were liable to fix them at their cost
Now when a road is built a few small rollers are used ,then the road is sealed and traffic and heavy trucks are then using the road
In a matter of months you can see the road subsiding and potholes appear
If they had let the road settle and allow traffic and heavy trucks to consolidate the road before it’s sealed I am sure we would have better roads
Not entirely correct. The reasons roads are failing now is because they are not maintained as frequently (well actually they are reaching end of life and need renewing, extreme weather and lastly and most importantly they are getting used a hell of a lot more by much heavier vehicles (trucks and SUVs). Nothing to do with quality of workmanship.
Fundamentally IMHO our roading infrastructure is crap, and made worse through neglect. I've driven in Europe and the US and their roads are an eye opener compared to ours.
I've driven there also. Somes better, somes worse, and the variable is the density of the area and the wealth of the location.
The highest quality roads improves transport efficiency no end
There's definitely an end. If you spend exorbitant amounts on new roads that only marginally improve transit times, you have malinvested.
We can resolve this though, higher fuel and road user costs.
Communication occurs at many levels. Transit times are just one part of the picture. Capacity to carry the required traffic is another, as is resilience. Design for efficiency is required. They should be built on future expectations not current population levels otherwise you're basically restraining everyone to what we could do when the roads were built, not what we need now, or should need in 10 years time.
All fairly sound reasoning.
How much will it cost, and what's the anticipated gain, is the problem.
The common catch cry of the moment is that infrastructure spend will save us. Outside of the short term bump in GDP from building it, it's really not so clear.
Cost can be a misdirection. Yes it may be expensive, but it is spending for future generations, the cost is not the total now, but incurred as the projects progress. Besides as roads are a fundamental requirement for our economy to function, they can be deficit funded. My view here is that the roading companies engaged to build them must be NZ owned and operated, so the money spent does indeed benefit our economy. Do it cheap and the on going costs will be high to maintain them. Do it properly and maintenance costs in the near and mid terms will be minimised.
but it is spending for future generations
They're the ones that'll be paying for it.
Put it this way, if we had say, Germany's road system, how much better would our economic predicament be now? Because Germany isn't doing too flash.
If we had Germany's roading system we'd be even more bankrupt than we already are. Don't worry Simeon will do his best to bankrupt us regardless with his MOAR Roads ideology.
Capacity to carry the required traffic is another, as is resilience. Design for efficiency is required.
Hence the need for decent public transport as a viable alternative. Why rebuild all the main arterial routes again and again when the population increases, when you could simply add viable alternatives to private transport and build a culture of acceptance and support for it. Look at the London Underground, and imagine if London could realistically function the way it does, and get to the scale it is, without this option.
Yes a decent public transport system is required, especially in the large to middle size centres, but they should also be a project for those municiple authorities, not the government . Perhaps some level of deficit funding might be required but local tax payers should bear the brunt. But the other point made is that NZ's problem is a dispersed population. Public transport is not a solution for many areas.
I am booking a train ticket for an upcoming holiday in Italy from Naples to Venice. It is about 725km - similar distance as Auckland to Wellington via Hamilton and Palmy - and the journey takes about 5h (which is faster door-to-door than flying). Yes, they have more people than us but this is just one of their many high-speed lines. They also have a long mountainous country with earthquakes and volcanoes (see also Japan). NZ train max out at 110kmh vs 400kmh in Italy.
That train journey cost $190 for 2 adults and 2 kids and uses a third of the C02 compared to driving.
PDK: "And infrastructure only services properties, when all is said and done."
What a load of bollocks.
Why's there only one elephant in the room.
The average country consumption rate around the globe is 63%, with only a handful of countries under 50%.
Most of us have outsourced supply of our needs and wants to a 3rd party. And then expect whatever narrow specialisation we have to afford all of them. Square peg, round hole.
Whatever the question the answer is not more public servants.
In 6 years Labour increased the public service by ~18000 / ~40% with no significant improvement in public services.
Public servants, well many are now on the dole, counting their enermous redundancy and re hired in contract, or heading overseas. When should we expect your improvements then?
The cuts to public services aren't as deep as previously reported since both sides of the spectrum have a vested interest in overstating the numbers.
There were only 2k cuts in FY24, a third of which were unfilled vacancies and a good portion of the remaining were fixed-term employees working on time-limited projects.
The number of redundancies being touted by PSC is 865.
Correct. Not forgetting Labours stacking the deck with several '000s in the 6m prior to the 2023 election. National are doing good work on reducing consultants however virtue signalling on the permanent public service
"...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
Exactly. Consultants and contractors are not included in staff numbers anyways as they are remunerated out of public procurement budgets, not payroll.
So much for NACT going line-by-line to reduce FTE numbers
Can you ask your Minister and Ministry of Regulation when we should expect improvement's then ( paying its staff an average salary of more than $150,000 and employing 90 people)?
Indeed, Kiwikids - and that's just the immediate public service, before you get to the hundreds of thousands of others (eg contractors, specialists, consultants, providers, suppliers, etc) all on the public payroll..
Here's a question for the public service bashers
We need to build a hospital - what roles is it OK to have in the public sector and which ones should be done by the private sector based on your ideological lens of public sector bad/private sector good.
Go through line by line in your mind and outline all the different steps that need to occur for a hospital to be built and then let me know. Genuinely curious.
I'll be clear about my position. I think the reason why it is so difficult and expensive to build a hospital now is because so much of the process is actually in the private sector which has to extract a profit at every single step of the way.
It's a good question. And I think Sir Brain Roche is looking at that now.
The issue is likely political interference and what the services are funded for. Out sourcing work means paying private company profits, so the trick would be to create a ministry which employs the skilled people needed to do a lot of the specialist jobs - Ministry of Works?
Throwing away that capability has indeed bitten us long and hard, but sadly rebuilding it will take years (decades?) to replicate...I doubt anyone is prepared to wait.
The MOWs delivered an extremely necessary function in NZ's infrastructure development ...
I.e. As a non-profit provider of infrastructure services they kept the pencils of all private consortiums very sharp.
MOW. They spent a few hours leaning on their shovels, however they built roads properly. Now you have young engineers who think they’re God’s gift when in fact they’ve sold their souls and said “yeah sweet we can design that replacement road for that shit amount of money, no worries” And the contractor says “yeah we can build it for that price, just sign this amendment that gives us all ongoing maintenance jobs for said road” So the story is, there is no money to do things properly anymore as the tax take is way too low.
'MOW. They spent a few hours leaning on their shovels, however they built roads properly."
That was (partly) what was used as justification....however what the MoW was in reality was the technical ability of the state, from planning to design and implementation....and today we live with the results of the states lack of ability in those critical fields.
Yes, it seems the sad fact both major parties are full of politicians who don't believe the state can do anything and through privatisation, they have self fulfilled their own beliefs while helping their mates cash in.
Agnostium. I spent decades in the health service and the reason hospitals are so expensive is the incessant infighting amongst doctors for status and pet roles. Nothing to do with user benefit.
And all on the public payrole.
Yeah, Nah.
Your elephant in the room is not ignored, from the article:
Recent UBS data show New Zealand also ranks seventh globally for average private adult wealth (US$408,231). But this figure offers cold comfort. It reflects a housing market untethered from economic fundamentals. We have excelled at selling houses to ourselves at inflated prices while failing to generate the income needed for quality public services.
NZ is 22nd in GDP per capita so we overspend relatively on property.
Oil heading back towards $80 with the NZD still heading down. Those cut price runout EVs are looking better by the day
Plenty of good Leafs on the market, swap a 24x battery to 64x...400km range.
Shoplifting costing every man woman and child in NZ $500 per year. Time to make an example of someone and toss them in prison.
Oh you mean that thieving ex mp ? Should follow the Oz example and 'Put the trash out'
But we replaced a physical person who made sure you paid for everything with a DIY system.
Exactly. A "high trust" model hardly works anywhere, let alone in a retail set up.
They are bloody handy though, I hate supermarkets without them. There's always the few that have to ruin it for the rest though.
The DIY system factors in the cost of shoplifting into the cost-benefit ratio. It's still cheaper to lose to shoplifters than pay people to ensure payment.
Could be worth a watch:
Good report, thanks for sharing.
She's seriously lost the plot!
I don't understand it, I assume it must be a metal health issue. Like Shane Jones paying for porn on the taxpayer ticket. Addiction does not follow logic.
Are you certain Mr Jones was the offender? Or was it more like he took responsibility for him/her/they?
It was his Ministerial credit card. Hardly the thing you lend out.
The wait and watch phase. 5 more days for Trump to take office. Will he really slap on blanket 60% tariffs on China? Will he really deport all the illegal aliens in USA? Will inflation take off and hiking cycle resumed?Time to find out.
I imagine it'll be like when you think you've got to do a massive number 2 and instead it's just a fart.
Or in Trumps case you think its going to be just a massive fart so you keep your underwear on.
Or open your mouth.
Assumedly Trump’s special envoy to the Middle East has clouted heads sufficiently hard to impress Trump’s pre-election utterances and bring the cease fire between Israel and Hamas into being of some substance. Next stop Ukraine then. Russia as indicated in this column is in something of a sinkhole all around and the impact of the immeasurable casualties from the battlefront cannot be concealed. Russia has weakened itself here militarily, economically and socially but whatever it may be Russia is Russia and only Russians can change Russia. Don’t know if Trump can fulfil his promised solution quite as rapidly on this one.
He's already backing away.
Who'd have thought doing stuff was going to be harder and more complex than just saying it.
Trump rides the coat tails of others achievements.
315 Billion to deport 11 million illegal immigrants. Why not try self-deportations? Station ICE workers at all major U.S. international airports. Anyone who turns up that can have their illegal status verified gets USD 10,000 and a one way ticket back to their country of origin. I reckon they would get quite a few takers.
Take it, jump the fence again and go for round 2, ka-ching!
Brent crude now $82.20
The days of sub $2 diesel seem over for now. Can’t see them ever returning tbh
As is said everytime the cost of oil goes up.
What a drama queen it’s literally below 1.90 at the pump right now. Crude goes up and down. Gaza war ceasefire and Syria rebuilding after the conflict. Could easily keep going down.
There is only one thing about oil, guaranteed to be going down...
...the amount of it left.
And that, and not just colloquially, is the good oil. Still, an interesting development at BMW touting a hydrogen powered vehicle production line by 2028?
How many times. Hydrogen is a 'battery' not an energy source. Needs converting. Only 20-40% of original electricity to make it ends up to power the car. EV is near 90%
Yes apologies, my post was incomplete. The development is an alternative battery function. It is already in use in use, albeit it limited. BMW are not known to be fools but perhaps they need to be told that they are wasting their time on this concept?
Learn the lingo. Hydrogen Fuel Cell. They create electricity for an electric motor.
Last chance Foxglove. Next time we'll be rude and just ignore you completely. Kind regards. :-)
Hydrogen seems such a dumb idea for private vehicles. Not just the efficiency of producing it but also containment (and its efficiency in use). Plus that tendancy to embrittle all metals.
I doubt I'll be in the market to buy one come 2028 but I hope I can ensure others go in with their eyes wide open.
Were you referring to Hydrogen Fuel Cells that create electricity for a local demand like an electric engine? ... Or burning it in an ICE?
The two are extremely different.
No, he's correct.
As you would have found out, had you bothered to read the (free) reference book I linked for you.
In both cases, the hydrogen has to be created, because it does not occur alone, naturally. That takes energy, as the Laws of Thermodynamics point out. In the case of hydrogen - whether the energy is re-extracted via a fuel cell or combusting it with a spark-plug - it takes far too much energy to make, versus what it delivers.
As BMW have long pointed out, had you bothered to read their description.
EROEI is the problem with hydrogen. Yours I can only guess at.
Good day to be in the market...the Trump Bump in effect?
Good day to be in the market
Everyone scurrying around like rats, trying to second guess the future. Sounds grand.
Better day sitting down on the beach.
Ha..you can do both at the same time - Sail GP Auckland this weekend - Brownie's pool should be busy! (Code Brown)
you can do both at the same time
Very hard to do anything at the same time, especially well.
But yeah, I suppose you could f up a nice day by the water by inserting a wanton desire for more than you went there with.
Get back to work Painter...and cheer up - its a grand day to be doing not much at all (like singing on a bike going downhill)
I'm generally pretty content.
I tried happiness your way, pretty fleeting.
1st day: check out my new car, whisper quiet, and so quick!
30th day: I hate sitting in traffic, travelling to my dumb job. I wonder if a new phone might perk me up.....
Nope. Mainly as David said, inflation going nowhere. Another major is the big banks reporting good results as some believe this is a good sign for US Inc. (It's a trailing indicator.)
US economy going gang busters. Just about all of EU in the doldrums or going backwards. I wonder why. Lets see Green energy policies, aka unreliables and the Russo Ukraine war go hand in hand. I doubt whether Trump will end the Russo Ukraine war as quickly as he claims, now in 6 months if I recall. The oil/gas lobby in the US will persuade him to drag it out for as long as possible while selling as much LNG as possible to the EU at high prices. The recent reduced supply of gas from Azerbaijan not helping either.
The song "Cold cold Christmas" comes to mind, with gas used where relevant.
The US also has a lot of problems that Europe doesn't have
The USA is not going gangbusters at all, more like just the going bust part of that. Major problems in the political division and major race problems that just will never go away. Massive consumers of energy and right up there at the top with emissions, they have serious problems going forward. The rich at the top need to start a bit of wealth distribution before the surfs revolt.
Correct, Zwifter. Jared Diamond is a good read, re where the US is currently. Tikal comes to mind, times a few million. Ecological overshoot levered in a way never seen. Dead State walking...
But those who myopically - and fiercely chosen myopia ot can be at times - adhere to 'measuring' 'economies' using keystroke-issued debt-tokens (and surveys of mood), can miss all that. And do...
More like the govt needs to tax them to pay down their debt, in order to at the very least try and maintain their global status before the masses all bail out on the USD.
Historian Walter Scheidel in his book the great leveler was:
It is almost universally true that violence has been necessary to ensure the redistribution of wealth at any point in time
same points made by Billionaire Nick Hanauer since at least 2014:
No society can sustain this kind of rising inequality. In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out.
https://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014/
Another comment from an L.A. friend, "My wife was right. We should have rented."
"Employment increased by 56,300 people in December, blistering past expectations as Australia’s still-tight jobs market acts as a potential barrier to interest rate cuts."
Good to see that there are still lots of opportunities for productive, tax-paying, successful New Zealanders to leave for Australia.
Anyone still thinking about it should get their skates on, in case the new Govt restricts the citizenship pathway. Better to be in Australia and safe, then stuck in NZ and sorry.
I found this terribly funny ... And sad once I read the comments ...
What is the top dream job for Kiwis and the world? Map reveals most searched careers in each country
Does anyone question the sample set these 'statistics' are based on?
Rhetorical question obviously - because clearly people don't.
The NZH should - but never do - mark such articles as HUMOR !!!
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.