Here's our summary of key economic events overnight that affect New Zealand, with news there are some positives to report today, but they may well be just temporary.
This weekend the August non-farm payrolls report for the US will be released and analysts are expecting a gain of +850,000 jobs in the world's largest economy comes back from the pandemic downturn. That will be far less than the +1.4 mln gained in July. Today, the precursor ADP employment report was released suggesting private payrolls rose +749,000 which was better than analysts expected. But some of that may be a make-up from a low July result which greatly undershot the July non-farm payrolls level.
It is fair to wonder if these gains will last. For example, Disney has announced huge layoffs mostly in its theme parks, about 20% of those workers many of which are part-time or minimum wage employees. Shell Oil said it will cut up to 9000 jobs.
There was another real estate market report showing the American housing market was strong in August. Pending home sales were a spectacular +24% higher than in the same month in 2019. And that is a record high. And "home prices are heating up fast" in US markets says an industry analyst. And recent mortgage applications are similarly high on a year-on-year basis.
Also rising is the latest Fed regional factory survey, this one from the Midwest industrial heartland. But they are just getting a later bounce-back than the rest of the country.
Also on the up, China's manufacturing economy retained strong growth momentum in September, with firms signaling further good increases in production and new orders. New business expanded at the strongest rate since January 2011, aided by a solid rebound in export sales.
And China said its foreign debt has now risen to US$2.1 tln. Given that 2020 GDP will come in at US$14.4 tln, that means their foreign debt load is less than 15%.
And don't forget, China is now in its Golden Week holiday, so economic news from them will be sparse for a while.
Hong Kong's August retail sales were down -13% from the same month a year ago and that was a much lesser shortfall than we have seen recently and activity is now back up to April levels.
Residential building consent approvals were also out in Australia for August today and they were little-changed from August 2019. But that was an unusually low benchmark. Still house consents were up strongly (+12%), undercut by a big dive in apartment consents (-18%).
August air cargo volumes rose in August from July but growth was hampered by lack of capacity. That was because the passenger market is still moribund. The Asia/Pacific international cargo shipments were down more than -18% from the same month in 2019.
Wall Street has started today up a strong +1.2% in midday trade, reversing yesterday's decline. The expectation of new fiscal stimulus is behind today's rise. European markets closed down about -0.5% however. Shanghai closed yesterday down -0.2%, Hong Kong closed up +0.8%, and Tokyo ended its session down a sharp -1.5%. The ASX200 closed even lower, down -2.2% while the NZX50 Capital Index had a flat result, 'good' in the circumstances.
The latest global compilation of COVID-19 data is here. The global tally is 33,743,000 and up +299,000 in one day. The European resurgence is gathering steam again, nor the one in the US. Global deaths reported now exceed 1,003,000 but clearly many are going unreported.
The largest number of reported cases globally are still in the US, which is up +47,000 overnight to 7,421,000. The number of active cases are stable at 2,539,000 so as many new cases as recoveries and making no real progress. Their death total is now just over 211,000 and rising at +1000 per day. At 637/million population, it is the worst western death rate bar Belgium and Spain.
In Australia, there have now been 27,078 COVID-19 cases reported, and that is only +15 more cases than yesterday. Deaths are up however at 886 (+4). Their recovery rate is now 91%.
The UST 10yr yield has risen today, up to 0.69% and almost a +5 bps gain. Their 2-10 rate curve is steeper at +56 bps, their 1-5 curve is also marginally steeper at +16 bps, while their 3m-10 year curve is also steeper at +62 bps. The Australian Govt 10 year yield is up +4 bps unchanged 0.88%. The China Govt 10 year yield is up +2 bps at 3.16%. And the New Zealand Govt 10 year yield is up +5 bps at 0.51%.
The price of gold is unchanged at US$1895/oz. But silver has slipped a little today.
Oil prices are firmer today, up by more than +US$1 to just under US$40/bbl in the US, while the international price is not much changed at just under US$41/bbl.
The Kiwi dollar starts today higher yet again, now back up to at 66.2 USc and a nine day high. But against the Australian dollar we have hardly moved and are now at 92.4 AUc. Against the euro we are +40 bps firmer at 56.5 euro cents. And that means our TWI-5 has risen to 69.6.
The bitcoin price is a little higher this morning, and now at US$10,782 and a +0.9% gain. The bitcoin rate is charted in the exchange rate set below.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
Daily exchange rates
Select chart tabs
80 Comments
More Austrslian news.
Covid Elimination costing AUD$ 319 billion dollars
23 % of GDP.
https://youtu.be/M7wPxPqjikM
Any estimates of the elimination for us, NZ?
Seven 7 weeks yesterday.
Aucklands second lockdown has past the seven 7 week mark.
On Tuesday evening, the Government announced it was moving Auckland into level 3 lockdown after four cases of Covid-19 emerged from one family, who had no known connection to overseas travel.
As the lunchtime deadline approached, police set up checkpoints at the main exits. Only those with a valid excuse – work or heading home – were able to leave the city. That didn’t stop some from trying to get to their holiday homes, or take day trips to Waiheke Island however.
On Saturday, the total number of cars stopped at Auckland checkpoints was 50,468.
At first....
Auckland will be pressed back into Level 3 lockdown for three days from midday Wednesday to stop the spread of Covid-19, while the rest of the country will also be put back into Level 2 for three days.
https://i.stuff.co.nz/national/health/coronavirus/300079882/coronavirus…
https://i.stuff.co.nz/auckland/auckland-faces/122468812/coronavirus-auc…
https://i.stuff.co.nz/national/health/coronavirus/300080700/coronavirus…
The subliminal take-out from last night's debate
When asked if they want house prices to drop. both candidates avoided the question.
When pushed, both finally admitted they want prices to hold where they are
The message for the young and FHB's is go for your life with your ears pinned back
The housing market is too-big-to-fail. It won't be allowed to fail
If you dont believe me look at all the TBC's and price withhelds. A year ago nearly all of these solds would have shown the price.
https://www.trademe.co.nz/property/insights/map
The ones with a price generally went for much more than CV. A game is being played here.
If I had to hazard a guess, it's probably due to the method of sale. Sales achieved at auction are generally notified almost immediately, whereas the rest typically go through a 6 - 8 week process before being notified. Looking at all the dates on that map I see that most or all of them are from the last two weeks, so that's consistent with the standard timeframes.
Prices dropping? Really? Got any evidence to back that up? The two housing markets that I follow - Auckland and Hawkes Bay - are both going gangbusters with properties selling fast and prices going up. I'm not saying it will continue like this and making no predictions for the future, but at this time it seems the market is on fire!
its still going up
41 thomas road MANGERE just sold for 1.28 million yes that is correct in mangere, local high school mangere college decile one. most likely a developer whom will remove the old house and build three story townhouses, the one 4 doors up being built has six townhouses with no car parking
https://www.facebook.com/watch/?v=713642805884803
ER
Also reside in HB but attended an auction in Gisborne a couple of weeks ago.
Only three properties on offer at this auction but all three attracted multiple bidders, all three sold and results were considerably well above both algorithm estimates and previous selling prices (+50%) of only a few years back.
Profile. An obvious set up. But don’t worry, Cindys wokey media mates are providing ‘balance’ this morning by beating up a storm of ‘it was a draw’ and ‘didn’t our hero come out swinging just ever so strongly against badjelly the witch’ propoganda. Coupled with multiple smiling tilty face number two soft focus stock shots of the anointed one.
Nobody outside interest.co.nz seems to connect the dots between the mass immigration ponzi scheme, a rampant money creating banking system, and overpriced houses. Always amazes me as it is so obvious.
Mind you, with the temporary halt to the ponzi, don't you think cracks would start appearing in the rental market? I mean all those hopeful sushi shop managers and nail technicians now realising that residency isn't a given, leaving their "5 to a room" s-hole and taking off.
The neoliberals running the scene are warming up their label-makers in response to your comment.
Covid has dealt a destructive blow to economies across Asia and we could witness a larger than ever influx of migrants into NZ if we don't toughen our migration criteria.
Judith is obviously all for it and Jacinda has expressed her excitement over importing yet more people by positioning NZ as a 'safe haven' from the virus and economic mayhem elsewhere.
Maybe, but as it stands and looking forward the housing situation impacts on the most vulnerable the most and the young are not far behind. The media and pundits keep going on about taxing capital gains without understanding that such a tax is just BS and really unworkable. But immigration impacts on housing and employment, and we need to ensure that Kiwis first and foremost are given the opportunities, especially the ordinary unskilled ones. So we need to ensure cheap unskilled foreign labour is not being used to drive wages down in the name of profits and to find ways to encourage companies to upskill existing staff. I don't believe that with the internet, someone working in London, for example, is any more capable than someone working in Auckland or Wellington. IT skills can be gathered remotely and developing talent can be done here just as easy as anywhere. But immigration policies are letting companies take the easy way out and denying our own opportunities. A treaty claim in this area would benefit all Kiwis not just Maori.
I am not a big fan of the Productivity Commission but they, along with several other economic research bodies, have said countless times that most NZ businesses are addicted to generate output by throwing people at it instead of investing financial and knowledge capital.
We're trapped in a self-perpetuating cycle of low wages, high living costs and limited career opportunities, thus attracting more competition at the lower end of the job market between locals and migrants, without any improvement on the genuine skill shortage landscape.
I watched one of the Maori TV debates which feature the different candidates for a single Maori electorate.
It was notable that the rhetoric was far more anti-immigration (and in Hannah Tamaki's case, frankly xenophobic) than what you would ever hear in a 'mainstream' electoral debate.
Yeah. In the name of skilled migration, incoming people have been giving our most vulnerable classes and minorities a run for their livelihoods, shelter and critical services.
It would be interesting to see how many newly-minted permanent residents have ended up on the dole and social housing queues in recent months.
What would be equally as interesting is the number of parents of recent migrants who came in to claim funded housing, home based supports, pensions, health care etc etc, all after having paid zero tax. I can guarantee to would be far higher than most people realise, as would the total cost to the taxpayer. In many instances the children have since moved to Aus or back to their respective countries leaving the tax payer to support their elderly parents.
Maybe globalisation is not so much the ‘excuse’ in NZ for our swarming immigration. More an inability or unwillingness to develop other strategies to address our intergenerational per cap productivity slump. Keep the sugar hit coming in the form of armadas of planes disgorging hordes of low quality migrants and to hell with objections from the plebs.
They mask the real issue of low-skilled migration under the guise of skill imports.
They insist we need to keep our doors wide open and give everyone being brought in by businesses and institutions a seat at the table.
The sad part for our most vulnerable people is that the so-called path to 'growth' for both parties comes from more people fighting over limited seats and food on the metaphorical table.
Curled up still in the long-standing argument is the undeniable truth of supply and demand. All the buzz words, niceties and platitudes do not alter that premise. So let’s see. NZ has a high inflow of people and a low output of housing stock. That needs to be reversed. Start in on the former first though as the latter, for instance Kiwibuild, ain’t going anywhere fast.
Kainga Ora seems to have a plan to circumvent council red tape. That seems to be the only way the agency can fulfill its ambitious plan of building 19k homes (market, transitional and state excl. Kiwibuild) within the next decade.
https://www.stuff.co.nz/business/122907586/kinga-ora-seeks-power-to-app…
phil twitford was the wrong guy to shape this policy. they needed to turn back the clock and build whole suburbs for kainga ora with a remit to help people either rent to buy or buy with low deposit some of the stock, the rest going into social housing. that way you could get the costs down by economies of scale.
what a pity labour sold the MOW when you now need them
The problem I see Adv, is that no matter how many houses we build at the moment, it will not drive costs down. Indeed supply firms are likely rorting the costs of materials somewhere in the supply chain, not to mention compliance costs. These fundamentals need to be addressed as well, before any material outcome will be seen. And then there are the banks and investors, including the RBNZ and Government with their view on housing. Housing is one of the biggest contributors to poverty in this country and no one is seriously interested in addressing it.
Another aspect is recent immigrants starting or running business dependent on other immigrants for low wage (or under the table) labour (e.g. sponsoring friends, relatives or others on dubious student visas + families which follow). This is a significant contributor to imported unskilled labour and demand on housing and services, but with not value to an "export" focused economy (in my view a net drain on the economy). Immigration settings and skills criteria need to be tightened.
Perhaps if we had a more democratic open process and allowed all the leaders of all the parties to debate in public and on TV we may find an honest leader who can say - yes house prices are too high and we want them to drop. Too many vested interests as revealed last night.
Although Collins was a tad cute in crediting increased supply in ChCh and consequence low house price inflation following the EQs to the Nats cutting through planning red tape when the key driver was actually existing deployment ready 30year plans in Selwyn and Waimakariri being fortuitously available. Unlike the hopeless ChCh council which hadn’t planned ahead and retreated to its bunker.
Local governments are still dealing with the leaky homes crisis and have become very risk-averse from the bad experience.
Allowing independent certifiers to sign-off on new builds led us to the crisis. However, councils retreating into approving consent on the basis of risk elimination instead of risk management, which is a terrible idea as well.
Anyone know what happened?
https://www.newshub.co.nz/home/new-zealand/2020/02/serious-fraud-office…
https://www.sfo.govt.nz/sfo-confirms-receipt-of-police-file-on-christch…
Still trying to open the .pdf maybe.
From work I was doing in the garden city following the EQs I had extensive exposure to CCC officials, particularly in the planning and consenting areas. Likeable and well meaning people at a personal level but so ineffective that they and their processes were listed as key roadblock issues in our strategic plans. They’d have quickly succumbed in the real corporate world.
The projection racket part 2
https://www.epsilontheory.com/the-projection-racket-pt-2/?utm_campaign=…
Everybody knows that everybody knows you can’t change social security.
Applies here in NZ also. You could substitute immigration or house prices, current government the perfect example as they campaigned on both and nothing happened. Almost nothing in politics that really needs done will be done, democracy is an illusion. So we keep going until something breaks....
The storm that just went through was a monster.
Here is a Southland farmer talking about it. The snow starts at about 7 mins in, will be some big stock losses, which believe it or not farmers really struggle with and it's not about the money, unless you are a honking great corporate run by accountants.
It's the poorest spring down here for a long time . Hill country lambers will have been hit badly but by the sounds of it , it is patchy.
Soil temp (still hovering around 6 to 7 deg) and grass growth are a month behind. Zero spring crops are in (for the best probably) , there will be no record milk flows down here this year.
This is the third spring in a row where winter starts from mid Aug on .
The milk report from the States is reporting NZ milk collection is up %5 over last year. This year is way better for us, soil temperatures are up and growing grass. Had a frost last night came in late, not as bad as it could have been gone by 8am. We can get three frosts in a row from these weather events, the first the biggest and then tails off. Lots of snow on Ruahines but it won't last long. Always coldest as the sun starts to rise, called the dawn drawdown. Grapes need 1mm of water for every degree of frost and we have had as low as -6º. Every mm is 10 tonnes of water so if you start putting on 6mm =60 tonnes a hectare per hour, if you fight for 10 hours things get a bit messy and you need really free soils to absorb the water. Grapes cannot get below freezing while apples are much more forgiving and damage doesn't start till -1º Water is more reliable than turbines but you need lots.
"When asked if they want house prices to drop. both candidates avoided the question."
So why was that even an issue/question?
Answer: Because it's a problem; one that any New Zealander concerned about the future of their country recognises, and that will be solved - one way or another. It's only a matter of "Who is going to, or continue to, pay?"
Has no one ever considered that our problems are created by the very people one voted into Power.
Has no one ever considered that Bankers are the problem that has never Saved our Nation from Aussie manipulation.
Has no one ever considerered that endless pumping and dumping of over priced and over valued rubbish we import and export and owe to Companies who import and export to Money Printing Countries beyond the norm, can never become the norm in the long term.
Has no one ever considered that killing off 1 million Covid19 sufferers and catering for the 2-300 million sick people, plus othersick and elderly people around the World is food for thought, about the fact we have way too many people born and borne by the growing population for ever and a Day. Yet we do not give out free Family Planning to Nations and preferably all Politicians and Bankers. That way, we may never need to moan about Houses, pumped up by previous aforementioned criminals printing money like a Gangsters Gang, going gang busters, ever again.
Has no one considered that Voters are part of the problem and that Borrowing into Future Debt is not beneficial to our Debtors demise.
Has no one worked out that "Money" is the biggest crime, created and implemented by those who Benefit. Print and be damned.
Has no one worked out Rising Prices for Housing Idiots is detremental to our well being in the future of our so colled...economy and the survival of our Work from Home and purchase via Computer... World set-up to make it Work.....at your expense. (Amazon and Microsoft, vote for me....pretty please)
Uptick, if you have the time and nowse....and can afford the time, spent....Minimum Wage, not with standing, seated looking at the screen.
Beyond that, it's "what the real income from any job can buy."
It doesn't matter if the average NZ worker is paid $100 per week if it buys more than what the gross average wage today of $1,000 per week is. It's just a number.
So, yes, employment is key. And how do we create that? Lower the input costs to business so that what we do make is cheaper for all; locals and offshore, to buy.
That is - not only lower interest rates but lower nominal wages.
Now, of course, that's not going to be allowed to happen - The Debt Machine working the way it does, so what happens?
New Zealand ends up with MASSIVE Public AND Private Debt that it can't repay and those lower wages I mention? They will be forced on us anyway, just as they were on Germany and Japan after their war-based economic calamity.
BW... Its a problem.... but the yes/no answer to the questions gives nothing.... A pointless question.
It would have been great if the Interviewer could have dug down into the issue.... Maybe asked the Leaders what they thought caused Higher house prices. Asked whether low wages is an issue.? Asked whether Local council graft thru the building consent process was a problem.?
Gower could have asked if Credit growth + immigration, which is so entwined in NZs' GDP growth "model" , is a driver of house prices.
etc...etc
AND..then at the end of that ..he might have asked what each might do about it.
As it was... the question for me was pointless and the responses gave me nothing... ( The leaders hesitation at least told me they know that a falling housing mkt would probably mean a deep recession... )
ps.. Simply taxing is not a solution, thou, obviously it would have an effect. ( Parties like TOP and the Greens would get more traction if they phased in their property taxes, slowly and incrementally over time, so people and markets can adjust. )
No problems with any of that.
We ALL know that we have a problem of many years making on our hands - even those who have and are taking full advantage of it (and why not?!)
But to allow it to continue is the biggest mistake we can collectively make. The end result will be shocking.
Many things HAVE to change, and if NOW isn't the time ( I stupidly thought John Key had recognised what he had to do when he told us of the problem and so got elected.), then the future will deliver it in a more costly way.
We have to stop raising the present value of future asset cash flows caused by perpetual interest rate cuts, which in turn prompts wealthy speculators to capitalise these gains with debt laden asset purchases.
We start with the idea of credit creation, specifically a swap of IOUs between a bank and myself involving a bank loan that is my IOU and a bank deposit that is the bank’s IOU. Nothing could be simpler, and yet the mind rebels, especially the well-trained economist’s mind, because this simple operation increases my purchasing power without decreasing anyone else’s. It seems like alchemy, or anyway a violation of some deep conservation law. Real productive resources are the same as they were before, and the swap doesn’t change that, does it?
Spending of the new purchasing power adds another layer of perplexity. If spending increases but real resources do not, then it seems logical that the increased spending must exhaust itself in higher prices—that is the intuitive appeal of the quantity theory of money. My purchasing power may increase, but everyone else’s decreases because their money balances buy less. From this point of view, the alchemy of banking seems like a kind of theft, something to be deplored in the name of economic science and if possible outlawed in the name of the general good. Link
If the RBNZ raised interest rate, what will happen? what impact it would have on NZD vs other currencies (who are all reducing their interest rate)? will it push the NZD too high if there is a flow of money NZ way to get higher interest income compared to anywhere else?
I imagine most increasingly impoverished Kiwis would hardly notice the difference. Just another burden to add to the many factors causing them to endure hardship.
Raising interest rates in not a direct corrective action. Regulating the flows of credit away from asset speculation to productive investment would correct interest rate levels as opportunity costs appreciate to reflect realised production based income growth across all sectors of the community.
Audaxes, i want to firstly say I am not celebrating where we are. I just disagree with your conclusions that the RBNZ actions cause us to be here. Money will flow where it get best returns. The fact that money has flowed into property is a symptom showing that NZ does not have real economic potential to further develop.
Your mentioned productive investment potential must be coming from somewhere. Either it comes from A) further developing what NZ has a proven track record (i.e. primary industries) or it must come from B) a new source (e.g. NZ starts something new, a new industry is introduced and developed, etc). I would argue that you can only logically direct credit creation toward A, as the risk and reward in B does not justify bank lending. And there is absolutely no sign that NZ economy in its A areas can grow much more. Actually there is real pressures for A to shrink (i.e. too many cows, reducing GHG emissions etc).
Investment in B is a high risk, high reward area that does not lend itself to lending. Those ventures require "equity". Now, that equity can potentially come from government (fiscal programs), and theoretically if you have truly wise, capable and keen eyed "talent scouts" working for the government to find these initiatives, that can be a good way to spend money. That may truly change the economic dynamics of NZ, increasing actual wages.
Credit rationing, controlling credit creation, etc may truly stop asset inflation, but then you will probably have a new set of issues springing up in your way. You cannot change the economic realities of a country by monetary policy. You may change how its issues manifest.
Yup, exactly what I have been saying.
If you want to spend $100b as the gubbmint is doing to "cushion the shock", you may as well find 100 startups and give them a billion each. It would be a massive runway for them. You would only need 20% to actually be successful and you would find us in a terrific position down the road...
Instead, what do we do? Give it to banks and pump most of it into the unproductive housing market... utter madness.
"The fact that money has flowed into property is a symptom showing that NZ does not have real economic potential to further develop."
Correct
But worse, its now a worldwide trend/problem
"everything works in ‘growth’, while it all stops working in de-growth.
It just stops working. But they won’t tell you, because “full faith & credit”.
Our petri dish was placed under a shower of surplus fossil energy and boatloads of credit, but suddenly someone put the lid on it.
When we look up we see the mark of Batman, and we think we’re saved.
What we really see are the flashlights of interests"
Money will flow where it get best returns.
Exactly - Is this responsible RBNZ regulatory oversight?:
Banks extending 60 % of their lending to one third of already wealthy households to speculate in the residential property market because the RBNZ offers them an RWA capital reduction incentive to do so.
Or this?:
RBNZ cutting OCR in half five times since July 2008, causing the rich to capitalise rising discounted present values of future unproductive asset cash flows.
Sorry if this has been mentioned, personally? I would box in all of them into a simple question, 'What would you like to see in general sense of average NZ citizens income earners/tax payers in term of housing affordability ratio against their family income to afford it. (DTI ratio of 3x? 4x? 5? or 9-12x?) - whichever but those politicians need to give their ideal ratio, after all many countries including Orr has been toying with the idea
Meanwhile in Hong Kong. Q: When is a Billionaire not a billionaire? A: When he can’t pay his bills. https://wolfstreet.com/2020/09/30/hong-kongs-overleveraged-commercial-r…
Perhaps not for this topic, but lot of people are reading, so I guess the best place to put a link:
https://www.armstrongeconomics.com/international-news/disease/parliamen…
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.