Here's our summary of key economic events overnight that affect New Zealand with news investors are holding back at the start of this week, waiting for a deluge to data to pass first.
US consumer inflation expectations for the year ahead edged up to a fresh record of 6% in November from 5.7% in October in a Fed survey that goes back to 2013. Uncertainty rose among those surveyed, but they do see inflation three years ahead being slightly lower at 4.0% than when they were last surveyed in October.
With inflation running hot, investors are seeking effective hedges, and in the US buying farmland is becoming popular for that. It might become a rush, as bond investors are facing steep losses.
Markets are in a sort of pause, awaiting the US Fed's December decisions which will come on Thursday NZT. The Fed is expected to accelerate tapering and signal that it will raise interest rates next year. There could be a lot to unpick when their documents are released, so uncertainty is high.
In China, a growing set of property developers are seeking to have their bonds not rated anymore, to avoid the odour the sector is suffering from. Stalled projects are unravelling their ability to sell off the plans, as buyers recoil from the risks they are taking with contracts like that.
In Japan, machinery orders rose with a bit more momentum in October from September, and are forecast to rise quite substantially in the October to December quarter.
South Korea now says it wants to join the CPTPP.
Indian CPI inflation was up +4.9% in the year to November, although this was a smaller increase than they had earlier in the year and lower than the +5.1% expected. This was solely due to food prices, and future rises are expected to be sharp as base effects wash through.
However, wholesale prices in Germany jumped +16.6% year-on-year in November and even higher than the +15.2% rise in the previous month. Worse, it is a record in a series that goes back 60 years.
None of this will be helped by a renewed jump in lithium prices. Nor will German inflation be helped by delaying the Russian gas pipeline project, Nordstream2.
In England, their central bank says it is planning to scrap mortgage 'floor' rates, the requirement that mortgage borrowers must be able to afford a 3 percentage-point increase in interest rates, in a move which could help home-buyers constrained by tough debt-to-income restrictions.
In Australia, pandemic cases in Victoria jumped to 1290 reported today. There are now 11,649 active cases in the state - and there were another 2 deaths today. In NSW there were another 536 new community cases reported today, another jump, with 4,677 active locally acquired cases, and no deaths. Queensland is reporting eight new cases. The ACT has 3 new cases. Overall in Australia, just under 89% of eligible Aussies are fully vaccinated, plus 4% have now had one shot so far.
The UST 10yr yield opens today at 1.41% and down -7 bps from this time yesterday. The UST 2-10 rate curve starts today flatter at +78 bps. Their 1-5 curve is also flatter at +94 bps, while their 3m-10 year curve is flatter at +139 bps. The Australian Govt ten year benchmark rate has dropped -11 bps to 1.54%. The China Govt ten year bond is up +2 bps at 2.86%. The New Zealand Govt ten year is -4 bps lower at 2.39%.
Wall Street has opened the week lower, with the S&P500 down -0.6% in Monday afternoon trade. Overnight European markets fell between -0.8% (London) and flat (Frankfurt). Yesterday, Tokyo closed up +0.7%, Hong Kong closed down -0.2%, while Shanghai rose +0.4% on the day. The ASX200 ended up +0.4% while the NZX50 starred, closing up +1.1%.
The price of gold will start today at US$1789/oz and up +US$6 from this time yesterday.
And oil prices start today -US$1 lower at just over US$71/bbl in the US, while the international Brent price is now just under US$74.50/bbl.
The Kiwi dollar opens today softer at 67.6 USc. Against the Australian dollar however we are little-changed at 94.9 AUc. Against the euro we are soft at 59.8 euro cents. That means our TWI-5 starts the today at 72.2 and its lowest in four months.
The bitcoin price is sharply lower at US$46,971 and down -5.8% from this time yesterday. Volatility over the past 24 hours has been very high at just over +/- 4.3%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
81 Comments
Mr Orr too was insisting and highlighting that Inflation is Transitory - has anyone asked his personal opinion as NOW what he feels about parroting transitory inflation used as an excuse to deflect and cover up.
Will Mr Orr apologise to the country that he was horribly wrong and has screwed up Big Time..
CNBC: El-Erian says 'transitory' was the 'worst inflation call in the history' of the Fed.
https://www.cnbc.com/2021/12/13/el-erian-says-transitory-was-the-worst-…
Will reserve bank NOW take data seriously instead of acting on their assumption or feeling or expectation despite data Every week suggesting otherwise.
Like Alice and looking glass Mr Oar is looking through this inflation blip.
And next week ? What happened to the $ 100 per barrel oil we were sposed to have "soon", before xmas I think it was.
Does it really matter ? I said the price of 98 petrol in Auckland will be $3 a liter by Christmas and it pretty much is.
Give the guy some credit, he started tightening well before any other central bank has. And the RBNZ has been caught out by raising rates too early several times in the last 12 years, so I think he was right to be cautious before pulling on the handbrake during a pandemic. Interest rates in NZ have almost doubled in the last 6 months, it would be quite risky to increase them much faster.
Gives a good argument that performance and pay should be linked, on that basis he should be in for one helluva pay cut .
Depends on how it is measured doesn't it? Some would say getting through a pandemic with lockdowns and yet having a booming economy might be cause for a pay rise.
If the economy is booming why do we have super low interest rates?
The economy is booming because we have super low interest rates!
If the economy was booming it wouldn't need super low rates.
The economy is not booming its total BS.
Really..... He should remember that NZ is a smaill economy unlike US and even economy is not diversify as other countries but concentrated to only Housing so parroting fed to suit biased pre planned narrative does not suit.
In other countries house prices have gone up by 15% and 20% and are screaming of ponzi but here it has gone up by 40% to 60% and still Mr Orr is in favour of wait and watch.
Interedt rates went up not because of rbnz but for overseas / international rise in borrowing. Besides when the ship is about to go down, it is rat who gets a sense first and jump.
Arguments can be presented in favour of half glass full or half glass emoty but everyone kniws where our politicians and Mr Orr stand and the same is evudent by his words and action - when fear of house price growth flattening went out with least regret policy overnight and this was was based on feeling but when house prices were jumping by $100000 every month went with policy of wait and watch despite data suggedting otherwise - even latest data announced in last few days suggest that ponzi is growing at much faster pace.............
Should protect FHB from overstreching under FOMO by implimenting DTI but......
That is one school of thought. Another is that Orr doesn't really give a crap about house prices as it is not his job to do so, but he is worried about pulling on the brake too hard as has repeatably happened by reserve banks in the past when there have been signs of inflation. Bollard was last to do it in 2008 I think when he raised the OCR over 8% and put us into recession just before the GFC.
It's all a bit of a mess, isn't it?
https://www.beehive.govt.nz/release/reserve-bank-take-account-housing-d…
"....Orr doesn't really give a crap about house prices as it is not his job to do so..."
If this is true than why did he reacted overnight in March /April last year by removing LVR and throwing everything to avoid slowing / flattening of house price rise .....at that time it was his job and had power to influence BUT when ....it is not his job nor he has power to influence house price - One has to be an idiot to believe it.
At that time absolutely everyone was predicting a house price flatten / fall. How can he justify having his foot on the housing market brake at that time? LVRs were never meant to be permanent. I will agree however that we has suspiciously slow to put the brake back on again.
JimboJones, So his reasoning that house price is not his job IS WRONG and his argument that he has no influence in housing market IS WRONG.
He stands exposed and get away with reasoning as we lack strong media who does not grill or argue but take any answer and let it pass allowing them to feel that they can get away with any shit.
His two main mandates are controlling consumer inflation and bank stability. He is also meant to maximise employment these days too, although that is of lesser importance than the other two. Everything else is just fluff really.
As has been pointed out, rising house prices can reduce bank stability, hence the need for LVRs to make sure people don't borrow too much and end up in negative equity. The time for LVRs is when prices are rising; if prices are stable or falling (as was predicted at that time), then LVRs can further prevent borrowing and cause a house price crash (which may actually be a positive outcome in some ways but is definitely not good for bank stability)
All of the tools he has are fairly well documented in how they are meant to be used, and I don't think he has strayed too far away from those rules to be considered incompetent or corrupt.
People were expecting the housing market to behave as a market, so he was compelled to step in...
Oh
I wouldn't quite agree with that, financial stability is part of his remit and a runaway housing market is not a good thing for financial stability.
Nah, I don't believe he is doing his job right. Removing LVR last year is the evidence. If he says house prices are not in his mandate then why he removed LVR in one day but took him half year to put it back on? I think this is why he is losing his creditability if he doesn't fullfill his mandate. Yes RBNZ moved before US. But you need to think our inflation came earlier than US. By June (If I remember right), we already had our inflation sitting around 3%, well above 2%, unemployment was really low. But he was still using "transitory" as his narrative. August, the data showed again the inflation is well above his target range, he didn't make any move by using "uncertainty" as another narrative. How could he gain creditability if he is not doing his job?
It certainly gives credence to those commentors on this site who stated that Orr was just parroting, and acting as a mouth piece of the Fed. My thoughts are that seeing how evident that is becoming, then his view of monetary matter is irresponsibly shallow, in that he was/is too dependent on other bank/s for their view before expressing his own.
Even I, looking at the global reports, mostly summarised on this site on impacts of logistics, climate change, pandemic and general market upheavals, could see that inflation was going to be much more than a blip. Indeed I had commented that inflation was very apparent on the street although the RBNZ and Government were trying to tell us it was very low. And if it was a blip then the prices should fall back. but they haven't and personally i do not think they will.
Isn't there an old saying that economists have predicted 10 of the last 2 recessions (or something like that). I think interest commentators have predicted about 100 of the last 0 house price crashes (myself included), so I wouldn't give too much credence. If you constantly predict gloom you will be right eventually.
Well it seems our economically savvy Prime Minister has spoken in an interview, and deemed a house price fall in value in 2022, back to equivalents two years ago, would be her real wish. OK that’s approx 30% isn’t it? Folks who have purchased recently & are highly leveraged to do so would have some degree of discomfort about that, to say the least, wouldn’t they. Happy New Year, compliments PM Adern!
As much discomfort as those who have seen their house buying chances disappear on a ever steepening graph, with a side rubbing of salt in the form of higher rent to pay some else's mortgage faster?
Yes, I thought for a second she was going to say "Pre-Labour" Prices.
Clueless and this lot are running the country.
Well as our PM, to use that job description lightly, by her own admission bases her housing market expertise on the status of the house across the road, is it then any wonder,
And the alternative major party responds by anointing a NIMBY property investor as leader...
Young Kiwis are really going to need to shift away from the major Natbour parties.
Inflation is a good thing / we are happy to overshoot for a while to make up for years of low inflation
Haha that why food banks getting record demand for assistance putting food on the tables around NZ? Because inflation is good?
Inflation is the value of your money melting away.
Think of your bank account balance as an ice cube, and every year its gets 5% smaller.
Inflation is only good if you have lots of debt, which is why countries love it.
More time passes and curves continue to do what they’ve already done, the longer they go without correcting themselves back to steep/upward sloping, more confident the market is in what the curves are getting at: again, neither inflation nor “inflation.” https://alhambrapartners.com/2021/12/10/omi
"In England, their central bank says it is planning to scrap mortgage 'floor' rates, the requirement that mortgage borrowers must be able to afford a 3 percentage-point increase in interest rates, in a move which could help home-buyers constrained by tough debt-to-income restrictions."
The ponzi must continue.....and the means are becoming thin on the ground
'to help first home buyers'
I'm not even sure how to describe that, pure greed? (edit - by the central bank)
Amazing that 50 years ago - in NZ, at least - we were focused on making affordable housing supply, something that resulted in high home ownership rates. Now we've completely turned it on its head and we're constantly searching for new ways to increase what we can get younger generations to pay us. The absolute moral decline and entitlement mentality in this...greedy, grubby and grasping.
If history cycles around to violent revolution again it's folk like these who will have led us that way.
By any logical definition of "affordable" NZ housing needs to be less than half the current price (at current interest rates). It would then be approx the USA average. There is no political will to fix land, design code, infrastructure & building supply adequately to make this happen; let alone any suggestion of a plan, because of too many vested interests.
Wait until boomers have left the workplace - then we will see change. We have a boomer leading the Fed abs his decisions are shaping the financial world - including here in NZ. When the ‘Me generation’ are gone, then positive change can be made. Until then it will be self centred chaos, because that is all this generation understands and without the guidance of their greatest generation parents, who have almost entirely died now, are lost at seas without a moral compass to guide their vessel. (most GI’s left the workplace in the 80’s/90’s and since then western society has rapidly deteriorated without their leadership)
:)...I was born in 1955
Great so what did your generation do with its collective demographic power to prevent society being where we find ourselves?
Boomers changed a lot by being active - French Nuclear testing, Springbok tours, sitting in native forest to save trees, workplace strikes, women's rights and so on.
The younger generation rant on a keyboard and expect that to work.
How many young who worry about property prices voted for TOP?
Time to get active if you want change. Stop blaming boomers for your own lack of action.
Well, sometimes they march and old folks rant at them. They just haven't done it about housing yet.
However, I see they're starting to explore options: www.reddit.com/r/housingprotestnz
An interesting idea posted in that site is using their keyboard warrior skills by starting a campaign to click as many real estate ads as possible to cause costs to the RE industry.
There appear to be plenty of boomers on this site ranting and they also appear to have zero awareness of what social responsibility means/is. If they did, we wouldn’t find ourselves in this situation. As I say above, let’s wait for the boomers to leave the work place and see if the theory is right. Wait until we have a millennials leader of the Fed and RBNZ who witnessed the financial repression that was forced upon them. Will they be as narcissistic and self interested as the generations above them that created the current mess we find ourselves in, or will they have learned to act with more social responsibility - The 4th Turning theory suggest they will act in the interests of all of society, not just themselves.
Plenty of boomers on this site equally as frustrated (you have a parent don't you)?
I've suggested a number of times you get active and try things like a nationwide rent strike. Send a message that in spite of Mr Orr, property is not risk free.
Get in and support TOP.
Wake up that the main parties are not interested in ended this property madness.
Get some momentum and you will find NZers from across the age range will support you.
I could be silent generation or gen x or millennial. I’m not a boomer. I do feel for millennials and those coming after them - although I do believe that as boomers die off, which they are in the process of doing so, society will heal itself. Taking action would only result in revolution or civil war. Waiting for boomers to leave the work force and crucial positions of influence (like Fed chairman) and replacing them with those who have felt the effects of the financial repression of the out of dates/unsuitable policies, is the best way to effect change.
What you will understand if you read The 4th Turning is that the millennial generation are the ‘hero’ archetype so they want to serve their society, not destroy it. But they are being let down by poor leadership so feel anxious and confused and depressed (hence high suicide rates among young men). What they need is not a revolution, but some balls from the men in the generations above them - but there appear to only generations of weak men who appear to only want to enrich themselves at the expense of others.
Boomers primarily wanted to rebel against their parents civic virtues and move society from being about the collective good to being about the ‘self’. Think self help books, drugs, hippies and free love baby.
"Hell, is The Truth seen too late"
The 4th Turning book provides some good insights into this and what we can likely expect. It won’t be until we have predominately millennial based leadership in our state and private entities that we see positive change. Boomers believe greed is good and gen x are their parrots along for the ride. This cycle of ‘crisis’ is expected to end later in the 2020’s when boomers are gone from the workplace and gen x look to millennials for leadership and a change towards civil cooperation and stability. Not this selfishness and division.
I have sympathy for what you are saying, but who is to say the children of the boomers won't also turn towards self interest?
Don't we have a history of young people being idealistic before becoming cynical and self interested as they age? Weren't the boomers just like that. Many of them were out protesting for civil rights and the anti nuclear movement in the '70s ...
You’ll need to read the book to understand the theory. The only time that the cycle didn’t occur in the last 400 or so years was the US civil war period - which is a possibility if there isn’t a violent international type conflict.
But generally speaking the generation that is coming into adulthood/middle age and witness this type of crisis is scarred from it and sees how damaging it is, so takes action to make society better for their children. These children then don’t understand the sacrifices their parents made to make society good, so don’t develop the capacity to continue that trend and society gets worse. Stuck in between this you have the likes of the silent generation and gen x who become somewhat ineffective as they are trapped between two more powerful demographic generations.
Before giving your sympathy - which I couldn’t care less for - read the book and you may then decide no sympathy is required and we can both be happy going forward and seeing the changes that occur as boomers leave the work force, their influence in society is eroded, and millennials rise to power and create/restore the much need civic/social responsibility that has been lacking under the boomers watch over the last 20-30 years. It’s not the boomers fault by the way, they don’t know any better because the greatest generation took responsibility for them - but since they have died - boomers lost their moral compass (which was their parents)
Yeah nah, each gen is more greedy than the last. Since when has the next gen been prepared to accept less than the last ? The millennials want even more. By the time they get into power the world will be in crisis mode, the whole planet is on a downward trajectory.
There's a subreddit called r/raisedbynarcissists...
That would be a typical boomer paradigm you see the world from. Exactly what the book describes.
Millennials are now rising to power, with some approaching power within the work place, and all they have known is crisis for most of the working life - thanks to the poor leadership/management from the generations above them. They’ve witnessed what not to do, in order to understand what it will take to do the right thing.
LOL management above you has always been poor, its the wrong type of people that typically aspire to get into the roles in the first place. Millennials will change nothing, they think posts on social media will save the world.
In fairness, posts on social media turned some New Zealanders into anti-vaxxers with Trump 2024 flags...
Millennials won’t change anything - lol - yet everything you have known has been a result of the conditions that were created for you by the greatest generation. Which you have taken and exploited for your own benefit - just like what the parents of the greatest generation did. The lack of self awareness and hypocrisy is always a laugh, but again this is something that the authors of The 4th Turning theory talk about in the book. Each post you make falls within the theory.
Yeah, as a species we are certainly struggling to move from "I care about these 100 close friends and family here on the savannah with me" to something that will scale and be sustainable for billions.
Singapore , has recently adjusted its population data, as a result ,vaccination rates have now increased further ,particularly in the important elderly groups Covid data is now separated into three groups, the unvaccinated plus partially vaccinated, the "fully" vaccinated, and the new grouping of the fully vaccinated plus booster. When New Zealand levels down to orange ,15 percent of the population are due boosters.
It's difficult to find solid repeatable data on boosters but I think once you start giving them they only last 3 months before it's "recommended" to get another (it stop providing the required protection). Why force this this when case numbers are decreasing? Anyone who wants a booster can get one.
Lets not mention omicron where I there are enough anecdotes out there that any booster protection will be very short lived. If govt wants force a new jab on the population before we open the borders (out PM is a fanatic so I am not ruling that out) it wont help uptake if we had to get redundant jabs before that.
Ideally everyone gets a booster just before winter. Until then its probably not so important unless Omicron is actually of concern. That was Dr Bloomfield's view and it seems quite sensible.
No country is giving 4th shots yet (except to a few immunocompromised people).
If ongoing boosters are needed, they're likely to be annual and given in the autumn with the flu shot.
In England, their central bank says it is planning to scrap mortgage 'floor' rates, the requirement that mortgage borrowers must be able to afford a 3 percentage-point increase in interest rates, in a move which could help home-buyers constrained by tough debt-to-income restrictions.
by Audaxes | 2nd Oct 21, 10:11am
The rate of interest – the price of money – is said to be a key policy tool. Economics has in general emphasised prices. This theoretical bias results from the axiomatic-deductive methodology centring on equilibrium. Without equilibrium, quantity constraints are more important than prices in determining market outcomes. In disequilibrium, interest rates should be far less useful as policy variable, and economics should be more concerned with quantities (including resource constraints). To investigate, we test the received belief that lower interest rates result in higher growth and higher rates result in lower growth. Examining the relationship between 3-month and 10-year benchmark rates and nominal GDP growth over half a century in four of the five largest economies we find that interest rates follow GDP growth and are consistently positively correlated with growth. If policy-makers really aimed at setting rates consistent with a recovery, they would need to raise them. We conclude that conventional monetary policy as operated by central banks for the past half-century is fundamentally flawed. Policy-makers had better focus on the quantity variables that cause growth.
by Audaxes | 12th Jan 21, 12:26pm
Lower interest rates are supposed to be stimulatory, helping boost inflation and employment in line with the RBNZ’s monetary policy mandate.
Indeed:This is what Milton Friedman called the interest rate fallacy, and it indeed refuses to die. We can tell what monetary conditions are in the real economy, as opposed to financial liquidity, though the two can be linked, by the general level of interest rates. When money is plentiful, interest rates will be high not low; and when money is restricted, interest rates will be low not high. The reason is as Wicksell described more than a century ago:
[The natural rate] is never high or low in itself, but only in relation to the profit which people can make with the money in their hands, and this, of course, varies. In good times, when trade is brisk, the rate of profit is high, and, what is of great consequence, is generally expected to remain high; in periods of depression it is low, and expected to remain low.
When nominal profits are expected to be robust, holders of money must be compensated for lending it out by higher interest rates. Thus, the same holds for inflationary circumstances, where nominal profits follow the rate of consumer prices. During the Great Inflation, interest rates weren’t low at all, they were through the roof well into double digits and higher by 1980. At the opposite end in the Great Depression, interest rates were low and stayed there because, as Wicksell wrote, the rate of profit was low and was expected to be low well into the future. High quality borrowers were given as much money as they could want while the rest of the economy was deprived of funds; liquidity and safety being the only preferences in what sounds entirely familiar. Link
However, wholesale prices in Germany jumped +16.6% year-on-year in November and even higher than the +15.2% rise in the previous month. Worse, it is a record in a series that goes back 60 years.
OUCH! German power price jumps >200/MWh for first time ever - Link
Should've kept their nuclear on. Immense sunk costs crystallised
Another day, another of your dollars thrown out the window:
Air New Zealand revise its Crown loan agreement, resulting in an additional $500m, increasing overall support to $2 billion.
Support for whom, exactly? It wouldn't be the shareholders, would it? This thing should have been nationalised several years ago. It's worthless without the Guarantee. And now The Government is so far in the hole it has to keep digging.
Guess who is going to pay for this lot? You. In your retirement savings. Your Kiwisaver Fund is likely to end up as the proud end-owner of these shares as they sink gracefully into The Tasman.
They really need to split Air NZ into a government backed domestic airline and a free market international one. I'm happy for the government to make sure we all have access to domestic flights as it is effectively a necessity these days, but international flights can be free market. Also I am sick of monopoly domestic fares propping up the loss making competitive international ones.
This is what happens when Government (all brands of them) try to avoid the nastiness of Life in the name of popularity/winning an election.
Failure is a part of Life. It can't be avoided entirely, and failure-delayed is failure-compounded. Paul Keating once said "This, is the Recession we have to have" and to the degree that we learn as much from failure as we do from success, he was right.
Well put.
I think the approach to covid has also been too influenced by the modern predilection of 'avoiding the nastiness of life'.
Especially the two-tier welfare and monetary response. A massive amount of wealth transferred to the already wealthy to protect them from risk innate to free markets.
A case study of a millennial ruler being kind because she didn't want to be like those mean, selfish boomers?
I'd bet some of that and plenty of Treasury and similar advice that house prices cannot be allowed to fall and rising prices are a good thing.
...neither is Orr a millennial.
ha..just clicked you link after my post....ditto.
Time for a name change back to NAC.
In other news, Transmission Gully opening won't happen this year. I am in serious doubt it will happen by Easter next year, by the sounds of things (I have heard from people working on it).
Again, for comparison, the first sod of Transmission Gully was turned in 2014, it has 29 bridges/culverts. In 2016, China started a 1000km high speed railway with 167 tunnels and 301 bridges between two countries with fully different legal systems and huge geopolitical implications. The Chinese project is now open, the NZ one is unlikely to open for at least another 6 months.
Yeah this country is a joke, it takes 2 years to sort a roundabout in Bayfair.
And if folk think it's the public sector, well, try ordering things to be delivered by courier...
"They had 18 months to prepare, yada yada yada..."
It's definitely both public and private sectors.
I have worked several jobs in both sectors and I'd say overall level of competence is similar.
But that's just my anecdote.
At the end of the day both are typically blighted by the same issues and philosophies.
It's another delivery debacle, this time overseen by both major parties.
I thought PPP's were supposed to be more efficient and effective?
One of the great myths of neoliberalism
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