A review of things you need to know before you go home on Wednesday; some big home loan rate increases; dairy prices slip, eyes on CPI, HNZ pays more, swaps up again, NZD firm, & more

My highly ill informed CPI data prediction 7.5%. Admittedly don’t have access to the same dart board as the RBNZ but reckon I can make a guess just as accurately if only on the basis of how my household costs are rocketing.

The Solomon Islands have signed a "security pact" with the CCP.

https://www.abc.net.au/news/2022-04-19/china-and-solomon-islands-sign-s…

It sounds like many are unhappy with the prospect of the enemy building military bases on our doorstep.

Crazy that CPI data is still reported quarterly, it should be live, or at least daily.

It's a simple task of aggregating price points for a set basket of goods and publishing it.

Pricespy has essentially done it, why can't RBNZ?

Stories are building (no pun intended) of builders / developers going bust:

https://www.nzherald.co.nz/business/85m-beachcroft-residences-auckland-…

OK. Huge loss for Netflix by suspension of services in Russia, but  the number of subscribers lost is the same as subscribers lost in the U.S. and Canada in a single quarter. 

Technology is deflationary.

https://www.cnbc.com/2022/04/19/netflix-nflx-earnings-q1-2022.html 

China hasn't followed is reserve ratio cut with lower prime loan benchmarks.

What everyone is saying, because it’s convenient, is that China’s zero-COVID policies are going to harm the economy. No. Economic harm of the past is the reason for the zero-COVID policies. As I showed yesterday, the cracking down didn’t just show up around 2020, begun right out in the open years beforehand, born from the scattering ashes of globally synchronized growth.



Xi Jinping saw how a very different post-2008 global economy without any recovery was going to keep China from living all the way up to Deng Xiaoping’s grand promise of total Chinese prosperity (borrowing heavily from its capitalism undercurrent). Rather than sit around waiting to be Gorbachev-ed, he gave himself the crown of dictator and has ruled with an increasingly harsh iron fist ever since. Link

In Denmark and Sweden, dairy giant Arla Foods said it is willing to pay farmers a premium for milk based on how many carbon-reducing activities they can tick off a company list.

A social credit system?

As the West grapples with the energy implications of a hostile Sino-Russian alliance, the steering group of the Net-Zero Asset Owner Alliance, whose members manage over $10.4 trillion of assets, issued a statement urging Western governments not to sacrifice climate goals for energy security. “The world is still heading for an excess of fossil fuel-based energy use that will vastly exceed the carbon budget needed to meet the 1.5° Celsius Paris agreement goal. This trend must be halted,” the United Nations-backed alliance said in its April 8 statement, arguing that “the national security argument for accelerating the net-zero transition has strengthened considerably.” 

What, one might ask, is the standing of asset managers to opine on national security matters? They have no expertise in this domain. It turns out that their understanding of the economics of energy policy is defective, too.   

The Net-Zero Asset Owner Alliance claims that development of new oil and gas reserves will lock in fossil fuel subsidies, exacerbating market distortions. In fact, the International Energy Agency (IEA) in its 2021 net-zero report states that under its net-zero pathway, tax revenues from oil and gas retail sales fall by about 40% over the next twenty years. “Managing this decline will require long-term fiscal planning and budget reforms,” the IEA warns. Similarly, Britain’s Office of Budget Responsibility estimates that net zero policies will result in the loss of tax receipts representing 1.6% of GDP. So much for the fossil fuel subsidy myth. If fossil fuels were heavily subsidized, eliminating them would mean fossil fuel subsidies disappear. Instead, it’s tax revenues that would melt away to zero. Link

National leader Chris Luxon 'loves Labour Day', but also wants to get rid of it

Gee he is working hard with the team coming up with radical policies that will make MOM & pop Kiwis wealthier and healthier.

In defence of the Reserve Bank, while this inflation print will be appalling and far beyond they target range, base effects mean the next will likely look a little better as long as they can drive non-tradable inflation back towards 0%. That's why I advocate slowing rate increases after this next one (assuming they do another 50bps) and unwinding QE faster to mop up the excessive liquidity sloshing around the financial system.

Otherwise we'll start to risk raising too fast and crashing the economy.

For those who want some comedy, Tony Alexander on why prices might not fall that much in Auckland...

https://www.oneroof.co.nz/news/41281

Where I of course agree with him is the fall away in housing development that's coming. But what I think he's ignoring is how much new supply will hit the market over the next few months, before we see the numbers fall away.