Here's our summary of key economic events over this holiday weekend that affect New Zealand, with news we are heading into a key week for economic data.
In the week ahead we will get the US CPI next on Saturday, June 11, and it is expected to hold at 8.3% as the headline rate. Along with last weekend's rise in non-farm payrolls, that probably locks in the next two +50 bps rate hikes from the US Federal Reserve, and a CPI number coming in as expected probably locks in one for September as well. Bond markets seem to be assuming that, and benchmark rates are rising today.
And later today, the Australian central bank will review its policy rate at 4:30 pm, likely to raise it from 0.35% to 0.60% - a +25 bps gain is the consensus. But don't be surprised if it is a bit more than that, perhaps taking it to 0.75%.
Tomorrow morning, we have another dairy auction, and prices there are expected to be quite a bit higher, perhaps with both WMP and SMP gains exceeding +5%. Low supply seems to be driving the trend, and if China is really opening up again, that won't hurt. But other regions seem better prospects.
China's private sector survey of their services PMI 'improved' but is still contracting. It is just contracting less. On it's own the May result would have been seen as a disaster, but because April came in at a fast-shrinking 36.2 (50 is steady state), the May reading of 41.4 just looks "better". Not really. They are going backwards fast. And don't forget their official services PMI was at 47.8, so it appears the official data was boosted by some Beijing gloss. No wonder Premier Li is worried.
With Shanghai looking like it is over the worst of its lockdown, that will help some. But Shanghai is not China. And no-one there is suggesting their tough-medicine approach to the pandemic is about to change.
Lockdowns keep a lid on inflation, so I suppose they will take that as a 'win' when comparing themselves to the rest of the world. Their May CPI is due to be released on Friday, June 10, and a little-changed rate of 2% is expected.
The Indian central bank reviews its policy rate tomorrow and it is expected to rise by +40 bps to 4.8%. India seems stuck with a weak currency at present, and combined with highish interest rates, they are dealing with some economic headwinds.
Late last week, South Korea reported a CPI inflation rate of +5.4%, well above the +4.8% in April and the expected +5.1%. That will likely mean another official rate hike there.
Singapore reported retail sales up more than +12% in April from a year ago, but they might have been disappointed in the tepid monthly rise from March.
In the US, their petrol price hit a new all-time record high to start their summer. At US$4.82/gal, that is now the equivalent to NZ$1.95/L (both U91). In the US they aren't paying NZ$1.08/L in taxes however (incl GST, just as the US prices include state and local Sales Taxes) as we are (or NZ$1.21/L in Auckland). Today's local Auckland price seems to be about NZ$3/L for U91. Bottom line is that they are paying about the same as we are if we forget our taxes.
In Russia, car sales have plunged more than -80% in May as their economy stumbles under sanctions.
Germany has raised its minimum wage to €12/hour (NZ$19.75 /hr) in a move said to help 6 million low paid workers.
And in Australia, their new government is pushing for a +5.1% minimum pay increase for their low paid. It will take their minimum wage to AU$812/week (NZ$22.50/hr NZ$900/week or NZ$46,800 pa). It will go to about 1.3 mln Australians. Australia's CPI is currently running at 5.1%.(New Zealand's adult minimum wage is currently NZ$21.20/hr. Given Australia's taxes are higher, it may surprise readers how low Australia's and Germany's minimum wages are, compared to ours.)
The UST 10yr yield will start today up an unusual +9 bps at 3.03%. A week ago it was at 2.74%. The UST 2-10 rate curve is a little steeper at +31 bps and their 1-5 curve is also steeper at +84 bps. Their 30 day-10yr curve is steeper at +216 bps. The Australian ten year bond is now at 3.50% and unchanged. The China Govt ten year bond is up +2 bps at 2.84%. And the New Zealand Govt ten year will start today unchanged at 3.66%. But expect our wholesale rates to rise today following the global moves up.
On Wall Street, the S&P500 has started their Monday session up +0.8%. Overnight, European markets were all +1% or more higher, led by Frankfurt's +1.3%. Yesterday Tokyo closed up +0.6%, Hong Kong recovered with a strong +1.3% gain after their four-day holiday break, and Shanghai was up +1.3% after the same break. The ASX200 ended down -0.5% as part of a regional sell-off, and of course the NZX50 was on holiday.
The price of gold is down -US$9 today from this time yesterday, now at US$1842/oz.
And oil prices are down -US$2 from this time yesterday, now just over US$117/bbl in the US, while the international Brent price is now just over US$119/bbl.
The Kiwi dollar will open today little-changed at just over 65 USc. Against the Australian dollar we are marginally softer at 90.2 AUc. Against the euro we are also little-changed at 60.8 euro cents. That all means our TWI-5 starts today at just under 72 and little-changed in a week.
The bitcoin price has risen by +4.5% and is now at US$31,301. Volatility over the past 24 hours has been high at +/- 3.2%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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168 Comments
Actually EVs might pollute the air more
https://www.google.com/amp/s/amp.theguardian.com/environment/2022/jun/0…
Yes I was going to raise this today but you beat me too it. A single study does not make a change in consensus but this is earth shatteringly important if it can be confirmed in subsequent studies.
In essence it means that tired vehicles are killing our air and water quality at rates that have nothing to do with their exhaust emissions.
The study does not address the carbon issue but we all know that cars only an increasingly small part of that equation (I am looking at you China coal electricity plants).
If the study is confirmed the amount of pollutant attributable to EV's will be higher on a comparative basis than those of existing petrol powered vehicles based on their increased weight for comparative vehicle role.
I did
The average weight of all cars has been increasing. But there has been particular debate over whether battery electric vehicles (BEVs), which are heavier than conventional cars and can have greater wheel torque, may lead to more tyre particles being produced. Molden said it would depend on driving style, with gentle EV drivers producing fewer particles than fossil-fuelled cars driven badly, though on average he expected slightly higher tyre particles from BEVs.
Dr James Tate, at the University of Leeds’ Institute for Transport Studies in the UK, said the tyre test results were credible. “But it is very important to note that BEVs are becoming lighter very fast,” he said. “By 2024-25 we expect BEVs and [fossil-fuelled] city cars will have comparable weights. Only high-end, large BEVs with high capacity batteries will weigh more.”
If you look at tyres only, slightly.
But then there is those tailpipe emissions that you seem to be rather keen to gloss over. Not to mention extraction, refining, and shipping of fuel, and service waste(~5L of oil and a filter every 6 months, brake pads and rotors, clutches, etc...)
You need to qualify his statement with "a new fresh off the factory floor and well maintained car." And no doubt he is totally ignoring the CO2 emissions and their effects on the planet, and concentrating solely particulates/respiratory pollutants.
I doubt half the cars on NZ roads would pass a proper emissions test if we ever dared introduce them in NZ, with an average age of 14.3years, and NZs attitude to servicing their cars.
Meanwhile you are trying to compare a (vehicle) lifetime of fuels and engine/transmission service parts vs a one off battery build (and batteries are 90% recyclable already). Got a good grip on that straw?
The calculations for total carbon costs of EVs are based on the current cost of producing them. They do not account for scaling. As the production of EVs are scaled up the materials required to construct them become harder to obtain and require increasingly higher amounts of energy to extract those materials.
Anyway the key takeaway is that EVs are not a long-term solution to the problem we face. In some ways they allow the rich to continue with their high carbon lifestyle and avoid having to make the changes that are required. They provide a temporary respite to a very narrow part of the problem. The broader solution is for there to be less cars (shared ownership) and for them to be driven less (alternative more sustainable transport modes like walking, cycling, electric micro- mobility and public transport).
I don't disagree with your overall position, but we are faced with the reality of nz govt (local and central) that fails to deliver. While PT options remain abysmal, the car will remain king. The pedalheads that think a bicycle is the answer haven't looked out my office window lately at the foggy, rainy shite weather, or have the privilege of working very close to home.
EVs are an extravagant solution to the problem of moving a ~70kg person around a city which is a significant part of our traffic. Bikes, e-bikes and scooters are a much better solution and I don't understand why the government isn't encouraging them more.
Yes, cars and trucks are needed by some people particularly those unable to ride a bike, and for hauling heavy/awkward loads, but when I'm sat at the bike crossing in the morning half the vehicles passing by are single occupant and I suspect many of them would be well able to use their legs for 30 minutes a day.
Time obviously has a cost - all part of the equation. Another thing to consider is time spent biking to work doubles up as exercise - there are people out there spending money driving to work to save time, and then spending more money and time so they can sit on a bike machine in the gym to keep themselves fit.
I'm in Chch - a flat city and fairly compact so I can bike to the other side of the city in ~40 minutes on my regular bike. Most commutes here would be maybe 20 minutes for a e-bike except for those who have really badly planned their home location vs work location. Not to mention those who drive a ton of metal a km or two to pick up a few kg of shopping - insane.
Obviously it's not going to work for every situation, but it seems like a good push could easily remove 5-10% of cars from the road.
Some are, definitely.
But biking isn't the magic bullet. Even if it was a 20min bike what happens if my kid gets sick? bike home, pick up the car, drive to daycare.
Want to do anything after work? Better make sure it's close.
Any after work sports? Better stop playing cricket.
Also there is no way I would bike in Auckland, way too dangerous.
The reality is there needs to be a combination of different options, biking when you can may make up a small amount of it.
pick up the kids on your bike.
go to cricket on your bike
for me, i don't have time to use the car for school pickup, the kids go on the back of the bike, much quicker than driving. Likewise for weekend sports.
In countries that provide for a variety of travel choices, active modes make up about 30% of journeys which makes it far easier to drive.
I'm seeing more and more parents out in Chch with their kids on the bike, either a seat in front of them or a trailer behind (I saw both just this morning actually).
This is on a protected bike lane of course - I don't see so many on the roads. Build the infrastructure and they will come.
That's funny. My partner can't drive. She has an ebike. She works in Newmarket, we live on the shore. She does all the things you've mentioned (although it's netball rather than cricket and she takes the kit bag). No dramas.
In fact the only time we have had an issue is when I drove to work and couldn't get home in time to pick up kids from after-school care because there was a crash on the motorway and the city traffic was stuffed. Give me the reliability of a bike over traffic anyway. Door to door, same time every time no matter what time of day or night. Congestion free commute.
I suspect 'being able to use your legs for 30 minutes' isn't the only stumbling block for these people - don't forget, congestion already creates a great incentive for those who can switch to alternative modes of transport to do so. What you're looking at is the people for whom that isn't the problem.
Honestly I think the biggest stumbling block is culture. Most people won't even think for 10 minutes about doing something other than driving to work, because that's what everyone else does and it's so 'convenient' (despite all the whining about congestion and parking). The other day I was asked if I had a death wish for hopping on my bike at 5:30p.m. because I was biking in the dark (with lights and reflective gear).
I hope he recovers soon. There are certainly some psycho and inattentive drivers out there but I do think the risk is smaller than people perceive. I've been biking every day in Chch for 8 years with nothing worse than a grazed knee, and no doubt the exercise has helped keep me fit and reduced other health problems.
I have seen studies showing that cycling is a net positive to life expectancy as the health benefits outweigh the risks, but humans are notoriously bad at calculating short vs long term risks. It's similar to how people are more afraid of flying than driving - the outcomes feel very significant and driving is so normal we forget how risky it is.
I think it's more the consequences rather than the outright risk of being hit that makes people reluctant. I was commuting a bit over 200km a week on average. Finally got cleaned up by a completely inattentive driver pulling a u-turn out of a Stop sign to nab a carpark they'd just gone past (so sorry, didn't see you). With a young family at home that was the end of my cycling habit. Thankfully now wfh full time for the moment.
This link I think came from another poster a while back.
https://www.theguardian.com/cities/2015/may/05/amsterdam-bicycle-capita…
"In the 1960s, Dutch cities were increasingly in thrall to motorists, with the car seen as the transport of the future. It took the intolerable toll of child traffic deaths – and fierce activism – to turn Amsterdam into the cycling nirvana of today"
This came up on my YouTube recommended feed the other day. A good watch explaining the net positives of how they have designed their cities to encourage cycling. It's a win-win, because where it's quicker to bike people will bike and those who need to drive enjoy less congestion.
Would take a massive culture shift in NZ, where merely dropping the speed limit to 30 kph in a CBD incites outrage.
Even on my most car avoidance rides around the north shore in Ak I have at least one close call every say 2nd day.
The risks are huge. Dare I say it, the risks are even higher for electric bikes which go faster.
PS a while ago I have got cracked ribs from someone who did not stop at a stop sign right in front of me. I also had a guy who was deliberately getting closer and closer to me when I was riding past some parked cars. He actually wanted payback from me holding him up slightly when I was staying 1m away from the car doors further up the road. In the end I slowly braked down to 0km/hr so he had to pass me.
Yes this is my point - humans dramatically overestimate the big dramatic risks (being run over by a truck) over the long term less visible risks (dying early from heart disease).
For example, people are scared of swimming in the sea because of shark attacks, when drowning is by far a bigger risk and causes orders of magnitude more deaths. But shark attacks are so dramatic and they always make the news, so we fear them...
I don't blame you though, and an obvious reaction should be to improve our cycling infrastructure and culture so that those big dramatic consequences become less and less common
I think it's honestly lack of infrastructure. Cultural change would follow if it was viable (safe and convenient). Right now most 'cycle lanes' are just thin strips of paint on busy roads. You have to watch out for traffic hitting you on the right and being 'doored' by cars on the left. To assess if a cycle lane is well-designed, ask yourself 'would you be comfortable with your young child cycling in it'. If the answer is 'no', then the design is unfit for purpose.
You're never going to get looks of people cycling if they feel like they're risking their lives each time they ride a bike.
I don't disagree that infrastructure is a big part of it. Perhaps we have a chicken and egg situation. Chch has done a lot of work on this and the new cycle ways do seem to be making a difference - my ride to work is now almost entirely off road except for a couple of quiet side streets. It's a shame that any funding that goes into this is shouted down as a waste of money by the very same people who complain about how bad the car traffic is...
As a keen cycling commuter I can tell you that cycling is not really an option for many people because:
-weather
-quality or lack of it on the roads I.e. bike paths have to be maintained, glass and stones swept away especially after rain. This is some the council ignores.
-kids pick ups.
-lack of facilities at work, including safe bike storage.
-general health I.e. not everyone is lucky enough to be able to bike.
I struggle to see how e-bikes are a solution because of cost and useful life. How long does the battery last etc. In my situation a car is cheaper.
Public transport is a joke, I often race a bus to work and have always beat it, not taking into account time wasted waiting, or walking from bus stop to work. So as much as I would love more people to get out of their cars I don’t see how it can happen.
> So as much as I would love more people to get out of their cars I don’t see how it can happen.
Well, we could just look to the many international examples of cities that have massively increased their active mode share and copy what they did? (which usually boils down to 'don't build streets that cater only to cars')
In Paris, it rains
In Paris, parents have children to transport
In Paris, buildings lack facilities at work
In Paris, there are disabled people who cannot cycle
Yet in Paris, more and more people are cycling
> EVs use low rolling resistance tyres
The biggest selling EVs like Telsa model 3 don't. They ship with Pilot Sport 4
Even the ones that do, it will be short lived, most people are not going to pay the premium when it comes time to replace.
Finally, this would be an advantage of low-rolling resistant tyres, not an advantage of EVs. Plenty of ICE cars ship with low rolling resistence tyres.
Nissan Leaf OEM tyres were definitely LRR.
The OE Michelin on a Tesla are actually a Tesla-specific design too, but I think that's more for noise reduction than rolling resistance (https://teslamotorsclub.com/tmc/threads/tyres-with-the-designation-to.1…)
Yeah it may be OEM tailored for acoustics, but the Pilot Sport 4 is a summer performance tyre, it's designed for grip, not rolling resistence, I very much doubt the tweaks they do for OEM will change the fundamental nature of the tyre design. EU efficiency rating is B, same as the regular PS4
A ridiculous assertion! From the article:
"(tyres produce)...300,000 tonnes of tyre rubber in the UK and US, just from cars and vans every year."
Let's put that in perspective: US vehicle CO2 emissions only: 5,981,000,000 tonnes per year. Or roughly 0.005% of CO2 emissions from the US. This doesn't include all the other noxious gasses produced by ICE vehicles.
Yeah, that's the problem we should be thinking about.
All passenger vehicles up to 3.5t pay the same RUCs, so no would be the answer. And even at 2.5t, a Tesla model X P100D is still a couple hundred kilos lighter than a toyota landbruiser.
Its hilarious hearing the same repetitive squawking points from the luddites.
Won't speak for anyone else but I'd be more than happy with that - as a Leaf owner I get free use of the roads and that seems a bit wrong.
I'm more than willing to contribute, although I'd prefer that to be via a higher registration cost rather than something I need to keep remembering to top up.
But, more importantly, I think people taking two tonnes of metal into the CBD everytime they go to work is absurd.
76 per cent of Aucklanders drive two tonnes of metal to work. Worse still, the average occupancy is 1.1-1.2 persons per private vehicle. Plus our fleet is one of the dirtiest in the West and is also increasingly getting heavier.
Now let's waste 5 years bickering over the most overpriced light rail system in the world that is, at best, within walking distance for a-sixth of Aucklanders from their homes.
Its no surprise most drive, the alternatives are just rubbish. 1.5hrs on Pubic Transport on three different buses, or maybe an hour 15 on a bike, vs 35mins door to door in a car, with aircon, stereo, etc.
You're not going to get me out of the car while the alternatives are complete rubbish. But AT doesn't seem interested in improving the public transport network, not out my way at least.
In the last 6 months all petrols have gone up by roughly 50%, allowing for the current tax rebate, whereas diesel has gone up 100%.
what is going on, we all know about price inelasticity of liquid fuels, but why diesel, is it the impact of EVs, is it the switch to public transport?
is it something to do with overseas demand, NZ demand?, how they crack the diesel out of the crude?, what happened to all the aviation fuel while planes were not flying, was that cracked into petrol? Has aviation got anything to do with the recent increases. Be good to know some of these answers.
I filled up 2 days ago and paid $2.589/litre for diesel. When RUC is added I'm effectively paying around $3.18/litre after 12c/litre discount (Farmlands cardholder).
Admittedly I haven't had to top up RUCs lately so I'm not currently taking advantage of the RUC reduction scheme.
And diesel is the basis of the economy:
Diesel to power the ships that bring us all our goods, diesel to power the trains and trucks that transport all the goods, diesel that powers the tractors and other heavy machinery that our primary industries and other productive enterprises are based on.....
Diesel has a different refining method, being distilled off at a higher temp of 250-300 degrees.
Late 2020, (so 18 Months ago?) I got some Diesel for 78c a litre.
Day before yesterday, here in Cromwell I paid $2.32.
So near triple.
I do work on price, main device is a Farmlands card.
Triple is ridiculous. And clearly of all those extra dollars only some is going to the oil field owner
What a day - Real Estate lobbyist / sympathiser / supporter crying foul
https://www.newshub.co.nz/home/money/2022/06/property-investor-laments-…
Fitz you are pretty triggered by this, bad weekend?
Your use of the word parasites is interesting, I will give you the benefit of the doubt and assume you know what it means, an investor has created an asset for others to use for a service fee. What part of this is parasitic in your view?
No they haven't lol. Sure in the rare case that an Investor has built a new dwelling, most just get their grubby little hands on an existing property title before the next generation of aspiring home owners have a chance to work enough hours in their life to save for the deposit.
No this is not mainly the case.
I am investor, I own 5 investment properties. I am the first title holder of 4 of those, buying off the plans (soon to take delivery of another). In an open market, that anyone who could afford to do could have done. The other I bought off the investor who was the first title holder.
By supporting the Developers, property investors are adding to the housing stock.
Some investors do buy existing housing stock that is true but that does not make them parasites, that was simply the most cost effective way to buy the asset. That tells you a lot about the cost of building.
Good work JustAnOpinion - I'm all for property investors building new properties and adding to housing supply. That is beneficial use of capital.
On the flipside I've been very much against relatively well off (at least from appearance in terms of clothing and vehicles...) investors in their 40's -60's at auctions outbidding young couples in their 20's and 30's (which I've witnessed many times the last 10 years) - especially for lower end homes that would be good starter properties for younger people. That has only been making inequality worse, creating a divided society, and part of the making of the conditions for financial and social instability.
Thank you, I was not trying to get support but trying to explain my view.
I agree this is a really critical point. The price of housing has been ridiculous for many years. I welcome this price crash on house prices, I really do, I have voted since 2017 consistently for parties I thought would do something about it. Now the global economy is doing the job for them.
Another group I really feel for are those who threw themselves into their first homes recently, in desperation for some I am sure and who are now going to get burned.
I have said it before but if we cannot regulate our markets (and it looks as though we can't) then I would support exceptional profit taxes on banking and foreign software services. I would use this money to forgive some of this debt.
I cannot say as my experience is simply my own. This is a quick analysis.
Investors make up ~40% of the market and this is relatively constant. (side note - Some investors do own a lot of housing at some leverage, I think these are the future bankrupts that will perhaps give FHB's a chance through mortgagee sales.)
https://www.rbnz.govt.nz/financial-stability/financial-stability-report…
There has also been a very significant increase of housing stock.
https://www.stats.govt.nz/information-releases/value-of-building-work-p…
So on that basis investors will be responsible for at least 40% of the new stock. I would say it is more given the fact that most of the building activity is in Auckland and that this market is heavy with purpose built investment developments.
So I guess that analysis supports that investors are still heavy participants in new building.
An investor who has built a new asset for the purpose of increasing housing supply has created an asset for others to use*
Not sure how investors competing against FHB and OO for a second hand anything could be considered “creating an asset”. There is a division of investors and there is a comment in the reddit thread linked to in the OP article which explains this quite well.
No, that is true when you are buying an existing house that is not creating an asset.
I have bought houses in the past (that I no longer hold) that I was not the first to own, but they were the best investment at that time. For people that cannot and will not ever have the financial means to own a home, a rental is critical. The creation of the service is important.
Your example above is good, buying off another investor.
Though in the market over the last 10 years or so the competing for providing this service, that is increased competition from investors, has contributed considerably to unsustainable prices.
I do agree with your point in providing a service to some extent, and there are many investors who provide an excellent service in many residential “sub” markets too… units, apartments, people with disabilities etc however there are many in it to win it at any costs and particularly over the last 10 years it’s drawn the sentiment away from providing a service and towards providing yield/gains.
For the record I don’t think investors are parasitic, there have simply been too many failed attempts to provide good conditions for sustainable housing in nz. Or maybe just not enough attempts lol
I have a very similar history JAO, but I put another proviso on it. To be genuinely able to claim you are providing a 'service' it must be affordable. To charge exorbitant rents that require the support of an accommodation supplement is not 'affordable'.
I also believe people should always have the opportunity to choose; rent (as such there will always be the need for landlords) or buy. At the moment even with the recent retreat, i still believe that there is no choice, that too many are trapped into renting. To those ends i suggest we need comprehensive regulation of the market and landlords, something that most seem afraid of.
Murray, I hear you on affordability. It is a very real struggle. We currently have a tenant who has got themselves behind in rent. It is now thousands of dollars. Those thousands of dollars I have had to make up. This is also a real struggle.
People cannot "choose" to do things they cannot afford to do unfortunately. Regulation of the market is very difficult and has had some unintended negative consequences the few times it has been tried.
I've done a little research on market regulation, prompted by some previous discussions on this site. All international examples of rental housing regulation I was able to find failed because the focus was solely on rents. I indicated a 'comprehensive' regulation, meaning that this must go well beyond rents and look to regulating and 'managing' housing stocks available for rent, preventing market manipulation and land banking. Big ask, but serious consequences.
Here you go Ashley. (But yeh, it's just tall poppy syndrome.....)
https://www.stats.govt.nz/news/homeownership-rate-lowest-in-almost-70-y…
"Homeownership rates have fallen for all age groups since the early 1990s, but especially for those in their 20s and 30s"
"Households that rent spend, on average, a higher proportion of their income on housing costs than people living in owner-occupied homes."
"The pilot housing survey showed that rented homes were more likely to be smaller, older, and in need of major repair, and less likely to have double glazing than owned homes. However, there was no significant difference in insulation between owned and non-owned homes. Rented homes more frequently had problems with mould and damp than owned homes, which was consistent with the results of the 2018 GSS and 2018 Census.
People living in rented homes were also more likely to report problems with cold, and less likely to have efficient heating sources such as heat pumps and wood burners."
it’s behind our nasty tendency to attack those who have succeeded and revel in the misfortune of those who fall on hard times after a period of success
I would say that's pretty spot on as evidenced by the majority of comments on Interest, for example Fitz's comment above:
by Fitzgerald | 7th Jun 22, 8:42am
Oh, the poor widdle parasite 🥺
Rising interest rates are going to kick him so hard. And now it looks like the kickings might continue for years. Bahahahaha.
Could be worse....heads have been chopped off in the past when the well off abuse their position of power.
Now days if the poor throw some verbal abuse at the well off, the well off throw their toys and try to pull the victim card!
"Oh poor me, I've worked so hard to earn these paper capital gains on my asset portfolio and now these poor people think I'm a bad person!"
Haha its so laughable. The rich should enjoy their riches and tread carefully because history suggests that if they become arrogant in their position...those who are the real victims of the system eventually rebel with more than just nasty words.
I think it's a bit more complicated than that. It's not other people's success that causes resentment. It's when a large part of that success is not really earned, but has been gained as a direct result of government policies explicitly designed to benefit one group at the expense of another, and when the 'successful' person refuses to even acknowledge that this is the case. Church is also just flat out wrong about so many things, to the extent that it looks like he is being deliberately disingenuous. Take them one by one:
1. People who invest in property come from wealth
While there’s no doubt that the wealthy do invest in property – coming from wealth is by no means a prerequisite for getting started. That’s not to say that property investors don’t become wealthy, over time – but that’s as a result of their efforts – not the basis of them.
Wrong. The vast majority of the value uplift property investors have gained in recent times has had absolutely nothing to do with their efforts.
2. People who invest in property are from high-income households
The vast majority of property investors, in this country, are waged or salaried Kiwis who’ve kicked off from the same starting blocks as most of the rest of us. I bought my first investment property – a block of flats in Napier – when I barely had two coins to rub together and while the rules make things more difficult right now, there are still plenty of opportunities to get into the market.
Wrong. The opportunities a waged or salaried Kiwi who is now, say, 25 are vastly different that the opportunities someone Ashely Church's age had. This ignores the significant intergenerational issues around the housing market.
3. People who invest in property are well-educated
Lots of educated Kiwis invest in property – but again, that isn’t the basis of their success – and many thousands of others invest in the market without the benefit of having any form of formal education.
Sure, but this seems a very odd thing to say. I've never seen any evidence that leads me to believe this view is widespread.
4. People who invest in property are risk-takers
While no form of investment is completely without risk – property is very much at the lower end of that scale – which is why tens of thousands of Kiwis are involved in it.
This seems to miss the point. The reason property has been such a safe bet is because of government policies explicitly designed to make it so, which have had the net effect of protecting the wealth of asset owners at the direct expense of non-asset owners.
5. Property investors add nothing to the economy
Around 35% of Kiwis rent – a figure which has stayed remarkably consistent for most of the last 100 years – and the vast majority of these rentals are provided by the private sector. Anything which decreases private property investment transfers that obligation to the State – which is simply you and I, as taxpayers. Property Investors are huge contributors to the economy and have saved the nation tens of billions of dollars over the years
This is an incredibly misleading way to present the data. What happened was an increase in home ownership, followed by quite a large decline, especially amongst those trying to get a start in life (those under thirty). It's not clear why the 100-year average is more relevant here than the decline. It also misses the point that a decrease in private rentals does not simply transfer the obligation to provide rentals to the state - a decrease in private rentals could also mean an increase in owner-occupiers. It's also not clear at all that the net effect of more private rentals and fewer state houses is a 'saving' for the taxpayer, especially when you take into account wider effects of housing instability that happens in the private market and less so in state housing (i.e., kids moving school a lot).
Yes I feel a bit sorry for Ashely Church.....
Talebs turkey comes to mind. A character that is suffering in their paradigm with severe confirmation/recency bias....conditioned by their environment with no awareness that their experience isn't reflective of the bigger picture. But how can somebody have awareness of the bigger picture without direct experience of it? If house prices have double every 10 years of your adult life...of course you start to think this is 'reality'.
I do wonder if he's ever travelled to or talked to people who have been severely burnt by declining property markets, say from Spain, Japan, US, Ireland etc? I have and on many occasions, so I'm very aware that house prices don't just go up. As such I think I'm less likely to experience a taleb's turkey experience, at least from a sharp decline in property prices or other asset classes.
A GOOD KIWI YARN
2 versions ….. Two different morals.
OLD VERSION:
The ant works hard in the withering heat all summer long, building his house and laying up supplies for the winter. The grasshopper thinks the ant is a fool and laughs and dances and plays the summer away. Come winter, the ant is warm and well fed. The grasshopper has no food or shelter, so he dies out in the cold.
MORAL OF THE OLD STORY: Be responsible for yourself!
———————————————————————————-
MODERN VERSION: 2022
The ant works hard in the withering heat and the rain all summer long,
Building his house and laying up supplies for the winter the grasshopper thinks the ant is a fool and laughs and dances and plays the summer away. Come winter, the shivering grasshopper calls a press conference and demands to know why the ant should be allowed to be warm and well fed while he is cold and starving.
TV 1 & 3 News, Sky News, and Seven Sharp show up to provide pictures of the shivering grasshopper next to a video of the ant in his comfortable home with a table filled with food.
The country is stunned by the sharp contrast. How can this be, that in a country of such wealth, this poor grasshopper is allowed to suffer so?
Sue Bradford appears on Seven Sharp with the grasshopper and everybody cries.
The Green Party stages a demonstration in front of the ant’s house where the news stations film the group singing, ‘We shall overcome’.
Green Party Leader James Shaw condemns the ant and blames John Key, Rob Muldoon, Roger Douglas, Capitalism and Global warming for the grasshopper’s plight.
John Minto exclaims in an interview with TV News that the ant has gotten rich off the back of the grasshopper, and both call for an immediate tax hike on the ant to make him pay his fair share.
Finally, to gain votes to win an election, the Government drafts the Economic Equity & Anti-Grasshopper Act retroactive to the beginning of the summer.
The ant is fined for failing to consider how his hard work and preparation has affected the Grasshoppers Mana; and, having nothing left to pay his retroactive taxes, his home is confiscated under the Government Land Repo Act and given to the grasshopper.
The story ends as we see the grasshopper and his free-loading friends finishing up the last bits of the ant’s food while the government confiscates the house he is in; which, as you may recall, just happens to be the ant’s old house, which has crumbled around them because the grasshopper doesn’t maintain it.
The ant has disappeared to Australia, never to be seen again.
The grasshopper is found dead in a drugs related incident. And the house, now abandoned, is taken over by a gang of Homeboy spiders who terrorise the once prosperous and peaceful neighbourhood with drive by shootings and the like.
MORAL OF THE STORY: Be careful how you vote in 2023
Cool story, bro. But I think you missed the moral of the story: The ant apparently lives in a place where you can just appropriate land and then do what you like with it, seeing as there was no indication that the ant had bought the land he was building his house on. Appropriating is apparently fine when he does it, but seemingly not when the government does it. He also appears to live in a place where there are only two types of people - people who work hard and are able to secure enough resources from that work to support themselves, and those who don't and aren't. There appear to be no people who have caring responsibilities that aren't compensated for in the marketplace, no people with disabilities or other health issues, no people who work very hard but are nonetheless struggling due to any number of things outside their control, like the death of a spouse or a massive increase in housing costs due to incompetent governments. So, the real MORAL OF THE STORY: Parables are cute and all, but the tell us next to nothing about real world cases.
Some very good points Al. Just add to the last one that he completely ignores the accommodation supplement which is in effect a subsidy of landlords. So while he might argue that there being less state houses, the obligation has transferred and increased through the accommodation supplement.
He is conflating genuine investors, ie ten plus year ownership and where the income is almost fully derived from yield, with speculators who are short-term owners and almost all income is derived from capital growth.
The high amount of capital growth issue is a system failing, but Church thinks even a long-term rental investor has a universal right to get both high capital growth and a high yield.
This type of return only happens in dysfunctional non-sustainable systems, and we are entering the non-sustainable part.
David, please provide evidence to back up your claim that Australia's income taxes are higher than ours.
I will concede that due to differing tax brackets there are some points on the income curve where your marginal tax rate would be higher. BUT as I said yesterday your total tax paid is lower in Australia all the way from zero to beyond 100k per year.
It would also be great if you could show us how to not pay tax on fuel.
I took the fuel tax comment to highlight that the sell price for fuel between the US and NZ is about the same -actually kind of surprising for me as I assumed Americans got petrol cheaper given they source a lot of their own. These are all things to consider.
Like Aussie tax, if you're a kiwi looking to move there, you need to consider that you're paying about the same tax in Aussie as NZ, but for arguably less value as you don't get the same public services in Australia if you're not a citizen.
Until you become a citizen. There's a pathway now. So you're betting that the much higher wages, lower living costs, cheaper food and electronics and all the other things that you basically have to swear off in NZ like the odd night out if you even want to keep your head above water are worth it until you can get citizenship.
Unfortunately there's a lot of Kiwis who are damned if they do and damned if they don't here, won't get much assistance either way no matter where they are, and can't face the crushing grind of being people-farmed by unimaginative landlords who piss and moan when someone suggests that maybe letting one group of people hoard all the affordable housing may not have been a good thing.
Oh look, it's the same tedious reckons that I never ask for and that you repeatedly offer in a pathetic bid to paper over the fact that formerly-comfortable middle-class professions are no longer enough to make ends meet, like it proves something, other than lazy property investors having screwed the scrum at the expense of middle NZ.
GV I missed the legislation that requires all affordable housing to be hoarded by landlords, and that annoys as I could have made a killing.
If people want to travel to new countries and start again then they should. I have done exactly that three times and moved cities within countries another three times. It is not impossible and frankly not that hard.
Great for those who can. Were I younger and without health issues or a family, I probably would have done it long ago.
But for those who aren't in that situation? They don't stop existing because they can't do the thing you personally think they should. Their situation still sucks.
There seems to be an expectation that young Kiwis just constantly taking one for the team over and over again, and then the same people will wring their hands and wonder why our mental health stats are in the toilet and our suicide rates are through the roof.
Golly. I wonder.
Agreed that moving with health issues and family commitments makes it harder, I have only done three of those moves with my family and it is more difficult.
It has to be done with more planning, much more saving and more confidence in your new situation being better than your current one. But it is still possible, its possible for those on a social benefit so it is possible.
If you work on an income of $250k, someone in Australia will pay roughly 10k per year more than in New Zealand.
Which is contradictory of the recent shrieks and wails claiming that our tax system has become more punitive by the introduction of the 39% rate for above $180k. Australia's is 45%.
... if you're working part time , a student with some weekend work , in Australia you earn up to $A 18000 tax free ... in NZ you pay $ 2170 tax on $NZ 18000 ... and , take home $ 15830 ...
Quite a difference , at Struggle Street level ... where the majority of citizens reside ...
... yes ... and , as most of us are somewhere in the $ 45000 to $ 70000 zone , we'd be far better off under Ozzie tax rates ...
I recall David Cunliffe as leader of NZ Labour being undermined by his own party , as well as the Gnats ... because he wanted a tax free threshold up to $ 6000 ....
.... the ridiculous counter argument was that rich folks on over $ 100 000 would get it too ... OMG ... how dumb to deny lower income earners tax relief , because wealthier people would get it too
It's almost if the lucky country has a fantastically positive trade balance of $9,314 million (seasonally adjusted) per year and does not need to tax it's people as much??
https://www.dfat.gov.au/trade/resources/trade-statistics/australias-tra…
Well said GB. I believe that those living on this Struggle Street need as much assistance as we can give. I know at the present time everyone is crying out for more, but at some point those who are trying to work, rather than simply taking a benefit, should be given assistance in the form of a tax break.
You don't evaluate a tax system by just comparing the top rate and declare that the end of the discussion. Where do must people fall on a marginal rate curve when it comes to average earnings? How far do those earnings go in terms of covering day-to-day living costs? Are you asking people to cover more costs with lower net-incomes? That's where the tax discussion needs to be.
The people on $250K should generally not be considered as representative of anything other than people on $250K.
You're right. And I'm not declaring it end of discussion, my comment was taking the piss. I 100% agree with the Australian tax brackets. Everyone needs their first $50k before their second.
What I would propose is tax brackets that are indexed once a year to the median wage. For example:
- 0 - 35% of median wage = tax free.
- 35.01% to 75% = 20%,
- 75.1% to 100% = 30%.
- Flat tax of 35% above median wage.
If the Gnats had their thinking caps on , they'd promise to adjust the lower tax brackets ... giving tax relief to low & middle income workers ... but leave the upper levels where Labour placed them
... a boon for lower income earners , without the usual criticism that a worker gets just a proverbial block of cheese tax cut , whereas Luxon gets $ 16000 ...
It's going very well! Have completed CON101 to 4 and CQS101. Now doing CQS102. Leaves the CON's (5-9) and then the DQS strand to go. Only doing 1 course per trimester for life balance. TTAF ends in December but by then I should only have 5 or 6 to go if I decide to sneak one in on a monthly intake.
I'm already an estimator in the civil infrastructure space so my study is not to get a foot in the door per se, but can help open doors later on in my career.
I'm currently an Estimator for a Civil Infrastructure supplier (3 waters). Had a job lined up with a reputable group home builder a couple of months ago, perfect job to compliment the study but withdrew my application due to uncertainty in that space, was really gutted but I had to choose job security.
I found CON101 and 102 to be quite tedious with the Essay writing, thrown in the deep end especially when it comes to APA referencing (and keeping track of your references). It gets better and more practical (enjoyable) from there.
Have found the markers (Open Polytechnic) to be quite pedantic in CON102. i.e. "missing final pleasantry" because I ended a mock letter to an unsuccessful tenderer with "regards, NZDAN". I assume they want something like "I look forward to dealing with you in future".
If David had said the top tax rate is higher in Oz that would be fine, but he didn't.
Only 2 per cent of those required to pay tax earned more than $211,365. Only 3 per cent earned more than $188,667.
Other Australians earn nothing like what you think. If you're on $59,538, you're typical
Source:
https://www.abc.net.au/news/2021-06-09/typical-australian-wage-less-tha…
Playing with those tax calculators some more I found the crossover point is $127,000, so if you're in the top 7% or so of income earners income tax is higher in Oz than NZ, which is not at all what David keeps telling us.
At the 2021 "typical" annual income of $59,538 Ozzies pay $701 less tax.
https://au.talent.com/tax-calculator?salary=127000&from=year®ion=Aus…
https://nz.talent.com/tax-calculator?salary=127000&from=year®ion=New…
Just so we're clear, here are the Aussie tax brackets.
$0 – $18,200 0%
$18,201 – $45,000 19%
$45,001 – $120,000 32.5%
$120,001 – $180,000 37%
$180,001 and over 45%
Note that they do have a Capital Gains Tax. However, your average working income earner is undoubtedly better off. There is also tax relief for retirement savings that counteracts some of the 45% rate for higher income earners.
Nat-Gas Prices Surge as Hot U.S. Temps to Boost Power Demand for Air-Conditioning
July Nymex natural gas (NGN22) on Monday closed up +0.799 (+9.37%).
So, we have payrolls; we have inflation; and we have missiles. The missing link for markets is how these actually join up, as opposed to ‘here is headline A’; ‘here is headline B and C’, etc.
If the West is going to win this geoeconomic struggle, it will have to involve supply chains: they must move nearer. Indeed, as the appropriately-titled SupplyChainBrain blog notes in an op-ed, “Over the next 12-18 months, companies will be witnessing an avalanche in slow motion. Even as the pressure of cargo and vessel backflow begins to ease, there’s no turning it around. And, as it runs its course, it will continue to alter the geopolitical and market landscape in ways both predictable and unknown.… companies that lack the insight and agility to avoid the worst of it are those most likely to be buried.” That might be surprisingly good for payrolls going forwards.
If the West is going to win this geoeconomic struggle, it will have to involve rates: they must move higher. They *cannot* be used as tool to stimulate aggregate demand when aggregate supply is deliberately choked off by geopolitical rivals, as we are accustomed to in more normal times. They *cannot* be used to push up asset prices to compensate for a lack of pay for most workers, as we pretend we are not doing in new normal times. The Fed *cannot* pretend it is in control of shadow banking and Eurodollar markets that are funding commodity-price speculation, as it does all the time. That all won’t be good for payrolls going forwards.
Markets still don’t seem to really grasp this. Some participants see the recent shift back towards ‘fiscal and monetary policy’ just drives up inflation if the supply is not there. Well done. Some also see there is a geopolitical clash underway (far, far away, and ‘hopefully over soon’). A prize to them too. However, they both refuse to join the dots that the West cannot enjoy its flimsy festering fat fiat fiesta forever. Link
High interest rates might be here to stay, but so, it appears is the pain of increasing prices. The goods and services that are actually driving up the cost of living (according to the HLCPI) are petrol, interest payments on mortgages, rent, local govt rates, food, meals out, property maintenance and insurance. Most of these key drivers have increased in price considerably in the last few months. I would expect the HLCPI to report another 7% year-on-year increase in the cost of living for the second quarter with interest rates being responsible for 1 - 2 percentage points of that increase.
I know people on here are well-informed - but at some point the public are going to start to question why economists think that the solution to the cost of living crisis is to make people poorer.
There's also an emerging narrative where it's argued we have to keep wage increases as low as possible, lest we end up in a wage-price spiral.
I would contend that after accommodation AND living costs blew out without the needle really moving much at all, that's not really your average worker's problem. Yet people are seriously suggesting they just cop having their net incomes devalued by double-digit percentage points a year. "Just take another one for the team" is not the cerebral show-stopper that some thought-leaders seem to think it is.
Just pay your staff more. I promise it won't hurt as much as it you think it will.
Indeed - every week the earnings data comes out and shows that wage increases are trending below CPI and HLCPI. This literally means that wages cannot be driving price increases - they are lagging not pushing. Yet, economic commentators are still warning about 'wage / price' spirals.
So many global south countries have been pushed by the IMF into dollarised debt, and into food insecurity by agricultural subsidies in Euro / US / Russia. They are now facing a perfect storm of a strengthening dollar, higher debt repayments, and rising prices of critical goods priced in dollars. This year will see the return of the food riots in a big way.
And keeping rates pinned far below inflation will re-ignite the already insane housing bubble as those with capital (or just collateral) pile in, further exacerbating the feudalistic tendency in our economy.
Anyway, I know you're a skeptic on the ability of interest rates to move inflation. Maybe Mr Orr should run an experiment - make the next OCR change a 50bp cut, and see what happens to inflation via the $NZ. I think it's a terrible idea, but I'd accept it as an experiment in the interests of science. (Hasn't worked very well for Turkey, mind, but of course we're not Turkey...)
I am more than a skeptic! I actually think Mr Orr has no intention of hiking rates much more - RBNZ are letting the threat of higher rates, and the higher mortgage rates coming online as a result of that threat, to do all the heavy lifting on suppressing house prices and reducing demand.
If I was to recommend an experiment, I would leave rates at around 2% but offer discounted rates for investment in good stuff like green infrastructure, social housing etc - through a state investment bank. I would also use a state investment bank to offer a 3.5% fixed-rate for the full-term mortgage for owner-occupiers. Letting commercial banks make billions in profit from our housing disaster is economic negligence.
This is why we needed DTI's in place as interest rates were aggressively dropped, GFC through to now. We've given excessive amounts of debt to people who don't deserve it, and as Sam B points out above, its resulted in a severe misallocation of capital into unproductive/non value added investment that is going to be a drag on the economy going forward.
'Mr Orr has no intention of hiking rates much more ' RBNZ is praying their threat removes the need to execute, as Europe are praying the war resolves itself quickly and they can get back to buying energy from Russia.
Unfortunately reserve banks are at the mercy of external events and will need to follow more than lead
Yes I agree....just like Powell was praying that his 'transitory' experiment would pay off because he knew that raising rates wasn't an option given the amount of debt in the US system....which they created in order to 'stimulate' the economy.
Same again...the central banks are praying that the threat will be enough to reduce demand....its going to be a real hoot if that doesn't work and like the 1980's, rates have to be raised to crazy levels to reduce demand and cool things down.
The US has quite different monetary policy channels - their mortgages are almost all fixed rate for term (30 years), and Govt debt is also almost all fixed rate (it is in NZ too). So, in the US, it is the cost of new credit that changes (mostly affecting businesses looking to expand), whereas in NZ, it is existing households debts that carry the bigger impact (e.g. on over $300bn of mortgages!) Another reason why NZ following the Fed is such a dumb strategy.
Yea Yea. I appreciate that this one is Straya but we need one of these too
https://www.youtube.com/watch?v=vuWAG9pr1rA&t=387s
that'll open up some worm cans....
I would be surprised if the results were any different in NZ. There is little to be done about it, I think it is one of the drivers for the depression, inflation in food and services being the main one.
How long is the interesting question, how long will the depression last?
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