Here's our summary of key economic events overnight that affect New Zealand, with news markets are struggling to make sense of a global economy buffeted by many unusual forces.
First, Russia has formalised its shutdown of oil and gas supplies to Europe and that is diving a scramble to activate other sources.
Then in the US, Apple and Google say that they will slow their hiring intentions, signals that are more 'news' than 'substance', but ones that are reverberating in markets. Microsoft is making job adjustments too, but plans a new hiring increase.
And US home builders are glum, seeing demand leak away as house prices have to rise on rising costs, and buyers afraid of higher mortgage interest rates. This is despite new home sales running ahead of pre-pandemic levels - just not at the unusual level they enjoyed during the pandemic.
Canada's June housing starts came in slightly better than expected but slightly less than for May. And they were -1.6% lower than year ago levels.
In China, the city of Beijing is issuing NZ$25 bln of helicopter 'coupons' to try and lure diners back to restaurants. Beijing is just one of 20 cities attempting the restart move.
These are necessary because of a sharp turn to risk-off consumer sentiment. Banks have been told to limit trading in gold as customers rush for the safe haven.
And staying in China, it is easy to draw apocalyptic conclusions from the regional bank failures in Henan Province. But it turns out there are others going bad too, the most recent in Inner Mongolia. A series of failures could create a chain reaction that would be hard to stop, especially as their big banks are also highly leveraged, and their local government is heavily in debt. China has faced down these sorts of threats before, but the balances at risk are much higher now and harder to control - harder when the economy is misfiring. Respected observer/critic Minxin Pei says a debt reckoning might be imminent, one that will have global repercussions. Let's hope not.
Singapore delivered better than expected export results for June with a +9.0% gain over year-ago levels.
Here's something you don't see every day. A listed company posted a profit of $200 mln in 2021, and will post a profit of $3 bln in 2022, a more than 10x rise. The company is Whitehaven Coal (WHC) on the ASX. Record high prices and limited global supply for its product has seen its share price rise from US$2.12 a year ago to $5.90 today. To be fair, their share price was higher in 2011, but it seems to be countering the ESG pressures, making those who counter-invested at the start of the ESG moves win outsized gains.
The States want in. Queensland has already instituted a windfall profits 'royalty' on such miners. NSW is now considering the same.
The UST 10yr yield starts today at 2.96% and up +3 bps from this time yesterday. The UST 2-10 rate curve is less inverted today, now at -18 bps and their 1-5 curve is also less inverted at -4 bps. Their 30 day-10yr curve is now at +103 bps and steeper. The Australian ten year bond is up +6 bps at 3.53%. The China Govt ten year bond is down -1 bp at 2.80%. And the New Zealand Govt ten year will start today also little-changed at 3.70%.
On Wall Street, the S&P500 started the week strongly but then fell sharply in early afternoon trade to be down -0.4% so far in the Monday session trade. Overnight, European markets were generally positive, all up almost +1.0%. Yesterday Tokyo ended up +0.5% to start their week. Hong Kong was up +2.7% and Shanghai was up +1.6%. The ASX200 ended its Monday session up +1.2% and the NZX50 was up +0.4%.
The price of gold will open today at US$1711/oz which is +US$2 firmer than this time yesterday.
And oil prices are up +US$3.50/bbl at just over US$98.50/bbl in the US, while the international Brent price is up even more at just over US$102.50/bbl.
The Kiwi dollar will open today back down to yesterday's level at 61.6 USc after a temporary spurt higher on the CPI news. Against the Australian dollar we are down to 90.3 AUc. Against the euro we are also down at 60.7 euro cents. That means our TWI-5 starts today at just under 70.6.
The bitcoin price rose from this time yesterday by +4.5% to US$22,033 and a one-month high. Volatility over the past 24 hours however has been very high at just under +/-4.8%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
Daily exchange rates
Select chart tabs
123 Comments
Painter,speaking of religion,be careful who you vote for...Scotty doesn't believe in Govt,he believes God has a plan for him.Funnily enough he didn't talk so much about this when he was campaigning...sound familiar? Luxon says his faith is personal, not a political agenda....maybe not.
https://www.stuff.co.nz/world/australia/300640270/dont-trust-in-governm…
excerpts;
In a sermon to Perth’s Victory Life Centre, the Pentecostal church run by controversial former Australian tennis champion Margaret Court, Morrison encouraged the congregation to put their faith in God rather than the government.
“We trust in Him. We don’t trust in governments. We don’t trust in United Nations, thank goodness,” Morrison said in the Sunday sermon.
“We don’t trust in all of these things, fine as they might be and as important as the role that they play. Believe me, I’ve worked in it, and they are important.
“But as someone who’s been in it, if you are putting your faith in those things, like I put my faith in the Lord, you are making a mistake. Firstly, they are fallible. I’m so glad we have a bigger hope.”
“Do you believe that if you lose an election that God still loves you and has a plan for you?” I do. Because I still believe in miracles,” he said to applause from churchgoers.
For the majority of the sermon, he talked about anxiety, which he defined as everyday worries that the “oil of God” could assuage.
“All of this anxiousness, all of this anxiety ... all of this feeling about the bills that are pouring in, all of this feeling about the anxiety, and then the oil of God, the ointment of God, comes on this situation and releases you, if you will have it, and receive His gift,” he said.
Succumbing to anxiety was “Satan’s plan”, he said.
“We cannot allow these anxieties to deny us that. That’s not His plan. That’s Satan’s plan.”
Crypto owners need to realise it's something out of nothing. For you to make a dollar means someone else lost a dollar. Sure if you got in early you are a millionaire but you did that on other people loosing money. If everyone tried to cash out now the price would crash to zero because the money doesn't actually exist. It's the greatest Ponzi ever created and that's the only respect I have for it, absolutely brilliant.
Crypto owners need to realise it's something out of nothing. For you to make a dollar means someone else lost a dollar. Sure if you got in early you are a millionaire but you did that on other people loosing money. If everyone tried to cash out now the price would crash to zero because the money doesn't actually exist. It's the greatest Ponzi ever created and that's the only respect I have for it, absolutely brilliant.
These opinions are a dime a dozen and sound like sour grapes to me. If you don't understand a digital asset and cannot understand how its market price has behaved, it doesn't make it a 'ponzi'.
Well it aint legal tender and it isnt tangible, so therefore its a faith based swap system.
5000 crypto token systems created merely out of ideas, worshiped by their followers for being "rare", "stable" & "decentralized"
Anyone with half a brain can see where this is going to end...
I cashed out at something like $2,500 to $3,000. Average buy-in at the bottom (or so) is closer to $1100. Can't complain with that.
You did what you had to do Wolfie. I was buying in closer to USD100 but also buying in at $4k. Not selling and adding to the sack.
Cathie Wood and AAK's price target of $147k is still mind boggling. Arthur Hayes says he wouldn't be surprised if we have $10k by the end of 2022.
Giving a bit away on the NZD front already today. Ah well, time to import more of that inflation that's apparently nobody's fault despite there being a literal target window agreed between the Govt and RBNZ, with there yet to be any consequences for missing it by a couple of hundred percent or so.
Bollocks. I't time we were above such partisan pathetic-ness.
All political Parties in NZ, are on the wrong track. As is all the media, to wit DC's comment this morning:
'a debt reckoning might be imminent, one that will have global repercussions. Let's hope not.'
There was ALWAYS going to be a reconciliation between fiat-issued debt growth, and the reducing materials and energy left on this finite planet. Those graphs were gong to cross, inexorably.
Hope. Grrrrrr. At this late stage, still not investigating, still optimism-biasing. Even as Germany - and the remaining EU - swelters towards a winter of discontented masses. Tainter was right; the collapse phase sees silence from commentators. Maybe they're too busy surviving. Pity we didn't do better this time; this is the first - and last possible - time we can run this experiment globally.
But raise your pathetic game, RP. National have even less answers.
One day we might see his predictions come true. But without saying WHEN it's going to happen then most people won't care to make any changes. And I suspect no timeline is given because they have been inaccurate in the past. To be fair to pdk he did say 2023 when pressed on this a year or two ago. We shall see.
I mean, it's impossible to predict an exact day for this kind of thing and I doubt there will ever be a mass 'eureka' moment where people realize this is a actually a physical problem which is manifesting economically (initially at least). I agree with PDK that the crux is that the resource base is declining in quality and the cheap energy which fueled the 20th century growth is well in decline.
I've personally always envisioned the 'limits to growth' would play out as a slow grind downwards in 'standards of living' where every year the cost of essentials would increase more than people's income. From what I've seen over the last 10 years, the economic conditions seem consistent with this theme. I suspect we'll have a few more abrupt steps down in living standard along the way (we likely have just had one with this 'transient inflation') but for the most part the decline of societies historically has been a slow and grinding affair, that only seems obvious and quick when viewed in posterity.
Seven-house-corporate-man-Luxon will be gone before the next election. He hasnt got a clue qnd the polls are already slipping for him.
Winston all the way for me - just because he has some common sense and stength of personality to keep jacinda in line until someone better eventually takes over at national or a smaller party sorts it.
Tend to agree. 2017 an overhanging black cloud for many voters daresay. Those disillusioned with Labour view his role in putting them in power as unforgivable. Particularly as WP himself often highlights their incompetence. Sure National gave him many negative sticking points but even so that’s expected in politics, couldn’t say it was novel territory for him, either side of the coin.
Chloe is a career politician who understands her voter base very well indeed. They want her to be bullish on climate change and take no prisoners and in the green party, she is a stand out. The Greens have melded with Labour at the moment and this must be disheartening to those who would vote green and I agree with the other posters Chloe is the answer to that and the sooner the better.
I agree. I am a centrist, but not averse to hugging the odd tree. Thought I would be floating between Labour and National, but with the state the world is in I am considering a vote for the Greens. Chloe is really impressive, I think she over reached on the cannabis legislation (should have just gone for decriminalisation) but her work on alcohol advertising is admirable. She must be one of the most intelligent and articulate MPs we have, and she won her own seat rather than relying on the list.
The bulk of NZ's issues are the result of leaving the OCR on the floor for months while everyone watched house prices rocket, after emergency cuts and dropping LVRs for everyone, including investors.
Now we have expensive houses and huge interest rate hikes needed to rein in inflation. They've baked in a lose-lose situation for many Kiwis.
I'm not revising anything. Everyone should have been cutting costs and squirelling nuts for the last 24 months. We've actually been fortunate to have such a large amount of foreshadowing of this, the timing has been the only grey area.
There's very few global exceptions to what's going on. Sometimes in life it's better to reach an acceptance on how things are than to expend mental brainfarts trying to create a bogeyman. "Worst government in living memory" doesn't mean much if your knowledge of global current affairs is limited to a daily diet of Newstalk ZB grizzlefest.
Anyone is welcome to present a case for how a government has managed this scenario with precision and perfection.
Yes. Press is letting our govt off the hook on the basis they copied everyone else. We wouldnt even let our kids off with that nonsense.
Especially as our lockdown was more severe, handouts bigger, ocr drop greater and immigration floodgates greater than anyone else.
I'm not saying governments shouldn't be beyond scrutiny, I'm questioning the very foundations of your assumptions. Countries that didn't embark on lowering rates also are taking the inflationary hits (or worse).
I don't really have a bone in it either way, but watching all sorts of entities public and private struggle dealing with the post covid environment, I can see it's more something to get through, rather than think if we zigged when we shouldve zagged that things would be materially different.
I'm questioning the very foundations of your assumptions
Allow me to question yours: Do you think the fact other countries had huge outbreaks, deaths and shutdowns compared to ours could be why they are having problems, whereas we have managed to give ourselves the same issues by leaving the OCR on the floor for far too long? Don't mistake the fact that everyone is struggling with it for the root cause being the same.
Allow me to put it this way: Why, after our (supposed) game-changing Covid response with fewer deaths and widespread devastation, did we end up the same boat as everyone else?
Saying "Everyone else has issues so it makes sense we do too" is a great argument if you want to stick your fingers in your ears and never objectively assess whether anything we did here ended up making life more difficult for ourselves.
We ended up in the same boat because:
a) we're tied into the same global market
b) despite the relative lower death rate in NZ, the trading environment for a business in this period is one marked with shortages and disruption
Like, I'm sure low rates haven't helped, but we are screwed either way. You're wanting to argue we'd be less screwed? Perhaps, but you'd still be fairly unhappy at the cost of living increases you'd be receiving regardless.
People would be a lot better placed to weather spiking interest rates to battle that overseas inflation if the government hadn't spiked house prices and loaded even more debt into a system they were fumbling to deal with in the first place while the finance minister and RBNZ governor wrote letters to each other.
But instead now we have the insane housing debt AND the high interest rates. I'm not just going to turn a blind-eye to the bit that's entirely self-inflicted because the other bit was probably always going to happen.
With fewer deaths and widespread devastation is total bullocks. New Zealand's heinous lockdown only delayed the inevitable and now we get to pay for the Covid scam. Your game changing Covid response just delayed the recession we are due.
You perhaps should stop reading the corporate-government sponsored media that give grants to their lackey scientists, yielding their desired beliefs. As I continue to say 'It is easy to fool someone, it is harder to convince someone they have been fooled'.
I agree that the RB and government were too late to act on the housing bubble, but at least they did act in the end. However, 7 house Luxon is promising to reverse these changes and get the whole ponzi up and running again. National have no answers to inflation. Promising tax cuts and removing Labours’ housing changes will just add fuel to the fire.
Aligning tax brackets with inflation that is spiking through the roof and destroying real income isn't a tax cut, it's basic tax administration.
It's only a tax cut because people keep repeating it over and over again because Nats bad, but they'll climb on board when Labour turn around and cynically offer it after years of higher tax receipts and shooting it down at every turn.
Inflation hurts the poor more than the rich as a greater part of their spending is non-discretionary. The way National propose to alter the bands will put more money in the pockets of the better off. It will be of little benefit to those on low incomes. The policies put forward by Luxon and Willis demonstrate that National don't really care about the average kiwi family. Their policies protect the well off and multiple property owning class.
Axing the top tax band is rubbish, I agree, but remember that if people want the people who earn more to pay more then adjusting the brackets for the same uniform inflation amount would mean the people who pay more get more back.
What you're talking about is tax reform, which again, isn't something our lazy governments have felt the need to do as the inflationary components have made surpluses possible and let them crow about their fiscal management - which is more a product of circumstance than competence, as we are now finding out the hard way.
Labour have been disappointing but I believe that it would be even worse for the poor under National. We are finally seeing both house prices and rents falling due to Labour's changes. National would undo this. Labour have bought in healthy homes, removed tax deductibility and introduced the CCFA which have all helped. They also introduced free school lunches for the poorest and discounted public transport and fuel. They do need to do more, particularly on education and policing.
Citation needed. Bill English's social investment approach was maturing, we had far fewer in motels and we were going to see tax brackets aligned with inflation for the first time in years. All that went out the window. Labour went on and on about our most vulnerable and then refuted the premise when many poverty indicators kept going up or only walked back within the margin of error, as well as effectively increasing tax for middle-income earners. The CCFA was indefensibly poor, and as usual with Labour, totally avoidable if they'd followed the official advice, which they seem to only do when it's telling them what they want to hear.
And let's not forget the bait-and-switch of Kiwibuild, Light Rail, the Foreign Buyer Ban that wasn't, etc. At the end of the day, there's only so many town hall resets people can stomach before they cotton on that you're just full of ****.
The well off and multiple property owning class pay a very disproportionate amount of tax, reducing that allows them to re-invest in productive enterprises. Poor people are workers not investors. That is not saying that are less valuable to society in real terms with contributions as valuable as any to the economy but their ability to invest and grow the economy is not there. If you want to grow the economy (and by extension the tax base) then you want to allow wealthy people to reinvest.
Not sure what your point is? Just taking your example, as an investor I invest in more properties (I have one being built due in Oct), this employs a number of builders, architects, concrete companies, building supply companies and various local government employees to govern things. Once it is built I will pay rates, tax on the rent, pay body corporate fees (to be paid on maintenance). The net gain to the economy of my being able to do that is significant.
Well done you,most appear to buy their 3 beddy fibro shack in Clendon spend no money on it and wait for the capital gain...or maybe capital loss if they bought recently.
Until the last few years,not many houses were being built,we merely borrowed more money from foreign banks to buy existing houses off each other,negatively gearing them,claiming tax rebates,increasing rents on an asset that hasn't changed in any way except home mortgage value.The net gain to the Australian banking industry has been huge...the NZ economy,not so much.
Last year we consented ~45,000 homes (https://www.stats.govt.nz/news/annual-number-of-new-homes-consented-up-…) and have a look at the graph, we have been building over 30,000 homes a year since 2017. Poor people (and this government) do not build houses.
Well done Labour,great building numbers since they have been in power....none of which detracts from my point around existing houses being ratcheted up with increasing mortgages making ozzie banks rich.
I find your language around 'poor people' a little condescending,plenty of ordinary joe bloes build/buy new houses,don't come over all philanthropic that it is only your 'class' that build for the good of the nation.
Poor people are workers not investors... Wow. If you want to grow an economy you produce more.
So lets punish the workers, entrepreneurs, innovators, confiscate their gains through taxation and redistribute the gains to the FIRE sector (Investors), the non-working human parasites that feed off a productive economy while producing nothing to it.
Property owning class do not re-invest in productive enterprises, owning a bunch of rentals in Auckland is not 'productivity'.
From the National Party Policy pages...I am happy for my $1043 to stay in the pot to help others.I think raising the minimum wage does a lot more for low income earners than $112 per year. Remember,not all people at the lower end are "bottom feeders" some are like my kids,studying at Uni,working hard at retail etc to get ahead.Labour increasing the minimum wage over the last few years is meaningful. They have increased "dollars per hour" rather than the insulting $2.15 p/week below.
Impact on taxpayers
Income
Annual tax saving
$45,000 $112
$55,000 $800
$75,000 $950
$78,100 + $1,043
Raising the minimum wage by 7% will just keep it aligned to inflation. We would have to believe that inflation is not transitory tho lol.
Just a note on tax. 56% of our population (2015) earn under $70k. That segment pay -34% of the tax (more is transferred to them than taken in tax WFF etc). 5% of our population earn over $200k and that segment pays 37% of the tax.
I am not that fussed on the "savings" of giving yet more transfers to those who are already getting 34% more in transfers than they are paying in tax.
I wonder, is it the fault of the "poor" workers, an inequitable tax system that taxes earned income more than unearned income, or regulations at the wrong end of the market?
Remove WFF etc and the market will have to find the new equilibrium lol.
Are the 5% also more likely to have a higher share of tax free gains? And still be in a better position to get further ahead after they've paid a larger portion of tax?
Ask any Aussie who isn't a greenie and they will tell you exactly what isn't being done to prevent fires. I know you were not being literal but there was a few chances to prevent the situation we have now. I feel the reserve bank is no more than a puppet of govt these days.
Yes it would be but I can't see it happening. Unlike supposedly free markets (lol I know) the CCP just tells their banks to keep trading and provides some relief funding until certain failed administrators can be sent for retraining and new ones sent to remedy the situation.
Germany hasn't been supporting the Euro, they have been manipulating it for years to the benefit of their high-value, export-led economy. Germany uses the EU and the ECB to keep the southern European countries in a kind of servitude - like peasants working in the fields to provide Germany with cheap stuff.
The seven members of the original EEC chartered self sustainability as the principal objective. Yet there are now twenty seven odd members virtually dependent on Russian energy, Chinese manufacturing and United States defence and/or armaments. Now of course the borders might flow with much greater freedom but those three major issues are rather a gigantic renunciation then, in terms of the original intentions.
I re-entered into the stock and equity markets in early May. Very gradual and small holdings mind you, nothing crazy. And fairly conservative for each. Crypto - heavily weighted in favour of bitcoin, some ETH and tiny alt holdings. US equities - conservative funds and value / consumer staple stocks.
For the first time the crypto portfolio is beating the equity portfolio - down 0.8% and 5% respectively.
Whilst we are a capitalist society money will flow into investments that offer the best ROi without being morally outrageous.
Governments role should be to adjust settings (laws tax etc) to make the ROI better for people with money to invest in industries that improve NZ situation over the short-medium-long term.. at the moment they have just encouraged people to invest in property causing a massive bubble.
Reserve banks should be responsible for economic stability and stable currency in short medium and long term instead they have also caused a massive asset bubble and contributed to imported and local inflation.
Productive economy to me is a bit of an outdated term. We should aim to have an a balanced, innovative export led economy that has multiple export markets (more customers than china) and products (not all our eggs in agriculture), we should create innovative and competitive products to export, encourage innovation in product development, attract innovative companies and workers. And we should focus on growing local talent (better education) and getting the next generation of poor people eductaed. Of course we should work to have a decent healthcare system and have affordable housing (to attract the right people and work towards climate change leadership)
Buying selling and renting houses at ever increasing prices, and importing cheap labour for agriculture and tourism is not smart economic strategy. Our current strategy is short term and outdated and i dont accept the excuse that its been tried we failed and its too hard.. we just need to try again and try harder.
This is just a fun side hobby to get some long term investments in place. Besides, I would have thought that at least investing into the equity markets has some productivity? What do you recommend, start a local cafe?
I do have lots of other productive ventures (not to mention a job) - more so once my term deposits expire later this year.
Why are foreigners such bad bond investors? Because they aren't bond investors even if they hold trillions of Treasuries and the like. What everyone gets wrong about why overseas institutions buy and sell their USTs (w/ @MetreSteven) and why it matters. Link
When I predicted in 2018 that a major recession and house price crash would occur in 2022-2023, I thought its origin would probably be in China. I didn’t predict the pandemic, which has ultimately been the cause of this crisis, I thought it would probably be a credit crisis in China. It might ultimately be a combination of the two.
Ah so you mean a GLOBAL credit crisis, be interesting to see how Europe goes here with Germany's gas issues, italy's lack of productivity and huge debt loading..... lets not mention the USA position, although they could one day build back better in infrastructure.....
Instead of Price Stability: Now the #Euro will become the Lira - and the #ECB will finally become a bad bank. https://welt.de/wirtschaft/article239975115/Jetzt-wird-der-Euro-zur-Lira-und-die-EZB-endgueltig-zur-Bad-Bank.html?cid=socialmedia.twitter.shared.web via @welt
And?
At that time the war hadn't started, which has changed the economic landscape hugely, especially with regard to inflation and a more aggressive OCR path. The acknowledgement of the *possibility* of small increases was predicated on the RBNZ stopping hiking by mid 2022 and even potentially reversing that path.
House prices will probably fall more than 10% this calendar year, sure. In late 2021 I recognised a price fall of 10-20% in 2022 being nearly as likely as 5-10%, and I outlined scenarios rather than a firm prediction.
House prices will probably fall more than 10% this calendar year, sure. In late 2021 I recognised a price fall of 10-20% in 2022 being nearly as likely as 5-10%, and I outlined scenarios rather than a firm prediction.
Sounds like you've been brainwashed by RBNZ Mouse
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.