Breakfast briefing; Markets struggle with negative economic anecdotes

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Europe scrambles for gas supplies; US talks itself down; China rolls out local boosts, eyes on bank stress; coal shines; UST 10yr 2.96%; gold and oil up; NZ$1 = 61.6 USc; TWI-5 = 70.6

19th Jul 22, 7:19am by David Chaston

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 ».

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123 Comments

by Brock Landers | 19th Jul 22, 7:29am 1658172580

Ethereum 🚀

by JustAnOpinion | 19th Jul 22, 7:51am 1658173906

Perhaps it will be useful there?

by Brock Landers | 19th Jul 22, 7:55am 1658174109

Why wouldn't it be?

by Pa1nter | 19th Jul 22, 8:15am 1658175347

Its sort of like religion.

Catholicism is clearly nonsense. But this Scientology, it's the real deal. Let's follow that one instead.

by Brock Landers | 19th Jul 22, 9:04am 1658178263

There's a lot of innovation happening in the decentralized finance space.

It's more interesting than watching paint dry. At least to those with a functioning brain.

by theglc | 19th Jul 22, 10:34am 1658183663

"At least to those with a functioning brain"

Dont you mean functioning "belief system"

by Pa1nter | 19th Jul 22, 11:39am 1658187547

If finding new ways to transfer value digitally gives you a woodie then more power to you, but it sounds like solving a problem that doesn't exist.

by Brock Landers | 19th Jul 22, 2:22pm 1658197362

Cool story.

Let's chat again when you improve your understanding of DeFi.

by vman | 19th Jul 22, 10:30am 1658183419

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.”

by Whatwillhappen | 19th Jul 22, 8:55am 1658177759

Good, because it's down 55% on when I bought any.

by BigOldWeapon | 19th Jul 22, 9:40am 1658180431

Good time to start dollar-cost averaging and bringing your average buy price down.

by Carlos67 | 19th Jul 22, 9:46am 1658180796

LOL

by Baywatch | 19th Jul 22, 11:34am 1658187283

Tell us again when BTC is going to zero again?

by lonewolfnz | 19th Jul 22, 9:58am 1658181529

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.

by Carlos67 | 19th Jul 22, 10:18am 1658182699

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.

by J.C. | 19th Jul 22, 10:33am 1658183608

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'.

by theglc | 19th Jul 22, 10:46am 1658184383

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...

by vman | 19th Jul 22, 11:12am 1658185920

And then there is NFT's...a picture of a monkey generated on a computor..what could go wrong?

by J.C. | 19th Jul 22, 11:25am 1658186736

Well it aint legal tender and it isnt tangible, so therefore its a faith based swap system.

That's entirely irrelevant to Ethereum.

by KH | 19th Jul 22, 3:44pm 1658202268

JC. You call it "sour grapes" That's easy.

But can you actually refute that - "for somebody to win, somebody loses" .

Give it a go.

by Dick Mortensen | 19th Jul 22, 12:04pm 1658189095

Incorrect. The greatest Ponzi scheme ever created was Central Banks. Crypto's are just copycats.

by J.C. | 19th Jul 22, 12:22pm 1658190146

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.

by lonewolfnz | 19th Jul 22, 10:55am 1658184912

Yeah my total return was +1000% in the end over four years. You can always search my name here for all the comments and remarks people made about me - its quite funny in hindsight.

by Carlos67 | 19th Jul 22, 1:10pm 1658193041

Good on you. You got lucky at the end of the day just the same as those that bought houses apparently, just born at the right time according to many on here so must all be pure luck.

by J.C. | 19th Jul 22, 2:54pm 1658199244

Buying low and selling high seems like a good strategy to me. If there's any luck involved, accept it for what it is.

by sit23 | 19th Jul 22, 3:00pm 1658199647

You just found bigger fools, Wolf. If it is all you said it is, why would you sell out? This Cathy person says $147000. Why didn't you stay in? Is it because, like us, you don't trust it?Hhhhmmmmm.

by J.C. | 19th Jul 22, 3:36pm 1658201810

Sure. Wolfie can make his own decisions. And if he doesn't believe in ETH, best not to own it. It's all part of decision making when thinking about risk reward scenarios.

by GV 27 | 19th Jul 22, 7:35am 1658172904

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.

by Eschaton | 19th Jul 22, 7:44am 1658173444

"The vast majority of money in the economy is created by commercial banks when they make new loans"

by Rex Pat | 19th Jul 22, 8:05am 1658174707

The pump is primed by imprudent Government spending. End of. Ardern and Robertson must own their part in this.

by powerdownkiwi | 19th Jul 22, 8:25am 1658175951

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.

by Whatwillhappen | 19th Jul 22, 8:58am 1658177926

Hope. Grrrrrr.

It's interesting this word hope. In English it means wishing for something unexpected. In Greek, 'elpis' means 'confident expectation'.

Worlds apart those two definitions. I bet the Greeks don't use 'elpis' that much in finance.

by Grattaway | 19th Jul 22, 10:09am 1658182177

Must be annoying when EVERYBODY else is wrong and you are right

by Beanie | 19th Jul 22, 10:30am 1658183406

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.

by Plutocracy | 19th Jul 22, 10:46am 1658184383

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.

by OldSkoolEconomics | 19th Jul 22, 10:15am 1658182511

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.

by Beanie | 19th Jul 22, 10:33am 1658183587

I think there is a fair chance NZFirst won't exist come next election.

by Foxglove. | 19th Jul 22, 10:45am 1658184309

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.

by Beanie | 19th Jul 22, 11:04am 1658185457

I think Winnie is too old now, the better MPs he had have left the party, and the major funding is in court under scrutiny.

by Mountie | 19th Jul 22, 10:58am 1658185096

I agree Luxon will be gone. Winston is long gone. The person to watch in my opinion is Chloe Swarbrick. I rate her highly.

by Beanie | 19th Jul 22, 11:07am 1658185670

Yes, but Chloe needs a wingman to clean the Greens out of the people that make them unelectible to most voters.

by JustAnOpinion | 19th Jul 22, 12:32pm 1658190762

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.

by Foxglove. | 19th Jul 22, 12:50pm 1658191833

Seems like they are on track to lever James Shaw out. Party rules have been changed. Previously not possible to have two male co-leaders. Now possible to have two female co-leaders. Change the body to suit the tailor.

by JustAnOpinion | 19th Jul 22, 1:03pm 1658192627

Yes the news last night seemed to suggest that is not far away, I think she will be a clearer choice for voters. The whole co-leadership thing is another play to the voter base and apparently well received, making it two women will likely also please the voters.

by Waikatohome | 19th Jul 22, 5:53pm 1658210031

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.

by Dick Mortensen | 19th Jul 22, 12:07pm 1658189269

Privately owned commercial banks

by JustAnOpinion | 19th Jul 22, 7:48am 1658173722

Government is knocking it out of the park, hospitals, rest homes, policing, housing, is there any record they can't break??

by nktokyo | 19th Jul 22, 8:47am 1658177251

Record=industry

by Whatwillhappen | 19th Jul 22, 8:59am 1658177994

is there any record they can't break?

Um, the one when they say 'nine years of neglect'? Because it's already broken?

by Pa1nter | 19th Jul 22, 7:58am 1658174328

If external forces caused an explosion of forest fires, would we blame the fire service?

Actually, a decent chunk of people probably would.

by GV 27 | 19th Jul 22, 11:08am 1658185713

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.

by Pa1nter | 19th Jul 22, 8:05am 1658174759

We can see internationally a very similar inflationary story playing out among a wide range of central bank approaches.

So I have a level of scepticism that the story unfolding was going to be much different.

That's not to say it's not annoying.

by Rex Pat | 19th Jul 22, 8:09am 1658174977

Exactly.

by Pa1nter | 19th Jul 22, 8:13am 1658175195

March 2020, lots of flashing signs were pointing towards "this is going to be expensive".

Here we are.

by Rex Pat | 19th Jul 22, 8:21am 1658175704

Revisionists love T.I.N.A

In August, our household will receive the first of the COL payments and we will pocket $8,625 for a rebate on our new Tesla. Good to know someone thinks we deserve it.

by Pa1nter | 19th Jul 22, 8:43am 1658176990

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.

by GV 27 | 19th Jul 22, 8:50am 1658177414

So because other governments bollocksed up their responses too, we should abandon all scrutiny of ours? How convenient.

by OldSkoolEconomics | 19th Jul 22, 10:20am 1658182858

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.

by sparrow | 19th Jul 22, 11:29am 1658186968

No, but is there a better alternative that will do less harm. I don't believe so.

If National were to campaign on leaving the tax settings for residential investors as they are, I might consider them.

by Pa1nter | 19th Jul 22, 11:47am 1658188078

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.

by GV 27 | 19th Jul 22, 12:16pm 1658189787

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.

by Pa1nter | 19th Jul 22, 12:46pm 1658191601

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.

by GV 27 | 19th Jul 22, 1:31pm 1658194298

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.

by Dick Mortensen | 19th Jul 22, 1:22pm 1658193727

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'.

by Whatwillhappen | 19th Jul 22, 9:01am 1658178113

Which is analogous to the firefighters not having paid any attention to the weather forecasts and neglecting maintenance of their tenders and hoses, so they couldn't get the fire under control early

by Waikatohome | 19th Jul 22, 9:35am 1658180159

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.

by GV 27 | 19th Jul 22, 9:32am 1658179929

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.

by Waikatohome | 19th Jul 22, 9:42am 1658180566

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.

by GV 27 | 19th Jul 22, 9:46am 1658180806

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.

by Rex Pat | 19th Jul 22, 10:01am 1658181689

Tired trope. The worst PM and Government in living memory are here right now. How could it get any worse for the poor? When wealthy boomers in Devonport villas are pro Labour you know it’s not the working class getting the spoils.

by Waikatohome | 19th Jul 22, 10:23am 1658183004

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.

by GV 27 | 19th Jul 22, 11:14am 1658186056

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 ****.

by agnostium | 19th Jul 22, 10:46am 1658184418

Best PM and government in living memory

by JustAnOpinion | 19th Jul 22, 10:50am 1658184637

Absolutely, as I said knocking it out of the park!

by JustAnOpinion | 19th Jul 22, 11:11am 1658185882

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.

by vman | 19th Jul 22, 11:17am 1658186262

Jeez,in the past,most have just re-invested in more properties...

by JustAnOpinion | 19th Jul 22, 11:28am 1658186898

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.

by vman | 19th Jul 22, 11:46am 1658187969

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.

by JustAnOpinion | 19th Jul 22, 12:10pm 1658189446

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.

by vman | 19th Jul 22, 12:20pm 1658190013

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.

by JustAnOpinion | 19th Jul 22, 12:37pm 1658191057

Anyone building a house is not poor, you seem confused about what poor means.

Labour have been atrocious at building houses, the price of houses has never accelerated so fast in the history of NZ as it has under this government.

by Dick Mortensen | 19th Jul 22, 1:24pm 1658193842

Housing is consumption, not production.

by Dick Mortensen | 19th Jul 22, 12:43pm 1658191403

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'.

by JustAnOpinion | 19th Jul 22, 1:00pm 1658192411

Man so much wrong thinking here I don't know where to begin. Quite comprehensive.

by vman | 19th Jul 22, 10:18am 1658182697

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

by JustAnOpinion | 19th Jul 22, 11:04am 1658185455

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.

by GV 27 | 19th Jul 22, 11:15am 1658186134

Indeed, all the while blathering on with meaningless dribble about 'fair shares' while insisting people who don't pay any tax at all should pay even less. Madness.

by Nzdan | 19th Jul 22, 6:52pm 1658213539

So those people should just choose to be paid more?

by meh | 19th Jul 22, 3:10pm 1658200218

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?

by Nzdan | 19th Jul 22, 6:53pm 1658213613

The 5% probably take a much bigger slice of the pie from the "poor" workers than the 5% did in the past. And then they have the gall to complain that in taking a larger share of the pie they end up having to pay more tax as a result.

by willamonte | 19th Jul 22, 9:11am 1658178674

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.

by Grattaway | 19th Jul 22, 10:25am 1658183139

If you look at the RB board you will see people appointed for who they are or who they know rather than because of their skill set - so issues now entrenched

by JustAnOpinion | 19th Jul 22, 1:15pm 1658193319

I agree but to be honest is it even realistic to have a local view of the OCR? If we are in a tight band with the Fed then why not just make that the policy and be done with it?

by Uninterested | 19th Jul 22, 7:41am 1658173278

I think a debt reckoning would be a really good thing.

by JustAnOpinion | 19th Jul 22, 7:50am 1658173843

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.

by theberg | 19th Jul 22, 7:58am 1658174302

Sounds like the Euro is on that path, huge underlying debt issues. Germany has been supporting it, but now faces an energy crisis with the likelihood that Russian gas flows will not restart. This is serious.

by Pa1nter | 19th Jul 22, 7:59am 1658174397

And people wonder why the USD is so strong.

by OldSkoolEconomics | 19th Jul 22, 2:38pm 1658198289

Bang on. USA demonstrates that you dont have to very smart to have a good economy or currency.. just dont be as stupid as the rest.. lol (by rest i mean.. nz/germany/eu/uk/china -> all damaged their own situations)

Lol.

by Jonny.Foe | 19th Jul 22, 8:11am 1658175112

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.

by linklater01 | 19th Jul 22, 8:36am 1658176615

Jfoe,

Right on the money, but so few seem to understand this.

by Carlos67 | 19th Jul 22, 9:54am 1658181264

Sounds like how the rest of the world tried to treat China turns out they are having the last laugh.

by Dick Mortensen | 19th Jul 22, 1:31pm 1658194291

The globalist agenda? Or is that a conspiracy theory?

by Foxglove. | 19th Jul 22, 8:24am 1658175854

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.

by HouseMouse | 19th Jul 22, 10:56am 1658185013

Italy in big strife too.

by JustAnOpinion | 19th Jul 22, 11:06am 1658185595

"Perma-strife". What is interesting is the illusion that the debt could ever be repaid. This is so unlikely that if anyone would take my money on it not happening I would bet all I could.

by lonewolfnz | 19th Jul 22, 8:24am 1658175848

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.

by powerdownkiwi | 19th Jul 22, 8:27am 1658176064

Ever though about doing something productive?

No? Sad.

by nktokyo | 19th Jul 22, 8:50am 1658177457

What someone does with his cash is up to them.

What do you suggest, start a business? With this government??

by OldSkoolEconomics | 19th Jul 22, 2:53pm 1658199227

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.

by Whatwillhappen | 19th Jul 22, 9:07am 1658178427

From the tone of some of your posts, 'doing something productive' will just fly in the face of declining EROEI and is futile. Love to hear what you think 'doing something productive' looks like.

by Harvey W | 19th Jul 22, 2:10pm 1658196644

PDK probably wants him to 'do something productive' like drilling for oil in Taranaki say..

by The Person | 19th Jul 22, 2:26pm 1658197570

raising a few chickens i think.

by lonewolfnz | 19th Jul 22, 9:13am 1658178834

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.

by Dale Smith | 19th Jul 22, 10:11am 1658182292

Good question, but what is a productive investment that gives you a return that doesn't add to the depletion of resources?

by Dick Mortensen | 19th Jul 22, 1:35pm 1658194527

Growing any real food, from livestock to veges, to fruit, you know things we really need! Hell no that is work.

by Audaxes | 19th Jul 22, 9:19am 1658179184

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

by HouseMouse | 19th Jul 22, 9:05am 1658178358

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.

by IT GUY | 19th Jul 22, 9:45am 1658180705

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.....

by Audaxes | 19th Jul 22, 9:47am 1658180846

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

Link

by Beanie | 19th Jul 22, 10:46am 1658184374

Ummm...your 2022 prediction made January this year had "house prices dropping 5-10%, but wouldn't rule out a small increase".

by HouseMouse | 19th Jul 22, 11:07am 1658185637

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.

by J.C. | 19th Jul 22, 11:31am 1658187080

Sounds like you've been brainwashed by RBNZ Mouse

by The Person | 19th Jul 22, 2:30pm 1658197813

Why is the headline on russia 'formalising' it's gas shutdown not a link to the story?

The MSM carries no such stories. Anyone got a link?