Here's our summary of key economic events overnight that affect New Zealand, with news of more evidence inflation may be topping out.
But first, US mortgage applications fell -1.2% last week, a fifth consecutive decline as the base mortgage rate hit 6% for the first time since 2008. That is now nine weeks in the past twelve that they have fallen, suggesting their housing markets are in retrenchment mode. But that isn't coming with excess stress, it seems. Delinquency rates remain very low on housing loans. We are seeing declines, yes, but without stress.
American producer prices fell -0.1% in August from July and this was as expected. Year on year they are up +8.7% which was less than expected and less than the +9.8% rise in July and was the least it has risen in any month over the past year. There are definite signs here that the punchiness of price rises are easing. Maybe yesterday's CPI data wasn't the harbinger it seemed.
But concerns are mounting over the potential upward pressure on prices if a huge rail strike snarls supply chains and hurts economic activity.
In China, a new people's movement is underway. After going on a mortgage strike over undelivered housing, others are now rushing to repay their mortgages. As the property market slumps, the once sought-after leverage has turned into a burden. Now increasing numbers of borrowers are cashing up their "wealth management products" (essentially money market funds) to pay down the home loan. The drive is helped because those funds are now returning very meagre results. A disinvestment push like this won't help reinvigorate their economy. And it could be deflationary.
Japan reported machinery orders for July, and they were up strongly (just like the machine tool orders we noted yesterday for August). It was a rebound that wasn't expected, showing the company board rooms are still investing. These orders were up +5.3% from June and up +12.8% from year-ago levels.
In India, their widely watched wholesale price inflation rose by 12.4% in August. But this was less than July's 13.9% rise and less than the expected 13% rise. Food prices were also up 12.4% in this survey.
The annual inflation rate in the UK unexpectedly edged lower to 9.9% in August from 10.1% in July, which was the highest reading since 1982. Analysts had expected it to rise to a 10.2% rate. It was milk and cheese that is helping propel their costs higher. They need less restrictive tariff-protection policies for their farmers. But of course they won't do that and will suffer the own-goal while blaming others. Their food prices were up more than +13% in August.
In Sweden the ruling centre-left coalition has been beaten by a centre-right grouping in a razor-thin result. The centre-right only wins however because of a surge in support from a far-right anti-immigrant party which will be part of the new government. The new government may not be very stable. Failure to deal with rising gang violence undid the centre-left parties.
And staying in Europe, their General Court in Luxembourg has upheld an NZ$8.5 bln fine on Google for the way it used its Android operating system to favour Google Search.
In Australia, new home sales are still declining. They were down -13% in July. Now new data shows they are down another -1.6% in August. They have been falling all year from the peak in December 2021 and are down -28% since then
The UST 10yr yield starts today at 3.41% and little-changed from this time yesterday. The UST 2-10 rate curve is more inverted at -37 bps. Their 1-5 curve is also more inverted at -36 bps. But their 30 day-10yr curve has held at +94 bps. The Australian ten year bond is down -4 bps at 3.66%. The China Govt ten year bond is unchanged at 2.67%. But the New Zealand Govt ten year will start today at 4.03%, an +11 bps rise overnight.
Wall Street in its Wednesday trading down -0.2% on the S&P500 in late trade after being higher for most of the session. The Nasdaq is up. Overnight, European markets were all lower, ranging from -0.3% in Paris to -1.5% in London. Yesterday Tokyo ended down -2.5%. Hong Kong was down -0.8% and Shanghai were closed down-1.3%. The ASX200 ended its Wednesday session down -2.6% and the NZX50 ended down -0.9%.
The price of gold will open today at US$1697/oz and down another -US$7 from this time yesterday. But most other precious metals made some sort of recovery overnight.
And oil prices start today +US$1.50 higher at just under US$89/bbl in the US while the international Brent price is now just under US$94.50/bbl.
The Kiwi dollar will open today at just on 60.2 USc and little-changed from this time yesterday. Against the Australian dollar we are firmer than yesterday at 89.1 AUc. Against the euro we have remained lower at 60.2 euro cents. That all means our TWI-5 starts today at 69.8 and still at its two year low.
The bitcoin price is now at US$20,116 and another -3.0% fall from this time yesterday. Volatility over the past 24 hours has been moderate at just over +/- 2.3%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
Daily exchange rates
Select chart tabs
83 Comments
Their food prices were up more than +13% in August.
Ouch! The UK really needs to sort out its food security otherwise "there'll be trouble at mill" in the future...
My recollection is that despite (because of ?) all it's agricultural protection & subsidies, the UK still only produces about half it's own food, the rest is imported.
Last I heard, NZ exports about 5X our domestic food requirements.
But imports all the phosphate (and fuels) required for those outputs, so I wouldn't call NZ's food supply 'secure', from a security or inflationary perspective.
That's right and excessive use of those imported fertilisers destroying the environment is another issue. NZ croplands have the second-highest level of excess nitrogen per hectare in the OECD, just a tad below Netherlands.
Outside of the OECD, it is just a few Middle Eastern nations with harsh climates that beat us in this respect (Jordan, Saudi, Egypt, Iraq, etc.).
Let's have a source for that claim Advisor but even if it's true (which seems very unlikely) land being cropped in NZ is less than 5% of total area.
Let me google that for you:
https://ourworldindata.org/grapher/excess-nitrogen-per-hectare
Yes, the chart is there with no supporting references and only the following explanation (complete with spelling mistakes):
This data reprersents the nutrient balance of global croplands for nitrogen and phosphorous. It quantifies nutrient inputs to the crops across multiple sources – synthetic fertilizers, organic fertilizers such as manures, and nutrient fixation from legume crops.
Nutrient removal at harvest was estimated using nutrient density data for the dry fraction of harvested material. "Excess nutrients" is the difference between nutrient inputs and the amount harvested in crop material. This represents nutrients that are lost to the environment and can create ecological imbalances on ecosystems and in water bodies.
It's very unclear if they are measuring the yield from animal products. If you divide the amount of nitrogen applied in NZ by the limited amount of crops we produce, of course it will be astronomical.
Here he goes again.....never give up Mr Tony Alexander
https://www.oneroof.co.nz/news/tony-alexander-blink-and-you-miss-it-the…
Ask him, how many FHB can buy 1.4 or even 1.2 million house.
Wonder, what will be his take if the housing market does not change direction- this spring.
He has done other things, of course. All good groundwork for working alongside the Real Estate Industry?
(He) did a contract for the NSW Bureau of Crime Statistics and Research examining the prostitution industry in the state. This was a nice follow on to (his) work for the Alcoholic Liquor and Advisory Council in NZ looking at the economic cost of alcohol abuse in NZ.
Did you hear Ashley Church on ZB last weekend? He is still sticking to his advice that it is always a good time to buy. Tell that to a resident of Lower Hutt that purchased in Nov 2021. They have now lost 25% of their homes' value from peak and could also be in negative equity. Any financial product advertising comes with a disclaimer that there is risk. Why are these property "experts" allowed to get away with this one sided commentary and advice when it comes to housing investment?
The best time to start a business or buy a property was yesterday.
So long as they're not saying values never go down, or something along those lines, then statistically the advice works.
Within some limits that is correct. If you don't have to sell, and can continue to afford the mortgage payments you are reasonably secure. Take either of of those factors away and you can quickly be screwed. I have known people who could not afford to sell their homes after the crash in 1987, but life circumstances had backed them into a crack. Wasn't pleasant to watch.
But, when buying any asset it is always prudent to assess the market and decide what your own personal goals and risk tolerance is. Real Estate agents are by virtue of the profession bound to talk the market up, as their income depends on sales, and because of that vested interest are the last ones who should be listened to. Professional property investors are a close second in that ranking, and banks about third. But at the end of the day people must take responsibility for their own choices.
Well put.
Until you've seen grown men openly crying, as I did in London 30 odd years ago - a Chartered Surveyor; Real Estate agent in our terms, because their property assets have fallen; taking all they have built up over many years with them, then it's hard today to understand what that means.
Post GFC, an American friend of mine had to pay her ex-husband $45,000 to agree to keep the house and continue paying the mortgage on it, rather than selling it and putting both of them into bankruptcy due to negative equity. Nothing has ever been more important now than "happy wife, happy life". At least a death comes with life insurance.
happy wife, happy life
That's my motto. Works on so many levels, and prevents the ultimate wealth destroyer.
Better motto. Happy life, no wife.
Bollocks it is. Timing can make or break a business and buying a house at the wrong time can result in you losing 100s of 1000s of $$$$$$.
I watched two couples wait the whole year of 21 and some of 2020 thinking prices would go down, both tried at auctions and were consistent underbidders. Even if they buy now waiting will have cost them a few hundred thou. Both have great jobs and I was totally bewildered by the behaviour. They knew what and where they wanted and I would expect they were planning on settling down to raise a family. It was stupid to wait.
why will it have cost them? The reduced prices will save them much more, surely?
Prices are still not back to 2020 and that's a couple of years paying dead rent money. Even in Tauranga now rents in my street are about to hit $700 a week. Couple that with if you buy now there is no longer low interest rates, do the math. I'm still over $200K ahead from September 2020.
Prices haven't stopped dropping yet, in fact they seem to be accelerating in most places. Could be they made the right choice given they likely saved a hell of a lot more as well (possibly saved the 200k if they have decent jobs and budget well). Also the choice of properties available to them now is night and day compared to back then.
The areas they both wanted have not dropped at all.
No it wasn't, they just need to wait a little longer.
Low IQ platitudes are quite often incorrect.
As are vested-interest assumptions.
Advertising revenue
He is always so positive. Even telling everyone, half a year ago that interest rates would stay low for next few years. His advice is just one man's opinion.
That doesn't make much sense. Ashley is saying now is the time to buy, when prices are down.
Its obvious (with hindsight) that the peak in Nov 2021 was a bad time to buy. Maybe this isn't the bottom of the market but if you are patient any investor will be able to secure good deals and in a few years you'll be laughing to the bank (especially if National comes in)
Ashley tries to avoid talking about prlces falling, he adjusts his time horizon to always show a rise. When prices fell at the start of the year he talked up rises over the past 12 months. Now they have fallen on an annual basis he talks of the 5 year increase. When prices were rising he said “buy now” now they are falling he says “buy now”. He is a one trick pony.
This is Tony Alexander
Here he goes again.....never give up Mr Tony Alexander
If Tony Alexander's mailing list of the reckons of REAs is your source of truth and barometer of a market, good luck to you.
Keep half an eye on Fosun gents. It looks like the property contaigon is spreading to other Chinese mega corps, and that is a very very big one to fall.
Crazy to think Fosun’s $40B debt seems like a drop in the bucket when compared to Evergrand’s $300B.
It's like you keep waiting for one specific thing to go pop, but the world is moving in so many directions you don't know where to look first.
You are probably right. I requested a breakdown of exposure to my "conservative " kiwisaver fund from AMP. They supplied a list of over 3500 separate global companies, banks and investment funds. So it would appear that all ships go down with the tide.
I've moved my kiwisaver to a cash fund. But i dont even think that is safe anymore. Smh!
The unit price of the ASB cash fund has not gone -ve. (So far).
In theory the unit price should increase as term deposits increase.
The problem I have with it is that the unit price does not increase as much as term deposits do. Plus they charge a smallish fee!
So, when I become 65 I will immediately withdraw all my money from Kiwisaver and put the into term deposits myself. Hopefully by then term deposits are higher than inflation. Like they always used to be.
Yes, like they always used to be. My how the earlier values of prudence (saving) and patience (putting off desires until you can afford to fulfill them) that I was raised with have all but disappeared in this buy-now-pay-later ethos/times.
Can you be sure you will be allowed to withdraw your kiwisaver balance at 65 (or 67 etc) or will you be forced to convert it to an annuity so you can't avoid the means testing of national super. It's been done overseas. When you look at the demographics and do the maths change is inevitable. No government has given a cast iron guarantee on what the situation will be when you retire. Effectively they control your money.
I think a whole lot of boomers are going to lose their super in the next five years.
It will be high up on the IMF wish list of things.
Lots of people asking here how we are going to pay the debt back.
Means testing will be in.Landlord subsidies will be out.
Unlikely
Beanie - no, they don't. You 'money' is merely a proxy; a forward bet. The control on that, is whether there is anything available in the future, to cash your proxy in for. They have no idea about that.
You are talking inflation making your money worth less real stuff. You'll get no argument from me on that.
But I reckon if I want to keep my land for the next 30 years I will need to pay my rates..in money.
https://www.telegraph.co.uk/business/2022/09/14/ftse-100-markets-live-n…
The EU has laid out plans to raise €140bn (£121bn) by capping revenues for non-gas energy suppliers as part of a radical effort to halt the escalating crisis.
Ursula von der Leyen, European Commission President, said the funds would come from capping revenues for producers of low-cost power such as renewables and nuclear.
They have to be careful here, they are discouraging investment from energy companies... right when they need massive renewable/nuclear investment. Maybe they should earmark that for investment into new energy, but most likely they will just spend it on CoL payments. Are we at UBI yet?
Only for over 65s
I also find it fascinating that renewable energy is now low cost! Only about 20 years ago experts in the field were saying "Renewable energy will never be cost competitive with non renewable energy", I guess they are eating their words now.
And this is still while we subsidise fossil fuels to the tune of $6t USD a year.
But you need fossil fuels to produce non renewable energy. And lots of them. Investment should be geared towards harvesting these fossil fuels, that give us a higher standard of living, safer climate, better environment, higher life expectancy, higher incomes. improved water systems, the list is endless. Drill baby drill.
Finite resource, and the best has already gone up in smoke.
Stupid, baby, stupid.
The horse has already bolted - hence the political smoke-and-mirrors.
Abiotic? As fossil fuel use has increased, fossil fuel proven reserves have increased. The best has yet to be discovered. New technology will have humans drilling even deeper.
Certainly we have plenty of waste that needs tidied up, autos, plastic industry, unnecessary air travel, unsustainable housing, etc but true supply and demand (government get outta the way) will cure that.
Total effing bullsh-t.
As finite fossil energy has been burnt, real reserves have been commensurately depleted.
On your shonky belief, one could get more from a static bank account by withdrawing ever more from it.
Sheesh...
We need to use the remaining easily accesible fossil fuels to transition to renewables (not continue the status quo of using them to reduce consumption costs) AND reduce our overall energy usage.
No we need to use the remaining easily accessible fossil fuels to find even more accessible fossil fuels. Wind and solar will collapse way before fossil fuels, Germany is a prime example.
... clean green nuclear power , power to save the planet , and to return Greta's stolen childhood back to her ...
Nuclear , green hydrogen , solar : Sorted ! ... you're welcome , world ...
Is that you Profile?
... the South Island is the best placed spot in the world to produce phenomenal quantities of green hydrogen ... fan-blooming-tastic !
I can smell the hydrogen on your breath and it ant green
I can smell the hydrogen sulphide on your breath , and it's turned me green ...
Check again..the cause of the smell is coming out of your ar$$e
'GBH' used to make serious comments. Then he vanished - like Wolly.
Then he came back - mostly in low-traffic periods. And spouts waffle.
Interesting.
Safer climate? Better environment?
By any objective measure, both of these have got considerably worse, so you are talking total horsesh#t. And the rest of the stuff you talk about is reliant on these two, hence our current quandry. If you believe this stuff, you are talking nonsense as any cursory examination of scientific consensus would tell you.
In the last 80 years, as CO2 emissions have most rapidly escalated, the annual rate of climate-related deaths fell by 98%. (Ibid)
US air pollution has gone down despite increasing fossil fuel use. (US EPA national emissions data).
Safer climate, better environment all from increased use of fossil fuels. The scientific consensus of catastrophic climate change is nothing more than speculation by people who seem more focused on a political goal than on a clear, honest big picture communication. The predicted catastrophes of depletion, pollution and climate change have just not happened. All climate model's have been complete failures but that is not mentioned by the scientific consensus.
As [China's] property market slumps, the once sought-after leverage has turned into a burden. Now increasing numbers of borrowers are cashing up their "wealth management products" (essentially money market funds) to pay down the home loan. The drive is helped because those funds are now returning very meagre results. A disinvestment push like this won't help reinvigorate their economy. And it could be deflationary.
Just as borrowing and lending are inflationary, paying down debt (or defaulting on it) is deflationary. We're starting to see a lot more of the latter than the former lately, so I think you're right, inflation may be nearing it's peak.
The problem is that deflation is an even worse problem to have, especially when there's so much debt in the world. We might find ourselves jumping out of the frying pan and into the fire.
Deflation is only bad for asset holders and deficit spending governments. Great for us savers and wage earners, you know the real economy.
Watching the ETH merge to PoS rather than PoW today. Would really love to see that succeed.
I have more ETH now than BTC, so I hope so too.
I think you will be disappointed...reminds me of Y2K hype
We shall see. Yes it would make me a bit of money, but more than that I want to see a viable replacement for PoW, which I consider heinously wasteful.
I have more ETH now than BTC, so I hope so too.
Curious to know how much ETH you have. But it's a crass question. What is a better question is what kind of fall in value what make you panic: 10%, 30%, 50%, 90%?
PoS and PoW are new to me. A quick Google is not giving me reasonable answers. Point of sale and 'pow' in comic books. Hmmm. Can anyone expand the letters for people not versed in the crypto space. Thanks jo
Both are different blockchain protocols. The major diff is that PoW requires high energy consuming mining while PoS doesn't. The trade off is that PoW is far more secure. That does not mean PoS is not secure.
Failure to deal with rising gang violence undid the centre-left parties.
Seems Sweden and NZ share a problem. Will we see Mad Max 2 come to life in the late 2020's?
Fuel expensive, the uneducated under class, people living in cars. Where for art thou "Godzone"?
Yes, to my mind our rising cost-of-living, particularly where housing is concerned, breeds discontent which breeds crime which promotes mechanisms of collegiality and cooperation amongst the oppressed.
This government can no longer afford to provide ever-growing taxpayer subsidies to labour and accommodation markets.
We have to find a way out and all I can see is better regulation of those markets. They have addressed many of the inequities in the labour market via regulation (legislating out 'zero contracts'; introducing pay equity; strengthening collective bargaining, etc.) but they have failed miserably in the accommodation space. My suggestion is -
No Kate we need less government and no subsidies. Start by raising interest rates above the inflation rate to stop the speculation in housing consumption.
How does that allow for abolishing the accommodation supplement (subsidy)? It's costing the country more than $2billion per annum without factoring in the costs of emergency housing. This is (as the Salvation Army put it) no longer a housing crisis, but a housing catastrophe.
Do you recon raising interest rates will bring rents down?
Yes in the long run. Raise rates (above inflation), stop speculation in the housing consumption bubble, housing goes down as debt servicing costs increase. FHB will then be able to afford a bigger deposit, on a less expensive house. Demand for rentals will wane, the evil landlords will have no customers and we will live happily ever after.
Don't know we have the time for an in-the-long-run solution. Things are going to custard globally and we, like everyone, are going to have to make adjustments. Important issue is to keep social cohesion and hence, unrest down.
The rent for my Auckland apartment has descended from $525pw pre-covid to $425pw now. And I'm happy to have a tenant - zero rental income is the alternative. If you move the balance of regulations between landlord and tenant too far and it is back to AirBnB.
What's the RV on your apartment - I can the calculate its weekly rent maximum under the formula proposed.
Yes, AirBNB is always an alternative - for everyone, mind. And more administration involved. Some apartment complexes don't allow it for security reasons.
Latest Taxpayers Union Curia political poll has the Gnats & ACT on 63 seats , Labour & the Greens on 55 seats , plus 2 for the Maori Party ...
... Gnats got 37 % support , Labour 33 , ACT 12 & Greens 10 % ...
Ardern on 37 % preferred PM , Luxon 26 , Seymour 7 , & Swarbrick 3 % ... Chloe scored higher than her co-leaders Shaw & Davison .... go Chloe ! ... awesome ...
As a footnote , this poll occurred after the Gaurav Sharma debacle ... that mess would've cost the government some support ... very very poorly handled by the PM ...
Pointless these polls so far out...Sharma who?
... the government hierarchy will be deeply troubled by this poll ... wetting themselves with their 3 waters ... regardless how far out from the next election , the tide has turned against them ...
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.