Here's our summary of key economic events overnight that affect New Zealand, with news interest rate markets are betting on a change of tune by the US Fed.
But first up today, the OECD says global economic growth will likely slow to +2.2% pa in 2023 from +3.1% this year, as the world economy faces persistently high inflation levels, rising borrowing costs, energy supply shortages, and the ongoing war in Ukraine. Europe and the US are set to be the hardest hit, they say, with economic growth rates in both areas easing to only +0.5% from +3.3% and +1.8% respectively.
For New Zealand, they say real GDP growth is projected to slow to +2.1% this year but just +1.0% in 2023 and +1.2% in 2024. Private consumption will weaken with lower employment growth and rising mortgage-servicing costs, they say. Tighter credit conditions and weakening demand will weigh on business investment. Unemployment will increase and headline inflation will fall throughout the projection period. They reckon there is a risk that house prices fall more than assumed, accentuating the downturn. Most of this will come just as the election campaign gear up.
For Australia, they say their real GDP will grow by +4% in 2022, +1.9% in 2023 and +1.6% in 2024. Elevated inflation is eroding households’ purchasing power there. As growth slows, the tightness in their labour market is expected to subside. Inflationary pressures will diminish as those labour market cool and supply chain bottlenecks ease. A stronger than expected decline in house prices is a key risk to their growth outlook too.
And separately, the OECD says G20 merchandise trade fell for the first time in two years in value terms in Q3 2022, retreating from the recent high levels in Q2 2022. In current US dollars, exports and imports contracted by -1.3% and -1.1%, respectively, as global demand began to slow and most commodity prices receded from their peaks.
Meanwhile in the US, retail sales on a same-store basis improved in the latest survey for last week, but rising on a year-on-year basis only by the CPI rate.
Factory activity in the Richmond Fed's district remained quite subdued, changing little in October from the overall negative situation in September which was its lowest point since May 2020. New order levels were weakest, but commitments to capital spending remain very high, so firms do expect improvement. Wage rate gains remained unusually high.
There are no updates on the Chinese Covid situation today. But the restrictions are extended as the case numbers continue to rise.
As a side note to the Qatari football World Cup, we should note that most of the big sponsors are Chinese companies, the key construction companies were Chinese, and the Chinese support the anti-diversity stance of the hosts. The Chinese national team may not have qualified to play in the tournament, but the "Chinese national team" has definitely "qualified" to be one of the biggest "players" in this tournament.
We should also note that there is no resolution to the deadlocked Malaysian election.
In Europe, despite some improvement in both November and before that October, consumer confidence remains at a very low level in the EU, and well below its long-term average. Still the continuing improvement was unexpected in the broader war-facing circumstances.
Today of course, all eyes will be on the RBNZ, Adrian Orr, and their final Monetary Policy Review for 2022 at 2pm today (NZT). The decisions they announce have to carry them through to February 23, 2023. Local analysts are anticipating a +75 bps rise to 4.25%. Offshore analysts are generally anticipating another +50 bps rise to 4.00%. Remember, one year ago, the Official Cash Rate (OCR) was 0.50% and this was raised by +25 bps at that year-ago meeting. The current hiking cycle started on October 6, 2021 when the OCR had been 0.25% since the start of the pandemic in March 2020.
The UST 10yr yield starts today at 3.77% and down -5 bps from yesterday. The UST 2-10 rate curve is little-changed at -74 bps. And their 1-5 curve is more inverted at -84 bps. And their 30 day-10yr curve is also more inverted at -9 bps. The Australian ten year bond is down -2 bps at 3.57%. The China Govt ten year bond is little-changed at 2.85%. And the New Zealand Govt ten year will start today down -4 bps at 4.20%.
Wall Street has started its Tuesday session up +1.0% on the S&P500. Overnight, European markets all ended higher too, mostly by +0.5% although London was up more than +1%. Yesterday Tokyo ended its Tuesday session up +0.6%, Hong Kong ended down another -1.6% and Shanghai ended flat. The ASX200 ended up +0.6%, but the NZX50 posted a -0.2% dip.
The price of gold will open today up +US$7 at US$1742/oz.
And oil prices start today up +US$3/bbl from this time yesterday at just on US$82/bbl in the US while the international Brent price is just over US$89/bbl.
The Kiwi dollar will open today at 61.4 USc and and still oscillating +/-½c. Against the Australian dollar we are a tad higher at 92.6 AUc and a new high since April 2022. Against the euro we are up at 59.7 euro cents. That all means our TWI-5 starts today at 70.7 and up +30 bps.
The bitcoin price is now at US$16,171 and up +1.3% from this time yesterday and off a two year low. Volatility over the past 24 hours has stayed moderate at +/- 2.6%.
There will be no video version today, or podcast due to Covid.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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138 Comments
Watermelon policies see US diesel stocks at 40 year lows - is the "soft landing" a black swan alighting?
"Within the next few months, almost every region on the planet will face the danger of a diesel shortage at a time when supply crunches in nearly all the world’s energy markets have worsened inflation and stifled growth.
...meanwhile poorer countries that can’t afford skyrocketing prices are suffering.
Cash-strapped Sri Lanka is struggling to afford international fuel prices and is unable to secure enough supply, the country’s energy minister has said. Thailand has extended a tax cut on diesel in a bid to shield consumers from rising prices, with the government forecasting that the move will cost about $551 million in lost revenue. Vietnam is looking to enact emergency measures, including using its central bank to open up more loans for domestic fuel producers in order to boost supply."
https://www.bloomberg.com/news/articles/2022-11-22/shortage-looms-for-d…
To say the least, 2023 nationally & internationally, is looking ominous, disastrous actually. Let’s cancel it.
They already cancelled the Future.
Hang on. The Beehive Grinchs are still working on first cancelling Christmas.
Epidemiologist Michael Baker still mentions the potential for lockdowns ahead ... should new super aggressive variants of Covid19 emerge ...
... between his histrionics , the hysterical screeching of climate change activists , and Putin's war in Ukraine , I think we've permanently mentally scarred a generation of youngsters ... in the immortal words of Greta " you've stolen my childhood ! " ... they have , sadly ...
I think that attitudes like yours make our country weaker.
If lockdowns are needed, then lockdowns are needed. I can't think of anything stupider than the "Freedom!" brigade wiping us all out with some horrible infectious disease, just because they were too arrogant to listen to doctors and epidemiologists.
What is that saying about good times making weak men?
Go easy on him..his generation are working so hard to make the planet better for future generation's and to reverse the damage already inflicted?
He's indisputably correct about Michael Baker.
Sir?
China will be much stronger than western countries, if a really bad virus does get out.
This "Freedom!" brigade is just weakening us as a country. Undercutting our foundations.
The Hobbit brigade , locking us into our hidey holes is weakening us ...
... sunshine , fresh air , work , education & innovation strengthen us ...
Don't forget diet Gummy and avoidance of doctors and their pharmaceuticals.
And cell towers..
... brother Gummy is a doctor ... he gives the same advice ... if you weren't seriously ill before you went into a clinic or a ward , you'd likely be so soon after entering them ...
And ... once a GP gets you onto statins or somesuch , he'll never getcha off them ... big pharma loves GP's ...
No, Big Pharma has indoctrinated GP's.
... I am not " a generation " ... that artificial grouping of people into blocks serves no positive outcome ... and , I've been a " greenie " all my life ... seeking environmental cleanliness long before it became a mainstream idea ...
Your not "Woke" are you Gummy?
" You're " , not " your " .... and , no ...
Elderly folks needed to be locked away safely , not everyone ... particularly after vaccines were available ... strong people wished to remain free , to work , study , as usual ...
... the pulpit of truth has weakened people ... not strengthened them ... so , I totally reject your theory ... you're wrong ...
And if the next virus is worse?
Worse than what , define what you mean ...
"And if the next virus is worse?" Fitz, you totally remind me of my parents, they were scared of everything, they only ever saw risk danger, so they never bought a house or opened up a business. They were good parents but they missed out so much in life because of their negative, fearful attitude. Of course, as their son I ended up with the same traits, thanks to my wife and after reading numerous books, I managed to remove my shackles and I can tell you from experience, life is so much more fulfilling when you let go of your fears!
Yvil in the 1980s I did business in your old land with a wise and charming man who explained that he was a colonel in your militia, if that is the right terminology. After lunch he opened the trunk of his car and revealed an automatic weapon that to my untrained eye, looked exactly like what Al Pacino went down with in Scarface. Over lunch he had explained that Switzerland’s long history of being situated right in the middle of centuries of continental warfare had tended to make their society careful, conservative and rather defensive too. I enjoyed every moment I had in your country, amongst your people, you always knew where you were with them and I would have that any day over some of the extravagant antics some in newer nations can display.
Thanks for your post Foxglove, I'm very happy you enjoyed my home country and I hope you will be able to get back to Switzerland, some time.
I was amazed , sitting on the canal bank in Basel ... watching people drifting down the river after work ... they inner tube home ... fantastic city , home of Roger Federer ...
Zurich, for me. Deeply styled wealth , but carefully understated. Ambition was Lake Lucerne but never had enough time. Long haul travel these days regrettably, too much of a challenge.
... I've still got a kilo of Swiss coins ... must go back & spend them ...on a hot chocolate or a delicious bread beer ...
The initial NZ response was pretty good, although a little slow to lock down. We managed to expel a disease that was unknown, suspected to be highly deadly, and was ravaging the rest of the world. This should absolutely be our response to future similar threats - there are plenty of candidate for future pandemics that are significantly more dangerous than Covid turned out to be - fatality rates measured in the 10s of %, or affecting the young more than the old as in the Spanish Flu. We should always be ready to lock down once more when the situation calls for it.
There is an argument that further lockdowns were counter-productive and may have caused more damage than they prevented, but this is difficult to measure and was difficult to predict at the time. For me, the tipping point likely falls around the emergence of Omicron, when the disease became less dangerous and the vaccines became less effective and therefore less worth buying time for.
Agreed. A bit slow starting & then lax for instance, on isolating the rest homes but there was no alternative to the border closure & subsequent lockdown nationwide, the speed & sheer volume of international travel dictated that plus the vast degree of unknowns about the covid itself. Personally I believe the government sat on their hands far too long after that though but I also suspect that they had a great deal of difficulty in directing & controlling the MoH. And in that regard they were in a bit of a cleft stick, as to criticise or even explain those shortcomings and obstacles, would have undermined public confidence in the public health sector at the very least.
The response was hideous, as are 'lockdowns'. It was not a disease; it was a mild cold and is known. It was never deadly, unless you had numerous underlying conditions. The gene therapy (it is not a vaccine), was never effective, with Omicron or any other variant. The gene therapy never stopped transmission or infection. The tipping point will be the adverse reactions and future illnesses (cancers, blood clots, infections) due to this clinical trial on humans. And Big Pharma's clinical trial is still ongoing.
I sure hope you aren't in charge next time bodies start piling up overseas from a disease we don't understand yet.
Virus deniers are no less tedious now than they were in 2020. They just sound increasingly rabid and fulfil every logical fallacy available in their rants.
Thankfully, NZ had one of the best responses of any country in the world.
If you want to look at where delusional narratives and denial get you, have a look at the UK’s death rate, political instability and economic mayhem subsequent to the alt-right narrative that took hold there.
Good to hear from you again gnj. Haven’t forgotten either, the onslaught from the deniers at the time, nor the good rebuttals that you rallied, with the facts.
I am not a virus denier (or rabid), a mild cold virus only attacks the immune compromised. NZ had the worst response of any country as has been shown now by the increase in all cause deaths. Vaccination policy perhaps? Economic mayhem will play out in the next few years with the crazy government spending (Inflation) to ensue.
mfd, bodies never piled up overseas. The only bodies that piled up overseas were full of cancer, diabetes, obesity, heart problems, the very people that go to a doctor. Go figure.
Good grief, Fitzy, take your head out of the sand, and see the truth all around you. The Covid careerists are trying to flog a dead horse. My town apparently has ridiculous amounts of old, current, and new Covids in our sewage, but hardly anybody is reporting it any more. We are all just trying to get on with our lives. We are all over it. That.s how herd immunity works. In spite of the liars in the USA trying to change it's definition. Check the Covid cases in our freezing works and dairy factories which all remained working flat out all through the pandemic. No big deal. It turned out that there is a direct correlation between being fully paid if one has covid, and needing time off to recover from it. If one doesn't get paid, one keeps working, unless actually incapacitated. When my wife and I caught it, we just stayed in an AirBnb until negative, with a penguin living under our cottage. Then back to work. Check out the African continent's death rates over the last ten years. No changes. Imran said Pakistan was too poor to spend any money on Covid. No big deal. Their cricket team still tours. Their fanatical nutcases still blow people up. Their death rate, such as it can be measured, is still roughly the same as usual. Most of the world feels the same about covid. The US drugmakers and their lackeys are the only ones pushing the fear and dread barrow these days. Right. Off for a round of golf.
"We are all over it"
Apparently a side-effect is presuming the right to speak for everyone and projecting your own personal circumstances over an entire population.
If you are so concerned about a horrible infectious disease, then by all means lock your doors, close the windows, do not come into contact with the 'freedom brigade, get boosted (again). Western world doctors and epidemiologists are the problem, not the freedom brigade.
Wonderful post GBH, you're a breath of fresh air on Interest, don't change!
Thankyou , Mr Yvil 😊
You are correct GBH re some mentally scarred younger generation - recently a parent was heard asking "what do I tell my 20yr old who says they aren't going to look to reduce emissions or do any ghg mitigations, because all the messaging is telling them 'we are doomed anyway. So why bother?'
... I grew up in the era of " cold war " , " iron curtains " , " acid rain " , and the ever looming threat of nuclear war ...
We have repeated the same mistake in scaring a generation witless with climate change/Covid19/Putin-Ukraine ...
... mental health should be front & centre ...
"They already cancelled the Future"
Actually I'll admit it, I'm the one who got him removed.
Somebody owes you a beer for that. Remind me if we ever meet.
Thanks lol, I like beer ;-)
Yves must have been feeling threatened about only being the second most arrogant person on the forum.
Cemented as Top Dog. Well done!
Who is next though?
... me me me , sir ... bags it's me ...
Sorry ... what was the question again ?
Honest question, and regardless of whether you actually had him 'removed/cancelled/banned' or not, why did (would) you want to have him removed - what was wrong with his posts?
Every now and then Yvil gives us all a little lecture about how this site is supposed to be helping us all to make "better financial decisions."
Well, Future was objectively one of our best commentators, in terms of providing advice to make "better financial decisions."
He/she was warning people about 7% interest rates long before anyone else. He/she has provided better financial forecasting than the RBNZ, or any of the banks.
He/she was also being teased by Yvil just the other day for being "wrong" about 30% house price falls by Christmas. Perhaps Yvil was uncomfortable with the idea of Future still being around in February/March, when the Christmas results come out.
Thanks Fitz. I enjoyed the humour and constant 7% reminders from the prophet, 2022, MMXXII, the Future and all other Pseudonyms that were used. I guess I just wanted to know why someone would be proud of having someone removed from their posting ability, sounds like a pretty crap person to me. Almost like the ministry of misinformation that's creeping in everywhere and all this censorship of posts on msm.
Coming up with names like St Landers of Better Tomorrow and those other ones was absolute gold!
Fair question Hemi, here was his post in response to me predicting that the OCR was going o be raised by 0.75%
by Future | 20th Nov 22, 4:14pm
Oh your back Yvil. I guess you must be naked in that Padded White Room ? Or does that Straight Jacket come with Pants ?
Don't Bother Screaming at me either, it's sound Proof. Nice of that Nurse to comment for you though.
Fair enough. That sort of enough, is more than enough.
Nobody likes the truth
Oh, Future is really a thing of the Past? Curses, I liked his funny prophecy/scroll rubbish for light relief.
What will happen to the second scroll???
The poor countries could use the climate compensation monies coming from the likes of us to help them buy CO2 emitting fuel?
Yes Hamish. But only for government ministers Mercedes.
Diesel is making up an increasing part of our massive and worsening balance of payments. At what point will we be one of the nations struggling to purchase?
perhaps that explains the hydrogen programme?
Cue, enter pdk.
It'll all be getting sent overseas if Megan Woods has her way. So even if hydrogen was any kind of solution to our energy problems (hint: it's not), we've already decided that making money is more important.
Still helps the balance of trade - we export nice clean-burning Hydrogen and import nice dirty, particulate producing diesel. Sure, it'll lead to hundreds of deaths from poor air quality, but diesel engines are so much more macho.
If making money was important, this government would be helping our agricultural and tourism industries. But Cindy's agenda is more important. In fact it requires our moneymaking ability to be hobbled, for whatever reason can be found, and as many as possible of us have to be dependent on the government for our day to day living. In theory, this will then require us to support them at election time. It has been tried before, and it didn't work then, but that doesn't stop politicians trying the same failed policies over again.
And as for balance of trade, most of our government ministers wouldn't know what that was, let alone worry about it.
True. The number of projects run by Venture Taranaki with the aim of transforming the region’s economy to a clean energy powerhouse reached 66 in 2022, and the funding amount distributed in Taranaki to $1,120,390 since beginning in 2015.
Good until you find out Heineken is set to receive 3x that amount as a handout from the ETS funds to replace its “aged” coal boiler with an electric one, which many critics have argued would’ve still been the made preferred investment decision for the corporationeven without the levy payer handout.
Maybe this is where all the people who needlessly bought utes as a status symbol over the past few years start to see the folly of their ways.
A "ute" is a status symbol ?
Nah, a Renault SUV is a real status symbol.
For tradies, yes. Some of them will work 80-hour weeks at high rates and still end up bankrupt cos they can’t resist updating their Ranger every year…
Anyone buying a new anything Ford every year will go bankrupt.
The young fellow who's Ford Ranger ute was struck by lightening near Hokitika yesterday demonstrates an amazing degree of optimism , bless him ... he actually thought a Ford would get him to Golden Bay ... ... as if ! ...
To the type of person who used to buy a V8 Falcon or Commodore, yes. I personally would like a new ute for farm work, but I make do with an old 4WD station wagon for now because it can hold a lot in the back and I don't care if it gets scratched and dented.
The 4wd station wagon- the only flavour I have ever needed and will ever need.
Just wait until the all the full use work vehicles (utes) start to be taken back from employees, and the number of them up for sale goes through the roof. Then you'll really hear the uproar. Cost of 1990's utes are already unseen as people can still wind the kms back to avoid RUC's on top of the diesel price
And yet diesel prices have come off their recent peak...
https://www.indexmundi.com/commodities/?commodity=diesel&months=360
In Europe, despite some improvement in both November and before that October, consumer confidence remains at a very low level in the EU, and well below its long-term average.
‘Ordinary Germans are paying’: anti-war protests stretch across central Europe
Demonstrations bring together unlikely hardline bedfellows from left and right over impact of Ukraine conflict
They reckon there is a risk that house prices fall more than assumed, accentuating the downturn.
I reject the premise of that risk
You can’t. Someone much higher & exalted than you, is already wearing that phrase.
Andrew Little has trademarked " I'm baffled " when asked how he spent $ 2 billion on mental health since 2017 and we still have the same 608 beds for acutely unwell mental patients ...
608 beds then , 608 beds now ... $ 2 billion gone pooooof ...
He's not wrong though, he is most certainly baffled.
When agitated, which is not rare, he can tend to sort of fast mumble his words. I think he may actually have said “battered?”
He certainly looks punch-drunk the whole time so that might be right.
... if there were 609 beds , they could put him up for the night ...
It's catastrophically bad, $1,900 million spent, not a single additional bed and no idea where the money went! I suppose Little said "baffled" because it would have been bad taste to say "it's insane"
They know exactly where it went lol. This is our "media" doing what they do, which is so close to nothing to be indistinguishable. Pitiful industry to belong to, I would be out wearing a sandwich board on Queen St touting meth for kiddies long before I would stoop to work in NZ Media. (interest.co excepted of course).
$128m to Corrections.
$283m to Housing
$455m to Addiction support
$235m for Health Facilities to be upgraded
$66m for the Royal Commission into Historical Abuse
$95m for historical abuse settlements
$213m for cost increases
And eventually
$455m to invest in front line mental health care over 3 years.
... listen to his interview with Mike Hosking this morning , and you'll be baffled too ... and a little insane , that he spent $ 2 billion of our money , but can't really account for it ... mental health ? ... that's madness ...
Maybe Andrew is not OK, perhaps we can direct him to get some support from... oh, that's awkward.
Too many hands in the ETA jar.
Looking at the relationship between outcomes and money spent, this is clearly the worst government in NZ history, by far.
I watched the interview with Little this morning - it is really scary that such an important part of the public service (health) is in the hands of an incompetent muppet who is clearly and completely out of his depth, and whose only skill and experience lies with the unions.
I pray that I am not going to need any public health support for the foreseeable future.
.. self medicate if you need health support ... beer works for me ... survived Covid19 on it ... yeast , to tame the beast ...
Basil Brush Best British Bitter. As the alliteration suggests, distinctly, consistently “B” grade. Guaranteed to keep you on the move.
Ha, the OECD Elysium dwellers think the worst worldwide recession since the early 1980s will be mild. Just look at the US yield curve. They just say what they want you to believe.
Just stop falling for the bullshit. These people are manipulative and predatory.
It does not make sense if you look at the German and English situation at all, Chinas rates are almost half the US should see serious currency devaluations soon, Looks to me that they are managing inflation and shortages by lockdowns
Another 50 today and watch the pain at the Xmas BBQ
China are in complete control of their currency value - the size of their foreign currency reserves (a function of their trade balance) means that anyone trying to start a run on the Yuan would face a swift and painful slapdown.
The economy in 2021 was a reflection of the massive monetary and fiscal easing in 2020. The economy in 2023 is going to be a reflection of the massive monetary and fiscal tightening in 2022. Link
Liquidity and The Wrecking Ball
Why the USD Will Likely Continue Its Relentless Rally and the Implications for Bitcoin
Soft landing......has this agencies have ever been correct.
Do they not keep shifting their standing by finding one reason or the other or should say blame one event or the other to justify their change - Wise after the Event.
It's the Bob Ross approach to global geopolitics. We don't have recessions, we have "happy little downturns".
Message appears to be dont scare the people coming into a tough winter - save the bad news for spring when at least you can turn the heater off and pay the power bill arrears
If your eyes are on Adrian Orr you really need something better to do.
What RBNZ will do is, what the market expect...raise OCR by 0.75% and come out with Hawkish tone for future - No surprises, unlike when he. drop the OCR by 0.5% / 0.75% instead of 0.25% to shock and send a message to get desired outcome of boosting demand but will he do when the time is to control flaming inflation ?
As per him, even now he is following the policy of LEAST REGRET but only defination of LEAST REGRET is different when it comes to drop interest rate and now when he has to increase interest rate.
Grammarly is your friend...
Nicely (and politely) put
I've stated here for a long time now that the reserve banks are not in control of interest rates, they follow, not lead.
He goes 50 the market is punch drunk he has already killed it
OECD says it will be a soft landing..
< for economists and bureaucrats? >
The bodies of the masses will soften the landing for the elites.
We've had plenty of landlords on this site who have been bragging about how the bodies of renters will soften the landing for rentiers.
Maybe a good hard landing is just what we need. Break a few bones. Crack a few skulls. Teach a few lessons about leverage.
The pain of any hard landing is going to be directly proportional to the leveraged risks we have taken, collectively and individually.
I had a hard landing the other day and fractured a rib. Ouch.
Not a lot of focus on yesterdays trade numbers. They were terrible, worst trade deficit in a decade and clearly unsustainable.
Only unsustainable for those who believe we can't keep stacking the debt mountain and growth can't go on forever.
For everyone else it's completely irrelevant.
Trade deficits have been the norm for my whole life. My whole life I've thought it unsustainable. I guess I'm just plain wrong, as I was about house prices the last ten years.
Indigenous traditions of forward-betting with artificial proxies,are a well-studied phenomenon.
:).
Ah, yes. The Good Ol' Days.
When if a country ran an economic deficit, the value of the currency fell and interest rates rose until such time as domestic production replaced imported goods, and the imported foreign capital to enable that. But when 99/100 counties were in that same boat, and the big exporter tied their currency to the biggest importer, then all sorts of distortions happened.
And now, here we all are.
(PS From a friend in Canada this morning. "If you find yourself feeling useless, remember it took 20 years, trillions of dollars, and four U.S. presidents to replace the Taliban with the Taliban." )
Ouch, of course the US industrial war complex would have a different view of the value of those trillions of dollars. There is a careful political spread of arms manufacturers across the US that require support like this to exist. Who the war is with, what or even if there is a reason for the war, these are all irrelevant.
Unlike domestic deficits, you cannot run current account deficits in perpetuity. Sooner or later there will be a currency crisis & recession.
Agree Te Kooti.
But our Wellington 'servants' are too insulated from cause and effect to understand that.
Cows will be coming home soon - now that China will need its money back
And yet the NZD has been appreciating pretty well these past weeks. What gives?
Global risk appetite. NZD correlation with the US equity market.
I think there’s a decent amount of risk on coming through in the currency as traders unwind their flight to safety into the USD which occurred first half of the year. I think there’s a good chance we see it whip back the other way if US data starts looking real soggy.
edit: yep what IO says
Overseas market expectations of a 75bps hike.
It will be darkly hilarious if the NZD tanks on announcement of a 50bp rate hike. As you say, it’s possible though.
It will tank if 50bp, 75bp is discounted with a strong OCR track forecast. Anything else will see it fall hard, the market is expecting a hawkish statement.
If our interest rates go up, our country becomes a more attractive place to park money, and our dollar goes up. That is what happened every other time in the past when we had high interest rates. It will therefore probably happen this time.
Not if we go up 0.5 with a looming recession due to massive property debt baked in while others are hiking 0.75 with much more favourable medium term consumer outlooks.
It is just "oscillations" to use a TTP phrase.
The overall trend is down. The Dollar Milkshake theory may be playing out. And it seems inevitable that Orr will crash the dollar, either by raising the OCR too slow, or by raising it too high and imploding our debt ponzi. There will either be a policy error, or a policy error. We are painted into a corner here because as a country we have high personal debt levels and high inflation.
All of my assets are in US$. I think that is the safest place to be.
Oh dear, Fitzy. That is the currency that has doubled it's number in circulation over the last few years, and through crookery and manipulation has avoided having it's value plummet. But it will happen. None of us are sure exactly when though.
Now do the NZ$ 🙃
“The question for me is if all you're doing is affecting that relatively small portion of the population is it enough to get demand and supply back into equilibrium. It’s not clear to me that the bank’s actions will be as effective as they would like.”- from Stuff article this morning talking about how if majority of homeowners only have small or no mortgages then is it it really the best tool if it doesn't have any affect on most people?
Are there any other approaches to lowering inflation that have been shown to work?
if all you're doing is affecting that relatively small portion of the population
If you start from a false premise then you're going to reach the wrong conclusion. Savers benefit from increased interest rates, and choose to save more and consume less as a result -> lower consumption -> lower aggregate demand -> lower inflation. Our exchange rate appreciates as relative interest rates increase, so imports become relatively cheaper -> lower inflation. Investment decisions are made based on NPV of future cashflows, higher interest rates mean fewer investments pass hurdle rates -> lower levels of investment -> lower aggregate demand -> lower inflation. Monetary policy is described as a blunt tool because it affects pretty much every part of the economy in some way, not just mortgageholders; they are just squealing the loudest right now.
Hadn't thought of it that way, kind of like a Scrooge McDuck effect? More they save the more the want to save... but surely some of these savers also suddenly have more money to spend?
I get what you are saying at high level for increasing interest rates theoretically increases exchange rate, but if there are global shortages on goods/commodities then those prices would be going up regardless. So wouldn't we still be importing inflation regardless of what we are doing within NZ?
So wouldn't we still be importing inflation regardless of what we are doing within NZ?
It's all relative. We are importing less inflation than we otherwise would be if we weren't raising interest rates.
"Catch 22"
Those with pay increases to offset inflation will also be cutting back and saving more if they can safely get a reasonable term deposit return currently more so that of other means of investment, thus lowering spending and slowing the increase in domestic inflation. Then again for the average punter who doesn;t understand the majority of the discussion on this site, the more media articles there are about the impending economic outlook and means to best reduce the plummet, the better the overall effect.
Business borrowing costs go up too
Shocking survey results in terms of the mental health of young kiwis. And financial pressures have emerged as a key stressor. Concerning.
https://i.stuff.co.nz/national/health/300746411/40-of-young-kiwis-consi…
Yes it must be incredibly demotivating and stressful to be a young person at the moment. The core of Maslow's Hierarchy of Needs levels 1 and 2 are all at record levels of pricing and are almost unattainable, therefore (according to the model) there cannot be any higher levels of motivation beyond their physiological and safety needs.
Even if they are unwell, we have epic incompetence in government that means they will be poorly served by our health system.
2 quick questions for the crystal ball gazers while I wait to see what Adrian does.
what is your pick for NZX 50 in 1 year and 5 years?
what is your pick for NZ Housing in 1 year and 5 years?
I’ll start the ball rolling by saying 0%, 50% & -5%, 30%
OCR record lift RIP Property
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