Here's our summary of key economic events over the weekend that affect New Zealand, with news of growing and spreading unrest in China, even in some key cities.
But first, the Americans finished their Thanksgiving Day holiday, and then turned their attention to shopping. It looks like the huge Black Friday retail event won't have quite the impact it once did, but it will still be important and markets will react to retailer sales reports. Early indications are not auspicious. However online shopping has hit a record for the day in nominal terms at least.
As we forecast a few days ago, China has pulled the trigger on lowering its bank reserve ratio requirements (RRR) by -25 bps, effective from December 5th, releasing around CNY ¥½ tln in long-term liquidity (NZ$110 bln) in an attempt to boost economic activity. It follows a similar move in April. The RRR for big banks now stands at 11%, the lowest since mid-2007 while the weighted average ratio for financial institutions stands at 7.8%. Authorities also said they aim to "keep liquidity reasonably ample".
China's industrial profits were officially reported to be -3% less in October than a year ago, a slightly steeper decline than in September. However they say SOE profits rose +1.1%; while those in the private sector fell -2.1%. It is unclear how overall results could be down -3%, but these are results "for the new Era, with Chinese characteristics". For us the main takeaway is that even the official data is unusually weak. Don't forget that Chinese enterprises are built on heavy debt funding, so falling profits can cause a rather sudden rise in credit stress. And we must always realise that SOEs in trouble will be bailed out with even more debt. If it ever comes, the end could be spectacular, but we are probably a long way from that yet.
However, social unrest is boiling over from the endless lockdown pressures. It started when crowds took to the streets in Xinjiang's capital of Urumqi, chanting "End the lockdown!" and pumping their fists in the air, after a deadly fire on Thursday triggered anger over their prolonged lockdowns. And in Beijing, under a lot less covid pressure, some residents under their lockdown staged smaller-scale protests or confronted their local officials over movement restrictions placed on them, with some successfully pressuring them into lifting them ahead of schedule. And there were aggressive protests in Shanghai over the weekend as well. Now other cities are reporting unrest.
Singapore saw its industrial production rise in October from September, and by more than expected, but that wasn't enough to avoid a year-on-year dip.
Somewhat confounding expectations, Germany reported an improved economic expansion on their September quarter than earlier estimated. Consumer sentiment has stopped falling too, but it remains very weak. French consumer confidence improved too, but it is also very weak.
And Spain is pushing ahead with new wealth taxes and new taxes on banks and energy companies, although it is now clear that the amount they expect to raise is much less than earlier indicated, especially on energy companies.
In Australia, voters in Victoria went to the polls Saturday to elect a State Government. It was expected to be a close race but in the end it was an easy victory for the ALP. The Murdoch press had been going hard against Premier Daniel Andrews with some pretty wild accusations. It backfired rather spectacularly.
The Financial Times is reporting that property catastrophe reinsurance premiums are set to soar as several companies have been forced out of the market after another year of extreme weather. The January 1 renewals may see premiums up more than +30%, on top of inflation's adjustment. All this comes as reinsurers become wary of supporting the exposures of other fellow reinsurers. EQC seems to have locked in our 2023 cover. However we haven't heard how much more they will be paying.
The UST 10yr yield starts today at 3.69% and unchanged. The UST 2-10 rate curve is little-changed at -78 bps. And their 1-5 curve has stayed inverted at -88 bps. but their 30 day-10yr curve is still inverted at -35 bps. The Australian ten year bond is unchanged at 3.60%. The China Govt ten year bond is also unchanged at 2.85%. And the New Zealand Govt ten year will start today little-changed at 4.16%. A week ago it was at 4.22%.
The price of gold will open today up +US$2 at US$1755/oz. This almost exactly the same as a week ago.
And oil prices start today down -50 USc from this time Saturday at just on US$76.50/bbl in the US while the international Brent price is just under US$84/bbl. These levels are -US$2 lower than a week ago.
The Kiwi dollar will open today at 62.5 USc, up almost +1c since this time last week. Against the Australian dollar we are little-changed at 92.6 AUc. Against the euro we are still firm at 60.2 euro cents. That all means our TWI-5 starts today at 71.3 and up +70 bps from this time last week.
The bitcoin price is now at US$16,536 and virtually unchanged from this time Saturday. Volatility over the past 24 hours has low at just +/- 0.6%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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65 Comments
Lies - they managed to do something the other day ...
https://www.stuff.co.nz/national/politics/130595459/dangerous-lastminut…
https://www.stuff.co.nz/national/politics/130595459/dangerous-lastminut…
excerpts:
Green Party local government spokesperson Eugenie Sage, who put forward the supplementary order paper, said the entrenchment would not set a precedent for future lawmaking, as overturning it required 60% support and not 75% as with electoral law.“We think it's important public policy that deserves recognition in the law.”She said it was needed because the National Party “had form”, ignoring a 2013 public referendum in which 67% of people voted “no” to the sale of state shares in energy companies while in Government.
The asset sale referendum was voted on by 44% of the voting public, and then-Prime Minister John Key disregarded the result on the basis his Government was elected in 2011 promising to sell the state assets.
“It is a key issue for the Greens and a lot of the public that three waters infrastructure and assets should remain public ownership, that was a major concern. So we want to have a responsive democracy where the law reflects issues the public have raised.”
I guess it won't be too hard for me to find Sage commenting on the huge number of submissions opposing the Three Waters reform then, if she's so concerned about the will of the people being ignored. Or is she only interested in 'responsive democracy' when it comes to overriding conventions to push an agenda that reflects her political sensibilities?
While we're talking about 'form', didn't the Greens back the EFA, which in turn broke against the convention of bi-partisan electoral law reform? Rather than panicking about what a hypothetical National government might do, she should take a long hard look at what she's actually doing.
It sounds like this is on the agenda for today's Cabinet meeting so it sounds like the PM is sufficiently concerned that we might see a walk-back. If that is the case then I bear her no ill-will for doing so. Leadership is about going "Oh ****" sometimes. This is probably one of those times.
I think there is serious questions, however, as to why her party voted for it and why the Greens proposed something of this nature. It does make you wonder what else is being slid under the radar to the extent that the PM is not aware of it.
Suggest the Greens did because either they were told to or promised certain outcomes if they did, in reality though both of those. Patsies of the most not independent minds in my book. This is a calculated, blatant transgression of NZ’s constitutional law and purpose and it is plainly obvious the Green’s spokesperson has been primed and schooled by the media consultants in Labour’s hierarchy to produce that statement. Who else is ever as mealy mouthed as that. As you say if the PM doesn’t intercede she will go down in history as a law breaker.
... 100 % that Labour approached the Greens with an offer , if you put this up , here's what we'll do for you after the next election ...
Ardern had better step back from this entrenchment of 3 Waters ... she risks the Governor General intervening & calling it unconstitutional ... that could lead to a snap election , and Ardern would be ousted ...
... even by this government's low standards , this 60 % entrenchment plumbs the depths of under handedness ...
THE FULL LETTER
We are public law academics who teach and research the Constitution of Aotearoa New Zealand. We are writing to express our concerns about the way in which an amendment to the proposed Water Services Entities legislation has been adopted by supplementary order paper, and its attempt to entrench a specific policy preference against change. The amendment, added late in the legislative process during Committee of the Whole House, would prevent amendment or repeal of a particular provision of the statute without a special 60% majority in Parliament. The protected provision prohibits the divestment or sale of water infrastructure unless a particular procedure has been followed.
We can understand why some hold concerns about the ease with which government owned assets can be privatised within the present constitutional system. However, we object to the way in which this amendment was introduced, the absence of a proper debate about its effects and the unfortunate precedent it may set. Up until now, the only statutory provisions which require special majorities for their change or amendment relate to certain core provisions of the Electoral Act that specify how electorates are drawn up, the method of voting, the voting age, and the length of the Parliamentary term. These provisions, which may properly be viewed as fundamental to our system of representative democracy, have had unanimous bipartisan support over many Parliaments. The just adopted provision entrenching the protection of water entities from privatisation does not meet the same constitutional threshold.
We urge government to think about the dangerous precedent that this legislative action may set. It extends the use of entrenchment protection from a very limited range of matters fundamental to our constitutional system to a matter of contested social policy. Not only does this move invite similar attempts in the future, it also risks undermining the seriousness with which entrenchment is taken by Parliament and the public generally.
Yours sincerely,
Professor Janet McLean
Professor Paul Rishworth
Professor Andrew Geddis
Associate Professor Dean Knight
Associate Professor John Ip
Dr Eddie Clark
Dr Edward Willis
Dr Jane Norton
I copy and pasted off The Herald. It's at the end of the article today. Personally I never want water privatised in NZ, but I am not sure this last minute type change is the way forward, it looks reactive to me. I do not want privatisation, I do not want co-governance , I want PROFESSIONAL GOVERNANCE by professional engineers, water is serious. I understand if debt is involved the service has to be profit producing to pay the debt back, but we should never sell our future generations down the river on this one. First 3 waters then 5 waters, then this, co-governance has never IMHO being fully explained to NZers. How are Maori representitives voted onto the 3 waters boards, if not voted, who appoints, how are the appointers appointed?
https://www.nzherald.co.nz/nz/politics/three-waters-lawyers-constitutio…
The present system has not been good for water, particularly our waterways, infrastructure and the way in which Regional Councils hold such waterpower by virtue of their voter base.
I see a lot arguing that water is a human right so should never be privatised. This argument holds little water with me - our food supplies, power companies and many essentials of life are are privatised..
This co-governance thing seems to be of most concern - though would it be any worse than governance by Regional Councils looking after their vested interest voter base (think qualify of rivers/aquafers, forestry stripping/erosion and the costs-imposed on downstream users, to clean up their mess).
As written the 3 waters see's ownership remaining in NZ on day one, this addition is that any privatisation (sell off) would need 60% backing before allowed, while I do not see that as a massive issue, I want water to remain in NZ ownership. This type of legislation has only ever been applied to electroal reform. It's the thin edge of the wedge, Will Labour accept this if national get in next and start doing the same things around Labour Market reform, Taxation etc?
But on record - I want Water to remain in NZ Hands, whatever colour those hands are, it should be a resource for all of us, forever.
"by Gummy Bear Hero | 28th Nov 22, 9:26am 1669580776
... 100 % that Labour approached the Greens with an offer , if you put this up , here's what we'll do for you after the next election ..."
How is supposition put up as if it was a fact by many in here?
We talking about the same Eugenie Sage who sold out the water at Otakiri Springs to an overseas bottling company? I suppose she is the best person to put forward legislation on privatising water, she knows all about it. Very rich to point to National as if she had some kind of moral high ground, though.
They are building a heap of state housing (need to add tamaki regeneration)
https://fyi.org.nz/request/20087-number-of-state-houses-built-between-2…
The No Evictions protests
the election was on DATE 23 September 2017
On October 12 the Tamaki Regeneration Company (TRC) handed her a 90-day eviction notice to vacate her two-bedroom home, in Taniwha St in Glen Innes. https://www.stuff.co.nz/auckland/88498924/glen-innes-women-refuses-to-l…
I was living in Glendowie, this was definitely started by National, its been a real success.
Mmmmm - Who was in power in 2012?
As a Fenchurch Street Liquor regular I have watched Glen Inness change over many years, I sold up in Ponsonby and went renting in Glen Inness as the GFC started. If Labour started the Tamaki rebuild it's like saying Labour have started the 2nd Harbour crosssing by merely talking about it.... They are good talkers.
Yeah National party and Auck Council, under labour leaning Brown, started it as a joint venture. The oia figures show when building really started to ramp up.
If National win next year, no doubt they'll claim responsibility for the huge amount of building (about to occur) in South Auckland , despite planning and massive earthworks/removals being started under the current government.
Don't forget that Chinese enterprises are built on heavy debt funding, so falling profits can cause a rather sudden rise in credit stress. And we must always realise that SOEs in trouble will be bailed out with even more debt. If it ever comes, the end could be spectacular, but we are probably a long way from that yet.
We use money every day, and yet the functioning of our monetary system is still deeply misunderstood. Without mastering the concept of money, connecting the dots in global macro is impossible. Let's see how different forms of money impact the economy and markets. A thread. 1/ Link
The UST 10yr yield starts today at 3.69% and unchanged. The UST 2-10 rate curve is little-changed at -78 bps.
Treasury Curve Inversion Has Even More To Come Than Feared
Warning after warning after warning...now another big one.
Major, sweeping inversion. WTI contango. In 2018, these warnings happened just prior to the Fed being forced out of its rate hike plans for 2019 because the economy and markets were more and more messed up. Before those, however, there was another huge shakeup...from China. All the same numbers are coming up in Nov '22, including the latest today...from China.
Years back, we were with AMI. They were definitely the cheapest, and we moved on after their unfortunate accident.
I have no idea where Tower stands at the moment, but not that long ago this website on the "Christmas Gong Awards" (or whatever they'll call it this year) ranked Tower as No 1 in the "WooHoo! We're still here" category. Once, nearly bitten, and all of that.....
I swapped from AMI to Tower as well, house, contents and car with AMI $4500, Tower $2500, although premium cost was not everything in my decision. Poss not the right thread here but I've insured my house not for replacement build or RV or some other hyper inflated figure but for cost of a modular instead, so we are 3 bed 1 bath, but I would simply not rebuild that, of course depends on the catastrophe. Anyone else thinking on same lines...insure for cost of moduler replacement not value/rebuild cost?
I won't dwell on the obvious risk that you're taking on by insuring your house for less than it would cost to rebuild, that's clear to you & your business should you choose to do so.
What I'd like to offer, is another potential solution to the problem of high house insurance prices. Any of the major consumer insurance companies here in NZ will allow you to select an excess which is higher than their standard. Typically, a standard excess on a home insurance policy is in the region of $500. If you elect to increase this to $2,500, or $5,000, you will see a reduction in your premiums. This reduction is able to be given to you because you cease being able to claim on smaller 'broken window' type situations, and therefore reduce the amount of risk which is being transferred to the underwriter.
What you may find interesting, is that often this reduction in premium for selecting a higher excess, is greater than the reduction achieved by knocking a few hundred thousand off your sum insured - after all, houses don't often burn to the ground, but windows get broken every day. Which costs insurance companies more?
Not financial advice, your situation & judgement should dictate your choices. But perhaps good for people to know this option exists in these turbulent times.
https://www.rbnz.govt.nz/monetary-policy/about-monetary-policy/inflatio…
A fascinating RBNZ tool to remind us of what we all know, "Where Inflation is hiding". I compared current CPI figures using an arbitrary $100,000 amount, with 30 years ago - 3rd Quarter 1992, and it's sobering.
General CPI Up 95% over that 30 years. Feels about right.
Food up 91%, Transport up 64%, Clothing up 6% (Yes, 6%! No wonder our manufacturing businesses closed) Wages up 158%...and the winner is....tada.... Housing up 680%. (The Ratio of Wages/Housing is up a factor of over 4, reminding us of why it takes +7 times Household Income to buy a median home today)
And we wonder why we are in the pickle we are. To make the number balance, we had to Borrow massively at the Household level.
The RBNZ have been stupidly worried about imported consumer goods decreasing in price for the last 14 years, so they used interest rates to instead make house prices increase massively. At no stage did either political party realise this was crazy and change the RBNZ mandate, and they still don't get it.
No wonder this monetary policy stance has proven detrimental to NZ's prosperity. For decades, we have lost productive operations to overseas locations and the RBNZ has responded to this trend by making debt cheaper.
This rising tide of debt has lifted prices for non-tradables in New Zealand, putting items such as housing out of reach for Kiwis who also lost higher-income jobs to foreigners.
The policy response from successive governments has been to add tens of thousands of lower-skilled workers to our population, which added rocket fuel to this dumpster fire.
The 30 years just applies the RBNZ Tool and is a comparison.
You can load in any term you like. 1 year, 10 years, or 50.
I'll leave that to you.
Who got the money? As the category for Clothing suggests.....one way or another, those offshore. That's where our Productivity Base has been outsourced to, and getting it back is going to be nigh impossible. "What happens then", is probably your next question? Have a look at the majority of people in China, and their standard of living (it's better than it was, but still pretty poor). That.....is coming to us.
I know we don't think so, but what else is there, except the harmonisation of Living Standards across the globe for minor countries such as ours?
Yes and for the 100 years prior to the 1990’s housing appreciated at or around the rate of inflation. Hence why I’ve been saying on here for a number of years that what we’ve witnessed for the past 30 years is an anomaly, not the norm (and only possible by driving interest rates to zero and increasing home price/income ratios from 3-4x up to 10x incomes).
It really is unsustainable and crazy.
Watching the Luxon interview from the weekend. Him and National are so bad! The biggest joke is that he will get in because of the interest deductibility reversal alone. We are such a landlord/property obsessed country that it’s a no brainer for him to accumulate votes. It’s like voting between a red sack of crap and a blue sack of crap.
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