Here's our summary of key economic events overnight that affect New Zealand, with news global trade networks seem to be fracturing at a faster pace now.
But first, there was an outsized jump in initial American jobless claims last week, up to +286,000 and pushing the total number of people on these benefits to just under 1.6 mln. The insured jobless rate jumped to 1.1% and while this is still incredibly low, it may well signal the economic slowdown is starting and starting to hit the American labour market.
But their latest update for consumer debt isn't indicating households are pulling back. It rose at a moderate pace in October, and there weren't any credit card red flags in this data.
And it looks like some major components of American inflation are starting to ease. Mortgage interest rates fell last week, back under 7% and back to September's levels. Rents are falling. American petrol prices are too and back to year-ago levels. These three are large enough categories to be noticeable in household budgets.
But markets don't think these reduced pressures will bring a change in inflation-fighting attitude at the Fed, and still see them raising rates from here.
China is cozying up to Saudi Arabia, shoring up its energy supplies and going its own way on global trade. While the Xi's trip there is mostly theatre, it does underscore the fracturing of the previous integrated global trade network. It isn't a great time for China to try this however. It's new grouping with Russia and the Middle-East looks more fragile than the US-Japan-EU network. India wants to be seen as a major power too, but is unlikely to join up with a China-dominated bloc.
In China, more evidence of the economic cost of their Covid-Zero policies are coming to the fore. More than 40% of their car dealers went out of business in November, and car sales dipped sharply.
The establishment of new not-China advanced computer-chip manufacturing facilities is gathering pace as China pushes ahead with its own. And India says it will do the same. This key industry is emblematic of a hardening of the trade fault-lines.
But trade is still going on, especially in basic commodities.
Australia reported another jumbo trade surplus in October of AU$12.2 bln for the month.
Container shipping rates continue to ease fast, down another -6% last week from the week before. Again, it is China-related trade that is taking the heaviest reductions. They are now -77% lower than year-ago levels, and -21% below the ten year average. But bulk cargo rates are not showing the same retreats.
In fact, there is little evidence of demand falls for key commodities, either mineral or food (although perhaps wheat prices are well passed their peak).
Back in Australia, their Federal Parliamentary Budget Office warned that unless the government addresses bracket creep, more and more taxes paid by fewer and fewer taxpayers will eventually undermine their tax system (see section 4.3) by encouraging "tax planning" by many, and lower workforce participation rates by other groups.
The UST 10yr yield starts today at 3.49% and up +5 bps from this time yesterday. The UST 2-10 rate curve is unchanged at -82 bps. But their 1-5 curve is less inverted at -99 bps, while their 30 day-10yr curve has reduced to just an -8 bps inversion. The Australian ten year bond is up +3 bps at 3.35%. The China Govt ten year bond is down -2 bps at 2.92%. And the New Zealand Govt ten year will start today down -4 bps at 4.07%.
On Wall Street, the S&P500 has started its Thursday session up +0.7%. Overnight, European markets ended mixed but little-changed at +/-0.1%. Tokyo ended yesterday down -0.4%. Hong Kong regained +3.4% and recovering the prior session's sell-off. Shanghai ended down -0.1%. The ASX200 ended its Thursday session down another -0.8% while the NZX50 eked out a +0.1% gain.
The price of gold will open today at US$1790/oz and up another +US$7.
And oil prices start today down another -50 USc from this time yesterday at just on US$72.50/bbl in the US while the international Brent price is down to just over US$77.50/bbl.
The Kiwi dollar will open today at 63.8 USc, and again a little firmer than this time yesterday. Against the Australian dollar we are -½c softer at 94.2 AUc. Against the euro we are at 60.4 euro cents and down slightly. That all means our TWI-5 starts today at 72.1 and very little-changed.
The bitcoin price is now at US$16,838 and up a mere +0.1% from this time yesterday. Volatility over the past 24 hours has also been 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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99 Comments
Jane Clifton: Adrian Orr has scheduled a recession. Is he likely to get it?
https://www.nzherald.co.nz/nz/jane-clifton-adrian-orr-has-scheduled-a-r…
If Adrian is lucky, Santa might dole out a few sackings this festive period.
genius https://www.stuff.co.nz/business/property/130677709/auctioneer-refuses-… not a STEM graduate
A Hamilton auctioneer refused to sell a property for $500 more because he said “I can’t make out my commission on that”.
Hah, he can't take his commission on a grand and half it.
If he had accepted it, and the winning bidder then came back in at $493000, everything would have been sweet. Then $493500 and so on. How much did the vendor actually miss out on? They should demand at least a $500 reduction on the commission, which would have been about $29500 anyway, so not a big deal for the auctioneer and his company anyway. What a clown of an auctioneer.
sit23 What rate of commission do they charge in Auckland?
Lets be honest its chicken feed for an auctioneer! The price of one grocery shop, a light lunch at their favourite restaurant or a dinner for a small group at a well known Texan chain, a tank of gas for the RR and boat. Detached maybe, from the reality of life in the tough back streets of Hammilktown and what that extra 500 would mean to their vendor
I thought auctioneers got a set fee? If I were selling I would appreciate another $500. However a phone bidder seems a bit riskier than someone actually at the auction.
but but but I thought the entire industry was working for the vendor?
"I'm not taking 500 dollar bids, I've already got that confirmed."
Had the vendor already instructed the decision.
Got to draw the line somewhere with minimum $ bids... could spend all day at an auction with people bidding tiny increments of $...
Though this was at the death and the bidder was not dragging out bids. Competitive bidding would have got at least a further 500 or $1000 from the other party.
No the auctioneer didn't say that it could take all day, he said he could not calculate his commission on $500 increase.... Meanwhile the entire industry closes ranks around him like a Labour caucus.
I wonder if the underbidder had an introductory agent, and if his bidder had won the main agent would have had to share the commission, was the auctioneer working for the main agent so he got the full commission. Smells fishy as the agent for under bidder is complaining.........
ITguy I thought you would be congratulating the underbidder for not catching a falling knife. Houses will be cheaper tomorrow
the falling knife now bears all the hallmarks of a meat cleaver
Queue Crocodile Dundee memes
Quite right. It is not Vanguard's duty to inflict some sort of moral code on their investor clients. It is their duty to comply with laws. If governments want us to do the right thing, then make us, don't bullshit us with fake, "woke" moral stuff.
I am the same with an Airbnb I have in a residential area with a shortage of long term accommodation. It will be an Airbnb for as long as it is legal to be. It will be long term when it is illegal to be an Airbnb.
Australian tax authority warning that tax bracket creep has become detrimental for want of a better word. Over there they would likely say it is “white anting” the tax system with all the relative negative economic consequences. Over here it has been a godsend to this government and as inflation pushes up wages so too does it become to them, a greater godsend. Bracket creep is pure rust but this government like any Labour government, with the exception of the remarkable Lange/Douglas outfit, just cannot bear to even think about reducing their tax haul. Way back Simon Bridges made correcting this a bit of an election platform for National. Does anyone know if that is still retained in National’s manifesto?
"White anting" Now that made me smile.
The funny thing about bracket creep is that it creates a fairly flat tax system where the poor pay almost the same rate as the rich. You would think it would be the left trying to index the brackets not the right.
Though that's true, Labour usually slip in a new higher tax bracket as well, like what they've done under Ardern and Clark. So it's essentially a flat income tax system up until you earn over 180K. Labour prefer to use transfers and rebates rather than income tax to create a tax wedge.
NZ Herald interview with Ardern (published last night) makes it clear there is no desire on their part to index tax brackets.
Instead it's going to be more "targeted" doling out of WFF credits etc.
Oh god more handouts. I’m happy if the bracket creep is used to invest in health etc, but if it’s going to be taken from me to hand out to someone else then I’ll vote National.
Read it for yourself here: https://www.nzherald.co.nz/nz/politics/jacinda-ardern-mulls-lifting-inc…
What I'd like to know is where all the extra $ from bracket creep has gone? What is it being used for? With my cynic's hat on I'd say it's being used to buy votes via handouts and expanding the civil service gravy train (as opposed to the 'productive' at-the-coal-face public service).
Anecdotally, I can't think of any public service I "encounter" that has improved with all this extra money sloshing around the system. I'm personally paying more and more tax, but everything seems to be going backwards.
Hospital wait times are mental, policing is on its arse, roads are munted, education standards in public schools are falling faster than a 737 Max.
Where is it all going?
At this rate, I'll surely be voting for whomever is going to let me keep more of my hard-earned.
Hand outs JJ? Some time ago got into a conversation with a couple of Americans at an airport. She a district judge he an employment lawyer. It was the time of Obama, they were republicans. The word socialism was tabled. Their interpretation was with that system the government would take money off them that they had earned, paid tax on and saved and give it to those that had done none of those things. But they qualified that in much the same way as you, in that the relatively high level of the tax they paid should be, say the high end, dedicated to providing services for those unable to afford it, hospitals, schools, sports complexes and so on. Seemed to make sense to me too.
Most of the additional tax revenue from “Bracket Creep” is being used for the biggest hand out of all: Super payments for the massive boomer retirement wave.
Woo Hoo the Gen X like me cannot wait either.
I feel like there may have been a politician from a certain party who raised this issue recently, only to be told that adjusting the Super age would be unacceptably racist/sexist (insert whatever other "ist" you fancy).
Tax system is broken there and here. Only one way to fix it, vote for a party that will make a meaningful change, not diddle around the edges and give more of the same like all the other parties. Nationals current policy is simply to adjust the brackets for inflation, which will just make administering it and calculating income tax harder, so a boon for accountants.
I doubt it will be a boon for accountants, PAYE is calculated by a computer system in most cases. Might be good for the IT industry.
How would it make it harder? The brackets won't change during the year you're being taxed. Provisional tax is based on estimates anyway.
The workforce is increasingly casualised, leaving those contract/casual/part time workers with different rules to apply each year. Just in my workplace probably around 50% of young people are now on casual/short term contracts, who already struggle with income tax/GST/ACC/Student Loan repayments (will these be inflation adjusted too?). Many of them end up asking me for tax advice, and I aren't an expert by any stretch. They are able to claim back multiple different items as well and some create their own companies to carry forward losses or change their tax obligations. They also change jobs a lot more frequently and are often in and out of permanent employment. Adding complexity by shifting the brackets up each year to a weird amounts will cause even more stress for them on how to calculate. For instance the 48000 bracket based on todays inflation rate will rise to 51456.
The rise of Hnry should tell you about the complexity of our current system. We are creating entire businesses to deal with the complexity. Also remember the users of this site are usually people with quite a bit of financial nous. For them tax probably isn't difficult, but for most people, especially the young, its not an insignificant stress in their lives.
Tax accountants have always existed, and always will. And there isn't a huge additional burden of compliance in changing the rates, given that it simply divies up the end number you're already going through the exhaustive process to get to anyway.
I'm sorry but the fact that some people who want to do it themselves might have to either pay someone to do it or spend a bit more time in a spreadsheet is not a good enough reason to accept fiscal drag over an entire working populace.
There is when you can tax differently by voting for a different system. But yeah, people want to keep voting for an increasingly dumber tax system, so let them have it.
China is cozying up to Saudi Arabia, shoring up its energy supplies and going its own way on global trade. While the Xi's trip there is mostly theatre, it does underscore the fracturing of the previous integrated global trade network.
History will show why the US decision to sanction Russia's central bank and effectively steal its assets was the worst foreign policy decision Washington has ever made. https://twitter.com/KSAmofaEN/status/1600794843202355201
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If China Russia and the Saudi's agree to settle oil transactions in Gold then its all over for the USD......
https://www.kitco.com/news/2022-12-07/If-Russia-accepts-gold-for-oil-go…
If Russia accepts gold for oil, gold price doubles to $3,600, says Credit Suisse's Zoltan Pozsar
What would stop them doing this? Both parties would be mad to keep up the status quo.
Probably provoke war, but could the US fight both Russia via Ukraine and another battle in the Persian Gulf?
The US could control Saudi in days, the only other country that could enter that war, Iran.
Oil would be at 300 per barrel. Oil settled in gold has been talked about for some time,
I don't see the Saudis trying this on, perhaps Putin will.
Again the lucky country would win. Maybe worth buying a small land holding in the Coromandel.
Why would Iran enter that war and on whose side?
Their two greatest enemies going to war would be a scene they'd want to watch from the side lines.
My guess would be a much diminished Eurodollar, one that is still used predominantly by the West (who are controlled easier) and a second currency emerging that may facilitate say 20% of global trade.
Russia has too many resources not to get something of their own way. USA plenty of resources left too.
No. All of Africa, South America, and quite a bit of the Middle East, and Far East only accepts US dollars for internal commerce. This will not stop. If the Saudis and Chinese are true to form, it will be a race to see which one will try to rip the other one off in an obvious, gross manner. Great spectator sport.
OMG is this a sign the market's picking back up?
The Block NZ - losing house ends up selling for the highest price https://www.oneroof.co.nz/news/42791
It's a sign, but only if you are a real estate agent.
good for the agent who sold it, as they will have xmas ham rather then ham and chicken roll
I think it shows that nice modern renovated insulated houses will still be in demand due to high build costs, the overpriced development shitter on a big section is doomed.
I have done well buying these at the bottom in the past, 2011-2021. They are good homes for kids as they have big sections, you can bang up an above ground pool etc etc etc. You don't have to spend much on maintenance as you know in 10-20 years it will be bowled for developement. As long as you can live with a curtain in the shower (over an old bath) you can make a lot of molah.
Great buys at the bottom and they are already 30% off cv now.
It's a new build in a location surrounded by similar builds... A big sh*tter with land atleast has value add potential...
Exactly, and the price levels they are going at right now shows you the stress in the industry. 30% is a lot of value to evaporate in 12 months. And this is just the start, we are not even in a recession yet. I would focus on the ones that come up next year with no RC and motivated vendors who purchased in 2014/15
You usually find that where there is land such as a sh#ter, LSB or reserve, next door to diddly squat land that the boundary fence will be low and tiny. If the fence is high the one party to benefit will start removing the boundary fence line. I bet there is a few stories about that.
As those in an apartment, unit or townhouse still appreciate an outlook.
Does anybody still watch that? Too much fake drama for me.
Change in NZ inflation typically tracks around 3 months behind the international oil price (with a 73% correlation). Might be a bit stickier on the way down this time. The irony is that RBNZ will claim an inflation fighting victory next year having done nothing about it (noting that the 25% drop in house prices will be a silver lining - until the reducing interest rates send them back up again).
Labour will claim the same victory... just wait for the spin.
Well,it's swings and round abouts...you can't blame the govt for everything that goes wrong,then give no credit if things turn around.
Yes you can, as long as it's not the "team" you like to vote for.
ACTs cunning 100000 migrants a year plan will fix the housing Ponzi.
I imagine the tax going back on will negate any drop in the oil price. The govts xmas dilemma. When to?
Even if the tax goes back on, come May 2023 prices are quite likely to be similar to May 2022 ie. zero or no inflation. That is of course assuming there isn’t a big spike higher in oil prices or a big fall away in the NZD.
Having said that, I think they will extend the tax exemption. It’s election year after all!
Yes, I expect they will extend. However, it is an opportunity (which may not last) to get the tax back on so they can fund the potholes.
I think it irresponsible to not get the roading revenue back asap. If not now...when?
Barry Soper made a comment that they need to make changes to legislation for an extension and thinks they are running out of sitting days.
Just get Eugenie Sage to slip it in in the small print of some other legislation. She has got away with it before.
I think it irresponsible to not get the roading revenue back asap
You've got it wrong. There has been no cut back to the National Land Transport Fund. Funding from the Crown is covering the $600m or so in funding shortfall from fuel excise cuts and RUC reduction. Robertson "re-prioritised" this funding from lower than budget spending on COVID support.
There is no free lunch.
Ok, so the revenue is there - thanks for clarifying. Still irresponsible that the Crown (being general taxation/borrowing/ printing or whatever other magic) is paying it and not the user. No free lunch as you say.
well it's hardly 'revenue' when it's coming from general taxation.
I agree with you. For a government that hates corporate subsidies, they don't seem to have a problem subsidising consumption instead.
Sure, corporate subsidies aren't always the right solution, but the likes of accommodation supplements and WFF are nothing but putting ambulances at the bottom of the poverty and homelessness cliffs.
.
I sell CNC machines for a living. A lot of that cheap money was invested into capex items for manufacturing…. Not just houses. People on here often talk about a lack of productivity, but from what I’ve seen in the last couple of years, companies have invested heavily in future proofing. We don’t sell as many robot loaders as I’d like but automation IS starting to be integrated properly. I think the manufacturing sector in NZ will wear a downturn in the economy as the main thing holding it back is a lack of talent.
An engineering company I deal with, and have known for over 20 years, has kept expanding its CNC machining capacity over that time. However they have geared up for construction, probably half their income and staff. It is coming to and end though, they already have spare capacity after being flat out the last couple of years.
Hopefully I'll be putting work their way.
Good to have your comment here though, boots on the ground stuff really helps to build a picture.
The company I work with earns its dough by exporting engineering services to clients in Australia and Asia. Demand has been through the roof since end of 2020 and until recently we were turning down clients because of lack of staff.
It wasn't particularly easy to hire high-skilled workers from overseas pre-Covid either. Our immigration advisors often joke that we should class our engineers as retail managers or baristas in visa applications if we want them here faster.
The immigration green list has been late to the party because the board earlier this year decided to create offices and outposts in target markets and hire skilled workers there instead. I suppose other large employers frustrated with immigration settings would have gone down the same route.
This is interesting. 6 years ago the engineering job scene was pretty bleak for graduates. Daughter was lucky, but then she has 2 science degrees as well, so was her company's first hire via facebook. Friend with a masters in Chemical Engineering had spent a year unemployed. It was so bad that WINZ told her to dumb her CV down so she could get anything.
So I wonder if a downturn pending next year will see the work dry up. Although the good ones will likely always be employable.
Really I wonder about our housing cycle, which is different from the last couple as it has corresponded with a construction boom. So the aftermath will likely look more akin to the post 87 period.
It is interesting indeed because I also struggled to get my foot in the door back when I graduated 8 years ago, as was the case with all my co-grads and mates from other faculties (accounting, finance, IT, law).
A trickle of graduate and internship opportunities at the time were on offer from a handful of large firms. We local grads had to compete fiercely for these roles with experienced foreign students.
It was also around the time when the Aussie mining boom had come to an end and wasn't absorbing all the STEM talent coming out of NZ universities.
This discussion would probably go straight over the heads of our politicians.
Has the interest rate slide already begun. Watch for lower US cpi and ppi figures
And it looks like some major components of American inflation are starting to ease. Mortgage interest rates fell last week, back under 7% and back to September's levels.
Wall Street will celebrate when Powell becomes more dovish at this month's Fed meeting.
Or will Jerome remember the Ghost of Arthur Burns?
Tricky things, these apparitions of recovery. One minute, they're obviously there. Then the next..poof...gone, and you're clubbing the real world with a 20% stick.
Maybe, but for us to follow our wage spiral has to stop, there is no sign of that yet in NZ, wage rises and claims still going thru at 6 to 20%. Teachers rejected 4 the other day, they want close to 8, and so it goes on.
Nz cpi will be falling as quick as you can say dinners ready, come and get it.
The problem is that nz stats are sooo slow and A Orr is a bit grumpy. Not like the much nicer Aussie RBA governor
Didn’t the government have a public sector wage freeze for a while? It seemed crazy at the time and even more crazy now.
Can I sign you up for a National Party membership Jim, you seem a bit more open to change today?
I would Personally NEVER EVER join a political
party. Just another fatally flawed form of club.
Yes, public sector wage growth is way behind the private sector. Just part of the reason so many areas are struggling for staff.
Yep its all tip-top here.
Meanwhile in the USA
Used-Car Prices Collapse Most On Record
Readers have been well informed that the used car market bubble popped earlier this year (read: here). Cox Automotive reported that its Manheim Used Vehicle Value Index, which tracks the auction prices of used cars, plunged 14.2% from a year ago. The index has also slid to the lowest point since August 2021 as used-car sales tumbled 10% in November.
November's monthly decline on a year-over-year basis of 14.2% was the largest ever on Manheim's data.
The same applies to New Zealand. What makes it worse for us is that we have a much smaller resources base to build GDP on. The mineral resources of Australia per capita put our rural production in the shade.
The overall level of labour productivity in Australia is largely determined by the performance of the people-servicing and city-building industries. Yet, these have shown little or no labour productivity growth over the past decade. The continued expansion of metropolitan-based people servicing through rapid population growth has resulted in economic growth, measured in terms of GDP, but this has been largely through low productivity capital widening. Low productivity GDP growth through population expansion will not serve Australia well.
I am amazed at how well Aussie is holding up considering the China Lockdowns. Coal is helping.
Iron Ore - looks like a breakout to the upside here? Maybe China unlocking?
Iron Ore | Today's Spot Price & Charts - Market Index
IT Guy with his gloom tinted glasses, is still amazed how well things are holding up.
IT Guy has been hard at work spinning an Armageddon narrative for sometime.
So what does this say to us numpties.
Thanks for the honest insight this time.
It's time to give up and become another Australian state. We would be a lot better off.
we are already their prison colony; not sure they would want to have the inmates back?
Met a new 501 deportee a few weeks ago. Labour are clearly not reporting the numbers so they are coming back in under the radar. By the way it appears to not be just individuals, the whole family comes back.
Are you saying that 501s family should not be allowed back?
Do their non-New Zealander family meet a good character test?
If a good character test was applied - most of our politicians would fail!
???? What are you thinking ???? They send the whole troublesome package back mate, its deliberate they ship the entire problem back and make it our problem.
Shut the borders...no wait
We would be a whole lot better off but Kiwi pride gets in the way. We should have switched to the AUD years ago when it all but hit parity.
So Ukraine should surrender and we should give up our sovereignty to Australia...back the Torana up, I need to get the Commodore out.
I am not sure our Iwi are going to welcome the cultural devaluation, going from 16% of the population to perhaps 3-4% ?
If Central Banks begin pausing the interest rate will we see inflation come back down into Adrian Orr's comfort zone?
The nighmare scenario for New Zealand I think is we are not going to see disinflation, nor are we going to see a significant job retrenchment, but we will see Government debt as I predicate rise in 2024 as the costs of borrowing for the four new entities of Three Waters impacts the Govt books. I've not seen a satisfactory answer from the Minister to this question.
So combined with Households stuck with no real inflation adjusted income, higher tax drag, and corporates ensuring their profitability but holding onto price rises New Zealand is going to be facing a very bleak two years ahead as whoever wins scrambles to tidy up the resulting mess to satisfy Moody's and the like.
More interest hikes. We will make 10% or better.
Yup. Workers haven't had the increases in income to catch up with the full 12 months of inflation we're measuring now. If we say 'no more because wage spiral' then they're not only behind by the inflation that comes next, but the inflation that happened since their last pay increase that was at or above the rate of inflation. That's a key bit no one understands.
Your pay review in a year is catching you up on the inflation cost you're already paying now.
Why Grant and Adrian have'nt resigned in shame is beyond me....
I'm kind of gutted the alternative for the staff party wasn't just a thread where we can air a whole year's worth of grievances with each other, unmoderated, in the absence of the 4pm 'What Happened Today' story.
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