Here's our summary of key economic events overnight that affect New Zealand, with news of a strong defence of central bank independence to make the hard but "necessary" calls to restore price stability.
But first in the US, mortgage applications were little-changed last week from the prior one, but remain more than -40% lower than the same week a year ago. Much of that is because mortgage rates remain high, although the benchmark 30-year rate did settle back to 6.48% last week (plus points).
Yesterday we noted some comments by Fed boss Powell delivered to a Swedish conference. There is another that is worth repeating here, justifying central bank independence: "Price stability is the bedrock of a healthy economy and provides the public with immeasurable benefits over time. But restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy. The absence of direct political control over our decisions allows us to take these necessary measures without considering short-term political factors. I believe that the benefits of independent monetary policy in the U.S. context are well understood and broadly accepted."
And staying in the US, the record high demand for imports over the past two years is now fading, with import shipping volumes reverting to the more usual levels they had in 2019 and prior. But that involves a rather large retreat from mid-2020 to mid-2022 levels. December import volumes were -19% lower than the same month a year ago. Analysts see this continuing with January volumes down -12% and February volumes down -23%.
In China, their central bank and their banking regulator are pleading with banks to step up financial support to the "real economy" and front-load loan issuance to boost the economy. Apparently Beijing thinks "more debt" is the answer to their economic malaise.
Later today we will get the Chinese inflation rate for December. It was just 1.6% in November and is expected to come in little-changed at 1.8% to round out the year. And you may recall their producer prices fell -1.3% in November. Those are expected to stay down but not slip any further in the data to be released this afternoon.
In Hong Kong, their commercial office property market is on track for its biggest glut in nearly 20 years despite hopes that a reopened border would spur demand from the mainland. New building continues making the current 20% vacancy rate even worse there. In some ways it mirrors the property development woes in most other China cities.
In Japan, the parent company of the giant international Uniqlo retailer said it would raise wages by as much as 40%. This is another sign that Japan's rock-bottom wages are starting to rise after decades of deflation and cost-cutting.
In Australia, inflation came in at 7.3% for the year to November, pretty much as expected. But beneath the surface are some worries. The rise from October was at a +10.8% annualised rate, showing the RBA has much more to do to get on top of their inflation problems.
November retail trade rose to almost AU$36 mln in November, a rise of +7.7% from a year ago and basically keeping pace with inflation. But the rise from October was sharper, up at a +16% annualised rate and indicating the pace has been accelerating recently. Clothing, footwear and in department stores is where the recent strength is.
Meanwhile, Aussie job vacancies stayed very strong at 444,200 in November, also virtually ensuring the RBA will hike again on February 7, 2023.
The UST 10yr yield starts today at 3.58%, and down -5 bps from yesterday. The UST 2-10 rate curve is still inverted at -67 bps. But their 1-5 curve is a little more inverted at -108 bps. Their 30 day-10yr curve is little-changed at -67 bps. The Australian ten year bond is down -14 bps at 3.64%. The China Govt ten year bond is little-changed bps at 2.92%. And the New Zealand Govt ten year is starting at 4.26% and also little-changed.
On Wall Street, the S&P500 has started their Wednesday session up +0.7%. Overnight, European markets all rose about +1.0% except London which only managed +0.4%. Yesterday, Tokyo ended with a +1.0% gain, Hong Kong was up +0.5%, but Shanghai fell -0.2% again. The ASX200 ended its Wednesday session up +0.9% as well, but the NZX50 bucked the trend with a -0.3% slip.
The price of gold will open today at US$1874/oz and unchanged.
And oil prices start today +US$2.50 higher than yesterday's levels at just under US$78/bbl in the US while the international Brent price is just under US$83/bbl. But Russia’s oil is now trading at less than half the international price. The West’s price cap and supporting sanctions, introduced only a month ago, appear to be biting.
The Kiwi dollar has held, now at 63.5 USc and little-changed. Against the Australian dollar however we are -½c softer at 92 AUc. Against the euro we are soft at 59.1 euro cents with -¼c slip. That all means our TWI-5 starts today at 71.1, and little-changed from this time yesterday.
The bitcoin price is now at US$17,361 and again virtually unchanged from this time yesterday. Volatility over the past 24 hours has been remained 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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In Hong Kong, their commercial office property market is on track for its biggest glut in nearly 20 years
The CCP killed their golden goose.
Not the first, won't be the last. Seems to be a default setting in the human race
It's their fault for not welcoming their new masters with open arms.
Golden goose once, now just a swamp hen.
OnceInaWhileIamRight: it's not about who is right, it's about what is right!
"Evil begins when we start to treat people as "things".
Well said!
From RBNZ in 2020 "New Zealand. Banks' total exposure to commercial property is around $40b, representing 8 per cent of total bank lending, with around $5b of this related to property development,"
Nearly 3 years later the hybrid working model is baked in now. Companies no longer need the large office floor plates in the CBD or anywhere for that matter. Also the same trends for import goods volumes are showing in New Zealand as they are in the U.S.A. Import transit times to New Zealand are improving. Demand for warehouse space will reduce over time as existing covid era inventories are sold down and companies will return to more of a just in time model.
I do wonder if companies will see the Just In Time model as being broken.
The just in time model relies on a well functioning global container liner industry and well functioning global ports to support them. Turns out when you print money to stimulate demand for goods during a global pandemic while the same pandemic is having a very negative effect on labor productivity in the shipping and port industries. They end up running at over 100% available capacity and the the whole system breaks down. Not to mention the 10x increase in freight costs as the shipping lines use the obvious tool they have to moderate demand and make bank at the same time. Now the worm is turning. Schedule reliability is improving, freight costs are normalising. Companies will have the confidence to reduce inventories as time goes on. Not to mention the RBNZ efforts to curb demand which will have it's own effect on inventories required. We just wont need all that warehouse space. Newer builds will do OK. But older B and C grade buildings will suffer.
We are going back to it, intend to reduce stock volume by roughly 40%, to pre covid levels. We use 3pl so will be paying them less, freight costs are rapidly normalizing. Sales ? Expecting 15% down.
Almost sounds deflationary. You are not an isolated case.
If only the RBNZ could pickup the phone and talk to real participants in the economy instead of running models with 3 month old data.
We could maybe even avoid a recession.
You are so right Westie
It changed its name quite a few years ago to JTL. Just Too Late
The absence of direct political control over our [central bank] decisions allows us to take these necessary measures without considering short-term political factors.
As important today as it always was, which is why it's concerning to see this government trying to exert more and more control over the RBNZ (along with everything else).
Luckily, the most they seem to have been able to do so far is introduce a blame-shifting mechanism. The wording in the new Reserve Bank house price stability mandate is so weak as to be practically ineffectual, but the fact that it's there gives the government a scapegoat for passing on blame if and when things go tits up.
Let's hope they don't get what they want.
Yes that comment struck exactly the same note with me. The RBNZ was meant to have been stiffened up in 1989, its independence guaranteed as free of government interference. Don’t think that status now remains quite as intended. It seems, in order to make up for their own shortcomings this government is over reliant on external consultants and alongside that, also become far too cosy with the hierarchy in the public service. The latter is, for obvious reasons, supposed to be politically neutral, but as with the RBNZ, that line of distinction now looks decidedly blurred.
The real concern now is not independence from government, but independence from the banks. With all the new appointments lately, RBNZ leadership is starting to look like a who's who of the Big Four.
Revolving door policy with no limit to lobbyists in NZ - can only get worse.
It's so common in the States that they've got a name for it: "regulatory capture". Might end up creeping into the vernacular here too.
Honorary Chairman roles come to mind,..with so much time off you can practice your hole in ones at exclusive golf resorts.
Honorary NZ Ambassador to the CCP
Regulatory capture is alive and well in NZ, don't worry about that.
I suspect that is the real concern. It seems that many people recruited to government departments (even "independent" ones) from private industries often bring with them an attitude that they know better because of where they come from and have misplaced perceptions and even possibly loyalties that can result in very damaging outcomes.
Defund, make sure things don’t work, people get angry, you hand it over to private capital. Sound familiar? Link
The RBNZ governer is chosen by the government. This is hilarious and then we think that it will be independent. Do we have our head in the sand?
You work for the person who hires you
The Fed is speaking in today's terms and the markets have priced in what is likely to happen over the next 6 months as the bus crashes into a bridge.
I believe that the benefits of independent monetary policy in the U.S. context are well understood and broadly accepted
You can have independence with or without coordination. During COVID, we have seen how a lack of coordination between Treasury and Central Banks can cause chaos. The UK debacle (Trussonomics) was a great example, but we had our own here too... Would RBNZ have dropped rates to the floor if they knew that Govt was going to inject 10% of GDP in fiscal stimulus in less than a year (using wage subsidies etc)? Would RBNZ have had to hike as quickly and as high if Govt had taken some policy action to suppress prices, or introduced a one-year temporary increase to the higher tax band to reduce disposable incomes?
https://www.nzherald.co.nz/nz/the-flashy-auckland-suburb-where-rent-pri… rents falling in manukau and clover park
Wow they're certainly flashy suburbs...
Nice one
flash in the pan
The article heading refers to the suburb of Greenhithe where the biggest rental declines have occurred. The heading reference of ‘flashy suburb’ is not referring to the balance of suburbs referenced to in the article.
Lol really...
Your comment implied you didn’t understand that, lol
Available rentals increased last year.
I’m sorry that’s not possible. landlords said they were going to raise rents to cover their new tax bill, and because renters have unlimited funds available they would be happy to pay more.
You do realize that 99% of landlords charge their tenants under market rent... so they say.
Well that’s kind of true - market rent should make a reasonable yield otherwise they are effectively a charity and would be better putting their money in the bank. Of course most of them are actually in it for the capital gain, good luck with that in the future.
And how relevant are yields in a market where the underlying asset value is hyper-inflated? When it sprints away relative to the incomes that you need to be buying at volumes to sustain those asset values, you have perfunctory values and nothing more. If you've been dumb enough to leverage against them to an insane degree, suddenly expecting fundamentals like 'yields' to stack up again TDs... well maybe it's a bit late for that.
Rent is actually the stablest part of our CPI basket - overall rents go up by between 3% and 4% every year, year-on-year, every year, like bloody clockwork. There are some variations of course - between regions, suburbs, housing types etc. But, ultimately they get back in the groove. Why? Because the power imbalance between landlords and tenants means that rents simply reflect what people can afford to pay. So rents rise with earnings. You might think that an increase in supply would change this power balance, but the level of increase required is way higher than anything we can realistically hope for. So, on we plod.
I correctly predicted flat to slightly rental prices in Auckland. Good news for the inflation picture.
Rent index is out next week - what's your forecast for Auckland and National?
This may have been covered but if not and they are right....
https://i.stuff.co.nz/business/130947380/inflation-has-risen-to-78-acco…
Approaching a full 100bps of inversion in the swap rates (1 vs 10yr). Nothing weird about that right?
"tick tock tick tock" 💣
Yield curve inversions are basically the market saying "a pound of your flesh later is worth more than my money now". Yeah, pretty weird.
Yikes..
"Price stability is the bedrock of a healthy economy and provides the public with immeasurable benefits over time. But restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy.
How did the Fed lose control if they are omnipotent? Same in NZ with the added bonus of massive QE collateral costs for the taxpayer.
Let's be rid of them.
A Labour victory would change the mentality of many from trying to keep the properties they had, to realising they had to sell,
www.stuff.co.nz/business/130950990/window-to-sell-closing-for-investors…
Get over your fear of the Maori (co-governanve) and do the right thing for your children.
Well, when you put it like that ...
Sure, this is the only policy that would lead me to vote for the current bunch. But I'm not a single-issue voter, or else I'd not be able to vote for anyone.
The “expert” in the Stuff article bought 12 rentals during the COVID period but thinks he will be fine??
They gambled on capital gains, but it OK now they are gambling on an election outcome.
Just one more throw of the dice, she'll be right.
I wonder if the Nats will either fudge or flip their interest deductibility policy.
They will role play the leaders debate and it's likely that this one will play very badly for many central swing voters. It's very hard to defend.
And those who own rentals will likely vote for them anyway.
Just a guess. Look for the words "we will review..."
Get over your fear of the Māori (co-governance) and do the right thing for your children
Easier said than done.
If voters put Cindy back in charge for a third term, it will likely be in coalition with Greens and perhaps Te Pati, both of which have a more aggressive stance on co-governance.
Surely the lot messing with NZ's democratic principles could do more damage to future generations than the one reinstating property speculation.
Nope, overpriced housing is the number one cause of poverty and inequality in NZ, plus it's one of the main reason why our best and brightest young people see no future here.
Co-governance (which I believe National signed us up for) is a non-issue.
If it's such a non-issue, why doesn't Labour just drop it so they can advance the rest of their policies more effectively? I don't see how it can be a non-issue if it's a hill that the government is seemingly willing to die on.
Ssssh....
Nope, overpriced housing is the number one cause of poverty and inequality in NZ
I'd actually say it's third, after having a broken family, and being the wrong ethnicity.
You forgot the critical one having a disability with less than half able to access equitable education, most with poor transport access to essential medical needs and less than half able to have the equivalent of a minimum wage. There is far more inequity which the public like you are blind to because the devaluing of the lives of disabled people is so great you don't even consider them to exist or deserve existence on par with other humans at all.
it's not co governance, it's not co government. It's a blatant political system powergrab by a very small number of self selected wannabe dictators enabled by a captured Labour party & compliant media bought off by the PIJF propaganda fund which specifically required them not to challenge the Govt's interpretation on the ToW's nonexistent "Principles & Partnership".
correct - most dont "fear Maori" they are part of my family
but plenty of fear for the elite in the Maori world for whom this is a personal power grab - T Morgan a classic example but Mahuta's clan just as guilty
Funny how when you say cogovernance it very rarely includes democratic input from local tangata whenua but rather a plutocracy of elites who take most the benefits for themselves through nepotism and leave most the regions tangata whenua in a state of high poverty without a voice or vote. Having the elite dictate and take undemocratic positions very rarely results in improvements for the populace at large or even their own ethnic population (which includes family across the different iwi). See history.
And staying in the US, the record high demand for imports over the past two years is now fading, with import shipping volumes reverting to the more usual levels they had in 2019 and prior. Indeed!!!
One big reason why global #recession is if not already here than uncomfortably close is how the inventory cycle in America (and elsewhere) just kicked into an ever higher (meaning worse) gear. More, deeper contraction on the way Link
Fighting inflation?
Either fiscal restraint or?
Reducing the power bargaining of workers gaining inflation wage increases.
We have seen this Govt increase the minimum wage to bring it close to salaries of the mid range, ie about $70,000 and halt increases for those with experience and Qualification and seniority.
This is deliberate. The Nurses Union protested the 1% increase offered for Senior Staff against the 14% increase for Staff Nurses. Many are now seeing Junior Nurses earning more than they are. My daughter a senior ICU Nurse is in this position.
Yep. While raising the minimum wage seemed the right thing to do on paper, it was in fact extremely inflationary as middle managers then had to negotiate to retain the wage gap appropriate for their skills and experience. So, in the end, those on minimum wage are no better off as inflation has consumed their increase. Swings and roundabouts. Action and reaction etc.
If the majority of NZ understood this, we would demand change. I have understood this since 6th form economics and been against such sustained increases in minimum wage for over a decade now as the inflation results in nothing but eating the middle income earners up and devaluing their experience and qualifications. Trying to explain my position and rationale to others seems more often than not to fall on deaf ears as the woke generation argue we need to focus on the wealthy not punish the poor. Anecdotally I have seen a very high level of attrition within my own workplace due to this as there are across the board pay band hikes and percentage based pay increases based on where in the pay band one sits, which resulted in staff with years of experience getting the same pay as new hires.
Labour govt's still believe they can "fix" markets - wage rate setting came first, price control next - out of office follows
Don’t know that Labour believe they can fix anything unless they have a fully fledged expensive report by an appropriate consultant that tells them that they can. Of course the problem with that is that they don’t have the acumen to work out if said consultant’s advices are correct or not. But then of course if the consultant has led them astray, they can then be blamed and that doesn’t matter either as the consultant will have a disclaimer anyway, absolving them from fault. Handy little merry go round. The ancient Greeks used to rock up to the Oracle of Delphi for the same sort of business.
Is Bitcoin settling into its 'real' price now, signalling speculators are mostly scared off and only true believers hold any?
Lets check with our BTC expert Carlos?
Nobody wants to buy into Bitcoin as a "Stable Asset". The only way to make money with it is on the wild swings. 2022 was a very bad year for Bitcoin, 2023 will be worse. The smart ones got out at $67k and left the rest holding the empty bag.
There you have it...😥
Nobody wants to buy into Bitcoin as a "Stable Asset". The only way to make money with it is on the wild swings.
Gold price over past 5 years in USD - +40%
BTC price over past 5 years in USD - +33%
Both relatively stable.
And yes, takes the prize for being able to profit from volatility.
Those who hold over the long term have greater stability and ROI.
But of trivia. Etheruem price almost same price today as it was 5 years ago.
This train of thought would make WeWork shares look worth buying.
Is Bitcoin settling into its 'real' price now, signalling speculators are mostly scared off and only true believers hold any?
When normies talk about BTC, it's good to listen. For ex,
- "It's going to zero. Told ya so."
This is a time to start accumulating at amounts that you're comfortable with remembering that it has potential to fall further.
- "Forget about BTC. Cardano is where you want to be" (during a bull run)
This is a time when you start taking profits (if that's your game. The diamond hands typically never sell BTC).
"normies" nothing cult-like there, no sir.
"normies" nothing cult-like there, no sir.
Used very much tongue in cheek. I find it quite amusing. Those most outspoken on the ol' rat poison tend to be those who have put in the least effort to understand it.
On this forum that would be you and Carlos though?
This is the same sort of argument as "if you just read the Bible more you'd see how evolution is a lie".
This is the same sort of argument as "if you just read the Bible more you'd see how evolution is a lie".
That doesn't make any sense nor does it seem to have any relevance. And if anything, BTC represents evolution.
The idea that normies know the future of BTC on water cooler banter and what they have read in the media doesn't really stand up.
It does make sense, because your arguments fall back on requiring faith. Really strong positions get defended better than "you'd understand if you just fell down the rabbit hole."
It does make sense, because your arguments fall back on requiring faith
Not faith. Probability.
If you were wanting to invoke statistics it looks even worse.
Probability and statistics are mutually exlusive. But the probability of BTC going to zero is quite low based on past events.
I would agree with you Pa1nter.
but also to be fair most investments are more built on faith than on full due diligence and risk assessment. Most funds are poorly described and studied and even cats and other pets picking at random are known to perform better than many hedge fund managers because investing is a practice that is so susceptible to bias it plays a key role in most play books. Bitcoin followers are often susceptible to gamblers fallacies and sunk cost fallacies, relying on speculative wins that are often poorly measured and even worse more likely to be a result of insider trading and market manipulation with pump and dump schemes. Even Eion Musk is well known for insider trading with bitcoin and pump and dump schemes.
The lack of protections for the public using such systems will ultimately leave the usefulness of such investments to be highly speculative without any real bottom or top. People will not be able to trust such systems, they will be subject to market manipulation movements and fraud even more and that in turn leads to less of the public entering the market making it less decentralized. Even the worst bank is more trustworthy and has more consumer protections than the best bitcoin exchanges... that is not changing even with FTX encouraging more of a spotlight on the industry.
"Few Understand"
Inflation will force rates higher for longer. Where the Fed goes we have no choice but to follow. Excessive debt holders not supported by yield are waking up and realizing they are about to be crushed by the weight of unproductive speculation.
The US stock market and Crypto show the impact of the end of free money.
Wells Fargo, once the No. 1 player in mortgages, is stepping back from the housing market
Mortgages are by far the biggest category of debt held by Americans, making up 71% of the $16.5 trillion in total household balances. Under Scharf’s predecessors, Wells Fargo took pride in its vast share in home loans — it was the country’s top lender as recently as 2019 when it had $201.8 billion in volume, according to industry newsletter Inside Mortgage Finance.
Russia’s oil is now trading at less than half the international price. The West’s price cap and supporting sanctions, introduced only a month ago, appear to be biting.
Good.
Good indeed however, where is the coverage of the level of cheap russian oil India is taking off their hands? I see none, and the reason? For those shifting manufacturing away form China, India is the next best option in many regards.
MSM cover this all the time
https://www.bbc.com/news/world-europe-64102180
https://www.bbc.com/news/world-asia-india-60783874
See "New destinations for Russia's oil and gas" https://www.bbc.com/news/58888451
In reality Russia doesn't have the physical infrastructure to export a larger volume of oil or gas to India or China. As they are barely clinging on in Ukraine they don't have the funding to build new export pipelines or ships either.
Should NZ be preparing to secure necessary resources given this claim?:
US military deepens ties with Japan and Philippines to prepare for China threat
Bierman said that the US and its allies in Asia were emulating the groundwork that had enabled western countries to support Ukraine’s resistance to Russia in preparing for scenarios such as a Chinese invasion of Taiwan. “Why have we achieved the level of success we’ve achieved in Ukraine? A big part of that has been because after Russian aggression in 2014 and 2015, we earnestly got after preparing for future conflict: training for the Ukrainians, pre-positioning of supplies, identification of sites from which we could operate support, sustain operations. “We call that setting the theatre. And we are setting the theatre in Japan, in the Philippines, in other locations.”
In theory Western preparations for the war in Ukraine should have prevented the war. Sometimes "Si vis pacem, para bellum" needs to be tested which appears to be the case in Ukraine. The test really occurred on a minor scale during the Second Nagorno-Karabakh War in 2020 which should have alerted Putin to the risks of using conventional armoured weapons in the 21st Century. China now has two lessons to learn from.
> In theory Western preparations for the war in Ukraine should have prevented the war.
You assume Putin is a rational actor
The US must decide what ‘victory’ means in Ukraine – or waste even more lives there
Until now the weaponry transferred to Ukraine has not included significant amounts of the kind of heavy equipment that will allow Ukraine to retake its land. The key capabilities here, as requested by Ukraine’s military command, are US-made tanks, armoured fighting vehicles and a step-change in the amount of artillery. We are talking here of hundreds, not tens. Earlier this month, the US announced the transfer of 50 Bradley armoured fighting vehicles. The Ukrainians asked for up to 700.
While the west’s support is generous and much appreciated, there is a harsh truth at the centre of it. What has been given was sufficient for the Ukrainians to challenge Russia’s ground forces – especially its formerly overwhelming artillery advantage – and to defend its airspace. But it is insufficient for Ukraine to conduct large-scale manoeuvre warfare to retake increasingly well-defended Russian-held provinces. The continued occupation of these provinces, by the way, constitutes Russia’s clear primary war aim.
they are coming - and at the end of the war Russian armed forces will have been set back by 50 years - probably Russian imperialism will as well
That does not aline to Audaxes world view.
Endgame maybe if current levels of support from the US were not ramped up and the primitive slaughter house tactics continue. Putin's navy and airforce are impotently skulking in fear far from the front lines in the face of limited quantities of tier three western technology. A gradual escalation is underway with tier two equipment likely headed there soon. It's clear Russia has no answer to tier one US conventional gear which would quickly extinguish RU military capacity. Putins survival dangles on a flimsy US controlled thread. Predicting Bahkmut as the endgame for Ukraine is premature nonsense.
The story is somewhere between Niall Ferguson and Larry Johnson.
Why?
It’s all strategic gamesmanship and geopolitical power games. There’s no way China is going to invade Taiwan, it would be suicidal on multiple fronts.
I don't agree with you, Taiwan is so close to China physically its short jet fighter trip away. China will at some point call the Americans bluff. There is no way the USA wants to get involved in a conflict over Taiwan. Yeah I know they were stupid enough to get involved in Ukraine and are pretty slow to learn a lesson. The USA needs to start focusing on the existing troubles in it own back yard, they would be nuts to get involved in another war that would almost certainly turn into WW3 at this point in time.
The very significant lobby group called the military–industrial complex disagrees. They want the turnover to drive profits.
China depends on imports to feed it's population, so if they invaded Taiwan do you really think everyone would just keep on buying from them, and Taiwan would be operating as usual? Think about it...(edit)
What is USA slow to learn backing Ukraine?
Bullshit. But it’s a surprisingly common bullshit view. The US would step in, there would be a very nasty war which China would lose (but there would be significant American and Taiwanese loss of life), China would be ostracised, and their economy would become a wreck….
HM. Why is it premature? ..... Prighozins troops are being mass slaughtered to take a few insignificant villages, reminiscent of the Germans as they advanced into the Soviet Union. Every village became better fortified, tougher to crack, until the Wehrmacht was bled dry. We know how that ended.
US Fed, ""Price stability is the bedrock of a healthy economy and provides the public with immeasurable benefits over time. But restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy. The absence of direct political control over our decisions allows us to take these necessary measures without considering short-term political factors. I believe that the benefits of independent monetary policy in the U.S. context are well understood and broadly accepted."
Hmmm.
So what Powell is saying is that - because there is no political interference - the Fed can hammer the young and poor every time inflation raises its ugly head ... for it is the young and poor who suffer most when interest rates rise.
Sounds fair to you?
Every wondered why the rich are getting richer? (hint: they are old and rich)
well when I was young interest rates were 15% ( and I still managed to get old )
In NZ Orr has a huge impact in the economy for an unelected bureaucrat - and we can debate if this is good or bad
But given the role it is important that the appointee is of the absolutely highest calibre and here we have been let down badly.
Given its a political appointment one solution would be for the appointment to be made by absolute majority - ditto reappointment and maybe a maximum term limit as well
I recall back in 85, mortgage rates being 19%! If the property was rented out, 20.5%!!!
Labour doesn't reward the pick of the bunch, it celebrates mediocrity with giving you another term. Poor handling of the economy means the damage is already done. 2023 is going to result in many people assuming the brace position because of the incompetence of the few. Fortunately I missed the plane and am still in the airport lounge bar.
You missed the boat also Carlos
You missed the point.
From Jarden
- July 1984 following the introduction of New Zealand mortgage caps in 1983 (11% for first mortgages and 14% for subsequent mortgages). This reduced mortgage rates ~26% to 12.8%. The subsequent 56% rise to a peak of 19.9% took 21 months.
- November 1986 had a local trough of 17.5%, following a ~12% decline. Over the next 8 months it rose 17% to a peak of 20.5%.
- After the 1987 Stock Market Crash induced recession, mortgage interest rates fell over 40% to 7.4% at the March 1994 trough. Ten months later mortgage interest rates had risen by 49% to a local peak of 11%.
- Following the Internet Bubble induced mortgage interest rate trough of September 1999 (6.5%), it took nearly nine years to rise 68% to a peak of 10.9%.
Lesson from the 80's The RBNZ needs to have the independence to act on New Zealand's best interest not just the government of day.
100% agree. Interest rates to at least 2% more than the inflation rate and let inflation be snuffed out. The vast majority being hammered by inflation with little to no debt will not blink. If the very few over leveraged burn down, so be it.
Those new fast retailing/uniqlo salaries are still quite telling. At current fx rates a uni grad will be on NZ 43k, and a new store manager 56k.
I was a bit surprised to visit Uniqlo stores recently around North Asia and noticed that they had automated the check-out process (given Japan still feels like it is living in 1995 in a lot of ways). In the past they had always had a lot of cashiers on hand, and Daiso has gone the same way with QR coding at self-checkouts. Not surprising given the demographic shifts and low immigration.
I wish we had Uniqlo here, one of my favourite stores for good quality, durable basics that have a decent fit. About half my wardrobe is Uniqlo, most of it purchased when I used to fly regularly to Australia prior to Covid, and it has held up well. I have my first overseas trip booked for next month, and I'll be stocking up in bulk.
The worst thing about Uniqlo (if they still do it) is the synchronised chanting of "Welcome to Uniqlo" by the staff every 10 minutes or so.
The worst thing about Uniqlo (if they still do it) is the synchronised chanting of "Welcome to Uniqlo" by the staff every 10 minutes or so.
In the Japanese context and language, it's quite normal and I personally don't find it grating in Japan Uniqlo stores. Awful elsewhere.
I was a bit surprised to visit Uniqlo stores recently around North Asia and noticed that they had automated the check-out process (given Japan still feels like it is living in 1995 in a lot of ways). In the past they had always had a lot of cashiers on hand, and Daiso has gone the same way with QR coding at self-checkouts. Not surprising given the demographic shifts and low immigration.
The flagship Uniqlo stores in Japan are next level. Two of them in central Osaka are a great experience and opportunity to understand retailing at its best.
Australia mining stocks have been on a rocket since China pivoted on Covid. The S&P/ASX 200 Materials index is within 2% of a new all-time high.
Powell saying "Price stability is the bedrock of a healthy economy" is the problem. Prices try to be a signal of the balance between supply and demand. Then we get central planners who think they have to control them (make them "stable"). They have my permission to quit.
#EndTheFed
Re Rent index...
I suspect rent inflation due to mortgage rate increases 10-15% in some locales, Lower across the board 7-9% against declining asset values . The data will wash and diminish the detail but logic demands increased costs to LL's mean increased costs to tenants. Demand for rentals hasn't gone away . The good news for the few tenants with substantial savings is increased TD rates will likely negate any effect overall. The bad news for tenants is most wont have near enough savings to negate those rental rises. Overall the slack given tenants due to CG's is likely gone already or come next rent review. Interesting thought re the 'market rates' ...who's market? The agencies or privateers or financiers slash mortgage holders certainly not the tenants (supply well short of demand). Plenty of confliction in the we are taming inflation arena. All I see is more hidden inflation . Likely report will mirror political agenda of 3-4% rises...but will be lagging by a year. Rents decreasing against a declining asset value with higher costs, zero chance.... Folk are trying to make a dollar or at least break even, not throw it away. The horse bolted years ago and they are still chasing it around the 'avenues and alley ways' (T.Christie).....lol
Er those term deposit rates are far below even the lowest projection of inflation. Anyone with money in a term deposit is losing it in real terms even if the loss is at a slightly slower rate than a standard bank account. Meanwhile in many ways the capital gains and investment gains have increased far in excess the proposed increase in asset maintenance costs that landlords should have always had to cover themselves (not the tenants). Saying that because it is harder to get basic property maintenance done (which all housing owners would need to do to retain the quality and security of their asset value) or meet basic housing standards (standards often below what many businesses must face) so the rent is being put up is a cop out. We always have minimum standards for health (often leading to physical harm of the public) yet complaining about those minimum standards being updated with more relevant research evidence (especially after what was discovered as the leaky building crisis unfolded) is exceedingly poor form.
We have third world respiratory and heart diseases in NZ due to the state of housing, often leading to life long disabilities. This affects all property owners and requires we all improve our housing standards, not just owner occupiers. Just had to reclad a rental and re-fix poor trade practices around windows yet again as both the original builder and several tradies afterwards to "repair" have repeatedly not met basic minimum standards. It is not the tenants fault the NZ building industry and materials produced is toxic to human health.
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