Here's our summary of key economic events over the weekend that affect New Zealand, with news we are now on the eve of some large central bank interest rate announcements, and the size of those rises will tell a story about how they see 2023's economic prospects.
First it will be the US Fed, followed by the ECB. Then smaller central banks like the RBA and the BofE will also chip in.
Markets are picking more restrained rises even if inflation levels haven't yet pulled back.
But before that, the next regional factory survey in the US is from Texas where they report flat conditions and weaker new order levels. And that makes it eight months in a row new orders have declined in America's oil patch. This region's results are a drag on the overall results.
In China, and in a somewhat odd announcement, Chinese officials are pushing students to enroll quickly at overseas universities, or their course "will no longer be certified". This will involve a rush for visas and flight bookings, and pressure on overseas universities to confirm enrollment. It isn't entirely clear why they are pressing their young students to act so quickly. Their attempt to explain themselves isn't very helpful.
Health authorities in China's southwestern province of Sichuan will allow unmarried individuals to raise a family and enjoy benefits reserved for married couples, in the latest effort to bolster a falling birth rate.
Taiwanese consumer confidence stayed very low in January, but at least it rose marginally from December which was their lowest since 2010.
In India, Adani Group shares extended their sharp falls as their 413-page rebuttal of an American short-seller's criticism failed to pacify investors. As expected, they framed it as an "attack on India". The unconvincing rebuttal drove share market losses for these companies to almost -NZ$110 bln over just three days.
This comes as the Indian Federal government is about to release its 2023 Budget, and Adani will be an unwelcome distraction. Inside India there is very muted reporting of the Adani woes. But now UAE royals are moving in and buying up positions cheaply.
In Europe, economic sentiment rose from a month earlier in January, to its highest level since June and well above market expectations. This is the third consecutive month it has improved and comes amid easing inflation and an improved economic outlook.
But despite those improvements, including in broad German sentiment indicators, the German economy shrank marginally in Q4-2022. However they revised their Q3 result up. Together they flattened the 2022 expansion it just +1.1%. However the Q4 contraction in Europe's largest economy was mainly led by a small dip in household consumption as those households prioritised saving.
The UST 10yr yield starts today at 3.55%, and up +4 bps from this time yesterday. The UST 2-10 rate curve is inverted at -71 bps and little-changed. And their 1-5 curve is marginally less inverted at -104 bps. Their 30 day-10yr curve is now less inverted at -100 bps. The Australian ten year bond is up +3 bps at 3.59%. The China Govt ten year bond is little-changed at 2.95%. And the New Zealand Govt ten year is starting today at 4.17% and also little-changed.
Wall Street has opened it Monday session with a -0.9% decline, mainly on uncertainty about what the Fed will do. Overnight, European markets dipped about -0.1%, except London which gained +0.3%. Yesterday, Tokyo ended its Monday session up +0.2%. But Hong Kong took a major bath, diving -2.7% on the day. Shanghai returned from its holiday and gained only +0.1%, so missing out on the prior weeks general rose. The ASX200 fell -0.2% yesterday while the NZX50 ended unchanged.
The price of gold will open today at US$1924/oz and down -US$5 from this time yesterday.
And oil prices start today low at just under US$79/bbl in the US which is more than a -50 USc dip from yesterday. The international Brent price is now below US$85.50/bbl.
The Kiwi dollar is little-changed, still at 64.8 USc. Against the Australian dollar we start today at 91.7 AUc and that is firm by more than +¼c. Against the euro we are still at 59.7 euro cents. That all means our TWI-5 starts today at 71.6 and little-changed from yesterday.
The bitcoin price is softer today, now at US$23,166 and down -2.0% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.1%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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61 Comments
Often overlooked, but the comments about "Health authorities in China's southwestern province of Sichuan will allow unmarried individuals to raise a family and enjoy benefits reserved for married couples" provide a glimpse of the penetration of the authoritarian government into the lives and freedoms of its people.
It is easy to overlook what the type of government would look like at the individual level in China, and many of those who would seek appeasement or similar when China gets aggressive should consider what the impact would be.
Probably goes for any fundamentalist society, after all the existing Chinese attitude towards pre-marital arrangements is a cultural relic older than the CCP.
For sure though, there's an assumption that other parties will listen to reason and be open minded. Getting that wrong can be perilous.
It won't do much. Japan has been trying to reverse population decline in a similar "too little, too late, too beauracratic" fashion for years.
Short of either enforced breeding or ridiculous levels of financial incentive, I don't feel governments really have much ultimate control over birth rates.
I agree, making daycare free for 3rd child and state backed 6 months maternity leave would help.
They are better to try immigration levers. This is immediate, but often runs into many other barriers. Japan didn't even try for cultural reasons (they didn't want to get overrun with Korean and Chinese people).
Population growth is the problem. We are just so familiar with it we don't see it.
Japanese have a strong sense of "identity," so are not keen on permanent immigration. "Guest workers" or "trainee workers" are tolerable... The issue of "purity" is a very complex one, with definite pros and cons.
aka Xenophobia
Mostly cons
The Japanese are right to be cautious. The problems with celebrated multi-culturalism tipping into loathed ghettos are all too visible worldwide. Of course the race riots ('Leicester' and 'riots' in the same sentence was unimaginable when I was younger) and the attacks on hostels holding asylum seekers are publicised whereas the many examples of different peoples living together peacefully while maintaining contact with their cultural origins are not newsworthy (for example every educated Papua New Guinean is skilled at dealing with dramatically different cultures).
Why does immigration work sometimes and not others? Language barriers and religion. The language barrier disappears as their children go to school but religion is the obstacle that is carefully ignored by our deliberately agnostic media. Irish and English had problems integrating until the two groups stopped going to church. It is like preparing food - some ingredients have to be introduced gradually and well mixed in otherwise it ends up lumpy. Fortunately NZ's rapid immigration policy has a wide variety of ingredients introduced simultaneously with only a few rare lumps appearing.
There's plenty they could do. PPL extensions, daycare subsidies (ECE free is basically the same as when it was announced despite both parents needing to work to service a mortgage in most parts of Auckland). Otherwise people put off having families until they think they can afford it, which means they either have fewer kids or may struggle to have any at all, as fertility declines in both men and women with age, and our lifestyle issues across our population (obesity, alcohol etc) don't help. And as inflation spikes and wages fail to keep up, that gets further and further out of reach for more and more people.
The irony being the answer touted as 'more migration' actively makes the issues young Kiwis who want to start families face even worse. More competition for housing, jobs and wage suppression.
There's lots of levers they can tinker with but the underpinnings of lower birth rates are mostly cultural and not financial.
Otherwise Africa would be empty and Europe would be bursting.
Nether of which is New Zealand, or reflects the cost of housing, feeding and clothing children in the place we actually live.
Sorry but if you make those things prohibitively expensive, people have fewer kids and have them later. We see that in our statistics here - as houses get less affordable, people delay having children and have fewer of them. We have a highly educated female population and have done for some time, the period in which we could attribute this to better education for women has long since passed. It's a cost of living issue.
Nether of which is New Zealand
The trends seem to be related more to women and not geography.
Its obviously easier and preferable to raising a family if you have a degree of material comfort, but we can see that financially incentivising childbirth usually has a small uptick initially and then the existing trend takes back over, i.e. there's a small number of people on the fence about having kids for purely financial reasons.
The trends seem to be related more to women and not geography.
The 'trend' from overseas is of limited use in a country that has some of the most expensive housing in the OECD relative to incomes, high inflation, high daycare costs and so on. Unless you want me to believe that those things don't matter at all.
If you approach this problem with a lens of 'it's a woman's issue' and make a point of ignoring all the extremely context specific things that factor into the decisions around how many kids people can afford to have in the country we actually live in, then yea, it's going to look like a women's issue. Conveniently this also makes it a problem we don't have to do anything about, and even more conveniently, one that we have to address via migration.
I'm not saying they don't matter at all, I'm saying they're insignificant against factors like:
- women attaining higher education
- women pursuing careers
- the introduction of birth control
- changing values around marriage and children
You will not significantly raise birth rates via financial incentive in light of the above and other factors. You may at best slightly slow the rate of decline. If it were just a case of being the top of whatever index we lead then youd expect that to correlate with birth rates, but almost the inverse is true.
So we are stuck with migration, stagnation, or some mythical place where we can timely slip machines into gaps left by a lack of people. Or cloning people maybe.
Those things will have far less effect on an already developed first world country like NZ than they do in countries where they are frequently cited as making a massive difference. We are past the point where they should be driving changing birth rates to any meaningful extent. The fact we have made raising a family a stupidly expensive exercise in this country is now what's doing the damage, and is as much driving the need for women having to have a career and the changes in the attitudes towards families and children.
Make it affordable for people to have bigger families, and then see if they actually want to, rather than trying to apply decades-old arguments to our current birth rates to explain why they are in decline. From what I can tell, it's not a conscious choice many are making because they 'don't feel like it'.
Exactly, anything they introduce is total tinkering.
best policy would be income sharing......
"Japan was the future but it's stuck in the past" - an interesting read & perspective on a self inflicted & xenophobic demographic disaster. Rang a few bells from my many visits there over ~20 years.
https://www.bbc.com/news/world-asia-63830490
It's a poorly written article and perspective that by nature contradicts itself. Japan may be stuck in the 90's but they seem willing to tolerate that. Japan in itself is a wonderful country to visit, but the Japanese themselves are weirdly and frustrating complicated in their interactions and way of communicating. I would argue immigration is the least of their worries, they need to resolve their internal issues first.
I don't understand why the issue of language being a strong barrier is never raised in these BBC/Guardian pieces - Japanese has a very distinct set of grammar that perhaps only Korean is similar to. Character wise it is similar to traditional Chinese characters (so some overlap HK/Ghangzhou and Taiwan). How does that magically get resolved by immigration?
Two quotes from articles in the MSM about the financial impact of the weather event:
From the Herald:
EMA head of advocacy and strategy Alan McDonald said many businesses were facing major financial impacts.“One of the things we’ve found is there’s quite a significant number of people who aren’t insured,” he said. With things like Covid-19, a lot of businesses have dropped their insurance.
From Stuff:
Tourism Industry Aotearoa chief executive Rebecca Ingram said they were still trying to get a handle on the scale of infrastructure damage and cancellations with a view to briefing government agencies and tourism Minister Stuart Nash about what might be needed for “tourism-specific relief.”
Business New Zealand is already warming up the government for hand outs.
Business New Zealand is already warming up the government for hand outs.
Everyone's got their hands out these days, everyone wants a daddy.
At the risk of sounding like a Daily Mail headline, we do seem to be becoming a "handout nation".
Election year mate
Nash is the absolute worst. When I was in Asia last year the two things I repeatedly got asked about NZ were "was life behind closed borders weird" and "why do you only want rich tourists now, that seems so mean".
The tourism for the rich was a sham. I remember Nash trying to sell the idea on numerous radio shows as a means to build a more "productive" sector offering higher-paying work. Good luck with that.
Analysing MBIE's numbers, it appears that somehow lifting the sector's productivity by a massive 50% will only bring it on par with the rest of the economy.
Its all good to promote Heli-ski heli-fly fishing etc but the reality is that the industry needs decent scale to be able to provide services at all levels. I note that many backpackers have closed so there is just less accomodation now for working holiday visitors.
I note that China has just told students registered to international unis that they must go tot he country where the uni is, not sure how many will arrieve into Auckland due to this?
Demand for accommodation from the 50,000 Chinese students or more likely to return to Australian university campuses within weeks could fuel at least a 5 per cent jump in rents across inner Melbourne and Sydney and worsen rental shortages, experts say.
Markets will continue to struggle to service the additional consumer demand from the huge influx of students, workers and tourists in NZ. Inflation is likely to spike again with soaring demand for accommodation, food, transport, fuel, energy, etc.
Granted some of the supply shortages are labour induced, but untargeted migration of this nature won't solve it. Also, goods/material shortages and capacity constraints will continue to worsen with an increase in aggregate demand for essential goods and services.
The Canterbury EQs revealed a disquieting number of underinsured or uninsured properties. Hard to imagine nationwide that percentage has not increased. Insurance is starting to look like becoming out of reach for too many Just got new notice for our vehicle value $30k, premium up 23.8%. Amongst our contemporaries some are resorting to 3rd party cover only.
A predictable outcome from the Govt previously bailing out underinsured homeowners in Christchurch.
Discussed more than a few times the level of rip off insurance is becoming. Highlighted after the Christchurch earthquake, but little done about it since.
Major events are a factor calculated into all premiums, but Insurance companies never hold a reserve fund to build up for these events. Instead they rely on Reinsurance and rake off any money taken in and not paid out on claims as 'profit'. Bullshit really as they charge for the major events, even if only a small part of a premium, but never invest to ensure they are capable of paying out for them.
what concerns me is that IAG dominates the market, if there was a big earthquake in Wellington and it was double what the CHC quakes were, and they were found they were 100's millions short of what they needed, would they just walk away from NZ and say see you in court NZ government. AMI is a point in case.
Went 3rd party years ago because it was cheap. Not had a claim for over 5 years and the payments suddenly halved so now its super cheap. Probably think its more peace of mind not the perfect solution, who knows until you actually find yourself needing cover.
Modern vehicles have become so complicated and parts so expensive (partly due to supply issues) that they are written off at the drop of a hat. What previously would have been a simple bumper cover, grille and headlight replacement is now a write-off situation. Bonanza for the pick-a-part industry but terrible for insurance premiums.
https://www.wsj.com/articles/how-quickly-rate-increases-slow-the-econom…
Some Fed officials say interest-rate moves influence the economy faster because they communicate their policy intentions far more explicitly than in the past.
Everyone points at the 1970's but the velocity and quantity of information and response is completely different now.
"now UAE royals are moving in and buying up (Adani) positions cheaply."
If you are a big short seller of anything, the last thing you want is to be seen buying back your position. The offers suddenly evaporate. So, you get a friendly 3rd party to do it on your behalf and sort out the paperwork later?
or their course "will no longer be certified
it's a warning to the overseas universities to deliver a real university experience, and the certification for online courses was only meant to be temporary anyways.
Wen-Ti Sung, a political scientist from the Australian National University said China was experiencing high youth unemployment, and the government hoped sending some young people abroad to study would alleviate the problem
The regime is sending mixed signals to its youth by, on the one hand encouraging young people to have more children, and on the other, asking them to leave the country because it's flagging economy cannot accommodate young workers.
Youth unemployment is not new to the Asian continent, India has witnessed youth unemployment hovering in the mid-20 percentage range for decades.
The 'demographic dividend' is a double edged sword. We live in interesting times.
some recent charts on the guardian have been eye opening: https://www.theguardian.com/world/2023/jan/17/chinas-population-falls-f…
A population of 770m by around 2100 (half that of India at the same time - largely driven by continued growth in Uttar Pradesh, Bihar, Jharkhand).
Telling students to piss off out of China is a good way to reduce the number of protestors.
Something tells me Wayne is going to have a lot more time to play tennis soon..weather permitting of course..
How did that text get out? He and Auckland are a match made in heaven.
His PR team must be in overdrive.... yeah no doubt Wayne has his best people on the job trying to smoke out the snitch on his whatsapp group lol
It would appear even his friends don't like him
Ironic, that attitude would be far more befitting of some born-to-rule cabinet ministers. Seems like more of a Wellington vibe to me.
Except Auckland just voted him in over Efeso Collins who by all accounts was the superior candidate. It was an anti-Jacinda vote and look where it took them.
He needs to be very cautious. Imagine those opposed to his presence considerably outnumber those in league and the former will combine and coordinate the opposition. Might even set up traps? Therefore all meetings have an independent person present and certainly no friendly pats on the back let alone pony tail tugs.
He really needs to resign, appalling.
Although his reference to the media as ‘drongos’ is on the money.
I really hope he stays.
His description of the media is about the most accurate thing he's said all week (although, in his defence, a family member of mine who works at high level of NEMA said that he did follow the process re: declaring the SoE; he fumbled the communication terribly and will not recover from it).
Between churning out clickbait dross masquerading as news for ad revenue, betraying any vestiges of journalistic integrity to take government money, and the insufferably ego-centric nature of headline journalists e.g. Gower, Hosking etc I think Brown has hit the nail on the head with that particular comment.
Funnily enough, a quick glance at the Facebook comments on the NZ Herald story about this and most are in agreement with Brown (to the tune of "he's an oaf, but he's bang on the money about the media")
I also appreciate Brown’s ‘attack dog mode’ on Auckland Transport. Debacle of an organisation.
A friend told me this morning that they got a parking ticket for their car that was abandoned on the street because of the flooding (edit: she even had to swim back to her house from her car in flood waters) . I mean, come on. AT’s leadership should have been providing advice upfront to their officers about not ticketing in those kinds of scenarios.
Very bad look.
I have no first-hand experience with AT (being a South Island peasant) but from what I've read it seems very dysfunctional. I couldn't believe, for example, that there were going to be no busses or trains for the Elton John concert had it actually gone ahead.
As I said before, Brown is a staggeringly bad communicator, and clearly lacks tact. I agree that he probably just won because he was the anti-Jacinda candidate (although Collins did seem to be a rubbish campaigner) and unless he pulls something magic out of the hat he won't get a second term.
However, part of me wonders how much of the opposition to Brown - at least internal opposition - is because he is at the least making noises about trying to shake up the management of the council and its various activities. The media opposition is obvious, because he clearly hates them and the feeling is mutual.
If Auckland Council is anything like CCC, there will be legion management-level employees doing nebulous work for excessive pay packets (compared to the productive value of the work they are doing) and I would imagine none of them want the risk of Brown raining on their parade ... the show must go on.
For example, presumably there must be some team within Auckland Council (under the CEO's auspices and not the mayor/councillor side) responsible for putting together flood/disaster response plans? What have these people been up to and how well prepared were they? Maybe the media could do some probing here as well. I don't know the answer, but all of this should be examined.
It was revealed by an independent enquiry, during the time of the previous CEO, that within the CCC a hard core of executives had developed into a dominant body that ruled and ran the whole shooting box. The untouchables. An echelon of inertia, insulated and self protective where their power, position and prestige was the foremost priority. The enduring slogan of the Brown Cardigan Brigade “All Authority, No Responsibility.”
Good Morning from #Germany where GDP contracted 0.2% in Q4 2022 QoQ, meaning Statistical Office has revised its estimate from stagnation to contraction in Q4, and that makes a #recession more likely. The consensus expects German GDP to contract by 0.5% in Q1 2023 QoQ. Link
In 4-5 months, I expect the US to be in a recession. A thread.
The mouse that roared: New Zealand and the world's 2% inflation target
In fact, Arthur Grimes, a former chief economist and senior official at the RBNZ who was seen as one of the key architects of the policy, would like the target to include a lower range.
"Zero's the obvious sort of place to head for - it is basically saying, on average, prices in 10 years time should be roughly the same as prices now. Why would you want anything different?" he said.
Well 0% is never going to happen is it ? Greed and envy will drive up prices on their own even if the input costs stay the same. The fact remains, energy costs will increase so everything else goes up. That 2 to 3% target band is looking pretty impossible right now.
"The mouse that roared". Haven't heard that expression since it was used to refer to Bill Rowling in the late 70s. The article seems to be calling NZ the mouse for instigating the now ubiquitous 2% inflation target. Talk about a mouse caught in its own trap.
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