Breakfast briefing; American inflation digs in

Business / news

American inflation stays sticky & persistent; Singapore raises taxes on the wealthy; Japan's GDP disappoints; India orders huge numbers of new jets; UST 10yr 3.75%; gold and oil down; NZ$1 = 63.3 USc; TWI-5 = 70.7

15th Feb 23, 7:18am by David Chaston

Here's our summary of key economic events overnight that affect New Zealand, with news inflation is a tough dragon to slay.

The American inflation rate slowed only slightly to 6.4% in January from 6.5% in December, less than market forecasts of 6.2%. Still, it is the lowest in 15 months. The annualised rate between December and January however is still over 6% so the main message the markets received is that inflation is persistent and the Fed's work is far from done. If you strip out food and energy, the annual rate is down to 5.6% while it ran at over a 5% annualised rate in the month. These 'core' measures are still well above the Fed's target and are little-changed over the past six months. The medicine is working, but very slowly, which is probably not a surprise given the strength of their labour markets still.

Retail sales last week came in +4.9% higher than a year ago on a same-store basis, and that was a tick higher than the prior week, but really no more than can be accounted for by inflation.

Financial markets are now pricing in further Fed rate hikes at the next three meetings, the next of which is on March 23 (NZT).

Singapore said it will raise taxes for buyers of higher-value properties and luxury cars, as it tackles a growing wealth gap brought on by the arrival of rich families, mainly from China. They are also extending family support measures as their birth rate stays very low.

Japan turned in a very lackluster economic performance in Q4-2022, one that was below expectations. And their Q3 was revised lower. About the only 'good' thing about these results is that at least their aren't contractions. (But remember, these are 'flash' results and subject to revision.)

In India, Air India has ordered 470 new planes, 250 from Airbus and 220 from Boeing. Its larger fleet has been Boeings, the smaller aircraft from Airbus. Air India is owned by the Indian industrial group Tata.

In Australia, January has revealed a serious wavering of consumer sentiment. (and here.) Sentiment is back to recessionary levels and historic lows. Over half of consumers expect mortgage rates to rise by +1% from here (3.35%) or more. And they are reporting intense pressure on their finances, in the mortgage belt especially (remembering OCR hikes hit instantaneously in Australia). Attitudes towards major household purchases are very low. Confidence around jobs is still positive but starting to get rattled again.

And we should probably note there are signs that Australian rents are starting to rise sharply too.

The UST 10yr yield starts the week at 3.75% and up +3 bps from yesterday after the US CPI data. The UST 2-10 rate curve is still inverted at -84 bps. And their 1-5 curve inversion is also little-changed at -96 bps. Their 30 day-10yr curve is also less inverted at -81 bps. The Australian ten year bond is up +6 bps at 3.82%. The China Govt ten year bond is unchanged at 2.91%. The New Zealand Govt ten year is starting today at 4.33% and up a minor +1 bp from yesterday.

Wall Street has started its Tuesday session with the S&P500 is down a mere -0.1% near the close. Overnight, European markets were all little-changed. Yesterday Tokyo finished up +0.6%. Hong Kong ended down -0.2%. But Shanghai ended its Tuesday session up +0.3%. The ASX200 ended up +0.2% but the NZX50 ended unchanged with an end-of-session dive.

The price of gold will open today at US$1849/oz and down -US$3 from this time yesterday.

And oil prices start today down -US$1.50 at just on US$79/bbl in the US. The international Brent price is now just over US$85/bbl.

The Kiwi dollar is down -¼c today, now at 63.3 USc. Against the Australian dollar we are up +½c at 91.8 AUc. Against the euro we are softer at 59 euro cents. That all means our TWI-5 starts today back at 70.7.

The bitcoin price is now at US$22,039 and up +2.6% from this time yesterday. Volatility over the past 24 hours has remained modest at +/- 2.2%.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

Daily exchange rates

Select chart tabs

Source: RBNZ

Source: CoinDesk

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

113 Comments

by Pa1nter | 15th Feb 23, 7:34am 1676399663

If you strip out food and energy

Wouldn't they be the most important items for consumers?

by Hemi Waipiro | 15th Feb 23, 8:10am 1676401854

Exactly my thought too! I know i'm unsophisticated but saying things like 'The medicine is working, but very slowly' seems a wee bit like wishful thinking.

When people have to pay for higher power, food, rates and insurance the price of non essentials will ultimately be forced down as businesses do what they can to survive including discounting stock.

Also remembering that 'food is energy'. The sheer quantum of food consumed by humanity is basically generated by fossil fuels. I'm afraid we're not getting out of this scenario by a few small upward rises to the OCR.

by kiwimm | 15th Feb 23, 9:10am 1676405459

Put another way: if you strip out everything except food and energy then inflation rose

by mrjadedvagabond | 15th Feb 23, 7:37am 1676399874

India will be the place to watch in the next 10 years

by nktokyo | 15th Feb 23, 7:47am 1676400459

For climate change disasters and political corruption maybe.

by Palmtree08 | 15th Feb 23, 9:14am 1676405682

At least they'll have a lot of shiny new CO2 belching planes to escape their disasters.

by Blackdog | 15th Feb 23, 8:18am 1676402291

how's that trade deal coming along Labour ?

by powerdownkiwi | 15th Feb 23, 7:39am 1676399981

We are starting to see what happens when one species overshoots; too much infrastructure pushed too far into non-resilient territory, done by short-term betting at all levels; from Government through all who wish to profit.

Compound(ing) issues; resource-quality reduction, resource-availability reduction, increasing entropy-parrying demands competing with new-wishes, reducing real amounts of available energy; we are entering a new era.

Increasing triage will be the order of the next few years; better we anticipate the end-stage rather than waste effort replacing the unmaintainable. But we won’t; we’ll peddle growth as the panacea for the problems caused by……

Growth…..

by Pa1nter | 15th Feb 23, 7:51am 1676400703

done by short-term betting at all levels

This is the nature of humans. It's why people fear immediate peril like shark attacks and plane crashes, when it's way more likely something with a longer tail like heart disease or diabetes is going to take them out.

Then again, we're even less adept at predicting the future.

There's unlikely to be an "end stage", more likely change and evolution.

by Hemi Waipiro | 15th Feb 23, 8:19am 1676402342

Agree again, we're just built to have a very short term bias. There won't be an end stage - as George Carlin said, "the world's doing perfectly fine, it doesn't care that it's windy or rainy, it'll be around for another billion years, humans on the other hand....".

by OldSkoolEconomics | 15th Feb 23, 9:16am 1676405805

There is a good reason the uber rich are spending their fortunes on on mars colonies and virtual worlds.

For humans continued living on the surface of Earth is looking pretty shaky. By the time our short term threat radar picks up the issue.. it will be way too late for us pheasants. Hopefully Musk, gates, mark and besos will let us share their opulant mansions on mars (for a small mknthly subscription) via the Metaverse before we all pass.

by Palmtree08 | 15th Feb 23, 9:17am 1676405866

I think you underestimate the fragility of any attempt to live on Mars.

by HouseMouse | 15th Feb 23, 9:47am 1676407659

Yes it’s a bit like the futile efforts of rich people building bunkers in case of nuclear war

by Whatwillhappen | 15th Feb 23, 10:08am 1676408926

Ah, Ready Player One was truly prophetic, apart from the bit about the benevolent creator of the Metaverse

by J.C. | 15th Feb 23, 7:59am 1676401159

Love your work Power. I think Ashley Church is heading down a similar path as you but his is all fire and brimstone. The way you explain things as fragile systems is far more valuable.

by KH | 15th Feb 23, 8:25am 1676402750

Then let's set a population target. Set some max number and stick to it.

The drive for growth benefits few and costs most of us.

by Pa1nter | 15th Feb 23, 8:34am 1676403246

Unless you were imposing some sort of Matrix-level people farming operation, maintaining a desired population level would be an exercise in futility.

by powerdownkiwi | 15th Feb 23, 8:41am 1676403702

Spellchecker playing up?

An exercise in fertility, surely....

by rastus1 | 15th Feb 23, 8:43am 1676403783

...just stop incentivizing breeding via the welfare system - job done.

by singautim | 15th Feb 23, 10:32am 1676410320

Our benefit system is crazy but it does not incentivize breeding except for a small number of single women who find having a baby easier than holding down a job. There is zero benefit for a working couple to have a second or third child. We know from the behaviour of certain politicians it makes economic sense not to admit the identity of a father and certainly not live with him.

Left to Kiwi born young couples our population would plummet.

by Pa1nter | 15th Feb 23, 10:52am 1676411547

We've had Working For Families for around 2 decades now. That's a 'tax credit' as opposed to a straight out benefit, but part of the drive for it was to try and smooth our aging demographic issues.

by singautim | 15th Feb 23, 6:25pm 1676438704

I did receive WFF when i was a younger immigrant on a conditional residency visa. I have a memory that four children was too many - WFF works better for small families.

by murray86 | 15th Feb 23, 8:48am 1676404094

No. Stopping immigration, or balancing against outflows would significantly slow natural population growth. Ensure standard of living is high to lower the desire/need to breed. But the population target that I believe is required and would make it extremely difficult is less than the current population. But population size is the discussion the whole planet should be having. Problem is so solutions are very frightening!

by Pa1nter | 15th Feb 23, 9:14am 1676405690

The inescapable problem is we have aging societal issues today, and new workers take 25 odd years to grow.

Coupled with that is the deferment of having children by the change to higher education and careers by women (not saying that's a bad thing), and the diminishing number of male partners for our higher achieving women leading to decreased long term relationships and therefore children.

How you 'plan' to define a population level in light of that is beyond me.

by singautim | 15th Feb 23, 10:35am 1676410531

Maintain status quo by issuing a residency visa only when a Kiwi emigrates.

Reduce population slowly be issuing 9 residency visas for every 10 Kiwis emigrating.

by Pa1nter | 15th Feb 23, 10:53am 1676411616

You have to account for age as well.

Plus if we have botched our education system we end up with short term demand issues with certain jobs.

by murray86 | 15th Feb 23, 12:31pm 1676417488

Pa1nter, you're paradigming into the old model that has to change. The radical change I suggested would never occur with the current and foreseeable crop of politicians. None of them have the understanding, vision or courage. Elderly are not an issue. The economy is.

by Pa1nter | 15th Feb 23, 1:30pm 1676421052

There's problems around every corner, pointing them out is usually easy, it's finding an actual workable solution that's the problem. For instance, working sucks and going to the beach is primo, but it's hard for anyone to paradigm shift away from having to work to exist.

People float vague notions of "just get technology to make up the difference", or "just pivot to more productive industry", but the devil is in the details, and in some cases there is no workable alternative. Some technology is decades away, and if you're trying to pivot to some reduced labour industry, you're competing in a very large pond with other countries desperately trying to do the same thing.

Much more controllable societies than ours are not adjusting well to this issue. NZ is in a fortunate place to watch this happen elsewhere first and learn, and given our much smaller population make modifications easier.

by murray86 | 15th Feb 23, 1:50pm 1676422230

Take your first paragraph; every society, every culture, every philosophy, every religion has had 'work' at the core of it's ethos. the reason - survival. as a species we've had to do it since the stone age. so it shouldn't be that hard to paradigm shift towards having to work for a living.

Modern technological 'quick fixes' such as JK's technology economy are just BS myths for the gullible.

I don't think NZ should spend much time watching and learning and start doing. The information, knowledge and skills are there. We just need the imagination, vision, and courage.

by Pa1nter | 15th Feb 23, 2:08pm 1676423324

The information, knowledge and skills are there.

They're not though. I see it every day, we have industry demands and gaping gaps in the ability to supply labour to do things, and it's getting worse, not better.

Although I'm open to more elaboration outside of imagination and vision.

by Palmtree08 | 15th Feb 23, 9:22am 1676406131

Hardly. Growth is mainly coming across the border. Once the burden of competing with immigration for life's essentials is lifted, who knows, perhaps people living here can afford families of their own?

by Pa1nter | 15th Feb 23, 9:38am 1676407132

Most of its not a cost issue, it's cultural.

by KH | 15th Feb 23, 10:05am 1676408740

No Pa1nter. You have been watching too many drama movies

Actually in the real world, with a near level birth death ratio already amongst New Zealanders, it's easy to manage.

But having no target means planning to be poor.

by Pa1nter | 15th Feb 23, 10:28am 1676410099

No drama movies, our birth rate is 1.6 and we have more older people, living longer. Our ability to produce more workers naturally is outnumbered by the amount of dependents they have to support.

by Hemi Waipiro | 15th Feb 23, 9:05am 1676405148

I think Paul Ehrlich maintains that about 1.5 billion is the number and given we're closing on 8 billion, there might be a few dissenters amongst us. A New Zealand or Aotearoa (whichever you prefer) with 1.5 million would be quite nice and natural, very quiet. But don't say boring because it probably wouldn't be peaceful from a human perspective. Can't see a diplomatic way of getting there.

Let's just carry on and be doozers - fix the storm damage, raise the OCR 50bp and see what happens at Fraggle Rock.

by jakenz | 15th Feb 23, 9:25am 1676406349

PE is yet to be correct about anything...

by powerdownkiwi | 15th Feb 23, 10:12am 1676409161

It is 100% correct that you'll be dead. Probably in the next few decades, perhaps the next few years, perhaps tomorrow.

YET? YET?

That's the kind of flawed thinking which projects exponential growth in consumption, forever, on a finite planet.

Or suggests the commentator is an economist.....

by Pa1nter | 15th Feb 23, 11:16am 1676413000

It is 100% correct that you'll be dead. Probably in the next few decades, perhaps the next few years, perhaps tomorrow.

So life is fleeting and best not wasted living in a circular myopic mindset of doom.

by jakenz | 15th Feb 23, 1:39pm 1676421586

Thank you for taking the time to reply to my comment PDK.

Yes, I shall certainly perish one day, yet this doesn’t change the validity of my comment nor make PE’s predictions any more accurate.

I write this looking over green paddocks on my small holding, lambs munching away happily, calves playing around, chickens picking at things, venison harvested on the weekend in the chiller, fresh fish ready to be cooked tonight. A bit sore from working hard clearing some bush to increase the vegetable production as there are more and more people interested in swapping fresh produce in our area.

We are very alike, you and I, the difference perhaps might be me believing in people’s innovative abilities, resilience and ultimately, if left alone, deciding to do the right thing. What do I know however, apparently where I live people are a bit backwards… 😉

by J.C. | 15th Feb 23, 9:33am 1676406832

A New Zealand or Aotearoa (whichever you prefer) with 1.5 million would be quite nice and natural, very quiet.

As long as you understand that the winter holidays to Fiji or ski trips to Whistler will no longer be available. And I think it's fair that any culling of people starts with the non-indigenous people. Those of Anglo Saxon stock are probably first to go considering their history of privilege and exploitation of others.

by rastus1 | 15th Feb 23, 9:49am 1676407788

NZ does not have an indigenous population. Some who paddled here quicker than others, but not indigenous (though they have messed with the definition in these sensitive times).

by J.C. | 15th Feb 23, 10:21am 1676409687

NZ does not have an indigenous population. Some who paddled here quicker than others, but not indigenous (though they have messed with the definition in these sensitive times).

You know what I mean. First in, first serve.

by refactornz | 15th Feb 23, 10:55am 1676411742

History shows the world doesn't work that way

by KH | 15th Feb 23, 10:07am 1676408834

Creepy J.P.

by Hemi Waipiro | 15th Feb 23, 10:16am 1676409390

As long as you understand that the winter holidays to Fiji or ski trips to Whistler will no longer be available.

Yep I understand. Given some of the unfortunate situations unfolding around the North Island currently, which clearly illustrate that when power and supplies are intermittent or non existent at best, overseas trips are not high on the agenda.

As for change, it's not best practice to be too specific with numbers and time frames because other social commenters will come along and tell you how 'wrong' you are, cough cough Yvil.

by singautim | 15th Feb 23, 10:39am 1676410788

It is happening. Just check out registered baby names or visit an Auckland pre-school or attend Rhymetime at your local library. The Anglo-Saxons are in rapid retreat.

by blobbles | 15th Feb 23, 9:58am 1676408293

Its not as simple as one number. We would need to include numbers of people in work, likely in particular industries as well.

There's no point in saying "We want only 4 million people", when you have 3 million people over 70.

by KH | 15th Feb 23, 10:10am 1676409040

You are exaggerating a bit there on the number ratio bobbles.

But ratios will change. And imagine not being always chasing to catch up with infrastructure. Currently about 50 years behind.

by JimboJones | 15th Feb 23, 10:32am 1676410333

Is he though? Lets say they turn off immigration and discourage (or even prevent) people having kids to get the population down, at some stage we will get to a point where there are no young people left.

The problem was created a long long time ago (the boomer bulge), we can't afford to have such a high percentage of the population retired when our superannuation is a pyramid scheme.

by KH | 15th Feb 23, 10:43am 1676411028

Exponential population growth and ignoring it does not end well.

by singautim | 15th Feb 23, 10:45am 1676411117

Why assume over 70 can't work? We are living longer and also healthier. The problem is not age but health. Our medical system is keeping the seriously ill alive longer and that applies to any age from the handicapped baby to the centenarian who breaks a hip. The cost of invalidity benefits is ever increasing.

by Pa1nter | 15th Feb 23, 10:55am 1676411708

Some over 70s can work but the range of tasks they can do diminishes inline with their faculties. Staying healthy helps but you can't fight nature.

by singautim | 15th Feb 23, 6:31pm 1676439099

True, my computer programming abilities declined and now in my mid-seventies I reckon 6 hours is a long working day. However there are many jobs I could do - notice the age of security guards at banks for example. I did enjoy being a chimney sweep after retiring. Other jobs could be parking attendant, barista and what I would like most - teaching maths to kids.

by blobbles | 15th Feb 23, 12:39pm 1676417948

They can work, but likely not in new industries, where the newer higher productive jobs are. Not without significant retraining and if you have ever had to train an over 70yo something on a cell phone, you will understand why.

by Pa1nter | 15th Feb 23, 1:20pm 1676420445

The flipside of that is the new industries are actually over subscribed, because boomers wanted better for their kids and pushed them into white collar jobs. So there's a void in blue collar jobs, and the white collar ones are more likely to be automated first.

by blobbles | 15th Feb 23, 1:55pm 1676422528

Blue collar jobs generally won't be done by over 70yos, their bodies mostly aren't up to it. They would more likely be advising the young only.

by blobbles | 15th Feb 23, 12:40pm 1676418034

My numbers were just examples, I don't mean for them to be taken literally. I am just saying that if we decide to cap population numbers, we will have to put caps on age population numbers somehow too.

by Pa1nter | 15th Feb 23, 1:21pm 1676420515

Yep, can't just cap it at a raw number. If 10% of your population was working age, you've probably got problems.

by nktokyo | 15th Feb 23, 7:46am 1676400413

The flooding in Auckland gives Chippy an out for light rail if he wants to take it.

by powerdownkiwi | 15th Feb 23, 7:50am 1676400635

You floating the idea?

by nktokyo | 15th Feb 23, 7:54am 1676400892

There's a strong current for investment elsewhere

by powerdownkiwi | 15th Feb 23, 8:01am 1676401268

I get your drift

by Foxglove. | 15th Feb 23, 8:09am 1676401767

“River of Dreams.” Billy Joel.

by kiwimm | 15th Feb 23, 9:50am 1676407806

Looks like it's raining puns today

by rastus1 | 15th Feb 23, 9:50am 1676407858

It's water under the bridge....next project pse.

by Foxglove. | 15th Feb 23, 1:41pm 1676421714

Water is under, over and through. Coromandel, Bay of Plenty, Hawkes Bay. Water goes where mother nature tells it to go. Speaking of projects, wonderhow that area in Napier, recently purchased by the government for housing, is faring given that it was said to be a flood plain but once the government acquired it, according to Minister Woods, it wasn’t.

by rastus1 | 15th Feb 23, 2:59pm 1676426368

My old biddy who just died. We suggested rest home Te Awa. No way she would say...that land is way to low..should never be built on.

Te Awa including Somerset has just been evacuated.

That little old lady could see what engineers, councillors and ppty people chose not to see.

by rastus1 | 15th Feb 23, 1:00pm 1676419202

by KH | 15th Feb 23, 8:26am 1676402811

Down the drain.

by nktokyo | 15th Feb 23, 7:55am 1676400923

Just about every business owner I've talked to in the last 30 days is pulling back. Est 15 folks over a range of industries.

Fewer hires
Use the opportunity to cut bad clients
Reduce costs
Pause on new internal expenditure projects. Make do for a year and reassess
Build cash reserves

Basically the corporate version of what consumers are, or should, be doing. B2B is in the same boat.

If you haven't already... look at redundancy insurance.

by Pa1nter | 15th Feb 23, 8:35am 1676403334

I pulled back in March 2020. Hard to say if it's turning out better or worse than I felt it would.

Hey, maybe it's a good time for people to retrain in a vocation we have a severe skills shortage in. Two birds with one stone, keep an income, keep out a pesky foreigner.

by kwbrn | 15th Feb 23, 9:03am 1676405018

Is this a dig at the RE industry,

Those of us in IT know all about retraining. Not much use for Wang OS, RSTS or COBOL these days.

by Pa1nter | 15th Feb 23, 9:39am 1676407189

It's advice for anyone that thinks they need redundancy insurance.

by dumbthoughts | 15th Feb 23, 9:08am 1676405309

Same feedback I'm hearing as well (apart from some of the Grant Cardone-reading "manifest your destiny" types who reckon that if you go big on leverage you'll be forced to work harder to make the sales ... seems a bit cultish to me but whatever. Interestingly enough there is a strong correlation between that mindset and being involved in property development or related lines of work).

I'm having the exact same conversations on a daily basis:

Lowered hiring intentions
Trying not to re-hire if someone has quit
Deferring new equipment purchasing
Cutting advertising/marketing costs
A general feeling of "the best times are past us"

In terms of my own business, I don't have any staff - just a few contractors on an as-needed basis - and I don't have particularly high costs anyway apart from paying myself.

However, I am cutting what costs I do have where I can, and I am trying hard to build up a big cash moat to weather any storm (pun and offence to those affected by the cyclone not intended).

I am definitely noticing it's taking longer to get paid, and I'm having substantially more of those awkward "oh we totally didn't see your invoice in the inbox"-type conversations.

by Jonny.Foe | 15th Feb 23, 8:15am 1676402131

The medicine is working, but very slowly, which is probably not a surprise given the strength of their labour markets still.

The medicine is at best a placebo - the US rate hikes are almost certainly doing more to push up prices than they are to bring them down for five reasons:

Increasing costs for businesses are being passed onto customers (same as in NZ)
Rate hikes are making no difference to consumer disposable income because mortgages are almost entirely on a 30-year fixed term (very different to NZ)
House buying has slowed down - people are sitting tight - that's why there are some sign of rent increases as people wait out the market (inflationary on rents) (same as NZ - see yesterday's figures)
HIgher interest payments on reserves mean billions of dollars of stimulatory dollars are being handed to banks (higher US debt as % of GDP ensures that this on a much bigger scale than in NZ)
Because people have jobs and salaries to spend, the consumer economy keeps going and businesses keep hiring, and the 'inflation reduction act' investment will also add jobs (different to NZ). The labour market is not tight - it is moving towards actual full employment (as it was in NZ before Adrian stuck his Orr in)

What is bringing the rate of price increases down is the unwinding of knots in supply chains, US strategic interventions in energy markets, and lower imported costs (shipping etc).

If we follow the Fed with futile rate hikes, we are going to be royally screwed here.

by bw | 15th Feb 23, 8:23am 1676402624

"It doesn't matter what should happen, but what's going to happen that does"

That's how money is made, as I'm sure you know.

So we can ignore The Fed and RBNZ etc if we wish, but we shouldn't be surprised if what they tell us they are going to do, they do.

by Jonny.Foe | 15th Feb 23, 8:40am 1676403644

I would definitely not ignore the Fed or RBNZ. The Fed is crushing economies across the world - whilst its own economy is ironically (purposefully?) very well insulated from its destructive action!

What RBNZ are doing is simply crazy - and they will crash the economy and send tends of thousands of people onto the dole and misery. I wish they would go back and read what Bill Phillips (the kiwi of Phillips curve fame) actually wrote in his 1958 paper on inflation; particularly the section on what happens when the import price of key input price commodities spike.

by Blackdog | 15th Feb 23, 8:22am 1676402566

if interest rates here keep going up kanga ora will pick up some bargains

by Jonny.Foe | 15th Feb 23, 8:32am 1676403127

silver linings.

by Chaosinflesh | 15th Feb 23, 10:23am 1676409834

Talked to someone yesterday who told me their house price is going up according to their bank evaluation app. I expressed my surprise, given the REINZ and QV data yesterday... then they mentioned two houses on their street were bought by KO in the last month - who overpaid by more than $200k ($650k for houses valued at $450k in the height of 2021).

KO is stuck in a feedback loop of people not affording homes needing to be housed, whilst KO pushes prices up, causing more people needing to be housed.

Hopefully the wider market crash will be able to overpower this, but in some communities it looks unlikely.

by Audaxes | 15th Feb 23, 8:40am 1676403607

Today's CPI was mostly shelter imputations. A little bit of transitory (yeah, I said it) rebound in gasoline prices. Other than that, damn I now have to agree with Jay Powell. The full disinflationary process has reached its fourth month in a row. Link

This is also the reason why market curves globally reacted so heavily and decisively in early November - that was when the October CPI in the US was released which showed outside of shelter and the non-economic factors in energy, price pressures had materially changed. Link

by J.C. | 15th Feb 23, 8:48am 1676404132

I'm over Jeffrey Snider and find his ideas too challenging and / or oblique for me to reconcile. While I understand the idea of the Eurodollar and the distributed ledger and the irrelevance of the central banks, it still doesn't make any sense to me how this is all one big game between commercial banks. Perhaps I need to do the Eurodollar University course to really understand things. But Jeffrey needs to understand that as well because I'm sure that I'm not the only person who doesn't fully understand his narratives.

by Audaxes | 15th Feb 23, 10:09am 1676408972

Rings true to me - I worked at a US owned Eurodollar bank based in London. The London branch dwarfed the US head office and didn't report to any central bank.

The CME retains the world’s most actively traded futures contract but for how long?

The CME Eurodollar contract traded a $127 trillion of notional value on turnover of 509 million contracts in 2020

Off balance sheet OTC swap trading hedges in the interest rate and currency markets are magnitudes greater.

by J.C. | 15th Feb 23, 9:37am 1676407031

The CME Eurodollar contract traded a $127 trillion of notional value on turnover of 509 million contracts in 2020

Off balance sheet OTC swap trading hedges in the interest rate and currency markets are magnitudes greater.

Right. I think your life experience puts you in a better position to understand these things. But even this short illustration is a moment of clarity for me.

by mikekirk29 | 15th Feb 23, 8:49am 1676404168

When inflation was b all no one complained about interest rates being virtually nil. Now inflation is over 6% and rates are below that the whining never stops . Rates should be above inflation or they are in fact negative and hence still stimulative. Economies with v low unemployment shouldn’t be stimulated. Trying to remove the economic cycle is v silly and dangerous

by Averageman | 15th Feb 23, 11:19am 1676413179

Agreed

by Baywatch | 15th Feb 23, 8:58am 1676404711

IMF says El Salvador's bitcoin risks have not materialized but 'should be addressed'

Feb 10 (Reuters) - Risks over El Salvador's embrace of bitcoin "have not materialized," but use of the cryptocurrency still requires transparency and attention, the International Monetary Fund (IMF) said Friday in a statement after a visit to the Central American country.

Real GDP is projected to grow by 2.4 percent in 2023, the IMF said, above the historical average.

by kwbrn | 15th Feb 23, 9:00am 1676404857

"Singapore said it will raise taxes for buyers of higher-value properties and luxury cars, as it tackles a growing wealth gap"

We used to have higher duties on luxury cars back in the 70's. If you wanted to display your apparent wealth then you had to pay for it.

by Advisor | 15th Feb 23, 10:25am 1676409907

Singapore is taxing the wealthy and increasing tax deductions (subsidies) on qualifying R&D expenditure from 250% to 400%.

As much of the world shuns neoliberal policies, NZ stays firm on this road to socioeconomic ruins.

by Audaxes | 15th Feb 23, 9:59am 1676408365

Emergency move to relax lending laws for flood, cyclone victim

For the already wealthy.

by nktokyo | 15th Feb 23, 9:17am 1676405874

What I love about Interest.co is the high level of empathy from it's members.

by HouseMouse | 15th Feb 23, 9:53am 1676408036

Yeah. Lots of potentially sociopathic mindsets around here 👀

by Noncents | 15th Feb 23, 10:45am 1676411135

Sociopathic? or are some people are just more aware that a short term hit, can lead to more severe long term issues.

by HouseMouse | 15th Feb 23, 10:48am 1676411326

I would say some commenters display such a severe lack of empathy so as to suggest they have a pathological condition.

by Noncents | 15th Feb 23, 11:09am 1676412593

Agree 100%, but I don't think this particular comment is one of them.

Artificially reduced lending for a period will not fix anybody's cyclone issues or existing financial strains. It will inevitably lead to the rich taking advantage of it, and the poor subject to even more pain in 6 months when it all needs to be repaid. Just like we saw in Covid, Chch, and everywhere else.

Borrowing is never the solution to any of life's problems.

by rastus1 | 15th Feb 23, 10:00am 1676408455

The lack of empathy a consequence of the specuvestors who pratted on relentlessly as to how smart and successful they were - at the same time rubbishing the young as they denied them the same home buying opportunities they enjoyed in their youth.

And now just look at the mess they have created form this housing ponzi.

by nktokyo | 15th Feb 23, 10:07am 1676408866

Case in point.

I have a lack of empathy for flood victims because property investors.

by rastus1 | 15th Feb 23, 11:51am 1676415063

I don't think many of us have a lack of empathy for the poor who are the most affected by the floods - in many cases due the decisions to build low cost housing on flood plains and swamps.

Who who benefited from these poor decisions?

Yep...the property industry.

by Nzdan | 15th Feb 23, 9:30am 1676406652

Why can't the Government issue $10k interest free loans to the victims? At repayments that are affordable?

If their bank accounts are already linked to IRD then *ding* here's $10k, IRD applies $10k debt to their tax account.

Oh that's right it'll become an attack vector for the Government as $100 million shows up as a debt on the Gov books, rather than an asset on a bank's books.

by FCM | 15th Feb 23, 11:28am 1676413689

On top of some ST monetary relief, they will need to set up a construction task force as they did for CHC earthquakes and Kaikoura. Way too much damage to try and fix with local contractors. Blueprint is already proven. Issue they will have is trying to get skilled workers now, but they have to do it otherwise the fix will be 5-8 years, instead of probably 18-24 months.

by Nzdan | 15th Feb 23, 12:15pm 1676416505

At least in the CHCH earthquakes you still had people living in their damaged homes, albeit with portaloos and tanker water.

This could be a completely different beast.

by rastus1 | 15th Feb 23, 11:45am 1676414752

The reason = inflation.

Handing out cash does not replace the lost crops and productivity.

When there is an absence of supply, prices go even higher.

Global lesson of the covid cash rush.

by Nzdan | 15th Feb 23, 12:13pm 1676416397

So people borrowing an extra $10k from the bank is not inflationary? We are talking about the move to relax lending laws as a "privatized for profit" relief package.

Those people that need a $10k mortgage top up, could instead obtain that $10k from IRD? IRD will have their latest address on file. Log in to MYIRD, click apply for relief button. Boom done. Button greyed out for people outside flood areas e.g. Dunedin etc. Usual disclaimer on fraudulent information.

by rastus1 | 15th Feb 23, 1:04pm 1676419451

Lets make it $200k then..for everbody.

by Nzdan | 15th Feb 23, 2:33pm 1676424835

Sounds good. Let the banks lend $200k to everybody without having the need to perform affordability assessments. Because $NZD lent from the bank is not the same as $NZD lent from the Government.

by rastus1 | 15th Feb 23, 3:41pm 1676428908

For inflationary affects what would be the difference? You have extra cash chasing same diminished resources. Why would the source of the cash matter?

by J.C. | 15th Feb 23, 9:43am 1676407417

Emergency move to relax lending laws for flood, cyclone victim

Credit creation for non-productive purposes as an extension of the govt.

by blobbles | 15th Feb 23, 12:47pm 1676418434

Extend and pretend, only now its linked to climate change events.

by Squishy | 15th Feb 23, 10:35am 1676410529

If you strip out food and energy...

And so the Amish Consumer Price Index (ACPI) was born. Most relevant to those who grow their own food and ride a horse to work.

by HouseMouse | 15th Feb 23, 12:12pm 1676416328

This flies in the face of the ‘broken windows fallacy’ nonsense being spouted the other day, by one individual in particular, about disasters being good for the economy:

https://www.nzherald.co.nz/nz/politics/cyclone-gabrielle-storm-will-hav…

by blobbles | 15th Feb 23, 12:45pm 1676418346

And its only going to get worse. As I have said repeatedly, our ability to actually grow anything economically is being eroded by climate change events. As we lurch from one climate change induced disaster to the next, we won't have any spare capacity to build anything new. Infrastructure retreat will be the only viable option, coming to a town near you.

Eventually we have to pay for ignoring this chronic issue which we have known about for 50 years and decided to ignore. Its like we have had a tumour growing on the planet for 50 years which we could have cut out or slowly got rid of by being healthy. But instead - nah, lets double down on fossil fuels and burn everything down.

by FCM | 15th Feb 23, 1:22pm 1676420575

There will be plenty who do benefit, lets hope we actually spend the rebuild costs with NZ companies so they can pay some of the Crowns borrowings back as tax. Issue we have is Government (NZ) is ba** deep in debt and they can ill afford this clean up bill. Don't expect the overseas insurance companies to have a speedy process with trying to resolve this quickly either.

by HouseMouse | 15th Feb 23, 1:46pm 1676421978

Yes there will be plenty who benefit. But overall, the economic costs are certain to exceed the benefits.