Here's our summary of key economic events overnight that affect New Zealand, with news underlying resilience is holding the global economy from any meaningful pullback.
There are no real signs yet of weakness in the American labour market. Their jobless claims were expected to rise last week, but they fell and were below their low year-ago levels. There are now 1.9 mln people on these benefits, 1.3% of their workforce.
The American Q4-2022 GDP growth data was updated today. Recall the advance estimate was a surprise +3.1% rate and this latest update was expected to trim that to +2.9%. But in the event, it has come in even lower at +2.7%. Actually, this second estimate recorded a higher nominal expansion, but also a higher price adjustment, so the 'real' expansion is lower. There will be a third estimate released on March 31 (NZT). The Q4-2022 New Zealand GDP result will not be released until March 16.
The next regional Fed factory survey is out, this one from the Kansas City Fed district. It shows a slight easing of conditions there, but they did record gains for new orders and jobs, which is more positive than many other districts.
In fact, the Chicago Fed's National Activity Index suggests economic growth picked up in January, and probably its best expansion in six months.
Taiwanese industrial production slumped more than -20% in January from a year ago in a worrying dive. But their retail sales rose on the same basis, although at a fast-easing rate.
Singapore's inflation rate was little-changed in January at 6.6% (December 6.5%). But this was less than the expected 7.1% so they will count this as a win.
In South Korea, they had a monetary policy review yesterday and they held their benchmark interest rate at 3.5%, as expected. This is regarded as a hawkish pause as more voting members seem to be open to future hikes. They are still battling inflation above 5%, but their expansion is slowing.
We should note that the case of mad-cow disease in Brazil has been confirmed. Already, exports to China have been suspended. This may rock beef prices in the short-term and the share price of all the major Brazilian exporters have been hit hard.
In Australia, a migration boom is underway. More than 400,000 permanent workers arrived in the country in 2022, and while this pace is expected to ease off, they still expect +350,000 this year and another +275,000 next year. That is +1 mln in just three years, and alone will raise Australia's population by +4% and decrease its average working age. They seem to be up for the inevitable stresses that may bring in the short term. If demographics is destiny, then Australia's looks bright.
The OECD is noting that international trade contracted in value terms in Q4-2022, although some of that is related to the sharp falls in the price of crude oil.
Reflecting that pullback, global container shipping rates fell another -3% last week and are now -30% below ten year averages. Bulk cargo rates actually stopped falling this week and turned a little higher, but are still near their pre-pandemic lows.
The UST 10yr yield starts today at 3.91% and up +1 bp from yesterday but still off its recent highs. The UST 2-10 rate curve is a tad more inverted at -78 bps. But their 1-5 curve inversion is little-changed at -92 bps. Their 30 day-10yr curve is unchanged at -64 bps. The Australian ten year bond is little-changed at 3.90%. The China Govt ten year bond is also unchanged at 2.94%. But the New Zealand Govt ten year is starting today at 4.68% and up another sharp +13 bps from yesterday. That is back to its recent highs which were the most since 2011.
Wall Street started its Thursday session with the S&P500 higher. But that has now turned and in late trading it is now -0.3% lower. Overnight, European markets were all higher by about +0.5% except London which closed down -0.2%. Yesterday Tokyo was closed for a public holiday. Hong Kong ended down another -0.4% and Shanghai slipped -0.1%. The ASX200 ended down another -0.4% but the NZX50 had a good day, up +0.8% in Thursday trade.
The price of gold will open today at US$1820/oz and down -US$12 from this time yesterday.
And oil prices start today up +50 USc at US$75/bbl in the US. The international Brent price is now at US$81.50/bbl.
The Kiwi dollar is at 62.1 USc, softer than this time yesterday. Against the Aussie we are a little firmer at 91.8 AUc. Against the euro we are unchanged at 58.7 euro cents. That all takes the TWI-5 to 70.3 and a -10 bps easing.
Bitcoin has risen +1.1% since this time yesterday and is now at US$23,865. However, volatility over the past 24 yours has again 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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76 Comments
Much to be admired in this piece (it's written about Australia but has applicability to NZ) : https://www.theguardian.com/business/commentisfree/2023/feb/22/forget-t…
Excellent article. My only reservation with it is I think he somewhat underplays the economic damage that will arrive with rising interest rates.
Hard to imagine anyone wishing to be in receipt of fiat currency for work done if this condition persists:
In reality, rates would have to increase much further to be effective. Despite rises, real rates (interest rates minus inflation) remain negative. This means borrowers continue to pay historically low rates which do not properly compensate savers for the loss of purchasing power of their money due to inflation.
Where are the bond vigilantes? Ohh, pricing recession down the road.
The variable component (c/kWh) of my natural gas bill is rising from 10.581 cents to 11.827cents + 11.78%.
I was fortunate to lock in a gas price about 4 months ago for a year of 10.8c/kWh incl gst but excl discounts of 12%.
War in Ukraine for the gas price increase?
Yet the headlines here have been all about the international gas price slumps. If only an LNG import terminal were cheap to build.
Who are you guys with? 8.802c ex-GST with Nova... (10.12 incl)
8.919¢ the current sign up rate https://www.novaenergy.co.nz/offers/energy-only
Australia - "we need people to replace our aging population, how can we make it easy for you?"
NZ - "we need people to replace our aging population, but don't really want you, please apply for this waiting list and ignore news for the next several months that you can go to Australia sooner, earn more, and spend less"
I wonder how many kiwis are in those Aussi numbers. Seems many high skilled people are leaving presently.
Arguably that emigration is only going to increase unless NZ gets some new and better direction. At present we have governments of the left hand and right hand sort of, all that results in is one big clap. Simplistic perhaps, but how does a nation needing to enlist large numbers of immigrants to bolster the workforce have such a large number of citizens being subsidised to not work?
'Debris removal workers' included in the just announced fast track visa system.
Silly me thought we had an unemployment problem in Hawkes Bay/Gisborne.
Cheap Pacific Island labour wanted.
I think the operative word is "willing", not cheap.
Many immigrants were using NZ as a bridge to Aussie after not qualifying for entry there. Now that Aussie is open, and a promised easier path to citizenship for kiwis, why would you stay here to be exploited by the overshoot in debt speculation presented as stupidly high rent and higher house prices?
Expect more productive youth and recent immigrants to hit the one way departure. It's ok, we can continue import 501s.
Agreed. Despite Australia not being as lucrative as it once was. It is the obvious choice for migrants right now
Many will be nurses and anaesthetic technicians. Elective theatre capacity in Auckland is a fraction of what it could be due to staff shortages. The covid blanket excuse is past its sell by date. The reality is a human resource crisis due to migration to Oz.
I spend a reasonable amount of time in Aussie, Without doubt earnings potential is much higher. However if you put 4 major NZ newspapers side by side with 4 major Australian papers and cut the headers off the top you would be hard pressed to tell which country they came from. (a little simplistic but you get my drift) The issues in both countries are exactly the same! Now that they have an almost total Labour red out of local and federal government they are fast implementing similar divisive policies that our government has.
The cost of living and rents have sky rocketed! Even petrol is not that much cheaper than here. If I was a young, newly trained job seeker I would be looking across the ditch too. However just like here there are plenty of jobs available, but they all want experience!
I know 3 sets of young people who left last year. NZ too expensive, better wages in Aus, better oppourtunities, better quality of life, they see NZ only working for old folk. But one day maybe they will come back, was pretty much the gist of why.
pretty much the tone of quite a few comments in this site over recent years. Can't blame them.
I really don't understand the 'low wage, low living standard' paradigms that tend to infest successive governments in NZ. Possible going back to the early major Labour Governments. This attitude is crippling our country and causing huge wastage.
We're just going to get Terminator style robots to do it.
I have always liked the Terminator movie's.
We have lost five staff members to Australia in the last three weeks. All aged 24-30 bracket. (2 are transferring to our Australian office's) the other 3 have other jobs lined up. All getting about 30% increase on what we can pay. Now trying to replace them, only had 8 CVs so far across all roles, 3 of those were full of spelling errors so won't advance those ones.
Perhaps you need to pay 30% more.
Or keep paying the same, but maybe become a little less picky about a few spelling errors. You get what you pay for etc.
Yep...but in the real world...
... you just watch as you lose staff to those who pay more.
again, in the real world.
Do the Australians charge 30% more? Or are they 30% more efficient? How can they pay 30% more?
I’m told more efficient……I guess economies of scale plays a part also. I’ve been looking at jobs that pay 25-30% more, with house prices considerably lower (obviously area dependent). The racial division being created is a big motivating factor for me…..and the fact that I just can’t see a long term future for anyone under about 55 in NZ.
That could only be passed on in inflation to consumers, or end on bankruptcy. Everyone happy with a 30% inflation rate...?
How can the Aussies pay 30% more and yet apparently things are cheaper there.
Family member of that age left, as are a lot of her circle. Pay was not the driver (but helped) - the driver was primarily due to immovable middle mngt who spent more time WFH and had no interest (or ability) in developing the business.
Another family member has the same problem. Managers who need to get out of the way as they have lost interest in the business - but a comfortable in doing same old.
Many our brightest have had enough.
Cost of living here is crazy.., and staff wanted signs everywhere as well Going to get worse as interest rates keep going up. But hey it's the war against inflation so will be worth it.
That remark indicates you do not appreciate how destructive inflation is. It has to be controlled or we really will become a basket case economy.
New Zealand is a basket case economy. I can't wait fr the budget lol
Will there be another cost of living allowance included?
...all aged 24-30 bracket. (2 are transferring to our Australian office's) the other 3 have other jobs lined up
People who live in glasshouses shouldn't throw stones.
There should be no apostrophe in "office's"
Isn't it a grammatical error, not a spelling error?
The demographic dividend of pumping more humans into the country is self defeating resulting in poorer overall quality of life.
We are all just chasing a finite pool of resources.
We can produce more with fewer working-age people today than at any time in history. With the right policies to redistribute wealth, falling populations could be a boon rather than a curse.
If we check out nations undergoing depopulation, decreasing productivity per worker seems to feature fairly heavily.
That's an interesting comment. Evidence? How accurate is it? any understanding as to why?
It's not the direction it needs to be going.
I looked through productivity rates of the countries experiencing the most rapid forms of aging/low birth rates. Japan was the only one not featuring negative productivity, although they were only flatlining.
As for the why, I'd only be guessing. Less attractive investment environment, and demands of elder care are the two possibles that come to mind initially.
It doesn't look like a situation that magically resolves itself.
The issue of aging populations will be largely resolved by 2050 as the 'Boomers' fall off their perches. Indeed we will see increasing number of Boomers falling even now.
But economic will require productivity to be improved if not at least maintained. That will require investment in technology and automation. The climate issue will require many if not most or all business paradigms to be reviewed and shifted. Greed will resist that from occurring. De-population should be viewed as a positive. It will put pressure on them though.
If things seem bad now, how mint do you reckon our public services and infrastructure will be after 25 years or ballooning costs and shrinking revenue.
About what they look like after 25 years of neglect!
But let's consider if a completely unknown individual, not particularly well spoken - just average, few rough edges, but with a vision for a transformed economy and how to do it that gave everyone an opportunity while it moves the country away from old paradigms, came out of no where to create a party to run for government - how do you think that person would be received?
I think the majority would reject them based on old attitudes. I disagreed with most of TOPs policies, but they too got rejected despite many liking their policies.
We can have everyone on NZ super and be fine? We already don't have enough working age population, hence low unemployment.
Our infrastructure is a shambles. Immigration should be limited to skilled immigration in key urgent areas such as health and education until it’s sorted out.
If businesses go under because of that then so be it.
Except healthcare and education in this country pays a pittance. We need to address that before pretty much anything else, and urgently.
Yep
Who's paying for the infrastructure and increased nurse wages?
The sick and elderly I presume
Well, we need more tax revenue. AND more focussed and less wasteful spending.
And that is why we are screwed. The Nats minimise taxes, and Labour are very wasteful and unfocussed in their spending.
HouseMouse we have a building industry that is about to go belly up because the demand for houses is dropping off. Wouldn't this be a good time to bring in migrants?
No.
this whole high growth model is fundamentally flawed.
As is our housing. But whats happening in housing, I have come to the conclusion, is becoming more of an efficiency problem in the last decade or so, not necessarily a lack of land/density.
Look around you and count how many of the aging population are still in houses designed for families but are simply retired people. If I count the 6 houses directly around me, 3 are being used efficiently (a person per bedroom). The other 3 have a single old person or couple in 3-4 bedroom homes. I am talking to a lot of middle aged people these days also about their parents, most of whom are in 3-5 bedroom homes in/near cities. Even my own family has 5 seniors taking up houses with 19 rooms - 3 rooms each with 4 to spare! A couple of them literally never visit half their house and just keep the doors shut so they don't have to vacuum etc.
We need an LVT to encourage them to move on and allow families/young people to use the housing stock (and hence infrastructure) better by buying their houses and setting up families/flatmates. We also need to have more livable retirement communities for them built on the outskirts.
We have three empty within a stone throw and only one of these on the market.
"We also need to have more livable retirement communities for them built on the outskirts."
Agree with most of this but the livable retirement communities need to be built in the centres. People are reluctant to leave their homes because they feel like they will get pushed out to the outskirts. We need more apartments for elderly people within walking distance of town centres not shoved to the outskirts. It improves quality of life for elderly as they are less reliant on others for access to services and improves the vibrancy of town centres as there are more people out and about doing stuff. Locking people up in retirement homes in the outskirts is pretty callous.
You reckon most old people in NZ want to live in the city centres and lots of old people in the city centres are going to make them more vibrant? I don't know where to start.
Your last sentence could be "Locking people up in retirement apartments in the cities is pretty callous." For reference, see Japan and Hong Kong. Outskirts are quiet and leafy, I don't know about you, but every old person I know wants a peaceful, quiet retirement, not the hustle and bustle of inner city living.
I said town centres not city centre or inner city living. I imagine you're thinking about downtown Auckland, I'm talking town centres like Panmure, Avondale, Pukekohe, Takapuna, Henderson, etc...
It might surprise you but old people like doing stuff other than sitting around waiting to die on the outskirts of town.
They like going to the shops, libraries/community centres, participate in community groups and activities, sports, grabbing a coffee, breakfast, brunch, lunch, dinner. They go to doctors and post office and lawyers and accountants and cinemas. And they even just hang out with friends.
New Zealand suburbia is not comparable to Hong Kong or Japan. Suburbia in NZ has very little in the way of amenities, you have to drive anywhere to get to anything. Public transport is poor and density is low and there are big distances to cover. As people get older they lose the ability to drive safely which is the only way to get around suburbia. If they get shifted out to the outskirts they become hostages in their own homes. We should plan our towns and cities so people can stay in the place they lived all their life if they choose to do so. That means different housing types for different stages in life in the same area. Close to town centres makes the most sense.
And yes, old people definitely add vibrancy to town centres. The more people of different demographics the more vibrant the town centre. I think your comments reveal a (I imagine unintended) ageist undertone.
Yeah we are talking about the same thing, just you are being considerably more presumptive. I am saying they should be encouraged to move away from inner city suburbs, which I think is the same thing you are saying (i.e. the suburbs right next to the city, the Grey Lynns/Newmarkets etc). Which is what a LVT would help solve, because those suburbs would be considerably more expensive due to high land values. I consider Henderson an outlier suburb, far from town centre, still with services. I wasn't talking about moving them to hicks ville nowhere land.
You are far too defensive and presumptive, tone it down a bit.
We live approx 300m from our daughter's school, I walk her to and from 3 - 4 days a week. A few other schools including private within 1km of us. Amazing how many elderly people seem to live in our street and how few kids walk from nearby properties.
I'm sure the countless cars that clog the streets, double parked to drop off the kids, belong to people who would loathe living near the schools.
No, we're not saying the same thing at all. I'm saying if they lived in Grey Lynn, Ponsonby, Newmarket all their life they should be able to live close to that area. They shouldn't have to stay in their 3/4 bedroom houses. They should be able to transition to a well designed retirement apartment in those areas. The inner suburbs need a lot more intensification.
Banks have migrated away from lending to productive business enterprises because the risk weights can be as high as 150%. Thus around 60% of NZ bank lending is dedicated to residential property mortgages owed by one third of already wealthy households
Mad Cow - Brazil export about 5 times the beef to China we do, that said sounds like its not come in from offshore sounds like it occurs spontaneously this type? lets see. on Zerohedge
Could be a huge boon to beef and other meat industries here if we play it right. We are unlikely to play it right.
My thought for the morning is discretionary spending is going to crash. And so what?
We have been living in a mirage of an economy fuelled by a debt induced property bubble.
People can live with less meals out, new shoes etc etc
Yes, unemployment will rise and some businesses will fail. C’est la fucking vie
The problem in New Zealand that’s driving Kiwi’s to emigrate is the cost of living, primarily housing. There are a lot of countries in Asia that have low incomes relative to New Zealand but more importantly have lower costs for living than New Zealand. New Zealand is fast becoming a Hong Kong in the South Pacific with property prices to match.
Soon to be an understaffed wrinkle farm
The problem in New Zealand ... is the cost of living, primarily housing.
And it has been thus for decades while we kept wages low with additional supply (immigration). Only when the price of petrol and food went up a hundred or so a week did the media start up about a cost-of-living crisis. Ignored rents (and house prices) going up many multiples of that even though both are practically unavoidable (if you live in NZ).
This is why I support The Opportunities Party (TOP) - they are the only one taking the main cost of living element seriously with their Land Value Tax (LVT) which is then used to pay for the first 15k of income being tax free (reward for working) so it isn't a tax grab. It is better than the Greens wealth tax as it targets the primary cost of living without the loopholes. Many other problems such as mental health due to financial stress would also be reduced if we made this county affordable to live in.
I can’t stand TOP. A land tax….another tax to be wasted on nice to haves…no thanks. How about the government stop wasting our money!
Nice to haves .. like reduced income tax for all.
I agree with the stop wasting money part. I wish politicians would just say what and why they want to do something and get on with it. The endless butt-covering with consultants etc is painful.
However, a tax switch (as is proposed by TOP) takes no additional tax as you state. The money raised from land holders (including overseas owners and land bankers waiting for council services/zoning to uplift their land value) and refunds it to current workers by giving them the first 15k of income tax free. This encourages the best efficient use of land, rewards those who work, now you know it's a tax switch (not an additional tax) are you okay with this TOP policy?
The forever cynical among us will shut down any ideas like this, forever keeping us in "business as usual", because they'll think that a tax switch policy will not actually result in tax switching. That politicians will just take more and more etc.
Singapore's inflation rate was little-changed in January at 6.6% (December 6.5%). But this was less than the expected 7.1% so they will count this as a win.
OUCH! Eurozone #inflation for January tops earlier estimate. CPI rose 8.6% in Jan YoY, up from 8.5% increase prev estimated. Core CPI, which strips out volatile categories, was 5.3%, up from preliminary estimate of 5.2% and fresh ATH. Core gives ECB hawks new fuel for more hikes. Links
Good Morning from Germany, where supermarket #inflation remains elevated. German Food CPI jumped 20.2% YoY in Jan. Following the rebalancing of the basket of goods by German Statistics Office, food now has a higher weight in inflation rate. Share rose by 2ppts from 8.5% to 10.5%. Link
The UST 10yr yield starts today at 3.91% and up +1 bp from yesterday but still off its recent highs
More debt = lower real yields. At +150 bps, 10y real yields today are way above what this long-term relationship would suggest. So, good opportunity for medium-term investors to buy bonds? Or regime change, and the economy can function with much higher real yields? Link
It begins. Email just received from Rabo:
Hello,
We want to let you know that some of our Rabobank Online Savings interest rates have increased effective 24 February 2023:
RaboSaver
The rate has increased from 3.10% p.a. to 3.45% p.a.*
PremiumSaver
The premium rate has increased from 3.75% p.a. to 4.25% p.a.**
The minimum rate has also increased to 2.00% p.a.***
Remember that your month-end balance must increase by at least $50 from the start of the month (excluding any interest paid during the month and after any withdrawals made during the month) in order to qualify for the premium rate. You need to do this before the last business day of the month.
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The rate has increased from 4.00% p.a. to 4.50% p.a.****
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