Here's our summary of key economic events overnight that affect New Zealand, with news deposit insurance and financial stability are getting involved in an unhealthy mix.
But first up, in the US there were the two competing PMIs for April released overnight. The closely-watched local one recorded a contraction, although less than expected and less than in March. The internationally benchmarked one recorded a small expansion after a minor contraction in March. Both suggested price pressures are not yet easing.
And we should note that JPMorgan Chase was the 'winner' in the FDIC auction to take over the failed First Federal Bank. They beat out two other bidders (PNC and Citizens Bank). Meanwhile, regulators are reviewing their deposit insurance scheme, one that was found wanting during the recent turmoil. Rather than protecting deposits to a limit, they face having to expand it to some sort of unlimited version. Interestingly, financial markets have shrugged of worries about bank health.
The RBNZ is due to institute a deposit guarantee scheme here, so they will no doubt be assessing what lessons they can draw from all this. The world is shifting to a policy trap where no-one can get hurt from risks that go bad.
The Canadian PMI was out overnight too and recorded a tiny expansion with price pressures not easing.
In Japan, their PMI is neither expanding for contracting which is an improvement from March. New order levels are firmish. But price pressures are being passed on.
In South Korea, their export engine is stuttering, extending a long decline to seven straight months. The pullback was led by a persistent slump in the semiconductor sector in the face of a global economic slowdown.
China is still on on its Golden Week holiday. Some financial businesses will start returning on Thursday. Travel volumes on the first day of this holiday were reportedly strong. But in commodities markets, prices for most raw materials are still retreating as confidence China will build back better evaporates.
In India, their factory PMI rose to a good expansion with increases in new orders and output.
In Australia, their factory PMI has declined further and is now contracting, capping almost three years of retreat. New order levels are declining faster.
Australian job ad levels fell again, now well off their peak. But the April slip was less than earlier months.
And staying in Australia, all eyes will be on their central bank and their monthly rate review, due at 4:30pm NZT today. No change is expected from the current 3.6% level, even though their inflation remains high and sticky at well over 6%. The RBA has been under severe political attack in Canberra, with substantial reforms planned for it. But so far their Governor is holding his course through these storms. The political pressure is to lower the policy rate levels to give highly-leveraged households debt-payment relief despite the unusually high level of inflation. And arguably the relatively low current policy interest rate is helping fuel a renewal of higher house prices. They are in a kind of no-man's land, policy-wise.
We should also probably note that Australia will essentially ban vaping, limiting it to prescriptions for legitimate therapeutic use, and calling it a menace to children and public health.
The UST 10yr yield starts today at 3.58%, and up a very sharp +15 bps from this time yesterday. The UST 2-10 rate curve is little-changed at -57 bps. Their 1-5 curve inversion is now at -125 bps and slightly less inverted. And their 30 day-10yr curve is now inverted at -80 bps with this inversion marginally less too. The Australian ten year bond is up +15 bps at 3.42%. The China Govt ten year bond is still at 2.79%. But the New Zealand Govt ten year is down -5 bps to 4.09%.
Wall Street has opened its week unchanged in Monday trade. Overnight, European markets were up about +0.3%. Yesterday Tokyo closed up a strongish +0.9%. Hong Kong and Shanghai were both on holiday although Hong Kong returns today. Yesterday, the ASX200 ended up +0.4% while the NZX50 ended down -0.1%.
The price of gold will start today at US$1982/oz and down -US$9 from day-ago levels.
And oil prices have fallen -US$1 from yesterday to be just under US$75.50/bbl in the US. The international Brent price is just under US$79/bbl. Yesterday's weak Chinese PMI data is undermining this price.
The Kiwi dollar is little-changed against the USD and now at 61.7 USc. Against the Aussie we are -½c softer at 93 AUc. Against the euro we are up marginally at 56.2 euro cents. That means the TWI-5 is now at 69.8 and actually little-changed since this time yesterday.
The bitcoin price is lower today, down to US$28,297 and -4.5% lower than this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.9%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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79 Comments
“to give highly leveraged households debt-payment relief despite the unusually high level of inflation. Blimey no wonder the first part of that sentence includes “political pressure.” Obviously the Australian counterpart of our RBNZ is neither as neutral nor independent?
Rolling teacher strikes.... Labour is being a special kind of dumb with the teacher pay negotiations.... and nurses, everyone except those who do not work..... Aussie is in trouble if inflation does not roll over they will be raising as we are cutting
The interest rate in Australia averaged 3.84 percent from 1990 until 2023, the inflation rate averaged 4.89 percent from 1951 until 2023,so it seems pretty normal. I suspect the super low recent interest rate regimes have changed expectations perhaps?
Why use 1951 to 2023 for one stat, and 1990 to 2023 for the other? The average inflation rate from 1951 to 2023 includes insanely high inflation rates of the 1970s and high rates of the 1980s. the average inflation rate from 1990 to 2023 is significantly lower, under 3%.
They were the only data I could find easily, looking forward to your better data.
The RBA has other reasons to raise their rate (but they probably won't). Looks like they took their foot off too soon
https://www.abc.net.au/news/2023-05-02/ian-verrender-housing-analysis-r…
Deposit insurance will just make the banks richer. They already make a premium on the Savings to OCR rate. How letting them lower the savings rate in the guise of insurance will benefit the consumer? is beyond me.
The insurance amount will be passed to the RBNZ to manage. So it's not self insured. But I think we need something to protect deposits.... it seems to me we are being smarter about this than superannuation, which is still not compulsory from newly turning 18.... at 10% like Aussie. You will need super, you may need deposit insurance.
In theory they make money by passing the savings directly to the RBNZ anyway. So technically one could say it is already guaranteed, they just wont pay out on it.
We need deposit guarantees, but it should not be the customer (who effectively by law - to deal with IRD/WINZ/Etc...is required to have an account with a retail bank)
JP Morgan Chase and FDIC holding hands and eating up all the little guys....plan is working..
Taxpayer contributing, nonetheless.
First Republic seized by California regulator, JPMorgan to assume all deposits. First Republic is 2nd largest Bank Failure in US history. FDIC estimates a $13bn loss to deposit insurance fund. First Republic's 84 offices to reopen on Mon as JPMorgan Chase. https://cnb.cx/3oR3YA5 Link
I understand that US deposit scheme is effectively being "rorted" by the banks as overnight transfers mean that your say $10 million deposit can be swapped with other banks to stay within limit - or am I misunderstanding?
A risk that any deposit scheme in NZ will also become unlimited - so risk free banking on the horizon?
Deposit insurance is largely about trust as the predicted figure of $80,000 probably cover most ordinary persons funds, but such a scheme is effectively a Taxpayer funded scheme to protect some taxpayer from bad Bank decisions, a better extra would be in the event of a Bank failure for all Banks Directors and Senior executives responsible for decisions relevant to a failure should lose their pension, share options and any mortgages place in default - it would surprise how just effective such a scheme would be in galvanising the above into ensuring decisions were actually safe or low risk in case they became accountable - fear is a real motivator when you have skin in the game.
I had to smile when I read DC's comment; "The RBNZ is due to institute a deposit guarantee scheme here, so they will no doubt be assessing what lessons they can draw from all this." He's still got a lot of faith in the RBNZ.
But I tend to agree. The RBNZ should enact regulation that requires the banks to pay for the DI scheme and not be allowed to charge their customers for the cost. And like all insurance it would require some degree of oversight to establish the premium rate, and should (I would hope) help constrain bank behaviour. A big part of the problem is that banks have been, and firmly believe they can continue to act with impunity irrespective of the effects on the economy. Banks are a private business but their power has become extreme.
The RBNZ should enact regulation that requires the banks to pay for the DI scheme and not be allowed to charge their customers for the cost.
Where should the money come from? All the money banks make comes from the customer one way or another.
Finally, the too-biggest-to-fail bank CEO warned, "we are clearly gong to see some reduction in bank lending," implying JPMorgan will be doing "God's work" for The Fed by contracting credit without the need for rate-hikes.
I wonder if the main banks in NZ are helping the RBNZ with this a bit here as well. While all crowing that they are open for business, and they have loads of money to lend, a 48% reduction in new mortgages year on year says it all...... intentional or not the credit tap in NZ not wide open - Mortgage lending has seen its Wile Coyote moment.
Australia to ban vaping - as it's a menace to children and public health?
We should also probably note that Australia will essentially ban vaping, limiting it to prescriptions for legitimate therapeutic use, and calling it a menace to children and public health.
If true, great.
Why are you against it?
It is no different to smoking. Lungs are designed for air.
Well that's just silly. Teeth are not designed for sugar either.
You're normally better for comments than that Kate. Sugar is a food item and any food is harmful in excess, but food is essential for survival. Vaping is not.
Sugar in some form is essential for survival. See how you go with a blood sugar reading of Zero.
Your lungs (and by extension) your brain do not do so well on the toxic chemicals that are in vapes. These people are not breathing steam, they are breathing a chemical cocktail that has proven links to respiratory failure and brain damage.
So cigarettes' should be banned as well following that logic? Might stop a few heading over the ditch.
Yes they should be, and in most places they are.
and in most places they are ??
Yes - in Most places they are.
- Nearly all workplaces/offices
- Hospitality bar/restaurant
- Educational facilities
- Retail shops/mall
- Any govt and/or public buildiings
- A lot of councils prohibit smoking at sports grounds, parks, and playgrounds
- Regional and National Parks.
- Public transport, taxis, and airplanes.
- Health providers
- Private residences - try being a tradie and lighting up in someones home.
- etc...
Same rules for vaping?
Hypocrites pick they drugs that give them the best kick back. Alcohol and tobacco don't like competition and their political puppets defend their turf for the coin.
Let's decriminalise meth and cocaine to give the alcohol and tobacco lobbies a run for their money.
Agreed, Portugal is leading the way (https://www.portugal.com/op-ed/portugal-drug-laws-under-decriminalizati…). Although, some drugs like cannabis, mushrooms and LSD should be legalised and commercially sold with the profits used to increase the tax take and fund drug addiction recovery. Hypocritical that NZ has legalised the 2 worst drugs that cause the most harm and then are happy to punish citizens who prefer not to drink poison or get cancer for their chemical buzz (https://www.drugfoundation.org.nz/policy-and-advocacy/drugs-in-nz-an-ov…).
All in or all out, anything less is tyranny.
Let's decriminalise meth and cocaine to give the alcohol and tobacco lobbies a run for their money.
I think you'd realistically see a huge profit for the alcohol and tobacco industry if you followed through with this
This is the only sensible way to put the gangs out of business.
The science indicates vaping is as bad or worse than smoking Kate. Why should it be legal?
"The science" consistently claims that vaping is less harmful than smoking, Murray.
https://www.nhs.uk/better-health/quit-smoking/vaping-to-quit-smoking/
https://www.cancerresearchuk.org/about-cancer/causes-of-cancer/smoking-…
https://www.hopkinsmedicine.org/health/wellness-and-prevention/5-truths…
All of those site talk about nicotine or tobacco products only. What about the other crap that is being put in them? People can get a prescription to use vapes to wean off tobacco.
Being worse than one thing does not make that thing beneficial or good. Just less worse.
For a chronic smoker, moving to vaping will offer some benefits. For a young person that has done neither, then doing either will have significant negative health impacts.
That's great, and probably what Murray should have said.
What science is that Murray?
Her's one for a start;
https://www.drugwatch.com/e-cigarettes/side-effects/#:~:text=Common%20s….
Thanks. I believe the Aussie approach could be a way forward - stop retail and just prescribe a tested product for smoking cessation for nicotine addicts. Of course it just opens up another black market.
The science indicates alcohol is one of the most harmful substances and yet many of the less harmful drugs are illegal.
It's never been about science, rationality and logic!
We have dinner in a place that's beside a Vape shop and its busy straight after work. Judging by the state of the people going in there it would be better if it was banned, from what they are driving and how they look, its pretty clear have much better things they need to be spending their money on.
Better shut the booze shops as well since we are in banning and judging mode.
I'm sick of breathing in the fumes of ICE cars, what sort of loser still drives one. Ban them.
we are ;)
Perhaps you're sick of breathing others breath indoors also
Personally I just stick to wine from the supermarket and as a cup full of Shiraz goes into the Bolly, therefore its classed as a food group, the rest of the bottle is however direct ingestion. Just a cooking tip, drink a glass before putting it in because if its corked (which is very rare) it will stuff the Bolly. Yeah who knew it could turn into a cooking show on here but don't judge me.
Because it makes you look like a total dweeb (health consequences aside). Imagine how lame Humphrey Bogart would have looked in Casablanca puffing away on a watermelon peach vape blend.
lol - that'll work, not.
Needs to happen here ASAP...its worse than smoking for teenagers.
Hilarious the elephant in the room is alcohol, as it kills and maims far more teenagers and adults and we are getting all hot and flusted over vaping!..
Alcohol has been around for thousands of years, and is pretty firmly established in society. Vaping, however, like party pills a few years ago, is not, and all the ugly little vape shops and their louche proprietors could be shut down as quickly as they popped up.
How many people out of it vaping have killed anyone?
Alcohol being bad, does not make vaping good.
Because people chose to poison themselves with alcohol for centuries we should not learn from past mistakes???
This is really dumb on so many levels but I am not surprised.
After all we're sleepwalking into a climate catastrophe because people are irrational beings.
"Chose" is the important difference. People are allowed to choose to consume alcohol or cigarettes. However, people are ordered not to consume cannabis, mushrooms, LSD and other drugs much less harmful than alcohol and cigarettes, or be punished by the state.
Not only is it stupid but it hypocricy forced on citizens by tyrants.
My point, since it needs clarifying for you, is that although alcohol is obviously a bigger problem, it's deeply established and can't be gotten rid of so easily.
Vaping has only recently popped up and could be dealt with as easily as synthetic cannabis or whatever it was called.
Yes, exactly.
So because alcohol is widely available, we shouldn't ban anything else?
We should have consistency across our laws. If we're contemplating banning vaping due to potential 'harm' then we should immediately ban alcohol (a significantly more dangerous drug) too.
It would be really helpful if there was a table somewhere that we could easily look up the impact of various things on quality adjusted life years (your own and others around you) so that we could easily look at a normalised standard when having this discussion. I think a lot of people would stop trying to control other's lifestyle choices under the guise of "helping reduce harm" if they could easily compare with the harm of their preferred lifestyle choices.
As far as drugs are concerned, look at the 'rational drug harm index' which was published in The Lancet medical journal. Researchers tried to quantify the harms of various drugs and alcohol is far more dangerous than most 'hard drugs'. Interestingly the psychaedelics (LSD, magic mushrooms etc) were by far the safest drugs to users and other, yet they are 'class A' drugs in NZ. Our drug laws are archaic and do not reflect the risk of harm at all.
Don't disagree.
Alcohol however can have a safe level of consumption so there are neglibile long term health impacts. The same cannot be said for most of the other drugs.
The primary issue with alcohol is the excessive consumption and/or related behaviour. Most of which is already justifiably banned/illegal.
It's now accepted in medicine that there is 'no safe level' of alcohol. There's a dose-dependent risk given it's a carcinogen.
Alcohol however can have a safe level of consumption so there are neglibile long term health impacts - complete fallacy - its a poison
Thanks Pluto could not have made it more clearer than your comment
Well we have a right little prissy bunch of socialist here this morning
Anything else you want banned that might be harmful to me - cured meat, climbing trees, waiting for an operation, reading womans day while waiting in ED
I am somewhat bewildered reading the comments this morning and not too amused.
Not one has recognised people should have a choice. What do they understand of and about freedoms. The more we ban and constrain people the more we lose something which makes us interesting. do we wish to go down the road of Singapore.
I for one, not.
I would remove all taxes on alcohol and tobacco. Instead I would give carrots to companies and corporates to improve their game.
I am all for freedom, but why should I pay for the poor choices of others?
Giving the people freedom is as easy as removing universal public healthcare and ACC.
Smoke, Drink, Vape, eat as much junk as you want. But you pay the bill.
I have never understood why any alochol related event is covered by ACC.
I am all for freedom, but why should I pay for the poor choices of others?
Sweet, just take the taxes off of cigarettes then. Over a decade ago taxes on cigarettes paid $350m more into healthcare than smokers took out in higher healthcare costs, and the government has added 10% in tax every year since then. Smokers are paying for your healthcare, not the other way around.
https://www.nzherald.co.nz/nz/smokers-save-govt-cash-says-report/FYUXTP…
No problem at my end.
"A Treasury report has admitted that smoking saves the Government money because smokers die earlier and pay more in tobacco tax than their health problems cost."
On Balance, as a non-smoker I will still live longer even with zero healthcare.
I have never understood why any alochol related event is covered by ACC
To be fair to everyone it is a no-fault scheme
Deposit Insurance in New Zealand is spurious at best. The same would happen here - an arranged marriage in a banking sector of a dozen registered banks. If not, there would be no banking system here to 'pay out' any insurance anyway. Re First National:
Does this mean deposits are safe? Yes. JPMorgan will assume the lender’s deposits. (But) Its common shareholders are wiped out. In this case, First Republic shareholders, along with its debt holders, will not receive anything.
https://www.nytimes.com/2023/05/01/business/first-republic-stock-deposi…
RBNZ see little stress, clearing the way for further OCR increases, just out
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