Here's our summary of key economic events overnight that affect New Zealand, with news debt woes continue to bedevil the world's two largest economies.
In the US the debt-limit talks drag on, casting a pall over markets. Public statements are all positive about "progress", but there is no deal and markets are growing weary (and wary) about all the unnecessary theatrics. Trading volumes on equity markets have suddenly gone quiet.
US households are also feeling uneasy at their own financial situation. An updated Fed survey of household economic attitudes shows the effects of inflation on Americans' economic confidence. About 73% said they were doing "at least okay financially" in 2022 which is down a sharpish -5 percentage points, the most since the survey was launched a decade ago. It had stood at a record high the year before but now it is at its lowest since 2017.
China has reviewed its key policy rates and left them unchanged in its May reviews The People's Bank of China (PBoC) maintained its key lending rates steady for the ninth straight month at May fixing, as widely expected. The one-year loan prime rate, which the medium-term lending facility uses for corporate and household loans, was left unchanged at 3.65%; while the five-year rate, a reference for mortgages, was kept at 4.3%. The move came after the central bank held its medium-term policy rate at 2.75% last week.
But in the background, China's hidden local government debt, which could be as high at US$10 tln, is restraining the country. The non-hidden debt seems to be US$23 tln. Policy makers are struggling to know what to do, in part because there is no agreement about the nature and size of the overall problem. The two combined is as much as the total American federal debt. And that is just for their local government.
Japan's core machinery orders, which exclude those for ships and electric power companies, fell -3.9% in March from February, improving slightly from the -4.5% drop in February. But analysts were expecting a small rise by +0.7% on this basis. Although this data is always quite volatile, it is considered as a leading indicator of capital spending in the coming six to nine months.
But investors think Japan has turned an important corner, economically. The value of Japanese stocks has leaped by +US$400 bn so far this year, the biggest increase in any Asian market and roughly double the gains of Chinese equities. Investors are taking a fresh look at Japan as an alternative to China.
Taiwan's equity market gains are outpacing China as well (even China+Hong Kong), despite the handicaps its claimant is placing on it. But orders for Taiwanese exports are still tracking a lot lower, down more than -18% year-on-year in April. Analysts had expected only a -14% decline and they came in just above the February level which was their lowest since the pandemic.
EU consumer sentiment improved slightly in April but it still remains deeply negative, just less so.
We should also note that the Greek election result surprised most observers. While there is another final round of voting to go at weeks-end, the incumbent conservative government has been surprisingly endorsed at the ballot-box. This has been a free and fair election. The same weekend Turkey is also holding a run-off vote. But to win that, its incumbent president has had to control the country's media and run hard on culture-war issues.
In Australia, there is now talk that Sydney house prices may surge more than 10% this year. Rental demand, immigration and FOMO are all driving prices up across the city. The irony is that this will likely push the RBA to raise interest rates further, causing wider household budget stress and bring more properties on to the market, but maybe not enough to quell the froth. Social pressures will rise.
The UST 10yr yield starts today at 3.71% and little-changed from yesterday. Their key 2-10 yield curve is slightly more inverted at -62 bps. Their 1-5 curve is at -132 bps. And their 3 mth-10yr curve is also slightly more inverted at -189 bps. The Australian 10 year bond yield is now at 3.62% and unchanged from yesterday. The China 10 year bond rate is unchanged at 2.73%. And the NZ Government 10 year bond rate is at 4.45% and down -2 bps bp from yesterday.
Wall Street has opened its Monday session little-changed with the S&P500 up a mere +0.1%. Overnight, European markets closed about -0.2% softer, except London which rose +0.2%. Yesterday Tokyo closed its Monday session up +0.9%. Hong Kong was up +1.2%. Shanghai ended up +0.4%. The ASX200 ended its Monday session down -0.2% while the NZX50 found things harder going, dropping -0.9%.
The price of gold will start today at US$1975/oz and down -US$3 from yesterday.
And oil prices are marginally firmer from where we left them yesterday to be just over US$72/bbl in the US. The international Brent price is now just over US$76/bbl.
The Kiwi dollar is little-changed against but firm the USD from yesterday and now just on 62.8 USc. Against the Aussie we are little-changed at just on 94.5 AUc although that is its highest of the year. Against the euro we are still at 58.1 euro cents. That means the TWI-5 is has crept up slightly to 71.4 and nearly a five month high.
The bitcoin price is virtually unchanged again today, now at US$26,867. Volatility over the past 24 hours has been modest at just on +/- 1.0%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
Daily exchange rates
Select chart tabs
69 Comments
No, they will both gain in spades, from population reduction. Overpopulation leads to ecological collapse - at which point your proxy tends to become worthless.
A thought-provoking comment, more overview than yours: https://www.theautomaticearth.com/2023/05/war/
I don't always agree with that writer (have actually spent an evening discussing with him, here in NZ) but in that link he nails it. Our MSM should be doing some introspection, about now...
Agree. We have rapidly developing Ai and via that (and automation etc ) we wont need as many people to maintain advancement acceleration. We are already looking at universal imcome and working less days.. but to do what support a popultion we dont need? Even wars can almost be fought remotely (10 to 20 years tops)
So less will be more for countries. Best way to sustain the planet and ensure a good level of wellbeing for the decling number of citizens.
It will for sure affect the economy and how we live. But as soon as we chamge from GDP growth via pple as the key kpi then no need for tons of pple now.. in fact a need for less.
Unless we see a real reduction in corruption amongst any other non-western countries, where many have a population growing exponentially already. Should this occur they will continue to tap their mineral and fossil resources, develop new technologies or harness those of the west, while the western world sees decreasing populations and less people working.
What an interesting next 50 years we will have.
Jeez, I'm not sure who wrote that automatic earth piece, but it reads like a direct communique from the ministry of truth, residing in the bowels of FSB headquarters. Russian society became absolutely toxic over the last two decades. The little mafia man in the Kremlin has exterminated the entire male populations of both the DPR and LPR with his meat wave attacks wiping "liberated" cities off the map! It says something about the power of propaganda when my own Russian wife's eighty year old mother has openly supported killing Ukrainian "Nazi" children.
The West is fully immersed in it's own planet threatening mythology, but to swallow this sick Russian BS as though it's some preferable alternative, is delusional!
I agree about the provocative hand wringing style but I think PDK is pointing to the conflict in general - not the actual protagonists. Resources - both strategic and mineral - the Black Sea and the Donbas. Last thing Russia will allow is Ukraine handing them over for military bases and extraction subsidies to the West. Ukrainians can assert their independence and their right to do this all they want. Putin says nyet! (or his oligarchs do) and they're prepared to fight for it. Whatcha gonna do?
Vlad was happily selling off Russian resources before his invasion, so what changed? Vlad has always been a nasty little man, but of course western capitalism was happy to humour him as he supplied the energy needed to keep the wheels of profit generation grinding.
Enter resource depletion and the wind drought caused energy crisis in western Europe. Vlad saw the limp wristed response to his annexation of Crimea and the donbas region and his aging imperialist brain, addled by isolation in his COVID bunker and yes men eager to avoid windows and polonium sandwiches, saw energy as a golden opportunity to expand his empire. It almost worked. If the initial German and French response had been the wider western response, Yanukovych would now be back in the presidential palace, taking orders from Vlad and getting ready to skim Ukraine's wealth into his vaults again, while the average Ukrainian suffers another 50 years of rot.
Anyone believing the regime of lying thugs running Russia being allowed a greater influence on the global stage, is a net positive for humanity, is sadly mistaken.
PDK, did you post the wrong link? Your link has nothing to do with debt or loss of population in Japan or China.
Whilst I agree that western msm is not neutral in its reporting of the Ukraine war, this goes a bit far I think:
"The US plotted a coup and moved NATO’s borders east, and Russia reacted exactly how they said they would. No nukes, no nazis, no NATO"
PDK, may I be so bold as to ask what your qualifications/experience are that back your statements in the following fields;
- Demographics. Previously your statements on the topic have implied if not outrightly predicted a doom and gloom future of over population, but your latest set to indicate that you have changed your position somewhat. Have you ever studied the subject or been involved in the collection, analysis or use of related data in say the policy making field either in the corporate (e.g. insurance) or government
- Physics. In many of your posts , particularly in reposes to someone else's, it has been to say "it's the physics". Accordingly, might I also ask, as per above, your thing/experience in the subject.
I have asked the questions before but have as yet to receive a reply. Still, no harm in trying
PDK touches on topics you don't need qualifications to be able to see, its just pure logic. When it comes to Physics there are the laws of physics that are undeniable, you use to learn them at school in the 6th form, surprisingly, in a class called "Physics" but knowing how the education system in this country is now shot to bits it appears that they are still teaching you to read and write at 6th form level instead. The word physics gets bandied about because its something you cannot change.
Here's the thing Mr Mannering, you don't have to own a list of doctorates as long as your arm to be able to understand the human predicament, you just have to accept the findings of those that do have a list.
"RCP2.6 is a scenario designed to keep global warming below 2°C. idealized case in which 2×CO2 forcing is kept constant until all fast and slow feedbacks are allowed to reach equilibrium. The answer we find is close to 10°C, for CO2 forcing alone. If we include the negative forcing by today’s aerosols, the response may be as low as 6-7°C, but ESS is ~10°C."
chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/http://www.columbia.edu/~jeh1/mailings/2022/EarthEnergyImbalance.22Dece…
Use your imagination for a second and try to picture a world 6+degC hotter?
Social sciences don't quite have the same heft as hard sciences, so best become knowledgeable about the hard sciences, then work backwards from there.
Good luck finding space when the 100 000 000 refugees arrive?
Oh, and that projected temperature is a global average, the warming over land has been double that of oceans.
https://www.carbonbrief.org/guest-post-why-does-land-warm-up-faster-tha….
The lost decade is Western countries pouring money into things that spike basic living costs while ignoring infrastructure needs to improve lifestyles and productivity, and the fat lazy governments that try to convince us an ever-declining status-quo is the best possible option on the basis that someone else 'would be worse'.
The problem we have is how do we pull out of it. So far we're at two decades of this and counting. The Fall of Rome playing out in front of our eyes.
Agreed. Those heavily discounted loans allow local and state governments to subsidise the industrial sector in China. This has allowed Chinese manufacturers to keep their prices artificially low to compete with other cheaper locations and maintain high employment levels.
Western governments have greatly benefited from the CPC's financial engineering, by underinvesting in infrastructure (more funds left for buying votes), while cheap Chinese imports offset the skyrocketing cost of basics.
If China becomes serious about dealing with its massive debt burden, the entire West will see inflation go through the roof once again.
An interesting perspective on smoke and mirrors around Australian wages vs productivity:
https://www.abc.net.au/news/2023-05-23/why-your-pay-is-not-keeping-up-w…
The general population protesting in the street and putting extreme pressure on the Australian government to enforce change. This could well be the catalyst. But in HW's world...house price go up = good. It's an odd dynamic over there...happy to sell there souls to Chinese investors, yet are some of the most xenophobic people I've ever met.
Taking advantage of boom / bust cycles is the definition of speculation!!!
A stable market can still allow you to add value in an investment approach.
Apart from trimming some trees, what else have you done at your property? Triple glazing to quieten the motorway noise? I have lived along your street in the distant past and it was noisy.
I prefer predictable to chaos, covid was chaos and I didn't like that or its after-effects. There's value in long term ownership and paying down a mortgage.
I've improved a few properties with value add by spending a dollar to make 3 or 10. And employed change of use principles but only to add value so that I can buy more. Thats a case by case basis rather than general increases.
Xenophobia is everywhere in the world, at more or less similar levels. How it is expressed is how it differs. In Japan, it’s typically subtle and not aggressive. In Aus, it can be a bit more in your face than here. Although many will be aware of the horrible experience a part- Chinese Australian guest of the Writer’s Festival had at an Auckland restaurant just the other day. Widely reported in the MSM.
Chinese money thankfully finding an alternative destination other than NZ to buy up assets. The RBA rolled the dice on keeping interest rates low and it's become a magnet for offshore investment in the property market. The smart move would be to target offshore money and block it in the residential property space. However, if they do indeed pull the interest handbrake harder instead the locals will get restless!
by HW2 | 23rd May 23, 7:37am - Sydney house prices! - Enough said eh R-P
LOL! Not bad coming from someone who said house prices tripled in 1973 and would keep rising in Nov-21!
Try putting some actual thought into your posts. Best you revisit this when the headline reads "House prices are once again booming in NZ"
Like the word "crash" and "crashing" are now appearing in mainstream media, it's best we set some non-fictional boundaries in advance - not from Oneroof. That doesn't count. :)
When will we once again see house price rises exceed the prevailing rate of inflation? - Good luck.
But in the background, China's hidden local government debt, which could be as high at US$10 tln, is restraining the country.
China's not the only one struggling with local government debt:
https://www.rnz.co.nz/programmes/the-detail/story/2018890737/why-local-…
We've seen this all before. During the GFC they were often called "austerity measures"; get national and local governments in so much debt they can't pay it off, then force a fire sale on assets and infrastructure in a flurry of forced privatisation.
I actually think Act’s idea of giving GST revenue on development to councils is quite a good one. Councils get few of the benefits of rapid population growth, and a lot of the costs.
I have one concern with Act’s policy and it is an obvious one. What does it mean in terms of loss of revenue for the government coffers? And for Act, I suspect it means cutting government services.
In which case it isn’t necessarily a good idea…
ACT has promised to scrap entire public ministries and programmes (CCC, Maori, Pasifika, Women, ethnic communities, etc.) out of existence, which would save hundreds of millions in both front and backend spending.
Then there will also be deep cuts in staffing levels at the backend across the agencies and ministries that do survive. The biggest savings would come out of the social budget, where raising super age, scrapping fees-free, ETS, KS subsidies, and reforming social spending (indexing payments to CPI) should help save billions.
As well as cutting R&D tax credits, scrapping Callaghan Innovation, removing all film subsidies, and selling the rest of the power company assets so we no longer have any control over them. Doesn't matter if they return more than they take it's on the cutting floor.
Not to mention their two rate tax system basically raises taxes one everyone earning less than $58k which is a bit rough to say the least.
I looked through their budget and it's a bit of a worry. It strikes me very much of a budget that sells the house to pay the mortgage, short term thinking over long term, a budget driven by ideology rather than pragmatism and whats good for the country as a whole.
Why are all our political parties so shit.
It seems to me that the ever-expanding "blob" of the public service administrative/managerial class (policy wonks, advisors, comms staff, umpteen layers of management etc) has become increasingly adept at using front-line staff as human shields whenever there is discussion of possibly having to cut back on headcount, pay or perks.
The discussion immediately becomes one of "you just want to see all the teachers/nurses/police officers/insert-actual-public-servant-here fired".
Take RBNZ, for example, which seems to have seen an explosion in terms of headcount. What are all these people actually doing?
We need a simple measure of how many public servants work in public-facing roles and how many occupy functions relating to administration, comms/PR, policy advice (e.g. what on earth are all those uni grads getting policy advisor jobs on larger-than-average salaries actually doing?)
Genuinely unsure whether slashing the civil service would be more detrimental to its output than just letting it continue on as is with the same pervasive status-quo.
I can tell you first hand some of the wastage in the current government that needs tightening and slashing:
- Consultants flown from around the country to Wellington, fully-paid accommodation and food supplement for 6months+ on top of a salary 2-3x the standard for that role within government
- Flying workers and consultants to and from Wellington semi regularly for projects when they could hire someone local or ask staff to relocate to Wellington to cut costs
- Catered meetings daily in most government departments once you reach above middle management - think $200 lunches or more, and consider the number of these 5 days per week across Wellington on the taxpayer dime
- Bloated staff levels from meaningless roles created in the last 4-6years, think staff who are paid to sit in on interviews to double check there is no bias or judgement being exerted for LQBTQI+ applicants, this is offered by many departments
- Too many in middle management which can be trimmed back, often leaders above the entry level roles reaching this point within 1 year then proving incompetent, due to the high level of attrition since the COVID fueled salary hikes we have seen
- Allowing too much to be negotiated into contracts due to the above attrition problems, playing into the low productivity we are seeing
Baring in mind these are only some of the issues I personally have seen and know of through colleagues, friends in other government roles at various levels, and some family who consult to govt. I won't even start on local government. Some might think it hard to believe, but this does all occur, and this govt needs a haircut and a kick up the proverbial to get people doing their job well and not cruising along on a cushy salary.
staff who are paid to sit in on interviews to double check there is no bias or judgement being exerted
I served on a short-term advisory panel role at a ministry about 18 months ago.
A few days before the interview, I got a call by some advisor asking if I wanted representation on the panel since I qualified as a "diverse" candidate.
Imagine how sh*tty someone would be at their job if they require handholding and counselling just to get through the interview.
Once selected, I received a set of forms every other day from different internal / external "advisors" to fill out. Most of the paperwork that came after day 2 had nothing to do with my candidacy. I also had to waste time on a bunch of woke trainings that once again had nothing to do with my time at the ministry.
I genuinely consider (and I have worked in the public service as a permanent employee and as a contractor) that if there was the will from a government in power (centre-right), non- frontline public service staffing could be cut 30-40%, and with a laser-like focus on absolute priorities, policy and advice would actually improve. The huge numbers create massive inertia, lack of focus, and inefficiency.
To be clear, I am talking about policy and communications functions. Not frontline staff nor the administrators providing support for frontline staff.
I am talking about policy and communications functions
The situation is much worse than that I am afraid and many of the slackers/unnecessary bureaucrats are in high places. Take RBNZ for example - 27 directors with multiple for non-core items such as info security, people, diversity, etc.
Several bureaucrats in top jobs are ideologically driven and have deliberately increased staff wasted spending on headcount, consultants and pet projects / woke causes and away from frontline services.
And oil prices are marginally firmer from where we left them yesterday to be just over US$72/bbl in the US. The international Brent price is now just over US$76/bbl.
That's about average over the last 25 years. Absolutely baffling really as Russian production is in decline. Are we to speculate that only Middle Eastern wars cause price shocks?
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.