Weekend briefing: Markets ignore tough debt limit negotiations

Business / news

US debt deal close; PCE inflation sticky; IMF likes most US economic positions; Taiwan in recession; Singapore struggles; Turkey vote risks rise; Lowe resists pressure; UST 10yr 3.80%; gold and oil firm; NZ$1 = 60.5 USc; TWI-5 = 69.4

27th May 23, 9:05am by David Chaston

Papamoa Hills, Bay of Plenty

Here's our summary of key economic events overnight that affect New Zealand, with news financial markets have convinced themselves a deal is about to be concluded in the US debt limit standoff and have gone on their Memorial Day long weekend holiday in a chipper mood.

The 'hard yards' are underway in the debt limit negotiations. They have enough funding authorised to last until June 5.

In the real world, American personal spending jumped +0.8% in April from March, the most in three months, and double the market forecasts of a +0.4% gain. It is a clear sign consumer spending remains solid. And it is supported by higher wages which have consistently risen more than spending (just not in April), and a tight labour market.

If there is a downside, PCE inflation is hovering around the +5% pa mark and not retreating much yet.

Durable goods orders rose by +1.1% in April from a month earlier following an upwardly revised +3.3% growth in March and easily beating market expectations of a -1.0% retreat. But year-on-year there was virtually no gain. Capital goods orders were even stronger for their recent rises, but again little year-on-year.

Rising economic activity however is making the US trade balance higher as it raises the demand for all goods including imported goods. Over the past year to April the US has run a merchandise trade deficit of -US$1.1 tln, but that is -7% lower than in the same year in 2022. And the deficit as a proportion of GDP has fallen from -4.8% to -4.2%. Of course their overall deficit is much less when services are also taken into account.

The IMF has been reviewing the US economic situation and said American interest rates will likely need to remain higher for longer to tame inflation, and Washington needs to tighten fiscal policy to bring down its federal debt. But overall it has been impressed with the way the US economy has been managed over the past few years.

Taiwan lowered its economic growth forecast for the year to +2.0%, the slowest pace in nearly eight years, after the island slipped into a recession in Q1-2023 reporting a -2.9% annualised drop in Q1-2023 after a -0.8% retreat in Q4,-2022.

Singapore’s industrial production dropped more than forecast in April, down -6.9% year on year and -1.9% from March. This was the seventh consecutive month of year-on-year decline and the worst streak since 2015.

In Turkey, they have a final round of voting today and it is widely expected the incumbent Erdogan will win again. But financial markets are also voting with their money, driving the Turkish lira to 20 to the USD, an all-time record low. Erdogan had to come out and deny there were cash withdrawal problems at banks as people remained skittish.

There is final voting in Greece this weekend too.

Australian retail sales didn't change in April from March and were +4.2% higher than year-ago levels. That means in volume terms they will be lower because Australian inflation is running at 6.3%. (Their April CPI will be released on Wednesday.)

And in Canberra, MPs from the new Labor Government tackled RBA Governor Lowe in a private meeting over what they see as his 'demonising' of wage increases. But Lowe held his ground, warning them that generous wage rises they were backing would make inflation worse unless they were accompanied by increases in productivity. And if that is what turns out - wage rises without productivity increases - he said rates would rise in response. It was probably an unhappy and tense meeting, and probably seals the end of his time as RBA governor when his term expires in September. Being right is no defense in politics.

In the background, a Fair Work Commission decision on the 2023 Minimum Wage/Awards application is due soon.

The IEA says global investment in clean energy is on course to rise to US$1.7 tln in 2023, with solar generation set to eclipse oil production for the first time.

The UST 10yr yield has ended today at 3.80% and down -2 bps from yesterday. A week ago this benchmark was at 3.69%. Their key 2-10 yield curve is more inverted at -80 bps which is more than the -59 bps a week ago. Their 1-5 curve is at -133 bps and little-changed. And their 3 mth-10yr curve is less inverted at -179 bps. The Australian 10 year bond yield is now at 3.71% and down -3 bps from yesterday. The China 10 year bond rate is little-changed at 2.73%. And the NZ Government 10 year bond rate is at 4.46% and up +2 bps bp from yesterday and exactly where it was a week ago.

Wall Street has ended its Friday session with the S&P500 up +1.4% for a weekly gain of +0.4%. Overnight, European markets all closed higher bookended by Paris up +1.2% and London up +0.7%.. Yesterday Tokyo closed its Friday session up +0.4% for a +0.6% weekly gain. But Hong Kong was closed for a holiday but that locked in a sharp -4.0% loss for them. Shanghai ended up +0.4% on Friday for a weekly -2.0% loss. The ASX200 ended its Friday session up +0.2% to book a -1.7% loss. The NZX50 found things tougher, falling -1.1% on the day and -2.2% for the week.

The price of gold will start today at US$1946/oz and up +US$3 from yesterday. A week ago the price of gold was US$1976/oz so a -1.5% fall from then.

And oil prices are +50 USc firmer from yesterday to be just under US$72.50/bbl in the US. The international Brent price is now just under US$77/bbl. For the week that is +US$1 firmer.

The Kiwi dollar is marginally softer against the USD from yesterday, down ast 60.5 USc. That devalues it -3.8% in a week, and -4.8% in a year. Against the Aussie we are down to 92.8 AUc. Against the euro we are softish 56.4 euro cents. That means the TWI-5 is has fallen another -20 bps to 69.4. So overall the NZD has devalued -2.7% for the week, and the same since the start of 2023.

The bitcoin price is a little higher today, now at US$26,775 and up +1.6% from yesterday. But it is down -0.4% from this time last week. Volatility over the past 24 hours has stayed modest at just on +/- 1.1%.

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

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78 Comments

by Audaxes | 27th May 23, 9:10am 1685135441

Weekend briefing: Markets ignore tough debt limit negotiations

There's a Real Ceiling on Money and Finance Unrelated to Government

by nktokyo | 27th May 23, 9:21am 1685136082

Anyone see the story about the family in the car in Taupo?

There will be a LOT of this in small town New Zealand.

More and more rentals go to AirBnb or social housing to pay the extra tax, or are even left empty because it's now illegal to contract to rent your holiday crib out for 50 weeks a year and still have your summer near the lake.

Perhaps someone should point out to this family that it's OK because the houses still exist and some people get to stay there, just not them. They might be homeless trucked into the region like Rotorua had, or tourists, or the home might have been a holiday home rented out the rest of the year in the past, however to protect tenants you can't do that anymore so the house probably just sits empty.... but hey, have another blanket.

I hate this government so much I avoid the news so I don't have to listen to them talk. Every single consequence of every policy that has backfired was pointed out at the time by multiple people and agencies. They're dangerously ignorant and cocky - a toxic mix.

https://www.nzherald.co.nz/nz/homeless-family-of-five-sleeping-in-car-i…

by tomjones_04 | 27th May 23, 10:11am 1685139101

Its sad to see. You could argue that it's a result of bad government management over the last 2 decades though. Prices shouldn't have been allowed to get out of control which would have resulted in better returns on Rental properties. Just saying... John Key was just accountable as Ardern in my book. Both dishonest and pondered to the rich.

by GetFeeling | 27th May 23, 10:52am 1685141577

The housing problem in NZ is largely due to how local Council's implement their planning and zoning rules. Their behaviour seriously constricts and restricts what can be built where. Council elections are joke in that few vote so that vested interests and NIMBY's get what they want at the expense of what is good for all. See my other reply as well.

by sit23 | 27th May 23, 2:22pm 1685154130

Without knowing the specifics, I would be interested to know this family's history. I am pretty sure the farm employer is not legally allowed to evict his/her tenants. Which is part of why people refuse to have long term rentals. There is more money and less hassle with holiday rentals. The only way to make people let their properties long term is to make them. Local and national government need to make laws to sort things out. Why don't they?

by MLSmith1 | 27th May 23, 5:08pm 1685164118

I’m not sure the legalities on worker provided accommodation. It generally is part of employment agreement and therefore not a Tenancy agreement.

by JoolzT | 28th May 23, 6:27am 1685212048

Two decades? I'd say four is closer to the mark.

by Independent_Observer | 27th May 23, 10:39am 1685140754

‘They’re dangerously ignorant and cocky - a toxic mix’

John Key wasn’t ignorant, but was cocky.

He knew what was happening and used it for political gain.

Therefore I ask, who is more toxic? The person who knows they are doing wrong and yet chooses to do so for their own gain, or the person who does it because they know no better?

by GetFeeling | 27th May 23, 10:46am 1685141173

Maybe your ire should be directed at Taupo's Council.

They are a massively conservative bunch that are so NIMBY they block so many developments its a joke. If Taupo has a shortage of low income housing them I would put the blame on the Council, not central Government.

(And, as you know, the National Party leader has foolishly pledged to grant Council's the right to opt out of the MDRS that both National and Labour jointly passed through. So, yeah, a Ntional led government will really help these people in Taupo - NOT!)

by sit23 | 27th May 23, 2:31pm 1685154665

In my town there are very few low income housing units, so all the beneficiaries have to live elsewhere. In my suburb we don't lock our doors and everyone is lovely. Our Warehouse and Pak'n'save do not have that certain je ne c'est qua.

by JimboJones | 27th May 23, 8:53pm 1685177593

And what about the elsewhere that the beneficiaries live? Probably not a nice place, and no normal people around to aspire to become. Society’s need to be mixed not segmented.

Also I bet your town is full of tossers.

by Pa1nter | 27th May 23, 10:37pm 1685183836

There's actually a large amount of empty social housing out there - waiting to be upgraded to healthy homes. This will take years.

Talk about an own goal.

by HW2 | 27th May 23, 10:50pm 1685184609

I would also say an own goal by the pressure groups, renters united and the like. The Govt vis-a-vis P Twyford, implied that the private LLs were milking it and there was nothing to the upgrades. They even had Mrs Kerre McIvor saying she can't understand what the fuss is about.

by kiwikidsnz | 28th May 23, 10:03am 1685224993

Well, she would say that wouldn't she.

No mention of the fact that because of the cost & difficulty in engaging resources the Gov't gave their own public housing provider several years extra extension on HH compliance than the private landlords who provide the majority of rentals.

by Nzdan | 27th May 23, 11:29am 1685143796

Remember when social housing managed stock reduced from 67k in 2015 to 63k in 2017? Sure, it's 2023 now, by December 2022 the managed housing stock is now 70k. A huge turn around, but obviously still not enough or not in the right places?

Not sure why you're referencing holiday homes rented for 50 weeks of the year? Turf your tenants out for 2 weeks so you can go on vacation? Not really what I'd be advocating for to be honest. Either it's a rental full time, or it's not.

by agnostium | 27th May 23, 12:50pm 1685148623

He's concern trolling. He's made his mind up about Labour and tries to fit the events to his internal narrative. Doesn't matter that National's housing platform is to just reverse the great policies Labour has brought in that is starting to address the housing crisis that has been festering for decades.

by HSL | 27th May 23, 5:37pm 1685165836

Please elaborate on these great policies? Seriously? There are an ever growing number of homeless in my city. Under national there was one…..and he apparently had a house but was mentally ill.

by JimboJones | 27th May 23, 6:44pm 1685169843

Under national in their 1st year or 9th? National turned the immigration tap on full and didn’t build any houses, ridiculous to say they were innocent.

by Roger the dodger | 28th May 23, 8:21am 1685218902

The building consent chart has been on an up trend since the GFC.

There is nothing particularly special about Labour or Nationals 'control' of the rate of building.

by blobbles | 27th May 23, 6:24pm 1685168695

There are currently 48 houses that are available for rent via AirBnB in Taupo able to take 2 adults and 3 children for the next 5 days.

The failure to regulate underutilised housing in the country is the cause of much of this in holiday areas.

by JimboJones | 27th May 23, 6:45pm 1685169911

Well that isn’t the problem then. 48 houses of about 20,000 is insignificant.

by blobbles | 28th May 23, 11:29am 1685230199

Don't be so obtuse. This is looking at only Taupo, not the whole country. It is also only looking at a specific accommodation type for 2 adults and 3 children.

by HW2 | 27th May 23, 9:22pm 1685179348

nktokyo, How much has the HH legislation affected the number of rentals

Some LL had to let their good tenants go, due to not being compliant

by bw | 27th May 23, 9:22am 1685136129

Inflation? What Inflation! ("How could you spend $600 for dinner for 4 the other night?!" I was asked. Well...)

"Mt Maunganui’s Fife Lane steak menu ranges from $46 to $80. Plates to share included châteaubriand at $138. Director Kat Dippie said the cost of meals was “most likely” to rise further. “Menu prices are a direct reflection of wage and cost of living increases. As long as these continue to rise, so will the menu prices."

https://www.stuff.co.nz/bay-of-plenty/300887505/58-for-veg-dish-80-for-…

by J.C. | 27th May 23, 9:38am 1685137106

“Menu prices are a direct reflection of wage and cost of living increases. As long as these continue to rise, so will the menu prices."

And with all these factors rising, the probability that the restaurant will have a smaller addressable customer base will also rise. Fewer customers means lower turnover, revenue, and profit.

by Zwifter | 27th May 23, 10:49am 1685141392

Pretty easy to spend that. We got a $250 voucher for a place that will remain nameless and I thought wow that's a lot for 2 people until I saw the menu, probably will not even cover the full bill if you order wine as well. My idea of dinner out is a $46 curry nite and BYO. Still you have to look at the location, if you can afford to live out at the Mt, then you are probably old and loaded with cash, the place would not be able to exist otherwise.

by GetFeeling | 27th May 23, 11:03am 1685142198

This is what happens when a roof over your head sucks up 50% or more of your disposal income. I find it utterly ridiculous that people can't see this. All restaurants & takeaways need labor and the labor needs to be paid enough to a) get to work as they often can't afford to live near where the restaurants are located and public transport doesn't run when they finish work and, b) provide for themselves and their families - that costs! If you want a cheap night out - get the cost of housing down!

But wait! Luxon says he's laser focused on bringing down the cost of housing. (He's not actually serious, nor believable, on this count as he's going to let Councils opt out of the MDRS so they can go back to limited land for building upon.)

by Yvil | 27th May 23, 1:39pm 1685151590

"This is what happens when a roof over your head sucks up 50% or more of your disposal income"

That doesn't make sense, spending over 50% of your income on housing does not lead to people spending large at restaurants, and restaurant prices going up.

by GetFeeling | 27th May 23, 3:12pm 1685157143

Have you tried running a restaurant on your own? ;-) You need staff. The staff have to be paid.

Back when housing costs consumed 30% or less of the staff's income, they would be happy with less pay - or just one job. Now they demand more. Waiting tables is not a highly skilled job. Ergo, the restaurant owner has to compete with other employers who may hire them for more and/or provide better conditions. Further, many waiting staff will have other jobs and to get them to work an extra 20-30 hours a week when their top marginal tax rate is in play requires more incentives from the restaurant owner.

Putting a roof over your head and those of your family, and keeping it warm, the lights on and the water running, is now a significant fixed cost for many low income people. When fixed costs rise to high proportions of income it becomes more and more difficult squeeze reduced consumption (savings) from the smaller and smaller amount that is left once fixed costs have been paid.

Is my post making more sense now?

by Pa1nter | 27th May 23, 10:40pm 1685184036

Waiting tables is not a highly skilled job.

Said by someone who's never waited tables. That well, anyway.

by JoolzT | 28th May 23, 6:19am 1685211560

Ha! You took the words out of my mouth. 'Skill' is entirely determined by the context.

by GetFeeling | 28th May 23, 10:53am 1685227996

That's where you'd be wrong. (again)

I waited tables when I was a university student. I applied in person and was working the next day with about 10 minutes of "training". It's training on the job mostly. You build up skills over time. However, the pay rates remain largely static. If you can get a job with no prior skills the job is classified as 'unskilled labor'. I've done lots of these types of jobs over time. Gas station attendant, lawn mowing, retail floor staff, nurse aiding / hospital porter, builders laborer, bar tender, life guard, ski field dog's body, etc. Fulltime university degrees have to be paid for. And some of these are me starting businesses just for fun or as ways to give up bad habits or get fitter - and sometimes just as a short break from my real job.

by Pa1nter | 28th May 23, 4:00pm 1685246431

The gap in output between someone skilled and unskilled even in the most menial jobs can be huge.

The problem is employers want to treat every position as disposable, so a worker who might be a liability equalises the income for someone more productive.

by Room319 | 27th May 23, 12:24pm 1685147092

Forget about Steak dinners at Fife Lane,you're gonna have enough trouble paying for your 6 and 12 pack yoghurts at your local supermarket once Goodman Fielder finally exit the market in a few months time.

by SteveO | 27th May 23, 2:21pm 1685154110

Forget about your meat pies too, Goodman Fielder ditching those as well. Hard to believe there's no $ in making a pie.

by Audaxes | 27th May 23, 9:25am 1685136313

It was probably an unhappy and tense meeting, and probably seals the end of his time as RBA governor when his term expires in September. Being right is no defense in politics. Indeed.

The Herald report Orr telling FEC that "he had not failed his mandate". The facts say otherwise, but perhaps he reckons if he says it often enough he'll get away with it. https://nzherald.co.nz/business/adria Link

by Peter M | 27th May 23, 9:50am 1685137832

He caused a 3.8% devaluation of the Kiwi dollar in one week with his latest statements. More price increases in the pipeline I would say and with our main exports, milk powder and logs in the doldrums don't expect a similar upswing in export earnings. Trade deficit is going 'to the moon'!

by GetFeeling | 27th May 23, 11:11am 1685142714

You are aware how a drop in currency actually benefits an economy, right? Exporters get more for the same volume of goods. Sure, imported goods will cost more in the local currency but fewer will be bought.

by E46 | 27th May 23, 11:45am 1685144753

Yeah, but it does sting with stuff we have to import. Fuel, fertilizer, equipment, etc.

Ideally, the currency would just be stable and consistent.

by GetFeeling | 27th May 23, 3:19pm 1685157567

Ideally, we'd have wise and foresighted progressive politicians that despise the status quo and reject 'doing nothing' as an option.

We don't. And we'll never have a 'stable and consistent' currency either. Somehow I feel these two issues are related but I can't think why.

by Chaosinflesh | 27th May 23, 12:32pm 1685147520

Sorry, thought we had a massive trade deficit - i.e., we're importing way more that we export.

In which case, a dropping dollar really doesn't help. Yes, it makes our exports more competitive price-wise, but that's offset by the greatly increased manufacturing costs of all the materials we import to make that product in the first place - which includes food, et al, that the workers consume in order to do the work - which then requires a pay increase to maintain their set quality of life - which requires a price increase on the exported item - which make the exported item less competitive.

All that's happening is that we're collectively getting poorer, while we bow down to the interests of those over-laden with debt.

by GetFeeling | 27th May 23, 3:48pm 1685159296

Without qualification and context, this is pub economics.

Let me use an example to highlight what I mean. Lets take butter. For this pub economics hold true you'd expect imported capital goods to make up almost all of the price of a pound of butter when it hits the export ship with only a small amount left over which ends up being distributed among the people who helped produce it. Does this happen? Hell no. In actual fact the contribution of imported capital goods is actually far, far less. Different products vary. Some are reliant on imported capital goods (see next example) but many are not (software development) and some even less so (tourism).

Another example, A farmer wants a new tractor. He delays buying because the NZD is low and the cost of a new imported tractor is high. Instead he maintains and repairs his existing tractor. He delays the marginal increase in productivity the new tractor might have brought and accepts the small additional costs of additional maintenance and the risk (which he can manage with neighbors) of it breaking down for long periods. There is considerable elasticity in how capital goods are used and when they are renewed. Most good businesses know these cycles and plan for them. (Russians are becoming experts in this now - like they were before Glasnost.)

What you say about our balance of payments deficits needs qualification and I'll not labor this because it's all been said before. The blow-out is temporary. It is due to massively reduced tourist numbers. These are now back to 4/5 of pre-covid numbers but margins are not as high as pre-covid.

What will get us back to full pre-covid tourism? Getting the Chinese back. How do we do that? Hmmm. You know NZ is a premium travel destination, right? How about we drop the price of coming here for a bit? Stack 'em high and sell 'em cheap until supply becomes constrained and we can increase the prices we charge tourists. Seem like a plan? And by golly by dropping the NZD a bit that's exactly what has happened.

So not as chaotic as you first thought, Chaosinflesh.

by Peter M | 27th May 23, 5:46pm 1685166379

The key words are: "Same volume of goods". With log exports about 20% below the last 5 years average, dairy export YoY 3.8% down and Kiwi fruit export about 500M NZD lower compared with previous year we are not exporting enough to pay our import bills. There is a reason for our record account deficit.

by Jonny.Foe | 27th May 23, 9:34am 1685136886

The IMF has been reviewing the US economic situation and said American interest rates will likely need to remain higher for longer to tame inflation

Donkeys at the IMF still think that hiking rates in the US is going to bring down prices. Even the Fed is now questioning this openly - e.g. see latest Fed minutes... 'several participants remarked that tighter credit conditions may not put much downward pressure on inflation in part because lower credit availability could restrain aggregate supply as well as aggregate demand'

Exactly - if supply side issues are pushing on inflation, the last thing you want to do is make it harder for businesses to invest in increasing capacity. Remember the US Fed, unlike RBNZ, do not have the ability to take loads of disposable income off mortgagors because US mortgages are almost all 30-year fixed rate. Also worth noting that the higher the rates go, the more the US Govt pumps stimulatory interest payments into the economy. Crazy.

by Independent_Observer | 27th May 23, 10:46am 1685141193

As I have said to you repeatedly Jfoe - what was really crazy was how we got into this situation. What we are seeing now with normalisation of interest rates isn’t crazy. This is the market trying to return to equilibrium after being artificially manipulated for years in an unsustainable fashion.

by Jonny.Foe | 27th May 23, 11:11am 1685142707

And, as I always repond... yes the drop to the floor was crazy, and so is the hike to the moon.

Where I think we might disagree on is what constitutes 'normal interest rates'. When we decided to 'liberalise our economy', shrink the State, and go on some daft super low Govt debt mission, we kicked off a process of basically transferring Govt debts to households and businesses. Between 1991 and 2008:

Household debt rose from 30% to 90% of GDP
Govt debt (old measure) dropped from 50% of GDP to zero
Business debts went from 45% to 70% of GDP

Right now, household debts are around 95% of GDP and business debt (thanks to piles of COVID funding and NZ basically not investing in anything useful for years) is back down to nearly early 1990s levels (about 50% of GDP).

When you have private debt (households and businesses) of around $600 billion (150% of GDP, skewed towards households) you cannot have interest rates at levels historically considered 'normal' - the drag on the economy is huge. For example, total wages in NZ are about $150 billion per year and household debt is about $360 billion. A 7% interest rate on that debt would see $25 billion (one out of every 6 dollars earned) going on interest payments! Those interest payments go roughly 50/50 to savers and bank equity holders (mostly overseas). It's a recipe for collapse.

So, interest rates have to be low. Do they have to be zero? No, but they need to be close.

by KH | 27th May 23, 11:56am 1685145412

Having no debt would solve the issues jfoe sees.

I have had debt from time to time, used it well, and got rid of it as quick as possible. Been marvellous.

by Jonny.Foe | 27th May 23, 12:03pm 1685145811

What? How many people can buy a house in NZ without getting into debt?!? How many farms can run without using revolving credit to smooth out seasonal variation in income?

The problem is our economy is really poorly structured - people make money (rent) out of their assets rather than enterprise, debt is the fuel of our economic growth (without which we would see a complete collapse), and we produce low value goods for China by destroying our ecosystem to earn overseas currency to spend on Teslas and the oil for our Ford Rangers. We're bankrupt - the only thing holding our economy up is having relatively competent institutions, which reassure overseas holders of debt that the interest payments will keep flowing.

by KH | 27th May 23, 3:41pm 1685158886

It is possible to run business (and households ) on a basis of ownership. The debtor thing we do now is not the only option. We can choose otherwise. Ownership has great advantages, we should try it sometime.

by Pa1nter | 27th May 23, 10:47pm 1685184435

It's possible to bootstrap everything. It's been good in my line of work not to have a bunch of regular loan payments for equipment and vehicles. It's not as nicer stuff, but it does what I need it to.

That said, if you make a measured risk and borrow from your future earnings to increase what you can make in the here and now, that's not something anyone should dismiss out of hand. Increased productivity, that sort of thing.

by Solid_Granite | 27th May 23, 12:56pm 1685148986

Jfoe as I've said before, having high inflation and low interest rates causes wealth to be transferred from saver to person in debt. So who on earth would keep their money in the bank if A: inflation eats it away with little compensation, and B: They fall behind while people in debt get ahead. Psychology plays a big part in this. Banks still need deposits, who's going to do it if they lose out?

by Jonny.Foe | 27th May 23, 2:07pm 1685153223

I have no issue with there being the occasional episode when peoples' debts and savings lose value due to price rises. It's not like our society is suffering from rampant equality is it? The idea of people with debts getting ahead is a peach though!

Banks do not need deposits - they need loan agreements and supporting equity (from investors / shareholders). It is the loans that create the deposits. Loan agreements are bank assets, deposits are their liabilities.

by Solid_Granite | 27th May 23, 4:19pm 1685161187

It doesn't work out that way. If the whole public were sitting in debt, where would their money go via interest rates? That's right, the wealthy. Now you obviously think interest rates are the enemy, in fact the real enemy is inflation and inflation expectations which drive the public to not save and get into excessive debt in the first place.

by KH | 27th May 23, 6:08pm 1685167715

The real problem is the debt, not the interest.

No debt is a position of power. If you have to have debt, use it sparingly, then root out debt with vigour and determination.

by Audaxes | 27th May 23, 9:45am 1685137501

"We're Heading Into 3rd Phase" Of Crisis - Ex-Fed Pres. Warns As Small Bank Deposits & Loans Surpringly Jump

Free to speak his mind, Kaplan concludes rather ominously, "the recent banking turmoil has highlighted the disparity between too-big-to-fail banks and smaller and midsize banks. I worry that increasing the Fed funds rate from here may create further strains on the deposit base for those smaller banks. I’m concerned that, as the Fed raises rates, it is tightening the vice on small and midsize banks and the small and midsize businesses that rely on those banks for funding."

by The Black Swan | 27th May 23, 10:23am 1685139783

NZD down 3.63% against USD on the week with the next RBNZ OCR call 46 days away, next GDP numbers only 19 days away. A short term Kiwi dollar massacre inbound....and if they don't lift rates again on 12 July, it will be prolonged with inflation having a 2nd peak in Spring..

by Justa comment | 27th May 23, 10:36am 1685140589

Yes US looking like higher for longer, we wont be immune. Swaps rising again.

by Smudge02 | 27th May 23, 10:53am 1685141581

Agree. RBNZ stating it expects OCR to now stay at 5.5% till the second half of next year before slowly declining is absolutely meaningless and will simply apply until after the election. Ask any middle income family if they feel their cost of living is improving and they will tell you how it really is.

by Zwifter | 27th May 23, 11:15am 1685142914

This is predictable, unless rates went into double figures to bring it down fast, we are left with the option of lower rates and then waiting much longer for it to come down. The question will remain however, have we gone high enough ? Only time will tell on this one. Do you remember when everyone was saying rates will not rise until 2024 ? now its rates will not fall until 2024 ? how wrong can you get.

by Smudge02 | 27th May 23, 11:22am 1685143346

Do you remember when everyone was saying rates will not rise until 2024 ? now its rates will not fall until 2024 ? how wrong can you get.

Yes I clearly remember, hence now saying OCR will stay where it is until the second half of 2024 is a joke. I wish TAB could offer bets on such things!

by Jonny.Foe | 27th May 23, 11:43am 1685144612

Rates in double figures would have driven prices *up* even faster and then led to a very deep recession as businesses went bust left, right and centre.

by Zwifter | 27th May 23, 2:44pm 1685155442

Its going to happen anyway, the difference now is that its death by 1000 cuts instead of that trap door suddenly opening below you. Now we have to be prepared to just live with inflation for a long period of time and spread the pain for years.

by GetFeeling | 27th May 23, 3:54pm 1685159693

So a smart person would immigrate to another country where they're doing it better. When's your plane ticket booked for?

by Zwifter | 27th May 23, 5:43pm 1685166238

No need to book a flight here, all sorted. Smart people can still make it in NZ, always could and always will.

by KH | 27th May 23, 11:18am 1685143084

https://i.stuff.co.nz/business/opinion-analysis/300887515/those-with-la…

Wisdom indeed. The beloved and I have big amounts in Kiwisaver. To avoid 'single manager risk' we should be able to have accounts with more than one scheme, once over some limit, say $50K

by GetFeeling | 27th May 23, 4:33pm 1685162023

Oh. Was this supposed to be taken seriously? I thought it was yet another example of someone who knows next to nothing about risk sounding off. She starts ...

"It’s a bit like going into a supermarket and being told you’re only allowed to buy food made by Wattie’s".

Seriously? The investment landscape is like your local supermarket? And fund mangers only buy products from a single conglomerate? Golly. I did not know that.

But some people are clearly nodding their heads in agreement. Why? Perhaps they haven't seen through what is a faulty "argument from analogy". (See https://en.wikipedia.org/wiki/Argument_from_analogy and https://simple.wikipedia.org/wiki/False_analogy )

The risk of "single manager risk" is extremely low but not zero. I do 100% agree with the article that once you have enough surplus income to invest beyond the kiwisaver minimums, you absolutely should be investing with another manager if for no other reason than it's fun to compare which is doing better given the economic situation at the time (although funds of similar types often produce quite similar results). You can also explore having your kiwisaver split into different fund types from the same manager - but follow the Buffet rule: don't invest in something you don't understand.

Which made me think, KH, that you and the beloved are of course with separate kiwisaver managers? Y'know. Managing the risk? If not, please report back on how and who decided to switch to another manager to manage the "single manager risk". ;-)

by KH | 27th May 23, 6:04pm 1685167462

??? You sound off, then end up agreeing.

Because you asked, the beloved and I have always been in different schemes from the start.

And as an aside I thought it illustrative in the finance company days when all the old ladies spread risk by putting their money into different companies.

Then - they all went broke together, at the same time. Tells ya something about spread that isn't spread.

by GetFeeling | 27th May 23, 7:13pm 1685171593

I worked for a year or two writing statistical 'widgets' to assist insurance underwriters who underwrite financial 'contracts'. Quite an eye opener. Most people haven't got a clue about how to assess risk. It is both mind numblingly obvious once you know what to assess and mind numblingly complicated having to actually quantify the risk into numerical terms.

No - I'm not agreeing. I think the risk is so low for most people it's not really worth any time worrying about. Most people that sign up to 30 year mortgages are putting far more at risk than a small slice of their kiwisaver balance.

(BTW - Great satire with finance company analogy. A perfect example of a faulty analogy fallacy.)

by Rob Reid | 27th May 23, 5:43pm 1685166224

The employment indicators come out of Stats NZ on Monday.

Should give us a useful data point on where we are at with the most anticipated recession of all time.

by JimboJones | 27th May 23, 6:35pm 1685169313

People who think our politics is bad - imagine if your best option was Erdogan!

by kiwikidsnz | 28th May 23, 9:58am 1685224683

Imagine that...

https://i.stuff.co.nz/opinion/132157503/damien-grant-chris-hipkins-fail…

by HW2 | 27th May 23, 9:43pm 1685180601

Healthy Homes has done wonders for our hospital admissions. Sarc

Remember when you were a child and you could get into hospital. Not anymore.

Hospitals hit 100% occupancy more than 600 times last year

https://www.1news.co.nz/2023/02/09/hospitals-hit-100-occupancy-more-tha…

by GetFeeling | 28th May 23, 10:55am 1685228144

Oh dear. Look up "correlation is not causation". Statistical analysis isn't a strong point, huh? Yeah. It has been noted.

by HW2 | 28th May 23, 12:38pm 1685234299

Struggling to defend the govts track record are you

Whats your explanation of causation sir

by agnostium | 28th May 23, 5:21pm 1685251300

Low medical wages, high cost of living, post-covid burnout, high university fees is putting off people staying entering the medical profession.

High housing costs puts off international recruits.

by HW2 | 28th May 23, 8:21pm 1685262076

I genuinely thought you were going to say something like the hospitals are full because our immunity dropped and now more are sick due to not going out after covid.

by Mountie | 28th May 23, 12:56pm 1685235405

Nice pic of Papamoa Hills Regional Park. Walked up there this morning. It's a pretty decent climb up to a trig station and a historic Pa site with stunning views in all directions.

by Beanie | 28th May 23, 5:59pm 1685253544

Someone asked the other day what mob I was from. The pa where that picture was taken from is the answer. Well some of my ancestors.