Here's our summary of key economic events over the weekend that affect New Zealand, with news upbeat economic signals are harder to find.
But first, let's take a look at what economic signals we can expect in the next few days.
It will be a busy week in the US, with the Fed interest rate decision on Thursday (NZT) and no change is expected by financial market pricing, and their CPI inflation rate comes on Wednesday (NZT). The week will also feature data on retail sales, and the University of Michigan consumer sentiment reading.
Elsewhere we will be following the ECB and Bank of Japan monetary policy decisions.
And China will be releasing industrial production, retail sales, and fixed asset investment data, while India will announce its inflation rate and industrial production figures. From Australia we will get consumer and business confidence and their May labour market data this week, also on Thursday.
Of course, locally our current account position for March will come out on Wednesday, along with our Q1-2023 GDP result. Financial markets expect a tiny contraction to come after the Q4-2022 contraction, so the headlines will scream 'technical recession'. Bank analysts aren't coming down on the side of contraction however. Not so technical will be the REINZ data for May which we should get this week. It is unlikely to uncover any green shoots.
Over the weekend, and as we have noted elsewhere, we got confirmation China has no consumer inflation. Their official data for May reported their annual inflation rate edged up to +0.2% in May 2023 from April's 26-month low of +0.1%, but less than market estimates of +0.3%. Between April and May, prices slipped slightly. None of this paints a picture of substantial demand. Milk, beef and sheep meat prices all fell faster than the overall level.
However, China does have deflation in its industrial sector. Producer prices fell -4.6% year-on-year in May, faster than a -3.6% drop in April and worse than market forecasts of a -4.3% drop. It was the eighth straight month of producer deflation and the steepest fall since February 2016. It comes amid weakening demand and moderating commodity prices.
China is losing investor favour faster now too and in a wider set of sectors. Foreign investors pulled a net -US$7.2 bln worth of funds from Chinese bonds in May, according to the Institute of International Finance Capital Flow Tracker. That marked the fifth consecutive month of outflows. In April, a total of -US$10 billion was withdrawn from Chinese debt. But Chinese equities posted +US$126 mln worth of inflows from overseas funds in May, compared with April’s outflow of -US$808 mln. This was minor and there is still a considerable fund-outflow pressure in China’s capital markets, particularly in bonds, over the past few months, amid a weaker yuan. The Chinese currency has lost -3% against the US dollar since the start of the year.
Beijing officials are clearly worried but not unnerved yet. Their central bank governor appealed for confidence and patience after the weak price data triggered concerns over deflation that is hampering their post-pandemic recovery.
In the US, concerns about the health of more regional banks is returning, especially over the valuation of their loans for commercial real estate.
In Canada, their jobless rate rose to 5.2% in May from 5% for the five previous months. It is the first increase in their unemployment rate in nine months. Their labour market is clearly cooling. -17,300 jobs were lost, largely by younger workers, the first decline in nine months, and this was a big surprise because analysts had expected a rise of +23,200.
Good rains in the US mean that they will have a substantial surplus this year in their wheat crop, with output rising to over 800 mln tonnes. But Russia, India, the EU and Ukraine are also all expected to have bumper wheat harvests. American corn and soybean exports are expected to be smaller however. All this comes from the latest USDA WASDE June update. They signaled no significant changes in beef and milk production or prices.
In Australia, more economists are now warning growth is evaporating there and the chances of a recession in the lucky country are now 50:50 in Q3 and Q4-2023. The latest to come to this view are CBA and HSBC. It didn't help that business turnover fell in April in Australia, and kind of sharply.
We should also note that it is a public holiday in much of Australia today (although not Queensland or WA).
The UST 10yr yield will start today at 3.74%, unchanged from Saturday but up +5 bps from a week ago. Their key 2-10 yield curve is still inverted at -85 bps. Their 1-5 curve is little-changed at a -130 bps. Their 3 mth-10yr curve is still inverted at -146 bps. But these inversions are a lot less than a week ago. The Australian 10 year bond yield is now at 3.96% and holding although +22 bps higher in a week. The China 10 year bond rate has stayed down at 2.70%. And the NZ Government 10 year bond rate is at 4.56% and down -2 bps from Saturday but up +20 bps in a week.
The price of gold will start today unchanged at US$1961/oz. But that is up +US$10/oz from a week ago.
And oil prices have stabilised from Saturday at just under US$70.50/bbl in the US. The international Brent price is still just under US$75/bbl.
The Kiwi dollar starts today little-changed at 61.3 USc. Against the Aussie we are little-changed from Saturday at 91 AUc. Against the euro we are marginally firmer at 57.1 euro cents. That means the TWI-5 is still at 69.4 and little-changed.
The bitcoin price is a little lower since this time Saturday at US$25,987, down -1.7%. Volatility over the past 24 hours has been 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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74 Comments
Virtually everything is built on extraction. Are the Ext Rebel protesting school girls going to stop using cosmetics, or driving to school.
Exactly... we now agree on something.
Those who oppose mining should return their mobiles, their EVs and their musical instruments. These rely on mining of elements from the earth, isn't it cruel.
It's just a funny train of thought.
Here's this activity, which we'll say is really damaging and should be stopped. The solution is deemed to be a slightly less impactful version of the same thing.
It's like hitting snooze on an alarm. Eventually you're going to have to get out of bed.
My comment was to PDK the complete anti miner. You're entitled to your opinion as am I.
Extremists like PDK, say landowners can use their land to benefit the populace, but only where it suits the extremists. Even if that use eg mining, conflicts with their strong beliefs. But so long as its something the extremists need, otherwise tough.
I've never understood giving honours to those who were just "doing their job". These paragons of business have all the recognition they need parked in their glass-walled garages or waiting in the local executive jet hangar.
Same applies to politicians, civil servants and so on - if the outcomes being honoured are merely a consequence of doing what you are either paid to do or seeking to profit from, then the pay check is the reward (plus any celebrity that comes with it if that's your vibe). If that's not reward enough, go find something else to do.
Honours systems should be reserved for those who go 'above and beyond' in serving the community in ways that they are not directly compensated for.
Wherever there is great property, there is great inequality. For one very rich man, there must be at least five hundred poor, and the affluence of the few supposes the indigence of the many. The affluence of the rich excites the indignation of the poor, who are often both driven by want, and prompted by envy, to invade his possessions. (Adam Smith)
https://oll.libertyfund.org/quote/adam-smith-inequality-rich-and-poor
And we wonder why ram-raids etc are on the rise everywhere.
"It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages."
Adam Smith on the Butcher, the Brewer, and the Baker | Online Library of Liberty (libertyfund.org)
It has come down to a basic personal tenet, something like - if I have not got something I want and in my situation there is no hope of ever getting it, then the only way to get it is to take it off someone who has got it. Then if being caught is comparatively inconsequential, then what the hell.
Sounds like a fairly logical approach.
The only way to combat this is to make sure those that have more are seen as having earned it and having achieved something that means they are recognised as deserving it. The social contract.
Unfortunately, the majority of those with wealth have neither earned it nor have come about it though some achievement that is deemed to be worthy of recompense. So we can expect to see more of this as the wealthy continue to take a disproportionate share of society's wealth and the social contract breaks down.
"Unfortunately, the majority of those with wealth have neither earned it nor have come about it though some achievement that is deemed to be worthy of recompense."
Any evidence for your assertions or just your "reckons" based on your personal opinions & definitions of "earned" & "worthy" ?
Average wealth per capita (global) is somewhere in the region of 90K US
https://www.credit-suisse.com/about-us/en/reports-research/global-wealt…
Median global wealth is around 9K.
To be a 1% individual in NZ, you would need net wealth of $3.866m.
Richest 1% bag nearly twice as much wealth as the rest of the world put together over the past two years
https://www.oxfam.org/en/press-releases/richest-1-bag-nearly-twice-much….
Of course, these 1% super rich obviously worked more than the whole of the rest of the world out together so they obviously deserve to get twice as much of the wealth generated. They must have personally cleaned so many houses, built so many buildings, flown so many planes, taught so many kids, treated so many patients, put out so many fires, made so many arrests. Amazing how productive they are, must be supermen.
You got it. Remember to also complain vociferously about the unlucky have nots stealing and ram raiding and generally not being satisfied with watching you increase your wealth while they struggle and get nowhere and you'll be living the current New Zealand dream.
They are criminals, there is NO excuses for that kind of action. The old "oh the poor criminals, the rich people and everyone else is to blame, let's make excuses for them",
Having lived in Asia, there is no welfare system over here but you don't see the same blatant crime committed by the youth. Crime is usually gang related. It's actually safer in many of the cities compared to NZ ones.
I do wonder how many of these defenders of criminal actions have ever been assaulted, robbed? Having lived by gangs the majority of the community (race, religion, wealth etc) has no sympathy for this behaviour for whatever reason..
I'm not defending it. Just pointing out the consequences of increasing wealth inequality. Wishing things to be some other way will not solve anything.
Broadly speaking there are two ways to govern, by consent and force/fear. The former requires a social contract where people can and believe they can prosper in relation to their fellow citizens. It is the foundation of democratic systems. Increasing wealth inequality erodes the social contract and social cohesion and crime increases. The latter requires one group to control access to force and enforce their will on the people through violence or the fear of violence. This is the foundation of authoritarian regimes.
If you look at society and see that if you abide by the law you will never achieve what others are achieving because you happen to not have been born into wealth then what is the incentive to abide by the law?
It's the logical response to the disenfranchised. I'm not saying it's right or wrong. It's just the way it is. Higher inequality = more crime and less social cohesion.
Without going into obvious examples many successful individuals, in term of wealth if you like, were hardly born into it. On the other hand some that were have successfully gone the other way, into rack and ruin. Whether you agree with the law, or a law, or not claiming immunity from it, whatever the circumstances might be, undermines the security and entitlements of the wider law abiding population and on sufficient scale, will inevitably destroy any society.
I think you're being a little extreme there as 'single handedly', but otherwise I don't disagree. Didn't like Maggie T much but it doesn't mean she couldn't say something to be remembered. Reagan wasn't the sharpest either, but he broke the back of the Soviets and that is worth at least a little tick. Most commentators suggest that while Ronnie sat in the seat, Nancy was the one who actually ruled.
MSM too busy trying to work out how they will spin the next horrific HPI figures to the sheeple
Either way, a 2.5% wealth tax is huge - the majority of residential investment properties would be lucky to net 2.5% so they would be looking for a new floor
Even France caps out at 1.5% over 10m euros
French Band of value - Rate of tax
Up to 800,000 €0%
800,001 € to 1,300,000 €0.5%
1,300,001 € to 2,570,000 €0.7%
2,570,001 € to 5,000,000 €1%
5,000,001 € to 10,000,000 €1.25%
Above 10,000,000 €1.5%
How about tax credits when your home value increases & then drops 30% each way in subsequent years - due to RBNZ/Govt acts of economic vandalism ?
Lotto winners won't be too happy either.
The elderly on low fixed incomes in their lifetime homes which after half a century are now in expensive areas will be tax farmed to support the indigent. Then when one of the couple dies their tax doubles.
Yes that is the point that I think most people miss. This is not about income. It is about the theoretical value of your assets and ultimately it is a hiding to nothing, because the end goal is to simply strip anyone of their wealth, no matter how apparently low the tax is.
Theres also an unanswered question as to how inflationary will it be to steal it out of people's unrealised equity (ie adding it to in money in circulation) & handing it out to people who will spend it quickly.
The projection quoted was $12 Billion for the first year
The elderly on low fixed incomes in their lifetime homes which after half a century are now in expensive areas will be tax farmed to support the indigent. Then when one of the couple dies their tax doubles.
Indignent is a rude way to describe superannuants, which is where over 50 percent of the welfare budget goes. The super amount is growing every year as well. The problem we are facing is skyrocketing super costs as demographics start to invert and we begin to have a higher ratio of retirees to workers, workers income won't be able to support universal superannuation on its current course. Some kind of asset tax is the only fair way of keeping things as is, and of those asset taxes, a land value tax is the least shit, especially as the proposal is to allow deferral for retirees so they wouldn't be kicked out of their homes. Your other options are a capital gains tax or wealth tax which both carry more negatives.
The reason the % of superannuants is so high is we are not having children, tax will do nothing to help this the core of the problem is a smaller portion of the population supporting a larger population of older people. Transfer all the bits or pieces of paper you want to the young, it won't change the fact that their not enough people working to support these people.
We need to become more efficient, and I don't mean more efficient at transferring money from one persons wallet to another's, like we seem to be doing now, but start making things that last, building things faster and better.
Universal 10% tax on every dollar of profit and no creative accounting allowed. There will be no need for half the accounting firms and millions spent on IRD consultations.
But but but it will never happen because rich are corrupt to the core and they are smart to not let this happen.
You pay 28% but lots of businesses have creative accounting to pay nil on any of their profits. So yes 10% on profit every 6 months. No creative accounting to save it. No matter how much you are using this profit to invest in new ideas. It's all creative accounting to not pay tax
Can you give me an example of how you can actually pay $0/0% tax on declared profits? I understand the argument (don't necessarily agree with it) of taxing revenue not profit, but what is one specific example of a loophole you can use to avoid paying tax on a declared profit?
I presume you're talking about things like the way that Facebook uses international tax loopholes to ship its profits offshore to a lower tax jurisdiction, as opposed to a small tradie business buying new vehicles to reduce profit and therefore pay less tax?
Crikey, Ngu. If my business makes $1 profit, there are a few ways to sort it. Firstly, declare $1 profit. Secondly, pull out income of $1, and zero profit. Thirdly, 50c for me, 50c for my wife. Still zero profit. Fourthly, new company vehicle, with the total cost being $1. Zero profit again. Obvious really. Any other ways?
Can somebody explain to me how a wealth tax on unrealised value doesn't incentivise the government to try and inflate the value of assets, considering that just like a labrador can never have enough food, governments can never have enough tax revenue (particularly if the Greens are involved)
In a nutshell, any tax on unrealised money means by definition that the victim does not have the money to pay. Two ways to fix this. Force thevictim to pay, as IRD does now, or lower government costs. Only provide government services that I think should be provided. That would result in quite a drop in government costs.
I wonder where Graeme Hart is domiciled for tax purposes, and whether the ~$375M tax bill each year would make him reconsider his life choices. Sir Mark Dunajtschik surely wouldn't have had $50M to pay towards a new children's hospital under this regime, and it very likely wouldn't have been prioritised by the government that was spending billions a year on a bureaucracy that had to perform annual in-depth audits of hundreds of thousands of people.
Clarification on this site;
https://www.interest.co.nz/public-policy/122447/green-party-would-provi…
To pay for these income policies, the Greens would raise taxes on high income earners and people holding more than $2 million in assets.
The party would impose a wealth tax of 2.5% on all assets, such as properties and shares, worth more than $4 million for couples and $2 million for individuals.
These are net figures, meaning debt would be deducted from the total value of assets.
A person who owned $2.5 million in assets would be taxed 2.5% on the $500,000 over the threshold. But if they had a $1 million mortgage, they would not be taxed at all as their net wealth would be under the threshold at $1.5 million.
Its on the interest story about it here:
"A person who owned $2.5 million in assets would be taxed 2.5% on the $500,000 over the threshold. But if they had a $1 million mortgage, they would not be taxed at all as their net wealth would be under the threshold at $1.5 million."
We won't actually know whether there was a technical recession or not for 12 months, because the official GDP estimate could be revised three times
That's how seriously we need to take the arbitrary measure of our "economic success" that MSM will be obsessing over this week.
Bankers and bureaucrats will nevertheless celebrate a print of 0% or higher with caviar and champagne.
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