Here's our summary of key economic events over the weekend that affect New Zealand, with news necessity is moderating China's "wolf warrior" diplomacy - even though the original 'wolf warrior' is back as the Chinese foreign minister.
Late last week China announced that they will drop its tariffs on Australian barley imports that have been in place for three years. In response, Australia said it will suspend its case at the WTO. It was widely expected that China would lose the case. China had already lifted its block on importing Australian coal. But don't forget China still has a blockade on Australian wine imports. Until that is lifted, the Australian prime minister won't visit Beijing, a stance that is said to annoy the Chinese leadership.
Staying in Australia, their competition regulator has knocked back ANZ's AU$4.9 bln takeover of Suncorp Bank. It is not a complete surprise, with others working to merge Suncorp Bank with Bendigo Bank. The ACCC is also promoting that 'solution'. But the problem with the alternative is that would be two weak institutions combining, and it wouldn't necessarily result in any strength improvement. However, the ACCC said “We are not satisfied that the acquisition [by ANZ] is not likely to substantially lessen competition in the supply of home loans nationally, small to medium enterprise banking in Queensland, and agribusiness banking in Queensland. ... Second-tier banks such as Suncorp Bank are important competitors against the major banks, especially because barriers to new entry at scale into banking are very high”. ANZ said it isn't giving up and will appeal the ACCC ruling.
Separately, the RBA released its Monetary Policy Review and trimmed its 2023 growth expectation from +1.2% at its last MPR to +0.9% now, as higher interest rates and inflation bite. A year ago, the RBA expected the Australian economy to grow +2% so the change since then has all been quite negative. It sees widespread "trading down" by households (p 33) as a key driver of the waning growth. In fact it might be slowing fast enough that even +0.9% is optimistic. Higher nominal wages are also driving a very much higher tax take.
Singapore said its retail sales are struggling, down -0.8% in June from May and only up +1.1% from a year ago. The key drag was from car sales, but the non-car sales activity isn't that flash either.
In the US on Saturday, the rise of their non-farm payrolls came in less than the +200,000 expected, up only +189,000 in July from June in seasonally-adjusted terms. This was very similar to the June rise of +185,000. But it was far less than the +568,000 surge they had in July 2022. There are now 156.1 mln people employed by 'establishments', up +3.25 mln from a year ago.
Regular readers will know that we also look at the household survey because this broader view brings in the self-employed and unincorporated workforce. That shows (on the same basis) the number of people in jobs was up +268,000 in July from June, and that is +3.0 mln more than a year ago at 161.3 mln.
It is mid-sized and smaller firms still hiring strongly; large firms actually shrank their payrolls even if it was only minor.
Overall, their headline jobless rate held at 3.5%. Their participation rate held at 62.6%. Average hourly earnings rose +4.4% in July from a year ago, exceeding their CPI rate of 3.0% in the same period.
This overall outcome in July from June was significantly lower than the precursor ADP Employment Report of private payrolls indicated, and for a second consecutive month. But it is still an expansion, and the year-on-year increase of people in paid jobs remains impressive. And the ADP report also showed these private payrolls +3.1 mln more than a year ago, so very similar overall.
Two Fed officials said the slower job gains suggest the US labour market is now better balanced, arguing they may soon need to focus on how long to hold interest rates at elevated levels. (There are however twelve voting members making these decisions, not just these two.)
North of the border, Canadian employment actually slipped very slightly, down -6,400 when a +21,000 rise was expected and the June rise was an impressive +59,900. But it was a fall-off in part-time jobs that skewed this result. Full-time jobs held little-changed.
Across the Atlantic, German factory orders came through with encouraging results for June however. They were expected to fall -2% from May but in fact they rose an impressive +7.0%, building on the very good +6.2% rise in the prior month. If they keep this up, it can really move the German economy's dial. They were up +3.0% in June from a year ago, and remember this is 'real', inflation-adjusted data.
The UST 10yr yield will start today at 4.04% and unchanged from Saturday but a -16 bps pullback from Friday triggered by the US jobs report. But that is up from the week-ago level of 3.96%. Their key 2-10 yield curve inversion is still at -73 bps. Their 1-5 curve is still at -120 bps. And their 3 mth-10yr curve is still at -134 bps. The Australian 10 year bond yield is now at 4.06% and unchanged from Saturday. The China 10 year bond rate still at 2.69%. The NZ Government 10 year bond rate is now at 4.88%. A week ago it was at 4.79%.
The price of gold will start today at US$1943/oz and up +US$2 from Saturday. But it is down -US$17/oz from a week ago.
And oil prices are still just under US$82.50/bbl in the US. The international Brent price is just under US$86/bbl. A week ago these two prices were US$80/bbl and US$84/bbl.
The Kiwi dollar starts today slightly softer at just on 60.9 USc and -20 bps slip from Saturday. A week ago it was at 61.5 USc so -½c down from then. Against the Aussie we are little-changed at 92.9 AUc. Against the euro we are still at 55.4 euro cents. That all means the TWI-5 has basically held at 69.4 which is -30 bps lower than a week ago.
The bitcoin price is virtually unchanged again today since this time Saturday and is still at US$29,050 and down -US$17. A week ago it was US$29,318 so down -0.9% since then. Volatility over the past 24 hours has been very low at just over +/- 0.2%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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39 Comments
Quite right.
The tax brackets need to be reduced, because the tax take doesn't buy what it used to, and more tax needs to be raised to buy the same stuff. But I'll guess that's not what you want?
We have a choice - pay more tax; one way or another, or raise more Debt to run our Current Account Deficit country. And doing the latter leads to higher interest rates which leads to more inflation which leads to more tax needed which leads us to...well, exactly where we are today.
pay more tax; one way or another, or raise more Debt to run our Current Account Deficit country
why not just cut some costs and adjust settings to realign businesses to focus on prodictive business and exports?
Tons of ways to do both.. ask Act about rapid cost cuts and some business leaders about exports...
By all 'means'.
The easiest and best way to cut costs right now is to raise the retirement age to 80. Means Test all current pensioners and bring back Gift Tax and rethink Trust Structures to stop asset reallocation. Drop the pension entitlement for anyone 64 and younger to zero, and get them to work another 15 productive years to get what will then be a Means Tested entitlement. (NB: When Universal pensions were originally brought in after WW1 at 60, that was above the expected life expectancy. People weren't expected to live long enough to actually claim it)
Cost Cutting always sounds so easy. And it is. Unless YOU (2nd person plural) are the person being cut. What happens to the tens of thousands of current workers in, say, the public service that lose their jobs due to Cost Cutting? I know! They go on the Unemployment Benefit.
If taxation was easy, all counties would be doing it the same way. And the fact we aren't tells us - there is no correct way of paying for the structural needs of any society. In fact, what those needs are different in each.
So maybe you are eligible for super 15 years before the age your parent died at or 65, whichever comes last.
You are a woman who's mum died at 95, you get super at 80. You are a man who's dad died at 70, you get super at 65. You could argue that is a fairer system but I doubt it would fly.
I agree with raising the retirement age (the sooner the better in order that people know well ahead of time so they can plan to work longer and save more). I also believe that New Zealanders need to have lived and worked in NZ 20 years prior to the time of being eligible for a pension.
Yeah no thanks. Wait until you are nearing 60 and no longer want to work. What I think you will find now is with the modern "Lifestyle" that the average life expectancy will begin to fall. Apart from medicine continually improving, everything else is getting worse and medicine can only do so much. Basically do nothing and the problem will go away.
I'll add my vote to Zwifter, no thanks. I turn 66 very soon, am still working because I can't afford to retire, and although I am very fit and healthy for my age, my body is definitely telling me I have got old. My resilience is very much reduced.
Besides when you are arguing to increase the retirement age now, remember you're also arguing for it to be raised for your children too. You might be in a well paid job and able to build significant reserves, but the majority of the country cannot do that on the current average wage.
Yip i'd rather have the economy crash and ŕeset naturally than all this discombobulated mish mash propping up of some areas at the expense of others to satisfy certain voters.
The public service is awash with thousands of highly paid spin doctors devising dumb ideas to justify their existance and the politicians who put them there will not remove them thru fear of voters removing them from power
Even as hourly wages are elevated, business is making up for it by cutting back hours, limiting weekly earnings growth. Lowest 6m change since 2020, and already down to 2019 "recession scare" levels when Fed was cutting rates. https://buff.ly/3qiwV99 Link
When are we going to get some investigative journalism on NZ in particular and Au currently full on? drive to a cashless society controlled by the banks and at the behest of RBNZ with politicians either in ignorance or connivance.
RBNZ with Robertson driving full steam ahead towards a cashless society using the usual guise of consultation.
Witness UK's path. https://www.youtube.com/watch?v=gTlYmgGDvtM
The property market in Wellington appears to be back to early 2020 levels. The median house (3 bed, 1 bath, 1 garage in the northern suburbs, sold for ~$700k in 2020) I use as a barometer is now back to the level it was at in early 2020, after peaking at around $1m in October 2021.
And that's using homes.co.nz, which is infamous on this site for its 'optimistic' market prices.
Act culling thousands of jobs will also weigh heavily on Wellington's real estate market. MSD's budget for departmental spending is $2.8 billion (up 80pc since 2017/18) and I bet there are billions more in staffing costs of contractors, advisors and contract/portfolio managers hidden away in non-departmental expenditure.
That doesn't even include all the contractor/consultant splurge from useless public projects. These expense items are accounted for as non-departmental "procurement" in government books.
DIA has already contracted an American IT provider owned by Koch bothers to roll out a 3-waters IT system nationwide at an expected lifetime cost of $659m over 2 years as per the business case. The provider plans to fly 500 contract IT workers into the country, mostly from India.
The same provider implemented the same software solution for Watercare a few years ago and blew several millions more than budgeted and took 4x the time to complete.
ZB reported a few months ago that the 3-waters entity had contracted JD writers for $130/hour. That's more than what directors at my firm earn and some of them write technical reports on structural integrity of bridges, dams and tunnels in NZ.
DIA has already contracted an American IT provider owned by Koch bothers to roll out a 3-waters IT system nationwide at an eyewatering cost of $659m over 2 years. The provider plans to fly 500 contract IT workers into the country, mostly from India.
Do you have the name of the contractor and is the closed tender been made available to the public?
Yup, it's called Infor.
The data is public but hard to find. A mate who is close to this transaction says DIA/Treasury has hidden the cost in "phases" to avoid public scrutiny. You wouldn't spend the first hundreds of thousands without intending to spend on the entire implementation lifecycle.
Three Waters: US-based Infor selected for IT platform 'discovery' phase - Reseller News
Well don't expect any better communication in future, as Act and National intend to get rid of most of the communications staff.
https://www.rnz.co.nz/news/political/485533/christopher-luxon-says-heal…
The way Luxon blatantly lies to us, really irks for example his comment on PPP:
"And that just means we get to do more infrastructure sooner, and we also make sure that we don't give the taxpayer a huge amount of debt to deal with."
He is selling the idea that we can build big roads and not have to pay for them. Debt is debt, whether it is hidden through the use of a PPP, or if it is straight government borrowing. PPP's usually end up more expensive anyway don't they?
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