Here's our summary of key economic events overnight that affect New Zealand, with news it seems to be the season for some "shock therapy" - from OpenAI to Argentina.
But first in the US, this is the lead-up week to their long Thanksgiving holiday weekend, a four-day Thursday-to-Sunday work-break - for many. Wednesday is usually a travel crush day. Thursday (Friday NZT) a quiet family day, and then followed by an all-out retail shopping frenzy, shopping for Christmas gifts traditionally. Economic eyes will be on the retail impulse. Financial market activity is already thinning out in the run-up to the holiday.
On Wall Street, all eyes are on the ructions at the ChatGPT firm OpenAI. Overnight, Microsoft hired its fired CEO and 500 staff said they were ready to join him. These are juicy headlines in a newly high-profile business segment, but not likely to have much lasting economic impact. The motivation for the OpenAI board, one ultimately controlled by core AI scientists, seems to be that the company’s expansion was out of control, maybe even dangerous.
In China, their central bank kept its key lending benchmarks unchanged in their November review - despite the obvious need for stimulus. It won't come from lower lending rates because this would expand downward pressure on the yuan and risk increasing capital and portfolio outflows. Those outflows hit -US$100 bln in both September and October. However as long as the interest rate spread to the USD remains heavily against the Chinese yuan, these outflows will likely persist. All they can do at the moment is not make matters worse which is why the one-year and five-year loan prime rates were held steady at 3.45% and 4.20%, respectively.
Taiwanese export orders rose +2.9% in October from September to be -4.6% lower than year-ago levels. But they have been on a steady recovery since the low point in April, and are now back to the high levels they were in the 2020-2022 period.
In Argentina, they have elected right-wing libertarian firebrand Javier Milei as its new president. He won decisively, 55:45. He is a hard-line social conservative with ties to the American right, opposes abortion rights and has called climate change a “lie of socialism.” He has promised to slash government spending by closing Argentina’s ministries of culture, education, and diversity, and by eliminating public subsidies. He also wants to close their central bank and "dollarise" their economy. But their central bank has no US dollars, so the challenge will be huge. How do you "dollarise" when you have no dollars? This will be new territory: no country of Argentina’s size has previously turned over the reins of its own monetary policy to American decisionmakers. The whole affair smacks of abject desperation.
When he won through to the final in the first round, the Argentine peso came under immense pressure and was devalued -18% to 350 to the USD. Now he is president-elect, another large devaluation is underway. The unofficial rate is now 1000 to the USD. Campaigning against his own currency has become self-fulfilling. He seems to have engineered a situation of making his own currency completely worthless while lacking the resources to dollarise. Who knows what happens from here. Those without US dollars are now destitute.
Also, while we are not looking, Turkey's currency is falling further while its inflation rate hovers stubbornly above 60% and almost double what it was in June. All this is the result of another crazy "shock therapy" experiment that went badly wrong.
The UST 10yr yield is little-changed from yesterday, now at 4.42% and -2 bps lower. The key 2-10 yield curve is still inverted by -46 bps. Their 1-5 curve is marginally less inverted, by -80 bps. Their 3 mth-10yr curve inversion is now -95 bps and little-changed. The Australian 10 year bond yield is now at 4.51% and up +4 bps from yesterday. The China 10 year bond rate is unchanged at 2.67%. And the NZ Government 10 year bond rate is up +4 bps at 5.02%.
On Wall Street, the S&P500 is up +0.4% in its Monday session. Overnight European markets closed little-changed although Paris did manage a +0.2% firming. Yesterday, Tokyo ended its Monday session down -0.6%. But Hong Kong rose +1.9%. Shanghai ended its session up +0.5%. The ASX200 closed up minor +0.1% in Monday trade while the NZX50 was up +0.3%.
The price of gold will start today at US$1974/oz and down -US$7/oz from this time yesterday.
Oil prices have risen +US$2 to be just over US$78/bbl in the US. The international Brent price is now at US$82.50/bbl.
The Kiwi dollar starts today at 60.2 USc and up +¼c from yesterday. Against the Aussie we are down marginally at 91.9 AUc. Against the euro we are little-changed at 55 euro cents. That all means our TWI-5 starts today at just under 69.2.
The bitcoin price starts today at US$37,269 and up +2.5% since this time yesterday. Volatility over the past 24 hours has also been modest however at just on +/- 1.5%.
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71 Comments
Sydney housing prices could fall 4pc next year
Nila SweeneyReporter
Nov 21, 2023 – 5.00am
Sydney housing prices could fall 4 per cent next year, triggered by a sharp decline in affordability, interest-rate stress that forces some owners to sell and rising unemployment, the latest Housing Boom and Bust report by consultancy SQM Research predicts.
"..sharp decline in affordability"
Says more about fhb ability to pay than demand for housing. The rich and mid class kids will ask mom and pop, the poor will ask their employer or give up trying.
Shopping for a house is on our Xmas list too, but haven't seen anything decent and well priced. Maybe will wait till after Jan 1
I'm full time in property. I think there will be good buying options over the next 6-12 months as the engineered recession hits, however it will depend on the vendor's circumstances and you might not find eactly the house you want. My advice to folks is to buy at a great price, as long as it is a not quirky or hard to sell, then in the short-to-medium term you will have the chance to sell and buy again. Your being willing to solve someone else's problem will help you in the long run.
A lot of folks get upset that the vendor of the perfect house for them isn't desperate to sell or willing to meet a down market. The property market isn't the stock market where all shares have equal price and are for sale at an equal price-to-intrinsnic-value at any one time.
Probably a well-meaning opinion, but really just a desperate and ultimately terrible piece of advice that will keep FHB's sidelined forever. Blackbeard, for your own good, stop thinking that waiting for prices to drop until they meet your ideal price is the way to go, it's the way to never own!
This must have a flow on effect for tourism from the USA. Please explain to me why so many airlines have started up services from the US to NZ in the last few months. When bookings dont materialise and flights are cancelled, at least there is a lot of capacity to off load their bookings onto
Yep. The dial is now clearly into "Greed"
In China, their central bank kept its key lending benchmarks unchanged in their November review - despite the obvious need for stimulus.
If you believe in US decoupling from China, take a look at Mexico's trade balance. Exports to the US (blue) are up massively, reflecting a big rise in imports from China (red). There is no trade decoupling. China is just sending its goods to the US on more circuitous routes... Link
With AI is appears to me that in future, before discussing details, identification will need to be established. Not through familiarity with voice or even video pictures. There will have to be some other means of establishing true identity. With family, this may have to involve a question about some past family detail that prior outside research by third parties could not uncover it.
"OpenAI staff demand board resign over Sam Altman sacking"
It is a bit of a worry when even the majority of commentators here don't believe in monetary policy and think our economic policies have failed. If you want to see what failed looks like, have a look at Argentina / Turkey / etc.
We get upset about a short burst of 7% inflation, imagine if our government made the NZD and everything you have completely worthless.
Yes, this will be a grand experiment. ACT voters should watch what happens, if we were to elect an extreme right libertarian here as many of them appear to want, the same may happen here. Not saying he will be good/bad, probably too early to make assumptions about, but its a grand experiment we can watch from afar.
Regarding Argentina. Their economy has already been dollarized, albeit unofficially.
A small 2 min clip
https://www.youtube.com/watch?v=Hn9pW8XaJDw
In another video he goes into greater details of how dollar has 3 different exchange rates depending on how much quantity you need to purchase. Very interesting.
Dollar is their unofficial currency and you will never know this unless you actually visit Argentina and spend a few days there.
Edit: This of course doesn't mean its going to be easy moving forward, but he at least has a base to start from, and the population is quiet used to dealing in US dollars.
Argentina's problem is it doesn't have a real central bank system, nor having a sensible treasury spending.
now that want to bomb their non-existence central bank hoping the USD can get them afloat.
well, where do they get those good USD needed, when they are in a 200b USD debt?
so my conclusion is that the 'Dollarization' has nothing to do with dollarization but to default their Peso.
"But their central bank has no US dollars, so the challenge will be huge. How do you "dollarise" when you have no dollars? This will be new territory"
Not new - look at El Salvadore. One of the best market experiments of late in South America - not to mention their bitcoin experiment. Crime down 99% or something too
This sounds familiar:
https://www.abc.net.au/news/2023-11-21/the-uncomfortable-truth-about-im…
Good link, agree completely. Making GDP a per-head measure (rather than a mindless total (to which migrants inevitably add, but less) might be a start.
But overpopulation and refugees and migration and incumbent inability to support - are all the same thing. A topic we avoid because it carries uncomfortable baggage (we have been living at the expense of others).
Meh. As an economist I almost entirely focus on real GDP per capita. I also ignore mainstream reporting of NZ economic events, since it's irrelevant.
Journalistic sycophantism/desire to mislead to fit journalist's own views/thinking NZ pop is dumb lead them to report nominal GDP values in the popular press, as well as other meaningless figures like nominal profit growth. Everything's a record when you don't adjust for reality.
All this is the result of another crazy "shock therapy" experiment that went badly wrong.
Turkey was dropping interest rates and inflation at the same time until they abandoned that 'crazy experiment' in June and returned to orthodox monetary policy with a new central bank type in charge. They have since been increasing interest rates and have seen inflation bounce back strongly. Just maybe, maybe, perhaps, there might be other factors at play?!
Inflation not over in the USA...back over 3% and climbing..
Campaigning against his own currency has become self-fulfilling. He seems to have engineered a situation of making his own currency completely worthless while lacking the resources to dollarise.
That's a very unfair statement. The previous Government has been doing a great job of making the Argentinian peso worthless over a number of years. Hardworking citizens have had enough of Peronist Governments.
Agreed, any change is a good change for the 50% not able to make ends meet. Radical change is particularly important as a creative-destructive trigger. I cannot see the removal of those departments as being particularly concerning as long as a funding stream of some sort is maintained for the schools they already have.
You make the same mistake David Chaston sometimes does; misidentifying driven and driver.
If the US (and/or global-scale corporates) puts the squeeze onto a nation which has voted for autonomy rather than economic servitude; the resulting conditions aren't as a result of the internal politics; they're because of the external repression. So we send in the IMF/World Bank,or the CIA or the military; start a coup, or we embargo/confiscate. Easy to kill a minor foreign 'economy'.
The Western elite have fostered a fear of 'communism' and a lot of shadowly-associated insinuations - partly through fear for their own backsides. Sad to see how much influence that propaganda has - how little people stop and contemplate the bigger picture. It creates some unease, of course.... These people 'over there' aren't just poor because they're poor; they're often poor because we've organized things so that we can extract their resources - without paying....
I used to call that kind of comment: Idiot.
But I've learned a lot about how people think; and it's not 'idiot'; it's just selectively truncated. Just like blaming Putin for invading Ukraine, or Hamas, Israel, or at its worst, Saddam Hussein for 9/11. Always, lengthening the time-frame you contemplate - both backwards, but increasingly, forwards - has to increase perspective, so also does widening your perspective (more difficult for those who have nailed their flags to a particular mast - even if the vessel under it is clearly foundering).
I've put this up before, but read it and rate yourself; I'd be genuinely interested. https://dothemath.ucsd.edu/2015/04/programmed-to-ignore/
Regarding ineptitude/corruption - it happens most, when repression is greatest. Now why do you think that might be?
Yes you love to hijack threads, call people idiots then link to long articles on other subjects.
So do you actually object to my original comment?
Campaigning against his own currency has become self-fulfilling. He seems to have engineered a situation of making his own currency completely worthless while lacking the resources to dollarise.
That's a very unfair statement. The previous Government has been doing a great job of making the Argentinian peso worthless over a number of years. Hardworking citizens have had enough of Peronist Governments.
I rest my case.
You don't read those links, do you? Ever asked yourself why?
If it was contemplating anything South American, for instance, I'd probably go back to the Monroe Doctrine. https://en.wikipedia.org/wiki/Monroe_Doctrine
'This re-interpretation of the Monroe Doctrine went on to be a useful tool to take economic benefits by force when Latin nations failed to pay their debts to European and US banks and business interests. This was also referred to as the Big Stick ideology because of the oft-quoted phrase from President Roosevelt, "speak softly and carry a big stick".[4][12]: 371 [42] The Roosevelt corollary provoked outrage across Latin America.'
Go well
Firstly, you updated your comment - there were no links there before.
Secondly, by all means feel free to start a thread about the history of politics in the Americas. In this thread you've gone off on a big tangent. As I wrote, "Hardworking citizens have had enough of Peronist Governments". They are the people who voted for change. Do you think they care about Monroe Doctrine and Big stick ideology?
Dogged blinkerism; I'd be p---ed off if that was my epitaph.
I added them for edification. Just sayin'.
When people fiercely need to stick to one facet, one 'now'; alarm bells go on - and usually stay on. We are entering a period where NOBODY OF ANY POLITICAL HUE can offer a 'satisfactory' story to those wanting a personal increase in resource/energy consumption. Thus we are entering a period of Governments/leaders being voted OUT repeatedly, until the penny drops.
https://consciousnessofsheep.co.uk/2023/11/10/the-inevitability-of-decl…
'Indeed, the political class long since gave up any pretence of solving the growing crisis, preferring instead to pursue policies which favoured a fabled “middle ground,” which conveniently turned out to mean people just like them… the impoverished majority could just be thankful for the rise of foodbanks.'
We always get stuck over Putin. Putin is to blame for invading Ukraine, if not, who else is invading? Although there was a story I heard today of a birthday being crashed and conscription notices being handed out to Azerbaijanis with dual citizenship, so maybe Azerbaijan is invading? It's certainly not the Mockba elites.
"Increase perspective"? Absolutely agree, that includes undestanding the imperialist mindset of Vlad and his team of thieves ruling Russia. No one needs the primative ideology of "Russkiy Mir" not even Russians.
https://www.youtube.com/watch?v=xhY4-IhUkkI&list=PLLWQyEN3YRo5aTfC5Xul1…
$12 billion of taxpayer money is okay to boost the property market during hard times, as is $2.5 billion per annum to subsidise rental yields, as is money to buy out flood-damaged houses and commercial properties. But it's lesser welfare for the poors that's the big problem, yes. "Crony socialism" is probably apt.
Fuel excise cuts that favoured the biggest polluters the most. National are not going to raise fuel excise inline with inflation.
NZ is becoming very "socialist" (in quotes for HouseMouse's benefit), but none of the right wing parties want to fix it. In fact they make it worse by cutting the needed "socialism" while extending the "crony socialism". I reckon we need a 1980's style Labour party to cut the lot, we have become Muldoonist.
Almost everything becomes an upward wealth-pump (as per Turchin) but as he points out, that is always near the end-game. Ordinary folk - whether Argentinian or English or Kiwi - are being wrung-out; that is being exacerbated by front-end depletion. They vote for Trumps or Trump equivalents, blindly, on the basis that they are being disenfranchised. They don't do their homework, don't think much, and tend to react real-time (pitchforks and mobs).
How about we just call the screwers: Elite? And it doesn't matter who they are, really. They take hold of the existing structure - NZ is no different, particularly since 84) and use it to further their power/wealth. Pointless blaming the structure - all that does is identify an Elite or a wannabe, arguing for the format they've nailed their colours to.
I saw Tamahere has come out swinging against the new government's "rolling back" of funding everything for Maori. Even his lot can see the wave coming in to wash a lot away.
That's the issue when the academics ram things through, they assume love and gratitude on the part of the people being rammed. We are going to see a lot of racial discord over the coming term and it won't be because the incoming government is racist, although it will be screeched about as such, rather that the people who were happy enough to see settlements and scholarships for Iwi were instead told we should be accepting of, if not apologetic for the need for, co-governance (read, payouts with no value added), separate health systems (read, prioritization for Maori in existing health systems), and a separate justice system for Maori.
That's why you need consensus among the people, because when you don't have it and you lose the seat of power, the next lot will look at how they can make it so we don't have to deal with this sh*t again... hence the push from the right for a referendum on the Treaty's place in society.
can make it so we don't have to deal with this sh*t again... hence the push from the right for a referendum on the Treaty's place in society.
Ouch..sounds like you want it torn up and burnt?
You sound like some rich retired blokes I know living on Waiheke Island...who often remark "what are we going to do about the Māori problem"
No, I'm totally fine with the treaty as it has been dealt with prior to 2017. I'm not fine with two health and justice systems and every public servant being forced to learn Te Reo to have a career. In particular am concerned with the health system as I've spend two years on a waiting list and a friend at the hospital asked me if I was part Maori so I could get bumped up the list when I asked why the delays.
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