Holiday briefing: Looking at 2024 leadership changeouts

Economy / news

US data stable but equity markets at all-time highs; Japanese retail rises; China girds against deflation; eyes on Aussie bank CEO change; UST 10yr 3.85%; gold and oil down; NZ$1 = 63.4 USc; TWI-5 = 71.1

29th Dec 23, 9:03am by David Chaston

Here's our summary of key economic events over the holiday period that affect New Zealand, with another quick news wrap-up so you can get back to 'time-off'.

US jobless claims rose last week and by a bit more than expected, but remain at historically low levels to end 2023 and almost identical to the levels in the same week last year. No labour market stress here, yet again.

US exports fell -7.2% in November from October to be -3.5% lower than year-ago levels. Their imports fell -7.4% on the same basis to be +0.2% higher than a year ago. Their merchandise trade deficit was -US$7 bln higher and an insignificant change.

There was no rebound in November pending home sales as expected after the weak October levels. This lack of catchup was something of a surprise to residential real estate watchers there.

And that was despite the average rate on a 30-year fixed mortgage at 6.61% last week, the lowest since May, dropping for the ninth consecutive week.

Japanese retail sales rose +5.3% in November from a year ago, handily more than can be accounted for by inflation. The gain from October was relatively more. Going the other way, industrial production slipped slightly on the same basis.

China's latest Monetary Policy Statement is notable this time because it is implicitly warning about the dangers of deflation hitting them again and it has vowed to do all it can to push up consumer prices.

China's prospects continue to worry foreign investors. Early in 2023 more than US$33 bln poured into their equity markets. Now most of that has left, and without the pain of a rush to the exits, because the home team has kept market valuations high and authorities kept the exchange rate stable. So investors got out with little cost from a herd "de-risking" retreat.

In Hong Kong, and yet another move to integrate the City into China proper, the local government is releasing farmland for housing in the New Territories, no longer separately concerned at all about local food security.

In Turkey, their currency depreciation is getting worse. The Turkish lira fell to a new record low of 29.5 to the USD, as investors became concerned that an almost +50% hike in minimum wage will fuel inflation. The government hiked their minimum wage for 2024 to 17,002 liras per month (NZ$912/month or NZ$5.25/hour), aiming to alleviate living costs ahead of the local body elections in late March. (They had a +100% hike in January 2023. Since then the Lira has devalued by -58% and inflation has risen by +64%)

In Australia, they are starting to talk about 2024 as a year when the big bank CEO's end their terms and a new breed is brought in for the rest of the decade. It is not that the current batch has 'failed' investors/shareholders, but that now "it's time" for a change. CBA's Matt Comyn is 48 yrs and been in the CEO position for six years. Perhaps he is the least likely to be replaced. NAB's Ross McEwen is 66 yrs and been CEO for 5 years. Westpac's Peter King is 54 yrs and is a 25 year veteran at the bank, and is a recycled CEO brought back to steady the ship. ANZ's Shayne Elliott is 61 yrs and has been their Group CEO for 12 years.

The UST 10yr yield is +6 bps higher today, now at 3.85%. The key 2-10 yield curve is unchanged, still inverted by -44 bps. Their 1-5 curve inversion is a little less inverted, now by -95 bps. And their 3 mth-10yr curve inversion is also less at -153 bps. The Australian 10 year bond yield is now at 3.97% and +8 bps higher. The China 10 year bond rate is unchanged at 2.60%. And the NZ Government 10 year bond rate is also lower, down -10 bps at 4.40%.

Wall Street is up a minor +0.2% on the S&P500 in Thursday trade having touched a record high earlier in the session. European markets were down about -0.2% overnight. Yesterday Tokyo ended its Thursday session down -0.4%. Hong Kong was up +2.5%, and Shanghai ended up a strong +1.4%. The ASX200 ended its thin session up +0.7% and the NZX50 ended up +0.8%.

The price of gold will start today down -US$4 at just over US$2074/oz and still near its all-time highs.

Overnight oil prices are -US$1.50 lower at just over US$72.50/bbl in the US. The international Brent price is now just over US$77.50/bbl. The reversal is down to increased use of the Red Sea and the Suez Canal. Maersk is returning but Hapag-Lloyd says it's still too dangerous.

The Kiwi dollar starts today at 63.4 USc and unchanged from yesterday. Against the Aussie we are essentially holding higher at 92.7 AUc. Against the euro we are marginally firmer at 57.3 euro cents. That all means our TWI-5 starts today just on 71.1 and little-changed from yesterday.

The bitcoin price starts today lower at US$42,477 and down -1.3% from this time yesterday. Volatility over the past 24 hours has been modest at just under +/- 1.8%.

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Source: CoinDesk

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31 Comments

by Audaxes | 29th Dec 23, 9:07am 1703794041

Another example of US undermining confidence in the western global financial order...

Backed by the UK, Japan and Canada, the US has proposed G7 working groups start preparatory work to be ready in time for the second anniversary of Russia's full-scale invasion of Ukraine https://on.ft.com/47hHoRR  Link

by Audaxes | 29th Dec 23, 9:57am 1703797054

Good morning. As we finish out 2023, the US Debt now stands at $33.9T, after piling on another $2.5T in a single year. Have a great day. Link

Year-End Angst in Money Markets echoes 2018 crunch as Fed continues to remove liquidity from financial system. Secured Overnight Financing Rate (SOFR) fixed at 5.35% as of Dec. 26 from 5.32% prior session. That’s off the ATH of 5.39% reached on Dec. 1. https://bloomberg.com/news/articles

Link

by Foxglove. | 29th Dec 23, 9:12am 1703794373

Bank retirees. My first work was a trading bank at the beginning of the 1960s. Retiring age was 55 full stop. Sadly some of the war veterans still present looked, to the young me, already well over that. Nowadays you would need to have been earning like a top dog, as evidenced above, to retire at that age.

by Audaxes | 29th Dec 23, 9:32am 1703795566

You are the Carbon They Want to Reduce. There is nothing sustainable about plant-based agriculture, since it requires an oil-based economy to produce the Ammonia needed to grow high-protein plants. This is the baffle them with bullshit while we destroy the pillars of the world. "Sustainable" = 1 billion people.

Quote Wide Awake Media @wideawake_media Dec 27·WHO head, Tedros Adhanom Ghebreyesus, declares war on meat and traditional agriculture, in the name of fighting "climate change": "Our food systems are harming the health of people and planet. Food systems contribute to over 30% of greenhouse gas emissions, and account for…Show more Link

by powerdownkiwi | 29th Dec 23, 10:28am 1703798886

Many people - most siloes and and all economists - miss the 'food is energy' point. Some are even ignorant enough to suggest we can maintain our low-entropy societal level of activity, using high-entropy energy (there is a reason no low-entropy life form eats its own wastes... entropy is that reason).

We have been applying stored solar energy to food-production (Haber Bosch, trucks, tractors, harvesters, diggers, plastic pipes and packaging), have overshot our species as a result, and are now retreating to real-time acreage. Of course that will impinge; energy-capture vs food production vs sprawl vs carbon sequestration; too many demands on an already-commandeered and being-degraded spatial acreage. And every 'next' option is a notch 'worse' (because we choose the best, first). That 'best first' includes the stored solar energy sources.... so this is a compound whammy.

The idea is to 'elsewhere' everything you can; extraction, pollution, sequestration; load it on the other people somewhere else. Except there are ever-more people somewhere else, demanding ever-more themselves, and much of this is becoming (has become) planetary in scale - meaning THERE REALLY IS NO ANYWHERE ELSE.

Interesting that Profile needed to divert (below).

by Let me be Frank | 29th Dec 23, 10:30am 1703799022

And the only question remaining is.....how long?

by Te Kooti | 29th Dec 23, 1:53pm 1703811226

One day something really bad is going to happen and for fleeting moment I'll think to myself "+%ck, PDK was right all along"

by J.C. | 29th Dec 23, 2:35pm 1703813735

One day something really bad is going to happen and for fleeting moment I'll think to myself "+%ck, PDK was right all along"

Listened to an interview with Whitney Webb. Power's "Bible" - Limits to Growth - is instrumental in the philosophy of the WEF and was introduced by Klaus himself.

The culling of the unfit and overpopulated useless eaters is behind all this. Scary stuff.

by Foxglove. | 29th Dec 23, 2:48pm 1703814535

There used to be wars to do that. The British used the hoi polloi to expand, exploit and protect their empire. Wellington’s army at Waterloo was a typical cross section of such expendables but obviously that didn’t dilute the fighting quality.

by powerdownkiwi | 29th Dec 23, 3:51pm 1703818288

JC - you conflate cause with caused.

Yes, there will be the odd intellect in high Elite places, who 'gets' the Limits to Growth'. By being Elite, they've already proved their dispassion for others, and their comfort in walking over same. So it is entirely plausible that some of the Elite will think in terms of personal survival at the expense of others. This is likely the reason some folk went down the Covid 'they're out to get us' rabbit-hole.

But the Elite are also dependent on the existing structures - finance, law, trade - for their position. So most of them (and 70%-plus of them won't have an N as their second Myers Briggs letter, as per the wider population) will just vote for the status (good pun, when you think on it) quo.

Foxglove - yes, wars are good at lowering overpopulation numbers, and usually the cannon-fodder is non-Elite. But they have no been effective enough; we needed to ba at 1-2 billion by now.

by J.C. | 29th Dec 23, 4:51pm 1703821919

Rockefeller Foundation is a fan as well. And fits in with the whole transhumanism and eugenics thinking.

by Let me be Frank | 29th Dec 23, 5:45pm 1703825156

I suspect Te Kooti that when it becomes a demonstrable decline (not the current obfuscation) the last thing you will be considering is what PDK wrote.

by sparrow | 29th Dec 23, 11:42am 1703803331

Food systems contribute to 30% of emissions, but every single person on the planet eats. As opposed to some other high emitting activities like tourism (around 10%), the fashion industry (8 - 10%), road transport (15%) and construction and the built environment (38%), which half the people on the planet don't participate in or receive any benefit from.

by Palmtree08 | 29th Dec 23, 1:22pm 1703809364

"Tedros Adhanom Ghebreyesus, declares war on meat and traditional agriculture, in the name of fighting "climate change".

That's one of those beautiful freedoms offered by exponential economic growthism. You get to chow down on delicious synthetic precision fermented food like substances.

Shame we are governed by clueless ideologues, when degrowth is the simple answer. We fantasize about warp drive, when walking was always the solution.

by Te Kooti | 29th Dec 23, 1:56pm 1703811360

Slight correction Palmtree, the masses will eat crickets and synthetic protein however some of us will still enjoy a bbq.

by J.C. | 29th Dec 23, 4:54pm 1703822057

Cindy will be at the BBQs at Gore's place. As will the likes of Trudeau, Blair, Albo.

by Baywatch | 29th Dec 23, 8:47pm 1703836029

But not Luxy and Winston...???

by profile | 29th Dec 23, 9:32am 1703795575

New Zealand excess death from OECD data averaging 14.5% higher than average to week 44 for 2023. Second only to Canada and just edging out Australia. An extra 90 odd bodies a week. Typically deaths increase at 1.4% per annum due to the aging population.

https://stats.oecd.org/index.aspx?queryid=104676

by Squishy | 29th Dec 23, 11:45am 1703803510

Looking forward to your readers predictions. Some of last years proved hilariously off-track: https://www.interest.co.nz/personal-finance/118979/2022-was-weird-year-…

Most of the unemployment predictions where too pessimistic and the inflation forecasts too optimistic.

A lot of last year's predictions look hilarious:

Labour remain in power: No.
NZ inflation 3-4%: Dream on.
Ukrainian victory in the war: Not yet.
Grant Robertson as PM: No.
House price grow 7-12%: Not even close.
NZX to end year where it started: Actually this one is very close!
Net migration 15-20k: Almost an order of magnitude out.
OCR to be cut by end of year: No.
Crypto is toast: No, unfortunately. *Sigh*
Trump to drop out of 2024: No.
Elon sells twitter: Not yet.
Rents increase: That's a winner.
Wages increase at a high rate: No.
Lorde not to have a hit song in 2023: I don't recall one but I don't listen to radio? Might be correct.
Oil prices $75-80: Yes!
NZ inflation to remain above US inflation: Yes!
Recession: No but this was essentially because immigration piled in, if the person had talked about per capita they would have been correct.

by Baywatch | 29th Dec 23, 12:03pm 1703804609

Crypto is toast: No, unfortunately. *Sigh*

Cheer up Squishy - your in for another year of more long sighs - fortunately

New prediction - Jan 9th 2024 - Bitcoin will soar to new all time high...

by Nifty1 | 29th Dec 23, 11:56am 1703804165

I was pretty accurate on these points...

by Nifty1 | 30th Dec 22, 5:31pm

1.Economists will have another dreadful year, with every data point being released continuing to surprise them. TA will move full time to Australia to escape the backlash as rates spike higher...

4. Towards mid-end of year, RBNZ will loosen policy around low deposit lending & relax LVR rules. Rates will spike early in the year, before slightly coming back towards to end of the year. Short term rates will be higher than long term rates... House prices will flat line.

5. Labour won't win the election, Jacinda will stand down to spend time with family - shortly after have a new job at UN. The wedding still won't happen, ask the Nanny. Luxon will make an idiot of himself, prove completely out of touch and also stand down.

by Foxglove. | 29th Dec 23, 11:52am 1703803958

Nobody, me included, foresaw the Ardern resignation. Not even GBH. Wherefore art thou GBH?

by Nifty1 | 29th Dec 23, 12:10pm 1703805006

Nobody? See above...still waiting on Luxon, could be 2024.

by Foxglove. | 29th Dec 23, 12:08pm 1703804920

Fair enough. Apologies. I failed to foresee the device in its timing to avoid a by election.

by Noncents | 29th Dec 23, 2:16pm 1703812597

by Noncents | 1st Jan 23, 4:09pm

Labour to lose election

Ukraine war to still be going

China will begin to destablilise

Supply issues to increase

inflation to remain high

Unemployment to rise

Majority of comments will be about housing.

I still stand by mine.

by Northern Lights | 29th Dec 23, 4:21pm 1703820108

My predictions made on the 31st Dec 2022

1. House prices nationally in NZ will on average fall for the first two thirds of the year then rise after that, the end result being house prices slightly lower for the year of 2023.

They apparently bottomed out in May but otherwise the prediction is not far off, the prices may be in fact be slightly higher than they started.

2. Inflation worries will continue to create pullbacks in worldwide govt fiscal spending in the first half of 2023. Coupled with a stagnant oil price that is too high for many countries economic activity will continue to wane. The end of the year will see pockets of disinflation pockets of inflation and the start of a trend of whipsawing interest rate rises and drops for the next few years.

I think this was pretty much on point and we will see if there is a trend of interest rate whipsawing to come.

3. The Labour Maori caucus having got what they were after with 3 waters will want to keep what they have taken. So all hands will be on deck to try and get a Labour/Greens /Pati Maori coalition win. But the situation will resemble the deck of the Titanic while the good ship Labour is slowly sinking with an unrepairable hole in the hull frantic orders will be given to lighten the shipload, steer clear of any other icebergs, go full steam ahead then hove to, rally around the captain and there will be many heated discussions on the bridge between all the co-governors. I will have many anxious moments in 2023 as Labour looks to be pulling off another dazzling con job on the gullible NZ electorate but in the end Labour will go out.

I had to laugh when I read this because I did have many anxious moments throughout the first half of the year when it looked like Labour were going to pull a rabbit out of the hat. But in the end Labour just didn't understand what they had done. Chris Trotter is bang on when he says they have lost the old European working class settler vote.

4. Ukraine and Russia will each lose another 100,000 souls to the Russian invasion and Ukrainian fightback but in the end the Ukrainians will push the Russians out and Russia will have to come to terms with the disaster it has created for itself.

So the Russians lost at least 100,000 souls but the Ukrainians didn't. And the Russians are still there and Putin is still in denial. So this prediction is incorrect within the 2023 timeframe.

5. New Zealanders will continue to work away to better their lot in life and to avoid the worse excesses of their clueless elite classes, the end result being a situation not as bad as it could have been. Due to sheer hard work and practicality by the ordinary population we will end up with a decent result at the end of 2023, but there will be plenty of misery along the way caused by feckless ideologues at the top.

I'll stand by this prediction, vague as it may have been.

I'll give myself a 4 out of 5 for the 2023 predictions, so an improvement from 2022.

by kiwikidsnz | 30th Dec 23, 8:52am 1703879557

"...avoid the worse excesses of their clueless elite classes..."

+1. They just gave Mallard a knighthood.

by JimboJones | 29th Dec 23, 5:58pm 1703825900

I must have been one of the few predicting a soft landing:

I’m not really a prediction type person but I will give my current thinking in terms of odds:

soft landing: 50%. Reserve banks get on top of inflation and we see either small growth or a small contraction in 2023.

hard landing: 30%. Reserve banks can’t contain inflation and have to keep raising the OCR until it really hurts.

a good year: 20%. Labour have provided very good economic growth before when the naysayers thought otherwise. Maybe the reserve bank gets inflation under control and we get good growth.

by J.C. | 29th Dec 23, 7:25pm 1703831115

Idea of a 'soft landing' is a bit of a cop out. It's short termism. Look at the extent to which the money supply and incentives have been distorted. The pain to be felt is not well understood by most, but we know that purchasing power of people's labor will not get stronger.

by JimboJones | 29th Dec 23, 8:28pm 1703834889

Short termism - it was a prediction for 2023, not the rest of eternity.

Most were predicting serious problems in 2023, in reality it was just a bit shit, most of us kept our jobs, houses, etc.

The pilot announced one of the engines had gone out, we all panicked and thought we were gone, but the plane landed with a number of bumps but no serious injuries. Soft landing. Flight NZ2024 might be different.

by J.C. | 29th Dec 23, 8:16pm 1703834177

OK. Fair enough. Most institutions think and express in time frames like a calendar year to measure their performance. They get to choose the benchmarks as well.