Here's our summary of key economic events overnight that affect New Zealand with news we are into Q4 now and it is starting out modestly in most places, despite an eye-popping rise on the Shanghai stock exchange.
First in the US, the Chicago PMI improved marginally in September although the gain was probably insignificant.
Meanwhile the Dallas Fed factory survey for the US oil patch in September eased further, although again, not a significant change.
But in October, this may all be affected by a looming East Coast and Gulf waterfront strike. And there is similar strike action underway in Canada. Workers are reacting to productivity changes from a new automation push.
China's National Day Golden Week holiday period starts today, kicking off one of the year's busiest travel periods as the country marks the 75th anniversary of its founding as a communist state. But their tourism industry is bracing for sluggish activity with bookings down -20%, even as regional governments begin to distribute cash vouchers to boost flagging consumer spending.
It is not only discretionary travel that is soft. The official Chinese factory PMI contracted at a lesser pace in September. And the companion Caixin factory PMI slipped from a minor expansion into a minor contraction.
Further, the official services PMI expansion ended in September with their lowest reading since December 2022.
But not everyone is looking ahead with trepidation there. Investors in Shanghai drove their equity markets up a remarkable +8.1% yesterday. After that exchange touched its lowest level in a decade on September 13, it has now suddenly shot up to its highest since April 2023. It is all about how Beijing is rolling out its stimulus - essentially guaranteeing investors that they won't lose (the Beijing 'put'). And they are all-in, filling their boots.
Much of this is driven by a belief that Chinese construction will be getting a big boost. The steel rebar price rebound shows that.
In the EU, the German CPI inflation rate fell to just 1.6% in September, its lowest since February 2021 when it was about to go on a tear, peaking at 8.8% in October 2022.
In Australia, they are claiming its 'first back‑to‑back surpluses in nearly two decades'.
The UST 10yr yield is now at just on 3.78% and up +2 bps from yesterday. The key 2-10 yield curve is still +18 bps positive. Their 1-5 curve inversion is still inverted by -45 bps. And their 3 mth-10yr curve inversion is still at -103 bps. The Australian 10 year bond yield starts today at 3.99% and up +3 bps. The China 10 year bond rate is at 2.18% and unchanged. The NZ Government 10 year bond rate is now just on 4.28% and up +2 bps from yesterday.
Wall Street has started its week little-changed on the S&P500 as end-of-quarter squareups take place. But European equity markets were all about -1.0% lower, except Paris which dropped -2.0%. Tokyo finished yesterday down a very sharp -4.8%. Hong Kong however was up +2.4% and Shanghai was positively frothy, up +8.1% on the Beijing put. Singapore was more level-headed, up +0.3%. The ASX200 ended its Monday up +0.7%. But the NZX50 fell -0.3%.
The price of gold will start today at US$2638/oz and down -US$20 from yesterday.
Oil prices are +50 USc firmer at just over US$68.50/bbl in the US while the international Brent price is still just on US$72/bbl.
The Kiwi dollar starts today at 63.7 USc and up +30 bps from this time yesterday. Against the Aussie we are little-changed at 91.8 AUc. Against the euro we have risen +30 bps to 57.1 euro cents. That all means our TWI-5 starts today at just under 70.9, and up almost +30 bps from yesterday.
The bitcoin price starts today at US$63,502 and down -3.3% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.2%.
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67 Comments
Australian central govt sector has run their second consecutive surplus (taxed more from the private sector than they gave them). A quick look at the stats confirms that this has been made possible by:
- Business credit growth running at around 8% (NZ 2.5%)
- Housing credit growth at over 5% (NZ 3.2%)
- State govts taking on some big debt as they invest in real things
- A moderate current account deficit of a bit over 1% of GDP (NZ is well over 6%)
Anyone who thinks NZ can get anywhere near a surplus in the next few years will need to explain the maths to me.
I am going to make myself unpopular here. But, I would argue that endless monetary and fiscal credit creation is required to support rampant rentierism. A minority of people own assets - licences, contracts, shares, monopolies, new world franchises(!) that enable them to extract rent from the economy at an alarming rate. A worker gets their salary and within days most of that money has been handed over to rentiers and either stuck in term deposits, govt bonds, or used to buy more rent-generating assets (pension funds etc). This means a constant flow of fresh credit is required to keep the economy ticking over. In recent years, we are also paying a lot more rent to offshore asset-owners, who then buy more NZ assets, and collect more rent etc.
We need a hard conversation about how we get out of this doom loop. We used to manage our economy to explicitly keep money moving around domestically. We need to get our mojo back.
"We need a hard conversation about how we get out of this doom loop"
We are having that conversation. But they, the rentiers, aren't. Or, rather, they are choosing to avoid the topic entirely. Luxon's (“Let’s be clear, I’m wealthy,”) comment re Capital Gains Tax yesterday, highlights that.
The answer is re-distribution.
Problem is though, the very rich are terrified of this and are doing their darnedest to ensure it doesn't happen, ala Prince John saying Trump would be better for the US 'economy'. What he's actually saying is that Trump would be better for the mega-rich which is how Prince John et al understand an economy. (Harris has a lean towards re-distributional policies that terrify the mega-rich.) That's the problem with the mega-rich. They have loud voices and own media megaphones so the b.s. gets out quickly, and very loudly. Ho. Hum. The French & Russian showed us how this will end in 1789 & 1917.
Jfoe - Somebody needs to own assets, and if the "majority of people" don't care enough to do work towards it then somebody else must, either that or we vote in a select group of people who maintain control over society and they are the only ones allowed to own assets. mmm communism.
"A minority of people own assets - licences, contracts, shares, monopolies, new world franchises(!) that enable them to extract rent from the economy at an alarming rate."
Let's not forget pension funds. Lots of people do in fact own these things through their pension fund, super, 401k, etc. The problem is though, these people look at the nominal amounts, e.g. $500k in their pension fund, and believe they own quite a bit. The reality of course is that their ownership is an infinitesimally small fraction of the whole. But that nominal amount is all that matters to them.
It reminds me of how most people simply don't get big numbers. e.g. A million sounds a lot, right? But convert to seconds. A million seconds is 12 days. Not that much, right? But a billion seconds is 31 years. That's lot! A trillion seconds? 31,688 years.
Keynes understood the Tragedy of the commons. The mega-rich believe it is someone else's problem.
Correct
So obviously you recognise the obvious friction/contradiction between your frequent calls for more Govt (deficit spending) and operating economics within boundaries
Unless you buy into the future being bigger and brighter (which 2008 on says requires hopium bordering on delusional) ....then we are seeing those physical limits now kick in
Yes, Govt needs to spend now - counter-cyclically as god intended. Govt should invest in the things that get the economy back in balance, improve our standard of living, and make us less vulnerable to global shocks. Some folk have got far too deep into the red team vs blue team nonsense (or the private good vs public bad dumbfcery) to see what is obviously required.
The trouble being more debt/credit is fast approaching the effect of pushing on a string
We arent short of debt claims, we are short of easy resources.
Lifting standards of living from here is simply impossible - the easy resource base (esp per capita) is tapped out
These articles explain the predicament well
https://ourfiniteworld.com/2024/08/21/todays-economy-is-like-that-of-th…
https://surplusenergyeconomics.wordpress.com/
https://ourfiniteworld.com/2024/09/11/crude-oil-extraction-may-be-well-…
" the primary purpose of the economy isn’t to move money around, but to supply material products and services to society.
It does this by using energy to convert raw materials into products, and into those physical artefacts without which services cannot be provided. It cannot be repeated too often that money has no intrinsic worth, but commands value only as a “claim” on these material products and services."
I think you're responding to a point you wish I'd made, so that you could say the thing you want to say!
I don't disagree with your point on real resources. I do however think the right strategy could enable us to improve our quality of life in aggregate without requiring any more stuff.
Not intentional
I think i was responding to the More Public debt is the Solution ... when I was trying to point out this is more than a typical downturn cycle
"improve our quality of life in aggregate without requiring any more stuff"
This is not an accurate summation of the problem. Its not about more "stuff" ... its about more economic activity (to match the increase in Money supply) ... otherwise inflation!!. Add in we are fighting diminishing returns / limits to economies to scale/resource degradation and its a far more complicated issue
If we lose faith in the debt, we lose supply chains
talking sense, What you describe is not Keynesian economics.
Keynes suggests governments spend more when the private sector is in contraction. And subsequently - this is the part people with little real economics education miss - that governments pull back spending and collect more tax when the private sector is back to spending again. (Tax effectively removes money from the system and balance is restored.)
Oil executives active in the U.S. shale belt are arguing that production has peaked, with further major production gains unlikely without a significant price increase.
The US was the largest producer on Earth in H2-24 by a huge margin, averaging 13.4 million barrels a day. Oil producers expect medium-term WTI prices above $100/barrel to make new oil wells economically viable for drilling.
And that really should be a significant and substantial start to alternatives. Alternatives are yet to be dominant for a variety of reasons, but lessening of fuel supplies will drive more R&D into real, viable alternatives. With deman, some that are viewed as unviable or impractical today may suddenly take on a new life. Wait and see.
Herald Premium but will be useful information for some and worth sharing, Jeff Fahrensohn, Auckland Council Building Inspection Manager reports 3722 (roughly 25%) of cladding inspections on new homes failed in the last year. He first posted about it on LinkedIn and there is a video there of the failures of the cladding on one house.
Yeah great for a shed but really ugly on a house. Linear board is good, I have worked on a house using untreated heart Kauri with the same construction technique, it lasts a 100 years so and by that time the house needs replacement anyway. I'm not really surprised we are still building shit in this country, all pine framing should be H3 treated, at least when the cladding fails the whole house is not a demo job.
"it lasts a 100 years so and by that time the house needs replacement anyway"
Really? Lots of wooden houses all over the world far older than 100 years. Obviously not found in cities as they've all been demolished for the land. That said, I'd expect many mass timber high rises being built today will be around for much longer than 100 years.
Just quietly Zwifter, you really typify most of NZ's problems in much of what you write.
You don't want to live in a 100 year old house, its shot. Go back far enough and the doors are not even high enough because people were shorter. The house becomes totally out of date with the design and all the plumbing and wiring is shot so it will probably just burn down anyway. Houses need to last 50 years, by then its a wrecking ball job, things have moved on. That's not really the problem in New Zealand though is it ? We cannot build them to last 20 years. We had decades of leaky homes being built, some of them lasted 3 years. From the looks of things we are still building crap, clearly if it not the materials its the skills required and no amount of new rules or codes can make up for cowboy builders. Its shouldn't be that hard to find a decent house.
Our current house is 111 years old and far from shot. It has been modernised and updated over the years but the structural framing is all original and in excellent condition. It is easily as warm and dry as the 2016 "high spec" build we rented when we were between owned house, and I haven't even started on the heating yet. It has the advantage of being in a prime site with full sun.
Our previous home is now 110 years old was even warmer than this one. It has fantastic sun and barely requires any heating. It was a bit of a bombsite when we bought but again the structure was sound. We fully renovated it top to bottom for far less than it would have cost to build from scratch.
Building a house and doing nothing to it for 100 years would be like buying a car and never changing the oil or brake pads.
He's a wanna be billionaire domiciled in the US - forget morals, forget the real world for the middle class - I just wanna be rich;
https://www.stuff.co.nz/politics/350434743/why-sir-john-key-thinks-dona…
Meanwhile, John's candidate says;
https://www.politico.com/news/2024/09/29/trump-violent-day-policing-cri…
And his campaign minders try to walk it back: "Clearly just floating the idea in jest".
Hey John, you can't make this sh#t up. But, he's your man and you're an embarrassment.
I saw this article first thing this morning and was livid. We are busting our butts in healthcare, and I have no intention of going to Australia, like many of my colleagues and this man spouts this crap. He has no idea what life is like for most people, and he clearly doesn't care if he think Trump is good for anyone - the political discourse has turned to culture wars and simplistic solutions to complex problems. Trump is no person to have in charge of your bakery let alone a country. Key should know better!
https://www.oneroof.co.nz/news/oneroof-house-price-report-october-2024-…\
This online article is also on pg 7 of the physical Herald except the header there reads:
"Market experts upbeat as prices in wealthy suburbs climb $150k"...in massive bold type lol.
Drill into the article,things not so rosy. For example:
SuburbTLAAverage property value3-month change %3-month change $RiverheadAuckland Rodney$1,794,000−3.2%−$60,000
SuburbTLAAverage property value3-month change %3-month change $CoatesvilleAuckland Rodney$3,439,000−7.4%−$275,000
We're in the news in Australia.
"The great New Zealand rate hike experiment and where it all went wrong"
https://www.abc.net.au/news/2024-10-01/the-great-kiwi-rate-hike-experim…
Good article.
But I wonder why Ian Verrender left out the RBNZ's role in generating our inflation in the first instance. I mean, dropping the OCR to 0.25% while throwing billions at Australian banks so they could make mega-profits was hugely consequential in the grand scheme of things. More so given that the RBA didn't do likewise.
Begs the question though, are we different due to the too low too long, followed by too high too long, I'd argue yes, but behind this is the matter of fixed term mortgages delaying the impact o monetary policy which isn't so much the case in AUS. If 90% of mortgage holders floated then we would have seen a sharper decrease in inflation and behavioural change, but so many do nothing until refix date is due. Understandably most don't float as they're likely to save substantial sums by fixing unless rates are dropping off a cliff quickly.
$180K tax free thanks to legislation he passed. How is this not a conflict of interest. Didn't one of the Labour Minister's have to quit because he held some shares he forgot to declare that may or may not have benefitted from some policy he was working on. And here we have a PM who directly benefits financially due to the legislation he passed.
The coalition is literally corrupt in plain sight, they are not even hiding it, let alone apologizing for it. Tobacco, property, mining, road-building, Greyhound racing ...
https://www.stuff.co.nz/politics/350435767/im-wealthy-and-im-sorted-pm-…
"House prices double every 10 years"
Rule of 72 says that's 7.2% per year.
Did Luxon achieve that?
Property 1: Bought 2015, for 650k. Sold $930k
Property 2: Bought 2020, for 795k. Sold $975k.
Annual Returns?
Property 1: 4.1 %
Property 2: 5.2 %
So as a property investor he's very average. That's what we like in a PM though, isn't it?
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