Here's our summary of key economic events overnight that affect New Zealand with news the market pressure on US benchmark interest rates is easing now.
First, an updated Dallas Fed survey showed the Texan manufacturing sector contracted less in November, the least in 2½ years. This was driven by the outlook mood which improved sharply, post election. But this may just be a partisan hope. New order levels actually fell to their worst shrinkage in a year, and continuing a two year trend of shrinkage in this oil-patch region.
And the broader Chicago Fed National Activity Index decreased in October from September to its lowest in nine months in a surprise result that was much worse than market forecasts. This index suggested US economic growth decreased. Current forecasts are that the US economy is growing at just under +2%, although the Atlanta Fed's GDPNow model has it at +2.6%. Anywhere else that sort of expansion would be considered very good for a developed economy.
There was another large US Treasury bond auction this morning, again very well supported. The yield was 4.24% at this event, and higher than the 4.07% median yield at the prior equivalent event a month ago - but not the sort of rise we have seen recently in other maturities.
Singapore’s inflation rate eased to 1.4% year-on-year in October from 2% in the previous month, and below market expectations of 1.8% gain. This marked the lowest inflation rate since March 2021, as prices moderated for housing and utilities.
Taiwanese retail stopped expanding in October after a long run of expansion that started in August 2021.
But Taiwanese industrial production is still growing at a healthy rate, although that rate of growth is slowing. It was up +8.5% in October from a year ago, down from an +11% rise in the year to September. A year ago in October 2023 it was falling -2.3%, so they have come a long way since then.
In China, their central bank injected ¥900 bln into financial institutions via a one-year medium-term lending facility yesterday at an unchanged rate of 2.0%. That compared with the ¥1.45 tln of MLF loans due this month, marking a net cash withdrawal of ¥550 bln.
After the March to August rises, the German IFO sentiment survey returned to its lows for other than the GFC or the pandemic. Analysts see a fading of strength in an economy that was only recently an engine of Europe. And overnight, ThyssenKrupp, the largest steel maker in Germany, said it would cut its workforce by up to 11,000 from the current 98,000, by 2030.
The UST 10yr yield is now at just on 4.29% and down -12 bps from this time yesterday. The key 2-10 yield curve has slipped back into a -1 bp inversion. Their 1-5 curve inversion is much more inverted, now by -19 bps. And their 3 mth-10yr curve inversion is also more inverted, now by -32 bps. The Australian 10 year bond yield starts today at 4.48% and down another -9 bps. The China 10 year bond rate is down -2 bps at 2.07%. The NZ Government 10 year bond rate is down -10 bps from this time yesterday at 4.57%.
Wall Street has started its truncated Thanksgiving week up +0.3% on the S&P500. Overnight European markets were in the range of non change in Paris, to up +0.5% in Frankfurt. Tokyo ended its Monday up +1.3%. Hong Kong hwever was down -0.4% and Shanghai was down -0.1%. Singapore ended down -0.4%. But the ASX200 ended up +0.3%. The NZX50 starred in this set, nearly matching Tokyo with a +1.2% rise.
The price of gold will start today at US$2631/oz and down -US$85 from this time yesterday.
Oil prices are down -US$2 at just over US$69/bbl in the US while the international Brent price is just over US$73/bbl.
The Kiwi dollar starts today at 58.4 USc and up a minor +10 bps from this time yesterday. Against the Aussie we are +20 bps higher at 89.9 AUc. Against the euro we down -20 bps at 55.8 euro cents. That all means our TWI-5 starts today at just on 68.2, down -10 bps from yesterday.
The bitcoin price starts today at US$95,648 and down -1.1% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.3%.
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93 Comments
Growth cannot be 'good' if it's killing off other species and threatening ourselves.
Just like children getting taller there has always been growth pdk. The thing is though, that during the last 100 years or so, the industrial, commercial and consumer growth of the human race has simply got itself strapped to a rocket. One might well wonder, if the humans hadn’t discovered the billions of resources that ancient nature had stored by the way of oil, what the world would be like today.
Only ever within available capacity Foxy. Even balloons burst if you over inflate them, and the envelope has no more give to give. I realise PDK tends to take an extreme view but that doesn't mean he is wrong. But considering Profile's post below, if that trend continues and there is no guarantee that it will, it could delay 'crunch time'. But nothing is ever for free when you throw in politics. What would Xi's, Putin's or some other power hungry numpty's reactions be when they realise a population decline is a real threat to their aspirations of power and immortality?
While a fight over resources may be a real possibility, the starter may be for other reasons.
However it is it is undeniable that oil and mostly burning it has catalysed change even more than the industrial revolution. Just like predecessors, stone, bronze, iron ages we are all now living in the age of oil and humanity would now be hard pressed to live without it. Just think about the military for a start. Steam powered aeroplanes or tanks or even trucks, don’t think so. The internal combustion engine, and similar, revolutionised everything in sight and beyond.
we are all now living in the age of oil and humanity would now be hard pressed to live without it.
*will* be hard pressed to live without it. It's finite, it will run out. It will run out more quickly than most people expect because we are taking a bigger chunk of it each year and the stuff that is left is increasingly hard to get and requires even more oil to get to it. At some point, the amount of oil required to get to the untapped oil will be more than the amount of untapped oil available.
If you have a 100 million in savings and start by taking out 100K a year, it seems like you have plenty but if you double the amount you take out each year (because everyone in the world is trying to match the super rich) that 100 million doesn't last very long.
"What would Xi's, Putin's or some other power hungry numpty's reactions be when they realise a population decline is a real threat to their aspirations of power and immortality?"
Funnily enough, a couple of years ago a commentator on the net somewhere said that Putin had invaded Ukaine when he did because he realised that if left any later he wouldn't have enough men of fighting age to have a chance of winning.
Putin not getting any younger himself. Spent COVID in his bunker figuring how to shore up his dictatorships flagging popularity. What better way than to give its aspirational neighbour a slap and bring it back to the poverty offered by the Kremlin? Fuelled with that giant chip on his shoulder, short angry man syndrome and legends of super human patriotic war exploits, what could go wrong?
Is it threatening humans though pdk? You suggest an extreme position but it's rather unsupported by evidence. There are no looming major resources shortages.
To be fair, his post doesn't suggest resource shortages (although I'm sure he'll mention it sometime soon).
The evidence? We have out of this world abundance and personal security. Yet society is getting more fat, tired, sad, and anxious. We don't even want to procreate anymore.
We don't know where we're going, or why. We're just rapidly changing everything, assuming it'll end up somewhere better.
The is no evidence of any resources are in short supply - other than babies. "Despite tremendous population growth in the last century, the planet is richer and better fed than ever before—and natural resources are more plentiful and less expensive (after adjusting for inflation) than ever before."
https://www.foreignaffairs.com/world/age-depopulation-surviving-world-g…
It's hard to argue there's a limited amount. So far our ability to identify and extract them has outpaced our demand.
I would put more weight into global security increasing scarcity before we get short on things.
Society is getting fat, tired, tired and anxious because of shortages. They eat c##p unhealthy food because the good stuff is rationed by price i.e shortages.
No procreation for many because of housing shortages...and other reasons, but they are all resource related when think through it.
The fatness is because we have a largely limbic economy. Much of what we consume is geared to jack up our dopamine system, and sugar's a good way of doing that, and a good way to perk yourself up a bit when you're sad. Then you get more sad, because you're fat.
Sit around all day searching for that next great find online, you feel tired and lazy.
So we've turned into a society of junkies, just that rather sitting in a corner monged out with a needle in your arm, we're scrolling, eating, feinding.
Housing supply only plays a minor role in procreation.
https://www.researchgate.net/profile/Simon-Michaux-2/publication/351712…
https://www.unep.org/resources/Global-Resource-Outlook-2024
You pen-name perhaps doesn't reflect your scoping...
The evidence is that we live on a rock flying through space with limited resources that will not support unlimited population growth or eventually not even current numbers. Sooner or later its pretty much all gone and you will have to rely on renewables making renewables and it will simply not sustain the world as we know it.
We'll mine other rocks floating through space then.
"Growth cannot be 'good' if it's killing off other species and threatening ourselves."
Agree. But 'growth' that keeps fossil fuels in the ground and restores habitats can be pretty good.
Th Chris of no name:
THERE IS NO SUCH THING.
Pity you didn't do a sciences paper; any one would have done.
That's true but contains an 'if'. When I worked in a tropical 3rd world country over a dozen years I saw the road side trees that gave needed shade progressively cut down by villagers and settlers who needed firewood to cook their dinners. With more money they could buy solar panels. Some have begun to do so and use it for refrigerators so their food doesn't go off. This problem was triggered by modern medicine resulting in rapid population growth and their firewood scavenging is caused by poverty. If they go backwards then it is a return to every third child not reaching the age of five; if they stand still it means ever longer walks to find firewood; the only option is they must have growth - that is growth in wealth not population.
Otherwise for developed countries you tell the truth.
Just spent a few days circling through Southland. Impressions.
1. The place is vast, especially with productive farmland. It just goes on and on. That's why Southland is rich. It's a land of opportunity for business.
2. We are eating oil. (PDKs point). Everywhere you look there is diesel being used to make our food. You don't even need to look, you can hear. No diesel, no food. But Southlanders are clever. We shall see.
With gas supplies dwindling, over a million households and commercial users along NZ's piped gas network will be forced to spend 7k to 20k to replace gas appliances with electrical ones.
I did a quick back of envelope calculation. If all households using piped gas in NZ switched to electricity, we would require an additional 6TWh of energy each year, despite an optimistic 2.5x factor applied for efficiency gain from heat losses.
That would put immense strain on our already stretched power system.
Assuming we don't just import gas.
Competing with a growing list of countries?
All resorce-endowed countries start out as exporters. They export more and more, while using more and more internally. Inevitably, in all cases, their supply-rate peaks, fter which they become net importers.
Which, of course, every country cannot be...
Competing with a growing list of countries?
Until the point where it's more viable to replace gas appliances with electric.
The sector will not spend $50-150M on an LNG terminal only for a change in government in 2-5 years rolling back of LNG import laws.
The lobbies have made it clear that such investments will only be made with significant contributions from the Crown.
If you're right, then it's time to invest in a hot water cylinder business.
Phasing out papermaking at Kinleith will kick the can a couple of years further down the road. Chemical pulpmaking is mainly self sufficient in energy. See: https://www.gasindustry.co.nz/data/gas-production-and-consumption/
But...again it comes with a loss of 200+ well paid rural jobs.
Problems with Gas are the very least of our problems, I have two 45kg bottles only for the gas hob and they last 5 years.
Advisor gas appliances are easily coverted to running on hydrogen. Lot of talk about making green hydrogen here in NZ with geothermal power.
Right so we can simply import LNG and convert it to hydrogen, replace the entire gas network with hydrogen safe pipes, then replace all appliances with similar hydrogen burning ones.
Is there such a thing as hydrogen safe pipes? Hydrogen apparentry embrittles all metals, which is one of several problems that the hydrogen proponents don't talk about.
Make hydrogen with what? Electricity? Takes us back to the issue that we don't have enough spare capacity in our generation mix any more, which is why electrifying gas usage was going to be a task.
That is before you consider that roundtrip efficiency of hydrogen is a joke, i.e., it takes more energy to produce and transport hydrogen than what you can get out of burning it plus the heat losses. Using electricity on efficient appliances to heat water and cook meals is a far better idea.
Why would switching from one form of energy to another require more energy, particularly if there is an efficiency gain?
It takes energy to obtain energy. Known as Energy Return on Energy Invested (EROEI).
EROEI tells us that hydrogen is negative (as are batteries, for that matter). You get less out, than you put in - the Laws of Thermodynamics are real.
Talk of geothermal-to-hydrogen is physics-ignorant; the rantings of the ill-informed.
Even where there are genuine efficiencies (remembering that they have hard upper limits via Thermodynamics and Carnot) the Jevons paradox applies; we just use more. Thus we've not displaced fossil energy with renewable, merely added the two. Same with the likes of cycleways; not a displacement but an addition.
Good take on the current state of the OCR/Interest rates
https://youtu.be/ZMZkDh3SPRw?si=aVujoz13aHUYrSCK
Interesting to see that the current average mortgage interest rates is only 4.6%
...humans are about to enter a new era of history. Call it “the age of depopulation.” For the first time since the Black Death in the 1300s, the planetary population will decline. But whereas the last implosion was caused by a deadly disease borne by fleas, the coming one will be entirely due to choices made by people.
...Just two generations ago, governments, pundits, and global institutions were panicking about a population explosion, fearing mass starvation and immiseration as a result of childbearing in poor countries. In hindsight, that panic was bizarrely overblown. The so-called population explosion was in reality a testament to increases in life expectancy owing to better public health practices and access to health care. Despite tremendous population growth in the last century, the planet is richer and better fed than ever before—and natural resources are more plentiful and less expensive (after adjusting for inflation) than ever before.
...Should South Korea’s current fertility trends persist, the country’s population will continue to decline by over three percent per year—crashing by 95 percent over the course of a century. What is on track to happen in South Korea offers a foretaste of what lies in store for the rest of the world.
https://www.foreignaffairs.com/world/age-depopulation-surviving-world-g…
Assuming urbanisation doesn't fall out of favour, probably.
Apparently birth rates in cities like Beijing and Shanghai are below .5.
and natural resources are more plentiful...
Bollocks - in all respects they are less plentiful.
And dropped in quality.
Human population through time
(American museum of natural history graphic video, 6 minutes, forecast at end)
https://youtu.be/vJ5p3pZlBi4?feature=shared
"In hindsight, that panic was bizarrely overblown" - we may say the same thing about low birth rate panics. Hard to know if low birth rates comes from decades of governments disincentivising having kids (which could be fixed), or if it just that people genuinely don't want kids.
Look at NZ for example. Unlike in the old days where everyone got family support, now you need to earn less than minimum wage to get anything from WFF. The only support an average family gets is free day care, and if you want to stay at home and look after your own kids you get nothing at all, you can't even share the tax burden!. There is a massive financial disincentive to having kids.
I often think that a unifying economic goal for people in NZ would be that one person working full-time should be able to live reasonably well and support a small family without a cash subsidy from Govt.
Agreed, although even 50 years ago many in that dynamic ended up claiming the Family Benefit.
When I was young and living in England my mother received a universal child benefit. Universal benefits are cheap to administer and more difficult to rort; ref Super.
It is hard to get governments to treat children well because unlike pensioners they do not vote. A solution would be to nationalise children: if they all belonged to the state then caring parents would be encouraged and those bastards who abuse their children prosecuted fast. Start by prosecuting all parents who have truant children.
NZ children should be NZ's best long term investment.
Same here. It seemed to be the pinnacle of communities in NZ thriving when lookin back.
They would be living in poverty though as poverty is relative. If one person working full-time should be able to live reasonably well and support a small family without a cash subsidy from Govt, then a couple who do not have a family will be super rich with two incomes and no kids to pay for. This then means the first person is actually living in poverty by most definitions. At the very least they are making a big sacrifice to have kids that others are not.
You can have money or family but not both.
If children were legally property of the state with their parents merely providing a service to the state by raising the children then the state would be responsible for the basic costs of raising Kiwi kids. It is accepted that the state pays for basic education and medical costs so why not the cost of realistic parental leave - say 18 years not 0.5 years. Also to be raised properly children require a bedroom or two bedrooms if children are male and female - so pay the difference between the average 2 bedroom property and the average 3 bedroom property as an extra child benefit. This is a very expensive proposal but it eliminates child poverty and eliminates multiple layers of means tested benefit cost and admin cost.
There are great incentives to have kids. You get to go on a benefit, dont have to look for work, and get a free house from the Govt. Evidence of this is reflected in the Census Stats.
The number of single-parent families in New Zealand has been growing, increasing by 7.9% from 2018 to 2023. This means that almost 1 in 5 children in New Zealand live in a single-parent family.
As Charlie Munger used to say, "show me the incentives and I'll show you the outcome".
Just make it a universal benefit.
"or if it just that people genuinely don't want kids."
Having kids has to compete with all the entertainment on offer. Lets see? Sleep deprivation, huge expense, ungrateful ignorant teens, sacrificing your other hobbies, interests, dreams. Or, head off for weekends, with nice meals and plenty of relaxing sleep, for those 18 years, (or 35+years)? Hmm?
Everyone has different values. what used to be called selfish if no having kids, is now called a valid and understandable choice by society. Some wish to live their best life and live vicariously through others if they like kids, as they'll likely have nephews or nieces, friends kids etc. Others wish to have children and raise them, see an image of themself and sacrifice some things to best ensure they get a decent chance at life with all the experiences it has to offer, then in their later years be able to watch them repeat the cycle if they choose with their own kids and have family around them when they finally come to pass. Variety is the spice of life and we've never had so much choice in the history of mankind n so many ways.
I find it somewhat ironic that a group that dismisses LTG are celebrating one of the outcomes forecast by that model.
What’s the go then? Is depopulation a good thing or not? Has to be, right? If it really does take hold I’d be willing to tweak the CE@70 action.
Is it a good thing or a bad thing?...it is both.
It is a positive in terms of better fitting our environment but it is a (big) negative in terms of our financial, economic and social structures...so in the short term it will (decades, if we manage to navigate it) it will cause instability but long term it may save us from ourselves.
Don't agree smaller population is bad for social structure. Small communities are far superior to the dysfunctionality you see with huge population centres. They tend to be more egalitarian for a start.
Smaller in toto yes....but it depends upon the demographic structure of that society.
the coming one will be entirely due to choices made by people.?
So falling fertility rates is a choice?
Yes, have you not heard about contraception?
I bloke with slow swimmers is caused by contraception - are we getting personal?
You can probably add in the popular fad of genitally mutilating children rendering them infertile.
Yes circumcision needs to be banned - agree with you KH.
How's the packing going for your Nirvana Ozi going... ? I was in Sydney recently and did not see one Indigenous Australian - you will love it.
Circumcision does not make one infertile Baywatch.
Oh my bad - replying to KW
Thus we find evidence suggesting that the practice of female circumcision does not have a statistically discernible effect on women's ability to reproduce.
Can you explain better what you mean? A popular fad, where?
Boomer conspiracy facebook
"the planet is richer and better fed than ever before"
Indeed, but this is not reconciling well with those who live in fear of scarcity and think the end is nigh.
New Zealand would be better with two million people.
Well… you could lead the way and leave, if you don't like it here.
Assessment of Oz main city house price +/- over next year
https://www.abc.net.au/news/2024-11-25/house-prices-to-fall-2025-melbou…
Thanks for sharing. And all their predictions, even the worse case scenario, seem to be based on heroically optimistic global assumptions (i.e world peace).
As expected, looks like the 10 year bond yield is taking a dive again, more than 25 bps down since a fortnight ago. Hopefully the market realises that the trajectory on inflation progress will be more or less affected by the trump administration and a return to normal requires more rate cuts.
Why can't RBNZ meet in December and/Orr January? Seems very LAZY to me.
Orr is one of the higest paid people in this country.
Orr come on - he has plans, head to the bach in flash Ute to catch some fish in his flash boat - the kiwi trifecta!
Why would Orr drive a ute ?
To tow the boat ....plus his belt sizes seem to be increasing - all those canapes I guess?
He's not a tradie, I think he's much more likely to tow the boat with his Range Rover if his boat was small enough to be towed, which I seriously doubt. He will have it permanently moored at pier T or Z at Westhaven.
You need a ute to survive the potholes and speed bumps these days.
The role of the RBNZ was originally seen in 1990 as very much as a background role.
It's role has become more prominent due to a) banks pretending what rates they set is influenced far more than they are by the RBNZ, b) politicians pretending far too much of NZ's 'economic policy' is in the hands of the RBNZ, and c) certain governors grandstanding and overreacting.
The collective debt Kiwis owe, mostly to foreign lenders grew to 790 billion in 2023. That was $60 billion more than a year ago.
A big reason why the agencies (banks, etc.) that deals in debt and sets its price, including the institution that regulates monetary policy, are all growing in power.
Finance Minister Willis Challenges DownToEarth.Kiwi (Robert McCulloch) to give her "ideas" about how to Break Monopoly power in the NZ Economy. Here they are.
Robbert McCulloch's main idea is "privatise the health system". Just like America which has about the least efficient healthcare system in the world.
Except that he uses the example of France, which invests 11% of its (considerable) GDP on healthcare while NZ invests about 6% of GDP in health. So yes, let's do it! Double our healthcare spending and then we would find that our current system will work just fine.
Hell, we cannot even run our world-leading ACC scheme properly.
In fact it was 1 of 3 main recommendations & you also contradict yourself directly within 1 comment by stating "just like America" & "uses the example of France".
"Every Kiwi, regardless of income, should be able to choose provider, whether public or private, in consultation with their GP, with the bill paid for by the government. Health NZ is a far larger monopoly supplier than the Big Banks and Supermarkets combined. Kiwis who can't afford private care have no other choice but to go public. The system I'm recommending is similar to the one in France, which has the best health-care in the world."
The French healthcare system may indeed be very good. But it is funded at twice the level of NZ. Where's the money coming from? We already have a strong private health system which receives A LOT of public funding so arguably we already have a version of the French system?
NZers love their public health system, even if has been ru into the ground over the last 30 years.
Finance Minister Willis is Sitting on a Gigantic Fiscal Hole - she's conjured Figures in Budget 2024 that Contradict Treasury's Long Term Fiscal Forecasts.
Did Willis fake her forecasts?
Hopefully the track is real and not fake as well?
OMG colour me surprised Austerity program causes government revenue to drop in relative terms. Who could have ever predicted that? (only almost every economist for the past 100 years or so).
We have a huge health burden coming online as the baby boomers retire, showing up in those graphs... and yet putting the economy into reverse to somehow help pay for that is Willis' plan. Well done everyone who voted for shooting yourself in the foot.
Thank heavens our landlord tax cuts are funded through general taxation and not from borrowing.
Nikki Kaye has died at 44. Reflect, regroup and confirm what is really important in your lives. I say live for the day, keep smiling.
Way too young. Respected by all parties.
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