Here's our summary of key economic events overnight that affect New Zealand, with news the IMF says global growth is projected at 3.0% for 2025 and 3.1% in 2026, an upward revision from the April 2025 World Economic Outlook. This reflects front-loading ahead of tariffs, lower effective tariff rates, better financial conditions, and fiscal expansion in some major jurisdictions.
But first, the overnight GDT Pulse dairy prices came in without the signaled drop in WMP prices by the derivatives market. In fact it rose +1% from the prior event. The SMP price however fell -1%. So in fact little net movement.
And the Stockholm US-China tariff negotiations are to be extended, essentially ignoring the US imposed August 1 deadline. And the US-EU 'deal' wasn't 'done' as the Whitehouse claimed. More 'horse-trading' is being scheduled.
The growth steam is slowly leaking from the Redbook retail index, up +4.9% last week from this time last year. Most of this will be goods inflation.
US exports rose +3.4% in June from a year ago whereas US imports were up +0.3% on the same basis. That reduced their merchandise trade deficit to -US$87 bln and back to about where it was at the start of 2024. Without the +11% rise in aircraft exports there would have been little improvement.
The number of job openings in the US fell by -275,000 from May to 7.4 mln in June, below market expectations of 7.55 mln. Their quit rate fell to a six month low. Expectations for the July non-farm payrolls are pretty modest at +110,000, taking them back to early 2025 levels.
The latest Conference Board survey of consumer sentiment, for July, was little changed. But almost 19% of those surveyed indicated that jobs were hard to get in July, up from 14.5% in January. This group thought inflation was running at 5.8% currently, and is likely to go higher.
There was a very well supported US Treasury bond auction overnight, for their seven year Note. But investors still wanted higher yields with the median coming in at 4.06%, up from 3.96% at the prior equivalent event a month ago.
But expect rising pressure from the demand side. The US Treasury said during the July - September 2025 quarter, they expect to borrow US$1.007 tln in privately-held net marketable debt, assuming an end-of-September cash balance of US$850 bln - which may be optimistic. This new borrowing estimate is +US$453 bln higher than they announced in April so it is rising faster than even they expected, primarily due to the lower beginning-of-quarter cash balance and projected lower net cash flows.
In Europe, the latest ECB survey of inflation expectations has them well contained, coming in at 2.6% for the year ahead, the lowest in four months. Policymakers there are not battling high inflation expectations.
Later today, Australia will release its Q2 CPI inflation rate, expected to be 2.2% and down from the 2.4% in Q1-2025.
The UST 10yr yield is now at 4.33%, down -9 bps from yesterday. The key 2-10 yield curve is slightly flatter at +46 bps. Their 1-5 curve is more inverted at -17 bps. And their 3 mth-10yr curve is now completely flat. The Australian 10 year bond yield starts today at 4.31% and down -4 bps from yesterday. The China 10 year bond rate is holding firm again at 1.74%. The NZ Government 10 year bond rate starts today at just under 4.59% and down -2 bps.
Wall Street is softer, down -0.2% in Tuesday trade. Overnight European markets all rebounded, most up +0.7% although Frankfurt was up a full +1.0%. However, Tokyo was down again, dropping by -0.8%. Hong Kong fell only -0.1% but Shanghai firmed +0.3%. Singapore dropped -0.3%. The ASX200 rose +0.1% on Tuesday. And the NZX50 rose +0.2%.
The price of gold will start today at US$3,327/oz, up +US$18 from yesterday.
American oil prices have risen +US$2.50 at just under US$69/bbl with the international Brent price is now at just over US$72/bbl.
The Kiwi dollar is now at 59.6 USc and down -10 bps from yesterday. Against the Aussie we are down -20 bps at 91.4 AUc. Against the euro we are up +10 bps at 51.6 euro cents. That all means our TWI-5 starts today at just on 67.5, down another -10 bps from yesterday.
The bitcoin price starts today at US$117,725 and essentially unchanged (+US$61) from this time yesterday. Volatility over the past 24 hours has remained low at just on +/-0.8%.
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30 Comments
The Comb officially, throws in his property towel:
Tony Alexander: RIP New Zealand's 'Mum and Dad' property investor, All things property, under OneRoof
Market Capitulation to come 2026/2027.
Lol - he effectively calls the housing market a pyramid scheme or ponzi.
It is effectively isn't it?
Yep. As Ponzi like, as it gets.
He better watch out, the feared Property Investors Federation, will drop a mighty fatwa on his head.
Many on here have argued it is not - and anyone using the term 'ponzi' in relation to the housing market is a fool.
I've personally thought our housing market (and many others around the world) have had ponzi like characteristics this past decade or so - with those who have bought into it then become cheerleaders of it because for them to profit, they need others to join it. So regardless of whether it was in the best financial interests of others to do so, they always said now is a good time to buy (even if in periods like 2021/2022 it didn't look like a great idea)
And I've agreed with you on this. I've always argued as well, that anyone considering investing in property needs to do their sums, understanding how they will make their money, and understanding that hope is not a strategy. I also believe that integrity is important and for me this includes charging an affordable rent. Market rents are not affordable and haven't been for around 20 years.
At times not much consideration has been given to cash flow - more capital appreciation. ie the slogan 'prices double every 10 years' meaning they should always expect approx 7% pa capital appreciation. So even if cash flow negative short term you can sell in a few years and come out on top.
But if that capital appreciation is gone (which I think it is because it is completely unsustainable for wages to rise with inflation ie 2% pa in the long term while house prices rise at 7% pa - as one is (house price) the sum of the discounted cash flows (wages/rents) of the other) then there are going to be a lot of people in trouble - as we've seen on the property investor FB page (complaining how they're topping up their rental by $100's each week).
Few property investors were encouraging buying in 2021/2022. Most thought the market had gone mad and expressed concern. I know I did.
There was a mania for buying development properties by people who weren't developers, driven by changed government policies and low interest rates so there was some rational thinking behind that specific niche.
"Most thought the market had gone mad and expressed concern"
BS - they weren't warning against the madness, they were too busy participating in the madness! ie you can't warn against something that you are being or doing yourself. Unless you are a hypocrite.
Unless of course part of the truth is that property investors were trying to suck FHBs in to offload their properties at peak prices at those times so that they throw the younger generation under the bus. 'Hey FHB its a good time to buy 'be quick' 'yesterday is always the best time to buy property' 'can't lose with property maaate' - but I'm actually selling up my rental portfolio because I think the market is going to be weak in the future'. So do as I say but not as I do - I'm selling but you should be buying my properties so I can be rich and you can be a debt slave in a weak economy and property market'.
No one here said 2021/22 was a particularly good time to buy.
It's a Ponzi in that it requires buyers or else the market will go down or crash. Never mind that property can earn rent, provide a place to live, work or vacation, keep you safer, give you access to good schools, provide convenience, stability, maybe increase your status in society and generally keep abreast of inflation. Never mind all of that stuff.
Oh, and it's a Ponzi if you don't consider that all these commenters calling it a Ponzi have also bought property, even after claiming it is a Ponzi.
Sorry, property has been totally the WORST INFLATION HEDGE. in the high inflation 1970s and since the 2021 inflation resurgence.
I know this aspect is drummed into the masses at the property seminars.......but it is complete and utter BS.
When did you buy your last house?
Also, I did write generally keeps abreast with inflation which means more often than not. You can't just pick out a couple of times in history when it was not, that's disingenuous.
Would you call term deposits a Ponzi? They don't keep up with inflation.
Lol - he effectively calls the housing market a pyramid scheme or ponzi
Maybe he watched the Tucker Carlson podcast with Richard Werner. I did. It's close to 3 hours long.
Werner came out with the Ponzi metaphor as it relates to how the housing markets across the Anglosphere are essentially not run by market dynamics and banks set the price.
Mr Optimistic thinks the 100+ group will hang on. Bigger they are the harder they fall.
Some of us saw this outcome a while back
and property prices need to decline further (or at least land costs do) to get back to where they should be for a second hand good
Now if rents also reduce the majority will all be better off
And there it goes...
Rental market softens: Median Auckland price down 2% on year, ‘affordability ceiling’ curbs rises
It is the first time since 2009 that the median rent has dropped.
Been going up relentlessly since 2009 though...
Been going up relentlessly since 2009 though...
Yep. And it's only a single data point in a time series. Panic will not be spreading like wildfire at the boomer BBQs.
You should watch the Tucker Carlson interview with Richard Werner. He seemed to suggest when property values fall up to 20% in any developed economy, you're more or less in a banking crisis, even though the hoi polloi will have no idea what's going on. Falling rents are a smoke signal. The idea that Aotearoa isn't anything but 'solid as a rock' in terms of bank stability is all built on underlying beliefs and myths. Most people have no idea that most of their assets are based on 'money out of thin air' and think it's some kind of conspiracy theory.
Yip and the more rents fall the more that people will try to offload their under performing rentals and then the more supply there is on the market and the further house prices fall, and the less demand their is for rental properties as more people become own occupiers, then the less demand there is for rentals, then the more rents fall, then the more people try to off load under performing rentals.
There is a spiral there that could start gaining momentum (which is the opposite of spiral of the past 20-30 years that resulted in the conditions we saw that hit a precipice in 2021 and now appears to be unraveling - which many of us here warned about but got called 'doom gloom merchants' for voicing such opinions).
.... then the more people try to off load under performing rentals.
That's because the investment's value is based on price, not by intrinsic mkt value. As I mentioned above, property mkt prices are set by the banks, not by mkt dynamics. You need increasing prices - capital appreciation - over anything else. Banks can do that through more credit creation.
Nobody pays enough attention to what happened in Japan and why it's so relevant to us. We like to believe that we're different and somehow superior. Ironically, that is what the Japanese believed as well.
And when prices are static or falling investors suddenly can't create new deposits out of thin air to buy more property by using the equity of other properties that had been going up at 5, 10, 15% pa in the past.
And when prices are static or falling investors suddenly can't create new deposits out of thin air to buy more property by using the equity of other properties that had been going up at 5, 10, 15% pa in the past.
Well yes. But the central banks can step in to purchase bank assets (mortgages). This can instill calm in markets. Not sure that intervention is necessary in Aotearoa at present.
It's a disaster because the business was capital gain. Nothing else. And that was back then but no more.
The word Ponzi is being used a lot here this morning. My 2 cents worth is that this as a description of any asset bubble misses the multiple elephants in the room...
#1 The fact that ~97% of the MS is created out of thin air by private banks.
#2 The eCONomic models tell us that lower interest rates lead to higher growth and higher growth rates lead to lower growth - this is back to front - (28:00) and at (2:27:00). The true narrative is that high growth leads to high interest rates. Low growth lead to low IRs.
#3 The eCONomics spinmeisters models are completely invalid because they ignore the role of private banks in money creation - in fact, the role of banks doesn't exist at all within their models. (16:00)
#4 Money creation is a myth in the Western-centric system - what is being created is debt-based fiat tokens - it's not money - this debt-based system is what fuels the casino financial economy, and the asset bubbles.
#5 This 'creation of money' trick is used within society, but also at a sovereign level when countries borrow abroad. This 'money' never arrives in the borrowing country - the loans are merely created out of thin air by the designated resident private banks that create the loan in local currency - the money never existed. However, the debt to the overseas lending private monopoly bank (read cartel), in London or New York, is made out to be real, and is secured using public assets as collateral - see at (2:29:00)
NB Werner gives his take on CBDCs at (2:38:00)
https://x.com/TuckerCarlson/status/1949877681027166608?t=856
Great to see that the Cackling Carlson is more than just an ex-Fox News talking head these days. This talk with Prof Rihard Werner was a real wake-up call for Tucker.
We all need to study what Werner exposes in this groundbreaking interview. He is brave enough to lay out on a plate the key to societal prosperity and the end of the forever wars (2:04:00) of the current Western model.
PLEASE, PDK take note at (2:25:00). So many people equate 'economic growth' as BAD - (basic physics tells us there is no such thing as growth) - are we really destroying the environment? - or is this simply what we are being fitted up with as yet another money-maker for the plutocrats, all based on statistical mumbo-jumbo?
'Economic growth' is not the enemy of the environment and nature - in fact, technology advances and egalitarian societal wealth could be the saviour of both.
Cheers to all
Col
Nice summary chief. Good you pointed out #2.
Colin what you haven't mentioned is the private banks creating debt is them betting on future economic performance, and taking a slice before the country gains any benefit. Because that's in the hands of a private business (the banks) they in effect control the economy despite any moves the government might try. Having the central bank or treasury in control of any debt available for the banks to distribute (and it's directing - housing or business) must surely be a preferable structure?
Werner doesn't make any recommendation for credit distribution to be centralized. On the contrary. He believes that having as many commercial localized banks as possible is a good thing. He even puts it down as instrumental in the success of the China economy. But in the Anglosphere, central banks prefer to have fewer banks - consolidation and centralization.
Werner claims central banks were often established as cartels by the largest banks to protect their interests. These institutions can coordinate policy and bailouts, offering implicit guarantees that encourage riskier behavior among major players, raising barriers for smaller banks.
Modern regulation and supervision, often led or mandated by central banks, tend to be resource-intensive - requiring capital buffers, compliance, and reporting mechanisms that are far easier for large banks to adopt than for local or community banks. As a result, consolidation accelerates, reducing the number of small banks and increasing the dominance of systemically important institutions.
In times of crisis, central banks historically focused bailouts and liquidity support on larger banks, frequently allowing smaller institutions to fail. For example, during the Great Depression in the U.S., the Federal Reserve did not bail out thousands of small, local banks, which led to their absorption by larger competitors. Depositors lost savings, while surviving large banks expanded their reach.
i don't really see central banks as an effective solution. I suggest it is the government's role to manage the economy and I feel that central banks could easily have divided loyalties. For example if the central bankers disagreed with the government's economic direction and policies they could work to undermine them or redirect the direction. Central banks as currently manifested are designed to be independent, but as much of our discussion determines very little if anything in the economy is independent. Thus if a central bank was retained, then it should be directly answerable to the government, or it's functions moved to the treasury and the bank disestablished.
We've identified that current, accepted economic theory is significantly flawed, thus a new, different approach is required. Banks can be expected to have significant issues with any approach that impacts on their power, influence and control.
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