Here's our summary of key economic events overnight that affect New Zealand with news inflation spike fear is gripping financial markets today as equities fall, bond yields rise, some key commodities like the oil price is spiking, and there is a sharp move toward perceptions of financial 'safety' which is hurting commodity-based currencies like the AUD and the NZD.
The fear is based on seeing central banks hiking policy rates to weight against a looming inflation spike, just when economic activity is likely to weaken sharply on the consequences of Trump's wars. The fear is stagflation on steroids.
It is affecting investors from New York to Shanghai. And now Trump is blaming friends (Spain, the UK) for not being supportive enough and threatening new trade restrictions.
But it isn't universal - yet anyway.
First up today, there has been another very good dairy auction overnight, the fifth positive one in a row, delivering prices up overall by +5.7% un USD terms. With the falling NZD, prices are up +8.4% in NZD. Our charts tell the story overall and in product detail. Basically prices are now back to the high 2025 levels in both USD and NZD terms. Yes, analysts will be reaching for their pencils to reassess the season's payout forecast, although we should caution that we are well past the peak of the milk flows - and that volumes offered and sold overnight are falling away seasonally.
More broadly, in the US overnight, the February US Logistics Manager survey showed pressure on their system with rising inventories and strained capacity.
Meanwhile the RealClearMarkets/TIPP Economic Optimism Index retreated in March from February, and delivering a decline when an rise was expected. This is largely because personal investor sentiment fell sharply as confidence in US government economic policies slipped away.
In the Middle East, only one tanker, a Singaporean one, has managed to traverse the Straits of Hormuz in the past day. It's essentially closed still. Insurers have cancelled policies. Now the US says it is considering providing that, at taxpayer expense. The costs of war are broad.
The scheduled meeting between Chinese President Xi and US President Trump is still on for the end of March. Given the unhinged policy-making by the US, it is a lottery on how this will play out. Trump will undoubtedly look for short-term, face-savings wins. Xi will be playing a much longer game.
Meanwhile, China is putting the finishing touches to its latest five-year plan. We are approaching the rubber-stamp set piece.
In Europe, the Euro area inflation rate rose to 1.9% in February, up from 1.7% in January. Although minor it was an unexpected rise. And that pushed core inflation up to 2.4% in February. Given the global rise in uncertainty, and the US/Israel/Iran crisis pushing up their energy costs very sharply in the past few days, these inflation levels are unlikely to stay this low in March, giving the ECB a new headache.
In Australia, total residential building consents fell at a -7.2% rate in January, following a -30.7% drop in December. Year on year it is down -15.7%, the largest fall since late 2023. This may have ended the rising trend of approvals that started in July 2024. But there were 9,900 detached houses approved for construction nationally, a 41 month high. The big shortfall is in intensive housing.
Australia’s current account balance fell by -AU$2.8 bln in December 2025 to a deficit of -AU$21.1 bln. This is its second consecutive fall, driven by a net primary income deficit widening. This will take -0.1 percentage points from the December 2025 GDP result which will be released tomorrow.
In public comments yesterday, the RBA governor acknowledged the sudden increase in uncertainty in the global economy, on top of already high uncertainty from Trump's abandonment of an international rules-based order. She said "a supply shock could, for example, add to inflation pressures. And the potential implications for inflation expectations are something we are very alert to. But at the same time, a prolonged impact on energy markets could have adverse effects on global economic activity and result in downward pressure on inflation. It is not obvious how this might play out." Westpac says Brent crude at US$100 is entirely possible in the coming few weeks.
The UST 10yr yield is now just on 4.06%, unchanged from yesterday, although it did get up to 4.11% in between. The key 2-10 yield curve is soft at +55 bps (-2 bps). Their 1-5 curve is still just on +8 bps (unchanged) and the 3 mth-10yr curve is now at just on +36 bps (also unchanged). The China 10 year bond rate is down -4 bps at just on 1.79%. The Japanese 10 year bond yield is up +7 bps at 2.13%. The Australian 10 year bond yield starts today at 4.83%, up a SHARP +18 bps from yesterday. The NZ Government 10 year bond rate starts today at 4.42%, up +4 bps from yesterday.
Wall Street has opened Tuesday trade with the S&P500 down -1.2%. Overnight European markets were down between London's -2.7% and Frankfurt's -3.6%. Yesterday Tokyo ended its Tuesday session down -3.1%. Hong Kong was down -1.1% and Shanghai was down -1.4%. Singapore was an outlier, rising +0.5%. The ASX200 ended its Tuesday session down -1.3%. And the NZX50 dipped -0.3%, a restrained result in the circumstances.
The price of gold will start today down -US$179 from yesterday at US$5117/oz. Silver is down another -US$4 at US$83/oz today.
American oil prices are up +US$5.50 at just under US$76/bbl, while the international Brent price is up the same to be now just over US$82.50/bbl. These at +7.5% rises. A collapse in Iranian oil production could have quite deep impacts.
The Kiwi dollar is another -50 bps lower against the USD from yesterday, now just on 58.8 USc. Against the Aussie we are down -10 bps at 83.8 AUc. We are down -60 bps against the yen. Against the euro we are unchanged at 50.7 euro cents. That all means our TWI-5 starts today down -40 bps, now just on 62.5 and a new one month low.
The bitcoin price starts today at US$67,575 and down -3.2% from this time yesterday. Volatility over the past 24 hours has been moderate at just under +/- 2.6%.
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28 Comments
20 years ago, I joined here under the powerdownkiwi pen-name.
I did so because that is what we were going to have to do, sometime in the near future.
This came from a fellow-traveller yesterday: The Limits to the Energy Transition: What Physics Means for New Zealand’s Economy - Whitepaper
I urge everyone here, to bother to make the time to read it. Then overlay what is unfolding globally. We are late with this discussion and the window is rapidly closing. When personal narratives diverge from reality, we - both individually and nationally - have a great ability to rationalise the unrationalisable. That split is widening to the point where Carney yesterday is not the Carney of Davos; where the US narrative has reduced to Trump having a hissy-fit re Spain (and Trukey will resist, too, is my guess).
Setting up NZ to be resilient, is something we are already late in doing. Rooftop solar (and batteries) will smooth the descent - but what we do re food, health, education, infrastructure? The old guard will attempt to hang on and will hang on too long (much of the political Left, is actually old guard too).
Others are looking at this too The Reality of Everything Symposium although that probably won't be as on-point as the paper above (essentially because of residual old-guard thinking).
yep. COVID restrictions gave a gentler heads up, during which our government sat on it's hands while our only refinery was closed. Actually they probably squatted in the corner sucking their thumbs, not knowing what to do. That included Chloe and her Green mates.
It's why I keep calling for a vision and plan for national resilience. None of our politicians seem to understand. Ironically NXF comes closest though, but some of their policies are total denial too......
I am not sure how a refinery adds resilience? It couldn't refine our own oil (to my knowledge), so we needed to import crude regardless.
The plan should be electrification. Anything else relies on us importing something, whether that be crude / refined / LNG / etc.
You are correct, but changing it to enable it to handle our own oil would have been better than letting it close. But that would also have required exploration for our own oil to continue, or the ongoing import of crude.
My understanding is it's dramatically easier to have a large stockpile of crude oil which you can refine into other products than is it is keep stockpiles of the products themselves. Much more stable.
Fair enough.
I actually think if there was a fuel shortage it would be a good thing in the long term. Like in the 1980s when many converted their car to CNG/LPG, except this time we would rapidly go electric.
I have read the link. Using the closure of the Hormutz Straight to justify the lack of physical energy resources globally is a bridge too far for me to get onboard.
I wrote above:
When personal narratives diverge from reality, we - both individually and nationally - have a great ability to rationalise the unrationalisable.
Have a good day you - thanks for reading all 28 pages in such a short time.
You struggle to acknowledge the finite limits to the physical resources? Or that the crude must first be shipped to a refinery, then to NZ as finished product, at least doubling the reliance on global supply chains that are placed at risk by global politics?
What would it take to get you on board?
Some establishments or institutions are vital to a nation. It’s power, water and transport for a start. It was necessary for Helen Clark to have the backbone to buy back Kiwi Rail because NZ is a long skinny mountainous country and needs the security of that transport. Ditto, but to a lesser extent, for AirNZ. The Bank of New Zealand too should have been bailed out, the profits since recorded would have paid that back over and over again. The oil refinery too, because as you say it at least gave NZ some control, and alternatives for supply, over part of the process. The corporatisation of SOE’s introduced by the Lange/Douglas government imposed profits as a priority over essential government functions but some of that must continue to operate regardless. Just as a minor comparative question, it is doubtful than any library in NZ returns a profit but who in their right mind would then discard them because of that.
"The Bank of New Zealand too should have been bailed out, the profits since recorded would have paid that back over and over again" - would it have? Kiwibank isn't exactly a money spinner for the government.
"imposed profits as a priority over essential government functions" - the opposite creates all sorts of inefficiencies and distortions. For example a not for profit government refinery would encourage more fossil fuel use, which would make the whole situation worse.
"it is doubtful than any library in NZ returns a profit" - some things the government / councils can only provide because the private sector can't or wouldn't. I don't think fuel is one of those. For example, food is essential, should the government also be manufacturing and selling food?
The government could have regulated that a decent amount of fuel storage must exist. The fuel companies would have decided whether that is via a refinery and crude, or by storing a lot of refined offshore.
Mixed metaphor - government, manufacturing/selling.
Actually, the ideal is a governance which lays down rules, for the benefit of all. How about: No Kiwi should go hungry? as a goal?
You don't need to own or manufacture to do that - but those who do, would need to comply...
The trouble comes when there isn't a profit available - as Foxglove points out. But who said there ever needed to be? Only those who benefit from the profit-taking system. Which as we are witnessing, is in trouble...
There is no comparison to Kiwi Bank, to think so is being entirely uninformed. Until its collapse the BNZ was the largest trading bank operation in NZ. The NAB straightened it out and restored the profitability. The BNZ is now only below ANZ & WPAC in size because of those banks merging with the other banks around at the time. NZ needs oil & petroleum full stop. The main concern therefore is the security of that supply because without it, like it or not, the nation grinds to a halt. Unless you are a fan of Stalin’s collective farming or similar no country in ordinary times sees fit to interfere with its farming and other food production except of course in out of ordinary times such as war, rationing is introduced
Guilt by association: Stalin, collective farming.
Invalid.
The latter is entirely achievable, ex psychopathy.
Nice homograph!
But you can download electronic books without central or local government provision. Libraries are now cafes, social centre's, computer access etc. Not just books!!
That’s good isn’t it and even more a reason for their existence. As stated some functions and services don’t need to return a profit to be of value to communities and the nation at large, and to make them think they need to, would likely be counterproductive wouldn’t it.
"sometime in the near future" - yet here we are 20 years later, oil is basically the same price, electricity is still available to everyone, as are food and water. I suspect most people believe in what your saying, but the timing is the most important aspect, 20 years is very different to 100 years.
I agree that we need to ween ourselves off fossil fuels as they won't last forever and would be better remaining in the ground (e.g. electric cars, hydrogen trucks, electric boilers and industry, etc). I wish National had kept Labour's momentum going with the clean car discount. If we move to clean energy sources that are in our backyard we also lose our dependence on imported fuel, as long as we build enough power generators (importing LNG isn't the answer). And perhaps our trade deficit will go the other way too.
We need a government brave enough to invest heavily in electrifying NZ.
"Labour's momentum going with the clean car discount" (& no RUCs)...& making everyone else pay for the Professional Managerial Class's virtue signalling Teslas
Every electric car helped the cause even if it was a "Professional Managerial Class's virtue signalling Tesla". Most were not.
The only issue with the clean car discount was it was so popular that it wasn't revenue neutral, it needed tweaks to make importing gas guzzlers even dearer.
Labour were going to move to RUCs for all as well AFAIK.
There is always an element of uncertainty - in everything. that's not an excuse to do nothing, denying the need. It's really an opportunity to look closely and develop a robust plan that doesn't cripple the country and takes the people along with minimal pain. The political denials are more rooted in a lack of understanding on how money actually works today. It's all connected, but the people making the decisions are all comparatively wealthy, and think they're universally smarter than everyone else. that alone will screw us.
JJ - your argument fails re scaling time.
Our irruption is completely via fossil energy. Started in 1800, with 1 billion essentially non-consumers. Exponentially ramped to 8 billion consuming ever-more per-head, than hithertofore. There cannot be 100 years left of such a trajectory.
You also assume BAU, by your comments re cars etc.
And hydrogen is an energy-loss vector.
Invest? Yes, but think of it as investing some of the residual fossil energy (and remaining resource-stocks) but with an eye to what can be maintained in a powering-down world. And generators, dams, grids, industry, trade - are all questionable in that scenario. As is the Onslow proposal. Buying PV and batteries now, is a way of spreading the energy of oil over a longer period - which see as valid because it slows the descent.
"hydrogen is an energy-loss vector" - does it really matter if some energy is lost between water falling down a hill and hydrogen being generated? It doesn't if you build enough generators.
Now we get to it - and you are wrong.
100%.
Think about it: what energy-source are you going to use to build the generators?
This is the quintessential cranial mistake made by all who have chosen to believe in money/growth/progress without understanding the reality of physics. What you did then was to cherry-pick data you wanted (while eliminating that which was inconvenient (the build/maintenance energy). (As a personal observation, this was not a one-off cherry-pick - just saying).
If you can magic the front end, you can argue that anything is possible. But I'll tell you that by the time you've built enough generation (using secondary solar, presumably - hydro dams?) to support the energy-loss of electrolysis, then the energy-loss of transporting to where was it - Japan? - using I presume ships I presume running on something other than oil??????? to be use there for? It's a physic nonsense; the 2nd Law (of Thermodynamics, aka the Entropy Law), Carnot, EROEI - you're too far into negative territory.
Also be aware that money is only underwritten by energy. So trading in that scenario?
"what energy-source are you going to use to build the generators" - surely construction uses a tiny proportion of the energy they generate, even if there is loss when converting to hydrogen. Wouldn't it make much more sense to use the last of the fossil fuel to build alternatives, rather than just using it and having nothing?
What is your idea for powering trucks? Or do we all live on a farm and be self sufficient? Is there enough land for 5 million farms? What powers the tractors?
Great questions.
There will be a transition phase - perhaps 100 years all up. Some existing infrastructure may last all of that. Most will be abandoned. Much will be adapted - as per Cuba post-revolution.
Yes, it makes sense to use the last of the fossil resource wisely, and wisely incudes building energy-harnessing (you cannot make it) infrastructure. The caveat is obvious: that infrastructure has to be maintainable using itself - or it is a waste of the remaining fossil stock. And no PV, windmill or dam, has ever produced PV, windmills or dams.
20 years ago, I thought we could. So far, we can't - and the physics suggests we won't. So what can be maintained ex fossil input? Low tech, easily fixed locally, local supply (no distance logistic issues) maximum recycling; it'll be triage-of-the-decaying on a rolling-maul basis.
What is your idea for a road-surface (assuming your trucks are going to have tyres (currently made of FF) which roll over something (roads are currently made of, and laid by, FF)? We could reverse the 2nd Law and make concrete using hydrogen?
Thanks for thinking :)
First up today, there has been another very good dairy auction overnight, the fifth positive one in a row, delivering prices up overall by +5.7% un USD terms. With the falling NZD, prices are up +8.4% in NZD. Our charts tell the story overall and in product detail. Basically prices are now back to the high 2025 levels in both USD and NZD terms.
Could the dairy industry actually come to our economic rescue this time? Prices are still holding up (longest stretch I can remember) and they're due a return of capital. Maybe they finally have the platform to confidently spend money. I certainly hope so because there's not much else on the horizon.
I'm going to hammer this today :)
Economic rescue?
Return on capital?
Spend money?
Try: Allocate future resources - including future energy resources.
Modern agriculture is the process of supplying food (which is energy without which no life exists). It does that by expending many calories of finite fossil energy, to produce one calorie of food. That is a temporary arrangement, ending in lots of digital proxy but no energy stock (and therefore not much food; you're down to real-time solar).
How we do food beyond the fossil bonanza - beyond Haber-Bosch, majorly - is the powerdown question of them all.
Can I suggest that horizons are perhaps perspective-limited?
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