Here's our summary of key economic events overnight that affect New Zealand with news no-one knows what is going on in the Iran-US 'negotiations' - least of all Trump. Ships are transiting at trickle-pace, but they tend to be large Chinese tankers. The bottom line is essentially 'no progress'.
And although the benchmark 10 year bond yields are basically holding, yields for shorter terms are catching up, so a rate flattening is underway.
US jobless claims dipped last week, and by marginally more than seasonal factors would have expected.
Precautionary stockpiling by manufacturers is currently driving the US factory sector. New order growth slowed slightly but is still higher than normal in May, according to the latest S&P Global PMI for the US. But factory activity has taken a step up so output is rising at its fastest pace in four years. Driving all this is the need to get ahead of surging input costs, which are spiking in dramatic fashion.
But the activity surge isn't everywhere. The Philly Fed's factory survey unexpectedly contracted in May. The Kansas City Fed's survey was little-changed from a modest expansion. Both saw very little respite from elevated input costs.
US housing starts dipped in April from the good March levels. They are being held up on the same drive to get ahead of expected large cost increases.
Across the Pacific in Korea, they are feeling producer price inflation at disarmingly high levels. They rose +2.5% in April to be 6.9% higher than year ago levels. But factory input costs rose an average of +11.3% mainly for fuel and other oil-based inputs. And this is very interesting.
After a strong rise in February, Japanese machinery orders were expected to ease back in March, and they did, and by about the expected level. However, export orders remained very strong. They are expecting the April-June quarter to just be level-pegging with the same period a year ago. But this whole machinery manufacturing sector is in an upswing phase that started in 2023 and one that gathered some real impetus from mid-2025.
That Japanese factory order data is confirmed in April export data out yesterday. Japan's exports jumped almost +15% to a near-record high of ¥10.5 tln in April, accelerating from an +11.5% gain in March, the fastest pace in three months and topping market forecasts. Exports grew to China (+15.5%), the US (+9.5%), ASEAN (+19.9%), the EU (+26.9%), and India (+8.9%). The May Japanese factory PMI is still expanding quite quickly but cost pressures are surging.
In India, their PMI is little changed at a healthy expansion, but they report that further expansion is being capped by this rising cost pressure.
EU consumer sentiment has stayed very low in May, even if it did bounce back from the ugly April level. The EU economy is being forecasted to slow down amid rising inflation following the energy shock.
The Eurozone factory PMI is still expanding, but less so, and under heavy input cost pressure too.
The Australian labour market is weakening with a turn lower in April. The number of employed people fell by -19,000 in April, while the number of unemployed people rose by +33,000. Markets had expected employment to rise by +10,000. Their jobless rate is now 4.5%, the highest in seven months. (The New Zealand jobless rate was 5.3% in March 2026.)
The April PMIs are out for Australia, and they show weakening business conditions. The S&P Global factory PMI slowed to a stall with the private sector getting its steepest fall in new business in over four-and-a-half years. The service sector is now in contraction after March's stall.
And staying in Australia, there has been an outpouring of voices, a veritable cacophony, claiming the loss of low tax capital gains is an affront, "punishing aspiration". "stifling innovation". Since when did 'aspiration' and 'innovation' rely so heavily on discounted taxes on the gains made from this activity? Inequitable taxes on this activity is just distorting behaviour and it helps misrepresent what is being achieved. It also loads more tax on those that can't avail themselves of these distortions. They all want a "level playing field" - unless the playing field is unlevel in their favour. What we are seeing is a classic lesson for anyone designing a tax system. Make it neutral and fair to start with.
Global container freight rates rose +6% last week to be +10% above year-ago levels, driven largely by outbound rates from China to the EU. Bulk freight rates fell -5.7% in the past week, easing after the prior six week run-up reaction to Trump's Gulf War. But that still leaves them +125% higher than year-ago levels.
The UST 10yr yield is now just on 4.58%, up +1 bp from this time yesterday. The key 2-10 yield curve is now at +51 bps (-3 bps). Their 1-5 curve is now at +41 bps (-3 bps) and the 3 mth-10yr curve is at +93 bps (-6 bps). The China 10 year bond rate is now at 1.75%, up +1 bp from yesterday. The Japanese 10 year bond yield is unchanged at 2.76%. The Australian 10 year bond yield starts today at 4.95%, down -6 bps from yesterday. And the NZ Government 10 year bond rate is down -8 bps at 4.75%.
Wall Street is holding firm, with the S&P500 up +0.1%. Nvidia's financial results were outstanding but traders sold to take profits. Overnight European markets closed mixed, between Frankfurt's -0.5% and London's +0.1%. Yesterday Tokyo ended its Thursday trade in a rush, up +3.1%. But Hong Kong fell -1.0%. Shanghai fell -2.0% which is a lot for them. Singapore ended unchanged. The ASX200 ended up +1.5% and a recovery from Wednesday's fall. The NZX50 ended up +0.9% and a partial recovery.
The price of gold will start today up +US$20 at US$4553/oz. Silver is up +US$1 at just under US$77/oz.
Oil prices have dipped -50 USc to just over US$97/bbl in the US, while the international Brent price is now at just on US$103.50/bbl
The Kiwi dollar is up +10 bps from yesterday at this time at 58.8 USc. Against the Aussie we are unchanged at 82.1 AUc. Against the euro we are up +10 bps at just on 50.6 euro cents. That all means our TWI-5 starts today at just under 62.3 which is up +10 bps from yesterday.
The bitcoin price starts today at US$77,759 and up +0.3% from this time yesterday. Volatility over the past 24 hours has been low at just under +/- 1%.
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41 Comments
Yes the Australian government has displayed here a very sincere effort to tax success. Winston Churchill got a lot of things wrong but he got it right when he said something like - a nation trying to solve its problems by taxation is like a man standing in a bucket trying to pull himself up by the handle.
But it's not 'success' is it?
It's displacement within a societal total, vis-a-vis others.
And Churchill was not impressed with that rentier class - of which he was one.
Unsurprisingly if you read Churchill on Churchill he was never unsuccessful. He couldn’t for a moment, allow himself to be. Success in my post admittedly was a generalisation. Synonyms such as accomplishment or achievement, may have been more succinct. However it is undeniable most humans have aspirations and some more than others and personally I would see any government attempt to punitively tamper down the former to supplement the latter as being highly counterproductive individually, societally and nationally.
The irruptions of social stratification, always come in the last 100 years or so.
So I 100% disagree with your last sentence.
And capital gains are an assumption of rights to access resource-stocks, based on doing nothing.
You're oversimplifying to gain your argument PDK.
Capital gains are the goal of any investment and are not necessarily the result of doing nothing. Equally capital gains may be an unintended consequence due to factors beyond a person's control. Equally capital gains may result from unbalanced manipulation by a few on a broader market.
To over simplify that argument to justify a tax for example results in an outcome where the target may have a higher tax, but others will be treated unfairly.
But I agree to your first sentence. Foxy on the other hand was trying to discuss how to avoid that. History teaches us that under the manipulations of human psychology, societies usually end up imploding and collapsing. But in our world we have a thing called 'democracy', which if understood fully should prevent such an implosion occurring. It is however being usurped and corrupted by various factions, and unless stopped makes the end outcome inevitable.
I would add that I believe 'democracy' is based on fundamental hopes and dreams that individually and collectively our species can rise above our petty emotions and greeds and truly become the best version of us as a species as possible. United and collective while celebrating all our differences. Fraught though that might be, it remains an admirable aspiration.
It's pretty simple - if 'capital' gains are 'made' on the back of nothing done, someone has taken advantage of someone else. Period.
So taxing that 'gain' is a no-brainer.
But the question remains about 'capital gains' per se. They are bets on the future, and the future is physical depletion. So I have asked some Labourites - who appear bemused - what it is exactly, that they're taxing? A yet-to-be-reclaimed betting-stub? And societies ending in collapse can be seen as aligned with resource depletion - particularly energy; that late irruption (exponential hockey-stick) is energised, but the forward bets get bigger too. So the fall is from a height never before gained, and almost no society retains its betting-system - the one the winners so focused their personas on.
While you're here, I have been contemplating scratch-building a Santos-Dumont Demoiselle and R/Cing it. Tricky to fly - AOA means you have to power them into a landing. Anyway, the algorithms threw me up this (must have though it similar): Alina Aerolite - YouTube
Alway smile when I see youngsters with grunt.
The "gain" is only real when it is realised by turning into cash or the basis of borrowing. Until then it is little more than a dream. Taxing a dream is not fair or equitable.
Yes all share investments are a 'bet on the future', as is any 'investment'. But that's the whole point of life. You invested in your future by going off grid. That was your bet. Without a future, what's the point? What was the value of your property when you built is, and did you build it with an appreciation of value in mind? I assume, as you've been there for a long time now, that it has appreciated quite a lot. Should you be paying tax on that change?
Build and fly a full size one! That girl can do it you can too. But I get you; the design, engineering and ultimately being able to fly it in miniature is an interesting challenge. Reynolds numbers can impact the responses too. How long until AI is being put into RC plane boxes and feed back to improve controllability? Probably already in drones for warfare.
The point was that she's 14! I once listened to a Laura Dekker talk - came away with the same respect. There are less of them in the coming generation than there were in ours, but it's good to see.
Miniatures take up less space, give the same aesthetic appeal, take less material to construct.
Well, as you have just done pdk, you can pull any specific that suits your agenda out of any generalisation you like, but it is not the only one that is there is it.
Hard to read that last sentence (in your post I refer to) any other way.
Well then undoubtedly your domestic lifestyle and attributes give you a sense of achievement in which you take quite some pride and you have put quite some effort in towards getting there on your and your family’s initiative. That motivation, that sort of quest in general, I submit is a natural human instinct employed by the vast majority of intelligent and honest humans worldwide to the best of their ability. My point is that no government should deliberately seek to harness or dampen that ability and from the look of it, with the protest as mentioned in this column, coming predominantly from the younger generations starting to set out in their lives, that sheets back to my original post.
personally I would see any government attempt to punitively tamper down the former to supplement the latter as being highly counterproductive individually, societally and nationally.
I find this view of yours intriguing as to how you reached the conclusion Foxy. Post WWII in NZ there was a 66% top tax rate, which didn't dissuade many from seeking higher education and careers in STEM areas, as they wished to achieve and contribute to society. We build large scale infrastructure under this taxation model, social housing, and could afford govt loans to help people into their first house. Objectively this seems to be far more ideal than today.
Since the Post WWII era we have seen the removal of free tertiary education, drastic drop of the 66% top tax rate, selling off of a portion of state assets built under the former tax regime and running down of said assets, we as a nation own less of what we need now and are more so at the mercy of the free market who have every incentive to fleece us daily for profit.
We now have billionnaires in the world, and a wealth distribution that has widened to a point of the breakdown of social cohesion, hence my intrigue into the foundation of your opinion given you have likely lived through this all.
As a young country NZ governments certainly introduced incentives and encouragement for the people to actively progress. For instance up until the 1980s there were tax incentives for value being added to exports to upgrade it from say just basic commodity. As well there was finance such as Kirk’s Labour government established the Rural Bank in part to assist young farmers to establish and enhance their operation. All of that though in the first instance required individuals with skill, energy and initiative, and a lot of what might be deemed as being ultimately successful, started from very small means. Hamilton Jet for example. My point is that with the removal of those additives and supplements you mention and more, it is then entirely counterproductive to signal to anyone starting out to commence, sustain and operate any project that will earn for itself, that the government is at the ready to siphon from the proceedings.
I see your point, however the govt siphons tax already and businesses have ways to minimise tax to some degree at least vs individuals paying PAYE, therefore the argument could be said that striving to start and build a successful business is still relevant, and preferable to being an employee. People already invest in assets and do what they can to avoid tax wherever possible to build wealth. Would it be unfair to tax those with say the top 0.1% of wealth far in excess of what they could ever use in their lifetime? I'm not sure back then that such vast wealth existed in the order of magnitude it does today, case and point multibillionaires.
Oh certainly PAYE is an irresistibly easy access target. To recap where we started our dialogue all those existing subsidies, enhancements and protections etc were swept out by Lange/Douglas, GST introduced then increased, and income tax reduced on the way to a intended flat tax regime only Lange & Co chickened out on that last part of it, and had a cup of tea.Then subsequently Labour governments have raised income tax again and National GST. That indicates to me that for the last forty years or so any real effort to address and improve NZ’s tax structure has simply been left at the bottom of the too hard basket.
Post WW2 there were 8 workers for every 65+, now there are 4 and soon to be 2. In 1950 life expectancy was 69 years. Demographics is destiny.
In broad terms that sums it up. Once upon a time there were only 2.5mill NZrs and a lower ratio of welfare recipients. The doubling and aging of the population has blown that ratio out as you point out. Surely it is then recognisable that signalling to the younger generations coming through that your enterprise is to be a tax target is quite a disincentive to having a go. In a way it emulates ex Finance Minister Michael Cullen - that it is bad enough we keep seeing rungs added to the top of the house price ladder. It is even worse when those rungs are taken from the bottom of the ladder.
As ever - define 'work'.
“What about the workers, indeed sir!” By the way, that was Sellers.
Why should income from investment be taxed differently than income from effort and exertion?
And tax doesn't take all the reward from successfully selling your business. The question is how much should it take? The same as from other income or discounted somehow to reflect the risk?
Australia: "What we are seeing is a classic lesson for anyone designing a tax system. Make it neutral and fair to start with."
Progressive income tax regimes are obviously inherently unfair & based on Marxist envy.
"From each according to his ability, to each according to his needs" K. Marx 1875
Proportional / Flat income tax is fair.
No, if you've been accessing more than your share (population vs resource draw-down vs time), you should contribute more back.
Ultimately, we will end up with egalitarian constructs - nothing else fits long-term maintainability, ex draw-down.
Tax has nothing to do with "fair"....is any tool fair?
Tax has a number of purposes not least of which is to remove excess 'money'....and that requires it to be removed from where the problematic excess exists.
Philosophically I am with you, but the data is kind of interesting. The 1% of the 1%, who own most of the assets worldwide, who have most of the earnings, as a proportion pay less than the “middle class “. Worldwide the system is designed with loopholes for those folks, not for the 99%. Think Google or Apple. Is it deliberate or accidental? There is a view that any taxes paid by those ultra rich is voluntary, because they can arrange their affairs to zero any liability. The butchers hand on the scales every time is my view. So when some ultra rich person says listen to me, perhaps we should say, sure, when you pay your fair share.
You throw that quote in as if it proves your point, but I am not convinced. Your ability to contribute to the tax take does not increase linearly with income. A beggar on the street picking up a $10 note has more need of that money than a high powered executive earning the same by sitting in a meeting for a few minutes.
It is perfectly rational to me that your contribution would grow non-linearly once you are beyond the various thresholds of "enough to survive", and "enough to live a reasonable life". When you are barely making ends meet your ability to contribute to society is extremely small.
When you are barely making ends meet your ability to contribute to society is extremely small.
Only if looking at tax contribution. This never stopped many spending time in the community helping in other, non-monetary, ways.
Yes, agreed. Meaning purely in a monetary tax fashion, not belittling any other contributions to society.
If the government gets too greedy the "high powered executive" will hit the road. See the UK as an example.
"In 2025-26, the top one per cent of income tax payers earned 12.6 per cent of total income and paid 26.6 per cent of income tax. The latter of these is down from 30.7 per cent in 2021-22."
https://taxpayersalliance.com/briefing-the-shifting-burden-of-income-ta…
And if they get too greedy at the lower end those affected will hit the food banks, the streets, or the crime and suicide stats.
There's strength in numbers....
The real problem with DC's comment is that there is a really important question underlying it; 'What is the purpose of the tax system?'
We are being told that we have to be taxed for the government to be able to spend. We know that is BS. Has been since 1971.
DEfining the purpose of the tax system, then creates the basis for how a 'fair and equitable' tax can be levied.
'What is the purpose of the tax system?'
Indeed...we live with the lie that tax funds gov. spending. If we base all of our judgements on that false premise how can we make beneficial decisions?
That stalemate in the Persian Gulf could be broken by the Israelis. Those crazies would have done so already, except the USA has told them no.
But they could yet break the leash.
Fair and equitable are two different beasts.
An equitable tax system, to me, ensures that the lower income earners, say lower 30%, have enough in their pockets after tax to meet basic living costs and that those in the upper 30% bracket pay a higher tax rate. Notionally unfair yet equitable, in my opinion.
That NZ does not have a form of consistent capital gains tax, to my mind, is inequitable. Livestock farmers are subjected to a capital gains tax - as values for core breeding herd/flock (capital stock) change, increases from opening value at end of financial year are taxable, reductions are claimable. I guess it's the same in other businesses with value of opening and closing stock on hand at end of financial year.
Another are of inequitable manipulation that I have observed and formed a perspective on, is in rents and property management, although may be a bit dated now.
What I observed was that when Government increased rent related housing benefits, property managers would increase rents to tenants. Basically that equitably driven transfer policy to the most needy being rapidly siphoned off to the house owner with the property management company pocketing their share. Leaving that target group in the same or worse financial position. Given that property management companies essentially operate on a ticket clipping commission basis (a percentage fee of rents received) there is a very strong motivation to keep rents rising. Not dissimilar to what banks used to do through staff incentives to secure new borrowing - Government stepped in and largely knocked that on the head.
I generally view the current NZ taxation regime as investment neutral (as compared with the 1970s and 80s). The only exception I recognise as still set in that era of 40+ years ago is property investment. Buying a property to rent out is mo different in my mind, than buying a herd or factory plant. The investment is made to generate income. Sell your herd or factory plant, and any capital value gain is taxable. And year on year any increase in capital value is taxable, decrease is claimable to the business.
Extend the capital gains taxation regime that currently operates to capture property, with an exemptionto the family home that the home owner resides in. Then rental property purchase decisions and even farm property, will be made on the same return on investment criteria other businesses operate under.
Your penultimate paragraph hits the nail fair and square. Prior to the mid 1980s all NZ governments considered residential property owned by household occupants distinct in so much that any other form of ownership must be a business. Bank and other lending was structured in a way that encouraged first home buyers in that regard.
"rental property purchase decisions and even farm property, will be made on the same return on investment criteria other businesses operate under."
Except capital gains are driven by factors external to those under control of the purchaser. Imagine for example if you are a young farmer looking to advance up the ladder. Each time you sell, wanting to take another step, you are whacked back by IRD, giving the greasy pole another layer of grease. Great for banks though. More than happy to make up the difference no doubt.
We do actually have a capital gains tax. It just needs to be enforced. If you are trading property you are hit. If you develop property you are hit. The bright line test is enough to pick up those genuinely making money flipping.
Share milking is the dairy industry ladder.
As Lou points out they already pay capital gains tax on their herd. Infact anyone selling capital stock this year will be in for a huge whack.
Yep, and with a universal property CGT, if they want to try struggling up the property ladder, they'll be hit at every step.
Or you could see it as the EROEI 'cost' of maintaining society is climbing
And they are having to shoulder a share of it...
I always ask of those who talk of 'getting ahead' - of what?
That assumes land prices are established on productive value. I don't think that's at all true.
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