Here's our summary of key economic events overnight that affect New Zealand with news of a rising risk mood among investors and that is generally 'helping' commodity producers.
But for us, the overnight dairy auction brought mixed results. Overall prices were up +2.2% in USD terms, but with the fast-rising NZD, they actually slipped -0.5% in local currency terms. It is obvious from the results that demand is highest for foodservice commodities with butter up +4.7%, cheese up +2.9%, and SMP up 2.5%. WMP only rose +1.5% in USD terms. This was the fifth straight auction that has avoided a fall in USD prices. Nothing in today's event will change the forecasts of the new season farmgate milk payout.
US housing starts in September were little-changed from August, but they didn't push on ahead to the extent expected. And building permit levels were also much softer than expected. Behind both trends are supply-chain woes - no builder needs the weight of partially built houses they can't sell.
And speaking of property developers, in China, Evergrande made an interest payment due for some of its local currency debt. But concerns continue to linger about the developer’s huge overall debt load. And foreign holders look like their investment will be worthless.
The OECD has updated its long term global fiscal outlook and found that the world has much larger problems that the recent run up of debt to handle the pandemic. Population aging and the related rising demand for public services pose very large funding problems for governments in the period to 2060. But they also say, taxes don't need to rise so long as reforms to boost employment rates and raise retirement ages are put in place soon. The problem of older people quitting the workplace early, as we have seen in the pandemic, is an especially corrosive trend and we are starting on the back foot. Unless it is addressed and soon, much higher taxes will come into play - or much reduced services.
In the minerals world, the price of copper it touching record highs in spot markets.
Australia's central bank bravely expects their economy to return to growth in Q4-2021 after the Delta outbreak derailed a Q3 recovery which they had also earlier projected. But hedging its bets it still does not expect to raise interest rates until 2024, board minutes showed.
And staying in Australia, Delta cases in Victoria have risen to 1903 cases reported there yesterday, and more than expected. There are now 23,376 active cases in the state and there were six deaths yesterday. In NSW there were another 266 new community cases reported yesterday with 4,490 active locally acquired cases which is lower, but they had another 5 deaths yesterday. Queensland is reporting zero new cases again. The ACT has 17 new cases. Overall in Australia, more than 68% of eligible Aussies are fully vaccinated, plus 17% have now had one shot so far.
The UST 10yr yield opens today up +5 bps to be now at 1.63%. The US 2-10 rate curve is unchanged at +118 bps. Their 1-5 curve is steeper at +107 bps, while their 3m-10 year curve is steeper at +156 bps. The Australian Govt ten year benchmark rate is softer by -1 bp at 1.75%. The China Govt ten year bond is down -3 bps to 3.03%. The New Zealand Govt ten year is essentially holding its new higher level and is now at 2.34%.
Wall Street has opened its Tuesday session with a good +0.7% gain on the S&P500, driven by good corporate earnings reports. In overnight European markets, most were up about +0.3% - except Paris which dipped -0.1%. Yesterday, Tokyo and Shanghai each rose +0.7%. Hong Kong rose double that, up +1.5%. The ASX200 ended its Tuesday session -0.1% lower. But the NZX50 rose a creditable +0.5%.
The price of gold has risen by +US$3 to US$1769/oz.
And oil prices are up strongly, up +US$1.50 at just under US$83/bbl in the US, while the international Brent price is now just under US$85/bbl.
The Kiwi dollar opens today also on the rise and now at just on 71.6 USc and up +½c since this time yesterday. Against the Australian dollar we are now at 95.8 AUc. Against the euro we are up sharply at 61.6 euro cents. That means our TWI-5 starts today at just on 75.1, and now well over the top of the 72-74 range of the past eleven months.
The bitcoin price has risen +2.0% from this time yesterday and is now at US$62,955. Volatility over the past 24 hours has been moderate at just over +/-2.2%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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https://www.odt.co.nz/opinion/hydrogen-not-energy-option-manapouri
This goes with the backward-looking housing announcement yesterday.
Woods - under both hats - is fighting the last war while the next one breaks around her. The real problem is well expressed here:
https://www.resilience.org/stories/2021-10-18/small-farm-future-why-som…
The last thing we need in a reduced-energy-input world, is more intense housing. Sunlit acres per head is the only valid measure; we will be seeing a mass exodus (ex-cities globally) in a direct reversal of the fossil-energised influx of the last 200 years. We can plan for the future, or plan for the past. Woods is stuck (either intellectually, or Overton-mandate-wise) planning for the past. 3 Waters is another.
... we just need one nuclear power plant located near to Orc Land : NZ's energy problem solved for the next 50 years ...
Couple that with the awesome initiative of Woods & Collins ... a shake up of the nimbys around the country ... a sock in the eye to landbankers ... intensification of housing : Whew .... finally ... we got there ...
... two of the nations problems solved , easy peasy : You're welcome !
I'm guessing you mean two+ nuclear power plants? You can never have just one. Shame they need a fuel source that is due to run out in a few decades, or maybe less than a few, if the cheerleaders get their way, ignoring the other downsides of course. It kinda like building a hugely expensive power plant to run on whale oil.
'...If large scale extraction were implemented over thousands of years, that concentration would fall, and more uranium would leach out of the rock. That's a potential 100 trillion tons or enough to satisfy Earth's energy needs for the next billion years ... by which time the human race will probably have moved on.'
https://newatlas.com/nuclear-uranium-seawater-fibers/55033/
'Construction of the experimental thorium reactor in Wuwei, on the outskirts of the Gobi Desert, was due to be completed by the end of August — with trial runs scheduled for this month, according to the government of Gansu province.'
https://www.nature.com/articles/d41586-021-02459-w
Nowhere in the housing debate, and nowhere in any of the blurb around James Shaw going to COP is there any mention of population being a topic of discussion. Until that happens, I can only surmise that they are not yet serious about this. That they still believe that somehow some genius will develop the technology to save the planet and species. But this should have happened decades ago, when instead, the major international fuel companies were actually working to suppress competing technology that would have made them redundant. Economics and greed will destroy us all.
... wow ! ... must be something in the 3 waters ... the lads are gloomy gusses this morning ... the world population growth is tapering off .... birth rates are falling below replacement rates across the globe ... the only thing pushing the population up is longevity ... we're living to greater ages ... nevertheless , death is still a near 100 % certainty , you just have to wait a bit longer ...
You certainly can. Many places have below replacement reproduction rates and some still have growing populations - imagine what happens to population with steady reproduction rates where over a couple of decades you go from an average of 3 generations alive to an average of 4 generations alive. No more births than before, but a ~33% larger population.
We're not all gloomy Gummy - there are still a few doers out there.
'MIT-designed project achieves major advance toward fusion energy
New superconducting magnet breaks magnetic field strength records, paving the way for practical, commercial, carbon-free power.
...Developing the new magnet is seen as the greatest technological hurdle to making that happen; its successful operation now opens the door to demonstrating fusion in a lab on Earth, which has been pursued for decades with limited progress. With the magnet technology now successfully demonstrated, the MIT-CFS collaboration is on track to build the world’s first fusion device that can create and confine a plasma that produces more energy than it consumes. That demonstration device, called SPARC, is targeted for completion in 2025.'
https://news.mit.edu/2021/MIT-CFS-major-advance-toward-fusion-energy-09…
Great read, thanks Profile.
"The successful creation of a power-producing fusion device would be a tremendous scientific achievement, Zuber notes. But that’s not the main point. “None of us are trying to win trophies at this point. We’re trying to keep the planet livable.”
Well, it might be tapering off but not in Kāpiti. A quick off the mark Council announced consultation on this yesterday, stating;
Over the next 30 years will need to build about 14,000 homes to accommodate at least 32,000 more people. To achieve this we have to an approved Growth Strategy, and then update the District Plan.
A 40% increase in population over 30 years!
And curled up in that aspect of longevity is that, while on average life expectancy is increasing, people though, through the pressure and tempo of modern life, are inclining to wear out earlier. Sad to say much of that “extra” life span may well be spent infirm in one way or another. Elderly resident healthcare has been an ever burgeoning cost to the state for quite some time now.
They're out in force today - readers spot the flaws; it's good critical-literacy training (something my better-half happens to know a little about).
First - when emotions are introduced, the argument is clearly too weak to stand on fact(s).
Second - when warning is purposely confused with advocacy (I do the former, not the latter) we can lay the 'too weak' lid on that box, too.
Read your way through Dasgupta yet, Nymad?
https://www.gov.uk/government/publications/final-report-the-economics-o…
And he is only one notch beyond Treasury's 'Wellbeing'; smart cookie but an economists' appraisal of energy. Still, it's a step in the right direction.
They broadly fall into two categories;
One is those who have put a goodly part of their lives into gaining status withing an existing framework. Comes a time when they haven't enough life left to reboot, and often those folk will head for the grave defending whatever they had been/done. Climate denial was strong in that echelon, but it's dying out with time, as did the cry of 'communist' in a prior cohort.
The other is fear-driven. They include a fair proportion of the green/conservationist crowd, most of whom are/were well-incomed; none of us like to relinquish such comfort. That lot also are cranially-capable of realising they're shafting their descendants' resource chances, and naturally avoid such uncomfortable thoughts. Them, one can take to the brink and they recoil, every time. They're the lot who are frantically vanishing down the Woke rabbit-hole, by way of self-justification slash virtue signalling.
A few - a very few (and perhaps this tells us who no Empire has survived) - seem to be able to look ahead pragmatically, just using science (physics, chemistry, biology). My guess is that that echelon never get to be more than 5%, and indeed that societies probably need it that way in 'normal' times; most need to be toilers.
Interesting times.....
You're doing it too - shooting the messenger (by twisting the message).
I said there were few who looked ahead - not that they were smart. Some are, Dasgupta is clearly smarter than me, for instance. It's a matter of not taking baggage into the discussion. Nothing more.
Can align with PDK on this one. Illustrated by another time in another theatre, but Kipling explains how the majority always ends up depending on the minority amongst them that knows what needs to be done, and how to do it.
It’s Tommy this, and Tommy that,
And Tommy, how’s your soul,
But it’s a thin red line of heroes,
When the drums begin to roll.
NYMAD....Do you know anything about PDK's way of life?
Compared to the Auck motorway gridlock followed by being plonked in front of a pc all day it looks far from grim.
Life off the grid: one pioneering family's experience | Otago Daily Times Online News (odt.co.nz)
'off the grid'
"It costs about $30 a month to run the generator."
"cooking is done on a gas hob"
Not very far off the grid. Better to connect and avoid the emissions from that generator, plus driving back and forward to refill the gas and petrol tanks.
And one of them does a daily 86km return commute to work by car. I would hate to see their carbon footprint. Though they offset that with 40 acres of trees. What population can NZ support at 40 acres/family?
Historic article, note.
Generator use these days nil. Travel by bike and bus.
But your comment re 40 acres is dead right - NZ can sustainably support perhaps 2 million. So many people start from the self-justification end (calling it a housing crisis rather than a population crisis).
I have a lifestyle block and run a few sheep and beef as well as growing an inconsistent supply of fruit and veg. I'm not convinced that a return to a form of peasant farming is the solution for the future. Its fun at the weekend, but I need a proper job in a City to pay for it. High density cities using efficient housing and transport solutions are a good idea. The problem with yesterday announcement is that the development is likely to be poorly planned and end up being a right mess.
Wh - try seeing it from an energy POV.
https://www.gov.uk/government/publications/final-report-the-economics-o…
https://radixuk.org/opinion/re-imagining-our-societies-2-energy-prosper…
https://www.interest.co.nz/opinion/112445/murray-grimwood-traces-long-h…
Your 'proper job'...........probably isn't. The energy flow - and the materials/resources we apply that energy to, is the all of it. As is the waste-ejection at the back end.
You will be doing something which allows you a socially-agreed amount of proxy, with which to access that energy/resource stream. That works until it doesn't. Same goes for cities - ex fossil energy no city of over 1 million managed to get enough in, and enough out (besides which they killed off too many, too fast, internally - they need a constant inflow). Cities are just giant heat-engines, in physics terms. As such, they are in post-FF trouble (wittering comments aside). A lifestyle block is probably a good one-family space, the fact that we can't all live that way just reinforces the fact that we are overpopulated.
This: "What if we could build a new world where economic growth and genuine prosperity are possible for all; without the exploitation of people and planet?" fellow?
I rest my case.
Food - and this is like hydrogen production - is an energy equation. You don't 'produce' energy. Fossil energy companies extract, agriculture grows. Both can be sourced to solar energy. Thus the GBH comment (factories) falls flat on its face. It fails the 'where does the energy come from? and where does the feedstock come from? test.
We need to be past this nonsense - as the NH is showing us, time is almost up for our temporarily-energised way of life.
Arable land is already being freed up. Peak farmland was 2001 at 4.88 million ha. Genetic gain and precision ag are freeing up land and people.
https://www.fao.org/faostat/en/#data/RL/visualize
'FAO’s latest information points to a record cereal production of 2 800 million tonnes (including rice in milled terms) in 2021, up 1.1 percent from the outturn in 2020.'
https://www.fao.org/worldfoodsituation/csdb/en/
The first Bitcoin futures ETF began trading on the NYSE over night, and eclipsed half a billion within the first couple of hours. Also Greyscale have applied to convert their Bitcoin trust to a spot ETF.
https://blockworks.co/bitcoin-futures-etf-surpasses-half-a-billion-in-v…
No I’m not a fan personally, but I do think it plays a part in growing institutional adoption and exposure.
Well it depends on what kind of 'institutional adoption' you want. For ex, I see banks custodial services of BTC as positive. Not for me as I've made the conscious decision to be my own bank and take responsibility for my own destiny. The futures ETF looks little more than an opportunity for arbitrage opps for the big boys.
Atlanta Fed Says US Economy Suddenly On Verge Of Contraction
In its latest GDPNow forecast published moments ago, the Atlanta Fed slashed its estimate for real GDP growth in the third quarter of 2021 to just 0.5%, down from 1.2% on October 15, from 6% about two months ago, and down from 14% back in May.
Population aging and the related rising demand for public services pose very large funding problems for governments in the period to 2060. But they [OECD] also say, taxes don't need to rise so long as reforms to boost employment rates and raise retirement ages are put in place soon. The problem of older people quitting the workplace early, as we have seen in the pandemic, is an especially corrosive trend and we are starting on the back foot. Unless it is addressed and soon, much higher taxes will come into play - or much reduced services.
With the working age population declining any increased taxes will be passed straight through to consumers who are predominantly pensioners. There is no more taxing the working man to pay pensions because labour is too tight. Might as well tax pensioners directly and let them choose the level of public service they want.
You'll see a lot of sustained wage inflation generated by the reduction in the working age population over the next three decades. We had the demographic dividend of low rates and cheap labour, now the tide is turning. Technology is not replacing jobs fast enough to meaningfully reduce pressure on businesses to bid up labour and, to be honest, I doubt it ever will.
In the minerals world, the price of copper it touching record highs in spot markets.
For China's part, Afghanistan still has strong development potential and is worthy of investment despite its decades of political turmoil. The country is rich in mineral resources like copper, gold, lithium and rare earths, and it has other natural reserves like oil, natural gas, coal and iron ore.
Moreover, if Afghanistan can rely on minerals mining to overcome its fiscal challenges and get the country's peaceful reconstruction back on track, it will be conducive to the regional stability and serve the interests of China and all its neighboring countries. - Link
Major development in regional security auguring high level of Russia-Iran strategic ties ... Shoigu proposes Syria-like cooperation to fight ISIS in Afghanistan; Moscow ready to maintain 'dynamic & versatile' military cooperation with Iran.. - Link
Agreed - the religious fanatics don't want to see development and wealth (unless it is their own) because that will undermine their own power. Increased wealth in the hands of the population means they will have more time to ponder on the troubles of their society and realise that it is those who took control who actually cause the problem. Afghanistan's problems are far from over.
Des Gorman talking lot of sense, and talking to something that has worried me for a long time - Ardern's obsession with becoming 'world leading' on covid caseload. This obsession is really problematic, it's coming at a lot of cost, social and economic. The Herald today is full of stories of business strain and mental anguish/depression.
Enough is enough.
https://www.nzherald.co.nz/nz/covid-19-delta-outbreak-virus-the-new-nor…
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