Dairy prices flat; IMF downgrades growth; China reveals tariff conditions; Wall Street up on earnings; Brexit deal possible; China debt jumps; UST 10yr yield at 1.76%; oil unchanged and gold down; NZ$1 = 62.8 USc; TWI-5 = 68.2

Dairy prices flat; IMF downgrades growth; China reveals tariff conditions; Wall Street up on earnings; Brexit deal possible; China debt jumps; UST 10yr yield at 1.76%; oil unchanged and gold down; NZ$1 = 62.8 USc; TWI-5 = 68.2

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Here's our summary of key events overnight that affect New Zealand, with news of slowing economic growth and rising debt.

But first up this morning, we can report the results of another dairy auction and again, there was little overall change. Prices were marginally higher in US dollar terms , marginally lower in New Zealand dollar terms. Quantities sold were almost identical to the prior auction. Of note however is that skim milk powder prices rose again, this time by +2.4% and taking them to their highest level in more than four years. SMP is a core ingredient for the global baking industry.

The IMF now says the global economy is growing at its slowest pace since the GFC with overall growth expected to be just +3%, down from its +3.2% forecast three months ago and down from the +3.7% forecast it made at this time last year. It blamed key policy mistakes around trade, tariffs and Brexit, all themselves mistakes from shallow short-term populism. The pullback is driven by slowing advanced economies who overall are expected to grow by just +1.7% in 2019. They see New Zealand growing +2.5% in 2019, the fastest of their "Advanced Asia" group. They slashed the Aussie growth to just +1.7% from +2.7% in 2018. As they say, there is now no room for more policy mistakes, and things will only get worse unless changes in policy direction are made.

On the trade war front, China is now saying more agricultural product purchases from the US depends on the US rolling back tariffs already imposed, not just holding them from going up again. Then it will spend the promised US$50 bln buying.

In the US, Wall Street is up more than +1% as some key corporate earnings reports have come in better than expected.

And on the Brexit front, the EU and England are moving closer to agreeing to a plan for the UK to leave the bloc, with a deal "possible but difficult" by tomorrow. This optimism has seen the English pound rise. It is not clear whether this will require an extension however.

In Canada, their housing market is rising sharply again. The number of home sales in September rose 15% compared with a year ago, as sales in the country's big cities climbed higher.

China's September CPI rose +3.0% year-on-year, boosted by high meat prices (especially pork) and high prices for fruit. Pork prices were up +70%, beef was up +19% and lamb up +15%, eggs up +8%, chicken +6%. Milk however was up only +1.1%. Vegetables were down -11%. TCM was up +5.2% and Western medicine services were up +4.7%.

And China's debt growth turned sharply higher in September. Banks loaned a remarkable +24% more than analysts were expecting, and +40% more than in August. Now that is a true debt binge.

In Australia, Latitude's greedy IPO has been called off.

The UST 10yr yield is up today by +4 bps at 1.76%. Their 2-10 curve is positive at +14 bps. Their negative 1-5 curve is back down to just -5 bps. Their 3m-10yr curve has disappeared, now at 0 bps. The Aussie Govt 10yr is unchanged at 1.04%. The China Govt 10yr is down -1 bp at 3.18%. The NZ Govt 10 yr is now at 1.18%, back down -3 bps since this time yesterday.

Gold is down sharply today, down -US$13 overnight to US$1,479/oz.

US oil prices are little-changed today at just under US$53.50/bbl. The Brent benchmark is just on US$59.50.

The Kiwi dollar is a little softer again today, now at 62.8 USc. On the cross rates we are at 92.9 AUc. Against the euro we are at 57 euro cents. That puts the TWI-5 at just on 68.2. Against the British pound, we are now below 50 UK pence and that is the first time in a year.

Bitcoin is lower at US$8,176 and down -2% overnight. The bitcoin rate is charted in the exchange rate set below.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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21 Comments

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Highlight new comments in the last hr(s).
10
up

Regarding yesterdays article on immigration rates.

As a result I messaged my local Labour MP to express how disappointed I was that they had not honored their election pledge to reduce numbers by 20- 30k. The response I got was "email Lees- Galloway and cc me in".

So a request to Readers and David -

Readers, email Galloway and CC it to your local Labour MP.

David: As the big msm boys are ignoring this, how about Interest put some questions/interview Galloway on your readers behalf?

Links for policy and email address.
https://www.labour.org.nz/immigration

https://www.parliament.nz/en/mps-and-electorates/members-of-parliament/?...

https://www.interest.co.nz/property/102128/country-lost-13577-nz-citizen...

Let them know.

Done, for all the good it will do!

14
up

Since the Chch event, Labour seem to have made a call to go PC and welcome all.

That requires the purposeful ignoring of overpopulation as a global problem, and ultimately as an NZ problem. I doubt we're going to go there - both major parties favour growth, and the easiest way to push it is more people. Other trends will likely overtake this one.

Work visas have increased. But Permanent Residency has dropped from its peak of ~52k to ~34k. This still leaves NZ with an exceptionally high legal immigration per capita but it is a success. Two reasons for it: (a) Nationals increased the salary required for a skilled immigrant to match median salary and (b) Labour have disgracefully reduced numbers by ever increasing delay. Disgraceful because some straight forward cases such as a parent of a NZ child with a NZ partner being excessively delayed (one recent example I know of involved someone having to take time off from work and leave their family while they return to distant country of origin to get a new police certificate - the previous certificate was accepted for 24 months) - the delays are not in the actual processing but the ever increasing period between application and a case officer being assigned. NZ must be missing out on some exceptional immigrants - they will go to other countries.

14
up

IMF calling Brexit and trade decisions "Mistakes"

That's very opinionated of them isnt it... If the people of the UK vote for Brexit or the US vote for Trump, there are reasons for them doing that, there is no mistake, that is democracy!!!

Like it or not but its the will of the people, but it seems that if you don't agree with Globalists, or the new socialist movement in the US, you must be WRONG!!!!

Those that are elected need to ensure that they work for the people that voted them in, instead of their own idealism otherwise the people will vote you out. Labour would do well to remember that.

USA is a Kleptocracy - with Britain not far behind. Be carefull what you vote (wish) for as NZ nearly went down the same path under Johnkey.

We are ALL still going down the same globalised road, because we are signed on to the UN and agenda 21/2030
We no longer have a choice

I would have argued a plutocracy ;-)

Well, the IMF is just gonna haveta take Brecht's sage advice ('The Solution'):
"....the people
Had forfeited the confidence of the government
And could win it back only
By redoubled efforts. Would it not be easier
In that case for the government
To dissolve the people
And elect another?"

Once youre in power, you can pretty much do as you please till next election

There is nothing wrong with saying the majority have made a mistake. I do whenever the majority of the population don't vote like me. If the IMF said it then be an expert body they must provide clear reasons.

They see New Zealand growing +2.5% in 2019, the fastest of their "Advanced Asia" group

Under the current economic setting, one would only expect NZ to grow at this pace as long as population growth keeps up at about 2%. Ironically, this could very well come at the cost of us retaining our "advanced" economy title.

10
up

So we can work out when we will be standing shoulder-to-shoulder, Kaitaia to Bluff, and we can therefore predict when NZ GDP growth ceases permanently.

Excellent. A bank-sponsored nobel prize for economics is in the post.

The IMF now says the global economy is growing at its slowest pace since the GFC with overall growth expected to be just +3%, down from its +3.2% forecast three months ago and down from the +3.7% forecast it made at this time last year. It blamed key policy mistakes around trade, tariffs and Brexit, all themselves mistakes from shallow short-term populism.

For close to 40 years the IMF has weaponized its handle on the western economy through the dollar-based western monetary system, and brutally destroyed nation after nation, thereby killed hundreds of thousands of people. Indirectly, of course, as the IMF would not use traditional guns and bombs, but financial instruments that kill – they kill by famine, by economic strangulation, preventing indispensable medical equipment and medication entering a country, even preventing food from being imported, or being imported at horrendous prices only the rich can pay. Link

The craziest thing is that Winnie has not been saying anything about the immigration no.s coming in!
Both Labour and NZF campaigned on getting the no.s down dramatically and they have failed abysmally, just like the other policies that they campaigned on.
I know in ChCh that we have got more than enough Ola and Uber drivers to last us a lifetime.

Was talking to my uber driver the other day. Came across on skill shortage in a retail manager role - however seemed more a supervisor role. Did that for <2 years, has been ubering for 8 years now.... I don't get it

Audaxes - I've always liked this line:

https://quotes.yourdictionary.com/author/quote/567661

The commentary series from Tuomas Malinen (GNS Economics) is a bit hair-raising. He claims that the Euro-domiciled banks have effectively been insolvent for over a decade, because they 'mark-to-fantasy' rather than 'mark-to-market'. When (not, he avers, if) some of them fall over, they contaminate the world's financial flows and the contagion would be quick and far-reaching.

The serious question is that of cause and causal. You can hardly blame them for extending and pretending - it's all they know, all they have, all they've been taught.

Currently the 'world's financial flows' far exceed the world's commodity flows, essentially there are more bets going on than things to bet on. Sure, some of the betting is zero-sum game, but there has to be a not-underwritten overhang when the music stops. Just who is holding the toxic parcel (unrepayable debt, presumably) at that point is the -$64,000 question.

Answer to Rastus, above. My reply will be the same as yours!

On behalf of Hon Iain Lees-Galloway, Minister of Immigration, Minister for ACC and Minister for Workplace Relations and Safety thank you for your email. Please consider this email as an acknowledgement.
Thank you for taking the time to write and please be assured that your comments will be read by the Minister. However, there may be no further response to you.

Good on you. I I haven't checked (home emails blocked here). If I get that I will hound my local MP - the lower ranked have more skin in the game/ more at risk and more likely to be worried. One could just give up, but at least I feel better... a step more than just posting grumpy posts to each other huh.