Here's our summary of key economic events overnight that affect New Zealand, with news markets are boxing on, pretending the global turmoil won't affect them, and normal is just around the corner.
First however, we should note that the New Zealand dollar is rising against all majors but especially the greenback. It has pushed up to a level we last had in early March, and since the recent pandemic-and-RBNZ-induced low on March 28, is rise of +13%.
And that is sharply affecting export returns. We had another dairy auction overnight and while prices overall were flat from the prior May 19 event, the Kiwi dollar has gained +5.2% since then and that has tipped the auction result down -3.9% in local currency terms.
Within the auction there was also sharp movement. Overall it might have been flat but butter prices fell -4.4% and cheese prices were down -5.3%. That was only balanced by the high-volume WMP price which rose +2.1%. Overall volumes sold were also higher at 22,000 tonnes, a ten percent rise from the same auction a year ago and a +30% rise from the prior auction.
In the rest of the world, American cities are in turmoil over anger about hardline policing tactics, and the President's threats to bring out troops against his own people. The unstable situation has added another dimension to their economic vulnerability. And the US's moral authority to stand up to China's own hardline tactics has now evaporated.
The US Administration has also moved to defend Facebook and Google from foreign 'digital taxes' claiming that their tax-dodging should be protected. It is the backstory for Facebook refusing to call out false political claims on the platform.
US retail sales took another retreat last week, both on a week-on-week basis and on a year-on-year basis. The riots in key cities this week won't turn anything around.
April airfreight trade was the expected disaster. No region was spared.
In China, local government bond issuance has boomed, hitting a new record high in May as they 'invest' to mitigate the impacts of the pandemic slowdown. They issued a record NZ$300 bln in bonds in May (¥1.3 tln), beating the April 2016 previous record.
Iron ore prices are the latest Chinese financial craze. They have surged more than +40% since April and the Chinese authorities are warning traders to act rationally amid a the frenzy.
The Australian central bank held its current policy settings late yesterday but said the economic outlook is highly uncertain and the pandemic will have long-lasting effects on their economy.
Wall Street is up +0.4% in late trade today. That contrasts with the more than +2% rise in Europe overnight, almost +4% in Frankfurt. Ever more stimulus is behind the jump. Yesterday Shanghai was up +0.2% but Hong Kong and Tokyo both ended with healthy gains, exceeding +1.1%. The ASX200 ended up +0.3% and the NZX50 was up +1.4%.
The latest compilation of Covid-19 data is here. The global tally is now 6,325,300 which is rising at a faster pace than recently.
Now, just under 29% of all cases globally are in the US, which is up +23,000 since this time yesterday to 1,820,500. This is a similar rate of increase and the spread isn't abating. US deaths are now exceed 106,000. British deaths have reached 40,000, the world's second highest. Global deaths now exceed 378,000.
In Australia, there have been 7221 cases (+17 since yesterday), 102 deaths (-1) and a recovery rate of just under 92% (unchanged). 26 people are in hospital there (+6) with 4 in ICU (+1). There are now 494 active cases in Australia (+12).
There were zero cases again yesterday in New Zealand, so now only one person is left with it in the whole country. We are now at eleven days with zero new cases.
The UST 10yr yield is up +2 bps today at 0.68%. Their 2-10 curve is unchanged at +51 bps. Their 1-5 curve is also virtually unchanged at +15 bps, and their 3m-10yr curve is unchanged too +56 bps. The Aussie Govt 10yr yield is up +1 bp to 0.92%. The China Govt 10yr is up an unusually strong +6 bps to 2.78%. And the NZ Govt 10 yr yield is also firmer, up +3 bps to 0.86%.
The gold price is lower today, down -US$10 to US$1,726/oz.
Oil prices are rising today. The US crude price is now just over US$36.50/bbl. The Brent price is just under US$39.50/bbl.
The Kiwi dollar has risen solidly overnight again. We are now just on 63.5 USc which is another +½c gain and an eleven week high. On the cross rates we have slipped back to 92.3 AUc. Against the euro we are also firmer too at 56.9 euro cents. That means our TWI-5 is up to just on 68.5.
Bitcoin is virtually unchanged from this time yesterday at US$9,532. But inbetween, it did rise to US$10,269 before traders thought better of it. 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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107 Comments
And as a taste of what might be headed here in our tourism and related sectors...
British Airways has asked thousands of workers to take pay cuts and accept new conditions or face losing their jobs. Employees... have been told they must accept pay cuts of up to 60pc if they want to continue working
Australia has stayed around 500 cases for quite a while now. I disagree with the fact Australia handled it better, if we go to Level 1 next week we have basically 0 restrictions and so should be playing catch-up on the Level 4 lockdown we had vs their permanent level 3 lockdown
A friend of mine who lives in Melbourne was saying that the they are only allowed to visit restaurants as of last weekend with up to 20 guests permitted in the whole restaurant.
He also mentioned that stores such as Bunnings are hit by chronic shortages of most things. Its not uncommon to go into a store and find lots of empty shelves for household items at the moment. Not grocery items, but things like tools, supplies etc.
I really think Australia are going to be stuck for a while at their level.
Great piece of journalism last night – best in a long, long time.
Guyon Espiner on RNZ, first of a series looking ahead. Unlike too many, he allows the three panelists to speak. And speak they do. Clearly. Best comment is from Simon Upton (easily the best brain National ever had) towards the end:
“Our economy is a total subset of our environment” and he goes on to rubbish the examination of GDP in minutiae, as if it matters.
https://www.rnz.co.nz/programmes/post-covid-podcast/story/2018748003/we…
Quite.
"The US Administration has also moved to defend Facebook and Google from foreign 'digital taxes' claiming that their tax-dodging should be protected." The world wide problem of US multi-nationals. Our Government needs to act now to require any multi-national to have a separate business entity established in NZ to do business here and rules around paying taxes on any dividends to parents. It is much more complex than that but this piracy must be stopped.
As I understand it Microsoft New Zealand is already tax headquartered in Bermuda or thereabouts. And this in a country with very high usage of Microsoft products.
Maybe time for a fundamental re-look about the role of companies in society? I.e. when they enjoy the benefits of stable and well-managed society, what should be there contribution to the same? At the moment it seems by enjoying the benefits but absorbing contributing that they are enjoying one while exempting themselves from the other.
There is also the carrot and the stick - the government can decide to move to an alternative operating system, for example Linux, across their fleet of hundreds of thousands of devices. Many governments have already done so. The French police moved to Linux over a decade ago, they saved 50 million Euro in 4 years in licencing fees. Microsoft is privileged to supply their products to our government, if they aren't paying their share in tax that privilege can be revoked.
https://en.wikipedia.org/wiki/List_of_Linux_adopters#Government
Last time I heard this argument about the cost of licensing fees, the counterargument was that the institutions that switched to Linux had to spend a lot more on tech support. Linux has its place, and it's not on the average non-tech savvy govt employee's desktop.
That's a fair argument, but increasingly less valid. Linux today is 100x more accessible than it was a decade ago, I have fewer issues on my Linux desktop than I do on my Windows 10 machine. The key thing is that the nature of work done on the machines is changing - a lot more browser based, online work and less reliance on local applications.
Big-iron Linux (which is what most Gubmints will want to rely upon because of scaleability, business continuity, guaranteed support and development etc) is owned by Oracle and IBM....so much for 'non-big-corporate offerings'......
Financial transactions tax, only needs to be a very low percentage, but it negates the effectiveness of book cooking and repatriation of money. Getting sick to death of the big boys threatening the littler ones and I think I want to separate us from them altogether.
As far as I am aware, parent companies typically issue loans to local subsidiaries sufficient to reduce down their local profits to negligible amounts for tax purposes. The loan repayments go back to a tax haven where a nominal amount of tax is paid. Dividends come from profit and retained earnings, profit would have already been taxed if it existed.
Thin capitalisation rules attempt to deal with debt loading. The problem is intellectual property charges which can strip the income from the country where the product is sold e.g. Starbucks Netherlands charges Starbucks UK an IP charge effectively the same as the profit generated in the UK. The argument the value is the brand and IP which justifies the charge. Transfer pricing is not able to deal with this income strip as often the argument is legitimate.
Those that generate IP income argue they should be treated like every other traded item e.g. no one is calling on Fonterra offices to be set up in China to pay tax to China on all dairy products sold in China.
IMO, in a globalised world, we need to have globalised agreements on things like global corporate taxes. And the threat of economic destruction to companies who don't comply. There simply isn't any other way to force these companies to pay their fair share to the countries they are operating in as they will just keep moving their headquarters to the country that gives them the biggest tax cut. Yes, it would be hard to push through, but surely all countries must see that the current "race to the bottom" is only benefiting the very companies you want to tax, to the detriment of almost every state.
The Posse Comitatus Act 1878 prohibited the US military from participating in civil law enforcement. Somewhere along the way that has obviously been circumvented. As an aside, the existence of that act was a direct contributor to the unfortunate events that unfolded in Tombstone at the OK Corral.
It is the backstory for Facebook refusing to call out false political claims on the platform.
How do we know that this statement itself is not a false claim? I would suggest it should be written as a question, like, "Is this the backstory for Facebook refusing to call out false political claims on the platform?"
Because, quite honestly, the thought went through my mind of withdrawing my little monthly contribution when I read that.
"And the US's moral authority to stand up to China's own hardline tactics has now evaporated." Yeah, nah. Governors standing down police forces to score political points vs China?
"An independent tribunal sitting in London has concluded that the killing of detainees in China for organ transplants is continuing, and victims include imprisoned followers of the Falun Gong movement."
https://www.theguardian.com/world/2019/jun/17/china-is-harvesting-organ…
They have been moving without moral authority for years. As every Empire eventually does.
https://consortiumnews.com/2020/06/01/john-pilger-the-forgotten-coup-ag…
I make 5,303 in AKL at close of business yesterday. Only an increase of about 100 or so over the last two weeks.
record_date | sale | rent
-------------+-------+------
2020-05-20 | 10505 | 5180
2020-05-21 | 10579 | 5199
2020-05-22 | 10581 | 5213
2020-05-23 | 10583 | 5246
2020-05-24 | 10594 | 5250
2020-05-25 | 10575 | 5246
2020-05-26 | 10597 | 5266
2020-05-27 | 10618 | 5260
2020-05-28 | 10603 | 5291
2020-05-29 | 10604 | 5282
2020-05-30 | 10588 | 5280
2020-05-31 | 10576 | 5284
2020-06-01 | 10558 | 5249
2020-06-02 | 10511 | 5303
Trademe has an API endpoint that returns the numbers you see in the dropdown boxes when you are filtering by district or suburb. Below is an example that will return a JSON object listing the sales counts of all districts in Region 1 (Auckland). You can replace 'sale' with 'rent' in this URL and it will give you the rental counts. You can replace '1' with any number between 1 and 16 to get different region counts. You can replace propertyRegionId with propertyDistrictId and the number 1 with the numbers returned by the region JSON (for the example below, 'Auckland City' district has a value of 7) to get the suburb level values.
https://www.trademe.co.nz/API/Ajax/HomepageSearches.aspx?propertySearch…
I don't have live rental quotes from Trademe yet, but MBIE reports on historical average rents from bond lodgements, Tenancy services reports on current rents by suburb and property type, and trademe half-heartedly reports on their own "Rental Price Index":
https://www.mbie.govt.nz/building-and-energy/tenancy-and-housing/rental…
https://www.tenancy.govt.nz/rent-bond-and-bills/market-rent/
https://property.trademe.co.nz/market-insights/?tag=Rental+Price+Index
https://kunstler.com/clusterfuck-nation/that-change-you-requested/
"The great big secret behind all that is not that capitalism failed; it’s that the capital in capitalism isn’t really there anymore, at least not in the amounts that mere appearances like stock valuations suggest. We squandered it, and now our institutions are straining mightily to pretend that “printing” money is the same as capital. (It’s just more debt.) Note, the stock markets are up this morning at the open! Go figure…."
IO, what is your bee in you bonnet about people owning houses?
What is so wrong with people renting out houses to people that require a roof over their heads when they don’t want to own?
As professional landlords we are extremely productive, pay tax on every single property, pay out thousands in repairs and updates on every single property.
Your point on people being on welfare is far more poignant!
You are not productive, you're parasitic.
Those houses would exist without you - and the occupants would have paid less via not having your competing bid. They would also have carried out the same repairs and updates. Given that your tax-paying is 100% funded by your tenant, there is no reason why they shoudn't shoulder it instead. They'd still be better off by not having to subsidise you.
I don't agree with that. When we were a FHB back in 2010, Landlords did not feature. In my experience they were not competing with FHB, they were looking a rung or two higher on the so-called "Ladder".
Main groups we were against were.
1. Developers/Builders.
2. Immigrants on working visas.
3. FHB with backing from the Bank of Mum and Dad
4. Regular old FHB.
If a developer was interested, their starting bid was usually 20%+ more than RV. This was usually enough, although every now and then someone would take them on, in which case it wasn't unusual to see a house go for 30-40% more than RV. Usually the developer still won and 12-18 months later, you would see 2-3 brand new listings at the same address all with asking prices higher than the original property.
In comparison. If a developer wasn't interested, you were getting it for between RV and RV+10%.
The aged care, health care, and hospitality sectors are not frontier businesses that will obtain growth-spurt or lift-off from technology. In fact in NZ they would be mature businesses. There are 7 Health Care residential (property) entities contained in the component list of the NZX50
An examination of the financials of Ryman Health Care reveals a company that has assets of $2 billion, earns $227 million from "underlying profit" plus $102 million from revaluations of unrealised retirement-village units. It makes new sales of 414 sales of occupation rights plus re-sales 824 occupation rights. Doesn't say whether the occupation rights are volumes or $ dollars. Do they pay GST on the sale of rights?
They are in the tax-free "Capital Gains" property business
Over the last 6 years they have paid zero tax on $1.8 billion
That's where the money is going
In the real world. My daughter sold all our chickens and replaced them with better looking ones, we have gone from 8-10 eggs a day to none. This morning I had to just have bacon without eggs, even the Lab looked put out, although if you leave the door of the hen house open she sneaks in and steals eggs, her coat is lovely and shiny, took a while for us to figure where the eggs were going.
Fall is beautiful, colours are fantastic after 29 mm of rain, still short of feed and a little way till end of winter. Perhaps I need a proper job?
The oats are up about 100mm, and just need a few weeks, the italian rye amongst them is doing well too. It easy in this weather to get a bit ahead of ourselves, winter is still to come. I have never had oats this short in June before,I have seen them grow really well behind a wire while break feeding. It was really warm yesterday, 20 degrees and no frost last night. Grass is short and watery so won't last long if i put sheep in the paddock or get a run of frosts.
If I stocked up now I would be out of feed by the end of July with no hay available, I'm forced to sit out of the market, but no one knows what this market is going to do anyway, it could be a blood bath in spring or better than you think. This drought has really hurt ,don't know how banks are feeling I suppose we find out in 6 months.
Stock Market Disconnect.
Panedemic, Death, Economy Crushed, Unemployment level high and rising, businesses closing down and now riots in major cities STILL stock market Rising in direction to touch New Highs....
If the heart stops and the person is still kicking = Something is terribly wrong somewhere.
I am trying to figure out what to buy for the farm and the markets are just a big unknown. My friends are just stopping spending and I have joined them. These are dangerous times uncertainty is not a good thing when you are buying expensive stock or worse stock thats looks cheap but isn't.
https://www.beefcentral.com/trade/global-beef-production-outlook-revise…
Severe land-falling hurricanes have actually been pretty rare in recent years, and long term trend is down if anything: https://journals.ametsoc.org/doi/pdf/10.1175/BAMS-D-17-0184.1
USA is an interesting place, I always respect police in USA and I'm a white dude. Driving in Pa when young and pulled over by a State trooper for going a little fast, trust me you should be super super polite, no fast hand movements, those guys mean business. I tell my children that when you get pulled over by police the first thing you need to pass is the attitude test.
In Ca my friend wanted to drive our car, (it was a manual) 4 miles later we get pulled over ,Dennis an African American gives the cop attitude, I'm like what the heck ,shut up, be nice.
In Ca the Highway patrol were really good guys, I found almost all the police were great to deal with, I get a few traffic enforcements, it's never my fault though. The police I was careful around were city police, thats because my mate is in the DEA, he doesn't trust city police so neither did I.
John Ward on the problems in USA
https://hat4uk.wordpress.com/2020/06/02/george-floyd-looters-power-resp…
A lot of cops in the US also default to drawing their gun at the start of any interaction. I had a mate jump the turnstiles in the NY subway (to avoid paying) and a nearby cop drew his gun on him and made him go back and pay. Another time in Texas we pulled into the high occupancy vehicle lane, effectively crossing a solid white line, and were pulled over. Cop had his gun out before approaching the car. It's pretty scary stuff for a kiwi boy, you don't ever see that here.
40 years ago in the states I was told the cops react that way because of the number of traffic cops shot without warning. From memory don't do asI would in the UK which is get out of car, take out wallet and show driving license - stay put in seat, open window when asked, keep hands in sight.
I prefer countries with unarmed police. In France trains were full of squads of heavily armed police; made me nervous.
We lived in woodland NJ in a crescent. We each had identical SUVs. We spoke with funny accents. We finally set off the security alarm. Within two minutes two patrol cars, one from each end of the crescent. Looked at the SUVs, looked at us, listened to us and then they just drove off as soon they had been able to stop laughing. Made their day I suppose.
I had kiwi friends driving in Colorado, got pulled over by police guns out, they took the piss, the police didn't know how to handle it, ended up face down on the ground, turns out car similar was in armed robbery, mates were still taking the piss while on ground. In end all had a good laugh about it, I wouldn't recommend it.
A mate and I were driving across Canada and got pulled for speeding by two really hot police women. They said you guys were over the limit. No worries write the ticket out. What are you ladies upto after your shift, we have a day spare day if you want to go out this evening. A bit more banter with them to and fro, at the end they said, just get in your car and keep driving and stay under the limit this time. Bloody funny.
Was in San Fran a few years back and friends there were telling us of a Subway cop who, along with partner had been subduing a person on a platform, had them on their face on the ground, and intending to torture them into compliance pulled their taser and shot them, only accidentally pulled their gun instead and killed them. US cops are worst in the western world.
Tasers are typically holstered on the chest or opposite side of the body from the pistol to prevent this kind of "accident". A pistol is significantly heavier than a taser, has a different holster clip and a different trigger mechanism. A pistol needs to have it's safety turned off and a round chambered before it can be fired. There is basically no way you can mistake a pistol for a taser, regardless of how poorly you are trained.
Discussion last night - a lady in business in a small rural town went to the bank to deposit her cash takings. The bank tellers refused to take it and referred her to the ATM outside The machine would only take 50 notes at a time (or on any one day). She had $2500 to deposit. Which makes you wonder what the drug gangs with $500,000 in plastic wrapped bundles of cash are going to do? They cant deposit the stuff. They can no longer buy houses with the stuff. They can't buy flash motor vehicles or gold-plated motorcycles valued at over $9,999 unless they do it in a series of payments. Is the game up? Is this the death-knell of the cannabis referendum
No one walks into a bank with a couple hundred thousand of drug money and asks to deposit it unless they've got rocks in their head. They move it through legitimate or semi-legitimate businesses, who then deposit it with their regular takings at the bank. AML limits of 10k don't really do anything there, because the cash came from business customers.
It's not the legitimacy of the business. It's the limitation on the amount of cash the ATM will take. Inside the bank wont take it. Went to a cafe the other-day for a $5 coffee. They wouldn't accept cash. Only EFTPOS. That cafe doesnt do any cash banking. Not many businesses deal in big-cash any more.
Amusing reading all you white folks and your funny run in with cops in the USA.
Now imagine being hassled every week - just because you have more melanin in your skin than they do? Pulled over for car fresher on your dash or driving too slowly (speed limit) or just looking suspicious. And each time wondering if you were going to be arrested or shot....
oh yeah, on the other hand I wouldn't want to be a cop on the beat in Baltimore, poor parts of town are dangerous. Around us it was Latinos in lowered cars with tats on their necks, hell yes ,you going to get pulled over, and they can be dangerous people so cops are on edge.
Lots of down and out white folk robbing and causing trouble too, USA lost too many jobs from 2000 to 2008, it was almost 8 million. I hardly ever get pulled over but with Dennis driving it's a dead cert, he's an intellectual kind of guy, with a German mother and a decent job.
We got pulled over by the border patrol, heavily armed they were too, on a trip near to El Paso. We were in a rental with Tennessee plates. Then there was our accents of course on top of that. No problems, good guys, seeing as we were on the way to Tombstone, give us a run down on all the local folklore round those parts, cowboy history. You can sense them relax if you just stay still, passive and polite in the first moment of two.
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