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US deficit now double its prior worst; US consumer expectations retreat; India inflation rising; southern China floods spread; Aussie JobKeeper toxic; UST 10yr yield at 0.64%; oil flat and gold up; NZ$1 = 65.7 USc; TWI-5 = 70.2

US deficit now double its prior worst; US consumer expectations retreat; India inflation rising; southern China floods spread; Aussie JobKeeper toxic; UST 10yr yield at 0.64%; oil flat and gold up; NZ$1 = 65.7 USc; TWI-5 = 70.2

Here's our summary of key economic events overnight that affect New Zealand, with news mismanagement of the pandemic is being compounded by mismanagement of their economy in Washington.

For the US Government, it was another disastrous financial performance in June, recording a -$864 bln deficit for the month (-NZ$1.3 tln). That takes the result for the past 12 months to a deficit just a fraction under -US$3.0 tln, or -13.5% of GDP. It is the worst deficit in recorded history. And it is double the previous peak reached in December 2009 (-10.1% of GDP).

The latest NY Fed survey of consumer expectations shows they are less optimistic about earnings growth, income growth, and job finding expectations compared to the period before the COVID-19 outbreak. But some indicators measuring the outlook for household financial conditions show increases, such as house prices are expected to rise. Expectations for inflation are lower at 2.7% pa.

One place where inflation is rising, and quickly, is India where it is up to over +6% in June.

Also rising and against expectations is the iron ore price, now at over US$106/tonne and near is recent high of a year ago.

In China itself, what is rising sharply are flood waters, especially in southern China.

But elsewhere, normal economic activity is returning and more core data supports the claim. But their new normal is still less than their old normal.

In the UK, it is becoming clear that they won't get the deal they need with the EU over Brexit and that the hardest version of a separation will happen at the end of the year. Preparations are underway for a 'no agreement' split.

In Australia, it is becoming clear that their wage subsidy scheme has become toxic for many firms. The deal was, take the subsidy but don't lay off the employees. However business hasn't returned for many so that they can survive with the old payroll. And now it turns out vacation pay has to accrue during the subsidy period. So firms who couldn't pay before the subsidy are in a bankrupt situation now. The effect will be widespread and fierce. New rolling lockdowns are the last straw for many.

Wall Street is currently up +0.3% (although earlier is had gained as much as +1.2%). Yesterday Shanghai rose +1.8%. Hong Kong gained +0.2%. But the daily winner was clearly Tokyo which was up +2.2%. Overnight European markets had a good night as well, generally up about +1.3%.

The latest compilation of COVID-19 data is here. The global tally is 12,984,800 and that is up +200,000 since this time yesterday. Global deaths reported now exceed 570,000 (+4,000).

A quarter of all reported cases globally are in the US, which is up +55,000 overnight to 3,444,100. US deaths now exceed 138,000. The number of active infections in the US is now up +26,000 to 1,771,200.

In Australia, there have now been 9980 cases reported, another +183 since this time yesterday, and still concentrated in Victoria - although NSW is now having a surge of its own. Their death count is up +1 at 108 and 18 people are now in ICU (+1). Their recovery rate has slipped back further to under 78%. There are now 2103 active cases in Australia (up +142 in a day).

The UST 10yr yield is holding at 0.64%. Their 2-10 curve is stable at +48 bps. Their 1-5 curve is also little-changed at +14 bps, and their 3m-10yr curve holding at just under +53 bps. The Aussie Govt 10yr yield is up marginally to 0.91%. The China Govt 10yr is marginally firmer, up +2 bps at 3.15%. And the NZ Govt 10 yr yield is unchanged at 0.98%.

The gold price is up today, rising by +US$9 and now at US$1,808/oz.

Oil prices are holding unchanged today. They are now just over US$40.50/bbl in the US and the international price is just over US$43/bbl.

But the Kiwi dollar is marginally softer at just over 65.7 USc. We have been following the greenback down so that means on the cross rates we are -½c lower at 94.2 AUc. Against the euro we are down -½c as well at 57.8 euro cents. That means our TWI-5 has fallen to 70.2.

The bitcoin price is +1% firmer at US$9,306. The bitcoin rate is charted in the exchange rate set below.

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I'm just waiting for the USA to implode. It's no longer a matter of years it's more like months now. When you see the IQ of some of them on TV you realise there is no hope.


Yes - and the Aussies may come to regret their choice of leadership too.

I note the 'open the border quickly' brigade hereabouts, have gone strangely silent. Funny old world.


It was only last week that they were saying that the virus is a non event.

Are you agreed the lock down was a good idea now Kezza?

Australia has 2229 ICU beds. 18 are being used. That ratio is repeated worldwide.

Doesn't seem to be in line with recent information out there:

Lol nice one. If I remember correctly and I do. I was all flavors of crazy calling for it on here.
Fraz, last week you stated that the virus was finished. How's that looking now?

Aye, so you did. If I recall we had a couple of Saturday evening lively debates with contrary posters, one of which went over the line on you personally.

Quite a few have stuck the boot into me on this subject, which dosent faze me at all, I give as good as I get. The moderator of all, 'time' is still ticking away telling its story.
The big question is, how have I called it fairly much exactally how it has played out when there are a lot of people out there on some serious money to be experts on this subject that did not see this coming?
Not blowing my own trumpet at all, just wondering why those who call the shots and influence people can not see what is coming when it is absolutely clear.

I'd say normalcy bias and 'vested interests' are your answers.

So no job offers at $200 plus thousand coming then. Bugga.

Lol I was quoting Trump..surprised you did not pick up on that?

I don't listen to anything Trump says. Look at their actions. Those actions if you missed them are add as much money as possible so the ship doesn't sink now and we will try and find a way out of this as time goes on.
Waiting for Trump to talk and then saying he's crazy is like waiting for a duck to quack and then saying, see I told you it can't talk.


I am very quiet on the virus these days. I was a big advocate of early intervention and lockdown to buy us time to prepare, understand the virus, potential treatments and work out better policies. I still stand by that.

Some countries have done some of this but some squandered the opportunity and the issue has become unhelpfully political. We are nowhere near a scientific consensus on any of it, not even within individual countries, let alone globally. We just don't know, we don't have enough to go on and we need to be patient and cautious as the data comes in.

But this week, we've been able to take our kids sailing and kayaking around Kaikoura in glorious winter sun, see dolphins, whales, fur seals, albatross, without needing to socially distance or worry about anything beyond the size of our crayfish order. We are just accepting that the next few years are a complete unknown and choosing to seize every opportunity now, knowing we are one of the only places in the world that can do so currently.

Yes we had the benefit of timely and well argued comment from gnj which too many failed to appreciate. This one today though is the complete answer.

Seconded. Like, I suspect, many privately, I've had it up to the gills with 'scientists' who seem more adept at burnishing their own reputation, than sticking to the hard and unrewarding job of generating hypotheses, always including the null hypothesis, and letting the data - all data, not just the convenient stuff - support or otherwise. There's far too much 'State of Fear' (Michael Crichton's seminal novel), which worms its way into the minds of the impressionable, young and old, and not nearly enough humility, caution, proper understanding and use of statistics. It's the celebrity culture of sports and music, come to science. And we are all the losers from That.....

Australia has proved the folly of lets try to control the virus rather than stamp in out, it is too infectious and has a nasty habit of not showing itself for quite a few days so can be spread from host to host quickly.
one study found a asymptomatic carrier came back from overseas rode the lift to her apartment and self isolated for two weeks but during that lift ride (60 seconds) she left traces which in turn led to the widespread infection of 71 people before it could be halted
another study has found antibodies don't last so you will need a vaccine yearly so that is why pharma companies are pouring 100's millions into developing one as they can see a long steady income stream

@carlos67 , be careful what you wish for .

When the US sneezes , we all get sick .

The US is still the biggest consumer of everything , and if it were to implode as you seem to wish for , we would not be spared in the fallout , nor would China which supplies a huge % of its manufactures in the US .

Consumer, Boatman? Does than not ring alarm bells?

Well I respect alternative views, and maybe this is time for a reset of consumerism as we know it .

The problem is , how do we cope with changes that come with it?

And the poor will be affected the most , which will widen the wealth gap that so many are concerned about

Jacinda is a very tough spot. Hug the poor, keep the economy going??? helicopter money and 'bail ins' on the way.

This morning briefing is a bit top heavy on the DGM. Silver price has been charging and the latest trough to peak (as low as $12 in March to approx $19 now) is looking ominous and increasing at a faster rate than when the price hit $48 / oz in the GFC.

Silver is indeed that very rare commodity.... expectations are that the price of it and other precious metals will explode in value.

Let's Hunt up some profit in silver trading!

No need to pump silver up, it's doing what it always dose in times of trouble. It will double or even tripple the returns on gold. Tripple diget silver in USD is only the start.
Options at present.
1, buy a house.
2, play the stock market.
3, cash sitting in the bank
4, PM's
Only PM's offer stability. The only risk is that the virus somehow disapares.

LOL. I'd suggest

1. plant a veggie garden,
2. knit a few jerseys,
3. preserve some fruit and
4. get to know your neighbours.

Got all that covered.

You will get too a pamphlet gratis, from the Greens, “how to knit your underwear.” Suggest you use pussy willow wool.

Yeah, nah.. That's not Indigenous. It's Matagouri or nothing....

A bit of a "V' shaped recovery in the US$ chart above.

Invest away you will make a killing.

Todd Muller has resigned

Don’t blame him really, it’s not a nice job especially when you know you won’t win (although could have held out for another labour bungle). Time for National to take a risk with a strong personality- not sure who though. Would Collins or Kaye want it? Anyone else with a chance?
Funny thing is that even the 3 minor parties have strong leaders much better than any option National have.


Funny thing about leadership positions. All people see is the nice person getting all the attention, credit and big money. what they don't see is that any good leader also has to be a hard arse with their own people. They have to be scrupulously fair,even handed and hold no favourites. they need to be able to demand performance, and set standards. They need to be able to lead from the front. They cannot be everyone's friend unless they are no ones friend. And any lacking of honesty and integrity, as well as transparency and you are screwed, big time. It's a lot like being a parent really, and most people can't do it.

Give Simon a second chance.

Do we expect Paula to change her mind?

Paula stuck the boot in on the way out the door.

And Muller is gone! Opportunity for Nicky Kaye?


Suspect he realised he could not trust his colleagues. Like David Shearer a nice man, a good man but as the baseball coach famously observed “nice guys always finish last.” National look like a rotten boat with a rotten crew rudderless, and before the wind on a rocky shore.

Amazing what a difference 3 years make. This time 3ish years ago national looked unbeatable and labour had Andrew Little as leader (who was similar in a way to muller; likeable and capable but not a strong personality). Can’t help but wonder what the National party would look like now had Winston chosen differently!

And Labour, that were a dismal mess before the last election.

Not to be confused with Labour that has a leader but no crew. Jacinda's PR spin team is second to none though.
"We are already" and "I will continue to hug people" boom lock down and somehow she had it all under control all along and she comes out looking great. That is not how it actually happened at all.

Muller gone...whos next? Why roll your current leader then quit ...soft.

If I were Luxton I'd be looking for another job; one that isn't anything to do with the National Party!

He could have been good but he's tied up with religion. Tainted goods.

Crusher is surely their only option this close to the election no?

(a) crusher can only be a placeholder, and
(b) she would be torn to shreds over Oravida and Ruakaka and the fuel pipeline

Yes and yes, but who else have they got?

To me she could at least ruffle some feathers between now and election day.

Surely Nikki Kaye wouldn't put her hand up, and Christopher 'man of the people' Luxon, will run a mile.


They just approved the campaign song..Another one bites the Queen..

Next please..sigh

Did ye no' check my link (edit - actually below, but before, definitely before)?

I hope they pay for it this time.

PDK was first mover by 10 minutes if you include time accessing the video

Bishop? Maybe someone like Steven Joyce (can that happen?). Amy Adams? I agree I doubt Kaye wants it. A Comeback for bridges or benefit? They really don’t have many options, kind of has to be crusher assuming she wants it.

No, leader of National has to be a sitting MP, so it rules out Joyce, Key, English, Don Brash (lol) etc.

I can’t remember when Joyce retired, it was after the last election wasn’t it so he must have won a seat. Not sure if that makes a difference.


Nothing would scream "we're failing to adapt to the times" like appointing a tobacco lobbyist the leader of the National Party.

Maybe. Kaye is fresh-faced but that didn't stop Jacinda.

I pick David Seymour waka jumping.

If he was sensible he would move act more to the centre. He alone could probably pick up 15% or even more of the right wing vote and make act relevant again.

Going to go out on a limb and claim the most dysfunctional red or blue party in the last decade.

No that honour was Labour who was in very real danger of despairing altogether before the last election.

Bring back John Key , even if just for a single term .

He was the best Prime Minister I have experienced in my entire lifetime

Helen Clark and John Key in a joint leadership roll to fix the mess.

Key? It doesn't seem like these times are ones which call out for a placeholder PM.


So many economists continue to say that 2021 will be the rebound year. From what I can see it's going to be when the storm is really hitting. Most Governments seem to be kicking the can down the road. When all of this free money support runs out its going to be a bloodbath. So many of these jobs Globally simply won't be coming back.

Only two types saying it's not that bad, 1, the ones that are quietly unloading their stock before the crash. 2, The ones that can't afford it to stop.

I'm beginning to realise the problem is much more complex. Sit23, below says the US will not implode. But I am beginning to see that under MMT what we call QE does not need to stop. But great care needs to be taken as to where those funds go, and what they do. The complexity includes issues such as perpetual growth within a finite system, trade, population employment and so on. In the first place Governments need to create/support industry that will provide employment for the population at a decent income. That industry needs to be able to deliver national resilience in times of crisis, but at the same time trade with other countries is vital to maintaining a world order that ensures opportunity for all. So this is also about balancing resources and the environment against what is needed. The US has a long history of the Government favouring the rich and powerful, so i am not confident they can even see their way through to this issue in a way that will provide a pathway out. So to Sit23's comment will they melt down? I am not so sure. The apocalyptic Hollywood stories like the Hunger Games could easily come closer to reality if those in power don't wake to the fact that they actually serve the people.

"I am beginning to see that under MMT what we call QE does not need to stop"

A Magic MOney Tree indeed.

The financial system is wholly predicated on perpetual growth in the real economy.
Creating extra financial claims doesn’t expand the real economy, but increases claims on a future real economy which is assumed to be bigger than it is today

The point of money has changed over the years and i think it might need to change back to a basic level again. QE should be used to ensure that ordinary people have something to occupy them and give them a decent living. But balancing that against environmental impacts, the consumption of scarce resources is tricky. But we still need to enable people to explore their talents, to develop new technologies that actually allow us to reduce our foot print on the environment. A part of this conversation also need to be population size. I sugget there needs to be a cap - world wide. That will be difficult if not impossible to achieve.


Will need to take care of living affordability if not to provoke great anger and unrest at the same time.

you just cant print your way round overshoot...

the financial system can only direct what is there to divi up ... and if it snaps then the divi up rules change on a dime

M86. Maybe the finicial system will remain. What will have the biggest effect is the lack of trickle down and the body bags to come. The US public will not stand back this time. They had a warm up riots, bigger and uglier to come. Hyperinflation, mass unemployment,
soup kitchens, riots, death, and all the rest coming on live TV soon.
The money isn't falling far from the magic money tree and the average Ken and Barbie won't be happy.
The States needs a war fast to redirect the public's attention away from what is really going on.

As to the war, well the US has just rejected most of China's claims in the South China Sea, aligning itself with a UN resolution from 2016. So it may not be too far off. To Rick's question above - I have doubts about a UBI as a population must be kept occupied, or else bad things happen, so employment is required and that's where the challenge lies. And yes Kezza, making sure that the money goes to where it is needed most is something a lot of Governments will struggle to achieve, because individual MPs mates will be influencing choices as hard as they can. Even now you can see in the debates that most people think/ believe intrinsically that the economic system will go back to the way it was. You can bet there will be pressure on the Government (s) and central bank Governors to ensure this happens, and to some extent we can already see evidence of it. How to change it? For us and the US, we have elections coming up, time to grill the nominees?

If only we could have honesty and choices made for the greater good and not for them to be reelected.

Too right. It might be idealism, but worth aiming for.

2021 is the year of the global insolvency crisis.

USA will not implode. It doesn't work like that. Countries just plod along in default. The incoming government, Republican or Democrat will fiddle the bonds etc and carry on. The 1% will build higher fences and need even more security, there will be more nogo inner city suburbs, but life will go on in some manner. Wait and see.

National to merge with NZ First. Winston chief, Crusher deputy

Lol I had the same thought.

Winston is too old for this gig, even in his current position with NZ First. He would be disastrous if this combination took place. I admit, he and Crusher get on well, in fact she thinks he is / was the best politician in the house.
Lets hope Todd Muller is in good health.

Thay would be the best tag team to stear NZ out of this. Winston on the front, Crusher as the hatchet person implimenting.

Ummm.....I am not that confident or convinced that would be best combination. Too much baggage on both sides. The public wouldn't buy it.

What I don't buy is that Labour will be able to deliver anything of substance.

Talking of Winston Peters, it appears he has gone to ground after committing the biggest gaffe of any politician this year: he appeared on the TV news one evening about 3 weeks ago strongly suggesting (virtually demanding) that NZ open the borders with Australia. The very next day Covid spiked in Victoria and it has now surged again in other locations in Australia. Then a loud silence from Peters until a short news item the other evening saying he was going into hospital for a 'small operation' but said he would be resurfacing in time to participate in electioneering before the election: How convenient !!!!
Peters has been 'found out' big-time.......that he has had to stoop to this level to avoid the inevitable ridicule from his premature NZ/Aust border opening push is revealing, and pathetic.

The agitation for opening the borders and generating a trans-tasman bubble was all driven from this side - here in NZ - I have family in Victoria and NSW - no interest in it from that side

Can we imagine what would have happens if Muller had been PM when Covid19 hit?!

"It has become clear to me that I am not the best person to be Leader of the Opposition and Leader of the New Zealand National Party at this critical time for New Zealand."
And there's the problem, Todd - your colleagues DID think you were up to it and the best fit for the job. If you weren't then second-best is a long way back in the field.


Reading between the lines, Todd had no interest in being the fall guy for this party of crooks and I respect his choice.

I agree.
To those baggers of Muller and I was one of them when he started the leadership, there is no point putting the boot in when the guy is down.
He just wasn't the right material for this leadership role. Thats it.


Does nobody check our recent history? Judith Collins has more baggage than an a camel train. It shows a complete separation from reality to even think she has some sort of chance at the job, and National has any sort of chance with her anywhere near the top. The Nat decisionmakers show their own separation from reality by keeping her and people like her in parliament. And don't get me started on the Nicky and Michelle sisterhood.

The rats will jump ship today
Many to ACT
Some to NZ First
Muller has just provided life support to Winston
Shane Jones will get up

Interesting, lets see what develops today or the next week.

"Last week, my wife Terri was reaching for a coffee cup in the kitchen, and noticed a little piece of paper taped to the corner of the wall, near the ceiling. It read “$100.” Admittedly, it was my doing. I had accidentally left it there for weeks.

It’s an illustration I often use to explain how valuations work. Suppose that the $100 taped in the upper corner of the room will be delivered a decade from today, and you’re deciding how much to pay today for that future piece of paper.

Drop your hand toward the floor. If you pay $19 today for $100 a decade from now, you’ll earn 18% annually on your investment.

Raise your hand a little higher. If you pay $32, you’ll get 12% annually. Raise your hand above chest-level. If you pay $46, you’ll get 8%. Raise your hand to the top of your head. If you pay $67, you’ll get 4%. Now reach above your head. If you pay $82, you’ll get 2%. Jump in the air so your hand is even with the piece of paper. If you pay $100, you’ll get 0%. And if you’re aggressive enough to pay more than $100 today for that future $100 payment, you’ll get a negative return on your investment over the coming decade.

That’s the first rule of valuation. Given any set of future cash flows, the higher the price you pay today, the lower the long-term rate of return you can expect on your investment. Nothing about this relies on mean-reversion. It’s just arithmetic."

Thats scares the daylight out of me because in farming, I think we are paying $120 for that $100 in ten years time, and parts of the industry look like the wheels are about to come off.

The reason the wheels are coming off is due to markets in the EU and USA in recession and massive stock shortages due to capital stock killed in the drought, added to by Council regulation and high cost structures. That was this weeks letter from John Hussman

I talked to a friend in the stock and station industry and they have literally only one client rearing calves from the dairy industry. No one has the confidence to rear calves, this will turn into a crisis.
I don't blame them, im buying one year old bulls at the same price they were worth a year ago, money has been lost. That's on top of all the in calf cows and in lamb ewes killed.
The gov't has dropped the ball on this drought, they should have imported feed and given it to farmers to stop capital stock getting killed, instead the went for votes. I don't blame the gov't ,farm values are high and farmers are seen as rich especially, especially if you have socialist Labour roots, but most families have no intention of ever selling the farm, so values are meaningless.

This is going to come back and bite unless calves get reared, the time to get going is already probably too late, the stock Shortage will shrink margins, profits will be hard to find, but we will be stuck with high costs, Hawkes bay Regional council increased rates by %50 this year by moving rate payments forward six months to September, the worst time for cash flows, that's on top of rate increases.

Hold onto your hats.

"As we’ve been somewhat stunned to note around here, never before had initial claims been greater than 700,000 in any prior week. Never mind the first big shutdown burst I was writing about back at the end of March and early into April. Over the last five weeks, just those five weeks, initial applications have summed to a combined 7.3 million.

That’s more than twice (2.2x) what had been the worst five weeks in modern US economic history (reached on two occasions, once in 2009 and before then in 1982). And its more than double the number of claims filed in the 16 weeks (almost four months) before this damnable mess began.
Two months into “reopening” and the level of labor market destruction continues to be off-the-charts. And that’s not counting the legitimately massive hangover of the previous 43 million who had filed claims.

The further we go on in this situation, the more it cannot be denied that the economy has been harmed beyond the non-economic disruption related to the COVID-mania shutdown. And the more the employment situation (to use the BLS term) is destroyed, the more likely, and the more vicious, second and third order effects will almost certainly be."

Median house prices for New Zealand excluding Auckland increased by double digits with an 11.3% uplift to $540,000, up from $485,000 in June last year and up from $530,000 in May this year.

Additionally, Auckland’s median house prices increased by 9.2% to $928,000 up from $850,000 at the same time last year and up from $904,500 in May this year. This was the second highest median price on record for the City of Sails.
Waikato achieved a record median price in June of $615,000 up from the previous record of $600,000 set last month, thereby marking two consecutive months of record median prices.

Yes, madness aye? Good news: Property and stock prices go up. Bad news: Property and stock prices go up.

Thanks Uncle Adrian!

Its strange that markets continue to be disconnected from economic reality .

We are staring down a barrel ............. facing a crisis and circumstances that almost all of us have ever experienced in our entire lifetime, other than a geriatrics who are so old they have forgotten.

We should be cautious , creating a financial buffer, staying out of unnecessary debt , and just being prepared for the worst ( which hopefully does not come to pass )

Instead people are throwing caution to the wind , and things are just carrying on as normal , house prices UP........... shares UP.

It makes no sense whatsoever

We have cycles but somehow very few remember that. This time is different, they are saying but at the end of the day they will look back and won't be able to figure out how they got it so wrong.

Oh look two bullies in a fight to be the biggest bully.
The US needs a war so the population has something grab their attention and focus on. If they do not have that the public will war on the state.

I can't make sense of it & I've been through a lot since the early 70's. Remember car-less days? Without the money printing we are broke. Someone has to pay. Someone always does. Do we save the businesses & put the govt into hock? Or vise versa? We may be an island nation but we are connected to planet Earth whether we like it or not. When you print money you devalue it, or you push up the prices of the things it buys. I wouldn't be surprised to see consumer inflation kick on followed by a rise (yes rise) in interest rates next year, catching us all out. It's as good a guess as any.

LJM - you and a lot of others. But I think you are too invested in what we have been sold as the operative model of economics. The tip to Stephanie Kelton a couple of weeks ago has provided some clues as to how the model needs to change. She identified that as the sovereign owner of our fiat currency (the NZ dollar) the Government can create as much of it as it needs to fund what is required. Tax is only used to control inflation (too much money in circulation causes excess inflation and vice versa) or manage behaviour. So basically or Government, as id did in the days of the gold standard, manages the total amount of money in circulation. In recent years, I suggest that the Government has abrogated this responsibility of managing the money supply to the trading banks, by allowing them to create credit to fund an out-of-control housing market. The problem with that is as we have discussed before, an imbalanced economy in danger of collapse.

\Hay, there is no mention of announcement that the CCP claim to South China sea is unlawful???


thank you Murray...but no mention in NZ herald an stuff. nor

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