Breakfast briefing: Wall Street takes fright again

Labour income dives -11%; US Fed calls for fiscal help; global PMIs hold; Japan, China to relax entry rules; huge Chinese grain imports; new Aussie bankruptcy rules; UST 10y at 0.68%; oil stable and gold dives; NZ$1 = 65.4 USc; TWI-5 = 69.1

24th Sep 20, 7:20am by David Chaston

Here's our summary of key economic events overnight that affect New Zealand, with news American investors have taken fright again.

A new report out overnight says that globally, labour income has fallen almost -11%, or US$3.5 tln, in the first three quarters of 2020, compared with the same period in 2019. But the figure excludes income support provided through government measures. Given the annual world GDP is US$80 tln the hard knock to worker incomes will take nearly -6% off that in 2020 and severely crimp demand.

And the clear resurgence of the pandemic in the US and Europe is telling markets we are a long way from beating the disease with current policies. Wall Street has taken fright again and is down sharply.

And US Fed officials testifying in Congress called for more fiscal support. They said the American economy is in need of more government spending to avoid a pandemic relapse in their economy. That support is unlikely to come from the Congress however.

However overnight there were a series of flash global PMIs released for September and they were generally positive. The US factory PMI expanded at a similar rate to August at 54. Their services PMI is expanding very similarly. But those surveyed aren't especially optimistic it will last.

In Japan, there was little change from August as well but that leaves the September results for both factory and services contracting. However they reported business sentiment appears to be improving.

In the EU, they report a stagnation, but at least it isn't a contraction.

The Australian PMI also reported a stagnation for services (undercut by Victoria) but a good expansion for manufacturing. But they also noted it is a burst that may "lack legs".

In Japan they are about to relax visitor entry rules from early October.

In China, they are also relaxing border rules and about to allow re-entry of people with valid residence visas. They have been excluded for six month as part of their pandemic restrictions.

The size of China's grain shortfall has been revealed in August Customs data released overnight. They brought in more than 1 mln tonnes of corn in the month, up +12% from the previous month and nearly five times higher than the volume recorded in the same month last year. Purchases at this level distort global food prices. And it is likely to extend for a long time yet.

In Australia, new budget rules are about to be unveiled allowing small businesses at risk of collapse to trade while insolvent, in a US style bankruptcy status, to help some of them recover.

In New York, the S&P500 is down more than -2.2% in early afternoon trade and another large retreat. They follow European markets that were generally higher by about +0.6%. Yesterday Shanghai ended its session up +0.2% and Hong Kong was up +0.1%. Tokyo was down just -0.1% which meant it missed the large falls of earlier in the week. The ASX200 ended up a strong +2.4%, and the NZX50 Capital Index ended up +0.8%.

The latest global compilation of COVID-19 data is here. The global tally is 31,714,000 and up +304,000 in one day. Global deaths now exceed 973,000.

Just under a quarter of all reported cases globally are in the US, which is up +54,000 overnight to 7,113,000. The number of active cases are stable at 2,540,000 so they have as many new cases as recoveries and making no progress. Their death total is now just over 206,000 and back rising at +1000 per day.

In Australia, there have now been 26,973 COVID-19 cases reported, and that is only +31 more cases from yesterday. Deaths are up slightly at 859 (+4). Their recovery rate is now just on 90%.

The UST 10yr yield is up +2 bp at 0.68%. Their 2-10 rate curve is up slightly at +55 bps, their 1-5 curve has steeped marginally to +15 bps, while their 3m-10 year curve is also steeper at just on +60 bps. The Australian Govt 10 year yield is down -4 bps at 0.86%. The China Govt 10 year yield is also lower at 3.11% and a small -1 bp dip. And the New Zealand Govt 10 year yield is also down a sharp -4 bp at 0.48% and if that holds will be a record low, beating the mid-May crash.

The price of gold will start today down sharply by a large -US$51 at US$1855/oz. Silver is down a massive -7% overnight.

Oil prices have inched up in a minor way and are now just under US$40/bbl in the US, while the international price is marginally firmer at just on US$42/bbl.

The Kiwi dollar starts today lower again at 65.4 USc and another -1c slip retreat. We are now at a one month low. Against the Australian dollar we are softish at 92.4 AUc. Against the euro we are definitely softer at 56.1 euro cents. That means our TWI-5 has retreated to 69.1.

The bitcoin price is virtually unchanged today from this time yesterday, and at US$10,464. 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 ».

Daily exchange rates

Select chart tabs

Source: RBNZ

Source: CoinDesk

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

113 Comments

by richard1965 | 24th Sep 20, 7:32am 1600889578

It was always known but now is been confirmed that only real economy in NZ is housing economy and the very existence of NZ economy depends on housing price rise. Ponzi has to be supported and continued for the very existence of NZ as a community - economically.

So anyone looking for any softness in housing market should give up hope as reserve bank and government only agenda is to keep the housing ponzi as that only equates to economy in NZ

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12…

Last election many voted Labour for on housing issue but they U turned as now part of 2 million dollar house from 600000 house

May be all those looking to buy house should vote Green Party for he very reason whether you like them or not.

https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12367466

by GV 27 | 24th Sep 20, 7:45am 1600890354

The Green plan is garbage. It targets all wealth, not just housing. Far more targeted options are available for hitting homes at a transaction level (stamp duties) and holding (land taxes). 'All wealth' will capture family homes as well as batches pensions, businesses, Kiwisaver, as well as boats and cars e.g. assets that are not necessarily held as investments, but that may also have inflated 'values' due to loose central monetary policy on an unrealised basis that you may actually have no intention of selling. If your net asset position goes over $1m, you get stung. I can't see that going down well with the Remuera Green voters. Fortunately, they'd have to win over 5% first, which is looking dubious.

by stuart786786 | 24th Sep 20, 8:18am 1600892315

If other major political parties are going in extreme to support and promote ponzi than why not go to another extreme by voting Green.

Two opposites may bring some balance.

Though Green Party is garbage or Labour is garbage or national - Agree with comment that all those looking / hoping for a house should try Green party - though still believe that bubble should burst and reserve bank statement yesterday confirms their worst fear which they are afraid to talk but actions give away.

by donny11 | 24th Sep 20, 8:50am 1600894210

Hate to say it but you are correct. NZ's absurd housing prices are primarily the result of monetary & taxation policies that penalise businesses & incomes while encouraging people to "invest" in housing fueling asset bubbles. A consequence of this is many young New-Zealanders are unable to buy a home unless they are willing to take on an unacceptably high mortgage. Act, National, Labour, NZ first all have policies that support this status quo. The Green party is the only party that has a policy platform that would alter it.

I'm a filthy capitalist but I am young. It is difficult seeing many of my friends struggle with the dilemma of whether to buy a home or start a family. As often you can't do both these days. Maybe they will get my vote.

by stuart786786 | 24th Sep 20, 9:15am 1600895750

Know quite a few business people who have turned devlopers, switched to buying a house than making additional house and selling.

Easy and fast money.

Hope the bubble never burst for many will lose everything.

by Kate | 24th Sep 20, 11:33am 1600904018

If all young voters did that and ate into Labour's vote - it is likely the Greens would have the balance of power (i.e., be the kingmaker) in the same way NZ First did last election. Imagine that.

by labcoat | 24th Sep 20, 3:44pm 1600919054

I doubt two opposite sides will bring balance. Green's tax increases are too broad to specifically affect housing, and their other polices will continue to crimp supply for housing.

by Foxglove. | 24th Sep 20, 8:47am 1600894044

So the Greens poll 6% and they just can’t contain themselves, out roll the envy tax accompanied by threats. This is a harbinger of just how presumptuous the Greens are going to be if Labour needs to be in coalition with them. Robertson has already irrevocably stated Labour’s announced policy will not change. Yet here are the Greens, pent up & rearing up ready to charge out of left field when the gate is opened and demand their own policies take priority. Labour cannot hope to govern like this, they know full well they will not be able to control the Greens, the government will be as chaotic as Bolger’s with NZF.

by Apex Andy | 24th Sep 20, 8:03am 1600891430

We voted labour last time because they said they would lower house prices - they lied - whats the point in voting, greens will probably do the same - all trust in the political system is gone. NZ is an elitist autocracy. True democracy no longer exists in NZ.

by printer8 | 24th Sep 20, 8:25am 1600892744

Apex
"labour . . . . said they would lower house prices - they lied"
Are you sure Labour promised to lower house prices - can you please reference that?

I know that Labour promised KiwiBuild but that is quite different to promising to lowering house prices - find it hard to believe that a political party would promise to legislate the market.

by stuart786786 | 24th Sep 20, 8:26am 1600892760

Labour did go for election in 2017 on housing crisis and CGT.

Created a committee for CGT and ultimately did U turn despite begging for votes on CGT and going against the committee formed.

FBB luckily was introduced initially otherwise would have done U turn on that as well just like CGT.

May be people for their self interest (if politicans can act for vested biased interest than why not citizen) vote for Green as they do not need much but slight boost by few % Will have them in a more powerful posistion though not a fan of Green Party but.....

by printer8 | 24th Sep 20, 8:45am 1600893925

Sturat

Labour did not do a U-Turn on a CGT. As part of the COL NZ first killed it - Jacinda stated her disappointment that she was unable to introduce a CGT on the basis of support as both NZF and National oppossed it.
That is not lying - that is political reality.

Labour introduced a FBB to cool the market. So they were doing what they could through legislation to influence the market. Moves on the OCR and LVR are the domain of RBNZ who by Act are independent of Government.
That is not lying.

Yes, KiwiBuild was a failure and embarrassment.
That was not lying.

by GV 27 | 24th Sep 20, 8:49am 1600894143

"That is not lying - that is political reality."

She ruled it out forever when there was a high chance NZ First would disappear at some stage. That wasn't necessary. NZ First killed it in this term, but Ardern nuked it from orbit to be sure.

by printer8 | 24th Sep 20, 9:02am 1600894937

Gv
Well that is being honest!

by muzled | 24th Sep 20, 9:07am 1600895274

copy and pasted from - https://thedailyblog.co.nz/2020/09/24/going-high-not-low-an-assessment-…

That’s why one of the most effective political statements of the whole evening came in response to John Campbell’s challenge to the Prime Minister over the Capital Gains Tax. “At some point, John,” Jacinda explained, acknowledging Labour’s three failed attempts to sell a CGT to the electorate, “you have to accept that voters don’t agree with you.”

by Foxglove. | 24th Sep 20, 9:18am 1600895922

CGT as the lawyer would say, is now out of time. In reality the revenue would not start arriving in any significance 8 to 10 years, hardly likely then to smooth the current troubled waters.

by waymad | 24th Sep 20, 10:14am 1600899260

Unless, unless....it's based on unrealised (rather than, as the usual chatter assumes, Realised) CG. And then we are in Consultant Heaven, as the current market value of every asset, however defined, has to be reassessed annually, to establish whether or not any CG (or CL...) has occurred, in order to define the current tax base. Lawyers, accountants, valuers, QS, et al would be in That deep trough like flies on poo.....

by Foxglove. | 24th Sep 20, 11:11am 1600902684

Aye and don’t forget the icing proposed courtesy the Greens. Vehicles, boats, artwork, family heirlooms all to be collated,recorded and audited annually on top of what cash is held. A dossier kept on everyone so as to enable accuracy and accountability of said assets. Which means right of entry for the asset police to look and see what might be under the bed. Orwellian architecture at its finest.

by waymad | 24th Sep 20, 11:39am 1600904362

And massive evasion incentive: paintings and jewellery walled up in a void, just like the MSSA oiled up, tarped, and dropped down the offal hole....

by Foxglove. | 24th Sep 20, 11:58am 1600905501

Well I read Papillon so know where to hide the engagement ring. Cover sharp edges first though.

by Pragmatist | 24th Sep 20, 11:19am 1600903145

Houses get revalued every 3 years for RV, so use that valuation for the CGT, and then when its sold make a final smallish payment to make up the difference between the RV guesstimate and the actual realised capital gain. So every three years you get a new RV and the CGT on that increase becomes payable, in three annual amounts to get you to the next RV update. It avoids the lockin effect of 10years of unpaid CGT becoming due if you sell, at most you have 3 years plus the difference between RV and market value.

Of course, if you want CGT on other capital assets then all you said above comes true. Only thing easy to value are listed shares, the value updates itself second by second during trading hours for most.

by Averageman | 24th Sep 20, 12:50pm 1600908613

Just do a land tax like rates. Paid quarterly and unavoidable. Good cashflow for NZ and forces productive activity in our largest area on non productivity....debt speculation on land.

by Foxglove. | 24th Sep 20, 1:37pm 1600911478

True the mechanism is there but local government have exploited rates, as a wealth tax based on the improved value of the property, to the point of extortion. Are you though suggesting that a land tax would be on the land only, ie unimproved value?

by stuart786786 | 24th Sep 20, 10:36am 1600900592

Understand WP opposed but if still believe in it, this was the perfect opportunity to try in this election as Government also needed money but ........so is lying specially going against committee created for the purpose, if not interested than why was the committee created and if did a U turn under WP, what is stopping her now from bringing.

Not to hide under that have promised as everyone knows politicans of all breed keeps promise that suits them or do a U turn with an excuse.

If market was hot in last election, imagine how it must be now so more the reason to bring it back on table but false ego / vested interest will prevent.

Not a big fan of Green Party but to bring some balance will like to see Green in a better position after election and I think even Green has understood the need so are raising their pitch and rightly so.

by Andrewj | 24th Sep 20, 11:47am 1600904869

Money has to come from somewhere, if you take off one person they have less to spend elsewhere, it's the productive sector of the economy that needs a leg up, house bubbles are inclined to self heal.

by Foxglove. | 24th Sep 20, 1:47pm 1600912033

Socialists, such as the Green Party here, would say take it off one person and give it to someone else to spend, that way it is still spent. In a similar vein an experience some time ago with an American couple waiting at the airport. One was a judge the other a tax attorney. They gave their interpretation of socialism as simply taking money from them that they had earned, paid taxes on and saved and giving it to someone who had done none of those things. At the time I was taken back by the over simplification and self righteousness they portrayed. Now though, with what the Greens here have been uttering of late, I see their point.

by Albert2020 | 24th Sep 20, 8:04am 1600891473

It would be great if the younger generation would look at TOP policies. They seem to be the only party that has provided evidence-based policies to address a plethora of issues, housing and inequality being their primary focus.

by youngdumbandbroke | 24th Sep 20, 8:48am 1600894123

Even politicians from other parties are starting to acknowledge the potential in TOP's policies

by Basil brush | 24th Sep 20, 8:12am 1600891966

TOP has the best policy around housing in my opinion. Worth a look if you haven't already.

by rastus1 | 24th Sep 20, 8:44am 1600893854

Got to agree... Anyone houseless or in the younger voting bracket would be crazy not to look at TOP and their policies. Some great stuff.

by muzled | 24th Sep 20, 9:11am 1600895488

I voted TOP last time because of their housing policies but it just seems like a wasted vote now.

But why they don't get the vote of every single renter in the country escapes me.

by rastus1 | 24th Sep 20, 9:52am 1600897963

A wasted vote is the incumbent main parties as they are not doing what we voted for.
TOP needs some momentum, they are gaining amongst the younger voters, perhaps not showing in the polls, but they are building.

by blobbles | 24th Sep 20, 9:33am 1600896789

Honestly, if you are young, tell all your friends. I have been telling many young people about TOP. Most of them thought voting was pointless, now some at least will vote for change.

People all over this site are complaining how neither Labour or National do anything and how the status quo is stuffed. Yet when a party who wants to upend the status quo and actually change things for the better comes along, they don't vote for it. It's tribalism at it's worst. A vote for TOP in many ways a protest vote against the major parties continuing their destructive policies.

by nigelh | 24th Sep 20, 9:08am 1600895290

I actually joined TOP when it was first established because it's economic policy was a breath of fresh air but didn't look at their other policies. When I later found out their kow towing to the Maoris I resigned.

by muzled | 24th Sep 20, 9:42am 1600897339

'the Maori'?

What were they kow towing to the Maori about?

by rastus1 | 24th Sep 20, 9:55am 1600898105

...with an attitude like that, good.

by Kate | 24th Sep 20, 11:42am 1600904550

I hardly think that promoting a policy that would establish a single constitutional document which would recognise/incorporate the three articles of the Treaty of Waitangi (alongside other legislation, such as the NZ Bill of Rights Act) is kow towing to Māori. Doing that is just reflecting/honouring the fact of our history as a nation.

by donny11 | 24th Sep 20, 9:19am 1600895990

I don't think TOP is going to solve anything. With there UBI policy they want to give $13,000 to everyone to all kiwi's. With 5 million New-Zealanders this will cost 65 billion dollars per year. Our GDP is a little over 210 billion. So essentially a third of our national income should be spent on this "welfare for everyone" programme??

by Advisor | 24th Sep 20, 9:42am 1600897356

Your numbers are incorrect - you calculated the $65 billion in NZD and factored the $210 billion size of the economy in USD.

FYI we currently spend $35 billion in direct welfare schemes plus another 10s of billions on subsidising expenses for low income households.
I am not convinced on UBI but is worth looking at if we can save the taxes wasted on administering numerous welfare schemes.

by donny11 | 24th Sep 20, 10:39am 1600900796

I stand corrected with regards to the nominal gdp figure.

by rastus1 | 24th Sep 20, 9:57am 1600898233

More than offset by dumping the enormous cost of running msd and all their handouts, let alone the savings at IR. Have an in-depth read of the policy, you will change your mind.

by lastredact | 24th Sep 20, 10:29am 1600900168

Agree. We could just automate the UBI payments once any citizen turns 18. Just provide your designated account number online and prove it's your account.

by blobbles | 24th Sep 20, 10:04am 1600898680

Look up their policy again. $40 pw per child (there are 1.1m children in NZ), $250 per adult which comes in around $53b. Currently we spend at least $34b on welfare which this would replace and simplify. They will also spread the tax base much wider to capture housing. It also sounds like they want to reform the way the RB works, so they can buy bonds directly from Treasury and cancel their own debt (very MMT like). Hopefully that would drive inflation and start seeing to the household debt problem. Currently the RB will buy bank bonds, basically a massive bank subsidy which we will all pay for - bank bail ins. They are currently looking at spending $100b doing this, which will inevitably rise. That's enough money to give the recently identified 160k children in material hardship $600k each. But instead, it's going to banks.

Really you have to look at all their policy changes as a whole, not just one.

by StuckAtHome | 24th Sep 20, 8:39am 1600893545

How does the Ponzi continue post mid-way through next year when interest rates cannot reduce further, QE is exhausted, and incomes are stagnant? I think a rude awakening is coming in the next couple of years - NZ doesn't produce enough goods & services to maintain the unsustainable lifestyle that people have become accustomed to.

by ham n eggs | 24th Sep 20, 9:30am 1600896630

the WHOLE world doesnt produce enough for the lifestyle they have been accustomed to...
hence the reason for a Debt leverage ponzi to keep consumption growing

We are now massively expanding wealth claims / money based on a diminishing pie
There can only be one outcome

by Foxglove. | 24th Sep 20, 9:43am 1600897399

Someone here some time ago, commented that society can longer afford itself. That does resonate somewhat.

by Becnz | 24th Sep 20, 9:39am 1600897150

Maybe we will soon see a policy update Govt to buy overpriced homes as state homes to keep bubble going nothing suprises me now.

by sit23 | 24th Sep 20, 12:20pm 1600906813

I t might be best if some of you take note of what goes on in New Zealand outside of Auckland. The vast majority of our exports and stuff that actually makes our country it's money is all generated out of Auckland. It's only involvement is clipping the tickets of all those involved.

by Apex Andy | 24th Sep 20, 7:46am 1600890367

Mugabe destroyed his countries financial position by rewarding his rich friends and ruining the poor, isn't that correct Mr Orr?

by bw | 24th Sep 20, 7:56am 1600890961

Yes. But Robert understood what he was doing....

by bjr8 | 24th Sep 20, 8:16am 1600892219

USA is doing the same. The base are two dumb to realize it. Trump and co are taking advantage of the already corrupt system.

by ZOG | 24th Sep 20, 10:07am 1600898820

Forget MAGA, Trump and his master Kushner are all about MIGA, making sure a certain little country in the middle east is great always its a total deception of his voters

by Timmyboy | 24th Sep 20, 8:40am 1600893643

I have a Zimbabwe one hundred trillion dollar note that I bought on Trade Me at the time of his greatest incompetence.

Ironically it cost me NZ$20.

by printer8 | 24th Sep 20, 10:17am 1600899438

Timmyboy
Relist it for $NZ40 - Zimbabwe dollar could prove to be better than Bitcoin.

by Henry_Tull | 24th Sep 20, 7:48am 1600890506

Here is the health & economics of where we are now, and the terrible comparison we are to Australia (excluding Dan - Jobs for mates scheme).

Health wise, cases & mortality we are same or poorer, say same as Oz.
Economically we are a disaster.
Oz spending 9.3% GDP on covid
NZ spending 16.3% GDP on covid

Oz GDP declined Mar -0.3%, June -7.0%
NZ GDP declined Mar -1.6%, June -12.2%
https://youtu.be/qsqYJhDR9nU
Menzies Research & Oliver Hartwich.

Running through the detail.
OH makes point no cost benefit done, no determination of what was safe.

It shows COL in terrible administrative, governance light.
The summary
https://youtu.be/4Ld86BHML5s

by printer8 | 24th Sep 20, 7:58am 1600891096

Henry
Getting a bit desperate there if you are relying on Nick Cater and the "Menzies Research Centre" for your information.

by Henry_Tull | 24th Sep 20, 8:16am 1600892192

Of the numbers, what one/s do you have a problem with. Would suggest some other numbers?

by printer8 | 24th Sep 20, 8:22am 1600892554

Henry
Its not that the selective numbers are necessary wrong - its just that the arguments are based on numbers that are selective.

by Henry_Tull | 24th Sep 20, 8:53am 1600894423

There are 4 numbers.
Cases/ m
Mortality/ m
Covid spend as % GDP
GDP %decline (Mar quater and June quarter).

What numbers would you exclude or include?

by blobbles | 24th Sep 20, 11:16am 1600903003

Just think about it:

"Ignore Victoria because the government screwed up"
"Let's look at how the NZ government screwed up"

Even a simpleton should be able to see that an analysis which completely ignores the worst part of one thing, while taking all of another is not comparing the same thing. Any numbers based of such ludicrous "analysis" should not be believed, nor should this persons conclusions be taken seriously. If I didn't know better I would think this is satire.

by Henry_Tull | 24th Sep 20, 1:04pm 1600909449

The Victorian Government has screwed up.
Not QLD not NSW, not SA not WA not TAS, not ACT, not NT.

The comparison is effect Govt administration of an elimination policy. Comparison of health outcomes and economic cost. (No one is debating the merit of elimination - yet).

Everyone knows that mal administration of border controls impacts health outcomes and $ cost.

And the comparison is interesting, for, for the same health outcomes (exclude VIC) as the competent Aust State Govt, we, NZ is spending 7% more GDP. In dollars cost expense.
And lost more - 1.3% GDP Mar and lost more - 5.0% GDP June.
For equivalent health outcomes.

That is one hell of a set of overheads.
What do I think of GR, - we can't afford him.

by blobbles | 24th Sep 20, 4:53pm 1600923232

You need your head read if you are believing this stuff Henry, I am all for making sure we are doing the right thing regarding COVID control, but listening to this sort of outlandish commentary is preposterous. Let's just conveniently exclude the worst hit area when using numbers. Fine. Then exclude Auckland in the NZ figures and get back to me with your results.

Can't be stuffed? Then you aren't comparing the same thing. You may as well compare the price of ostriches in Uganda with the price of lamb in NZ and base conclusions on the differences between them. It's not useful nor logical to do so.

by Henry_Tull | 24th Sep 20, 11:35am 1600904137

Here Sky News
NZ biggest contraction of GDP ever

https://youtu.be/LJYZnW2wdmw
Discuss unemployment rate, and how Govt job support bans redundancy
Also the tardiness of Govt GDP numbers really slow.

https://www.rnz.co.nz/news/national/426777/hospitality-sector-braces-fo…

Uncertainty, job losses, and business closures are being anticipated for restaurants, bars and cafes with the wage subsidy winding down.

More than 400,000 jobs were being supported by the government's support scheme at the beginning of July.

Now, a month and a half on, that figure has nearly halved, and for one of the most vulnerable sectors - hospitality - there are questions over what's going to happen next.

by blobbles | 24th Sep 20, 10:45am 1600901158

Still spouting nonsense from this misleading ignoramus.

"If I ignore all the bad bits from Australia and only look at the good bits, then look at all of NZ, look how much worse off NZ is!"

Comparing apples and oranges is utterly hopeless. If you listen to idiots without engaging your brain, you will quickly become one.

by Apex Andy | 24th Sep 20, 7:58am 1600891122

The young will be leaving NZ in droves soon. The RBNZ has shown them total contempt. Good luck with house prices when the whole bottom tier of the house of cards has gone.

by Tom Joad | 24th Sep 20, 8:04am 1600891499

... and with zero real return on TDs the retirees are downsizing or selling "investment" properties to fund their retirement.

by bw | 24th Sep 20, 8:20am 1600892425

They sure are!
I know 2 who used to pay their rates and insurance out of their TD returns. No longer.
Now they HAVE to sell because they can no longer pay for the utility costs that before were an annoyance, now they are a financial and mental burden. But the principal will last a while longer until its extinguished, giving them some breathing space I guess.

by printer8 | 24th Sep 20, 8:32am 1600893169

Tom Joad
Due to low TD rates, retirees are "selling investment properties to fund their retirements".
What's your source of information or basis for this assertion?

News for you sunshine - just wishful thinking on your part. Some retirees are cashed up and getting back into property - far better yields.

by BadRobot | 24th Sep 20, 8:53am 1600894406

Swing this 180 - what evidence do you have that this is not happening....... just saying.

by muzled | 24th Sep 20, 9:06am 1600895161

I was on the phone to my boomer parents last night BR, they're thinking of buying another house as their investments have dropped 10% and they think at least they'll get something out of a rental each week and end up with a house even if it all turns to custard.

by printer8 | 24th Sep 20, 9:40am 1600897201

BadRobert
My wife got out of TD last year and into a rental (I posted last year), I made a number of posts over the past three months about being cashed up watching and waiting and posted a week or so ago that I have gone into a rental in shares with my son.
Tony Alexander indicates that this is one likely current driver - and he will have a wide source of anecdotal information to base that comment.
I can't offer supporting verification but . . . .
Out of interest I keep an eye on what is happening in the property market. I meet with a group of investor friends for monthly coffee - all long term investors and retired - and they are holding and now looking to further purchase properties.
I was also recently speaking to a valuer friend and this was his view.

The rationale supports retirees holding their investment properties - what are they to do with the money when cashed up?
As for the suggestion that retirees are selling investment properties to fund their retirement . . . . why would they when in property the yield is far greater?
Tom Joad's comment is simply a wild, baseless and illogical assertion.

by rastus1 | 24th Sep 20, 10:14am 1600899297

...fair enough if you have cash and don't need to gear up. But if you have to borrow, then a completely different risk factor.
Sheep always feel better when they are in a flock heading the same way, they feel safer but can't see the cliff.

by printer8 | 24th Sep 20, 10:27am 1600900053

rastus
You are correct if a retiree wants strong cash flow - which they do need - then they need high equity.
Interestingly, a younger investor (45 is younger) I was talking to was saying how his figures meant that he was leveraging off the mortgage. The mortgage was under 3% and his gross yield was just over 3.5% - making gross 1.5% on the bank's money and over the next year that is likely to get better. He is however also a listener - he is also being prudent and paying down debt.

By the way - I did comment last year when the wife bought her property that she wasn't taking advantage of the low - and now even lower - interest rates. Did consider a couple of properties but wanted that good cash flow.

by Ptolemy | 24th Sep 20, 9:49am 1600897789

I'm not a boomer but do have cash in TDs. I am looking for rentals as the return on term investments is pitiful and I would rather be owning tangible assets when this house of cards collapses. At the open homes (which are crazy ATM) I go to, I would say 50% of the punters are grey hairs. Pretty sure they aren't looking to live in them.

by printer8 | 24th Sep 20, 10:02am 1600898563

Cheers Ptolemy
Agreed that rental yields are not great and rentals require more work, however the returns are currently better than term deposits.
Couple of key factors in rentals
- be prudent (read too many instances in Property Investor magazines where "five properties in two years" as they later crashed)
- forget short term fluctuations in the house market as it is long term and rent income is consistent.
I won't mention the long term tax-free capital gains as that will upset too many posters.

by rastus1 | 24th Sep 20, 10:16am 1600899407

..the massive media campaign is clearly working on you. ....... go for it!

by printer8 | 24th Sep 20, 10:38am 1600900700

rastus
RBNZ HC31 data shows over 25,000 mortgages to buyers in July alone.
Maybe you are seeing the cart before the horse.

by waymad | 24th Sep 20, 10:20am 1600899638

Talked over a beer to the partner of an ex-workmate who has development properties north of Christchurch. Price range for house+plot $395-459K. Main demand is from investors, as the rental returns pencil out in the 5-7% bracket. As Scott Adams notes in 'Loserthink' - if it's legal and profitable, you'll see a Lot of it....

by printer8 | 24th Sep 20, 10:40am 1600900817

waymad
Not surprising
Latest RBNZ mortgage data HC31 (unfortunately currently only up to July) is showing investors - although low in numbers - are now starting to get back into the market post Covid;
April 1403 mortgages to investors, July 4324 mortgages.
Posted at the height of Covid downturn that renewed/increasing investor interest would be an indicator of market upswing. Investors tend to know the market better, are purely in it for financial reasons, and are prepared to back up their view with money.

by iconoclast | 24th Sep 20, 8:08am 1600891701

Where do you think they will go?
Go to Australia? Buy a house and pay Stamp Duty and Land Tax
Genius
Stamp duty on $1m house = $40,000

by Apex Andy | 24th Sep 20, 8:17am 1600892222

1 million dollar house??? Houses are 50% cheaper in most of Oz and are built for human habitation. So much better value plus more well paid job opportunities. People higher up the ponzi need to start worrying (and caring).

by GV 27 | 24th Sep 20, 8:19am 1600892370

$450K Australian 20 minutes from the Sunshine Coast gets you what $1.5m+ gets you at Hobsonville Point, which ends up being over an hour from the CBD in rush hour, with higher wages and lower living costs to boot, as well as more flexible education/upskilling options. Were it not for family, I'd have been gone years ago. It's terrifying what we've managed to normalise on the basis of 'young people are lazy' and other greatest hits of talkback.

by Te Kooti | 24th Sep 20, 11:44am 1600904668

WTF are you going to do 20 minutes drive from the Sunny though??? There are no jobs, wages are low, schools hahahaha I think I'll go to Med school, wait....

by Masher | 24th Sep 20, 8:20am 1600892426

Correct.

Overall the NZ housing market is more expensive, and of shitter quality.

by Just Some Advice | 24th Sep 20, 8:14am 1600892066

The problem is that there is no perfect country. The best thing young people can do is vote in the upcoming election.

by ShoreThing | 24th Sep 20, 8:52am 1600894321

Has any party said anything about the RBNZ's mandate? Suggested any changes to the Policy Targets Agreement? What good is voting going to do? Best thing young people can do is leave this basket case of a country, vote with your feet.

by RickStrauss | 24th Sep 20, 10:09am 1600898995

On important issues, David Runciman makes an important point: governments will first sleepwalk then tightrope walk through them for as long as possible, before action is forced.

The force either comes from time running out (e.g. Muldoon leading NZ to one day from default) or through energy from people - protests, marches, disruption or worse. Young people just voting for TOP is not going to be enough. They may have to get far more angry and energetic to force governments and technocrats to approach things more equitably rather than continuing their wealth transfers from young to old.

by Just Some Advice | 24th Sep 20, 10:34am 1600900489

Hi, Shore, Rick, I wholeheartedly agree. The RBNZ does have an influence, and there has to be some questioning regarding the decisions that they make. However, there is no harm in young people (I'm an older millennial btw) in voting for a party they think best suits them, and the future generations, because as we had seen when Labour introduced the FFB, there was a notable drop in house prices. To ask people to leave their country of residency or birthplace, or comparing apples with oranges like Mr Andy is doing so below is defeatist and would not solve much.

by Henry_Tull | 24th Sep 20, 8:57am 1600894620

Could be.
The breather valve to Australa may contract.
Remember non citizens pay more capital gains than Oz citizens.
Many recent immigrants (last 30 years) may go to the countries of their parents passport.

by Advisor | 24th Sep 20, 9:05am 1600895153

If you're talking about Europe, the region has a long overdue financial crisis approaching and the recent money laundering revelations aren't going to make things any easier while the EU member states battle out over joint fiscal funding.

by Masher | 24th Sep 20, 9:53am 1600898032

You're confusing citizens with tax residency status.

If a NZer moves to Australia and makes a profit on the disposal of an asset they will be treated the same as an Australian from a tax perspective.

by refactornz | 24th Sep 20, 11:33am 1600904039

Unless it's an NZ asset, in which case the NZer is better off than their Australian counterparts.

by Arrival | 24th Sep 20, 9:11am 1600895510

Covid has made leaving relatively difficult for now. Once that passes I suspect the govt will happily make up the shortfall with immigration.

by ngakonui gold | 24th Sep 20, 8:01am 1600891274

HOUSING...............The only game in town.

by Advisor | 24th Sep 20, 9:23am 1600896181

The only upside I can see from skyrocketing house prices is a construction boom bringing us out of recession. There has been a record number take up in construction trades and sign-ups for apprenticeships in July.

If all parties have been voicing their clear intentions over fixing RMA for as long as I can remember, what's the hold up?

https://www.stuff.co.nz/national/politics/300099144/coronavirus-exodus-…
https://www.stuff.co.nz/business/122852866/the-construction-industry-is…

by nigelh | 24th Sep 20, 9:23am 1600896230

That's one of the few things i can compliment Labour on is apprenticeship support. Could have cut the first year university subsidy and ploughed it into trades training. Those who advocate for construction push to save the economy need to define construction more clearly. If its for residential housing dream on with the trades shortage. Here in NP you more or less have to plead to get someone and don't ask for their rate. You'll scare them off. They prefer people who ask to get a job done and sign the "cheque" when presented with the invoice. That's likely to be most people. Indicate that you only require something done in the next one to two months and they forget about you. TOO MUCH WORK.

by Squishy | 24th Sep 20, 8:11am 1600891898

I'm not surprised by the falls in share prices this month. At the end of August markets where 3SD from the long-term trend growth rate, exceed market levels of the .COM bubble. There is still a long way down from here to regress to trend.

by printer8 | 24th Sep 20, 8:56am 1600894609

Squishy
Interesting the three common measures of the US market - NASDAQ, Dow Jones and S&P500 - have all shown falls of between 8% and 11% over the past month from their post-Covid highs.
We now head into October which has traditionally been a nervous time for many superstitious investors.

Donald will not be happy.

by scarfie | 24th Sep 20, 9:07am 1600895251

Just two design rules (of many) I would use in designing a house. Passive solar and natural light from two sides of every room. Passive solar has two key parameters, face the sun with your collector, and thermal mass to store it. 20m2 of collector would be adequate for most of the North Island to provide 100% heating, and cooling in summer if done the right way. Target is to hit the comfort zone of 20-25°C and humidity of 50-70%.

Light has a physiological response. If we don't get good natural light from multiple directions the space is not desireable to habitate. That is to live or work.

We've got the most expensive housing the world but some of the most poorly designed. They are damp in the winter and too hot in the summer, they are simply not fit for the climate.

by waymad | 24th Sep 20, 10:22am 1600899769

And Eaves....

by scarfie | 24th Sep 20, 12:42pm 1600908147

And eaves, yes. Lol. Probably best not rely on council to ensure your home is built to a reasonable standard either :-P Or timber companies to appropriately grade the timber used. Or ... I'd better stop.

by kiwimm | 24th Sep 20, 3:28pm 1600918094

Better to go for certified Passive House over passive solar. This gives a guaranteed outcome of temperatures between 20-25 degrees, managed humidity, minimal overheating and low energy use and extremely low heating load. The modelling will give you all of these values upfront.

by Apex Andy | 24th Sep 20, 9:40am 1600897218

Just to put this into perspective. The young kiwis can pay 600k and live in this persons garden in a tent at the mount? (Almost as far from the mount as you can get) https://www.trademe.co.nz/a/property/residential/sections-for-sale/bay-…

ORR they can get this in one of the nicest spots in North Wales with a guaranteed income. This country is sick. We are destroying our young for greed.

https://www.rightmove.co.uk/property-for-sale/property-89317763.html

ORR this and have 100k left over. Disgraceful.

https://www.rightmove.co.uk/property-for-sale/property-88595825.html

by Becnz | 24th Sep 20, 9:46am 1600897580

Some sucker will payup for the tentsite and create a new record price for the street to keep ponzi going a little longer.

by Alter Ego | 24th Sep 20, 10:00am 1600898447

Only a fool would buy an over priced House in New Zealand.

And most of them did.

Nuf said....on the subject of Houses...they are not worth the money printed...to buy em.

by Andrewj | 24th Sep 20, 10:06am 1600898783

Don't worry Ego, we have a class of bureaucrats in charge, only differentiated from your council bureaucrats by two pay scales , so what the hell could go wrong with them in charge of monetary policy?

by Alter Ego | 24th Sep 20, 10:11am 1600899117

I live in New Zealand for the lifestyle...not the Life Sentence.
I Labour to understand, what and why anyone would vote for stupidity on a National scale....and may Act accordingly....
Vote with my feet if this gets any worse.

by Just Some Advice | 24th Sep 20, 10:36am 1600900611

What a silly comment, there will always be something 'better'.

by Masher | 24th Sep 20, 10:49am 1600901341

The boomer irony. Complains that NZ isnt what it used to be.....sells back yard for half a million.

by alittle | 24th Sep 20, 10:19am 1600899573

Nasdaq down appox 12% from all time high.

Is it a healthy correction or something bigger ?
October is suppose to be bad month for stock market so if it fall further down from here, it may trigger a bigger fall specially panick selling by robinhood traders who for the first time will witness a crash and just like they were pumping when market was going up will run away when see the fall.

Fed and RBBZ signalling new drastic measures and more printing is by itself a bad sign for the economy and in such a situation need one catalyst for the market to fall from the cliff.

With so much of euphoria many forget that we are still in a situation where anything is possible and world is shut down with economy going for a toss and only supported by free and easy supply of money.

Also are forgetting under euphoria that earlier also was predecting that worse will be when wage subsidy and stimulus ends by the end of the year or early next year so still one has to be very cautious as still not out if the woods and many are of the view that worst is yet to come as till now it has been easy ride with wage subsidy and other stimulus for many who may feel the pain, once it ends.

by Alter Ego | 24th Sep 20, 10:24am 1600899848

Do you remember when the saying "I shall be eternally in your debt" meant somewhat different in actual terms.

Flogging both you and your wife to a life of servitude to appease a Bwanker and a low life politician, is not my idea of eternal gratitude.

by Carlos67 | 24th Sep 20, 10:26am 1600899996

Gold takes a huge drive in the race for liquidity. Another big stockmarket crash is coming.

by Henry_Tull | 24th Sep 20, 1:07pm 1600909640

Everyone has seen DR B finally talk about CT in regards PCR testing.

Here is need to know context.
https://youtu.be/HSsTCjbNPF0
Peak Prosperity

And our own Dr Sam.
https://youtu.be/kcONxyAJ8S4