Here's our summary of key economic events overnight that affect New Zealand, with news policy makers no longer seem to fear inflation even as the global economy gears up post-pandemic and commodity shortages loom.
In China, ANZ analysts are pointing out that as much as 40% of the total 'social financing' that supports the expansion of their real economy was in fact borrowers needing more to make interest payments. Given that total social financing rose +13% in 2020 and is slated to rise even further in 2021, their debt-based financing has reached a tricky spot for public policymakers. They can't restrain this 'growth' without undermining loan quality and therefore bank balance sheets and putting their banking sector at risk. They are seeing plenty of room to let this rise by claiming their macro leverage ratio is currently 'stable'. It is certainly something of a global-scale distortion to watch.
In India, they may be getting on top of their pandemic spread and their economy is returning to a more normal state. Vaccination rates are rising fast. But for India, "normal" isn't a helpful term. Consumer confidence isn't high and there remains a lot of industry slack. Inflation, perhaps a localised case of 'stagflation', is embedded and unlikely to go away, meaning their central bank has few opportunities to lower the cost of debt in India. That makes it an expensive place to invest.
India is the world's fifth largest economy with a high nominal growth rate. But that hides an inefficient structure that policymakers are finding it hard to reform. It is making economic progress however, especially if viewed from a longer perspective, and there are many economic stars in their economy. Despite this, it is unlikely Indian growth will help lead the global economy out of its pandemic setbacks. It is more likely to be a beneficiary of others (US, Japan, China) than a driver on its own. It remains an underperformer, and is a long way from emulating the economic success of South Korea or Taiwan or even China. But its sheer size means it gets a seat at the global table of policy makers.
Back in China, trading in iron ore futures shows buyers are failing to drive the price lower, as Beijing wants. Yes, it took a small dip a week ago, but has risen since and although it is not quite back to prior levels it certainly hasn't retreated significantly and remains +85% higher than a year ago and +30% higher than at the start of 2021.
If the US and Japan economies rise in 2021 as anticipated, this could put the squeeze on China. It won't then be the dominant buyer of many key commodities and that will likely raise prices further, itself an inflation-fueling event.
In fact, analysts are now seeing key commodities like copper with huge price upsides. Miners are reluctant to bring on more capacity due to being restrained by regulation, and being burned the last time they did that through an oversupply rush. For them, a better strategy is to ride what they think is a new "supercycle". Similar industry tracks are in place for lithium. If it turns out like that, it will be inflationary - the age of product deflation may be ending.
In the US, the Fed has announced that its looser capital requirements for banks during the pandemic will expire at the end of this month, a signal that they expect the US economy to speed out of its COVID funk. The Fed is different on this side of the pandemic, with no fear of inflation and is an unusual beast to read because of that lack of fear.
We keep an eye on the food security situation in China a lot for its obvious implication for New Zealand's agri-food industries. But we should also note the extended long-term drought conditions in the US, especially in the Western states. This too will have a global impact on food supplies and prices.
In Canada, their recovery is mixed at best. Their retail sales are still shrinking on a month-on-month basis, even if they are up a minor +1.3% above the pre-pandemic level a year ago in February 2020. Those year-on-year gains are shrinking however.
We should also note that Turkey is in a financial crisis again. Inflation is running at a high +18% and their government has burned through most of its reserves trying to keep their currency at their target level while keeping interest rates below the inflation rate. It is not sustainable and their central bank raised its policy rate to 19% a few days ago. That had their autocratic president fuming, so he has fired the central bank chief, replacing him with a professor who favours low interest rates in the interests of 'stability'. The Turkish currency is consequently under very heavy devaluation pressure, now worth 14c and down from 28c five years ago. It is sure to go lower.
The latest UN World Happiness Report for the pandemic-dominated 2020 sees New Zealand unchanged at 9th in the world. Australia slipped one place to 12th. The US improved five places to 14th. The UK slipped one place to 18th. Interestingly, Sweden improved one place to sixth.
The latest global compilation of COVID-19 data is here. The global tally is still rising and at a fast pace, now at 123,008,000 and up +964,000 in two days. Global deaths reported now exceed 2,712,000 and +17,000 in two days. Vaccinations in the world are rising fast however, now up to 410 mln and in the US a third (120.4 mln) have now had this protection (+5.7) and they are achieving a very fast rollout. The number of active cases there fell yesterday to 7,248,000 (-35,000 in two days), resuming the reducing trend and taking the number currently infected down to under 2.2% of their population.
The UST 10yr yield is unchanged from Saturday at just on 1.73% and a rise of +9 bps in a week to a 15 month high. The US 2-10 rate curve is staying steeper at 158 bps. Their 1-5 curve is also a tad steeper at +82 bps, while their 3m-10 year curve is firm at +172 bps. The Australian Govt 10 year yield is up +1 bp at 1.84%. The China Govt 10 year yield is unchanged at 3.27%. And the New Zealand Govt 10 year yield is still at 1.83%.
The price of gold starts today up +US$2 in New York at US$1745/oz.
Oil prices are holding at just under US$61.50/bbl in the US, while the international price is now just under US$64.50/bbl.
The Kiwi dollar opens today at over 71.6 USc and marginally softer. Against the Australian dollar we are holding at 92.6 AUc. Against the euro we are also little-changed at 60.2 euro cents. That means our TWI-5 opens today at 73.8 and slightly lower compared to where it was a week ago.
The bitcoin price will start today at US$57,340 and down -2.6% from this time Saturday. That is also below where it was this time last week. Volatility in the past 24 hours has been high at +/- 3.5%. 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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84 Comments
Is this Jacinda Arden idea of housing affordibality
https://i.stuff.co.nz/life-style/homed/housing-affordability/124581254/…
... you're not being kind ! ... I'm locking you down for that comment : level 3 for you me laddo ... 7 days on level 3 ... we may bring you back to level 2 , if you demonstrate kindness .... oh ... whilst we've got you , got any guns at home we can buy off you ? ... we're paying over the odds for them...
‘Woke up this morning
Closed in on all sides
Nothing doing
I feel resistance
As I open my eyes
Someone's fooling
I've found a way to break
Through this cellophane line
Cause I know what's going on
In my own mind
Am I living in a box
Am I living in a cardboard box
Am I living in a box
Am I living in a cardboard box’
Richard, I have reported your comment.
I read that article, and neither the Government, not the PM, were mentioned, nor blamed. Please try to keep emotive and prejudicial comments out of the discussion? This was always going to be the result of the injection of exponentially-more debt into the system. It is a serious problem, indicative of an even more serious one. We need to not only raise our discussive game, we need to avoid misdirecting blame. Nobody can re-boot 'growth', despite the echelon (including media) who laud its desirability. The attempt to re-boot it is what is having these anomalous outcomes. On the Kerr thread, I posted a link, and my challenge is to you is this: Read it, then come back and re-iterate your statement.
Your definition of "wedged between" is... interesting, to say the least.
Also, there is nothing wrong with being next to a church (and I say that as someone who lives across the road from one): even on Sundays they're quiet neighbours, are empty (or near to it) 6 days a week, and often sit on large sections which work like a quasi-park - the local kids play on the large lawn in front of the church by us, which is great given no-one can afford a backyard these days...
The only downside is people parking on the street on Sundays, but 32 Trebann St looks like it has off street parking.
Perry's Berries are shutting down ... one of our biggest producers of strawberries ... a failure to get pickers from the islands .... we need Wiggles apparently , but not productive horticulture ... expect more pain for producers who require short term or casual workers ... but , regardless of that ... let's be kind , team of 5 million ...
No one should work for $ 16 / hr , the minimum is $ 18.90 ... and , lotsa seasonal workers wish to come here from their Covid-19 free islands ... but , not allowed to ... ironically , they'd be more likely to contact Wu Flu in our MIQ isolation , than bring it with them ...
Back when it was less than 1/3 the size - and that was including wine.
https://www.freshfacts.co.nz/files/new-zealand-horticulture-facts-and-f…
Yup I have a few friends who have almost saved up the housing deposit. Only to see prices sky rocket in the last year & their deposit become inadequate for the houses they were hoping to buy to start there families in. Inflation is not very acceptable in their eyes.
It would be acceptable if interest rates were back up to double digits like the horror times of the 70's and 80's. Imagine only having to save $30k for a deposit, but with term deposit rates at 15% you only really need to save $18k because interest does the rest. Even better than that, you can stop saving at $26k and wait 6 months for interest to do its thing.
That was times of REAL inflation too, when your wages went up by at least inflation every year as well.
Now, even though we might have serious food price inflation, your wages are staying the same or going backwards. Don't worry though, soon we will all be on the minimum wage, the rate at which the government is deciding to put it up.
That period didn't almost send us broke at all.....
You might get interest from your savings, but you probably couldn't afford to have a mortgage because nowadays it would take 200% of your salary to service. Those of us (just) old enough to have seen that period remember it poorly, high mortgage costs, inability to buy from overseas, restrictive foreign exchange rules, carless days, big government, high taxes, massive price inflation (except for the failed wage and price freeze - which wasn't). No thanks
But somehow people did afford their mortgages on a single income with multiple children in their early 20's.
Oh yes, the wage freeze. Wages were going up so quickly (mortgage balances weren't might I add) that the Government needed to initiate a freeze...... the melodrama from that era is really just an ego thing.
But you're right, people today wouldn't be able to afford their mortgage at 20% on current DTI's.
Everyone assumes if we have high inflation that wages are going to rise - but if they do, its going to be offset by the increases in the general price level and the costs of servicing debt. So to me, its a zero sum game. And what about the high unemployment they're seeing in the US...higher inflation, with relatively high unemployment. Do you need higher and higher budget deficits to pay welfare for those being left behind? It doesn't stack up. I think we're witnessing a dying economic system.
Inflation used to be a good thing for debt. A luxury the battlers in the 70's and 80's got to enjoy. Imagine seeing your debt burden erode magically through wage inflation, and then by the time you dispose of the mortgage interest rates are ratcheted down enabling you to enjoy accelerated capital gains to leverage from.
Interesting stat from RBNZ M10 data https://www.rbnz.govt.nz/statistics/m10, put Corelogic's reported sales at 12157 for the December quarter. That would be ( if the number is correct), the lowest quarterly number since 1990. For all that is being said about the housing market, on Corelogic's numbers the year 2020, saw the lowest turnover of housing since their records began falling below 4 percent for the first time . In context in 2003, 9.8 percent of housing stock was sold, or about one in ten.
PSA:
Australia vaccination doses at about 1% of the population. They release live data. 256000.
New Zealand at about .5% as at last released data. Govt not releasing the data regularly. 27000.
Australia still well behind their own target of 4 million by early April. Looking like they might get to 1 million. NZ looking like it will be a long haul.
1000 GP's across Australia are set to begin vaccinations this week ... 6 million doses from CSL in Melbourne ... they have a plan 1a , and a 1b ...
... here in NZ we have a .... aaaaaa ... well , nothing much really ... but at least we are " at the front of the queue " ...
Peace, stability, access to emergency aid when required, access to and contributor to international research and environmental protections, access to and contribution of standards and various forums for sorting out disputes that would otherwise escalate. Oh... and access to medical supplies when we need it.
The first two are the key. If you want to call them "feel good", that's up to you. But if we were in a state of perpetual war or even occasional wars, "everyone for themselves" will mean NZ doesn't last very long and would quickly be gobbled up by a bigger power.
Roger....Even though we have no covid in the community to deal with and one of the lowest number of people to vaccinate I think it is likely we will be the last developed country to fully vaccinate and will even take much longer than most third world countries. In a few months the world will have returned to some sort of normalcy but we will have been left behind with most of our people still unvaccinated.
New Zealand 29 days, 27 000
Hong Kong 23 days 330 000
Malaysia 25 days, 400 000
South Korea 23 days, 677 000
Dominican Republic 33 days, 675 000
Australia 27 days, 253 000
Rwanda 35 days, 330 000
And using per capita measurements (which some claimed we were doing OK by) we are ahead of exactly 4 countries who have been underway for 30 days or more; Iran, Egypt, Venezuela and Trinidad and Tobago. I was asked to give them a chance and wait a month before passing judgement. The month is up and the results are there for all to see.
Commodity prices are rising with copper seen as having ‘huge upside’ but in a seemingly snap decision, policy makers ‘no longer fear inflation’.
Ostriches, head, sand et al?!?!
(Isn’t this the same mob that are always waiting (eternally) for ‘more data’ as the situation is ‘not clear’?)
One for Dr Anne Brady I note that the Lawyers and Conveyancers Disciplinary Tribunal, took the unusual step of an interim suspension of Jesse Seang Ty Nguy at months start. Murky real estate dealings and a colourful past.
https://www.justice.govt.nz/assets/Documents/Decisions/2021-NZLCDT-4-Au…
Streetwise ,you should be very very careful when you describe a post as being racist. The post has nothing to do with racism . Perhaps you should reconsider your own comment.
i refer you to https://thebfd.co.nz/2020/03/03/part-eight-national-labour-party-links-…
It will be interesting to see if the increases in the broad money supply (M2) keep getting absorbed by a falling velocity of money? If the velocity of money starts moving sideways or even increases I can see our country getting hit with an inflation shock. We then get stuck in an inflationary trap. This occurs as "the masses" start to feel fiat is no longer a good store of value & a use it or lose it mentality develops. This exacerbates the problem as because people spend money faster the velocity of money increases further, causing further inflation & further increases in the velocity of money. It becomes a sort of circular, self fulfilling cycle.
In the US, the Fed has announced that its looser capital requirements for banks during the pandemic will expire at the end of this month, a signal that they expect the US economy to speed out of its COVID funk.
Jay Powell’s Bad Cop Routine: Intentionally Pushing Banks Off the SLR ‘Cliff’
And so, we have to ask just how it is that one year later the US economy can be short not just the 10 million or so jobs which still haven’t come back but also the 2 million (conservatively estimated) others that never happened? How can we be, like the thirties, stuck with Chairman Powell, like Chairman Bernanke not long before him, trying to sell the public on yet another “pretty good come-back from the low point?” Link
So, in China, you are saying that "social financing" from CCP State largesse, is now bien largely taken up paying extra interest costs on debt. SO, interest payments are rising and printing is paying for them. This is, in effect, insanity. Interest rates are, therefore, rising in most indebted country there is. But no need to worry, the CCP has it all under control and China is going to sail along regardless.
China was smart enough to recognise the modern iteration of Beads and Blankets as the way to World dominance, just as the Britain and the USA were before it.
They don't care how much 'paper' they have to create (call it debt, call it equity, call it anything you like).
What they do know is that trading paper for real, hard assets; Engineering Companies in Germany; Farms in New Zealand and mines in Chile, is the way to control everyone else. When the next Big Reset comes along, they will have the assets, and the paper-debt will be incidental.
And we, have all been fool enough to do the swap for them.
Didn't we learn anything from our own histories?
("Ah, yes. But those hard assets are here. We can just change ownership by nationalising them!"
I think Argentina said something along those lines to Thatcher)
That has to be the comment of the morning.
And the answer is: No we didn't.
The West de-coupled themselves from physical making, some time ago (although they still do primary industry and tourism, both reliant on the real) but mind-set-wise they made he mistake of thinking of what they do - sitting in front of a screen, often - as 'work'. It wasn't. And ultimately, it isn't fungible with real work, no more than energy is fungible via proxy-trading.
The mention of the importance of large Asian economies to our current and future welfare in David's morning Report brings to mind Mathew Hooton's piece on Nania Mahuta's appointment to Foreign Minister in Saturday's Herald. It is an interesting piece on two levels, one as an expansion on the title and two, on his career. While he correctly points out that NZ foreign policy is a conflicted mess, given that it tries to rely on the U.S. and its partners for security on one hand and on the other an increasingly bellicose and aggressive PRC for income in its various forms. This is not just because of the current confused, "kind" government, but New Zealand's more deeply rooted belief in "New Zealand exceptionalism and that the rest of the world stands in awe of a country "punching above its weight" as the MSM so often reminds us. In an Kiwi atmosphere of hubris and smugness, first David Lange tripped around the world thinking that other countries would fall into line behind our anti- nuclear stance and now our current Prime Mister talks about the countries following her government's ban on oil and gas exploration, our generation's "nuclear free moment "on TV and magazine covers. This is in addition to Labour's faith in the multilateral rules-based system - the WTO, the UNFCCC and the UN itself - just as it is coming apart at the seams. Ah yes, the UN )a place for post political employment); just ask the people of Bosnia, Ruanda, the Congo, and Palestine etc. about putting one's security in its hands.
For me Mahuta's appointment was quite a shock given that our major trading partners are overwhelmingly in Confucian influenced North East Asia where tribal peoples with tattoos are looked down upon, especially when they (increasingly these day), have a tendency to frequently break out in wild often bare arsed dances called hakas typified by prancing, yelling, poking out of tongues, rolling of eyes etc at official functions such as when greeting visiting royalty and heads of state. However, just as in the rest of life our relationships are based in part on the how others see us, and I know from over 30 years in Japan, that you are sized up very quickly by the other party in much the same way as an Englishman (I am the son of one) who forms an opinion on who he/she is dealing with in about 30 seconds, based in part on one's accent and appearance and treats you accordingly.
The people of North East Asia have civilisations going back thousands of years, invented written language and developed literatures and poetic and dramatic art forms of which they are very proud, along with having a great respect for learning and arts and progress based on key technologies and inventions in fields such as metallurgy, chemistry, medicine, irrigation end so on. As my Japanese ex and friends said , after witnessing the Waiting Day celebrations at the New Zealand Embassy in Tokyo.
"What ! You 're presenting yourself as a neolithic tribal people without a written language, no metallurgy, ceramics or other technologies ?" Aah yes, but now we have one with a mono ! In Japan, people with tattoos are not allowed in to public places like hot springs because they are associated with the Yakuza - Japanese organised crime.
In most countries, real countries, foreign policy is not a joke. The foreign ministry ranks alongside and sometimes above treasuries/finance ministries because foreign policy is considered to be so important. And being a basically defenceless (no, we have two infantry battalions and some frigates that sometimes go to sea !) country of five million (The Team of such - with another million overseas) and no real influence on the global economy apart from that for the market for dairy products, we bob around on the swirling currents of the increasingly turbulent international system like a cork and hence need reliable friends and experienced, respected hands on what tiller we have.
... the problem is , they promised so much prior to the 2017 election , because they never dreamed they'd get power gifted to them ...
Delivery on those promises is impossible ... always was gonna be ... reality is catching up fast ... media is beginning to turn on her ... polls are trending down ..
https://ourfiniteworld.com/2021/03/20/headed-for-a-collapsing-debt-bubb…
"I expect that oil prices will rise a bit, but not enough to raise prices to the level producers require. Interest rates will continue to rise as governments around the world attempt more stimulus. With these higher interest rates and higher oil prices, businesses will do less and less well. This will slow the economy enough that debt defaults become a major problem. Within a few months to a year, the worldwide debt bubble will start to collapse, bringing oil prices down by more than 50%. Stock market prices and prices of buildings of all kinds will fall in inflation-adjusted dollars. Many bonds will prove to be worthless. There will be problems with empty shelves in stores and gasoline stations with no products to sell."
"I doubt that the new currencies will be electronic currencies. Keeping the electricity on is a difficult task in economies that increasingly need to rely solely on local resources. Electricity may be out for months at a time after an equipment failure or a storm. Having a currency that depends on electricity alone would be a poor idea."
The Wnderer
"This is ridiculous. By that logic we wouldn't have women in any positions of responsibility for fear of offending certain Middle Eastern countries."
I'm not sure how your comments in response to my post about NZ foreign policy being headed by one woman, Ms Mahuta, can be extrapolated to all woman and Middle East countries as I was referring specifically to one individual and how she/we are are percived, because of cultural reasons are perceived in another, in a very different part of the world and a line of work that I have considerable experience with, namely foreign policy perceptions in North East Asia.
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