Here's our summary of key economic events overnight that affect New Zealand with news two of the four world's largest economies are back in recession or are nearly.
But first up today, there was another dairy auction overnight and prices in US dollars were virtually unchanged (-0.2%). But in New Zealand dollars they dipped -1.7% as the NZ dollar has appreciated by +1.0% in the past two weeks. This is the fourth consecutive event where prices have stayed virtually unchanged, so in effect it embeds in the big rise we got at the beginning of March. Prices are now up +25% from the start of 2021, and up +42% from this time last year. It seems unlikely today's event will undermine any farmgate milk payout price forecast. Volumes sold were +26% higher than at the equivalent event a year ago. This is the season low for product offerings and they will rise from here. And today's auction offered the most at this low season point than at any time in the past eight years.
US housing starts fell quite sharply in April and more than expected, continuing an unusual volatile start to 2021. But building permit levels remained high so the building start miss is unlikely to be a trend. More likely, timber shortages and other supply-chain issues are behind this miss.
The latest weekly US retail sales indicators suggest firm activity. But that is only a full recovery rather than a material gain as levels are now only +3.5% above 2019 equivalent levels.
In China, the massive infrastructure push over the past ten years, one that was financed by more debt, finds that more than US$2 tln of that will fall due over the next 30 months. That wall of maturities is starting to unnerve the debt holders and those who are foreign are quietly trying to offload it. It isn't going to be pretty for global bond markets generally given how much is involved. China already has a big issue with its state-owned Huarong 'bad bank', one set up to manage a debt disaster from an earlier era.
A new report on private wealth in China jointly released by China Merchants Bank and global consultancy Bain & Company highlights the huge volume of investable assets held by the country’s rapidly growing population of high net worth individuals. China has 2.6 mln people with investable assets exceeding NZ$2 mln (and these are considered high net worth investors). They are a key part of the NZ$50 tln of all of China's households. (US households have NZ$180 tln in personal net wealth.)
Japan’s economy stalled in the March quarter, shrinking more than analysts expected. GDP shrank an annualised -5.1% from the prior quarter in the three months through March, ending a two-quarter streak of double-digit growth. Economists had forecast an overall contraction of -4.5%. Growing pandemic restrictions are hitting their economic life hard, raising the risk of a double-dip recession if the country cannot bring these lock downs to a swift end.
The EU also reported March quarter GDP data, and that also retreated, down by an annualised -1.8%. This is the second quarter of shrinkage so the EU is back in recession, a double-dip they just don't need but imposed because they can't get on top of the pandemic properly.
There are small shifts in the trade deal negotiations currently underway. China is making more efforts to join the TPP just as the UK is doing the same. Given that the TPP was set up to counter China, it seems unlikely that the Chinese charm offensive on this will move very quickly. The UK is trying to get bilateral deals going with New Zealand and Australia. But British farming groups are recoiling in horror at the prospect - and freer trade on agriculture is the only key attraction the British can offer Australia or New Zealand - so these ones are probably not likely any time soon either.
The latest global compilation of COVID-19 data is here. The global tally is still rising, now 163,766,000 people have been infected at some point, up +585,000 in one day, still largely driven by rises in India and Brazil. A fast-spreading Indian variant is now a new and dangerous risk. Global deaths reported now exceed 3,394,000 and up +12,000 in one day. Vaccinations in the world are also rising fast, now up to 1.502 bln (+27 mln in one day), and in the US almost half of their population (48.1%) have had at least one dose as they struggle to keep up the pace of vaccinations. Now approaching 40% have been fully vaccinated (125.4 mln people). The number of active cases there has fallen to 5,946,000 with fewer new infections than recoveries recently and steady progress.
Wall Street has opened flat following flat markets in Europe overnight. Yesterday the very large Tokyo market closed up a strong +2.1%, Hong Kong was up +1.4% and Shanghai closed up +0.3%. The ASX200 ended its session with a +0.6% gain, and the NZX50 Capital Index ended up +0.2%.
The UST 10yr yield starts today at 1.64% and little-changed from this time yesterday. The US 2-10 rate curve is at +149 bps and little-changed. Their 1-5 curve is also unchanged at +78 bps, while their 3m-10 year curve is still at +164 bps. The Australian Govt ten year benchmark rate is up +1 bp at 1.73%. The China Govt ten year bond is down -1 bp at 3.16%. But the New Zealand Govt ten year is up +2 bps at 1.91%.
The price of gold starts today virtually unchanged from this time yesterday at US$1868/oz.
Oil prices start today a little softer at just under US$65.50/bbl in the US, while the international Brent price is just under US$68.50/bbl. Both are slips of about -US50c/bbl.
The Kiwi dollar opens today at 72.5 USc and firmer overnight. Against the Australian dollar we are firm at 93 AUc. Against the euro we are little-changed at 59.3 euro cents. That means our TWI-5 starts today at 73.8.
The bitcoin price is now at US$43,190 and little-changed (+0.8%) from this time yesterday. Volatility in the past 24 hours has been very high at +/- 4.2%. 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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61 Comments
Don't worry, rapid house price rises that make multiple home owners and slumlords enormously wealthy are simply a "first class problem". Just ignore the enormous wealth gap, the homelessness, the kids trapped in uninhabitable motels, the increasing health issues suffered by our poor and becoming poorer, the FHB's who have been suckered into a life of enormous debt, the extra risk that have been added onto the NZ banking sector, the damned unfairness of it all. Don't worry about all that, when u r at the top of the ponzi "she'll be right". If Orr and Bascand don't resign with immediate affect then there needs to be a thorough enquiry into what their motivation was to destroy NZ. Knowing the arrogance of the pair they will say they did their evil deed to keep wages coming in, but even that is sinister when they only want wages coming in so the struggling renters can pay their parasytic landlord. We need answers to this pairs real motivations. The whole scenario absolutely stinks!
https://www.nzherald.co.nz/business/auckland-homeowners-to-get-bombshel…
Another news to add FOMO and establishment still in Wait and Watch mode.
Yes & no. A ratepayer pays pro rata their share of the total rate take a council sets. The resultant amount is admittedly not quite entirely calculated on your property value but in short the higher valued property will pay more rates than the lower valued property. However historically it’s not inaccurate to say that councils start at the other end of the stick, when setting the annual rate total take, ie how much can they get away with, putting it up to. And now we have ratepayers sitting on enormously increased property values and equity, perceived wealth in other words, then it is unlikely councils will not seem themselves as justified in tapping into that. Of course having your property increase by say $250k doesn’t actually provide the ratepayer any increase in income. If this trend carries on more and more homeowners will be forced into reverse mortgages just to be able to stay in their own homes.
Exactly FoxGlove so do people out there seriously think if property prices go down their rates will decrease ? Fact is even if property had gone down your rates would still be going up 5%. The only difference is that home owners are so drunk from the recent "house warming" party they will not complain about the increase. The new RV for my place is 1st July 2021 and its going to be very interesting, potentially its going to be a 20-30% increase from 3 years ago.
For decades Auckland has sent its home owners rates bills that are lower than most of the rest of the country. When I lived there in the mid to late 80s it was very much a sore point for people. But they did not understand, and likely were not interested, that their bills were less than most of the rest of the country. Councillors won or lost elections over the rates debate. This issue has been building for years. It has only been delayed because the Government swallowed the Auckland Councils PR BS about how important Auckland was and that they had to have Government, and wider tax payer support.
Another media article / news not only Auckland but most NZ :
Again the herald is going for a headline which aims to deliberately mislead.
But of course the main issue % increase that the Council is forcing through. Which allows the Council to borrow even more for uneconomical projects such as the train tunnel and sewer tunnel.
I think arguing that it's hard to ban isn't necessarily the best way forward here. Would you suggest that we shouldn't try to stop child porn because we can't actually get it all given the technological constraints of the internet?
BTW crypto ransoms are pretty much standard practice, I would assume that's what will be demanded in the waikato case. One tiny example in NZ will do nothing to alter the perceptions one way or another, but there's no denying that crypto is used in this way, and that it if nothing else it is an image problem.
Yes let's ban a network! We can start with the internet since it uses so much energy. That'll get rid of all that pesky cH1LD Pr0n.
Then we can move to Bitcoin. We'll get all the ISPs to report network traffic (like we did with torrents because it worked so well), then put the onus on those private companies to throttle their services for the greater good. To get past peer to peer transfer we can have a CPU amnesty where everyone, hands in their devices to the Central Bureau of Administration.
Simple - problem solved!
You geniuses really should work in government.
Calm down. I didn't say that we should ban it, or even remotely that bitcoin=child porn. Rather if someone is suggesting banning it, I think you'd be much better off arguing that it *shouldn't* be banned (which incidentally I probably agree with), than that it practically can't be. In some ways the latter is a tacit admission of the former.
It should be banned though - it's hard money that is going to destroy the current financial system as we know it, completely obliterating Central Banks ability to control inflation, thrusting the world into a recession that will make the great depression look rather pleasant. The problem is, it can't be.
You obviously didn’t see what happened in Nigeria when the CB banned it...the locals were paying a 46% premium to get it.
https://www.coindesk.com/bitcoin-is-trading-at-a-46-premium-on-luno-nig…
So you are saying that banning it in Nigeria caused the price to go up? Ok then.
But a ban by all the central banks would be a different story. Enough people would head for the exit to crash the price.
And why wouldn't all the central banks ban it? They just need a palatable excuse, and ransomware attacks on public institutions like hospitals and fuel pipelines could be it.
How does a Government ban anything else? Laws don't prevent people from breaking them. People still drive over the posted speed limit, minors still drink alcohol, people still smoke dope, people still money launder, companies still evade tax etc etc etc.
I'm sure the ISP's can packet sniff bitcoin traffic, and then everyone will use a VPN. Then they'll ban VPN's or something.
Yes and they start confiscating your hardware to mine it, its already happening in some countries. There is a new series on Aljazeera coming up on Crypto. Bitcoin has to go mainstream before its worth anything in real terms and the governments can still kill it. Yep making something illegal tends to severely limit it in terms of being used as a currency by the general population.
Adrian Orr, you may not care to see the damage you have created in NZ but I thought that this article here might give you some understanding of the disaster you have unleashed on the poor. "First class problem" https://i.stuff.co.nz/national/crime/125098964/the-state-paid-1300-a-we…
Firstly, oh member for one week who claims to have left NZ because it's so terrible, Orr merely inherited a local slice of a global ponzi. Don't blame him, Catton published Overshoot in 1980 (Vic Uni had a symposium on the subject in 1972;Catton was present) pointing out we were overshot.
Sure, we can become egalitarian. Wide, but not deep, that is. That would solve the problem temporarily, and only in NZ. Egalitarianism will no longer work globally; we are too overshot.
Then there's the problem vis-a-vis future generations. How many of then do you want to be egalitarian about? Because for every one you add, reduce your per-head consumption proportionately. Overshot population is the problem, overconsumption it's manifestation. Orr is merely a pawn in the game.
I'd rather we educated the woman who had had 6 children, quoting her 8-year-old that there was a lot of unbuilt land..... That shows an ingnorance - including by RNZ for allowing the comment to go public.
It is clear you have a significant misunderstanding of what Adrian Orr's powers are. He sets interest rates. He does not set room rates. He does not dictate social housing policy. He does not manage Government procurement. He does not manage social services. He does not work with Pacific Island communities or mental health agencies.
In China, the massive infrastructure push over the past ten years, one that was financed by more debt, finds that more than US$2 tln of that will fall due over the next 30 months.
China Huarong Asset Management, which specializes in acquisition and management of nonperforming loans, is now fighting for its own survival. A China Huarong unit has won creditor banks' approval to postpone repayment of $100 million in debt until the end of August.
And today: China Huarong Wires Funds for $300 Million Bond Due Thursday
According to Bloomberg:China’s Growth Set to Drive World Economy in Post-Pandemic Years
According to the Chinese government, Industrial Production rose 9.8% year-over-year in April. Compared to April 2019 instead of April 2020, however, IP was up just 14.1%, or a compound annual change of 6.8%. That’s about the same level of growth as Chinese industry had been experiencing during…2018, and it only gets decidedly less sweltering from here.
Total FAI during the four months January to April 2021 was 19.9% more than the same four months of 2020. But it was only 7.6% more than cumulative January to April 2019. The 2-year change (an ugly 3.7%; just 2.4% in private FAI) best illuminates China’s true economic state as well as unambiguously illustrates the deception; where’s the boom?The real missing piece, however, is the very one upon which the Communists have already said – repeatedly – they are going to rebuild themselves back better-ish. It used to be called “rebalancing” and nowadays is labeled “dual circulation”, under any terminology authorities have made it their purpose to go after internal economic growth on a consumption-based model.
If China is going to recover, then it is being pushed to do so on the spending of Chinese consumers. According to the same government forces doing the pushing, as you can clearly see, Chinese consumers aren’t spending on much this year which isn’t much change from last year’s recession year. Retail sales not only missed badly to expectations last month, again the 2-year change:The NBS figures, using its own methods, that retail sales rose 17.7% year-over-year, which, given that retail sales had fallen 7.5% year-over-year the previous year, means the 2-year compounded increase was only a little more than 4%. Four.It hadn’t even been this bad during the 2001 economic year when China had both the tail-end of the Asian Financial Crisis as well as the global dot-com fallout on its 2-year comparison. There was, in 2020, a very real recession but certainly these estimates demonstrate only a lack of recovery yet from it let alone any kind of extraordinary strength consistent with the world-economy-is-on-fire-inflation stuff.
All of these numbers are on the opposite side of the spectrum – struggle, not strong – just like they had been in 2018. Link
Check this out :
https://www.stuff.co.nz/national/crime/125098964/the-state-paid-1300-a-…- -housing-where-a-boy-was-murdered-but-what-did-it-do-to-keep-him-safe
And
https://thekaka.substack.com/p/dawn-chorus-the-5200week-rental-in?token…
Yes, anyone building a motel/hotel now will be able to have the development paid off in a couple of years in total. A license to print money.
This is actually because we do care as a society and we are all in on accommodating those who cannot look after themselves. As a comparison, try living in India or China for a reality check on countries where no one cares.
Comment of the day Bugger, the poor average Joe is working so hard just to keep his head above water he doesn't even have time to comment on here. Its very competitive out there now, you either get in the game and go hard or you will get smashed on the sidelines just "Waiting and watching".
For all the frantic hand-wringing commentary here about the room rate, this article quite rightly focuses on the stress the Hotel Owner has been put through by dealing with this situation. Want to know why the rate is $1300? Read the article, he is dealing with a child's murder in his property and feeling bad about not doing more!
What a predection :
https://www.stuff.co.nz/business/money/300310350/westpac-expect-house-p…
When all the experts knows that low interest rate is the reason for house price ponzi, how hard is it to have policies in place to offset the side effect ( As per Mr Orr) of low interest rate.
Mr Orr should seriously consider controlling Interest Only loan and DTI. (when one see news, day in and day out about ponzi and how hard Mr Orr is thinking - not intending but thinking, has to be highlighted).
What exasperates the issue, is we have effectively 2 x demand for every unit of accommodation (FHB + Investor), but the end result is still the same i.e. 1 household ends up with a roof over their head. Bidding up the price of a "title" so to speak.
The market sees this demand and reacts by building. But to build you need to free up land, design, consent, install horizontal services, roading etc which all takes time. Meanwhile our immigration tap has now turned off, but we've still got land coming online based on demand factors from 18 months ago. Recipe for disaster.
The bank regulator was missing in action - a reorganisation is imperative.
“The proposed reforms signal the biggest changes in the residential housing market in over 30 years. Leveraged investors currently account for around one-third of sales in markets like Auckland and Wellington, and their search for yield has been a major factor underpinning house price increases in recent years.
True - gotta pay for it somehow?
Consumerism is defined as a social and economic order and ideology that encourages the acquisition of goods and services in ever-increasing amounts. ... The way this behavior spreads and elevates its status in society is surprisingly similar with religious traditions
So what happens if interest rates start to rise significantly ? I see the tide turning and money pouring out of Bitcoin to pay down real debts that people have. Bitcoin is no different from anything else, its not protected and it could go down like a pack of cards faster than any hard assets. All it takes is the top few percent which are the major holders to sell and its game over.
"bitcoin represents the fantasy of producing money without the energy-input of work. Which defines it as a Ponzi scheme.
The value of any ‘investment’ that relies on someone else buying it is the same concept..
I said it years ago, when bitcoin first appeared on the financial horizon
https://end-of-more.medium.com/the-myths-of-crypto-currency-f5dea863d116
That’s not to say people haven’t made a lot of money out of bitcoin. They have. But they got in and out early, took their profits and ran.
and people are still convinced that is real money"
Whats not in the news?
Well the South Island water. The Government distributed plan for joint ownership.....
"Owners are the Canterbury councils and Ngai Tahu"
& NT saying....
... "that we are not here to be assimilated by Crown Policy."
Ngāi Tahu, Statement of Claim - Wai Māori
https://youtu.be/sHoJQdQk_80
Rather the msm are happy to run hit pieces on JC basis the Chris Trotter debunked Tova poll from days ago.
It's getting interesting....
Remember to check your opinions, are they yours, or some that were assigned to you. :) :), :( :) ^^.
P.S. here is TC ex Stuff with a set of the guilts (doing it for his LinkedIn)..
https://i.stuff.co.nz/national/politics/300310699/hear-me-out-the-natio…
- fear not, its deeply buried within Stuff, so TC dropped on his twitter feed.
Stinky stuff on Water.
https://twitter.com/i/status/1394522025163587587
Jacinda Ardern refuses to rule out giving Ngāi Tahu co-governance rights over South Island water infrastructure. Why can’t she just level with New Zealanders and tell us what she’s up to?
https://mobile.twitter.com/dbseymour/status/1394522025163587587
Watch the video, then comment as to what she said.
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