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Chinese yuan rises; floods and power production new risks; NZ backs Australia in barley dispute with China; US on holiday; huge Biden budget exposes risks; UST 10yr slips to 1.58%; gold up and oil stable; NZ$1 = 72.5 USc; TWI-5 = 74.1

Chinese yuan rises; floods and power production new risks; NZ backs Australia in barley dispute with China; US on holiday; huge Biden budget exposes risks; UST 10yr slips to 1.58%; gold up and oil stable; NZ$1 = 72.5 USc; TWI-5 = 74.1

Here's our summary of key economic events over the weekend that affect New Zealand with news New Zealand is backing Australia in its dispute with China over arbitrary tariffs on barley.

But first, the US dollar is falling against a resurgent Chinese yuan, dipping to 6.37 to the US dollar now and back to levels last seen three years ago. The appreciation of the yuan will suppress their trade surpluses but it will also suppress inflationary impulses building quickly in the Chinese economy. To combat the natural instinct to import more, Beijing may have to adjust its opaque border and customs policies if the rush gets too unseemly, but that will be done secretly given its public commitment to its international trade and tariff agreements, including the one with New Zealand.

Exporters in Guangdong province are facing a new threat. Not only is a rising yuan trouble for them, rising material costs are too, as are shipping costs, and now they face electricity rationing. Demand exceeds supply because many new projects have failed to get started in the region and that may mean more coal-fired production.

And so far, we are not seeing the price of key industrial commodities like iron ore or coal falling in price after last weekend's warnings from Beijing. However, shipping costs are easing.

Flooding in the Yangtze River basin is an annual threat, but like last year, this year is also shaping up to be especially damaging. Almost 100 rivers have already exceeded flood warning levels. This too will have food price implications.

Australia is moving ahead with its dispute with China over the Middle Kingdom's imposition of sudden tariffs on a number of commodities, including barley. The WTO case against China is underway, and a twelve countries have joined in the action, including New Zealand. China is in the box seat of course because it will take more than three years to resolve and even if China loses, it will have extracted a price on Australia just from the delay. And China will always appeal a loss. Meanwhile, Australia is also about to launch a WTO action against China over wine restrictions.

Rural conditions are amazingly friendly in Australia again this year, with huge harvests reported, and at a time other major cereal producers are struggling. Australia has the extra production China needs, but Chinese sensitivities mean it will be sold elsewhere and China will pick up higher cost supplies from others.

In Victoria, their latest pandemic lockdown is featuring a fast growing list of exposure sites.

In South Korea, they have raised their 2021 growth forecast to +4% as trade, investment, consumption and employment all recover faster than was earlier expected.

In India, their monsoon is about to start. This is a huge event for world grain security. Last year’s monsoon rain was +9% higher than normal, and it was +10% more than the long-term average in 2019. Last year's good rains helped crops and boosted India’s food grain output to a record in 2020-21.

It is Memorial Day in the US so their working week including Wall Street won't start until Wednesday our time.

Over the weekend they announced that household personal income fell by less than expected in April as pandemic support started to be withdrawn from households. Personal spending was unaffected by that pullback, rising the expected +0.5% as their jobs market picked up strongly and covered the transition.

However most economic interest in this data was on the PCE number for April, the inflation measure the Fed is reportedly more focused on for policy reasons than the CPI. It was up +3.6%. That was lower than the March level which was revised up to +4.7% (The April CPI was +4.2%.)

In the industrial heartland of America, the latest Chicago PMI paints a buoyant picture, reaching its highest level since November 1973. Demand provided a boost to business activity, but supply chain constraints remain. Among the main five indicators, New Orders and Order Backlogs saw the largest gains. Prices seemed less of an issue overall, and the Jobs indications weren't strong.

The latest American consumer sentiment survey keeps the level unchanged from their mid-month reading, but down from April. And the resurgent strength of the economy produced more immediate gains in demand than supply, causing consumers to expect a surge in inflation. Overall sentiment is much improved since January, but is still not back to pre-pandemic levels.

The new US Administration has launched its Budget with projections of spending and deficits out to 2035. The numbers are very large. It's been called a spending surge, but actually in 2020 and 2021 US Government spending ran at 32% of GDP whereas this budget takes it back to about 24%. What will be rising are taxes, from 16% of GDP to just under 20%. Both are still low by international standards. (New Zealand runs at 33%, and we are mid-pack.)

There is criticism, some of it partisan. Maybe because it includes a massive +US$13 bln extra for the IRS for increased oversight of high income and corporate tax returns to ensure compliance. Others say the massive extra 'recovery stimulus' is unnecessary and adds new inflation risks.

The US budget deficits are expected to run at about -US$1.4 tln per year over that period and that is about -5.6% of US GDP, falling to under -4.6% by 2027. (See page 37.) (For 2022 the deficit is -US$1.8 tln.) For perspective, the New Zealand budget deficits are expected to run at -4.5% of GDP this year and -5.2% next year. Both governments are weighing against the damage the pandemic has done, and the US is also weighing against the damage done by the previous administration. Both will take years to rectify.

The latest global compilation of COVID-19 data is here. The global tally is still rising, now 170,050,000 people have been infected at some point, up +1,930,000 in two days. India is on track to pass the US, as the country that has had the most infections, by the end of June. Global deaths reported now exceed 3,536,000 and up +22,000 in two days. Vaccinations in the world are still rising but at a slower pace, now up to 1.87 bln. In the US half of their population (50.9%) have had at least one dose. More than 40% of Americans have been fully vaccinated (136.4 mln people). The number of active cases there has fallen to 5,607,000 with fewer new infections than recoveries recently and steady progress.

The UST 10yr yield starts today unchanged at 1.58%. The US 2-10 rate curve is at +144 bps and a bit flatter that this time Friday. Their 1-5 curve is at +75 bps and flatter, while their 3m-10 year curve is at +158 bps and also flatter. The Australian Govt ten year benchmark rate is still at 1.63%. The China Govt ten year bond is also still at 3.11%. However, the New Zealand Govt ten year is down -2 bps at 1.86%.

The price of gold starts today up at US$1904/oz, a gain of +US$2 since this time Saturday. Over the past week, the gold price has risen +US$26 or +1.4%.

Oil prices start today little-changed at just over US$66.50/bbl in the US, while the international Brent price is just under US$69/bbl.

The Kiwi dollar opens today at 72.5 USc and almost a -½c retreat most of which happened on Friday. Against the Australian dollar we are still down at 94.1 AUc. Against the euro we are holding at 59.5 euro cents. That means our TWI-5 starts today at 74.1 which while lower is above week-ago levels.

The bitcoin price is now at US$35,876, a+1.6% rise from this time Saturday. Volatility in the past 24 hours has still been very high again at +/- 4.6%. And in Australia, their tax authorities are warning 300,000 taxpayers they have identified who trade in cryptos that they must report the results of this activity.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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Believe Australia’s barney with China goes well beyond barley. And Uncle Sam has leant its heavy shoulder too. When CV19 went global there was a tacit sentiment that the traditional western allies, plus some others, would “reform” to a degree out of both necessity and security. Trust in past alliances so to speak. NZ too, in its own way of course?

Are people finally beginning to realise that a) overconsumption doesn't really make you happy and b) doing/buying less is the number one way to reduce our environment impact (albeit while tanking the economy...)? This might be one of the few benefits of the pandemic

Along that line of thinking, this is as good an explanation as I've seen:

Makes the standard patter ('normal', 'back', good, encouraging, healthy etc etc) look a tad sick.

Interesting and scary read. Surely "easy monetary conditions" can fix all those resource issues?

I will follow this guys suggestion about less consumerism and not buy his book.

No lockdown Sweden all cause death since Jan 2020. Not quite the 96,000 excess deaths predicted.
<65 -395
>65 +1570

Good news that the restrictions they put in place (limited gatherings, travel, social contact etc) managed to keep the death rate manageable. I do note a little data massaging by including the January - March 2020 period with a mortality deficit, but yes well under 96,000 (which presumably was predicted based on no government or personal decisions to change behaviour?)

Restrictions? How to have pandemic without taking away basic human rights. "As winter fades and spring breaks over Sweden, a high-stakes experiment in self-responsibility is underway. Stockholm's waterfront restaurants and bars are filled with people soaking up not just the sunshine, but an extraordinary degree of freedom.
Along with restaurants, Sweden's schools remain open for all students under 16 years of age, and shops and gyms have kept trading during the coronavirus pandemic. Borders are functioning. Desks are still occupied in offices and gatherings of up to 50 people can go ahead.
Sweden's 'light touch' response to the emergency has triggered fierce debate amongst the country's medical and scientific community."


Yes, there were restrictions on gathering size (although very generous by worldwide standards except countries like New Zealand who managed to eradicate), and advice against social contact, travel etc. Results of these and personal decisions to restrict behaviour can be seen in the data here

Swedish use of transit stations regularly down 40-50%, workplaces down 20-30%, retail similar. Boom time for parks though. New Zealand workplaces and retail have been close to baseline for much of the last year.

Like I said, comparatively good results from fairly light touch restrictions, but I'm certainly glad I'm in New Zealand rather than Sweden.


If they had listened to the scientists they would have had 52 dead from Covid rather than 14,413 and GDP would have been down -0.7% ( rather than -1.5% ( for 2020. So, thousands more dead and a worse off economy by ignoring the science.

And this from a country where the most common household is single person with no children (

"The previous year is important for understanding deaths of the next year. Sweden had far below normal deaths in 2019 than expected and far below that of the other Nordic countries. 2021 is again showing substantial below expectation deaths. 2019-21 excess deaths are approaching 0".
NZ had far, far higher excess deaths in 2019 than Sweden and higher than Denmark, Norway and Finland. We not listening to the scientists that year?

Excess deaths is based on previous years' actuals to estimate future and is far from accurate and can be influenced by many factors. Using it as a basis for a claim that a lock down would not have saved any of the 14,400 people who died of Covid as they were destined to die anyway as per the excess death calculation elevates an estimation to a certainty, which it isn't. Even worse you are using it as an actual predication of the death of specific persons i.e. those that died of Covid.

If excess death is not for you I also linked all cause death above. If they wouldn't have died anyway why is all cause death only up 1175 since Jan 2020?

Because the excess death estimation was way off what the actual deaths would have occurred if covid had not spread. Why could the estimation be wrong? Failure to take into account warmer than average winter, better health services... who knows. Still doesn't make the estimation of excess deaths accurate.

So just use all cause if you don't like excess.

Is there a difference? Isn't excess deaths just all cause death minus some baseline of all cause deaths from previous years, or is there some fundamental difference I'm missing?

Oh god, profile again completely misrepresenting data... do you where you gave us a link that was for 2021 to data that often has a 3-12 month time lag? Well done.

Maybe if people want to see the real thing, they can go to your link, choose Sweden, choose 2020 and see the excess mortality skyrocket in their first and second waves of COVID. Then choose 2019 for Sweden and see how excess mortality was decreasing YOY for a long time.

I don't know what you think you are doing, but if anyone is believing the garbage you post, they should think twice.

I suspect Profile also needs to deflect.

Spin comes in many guises.

Yeah blobbles I guess Nobel Laureates aren't what the used to be.
Michael Levitt
Stanford Prof. of Biophysics, Cambridge PhD and DSc, 2013 Chemistry Nobel Laureate (complex systems), FRS & US National Academy member, I code well for my age.

Does a Nobel prize in chemistry give you particular insights into epidemiology? Always risky assuming expertise in one area makes you an expert in other, unrelated, topics.

Barack Obama should've handed back his Nobel peace prize on the way out the White House, with his continuation of the War On/Of Terror.

Since then, I've not taken the Nobel committees seriously.

HeavyG ,out of curiosity which GDP numbers are you actually quoting from TE.

GDP annualised to Jan 2021 as per links.

GDP dropped 2.9 percent over the year to December 2020, the largest annual fall ever for New Zealand. TE
"Considering 2020 full year, the GDP shrank 2.8 percent." Sweden TE


try reading this-

I have no doubt that our approach has served us better than Sweden's has served their country.

No comparison. We don't share a border. Border closure conflated with lockdowns? An NZ Cooks Island comparison would be more apt? If NZ had taken MOH advice borders would have been closed sooner and there would have been no deaths here. Sweden didn't have that luxury but showed what can achieved without draconian measures.

We fight to prevent covid.
At the same time ring our hands over climate.
Bit of a conflict in desired outcomes perhaps?

With COVID, the death toll isn't the full story. Sweden, much like the USA, now has over 10% of it's population with a recorded COVID infection. How many of them will suffer long term health complications? We all know that COVID has a more severe effect than bog-standard influenza. The impacts we won't know until this pandemic is finally over. But given the anecdotes of sufferers of long COVID, I am happy that we took the lockdown route.

Also, take into account Swedish culture. Despite the news stories that certain people like to fixate on, a lot of Swedish people stayed home anyway.

"Rural conditions are amazingly friendly in Australia again this year, with huge harvests reported, and at a time other major cereal producers are struggling." Repeat the mantra Climate Change a few times.
After any drought or flooding. Just wait for MSM, probably NIWA as well and others to get on about the Canterbury floods and you'll start reading that it's climate change (man made of course)

incl Salinger. The one who is looking under every rock for man made climate change....

Here is a "No Soup For You" report from Mike Joy.
- the renewables (unreliables) paradox
- the purity of those identifying as green.

The paradox
We must stop burning fossil fuels, but we must also understand that every technology to replace them, while attempting to maintain our current consumption, let alone allowing for consumption growth, requires huge amounts of fossil energy.

Green purity
Environmentalism emerged from the 1960s as a movement to save the natural world. Now it seems to have been appropriated to describe the fight to save industrial civilisation – life as we know it.

Traditionally, environmentalists included people like Rachel Carson, whose 1962 book Silent Spring alerted Americans to the industrial poisons killing birds and insects and fouling drinking water, or environmental organisations like Greenpeace saving whales and baby seals.

Time to pull out the old Supertramp albums.

I thought you might have pinged on THIS article Henry. This chap, an Aussie inventor/scientist/entrepreneur thinks we can save the planet and not impact lifestyles by just electrifying everything. I found his perspective too shallow, as total electrification will still require resources that are, or will be rare, and not without environmental or climatological impact.

But here's a question; if we stopped using fossil fuels today (ignore whether it is possible or not) what impact will this have? Or are there too many animals as well?

What one of the Mad Max movies is your favorite?

They were all good entertainment Henry. But well beyond any perspective of being realistic.

Human beings will degenerate into fairly brutal animals, but resources will not be available. Survival skills will reign supreme along side adaptability.

For the nitty gritty go back to the Odyssey & Zeus.

No. All but the original were absolutely rubbish

Saul seems the opposite to Mike Joy, James Shaw & Rob Carr, how's that?

- climat change commission set of rolling, country-wide emissions caps, out today.

Shaw and Carr are - publicly at least - light years behind Joy. Joy seems to be one of the few academics who can think ex-silo.

Australia is moving ahead with its dispute with China over the Middle Kingdom's imposition of sudden tariffs on a number of commodities, including barley. The WTO case against China is underway, and a twelve countries have joined in the action, including New Zealand.
Some claim military action in the not too distant future:

In the South China Sea, it will conduct an exercise with the “Five Powers Defence Arrangement” – the Commonwealth nations of Australia, Malaysia, New Zealand, Singapore and the UK. Link


When we are forced to choose between China and Australia, we must always choose Australia.

That is unfortunate. Can't we just pull their plug out and let them sink?

I mean we will chose Australia.

However the problem NZ faces is our export goods to China (dairy, meat) are not necessities for China. We supply luxury goods to the Chinese upper middle class. If China wanted to "punish" NZ they would find it a lot easier than it has to punish Australia. As a bulk of Australian exports to China are necessities (iron ore, coal copper etc.etc.) & the Chinese economy needs these to survive.

You hint at the cause of all our problems; capitalism in all it's forms. While to a limited extent it aids and supports our survival, today it is primarily used to achieve supremacy over others. An extreme form of tribalism which will ultimately cause the collapse of societies.

donny. And NZs vulnerability that you identify is why we ought not to imitate Australian bellicosity towards China. I think Mahuta is one of the poorer foreign ministers we've had a for a while but on this issue I agree with her attempts to find another way than simply bow to pressure from our thuggish trans Tasman cousins who hold a great many more trade war cards in their hand than do we.

NZ has 4500 army personnel, Aus 30,000 and China has 2,185,000. Banding together is not going to make too much difference.

War in the 21st century isn't one in the trenches

The scale on all fronts and axis is about the same.

Whether its fought in the air, the Cloud or by remote technological warships firing missiles from 2500km away, NZ won't be much of an impediment to a rampant Chinese military......

Maybe it's done via cyberattacks.....

The 300,000 Aussies identified as being owners of crypto assets is interesting. The ATO's website suggests that there are 13.5 million taxpayers so that is roughly a proportion of 2% of all Aussies owning crypto. That's much lower that the claims I've seen.

Then the remaining punters got into crypto in the right way imo :P or more likely the government just hasnt got with the times yet.

We should not be backing Australia on China they screwed the pooch now they are trying to drag us into the mess I nearly threw up watching the TV news last night where we we promised better domestic conditions in Australia like welfare and them not sending prisoners home if we spoke out on China what a joke.