Here's our summary of key economic events overnight that affect New Zealand with news energy prices are roiling markets everywhere.
But first in the US, the ADP employment report was positive, coming in better than expected with an +568,000 increase in jobs for September and suggesting that the upcoming US non-farm payrolls report will be a reasonable one. There were good gains in every sector in the ADP report. Analysts expect the non-farm payrolls report to show a rise of only +473,000 however.
But there were challenging data in the American home loans sector. Applications fell sharply last week, and interest rates rose sharply which probably explains the applications retreat.
In Asia, fuel prices are soaring, and not just in China. But China is relenting on its blockade of Australian coal, releasing ships carrying the fuel that have been waiting to unload for months. And India, state-owned Coal India has been ordered to raise output of thermal coal sharply. Everywhere, demand for propane, diesel and fuel oil is very high and prices are rising sharply.
In Europe, very high natural gas prices are a very real threat to their economic expansion. But overnight, Russia agreed to increase supplies, taking the top of the sharp increases yesterday at least. Russia has the EU in a choke-hold ahead of their winter season.
And staying in Europe, the recovery in retail sales didn't eventuate in August as expected, a disappointment for them.
In Australia, their prudential regulator APRA has announced an increase in “the minimum interest rate buffer it expects banks to use when assessing the serviceability of home loan applications.” It has risen +50 bps to 3.0%. APRA estimates that “a 50 basis points increase in the serviceability buffer will reduce maximum borrowing capacity for the typical borrower by around 5 per cent.” This is probably just the first of a series of tightening measures aimed at cooling their housing markets.
Also in Australia, their tax office is tightening scrutiny of increasingly popular exchange traded funds (ETFs) amid concerns about the failure to report capital gains from share sales and income from dividends and distributions.
And staying in Australia, the explosion of Delta cases in Victoria has risen to 1420 cases reported there yesterday in a "very serious jump". There are now 14,410 active cases in the state. In NSW there were another 594 new community cases reported yesterday with another 423 not assigned to known clusters. They now have 8,195 active locally acquired cases which is lower, but they had 11 deaths yesterday. Queensland is now reporting zero new cases. The ACT has 28 new cases. Overall in Australia, more than 57% of eligible Aussies are fully vaccinated, plus 23% have now had one shot so far.
The UST 10yr yield opens today at just under 1.53% and little-changed from this time yesterday. But they did jump to 1.57% at one point earlier. The US 2-10 rate curve is holding at +122 bps. Their 1-5 curve is also unchanged at +89 bps, while their 3m-10 year curve is still at +142 bps. The Australian Govt ten year benchmark rate is +3 bps firmer at 1.56%. The China Govt ten year bond remains unchanged at 2.89%. And the New Zealand Govt ten year is also unchanged at 2.01%.
Equity markets have started weaker on Wall Street, with the S&P500 down -0.6% in early afternoon trade in the Wednesday session and back in loss territory for the week so far. Overnight, European markets fell hard, down about -1.2% across the board. Yesterday, the very large Tokyo market fell -1.1% and Hong Kong fell -0.6%. Shanghai is closed until tomorrow. The ASX200 ended yesterday down another -0.6%. The NZX50 fell -0.3%.
The price of gold will start today little-changed, up +US$2 at US$1762/oz.
And oil prices are lower today, down almost -US$2 to just over US$77/bbl in the US, while the international Brent price is just under US$81/bbl.
The Kiwi dollar opens today noticeably lower at just on 69 USc and nearly a -1% devaluation in a day. Against the Australian dollar we are down -40 bps to 95.2 AUc. Against the euro we soft at 59.8 euro cents. That means our TWI-5 starts today down at 72.9, but still in the middle of the 72-74 range of the past eleven months.
The bitcoin price is sharply higher again since this time yesterday, up another massive +9.4% this time to be now at US$54,752. Volatility in the past 24 hours has been extreme at just over +/- 5.3%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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81 Comments
.. why is this government spending so much time snuggling up to Harry Tan & the gangs ... gifting them $ millions ... meeting & greeting ... giving them " essential workers " rights to travel ....
Is Jacinda confused ... does she think the Mongrel Mob are the Kiwi version of the Wiggles ?
They're confused because they followed a religious creed which turned out to be willfully blind.
Some from within the creed, are Martin-Luthering it, but they're probably out of time. Here's a short morning read of one such:
https://assets.publishing.service.gov.uk/government/uploads/system/uplo…
Close - I'm about 1/3 of the way through, but have yet to see the crucialness of energy articulated. But it should be compulsory reading for all who peddle Growth-forever.
The Government are also attributing much if not all of the current outbreak beyond the borders to gang activities, essentially dealing in drugs. Of course this is being decried as racist, but with some experience in dealing with gangs, I suggest that the Government's position is more credible and those decrying it should provide evidence. It is also gang members or associates who are breaking out of MIQs. The misery caused by the gangs in every community should be enough for anyone to reject their involvement. They are violent and abusive. Individually we probably cannot stand up to them, but as communities we can.
wrong rastus - it was Labour govt in Sept 2011. National weren't elected till November 2011.
http://www.stuff.co.nz/auckland/local-news/5572444/Pharmacists-welcome-…
Codeine, and opiates in general, suppress your respiratory system. Codeine was present in cold and flu medicine because it reduced coughing symptoms. It was also very easy to extract from the cold and flu medicine (cold water extraction), but this would also extract the acetaminophen (panadol) from the cold and flu tablets. Some inattentive opiate addicts would extract the codeine from cold and flu medicine and blow their liver to pieces with a panadol overdose. I believe this contributed more to it's ban than constipation.
Better to leave the Gangs to their drug dealing.
On the odd occasion, the Filthy Few will assert control over a Head Hunter etc. with deadly consequences; something 'our' gang - the Army/Police can't/won't do.
Besides. There's always another source of income waiting, if one is removed from their clutches. Like, say, asking you for a donation outside Countdown before you are allowed to go in to shop.
Short of reimposing Capital and/or Corporal Punishment; again, something we are unwilling to do, Gangs are going to be a fact-of-life thing that tolerating the least form of intimidation requires. If they could be controlled by 'us' they would have been by now.
Legalise meth and heroin? Not just no, but HELL NO! The damage they do is just too extreme, not just to the user but to those around them as they lose the ability to cope with normal emotions. Even over use of cannabis can have that effect. And who pays the health cost?
Besides if drugs get taken out of the gangs picture they would just find another thing - protection rackets and other black market activities have long been the province of gangs. They don't do that so much now because drugs are easier, but they will pick those activities up if forced to. Legalising drugs will not get rid of gangs, but will widen the spread of harm.
Then just legalise the drugs that pose little harm. Cannabis, ecstasy, LSD, mushrooms, cocaine etc - very low risk, comparable to or safer than alcohol.
Remember those who want to over use cannabis already do so, and we pay the health costs right now. At least smokers cover some or all of their likely lung cancer treatment through the tax on tobacco.
If you don't want to make life harder for the gangs then you have a very different perspective to me - I'd be happy to move their easy money into the legal economy. Maybe if money is harder or riskier to make than selling drugs to teenagers the incentive to join will reduce.
We haven't even discussed the purity issues which currently expose users to much greater harm than the pure drug would, and the incentive for gangs to upsell to more addictive drugs.
Think again murray and think Portugal.
In 2001, Portugal decriminalised the personal possession of all drugs as part of a wider
re-orientation of policy towards a health-led approach
Drug decriminalisation in Portugal: setting the record straight. | Transform (transformdrugs.org)
Slanted document. One example drug related deaths only refers to deaths from overdoses, but drug related deaths also includes IMHO deaths from the violence that stems from drug use, and that violence is not even referred to in the article. The issue is much, much more complex than the pro-drug groups would have us believe.
What would happen if we legalised drugs? The drugs would have a tax on them just like tobacco does today, so what would the gangs do? Undercut the price of course and not pay the tax. Commercially grown cannabis will have so many license requirements the cost for such an operation would be quite high, and illegal growers would easily undercut that - the gangs are still in business, just as they are everywhere else.
The real solutions are much more grass roots. People turn to drugs to cope with stress and fell better about themselves. Socio-economic policy has driven the lower and middle classes down in the last 30 - 50 years, putting even more pressure on them. The real solutions are to have policies that create real jobs with decent incomes that enable people to have a decent life style and feel better about themselves without having to turn to drugs. Giving people drugs to feel good is not a solution to the ills that afflict our society today. Proper, decent democracy that genuinely serves the people is the fundamental core to a real solutions. But then the current review is looking to justify further undermining that too.
I agree with your final paragraph, which I would argue would be made far easier if drug users could buy their products legally with appropriate warnings, advice on where to seek help etc. Pushing the issues underground and users into interactions with gangs is certainly not helpful.
Regarding your second paragraph, the saying 'perfect is the enemy of good' comes to mind. Legalisation is not going to solve all the issues for sure, but I think the issues it creates would be significantly less than the ones we are currently suffering. Right now the black market which the gangs largely control is the entire market - many users would happily spend a little more to ensure purity/quality/safety of product and to use legal product. If we allowed cannabis users to grow their own then the gangs are totally removed from their lives.
IMO the gangs are a symptom of an unhealthy society, not the cause of it. I despise the interviews on the radio whenever they talk to someone from a gang, when it inevitably devolves into "Are you going to promise that no drugs will ever be sold by gang members!". Pointless inflammation for populist point scoring, fanned on by the Govt opposition.
It's interesting to think it through; our ancestors overcame their ancestors (because they arrived packing more energy - gunpowder and early industrial products). The indigenous race became repressed, displaced. They inevitably showed up in court and prison statistics; not because they are more evil, but because that is where we divvy up assets - and they are on the losing end of that process (that we designed). So then, some of them band together for social (herd) reasons, as we all do. But their commonality is overwhelming repression. So they do 'illegal' things, and learn to live with penalised life.
Hardly surprising that such folk give social obligation the finger. They were disenfranchised, so not part of the Team.
Hoist with our own petard........
Yay somebody who understands the dynamics, the gang's, criminals, poor people, and disadvantaged are just those that we exclude from the group to drive group dynamics!
Having excluded them from the group we cannot expect them to behave how the group would like them to behave they are not one of us!
I agree with your comments. However, you would hope that group would have enough intelligence to consider their own self preservation. Unfortunately that is too much to ask. If the gangs and disinfranchised want to take on covid vaccine free then its on them (although the strain on the health sector should they go running to the hospitals if sick would be an unwanted outcome).
Open the borders, let's get this party started.
Wow, 4 insightful comments on gangs in a row.
Gangs welcome disenfranchised and angry Maori and Pasifika young men who have no role models, no hope and only known violence and disfunction. They are a symptom of our colonial past and a system that favours those socio-economically advantaged which, let's face it, is mostly pakeha.
Gangs are a dead-end, why this Govt engages with them is beyond me. So many better avenues to reach these men.
Yeah. It's easy to get pissed off at gangs and feel punitive -- they're self-destructive entities that increase fear and violence in the communities they're from.
But it's also easy to be empathetic with gang members when you actually know them, and when you know the absolute poverty of opportunity that some people grow up with. Of course there is a world of opportunity for those who know, but a lot of people grow up in a very, very small world, they have no idea of what opportunities there are for them in the world and no belief that they can access them. Hence despair, nihilism, violence.
Agreed, some are total scumbags with no real prospects while others have enormous potential. Anger at being locked out of society/housing combined with seeing gang members with money (drugs) and the (perceived) brotherhood it's easy to see why disaffected young men join. Throw in the warrior mentality and you have the making of a serious gang problem, which of course NZ has.
My British ancestors came with European diseases, not just guns. Abel Tasman gave NZ a wide berth after some of his crew members were killed and eaten. The Dutch had plenty of ships and guns but NZ was just too far away with too few obvious resources and too many warlike natives for it to really be worthwhile setting up a settlement here.
Most early casualties were from disease and European traders selling muskets to local tribes who then went and slaughtered other tribes. The whalers were here for 20 years before the British crown was urged to claim the country and that was because of the missionaries lobbying.
I remember reading that when Europeans first came to the main island in Tahiti there were wall to wall plantations and 100,000 Tahitians living on that island. When the Europeans returned 10 years later they counted some 9,000 Tahitians living there. All the rest had died from the diseases the Europeans had given them.
If Pacific peoples can learn one thing from the colonial experience it should be that disease that they have little natural immunity to is the no. 1 enemy. The British dna that most Maori carry nowadays is probably the ticket to recovery from Covid. Samoans with Danish or German ancestors will in my opinion be better prepared to resist Covid than pure blooded Pasifika. I'm thinking that my European ancestors have had this disease before, in the distant past and those that survived the experience have given the gift of resistant dna to some of their progeny.
Successive government have done more to push people into gangs and their orbit than anything else. By running an immigration driven low wage low productivity economy and doing every thing they can to support run away house prices, they have removed any hope of people ever being able to own their own homes or get ahead and become a positive contributing member of society. People with hope and positive prospects don't usually go down these destructive rabbit holes.
Enjoying your ever increasing house and property portfolio capital gains - well the cost is gangs and the steady destruction of our social fabric.
It can be traced back, pragmatically, to overpopulation of a horizontal space. Europeans were over-full, went looking for space to commandeer. They could rent the space if closely populated (Ireland) but not if sparsely populated (early US). Thus the tea-rent, thus Boston.
For a time, we staved off the spatial competition by digging up old sunlit space; fossil fuels. That epoch was always going to be temporary; it's overshoot by any other name. So we are going to see more and more disenfranchised, as time goes on. ISIS and our gangs are symptoms of the same problem.
You can no longer enfranchise everyone; there isn't enough planet. We are therefore in a period of consequences, with no easy road either back or forward. Universal kindness would be ideal, but you don't get it in an overpopulated space.
Which is why the Govt failed to stop Delta. Systems thinking - we need to be teaching it at every level; too many feed-back loops coming our way too fast now.
How much intelligence do you think we need ? I think it needs to be pretty high for a person to see the big picture and you also need to be a bit emotionally devoid because the decisions that needed to be made go against natural human traits. Because nobody even wants to discuss population control it will come in the form of war and famine and disease instead.
We are getting yet another stark reminder of fossil fuel energy’s crucial role in the economy.
We humans have become collectively enormous and utterly dependent on this finite resource.
As we have utterly failed to find any useful alternative of scale, and failed to scale back, my considered opinion is we’re totally screwed.
I agree so the only question is when will be totally screwed by ? Energy costs will keep rising, usage keeps increasing, climate change gets worse which promotes even more energy useage to try and cope with the extremes, food production gets harder and starts using more energy. The whole thing turns into a nasty feedback loop and in the end war is inevitable as the fight over energy continues. I still think we can make it to 2040 or even 2050 but that's about it and that's not being a DGM, thats being an optimist.
Debt won't allow a scale back or deleveraging
That's what the economy is.. we generate income through energy burn
So yes, we are in trouble
All those supposed future income streams banked in pixels are ultimately a fiction...
Meanwhile, the covid sideshow is just that... a sideshow
In Europe, very high natural gas prices are a very real threat to their economic expansion. But overnight, Russia agreed to increase supplies, taking the top of the sharp increases yesterday at least. Russia has the EU in a choke-hold ahead of their winter season.
MOSCOW, October 6. /TASS/. The European Commission (EC) made a mistake when it curtailed long-term contracts and switched to gas trading on the stock exchange, Russian President Vladimir Putin said at a meeting on energy sector development on Wednesday. Link
BELGRADE, October 6. /TASS/. The energy crisis in Europe was triggered by countries’ failure to sign long-term gas contracts with Russia in time, Serbian President Aleksandar Vucic said on Tuesday during his visit to Slovenia.
"The first reason [behind the energy crisis] is the hydrocarbon tax. And here’s the second one: in March everyone thought the main wave of the coronavirus was beginning to subside, and they wanted to give a boost to their industries with the cheap gas they already had in their storage facilities," the Tanjug news agency quoted the president as saying.
"They [European countries] have run out of their supplies, and did not sign long-term purchase deals with the Russians, and now <…> [Russian President Vladimir] Putin is the absolute ‘kingmaker,’ with the possibility to decide who [will buy] at what price, and how a price should be raised," the Serbian leader continued.
"Now, coal prices have also gone up, and everyone turned their nuclear stations to full capacity. Belarus was not allowed to sell its electricity, but we’ll see how the situation unfolds," he added. Link
A good incentive to use PPE and avoid COVID as much as possible is to avoid being sent to MIQ. Becoming more like prison every day:
Troublesome guests in Auckland quarantine hotel Jet Park are trashing rooms and intimidating staff, as police look to bolster numbers at MIQ facilities.
Stuff can reveal five rooms have been damaged at Jet Park. Some are understood to have been completely trashed.
I hope all you haters out there acknowledge the economic miracle Adrian Orr just pulled off.
He raised our interest rate without driving our exchange rate up.
Okay - its not all his doing but in business it is ALL about timing.
Name the last time the RB managed to start tightening the domestic economy without screwing the rural sector over.by reducing our NZ dollar export returns?
Depend which way you look at it. The answer usually depends on if your a net importer or a net exporter ie do you import more than you export
the dollar dropping makes imports more expensive - ie at .70 USD a $1 USD item costs $1.42 NZD, at .60 USD a $1 item costs $1.66
It however means farmers get more kiwi dollars for what they export (as most commodities are costed in USD or the country's currency who is buying the goods). This can incentivise farmers to grow more and sell the excess to the domestic market at lower prices.
At the moment NZ exports more than it imports but traditionally its been a net importer.
GV - There are two ways for NZ to pay for it's imports. Generate export earnings or borrow overseas against our assets.
Crippling the rural sector by destroying profitability and resulting reinvestment -the sector that is currently generating overseas funds to pay to buy your car or pay for the petrol that runs it or the thousand and one other items imported to give you a comfortable life - has been done before when trying to contain domestic inflation. Raising interest rates and the consequent rising exchange rate - trying to fix one area of the NZ economy while destroying another.
The consequent crash in farmer sustainability led NZ to the easy plan B - borrow and pray.
Now our kids and their kids will be left with the mess because it wont be sorted in our lifetime.
Hmmmm...- U.S. Dollar Index Cash (DXY00)
The APRA change where banks will need to add 3% to their current home loan rates to assess applicants repayment ability is highly likely to come into effect here in NZ- if it hasnt done so already.
NZ banks who are Australian owned are likely to fall in line for simplicity - but with a 1% OCR hike already pencilled in - the RBNZ will be wanting to see a strong repayment buffer for borrowers - in case the 1% proves to not be enough.
As a rough calculation - every .25% increase in interest rates reduces borrowers borrowing amounts by roughly 5K per 100K borrowed. So if the banks add a 1% buffer - somebody currently pre-approved for 500K will now only be able to borrow 400K.
And staying in Europe, the recovery in retail sales didn't eventuate in August as expected, a disappointment for them.
No bank lending expansion to underwrite economic growth.
QE in any form doesn’t actually work and never has (for more than twenty years). It has uniformly been unable to accomplish a single one of its goals through any of the three theorized channels: expectations, falling interest rates, and portfolio effects.
As to the latter of the trio, there’s absolutely no lending. Apart from panicked corporations desperate for liquidity during last year’s GFC2, loan activity to companies in Europe since has been more recessionary than inflationary.
Even overall lending (mostly to consumers) has been lackluster and clearly unaffected by QE’s, tapering QE’s, more QE’s, and now a promise to reduce QE without calling it a taper. Despite all of it, nada: Link
Impossible to capture over large areas. What would you do? Create a massive cover? Mine through the permafrost to get each bubble? Would be rather difficult if not impossible as the energy used for extraction from every bubble would likely be more than the return. AND you need to power that mining device or build that cover and extraction mechanism, likely from fossil fuels, so you are burning more to get less.
I would suggest we have already locked in a lot of permafrost melt, as there is a lag to the climate heating up. What we are experiencing now is not due to the pollution yesterday, but due to pollution 5-30 years ago. Locked in is already ~1.5deg and recent developments show we aren't getting anywhere near limiting to under 2 deg. At which point most estimates say once we go over it, negative feedbacks (including permafrost melt) will mean runaway. Where that stops (8 deg increase is on the cards) is close enough to anyones guess, like forecasting the weather 50 days in advance.
We have all collectively forgotten that all human civilisation is built on one thing - a stable climate. It should be the first thing we ensure is OK, but we are currently treating it as the last thing.
Can you not see how the two are linked? US borrows/prints more money, things that are scarce/limited go up in USD terms as the value of the USD has gone down...
Infinity/21,000,000
Fiat is a ponzi
https://bitcoinmagazine.com/markets/bitcoin-value-in-credit-default-swa…
MATHS PEOPLE! Do some.
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