90 seconds at 9 am with BNZ; Flood impacts; Portuguese bonds; yuan value

90 seconds at 9 am with BNZ; Flood impacts; Portuguese bonds; yuan value

David Chaston details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand.

Today is when the crest of the floods in SE Queensland are expected to happen. When that passes, attention will turn to the economic impacts on the Australian economy.

First indications are that it could turn the Federal govt’s budget surplus into an unexpected deficit.

Substantial spending on relief and reconstruction, and lost tax receipts, will be the main impacts. However, when things recover, Australian commodity exports will be being sold at significantly higher prices.

Portugal’s bond issue last night went off successfully. There was strong, non-ECB demand. EU president Barroso (who is also Portuguese) called for increasing the size of their bailout funds, and although the initial reaction was negative, bond buyers can clearly see little downside to buying Portuguese debt now if they are going to be bailed out should things wobble in the future.

In the middle of the euro storm in Germany, and that economy is doing very well indeed. It’s economy expanded at its fastest pace in over two decades on both export and domestic strength. A real growth rate of +3.6% was reported for 2010.

The Dow was up strongly on this news and the successful Portuguese bond auction, and signs of strength in the American banking sector.

Oil was up strongly also, as was the value of the Chinese Yuan. Premier Hu is about to visit the US and when that has happened before, the Chinese allow noticeable appreciation to take the sting out of direct US criticism of their exchange rate policy.

The Chinese, in their turn, want the US to stop monetizing their debt. Not much chance of that now, I suspect.

 

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

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

17 Comments

Its an interesting world when you have to ask the bloggers what really happened at Portugals bond auction.

----------

poldarkThe bond auction was not a success.

They got a bail out because the ECB intervened.
Also, the close was delayed for quite awhile. I suspect the ECB was making some frantic phone calls all around the world.

drjonathanwilson

Today 05:54 PM

 

Indeed - this is sloppy "journalism" from Amy Wilson - no mention of who the buyers were or what the coverage was - then break those numbers down by inter EMU buyers and extra EMU buyers

Come on Amy its not too much to ask!

Jonathan

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8254735...

 

And oil is up nearly $3 in the last few days to $92.10 while brent passes $98 with Kuwaiti  forecasting $110 within two weeks. Better fill the farm tanks up today.

According to The Oil Drum website ...

If you look back at what happened three years ago in the period from autumn 2007 to the oil price spike to $147 in July 2008, there was a huge run up in the price of oil, but very little change in oil supply.

That's probably got more to do with OPEC's inability to ramp up supply than it has to do with the cartel's desire to maintain a high price. In that period, OPEC increased its oil supply by 1.3 million barrels per day; non-OPEC actually decreased its supply by about 0.3 million barrels per day providing a net increase in oil supply of only about 1 million barrels per day ... despite the huge run-up in prices.

OPEC has done a good job of convincing the world that it has a lot of extra supply, but it is less than clear that it has much more excess capacity than it had in the 2007-2008 period. Spare capacity, like oil reserves, is not audited. The higher the numbers proclaimed to the world, the more powerful OPEC appears, both in the eyes of its own people, and in the eyes of people around the world.

If demand continues to grow, we could very well see another surge in oil prices (towards, say, $150 per barrel), and another test as to whether there really is spare capacity. The evidence suggests we won’t be getting much more oil ... perhaps another 1.5 million barrels per day, even if prices spike.

The one possibility that would seem to postpone such a price run-up is if world economies in the very near term start heading into recession again. Such a recession might indicate that even the current oil price is too high for economies to handle, in their weakened states.

EQC processing center was moved to Brisbane and is now closed because of the flood. I guess they moved to for some sort of risk aversion..go fiqure. But I guess they still employ kiwis, some of the thousands that live over the ditch.

You would think by now Treasury would have data to give a clear indication of the impact on the economy of each $1 rise in the price of oil. Obviously being an economy dependent on the roading system to freight dam near everything everywhere 24/7, the costs must flow through into the col...unless of course the bureaucracy manipulates the numbers as they do in the USA.

This is the consequence of both the rising new world demand for oil but also the stupid behaviour of the Fed in trying to print a way out of debt in an age old act of criminality. We get a daily dose of BS about great commodity prices and how they will save the economy...but bugger all is said about how households are expected to cope with flat incomes, expected rising interest rates and the dreaded inflation.

Those households that avoided borrowing to binge on rubbish or to chase their neighbours round the streets trying to outdo them in paying brainless prices for the same properties, they are the ones that will survive this recession...but what they don't know is the govt and RB have every intention of socialising the gargantuan banking sector debts by debasing the currency, thieving from those who saved and applying policy to ensure housing remains seriously unaffordable.

Households are mad if they do not pay down debt...and beyond being stupid if they take out mortgages because this recesion is set to run for at least another decade maybe two. Remember, as the banks begin to crystalise the losses on their brainless lending..ie yellow pages...they will hike rates on existing debt to restore their balance sheets. YOU are the one who will pay if you owe them any money.

Problem is though that paying down debt takes a long time generally for the average person. As cost price inflation pushes prices of our essentials even higher, debt repayment becomes even harder as many families are simply struggling to keep above water.

I don't disagree with your advice though ..

But if your asset is falling as you are paying down debt you dont get far and the exercise becomes futile.

http://www.oftwominds.com/blogjan11/goldilocks-red-queen01-11.html

What will happen with NZ’economy under climate change, in a case weather events turn nasty like they do all over the world currently, and NZagriculture exports and NZtourism are at risk ?

 A farmer response: Walter - NZfarmers for generation had to live with bad weather, so this is nothing new for us.

A few others and Walter thinks: Hmm - do those NZfarmers and the government under the influence of climate change/ oil not think, maybe we should start creating a new strategy in business and overall approach in economics creating new stable segments – more diversity/ flexibility – described many times before ?

 Small nations have to think small with big ideas – branding a “100%NZpure Economy” and not turning the purest water into the dirtiest.

 

What if the climate doesn't change , but remains as it always has been , bloody unreliable & erratic ? .............. Just ask any farmer to verify that .

 "Queensland's attraction for skilled Kiwi workers is likely to get stronger when the devastating flood waters recede, with labour market experts predicting an exodus across the Tasman to help rebuild the stricken state."

http://www.stuff.co.nz/business/industries/4535524/Flood-work-tipped-to-aggravate-labour-exodus

What will this do for property bubbles in NZ?

Well it could yet another factor that tightens up the scope to build new houses, could result in a shortage problem before the year is over in the areas that people are wanting/needing to live and work - the over-supply  in the coastal/beach areas will still be around for some years though

Man i get tired of people advising NZ to change its economy. None of them come up with the key question " To What". Food production is a winner managing that efficiently for more profit is the answer. We are too late thank goodness to be an Irish economy. We missed the Microsoft the nokia and the facebook economy. We dont have a close at hand market of 100's of millions of affluent punters(who does these days). We already have a sustainable product mix but unfortuantely it wont support the several million hangers on in our welfare state. There is no easy answer and at least the government no longer describes food production as a sunset industry. The government needs to address the fact that we cannot afford the current levels of income transfer and instead we need to address the needs of the truely impoverished as a safety net and get rid of the middle class trough. Unfortunately making the change will be very painful.

Nice wish list Dug...maybe the govt should pay the unemployed to cross the ditch and get a refund later....Don't fancy your chances though because there are so many votes to be had from the benefit brigade. Certainly Labour think so.

Dug: The error is to think that one should be constantly changing. Why change ?. One should stick to what you know, to what you are good at, whatever it is.

 "Unemployment is losing its sting. The latest job vacancy survey shows more jobs on offer than ever before.

The Bureau of Statistics found 194,000 jobs unfilled in November, well up on 151,000 the year before.

With 575,000 Australians looking for work, the finding means there are now only three unemployed for each vacant job.

 A year earlier there were four."

http://www.smh.com.au/small-business/trends/job-vacancies-at-record-levels-20110113-19opu.html

Quick hop across the ditch boys...fatter pay!

Got a mate who owns a transport business in Aussy, has a fleet of 48 trucks. Says he's sick and tired of 'dead-end, lazy, unreliable'  Aussy workers and makes it an employment strategy to hire Kiwis. He might be a tad biased, being a Kiwi himself, but he's got story after story about the Aussies as slackers. What are other people's experiences?

ON COMMODITY PRICE RISES ...I am astonished at the positive spin  the Herald  has put on on commodity price increases this morning , and how the Australian floods will miraculously "help us" .

This flood will not help us, or anyone else for that matter 

The Herald's  second error is attributing the increase in commodity prices to the floods alone .

The price of commodities has been increasing steadily for months as the US federal Reserve waters- down- the- dollar,(  like  adding water to a rich soup , you end up with a weaker soup , keep watering it down and you end up with water only )

Commodity exporters trying to maintain the US$ parity  value of their exports are demanding more US$ for each bushel of wheat, pound of raw sugar , or kilo of milk solids , kg of bananas, coffee, tin, bauxite, coal, iron ore, copper, ounce of gold you name it 

Commodity traders and futures traders are astute buggers and they know the maintenance of price parity is essential to a proper functioning market   

We import wheat and masses of sugar from Oz  , everything from bread to sugar to chocolate , coke , and processed food generally will go up .

Our dairy commodity prices may go up , but the New Zealand consumer pays international parity for milk cheese and butter , so we will feel this price increase soon.

Every commodity on the planet has gone up in US$ terms and most people dont realize the implications yet . 

Oil has spiraled out of control and one can only hope it adjusts down soon .

I am frankly concerned about imported- price- inflation for New Zealanders in the short term.  

 

Leading economic analysts at the Herald boatman...you're expected to believe!