Here's my summary of the key news overnight in 90 seconds at 9 am, including news of a tough Australian budget.
But first, following a really big gain in March, American retail sales in April were up only +0.1%, although business inventories rose more. Markets were positive about the data.
Also, China has released weaker-than-expected manufacturing data. Industrial output rose by 8.7% in April from a year earlier, weaker than expected. Retail sales and fixed-asset investment spending also came in below forecasts as well.
This data may have been weak, but it is still good. However, Chinese housing starts slumped by a quarter in April from a year ago, a huge correction for a country long buoyed by residential construction. Vacancy rates have soared in many existing developments.
In the Australian budget last night there were major expenditure cuts across government, merging departments and redundancies, but there was also new spending, particularly on roading infrastructure.
On the revenue side there are new taxes on high income earners, six-monthly indexation on petrol tax, and new charges for visits to the doctor.
There is no forecast of a return to surplus.
There will be new borrowing. Australian Federal debt will rise to 24% of GDP, although that is relatively low in the New Zealand context - ours is currently 28% of GDP. Australia's AAA credit rating won't be under threat. Overall, their 'age of entitlement' might be over, but this medicine is actually quite modest.
Gold and oil were range-bound overnight; UST 10 yr bond yields are now at 2.62%. Equities however were up in late New York trade with the S&P500 rising above 1900 for the first time in morning trade.
On the exchange rate, we start today with the NZ dollar marginally higher at 86.3 USc, the budget announcements only had a very minor impact on their exchange rate and the Aussie is currently at 92.3 AUc. The TWI is just on 80.3.
If you want to catch up with all the changes yesterday, we have an update here.
The easiest place to stay up with today's event risk is by following our Economic Calendar here »
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3 Comments
Interesting article in the Waikato Times this morning regarding high earners in Aussie earning an average of 2.6 million cutting their taxable income down to$1.10 each.
If this behaviour goes on in Aus you can bet it goes on here to.The article is written by Peter Martin the economic editor for the AGE.
Looking at the Australian budget, I don't know that young kiwis trying their luck in Australia are going to be any worse off than young Australians anymore, given the 6 month unemployment benefit standdown.
http://www.theguardian.com/world/2014/may/13/young-australians-to-face-…
It strikes me that yound Australian's may be being called on to bear a disproportionate amount of pain compared to both their assets and the degree to which they contributed to Australia being in this situation.
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