IMF sees higher global growth, but more debt, more volatility; China's power use up +5%; Aussie Federal debt to exceed $0.5 tln; UST 10yr yield at 2.40%; oil stable, gold up; NZ$1 = 71 US¢, TWI-5 = 77

IMF sees higher global growth, but more debt, more volatility; China's power use up +5%; Aussie Federal debt to exceed $0.5 tln; UST 10yr yield at 2.40%; oil stable, gold up; NZ$1 = 71 US¢, TWI-5 = 77

Here's my summary of the key events overnight that affect New Zealand, with news that expert opinions about the growth rate of the world economy are in the spotlight today.

Firstly however, it is a public holiday in the US (Martin Luther King Day) so market activity will be lighter than normal.

The IMF has updated its 2017 global growth forecast and confirmed that it sees improving conditions in most regions.

It has lifted the growth expectation for the US on the basis that significant deficit spending will happen under the Trump presidency. It also raised its growth forecast for China. But both countries will achieve that with significant increases in their debt levels. Interestingly, US Fed officials no longer see the need for added fiscal stimulus, worried that such a program will make larger problems down the road.

The most noticeable feature of their growth forecasts however are not for these two; it is that they don't see any improvement on the +1.6% growth for the Euo Area, or the +1.1% for Russia. Almost all other world regions far exceed that. (They did not make specific forecasts for either Australia or New Zealand in this Update.) They did note that 2017 will be more volatile.

In China, data out overnight shows that electricity use grew +5.0% in 2016, significantly below the country's official growth rate. Electricity consumption is often used as a proxy for a more realistic assessment of the growth rate in China.

In Australia, fixed mortgage rates are rising there, with both the NAB and ANZ raising them for terms of two years and longer. The warning has also gone out that "variable rates are under pressure".

Also in Australia, it is becoming clear that the debt of the Federal government will exceed AU$500 bln by the middle of this year. They used to have a debt ceiling law but that was abandoned in 2013 by the Abbott government with the support of the Greens. At that time, the limit was AU$300 bln.

In New York, the UST 10yr yield is unchanged because of the holiday, still at 2.40%.

Oil prices aren't affected by that but they are unchanged anyway, now still at US$52.50 for the US benchmark, while the Brent benchmark is now just on US$55.50 a barrel.

The gold price is up US$7 and is now at US$1,202/oz.

The New Zealand dollar is little changed as well, now at 71 US¢. On the cross rates it is at 95 AU¢, and against the euro at 67 euro cents. The NZ TWI-5 index is at 77.

If you want to catch up with all the changes yesterday, we have an update here.

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

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8 Comments

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What's the point of GDP figures , when they get routinely revised such that the contemporaneous commentary or hope becomes redundant. Statistics NZ is particularly adept. A single quarter can be erroneously stated if the quarters adjacent suffer the same revision, but when growth over longer periods get revised up or down , how we measure 'growth' needs some serious questions. In aggregate , 2013 without statistical revision growth was 3.1 percent, after multiple revisions , cut in half to 1.55 percent..The December 2013 quarter started at .a headline of 0.9 percent, , now 0.0

IMF be damned.

A report by Oxfam released ahead the World Economic Forum in Davos shows the gap between the ultra-wealthy and the poorest half of the global population is starker than previously thought, with just eight men owning as much wealth as 3.6 billion people. And since 2015, the richest 1 per cent has owned more wealth than the rest of the planet. Read more

And yet one of them seeks and gets a hand in the wallets of the taxpayer and the poor they are increasingly called upon to support.

Food-stamp recipients can use their taxpayer-funded benefit to order online from retailers like Amazon under a new Obama administration initiative that aims to facilitate the shopping experience for rural and urban residents. It marks the latest of many costly experiments by the administration to expand the fraud-infested program, which has seen a record-high number of beneficiaries under President Obama. To eliminate the welfare stigma, the administration renamed food stamps Supplemental Nutrition Assistance Program (SNAP) and the rolls swelled to an astounding 46.5 million in 2016. This cost American taxpayers and eye-popping $70 billion, according to government figures. Read more

And despite information like this they still don't understand why Brexit and Trump happened!

Wow , the Aussies sure have a staggering amount of debt !

I hope they have something to show for it , and that it has not all been wasted on current expenditure .

My hand-held calculator does not go into the Billions ( Nine zero's?)

What is the per capita debt when the Government has $ 500 , 000 , 000 , 000 and there are 23 million people ?

It looks like around $22, 000 per person , which does not seem like a lot , but they only collect around $170 billion per annum in tax , which is about 34 % of the total debt .

Debt servicing costs must be a big number , too

Here's some advice from a Boomer :-

Recklessly spending and living beyond your means is never going to end well.

Good advice for the ordinary person Boatman, but Banks won't want Governments to follow it. If they do, banks will lose a lot of their power and influence.

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Wow , the Aussies sure have a staggering amount of debt !

I hope they have something to show for it , and that it has not all been wasted on current expenditure.

Not much at all really if this tale of woe is a good example.

The world’s biggest mining companies producing iron ore from Australia aren’t paying their fair share in taxes, according to a lawmaker who wants a 20-fold raise in a state levy that’s been unchanged since the 1960s and the era of imperial pounds, shillings and pence.

The proposal has “overwhelming” support and Rio Tinto Group and BHP Billiton Ltd.’s objections don’t stack up, according to Brendon Grylls, Western Australia’s Nationals party leader. Grylls, a farmer and one-time baker turned politician, is championing the drive to raise the lease rental payment, levied on ore from the two companies, to A$5 a metric ton ($3.68) from 25 Australian cents. Read more

I guess reality has become relevant after years of false optimism around the prospect of over borrowing today against the collateral of future earnings that do not exist.