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OECD sees growth; NZ to grow faster than most; AU close to rate hike; US Fed signals hike; US confidence up; Canada sees mortgages tightening; HNA pulls back; UST 10yr yield at 2.32%; oil down, gold stable; NZ$1 = 69.3 US¢, TWI-5 = 72

OECD sees growth; NZ to grow faster than most; AU close to rate hike; US Fed signals hike; US confidence up; Canada sees mortgages tightening; HNA pulls back; UST 10yr yield at 2.32%; oil down, gold stable; NZ$1 = 69.3 US¢, TWI-5 = 72

Here's my summary of the key events overnight that affect New Zealand with news bitcoin can't quite make it to US$10,000 as conviction is being tested.

But first, according to the OECD’s latest Economic Outlook the world economy has strengthened, with monetary and fiscal stimulus underpinning a broad-based and synchronised improvement in growth rates across most countries. They are picking New Zealand's growth to be +2.4% this year and see it rising in the subsequent two years. They also see our jobless rates staying down and our current account staying at just under -3% of GDP. Much of this is based on 'fiscal expansion' with the new Government spending freely. Interestingly, they don't see house price falls. But they do see higher inflation and upside risk to a "deterioration in the budget position".

In Australia, they see the party continuing although with growth slightly less than for New Zealand. Housing and the links to China are flagged as the main risks. Still, they see the RBA as close to hiking its policy rate.

Meanwhile in Washington DC, US Federal Reserve governor Jerome Powell said “conditions are supportive” of another rate increase next month, during a Senate hearing to consider his nomination to lead the central bank. He also said existing bank rules are 'tough enough', and by implication pushing back at the President who wants to unwind the existing rules that he says have victimised Wall Street.

Meanwhile another US confidence indicator shows it at a 17 year high.

In Canada, their central bank has been reviewing its financial system and is predicting that the upcoming new mortgage stress test will disqualify more than 10% of borrowers in 2018, more in Toronto and Vancouver, less elsewhere. More generally, they see financial risks easing in Canada. The RBNZ releases its own Financial Stability Review here today at 9 am and we will be carrying the press conference live at 11 am.

In China, HNA Group has confirmed it is selling down some of the assets it bought in its recent offshore splurge. Property in Sydney is part of that selloff. HNA says it is bringing its overseas acquisitions in line with the country’s policies, in a clear sign Beijing is reining them in.

In New York, the UST 10yr yield has slipped to 2.32%.

The price of crude oil is a little lower again today, now just under US$58 / barrel, while the Brent benchmark is just under US$63.50.

The price of gold is up US$7 to US$1,294 oz.

And the Kiwi dollar is also up. We are now at 69.3 US¢. And on the cross rates we are at 91 AU¢, and against the euro at 58.3 euro cents. That puts the TWI-5 over 72 for the first time in two weeks. Bitcoin has moved a little higher overnight, now at US$9,945, but can't break the US$10,000 mark. Even the boosters may be questioning their conviction.

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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23 Comments

with the amount of debt now in the system how can reserve banks raise interest rates whilst not being nervous about the fallout.

....It's hard to see interest rates rising very far. It's like ground zero, these bubbles are on life support.

The OECD is urging Australia to begin increasing official interest rates, even if inflation remains weak, to.... prevent a blowout in risky debt levels

http://www.afr.com/news/economy/economy-ready-for-higher-rba-rates-tight...

The same thinking should apply here, there and...everywhere, but as you suggest, it won't....

12
up

Too late now - the crash is baked in. Debt pulls the economy forward ... so unless we see debt growth we hit stall speed. All ponzi's crash eventually - we should be preparing for the new norm ... contraction.

"Think of “borrowing” as a promise to provide future goods and services made with energy. Promises come from optimism about the future. At some point, those promises cannot be fulfilled. There generally is no backing at all for the promises. Selling shares of stock in a new company is very similar to debt — has the same effect. A company issuing bonds to build a new factory is making a promise about the future; this is also true if the company goes to the bank to get the loan... Governments can make promises of pensions for all of its old people, even as the number of old people increases and the number of young people (and the kind of jobs they have) decreases. We tend to believe these promises, because in a period of growth they were true. They cannot be true in a period of contraction."

This is the ugly new norm that awaits.

I promise you this digit I just created on my pc is worth $10,000.

Bitcoin is setting itself up to be the black swan 'trigger' that sets of the stampede of asset collapses.

bitcoin sounds a nice idea in theory, but it works against govts trying to ringfence resources. I think we will find resource hungry nations will resort to force than bitcoin rules.
It also cant produce any resources. Its justs consumes power.
It isnt a panacea, it can only be a bubble.

12
up

Meanwhile JK has been found to have lied big time (again)
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11948852

This time to a level that would have probably had him resigning if it it had came out in 2013/14.

Lets see how much air time NZ gives to this story. - incredibly it is the Herald leading with it.......

Kiwis so dumb lah!

What a revolting abandonment of integrity. Or absence, should I say.

And the New Zealand Corporatism party, hastily gave him a Knighthood double quick time. What did Bill know?............... and has he also deleted those texts about it all.....smiles

Watch "Saving Capitalism" on Netflix to get an understanding who is actually in "government" making the rules. Put's a new perspective on the push to remove the LVR's. Puppet masters.
https://www.netflix.com/nz/title/80127558

Do the OECD comment on money expansion, and how much expansion of the money supply it takes to get GDP growth? If I recall correctly Steven was commenting way back in the post GFC days about a 3:1 ratio. Trouble is the money has to go somewhere.

News reports from countless sources suggest that China's in real trouble.

Its not new , these reports have been coming out for ages , but, given our trade with China its troubles could actually be are our troubles, and Australia's troubles even more than ours .

Its difficult to know what to believe, the paucity of data that comes from China, and not knowing what is fudged and what is true , only serves to muddy the waters and make the picture cloudy .

China's inherent reliance on groupthink ensures that no one speaks out or rocks the boat , so things tend to fester until they have become a real problem .

Thats when the Communist Party steps in to get it sorted , often with quite quite extreme measures . Free market democratic societies dont have such recourse when things go wrong

What we do know indicates asset price bubbles , over-borrowing for development , weak demand internationally , and banks carrying large non-performing loans that don't have ( or are unlikely to have) adequate provisions .

If anything , we should be aware of the downside risks of something going wrong, particularly a stock market correction that becomes a rout . Such a correction , if it becomes rout, could lead to a reduced demand for commodities

The problem with groupthink is that when the group thinks their stock market bets are too risky, or their banks cannot meet their withdrawals , true to form, they exit as a group.

We should not forget that Chinese stock markets literally have tens of miilions of individual small investors, unlike the West where stockmarkets have huge institutional investors, Insurance Companies and Pension funds willing and able to weather a correction .

I have a friend who is a lawyer in China, a local. He told me a few weeks ago that China was struggling and slowing, his family have a manufacturing business and it's struggling. I don't know when it comes out in the data but it cannot be far away.

I am not sure if we should be patting ourselves on the back for a 2.4% YoY GDP growth or kicking ourselves for achieving that with a 2.1% population growth.

BitCoin went just over 10K about 30 mins ago now....

possibly. There are dozens and dozens of unregulated, uncoordinated markets for cryptocurrencies, many of them in the Far East. Korean markets had it over US$10,000 a few days ago. There is a good business arbitraging these platforms. 

But we are following the live price here - and so far it has not gone over US$10,000 - yet. (I am not claiming this is the most respected or important platform, it is just the one we follow.)

Bitcoin is not alone - Dow Jones has just gone mad

I am no expert on anything really , but my first rule for investing is never to invest in anything when I dont understand how it gets its income or makes money ...................... and I dont understand how Bitcoin makes money.

How does gold make money Boatman, or a piece of fiat currency paper? Serious question then we can then discuss bitcoin.

You are correct , Gold has absolutely no value whatsoever , other than for the purpose of female adornment . But it is tangible , it is saleable and it has the use I have described .

Fiat currency relies on trust to hold its value , but Bitcoin is something else completely

"Trust" yes correct exactly what people buying Bitcoin have. I brought some software yesterday and had the option of paying with Fiat, Credit Card, Bitcoin ..but not gold

Exactly Boatman. It's just the same as when Mr Ponzi himself told folk back in the 1920s. "We will get you 50% pa interest. But don't ask how, it's magic"

When the Bitcoin fails, will they call it "Cloud Burst' ?