Here's our summary of key events from over the weekend that affect New Zealand.
Chinese authorities have ordered the country's banks and insurance companies to ease the pain caused by slowing economic growth and trade war fears. The China Banking and Insurance Regulatory Commission has called for financial institutions to address “weak points” in the country’s infrastructure sector, and instructed them not to “blindly” withdraw funding from companies with good credit ratings that are experiencing “temporary operational difficulties”. It’s also said support should be given to import/export-oriented firms.
Both Moody’s and Standard & Poor’s have cut Turkey’s sovereign credit ratings deeper into “junk” territory. Downgrading its rating a notch to B+, S&P cites extreme lira volatility and forecasts a recession next year. It also expects Turkish inflation to peak at 22% in the next four months.
Inflation is picking up around the world, largely off the back of higher energy costs. Annual inflation in Canada rose to 3% in July, from 2.5% in June. Meanwhile inflation in the Euro area rose to 2.1% in July from 2% in June.
The US's latest consumer sentiment index has come in much lower than expected. The University of Michigan’s index has dropped to its lowest point since September last year, largely due to a decrease in optimism from low income earners. Of particular concern is that buying conditions for large household items sank to their lowest level in nearly four years – this being an indicator of coming stagflation.
A new study has found that while climate change will be bad for the world's food security, a carbon tax big enough to slash emissions, will be worse. A paper in the Nature International Journal of Science concludes that while the changing climate will directly hit agricultural productivity, a hefty carbon tax will raise energy prices, making food production more expensive and thus threatening supply. The Productivity Commission says the price of carbon in New Zealand needs to increase 10 to 12-fold for us to reach net-zero emissions.
Finally, a Reuters news report that can only be read as a word of warning to our neighbours in the Pacific. China is boycotting the tourism industry it largely built in Palau, as the tiny Micronesian nation refuses to ditch Taiwan as an ally. China last year effectively banned tour groups from visiting Palau, branding it an illegal destination due to its lack of diplomatic status. While the Chinese have been buying up real estate in the islands, and accounted for half its tourists in 2017, Palau's hotels are now empty, with an airline even canning its China route. China last year halted tours to South Korea after Seoul installed a controversial US missile defence system.
The UST 10yr has fallen since this time on Friday to 2.86%.
Gold is down a few dollars to US$1,177/oz.
Oil is up slightly. The US crude price is at US$66/bbl, while the Brent benchmark is at US$72/bbl.
The New Zealand dollar has jumped to 66.4 USc, but remains at 90.7 AUc and 58.0 euro cents. The TWI-5 is up to 70.3.
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10 Comments
China has said reports it is holding a million Muslim Uighurs in detention in Xinjiang are "completely untrue".
Uighurs enjoyed full rights but "those deceived by religious extremism... shall be assisted by resettlement and re-education", officials said.
The rare admission from Beijing - at a UN meeting in Geneva - came in response to concerns that the region "resembles a massive internment camp".
and https://www.theguardian.com/world/2018/jan/18/china-testing-facial-reco…
and https://www.hrw.org/reports/2005/china0405/4.htm
Still waiting for shadow minister and National MP Jian Yang to give his opinion of the number of Uighurs detained and/or disappeared in Xinjiang. He ought to have an informed opinion since he is reputedly in good favour with Chinese govt organisations.
Maybe he could contribute an article to Interest.
Steve Keen suggests that Australia may go into recession as the economy continues to deleverage from its massive mortgage debt. He beleves that th RBA will unleash some form of QE that will feed into the ASX, which has ben comparatvely flat since the GFC.
https://www.rt.com/op-ed/436263-australia-economy-stock-market/
Note: Edited for spelling and grammatical errors. Need to be rigourous when posting. This one was appallingly bad.
"The Productivity Commission says the price of carbon in New Zealand needs to increase 10 to 12-fold for us to reach net-zero emissions." A carbon tax is rubbish. It is based on a principle of putting a price on something will effectively curtail its use. The problem with it is that there has to be a viable, affordable alternative. The only people proposing it are ones who do not understand this and cannot see the big picture, or just don't care. A carbon tax would adversely impact the economy and disproportionately impact the lower socio-economic groups unless a alternative that can be afforded is offered. For example power; people are foregoing heating their homes already due to the high cost of power, and the current allowance to compensate this is weak at best. Transport, a carbon tax would deprive people of transport options as they could no longer afford cars and be reliant on public transport, but the cost of that would skyrocket too.
So we shouldn't encourage reduced emission alternatives via a carbon tax. Even though there are clear proven alternatives for your example of power and transport.
What do you suggest is a better approach?
We could keep the ETS system, only the unit price will need to skyrocket to have any actual effect on behaviour. And wouldn't it effect behaviour in the same way as the carbon tax, by increasing the cost of fossil fuel powered electricity and transport?
The government could just ban the use of fossil fuels? Can't see the effect of this being any better.
No. firstly i disagree with your point about proven alternatives. while there are a number of possibilities, none are affordable at the moment. Disagree? Tell me how someone on the minimum wage could afford an electric vehicle, or have transport options 24/7 if they don't own a vehicle, or someone on the GRI being able to afford to heat their home in the winter?
The solution is for the Government to regulate green house gas emissions in a way that everyone is impacted not just to lower socio-economic groups, No Exemptions. No opportunities to trade units that allows a person or group to avoid responsibility. Price controls will be required too, to limit greed and profiteering.
There are plenty of possibilities, but people must be compelled, not taxed. Cost only forces those who can't afford it, the others avoid it. Farmers should be paying for their part now, not in 10 years or so.
On the issue of food security, there is a serious question over the ability of the oceans to continue to supply any.
https://www.themonthly.com.au/issue/2018/august/1533045600/james-bradle…
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