Here's our summary of key events over the weekend that affect New Zealand, with news Northern hemisphere holiday makers are returning to an economic situation that is far from upbeat for most. And the storms in the US and China are not the issue.
Firstly, American retail sales recorded their smallest gain in six months in August as consumers cut back on purchases of cars and clothing. Although that was below market estimates, it is +6.6% higher than the same month a year ago. And we should note that there were upward revisions to July data. Essentially this data doesn't change economic growth expectations in the third quarter, even with its weak car sales component.
A key measure of industrial production and capacity utilisation came in at modest levels, and about what was expected.
And interestingly, August imports at the two huge Los Angeles seaports were down -3.1% at a time they normally grow. This does suggest that some of the tariff front-running may have peaked.
But a widely reported index of consumer sentiment came in higher than expected, but staying on the same overall track it has been on since 2009.
Across the Atlantic, data for the EU trade balance in July was lower than expected and by quite a bit.
Feeling the pinch of sanctions, and the more general emerging market squeeze, Russia has moved to defend their currency, raising official interest rates by +25 bps to 7.50%. It was their first rate hike in four years.
Indonesia is also feeling the pressure. It is reported to be delaying infrastructure projects (and the debt they require) to reduce its vulnerability to the international currency stresses they are now facing.
There are widespread reports that the American President has ordered staff to proceed with the second set of tariffs on China - covering about US$200 bln of trade - and this sort of undermines his Treasury Secretary's attempt to restart trade talks with China. And China is quickly adjusting to its own rejection of US imports. And they think they have moneatry policy options too.
In China, new data has revealed signs of softness, as the pace of investment has slowed to a new low (for them). Stable figures for retail sales growth and industrial production have done little to ease concerns of a cooling in their economy.
But property prices in China rose at the fastest pace in almost two years in August. As their export economy cools, and stresses the in P2P sector turn ugly, speculation in the housing market is turning up, adding to the likelihood of more government tightening in the housing market.
New data in Canada shows their household debt ratio up slightly to 169.1% but still well below its high in 2017 and today's data suggests it may be turning to an improving track. (New Zealand's equivalent data is 166.0%.)
The UST 10yr is higher today at just on 3.00%, +15 bps higher over the past week. Their 2-10 curve is at +21 bps, -3 bps lower in the week. The Aussie Govt 10yr is at 2.60% (down -1 bp), the China Govt 10yr is at 3.68% and up +3 bps, while the NZ Govt 10 yr is at 2.58%, unchanged. New Zealand swap rates have changed very little over the past week, or even the past two weeks.
Gold is weaker and is now just on US$1,193/oz in New York, down -US$8 and lower than level as this time last week.
US oil prices are little changed at just under US$69/bbl. The Brent benchmark is now just over US$78/bbl. The US rig count moved up this week.
The Kiwi dollar is starting the week slightly softer at 65.5 USc, but little changed on the week. On the cross rates we are marginally softer too at 91.5 AUc, and softer at 56.3 euro cents. That puts the TWI-5 at 69.4 and exactly where it was seven days ago.
Bitcoin is now at US$6,488, a similar level to this time last week but -1.4% lower than where we left it yesterday.
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10 Comments
NZ the 'second most overvalued housing market in the world'
New Zealand's housing debt sat at 89 per cent of GDP, according to the report.
https://www.oneroof.co.nz/news/35410
https://motherboard.vice.com/en_us/article/43pek3/scientists-warn-the-u…
Really? I though it went on forever. I was told 'there are rules'. Oh well, aybe the referee was sexist and that changed to whole ball-game......
If the Government really wants house prices to be fair and reasonable there are a few things it can do ., and end up with families owning a basic 3 bed house could cost a s little as $500/week on leasehold land
But it wont do any of them .
They are , in no order of importance :-
1) Triple rates and taxes on undeveloped sections vacant for more than 2 years ( to stop landbanking )
2 Treat sales of unimproved land as if it was a business ,( ie speculative activity )
3) Encourage subdivision by making council fees free for 36 months ( including free water connection ) and if you dont subdivide within 36 months then the fees are the full 100%
4) Allow flatpack homes to be shipped in by container from Germany and Poland DUTY FREE this will shake up the building supply cartel
5) Allow short -term inward migration of tradesmen from Asia
6) Government could Service residential land and make it available on 99-year leasehold like London or Singapore or many parts of China . The rent could be fixed at 3,45% of actual cost of establishment per annum , so a $300k section would cost around $150 to $199 per week in leasehold and the top structure would cost about another $200 per week , so a 3 bed house could be "owned " for a little as $500/week
*1) Triple rates and taxes on undeveloped sections vacant for more than 2 years ( to stop landbanking )*
Triple rates on all urban residential and commercail land with a lower density than X. Under developed is just as bad as not developed, and Auckland council for one needs the revenue to dig itself out of debt and fund the infrastructure.
Why don't we just go to the real core of the problem, instead of your half arsed ones. You almost have it at with 1) when you introduce the theme of demurrage. Instead of putting it on the land, scrap interest altogether and put the demurrage on money. The problem will totally solve itself very quickly, but upset a lot of people with skin in the game.
If you contemplate your comments more fully you will see your interest payments in 6) are at odds with your demurrage at 1). Perhaps one cancels the other, but I doubt this was your thoughts when laying out your strategy.
What I will concede is that demurrage on land could be a way the council could influence monetary policy by sidestepping central government and the RBNZ, thus it would be an excellent idea to rip out the rug from under property investment as an asset class in this country. By such action the Auckland Council could take a step towards independence from the rest of the country.
The power to do #1 already rests in the Rating Act, view it all here:
Schedule 2
Matters that may be used to define categories of rateable land1 The use to which the land is put.
2 The activities that are permitted, controlled, or discretionary for the area in which the land is situated, and the rules to which the land is subject under an operative district plan or regional plan under the Resource Management Act 1991.
3 The activities that are proposed to be permitted, controlled, or discretionary activities, and the proposed rules for the area in which the land is situated under a proposed district plan or proposed regional plan under the Resource Management Act 1991, but only if—
(a) no submissions in opposition have been made under clause 6 of Schedule 1 of that Act on those proposed activities or rules, and the time for making submissions has expired; or
(b) all submissions in opposition, and any appeals, have been determined, withdrawn, or dismissed.
4 The area of land within each rating unit.
5 The provision or availability to the land of a service provided by, or on behalf of, the local authority.
6 Where the land is situated.
7 The annual value of the land.
8 The capital value of the land.
9 The land value of the land.
So what's actually stopping AC from impementing #1 at the next Annual Plan? In descending order of significance:
- Cojones
- Vertebrae
- Economic Clued-uppery
Wholesale electricity market jumps.
Fat fingered trader dobson trading jumps from $102 mw to $9530mw?
looks like there are distribution issues in the SI island power network due to snow.
https://www.transpower.co.nz/power-system-live-data
ni Thermals firing up HVDC SENDING SOUTH.
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