The New Zealand Reserve Bank’s Monetary Policy Committee lowered the Official Cash Rate to 4.25% from 4.75%.
The bank’s updated projections are consistent with another 50-point reduction at its next decision on Feb. 19, Governor Adrian Orr told reporters at a press conference. “But it’s also conditional on economic projections panning out,” he said.
“Economic growth is expected to recover during 2025, as lower interest rates encourage investment and other spending,” the bank said. “Employment growth is expected to remain weak until mid-2025 and, for some, financial stress will take time to ease.”
This is a very different path compared with the RBA’s 4.35% well into 2025.
Sometimes a short sharp shock is better!
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Digital Finance Analytics (DFA) Blog
Kiwis See Another Rate Cut As The RBNZ Takes A Different Path!
The latest monthly CPI data from the ABS showed headline inflation going sideways and underlying inflation rising, despite the massive Government support to households across electricity and rents.
Nothing here to signal rate cuts in the short term, and the RBA will continue to look through to the underlying rate of 3.5% which is up from last month and higher than their target.
Of course, politically speaking we will hear loads about Government support, and bearing down on inflation, despite the fact that many of the actions of Government are driving inflation higher.
Its another classic case of numberwanging, because the real costs for people are so much higher.
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This is our weekly market update, where we start in the US, cross to Europe and Asia, and end in New Zealand and Australia, covering crypto and commodities along the way. This is data heavy, so strap in.
Global stocks registered a strong weekly gain on Friday while U.S. Treasury yields slipped as markets eyed President-elect Donald Trump’s likely policies and their impact on the U.S. economy, even as bitcoin traded near the $100,000 threshold as bets that Trump’s administration will take a lighter-touch approach to regulation as chairman Gary Gensler plans to step down on January 20, the day Trump is inaugurated.
MSCI’s gauge of stocks across the globe rose 0.33% to 854.13 and gained about 1.4% for the week. Europe’s Stoxx 600 share index ended the week 1% higher, snapping four straight weeks of losses.
All three Wall Street indexes finished higher and each notched a weekly gain. Industrials, consumer discretionary, financials and consumer staples drove gains while communication services, utilities and technology equities were the biggest losers.
Nvidia (NASDAQ:NVDA), the world’s most valuable company, ended down 3.2% after the artificial intelligence chipmaker reported strong quarterly results but issued lacklustre sales forecasts having hit a prior record high.
European equity markets closed higher on Friday, despite investors digesting weak economic data as well as the intensifying conflict between Russia and Ukraine. Data released earlier Friday vividly illustrated the economic woes that Europe is currently suffering, pointing to further interest rate cuts by both the European Central Bank and the Bank of England. Germany’s DAX rose 1% and the UK’s FTSE 100 gained 1.4%, while France’s CAC 40 climbed 0.6%. The pan-European STOXX 600 jumped 1.2%, its best daily performance in nearly two months.
Most Asian stocks rose on Friday, buoyed by strength in chipmaking and cyclical stocks, which helped markets weather heightened tensions over the Russia-Ukraine war.
A rally in oil prices on fears of an escalation in the Ukraine-Russia conflict pushed energy stocks higher, sending the Australian sharemarket to a fresh closing high on Friday. Australia’s ASX 200 benefited from a shift into economically sensitive sectors despite Australian PMI data showing a contraction in both manufacturing and services activity.
The S&P/ASX 200 jumped 0.9 per cent to 8393.8 at the closing bell, resetting Tuesday’s record of 8374. The index climbed 1.3 per cent this week. The All Ords rose 0.8 per cent.
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Digital Finance Analytics (DFA) Blog
Markets Reach For The Stars Again, Even As The Ground Shifts Under Foot!
OK folks a rant warning. It seems you are better placed financially and socially, if you are old with property compared with being young with none or a massive mortgage! And its structural thanks to bad policy across the board. One reason why younger people are turning away from the major Uniparty.
If you are one of the many thousands of younger Australians struggling to try and get on the property ladder, you will already know there is a war on youth, thanks to mass immigration, a permanent per capita recession, the rent shock, the energy shock, unaffordable homes, crushed wages, rampaging mortgage repayments, destroyed and expensive education, plus a ruined built environment a wrecked natural environment, oh and a dying planet.
But Older Australians are in a completely different world. CBA says Australians are freeing up more of their wallet for discretionary purchases with a focus on value and convenience, according to the latest CommBank iQ Cost of Living Insights analysis. Overall spending continues to trail inflation, up by just 1.5 per cent compared to the same time last year.
The combination of higher prices and mortgage rates has pushed the percentage of median household disposable income spent on mortgage repayments on a median-priced home to a record high of 50.6% nationally.
But on another planet, far, far away, cash sales in property surged 14 per cent to $138 billion across NSW, Victoria and Queensland over the past financial year, fuelled by wealthy downsizers, retirees and investors, a new report shows.
So it’s better to be old, with property, than young with no property or a massive mortgage, and the intergenerational gap is continuing to grow. Trouble is, unless things change trends are set to deteriorate further. Sure if you have parents with property who will fall off the perch sometime in the future, you may gat a look in, but if not, permanent renting is the order of the day. So much for the Australian dream of property ownership.
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Today’s post is brought to you by Ribbon Property Consultants.
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Following my live show on Tuesday I had a number of requests for mapping of the Rental Stress story across the country. So in this show we look at the distribution of rental stress both in count and percentage terms, based on DFA modelling and surveys.
Live show was here: https://youtu.be/c8rTWEEw2KU
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Can the Australian economy be weak, and strong at the same time? Or which is it? This is an important question because the answer will determine the future policy direction of interest rates, and the well-being of ordinary Australians. So I am going to do a deep dive on this in the light of the latest employment and wage rise data from the ABS.
While The RBA has made inroads into getting inflation under control, at 3.5 per cent, underlying inflation still remains above the central bank’s 2 per cent to 3 per cent target band. And even though the jobs market has softened, it is still far stronger than almost any time since the 1970s as data out today shows.
Yet Consumers have cut back sharply as they try to cope with 13 interest rate rises by the RBA and this decline in spending has caused economic growth to grind to a halt. On an annual basis, the economy grew by just 1 per cent in the year to June, down from an average of 2.7 per cent over the past 20 years. Excluding the pandemic, that marks the slowest rate of growth since the 1990s recession. And household financial stress based on our analysis is at peak as we discussed in my live show this week.
So we have an economy driven into overdrive by high migration and big government spending, forcing interest rates to stay higher for longer, yet with a low unemployment rate and people working till they drop. None of this helps to improve productivity the share of the economic cake continues to shrink on an individual basis. And those in the rental sector or with a large mortgage are under the pump.
My point is, bad policy over a couple of decades have got us to this point, but unless we radically change direction, this Messy And Complicated journey will continue to the detriment of many ordinary Australians and businesses. There is no Goldilocks zone here.
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Digital Finance Analytics (DFA) Blog
The Australian Economy; Its Messy And Complicated!
One of the themes which comes through in our household surveys is that many people are under financial pressure, but are holding out for interest rate cuts in the short term.
But America’s election outcome continues to reverberate across the globe.
Bond markets continue to push higher with the US 2 and 10 year moving up, a trend reflected on the Australian market too. With the 10 year up to 4.7% compared with 3.8% in the middle of September. The ASX 30 days cash rate futures is still trending down, but more slowly than recently.
Financial markets and economists have been consistently pushing back the timing of the first rate cut in Australia since 2022 because inflation has proved far more difficult to tame and the labour market has remained strong. Traders are now fully priced for a move in September next year.
But some reckon there is a much higher chance of no rate cut in 2025 that the market is pricing in.
The US dollar index, which measures the greenback against a basket of six currencies, climbed to a six-month high on Wednesday. The AUD was down to 65.25 cents against the USD.
A strong greenback is likely to stoke inflation in Australia because of higher prices of imported goods denominated in US dollars such as oil, complicating the RBA’s job to bring inflation down so that it can start lowering the cash rate.
While Trump’s policies will become more of a focus next year, for now, the RBA’s focal point is the Australian economy, where higher for longer is going to play out.
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I caught up with Troy Harris a Crypto Advocate and Author of “CRYPTO NEW RICH” in the week Bitcoin rose above US$80,000 after the recent Trump victory.
We explored what is going on here, and what factors could drive the price of Bitcoin even higher.
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In our first post Trump result Rant, Edwin and I consider the implications for property as rates higher for longer seem to be the order of the day. But some markets will perhaps still be buoyant because demand is so strong. Meantime we also look at how the property portals are being flexible with the truth, and we chat about people making poor property decisions, because they assumed….
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Today’s post is brought to you by Ribbon Property Consultants.
