Tag: New Zealand

Too Late! Kiwis Get Another Large Rate Cut, With More To Come…

Poor Kiwi’s have been hit by some of the highest interest rates in the western world, thanks to the aggressive OCR hikes from their Central Bank, as high migration stoked inflation, but still saw a recession. Then the RBNZ turns turtle and started to cut rates, as migration started to fall, along with home prices, and now they have another rate cut to contend with, as the economy remains weak, and international factors could push inflation higher again.

All up New Zealand’s economy has stalled, unemployment is rising and house prices are falling as the prolonged period of high borrowing costs curbs demand. Economists say inflation is now slowing rapidly, and some have warned it may undershoot the 2% midpoint of the RBNZ’s 1-3% target range. It’s a mess, and an object lesson in the impacts of long and variable lags.

This week, New Zealand’s central bank cut interest rates by half a percentage point, stepping up the pace of easing as policymakers become more concerned about the economic slowdown.

The Reserve Bank’s Monetary Policy Committee lowered the Official Cash Rate to 4.75% from 5.25% Wednesday in Wellington. It is the RBNZ’s second straight reduction after it began its easing cycle with a quarter-point cut in August. The decision was a policy review, which is not accompanied by fresh economic forecasts or a press conference.

ASB’s inflation forecast suggests a risk that inflation undershoots the 2% midpoint of the 1% – 3% inflation target. The fallout of aggressive monetary policy will stay with Kiwi’s for a long time. And the road remains bumpy at best. No wonder the number of New Zealand citizens leaving is up significantly!

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Too Late! Kiwis Get Another Large Rate Cut, With More To Come...
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Too Late! Kiwis Get Another Large Rate Cut, With More To Come…

Poor Kiwi’s have been hit by some of the highest interest rates in the western world, thanks to the aggressive OCR hikes from their Central Bank, as high migration stoked inflation, but still saw a recession. Then the RBNZ turns turtle and started to cut rates, as migration started to fall, along with home prices, and now they have another rate cut to contend with, as the economy remains weak, and international factors could push inflation higher again.

All up New Zealand’s economy has stalled, unemployment is rising and house prices are falling as the prolonged period of high borrowing costs curbs demand. Economists say inflation is now slowing rapidly, and some have warned it may undershoot the 2% midpoint of the RBNZ’s 1-3% target range. It’s a mess, and an object lesson in the impacts of long and variable lags.

This week, New Zealand’s central bank cut interest rates by half a percentage point, stepping up the pace of easing as policymakers become more concerned about the economic slowdown.

The Reserve Bank’s Monetary Policy Committee lowered the Official Cash Rate to 4.75% from 5.25% Wednesday in Wellington. It is the RBNZ’s second straight reduction after it began its easing cycle with a quarter-point cut in August. The decision was a policy review, which is not accompanied by fresh economic forecasts or a press conference.

ASB’s inflation forecast suggests a risk that inflation undershoots the 2% midpoint of the 1% – 3% inflation target. The fallout of aggressive monetary policy will stay with Kiwi’s for a long time. And the road remains bumpy at best. No wonder the number of New Zealand citizens leaving is up significantly!

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Will Kiwis Say “Hello” To Deflation?

Compared to the weak RBA rate of 4.35%, the Reserve Bank of New Zealand, lifted earlier and higher, and has begun to cut rates as the New Zealand economy slipped into recession. Next week we will get the next RBNZ rate decision, and a new survey has show that although New Zealand business sentiment is improving a window has opened to allow a cut interest rates of 50 basis points. The RBNZ has forecast around 2.5% of rate cuts over a 2.5 year period.

The contrast with Australia is interesting, because the RBA has left rates at a lower rate trying to preserve the gains in employment, whereas the RBNZ lifted more aggressively and tipped the New Zealand economy into a recession. Neither outcome is great, showing the problem with blunt monetary policy tools.

In addition, the latest New Zealand migration stats reveals a sharp moderation in net overseas migration, a critical factor working against economic growth. And worse, a large number of citizens are emigrating from New Zealand, replaced by poorer migrants from developing nations according to Stats NZ. As a result, annual New Zealand’s population growth is slowing, which will moderate demand. And of course New Zealand’s economy is stuck in a protracted per capita recession and unemployment is rising fast.

All up, clearly more rate cuts are coming, and a period of falling prices – deflation – could well be on the cards. As a result, the RBNZ will need to front load those future rate cuts, so 50 basis points next week are highly likely.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Will Kiwis Say “Hello” To Deflation?
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Will Kiwis Say “Hello” To Deflation?

Compared to the weak RBA rate of 4.35%, the Reserve Bank of New Zealand, lifted earlier and higher, and has begun to cut rates as the New Zealand economy slipped into recession. Next week we will get the next RBNZ rate decision, and a new survey has show that although New Zealand business sentiment is improving a window has opened to allow a cut interest rates of 50 basis points. The RBNZ has forecast around 2.5% of rate cuts over a 2.5 year period.

The contrast with Australia is interesting, because the RBA has left rates at a lower rate trying to preserve the gains in employment, whereas the RBNZ lifted more aggressively and tipped the New Zealand economy into a recession. Neither outcome is great, showing the problem with blunt monetary policy tools.

In addition, the latest New Zealand migration stats reveals a sharp moderation in net overseas migration, a critical factor working against economic growth. And worse, a large number of citizens are emigrating from New Zealand, replaced by poorer migrants from developing nations according to Stats NZ. As a result, annual New Zealand’s population growth is slowing, which will moderate demand. And of course New Zealand’s economy is stuck in a protracted per capita recession and unemployment is rising fast.

All up, clearly more rate cuts are coming, and a period of falling prices – deflation – could well be on the cards. As a result, the RBNZ will need to front load those future rate cuts, so 50 basis points next week are highly likely.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Kiwis Get A Rate Cut As The Reserve Bank Pivots!

Interesting question, who you believe more the markets, or Central Bankers. Of course those in Central Bank land, will claim data dependence, and moving targets, and as RBA Deputy Governor Andrew Hauser warned recently it’s a risk to listen to “false prophets” on interest rates; and yet after several false dawns, New Zealand’s central bank cut interest rates, embarking on an easing cycle much sooner than previously indicated as The Reserve Bank’s Monetary Policy Committee lowered the Official Cash Rate by a quarter percentage point to 5.25% Wednesday in Wellington.

The RBNZ’s pivot to easing is a rapid change of tune after it said in May it considered raising rates and wouldn’t cut them until the second half of 2025. The bank’s concerns over sticky domestic inflation are being alleviated as the economy teeters on the brink of its third recession in less than two years and unemployment rises. The RBNZ’s new forecasts show the OCR falling further in the fourth quarter and by about 100 basis points by the middle of next year.

So will the RBNZ’s move influence Australian interest rates. Probably not because inflation in Australia is way worse, and Government spending and support significantly higher. RBA governor Michele Bullock last week ruled out the prospect of rate cuts this year. But the RBA’s significant lag in monetary policy will catch up to the Australian economy as it has done in New Zealand.

Generally, I think Australia will see rates higher for longer because of poor Government policy, as I discussed in yesterdays live show with Leith van Onselen. But the rate trend will be lower ahead, but not back to close to zero, which was in its own right a policy error and helped to fire up inflation in the first place. At least Kiwi’s can breath a little easier, though you can probably thank lower migration for that – Australia please note!

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Kiwis Get A Rate Cut As The Reserve Bank Pivots!
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Kiwis Get A Rate Cut As The Reserve Bank Pivots!

Interesting question, who you believe more the markets, or Central Bankers. Of course those in Central Bank land, will claim data dependence, and moving targets, and as RBA Deputy Governor Andrew Hauser warned recently it’s a risk to listen to “false prophets” on interest rates; and yet after several false dawns, New Zealand’s central bank cut interest rates, embarking on an easing cycle much sooner than previously indicated as The Reserve Bank’s Monetary Policy Committee lowered the Official Cash Rate by a quarter percentage point to 5.25% Wednesday in Wellington.

The RBNZ’s pivot to easing is a rapid change of tune after it said in May it considered raising rates and wouldn’t cut them until the second half of 2025. The bank’s concerns over sticky domestic inflation are being alleviated as the economy teeters on the brink of its third recession in less than two years and unemployment rises. The RBNZ’s new forecasts show the OCR falling further in the fourth quarter and by about 100 basis points by the middle of next year.

So will the RBNZ’s move influence Australian interest rates. Probably not because inflation in Australia is way worse, and Government spending and support significantly higher. RBA governor Michele Bullock last week ruled out the prospect of rate cuts this year. But the RBA’s significant lag in monetary policy will catch up to the Australian economy as it has done in New Zealand.

Generally, I think Australia will see rates higher for longer because of poor Government policy, as I discussed in yesterdays live show with Leith van Onselen. But the rate trend will be lower ahead, but not back to close to zero, which was in its own right a policy error and helped to fire up inflation in the first place. At least Kiwi’s can breath a little easier, though you can probably thank lower migration for that – Australia please note!

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

The Chilly Economic Winds Hits Kiwi Property Market!

Latest data from REINZ shows further momentum falls across property sales and prices in New Zealand, as the higher rates continue to squeeze households and dampen the markets. Prices are now 16% below past peaks.

https://www.reinz.co.nz/Web/Web/News/News-Articles/Market-updates/REINZ-June-2024-data-property-market-a-little-chilly-amid-economic-challenges.aspx

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Kiwi’s Feeling Recessionary, While The Central Bank Turns A Bit Dovish!

If you talk to ordinary Kiwi’s across New Zealand, its pretty clear things are not looking good. We already highlighted the easing of home prices and businesses are closing in many centres, take for example, downtown Wellington, New Zealand’s capital city, where dozens of empty shops speak to an economic gloom that’s pervading the entire country.

Retailers are in the front line as households simply do not have money to spend, given the current 5.5% interest rate, and until now expectations that rates will remain here for the rest of the year. Struggling retailers are the most visible sign of a sag in demand that’s hitting multiple industries, from manufacturing to construction and real estate.

Possibly the latest Reserve Bank released “OCR 5.50% – Inflation Approaching Target Range” gives a slight hint of possibly earlier relief, but barring the pandemic-induced slump in 2020, the economy is heading for its worst year since the Global Financial Crisis 15 years ago.

The RBNZ on Wednesday acknowledged that domestic price pressures still remain strong, but said there are signs “inflation persistence will ease in line with the fall in capacity pressures and business pricing intentions.”

So, it does appear the RBNZ’s next move will be a cut, though there is a wide range of views on the timing — from as soon as August this year to as late as the first quarter of next year. They will be reliant on incoming data, and we know from previous history data can turn negative quite quickly, once we factor in the current higher Oil prices, and shipping costs alongside weaker new migration as more Kiwi’s head offshore.

In the longer term, it could be the higher Kiwi rate will pull them through the inflation battle quicker than in Australia where rates are a lower 4.35%, and where there is still talk of a need to raise rates to pull inflation down. At least in New Zealand, inflation is easing, for now; but the social and economic consequences of the brutal Monetary Policy will be with us for years.

Worth remembering that this bout of inflation was inflicted by too loose monetary policy, QE and high Government spending and debt. As always policy makers case the problem but real people play the price!

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Kiwi’s Feeling Recessionary, While The Central Bank Turns A Bit Dovish!
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Kiwi’s Feeling Recessionary, While The Central Bank Turns A Bit Dovish!

If you talk to ordinary Kiwi’s across New Zealand, its pretty clear things are not looking good. We already highlighted the easing of home prices and businesses are closing in many centres, take for example, downtown Wellington, New Zealand’s capital city, where dozens of empty shops speak to an economic gloom that’s pervading the entire country.

Retailers are in the front line as households simply do not have money to spend, given the current 5.5% interest rate, and until now expectations that rates will remain here for the rest of the year. Struggling retailers are the most visible sign of a sag in demand that’s hitting multiple industries, from manufacturing to construction and real estate.

Possibly the latest Reserve Bank released “OCR 5.50% – Inflation Approaching Target Range” gives a slight hint of possibly earlier relief, but barring the pandemic-induced slump in 2020, the economy is heading for its worst year since the Global Financial Crisis 15 years ago.

The RBNZ on Wednesday acknowledged that domestic price pressures still remain strong, but said there are signs “inflation persistence will ease in line with the fall in capacity pressures and business pricing intentions.”

So, it does appear the RBNZ’s next move will be a cut, though there is a wide range of views on the timing — from as soon as August this year to as late as the first quarter of next year. They will be reliant on incoming data, and we know from previous history data can turn negative quite quickly, once we factor in the current higher Oil prices, and shipping costs alongside weaker new migration as more Kiwi’s head offshore.

In the longer term, it could be the higher Kiwi rate will pull them through the inflation battle quicker than in Australia where rates are a lower 4.35%, and where there is still talk of a need to raise rates to pull inflation down. At least in New Zealand, inflation is easing, for now; but the social and economic consequences of the brutal Monetary Policy will be with us for years.

Worth remembering that this bout of inflation was inflicted by too loose monetary policy, QE and high Government spending and debt. As always policy makers case the problem but real people play the price!

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

The Kiwi Economy On A Knife Edge… As More Leave!

In this show we will look at some of the recent data relating to the New Zealand economy, which is sitting in a high interest rate, recessionary condition, as the Reserve Bank of New Zealand wrangles inflation towards its targets. We saw a significant rise in people leaving the country, with New Zealand Citizens voting with their feet!

So, we will look at the latest on property prices, retail spending and the latest inflation and migration updates. Overall, things remain very tough, though inflation while remaining sticky, is easing slowly.

So, standing back, clearly the New Zealand economy is not out of the woods yet, but the Reserve Bank of New Zealand’s approach of lifting rates higher than Australia does appear to be pushing inflation in the right direction. The uptick in exits from New Zealand suggests perhaps that some are deciding to jump ship, because households are clearly feeing the pressures. And recent policy changes will likely continue to reduce net overseas migration, with potentially significant impacts on the jobs market, and demand for property.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
The Kiwi Economy On A Knife Edge… As More Leave!
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