NZers and Aussies: Switching it up

[Paxter]

At least one Liberal has a bit of backbone.

Bridget Archer (member for the Tassie swing electorate of Bass) has declared her intention to campaign for "Yes". Hopefully she is not the only member of our gutless Parliament willing to do what they and their electorate believe is right. 

Edited April 7, 2023 by Paxter

[Skyrazer]

Archer has gone against her own party several times - climate bill, Morrison censure, Super changes, etc. Her backing the Voice was fully expected.

She's basically a teal really and one of the last sensible members left in the LNP.

[Paxter]

10 hours ago, Skyrazer said:

Archer has gone against her own party several times - climate bill, Morrison censure, Super changes, etc. Her backing the Voice was fully expected.

She's basically a teal really and one of the last sensible members left in the LNP.

Yeah looks like the Libs are going to dump her at the next cycle.

[Paxter]

Ken Wyatt (former MP in my electorate and Minister for Indigenous Affairs) has also quit the Libs.

Nice work, Dutton. 

[Jeor]

There was a small chance Dutton might have personally opposed it but allowed the caucus a conscience vote, but he's probably decided that he needed unity. Of course in doing so he has lost the respected Wyatt and cemented his position as a spoiler and wrecker rather than an alternate leader.

I daresay there will be more until we reach Peak Dutton, at which point someone more moderate might get a shot. As always, the electorate tends to vote for centrist PMs from both parties rather than those at the far ends and most parties realise that when an election draws near. Abbott was probably the main exception in the last 40 years.

[Skyrazer]

On 4/6/2023 at 9:33 PM, Paxter said:

Yeah looks like the Libs are going to dump her at the next cycle.

If they do that, they can kiss Bass goodbye. Archer was just about the only lib to increase their vote at the last election and if she continues as an independent (why wouldn't she?), she'll only increase her vote further from all the sympathy she'll garner.

Not to mention the optics of a party that's in the dumpster when it comes to women dumping one of their women who's performing well.

[Paxter]

Dutton has probably sealed his party's fate anyway with this latest decision. Voters in many of the seats he needs to win in two years will be even more put off.

Speaking of which, the most recent poll conducted by Newspoll made me a little more optimistic. It indicated nationwide support for The Voice (at 54% vs. 38%) and five of the six states with greater than 50% support. No surprises on which state is still lineball. 

On these numbers, we should get our first constitutional amendment since '77. 

Edited April 9, 2023 by Paxter

[The Anti-Targ]

On 4/6/2023 at 6:49 AM, Paxter said:

Interesting that the RBA decided to pause at 3.6% at the same time that the RBNZ hiked to 5.25%. Clearly plenty of hawks across the Tasman. Headline inflation is actually running hotter in Australia (7.8%), but the RBNZ is opting for a higher nominal (and therefore real) interest rate.

It will be interesting to see how this plays out now in terms of the relative performance of these two open economies. 

The Bank of Canada also paused recently, but rates here are 4.5% and inflation is lower (5.2%). 

We had some shit weather recently and the RBNZ reckons the recovery, and lost production has increased inflationary pressure which is yet to come through. Interestingly a huge number of people are about to have to re-fix their mortgages, and so jump from 2-3% up to 6-7%. So there is a significant lag between increasing interest rates than that translating to hitting households. The sudden drop in disposable income then re-fixing will cause in the next month or so might well show that the RBNZ has over-corrected. Some economists think this is the case, as a rank ignoramus I'm inclined to agree wit those economists. I think the RBNZ is tanking the economy much worse than is necessary.

[Paxter]

36 minutes ago, The Anti-Targ said:

We had some shit weather recently and the RBNZ reckons the recovery, and lost production has increased inflationary pressure which is yet to come through. Interestingly a huge number of people are about to have to re-fix their mortgages, and so jump from 2-3% up to 6-7%. So there is a significant lag between increasing interest rates than that translating to hitting households. The sudden drop in disposable income then re-fixing will cause in the next month or so might well show that the RBNZ has over-corrected. Some economists think this is the case, as a rank ignoramus I'm inclined to agree wit those economists. I think the RBNZ is tanking the economy much worse than is necessary.

You’ll have a nice comparison point because the RBA has stopped well short of the RBNZ. You can do a victory lap if Australia tames inflation without tanking the economy.

And, woah, we have more spine in the Libs! Now it’s a frontbencher who has quit his post over Dutton’s stance. Bravo.

[The Anti-Targ]

Aus seems to weather almost every economic crisis without the economy tanking. IIRC it has rarely gone into recession even when most of the rest of the world does. So it seems probable that Aus will get through this inflation problem while maintaining positive economic growth and possibly decent employment rates. It was the stated aim of the RBNZ last year to force NZ into recession and create more unemployment. The recession seems to have arrived quite quickly but the unemployment hasn't materialised just yet. It feels like the RBNZ will keep squeezing until they see the effect materialise, but by the time that happens things will possibly be on course to get way worse than than intended.

Not sure why I would do a victory lap if Aus gets through with minimal pain and NZ shits the bed. Though credit to Aus if so for having a smarter RBA chair, advisers and analysts.

An analysis from a financial markets website on the 50 point hike

Quote

Thursday seems like ages ago now, but in the last trading day before Easter, NZ rates showed decent falls, led by the short end of the curve, further unwinding the initial market reaction seen post the RBNZ’s MPR 50bps rate shock on Wednesday. The 2-year swap rate fell 13bps to 4.99%, the 5-year rate fell 11bps and the 10-year rate fell 5bp.  The 2-year rate is now only 3bps higher than the pre-MPR level, with longer term rates lower. The market reaction suggests the RBNZ’s shock move has back-fired. Some market intelligence gathered pre meeting would have suggested a significant curve flattening to a larger rate hike, with the market disbelieving of the necessity for an aggressive move with the economy likely already in recession. The NZD is weaker on all the crosses apart from NZD/JPY since the MPR, with the TWI down about 0.9% since that time, suggesting no bang per buck from the currency either.

A similar market reaction was seen in NZGBs, with the bond tender well supported, particularly for the $200m of 2026s on offer, which had a bid-cover ratio of 6.25 and issued at 10bps below the pre-tender mids. Strong demand was supported by the forthcoming lift in index duration following the maturity of the April-2023s.

https://www.interest.co.nz/currencies/120708/us-treasury-yields-higher-after-solid-non-farm-payrolls-report-other-labour

The economy is already in the pooh and institutions are predicting the RBNZ will need to start dropping interest rates soon because the economy will tank, so they are also predicatively dropping rates.

Edited April 11, 2023 by The Anti-Targ

[Makk]

1 hour ago, Paxter said:

You’ll have a nice comparison point because the RBA has stopped well short of the RBNZ. You can do a victory lap if Australia tames inflation without tanking the economy.

And, woah, we have more spine in the Libs! Now it’s a frontbencher who has quit his post over Dutton’s stance. Bravo.

Going back to your previous figure, Aus inflation is down to 6.8% (not 7.8%) in the year to march and has dropped for 2 consecutive months.

I also tend to think that the RBNZ was more aggressive than needed with a 0.5% rise given that the impact of the previous hikes is yet to come through fully. The RBNZ mentioned the recent storms will push food prices up but they really should be looking through short term inflation forces.

However I don't think inflation has peaked yet so it is tricky. We have just had a minimum wage hike to go through and the wholesale mortgage rates were actually looking to drop in some categories (2+ years) as global inflation stopped creating more supply and overseas investment in NZ. And we are also entering an election year which these days means a lolly scramble from both main parties.

[The Anti-Targ]

Minimum wage rise has a minimal effect on inflation unless it flows through to consequent salary and wage rises for other non-executive / non-professional employees. But if recent history shows anything what will end up happening is those higher pay rates won't rise nearly as much. 20 years ago bus drivers were earning (IIRC) 160% of the minimum wage, now it's more like 130% of minimum wage. Likely it will drop to 129% now. If something doesn't change such jobs will eventually become minimum wage at which point why would you bother with such a job when you can get a McJob for much less responsibility and stress but for the same pay. The differential is almost at a level now where lower pay for a simpler job is becoming a better option. And in the opposite direction bus drivers are leaving to become truck drivers and getting paid a lot more for pretty much the same skill set.

[Paxter]

16 hours ago, Makk said:

Going back to your previous figure, Aus inflation is down to 6.8% (not 7.8%) in the year to march and has dropped for 2 consecutive months.

I also tend to think that the RBNZ was more aggressive than needed with a 0.5% rise given that the impact of the previous hikes is yet to come through fully. The RBNZ mentioned the recent storms will push food prices up but they really should be looking through short term inflation forces.

However I don't think inflation has peaked yet so it is tricky. We have just had a minimum wage hike to go through and the wholesale mortgage rates were actually looking to drop in some categories (2+ years) as global inflation stopped creating more supply and overseas investment in NZ. And we are also entering an election year which these days means a lolly scramble from both main parties.

CPI was 7.8% for the December quarter (per the RBA website). The monthly indicator (6.8% in Feb) is a decent inflation estimate but not the usual/preferred measure of CPI. We still have to wait for the Q1 CPI - the monthly indicator only covers around 2/3 of the CPI basket.

Edited April 11, 2023 by Paxter

[ants]

On 3/28/2023 at 2:55 PM, The Anti-Targ said:

And, not very popular here, greater decoupling of govt spending from taxation. Govt doesn't need tax to spend, it just needs tax to create private sector demand for the currency and manage money supply.

Given I think government spending during Covid was a huge factor in our current inflation, I very much disagree with this sentiment. 

[ants]

On 4/7/2023 at 2:36 AM, Paxter said:

Ken Wyatt (former MP in my electorate and Minister for Indigenous Affairs) has also quit the Libs.

Nice work, Dutton. 

It shows how conservative the Federal liberals are. Dutton’s not only splitting his party, he’ll be campaigning against multiple State Liberal leaders. 

[The Anti-Targ]

On 4/14/2023 at 11:57 PM, ants said:

Given I think government spending during Covid was a huge factor in our current inflation, I very much disagree with this sentiment. 

You may think that, but it's not really true, or at least it only factors somewhat in the current inflation but not the majority of it. Most inflation above 4% is about supply shocks and profiteering.

[ants]

On 4/16/2023 at 11:14 AM, The Anti-Targ said:

You may think that, but it's not really true, or at least it only factors somewhat in the current inflation but not the majority of it. Most inflation above 4% is about supply shocks and profiteering.

What profiteering?

The supply shocks arose from Covid which would have dampened demand except that governments spent big. So they are tied to the government spending. 

[karaddin]

@The Anti-Targ I saw your comment to Raja recently about Auckland and affordability etc in the UK thread, but it really hadn't sunk in how bad it is

Auckland being worse than Melbourne is not what I expected. Also 3 cities from Aus+NZ in the top 10 seems excessive given the size of our populations.

[Skyrazer]

Surprised NYC and London aren't in the top 10.

[Paxter]

7 hours ago, Skyrazer said:

Surprised NYC and London aren't in the top 10.

Incomes are very, very high in NYC, primarily driven by the Wall St banks and adjacent companies (like consultancies, tech firms). I can't speak to London.

@ants: On profiteering, many firms from across the supply chain have been using rising prices to also boost their margins. Margin compression has not been a thing for many companies in the last two years.