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Kiwi Pops After RBNZ Cuts Rates, Citing Commodity Price Pressures
While we know now that Greece is irrelevant, and China is irrelevant (fdrom what we are told by talking heads), it appears the commodity carnage of the last few months is relevant for at least one nation. Having already warned about Australia, it appears New Zealand has got nervous:
- *NEW ZEALAND CUTS KEY INTEREST RATE TO 3.00% FROM 3.25%, FURTHER EASING LIKELY AT SOME POINT
The Central bank blames softening economic outlook driven by commodity price pressures. Kiwi interestingly popped on the news to 0.66 before fading back a little, despite RBNZ noting a further NZD drop is necessary.
* * *
- *RBNZ SAYS SOME FURTHER EASING SEEMS LIKELY
- *RBNZ SAYS FURTHER NZD DROP IS NECESSARY
- *RBNZ: FURTHER NZ$ DEPRECIATION NECESSARY GIVEN COMMOD PRICES
and finally...
- *RBNZ SAYS FURTHER NZD DROP IS NECESSARY
Disappointly, Kiwi is rallying...
RBNZ Governor Graeme Wheeler Cuts Key Rate to 3.0%: Statement
The Reserve Bank today reduced the Official Cash Rate (OCR) by 25 basis points to 3.0 percent.
Global economic growth remains moderate, with only a gradual pickup in activity forecast. Recent developments in China and Europe led to heightened uncertainty and increased financial market volatility. Particular uncertainty remains around the impact of the expected tightening in US monetary policy.
New Zealand’s economy is currently growing at an annual rate of around 2.5 percent, supported by low interest rates, construction activity, and high net immigration. However, the growth outlook is now softer than at the time of the June Statement. Rebuild activity in Canterbury appears to have peaked, and the world price for New Zealand’s dairy exports has fallen sharply.
Headline inflation is currently below the Bank’s 1 to 3 percent target range, due largely to previous strength in the New Zealand dollar and a large decline in world oil prices. Annual CPI inflation is expected to be close to the midpoint of the range in early 2016, due to recent exchange rate depreciation and as the decline in oil prices drops out of the annual figure. A key uncertainty is how quickly the exchange rate pass-through will occur.
House prices in Auckland continue to increase rapidly, but, outside Auckland, house price inflation generally remains low. Increased building activity is underway in the Auckland region, but it will take some time for the imbalances in the housing market to be corrected.
The New Zealand dollar has declined significantly since April and, along with lower interest rates, has led to an easing in monetary conditions. While the currency depreciation will provide support to the export and import competing sectors, further depreciation is necessary given the weakness in export commodity prices.
A reduction in the OCR is warranted by the softening in the economic outlook and low inflation. At this point, some further easing seems likely.
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someone doing a little more island shopping?
I really like NZ, but they are going to take it on the chin with the commodity price crash ... if that continues to play out ... on the upside, they won't go hungry!
Regards,
Cooter
That's on the money.Small family dairy farms will come through in reasonable shape, especially those with no debt and low costs of production, i.e. totally grass-fed cows.
A NZ dairy farm with no debt?!
Obviously you have no idea about the NZ dairy industry. The average dairy farm debt in NZ is NZ$4 million PER FARM.
And the entire industry is about 90% grass fed.
I'm a NZ dairy farmer ,for the last 40 years.
Debt free farms exist.
You may be saying that the majority are deep in the shit. Exactly.
Most farms have been buying a large % of their production for years.
Only the 100% grass fed farms have costs of production below the current price.
For what it is worth , I think I know exactly what state the NZ dairy industry is in.
I recently returned from a holiday to NZ. Absolutely love it! I lived there 20 years ago and it's still a great place. A lot more immigrants from China, HK and Pakistan today. Let's hope and pray the new comers assimilate. NZ is too small to be a melting pot.
Did you gamble at a Maori casino? I lost it when I saw one and realized some things are universal. Natives everywhere seem to be granted a monopoly on casinos.
"Natives everywhere seem to be granted a monopoly on casinos."
Not in NZ. Casinos are businesses right?
Anyone can own one.
Yep. My mate in the Waikato has a large family farm. Mortgage free. 100% grass fed. His break even is 3.50NZ$ a kg. of solids. Fonterra stiil forecasting a 5.20NZ$ pay-out. He's sitting on a mountain of cash he shoveled away in the boom years. Bring it on........
Yes he'll be fine , but I very much doubt that the $5.20 payout will materialise; if the downward trend continues then $4.20 is more like it.
You have elsewhere expressed the view that the US is fine , and that QE4 will not eventuate ; so we should not fear a rising $NZ.
Do you still think that?
They are dumber than the Sheep and Beef they grow, They don't even know that their LOW priced primary product oversupply was caused by the sanctions imposed on Russia. Day one after MH17 was downed Their PM was ready to send troops to fight alongside HIS Nazi brethern. Go figure.
Nothing to do with record production in NZ ; oversupply in the US as a result of cheap corn; and production quotas lifted in Europe; milk powder stockpile in China then
Good to hear. Should be all good .
Actually NZ kept selling dairy products to Russia; we just sourced them from outside NZ. Simples.
I think most people know that MH17 was a false flag, and the Russian sanctions are hurting Europe more than Russia.
Many NZers would argue that the PM , John Key , has very little allegiance to NZ.
going to the hell
Kiwi goes up while rates go down?
Everyone was short going into it. Its down 9% or so in one month. Money has already been made, vultures going home.
Every central bank in the world is lowering rates and the fed claims they are going to raise rates in the face of a global depression ...... Yeah right.
Dr E.. It that a dichotomous statement
Talk about tearing the fabric of finance while trying desperately to ignite the animal spirits of a long dead horse.
and they say Masturbation is rewarding.
It is beyond me why anyone thinks that the fed will raise rates, or that it will not have to unleash QE4.
But I am just a peasant: how could I ever know?
PRINT THAT PAPER, BITHCEZ!
Not an option here in Godzone, thank Dog.
Kiwi's think printing your own funny money is somehow insane, They however consider Borrowing Printed Paper from the FED as perfectly sane.
The boys at the RBNZ havnt got a clue; they pushed up interest rates a year ago by 1% to curb house price inflation in Auckland that is running at 16% pa, but it is the chinese buyiing spree that is pushing the house prices (so had no effect). Now NZ has been hammered by low dairy prices 60% drop, (there main export earner) they are dropping rates to boost the economy. Even at 3% they are way to high.
RBNZ still believes Yellen will tighten, and $NZ will fall. I can't see it myself.
NZ has a lot of private external debt.
If the overseas lenders think we are a bit shaky , and start demanding a risk premium on interest rates, then all hell will break loose.
Choppy waters ahead.
Back when we used to have free markets when a country raised interest rates the currency went up.
Has to do with laws of economics which have all been turned upside down by central bank QE and open market operations.
Then buy $U.S.
Good luck with that.
Countries don't raise interest rates, free markets do. If it's the country raising rates then you don't have free markets.
Free markets ? Where in the world are interest decided by 'free markets' ?
You don't like a 10 year NZ government bond at 3.5% , AND a rising NZ dollar?
Why so?
Two things:
Pick up a history book and you will find the Kiwis were hurt very badly during the depression (1929 crash).
Also their participation and casualties for serving in the First World War were very high (along with Fiji,Tonga
and so on).
After the war,the Kiwis and Aussies asked for debt forgiveness from their Mother country (UK).These were
debts the UK said were for training,feeding and equipping these troops,who turned out to be the bravest and
toughest of the bunch.Of course the UK told them to take hike ("Thanks for the help").
Look up in Wikipedia list of UK Commonwealth Victoria Cross winners.Most are posthumous awards....
When Britain joined the Common Market we got another severe kicking, but did not learn our lesson.
We continued with our existing seasonal agriculture, and failed to move up the value chain to producing consumer items , capitalising on our remote location , and relatively clean environment, as well as our high food production standards.
Talk about a missed opportunity.
Still we may be forced to change this time.
In 1929 most of the population was rural or had some access to farm produce.
Landless urban folk did it really tough.
This time around the country is over 80% urban.
There is a good chance the dairy farms will not have to rely on imported Filipino labour.
Just think thats the best way to grow MUSHROOMS, In Shite and the Dark. Next they will get all wound up about a Flag, Lol. BaaBaa.
Actually there is supreme indifference amongst the general population.
It was the PM who was promoting this distraction for his own political purposes.
Indeed DAD said that he thought that the Brit command used them as cannon fodder and hated them for the deception WW2 was.
Time for a joke or two as told by Australians:
Why do New Zealand horses run so fast?
They saw what happened to New Zealand sheep.
How do you get a New Zealander into a small business?
You put him into a big business and let him take it from there.
And to balance things out with the Aussies who made these jokes up:
Describe an Aussie's life:
First they have children, then they get married and then they have their 21st birthday party.
New Zealand Sucks was born there thank god my parents left, Started underground at 18 in Australia, Anyway went back there in 2005 for jumbo mining role at wahi, Mixed crew had to ups some of those kiwi coons for stuffingaround 5 of them ran of told the boss. Shift boss comes back and says you carnt talk to the bro's like that. Fuck New Zealand and those useless Kiwi coons.
Good to hear that you will never come back.
Seriously considering a move to NZ in the near future. I would love to have an ongoing conversation with anyone currently living there who might help me work through my thought process. I can be contacted through ZH.
You will be spoiled for choice when it comes to buying opportunities ; dairy land and Auckland house prices are due for a correction. Maybe other sectors too.
I'd sit back and see what has transpired by Xmas; events are moving very quickly.
On the other hand if you are in the US , then a falling $US dollar could undermine your plans.
Don't do it unless you are financially independent. If you have a net worth upwards of USD 5 million, everything will be just fine. If you need to rely on working for a living, NZ will punch out your lights and shake you down. The situation is especially dire for skilled professions where you will find that none of your credentials are valid here, you will need to requalify (at great cost of time and money). Forget about self defense, it is illegal here, even with a hockey stick, much less a knife or gun. If you move here your income will halve and your cost of living double. Plus even if you live here for decades your accent will forever label you as a foreigner. Finally, forget about networking with other people from North America, they are few, and mainly struggle as individuals. There is no expat community to provide support for your morale.
Thanks for frank feedback.
I live in NZ and our politicians are no different from the scum who run the show anywhere in the world. Australian banks run our countrty and our prime minister is an ex bankster who worked at the FED .He is an absolute bottom feeding ponytial pulling smirking skidmark and has his lips tissue welded to the asses of of the banking elite. Our interest rates are always higher than most other "developed" countries for no valid reason I can see except you can/t trust an underarmer from the criminal nation.
https://www.youtube.com/watch?v=hoF_fa9TMDk
Housing is some of the most unaffordable low yielding poorly built POS', you can find anywhere .
Auckland is unbelievably expensive and probably the worst city to live in NZ. I live in Wellington which is almost as bad in terms of prices and yields but it is a the nicest city I have ever lived in. Outside of the main centers farm land is relatively affordable and with one of the best climates for hort and ag in the world and there is still plenty of food and more importantly water.
I don't believe that its more expensive to have a simple healthy lifestyle here than in the US but I do agree that wages are pretty shite .Still see brits or americans come out here and rent five bedroom houses with sea views for less than their basement flat in Soho or a loft in Manhatten and end up getting residency here .
Feels a lot safer than the USA too where we always had guns, over here I don't feel like I need one or a hockey stick perhaps WH might find the aussies a bit more to his liking. Keep an eye on your wallet tho
https://www.youtube.com/watch?v=wZb4vwMV8lY
I am wrapped that dairy prices are plunging and hope they keep going down so we have less dairy farms and less cowshit and fertilizer laden rivers.
I would recommend that any one thinking of moving here come down and have a three month or longer look around December to March is best weather