Dawn chorus: New eras begin
Labour's second term starts in earnest; The immediate challenge is the housing market; Watch for the RBNZ MPS on Wednesday; Biden wins, but the global economy and trade relation are still sick;
Morena. Labour’s second term and the first one party Government under MMP begins in earnest this afternoon with the first proper working Cabinet meeting. The latest housing boom and what to do about is dominating the national conversation. But the PM and the Government are hamstrung by their own pre-election promises not to tax wealth or invest properly in the housing infrastructure needed to add major new supply. Expect green lights for major projects such as the Manawatu Gorge replacement and the Mt Messenger road among the first announcements.
Joe Biden won the US Presidency over the weekend, but the global economy is still sick because politicians, including America’s are reluctant or unable to launch fresh fiscal stimulus. New Zealand is in the same boat. The only other players able to respond quickly and without political sign-offs are central banks, who keep thrashing asset prices higher with massive money printing plans. Biden has pledged to put America back into the Paris Climate Accord, but don’t expect a TPP or a detente with China any time soon. America’s pulling back from the global trading system and China was pretty much bipartisan.
The Reserve Bank will outline its latest money printing plan, ‘Funding for Lending’, on Wednesday. It could add another $50b of near-zero percent printed money to the pot via loans directly from the central bank to banks, who would then shovel it on, mostly into the housing market. The central bank’s role in housing affordability is about to become even more political. Labour appears to be turning a blind eye to a Government agency choosing, and being allowed, to print $150b and add at least $200b straight onto house values for the already rich.
Breaking this morning…
Curious quotes and obvious questions
"No one in New Zealand wants to see a housing market where home ownership is determined by the prior generation being wealthy enough to support the next generation, and yet that is the reality. I'm looking at ways to overcome that" - Prime Minister Jacinda Ardern
So why did the PM commit herself to not taxing wealth in her political lifetime? And why is the Government choosing not to use its strong balance sheet to address the underlying infrastructure shortages that are stopping the big increases in housing supply that would help solve it.
Notable people moves
The CTU announced yesterday the appointment of Craig Renney as its new Economist and Director of Policy. Renney was the back-room guy in Grant Robertson’s office through the last five years and is famous for finding the ‘fiscal hole’ in National’s shadow Budget before the election.
He’s an influential and engaging guy with some fresh ideas who will make an impact, in part because he’ll be able to air those ideas in public. Renney takes over from Andrea Black in December. She was on a fixed-term contract.
My weekend reading
Symptomatic of the too-heavy load that monetary policy is being forced to carry to bolster the global economy, the pile of negative yielding Government bonds rose to a record high US$17t on Friday. (Bloomberg)
We are not so much a real economy as a housing market with bits tacked on. Interest.co.nz estimates the real estate industry earned around $568 million in gross residential sales commissions over the three months from July to September, up 51% from the same period a year ago. (Interest.co.nz’s Greg Ninness)
Worth reading this morning
Some useful report reading
This report, New Zealand’s economic future: COVID-19 as a catalyst for innovation was published by Auckland Uni’s Koi Tū: The Centre for Informed Futures on Friday. It recommends a land tax.
Light relief from all the doom-scrolling
Coming up…
Today - First working Cabinet meeting of the new term. PM expected to hold a news conference in Wellington around 4pm.
Tues Nov 10 at 10.45 am - Stats NZ to publish electronic card transactions data on retail spending in October 2020.
Weds Nov 11 at 9am - Contact Energy AGM
Weds Nov 11 at 2pm - Reserve Bank quarterly Monetary Policy Statement (MPS) and news conference at 2pm. Details expected of the Reserve Bank’s $30-50b Funding for Lending Programme (FLP) of Reserve Bank money printing and lending to banks at or around the Official Cash Rate (currently 0.25% and expected to fall to minus 0.5% next year).
Thurs Nov 12 at 10.45 am - Stats NZ to publish travel and migration data for September.
Thurs Nov 12 around 8.30 am - Sanford to publish full annual results to NZX, but it gave an early indication on Nov 5 of a 46% fall due to Covid-19.
Fri Nov 13 at 10 am - Business NZ-BNZ Purchasing Managers Index for October
Fri Nov 13 at 10.45 am - Stats NZ to publish rental price indexes for October.
Mon Nov 16 at 10.45 am - Stats NZ to publish wellbeing statistics for September quarter.
Sat Nov 21 - National Party AGM due to vote on re-election of President Peter Goodfellow.
Weds Nov 25 2pm - Reserve Bank to publish six monthly Financial Stability Report (FSR) . Expected to warn of re-imposition of high LVR lending limits from May 1, 2021.
Weds Nov 25 - Opening of Parliament for 53rd term, including swearing in of new MPs
Thurs Nov 26 - Speech from the throne in Parliament outlining Government’s agenda
Ngā Mihi
Bernard