New Zealand, the Saudi Arabia of Milk. While such metaphors are probably ill-advised at the best of times, it really falls short lately. NZ dairy exporter Fonterra warned on Saturday it found some of its products manufactured in May 2012 tested positive for a strain of bacteria that can cause botulism.
Oil supplies aren’t likely sources of panic over one’s babies — at least, not in such a proximate way. Read more
Don’t go messing with the kiwi! The governor of New Zealand’s central bank, Graeme Wheeler, was pretty clear in a speech earlier today:
We believe the exchange rate is significantly over-valued relative to what would be sustainable long term in the absence of sizeable increases in the terms of trade and productivity. Read more
Time for some property porn.
It comes from the 2013 Demographia International Housing Affordability Survey – a piece of work often quoted by bubble hunters and rubbished by the property bulls who babble on about flawed methodology. Read more
Large currency moves are generally easy enough to
apply a reifyingly simplistic narrative to figure out.
Japanese yen having a bad year? That’s the Bank of Japan’s fault. Read more
Australia unexpectedly lost jobs for a second straight month in December, capping the nation’s worst year for employment in almost two decades and weakening the local currency, reports Bloomberg. Falling part-time employment stalled job growth last year, with total payrolls posting little change in the year through December, its worst annual performance since 1992. The unemployment rate held at 5.2 per cent for a second straight month in December as full- and part-time positions combined posted the biggest drop since April. Meanwhile New Zealand consumer prices unexpectedly fell by 0.3 per cent in the fourth quarter over the previous three months, Bloomberg reports separately. The median estimate in the news agency’s survey of 15 economists was for a 0.4 per cent increase and none forecast a decline.
Hundreds of flights in Australia and New Zealand have been cancelled after a volcanic eruption in southern Chile blew ash across the southern hemisphere, reports the FT. More than 8,000 passengers were stranded at airports in southern New Zealand and south-eastern Australia on Sunday evening and that number was expected to rise as more flights were cancelled. Qantas and its low-cost carrier Jetstar expected about 16,000 passengers to be affected by flight cancellations in and out of Melbourne and Tasmania, and between Sydney and the Gold Coast and Australia and New Zealand. Airlines including Virgin Australia and Air New Zealand said they could not rule out further cancellations over ensuing days, while NZ’s civil aviation authority said the country’s airspace might be affected for at least a week.
New Zealand’s central bank sliced half a percentage point off its benchmark interest rate on Thursday in an effort to limit the short term economic impact of last month’s devastating earthquake in Christchurch, the FT reports. Economists said the cut to an “emergency low” of 2.5 per cent was twice as big as expected and designed to support the nation’s fragile economic recovery.
The Reserve Bank of New Zealand Thursday cut its official cash rate 0.5 percentage point to 2.50% to offset the economic impact of the earthquake that devastated the country’s second largest city of Christchurch on Feb 22, but indicated there would be rate increases once reconstruction gets underway, reports the WSJ. RBNZ governor Alan Bollard said in the bank’s March monetary policy statement the bank had “acted preemptively” to lessen the economic effect of the quake. The official death toll from the 6.3-magnitude quake stands at 166. Prime Minister John Key said up to 10,000 houses in the region would have to be demolished and a further 100,000 could be damaged as a result of the quake.
For the commute home, and to help you qualify the recovery,
- David Wessel spots three storm clouds in the US recovery: oil, rich-country government policy, and emerging market slowdown. Read more
New Zealand’s government may relocate Christchurch’s central business district to the edges of the city after last week’s 6.3-magnitude earthquake destroyed almost a quarter of the centre’s office buildings and killed 159 people – with the deathtoll set to rise further, reports Bloomberg. The government is in talks with companies about setting up temporary business parks in the next two months to get business operating again in NZ’s second largest city. About 755 buildings in the city center have been condemned, said the city council. Buildings in the CBD were already badly damaged by a temblor that struck city on Sept 4. Reconstruction could cost as much as NZ$20bn ($15bn) after both earthquakes, Prime Minister John Key said this week.
The earthquake that devastated the southern New Zealand city of Christchurch may drive up prices for reinsurance in the Asia-Pacific region, reports Bloomberg. Rates may climb as companies including Munich Re and Swiss Reinsurance take losses, compounding costs from last month’s flooding in Queensland, Australia, Credit Suisse said in a Feb 22 client note. Reinsurance rates in other regions probably won’t be affected, it added. Earlier, the FT reported that rescue workers fear the confirmed death toll of 76 from the quake is likely to double. Five refuge centres have been set up in NZ’s second-largest city to shelter those displaced by the quake.
Almost 200 frustrated people are bunking down on the floors of two large halls at Burnside high school, one of five refuge centres set up in Christchurch to cater for those displaced by the deadly earthquake, reports the FT. French and Japanese tourists who fled collapsing hotels rub shoulders with homeless local people. They all struggle for some private space amid the challenges of limited sanitation, distressed children and cold, wet weather.
Here’s a counter-intuitive policy suggestion, if ever there was one.
On Tuesday, after a 6.3 magnitude earthquake hit the New Zealand city of Christchurch, the swap market doubled-down on bets the country’s central bank would cut interest rates. Early estimates by prime minister John Key had the fatal quake causing about NZD $6-8bn (USD $4.5-5.97bn) of damage. A 7.1 magnitude earthquake in September, in nearby Canterbury, caused about NZD $8bn of damage — but there’s talk the Christchurch quake could cost as much as NZD $16bn. Read more
New Zealand rescue workers continued searches on Wednesday for people trapped under debris after an earthquake that struck the southern city of Christchurch at lunchtime on Tuesday, reports the FT. An estimated 120 people had been pulled from the rubble by early Wednesday morning. Bob Parker, Christchurch mayor, said at least 100 more remained trapped. Bloomberg adds that the death toll climbed to 75 by Wednesday afternoon. The government said the disaster is likely to cost about NZ$5bn ($3.7bn). However, the NZ dollar rose 0.4% from a two-month low to $0.7497 after Moody’s said it saw no immediate impact on NZ’s Aaa credit rating, and amid speculation that markets had overpriced the probability of a rate cut by the Reserve Bank. The NYT posts live updates and video reports.
New Zealand rescue workers continued frantic searches on Wednesday for people trapped under debris in the aftermath of the earthquake in Christchurch that has so far claimed the lives of at least 65 people, reports the FT. The 6.3 magnitude quake struck at lunchtime on Tuesday – a busy period for the nation’s second-largest city. An estimated 120 people had been pulled from the rubble by early Wednesday morning, local media said. Bob Parker, the mayor of Christchurch, said his best estimate was that more than 100 remained trapped.
A powerful earthquake struck the southern New Zealand city of Christchurch on Tuesday morning, with authorities reporting multiple deaths as buildings collapsed in the heart of the business district, reports the FT. The 6.3 magnitude earthquake struck near the country’s second-largest city at a depth of just 5km at 12:50pm Tuesday when the city was at its busiest. The quake devastated large parts of the Christchurch, which suffered a 7.1 earthquake last September. Witness reports on NZ television said the centre of Christchurch looked like a war zone. Radio NZ said fatalities had been confirmed at several locations in the city, including when two buses were crushed by falling buildings. Bloomberg adds that the NZ dollar dropped 1.3% to Y62.68 as of 12:36pm in Sydney, the biggest slide since Nov 23, after reaching Y63.76, the strongest since Feb 10.
Kiwi action, after New Zealand reached a deal to keep the filming of ‘The Hobbit’ local:
Aussie slumps on soft inflation; kiwi outperforms – International Business Times
Coats, one of the UK’s oldest names in textiles, is set for a London stock market return within two years as part of a corporate restructuring by its owner Guinness Peat Group, the activist investment company. GPG, quoted in London and New Zealand, took Coats private in 2003 after making a £414m takeover offer for the thread manufacturer, the FT reports.
The Kiwi dollar was doing quite nicely, climbing steady but with no great dramas, until New Zealand’s unexpected emergence from recession – as per data issued Wednesday – put a rocket under it, driving the Kiwi to a 13-month high against the US dollar.
Helped also by figures on Tuesday showing that New Zealand posted the narrowest current account deficit in more than four years, the currency has gained nearly 3 per cent in just two days – and a total of 27 per cent against the US dollar in six months. Read more
Australia and New Zealand launched co-ordinated plans on Sunday to safeguard their banking systems, hoping to stem heavy losses suffered by their currencies and markets last week. The two governments pledged to guarantee all bank deposits. Canberra went further, guaranteeing all term wholesale funding by Australian banks in international markets and doubling its pledge to purchase residential mortgage-backed securities to A$8bn ($5.2bn). Although Australia’s four largest banks are among fewer than two dozen in global banking to retain double A credit ratings, they remain vulnerable because of their heavy reliance on international wholesale markets for funding. Australia’s benchmark S&P/ASX 200 Index slid by nearly 16% last week, while New Zealand’s NZX 50 fell by 11%. The Australian dollar fell more than 5% against the US dollar on Friday alone. Australia’s deposit guarantee would last three years and cover the country’s entire deposit base of A$600bn-A$700bn.
In case you missed these FT stories:
NY launches investigation into CDS trades
Andrew Cuomo, the New York attorney-general, is investigating whether traders have been manipulating the largely unregulated credit insurance market as a way to push down the prices of stocks. Read more
New Zealand’s central bank on Thursday cut its benchmark interest rate by a half point to 7.5%, exceeding most economists’ forecasts, saying the economy is in a recession and inflation will slow, reports Bloomberg. The nation’s currency dropped to a 22-month low, bond yields fell and stocks gained after the decision. Allan Bollard, central bank governor, said the economy is in its first recession since 1998 as the jobless rate rises, housing slumps, retail sales drop and a drought cuts farm exports. The New Zealand dollar, a favourite of the so-called carry trade, has dived 13% since July 24, when Bollard cut the benchmark for the first time in five years from a record.