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Musical Chairs

@musicalchairs.bsky.social

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Ugly graphs, insights and outbursts. NZ.

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Musical Chairs @musicalchairs.bsky.social · Dec 21

Whose fault is this recession? Let's rank the villains for giggles 🧵
Boss villain is easy, ol' Shock and Orr.
RBNZ took a hero pill in 2020 and went nuts juicing the housing market. Then they took *another* pill in late 2021 and slowed the flow of credit to a trickle through 2023 and 2024. [1/n]

Graph showing net bank lending (new bank loans minus repayments) vs the RBNZ interest rate (OCR). The graph shows a surge in net bank lending in 2021 followed by a slump in 2023/24.

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Reposted by Musical Chairs

Kirsty Johnston @kirstyjohnston.bsky.social · 19h

Can’t wait to see the regulatory impact statement that outlines the impact of this decision on everyone who isn’t a farmer

www.rnz.co.nz/news/nationa...

Government lowers methane target, rules out methane taxes

The government is lowering its biogenic methane target for the next 25 years and is ruling out agricultural taxes on methane emissions.

www.rnz.co.nz

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Musical Chairs @musicalchairs.bsky.social · 1d

This is my favourite of the famous five...
5. Every cycle turns eventually.
Wtaf! Cycles don't have to 'turn' - economies can just bobble along under-employing people and generally being crap whole Govts hold the purse strings tight and spout word salads. See UK through the 2010s. Good grief. [Ends]

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Musical Chairs @musicalchairs.bsky.social · 1d

4. Card spending is up a bit.
Oh. Can you see it? Right at the end there? Tiny little rise? Hopium?
I agree with Shamubeel that Govt capital spending will pick up next year, but the pace of spend/delivery will be painful as we feel the loss of productive capacity. [11/n]

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Musical Chairs @musicalchairs.bsky.social · 1d

This rare alignment of lucky stars is a fragile thing - foolish to bank on it. The article also notes correctly that the extra income for primary sector is being used to pay down debt (killing $) rather than investment.
Also, can you see the issue with our 'two-speed' economy? [10/n]

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Musical Chairs @musicalchairs.bsky.social · 1d

3. Commodity prices are hot!
Indeed, butter, dairy, meat prices are high (you might have read about it). Global oil prices are also being kind to our little oil-powered, two Japanese reject cars per person economy. This means we are not running too chunky a deficit with the rest of the world. [9/n]

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Musical Chairs @musicalchairs.bsky.social · 1d

Now from shaky reckonomics to plain daft...
2. Job ad numbers have increased.
Woooohoooo! Look at them go! We're talking about that little pink prick here. Well I guess the good times are just round the corner (and the bend is 10 years long). [8/n]

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Musical Chairs @musicalchairs.bsky.social · 1d

Lower business debts and quicker pass through of OCR changes mean that we will be back to 2017 levels of business debt servicing costs by end of 2025. BUT, business investment *follows* growth, it doesn't lead it. Lower debt costs will help profits / dividends recover though. [7/n]

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Musical Chairs @musicalchairs.bsky.social · 1d

While housing debt as a % of GDP is still at 2008 (GFC) levels, business and agriculture debt levels as a % of GDP have fallen. I mean, why invest in business when you have a tax-incentivised property ponzi scheme to feed? [6/n]

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Musical Chairs @musicalchairs.bsky.social · 1d

The lag between changes to the OCR and changes to the weighted average mortgage rate is significant. It could be late-2026 before we get back to pre-cvid levels. Better news for businesses though... [5/n]

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Musical Chairs @musicalchairs.bsky.social · 1d

If we multiply the OCR by housing debt as a % of GDP we get a rough indicator of housing debt servicing costs over time. As you can see, by the end of 2025 we will be back to 2012 (ish) levels - hardly stimulatory. And, there's more... [4/n]

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Musical Chairs @musicalchairs.bsky.social · 1d

How quickly OCR changes 'work' depends on (i) OCR change, (ii) how quickly OCR changes impact market interest rates and avg rates paid, and (iii) size of private debt relative to the economy.
Here's our debt stack as a % of GDP. Note that housing debt is stubbornly high [3/n]

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Musical Chairs @musicalchairs.bsky.social · 1d

Quick explainer first: A higher official cash rate (OCR) drives $ from people/businesses with debts to wealthier folks with savings. This reduces the money spent into the ecomomy - slowing things down & killing jobs. Look at the pink & yellow lines below - you can see the economy go snap. [2/n]

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Musical Chairs @musicalchairs.bsky.social · 1d

OK, due to popular demand, let's work through these five reasons to be positive...🧵
1. The Official Cash Rate has dropped, praise be! Now, people do not often say to me 'there's been 250 basis points of...' but let's explore this 'stimulatory territory' thingy. [1/n]

1. The official cash rate has dropped
Kiwibank chief economist Jarrod Kerr said the fact that the official cash rate had fallen to the level where it was stimulatory for the economy would be a gamechanger.

"People often say to me 'there's been 250 basis points of cuts, it's not working'… it's like yeah because it only took it back to a neutral setting at 3 percent. [At 2.5 percent], now we've actually gone into stimulatory territory.

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Reposted by Musical Chairs

the Juice Media @thejuicemedia.com · 2d

The Government of New Zealand has made a new tourism ad and it's surprsingly honest and informative!

Honest Government Ad | Visit New Zealand!

YouTube video by thejuicemedia

www.youtube.com

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Musical Chairs @musicalchairs.bsky.social · 2d

Yeah, it's been like, 50 years.

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Musical Chairs @musicalchairs.bsky.social · 2d

Wellington is clearly stabilising as the public sector anchors the economy. Auckland is drifting badly, looks waaaaay off stability. The data in these two charts is annual change (%) btw.

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Musical Chairs @musicalchairs.bsky.social · 2d

Latest benefits data is out. More detail later, but suffice to say that we are going to need some new forecasts.

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Musical Chairs @musicalchairs.bsky.social · 3d

Always worth finishing off with our favourite intermediary - our financial institutions. Paying out loads more, charging loads more. Taking a slice. This is the way. [Ends]

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Musical Chairs @musicalchairs.bsky.social · 3d

Here's the rest of the world, taking $12.6bn over the last year in net interest income (compared to $1.1bn central Govt). INCREDIBLE that is it the Govt interest payments that get the media coverage. [4/n]

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Musical Chairs @musicalchairs.bsky.social · 3d

... households are OK, $2.7bn a year of net interest income. Obviously, this masks the $11.5bn that indebted households are paying vs the $14.3bn that households with savings are receiving. Rate hikes slow the economy by distributing money from kiwis buying houses & businesses to rich folks [3/n]

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Musical Chairs @musicalchairs.bsky.social · 3d

... $17bn net interest payment made by our plucky non-financial businesses - that's $47 million per day! Now, how how do businesses pay this bill? By charging customers. Great, that's us. Remember: increasing business costs is how we tackle inflation. So, who's winning? [2/n]

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Musical Chairs @musicalchairs.bsky.social · 3d

Net Govt interest payments on debt are back to typical levels - well under 1% of total Govt spending. Always worth cancelling out the interest Govt receives (and pays each other). The net interest payment figure ($1bn net) is very tiny compared to... [🧵1/n]

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Reposted by Musical Chairs

The Spinoff @thespinoff.bsky.social · 3d

Nation upset at the inevitable result of its own actions

Step one: push people out of work and onto the streets. Step two: get mad at people being out of work or on the streets...

thespinoff.co.nz

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Musical Chairs @musicalchairs.bsky.social · 3d

Here's the weekly data by year. Our population has grown by 240,000 since 2022... but we might see job numbers dip below 2022 levels before the year is out.
Probs worth clarifying that cheaper credit doesn't jumpstart economies. Knock, knock. Is anyone there?(2/2)

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Musical Chairs @musicalchairs.bsky.social · 3d

Annual job growth still stuck firmly in the negative - running just short of 30,000 below the same week last year. Misery compounds. (1/2)

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