Matt Nolan

GDP June 09: The recession is over

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So, the recession is over – not what I expected.

I had an ipredicit contract saying that GDP would be positive, but then I covered my position yesterday.  That will teach me 😉

Update:  Looks like it was the cold winter that pulled us out of recession – the increase in electricity generation more than accounted for the increase in production GDP over the quarter.

Randomly, RGNDI per person rose 1.7% in the quarter as well.  This is something I’m going to have to spend some time looking at, as on the face of it that is an awesomely good result.

Update 2:  Miguel points out the leap in RGNDI is because of yesterday’s reported movement of funds from BNZ.

Matt Nolan

Did we have positive growth in June?

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GDP is out later today, and there are calls from some that growth turned positive again in June.

While a mild bounce-back from the sharp March 09 fall is conceivable in of itself I’m not sure if I buy it.  Partial indicators have still been poor and the NZIER QSBO was still incredibly weak for the June quarter.

Personally, I would not be surprised seeing a moderate contraction for June above what the market is picking (currently a 0.2% fall).

Of course, the more concerning factor for me will be the sharp decline in RGNDI – which is a far better indicator of the true cost of the recession than GDP.

Matt Nolan

RBNZ MPS Sep 09

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So the Reserve Bank left the cash rate unchanged at 2.5%.

Three quick points:

  1. Their forecasts are stronger than in June,
  2. They talked alot about structural imbalances (something I heard about a couple of months ago),
  3. They actually framed their decision in terms of inflation again, like the Aussies have been.

“Annual CPI inflation is currently well within the target band and is expected to track comfortably within the band over the medium term”

Thank you 🙂

All in all, it was a good statement from the Bank.  I’m just not sure if I really believe them when they say they won’t increase the OCR until late-2010 😉

Matt Nolan

Why?

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Defective Equilibrium mentions that John Minto’s idea of a salary cap is madness.  He is correct.

My question is why?  Why have a salary cap?  Why would society need to stop people voluntarily trading?

If someone pays someone else an “eye popping salary” this is voluntary trade, why do we feel that we have to jump in and regulate a “maximium value” for this trade?  There are two reasons for asking this question:

  1. It makes us realise that capping salaries just because they seem too big isn’t a “fair” thing to do.
  2. It might make us see where an actual market failure exists – which is turn might illustrate an issue we should look at regulating.

So, why?

Matt Nolan

Shock of the day: banks are rational

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According to Kiwibank, the other banks profit maximise:

Most banks are only interested in making as much money as possible out of their current customers, Kiwibank chief executive Sam Knowles says.

Now the actual stuff Sam Knowles says, for example the context of the above quote is really that Kiwibank is trying to build market share (since there is a significant transaction cost for consumers moving around the market) while the other banks are satisfied with their share, and so will be extracting surplus – in other words Kiwibank is keeping prices lower now to “invest” in the future.  Furthermore, I agree with him when he says:

New Zealand should work towards customers having a bank account “for life” and if they want to change banks “you can go and get it done” without any hassle,

As this would improve competition.

However, I just thought it was funny that the quote at the start of this post was the first paragraph in the article.  It is as if the newspaper thought there was something novel in the fact that banks act like everyone else.

Will Taylor

Fonterra auction to “blame” for high milk prices?

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Back in November (I need to post more often, lol) I posted about how retarded it was that the Fonterra auction was being blamed for low milk prices.

Reading in the news today that prices on the acution are up 24%,  I wonder if the auction will also be “blamed” for this change in prices?

I somehow doubt it, I think people will continue to attribute “blame” to the auction when prices don’t swing their way rather than look at the underlying reasons behind the change. Something like what Matt and I did after my last post on the auction (here).