Economic Week - October 9

by Nick Clark

Commodity prices weaken

The ANZ World Commodity Price Index slipped 0.2% in September with lower dairy and meat prices but stronger prices for logs, fruit, and aluminium.

Dairy prices were down 1.3%, with skim milk powder and cheese increasing, but falls for whole milk powder and butter.  The meat and fibre index fell 0.4%, with beef down 1.5% but lamb up 0.6%.  Wool prices remained weak but lifted marginally.  Horticulture prices were up 1.1%, with kiwifruit up and apples down; forestry prices were up 1.7%; and aluminium up 0.4%.

In local currency terms the NZ Dollar Index fell 1.3% as the exchange rate strengthened 0.6% during September.

Compared to the same time last year, the World Price Index was down 3.0% and the NZ Dollar Index was down 6.4%.


GDT rises

This week’s Global Dairy Trade auction posted a 2.2% rise from the previous auction three weeks ago, building on a 3.6% increase at that previous auction.

Five commodities increased in price while two decreased.  Whole milk powder was up 1.7%, anhydrous milk fat up 5.4%, butter up 8.4%, cheddar up 0.4%, and butter milk powder up 9.1%.  On the other hand, skim milk powder was down 0.9% and lactose down 7.4%.

The average selling price was US$3,143 per tonne and 35,090 tonnes were sold.

The GDT Price Index is down 4.3% compared to the same time last year.


Business confidence lifts

Businesses are feeling in better spirits, according to the preliminary results for ANZ’s October Business Outlook Survey.

A net 14.5% of respondents expect general economic conditions to worsen over the coming 12 months, a 14 point improvement on September’s -28.5.  Meanwhile, a net 3.6% expect their own activity to improve, up 9 points on September’s -5.4%.

At +3.6% own activity is by no means strong, but it’s the first positive result since February.  It’s also positive that despite the tapering back of wage subsidies, only a net 3.2% expect to reduce employment and there was also an improvement in export intentions.  On the other hand, expectations for profitability remain weak (although improved), investment intentions remain subdued, and credit remains tough to access.

The final results for October are due at the end of the month.


Consumer confidence steady

Consumer confidence was unchanged at 100.0 in September, according to the monthly ANZ Roy Morgan Consumer Confidence Index.   This is well below its historical average of around 120 and it is around 2009’s average level (the last time we experienced a recession).

The net proportion of households who think it’s a good time to buy a major household item improved 2 points but remains recessionary at a net -1%. Consumers’ perceptions of their current financial situation fell 3 points to -2%, its third consecutive fall.


Advice to a new government

Think tank the New Zealand Initiative has released a Briefing to the Incoming Government, called Roadmap for Recovery.

The Briefing is scathing about most of the election promises made during the campaign, with it considering many to range ‘from trivial at best to economic sabotage at worst’.  This sad state of affairs comes despite immense problems New Zealand is facing.  It believes the ‘country desperately needs sensible policies’.

The Briefing discusses boosting workers’ skills to help fix the country’s lagging productivity; removing regulations choking new house building; incentivising councils to promote development; and doing away with the Overseas Investment Act.

It calls on the next Government to resist the temptation to tighten labour market settings which have served us well. It considers labour market flexibility to be key to employment growth post-COVID-19.

The Briefing argues that raising taxes at this time would hurt growth and impede the recovery. It says more taxes are not necessary to get public debt under control. Instead, there is ample scope to reduce low quality public spending.

It also maintains that the RMA exacerbates resource problems by undermining private property rights and failing to internalise costs.  It wants replacement legislation to protect property rights and wants objectors to be confronted with the cost to the community of foregone use and for compensation for regulatory takings to be permissible.  It supports the ETS as the primary instrument for reducing greenhouse gas emissions.

While not everyone will agree with everything in the Briefing, it contains a lot of very sensible ideas and it puts a sound and credible alternative to what has too often been very poor public policy over recent times.

Federated Farmers’ own prescription for the incoming government is contained in its General Election Platform.


NIWA Soil Moisture Data

NIWA’s latest soil moisture maps (as at 9am Thursday 8 October) show soils in the upper North Island, from the Far North to the East Cape, becoming increasingly dryer than usual, along with coastal Wairarapa.  In the South Island coastal areas of Canterbury and North Otago are significantly dryer than usual.

Exchange Rates

Over the past week the NZ Dollar weakened 1.1% against the TWI and it was down against all our major trading partners.



NZ Dollar versus

This Week


Last Week (1/10/20)

Last Month (8/9/20)

Last Year (8/10/19)

US Dollar





Australian Dollar










UK Pound





Japanese Yen





Chinese Renminbi





Trade Weighted Index





Source: Reserve Bank of NZ


Wholesale Interest Rates

Over the course of the week the 90 Day Bank Bill interest rate was down 1 basis point while the 10 year Government Bond yield was up 4 basis points.  The Reserve Bank will next review the OCR on 11 November.



This Week


Last Week (24/9/20)

Last Month (1/9/20)

Last Year (1/10/19)






90 Day Bank Bill





10 Year Government Bond





Source: Reserve Bank of NZ