In today's email we argue that the Wall St slump does not herald the start of a new GFC.
1. This is no new GFC
Global stock indices were actually up this morning in the wake of Tuesday morning's 4.6 percent slump on Wall St and few see this latest stock market turmoil as the start of some sort of new 2008-style Global Financial Crisis.
It was tempting to ask yesterday if the worst points drop in the history of the Dow Jones Industrial Average (1,600 points in mid-afternoon trade) was the beginning of a new crisis and the "looming economic correction" that Winston Peters warned New Zealanders shouldn't blame him for when he chose Labour four months ago.
At first glance, it looked serious.
The Dow closed down 1,175 points on Waitangi Day morning New Zealand time. At one stage at around 9.15 am, the index was down 1,600 points, its biggest ever points drop within a single day in stock market history. Traders have worried in recent weeks that stock values might have become stretched after rising 44 percent in the 15 months since Donald Trump's election. Some rushed for the exits in late trade and there were some brief signs of panic before a slight recovery later in the day.
Some also worried that tentative signs of wage inflation in the United States might prompt the US Federal Reserve, which now has a new Chair in Jerome Powell, to raise interest rates sooner and faster than previously expected.
Slightly stronger than expected US labour force figures on Friday helped drive market interest rates higher, which makes bonds and term deposits relatively more attractive than stocks for savers.
But a closer look at the figures and the wider global economy shows the numbers are not as bad as they seem and the fundamentals underpinning real economies here and overseas are much healthier than they were 10 years ago before the Global Financial Crisis.
See my full analysis of the markets drama and what it means within our own political and economic contexts here on Newsroom Pro, where it was first published yesterday. By the way, here's the correct link to my piece on the landmines in Jacinda Ardern's next 1,000 days from Monday. My apologies for the incorrect link in the email.
2. Jacinda's Waitangi weekend success
Newsroom's Sam Sachdeva was hard at work for Newsroom up at Waitangi over an historic weekend where Jacinda Ardern became the first woman Prime Minister to speak at the Waitangi powhiri.
Sam saw the visit as an unmitigated triumph, one which may have left Bill English wishing he was nearby rather than at the opposite end of the country in Bluff.
Everything within her control was executed perfectly, and everything left to chance fell her way - even the weather, with bright blue skies at the times she needed them the most, Sam wrote.
"There is a temptation in some corners to paint Ardern as a lightweight, all smiles and no substance. Leaving aside the fact much the same was said about John Key, that charge simply does not tally with the woman who made the most of her chance to be part of history.
"Ardern’s speech at the Waitangi powhiri - the first address by a female prime minister - would have been remembered regardless of its content, but it contained a lyricism that feels all too rare in New Zealand politics.
"The personal and the political seamlessly wove together, Ardern speaking about her hope that her child would understand the history of Te Tiriti o Waitangi, and the urgent need to close the distance between Maori and Pakeha in Aotearoa.
"It was not what she said that struck home as much as how she said it, a sense that each word had been carefully considered."
Ardern herself acknowledged that talk is not enough, and it is action that her government will be judged on. But as her deputy Winston Peters has been known to say, words do mean things, and hers seemed to strike home with Ngapuhi and other iwi.
See Sam's full report wrapping up the weekend here on Newsroom Pro.
And here's his photo gallery of the weekend on Newsroom, including the masterstroke of political image-making of the Prime Minister cooking breakfast sausages for the public. Over 40,000 attended at Waitangi yesterday.
3. A precedent for tri-partisan work deals?
Newsroom's Auckland reporter Teuila Fuatai has taken a closer look at what the Hobbit law reform process might mean for the Government's wider plans for industrial relations reform.
Teuila reports the findings of the Hobbit Law working group could influence the Government’s wider body of work around industry minimum standards and collective bargaining for contractors.
Richard Wagstaff, president of the New Zealand Council of Trade Unions, said working groups involving Government, employer and workers’ representatives, would be particularly useful in negotiating industry standards where workers were unable to bargain collectively, and union representation was low.
Importantly, the current appetite among law makers for “tripartisan” consultations – those involving Government, employer and unions - indicate that's probably the direction things are heading in, he said.
“There is already an established forum in the health sector – The Health Sector Relationship agreement – which is a tripartite forum that has been going for 15 years now, and this Government has expressed strong support for it,” Wagstaff said.
4. A pick and mix America's Cup solution
Newsroom's Co Editor Tim Murphy reports that a compromise plan is in the wind for the Auckland waterfront after a standoff between the Government and Auckland Council over where best to invest up to $140 million of public money.
The new plan is expected to be a pick-and-mix of elements of the two proposals publicly debated since late last year, he reports.
The Crown and council would likely go halves in whatever public money is required to develop the waterfront home for the event due to be held between 2020 and 2021.
Mayor Phil Goff and council officials met America's Cup minister David Parker and Government advisers in the Mayor's office on Friday, with the parties saying afterwards they were working well together on outstanding issues.
Auckland Council had already applied for consent for a double wharf extension known as the Wynyard Basin, with support from Team New Zealand. It is based around Halsey and Hobson wharves and is close to the Viaduct and downtown.
But Parker has refused to let go of his preference, a land-based option with no wharf extensions on the old tank farm, known as Wynyard Point. Parker has talked up publicly his progress in negotiations to find a deal with the hazardous substances company which uses the big storage tanks and has said his option could save the public millions.
However the Wynyard Point site has always laboured under negatives identified months ago by Team New Zealand — that its waters are either too shallow or too exposed to westerly winds for the America's Cup bases to launch and recover the expensive racing yachts.
Parker and the council's development arm, Panuku, have been at odds over how much the considerable bill to move the storage tanks off Wynyard Point would be and whether it could be done in time. He has had support in his position from the Save our Harbour lobby group and a councillor, Mike Lee, who oppose any extra permanent wharf encroachment onto the waters of the Waitemata.
Now Newsroom understands the sides are working on a compromise option using some of the tank farm area but still using some of the Halsey Wharf extensions. See Tim's full report here on Newsroom.
5. Briefly in the political economy...
Extra creamy - Wholemilk powder prices rose 7.6 percent to US$3,226/tonne in last night's auction on Globaldairytrade. This was the third successive increase in prices in the fortnightly auction, and extended the GDT index rise to 13.5 percent over the last month. Prices are now more in line with Fonterra's current forecast payout of $6.40/kg. The strength reflected lingering concerns about weak supply in a drought affected parts of New Zealand and solid demand from Chinese buyers before their New Year break, ANZ wrote this morning.
Uncompetitive - Australia's Productivity Commission published a draft report yesterday criticising a lack of competition in the banking sector, which is dominated by the same big four banks that dominate New Zealand's banking sector. Winston Peters argued in opposition for an Australian-style inquiry into banking and Labour agreed in its coalition agreement with New Zealand First to looking at making Kiwibank the Government's banker.
Yay for lawyers - NZME and Fairfax NZ (now renamed Stuff Ltd) announced on Monday they planned to appeal their twice-rejected merger plan, known as StuffMe, in the Court of Appeal. Tim Murphy wrote on Newsroom the two media companies had already lost twice, but were betting a new set of judges would take a different view.
6. Coming up...
Statistics New Zealand is scheduled to release December quarter labour force figures at 10.45 am today. Economists expect a slight tick up in the unemployment rate to 4.7 percent from 4.6 percent and modest (0.3 percent) jobs growth. This follows surprising strength in the September quarter and a reversion of labour force participation from a record high.
The Reserve Bank of New Zealand is scheduled to deliver its first full Monetary Policy Statement of the year at 9 am tomorrow. Economists expect acting Governor Grant Spencer to leave the Official Cash Rate on hold and maintain the bank's ultra-easy stance and flat rate outlook into 2019. Inflation is seen remaining low despite solid economic growth. Monday's market slump has added some spice to what was expected to be an uneventful MPS.
7. One fun thing...
In honour of the auction result above and the need for a dad joke on occasion, here's one from 'You only had one job': 'This is cheesy'
8. This morning's political links
These are provided in the morning subscriber email.