1. The things that mattered this week

New Zealanders see an affordable house price as being almost $200,000 cheaper than a KiwiBuild house in Auckland. China wants New Zealand to correct its "wrong statements" about China's activities in the Pacific. The economy continues to show signs of cooling ahead of key inflation figures next week.

1. Who is kidding who?

The Government is pushing ahead with KiwiBuild as a key part of its affordable housing push, but the public sees the prices offered as far, far too high to be truly affordable.

A nationwide online poll conducted by Horizon Research found New Zealanders think on average that an affordable home should cost around $375,000. That's almost $300,000 below the cost of a three bedroom KiwiBuild home in Auckland and $125,000 below the KiwiBuild price cap outside of Auckland and Queenstown.

The Horizon Poll found Aucklanders thought an affordable home would cost around $468,400, which is more than half a million dollars below the average house value in Auckland in June and almost $200,000 below the KiwiBuild level pitched as affordable.

Even in Christchurch, the affordable level was seen at $308,100, which is almost $200,000 below the average actual value in Christchurch.

Essentially, the horse has bolted and the only way to get it back in the box for first home buyers to afford without help from families or lotto is to engineer a halving of land prices.

But the brutal political truth is that home owners who vote don't want that. The rest is a charade where the Government pretends that $650,000 is affordable and that house prices can remain stable and rising wages will restore housing to true affordability.

See the full list from the Horizon poll above.

2. Where's the inflation?

The economic focus is switching locally to the inflation outlook ahead of next Tuesday's June quarter Consumer Price Index inflation data, which will be the last major economic indicator before the Reserve Bank's August 9 monetary policy statement.

Economists expect CPI inflation of around 0.1 percent in the quarter, which would lift annual inflation to around 1.2 percent from 1.1 percent in the March quarter.

That is barely inside the Reserve Bank's target range and well below both the Reserve Bank's last forecast of 1.5 percent and the 2 percent mid-point of the target range.

There continues to be warnings that the 25 percent minimum wage hikes agreed over the next three years, the public service industrial action and various new pay equity deals will generate wage inflation pressure.

The key question for the Reserve Bank will be whether they wait for the wage inflation appear, or whether they try to get ahead of the curve with warnings of a rate cut.

3. China wants correction

China's ominous and very public reaction to Ron Mark's hawkish defence strategy was the major event in the global political economy this week.

China's Foreign Ministry Spokesperson Hua Chunying was asked at her regular news conference about Friday's strategy statement and Monday's announcement of the purchase of four Poseidon marine surveillance aircraft.

"We have noted the China-related content in the relevant document issued by New Zealand. We have lodged stern representations with New Zealand on the wrong remarks it has made on China," she said.

"We urge New Zealand to view the relevant issue in an objective way, correct its wrong words and deeds and contribute more to the mutual trust and cooperation between our two countries."

The bolding is mine. It doesn't get clearer than that.

Newsroom's Sam Sachdeva then interviewed Acting Prime Minister Winston Peters and he wasn't backing down.

"We have trading relations with China, we have a number of international cooperative enterprises going on with China, we work with China in the Pacific on occasions, it’s a relationship which has been built up over the years, but that doesn’t mean that we, how should I put it, lose our independent, sovereign voice," Peters said.

He went on to detail a go-slow on New Zealand's involvement in China's Belt and Road Initiative, which New Zealand signed up to in a vague form under the previous Government.

"When you look at it [the agreement], its words are without any substance, it’s not binding - it doesn’t require us to do anything," he said.

See more on that from Sam below, along with his piece on British PM Theresa May's little-noticed pledge to try to join the CPTPP.

Also little noticed yesterday by most media was Stats NZ's announcement of a six month delay in the release of the 2018 Census results until March next year because of a lower-than-expected response rate (90 percent vs 94.5 percent in 2013) in the first full digital census.

4. Census results delayed

Newsroom's David Williams followed the Census' various IT hiccups through the process earlier this year.

He had the details below this week about how the low response rates were flagged at Stats NZ's daily operational meetings in March.

Stats NZ said yesterday this was an international problem and it was bringing forward population estimates to help DHBs and the like.

The Opposition was critical of the delay and there will be more to come on this.

5. More signs of a slowing economy

In more signs the economy cooled through the autumn and into the winter, Stats NZ reported retail spending with credit and debt cards stalled in the June quarter, rising just 0.2% in the three months. That was down from growth of 1.8% in the March quarter.

The Government will be hoping increased infrastructure spending will offset some of the cooling elsewhere in the economy. Housing and Transport Minister Phil Twyford announced that the Housing Infrastructure Fund (HIF) set up by the previous Government would make $196 millon of interest-free loans to build water infrastructure in Tauranga and Waikato to support 37,790 new houses. Twyford announced plans to replace Housing NZ's 87-unit apartment block at 139 Greys Ave in Auckland's CBD with 280 new purpose built apartments.

Meanwhile, manufacturing activity slowed for a second month in June to the lowest level in six months, as the employment index contracted for a second straight month and the production measure fell to its lowest point since January.

The BNZ-BusinessNZ performance of manufacturing index fell to a seasonally adjusted 52.8 in June from 54.4 in May, marking the lowest level since December 2017's 51.