Economy Watch

Kia ora,
Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
Today we lead with news we need to keep an eye on the 'Sell America' trade, which until now has been more headlines that substance and mainly about China's divestment in US Treasuries. But the Greenland kerfuffle has triggered a serious rethink by many pension fund managers, and more are taking this action.
But first, the week ahead will be a relatively quiet one locally on the data front, but we will get a big range of December banking sector data, allowing us to cap the 2025 year on a number of important metrics. In Australia, the key event will be Wednesday's CPI data where it is expected to rise to 3.6%, the final indicator before next week's RBA rate review.
Globally, all eyes will be on the gold price and its expected push up through US$5000/oz which could come early in the week.
And in the US, all eyes will be on the Fed and its January 29 meeting, amid increasingly contrasting takes by voting members on the appropriate rate path. But most things related to public policy are in turmoil in the US, and the Fed's position is just part of that. We will be watching for bond market reactions.
Elsewhere, official interest rate decisions are expected in Canada, Brazil, and Sweden, and the Bank of Japan will publish meeting minutes.
An don't forget it is a holiday today in the north of the North Island (Auckland Anniversary Day), and in Australia (Australia Day),
In the first news up today, China released its December FDI data overnight and it was negative again. For all of 2025 foreign direct investment fell -9.5%, following a sharp -24.7% fall in 2024 and that makes it the third consecutive year of contraction. December alone recorded a good pickup from November but even with that it was -7% lower than the December 2024 month. But at least it didn't shrink as it did in November from October.
China also release minimum wage rate data that showed 27 of the country’s 31 provincial jurisdictions have increased monthly minimum wages over the past year, with half introducing double-digit rises.
In an interview with state media Xinhua, the Chinese central bank governor indicated that cuts to their interest rates and reserve ratio requirements are on the cards in 2026.
Taiwan said industrial production surged more than +21% in December from the same month a year ago, the strongest growth since May. For all of 2025 it was up +16.7%, so the latest activity is an acceleration. But their local retail sector is not showing the same exuberance, up just +0.9% in December from a year ago but down -0.2% for all of 2025. Consumers there are prioritising saving over spending, just like in the country to their west.
Japanese inflation eased to 2.1% in December from 2.9% in November, the lowest since March 2022. Food inflation fell to a 13-month low of +5.1%, driven by the slowest rise in rice prices in 16 months.
The Japanese January 'flash' PMIs were quite positive with private sector output expanding at their quickest rate for nearly a year-and-a-half to start 2026.
The Japanese central bank reviewed its monetary policy and no change was made, held at 0.75% - because an election is imminent. But now inflation concerns seem to be easing too. But markets are on alert for official intervention to support the yen.
In India, their 'flash' January PMIs rose across both sectors, maintaining the very high rates of economic expansion there.
We are starting to get the early January PMI reports for many key economies. The US factory version was little-changed in a modest expansion and it was the same for their services sector. But both recorded slightly better new order flows. Both noted cost pressures from their tariff-taxes. But as you will note from below this expansion lags most of the other large global economies.
The Conference Board's leading economic indicator tracking for the US isn't positive reading, with the latest update reporting further declines.
In Canada, their retail sector reported good gains in November, up +3.1% from a year ago, but these may not have extended into December, according to their overnight update.
In the EU, output continues to rise in January and business confidence strengthened. That raised their factory PMIs to expansion, but their services PMI's hesitated.
In Australia this week, they posted stronger than expected labour market data. That has sharply changed financial market pricing. And in turn there has been a rush by banks, both a major (NAB) and some challengers, to hike their fixed home loan rates today. They get their December CPI result next week and it is widely expected to challenge the upper end of their policy tolerance. If it does, suddenly Australian floating mortgage rates are at risk of a rise on February 3, 2026. If they do hike then, the Aussie policy rate will be 3.85% (3.60% +25 bps). And that will put it 160 bps higher than the RBNZ current 2.25%. It has been 14 years since this difference was that large.
In Australia, private sector output expanded at its fastest pace in five months in December according to the S&P Global 'flash' PMI report. Both the factory and services sector expansions picked up, the services sector more than the factory sector however. Faster new order growth, including for exports, was a noted feature.
And we should probably note that China received its first shipment of iron ore from their giant African mine at Simandou, Guinea. This likely marks a shift in China's iron ore import focus, likely to Australia's detriment.
The UST 10yr yield is now just on 4.24%, down -2 bps from this time Saturday. 
And here is something to keep an eye on, Europe's largest pension fund cut its holdings of US Treasury debt sharply in 2025, a trend that seems to be gathering steam, the 'sell America' trade, one started by Norway's sovereign wealth fund late last year.
The price of gold will start today at US$4983/oz, up a minor +US$1 from Saturday bit still a new record again. US$5000 could come quickly now. Silver is up +US$2/oz at US$103/oz and also a record high. Platinum ihas eased marginally to US$2741/oz.
American oil prices are holding at Saturday's at just on US$61/bbl, while the international Brent price is firmish, now just under US$66/bbl.
The Kiwi dollar is little-changed from Saturday, still at about 59.4 USc. That makes it almost a -2c loss for the greenback for the week. Against the Aussie we are up +10 bps at 86.3 AUc. Against the euro we are down -10 bps at just on 50.3 euro cents. That all means our TWI-5 starts today just under 63.1, and up +10 bps from Saturday, its highest since late September, and up +150 bps for the week.
And we should probably note that the official Chinese yuan setting by the Peoples Bank of China slipped below 7 to the US dollar in Saturday's fixing, the first time it has done that since May 2023. Although to be fair, most currencies are rising against the USD, ours included.
The bitcoin price starts today at US$87,968 and down -2.0% from this time Saturday. Volatility over the past 24 hours has been modest at just under +/- 1.0%.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston and we’ll do this again tomorrow.

​By Gareth Vaughan
Governor Anna Breman has implied the Reserve Bank's Monetary Policy Committee will increase the Official Cash Rate (OCR) in the run-up to November's election if members believe this is what is required.
"We are statutory independent. We are an independent central bank, like you point out, and we will do what is best for the New Zealand economy and to reach our inflation target," Breman told interest.co.nz in a new episode of the Of Interest podcast.
She was asked if the Reserve Bank believes increasing the OCR is necessary, she would be comfortable doing so in the run up to November's election.
Breman was speaking on Friday, after the release of Statistics NZ's December quarter Consumers Price Index (CPI) showed annual inflation at 3.1%, above the Reserve Bank's 1% to 3% target range.
"We are carefully looking through all the data. It's clear that there are some items in there that typically are very volatile. They can change a lot between different quarters. But of course 3.1% is high and it means that inflation that's been hurting households for many years is still above where we want it to be, but the outlook is still favorable in terms of inflation going forward. So it's also important to stress that we will focus on getting inflation back in the target band and towards the midpoint of the target band," Breman said.
The Reserve Bank reviews the OCR for the first time this year on February 18.
In a note following the CPI release BNZ Head of Research Stephen Toplis said financial markets had almost fully priced in a first OCR increase for the Reserve Bank's September 2 Monetary Policy Statement. And BNZ's economists have brought forward their expectations for a first OCR hike to September 2 from February 2027.
"One thing that needs to be taken into consideration is the General Election on November 7. The Reserve Bank is operationally independent so it can broadly do what it wants when it wants, but central banks are not keen to become embroiled in election campaigns if it can be avoided," said Toplis.
"In our opinion, this means the 28 October Monetary Policy Review would be far from optimal for a first rate hike. Moreover, it’s always easier to tell the full story with a complete Monetary Policy Statement when a hiking cycle, or cutting, begins."
Breman said she doesn't comment directly on market pricing. The OCR is currently at 2.25%, having been reduced from 5.50% since July 2024.
In the podcast audioBreman speaks further about inflation including the challenges facing households, whether she expects help from government with the inflation fight, limits to Reserve Bank monetary policy, her recent support of US Federal Reserve Chairman Jerome Powell and the response from Foreign Minister Winston Peters and Finance Minister Nicola Willis, risks around the Fed becoming less independent when President Donald Trump appoints a new Chairman, what climate change means for the Reserve Bank, her thoughts on a potential central bank digital currency, and more.
*You can find all episodes of the Of Interest podcast here.​

Kia ora,
Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
Today we lead with news the US dollar is being marked down as demand for precious metal hedges rises.
But first in the US there were 260,000 initial jobless claims last week, down -71,000 from the prior week and a marginally smaller change that the -73,000 change seasonal factors would have expected. There are now 2.21 mln people on these benefits, marginally less than the 2.24 mln a year ago. Two years ago, pre-Trump, there were 1.75 mln people on these benefits.
US real personal income rose +1.0% in November from the same month a year ago. On this inflation-adjusted basis it has been flat since April 2025. But real personal consumption expenditures rose +2.6%. On an inflation-adjusted basis this is the same pace of rise that started in April 2021. It has been driven recently by services and non-durable goods. While the PCE data is still within the Fed's inflation band, the income drag will be worrying policymakers. The spending rise can't be maintained.
The latest regional Fed factory survey, this one from the Kansas City Fed, shows no improvement from its dour base. It is still negative.
Malaysia's central bank reviewed its monetary policy and related policy rate overnight and made no change to its 2.75% level. They have a strong economic expansion underway, and inflation is low.
Japan’s exports rose +5.1% in December from the same month a year ago, the fourth monthly increase and reaching a record value. As good as that was, analysts had expected a rise of +6.1%. Imports climbed +5.3% on the same basis, the fastest pace in 11 months and much faster than November’s +1.3% rise.
The EU's consumer sentiment survey for January was marginally better (less worse) than for December - again. This continues the slow grinding improvement from its depths in September 2022 and halving that negative level. But it is still negative at double the negative pre-pandemic. Still it is on an improved trajectory and that is in sharp contrast to the US where the similar UofM survey is now deeply negative with a recent deterioration and half the level it was pre-pandemic
In Australia, their labour market performed well in December. Employment increased by +65,000 in the month to 14.65 mln, with full time employment up +54,800 and part-time employment up +10,400. Hours worked rose. As a consequence their jobless rate fell to 4.1%, well below the prior 4.3% and the expected 4.4%. This probably ends any chance of a rate cut early February and brings forward the chance of a rate hike in 2026. Everything now depends on next week's CPI outcome where there is upside risk to November's 3.4% CPI rate now.
Staying in Australia, job ad portal Seek is saying their platform shows job ads dropped -1.2% in December from November, and are down -3.5% from the same month a year ago. Applications per job ad fell -0.3% in December, "demonstrating a slightly sharper year-end decline in candidate activity than usual".
And Australian unicorn Airwallex is to be investigated by the money laundering regulator AUSTRAC. They suspect "serious non-compliance" by the global payments platform, specialising in moving money internationally for dodgy clients.
And we should probably note that the Trump Administration has advanced its role in granting licenses to mine the seabed in international waters. It is currently mapping resources off Samoa, and it has granted its first license to mine in international water to a US miner. The US only recognises a 12 mile country claim, so vast areas are now open to grant permits for their firms to mine. There is potential trouble ahead on jurisdictional issues.
Global container freight rates fell -10% last week from the prior week to be -43% below year-ago levels. Bulk cargo freight rates rose +16% in the past week to be double year-ago levels.
The UST 10yr yield is now just on 4.25%, down -3 bps from this time yesterday.
The price of gold will start today at US$4909/oz, and up another +US$66 from yesterday and a new record again. Silver is up +US$2.50/oz at US$96/oz and also a record high.
American oil prices are down -US$1 from yesterday at just on US$59.50/bbl, while the international Brent price is now just under US$64/bbl.
The Kiwi dollar is firmer from yesterday, up +50 bps to 59 USc as the USD is devalued in financial markets. Against the Aussie we are little-changed at 86.4 AUc. Against the euro we are up +30 bps at just on 50.3 euro cents. That all means our TWI-5 starts today just on 62.9, and up +40 bps from yesterday and its highest since late September.
The bitcoin price starts today at US$89,026 and up +1.2% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.7%.
Join us later this morning when we will report the New Zealand Q4-2025 CPI result, which could set the scene for the RBNZ decisions in 2026, the next one on February 18, 2026. Markets expect a 3.0% CPI rate, right at the top end of the central bank's policy comfort level.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston and we’ll do this again on Monday.

Kia ora,
Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
Today we lead with news it is all about the 'debasement trade" today - Trump debasing US public policy resulting in a rush to gold, a jump in US Treasury yields, and a fall in the greenback. Equities and cryptos are falling.
In the US overnight, there was another good rise mortgage applications, largely on the back of a rush of refinance activity as 30 year mortgage rates eased.
However December data for pending home sales took an unusually large dip from November to be -3.0% lower than year ago levels.
In Canada, producer prices actually fell in December, unexpected because a small rise was anticipated. That puts them +4.9% higher than year ago levels, the slowest rise since August.
In Indonesia, they reviewed their policy rate overnight, leaving it at 4.75% as expected.
In Europe, the European Parliament has suspended the approval of a key US trade deal agreed in July in protest at Trump's demand to take over Greenland. Both Trump and some of his cabinet are at Davos, and in full arrogant insult mode.
In Australia, the Westpac–Melbourne Institute Leading Economic Index inched up 0.1% in December from November to +0.42%, following the no-change in the previous month. The recent uptick is led by commodities and an improved homebuilding outlook. But the December rise was less than expected. A year ago its was +0.25%, so nearly a doubling since that tame benchmark.
We should perhaps also note that cocoa prices have fallen sharply today, back to US$4400/tonne and the same level as two years ago. You may recall they reached US$12,250/tonne in April 2024 at the height of its surge.
The UST 10yr yield is now just on 4.28%, unchanged from this time yesterday. 
Wall Street is in its Wednesday session with the S&P500 recovering +0.3% but the earlier much larger recovery gains (over +1%) seem to be fading. The S&P500 has fallen a net -1.8% in the past two days, so far. It's the same for the Nasdaq which is now back with a small loss today, down -2.2% for the same two days. 
The price of gold will start today at US$4843/oz, and up another +US$93 from yesterday and a new record again. Silver is lower at US$93.50/oz and off its record high.
American oil prices are up a bit more than +50 USc from yesterday at just on US$60.50/bbl, while the international Brent price is unchanged at just under US$65/bbl.
The Kiwi dollar is holding from yesterday, still at just under 58.5 USc. Against the Aussie we are down -30 bps at 86.4 AUc. Against the euro we are up +20 bps at just on 50 euro cents. That all means our TWI-5 starts today just on 62.5, and unchanged from yesterday and still its highest since early October.
The bitcoin price starts today at US$87,927 and down -2.0% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.4%. And we perhaps should note that the $TRUMP memecoin has plunged more than -90% from its peak a year ago, burning its adherents bigtime.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston and we’ll do this again tomorrow.

Kia ora,
Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
Today we lead with news long term bond yields are on the move higher, notably in Japan and the US.
First however, the overnight dairy auction delivered a modest gain, up +1.5% in USD terms, but up +0.4% in NZD terms as the US dollar is weakening. However, most of this rise is the same as recorded in last week's Pulse event. But it does cement a second consecutive rise in the full auction after nine consecutive declines. So +7.8% of rises after the -22.5% of falls. Also notable is the much less buyer interest from China, counterbalanced by stronger interest from most other regions.
In the US, markets have returned after a chaotic weekend politically to a weak ADP weekly jobs report, recording just +8000 jobs gains and well within the margin of error. January is starting out tough in their labour market. But at least it wasn't a decline.
The US Supreme Court issued three decisions overnight but did not decide the closely watched dispute over the legality of the Trump tariff-taxes. they gave no indication when they will. Also delayed is Trump's 'imminent decision' on his Fed boss nomination. Apparently all his candidates have issues.
Also weak is the USD. It is now under 7 CNY to the USD and its lowest since 2023.
In China, household borrowing is weak and household savings is strong, up +10% in 2025. That says a lot about the stress Chinese households are feeling going into 2026. Per capita bank deposits have now risen to over ¥118,000 (NZ$29,000). And we should probably note that Chinese smartphone shipments fell in 2025, the second year in a row this has occurred.
In Taiwan they reported export orders in December exceeding US$76 bln, far and away a new record high and +43% higher than year ago levels. The Taiwan miracle continues. For all of 2025 these export orders rose +26%.
In Malaysia, they reported good December exports too, up more than +10% from the same month a year ago to just over US$37 bln and maintaining a strong trade surplus.
In Germany, producer price deflation picked up slightly to -2.5% in December from a year ago to cap a 2025 year where it averaged -1.2%.
But overall German investor economic sentiment picked up notably in January, and that was also enough to propel overall EU investor sentiment into positive territory in this wide survey.
It is also probably worth noting that the Microsoft boss said overnight (at the WEF) the AI bubble could falter unless adoption of the technology picks up.
The UST 10yr yield is now just on 4.28%, up +1 bp from this time yesterday and now its highest since September. The UST 30 year bond is now at 4.90% and its highest in almost ten years. The Japanese 10 year bond yield is up another sharp +7 bps at 2.35% and we make that its highest in 28 years. Its 40 year bond is now over 4.25% and its highest since our records began in 2007. 
The price of gold will start today at US$4750/oz, and up another +US$78 from yesterday and a new record. Silver is is actually marginally lower at US$94/oz and off its record high.
American oil prices are up a bit more than +50 USc from yesterday at just over US$60/bbl, while the international Brent price is just under US$65/bbl.
The Kiwi dollar is up another +50 bps from yesterday, now at just under 58.5 USc. Against the Aussie we are up +40 bps at 86.7 AUc. Against the euro we are holding at just on 49.8 euro cents. That all means our TWI-5 starts today just over 62.5, and up +50 bps from yesterday and its highest since early October.
The bitcoin price starts today at US$89,708 and down -3.8% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.8%.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston and we’ll do this again tomorrow.