Is this the depth of discourse for next few months? If things are this thing that they're not, and that carries on, then we have to entertain the possibility, and I'm not saying this will happen, that mortgagors and businesses will have to pay more on their debts. (🧵 1/n) What's actually happening? RBNZ have dropped interest rates by 300pts, that reduced business debt costs by around $500m per month. Household and landlords are seeing similar cost savings come through but more slowly. So, a billion of disposable income released / month. And? (2/n)

Oops. I read Judith's letter! It's really bad! I'll try and keep this short.
First up, this bare-faced lie. The countries in the pink circle have a similar-sized economy to NZ. Govt spending is a lot higher in all but one . [🧵 1/n] And, if you want to talk about comparative wealth, then let's TALK ABOUT IT! Our top few per cent rentiers have been stacking up the wealth for fking generations. We're stinking rich, up there with the big boys... well, on average. Ssshhh. [2/n]

Oh Liam, wtaf are you talking about here? How can you get so much missionary zeal for self-flaggelation and woefully bad analysis into a single article? Let's have a quick look... [🧵1/n] An 'almighty dose'! The IMF did some truly awful analysis of COVID stimulus in 2021. The 'neoliberal thought collective' added up random stuff - inc benefit increases over 4 years - and concluded that NZ had gone hard on stimulus, like crazies in Singapore, UK, USA, Aus... [2/n]

A few questions on the balance sheet stats I shared. Crash course 🧵
Start with an easy one - bank account balances and physical currency.
The money in your bank account is your 'asset' ✅
But your bank account balance is your bank's 'liability' (debt), they owe it to you [1/n] Say what? Yes, banks aren't rich because they have your money - your money is a *liability* to them.
So, what assets do banks have?
Mostly loan agreements... $550bn of them! See the tall blue bar below. See how it's offset by the loan debt of businesses & households (pink)? [2/n]

Seven NZ econ/finance myths that need busting...
Myth 1: The NZ Govt is in worrisome debt 😱
Govt is not even in 'net debt'. Govt has *debts* but they are more than outweighed by *financial assets* (shares, equity, outstanding loans etc) [🧵1/n] Myth 2: NZ Households are only 'wealthy' because they own loads of over-priced land and housing.
Nope. Non-financial assets (including land and houses) only make up about half of households' net worth. In fact that brings us to... [2/n]

End of month bank data 🧵
Two clear shifts to report 🫡
1. The credit contraction appears to be over. The good news is that this means there is a *tiny* bit of economic stimulus coming. The bad news? It's going to be property again folks. What else? [1/n] 2. Govt are losing control. Our current account deficit is still high, net bank lending is still v.low, and savers aren't opening their wallets. This combo *inevitably* drives Govt deficit spending up. Auto stabilisers are kicking in & Willis ain't Milei (small mercies) [2/n]

Whose fault is this recession thing? Let's rank the villains 🧵
Boss villain is easy - ol' Shock and Orr. RBNZ took a hero pill in 2020 and went nuts juicing the housing market. Then RBNZ took *another* one in late 2021 and slowed the flow of credit to a trickle by 2023/24. [1/n] Why is the flow of credit important? Because we rely on banks pumping shiny new $ into the economy when they make loans. The 'net flow' of bank credit (new loans - repayments) fuels our 'growth' in NZ.
Anyway, RBNZ hiked rates, slowed credit, and poop went the economy... [2/n]

So, end of October data - two and a half months after the first OCR cut. How much less interest are we paying on mortgages? Errrm, we're not paying less. We're paying more. Wtaf? Yes, let me explain... [🧵1/n] The effective interest rate on mortgages (weighted average) is still *creeping up* as people fix for longer, pay off their cheap rate mortgages, take on new ones, move to floating rates etc. What does this mean? [2/n]

Seeing His Lucksin on Q&A 'inspired' a quick 🧵 on changes to economic forecasts over the last year or so.
Here's the number of people employed.
The forward track is grim: 50,000 below the forecast from just *six months* ago. Quick fire highlights to follow... [1/n] Now, note the actual employment figures exceeded RBNZ forecasts in 2023. Was that Labour's incredible handling of the economy? Well... they opened the borders and the precarious, poorly-paid, split-shift kinda vacancies got filled (graph 2). Then the descent resumed 👇 [2/n]

Media full of silly Govt debt news. Let's have a quick look 🧵
Here's the balance sheet for NZ Inc. What do you see? Yes, our businesses have massive liabilities and our households are very rich indeed. But what about that little green Govt bar? It's positive?!? [1/n] Yes, NZ Govt has a net positive financial worth thanks to all the shares and equity (and Govt debt!) they own. Those financial assets are worth more than their 'debts'.
As you can see this is not usual for Govts. In fact... [2/n]

Dangerous failure to understand the situation we are in. Cutting spending will tank the economy and the tax take and won't deal with the structural issues that are crushing the economy. Let's have a quick look... [🧵1/n] In normal times (2017 to 2019):
Govt (pink) adds more to its portfolio of financial assets (super, ACC, student loans etc) than it borrows.
Offshore savings (yellow) increase because NZ has a current / trade deficit.
Banks also build financial assets / equity (green). [2/n]

Quick 🧵 to help people see through the NZ austerity bullsh*t.
Here's the core crown spend and revenue for the year 2024/25. Govt intend to spend $145bn and tax back $136bn. That means that this year the Govt will make the private sector $9bn richer. How so? [1/n] Govt debts are private sector assets. When Govt spend more than they tax, the private sector (that's us) gets *richer*.
Govt do not sell bonds to raise or borrow money - they sell bonds to soak up the surplus cash they have spent into the economy. Yeah, right...![2/n]

NZ is tackling inflation by reducing the disposable income of people with debts. Govt are also cutting 'wasteful' spending.
Both are aiming to reduce consumer demand & increase unemployment... assuming that this will slow price & wage rises.
Same everywhere? Nope [🧵1/n] Bit of context: In 2021/22, oil & gas price spikes sent an inflation 'impulse' through the global economy. The world runs on fossil fuels so high energy prices quickly infected other prices (eg transport). This drove a 'sustained change in the price level' (aka inflation) [3/n]

Govt tax take is tanking - now well over $1 billion behind forecast. What could possibly be going wrong? Quick 🧵 to explain (it's uncomplicated).
Corporate tax is main driver (for now). Real term consumer demand is plummeting, sales are down, so firms scaling back/closing [1/n] Income tax is holding on (for now) because new arrivals have filled vacant jobs, wages have been pulled up by cost of living, and more people are being caught by higher tax brackets. I say 'for now' because... [2/n]

Short 🧵 inflation musings..
1970s inflation across the world - inc NZ - led to a sustained shift in the price level of NZ imports.
The 1980s stock market crash hit NZ hard. We also introduced GST in 1986 and raised it in 1989 creating our very own inflation spikes 🙏 [1/n] We had a few inflation blips between 2000 and 2023, all triggered by sudden increases in import costs - apart from *one* in 2011. What happened? We increased GST again for the win ✌️. [2/n]

Just a timely reminder that Govt has over $31 billion in its Crown Settlement Account. Govt could pay for the floods recovery today without 'raising any finance' or running a hundred special Lottos. What's the catch? [1/X] When Govt spends $100m, the Crown Settlement Account reduces by $100m, and the Settlement Account of a commercial bank goes up by $100m. The Crown then starts paying interest on that $100m at 4.75% (current OCR). Gross interest payments on total balances is $6.24m per day! [2/X]

Windfall taxes are back in the news today. I thought it would be worth doing a quick thread on why windfall taxes are a ‘feel good sticking plaster’. First, humour me and ‘follow the money’ through the NZ economy of the last ten years, a 🧵 [1/X] Brand new NZ Dollars come from 2 places: Commercial Bank lending and Govt spending. Commercial banks pumped $232Bn of new money into our economy over the last ten years (private debt is now a whopping $554Bn). Govt gave us a measly $30Bn - taking Govt ‘net debt’ to $70bn. [2/X]

Only had a minute to look briefly at the Business Price Indices today. They provide a crude comparison of input costs vs prices. Just thought I'd pick a few out...
First up (and topical) 'big stuff' construction - note how closely input costs and prices align. 🧵[1/X] Now residential building construction - some signs of widening margins there as we went crazy building and renovating our weatherboard palaces in 2021 and 2022. [2/X]