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Recent releases

Dairy price drop lowers input and output prices Further falls in farmgate milk prices saw producer input and output prices drop 1.5% and 1.1% respectively over the September quarter. As a result, both input and output prices were lower than a year earlier for the first time since December 2012. We expect price pressures to remain subdued over the year ahead as world dairy prices remain weak and slower economic growth limits growth in domestic output prices. Read more

Capital good price inflation strongest since 2009 In the September quarter, capital goods prices rose 0.5% from June to sit 2.3% above their September 2013 level — the strongest annual increase since September 2009.  However, the devil is in the details, as rising construction costs dominated the lift while the price of imported goods slid.  With the dollar falling sharply in recent months and the Canterbury rebuild taking place, we expect capital good price growth to accelerate over the coming quarters. Read more

Commentary

Milk price smackdown continues Fonterra’s Global-Dairy-Trade (GDT) index recorded another drop this week, falling 3.1% to its lowest level since August 2009 – although still 30% above their July 2009 low. With export returns falling for dairy farmers, what does this mean for the New Zealand economy overall?
Getting regional facilities and services right Wellington City Council has recently approved the construction of a 1,200-seat convention centre in Wellington, which the Council will lease on a long-term basis from the developer at a cost of $4m per year. The aspect of this deal that has unsettled residents and ratepayers is the projection that revenue from the convention centre is only expected to average $2m per year, leaving a $2m shortfall.  The fact that the Council is embarking on this project knowing, ahead of time, that it will be a loss-making venture, provides an obvious reason as to why we haven’t seen private sector investment in this space in the past, and has led some people to question the business acumen of the Council. Read more.

A slow unwinding death for inheritance? Inheritance has long existed as a power-transferring mechanism for the few and an intergenerational social security blanket for the masses.  However, increased longevity has altered the mechanics of inheritance, stretching the system across more than one generation.  As a result, the inheritance cycle may not be as socially advantageous as it once was.  This article proposes that, even if inheritance no longer serves the same purpose, we have developed alternative practices of providing intergenerational support.  Furthermore, and regardless of whether it is needed, the tendency of people to build wealth over their lifetimes suggests that inheritance is inevitable. Read more.

Latest Forecasts

Best before: February 2014

If you’ve gone to the fridge and taken a swig of milk from the bottle lately, you will have noticed it’s got lumps in it – which is hardly surprising when you look at the “best before” date. Prospects for the dairy payout and GDP growth looked pretty tasty back in February, but things have soured markedly throughout the course of this year.