Daybreak Weekend: US Jobs, Ukraine Funding, Australia GDP

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This is Bloomberg Daybreak Weekend, our global look at the
top stories in the coming week from our Daybreak anchors
all around the world. Straight Ahead on the program, we'll
look to some key jobs data in the US. I'm
Nathan Hager in Washington.
I'm Kline Hepkee here in London, where we're looking ahead
to the EU sending fresh funds to Ukraine. On what
comes next in this ongoing rule.
I'm Doug Krisner, looking at whether Australia's economy will show
signs of cooling in Q one.
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three YEO New York, Bloomberg ninety nine to one, Washington, DC,
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dot Com and the Bloomberg Business App.
Good day to you. I'm Nathan Hager. We begin today's
program with some key economic data in the US. The
Labor Department's all important non farm payrolls report for the
month of May is due out this Friday at eight
thirty am. Wall Street Time for more on the numbers
and their impact on Federal Reserve policy. We are joined
by Bloomberg International Economics and Policy correspondent Michael McKee. We've
been looking at this labor market talking about low higher,
low fire for so long, Mike, is this print going
to be low drama?
Let's just say I hope you have a high tolerance
for boredom. At least according to what the economists are
predicting another low, higher, low fire. The unemployment rate doesn't change.
Four point three percent is the forecast, and that's basically
what the Fed is looking at. They're less concerned with
the number of jobs created, and that will basically change
as the week goes on towards the jobs number as
we get additional information, But it doesn't look like we're
going to have any kind of major change in the
number of jobs. Remember last month with one hundred and
fifteen thousand, and at this point, because the labor force
is shrunk, you need far fewer jobs to keep the
unemployment rate stable. So they won't worry if we come
in somewhere anywhere, say between fifty thousand and one hundred
and fifteen thousand, or if it gets a little if
it gets a little stronger, that and helps them make
the case for rate increases.
Yeah, well, what's been keeping the labor market at this
kind of simmer that we've seen over the last few months.
Is it just about uncertainty around the war? Is it
artificial intelligence? What do you see underneath the hut?
It's all of that. It's in part the fact that
the labor force has shrunk. But companies just keep reporting
over and over again to FED officials that I talked to,
and what we've seen in earnings reports that they're kind
of frozen at this point because they're waiting. A new
round of tear are coming in July, and there's still
the war going on, and we don't know how long
that's going to last. All the analysts say, if we
have a ceasefire, it's still going to take a month
to two months to get enough stuff flowing through the
strait to where it needs to go to bring down
prices significantly. And we're not just talking about oil prices.
We're talking about things like fertilizer, aluminum, other products that
haven't been able to get out of there. So companies
are reluctant to make plans and staff up. And also
they're dealing, as you said, with the AI situation of
are we going to need these employees or are we
going to need add different employees somewhere else or cut
out a department because the computer can do it. So
there's a lot of reasons for companies not to make
any big commitments at this point.
Yeah, I keep coming back to that comment we heard
recently from Standard Chartered CEO Bill Winters about lower value
human capital and how artificial intelligence could impact the financial
services business. Could we start to see some of that
reflected in the labor department numbers that we're getting this week.
I don't think they're going to lay off Jamie Diamond,
but it's a little early to be able to say that.
We are seeing that there was less hiring last month
in financial services. But AI is only beginning here, and
there really aren't any companies other than AI companies who
have a reasonable handle on the people that they need.
And we have seen a lot of AI companies announcing layoffs.
So that's the one area you could watch. It's going
to be a while till we see any major change
in any other area.
Interesting to hear you mentioned the AI companies talking about layoffs,
because they're not the only ones that have been putting
out some pretty high profile layoff announcements. How could that
potentially be reflected in this month's print.
Well, the AI people will show up in computers, in
software and software design, in terms of jobs, in terms
of other jobs, it's really going to depend on whether
or not you can tease out an AI effect. Don't
forget that every company that doesn't do quite as well
as expected tends to announce layoffs after their earnings because
they're going to right size their business or something like
that to try to bring down costs and keep the
stock price up. So that's not unusual. And the other
thing that happens is this is a very dynamic labor
force and there are millions of jobs lost and millions
of jobs gained each month, and what we talk about
is the net change. So you'll have all this stuff
going on in the background and we won't really have
a good handle on what's happening for a while yet.
The non farm payrolls report from ay doout this Friday,
eight thirty am. Well, Street Time, thank you for this, Mike.
As always, that's Michael McKee, Bloomberg International Economics and Policy correspondent.
Let's take a look. Now, it's some stocks making news
in the week ahead. I'm Nathan Hager with Bloomberg Equities
reporter in Italia Kanijevich, and it looks like this Wednesday
is going to be the day we see a lot
of news with a bunch of companies reporting, including Broadcom.
More of the software story to be told, he in Italia.
That's right, So yes, Broadcom reports earnings on Judiser, the
tickets Avgo. You know, lots of expectations, of course for
this earnings report, because we've heard from CEO who said
that the company expects to see sales above one hundred
billion dollars next year. They also said that AI chip
revenue will be at around ten point seven billion dollars.
And then if you look back at the latest earnings report,
we saw that the company posted better than expected quarterly outlook.
They also announced a solid stock stock buyback program of
as much as ten billion dollars. We know that companies
have been buying back their own stocks pretty aggressively this year.
Analysts are of course really excited by the company's AI
related revenue. We know that Broadcom expanded agreements with companies
like Google and Anthropic, and it's also you know, a
good addition to multi year visibility and contracts. And we
also saw you know, some optimism across Wall Street analysts
because on Thursday, Susquehanna Analysts also erased the price target
on Broadcom to four hundred and ninety from four hundred
and fifty dollars. And the stock has done really well
this year on a year today basis, as of Thursday,
the stock was up by twenty three percent, so it's
a pretty solid run.
Yeah, a nice little run there for that stock. So
we'll be definitely keeping an eye on that one, along
with another pretty big tech name that's had an even
better run. This is CrowdStrike, also reporting Wednesday.
That's right, Yes, so CrowdStrike valuation of course, have searched
this year, helped by deals to make custom chips for
companies like open Ai and Anthropic. And again I'm going
to cite the latest earnings report because CrowdStrike shares kind
of fluctuated a little bit, but the software company reported
results that were in line with expectations, and we know
that this stock, among other software peers were really volatile
this year because investors were debating potential disruptions coming from AI.
Cybersecurity stocks in particular were really volatile because Anthropic announced
new features in its cloud AI model that can scan
different codes for vulnerabilities. So lots of debates about the
sustainability of this software sector here in the United States. Nevertheless,
we also see some optimism on Wall Street. On May
twenty seventh, Webbush analyst Dan Ives raised the price target
to crowd Strike Hollings to seven one hundred dollars from
five hundred and fifty. He maintained outperform rating, and as
of Thursday, as you mentioned, the stock has been doing
really well this year. The stock was up by about
forty three percent, so definitely outperforming broader markets.
Yeah, well, we know how bullish dan Ives of Webbush
is across the AI story, so his perspective definitely won
to pay attention to. Now, before these tech and software
companies report, we're going to hear from a big name
in retail before the bell on Wednesday in Macy's how
are things at Harold Square these days?
To Tellia, Yes, so you know, I actually also go
to mases pretty regularly. When you go to the department store,
it's very crowded, no signs of you know, any consumer
concerns or recession, but the stock is flat year to date.
We of course keep an eye on Macees because it's
also a bell weather because it's such a huge presence
across the United States. So Bloomberg Intelligence analysts expect that
sales may meet consensus based on transaction data, comparable sales
could be somewhere at around one point three percent EPs
could top expectations. Now Bloomingdale Sales, which is around the
corner from Bloomberg office, Yes, yes, so they expected that
sales have risen to low to smid single digits on
the earning skull. Of course, people will be watching whatever
macy says about the progress because they including two hundred
revitalized stores, all things on consumer trends, luxury spending, teriff
free funds, and of course the outlook. You know, it's
interesting because Macy's management also introduced a new letter for
the shape of US economic growth. They expect E shaped
economic recovery. Oh where you know, wealthy consumers are doing well,
middle income consumers hanging in, and lower income consumers are struggling.
So anyway, latest report, by the way, it was really good.
The company reported better than expected results, but it did
not help the stock price. Maybe there are lots of
concerns about consumer trends going forward, maybe something that we
have not seen yet.
Yeah, we'll have to think about new alphabet the letters
to talk about the economy, not just M the ticker
K but E very interesting. Thank you for this, Natalia.
That is Bloomberg Equities reporter Natalia Kenijevich. And coming up
on Bloomberg Daybreak weekend, the EU is sending fresh funds
to Ukraine. We'll discuss what comes next in the ongoing
war with Russia. I'm Nathan Hager, and this is Bloomberg.
This is Bloomberg Daybreak Weekend, our global look ahead at
the top stories for investors in the coming week. I'm
Nathan Hager in Washington. Up later in the program, we'll
look to some key economic data in Australia. But first,
Ukraine is now in the fifth year of its war
against Russian invasion. European allies and Canada have largely taken
over responsibility for financing Kiev's military aid. The country is
set to receive the first payout from an EU support
package in June, followed by two further payments later this year.
Bloomberg Daybreak europe banker Caroline Hepgar has more.
Nathan, the conflict in the Middle East has pushed Ukraine
down the agenda, but in June the country is expected
to start receiving ninety billion euros from the EU. The
conflict in the Middle East has pushed Ukraine down the agenda,
but in June, the country is expected to start receiving
ninety billion euros from the EU. It's vitally needed funding,
but it will finance a Ukrainian war machine, which has
surprised its allies with its ability to innovate. Increasingly, Ukraine's
drone technology is in demand as a cost effective alternative
for both the United States and NATO. Meanwhile, Russia is
having defend off attax on its capital, Moscow and its refineries.
Tony Haupn leads Bloomberg's coverage of Russia's government and economy
and joins me, Now, Tony, good to speak to you
a year ago. Who can forget President Trump telling President
Zelinsky that Russia holds all the cards in what's become
a historic dressing down in the Oval Office. If Russia
does hold all the cards, why is this war still
going on?
It's a good question. I think the past year has
demonstrated quite a lot for both Russia and Ukraine about
how this war is evolving. A year ago, when Trump
said those things, it was certainly the case that Ukraine
was up against it. They were just emerging from a
difficult winter, there were question marks over continued US military supplies,
and Russia appeared to be on the front foot and
advancing slowly, if surely, in the east and south of Ukraine.
But since then quite a lot has changed. I was
just recently in Kiev, and I was really struck by
the degree to which people felt a lot more confident
now about their positions on the battlefield, about their ability
to push back Russia. And part of that is to
do with drone warfare. Their innovations in drone warfare are
equalizing things on the battlefield. They're helping to make up
for a short of manpower in comparison to Russia that
Ukraine has always had. And I think they've also realized
they've come through what was a really brutal winter just
this last winter by far the harshest of the war,
and maybe there's some optimism related to the arrival of spring,
but they saw I think that you know, Russia tried
to freeze them into submission. There was a sustained campaign
of strikes against Ukrainian energy infrastructure all through last winter,
and it didn't really work. It didn't extract any concessions
from Ukraine. And at the same time, Ukraine has been
busy developing its own weapons industry, developing its own drone output.
And it feels now that it doesn't necessarily depend as
it did before a year ago or so to the
same degree, at least on the US for weapons that
it's secured. It's the European funding, so some of the
pressure has been relieved there. As you will remember, late
last year there was a big question mark over that
and Russia seems to be running out of answers, so
they are feeling a bit more confident. I think that
they can stand their ground and perhaps even force putin
eventually to the negotiating table.
That's interesting that you report on that change in mood
from having visited the country, and as you say, yes,
more independence in terms of weapons manufacturing. I thought it
was an extraordinary number that Ukraine saying that it could
make as many as four million drones a year. And
on the Russian side, that victory parade that is an
annual event very much pared back this year. How has
Ukraine managed to hold on against you know, as you say,
a much larger and more powerful country if you just look.
At the two presidents Zelenski and Putin for example, I mean,
Zelensky has been traveling quite extensively in recent months. He's
been in the Middle East, offering, as you've noted, Ukrainian
drone technology to countries there which are suffering from Iranian
miss island drone strikes. He's been traveling extensively in Europe. Putin,
it seems, couldn't even go out onto Red Square safely
without worrying that there might be Ukrainian own attacks. So
there's a clear sense that, you know, Russia's actions have
been far more restricted now than they were even a
year ago. Ukraine is holding on because I think essentially
for them, you know, this is an existential fight, right
if they win this war, or if they prevent at
least Russia from winning this war, then they get to
survive as a nation. If Russia wins this war, The
intention clearly is for Ukraine to disappear as a country. Now,
that's far more motivating to you as a soldier if
you're defending your home and your family and your country
and your beliefs against people who might be there just
because they're able to earn a lot more money than
they were earning at home. And Russia has relied very
heavily on very large recruitment bonuses and salary payments to
persuade people to sign contracts to join the military, so
they are more motivated. They are innovating much more quickly
because they've been obliged to innovate much more quickly. That's
the only way they can really match up against the
country which has far more resources and far more people. Russia,
you know, in any measure, can produce a lot more
than the Ukrainian economy can in terms of its more economy,
in terms of defense materials, in terms of soldiers. But
the way to answer that clearly has been to innovate.
And we've seen the way Ukraine has developed its whole
drone industry, which is something now the rest of the
world is looking on with a degree of envy and
eager to copy. And we've also seen that they've been
much more innovative in the way that they've deployed their
military than Russia. Russia has relied in many respects on
a kind of Soviet era playbook, where you just keep
throwing large numbers of people into the fight, pushing forward
in the hope that eventually your opponent will break. Ukrainians
have been much more nimble on the battlefield than that.
Motivation and innovation really interesting. In terms of the finances,
the EU has decided, now that Hungary has lifted its
veto to hand over this ninety billion euros in this
loan package, how easy will it be for Ukraine to
get all of that money? You know, what are they
going to use it for in terms of supporting their
wartime economy?
Yeah, I mean this has been an absolutely crucial decision.
There was every prospect that Ukraine was going to run
out of money by about June if this money hadn't appeared,
and that would have been very difficult for them to
pay their soldiers. It would have been very difficult for
them to keep the economy running as smoothly as it
currently does. So there's big relief all round in Brussels
and in Kiev that the blockage of this funding has
been lifted and it should flow reasonably steadily. Now it's
a commitment for two years and it will be doled
out in tranches through this year and next year, and
that will help Ukraine support itself as a government and
an economy and a war effort that previously they had
some doubts about. There are still obviously some other issues.
They're in talks with the IMF about support packages there,
and some of that money is dependent on Ukraine making reforms,
which many in Eliament are opposed to doing because it's
just difficult to do in a wartime setting if you're
trying to impose extra cost or a burden of taxes
on people. But I think there's a general understanding really
that Ukraine needs this money. It needs to keep functioning,
because that's part of a general European defense position.
Right.
If Ukraine loses this war for lack of funding, it
just requires everyone else in Europe to spend even more
than they do now, ramping up their defense spending and
their defense industries. So in some ways this is viewed
as an investment really against future spending.
In terms of the conflict. What might happen next? It's
a horrible phrase fighting season, but the seasons, as you've indicated,
play a very big role in the kind of cadence
of fighting. What do you think might come next?
Yes, I mean it's inevitable because you know, the winter
is so harsh there. It's very difficult to move around.
There's a lot of snow, its very cold. So of
course then you get spring and everything melts and becomes
rather muddy, and it's still quite difficult to move. But
by summer you've got hard ground and people are looking
to make some progress when that happens, at least to
improve their positions before the winter weather arrives again. One
of the interesting things this year has been that there
was an expectation, I think that you know, Russia was
going to come out of this winter having bombed Ukraine
extensively throughout to try and weaken morale and undermine the economy,
that they were going to come out of this winter
with some kind of new offensive in spring and summer,
intending to put pressure on the front line and try
to break Ukraine in various positions. Ukraine has resisted that
Russia has not managed in any point on the front
line to make significant progress. There are still points where
it is grinding forward, and there are points, it seems
where Ukraine is managing to push them back, but any
kind of large scale offensive hasn't occurred, which suggests that
effectively the whole thing is at a stalemate now on
the battlefield, and that somewhat explains Russia's decision to revert
to more intense boling of Kiv that they want to
try and exert pressure on the civilian population because they're
not really making much progress against the military. The risk
there is precisely that the war just grinds on with
no one able to resolve it and no one able
to resolve it militarily, and that the diplomacy then sort
of fails to find some kind of form of words
that both sides can sign up to. I think that
is the biggest risk at the moment, because, as the
US is indicated, there are no active talks going on.
The US isn't really trying to bring the two sides
together at this point because its boundwidth is consumed by
what's going on in Iran and the Middle East, and
so it's being left to the troops on either side
to sort of continue their actions, and neither side can
really demonstrate that they are able to make a decisive
breakthrough that at least at present will change the course
of the war.
As you say, distracted by Iran. How has the US's
world changed in the war under President Trump in terms
of diplomatic Is there anything in the offering We started
by talking about President Charmps meeting with President Zelensky, Maybe
we should end thinking about the US attitude in all
of this.
Yes, I mean, I think secular estate. Marco Rubio's words
the other day that you know, they seem to be
the only people who can get this done, but others
are welcome to try if they want to was kind
of a slightly sideways dig at Europe's inability to get
to the table. And one of the things we're currently
watching for is whether Europe can get its act together
and find a representative who would then engage with President
Putin to try and move the diplomacy forward. There's been
a lot of talk in Europe about re engaging in
some form with Russia because that's the only way that
they can really get involved in the diplomacy that ends
the war. Clearly they're supporting Ukraine and President Keelensky, but
they don't have engagement with Russia. If that does happen,
and if they manage to engage in that way, then
the question for Trump will be whether you know whether
the US steps back or whether it tries to step
and they haven't managed to do it. So it's an
outstanding item in his intro. We'll have to see if
Europe does find someone, we'll have to see whether Russia
is willing to engage with that person. And even if
it is, the outstanding question remains Russia's territorial demands and
how willing or otherwise Ukraine and not only Ukraine, it's
allies are to accepting Russian demands. If Russia doesn't feel
that it can get a deal on the table, then
put in as indicator that he's ready to keep fighting
even if there are increasing difficulties, as they clearly are
in Russia's economy.
Indeed, yeah, all of this as Europe prepares to disburse
those funds over to Ukraine in support of their wartime economy.
But what of the diplomatic efforts, Tony, A pleasure to
speak to you as always, Thank you so much Tony Halpin,
who leads Ballomberg's coverage of Russia's government and the economy,
talking us through the later when it comes to Ukraine.
I'm Caroline Hepkee here in London and you can catch
us every weekday morning here for Bloomberg Daybreak Europe. That's
beginning at six am in London, one am on Wall Street.
Nathan, Thanks Caroline, and coming up on Bloomberg day Break Weekend,
we'll look ahead to Australia's first quarter GDP. I'm Nathan Hager,
and this is Bloomberg. This is Bloomberg day Break Weekend,
our global look ahead at the top stories for investors
in the coming week. I'm Nathan Hager in Washington. This
week we get the reading on Australia's first quarter GDP
with a closer look, Let's get to Doug Krisner, host
of the Bloomberg Daybreak Asia podcast.
Thanks Nathan. Australia's economy has been in an upswing for
a while, so it seems the question now is whether
the momentum has shifted. For a closer look, let's bring
in Bloomberg economist James McIntyre, who covers the Asia Pacific
for us from our bureau in Sydney and he joins
us from our studios there. James, thank you so very much.
What are we expecting to learn from this GDP data.
Yeah, what we're expecting to see from the late the
March quarter reading for Australia is how the economy was
faring in the initial parts and then some of the
beginnings of the hit from the energy price shock. So
Austraya is a bit interesting when it comes to how
the economy is going to get buffeted by the closure
of the Strait of hor moves. As a very very
large energy exporter, especially when it comes to natural gas,
it delivers an export boom, the spike and ore prices
and the gas market shortages with Qatar being taken offline.
But as while we export gas, we import all of
the petroleum products from Asia, and those Asian refinery disruptions
are costing consumers, so we should see some of the
beginnings of that within the GDP data. But overall we're
likely to see the quarterly pace of growth is back
a bit. We had a very very strong zero point
eight percent quarter on quarter growth in the last the
final STANZA of twenty twenty five, that's likely to slow
down to zero point five or below for this first
quarter of the year. The real question when it comes
to the RBA and what it might mean for monetary
policy and what they're going to be thinking about is
where is the second quarter for the economy, Because after
this March quarter data, we've seen consumer confidence at record
low levels as a result of all of the uncertainty
stemming from the war with her own.
So what about the tension between overall economic growth and
the poll of inflation? I mean, what is happening on
the inflation front.
We've had a spike up in inflation, but we've also
had a real full court press going on from the
Australian government when it comes to dealing with the fuel crisis.
So the direct impact of has been petrol prices spiking,
but the government has given it's halved its tax and
handback another chunk of tax, which has meant that overall
petrol prices or gasoline is about level pegging with where
it was last year in pre war. There's a diesel
price shock that's hitting the economy. That's when it comes
to the inflation side of things. The spike up and
the spike down at the headline level is likely to
give us a bit of volatility, but we have seen
a big cushion there from government action. Second round effects
are going to be really what's interesting over the next
little while as we see the next six, twelve and
eighteen months, as we see the diesel hit to the
economy affecting all of the transport around and Australia is
a small population, big land rail doesn't get a lot
of love. It's a lot of trucks driving a lot
of things around. That's a diesel economy, and also mining
and agriculture as well, and so when we see diesel
fertilizer those disruptions, that's going to push up food prices
down the track. So we've pushed the initial impact of inflation,
but there's still a few inflation bogies lying in wait
for us down as we moved through the rest of
the year.
So you alluded a moment ago to the fact that
the consumer seems to be struggling. Obviously energy price is
a big component in that. But I'm wondering about the
labor market and how well that is holding up.
Yeah, So the labor market has been it's been a
real despite GDP per capita and being negative for quite
some time and having a GDP per capita recession, and
so more consumers in the economy has kept the economy
ticking along. We've actually found jobs for all of those
migrants as well, and that's been a really strong point
of the economy for twenty twenty four and twenty twenty five.
But we've begun to see some of that momentum slow
We've just had recently, we've had the April labor market
data and that's shown some cracks emerging and the unemployment
rate ticking up to its highest level in a couple
of years. Our view is that's likely to push further.
There's been some cuts in the recent budget to some
very employment heavy parts of the economy that the government
was providing a lot of injecting a lot of money into,
especially around health, age care, and disability services. Big cuts
in those areas means that those employment intensive bits of
economic growth are actually going to pull backwards. And meanwhile,
we've got resources side of the economy benefiting from higher
energy prices and some higher commodity prices. There's not a
lot of jobs when it comes to mining, to digging
the things out of the ground. And so this swing
in the economy means that the labor market outlook isn't
quite as favorable going forward as it's been, and so
we should see the unemployment rate ticking higher over the
course of this year.
I'm wondering about the real estate market. I mean, Australia's
homes are among the most expensive in the developed world.
Of home price has been holding up, and is there
anything that has been done to address the shortage of
housing supply.
Well, the government's been trying to get a lot at
the federal level. The government's been trying to get a
lot of traction on improving the supply of housing. Some
of that responsibility rests with the state governments. And in
that recent budget where we were just discussing before, there
was a program by the government to inject a lot
of money into rolling out the infrastructure so that we
can get some of the greenfield's developments on the edge
of the city's new homes out the back in new suburbs,
the infrastructure for those laid out and laid out faster
so that we can get moving. But there's a lot
of pressure from the government on states to open up
planning and the restrictions that are holding back the intensification
in the inner and middle parts of our cities. That's
what's really needed to get that housing where the jobs are.
When it comes to the price side of the economy,
you've really had a bifurcation, a two speed on two
different fronts when it comes to the economy. Sydney and Melbourne,
the big population centers, they have seen how their housing
markets slow over the course of the last year or so,
whereas the other smaller capitals Brisbane, Adelaide, Perth, they've seen
very very strong house price growth. They've been more affordable,
they've got the resources side of the equation when it
comes to the upside in the economy, and so those
housing markets are roaring ahead. But even when we look
at Sydney and Melbourne, a government politicy to support first
home buyers and help them overcome the deposit gap by
the government underwriting five percent deposits for them as has
actually really pushed up all of the prices that first
home buyers can reach at the lower and up to
the middle end of the market. So that's been really
a strong point for Sydney and Melbourne Whereas ever since
November last year when it became clear that inflation might
be stirring a little and the RBA might be beginning
to take back its rate cuts that are delivered in
twenty twenty five. It's delivered three so far in twenty
twenty six. But that top end of the housing market,
very interest rates sensitive, that has seen a big slide
down and that's likely to be continuing. As we see
the announcement from the government around taxation changes to housing,
it might actually broaden out some of that reticence, some
of that hit to confidence and see that price softening
become a little bit more pervasive across the rest of
the housing market, not just the top end of Sydney
and Melbourne.
As long as we're talking about home prices, maybe another
antipothy and jurisdiction, let's go to New Zealand. Once home
of the world's biggest housing boom, it now appears as
though that home prices in New Zealand are in a
prolonged downturn. Give me a sense of what's happening here.
Yeah, So the team led by the New Zealand Bureau
has put out a big take on New Zealand's housing market,
and what that piece was looking at was the big, big,
I hate to use the b word bust, but the
big prolonged decline in New Zealand house prices. So New
Zealand does have ups and downs in its housing market,
like every economy, but this has been one of the
longer ones. And we've seen over about four and a
half years now since late twenty twenty one. House prices
has peaked then and they have not recovered and they've
continued to track sideways. What's happened there is we've had
a sixteen percent fall from the peak to where we
are now and things still don't look all that great
when we think about the inflation that's happened over the
time since that time, since twenty twenty one, especially that
inflation shock post Russia's invasion of Ukraine. That real house
price decline very significant. So many consequences this for the economy.
But what's driven it, well classic and sorry to be
an economist here, but supply and demand. So what's happened
is that in New Zealand's economy it's been in and
out of recession for the last couple of years. The
labor market. We've seen the unemployment it's been very weak.
We've seen elevated unemployment there and net overseas migration, which
is usually a big positive for New Zealand's economy because
Australia has been doing well in New Zealand's been weak.
As a New Zealander or as an Australian, you can
choose to live and work in either country. That's a
deal that we have between both economies. We have a
common economic market. And so what's happened is with the
weakness in New Zealand, we've seen New Zealanders move over
to Australia, and when they do that, the demand for housing,
whether it's the rental market or to purchase is weak there.
Then New Zealand managed to do what so many countries
in the anglosphere have struggled with over the recent decades.
They managed to get there how unlock their housing supply,
get those regulations that are holding the supply of housing
back removed in some instances, or really freed up so
the market could deliver a lot of housing. And it did.
And so what we've had we've got this combination of
a recession, a high unemployment rate, weak migration and a
strong supply of dwellings. Guess what nobody's you know, the
price is the thing that's correcting there, and it's been
there for quite some time.
I'm curious, though, James, about non keyw home buyers, whether
there has been or was an influx of foreign buying
and maybe that trend shifted a bit. Is that something
that we need to consider that was.
There, That was there, and it was very much at
the higher end, and you had some big names. There
was a trend for quite some time for you know,
some notable figures Silicon Valley, Peter Teel for example, buying
the New Zealand bug out joints. So if everything goes
wrong upon a plane and you fly across the Pacific,
and you'll be safe and sound in New Zealand, the
land of milk and honey, while whilst the world tears
itself apart there you know. So that was a trend
very much something that really pushed up some of the
higher end prices. The New Zealand government, different governments cut
back on that, put in place residency restrictions so we
didn't have that, you know, kind of foreigners just buying
up and holding these places as a kind of a
doomsday card. Instead you had to be a resident, and
so there was that program. The new government introduced a
Golden visa you could if you brought five million dollars
worth of funds, you could either purchase a home or
purchase a business and that would guarantee New Zealand citizenship.
That didn't really get taken up as well.
James will leave is there. It is always a pleasure.
Thank you so very much, Bloomberg economist James McIntyre. He
covered there is the economies of the Asia Pacific, notably
Australia and New Zealand. I'm Doug Christner. You can catch
us for the Daybreak Asia podcast weekdays. It's available wherever
you get your podcast. Nathan.
Thanks Doug, and that does it for this edition of
Bloomberg day Break Weekend. Join us again Monday morning at
five am Wall Street Time for the latest on markets
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