Kia ora,

Welcome to Monday's Economy Watch where we follow the economic events and trends that affect New Zealand.

I'm David Chaston and this is the International edition from Interest.co.nz.

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Today we lead with news economic stress is promoting political stress as governments pull back from cooperation.

Firstly in Australia, they have decided at a national level that all states except Western Australia will open their borders by late July and the first foreign students will be allowed in from overseas. But the spat with China is a serious issue for them. There is rising alarm among universities and tourism operators in Australia that China's travel warnings for tourists and students are here to stay.

Also under threat are Australia's coal mines. Their new risk is that they won't be able to get insurance, and insurers shy away from covering risks that add to climate change exposures. Another danger is that China is signaling it may avoid buying Aussie coal, a policy that is seeing their own local coal prices rise. China is looking elsewhere. The growing China-Australia hostility is a tricky dynamic for New Zealand.

The one area China is not punishing Australia is in its iron ore purchases. And the price they are paying just keeps on rising.

Going the other way, India’s industrial production shrank a record -55% in April with manufacturing crashing a whopping -64%.

In Japan, industrial production fell a sharp -15% year-on-year in April. This was an awful result. Business sentiment is now at an eleven year low. In response, the Japanese government has enacted +¥32 tln in extra stimulus. (+NZ$460 bln). The irony of this is that NZ$1.5 tln of previous stimulus hasn't yet been spent, "mired in a bureaucratic logjam".

In England, they have posted a -20% drop in economic activity in April. It is a fall of historic proportions - even in the Great Depression of the 1930s, GDP didn't fall more than -1% in one month.

In the United States, Americans’ view of the economy improved in early June as the country tried to reopen. The latest survey of consumer sentiment rose in the past two weeks and above what analysts were expecting. But the level is still very low, down -20% from this time last year. Fear of income loss is very high, driven by what might lie ahead with a second wave from the pandemic. And as each day passes, that fear is becoming more realistic.

And the Fed released their Monetary Policy Report to Congress giving more details of the fragile situation American households and businesses are in. A key message is that these vulnerabilities will be persistent.

In Canada, they are seeing rising household debt for the first time since 2017.

The latest compilation of Covid-19 data is here. The global tally is now 7,838,800 which is up +265,000 in two days, and a faster rising pace. Global deaths now exceed 423,000. France, Germany, Italy and Spain have crushed their curves. The UK hasn't yet. And Canada has joined the list of countries with more than 100,000 infections and has recorded almost twice as many deaths as China.

Just under 27% of all cases globally are in the US, which is up +50,000 since this time Saturday to 2,083,100. This is also a faster rate of increase focused on large rises in Texas, California and Florida, a sun-belt trend. It is becoming clear that 'reopening' is raising the infection rate. US deaths now exceed 116,000.

In Australia, there have been 7320 cases (+30 since Friday), 102 deaths (unchanged) and a recovery rate of just over 93% (rising). 16 people are in hospital there (-1) with 3 in ICU (+1). There are now 380 active cases in Australia (-25).

The UST 10yr yield is a little higher today, bouncing off Friday's decline and up +5 bps to 0.71%. But that still means it is down -18 bps in a week.

The gold price is little-changed from Friday, still at US$1,732/oz.

Oil prices are holding at Friday's level. They are now just over US$36/bbl in the US. The Brent price is just under US$39/bbl.

The Kiwi dollar is slightly firmer this morning at 64.5 USc. On the cross rates we are still at 93.9 AUc however. Against the euro we have are firmish at 57.3 euro cents. That means our TWI-5 is marginally higher at 69.3 but -60 bps lower than this time last week.

The bitcoin price is in another quiet phase, one that has lasted four days and has the price at US$9,392 today. And that is almost -4% lower than a week ago.

You can find links to the articles mentioned today in our show notes.

If you are one of the new listeners how have joined us recently, welcome – we appreciate your company.

Get more news affecting the economy in New Zealand from interest.co.nz.