Daybreak Weekend: US Jobs, Ukraine Funding, Australia GDP | Bloomberg Daybreak: Europe Edition

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[00:01:47]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.

[00:02:00]>> I'm Caroline Hepka here in London where we're looking ahead to the EU sending fresh funds to Ukraine and what comes next in this ongoing war.

[00:02:09]>> I'm Doug Krer looking at whether Australia's economy will show signs of cooling in Q1.

[00:02:15]That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 1130 New York, Bloomberg 991 Washington DC, Bloomberg 929 Boston, DAB Digital Radio London, SiriusXM121, and around the world on Bloombergradio.com and the Bloomberg Business App.

[00:02:40]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 allimportant non-farm payrolls report for the month of May is due out this Friday at 8:30 a.m. 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 McKe. We've been looking at this labor market talking about low hire, low fire for so long. Mike, is this print going to be low drama?

[00:03:13]>> Uh, let's just say I hope you have a high tolerance for boredom, at least according to what the economists are predicting.

[00:03:20]>> Another low high or low fire. The unemployment rate doesn't change. 4.3% 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 um basically change as the the week goes on towards the jobs number. um as we get additional information, but it's it doesn't look like we're going to have any kind of major change in the number of jobs. Uh remember last month was 115,000 and at this point because the labor force has shrunk, you need far fewer jobs to keep the unemployment rate stable. So they won't worry if we come in somewhere any anywhere say between 50,000 and 115,000 or if it gets a little if it gets a little stronger that and helps them make the case for rate increases.

[00:04:08]>> Yeah. Well, what's been keeping the labor market at this this kind of simmer that we've seen over the last few months? Is it is it just about uncertainty around the war? Is it artificial intelligence? What what do you see underneath the hood?

[00:04:20]>> It's all of that. It's uh in part the fact that the labor force has shrunk, but uh 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. The new round of tariffs are coming in July and there's uh 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 straight to uh to where it needs to go to bring down prices significantly. And we're not just talking about oil prices.

[00:05:00]We're talking about things like fertilizer, aluminum, uh 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 add different employees somewhere else or cut uh 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.

[00:05:30]>> 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 to be able to say that we are seeing that. There was less hiring last month in financial services, but uh AI is only beginning here and there's 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.

[00:06:22]It's going to be a while till we see any major change in any other area.

[00:06:26]>> Yeah. Interesting to to hear you mention the the AI companies talking about layoffs because they're not the only ones that have been uh putting out some pretty high-profile layoff announcements. How could that potentially be reflected in this month's print?

[00:06:39]>> Well, the AI people will show up in computers and software, software design in terms of jobs. Uh, in terms of other jobs, it it's really going to depend on uh 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 rightsize 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 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 uh 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 for May due out this Friday 8:30 a.m.

[00:07:36]Wall Street time. Thank you for this Mike as always. That's Michael McKe, Bloomberg international economics and policy correspondent. Let's take a look now at some stocks making news in the week ahead. I'm Nathan Hager with Bloomberg equities reporter Natalyia Kenvich. 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. A Natalya, >> that's right. So yes, uh Broadcom uh reports earnings on June 3rd. The ticker is AVgo.

[00:08:08]you know, uh lots of expectations of course for this earnings report because we've heard from CEO who said that uh the company expects uh to see sales uh above $100 billion next year. They also said that AI chip revenue will be at around $10.7 billion. And then if we look back um at the latest earnings report, we saw that the company posted better than expected quarterly outlook.

[00:08:35]They also announced a pretty solid stock stock buyback uh program of as much as $10 billion. We know that companies have have been buying back their own stocks pretty aggressively uh this year. Um analysts are of course really excited uh by the company's AI related revenue. We know that Broadcom expanded agreements with companies uh like Google and Anthropic and it's also you know um a good addition to multi-year visibility and contracts and we also saw you know some optimism across uh Wall Street analysts because on Thursday uh Sesuana analysts also erased uh the price target on Broadcom to $490 from $450 and the stock is doing really well this year on on a year-to-day uh basis. As of Thursday, the stock was up by uh 23%. So, it's a pretty solid run.

[00:09:34]>> Yeah, 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 uh Crowd Strike also reporting Wednesday.

[00:09:47]>> That's right. Yes. So, Crowd Strike uh valuation of course have surged uh this year helped by deals to make custom chips for companies like Open AI and Anthropic. And again, I'm going to site the latest earnings report because Crowd Strike uh shares um kind of fluctuated a little bit, but the software company reported results that were in line with expectations. Uh and we know that this stock among other software uh peers were really volatile this year because investors were debating potential disruptions coming from AI. Cyber security stocks in particular were really volatile because anthropic announced uh new you know features in its cloud AI model that can scan different codes for vulnerabilities. So lots of debates about the sustainability of the software uh sector uh here in the United States. Uh nevertheless, we also see some optimism on Wall Street. On May 27th, Wedbush analyst Dan Ives raised uh the price target to crowd strike holdings to $700 from $550. 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 43%. So definitely outperforming broader markets.

[00:11:11]>> Yeah. Well, we know how bullish Dan Ives of Wedbush is across the AI story. So his perspective definitely one to uh pay attention to. Now uh before these uh tech and software companies report, we're going to hear from a a big name in retail before the bell on Wednesday in Macy's. How are things at Herald Square these days, Natalia?

[00:11:35]>> Yes. Uh, so you know, I I actually also go to Maces pretty regularly. When you go to the department store, it's very crowded. No signs of, you know, any consumer concerns or recession. Uh, but the stock is flat year to date. Um, we of course keep an eye on Macy's because it's also a bell weather because it's such a huge presence across the United States. So uh Bloomberg intelligence analysts expect that sales may meet consensus based on transaction data. Uh comparable sales could be somewhere at around 1.3% EPS could top expectations.

[00:12:12]Now uh Bloomingdale sales uh which is around the corner from Bloomberg office.

[00:12:18]That's right. Yes.

[00:12:19]>> Yes. So they expected that sales have been have risen to low to mid single digits on the earnings call. Of course, people will be watching whatever Macy's says about the progress because they uh including 200 revitalized stores, all things on consumer trends, luxury spending, tariff funds, and of course the outlook. Uh 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 inome consumers hanging in and lower income consumers are struggling. So anyway, latest earnings report by the way was really good. The company reported better than expected results. Uh but it did not help the stock price. Maybe there are lots of concerns about consumer trends uh going forward. Maybe something that we have not seen yet. Yeah, we'll have to think about uh new alphabet uh letters to uh talk about the economy, not just M the ticker K, but E. Uh very interesting.

[00:13:31]Thank you for this, Natalyia. That is uh Bloomberg Equities reporter Natalyia Kenvich. 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.

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[00:15:35]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.

[00:16:06]Bloomberg Daybreak Europe anchor Caroline Heepker has more.

[00:16:10]>> Nathan, the conflict in the Middle East has pushed Ukraine down the agenda, but in June, the country is expected to start receiving 90 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 90 billion euros from the EU, its 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 to fend off attacks on its capital, Moscow, and its refineries.

[00:16:56]Tony Halpin 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 Zalinski 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?

[00:17:23]>> It's a good question. I think u you know the 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. There they were just emerging from a difficult winter. there were question marks over continued US military supplies and uh Russia appeared to be on the front foot and advancing slowly if surely um in the east and south of Ukraine. But since then quite a lot has changed. I was just recently in Kiev and 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 shortage 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.

[00:18:24]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 uh 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 um developing its own uh weapons industry, developing its own drone uh output and it feels now that it doesn't necessarily depend as it did before a year ago or so on the uh to the same degree at least on on the US for weapons that it's secured the European funding. some of the pressure has been relieved there. As you will remember, late last year, there was a big question mark over that and 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 um even force uh Putin eventually to the negotiating table.

[00:19:16]>> That's interesting that you report on that change in mood from having visited the country. Uh and as you say, yes, more independence in terms of weapons manufacturing. And I thought it was an extraordinary number that Ukraine saying that it could make as many as 4 million drones a year. And on the Russian side, that victory parade that is an annual event very much paired back this year.

[00:19:42]How has Ukraine managed to hold on against, you know, as you say, a much larger and more powerful country?

[00:19:49]>> If you just look at um the two presidents, Zilinsky and Putin, for example, I mean, Zilinsky has been traveling quite extensively in recent months. He's been in the Middle East offering, as you've noted, Ukrainian drone technology um to countries there which are suffering from Iranian uh missile and 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 drone attacks.

[00:20:13]So, there's a there's a clear sense that, you know, Russia's actions have been far more restricted now than they were even a year ago. Um, 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.

[00:20:39]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 uh they're able to earn a lot more money than they were earning at home. And Russia has relied very heavily on very large uh 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 that's the only way they can really match up against a 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 war economy, in terms of defense materials, in terms of soldiers.

[00:21:22]But the way to answer that clearly has been to innovate. And we've seen the way Ukraine has uh developed its its whole drone industry, which is something now the rest of the world is looking on with a degree of envy and and eager to copy.

[00:21:35]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.

[00:21:50]Ukrainians have been much more nimble on the battlefield than that.

[00:21:53]>> Motivation and innovation really interesting in terms of the finances.

[00:21:59]The EU uh has decided now that Hungary has lifted its veto to hand over this 90 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?

[00:22:22]>> Yes, I mean this has been an absolutely crucial decision. Um there was every prospect that Ukraine was going to run out of money by about June if this money hadn't appeared and that it 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 around in Brussels and in Kiev that the uh blockage of this funding has been lifted and it should flow reasonably steadily.

[00:22:48]Now it's a commitment for two years and it'll be doled out in in branches through this year and next year and that will help uh Ukraine support itself as a government and an economy and a and a war effort that previously that 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 parliament are opposed to doing because it's it's just difficult to do in a wartime setting. If you're trying to impose extra costs or or 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 if Ukraine loses this war for lack of funding, it just requires everyone else in Europe to to spend even more than they do now uh ramping up their defense spending and their defense industries. So, in some ways, this is viewed as an investment really against future spending.

[00:23:47]>> 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?

[00:24:05]>> Yes. I mean, it's inevitable because, you know, the winter is so harsh there.

[00:24:08]It's very difficult to move around.

[00:24:10]There's a lot of snow. It's very cold.

[00:24:12]So, of course, then you get spring and 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 the winter weather arrives again.

[00:24:27]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 uh new offensive in spring and summer intending to put pressure on the front line and and and try to break Ukraine in various positions. Ukraine has resisted that. Russia has not managed in 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 largecale 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 to more intense bombing of Kiev, 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 is is precisely that that the war just grinds on with you know no one able to resolve it and no one able to resolve it militarily uh and that the diplomacy then just sort of fails uh 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 has 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 bandwidth is consumed by what's going on in Iran and the Middle East. and and so it's being left to to the troops on either side to sort of continue their actions and and neither side can really demonstrate that they are able to make a decisive breakthrough that at at least at present will will change the course of the war >> as you say distracted by Iran. How has the US's role changed in the war under President Trump in terms of diplomatic attempts? Is there anything in the offing? We started by talking about President Trump's meeting with President Zalinsky. Maybe we should end thinking about uh the US attitude in all of this.

[00:26:26]>> Yes. I mean, I think Secretary of State Marco Rubio's words the other day that, you know, they seem to be the only people who can 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 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.

[00:26:59]Clearly, they're supporting Ukraine and President Zinski, 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 entry.

[00:27:20]We'll have to see if 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 the the outstanding question remains Russia's territorial demands and and how willing or otherwise Ukraine and not only Ukraine, its allies are to uh accepting Russian demands. If Russia doesn't feel that it can get a deal on the on the table, then Putin has indicated that he's ready to keep fighting even if there are increasing difficulties, as they clearly are in Russia's economy.

[00:27:52]>> Indeed. Yeah. All of this as Europe prepares to disperse 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 Bloomberg's coverage of Russia's government and the economy talking us through the latest when it comes to Ukraine. I'm Caroline Hepka here in London and you can catch us every weekday morning here for Bloomberg Daybreak Europe. That's beginning at 6:00 a.m. in London, 1:00 a.m. on Wall Street. Nathan, >> thanks, Caroline. And coming up on Bloomberg Daybreak Weekend, we'll look ahead to Australia's first quarter GDP.

[00:28:31]I'm Nathan Hager and this is Bloomberg.

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[00:31:44]>> 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. This week we get the reading on Australia's first quarter GDP. With a closer look, let's get to Doug Krner, host of the Bloomberg Daybreak Asia podcast. Thanks, Nathan.

[00:32:02]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 uh the late the March quarter uh reading for Australia is um is how the economy was fairing in the initial parts and then the some of the beginnings of the hit from the energy price shock. So Australia is a bit interesting when it comes to how the economy is going to get buffeted by the closure of the straight of Hormuz as a very very large energy exporter especially when it comes to natural gas. It delivers an export boom at the spike in oil prices and the gas market shortages uh with Qatar being taken offline. Uh but as uh 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 uh the GDP data. But overall uh we're likely to see the quarterly pace of growth ease back a bit. We had a very very strong 0.8% 8% uh quarteron quarter growth in in the last the final stanza of 2025 that's likely to slow down to 0.5 or below for this first quarter of the year. the real question when it comes to the RBA um 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 uh as a result of all of the uncertainty stemming from the war with Iran.

[00:33:51]>> 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 uh up in inflation, but we've also had a real fullcourt press going on from the Australian government when it comes to 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 uh and handed back another chunk of tax which has meant that overall petrol prices or gasoline uh has 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 is likely to to give us a bit of volatility. But we have seen a big cushion there from government action.

[00:34:45]Second round effects are going to be really what's interesting over the next little while as we see or the next 6, 12 and 18 months as we see the diesel hit to the economy affecting all of the transport uh 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 you uh fertilizer those disruptions that's going to push up food prices down the track. So we've cushioned the initial impact of inflation but there's still a few uh inflation bogeies uh lying in wait for us down as we uh move through the rest of the year.

[00:35:26]>> 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.

[00:35:37]>> Yeah. So the labor market has been it's been a real despite GDP per capita and uh being negative for quite some time and having a GDP per capita recession and so more more consumers in the economy uh 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 2024 and 2025. But we've begun to see some of that momentum slow.

[00:36:03]We've just had uh recently we've had the April uh labor market data and that's that's shown some cracks emerging and the unemployment rate ticking up uh to its highest level in in a couple of years. Uh our view is that's likely to to push further. There's been some cuts uh in the recent uh budget to some very employeeheavy 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, you know, there's not a lot of jobs when it comes to to mining uh 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 uh as it's been.

[00:36:59]And so we should see the unemployment rate ticking higher uh over the course of this year.

[00:37:04]>> I'm wondering about the real estate market. I mean, Australia's homes are among the most expensive in the developed world. How have home prices been holding up? And is there anything that has been done to address the shortage of housing supply?

[00:37:22]>> Well, the government's been trying uh to to get a lot at the federal level.

[00:37:26]government's been trying to get a lot of um traction on improving the supply of housing. Uh some of that responsibility rests with the state governments and and uh in that recent budget where uh we were just discussing before there was a program uh by the government to inject a lot of money into to rolling out the infrastructure so that we can get some of the green fields developments on the edge of the cities, new homes uh out the back in new suburbs. uh the the infrastructure for those uh laid out um 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 and the restrictions that are holding back uh the the intensification in our in the inner and middle parts of our cities. That's what's really needed to get that housing where the jobs are. But when it comes to the price side of the economy, you've really had a bifocation, a two-speed on two different fronts. uh 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 of the last year or so, whereas the other smaller capitals, Brisbane, Adelaide, Perth, they've seen uh very very strong house price growth.

[00:38:37]They've been more affordable. They've got the resources side uh of the uh the equation when it comes to the uh the the upside in the economy. And so those housing markets are roaring ahead. But even when we look at Sydney and Melbourne, a government policy to support first home buyers and help them uh overcome the deposit gap by the government underwriting um uh 5% deposits for them has has actually really pushed up uh all of the the prices that first home buyers can reach at the lower and up to the middle end of the market. Uh so that's been uh really a strong point for Sydney and Melbourne.

[00:39:14]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 2025. It's delivered three so far in 2026. But that top end of the housing market very interest rate sensitive. That has seen a big slide down uh and that's likely to be continuing as we see um the announcement from the government around taxation changes to housing. It might actually broaden out some of that reticence uh some of that uh hit to confidence and see that price softening uh become a little bit more pervasive across the rest of the housing market, not just the top end of Sydney and Melbourne.

[00:39:56]>> As long as we're talking about home prices, maybe another antipod and jurisdiction. Let's go to New Zealand.

[00:40:03]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.

[00:40:13]Give me a sense of what's happening here. Yeah. So, uh, the team, uh, led by the, uh, the New Zealand bureau has put out a big take on New Zealand's housing market and, and what that piece was looking at was the big big, um, you know, I hate to use the bust the B- word, bust, but the the big prolonged decline in New Zealand house prices. So New Zealand does have ups and downs in its housing market like every economy.

[00:40:37]Uh but this has been one of the longer ones and we've seen over about 4 and 1/2 years now uh since late 2021 uh house prices peaked then and they have not recovered and they've continued to track sideways. Um what's happened there is we've had a 16% fall from the peak to where we are now and things still don't look all that great. Um when we think about the inflation that's happened over the time uh since that time since 2021 uh especially that inflation shock post Russia's invasion of Ukraine um that real house price decline very significant so many consequences of this uh 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 um New Zealand's economy it's been uh 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.

[00:41:38]Because Australia has been doing well and New Zealand's been weak. As a New Zealander or as an Australian, you can choose to live and work in either in either country. That's a uh a deal that we have uh between both economies. Uh 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 uh 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 their h 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 is we've got this combination of a recession, a high unemployment rate, weak migration, and a strong supply of dwellings. Guess what? Nobody's uh you know, the price is is the the thing that's correcting there, and it's been there for quite some time. I'm I'm curious though, James, about non-Kiwi home buyers, whether there has been or was an influx of foreign buying and maybe that trend shifted a bit. Is is that something that we need to consider?

[00:42:53]that was there uh that was there and it was it was very much at the higher end and you had some big names uh there was a trend for quite some time uh for for uh some you know some notable figures uh Silicon Valley Peter Teal for example buying the New Zealand bugout um uh joint. So if everything goes wrong you hop on a plane and you fly across the Pacific and um and you'll be safe and sound uh in in New Zealand, the land of milk and honey uh whil whilst the world tears itself apart. um there you know so that was a trend very much uh uh something that uh really pushed up some of the higherend prices um the New Zealand government uh different governments cut uh cut back on that put in place residency restrictions so we didn't have that you know kind of um foreigners just buying up and holding these places as a um as a you know a kind of a doomsday card instead you had to be a resident uh and and so there was there was that program The new government introduced a golden visa. You could if you brought $5 million worth of um funds, you could either purchase a home or purchase a business and that would guarantee New Zealand citizenship.

[00:44:04]That didn't really get taken up as well.

[00:44:06]>> James, we'll leave it there. It is always a pleasure. Thank you so very much. Bloomberg economist James McIntyre. He covers the economies of the Asia-Pacific, notably Australia and New Zealand. I'm Doug Krishnner. 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 Daybreak Weekend.

[00:44:29]Join us again Monday morning at 5 a.m.

[00:44:31]Wall Street Time for the latest on Markets Overseas and the news you need to start your day. I'm Nathan Hager.

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