House price distortions spread globally

<p>Kia ora,</p><p>Welcome to Wednesday's Economy Watch where we follow the economic events and trends that affect New Zealand.</p><p>I'm David Chaston and this is the International edition from Interest.co.nz.</p><p>Today we lead with news the focus might be going back on to global house price distortions as both Canadian and Australian regulators show signs they, like New Zealand, are worried about what their pandemic QE has done to these asset prices.</p><p>But first, the overnight <a href="https://www.globaldairytrade.info/en/product-results/" target="_blank"><strong>dairy auction</strong></a> was essentially unchanged by holding on to most of the gains from the <a href="https://www.interest.co.nz/charts/commodities/dairy-prices" target="_blank"><strong>sharp jump two events ago</strong></a>. Recall, it rose +15% then, then corrected down by -3.8% at the prior event. But this time those net gains have been held. This justifies the raising of the farm gate milk price forecasts over this period. Over this period, the net rise is +11.5% in US dollars, but with the retreating NZ dollar, it is +14% in local currency. This time the key WMP price was unchanged, and the SMP price rose +0.6%. Butter and cheese prices were up about +2% from the prior event.</p><p>The IMF has upgraded its <a href="http://www.interest.co.nz/sites/default/files/embedded_images/text%20%285%29_0.pdf" target="_blank"><strong>global growth forecasts</strong></a>, based on new large fiscal support in a few large economies, especially the US. Global growth is now projected at +6% in 2021, moderating to +4.4% in 2022. The projections for 2021 and 2022 are stronger than in the ones they released in October 2020. The vaccine-powered recovery in the second half of 2021 is also a big factor, and they point to "continued adaptation of economic activity to subdued mobility". They also say "high uncertainty surrounds this outlook", so perhaps we shouldn't rely too much on these guestimates.</p><p>They now say the US will expand +6.4% in 2021, the EU +4.