Misery Index Gap Weakens Aussie Versus Kiwi: Chart of the Day

Australia’s near decade-high jobless rate and quickening inflation have Japan’s Kokusai Asset Management Co. looking for alternatives across the Tasman Sea in New Zealand.

The CHART OF THE DAY shows the inverted spread between the two nations’ misery indexes, which add the jobless rate to the level of inflation. Australia’s index worsened last month by the most relative to New Zealand’s since October 2008. It also tracks the Aussie dollar plunging about 20 percent from its peak in March 2011 versus the kiwi.

“The headline numbers appear strong, but those have not rippled through to the people of Australia yet,” Masataka Horii, who runs the 1.18 trillion yen ($11.5 billion) Global Sovereign Open Fund at Kokusai in Tokyo, said in an April 11 interview. “New Zealand’s economy looks to be in better shape than Australia’s. It is solid and income there is increasing.”

Global Sovereign Open Fund, Japan’s second-biggest bond manager, held 4 percent in kiwi-denominated assets as of April 17, up from 3.2 percent at the end of last year, data on the company’s website show. That’s a reversal from its Australian holdings, which fell to 1.1 percent from 1.9 percent. The Aussie currency will weaken to NZ$1.06 by the end of June from NZ$1.0899 as of 1:04 p.m. in Sydney today, the median estimate of analysts surveyed by Bloomberg News shows. It touched NZ$1.0493 on Jan. 24, the weakest since December 2005.

Citigroup Inc.’s Economic Surprise Index for Australia, which shows whether data beat or fell short of economist forecasts, rose to 74 on April 15, the highest since July 2012. Even so, wage growth is the weakest on record and joblessness has climbed to 5.8 percent in March from 5.1 percent two years earlier. The government probably will report April 23 that annual inflation accelerated to 3.2 percent last quarter, the fastest pace since 2011.

“We are currently overweight on New Zealand,” Horii said. “China’s average income is growing and New Zealand is set to be a beneficiary in the long-term.” China is the biggest buyer of Australia’s iron ore exports and New Zealand’s top export market for dairy shipments.

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