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Kia ora.

Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.

I'm David Chaston and this is the international edition from interest.co.nz.

Today we lead with news rising oil prices are reigniting inflation concerns and even equity investors have noticed. Bond investors have bid up benchmark bond rates. The Fed next has to deal with this risk in just over a month, but that investors are moving now indicates the heightened concern that Trump's quagmire isn't getting resolved anytime soon. Certainly, his promise of a deal with Iran "very soon", has vanished.

Meanwhile, the Yemeni Houthis have struck Saudi related tankers and hit a Saudi oil refinery. So, the conflict is spreading.

Markets have reacted as though they expect inflation to rise from here.

In Japan, their official 'economy watchers' July survey is signaling continued improvement, especially in their services sector. These survey results took a sharp tumble when the US attacked Iran and the Strait of Hormuz was shuttered. But since then it has climbed back as time has shown that most of the world has adapted effectively, and that includes Japan. Strong exports and a weaker currency have helped.

You may recall the recent deadly earthquake in the historic city of Kumamoto. But that hasn't stopped Sony and Taiwan's TSMC announcing yesterday a US$6.3 bln new joint investment into an advanced image sensor plant there. Nikkei has the details.

Indonesia’s consumer confidence fell in July from June to its lowest level since April 2025 although still in positive territory. The moderation was largely driven by weaker assessments of current economic conditions.

And staying in Indonesia, their government has appointed the long-experienced deputy central bank governor to the top position made vacant by the President firing him, foregoing the opportunity to appoint the daughter of the President. This will reassure financial markets that some Turkish-like instability is being avoided.

In Australia, bank shares are took a beating yesterday, with Westpac down -5.9%, CBA down -2.1%, ANZ down -1.7% and NAB down -2.4%. The reason is a Westpac Q3 market update that shows their mortgage applications down -11% in the period and are running down -20% following their Federal Budget. Almost all of this fall away is because residential investors are pulling back because the expectation of capital gains is vanishing. Westpac says investor "credit growth" will fall from +9.1% this year to about +4.5% in the next two years. They expect little change in demand by owner occupiers.

And don't forget there is an RBA monetary policy review later today. No-one expects any official rate change, but given the high and sticky inflation levels, there will be a lot of interest in their analysis of why they aren't moving to qua