Infometrics is forecasting high inflation will persist, stuck at 6.6% at the end of this year with a return to a one-to-three percent target not forecast until mid-2025.
That’s a notably bleaker picture than the Reserve Bank, Treasury, and all the major bank economists have painted so far, although new data next week will give us updated CPI figures which may impact a few takes.
The curious thing about the Infometrics forecast is that it underscores a growing sense that New Zealand’s inflation battle is diverging from comparable countries.
CPI data in the U.S this week has a year-on-year rate of 5%, way down from the post-Covid high of 9.1%. The Eurozone went from 8.5% in February to 6.9% in March. And the head economist of Australia’s biggest bank is flirting with the possibility of mortgage rate cuts later this year.
Meanwhile, Infometrics is forecasting New Zealand’s inflation will remain stubbornly high, and the cash rate could be raised another 50 basis points in the next few months. What’s more, the speed with which mortgage rates have risen will not be matched by the speed of cuts when we do reach the other side.
So far, the government has blamed much or most of our inflation on international pressures outside of their control: supply chain issues, Covid, and the war in Ukraine. Much of that is fair. We’re hardly the only developed democracy with a cost-of-living crisis. But if New Zealand lags behind comparable countries in bringing inflation down, voters’ patience with that argument will deteriorate quickly.
The government knows this. There is a reason Three Waters is now called the Affordable Water Reforms, even though it delivers fewer savings and is less affordable from a ratepayer perspective than the previous model. There’s a reason we’ll hear “bread-and-butter” over and over again. But slogans and branding will only help so much, and for now Grant Robertson is still planning a significant operating allowance in the budget next month.
The Infometrics forecast make it crystal clear. Forget co-governance or education, climate change, mental health, or the All Blacks prospects at the World Cup, six months today the 2023 general election will be decided by voters with an intense focus on their back pockets. And if New Zealand isn’t making meaningful progress on taming inflation and other countries are, it’ll be that much tougher for Labour to win a third term.
Jack Tame is a well-known television presenter and journalist in New Zealand. This article was first published HERE
CPI data in the U.S this week has a year-on-year rate of 5%, way down from the post-Covid high of 9.1%. The Eurozone went from 8.5% in February to 6.9% in March. And the head economist of Australia’s biggest bank is flirting with the possibility of mortgage rate cuts later this year.
Meanwhile, Infometrics is forecasting New Zealand’s inflation will remain stubbornly high, and the cash rate could be raised another 50 basis points in the next few months. What’s more, the speed with which mortgage rates have risen will not be matched by the speed of cuts when we do reach the other side.
So far, the government has blamed much or most of our inflation on international pressures outside of their control: supply chain issues, Covid, and the war in Ukraine. Much of that is fair. We’re hardly the only developed democracy with a cost-of-living crisis. But if New Zealand lags behind comparable countries in bringing inflation down, voters’ patience with that argument will deteriorate quickly.
The government knows this. There is a reason Three Waters is now called the Affordable Water Reforms, even though it delivers fewer savings and is less affordable from a ratepayer perspective than the previous model. There’s a reason we’ll hear “bread-and-butter” over and over again. But slogans and branding will only help so much, and for now Grant Robertson is still planning a significant operating allowance in the budget next month.
The Infometrics forecast make it crystal clear. Forget co-governance or education, climate change, mental health, or the All Blacks prospects at the World Cup, six months today the 2023 general election will be decided by voters with an intense focus on their back pockets. And if New Zealand isn’t making meaningful progress on taming inflation and other countries are, it’ll be that much tougher for Labour to win a third term.
Jack Tame is a well-known television presenter and journalist in New Zealand. This article was first published HERE
6 comments:
With respect to the 3-5 Waters, does anyone really believe in the "computer model" used by the government to forecast costs and benefits ? The first output from the model was ridiculed by reviewers for over-estimating benefits and under-estimating costs. How can anyone believe the output from the second model ? The old saying of garbage in and garbage out still applies. It is nothing more than as asset and income stream grab by powerful Maori.
Over the last 30 years successive governments have taken a prudent approach to managing our economy by driving debt down to 20 percent of GDP.
Grant Robinson’s Government has wasted billions of tax payer dollars pursuing aspirational ideology without delivering any tangible value. His mantra is that it’s easier to tax people more than to cut the Govt’s spending.
In 2017 NZ debt was $112 billion or $65,000 per household.
Today, excluding an accounting trick with the NZ super fund our debt has grown to $224 billion or $115,000 per household.
Our debt is so high from Robinsons addiction of spending more than we earn, will leave a bleak legacy for our children and grandchildren to suffer. (Material acquired from Paul Glass’s excellent piece)
Ignoring any possible merits in Jack’s comments - why is it journalists no longer just ask questions report? Why is it they now publish these opinion pieces despite having no qualifications or experience to back up their views? If Jack just stuck to doing his job, perhaps he could have asked whether the government and Reserve Bank’s decision to use demand based policies to grapple supply issues has contributed to our dire economic position.
I liked jack on q&a today. Good interview with that mcnulty telling jack how nz should never have been a democracy in the first place. Who says this 6 mths out from an election in a democratic country?
I wonder if any media are going to pick up on the fact that the current Govt of NZ doesn’t believe in democracy.
Imagine if Joe Biden went on national TV and said, you know what, we’re giving Native American Indians 6 votes to everyone else’s one. There would be chaos.
Labour are an unacceptable disgrace to the country and the Westminster system of Democracy.
And what is the end game of this partnership? . Will we have to own our homes in a sort of 50/50 partnership also? Politics has gone mad.
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