The Reserve Bank was picking a contraction of 0.3 percent. The consensus was a contraction of 0.4 percent. The worst-case prediction from one of the banks was a contraction of 0.5 percent. It's come in at a contraction of 0.9 percent, which is basically twice as bad as most of us thought.
Now, the immediate problem that we have is what this is going to do to confidence, because people are already scared.
That is why it's taking this country so long to come out of recession, because every single piece of bad news like Trump's tariffs earlier this year freaks us out all over again, so we keep our wallets shut for longer.
There are people out there who absolutely can afford to spend more money, but they're choosing not to because they do not know that they can trust that we're through the worst of it.
This is part of the reason, if not one of the bigger reasons, why the Reserve Bank's cuts to the OCR are not stimulating the economy like the bank thought that they should be.
And this number that we see today, I fear, is going to do this all over again. And it's gonna freak us out all over again.
And I think the reason we're going to be freaked out all over again by this is that we think that the people who are in charge, mainly the Reserve Bank, but also the Government who keep telling us that the economy is definitely recovering, really have no idea how bad this is.
Now, I think it is a little unfair to blame anyone but the Reserve Bank right now because they really deserve it. The verdict is in on this now, isn't it?
They have well and truly stuffed this up, they have no idea what is going on in this economy.
In July, which was only one month after Q2 ended, we'd just gone through this massive contraction - and the next month, they decided they didn't need to cut the cash rate anymore.
They held the cash rate. That now should blow your mind.
Just a month ago, they released their monetary policy statement forecasting the contraction at only 0.3 percent They got it wrong by a factor of 3 percent.
Now, what them getting it so badly wrong now means is that the pressure is on them to fix this and fix this fast and do a double cut in October, really more to restore confidence than anything, because confidence is what we are very much lacking at the moment.
Heather du Plessis-Allan is a journalist and commentator who hosts Newstalk ZB's Drive show HERE - where this article was sourced.
5 comments:
The Reserve Bank has been no more accurate than a water diviner with a cleft stick. And water diviners aren’t paid the ridiculously massive salaries these bankers demand. Incidentally, how many qualified economists do they have?
The Ardern /Robertson ere is to blame- but noone says so
because Nat and Labour are the same entity.
"They got it wrong by a factor of 3 percent."
When you're criticizing someone for bad nath, you should be extra careful.
They got it wrong by a factor of 3.
Where is the uber-qualified Finance Minister in this mess?
I don't think it is reasonable to blame the tarriffs on the drop in GDP. After all, our tariff is 10%, others are higher but they are doing far better than us.
No, I think this is self-inflicted. Our obsession with Net Zero is the root cause. To achieve this, government has closed oil and gas drilling, closed our coal mines, including the anthracite mines, and basically stopped all new hydro projects. The extremely high price of electricity as a result of these inane and insane acts by government is putting businesses to the sword leading to higher unemployment that requires more taxpayer funded benefits.
Luxon's blind faith in Net Zero, against very strong scientific evidence, is akin to a Mr Micawber moment. The longer Luxon stays as PM, the worse it will be for New Zealand: he is not a Prime Minister but a Prime Suspect in leading New Zealand down the gurgler. That he cannot or will not see this and/or cannot understand the simplist form of dot-connecting makes me wonder how he survived as a CEO of big companies. Maybe he survived because he belongs to the Old Boys' Network where who you know is far more important. As he strongest connection to that Network is through his mentor, the slippery, shiny, snake that is John Key.
If the Centre Right is to win the next election, Luxon needs to do what we, The People, voted him in to do, not what his Lords and Ladies of the National Club want him to do.
Post a Comment