Because on the bright side, the Official Cash Rate didn’t go up. On the downside, it looks like it’s definitely going up next time. So yes, it’s a reprieve - but it’s only a reprieve for six weeks, excuse me, before the screws on the economy start turning again.
Thanks to the new transparency rules at the Reserve Bank - which, frankly, we should all love - we know that the committee voted and it was split right down the middle. Three members of the committee wanted the OCR to stay at 2.25 percent. Three of them voted for it to be raised by 25 basis points immediately to calm down inflation pressures.
But Anna Breman, who is the governor, has a casting vote. She said it needs to stay, so it stays put.
But they didn’t hide the fact that it is going to go up sooner than they had thought just three months ago. And it will go up by more than they thought just three months ago.
Much of it appears to hinge on what businesses do with prices from here on in. Because what the Iran war is doing to prices is so widespread - and so many prices are going up, from fuel to fertiliser to food - that it runs a higher risk that businesses start jacking up more prices in a second round of increases. And that is what they’re worried about at the Reserve Bank.
So economists are now calling for three hikes in quick succession from here: July, September and October.
Now, there are two problems with that. The first: all three hikes are before the election in November. National, especially, should be sweating, because poorer voters are not happier voters - they are voters who turn to New Zealand First.
The second problem - and this is probably the biggest of them all - is what this is going to do to our recovery, our economic recovery.
We are probably in negative growth this quarter. Next quarter is probably not that flash but at least positive. Entire sectors, like construction, are still struggling to get back on their feet. Unemployment is still in the fives. The Iran war is still pushing up fuel prices and therefore pushing up the price of everything.
So, glass half full: at least we get another six weeks before the screws start turning.
Glass half empty: when they tighten, they will be tightening fast on an economy that doesn’t need that kind of pressure.
Heather du Plessis-Allan is a journalist and radio broadcaster who hosts Newstalk ZB's weekday Drive-Time Show – where this article was sourced.
3 comments:
70,000 kiwis departed for brighter shores last year alone. The biggest age group leaving is 18 to 30 year olds.
These are young Kiwis with skills. They are looking at New Zealand, doing the maths, and deciding they have to go somewhere else.
A nurse can earn 30 to 40% more in Australia for the same job. A young tradie can buy a house in Brisbane. A teacher in Melbourne can actually save money after paying the bills.
Most of them don’t hate New Zealand. They just can’t afford to live here under a right wing government, all while politicians get stuck into extracting every bit of top up from taxpayer coffers that they are “entitled” to. A country that loses its young people loses its future.
Labour froze MP pay rises in times of global hardship. Luxon has no such backbone. The coalition must be voted out this year.
Top Secret; For Your Eyes Only; Confidential Comment = Do your readers wanna know why the RBNZ held rates? Because Breman didn't know what to do so consulted AI asking what her friend Lagarde is doing at the ECB. AI says "the European Central Bank and President Christine Lagarde are maintaining a strict "wait-and-watch" approach, keeping interest rates on hold as they wait for more clarity on inflation dynamics, wage growth, and global trade shocks". So Breman cut & pasted since she's new to NZ. But NZ aint Europe and we have different law. In fact, Breman is in willful breach of the RBNZ's strict 1 to 3 percent inflation single mandate since inflation is now headed to over 4 percent. Considering the state of the NZ economy was strictly ruled out by Willis when she changed the Reserve Bank Act, but Breman (and Willis) are now ruling it in. Our country has become a rolling omnishambles.
Wow Robert that’s such a bombshell, it made me forget all about Nash and Uptson rorting the system while making cuts for those that can least handle it.
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