The past four years have been tough for the New Zealand economy. Extremely challenging conditions have been due to mainly unforeseen factors. Covid and the consequent recessionary years leading to cost-of-living struggles for Kiwis have impacted us all – from homeowners struggling with higher mortgages, consumers forking out more at the supermarkets, and small business owners doing all they can to stay afloat.
After two cuts to the Official Cash Rate by the Reserve Bank, driven by falling inflation, there are signs that the challenges of the past four years will ease, though when that may be is still undecided. Interestingly, while all of the larger economic factors that have forged tougher times are not down to us, the key to moving out of them is. Consumer confidence measures how consumers feel (good or bad) about the economy and is then used by economists as a barometer to establish the wider health of the economy. While there have been months of a rise in confidence – according to the various banks that monitor it – concerns about unemployment have tempered it this month.
“The ANZ-Roy Morgan survey showed a four point fall in confidence in October, to 91.2, after three months of improvement, which had measured confidence at the highest level in more than two years. However, the latest survey showed consumers less confident about their current financial position and future outlook. ANZ economist Henry Russell said a worsening labour market has given consumers a reality check. ‘Employment prospects remain very weak and that’s likely to weigh heavily on households as we see job security fears rise.’
“Russell said falling interest rates and lower inflation would deliver benefits to consumers in due course as they trickle through to household budgets, but the likelihood of unemployment pushing through 5 percent would weigh on activity. “There are things for consumers to look forward to, but it’s going to be a tough six to nine months before we get there.'” (Source: “Worsening labour market dampening consumer confidence – ANZ,” 25th October, www.rnz.co.nz).
“Economies are shaped by fiscal and monetary policies. But they are driven by the public mood.” (www.nzfunds.co.nz)
Therein lies the conundrum. Even as major economic factors show signs of positivity, consumers need more to open their wallets or to lend and thus drive the economy forward. It could be argued that government policies during the Covid years provided that – lending heavily to pour cash into the New Zealand economy that would be spent to benefit Kiwi businesses and keep them solvent. While it may have been a temporary solution at the time, under a generationally unique event, the reality is we would pay for it later. All debts need to be paid and the money needs to come from somewhere. For our current government that comes from cutting services and encouraging investment to stimulate growth.
Still we are left with a public mood that is hesitant, and I daresay, resentful. It will take further shaping of the economy to shift that because it is essential to the overall well-being of the country. It is a shame that national politics are driven by opposition, rather than consensus. What matters to New Zealanders overall is our economic health – not sideshows. Without a strong economy, we all struggle, we all make hard choices about where to spend and what we prioritise our spending on.
I’m reminded of the early part of John Key’s fifth national government where a call went out for ideas to improve New Zealand’s economy. From memory, one legacy of that effort was the Roads of National Significance. Personally I believe that right now we have the perfect situation to lay adversarial politics aside and really investigate how we can create and grow our economy. Instead of divisive social policies, let’s focus on positive ones that will benefit all New Zealanders. Afterall, you can’t create a positive mood, with negative actions.
