Just as economic conditions are biting into the living standards of the average New Zealander, so are they darkening for the Labour government.
For Chris Hipkins, who has given Labour a bounce in the polls, the charmed run he has enjoyed could be coming to a brutal end.
He may be pinning his hopes on his Finance Minister, Grant Robertson, working a miracle in a budget that will produce a glow to warm the average taxpayer. The problem for Robertson, though, is that if he spends up large, as he did through the Covid pandemic, he may just prolong the agony inflicted by high prices, because the Reserve Bank will have to sustain interest rates at a peak as it tries, in Governor Adrian Orr’s phrase, to “cool the jets”.
In any case, the Prime Minister contends prices are beginning to stabilise.
That doesn’t wash with the average householder who has just seen — and felt — the impact of food prices rising by 12.1%.
The April 1 boost to benefits, large as it was, was supposed to offset rising costs but failed to do so.
Continue reading “Hipkins has enjoyed a bounce in the polls, but now economic conditions are biting into living standards of the average Kiwi” →
Inflation is showing little sign of slowing down, posing a problem for freshly minted PM Chris Hipkins.
According to that old campaigner Richard Prebble, Hipkins should call a snap election. If he waits till October, he risks being swept away.
The dilemma for the new leader is that fighting an election while inflation is raging is no fun at all. It underlines the extent of Labour’s failure to implement successful economic policies.
Statistics NZ reported the CPI rose 7.2% in the latest quarter. It follows months of high inflation where prices frequently rose faster than at any time since the early 1990s. Continue reading “Inflation is not slowing down yet, so can Hipkins take a tip from Prebble and risk a snap election?” →
Dr Bryce Edwards writes –
The corporate retail banks are making mega profits on the back of Government policies and indirect subsidies of recent years. As a result, there are calls from across almost the whole political spectrum for greater regulation of the banking sector, including windfall taxes. But will outrage turn into action?
Prime Minister Jacinda Ardern led the charge against the banks this week, warning the likes of ANZ – which announced recently that its profits were up 20 per cent to a record $2.3b – that they are at risk of losing their “social license” to operate here.
The Prime Minister sounded tough, but she was also quick to admit that she has no intention of taking any action or changing the rules. The Finance Minister Grant Robertson was also fast to rule out any reforms or further investigations.
Critics have said that Ardern’s plea for the banks to have “self-reflection” is wishful thinking in the extreme. The Green Party’s finance spokesperson, Julie Ann Genter, put forward this analogy: “Expecting banks… to put people ahead of profit would be a bit like putting the fox in charge of the hen house.” Continue reading “BRYCE EDWARDS: Will the Govt act on mega bank profits and reform the banking sector?“ →
Prime Minister Jacinda Ardern has won lots of favourable publicity, while attending the Queen’s funeral in London and the UN General Assembly in New York.
It was a sombre mission in London, less so but no less tiring in New York (although the nuclear threat from Russia was sobering).
On both occasions, Ardern has represented the country so outstandingly that New Zealanders for a week or two might have overlooked how poorly the government has been performing at home.
Indeed, one commentator – Matthew Hooton in the NZ Herald – suggested that if NZ became a republic he would back Jacinda Ardern for president.
Nobody, he says, better personifies contemporary New Zealand globally and in national celebration or grief. Continue reading “The PM has basked in the glow of approving publicity overseas – but the dollar’s dive should bring her back to earth” →
Is the NZ economy heading for a hard landing? As the country awaits the presentation of Budget 2022, the omens are not good.
The ANZ Bank, in its latest quarterly economic forecast, says many commentators are talking about the risks of a recession. It’s a valid concern, as it is clear that the impact of hikes in the official cash rate (OCR) has already reverberated through the housing market through higher mortgage rates. The bank’s economists say this adds an extra layer of concern over and above fears about the cost of living and sustainability of asset prices (via KiwiSaver balances and the like).
“However it is imperative that the Reserve Bank gets on top of inflation quickly. Going hard should, in theory, lessen the need to hike by more in total and that has been a key RBNZ message.
“ Raising rates aggressively while consumer confidence is around record lows and housing retreating might seem counter-intuitive, but the policy choice is between some pain now or probably more pain later. Indeed not hiking aggressively now would itself be risky.
“If bond market participants sense that central banks are going soft on containing inflation, long-term interest rates are likely to rise even more sharply over time as investors seek inflation compensation. This is what happened in the 1980’s and it is crucial that this is avoided this time around so as to avoid a deep and prolonged period of stagflation.” Continue reading ““Considerable uncertainty” clouds the outlook as Robertson prepares to present 2022 Budget” →
Reserve Bank “not in a good place”, admits governor. This was the headline Radio NZ News ran over a report of RBNZ governor Adrian Orr speaking to an International Monetary Fund seminar.
He might have added that the average Kiwi consumer is “not in a good place”, either, when doing the daily shopping, with food costs soaring and inflation rising at a faster rate than it has for nearly 30 years.
But isn’t it Orr’s job to keep inflation under control – or can he pass the buck (as it shrinks in value) to the Monetary Policy Committee?
And whatever happened to the inflation target?
Orr does concede that the RBNZ was caught on the back foot, but argues that was the same for many other central banks, as a result of supply chain shocks and the Russian invasion of Ukraine, which had exacerbated inflation pressures.
Moreover, he contends the RBNZ had been “reasonably aggressive” in ending its bond-buying programme last year and moving to lift the official cash rate, and is also balancing risks. Continue reading “RBNZ on the back foot as inflation rises – but consumers are struggling on a sticky wicket, too, as food costs soar” →
Roger Bootle is a British monetary economist. He had a good run a few decades ago. Since then, his warnings about monetary instability and inflationary risk have appeared less prescient.
But the next few decades may be kinder to him (if not to us).
Continue reading “A smack in the face from inflation” →
Finance Minister Grant Robertson, wearing his Sport and Recreation ministerial hat, can show he can be a big spender and draw voters’ attention to his largess each time he dispenses money from the funds under his control – or the control of an agency within his ministerial bailiwick.
Yesterday he announced the first distributions from the $265 million Sport Recovery Package, in contrast to colleague Kri Faafoi, who was winning his brownie points by crimping the incomes of mobile traders and truck shops.
Faafoi advised us that mobile-traders and truck shops since June 1 are covered by the lending protections in the Credit Contracts and Consumer Finance Act. This means that all mobile-traders must meet requirements such as assessing affordability, before agreeing to sell any goods on credit.
We can only wonder why it took Faafoi a few days before he cranked up his publicity machine to inform us how borrowers are being protected – by a cap on interest and fees at a maximum of 0.8% a day, for example. Continue reading “Sports organisations score from govt handouts but truck shop operators are nobbled by new lending rules” →
It’s been a grim week for investors. RNZ reported the local sharemarket continued to slide yesterday, because of anxiety about the coronavirus and the prospect of it sparking a global recession, and the NZ dollar tumbled after the first case in this country was confirmed.
The market mayhem was induced by the global panic as news of more coronavirus cases, notably in Italy, raised concerns of the virus’s economic impact being much greater than previously expected.
The market started the week at a record high but fell every day and had lost almost 7 per cent by the end of trading on Friday.
The three main US indexes ended the week down 10% or more.
“A known unknown” is how one major company boss described the economic fallout of coronavirus to the BBC, which reported the markets have woken up to the disruption to the economic activity from coronavirus being wider, deeper and perhaps longer lasting than previously assumed. Continue reading “Sorry, but we can’t find a financial whiz to assure us the short-term economic outlook is bright” →
So what, on reflection, are we to make of the Reserve Bank governor Adrian Orr last week slashing the official cash rate by half a percentage point to a record low of 1%?
After all, just the day before Orr made his historic move, Finance Minister Grant Robertson was delivering assurances to anyone who might be listening of the NZ economy’s “solid fundamentals” as he celebrated the unemployment rate falling to 3.9%.
Why then would investment guru Brian Gaynor label the OCR cut as a “bizarre decision”?
In his widely read column in the Saturday edition of the NZ Herald, Gaynor wrote:
“Populist politicians and central bank governors are obsessed with taking measures to avoid any form of economic slowdown. This approach, which has been strongly influenced by Trump’s pressure on the US Federal Reserve Board, is unorthodox, because expansions and slowdowns are an integral part of the business cycle. The weird 0.5% rate cut…means our Reserve Bank has more limited options if NZ is confronted by a serious recession”. Continue reading “Lopping the OCR might be a stroke of genius – or an Orr-ful monetary policy blunder” →