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New Zealand's economy grew 0.9% in the June quarter and avoided recession altogether

Economy / news
New Zealand's economy grew 0.9% in the June quarter and avoided recession altogether
Photo by Liam Shaw on Unsplash
Photo by Liam Shaw on Unsplash

New Zealand’s economy grew 0.9% in the June quarter, beating economist expectations, pulling the country out of recession, and bringing the annual growth rate to 3.2%, Statistics NZ says.

Technically, the economy was never in recession at all. The figure for the March quarter was revised up 0.1%, bringing the result to 0.0% or completely flat.

There is no formal definition for a recession, but it is most commonly defined as two quarters of negative growth. This  means a tiny change in economic conditions can tip the balance.

Gross domestic product (GDP) fell 0.7% in the last three months of 2022, was flat in the March quarter, and has now grown 0.9% in June quarter. Meaning no technical recession. 

Doug Steel, an economist at BNZ, predicted this being a possible outcome and wrote about it in a note. 

“Technical recession or not, there is absolutely no doubting that economic conditions are tough for many,” he said. 

Much of the economic growth has been driven by an increase in population. GDP per capita increased just 0.2% during June and fell 1.6% between October 2022 and March 2023. 

This helps to explain why it feels like a recession to individuals in the real economy, even though the overall figures are growing. 

Average growth

The economic slowdown, if not recession, has been engineered by the Reserve Bank to cool the economy and try to get inflation back into its 1% to 3% target range. 

New Zealand’s economy grew a whopping 6% in the 2021 calendar year, and will subsequently grow very slowly in 2023 and 2024, before normalizing in 2025.  

In the five years from 2021 to 2025, the annual growth rate is expected to average out at 2.5% which would be exactly in line with the 20 year average.

Statistics NZ said business services were the biggest driver of economic growth during the June quarter, largely due to software design work. 

Transport equipment and machinery manufacturing drove higher activity 

Manufacturing activity bounced back after five consecutive quarters of decline, led by transport equipment and machinery. 

Jason Attewell, an economics manager at Stats NZ, said Cyclone Gabrielle had reduced activity in both education and transport/warehousing during the first quarter.

Those two sectors had bounced back 1.5% and 2% in June but agriculture, forestry, and fishing had experienced another, bigger decline of 2.3%. 

Primary industries dropped 1.9% in June, adding to a 0.6% fall in the March quarter. Public administration and safety saw the biggest increase at 2.8%. 

New Zealand’s real purchasing power increased during the quarter. The total figure was 0.8% and the per capita figure was 0.1%. 

New Zealand grew faster in the quarter than most economies it is commonly compared to. Australia grew just 0.4%, Canada was flat, the UK was up 0.2% and the United States expanded half a percent.

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104 Comments

It's a rock star economy under Labour... what's National talking about? 

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26

Nothing like a bit of fake news just before the election.

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15

Gravity beckons the dead cat. 

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14

Yes we avoided the recession; except that everyone feels like they are in a recession.... Unless you are a part of the smash and grab gang

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3

It's lucky NACT will put a stop to that.

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6

They are stopping the runaway 50T truck with a block of wood.. Yeah that will work!

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0

Smashing and grabbing following generations ' wealth via housing?

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7

Exactly, numbers to suit the narrative.

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1

And Hipkins had to sell his soul to the devil by letting in 200,000 migrants. Per Capita GDP will be woeful

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15

https://www.nzherald.co.nz/business/did-we-really-dodge-recession-or-ha…

Strong net migration buoyed the numbers but the better than expected performance from sectors like manufacturing meant growth remained marginally positive even on a per capita basis.

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12

I thought all you National supporters wanted some workers?

Is the devil not Winston Peters?

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Yep 3.2% was about as good as National ever achieved in their rock star days. 

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10

Certainly rocking a lot.

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0

Yawn...they can't spin there way of how much money the average person on the street has in their wallet after factoring in their cost of living expenses.

Pity the September-23 Quarter inflation read isn't until after the election - the insane cost of living increases are undeniable.

 

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https://www.stats.govt.nz/news/income-growth-for-wage-and-salary-earner…

 

Median weekly income growth for wage and salary earners is about the same as inflation, so the median person should have more money in their wallet (inflation-adjusted, about the same amount of money in their wallet).

 

The soft landing seems to be occurring here, despite a lot of negativity floating around. There aren't that many mortgagee sales, wages are keeping up with inflation, unemployment is low, GDP rose (maybe per capita it's flat?). I just don't see evidence to the claim that the economy is in shambles.

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Birdie - you missed out taxation so to be neutral wages increases need to be ahead of inflation by tax rate grossed up.

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Fair point; I'm not sure of what exactly the effect of that would be although I don't imagine it would change the numbers drastically.

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When your household finances are on a precipice, it doesn't take a drastic number to tip you over the edge.

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6

Wise words. What really eats up quality of life is a fall in disposable income. That is income that is left after tax and necessities. Necessities such as food, power, insurance & rates have undergone double digit increases, this combined with no indexation of the tax brackets is eating up the disposable income of the working class. Families that may have had $200 to play with each week in 2019 now have $0 or -$100. 

No wonder Labour is polling in the 20's.

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12

You forgot the necessity of shelter and associated increases that directly impact ones disposable income.  We've created so many modern necessities without a proportionate increase in incomes, hence the need for more consumer credit creation. I'd suggest humanity no longer has any concept of quality of life. Our focus on a materialistic standard of living is at odds to quality of living.

No wonder we have the political, economic and environmental divide and imbalances we currently have.

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Yeah but those families didn't have $200 week to play with rather National told me they instead had $400 per fortnight 

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Lost in aggregation is that many salary and wage earners have not had inflation adjusted earnings and will not those on collective contracts through 2024. Suggest a smaller group have had a dipropionates increase to the whole. I recognize this is the key stat we have however to project it economy wide where equally large sectors of disposal earnings, at the micro level, are self employed and another large sector receive a benefit, makes it hard to extrapolate as suggested.

 

 

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Its only the tax bracket creep that changes anything, and it wouldn't be very much. Otherwise tax is not a factor if income and expenses go up by the same percentage. 

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Depends on tax bracket factor only. The relationship between gross and net and prices is the same. 

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Hmmm....non tradables such as Rates & Insurance have been increasing hugely of late (25% annual insurance increases are not unusual).

Food inflation is still at approximately 10% annually.  The Reintroduction of the Fuel Tax and the deteriorating NZ$ V US$ (especially after the FEDs recent hawkish statement) will increase fuel prices at the pump, and subsequently transport costs.

I expect the next inflation read to still have a 5 in front of it.

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21

The critical infrastructure backlog we are carrying as a nation is rather serious.

With this backlog worsening under high population growth and no targeted funding support in sight from the central government, you can expect infrastructure providers (NZTA, Transpower, local govt, power generators, etc.) to keep hiking rates/prices for the foreseeable future.

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I agree Advisor. And I think we need to have a good look at our ability to complete infrastructure projects in a cost efficient manner quite apart from the capital cost.

It seems to me based on conversations with major building project managers that we have gone crazy on health & safety issues. All good stuff to protect workers but there has to be some rationality. How often do we see quite minor road repairs involving two sign trucks ( with drivers in place all day long) a thousand cones and signs, but with very little actual work?

Actually the news today that H&S are facing job losses is quite good news. I wonder if anyone has actually done a costing on the provision of cones/signs/scaffolding/ etc, plus the mindless bureaucracy imposed of every project. I am not advocating a return to the old days when workers wandered across narrow beams 10 stories up, but we seem as a country to have gone overboard on the emotional cry that "there is no cost too high to save a life." It's a rabbit hole the State has gone much too far down.

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 I wonder if anyone has actually done a costing on the provision of cones/signs/scaffolding/ etc, plus the mindless bureaucracy imposed of every project

I do this fairly routinely, to the point I ask for clients' health and safety policy before I submit a tender.

A mandatory daily 15 minute safety briefing to talk about the same potential hazards as yesterday, costs around 5 grand per worker, per year.

I miss the old days where there was just a schedule of rates you worked off reliably.

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"We have not before lived through a period when the economy has just been hit by both a massive fiscal stimulus which has tripled the ratio of net debt to GDP, and a massive monetary policy stimulus from a central bank failing in its role of controlling inflation. We don’t know the path which inflation etc. will take in such an environment."

https://www.tonyalexander.nz/latest-tonys-view/

 

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6

The comb. Really?

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14

Nobody's wages are keeping up with the interest rate hikes. Food price increases are insignificant if you have a big mortgage.

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Important not to confuse overleveraged property owners pain with everybody's pain. 

The overleveraged are the ones that will have to be sacrificed for the good of the country. 

House prices have to fall to affordable levels for NZ society to function. Those who have borrowed too much (plus the banks that lent them the money) were responsible for prices being higher than they need to be.

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Just look at our terms of trade. That's all about real money, not the monopoly stuff we use locally. Not a pretty picture stacked up against our miserable productivity record.

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It's a bit outdated now, but there was a good NPR 'Planet Money' podcast episode about this (from USA perspective) entitled something like 'Are We In A Vibe-cession' ... basically talking about that although the scientific/technical indicators were positive, most people felt a lot worse off financially with higher CoL.

Similar thing here I'd imagine. I suppose a few people might go "wow a whole 0.9% growth how amazing" but most people I talk to at the moment whether in a private capacity or business context are complaining of everything costing too damn much, feeling uncertain about jobs and/or business deals (across the 20-odd businesses I work with regularly I can't think of a single one that has a properly positive outlook right now - the most common complaint being that converting opportunities to sales is just so much harder)  and a general feeling of malaise.

I personally don't things will be as bad as many predict, barring some catastrophic event e.g. a new war breaking out somewhere or whatever, but many individuals and businesses are doing it tough or just about treading water at best. 

That isn't necessarily captured well in the statistics, which let's face it we are all guilty of torturing to suit our own narratives one way or another (reference, for example, any data posted here that shows anything that might look like a positive note for the property market). 

I'd say the average Joe is going to be more alarmed about headlines of $3.50 petrol than relieved by avoiding a technical recession. 

I'm not saying a change of government will fix this either, just that 'on the ground' perception is always more important.

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Funnily enough, the businesses I am involved in are all flat out and hiring again, after a ~12 month period of stagnation. As per the article, they are in software development and manufacturing :P

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Software businesses I'm working with are probably doing better (on average) but the few manufacturing ones - well actually they are businesses selling machinery/equipment to manufacturers - are finding it tough going.

I've no doubt that some businesses are going gangbusters (my own one is doing well at the moment, so I guess I should fall at Grant Robertson's feet but I don't believe in showing gratitude to any politician or party so no thanks) but certainly most of the conversations I'm having are negative.

The primary complaint is not getting inquiries, but getting leads closed into deals/sales as there seems to be slower decision-making. 

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I think people/businesses need to bed in these new costs. Example remeber 18 mth ago when petrol was hitting 3 dollars a litre and people were so vocal about it. What happened govt stepped in and oil dropped. Then over time it inched up and up govt takes it subsidy off and people ain't so vocal as they have got used to it. 

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Fuel costs seem to be creeping back into the news and 'day-to-day' discussion.

Plenty of articles this week about petrol re-approaching record highs and looking at $3.50/L by Xmas (I like to keep a bit of a tabs on what topics are popular for discussion over on Reddit NZ, and that was one of the most commented topics in some time).

 

 

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That headline of $3.50 is misleading if you actually look what the guy said

“We’re getting close to $3.12 for average price of 91 (octane). I’d imagine it would be over $3.20 within about a fortnight and we could be by Christmas closer to $3.50 than $3.”

So closer to $3.50 than $3.00 could mean $3.26

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I paid $3.70 for my 98 20 mins before the fuel subsidy announcement. Are we back there yet?

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Well is the RBNZ is going continue to stay the course, or is there another OCR hike coming post election? Inflation seems pretty entrenched now... at way over the RBNZ's mandate, and the economy is still growing ! The current OCR must be neutral.. The OCR obviously isn't high enough, continue the flogging...

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6

There is going to be another OCR hike before end of the year, that's for sure. Just look at the latest Fed's statement and at the current swaps. 

There is going to be one hike on this side of Christmas, and another one early next year. The OCR will go up to 6%, stay there for a significant amount of time (a few quarters), and decrease only a little bit towards the end of 2024 at the earliest, most probably around mid 2025 actually.    

The era of ultra-loose monetary policy is finally gone for the foreseeable future.

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3

If only there was a third option for describing an economy in between growing and recession, e.g. stalled. Then we could use it to refer to the current state of the NZ economy.

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Stagflation

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Except the economy is growing, and at a better rate than a few other countries. Inflation running high, wage increases, very very low unemployment, 80% of workforce are in full time work, immigration high, rents increasing, house prices climbing. It's all growth. 

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8

A flood of immigrants and what is the GDP per capita now ?  

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"“So here’s my question – GDP growth up to June 2024 is forecast to be just over 1%. On the other hand, it is also stated immigration is now running at 100,000 a year, corresponding to an increase in 2% of our entire population. But if total GDP is only growing at a bit over 1% and the population is growing at 2%, then GDP per capita must be declining, since GDP per capita equals total GDP over population size.

...As Professor MacCulloch points out, in spite of the Finance Minister’s own PREFU numbers show GDP per capita is collapsing – from a 2.1 percentage increase in the year to July 2023, to negative 0.7 percent in the current financial year, before recovering to 0.6 percent increase in 2025, and stabilising at a 2 percent increase in 2026 – he’s telling 5 million Kiwis they are all better off!"

https://www.nzcpr.com/opening-the-books/

 

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8

https://www.nzherald.co.nz/business/did-we-really-dodge-recession-or-ha…

Strong net migration buoyed the numbers but the better than expected performance from sectors like manufacturing meant growth remained marginally positive even on a per capita basis.

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5

Strong net migration buoyed the numbers

I must owe INZ an apology then, imagine the result if they's slowed the process down by checking more than 3% of the accredited employers out before approving them:

Figures released to the Herald showed that verification and checks had been made on just 4300 of the 94,913 applications and 800 of the 28,000 accredited employers.

Another boost to GDP just around the corner too (More support for exploited migrant workers as INZ ordered to strengthen checks (msn.com)): 

Immigration Minister Andrew Little has announced more support for exploited migrant workers including a temporary package of funding for accommodation

...and someone here said we cannot get rich selling houses to each other, pfft.

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4

Last glimpse of hope for NZ before the Nat team coming in with their own agendas.

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11

Thank you, Labour. 

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8

Not going to help the RBNZs cause. Rates to go higher. On a complete tangent a great interview of Winston Peters by Peter Williams. 

 

https://www.youtube.com/watch?v=P1cPGsHZ8R0

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4

Curious about what many here think of Winnie. I'm in my 20s and I like much of what he's been saying as of late but I also know he's a career politician. 

All talk or is there some substance behind his words? 

Also great interview, Williams basically got shunted out of NZ media because of his open mind reporting on the jab... 

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I don't trust him in the slightest, but I'll probably still vote for him as a I'd like a handbrake on NACT (and - although it seems very unlikely at this point with even Labour MPs now publicly admitting it's all over but the crying, Winston First could act as a handbrake on Labour et al as well).

I don't care how much piss he sinks on the taxpayer dollar, I don't care how much time he spends down at the racetrack, I don't care how many first class flights he takes, all I need him to do is try to reign in the more economically destructive aspects of NACT's policy platform or the more socially destructive aspects of Labour/Greens/TPM if they do somehow pull off an upset victory.

Bathroom issues aside (which is a total distraction IMO - take a slash wherever you like for all I care) NZ First really seems like the only 'centrist' party at this point. 

It doesn't help confidence-wise that their policy platform appears to be a series of incoherent ramblings about moving a naval base and giving Dargaville a new airfield, but I have probably just enough faith that Winston cares sufficiently for the average Kiwi that he can pull off what voters like myself are hoping he can do. 

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Great points. Exactly why I will be voting for him. 

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TOP is considered the most centrist party of the lot, extreme centrist.

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I was away with a large group last weekend and a number were talking up Winston. I said it early on he will judge his run to perfection and looks like he is...I am picking NZ first will get 6-7%

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"the only 'centrist' party" - if you watched the debate it was interesting how much National and Labour had in common, they basically had the same answer to everything. 

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100%, they should form a coalition they could then claim to have a real mandate as they would represent a significant proportion of the voters. 

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Hi dumbthoughts,

Like that really worked when Winni sided with Labour.

You are much smarter then being suckered in by Winni again.

As the old proverb says "Fool Me Once, Shame on You; Fool Me Twice, Shame on Me".

 

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From my perspective there isn't anything massively objectionable about what he says, does what I regard as good things such as meeting with the 'mandate' protestors but he is certainly missing in action on things like taxation reform.  Certainly, the best entertainment value even if economical with the truth (him holding up the 'NO' sign in the late 2000's).

The main problem for me is despite being king maker multiple times, he hasn't really gotten key platforms that got him votes sorted - specifically immigration.  He was pointing out the problems back in the 90's with immigration, he's been in a position to demand a long-term plan but instead has done things for the racing industry and himself. 

Winston First, not NZ First.  That said, the last 3 years would have been better if he was still part of the government curbing Labours most 'ambitious' policies.

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Good points.

With Winston, a mindset shift is required. It's not about what he proposes to do, but what he proposes to stop others from doing.

 

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Well there goes all of Luxon's ammunition, he's been talking for months about the economy being in a recession.

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"This unexpected growth means that National is even better-positioned to deliver meaningful back pocket relief with our tax cut package - it's time ordinary hard-working Kiwis share in some of this new growth" mic down, job done, walk off stage without answering any questions. You read it here first. If he can't pivot and counter off this he deserves to lose.

 

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National Governments deliver lower wages and reduced working conditions and they won't be able to pass anything without the ACT Party's stamp of approval anyway and they have their own crazy agenda. A government between those two would be lucky to see out its term.    

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Rock star economy?

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Soon NZ will be back in recession and more so reflecting back on how just unsustainable things were (especially 2020/21. Cheap credit and fuel were taken for granted and now the party is over. 

It's hard to comprehend those who think another party is beginning right now - it's just plain delusional. 

This progressing reset is a welcome development the one we needed to have.

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"Soon NZ will be back in recession" - you guys have been saying that for 15 years!

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Try to avoid tripping over the kicked cans. 😂

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You are the definition of a DGM. Can turn any positive headline into a negative one. Depressing.

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Call it what you like but deep down I'm a realist. I see this blip in growth for what it really is - a "blip" A trend reset is in progress that will hopefully mitigate a far more damaging one down the track. For the sake of this great country of ours, I hope to see an end to this can kicking that's largely appeased the greedy minority. If we don't, those who lend this country money will force change on us and then you'll really have something to complain about. Interest rates will eventually come down but some pain will need to be endured first. 

Try to be positive yourself! 

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I’m heaps positive mate thank you. I bet you’ve been whining on about things since the early part of the century. Look across the ditch, things are much the same there. By the way, I’m not expecting things to pick up until the end of the decade, that’s being realistic. Do you even know why you moan any longer? Can always do something about it and leave, good luck finding something a lot better.

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Iceman, are you being honest with yourself. Are you really a realist? Maybe we have more in common than not. Anyway, I love this country. Why would I leave? Again, I'm a realist and have therefore formed a realistic acceptance about the rough road ahead. If it transpires there's less potholes - that's great isn't it? The goal here is sustainable prosperity not this fake illusion that prevailed in 2020/21. 

Try to avoid coming to conclusions based on poor assumptions. 

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Well you’re having a moan about a pretty positive thing in your initial comment, just enjoy the moment mate. Let me remind your that you labelled others as delusional and claimed Nz will be back in recession. That’s pathetic. There’s some part of the population that vehemently believe things are always bad/worse than it actually is and you come across that way.

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Iceman, I enjoy a good party too. I like to remain sober enough so to still remain cognizant of what's going on around me :)

Some are so vested in property they've become so myopic and as a consequence delusional with their expectations.

It is what it is. 

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Whilst labelling others delusional and claiming to be a prophet. You sound credible mate. 

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Iceman, ok - now you're just getting desperate. Can you now post a link to where I claimed to be a prophet. I know you can't. I'm just an individual who post's his views and opinions like many others. I'm nothing more than pixels on your screen. Try not to get so triggered. 

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You’re a joke mate - labelling people are delusional and claiming we will be back in a recession is called predicting the future. Nice, I see you edited your previous comment too. Some just have tall poppy/are insecure - sorry can’t help you. Clown

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....yup thought you couldn't. You desperate little Iceman. 

IMF warning here - https://www.youtube.com/watch?v=LF-1UBj2U5E 

Now we all pretty much know the next Government is going to have to borrow just to keep the lights on. Then there's the ever increasing interest bill. 

edit.

 

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Labelling others little now. You’re in your 50s but you sound like a child. Your family must be very proud of you.

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ICEPERSON----- please moderate you abuse , this a family chat show 

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Bit sensitive? I don’t see any abuse. Just calling him out for things he said.

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The current financial landscape is characterized by an abundance of liquidity within the markets. This prevailing condition leads us to a reassuring conclusion: the specter of a recession appears distant and unlikely.

However, it is essential to recognize that this optimistic outlook is not without its nuances. While the financial markets bask in the glow of ample capital, it is the vulnerable and marginalized segments of our society who may find themselves ensnared in the web of debt. This disparity underscores the poignant reality that economic prosperity, as manifested in the stock indices and investment portfolios, does not necessarily translate into equitable prosperity for all.

In this scenario, it becomes apparent that the divide between the affluent and the less fortunate persists, with the former continuing to revel in opulent lifestyles symbolized by their metaphorical "harems" of luxury. This contrast in fortunes highlights the pressing need for policies and initiatives that promote economic inclusivity, ensuring that the benefits of a thriving market are shared by a broader spectrum of society.

In conclusion, while the markets' current affluence suggests a recession may be averted, it is imperative that we remain mindful of the socioeconomic disparities that persist and strive for a more equitable distribution of prosperity.

God save NZ 

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actions / experience speak louder than words 

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Dead cat has bounced. With "91" petrol prices projected to be $3.50 per litre by Christmas, this is inflationary and it's like adding another tax on already stretched finances. The FED is expecting to raise interest rates at least once more this year and that has quite a bearing on Global rates. Its not rocket science to assume that borrowing rates are still heading north. There's fixed interest rollovers in progress as we speak. The unknown distress factor is expected to play out for recent borrowers throughout 2024. 

 

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Well. I was wrong. Didn't pick that at all.

Off to drill into the numbers and see why I was wrong. Maybe I was too early? And the worst is still to come? (I do that a lot even though I know I do it.) Maybe I talk to too many involved in building and construction? The manufacturing 'increase' is certainly at odds with what I've seen and been told. The software rise is interesting as there's a lot of spec work going on and that may not actually give rise to any sales and may come crashing to stop. And retailers certainly aren't reporting any growth (discount stores excepted]. Ho. Hum.

May you live in interesting times. [Old Chinese curse]

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Expect high inflation to continue so long as the immigration gates are open. 

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The current and rising price pb of oil is also a key factor for the inflation rate going forward..... 

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On a nominal basis annual Jun. 23 GDPE grew 8.8885%.

The Liquidation of Government Debt

We find that financial repression in combination with inflation played an important role in reducing debts.

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The most important bit of this report:

"Much of the economic growth has been driven by an increase in population. GDP per capita increased just 0.2% during June and fell 1.6% between October 2022 and March 2023." 

 

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We had 6% GDP growth in Dec '21 with almost no immigration, if we can choose the dates to suit...

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That was a post-lockdown rebound

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The Evident clearly show higher OCR will lead better economy. RBNZ must increase OCR to 30% now to create much better economy. OCR should be increased to 50% pa by end of 2024. Home loan rate should be 60% pa+. business loan rate should be 100% pa. New zealand will be the strongest economy in this world. 

Lets go RBNZ. 50% pa OCR !

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560 billion of combined bank and non-bank debt owed in New Zealand. Every day a portion of that debt gets repriced to an interest rate 300-400 basis points higher than the rate it is on now.

300 points on 560 billion is 16.8 billion per year. $8400 per New Zealand household. Someone has to pay.

Interest rates go back down or we have persistent inflation to eat the debt or we have both and devalue the NZD. Or

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Now Everyone says higher OCR will no impact economy. Our economy is getting stronger.  So Just keep increasing the OCR , all problems will be fixed. if it is not fixed, Thats because interest rate is not higher enough. Lets start with 20% OCR first from end of this year. Next year GDP grow will reach 10% .

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Someone is feeling the interest rate rises.. :-) The longer we have inflation, the longer the OCR will stay high, and everyone's debt is inflated away, including the governments debt, along with rising incomes. The government pretends to care about inflation but in reality, it is the only way out of the bloated level of private and public debt we have. House prices could come down... that's the other option.

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Correct, but I floated that idea on here a while back and everyone rubbished it. Inflation begins to eat away your existing debt but only if you are getting pay increases to match and therein lies the problem, wages don't keep up with the big ticket items. 

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At an individual level, if your debt and interest rates are stable and your income increases, I guess you could say debt is inflated away.

But as a whole, debt is never inflated away, there is only ever more or less debt at a given interest rate. Loans and deposits are created in parity. As a loan is paid off it can only be paid with money created against a new loan. A disruption to this is a +ve or -ve trade account or govt deficit. So as those billions leave our economy as trade deficit or govt surplus, that debt burden grows significantly. 

So in a scenario where trade deficits are 0 and govt deficits are 0, you can create a new loan alongside a deposit but that only increases numbers on either side of that balance regardless of interest. And the previous debt is never ever inflated away, only ever paid off and replaced with a new debt.

The inflation we see today is mostly a product of way too many loans and deposits written. But also conditions overseas. Our GDP has been pretty much stagnant for about a year yet the interest cost (and therefore value) of our debt has risen significantly. In aggregate the debt is not being inflated away, it is “growing”.

Scenario:

$1m debt in 2021 cost then, what $500k debt costs now. So the current cost of that $1m is what $2m would have cost in 2021. The amount of money in the economy has been fairly stagnant since late 2021, but the cost and therefore value of debt has skyrocketed. Meanwhile we’re sending $b overseas for those big ticket items you’re talking about, shrinking the economy and further exasperating the debt burden. So how could you argue that debt has been inflated away? 

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Yep that mortgage will be feeling smaller by the day. After years of the principal of our mortgage barely moving, it effectively went down by over 7% last year. 

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When you look around it's easy to see that GDP 'growth' and even per capita GDP are meaningless metrics. 6% growth in 2021 while practically in nation wide lockdowns, why don't we recreate this and be the global leader and world class in GDP growth. 40 years of neo-liberal economics and what real improvement has this gained us as a society? The Economy is obviously not serving the people as a whole and we're literally being ruled by the property market and the financial system.

Mainstream and bank economist's running the narrative does not help and the masses remain ignorant. Politicians no longer understand the purpose of government or their role as public servants. Governing the market for the good of the people rather than governing the people for the good of the market.

https://www.wondriumdaily.com/karl-marx-and-adam-smith-on-the-dangers-o….

https://blogs.lse.ac.uk/politicsandpolicy/adam-smith-and-inequality/

Whilst I may not agree with many of Adam Smith's beliefs and there are definite polarities between his two works, his economic theories were the foundation of our economic system. One could suggest that the trickle down theory actually worked until vested powers forced neo-liberal economics upon the people.

We really need a proper critique of our economic and political environment and whether it's really serving our best interests. Unfortunately I don't have a lot of faith any of our media are capable of this. We talk about freedom yet in many ways we've been captured by those with more influence over the narrative.

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We picked capitalism, because communism was mostly dreadful.

And now we want to implement social policy, via capitalism.

The narrative has always been co-opted. For instance, we were told for a long time we were prosperous, because our culture was superior. Now the world's more level, we're quickly finding that prosperity we enjoyed was paper thin.

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Seems the young are getting tired of the current mix of welfarism for the older and wealthier and own two feet for the young.

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It's welfare for everyone, young included. Just a limited pool of taxpayers putting in, to an increasingly expensive tab.

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Everyone on welfare, the pension, and minimum wage got 7%+ increase in income on the 1st April.  How is anyone surprised that GDP went up?  Labour is borrowing and spending its way out of recession in order to win an election. 

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