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BNZ economists expect the economy to contract in the first two quarters of the year; ANZ economists call for a minimum wage freeze and for the Government to increase its debt limit by $60 billion

BNZ economists expect the economy to contract in the first two quarters of the year; ANZ economists call for a minimum wage freeze and for the Government to increase its debt limit by $60 billion

BNZ economists are warning the risk of recession in New Zealand has moved from “plausible” to “probable”.

They are forecasting -0.1% declines in gross domestic product (GDP) in both the first and second quarters of 2020.

Other bank economists are at this stage only forecasting a contraction in the March quarter, even though their outlooks are darkening by the day.

Finance Minister Grant Robertson on Monday afternoon said Treasury wasn't forecasting a recession. 

"This is not a cyclical downturn so the economy won’t react to “standard” cyclical monetary and fiscal policy responses,” BNZ economists said.

“This downturn is fundamentally a supply shock which, in turn, is creating a demand shock. Its root cause is Covid-19 so how the behaviour of individuals, globally, to this shock evolves will ultimately determine the economic path from here on in.

“Policymakers can only hope to smooth the process.

“While all the focus is, naturally, on the future of the New Zealand economy, one shouldn’t ignore the fact that New Zealand’s growth rate was already in decline.

“By the September quarter of 2019, annual GDP growth had fallen to 2.3% from 3.0% a year earlier. As things stand, we are forecasting only 0.3% for Q4 GDP, due for release March 19. That takes annual growth down to just 1.5%.”

Call for freeze on minimum wage increase

ANZ economists are upping the ante, calling for more fiscal stimulus, sooner.

They said scrapping this year’s minimum wage increase should be a “no-brainer” for the Government, which needs to get comfortable borrowing up to $60 billion more than it is.

They’re calling for April 1’s minimum wage rise to $18.90, from $17.70 to be frozen, saying the cost to businesses could lead to staff cuts, if not more businesses failing.

“In this environment, a lift in the minimum wage is more likely to result in higher unemployment than lead to better social outcomes,” they said.

Both Robertson and Prime Minister Jacinda Ardern on Monday afternoon ruled this out. Ardern said it was important for people to keep spending and stimulating the economy.

Govt should be open to borrowing an extra $60b

ANZ economists also said the Government should be willing to borrow the equivalent of 40% of GDP - an increase from the 19.5% of GDP net core Crown debt is currently at.

In dollar terms, increasing the debt limit to 40% would give the Government an extra $60 billion to play with.

ANZ economists said 30% should be the long-term target, as opposed to Robertson’s 15% to 25% range.  

They reiterated their call for fiscal policy to step up, particularly as the Reserve Bank (RBNZ) doesn't have much room to cut the Official Cash Rate (OCR), which is at 1%.

They said the Government’s approach to targeting specific industries will become increasingly difficult to implement rapidly as the economic slowdown becomes more “synchronised”.

“The Government needs to consider a broader (macro) policy response, while ensuring it is timely, temporary, and targeted,” they said.

“It might not be feasible to bring existing planned projects forward, but making sure delays don’t slow things down when activity is lifting once again could go a long way.

“Lengthening the infrastructure pipeline could also shore up confidence in the medium-term outlook and thereby encourage hiring and investment.”

ANZ economists also noted that even without major business support packages, etc, debt to GDP will increase as the Crown’s tax revenue falls and benefit payments rise, as the automatic stabilisers being relied on at the moment kick in.

RBNZ unlikely to make an emergency OCR cut on Tuesday

Kiwibank economists have joined ANZ economists in forecasting a whopper 50-basis point OCR cut at the RBNZ's next scheduled review on March 25.

Other bank economists forecast a 25-point cut in March and then another 25-point cut in May.

ANZ economists haven’t ruled out the possibility to the RBNZ making an emergency cut before the scheduled review.

The RBNZ has strongly signalled it won’t make a move on Tuesday when it releases “high level principles for unconventional monetary policy” - a piece of work it’s being working on since before coronavirus.

It said in its invite to an event related to the release of the report: “Please note, the principles and speech will not discuss current economic conditions or the Reserve Bank’s outlook for the Official Cash Rate (OCR). The Reserve Bank’s next OCR decision is scheduled for March 25.

“A small group of stakeholders have been invited to the speech. You are welcome to record and report from the speech, but due to space constraints, we will not have desks, power or audio connections available...”

Govt focussed on cashflow and keeping people employed 

Cabinet on Monday afternoon agreed for work to be done on a "business continuity package" - the details of which are yet to be revealed. 

The package will be targeted and include a wage subsidy. Ardern didn't say when the package would be introduced. 

Current govt support

This is what the Government is already doing to support businesses:

  • Continuing to work closely with banks to ensure they are being proactive with their clients
  • Improving cashflow for small businesses by signalling action on prompt payment terms and times
  • Inland Revenue is entering into instalment arrangements and waiving penalties on a case by case basis where individuals and businesses have had their income and cashflow affected
  • An extra $4 million invested in the Regional Business Partner Programme to allow for extra advisors and give them more time on the ground supporting businesses
  • Working with Xero to get real-time information about the impacts on business, particularly SMEs.

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I'd call an ALL government approach!

It is such a waste to have half of brains in the parliament only sitting there to disagree for the sake of it!

All parties in the parliament need to contribute in a positive fashion to keep everyone in NZ safe and minimise negative impacts from COVID-19.


Clearly you don't understand how a parliamentary democracy works.

An adversarial system ensures different ideas are put forward thereby creating debate and possibly a more creative solution to a problem.

A corrupt dictatorship, like the one you have in China, ensures only that the leaders goals are pursued.

Really? we have debate and more creative solutions?

I don't beleive that for a second.

There is very little constructive debate, just point scoring and banging heads, unless things are so obviously a completely forgone conclusion that no-one in their right mind could go against it.

You've got that one right.

Talk to these MP's and you'll find most don't have a brain or clue on the business of running the country. Hardly democracy; more like plutocracy.

As for ANZ and BNZ, most of their commentary is driven by self interest. If this lot had any interest in this country they would half their profits, and increase frontline staff so you don't have to wait 20 minutes in line to get served. The general NZ population are such an apathetic lot, and need to start voting with their feet.

It time this government legislated bank account number portability; just like they did with phone numbers, so its much easier to change suppliers. The banks might then wake up to the poor service levels they are getting away with, employ more locals and keep the account holders money circulating locally; rather than exporting $5 billion profit annually.

lets shift all the healthy one to an island.. Wait, damn it someone has taken that island!

Its called the South Island (at time of typing). We've still got time to build the defences and lock it down ;-)

Calls for an emergency budget to announce billions in urgent fiscal spending: landlords in the Wellington region must be sharpening their blades!


Lets all blame coronavirus, nothing to do with record debt and asset bubbles. Let see them try to borrow their way out of this, spread the pain around.

Well, if the $60Bn is created (rather than borrowed) and given to citizens to spend / pay down debt - but not leverage into credit - then I'm all for it.

But it won't be.

You are effectively asking for a devaluation of the dollar. You do realise that this will inflate nominal asset prices and thus favours the asset rich?

When $31Bn was pumped directly into Christchurch did the NZD devalue?
Did it cause any more than very limited local inflation within specific sectors for a relatively short period?

Forget the tropes of classic monetary theory.
Money isn't even real anymore. It's all about private debt, and reducing it's loading on the productive economy.

No. Just NO.

If you have private debt then that's on you.
Stop fueling moral hazard.

Helicopter money is not a great wonderful elixir. It's the type of rubbish that got us here.
It's horrific policy. Stop it.

Nah, the type of rubbish that got us here was the US Fed helicoptering money into equities and driving the world down to the zero bound. Begger thy (sovereign) neighbour and to hell with main street.

What are you talking about.
The only CB buying up equities directly (or your poorly applied "helicoptering") is the BoJ.

I love how these events spur overnight economics experts.

And the Swiss.



The over-leveraged shouldn't be handed a get-out-of-jail free card in the form of helicopter money.

NO. F******. WAY.

This will get me in the streets with placards.
The prudent ones amongst us aren't at risk.
Everyone (bar the resident spruikers) saw the risk of something like this coming.
If you're over-leveraged then that's on you right now - don't expect a cent of bail out money.

I'm fed up with feeding this moral hazard monster.

Well, if a bail out is politically inevitable, I'd rather it be citizens than banks.
If the cash can't be used to create new credit / leverage (I'm sure this can be managed through some accounting chicanery) then if it takes the steam out of speculation, as above, I'm all for it.

No, as someone else said this will just go straight to asset prices.

It's a bail out for the indebted and worse than that, inflates and de-risks their asset holdings.
It is a terrible idea.

Similar but far worse even than guarantees to finance company depositors that were, let's face it, greedily chasing yields of 8%-10% when the going TD was 6%.

I would be absolutely, beyond septic if anyone seriously proposed this.

I don't know, jobs could get a bit hard to find, taxes fall and so on, all negative for asset prices.


Fine, deal with that without helicopter money.

Sell some of your assets if you need to. [**gaaaassssp**]

Welcome to recessions.
Wake-up call - This is what you're supposed to do if & when you've over-stretched.
Not expect the Government to throw money at you.

Gov't is on the side of the indebted.

This should be the one, the *ONE*, issue that gets anyone under 35 out of bed and on to the streets.

Bailing out the indebted is one massive, unprecedented slap in the face to these generations.
Basically embeds asset price appreciation and socialises any loses.

Absolute BS.

So much for "did it all on my own two feet".

I'm not overstretched, can I have helicopter money?

Sure - the whole point is it goes to every citizen at an even rate. Universality is the benefit. If you’ve got debt it pays off that. If you don’t, spend it up.

Yes but cmat doesn't agree with the idea due to the over-leveraged. I don't think it's fair that those who have been prudent miss out on free money due to the frivolity of others.

They don’t miss out.
See above re universality.

I don't agree because it just continues to pump up and distort asset prices.
Whilst rewarding the biggest numpties in society - those who should rightfully be burned in a recession.

Something you noobs fail to grasp.

You think they may fail to grasp it, however it seems to me you fail to grasp that the people that vote are going to want a bailout.. I'll be happy if its limited to owner occupiers. Any property that has had a bond lodged against it since last change of ownership, or been listed on AirBnb for more than 30days in the last year and no protection for you. (or some serious evidence needed to prove its no longer a rental.)

This. There'd certainly be ways of limiting the citizen/owner test to be actual people (for a start) and not applying to investment property.

CMAT don't worry, it's *highly* unlikely there will be a government bail out of private borrowers. That's just not the way these things work. At best (if you're a borrower) the govt will support programs that enable banks to accept short sales (you sell the home for less than it's worth) or props up bank losses in case of a spate of mortgagee sales. Or the govt supports refi programs with lower rates (which would doubtless apply to new buyers too, and prevent the collapse from being as bad as it could be).

The govt wont be dolling out cash to borrowers to pay down their debts so they can hold their assets more safely. Or did I misunderstand you?

If there is to be a major shift in finance/monetary policy, I'd like to see it is established as a UBI programme, as opposed to a one-off hit or something else like that. Regardless COVID-19, the future of work is less certain in the long run. Time to switch to more progressive policies that smooth what are likely to become far more frequent disruptions in the labour/jobs market, i.e., such as infrastructure failures and climate effects.

Hey, I agree re UBI.

However, I think right now it’s about what might be politically achievable.

My suspicion is that a one-off universal ex gratia might be, particularly if it’s tied to a narrative about heading off a crippling aggregate demand slump.

Oddly, I reckon these three coalition parties would all support a limited/temporary experimental UBI programme. NZ First knows full well that the universal nature of our super is the reason we have low levels of poverty in our elderly population - Labour and Greens have enough progressives in their caucuses to get it over-the-line. Nothing would change for superannuitants (as they already get one). The unemployed and other beneficiaries would get switched over to a UBI (which would preferably equate to existing NZS payments - which I believe would make for a pay rise) - and WFF and A/S could be scrapped in favour of the NZS-equivalent UBI.

Someone ought to do the numbers.

You seriously think helicoptering 10k to every citizen will spruik asset prices?

Tell you what, call it a universal tax credit then.
Are you less horrified?

No I'm not less horrified. That is also a terrible idea.
Everyone has more money chasing the same number of assets.
I seriously think that because that is **exactly** what has happened for the last 10 years.

We are in the most painful part of the crisis.
Where noobs come out of the woodwork with their expert reckons.

Where were you commenting 12 months ago with all your ideas?
Helicopter money has been covered here hundreds of times.

It's a terrible idea. The End.

I’ll guess I’ll get right on inventing that time machine, so I can express my noob reckons in the past for you to shoot down with your Postgraduate degree in savage burns.

Lighten up, son.
It’s a public forum.


ANZ's preferred response, and the steps taken by government so far, amount to a very big can being kicked down a road which is mostly behind us.

We all heard of Coronavirus less than three months ago, those businesses that are teetering on failing already have gotten into that position in a very short period. If they are not new businesses, I've got very little sympathy, and see them as simply the slowest buffalo's getting eaten first.

Let capitalism and socialism both do their things, lets support the people, and leave the businesses to stand or fall on their merits and reserves.

Absolutely agree. Don’t let people starve but time for a good clean out. Let the market decide who comes out of this on top. We need a good recession to set current generations on a prudent path.

How to read sign of Greed at works... when up & up profit? leave everything to 'market' albeit being manipulated, no need interference.
When down & down loss? Govt./tax payers should help - By now, most of the worldwide citizens started to see the same pattern all over repeated - so? This greed eventually getting more visible to spot.


Only BNZ calling a recession,wow, what BS!
All the economists know one is coming, they are just being deceitful to 'retain confidence'.
A bit like WHO saying it isn't a pandemic.


What no 7% rise in house prices??
Credit crunch coming due to defaults
Being up to eyes in debt is fine and “affordable” until linear thought script disrupted by rude reality which is not linear

Bugger the Borrowing i say, time to tighten belts and knuckle down, take the less trodden path and do something different to all the other clowns,but do it NOW

60 billion increase in govt debt..To give to first home buyers to purchase homes thus stimulating the economy..

Better to put it into building new homes for FHB.

In the face of obvious monetary policy limitations to "stimulate growth" (aka keep housing prices escalating), banks call for an OCR cut the moment their forward credit books start to look weak.


I think if more executives take the cue of Greg Foran and cut their own salary then a stop to increases to those on minimal wages would be more palatable.

However given the damage the banking sector caused the economy in the last recession, I don't think politically the 'look' of those less well off taking the hit again will fly well.

The ‘banksters’ don’t need another bailout, look at the GFC, took the government $ and magically turned it into bonus payments!

Ha sudden Keynesian conversion from neoliberal high priests of banking

Yeh, ha ha

If only.

I'm sure the subtext is "We're entirely supportive of economic stimulus so long as it is transacted via us".

Yeah, exactly. Let's hope Orr and Robertson are smarter than that.


Can we have a sensible item, on what to do under the circumstances we are currently and currency seeing.

For instance, what should a Lotto winner do this week with a million dollar win, or a simple Saver do with 10,000 dollar TD bearing fruition.

Is there a sensible choice, is there any cash sensible options, will anything Oil the works...or are we still gonna be taxed to the hilt on any Oil Futures...etc....will they still keep us pumping up the Government obligations...and their Housing personal debt.

if you win lotto just ask for 20's 10's and 100's.

Hi AJ.....I get the cash idea....but a safe hiding a bit tricky....

Butt I could build you a well and a Bore and make a Great Lake...

We are lucky it is raining here in no need here... It was all a theoretical question...I gave up on Lotto and Housey Housey a while back...

Thanks Anyway.

Buy yourself a nice bar of gold


I would, but a ton of gold is a little hard on my pocket....weighs heavily, no use at Countdown, no use at the strip my money shops and gas stations, using credit and debit cards, paying my taxes, plus gst of course to an uneconomic third Party, they call Government Departments and Social Welfare....and of course Bankers share of the rort.

But what the Hell...Gold is so cheap at 1700$ per ounce, maybe I should cut off my wife's wedding ring and go for Holiday in Italy, China, or even Syria.....before I die.

Probably shouldn't get too carried away with the pro stim support, look at what happened when sars panicked everyone, the already loose monetary policy became positively promiscious and partly I think built the bubble that became the gfc...its just a cold people....chill out and buy some cheap shares...I am!

Naah, scare mongering again... these Banks has been infected with DGMs...Banks will join force together to shed couple months back billions & trillions of profit.. to be shared with all in emergency. But wait.. there's more. This Mar 25th the RBNZ will have to do the initial shock & awe by 75 basis reduction, then further in about month later.

10 years ANZ/Nat party property binge party, now? freeze the minimum wage? (which actually supposed to feed into 'rental' increases anyway) - Then more public/tax payers debt.
Here's a thing about 'greed based economics'
- When you in profit, marginalised the poor tax payer
- When you in downward time?, request the poor tax payer by more borrowing.
One thing to avoid, a dent on their 'wealth' - Lobbying the ruling elites is the key, But for how long.. ?

At that point, it's time for folk to get very, very angry. And act on it.

What, hard times are coming, fewer buyers out there in the market?
Why then, it must be time to BUY!! Buyers' market everyone, dive IN! Whoop whoop!

might need to put that $60b into hospitals and health care

$60 billion in government debt ? Who will fund it ? Other countries who are also having to take bailout measures or local savers/investors ? Or Investment Banks and such ? Or the banks here who will get it back in the guise of 'Working Capital Support' ?

These people could fund it easily...

Not to be sneezed though.

They would rather buy large chunks of land in the South Island.

wow - bank economists recommend fiscal stimulus. Things must be bad!

Every one wants free money, why not the bankers too ?

Their free lunch comes from ever looser monetary policy, increased leverage, and the financialisation of everything.

1. The First Law of Economists: For every economist, there exists an equal and opposite economist.
The Second Law of Economists: They're both wrong...!
2. Economic forecasters assume everything.... except responsibility
3. Did you know economists have predicted nine out of the last five recessions?