I've really struggled to form a firm opinion in my mind as to what sort of year this has been.
Good? Bad? Indifferent? Well, for me, probably indifferent. But one interesting thing about the current environment is that things are clearly not equal for everybody.
At a surface level, it has felt like not that much has happened. Certainly not when compared with the tumult of, say, 2020.
But taking things at a surface level can be misleading as well. The reality is that much more happened this year and at much more pace than the mind immediately registers.
I had, for example, forgotten till I sat down to write this that the Prime Minister of this country at the start of the year was Jacinda Ardern. By the end of January she wasn't, so, I suppose it was easy enough to forget.
You get the idea though. We go through our lives day by day (hopefully) taking things in our stride and then at the end of the year we can realise we've actually gone through a fair bit and a lot has changed.
As has been my recent custom, at the end of last year I had a two part look at what I was expecting of this year.
The first part looked at the general economic picture, while the second one looked at some more specific parts of the picture, including the election. So, how has this year compared with my expectations?
If there's been a big surprise for me this year it is the ferocious speed with which inbound migration has emerged once again as an enormous issue. I had certainly seen it as one to very much watch for the future, but more so probably once we had the seemingly inevitable National-led Government in place.
But, no. One of the later acts of the dying Labour Government was, having said we couldn't just 'turn the tap on' again to inbound migration, then itself turning on every tap in view and leaving them all on.
Statistics NZ says we had a record overall net migration gain of 118,800 people in the 12 months to September.
It is too early to know just exactly will be the impact of this inbound migration explosion. We just know there will be one.
The Reserve Bank, our inflation fighter in chief, has been mightily surprised too by the migration torrent. After trying to play down the potential impacts earlier this year, it went big on the - still largely unquantifiable at this stage - risks in its last Official Cash Rate review of the year on Wednesday, November 29.
We can say what we want about the RBNZ, well, turning on too many taps (cash, anyone?), during the pandemic, and the fact it was slow to react to the surge in inflation, but taking this year in isolation - actually, it has had a good one. A fine one.
Go back about a year to the RBNZ's last Official Cash Rate Review of 2022 and things were not looking flash at all. The September quarter Consumers Price Index (CPI) showed annual inflation for the year to September 2022 at 7.2% - much higher than expected and only just down from the peak level of 7.3% seen in June 2022. The worrying factor about the September figures was the strength of domestically generated inflation pressures.
So, in its November 2022 review, the RBNZ hiked the OCR by a record (for a hike) 75 points to 4.25%.
That's proven to be kind of a turning point. Pretty much since then, economic data - that had been constantly surprising the RBNZ on the high side - started to behave more in line with expectations.
Consider some of the forecasts that the RBNZ made in its November Monetary Policy Statement of last year.
It forecast the OCR to peak at 5.5%. That's where it is now and it IS likely to be the peak.
It forecast inflation to be 6.0% by the September quarter of this year. Inflation actually came in below that at 5.6%.
The labour market has lagged. The RBNZ has been a quarter behind with its predictions of unemployment. It forecast unemployment to rise to 3.6% in the March quarter of this year and to 3.9% in the June quarter.
In fact we saw unemployment hit 3.6% in the June quarter and, yes, 3.9% in the September quarter. But the trend is now definitely going in the right direction, and quickly. Although it is interesting to note that this is clearly a product of that massive migration surge, something that the RBNZ would not have factored into its earlier unemployment forecasts.
Anyway, one area that the RBNZ has been wrong in - and would be very happy that it is - was in its pick last year that NZ would go into recession from the June quarter onwards. It hasn't, and now there seems every chance it might not - even if economic activity isn't exactly shooting the lights out.
If the RBNZ can get inflation to keep heading in the right direction without a recession, it will surely take that. And this now does seem a possibility.
Which is not to say people aren't doing it tough. My biggest concern was how much cumulative damage might be done by mortgage rates that rose so fast in such a short time.
Notwithstanding the RBNZ's pre-summer holiday 'hawkish' blast - which I just take as a warning to the wholesale interest rate markets not to get ahead of themselves - I still think it is likely the OCR will not go any higher than 5.50%. There is, therefore, some hope mortgage rates might now have just about peaked.
Looking at the RBNZ monthly data for average 'special' fixed mortgage rates tells us that as of October this year (latest available month) the average one-year 'special' rate was 7.26%, while the two-year was 7.01%. In October 2022 the figures were 5.8% and 6.09%. In October 2021 the figures were 3.16% and 3.66%.
They've risen a lot, but the rise has slowed and gradually everybody that was on those cheaper rates are rolling over. And the impressive thing is that mortgage delinquencies to date have not been rising at anything like alarming levels.
Most people are at least coping.
Obviously a major concern was whether we may seen sufficient numbers of people battling mortgage woes that this would produce a wave of forced house sales. There certainly seems to have been some. But not to the extent that extreme downward pressure has been put on prices.
Indeed, prices have stabilised and even risen a little though there appears to have been a 'wait and see' approach more recently as people await the outcome of the election. And justifiably so, it would seem.
I'm not at all surprised, but nevertheless disappointed with the election outcome. It's the classic MMP minestrone soup outcome. Lots of things all chucked in together, when arguably the country might be better served with one clear, strong, policy direction. Well, here's hoping that the various voices in the new administration can all sing the same tune. The start has not been promising though.
Hey, our economy, in spite of everything, is doing okay. Here's hoping the new Government will help and not hinder that.
So, all right, how do I think we've done this year? Well, I think we've done all right, you know? It looked like it could all be a lot worse.
I'm prepared to conclude that the RBNZ did know what it was doing and that its 'medicine' is working, even if it is not yet that convinced itself.
All of which leads us nicely into the year ahead.
I will be outlining some of the things that I'll be looking out for in 2024 in the next few days. So, watch for that.
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