New Zealand’s economy “was supposed to be better by now,” says Herald business editor Liam Dann, who admits even economists are baffled.
The Official Cash Rate has dropped 250 basis points, yet “rate cuts seem to have had little impact on the economy so far,” according to Mark Brown of Harbour Asset Management.
Housing markets in Auckland and Wellington aren’t reacting, consumers remain wary, and the Reserve Bank “appears to have been surprised by quite how soft the economy became through the middle of the year.”
Dann rejects government attempts to blame April’s US tariffs for the weak GDP result. “I just don’t buy that,” he writes. “Dairy, meat and kiwifruit exports are all booming.” The real problem, he says, is that “New Zealanders have been hit in the pocket by rising food and energy prices at the same time as they are worried about losing their jobs.” That double squeeze has created “a negative feedback loop” as consumers spend less, businesses retrench, and confidence keeps falling.
While some blame the RBNZ for moving too slowly, Dann argues, “Any extra dollars coming in because of rate cuts are being eaten by additional living costs.”
Comparing the moment to Rocky, he says New Zealand needs less pep talk and more realism: “If something doesn’t work, acknowledge it quickly and move on – or, as a good corporate leader would say, pivot.”
Centrist Ltd.