How will New Zealand’s economic downturn affect jobs and elections?

New Zealand and neighboring Australia have been battling soaring inflation in recent months, fueled by supply chain disruptions and shortages caused by war half a world away in Europe.

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A survey of 1,000 people conducted in July by independent research organization Research New Zealand found that 33% of respondents were going without medical care due to cost concerns, and 32% were struggling to pay for transport. However, 32% of respondents were found to have difficulty paying their utility bills.

“So far, the recession has been uneven,” said Richard Martin, managing director of IMA Asia, an insight forum for CEOs and senior executives in the region.

“What happens next depends on the global outlook. If China fails to boost economic growth and oil prices rise towards $100 a barrel, the Reserve Bank of New Zealand will continue to keep policy rates low. “While we must remain elevated, external demand will continue to be weak, so the downturn will spread across the New Zealand economy. For longer,” he said. “Unfortunately, that risk is increasing.”

Living cost issue

New Zealanders on the ground said in Asia this week that they had mixed feelings about the economy.

Oakland executive Brett Lawton and his family are on their toes. He said he cannot take his job for granted in the current economic climate and does not expect wages to increase enough to offset rising inflation.

“We will not observe international holidays, so we will need to reduce discretionary purchases,” he said. “Every time I go to a supermarket or petrol station, I die because of the prices. Gasoline costs over NZ$3 (US$1.78) per liter.” By comparison, petrol costs about NZ$1.78 per liter in the US. dollar, more than $2 in Singapore.

Gas prices in Auckland hit an all-time high of NZ$3.15 in May last year and have barely fallen in the months since, according to New Zealand fuel price app Gaspee.

Lawton said he sees signs that stalled housing projects will significantly slow down and the number of construction companies going bankrupt will increase.

In the sleepy Hawke’s Bay region of New Zealand’s east coast, 400 kilometers (250 miles) from Auckland, a couple in their 30s who work in the technology sector and asked to remain anonymous for this article are aware of the fact that they are both employed. Told. It reduced their anxiety.

They said the economic decline “is front and center in the media and is a big deal for the country, but among our closest friends and family, it’s not where we are.” [constantly] talking about it. ”

But both men said they felt inflation was “out of control” and believed no government knew how to deal with it.

New Zealand’s employment figures may be strong, but high interest rates mean consumer confidence is low, and spending is weak and falling, IMA Asia said.

While job losses may not yet be widespread, major employers such as Amazon, garden center chain Bunnings, food manufacturer Goodman Fielder and some of the country’s universities have already announced plans to cut jobs. .

lagging numbers

Economic activity in New Zealand is weak, according to the latest figures from key policies.

The BNZ-BusinessNZ Manufacturing Performance Index in August was at its lowest level since June 2009, excluding months affected by the pandemic, while the Services Performance Index was “well below its long-term average”, BusinessNZ said. states. Thousands of businesses.

Employers are becoming increasingly cautious about hiring additional employees, he said.

“We have heard from network partners such as chambers of commerce that the helplines they run are receiving an increasing number of inquiries about how to restructure or make redundant workers, but this is anecdotal and However, it is not reflected in official statistics. [on employment]” BusinessNZ advocacy director Catherine Beard said.

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He added that small businesses, defined as those with fewer than 20 employees, have a harder time retaining staff than larger businesses.

There are approximately 546,000 such businesses in New Zealand, accounting for 97 per cent of all businesses.

The latest quarterly business poll conducted by the NZ Economic Research Institute (NZIER) shows that businesses are still hiring despite a decline in demand for new talent across retail, manufacturing and services. It became clear.

NZIER senior economist Ting Huang said: “The retail sector’s employment outlook looks the worst, given that households have already started cutting back on discretionary spending as mortgage repayments increase significantly.” Ta.

02:06

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He added that more pain could be in store, given that the impact of higher interest rates on labor demand “may be delayed for quite some time.”

“While the Reserve Bank has started raising the official cash rate; [the interest rate a central bank charges commercial banks for loans] “As of October 2021, this will only start to translate into weaker demand and economic activity in late 2022 or early 2023,” Huang said.

“This delayed transmission means that the effects of monetary policy tightening will take longer to spread through the decline in labor demand.”

Nevertheless, Thursday’s positive numbers are unlikely to be repeated, Bank of New Zealand head of research Steven Toplis said on Thursday. “This economy is still slowing on a trend basis and this will become clearer once the data is released.” [for next quarter] is published. ”

‘Negative and personal’: Election season begins in New Zealand

The government’s pre-election economic and fiscal update released two weeks ago predicted a further 18 months of economic slowdown, with the two main parties contesting next month’s general election, the ruling Labor Party and the centre-right National Party. is already drawing its battle lines in the economic field. Issues including controlling runaway inflation.

But New Zealand International Business Forum executive director Stephen Jacobi said it wasn’t all doom and gloom.

He said New Zealand’s net debt was low compared to other developed countries and rating agencies were optimistic about the government’s plans to respond to the economy.

Credit rating agencies S&P, Moody’s, and Fitch all reaffirmed their high ratings for the country’s fiscal management.