It’s finally here!
It’s official. June saw the feared ‘R’ word go from a prediction to reality, NZ is officially in recession. Which is hardly surprising considering it has been forecast for what feels like an eternity.
As a brief recap, this is how we find ourselves with a Reserve Bank actively trying to push the nation into a (shallow) recession: as the nation was coming out of the first lockdown, the Reserve Bank (much like most central banks around the world) introduced a range of stimulus to try and jumpstart the economy back to life. These measures were kept in place for a couple of years which, with the benefit of hindsight (and possibly the benefit of foresight) led to the economy becoming overheated. This, combined with supply chain constraints on anything imported or reliant on imported components, led to the cost for everything spiralling out of control. These price pressures have been magnified by the recent rubbish weather. So now we find ourselves with the hangover of these excesses.
Thus far, the ‘recession’ is hitting rather unevenly, with some industries affected, while others are still experiencing record demand. But even if your business hasn’t faced any challenges that are typically associated with a slow-down, now’s as good a time as any to consider what might happen if demand starts to dry up. If a general slow down has crossed your mind, have a read of this from Xero.
If you’re feeling the pinch at the moment, please get in touch.
Out of whack
One thing that might have an effect on NZ’s fortunes, is something that economists refer to as our current account. The current account is a measure of trade – a current account surplus means we are ‘selling’ more than we are ‘buying’, while a current account deficit indicates that as a nation, our spending is outstripping our ability to earn. And right now, as a nation, we are racking up a big credit card bill.
While the present ‘slowdown’ looks like it will be relatively modest, Infometrics are suggesting that if we don’t get the economy back in balance, we’ll be in longer term trouble. Read about it here.
We tend to agree with Infometrics sentiments – as a nation, we have been earning less and spending more since well before the pandemic hit our shores. As much as we are apolitical, it is our hope that whichever version of Chris finds himself occupying the top floor of the Beehive, the government he leads will finally turn some real attention to our falling productivity.