NZ Economy: Storm Clouds Building
The latest BusinessNZ Planning Forecast reveals that while things might look favourable at first, there are several factors which are still cause for economic concern.
Both Treasury and the Reserve Bank have predicted the economy will go into a shallow recession by the second half of next year. BusinessNZ’s forecast for the December 2022 quarter aligns with this prediction.
BusinessNZ Chief Executive Kirk Hope says household spending is set to be slashed, with mortgage-holding Kiwis in for a tough time in particular.
"Inflation remains well above the Reserve Bank’s 1-3 percent target and interest rates are set to soar in the new year, meaning many households will not feel the full impact until mortgages start to be refixed from 2023.
"Combined with elevated levels of household debt, increased mortgage payments will potentially put significant pressure on people and their budgets, even more so when our record low unemployment level starts to rise again."
Internationally, the global economic outlook has deteriorated with both continuing geopolitical risks and supply chain disruption.
"There is some evidence of inflationary pressures declining in some key markets like the United States, while international oil prices have taken a dive largely on the back of recession fears," Mr. Hope says.
The BusinessNZ Economic Conditions Index sits at 0 for the December quarter, down 6 on the previous quarter and down 1 on this time last year. Continuing low levels of business and consumer confidence, combined with entrenched inflationary expectations and rising interest rates, are continuing to take a toll on the index.
The Index tracks 33 economic indicators including GDP, export volumes, commodity prices, inflation, debt, and business and consumer confidence.