NZ in a ‘crisis of confidence’
‘Recession-like’ situation, but Bay has factors in favour
Weaker house prices and the rising cost of living have created a “recession-like” environment as people close their wallets and grapple with a “crisis of confidence”.
But an economist says the Bay of Plenty would be less vulnerable to an economic downturn.
The region will recover, albeit slowly, and the “silver lining” of bouncing back too fast would be not enough staff to meet demand.
Two separate economic confidence surveys show Bay households and businesses remain pessimistic about the future.
Arrowtown-based independent economist Benje Patterson said the country was not technically in a recession as the June quarter had bounced back from an Omicronriddled March quarter.
“From that perspective, it is going
to require us to have a bad September, a bad December, and we wouldn’t know until February or March next year if we have technically entered recession.”
But he said the economy felt “really flat” as people were more cautious about spending, which pointed to a “recession-like” situation.
“It is not a deep recession by any means . . . It is just that we are grappling with a severe crisis of confidence and really high inflationary pressures.”
Patterson said New Zealand’s recovery from having essentially zero international tourism was going to be slower than expected.
A “silver lining” was if things recovered too quickly there would not be enough workers to fill demand, he said.
“There is a risk if things recover too fast that it actually degrades the tourism experience because we don’t quite have the staff on offer to deliver a high-quality experience to people and have sufficient opening hours.
“Some restaurants have had to rationalise because there are staffing shortages and have reduced hours. If we have slightly fewer tourists it puts less pressure in the short run.”
The flipside was while Kiwis would still travel overseas to reconnect with family, others would opt for easier and cheaper getaways and choose to travel domestically.
“For somewhere like Rotorua, that might mean they do a little bit better out of the Auckland drive market.” Mortgage rates had risen “dramatically” and were squeezing household budgets. “That is not something to underestimate.”
The blow to the Bay was going to be “variable”, he said.
“The primary sector has got very strong returns and that is going to help stabilise a lot of the Bay of Plenty.”