No economic respite in sight just yet
Thankfully, the Reserve Bank of New Zealand decided once again in its latest announcement earlier this month, not to increase the Official Cash Rate (OCR), maintaining it at 5.5%.
As I was writing this article last week, the latest Consumer Price Index (CPI) announcement from Stats NZ was a couple of days away with the Reserve Bank predicting that there may be some positive news.
The Reserve Bank said it expected the annual CPI figure to have eased to 3.8%, dropping below 4% for the first time since mid-2021.
While all that sounded positive, even if their predictions had been accurate, the Reserve Bank has already said that the OCR still needs to stay at a “restrictive level” for a sustained period of time. And now, as we know, the CPI announcement on April 17 showed it was still sitting at 4%.
On a brighter note, they are confident that CPI will return to within their 1 to 3% target range this calendar year, but while the rate of inflation is declining it is still too slow and remains too high _– meaning that the OCR and interest rates which are significantly influenced by the OCR will also remain high, as has regularly been predicted and reported.
As these rates remain elevated, the ongoing and inevitable difficult economic climate, which sees the growth of the economy being described as feeble by the Reserve Bank, has seen the financial pressure on businesses and households gradually increasing, with
recent figures illustrating the extent of the problems caused by intensifying financial stress.
Consumers have found their level of disposable income declining, resulting in a 1.9% reduction in retail sales in the December 2023 quarter.
In addition, small to medium-sized businesses recorded a fall in productivity last year and the Companies Office recently reported that 282 companies went into liquidation, receivership or voluntary liquidation last month, the
highest number in nine years.
With unemployment also on the increase, this is all proof, if proof were needed, that business and household resilience will be further tested in the months ahead.
More and more people are falling into financial hardship with little or no respite predicted for quite some time.
So, if you’re finding your financial situation is becoming unsustainable, I would advise you to be proactive and have a chat with your bank to work out
a solution, as unfortunately, burying your head in the sand and hoping that it all just goes away isn’t an option.
Hopefully, the resilience that people built up during and post the pandemic will enable those experiencing difficulties to find their way through to what will hopefully be better times ahead.
Finally, please keep supporting our local businesses.