‘Hold on’ – things will look better next year
Things could be looking a lot brighter for New Zealanders in a year’s time, one economist says.
Many households are under pressure, with inflation high and concerns that the country could enter a recession through the latter half of this year.
But independent economist Tony Alexander said that if people could hold on for six to 12 months, things would start to look markedly better.
‘‘The cost of living, inflation situation will be looking a lot better in six to 12 months,’’ he said.
‘‘With China now getting cheaper energy, we might get some cheaper goods out of China soon and retailers that are running excess inventories might fairly soon be discounting stock.’’
One-off factors that had led to surges in prices, such as oil, should have worked through the system before too long, he said.
While inflation would still be higher than in recent years by next year, households should be able to see signs of improvement.
By mid next year, house prices would have stopped falling, on average, he said, and long-time investors would already have made their ‘‘canny purchases’’, he said.
Turnover would increase for real estate agents, as people who should have moved due to lifestyle factors returned to the market in ‘‘catch-up buying’’ mode, he said. ‘‘Things will look better in a year’s time.’’
But he said there were already reasons to be optimistic – export prices were holding firm and exporters would be helped by a lower exchange rate.
Higher international food prices were good news for many New Zealand producers.
Most employers, perhaps with the exception of the real estate industry, would say they did not have enough staff rather than having concerns about having too many, he said.
‘‘There is still no evidence of a labour market hit. People feel happy
‘‘Things will look better in a year’s time.’’
Tony Alexander Economist
about their wages and hours generally.’’ Interest rates were near their peak, he said.
While he would not rule out twoyear interest rates increasing again after they were cut by several banks this week, he said most of the longer-term interest rates were now about as high as they would go.
‘‘At some point the Reserve Bank will go: I think we can take it a bit easier now, we are seeing what we need to see.
‘‘I think we will see that before the end of the year.’’
He said loan-to-value restrictions would also probably be loosened.
The Reserve Bank had indicated that a 15% fall in house prices would take them back to a level where they were no longer unsustainable, he said. “People do tend to get overly despondent and can struggle to see a way out of things.
‘‘But the factors that will herald the economy is in recovery are starting to appear now.
‘‘The weirdest one is that it all looks like trash at the moment. But that’s setting the scene for the Reserve Bank to cut interest rates.”