Ardern returns under inflation, crime clouds
Less than a fortnight after her last Hamilton visit, Prime Minister Jacinda Ardern was back yesterday to tour transitional housing and receive an update on the city’s regional theatre build.
Hamilton’s turbid weather did not dampen the mood.
But Wednesday night’s fatal stabbing of a dairy worker in Sandringham, near Ardern’s family home, overshadowed proceedings.
The worker at the Rose Cottage Superette was stabbed in an aggravated robbery at 8.05pm on Wednesday. Ardern described the incident as an ‘‘absolute tragedy’’ and said: ‘‘I know the community and it is a tight-knit one . . .
‘‘It is devastating to see what has happened. Our job as government is to prevent these kinds of events from occurring and to support police.’’
The first stop on the PM’s itinerary was Te Ru¯ nanga o Kirikiriroa’s new Frankton site.
In Higgins Rd and a stone’s throw away from the organisation’s headquarters, the site will provide a dozen transitional housing spaces for people aged 16-24. Complete with communal eating facilities, private bedrooms and ample off-street parking, it represents one tranche of the 313 transitional housing places the Government has afforded the city since 2017.
Waiting for Ardern was a local restaurant owner who decried the Government’s crime policy and implored her to visit a nearby business that had been
burgled recently. The clouds parted as Ardern arrived at the southern Victoria St site of the new Waikato Regional Theatre.
The project has received $12 million of Provincial Growth Fund support and was visited by Ardern a little less than a year ago when she turned the sod.
Visible yesterday was the concrete raft foundation upon which the $76.3m theatre will sit and the remnants of a beer cellar unearthed during excavations.
After Reserve Bank governor Adrian Orr’s announcement on Wednesday that the central bank would increase the official cash rate by 75 basis points to 4.25%, Ardern stopped short of warning Kiwis not to spend up big in the lead-up to Christmas.
‘‘Individual families will be making their own choices.
‘‘Our job is to support them through what is an internationally turbulent time.’’
A perfect storm of inflation, an engineered recession and interest rate hikes could prove bruising for a Labour Government coming into a by-election in which they are the incumbent.
Waiting for Ardern outside, it was clear the prime minister’s appeal has not waned with those beyond New Zealand’s shores.
Jonas McLallen, a film producer from Sydney, was with Japanese colleagues doing research for an upcoming production.
As Ardern departed, McLallen asked: ‘‘Can you come and run our country for a while?’’
To which Ardern replied: ‘‘I think just the one is enough.’’
‘‘The power is in the hands of the people. You know, if you just start behaving, ‘1% different’ around inflation expectations and wage growth that makes our job easier.’’ Reserve Bank governor Adrian Orr
The Reserve Bank is deliberately engineering a recession to rein back inflation after being slow to raise interest rates, Reserve Bank governor Adrian Orr admitted to a select committee yesterday.
But he forecast the 1% decline in the economy that the central bank is forecasting could be ‘‘job rich’’ and said the country was relatively well-positioned internationally.
The Reserve Bank raised the official cash rate by 75 basis points to 4.25% on Wednesday and surprised economists by forecasting the rate would peak at 5.5% next year while also predicting a further rise in inflation and a year-long recession beginning in April.
The bank forecast that official unemployment would climb to 5.7% in 2025, from 3.3% currently.
Orr told Parliament’s Finance and Expenditure select committee it was correct that the Reserve Bank was engineering a recession, saying it was deliberately trying to slow spending in the economy.
‘‘There will be a likely rise in unemployment, but it may be a job-rich slowdown because of the severe lack of labour in the economy at the moment,’’ he said.
‘‘If we are successful, we slow down and inflation comes out, it would mean that ‘per capita’ consumption is still in real terms at the levels pre-Covid in 2019 and participation in employment is still very high.’’
But commenting further on the recession risk, Orr said the power lay in the hands of the public, who could reduce the need for an economic contraction if they collectively cut their spending and assumed inflation would fall, for example when negotiating pay rises.
‘‘The power is in the hands of the people. You know, if you just start behaving, ‘1% different’ around inflation expectations and wage growth that makes our job easier. We don’t have to pay that cost.’’
Orr agreed New Zealanders would be paying a price through higher inflation and higher interest rates for monetary policy being too stimulatory for too long, simply stating ‘‘yes’’ when asked whether that was the case.
‘‘There will be some households who need to be talking very quickly with the banks around making sure they have strong relationships,’’ he said.
Those conversations could see some defer their mortgage payments or switch to interest-only loans, he said.
The biggest surprise since its monetary policy statement in August, when the bank was forecasting the OCR to peak at only 4%, was the persistence of global inflation, he said. But the bank was also seeing pricing pressures domestically everywhere ‘‘in particular, because of labour shortages’’, he said.
‘‘Without doubt, labour has never been more scarce looking back across modern economic history in New Zealand.’’
National Party finance spokesperson Nicola Willis questioned Orr on whether relaxing immigration rules might help address that, but Orr suggested it could not be a quick fix.
‘‘If we suddenly expanded the labour force by 10% from external migration, they would bring increased skills and supply capacity, [but] they would also bring increased demand with them as well, for housing and so forth.
‘‘In the long run the supply of labour helps,’’ but in the near term the increases in supply and demand could ‘‘offset’’ one another, he said.