Andrew Dickens: New Zealand's economy is balancing on a high wire

Andrew Dickens,
Publish Date
Friday, 6 September 2019, 4:41PM
It seems as though New Zealand and much of the world is balancing on an edge.

There’s an old Chinese curse made famous by John F Kennedy which goes something like this.

“May you live in interesting times.”

It’s a backhand curse of course. First you think, that’s nice, I mean who wants to live in uninteresting times. It’d be so boring and dull. But the downside of living in interesting times is that’s when bad things happen. You know the usual suspects. Chaos, Disorder, Hardship, War, et cetera. Then again those negative Chinese could always be wrong and we have happy interesting days.

I say all this because we live in interesting days and we don’t know if it’s going to go bad or turn out just fine.

Today the ANZ came out and predicted 3 OCR interest rate cuts in a row. They reckon we’ll be at 0.25 per cent in a year. Wow. It’s an unheard of set of conditions. 

You can topline the thing and say we’ve got plenty of jobs and much of our primary produce is holding up except for Dairy and Tourism has plateaued but it hasn’t collapsed. Treasury and the Reserve Bank have forecast growth that’s soft but not horrible. So you could argue that the only thing we have to fear is fear itself.

But the ANZ has a few more tools in it’s crystal ball toolbox than the RB. Like the truckometer which measures the light traffic screaming around doing business. It’s down. The bank also uses more data than the RB to look at forward investment and activity by businesses and that’s down too. It all flies against the projections of the Reserve Bank and suggest we’re slumping a little bit more than expected. Just a little. But enough.

Then we come to the so called international head winds that Grant Robertson mentions so much. Trump, China, Brexit and money printing.  

The ANZ also mentions what happened in Australia this week. Our biggest export market has got the jitters even more than we have. 1.4 per cent growth in a year. The same as population growth so they’ve definitely parked the car. 

The RBA has cut their cash rate to 1 per cent. The thing about that is the lower their interest rates go the higher our dollar goes if we don’t keep pace. A higher dollar right now would slam our exporters so we don’t want that.

So even though we have robust commodity prices, easier monetary conditions, population growth, and a tight labour market the ANZ reckons we’re slowing down more than the Reserve Bank had forecast.

Therefore, the ANZ says If the world keeps it together – and that, they say,  is an increasingly optimistic “if”, given the relentlessly negative tone of most the global data – then we should be alright and should pick up next year. But that if is getting bigger.

It seems as though New Zealand and much of the world is balancing on an edge. Like Jonah Lomu running down the sideline in 2000 against the Wallabies in the greatest game of all time, we are tiptoeing like a rhinoceros on a high wire. One push we’re out. Or we score a try. 

Interesting times.

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