For months, the economic recovery has been said to be imminent, and the forecasters at the banks keep promoting that message, even though the former predictions of good times in 2025 have now been pushed back until…maybe next year? The patterns of business confidence and retail spending are being anxiously scrutinised for signs that lo, the economic resurrection may finally be at hand. Yet the recovery never arrives. It is all starting to feel a bit like the Great Disappointment of 1844.
To ordinary folks, the good news still sounds mighty uncertain, at best. For example: in its latest quarterly survey, Infometrics claims the recovery has been glimpsed in the South Island, and is moving northwards and is “definitely under way. ” GDP was up by 0.9 % in the last quarter! Okay…but that is in the context of a 0.9% fall in the June quarter, and a 0.9 per cent gain in the March quarter. Overall, GDP is still lagging behind where it was a year ago.
As for everything else…in the peculiar jargon used by the business media, the labour market is expected to remain “loose” well into 2026. Meaning: high levels of unemployment will persist, and job seekers will continue to outnumber the jobs available. But hey that outlook is largely being reported as a “good news” story – because it will put “downwards pressure on wages ”and thereby rescue the Reserve Bank from the need to cut interest rates further to curb inflation. If that’s a good news scenario, shoot me now.
So… let’s summarise the allegedly happy trendline towards recovery : no relief in sight on unemployment, on job creation, and on job security. Wages falling further behind inflation. In record numbers people are still running for the planes to get out of here while they still can. No sign yet of anything more than a microscopic increase in GDP. Even if a recovery of sorts is happening in the south and moving north, that’s not (yet) a reason for jubilation.
Reason being, the evidence suggests that it will remain a jobless recovery for the foreseeable, offering little or no joy for the unemployed, or for retailers. After all..reportedly, there is little or no sign as yet that the high global prices that farmers have been getting is being reflected in retail spending.
One last thing…routinely, the business media is selective in how it analyses and discusses cuts to interest rates, and the (often) related falls in our exchange rate. The chatter is almost entirely about how the exchange falls will be good for exporters and the tourism sector, and interest rate cuts will be good for people with mortgages. (Newsflash: nearly half of New Zealand householders are renters, and the figure is rising.)
More to the point, that sinking exchange rate will almost certainly raise the price that workers and beneficiaries have to pay at the petrol pump, and for imported essentials at the supermarket. For many households, the cost of living crisis is about the price of petrol and groceries. There is little sign of joy on either front. If anything, the price of both will increase as the value of our dollar sinks to record lows against our major trading partners.
For evidence of how the arc of retail spending is flattening out, take a look at the Stats NZ figures for our own card spending patterns during the month of October :
- consumables, up $22 million (0.8 percent)
- fuel, up $2.5 million (0.5 percent)
- durables, down $1.5 million (0.1 percent)
- apparel, down $1.9 million (0.6 percent)
- motor vehicles (excluding fuel), down $2.3 million (1.2 percent)
- hospitality, down $21 million (1.4 percent)
For retailers, this is not a good pattern. It suggests that people under pressure are restricting their spending to the absolute essentials of fuel and groceries. To use the jargon, the falling exchange rate is very likely to put “upwards pressure” on prices, at a time when there is still “downwards pressure” on wages. Yet on RNZ’s flagship current affairs show, one of the presenters dismissed the plunging exchange rate as being bad for people going on overseas holidays, but good for tourism. “Swings and roundabouts” he jauntily concluded. The likely impact on the other 90% of New Zealanders didn’t happen to register as being relevant.
Footnote One: In sum, low to middle income people facing (a) rising prices for fuel and groceries and (b) skyrocketing central and local government charges and (c) government-induced unemployment and job insecurity are in no shape to lead a recovery in retail spending. Nor are they in any shape to raise their contributions to KiwiSaver up to Australian levels of saving – as the government is proposing.
For that to happen, the government would need to create an economy that’s paying Australian levels of wages. It is doing anything but.
Footnote Two: National’s proposal to double the rate of KiwiSaver contributions is remarkably tone deaf. As even Labour leader Chris Hipkins has pointed out, low income workers already struggling to meet 3% KiwiSaver contributions will simply not be able to cope with 6%.
Moreover, National’s citing of Australia as a model form of workplace-based retirement savings overlooks the glaring difference. Across the Tasman, employer contributions are fenced off as being in addition to wages, and cannot be treated as a trade-off in wage bargaining. Christopher Luxon has made no mention of protecting remuneration levels here in a similar way. As a a result, the risk is that New Zealand employers will have every incentive (and opportunity ) to write off their extra KiwiSaver contributions against the wages of their employees.
This extra “downwards pressure on wages” would make it even harder for low to middle incomer workers to afford their doubled KiwiSaver contributions.. let alone enable them drive an economic recovery with their mythical spare cash. This level of myopia is a side effect of a government that continues to devise policy that’s of benefit only the top 5% of the population.
Memo for Mark Mitchell
With his “tough on crime” jawline set in concrete, Police Minister Mark Mitchell is an almost satire-proof politician. All the same, and for his own peace of mind, maybe Mitchell should steer clear of this stretch of Onion territory. Fella’s head might explode.
Railing against the light
As a fan of the warm glow you get from incandescent light bulbs, I’m probably the target audience for this new song by the US-Filipina musician Haley Heynderickx. In it, she rails against…fluorescent light bulbs as a symptom of our social malaise:
There was an ancient light/there was an ancient song
Now something isn’t right…
In schools and prisons and dying
Yeah, its all in fluorescent light
How has it come to this? Partly because, as the song also says, “brilliant minds go to college just to study marketing.” Sad.
Covid changed the career of Avalon Emerson, the Bay Area DJ who had found immense success a decade ago in Berlin, until the pandemic all but killed the clubbing scene. (Only temporarily, as it turned out.) In the immediate wake of Covid though, Emerson re-located back to the US, and she eventually added another string to her bow, as the lead singer of her own band, the Charm.
Hard driving dancefloor bangers textured with a distinctive sense of wide open space was/is her signature as a DJ. (Nearly ten years on, “The Frontier” remains a stone classic.) Two albums into her work with the Charm though, this realm of her music continues to have a surprisingly light, dreampop quality.
The new single “Eden” for instance, falls neatly in between glittering indie-pop and the dancefloor, and has the same pre-occupation with her environment. “You’re my favourite place in Eden/you’re my favourite part of me.” I also liked the rueful way she describes how her job as a DJ dictates her experience of the world, and the shape of her relationships:
Rolling hills under falling water
Lingering over staying longer
When my moonlight is my day job
And my daylight is my night song