26 Sep 2022
Economic growth in New Zealand is poised to slow as monetary tightening weighs on domestic demand. But the return of international tourism and weaker demand for imports should provide a decent offset in gross domestic product terms.
Whether or not New Zealand avoids recession remains a line ball call. But it’s important to note not all recessions are created equal. A recession that brings about a transition from the currently over-stretched economy towards sustainable expansion, while also avoiding a significant household income shock, may not be as bad as the R-word portends. Particularly from a long-run economic stability perspective.
And if it means squashing the current wage-price spiral before it necessitates even more aggressive action by the Reserve Bank of New Zealand, then it may be a cost worth paying.
One way or another, the economy needs to find its way to a sustainable path. Price (and economic) stability is at stake and so too is very hard-won central bank credibility. Hopefully a 5 per cent official cash rate is enough to get the job done.
Source: Stats NZ, RBNZ, REINZ, Macrobond, ANZ Research
Miles Workman is a Senior Economist at ANZ Institutional and Sharon Zollner is Chief Economist at NZL Institutional
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
26 Sep 2022
09 Aug 2022