JUNE 2024 NZ Economy: Slow grind

One of the unfortunate, but totally predicable, outcomes of the previous Government’s decisions in a range of areas, was to reduce business certainty, with fears about whether the rules of engagement would be changed at the drop of a hat, making businesses reluctant to expose themselves to potentially significant investment losses if the Government changed the rules mid-stream. [...] On the positive side of the coin, the Government moved quickly to introduce and pass legislation to narrow the Reserve Bank’s mandate solely to price stability – away from the dual mandate of price stability and maximum sustainable employment. [...] On the other hand, there are a range of very good reasons why the Reserve Bank will be reluctant to move to reduce the OCR before next year despite a number of indicators pointing to the economy being in a mild recession with mediocre growth likely over the forecast period. [...] Fourth, the Government’s earlier decision to introduce the Fast-track Approvals Bill (due to be reported back from the Environment Select Committee in September this year), the purpose of which is to fast-track consents for regional and nationally significant infrastructure projects, may well be a shot in the arm for the agricultural sector, particularly in respect to the potential development of. [...] The likelihood is that net migration inflows may recede quite rapidly, since as the recession continues, the attractiveness of NZ as a destination will take a hit, while at the same time, the Government may well be mindful of the need for a reset of immigration policy given the concern about whether NZ has the appropriate settings to attract high skilled younger individuals that can effectively ad.