Evidence suggests the inflationary beast is under control

Yesterday’s business confidence survey figures should kill off any talk of another OCR hike in the foreseeable future says an economist, with signs inflation is abating

Mōrena and welcome to The Bulletin for Wednesday, July 5, by Anna Rawhiti-Connell. Presented in partnership with Z Energy.

In today’s edition: plan launched to recruit the thousands of healthcare workers we need, National to launch health policy; El Niño means drier weather but there are concerns about its role in creating the perfect climate storm; house prices fall again; but first, business confidence survey results should make Reserve Bank happy but don’t bode well for government’s books or improving productivity

Adrian (Th)Orr will be happy about the latest business confidence survey results (Image: Tina Tiller)

Business confidence up slightly, concerns about sales rather than staff

Depending on which headline you read or where your primary concerns lie right now, the latest New Zealand Institute of Economic Research (NZIER) quarterly business confidence figures released yesterday were either good news or bad news. Realistically, they represent a mixed bag. On the slightly good news front, business confidence has grown, a little. The survey shows a net 59% of businesses expect a deterioration of business conditions, down from 63% last quarter. Retailers however are feeling less optimistic, with consumer spending constrained and a majority of businesses expecting a softening of demand in the coming months. Concerns about that and the cost of doing business emerged as a dominant theme, as workforce shortages become less of an issue. Last week’s ANZ business and consumer confidence figures were described more enthusiastically as a “solid bounce”. Bernard Hickey has a good summary of those survey results. 

Strong evidence that inflationary pressures are abating

BNZ’s head of research, Stephen Toplis says there’s “next to no chance” of another official cash rate hike in the foreseeable future barring any shocks to the economy. BNZ’s research team sees the rate of inflation coming down to 4.5% by the end of the year. It was 6.7% for the year ending March 2023. Stats NZ will release the latest inflation data on July 19. Toplis said the Reserve Bank will be happy about the NZIER numbers. “It provides very strong evidence that inflationary pressures are abating and that we are heading towards maximum sustainable employment at an accelerating rate.”

Slowing economy could be bad news for the government’s books

The government opens its books today as Crown accounts for the eleven months ending May 31 are released. The last set, released in early June, showed the government’s operating deficit was 22% above Treasury’s forecast due to a shortfall in money raised from company tax. Toplis says the “moribund” expectations from businesses in the survey for future profitability are “bad news for business, future employment and investment but also for the government whose finances are already under pressure from a slumping corporate tax take.”

Productivity in New Zealand hinges on us working longer hours 

That note on investment provides a good segue into a new Productivity Commission report released on Monday. It shows that New Zealand has gone from being one of the most productive economies in the OECD to being one of the least productive. Productivity gains overseas can be pinned to investment in research and development, new technologies and products and machinery that reduce working hours but increase what is produced. The NZIER survey results point to businesses reducing investment, particularly in machinery. Productivity is an issue, alongside having something resembling a position on population growth, that really should be more central to election debates about the economy than it is. Perhaps it’s the language used. Outputs per capita and units are a bit alienating and inhuman, but the upshot is productivity gains in New Zealand rely on us working longer hours. We’re working harder, not smarter, so to speak. In other news, the 500 richest people in the world added $852b to their collective fortunes in the first half of this year according to Bloomberg’s billionaires index. Elon Musk and Mark Zuckerberg did particularly well. Plenty of spare cash to hire trainers for their supposed cage fight.

Simran Kaur on This is Kiwi

Celebrating extraordinary achievements by ordinary people, This is Kiwi explores the remarkable stories of incredible New Zealanders. In the second episode of this six-part series, Jane Yee talks to ​Simran Kaur, financial security advocate and founder of Girls that Invest. From growing a ​social following of over 500,000​ to inspiring women to find financial empowerment, writing a ​bestselling book​ and hosting an ​international number one podcast,​ Kaur is a shining example of ​following passion to find success.

Listen now wherever you get your podcasts (sponsored)

New Zealand needs 13,000 extra nurses and over 5,000 doctors within a decade

Continuing on from yesterday’s look at the government’s health announcements this week, health minister Ayesha Verrall launched a plan to boost recruitment and retention of healthcare workers. New modelling done by Te Whatu Ora has forecast that New Zealand needs 13,000 extra nurses and over 5000 doctors within a decade. Verrall says the plan would bring together education and immigration settings to not only grow the workforce but reduce attrition. Initiatives include “earn-as-you-learn” programmes, targeted rural programmes and funding for 50 new medical school places. Benn Bathgate at the Waikato Times is reporting this morning (paywalled) that the National party will release its health policy today in Hamilton which includes putting plans to create a school of rural medicine in the region back on the table if they win the election.

El Niño is officially here and it comes with a warning

El Niño (Spanish for “the boy”) has officially arrived. The UN’s World Meteorological Organization (WMO) is warning of record temperatures and extreme heat, and an environmental ‘double whammy’ as the climate-heating weather pattern collides with the increasing global heating driven by human-caused carbon emissions. Here in New Zealand Niwa forecaster Chris Brandolino​ says El Niño will bring “drier conditions for a good chunk of the country, particularly the upper North Island.” Looking past our own noses and beyond our backyards, alarm bells have been ringing among climate scientists following several days of average global surface air temperatures rising above 1.5C and a big drop in the area of global sea ice. Scientists have reacted to a sharp increase in north Atlantic surface temperatures by describing it as “very unusual”, “worrying”, “terrifying”, and “bonkers”. The Guardian has a really good piece on whether El Niño and global heating will create a “perfect climate storm”.

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Click and Collect

• House prices have fallen yet again

• The number of residents notifying Auckland City Mission about the welfare of people sleeping rough has doubled in the last year

• Taieri MP Ingrid Leary mistook a Mongrel Mob hui in Dunedin for an Electoral Commission meeting because there were commission staff there

• It’s seen out 12 presidents, 10 kaisers and two republics but the world’s oldest national newspaper has printed its final edition after 320 years

• Elusive pig alert as Auckland’s animal management team tries to capture a pig that has been chomping up an elderly woman’s large lawn for a week

Got some feedback about The Bulletin, or anything in the news? Get in touch with me at thebulletin@thespinoff.co.nz.

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'It's as if the riots in France are happening in a political vacuum'

In an interview with Le Monde about the recent riots in the banlieues (French suburbs), François Dubet, a professor in sociology at the University of Bordeaux describes a kind of political impotence in the inability of political parties and movements to transform the sense of abandonment felt by those in the banlieues into organised action. That Le Monde interview is partially paywalled so I’ve also included another piece from Dubet on The Conversation on the same topic. I think there’s something in this particular statement that’s potentially relevant beyond France right now: “There is something new in this tragic repetition. The first element is the rise of the far right… the second is the political and intellectual paralysis of the political left. While it denounces injustice and sometimes supports the riots, it does not appear to have put forward any political solution other than police reform.”