Inflation stagnant as government strives for growth
The cost of living crisis appears to be over, even if it doesn't feel like it yet.
Mōrena, and welcome to The Bulletin for Thursday, January 23.
In today’s edition: Union warns of brutal year for polytechs, media giant NZME to cut nearly 40 roles, and Labour leader Chris Hipkins explains why his party won’t implode in 2025. But first, is the cost of living crisis really, truly over?
Inflation steady
Annual inflation has remained static – or should that be stagnant – at 2.2%, according to the latest quarterly update from Stats NZ. As 1News reported, this marks the second consecutive result in which inflation has been within the Reserve Bank’s target range of 1-3%. The result is broadly in line with expectations, if a tad higher, with many economists expecting inflation to have dipped to a four-year low of 2.1% over the last quarter. Rent was the largest contributor to the annual inflation rate, said Stats NZ, up by 4.2%.
Kiwibank’s chief economist Jared Kerr said the result confirmed the cost of living crisis was “definitely over”, reported RNZ’s Susan Edmonds. However, it may not feel like that for households just yet. "You've got to experience a wage rise a couple of times with inflation running below that before you feel that real pick-up in your purchasing power,” Kerr said.
Where we’re heading
It feels a bit like financial deja vu to hear, but things should start to get easier from here on in. This latest inflation data firms up expectation for another large rates cut next month, though there remains the possibility of the Reserve Bank opting for a less risky 0.25 basis point cut to the official cash rate. The Herald’s Liam Dann reported (paywalled) that bank economists remained in agreement that a 50-point drop was appropriate in February. “If anything, today’s release should add to the RBNZ’s confidence that tight monetary conditions have worked to tame underlying inflation, meaning it’s entirely appropriate to return monetary conditions to a more neutral setting,” said ANZ senior economist Miles Workman. Beyond that, reported BusinessDesk’s Rebecca Howard (paywalled), the Reserve Bank is likely to pull back on how quickly it drops the official cash rate.
Government claims victory
The government has claimed the result showed its economic plan was working. Finance minister and newly appointed economic growth minister Nicola Willis said the foundation had been set for “economic growth, and the investment, jobs and incomes it creates”, reported Stuff. The opposition was less confident, with Labour’s finance spokesperson Barbara Edmonds saying the government was just taking credit for “global inflation trends” while families in New Zealand will still worse off.
Political point scoring aside, things do appear to be heading in the right direction (though renters will be undoubtedly be concerned by the increases there). For homeowners, the big question is what this means for mortgages. Major banks have already been dropping interest rates over the summer and these are expected to continue falling through the Reserve Bank’s cash rate decision next month. David Hargreaves at Interest said the central bank had effectively already promised it would drop rates by 0.5 basis points next month, but there was still a lot of water to flow under the bridge, including new unemployment data and another business outlook survey.
‘Growth’ the word of the day/month/year
The weekend’s National Party reshuffle has already teased what we can expect to hear a lot about in 2025: economic growth. With Nicola Willis taking on additional financial responsibility as the new economic growth minister, the government is tipped to double/triple/quadruple down on plans to boost the economy. Part of that, Willis told RNZ’s Morning Report yesterday, could include making it easier for tourists to visit New Zealand. Ben Thomas, on a new episode of The Spinoff’s Gone by Lunchtime podcast, noted a “tension” between that and the decision to raise the visitor levy last year to $100 from $35.
We’re due to get some insight into the government’s growth agenda later today, with PM Christopher Luxon delivering a state of the nation address in Auckland. The Post’s Luke Malpass said this speech is tipped to include “significant announcements” on foreign investment, including possible changes to incentivise research and science for economic benefits. Politik’s Richard Harman (paywalled) said Luxon was pinning “his political future” on being able to deliver on this. We’re about to learn the plan, now we wait to see how and when it’s acted on.
Have thoughts? Join the conversation in the comments.
Certainty for polytech staff and students promised
A long-awaited plan for the country’s polytechs will come before the end of the year, the vocational education minister Penny Simmonds has promised. Simmonds told Stuff’s Glenn McConnell that she expected 10 polytechs would be self-sufficient by the time Te Pūkenga, the merged entity launched by the last government, was disestablished. The union representing tertiary teachers, however, is expecting tough times ahead. “Hardly any of them can survive without… making major cuts to provision, major cuts to the opportunities that communities will have. So for staff, it’s almost unbelievable that they don’t have any certainty,” Tertiary Education Union national secretary Dr Sandra Grey said.
More reading:
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NZME set to cut almost 40 jobs
If last year was the local media’s annus horribilis, 2025 is also getting off to a shaky start. Media company NZME, owners of the Herald and Newstalk ZB, has confirmed plans to cut close to 40 jobs, reported The Post’s Tom Pullar-Strecker. The proposal would involve the net loss of 14 reporting and 24 editorial production roles, with fewer stories published and a stronger focus on video content (something other newsrooms like TVNZ and Stuff have also emphasised in recent months).
More reading:
Cutbacks at NZME harmful for public, “news ecosystem”, says union (RNZ)
More industry cuts to come following NZME restructure (Newstalk ZB)
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Auckland at Q Theatre: Bryn & Ku’s Singles Club Party, February 13 and Gone by Lunchtime Live, April 9.
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From hatchet man to healer
Following last weekend’s cabinet reshuffle, Joel MacManus takes a look at what Chris Bishop’s appointment as transport minister could mean for the sector.
Bishop is seen as more of an ally (or at least less of an enemy) to urbanist ideas. He is still more of a cars-and-roads guy than some would like, but he is far less extreme than [Simeon] Brown.
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Click and Collect
Labour leader Chris Hipkins on why his party won’t implode in 2025.
Health NZ pushes back restructure meetings in wake of new minister.
TikTok could end up in Elon Musk's ownership, after Trump approval.
Interesting post from economist Michael Reddell on his blog looking at inflation of a different sort: the increase in ministerial portfolios under the current government.
No reason given for Western Bay of Plenty District Council boss’ surprise resignation.
Jacinda Ardern has unveiled her long-promised memoir, titled A Different Kind of Power.
Pippa Coom argues that Auckland's Great North Road upgrade is a triumph for AT, whether the mayor likes it or not. Playwright Jenny Pattrick recalls a macabre holiday with Annie Proulx for The Spinoff Books Confessional. Gone by Lunchtime discusses Luxon's 2025 reboot. Alex Casey and Tara Ward present a serious and urgent briefing for the first minister for the South Island. Producer Ahmed Osman outlines the challenges 2025 has in store for the screen industry.
That’s it for today. Thanks for reading and see you tomorrow morning.
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No where in any media posts , let alone this government do we hear of the impact of the current “cost of living “ and interest rates changes to our Senior Sector . Lower Deposit Rates impact those of us who depend on this extra income to keep afloat in this economic downturn. How about an article on the Forgotton Older Generation Struggles!!!
I find it inconceivable that so many governments, worldwide, are wilfully ignorant of the effects of climate change and the need to make environmental concerns a higher priority than economic growth.