Murky economic outlook sets the scene for the year to come

Further interest rate cuts are coming, but why does everything still feel so bleak?

Mōrena, and welcome to The Bulletin for Tuesday, January 14.

In today’s edition: Australian opposition borrows National's 'Back on Track' slogan, what the impending US TikTok ban could mean, and we delve back into the archives with more summer Spinoff reissues. But first, where the economy is heading in 2025.

It’s the economy, stupid

Yesterday we looked at three big issues set to dominate a lot of the year – and this morning we have more of those big picture calls. The Spinoff’s published its predictions for what will suck up air time in politics in 2025, and unsurprisingly, there’s a lot of talk about the state of the economy. “We have a structural deficit. It has to be solved. There are no painless solutions,” wrote Eric Crampton, chief economist at the New Zealand Initiative. “The economy, stupid,” said founder of The Spinoff, Duncan Greive. “The whole theory of the coalition is that they’re the parties of business, that they understand how to make lines go up. The rest of the Anglosphere is somewhere between cautiously positive and flying, while our economy is falling apart. It needs fixing, and fast.”

Business community concerned

It all contributes to what can broadly be described as “bad vibes”. It may now be almost five years since the start of the Covid-19 pandemic, but the economy and the cost of living remains a dominant, though easing, concern among the public and, according to new research, the business community as well. The Herald’s Chris Keall reported yesterday (paywalled) that 77% of senior managers identified economic uncertainty as the primary threat to their organisation over the next 12 months, compared to just 13% last year. Respondents from larger firms were more likely to be optimistic about the year ahead, the survey found.

In a Q&A for the Herald, new EMA chief John Fraser-Mackenzie was similarly pessimistic. “Even with lower interest rates and the economy recovering, it will take time to rebuild balance sheets before there is any meaningful investment in growth,” he said. The government has identified that economic growth has to be a focus this year, intending to open us up to further foreign investment. Finance minister Nicola Willis told the Herald’s Thomas Coughlan (paywalled) that the goal was to “have more invested here in industries and projects that will drive growth and development”.

Interest rate cut coming next month

From the outside, it feels slightly confounding that the economic outlook and the general mood remain so gloomy while interest rates have been on a downward trajectory. The Reserve Bank has been widely picked to make a further 50 basis point cut to the official cash rate next month, and indeed governor Adrian Orr signalled as much during the November update. However, that may now be a line call. As BusinessDesk’s Rebecca Howard explained yesterday (paywalled), a weakening New Zealand dollar coupled with a strengthening US economy (and a new president waiting in the wings) may prompt our central bank to go with a more cautious option in February. “The anticipated 50 basis point cut… should not be considered a done deal,” BNZ senior economist Doug Steel said. “Indeed, we think there is much more chance of a 25 than a 75.”

The NBR’s Nicholas Pointon has a good write-up on our current economic situation, for subscribers only, explaining that as a general rule countries with higher interest rates tend to attract foreign investment, increasing demand for that country’s currency compared with those offering lower rates.

Consumer spending muted

Meanwhile, in more unwelcome news for businesses, consumer spending growth was at its lowest level in five years in 2024, reported RNZ. Data showed that consumer spending through retail merchants, excluding hospitality, rose just 0.8% last year, while the average transaction declined by 0.6%. While transaction numbers may have been marginally up, payments company Worldline said the annual underlying spending growth was the lowest in the last five years. As noted by The Post, while there was the traditional flurry of pre and post-Christmas spending, it wasn’t enough to push spending above levels seen in major cities a year earlier – December spending was down 0.7% on 2023. Hospitality businesses also suffered, reported Worldline, with total spending down 2.7% on the year before.

Does any of this surprise you? What do you expect to see in 2025? Join the conversation in the comments.

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We revealed that only 2% of our audience support us financially and shared the real need to double the number of members who support us with monthly or annual payments.

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Australian opposition borrows National's 'Back on Track' slogan

The Liberal Party, Australia’s main opposition party, has launched its campaign slogan for the forthcoming election. As The Post’s Thomas Manch writes, it might sound familiar: “Let’s Get Australia Back On Track”. The slogan was directly borrowed from our National Party’s 2023 election run. No date for the election has been set, but it must be held by the middle of May. Australia’s current Labor government, led by Anthony Albanese, has only been in power for one term. Polling is close – a lot closer than an incumbent government would like – indicating a tough race ahead.

More reading:

• Dutton makes case to become PM, rallying Liberal faithful at launch (ABC)

• Anthony Albanese is already on the campaign trail. It signals the tough election battle ahead (The Conversation)

What the impending US TikTok ban could mean

In under a week, it appears likely that popular video app TikTok could be banned in the United States. As the New York Times explains, legislation signed by president Joe Biden gave the app’s owners until January 19 to divest, but there is a slim chance that incoming president Donald Trump could step in once he enters the Oval Office. The Herald’s Chris Keall looks at what this all means in practice (paywalled), explaining that the app would still work on Americans’ smartphones – initially – but without new security and feature upgrades. It will mean an exodus of US TikTok content creators, changing the experience for global users (like those of us here in New Zealand).

More reading:

• What happens after the TikTok ban? (Reuters, via RNZ)

• Concern about racial undertones of looming US TikTok ban (1News)

• Can Trump stop TikTok ban? Here’s what he can – and can’t – do (Forbes)

Join us live in 2025

We have four fantastic live events in 2025. Join us in Auckland and Wellington for The Spinoff Live!

Auckland at Q Theatre: Bryn & Ku’s Singles Club Party, February 13 and Gone by Lunchtime Live, April 9.

Wellington at the Hannah Playhouse: The Fold Live, February 20 and The Spinoff Book Club, March 13.

When is it too late to say ‘Happy New Year’?

The Spinoff’s Tara Ward bravely wades into one of the thorniest questions and determines when it’s too late to greet someone with “Happy New Year”. Your window is closing, and quickly!

To support work like this, consider becoming a Spinoff Member.

Click and Collect

• Extended rail closures will not be required in Auckland once the city's rail networks have been modernised, says KiwiRail's chief infrastructure officer.

• Cherry pickers living in “medieval conditions”, seasonal worker claims.

• If you’re a BusinessDesk subscriber, Pattrick Smellie explains why BlackRock gives foreign investment a bad name in NZ. (paywalled)

• New Zealand’s climate credentials on the line in 2025.

• Research reveals potentially dangerous “urban heat island” effect in central Auckland.

• Little penguins keep stealing the show at Ōamaru Netflix series set.

Right now on The Spinoff

Return to Shanti Mathias's original piece investigating the problem with pokies. In 2024, Alex Casey watched Christopher Luxon watch the World of Wearable Art show. Maddie Holden argues that the backlash to therapy culture shouldn't stop you doing therapy.

That’s it for another day. Thanks for reading and see you tomorrow.

Want to get in touch? Join the conversation in the Substack comments section below or via email at thebulletin@thespinoff.co.nz if you have any feedback on today’s top stories (or anything else in the news).

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