Recession tipped to be deeper and arrive earlier
Described as sticky and intractible, economists now think inflation will bite for longer with GDP forecast to contract by 2%
Mōrena and welcome to The Bulletin for Tuesday, April 18, by Anna Rawhiti-Connell. Presented in partnership with Z Energy.
In today’s edition: teachers grade government’s class size plans; Louisa Wall understood to be in talks about standing for Te Pāti Māori; Hipkins and Luxon to attend Coronation but first; deeper recession forecast as inflation settles in
(Image: Tina Tiller)
Inflation expected to defy calls for spending restraint
You’ll note I’ve restrained myself from deploying a third “Orr” pun in as many months today. Not Duncan Greive though, who in his preview of what economists are expecting from the consumer price index (CPI) inflation data on Thursday, explains why New Zealand’s price rises continue to defy Orr’s hammer. Worth a click for the image alone. All signs point to the rate landing somewhere between 7% and 7.2% on Thursday. The last CPI update was in January where the rate of 7.2% was seen as an “encouraging sign” by ANZ economists as it was unchanged on the previous quarter. Crucially, the non-tradable inflation rate of 6.6% in January (also unchanged since the September quarter data) was seen as a sign that domestically-generated inflation was slowing. As Greive notes, the concern now is that domestic inflation may prove to be sticky at high levels.
The song we’re singing has changed — we’re not winning
In his column over the weekend, the Herald’s Liam Dann (paywalled) notes that non-retail spending — which includes travel — was up 11.4% in March compared to February and spending on hospitality was up 14.5%. The post-Covid party isn’t stopping. This morning a forecast from ASB economists is tipping New Zealand’s looming recession to be twice as deep as previously thought. ASB is predicting a 2% contraction to gross domestic product (GDP) by early 2024, which is double what the bank last forecast. The bank also forecasts that the country’s expected recession is likely to set in earlier. ASB’s chief economist says high-interest rates and inflation will continue to restrain consumer spending in the coming year, with homeowners feeling the strain and pain the most.
Thirty-year record broken on food prices
Everyone has their own annoying food-price cracked record to spin and mine is currently the price of cauliflower. I last saw it a few weeks ago at $12.95 a head and have not looked again. Yesterday, Stats NZ released the food price index figures for March. Food prices were up 12.1% in the year to March 2023 - which is the highest annual rate of increase seen since 1989. Sadly I was old enough to own Markita’s Toy Soldiers on cassingle when prices were last increasing like this, but not old enough to truly appreciate cauliflower. Fruit and vegetables were up 22.2%, a slight decrease from the 23.1% recorded in February. Vegetables aren’t even the worst of it with Stats NZ spokesperson James Mitchell saying “increasing prices for barn or cage-raised eggs, potato chips, and 6-pack yoghurt were the largest drivers within grocery food.”
Research highlights link between government spending and inflation
As the Herald’s Thomas Coughlan reports, research from Treasury economists has highlighted the effect of government spending and low interest rates on New Zealand’s persistently high rate of inflation. The research does not represent the official view of the Treasury but the economists looked at spending and inflation data and created models to look at which parts of that inflation were driven by demand and which parts were driven by supply. The National party has been trying to argue that the government and the Reserve Bank went too far in stimulating the economy over the course of the pandemic, while the government has consistently pointed overseas to other economies experiencing high inflation. The research suggests the opposition may have a point.
Editor’s note: In a prime example of “It’s me, hi I’m the problem, it’s me”, I just want to give you a heads up that I am not cooling the jets but jumping on a jet and heading away for three weeks from Thursday. I will be leaving you in the capable hands of Catherine McGregor (and a couple of guest stars) and will be back in time for Budget week on May 16.
“It’s early evening in Ranui, and the Waitakere BMX club is buzzing. A very small child is clambering over the seats, clutching a pair of bright pink cycling gloves. Two adults are animatedly discussing the merits of different wheel sizes. Everywhere, there are bikes." Shanti Mathias visits a BMX-racing institution in West Auckland, documenting it all on the new Samsung Galaxy S23 Ultra. Read her full story here (sponsored)
Teachers grade government’s class size plans
Announced yesterday, teachers spoken to by Stuff say the government plans to reduce the funded teacher to student ratio for years 4 to 8 by one will have little impact. Tim Nelson, principal at Masterton’s Lakeview School, said any recommendation to cut class sizes was a positive but in this instance the one-student change would make little impact. Speaking to RNZ’s Checkpoint, Finlayson Park School principal Shirley Maihi described the announcement as “a slap in the face” that “certainly won't entice people to come into the teaching profession.” Members of the country’s largest education union, NZEI Te Riu Roa, are set to vote on an improved offer from the Ministry of Education. Negotiating team leader Barb Curran welcomed the class size announcement. Newsroom’s Tim Murphy reports on the announcement which was made from an empty Remuera Intermediate during school holidays. Worth a read.
Report: Louisa Wall in talks to stand in Manurewa for Te Pāti Māori
Local Democracy Reporting (LDR) understands Lousia Wall has been in talks with Te Pāti Māori about running in the Manurewa electorate this year. Wall won the Manurewa seat for Labour in 2011, 2014 and 2017. In 2020, there was a legal stoush after a nomination from current Labour MP Arena Williams came in after the party deadline. Wall withdrew her nomination and ended up on the Labour list before resigning from parliament in 2022. LDR also reports that Buttabean Motivation (BBM) founder Dave Letele has confirmed he is in talks with Te Pāti Māori about standing in Māngere. That seat is held by Labour MP Aupito William Sio who has signalled he will not contest the seat in 2023 and plans to retire from politics.
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Hipkins and Luxon to attend Coronation
Prime minister Chris Hipkins will take three trips overseas this year, including to the UK for the Coronation of King Charles III in May and a NATO summit in Lithuania. Hipkins will also visit Australia this weekend. It’s expected Hipkins and Anthony Albanese will discuss whether any progress has been made on the rigths of New Zealanders living in Australia. Christopher Luxon, Richie McCaw and Abdul Aziz will also attend the Coronation. Recent Coronation news includes King Charles and Camilla choosing coronation quiche as the signature dish they hope will be enjoyed by all those not attending the Coronation but having parties at home instead. In a sign of the times, one of the reasons the dish has been choosen is that it’s not too costly to make. Two eggs though.
Click and collect
Simon Wilson looks at the battle shaping up at Auckland Council (paywalled) where not making deep cuts to arts and community funding and not raising rates and increasing debt by “a little more than proposed” requires the sale of the Council’s shares in Auckland airport
Prisons described as the country's largest residential mental health service following release of figures from Corrections on mental health services
Is driving on the left stopping New Zealand reaching its climate goals? Interesting line of thinking from Henry Cooke.
Prime minister defends increase in communications staff since Labour came in power
Update on Arnold Schwarzenegger and the pothole he filled in. According to the Los Angeles Department of Public Works, he actually filled in a utility trench.
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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Are coincidences real?
Paul Broks experienced a run of coincidences in 2021 and has set about trying to estbalish if they’re real. “The rationalist in me knows that coincidences are inevitable, mundane, meaningless. But I can’t deny there is something strange and magical in them, too.”
"Orr’s hammer"
That's O for Orrsome...
Treasury - didn't it get off track around 1984 and has been as lost cause ever since?