Brad Olsen says a recession is ‘somewhat inevitable’ but hopes it’s ‘short and sharp’
A leading economist says a recession is “somewhat inevitable” for the New Zealand economy.
It comes as house prices continue to fall throughout May, with the trend towards weaker housing market conditions likely to continue, CoreLogic said.
The official cash rate (OCR) reached its highest level since 2016 after the Reserve Bank raised it to 2 percent, up 50 basis points, in the face of 30-year-high inflation.
Infometrics principal economist Brad Olsen told AM on Wednesday even though unemployment is at record low levels, he thinks a recession is “somewhat inevitable”.
“A recession does seem somewhat inevitable for the New Zealand economy and the hope really has to be it’s a short, sharp recession and we don’t see that sort of economic scaring, a long term hit that we usually associate with recession,” he told AM Early host Bernadine Oliver-Kerby.
I don’t think we are appreciating the magnitude of economic damage coming our way.
We were looking at 3.9% OCR by 2024.
That’s been revised to 4.5% this time next year.
The full impact of the economic implosion from the war in Ukraine has not hit us yet. Putin’s submission hold won’t be fully felt until December and seeing as that war is now predicted to continue through until next year, if you think inflation is bad now, you ain’t seen nuthin yet.
Put the war alongside a zero covid policy in China that could be triggered any time a new outbreak occurs, you have global supply chains that are broken and simply can’t mend.
Even if Putin’s own take him out or he dies from an illness, those taking over will still be left with the existential weakening of Russia. He has set a path towards war and destabilising the global system of rules based governance that empowers the West so fruitfully. They will have no choice but to double down.
The use of a nuclear battlefield nuke to terrify NATO and the Ukraine into submission grows by the day.
In China, their poor vaccine knockoffs are not as strong as the Western versions and the authoritarianism used to force control even the affluent in the cities is causing enormous economic harm and social damage. Their zero tolerance of Covid means any time it pops up in China, they lock down. This at a time of global geopolitical posturing in the South Pacific and their support of Russia while they eye Taiwan.
The current lock downs causing vast bottlenecks at Chinese Ports and strangling off global supply chains hurts the West as much as it does China, but it also provides the Communist Party vast power over a domestic population they are increasingly becoming afraid of and that could easily justify an external war for nationalism.
To put it simply, the things making life so tough right now are far more likely to become vastly worse by December.
What is the Government’s response? David Clarke has threatened the Shopping Duopoly with a wet bus ticket and promised slaps on wrists.
Y-e-a-h.
The sea is still rushing away from the shore at this stage as the tsunami crests the horizon.
We face the economic turmoil of a global economy that has printed $25Trillion dollars since 2008 to prevent an international economic meltdown which has artificially created the lowest interest rates for 5000 years!
You have to go back to fucking Mesopotamia for interest rates this low!
I don’t have a PHD in monetary theory, but I’m not sure raising interest rates that gives all that debt gravity as a means to slow spending will counter inflation if it’s being driven by Supply side dynamics, not Demand side dynamics.
Halting the speed of money flow is counter productive if Kiwis don’t have any money to start with. Prices are skyrocketing because of international inflationary pressures exacerbated by a global financial market pumped full of printed money. If Supply side dynamics are driving the inflation, cutting back consumer spending will tilt the economy into a steep recession, which will quickly become a depression when prices continue to climb because of scarcity.
The domestic response to this economic pain? An explosion of crime, explosion of desperation, explosion of domestic violence, explosion of poverty and a very real threat of political terrorism in this country.
Look, maybe I’m wrong. Maybe there can be peace in Ukraine tomorrow, all the infrastructure damage replaced at record speed and China won’t see another Covid infection and all that printed money bounces back and the global economy steams ahead cheerfully.
Maybe.
B-U-T I think that’s highly unlikely.
We are facing geopolitical shockwave after geopolitical shockwave, these are unique times that risk enormous Black Swan events the ramifications of which are incredibly dangerous.
I do not believe that you are ready for this Jelly.
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https://www.youtube.com/watch?v=B6Zb_AvxT8g
In full: Former BoE Governor warns of a “very unpleasant period” ahead – YouTube
Former Bank of England Governor Mervyn King blames central banks for fuelling the cost of living crisis by printing too much money during the pandemic.
30 minutes of lucid, eloquent plain English.
They will when first home buyers have the 20% deposits they were forced to save for wiped out by those very same banks.
https://www.youtube.com/watch?v=-DT7bX-B1Mg
The reality is that the central banks have been printing too much money since at least 2008 and that stemmed from America. How unfortunate that the rest of the world is now getting dragged into it amidst a global pandemic and a war in the Ukraine.
I think given Shanghai and Beijing are relaxing restrictions it’s a bit hard to say what the supply side situation is in the short to medium term. How issues in China relate to our local food production is not clear to me and I welcome some enlightenment.
Bob apparently you have all the answers so do your best!
Ok I get the impact of fuel charges on local food costs clearly but with increased Middle East production I saw a report somewhere saying crude prices were predicted to go from $105/barrel to somewhere in the $80 range/barrel. How that fits into all of Martyn’s prediction I don’t know. Ok is it the fact that people actually paid to gather our food are being paid, more than a pittance, is that an issue?
Lastly all the Putin/Russia fan club on this site keep saying he has Ukraine in the bag so the war may not go into next year at all. Maybe they are right. Either they win or those Russians with lots of money say enough is enough. It’s just plain wrong to say the strength of rouble is completely driven by demand. Those capital restrictions will be pissing people with influence off.
You don’t have to be part of a made-up Putin/Russia fan club to be allowed to highlight the lies and progagnda masquerading as news on the western media.
………… ‘strawman arguement’ comes to mind.
Agree Kevin you don’t, but some comments on this site seem have Putin as a poor innocent leader just trying to get by in the world.
Bollocks, Some of us struggle to make the point that the Ukrainians are no more innocent than the dirty Russians; that a war has been going on there for 8 years that we have not been informed about, and that our USA friends have been involved from the start. Another venture like Vietnam, Iraq, Afghanistan, etc.
Gee weren’t the Russians in Afghanistan? No argument from me about the Ukrainians, after all they have a strong Russian influence/connection. In fact Putin was supposed to be liberating them from the Nazi types. Unfortunately liberation seems to involve a whole lot of shelling.
I think the Russians were in Afghanistan at the request of their government, which was under threat from the Teleban.
Yes, I agree, what is it with that? Putin has always been the polar opposite of a poor leader simply trying to get by. His intelligence is second to none and his cunning makes him a dangerous man along with his skills, acumen and razor sharp perception of situations.
Oil is predicted to hit $175 barrel Wheel – I believe my analysis will stand till December
But but but KAMAHL SANTAMARIA !!!! (and of course “our friends at ASB and Dilmah”) /sarc
Robert Reich seems to have super vision and can see both what is obvious but remain unseen to all key players, and also explain why about inflation. He explains it is caused by corporate power, market domination by few giant companies, and a see-saw arrangement that enables each to raise its prices in turn. This is the very opposite of competition which we were told was going to ensure an efficient market and prevent bloated prices feeding Mr Creosote. We need to know about such and get inside those well-barbered heads who manage this stuff.
Link to his short summary: https://www.youtube.com/watch?v=Zi4KMCQuQYE
Didn’t this same economist along with a few others say NZ house prices would drop and not long after that they went up by 7% they are not always right. Some NZers have over leveraged themselves too much FOMO and as result they may end up with zero equity. And so who do you blame the banks or the borrowers or both.
I heard Grant Robertson and Adrian Orr warn people about buying expensive properties that they can’t service and many chose to ignore them. Now will this be at there peril (the borrowers) we will have to wait and see.
Absolutely CIP my thoughts exactly and why buy into a property that is so overpriced it would be a prison sentence.
Here’s a link showing how all this started in 2021. It has nothing to with Ukraine and won’t be solved if that war ended tomorrow. It’s all Government deflection (supported by the media) from decades of fiscal incompetence.
https://www.rbnz.govt.nz/monetary-policy/inflation
A 2% interest rate rise would mean paying another $200 pw on a $500k mortgage, on top of current repayments. Robertson’s 3-fiddy cost of living payment will need to be rolled out every week at this rate. However this could be an opportunity for a reality tv program series which follows ambitious gen-ys and millenials about to lose everything, and the cameras catch all the hope but also all the despair, the lack of money for discretionary spending and then even the basics, overdrawn accounts and payment defaults and then the mortgagee sale, and finally the big move back in with the parents who will love unconditionally. I don’t watch reality tv but I would watch this reality tv.
Robertson’s middle class cost of living payment will buy just two burgers in today’s money
https://i.stuff.co.nz/life-style/food-drink/300602120/burger-wellington-restaurateur-behind-185-burger-says-nows-not-the-time-for-shy-cooking
Chef has a point, now is the time to be bold with that bloated public sector salary Karen, even at these Weimar hyperinflation rates. Show the world you are not one of these dirty bennies. Buy the burger Karen, get it down your gob and let the juices drip down your chin you beautiful case manager you.
It saddens me that Kiwis do understand how bad things are going to get economically but if the effect does not seriously affect them then they will not care.
Do I sense crocodile tears?
The effect of the rampant immigration during the National government years has come to the surface. A high population, creating huge problems with infrastructure, waiting lists just to see a GP, a housing crisis and poverty.
This is the accumulative effect of no foresight.
Prof Jane Kelsey has done her best to stir up some intelligent thinking about outcomes from trade deals we have considered and then triumphantly signed. Look what I did Mum says the toddler with some pretty precious artifact in pieces! That will be having an effect on us at the end of the day. This is what TDB and Prof Kelsey put up in March 2022.
https://thedailyblog.co.nz/2022/03/01/nz-uk-fta-inclusive-trade-agenda-does-nothing-to-redress-failed-free-trade-model/
“The use of a nuclear battlefield nuke to terrify NATO and the Ukraine into submission grows by the day.”
Why? Russia is winning. Notice the tone has changed in the Globalist propaganda media like NY Times, suddenly talking about likely Russia win of Donbas etc. Cold War dinosaur Kissinger wheeled out to warn and advise cutting a deal with Putin. No more Adolf Putin losing HUUUGE! Go The Ukraine! messaging.
“I don’t have a PHD in monetary theory, but I’m not sure raising interest rates that gives all that debt gravity as a means to slow spending will counter inflation if it’s being driven by Supply side dynamics, not Demand side dynamics.”
True. What the RBG is trying to do is get the dollar higher to reduce imported cost (the signal of a further doubling 1 to 2 and then onto 4% next year is to get the markets onboard with currency revaluation). It’s the easiest way to get a quick impact. The reduced demand from homeowners and farmers (due to higher mortgage payments) would take longer to have an impact.
On the positive side it looks like China is to ease its lockdown approach, starting with business.
On the negative lower production because of omicron infection and isolation will continue (local shortages are part of the problem) through the year – hopefully employers flu dose their workers.
‘Consequences will be dire’: Chile’s water crisis is reaching breaking point
https://www.theguardian.com/world/2022/jun/01/chiles-water-crisis-megadrought-reaching-breaking-point
“Among their demands – which ranged from better pensions to healthcare reform – the slogan “it’s not drought, it’s theft” was a common refrain.
Many called for a rewrite of Chile’s 1981 water code, a relic of Gen Augusto Pinochet’s dictatorship (1973-1990) which enshrines one of the most privatised water systems in the world, allowing people to buy and sell water allocations like stocks.
Chile is also the only country in the world that specifically says in its constitution that water rights are treated as private property.
Before his election last year, Gabriel Boric, Chile’s progressive new president, promised a green future for the country, emphasising the protection and restoration of hydrological cycles.
Boric, 36, signalled his intent by appointing a renowned climate scientist, Maisa Rojas, as his environment minister – but he need not look far for a jarring reminder of the task awaiting him.
Just 50km south of Santiago, Lake Aculeo, once a tourism hotspot, was wiped off the map in less than a decade, disappearing altogether in 2018.
A recent paper, of which García-Chevesich was a co-author, found that the sale of water rights, local population growth and climate change combined to dry the lake out completely.”
NZ going in the same direction, 3 waters will not help, it will centralise and make it worse.
NZ Government should have put in population growth rules (instead they are doing the opposite encouraging more people to live in NZ and more private polluting growth), climate change rules (virtually non existent, NZ buys credits from overseas because they are too cowardly to stop polluting industry here in particular the 50% that is NOT dairy which is not talked about and expanding), and stopped increased consents for private individuals for golf courses and water bottling which has been rampant.
Consent granted for Chinese water bottling giant to purchase Otakiri Spring
https://www.stuff.co.nz/business/104695650/consent-granted-for-chinese-water-bottling-giant-to-purchase-otakiri-spring
Coutts water battle off to court
https://www.newsroom.co.nz/coutts-water-battle-off-to-court
Helena Bay Lodge consent for small stream to water lawns
https://www.nzherald.co.nz/northern-advocate/news/helena-bay-lodge-consent-for-small-stream-to-water-lawns/REQ2EGNNRIEJDGZ2QWTON4HRWI/
Chinese water bottling plant’s proposal to take water from Whakatane aquifer ‘sustainable’, court hears
https://www.tvnz.co.nz/one-news/new-zealand/chinese-water-bottling-plants-proposal-take-whakatane-aquifer-sustainable-court-hears
Canterbury water on way to Chinese market as bottling plant starts production
https://www.stuff.co.nz/environment/107721548/canterbury-water-on-way-to-chinese-market-as-bottling-plant-starts-production
Whakatane locals outraged on government’s encouragement of Chinese water bottling investment
https://www.tvnz.co.nz/one-news/new-zealand/whakatane-locals-outraged-governments-encouragement-chinese-water-bottling-investment
NZ Government Secretly Funded Water Bottling Companies
https://www.scoop.co.nz/stories/PO1904/S00055/nz-government-secretly-funded-water-bottling-companies.htm
Dome Valley Shock Decision: why is a Chinese company dumping French radioactive waste north of Auckland?
https://thedailyblog.co.nz/2021/06/17/dome-valley-shock-decision-why-is-a-chinese-company-dumping-french-radioactive-waste-north-of-auckland/
Dam delays: Half soon, half later. Maybe.
https://www.newsroom.co.nz/dam-delays-half-soon-half-later-maybe
US billionaire gets green light for two more golf courses at Te Arai
https://www.nzherald.co.nz/northern-advocate/news/us-billionaire-gets-green-light-for-two-more-golf-courses-at-te-arai/JYHQTEGHQCLJMR2ZFGJAQS74HI/
Thanks Save NZ while we are looking the other way all this is going on. We do have to peer through our fingers like frightened children at it. Of course the practical grown-ups would laugh at that analogy, and ignore most of it and put some paltry control on something that allows somebody bearing gifts to carry on despite.
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