New Zealand likely to remain in recession into next year - Infometrics forecast
-
Loading... - Martin Lucy
- 03 Feb 2023
- 75 Views
- 0 Like
- 0 Comment
The economy is probably already in recession and likely to remain so into next year amid rising interest rates and pressured household budgets, according to one economic forecaster.
Consultancy Infometrics has issued a new set of forecasts for the coming year and believes the Reserve Bank's (RBNZ) aggressive rate rises, the housing slowdown, labour shortages, and supply chain disruptions have already taken a toll on the economy.
"We think the economy is already in recession at the moment. We suspect that the final quarter of 2022 will have shown negative growth, and we're expecting negative growth to pretty much continue throughout 2023 and early next year as well," chief forecaster Gareth Kiernan said.
He said the contraction may not be too deep, around 1-1.5 percent, but it could not and would not be avoided as the RBNZ lifted the official cash rate to 5.75 percent by the middle of this year, sending mortgage rates to 14 year highs above 7 percent.
"In tandem with other cost-of-living pressures, higher mortgage repayments are starting to reduce spending volumes compared to the last couple of years."
Kiernan said that would inevitably result in higher unemployment, touching five percent next year.
"Job losses will directly weigh on people's spending, but increased nervousness about job and income security will lead to more cautious spending behaviour across a broader range of households." Read More…
