Business reporter Katie Bradford sets the scene for next week in economics.
Prevo
The pre-election financial update will be released on Tuesday. We know it’s going to be bad. The question is how much pain and spin the normally unflappable Grant Robertson will have.
It will reveal the Treasury’s forecasts for inflation, unemployment, government debt, employment balance, and economic growth over the next two years.
The Minister of Finance hopes that this will not be the final nail in his coffin for this desired role. He will be looking for any nuggets of gold that can be spun positively and add some sparkle in the eyes of voters. There are a lot of difficult obstacles in his way. The disappointingly low tax – $2 billion less than expected in the May Budget – means everyone already knows the books are in bad shape. But economists are now forecasting a deficit that could be as much as $5 billion worse than expected.
While it is the Labor Party that will be hurt the most, it is making expensive promises that will be more difficult for all political parties to make. Their costs depend on what they know. They are all walking a very thin tightrope between spending cuts, new taxes, and tempting promises. Any more bad news and the rest of the election campaign will be all just souvenirs and not dealt with politically.
Multiplication and spending
How strong are the remaining cards in people’s wallets? Stats NZ e-card statements will also be released on Tuesday. Spending over the past few months has remained stable, or with little movement, but this is largely due to rising commodity prices. High interest rates and a general cost-of-living crisis are causing consumer spending to rapidly slow. This is despite a surge in migrants and tourists, meaning New Zealanders are keeping their wallets locked. Nearly half of mortgages will be refixed in the next few months, which will only reduce spending further. This will make the Reserve Bank happy and, if it continues, will keep interest rates stable for a little while longer.
Grocery bills
Food prices (and rent) will be released on Wednesday. Speaking of inflation… the next CPI (our main measure of inflation) won’t be released until three days after the election, so these monthly numbers are our best indicator of how inflation is tracking.
Food prices fell 0.5% in July on a monthly basis. That number is still 9.6% from 2022, but this lower decline was a ray of light in a dark cost-of-living crisis.
Immigration
Immigration figures are also released on Tuesday. One of the most important drivers of the economy right now is immigration. These additional arrivals are a good thing for employers desperate for workers and companies looking for new clients. Queenstown is booming again and immigration plays a huge part in that. Net migration was 86,800 on an annual basis in June. Arrivals increased by 219% – for obvious reasons. Visitor arrival figures have also been announced, giving us an idea of how successful tourism is. All signs point to tourism being on a positive note and, along with hospitality, slowly returning to pre-Covid levels. Political parties will also be watching these numbers closely as they consider immigration settings.
globally
China. keep watching. If the Chinese economy continues to deteriorate, all expectations will be out of the window.