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Economic update: Inflation dips slightly, but business confidence is shaky

In brief
  • New Zealand’s quarterly inflation slows to 6% per annum
  • Jobs advertised, those applying for them and wages increase.
  • The housing market shows faint signs of recovery after 18 months of decline. 
  • BusinessNZ’s Forecast indicates minimal growth because of government spending, rising debt, high inflation and regulatory burdens. Confidence amongst business owners is low.

Inflation slows in NZ, but still high

The Consumer Price Index (CPI) annual inflation rate in New Zealand has slowed to 6% in the second quarter that ended in June 2023. It had peaked at 7.3%, in June, 2022. According to Stats NZ, rising food prices, which are up over 12% for the year still continues to be inflation’s biggest contributor.

On the one hand, some highlight the fact inflation in NZ is lower than the OECD average of 6.5%. On the other hand, critics of the Government point out that NZ’s inflation rate is still much higher than comparable countries like Canada, the US and Australia. 

Fuel prices have risen again, at around  $3 per litre of 91 octane fuel, even outside Auckland, over the last few months. This has prompted some protests and calls for the Commerce Commission to investigate

Wages increasing and job applications up’s employment dashboard shows an increased number of jobs advertised and more people applying for them. The SEEK Advertised Salary Index (ASI) shows a 5.1% year-on-year salary increase, from Aug. 2022 to Aug. 2023. The “fastest advertised salary growth on record” (data back to 2016).

Economic update: Inflation dips slightly, but business confidence is shaky - Centrist
NZ’s inflation is still going up. It’s not going up as fast as it was. Nor is it going up as fast as in some other places, but it’s still going up.

The sectors with the most significant salary boosts were consulting and strategy (increasing by more than 10%), engineering, healthcare and medical.

Wage growth on average still lags behind core inflation, but the data suggests potential future increases and more sustained growth. 

Job ad volumes and the number of applications per job ad have both risen by 2% monthly in August. But ad volume is still down 26% since this time last year.

NZ house values rising for the first time since late 2021

Data shows New Zealand’s housing market is exhibiting signs of a very slight recovery following 18 months of decline, beginning late 2021. Over the past three months, on average, NZ house values have shown a modest increase of 0.5%. This marks the first positive movement in this metric since the downturn began.

NZ’s real estate industry is pointing to this rise in house values as evidence of growing market confidence. ANZ economists have predicted another 4% rise over the latter part of this year.

NZ business owners frustrated

The latest BusinessNZ Planning Forecast indicates minimal growth prospects and a dim business outlook. It shows rising government debt levels, persistent and high inflation, weak agricultural prices and regulatory burdens are currently hurting economic growth.

GDP is up, but are we better off?

Craig Renney, Chief Economist for the Council of Trade Unions, pointed to a 0.9% GDP growth in the last quarter. But, as we reported last month via The FACTS, these numbers likely need more context to account for a significant population increase, as the GDP per person is actually down.

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