Per-Capita Economic Stagnation

Well, that official cash rate decision today is probably one of those moments where you find out if you're a glass half full or a glass half empty person. Because on the bright side, the official cash rate didn't go up. On the downside, it looks like it's definitely going up next time. So yes, it's a reprieve, but it is only a reprieve for six weeks. Excuse me, before the screws on the economy start turning again. Thanks to the new transparency rules at the Reserve Bank, which frankly we should all love. We know that the committee voted and it was split right down the middle. Three of the committee wanted the OCR to stay at 2.25%. Three of them voted for it to be raised by 25 basis points immediately to calm down inflation pressure. But Anna Bremen, who's the governor, has a casting vote. She said it needs to stay so it stays put. But they didn't hide the fact that it is going to go up sooner than they had thought just three months ago. And it will go up by more than they thought just three months ago. And much of it appears to hang off on what businesses do with prices from here on in. Because what the Iran war is doing to prices is so widespread and so many prices are going up from fuel to fertilizer to food that it runs a high risk that businesses now start jacking up more prices in a second round of price rises, and that is what they're worried about at the Reserve Bank. And so economists are now calling three hikes in quick succession from here. Uh July, September, October. Now there are two problems with that, right? First one, all three hikes are before the election in November. National especially should be sweating because poorer voters are not happier voters. They are voters who turn to New Zealand first. The second problem, and this is probably the biggest of all the problems, is what this is going to do to our recovery, our economic recovery. We are probably in negative growth this quarter. Next quarter is probably not that flash, but at least positive. Entire sectors like construction are still struggling to get back up on their feet. Unemployment is still in the fives. The Iran war is still pushing up our fuel prices. Ergo pushing up the prices of everything. So glass half full. At least we get another six weeks before the screws start turning. Glass half empty, when they tighten, they are tightening fast on an economy that doesn't need that kind of pressure.