Headlines are being made about the looming recession in New Zealand, making us all wonder, well, how is the recession affecting me? Let’s discuss everything ‘on the fly’ to reduce risk and fear, and make sure you’re covered for whatever comes next.
What is a recession?
The official definition is a drop in two or more consecutive quarters in the gross domestic product (GDP): the economy has been in decline for the past six months. People tend to be afraid to do anything when this happens, so they don’t invest money, don’t hire, and cut a lot of expenses, which only exacerbates the downturn.
Why do people think there’s a recession in New Zealand?
New Zealanders couldn’t afford to spend their money on one of their favorite pastimes, travel, so they dumped it into another sector: housing. During this time when money was cheap, the economy was closed, and it was protected by government reserves, it seemed that they had not suffered any problems in this regard yet.
Until now. Supply chains are tight (even in the famous Gib situation) and it takes a long time to get there. Inflation is rising and the Reserve Bank of New Zealand is raising the OCR higher than it has in the last two decades to control this.
In early June, the US Federal Reserve Bank raised interest rates, which meant that global markets fell sharply, known as a ‘bear market’. The definition of a bear market is when major US stocks (think S&P500) fall 20% or more from their long-term highs. Note: These situations are rare and usually indicate an economic downturn or decline. While the piece of heaven in this corner of the world is largely shielded from external factors, international markets dictate how the rest of the New Zealand economy is faring. The NZX50 is down nearly 20% since the start of the year, and cryptocurrencies (albeit unregulated and volatile) are also down significantly.
What is most alarming about this time in the economy?
Kiwis lack faith and trust, according to ANZ Bank’s June business opinion survey. What we see is the business confidence index has dropped to -62.6, approaching our low of -66.6 just prior to the close of the first disaster in April 2020. People have reasonably avoided any additional spending. , adjusting their bags, all with the intention that they might survive this.
On top of that we’ve been in and out of lockdowns which has generally slowed down the economy, OCR is going up which is causing interest rates to go up and the stock market to go up.
What is out there at the moment?
Back in 2011, the popular Parks and Recreation show launched ‘Treat Yo Self’ – introducing a day every year where people pamper themselves and indulge in an informal, luxurious and luxurious experience. This was just after the Global Financial Crisis of 2008-2009, where people began to look to micro-medicine as something to look forward to.
What we see now, in all events around the world, is that people rely on ‘f*ck it money’ (or Korean – Sibal Biyong). Basically the future is bleak, the present is tough enough, why not pay more for uber instead of taking the bus?
In contrast, we see families tightening their wallets, including essentials such as white goods, groceries, and all other bills, and are not confident in their big purchases. People are both afraid and not afraid to spend money freely, which can cause tension.
A single headline can make shock waves through the media – from journalists who distort consumer confidence into a depressing headline to experts who don’t weigh in to share their opinions. All it really does is give people extreme and distorted information, which doesn’t help people.