Our presenter Tony Alexander gave another insightful and entertaining presentation on his view of the New Zealand economy, and we summarise our take on Tony’s main points below:

Tony felt we are currently in the maelstrom of a number of factors which have led to a softening in the economy and business and consumer confidence.

• The full effects of the Reserve Bank’s tightening of monetary policy from late 2022 onwards are now coming home to roost in the form of high interest rates and increased unemployment figures.

• Consumer spending habits are down as a hangover of the post-Covid spending splurge many kiwis undertook a couple of years ago. After being cooped up in isolation we reacted by spending our savings on travel, house renovations and new toys, and as a result we don’t feel the need to spend to replicate or replace these items in the near future. This has led to pressures in the retail environment.

• There are increased concerns about job security in some sectors, which in turn leads people to feel less confident about making large spending decisions, whether that is buying a new home or investing in new equipment or staff for their businesses.

• While inflation is generally decreasing towards acceptable levels, cost of living pressures in the form of significant increases in council rates and insurance premiums continue to bite.

The current slogan of choice has been ‘survive to ‘25’. Tony suggested that New Zealanders may want to temper our optimism that we will suddenly switch to an environment where we will all ‘thrive in ‘25’. He felt that a number of the aforementioned factors may continue to restrain the economy to a greater or lesser degree for the next 12 to 18 months.

While the economy continues to right itself, Tony suggests that businesses and people take a pragmatic approach:

• There is a natural limit to how much businesses can raise their prices, before driving their customers away. Instead business may need to look at making hard decisions, whether that is cutting back on staff or the locations they operate from, or running an eye over their businesses to focus on the most productive activities at the expense of trimming unprofitable goods and services.

• Businesses will do well to remain flexible and not overly rely on the hope that certain economic predictions may come to pass. New Zealand’s historical issues with productivity, combined with some of the unprecedented aspects of the current economic headwinds (such as the recovery from an unprecedent global pandemic and a lack of spending plans from consumers-) mean that it is difficult to predict where factors such as interest rates may end up.

• There is also some uncertainty as to the pace at which the world’s economy may recover, which will have a flow on effect on both our exports and imports. Some traditionally strong aspects of our economy, such as tourism, have plateaued recently as a result of overseas tourists taking a cautious approach to their finances.

• The property market is expected to strengthen over time. New home consents remain above the previous average, although there is a softening in the demand for multi-unit developments.

While this uncertainty makes it somewhat difficult to predict how quickly the economy will bounce back, it is not all bad news!

• Interest rate decreases are almost certainly on their way and we may see movement as early as late 2024/early 2025.

• The current cooling in the economy will not continue for ever. Businesses and people who continue to make considered decisions about rationalising their affairs will come through the current uncertainty in a stronger position. This will require carefully weighing up all of the factors that are relevant to your specific situation and receiving the right advice as to your best options.

This is where Cavell Leitch can help. Our team of experts in all areas of law can assist you in making the right decisions for you, whether that is in relation to your property or business affairs, dealing with disputes or relationship issues, protecting your assets and planning for the future, assisting with your business’ staffing or immigration needs, or helping implement your development or construction projects. We will provide you with tailored and cost-effective advice so that you can make decisions on the best way forward for you