Government tried to tell us<\/a> the shock of the United States tariffs in April was to blame for the tanking second-quarter GDP.<\/p>\nI just don\u2019t buy that. There has been almost no significant tariff impact on the New Zealand economy yet.<\/p>\n
Dairy, meat and kiwifruit exports are all booming with record prices.<\/p>\n
And I don\u2019t think that, for the average consumer, tariff policy is the all-pervasive issue that political and economic commentators see it as.<\/p>\n
Donald Trump gets bigger headlines for weirder stuff every week.<\/p>\n
Did you see him address the US Generals?! That was weird and worrying.<\/p>\n
The problem is that New Zealanders have been hit in the pocket by rising food and energy prices at the same time as they are worried about losing their jobs (or have actually lost their jobs).<\/p>\n
We\u2019re being squeezed by both kinds of bad economy at once.<\/p>\n
Economists call this stagflation.<\/p>\n
Any extra dollars coming in because of rate cuts are being eaten by additional living costs, saved or used to pay down debt to help create a buffer against the risk of redundancy.<\/p>\n
That\u2019s created a negative feedback loop. Consumer caution hits business returns, which causes job losses, which hits consumer confidence … and so on.<\/p>\n
Some people have laid the blame on the RBNZ for not cutting the cash rate fast enough. But let\u2019s not forget that the Government changed the bank\u2019s mandate to a sole focus on inflation.<\/p>\n
That means it has to keep worrying about inflation (even though most of the rising prices relate to tradeable items outside its control) and it isn\u2019t supposed to consider what\u2019s happening to employment.<\/p>\n
The ideological policy move has turned out to be quite a substantial own goal for the Government (perhaps second only to the money that was wasted on tax cuts for which they\u2019ll get no credit at the polls next year).<\/p>\n
Many economists think the RBNZ will be in catch-up mode on Wednesday and will deliver a 50-basis-point cut.<\/p>\n
Others believe it will have to stay wary of inflation and move more slowly. But there is general agreement the OCR will go to at least 2.25% \u2013 and outside odds on a low of 2%.<\/p>\n
I still believe monetary policy works. So I still retain a good deal of confidence that the economy will improve in the next few months. Or the next several months (I\u2019m less keen to put a timeframe on it now).<\/p>\n
The economic cycle never stops turning.<\/p>\n
If it\u2019s bad now, it will be good later; if it\u2019s good now … watch out.<\/p>\n
Economics can tell us where we are, and sometimes it can tell us where we are going, but no amount of economic knowledge is a sufficient condition for financial success.<\/p>\n
That requires action.<\/p>\n
So, after the beating we\u2019ve taken over the past few years, I think we need a renewed sense of realism about what recovery looks like.<\/p>\n
I watched the original Rocky movie again last week.<\/p>\n
For those who haven\u2019t seen it (or haven\u2019t seen it in years), it is much grittier than the sequels that followed.<\/p>\n
Rocky is a loser who gets an unlikely shot at the title. He\u2019s the lovable underdog.<\/p>\n
But after all the build-up, all the big dreams, after the epic training montage that ends with Rocky dancing on the steps of the Philadelphia Museum of Art, the movie takes a dark turn.<\/p>\n
The night before the big fight, Rocky goes for a walk through the empty arena. He thinks about the challenge he\u2019s facing and what\u2019s about to happen.<\/p>\n
He goes home to his partner, Adrian, and tells her he can\u2019t win.<\/p>\n
He recognises that the champion, Apollo Creed, is just a class above him.<\/p>\n
Adrian\u2019s response is profound. She doesn\u2019t give him a pep talk or say \u201dYou can do it, Rocky”.<\/p>\n
She just looks at him and says, \u201cSo, what are we going to do?\u201d<\/p>\n
That\u2019s the response we should have to this extended economic downturn, both on a personal level and as a Government policy approach.<\/p>\n
The recovery hasn\u2019t happened in the manner we hoped it would, so now what \u2013 deliver another jargon-filled pep talk and keep our chins up?<\/p>\n
Here\u2019s a piece of corporate jargon that actually works quite well: fail fast.<\/p>\n
If something doesn\u2019t work, acknowledge it quickly and move on or, as a good corporate leader would say, pivot.<\/p>\n
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.<\/p>\n","protected":false},"excerpt":{"rendered":"We\u2019ll definitely turn a corner then, right? The data will improve, and confidence will return … things will…\n","protected":false},"author":2,"featured_media":382057,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[4891,64,63,99,205539,46193,47027,164,205540,1467,15448,46332,2652,36221,24677,196584,320,19004,319,15340,16363],"class_list":["post-382056","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-4891","tag-au","tag-australia","tag-business","tag-canvas","tag-dann","tag-didnt","tag-economy","tag-heralds","tag-it","tag-liam","tag-like","tag-on","tag-recover","tag-stories","tag-supposed","tag-the","tag-this","tag-to","tag-was","tag-why"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/382056","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=382056"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/382056\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/382057"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=382056"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=382056"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=382056"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}