An OCR rise today is virtually guaranteed as commentators leapfrog to anticipating another one in time for a Christmas retail season that’s come even earlier, writes Anna Rawhiti-Connell in The Bulletin.
Crown accounts released today
It’s a big day for economic news as the Reserve Bank (RBNZ) gets set to announce the official cash rate (OCR) and Treasury opens the government’s books, releasing the Crown accounts for the year ending June 2022. There’s a two hour lock-up for economists and journalists this morning, followed by the release at 1pm. The Herald is running with a “blood bath” headline online, although it’s “Accounts to capture Covid pain” in print. The accounts will indeed capture the full fiscal impact of the delta and omicron outbreaks and the prime minister has already signalled that they won’t be pretty. Finance minister Grant Robertson has also indicated an era of more restrained and targeted government spending is upon us.
Light at end of tunnel
The Crown accounts may be “a blood bath” but there was some better domestic economic news yesterday. The New Zealand Institute of Economic Research runs a quarterly survey and released this quarter’s findings yesterday. Businesses are feeling less gloomy and reporting “light at the end of the tunnel”. Survey results also suggest that inflationary and workforce shortage pressures may be easing. That’s backed up by a report from TradeMe Jobs yesterday which found demand for roles from job applicants was up for the first time in two years.
3.5% OCR picked for today
At 2pm today, the RBNZ will announce the OCR. It’s largely accepted that the bank will lift the rate by 50 basis points to 3.5%. The Reserve Bank of Australia (RBA) surprised people yesterday by only announcing a 25 basis point rate increase. BNZ’s Stephen Topliss says it will be an even bigger surprise if the RBNZ follows Australia but that “the last thing that central banks will want to be doing is tightening really aggressively to thwart past inflation pressure” when there’s the prospect of a rescission looming. For a really grunty read on the risk of recession, I recommend Chartbook’s Adam Tooze this morning. It’s all crystal ball gazing, swings and roundabouts and roller coaster rides at the moment, I guess. David Hargreaves at interest.co.nz has leapt ahead to the next OCR announcement on November 23, writing that “a 4% OCR for Christmas is virtually signed and sealed.” That’s in line with what most economists currently think.
Christmas is coming early
Which brings me, you and all of us to Christmas and its creep. Christmas creep is the very real phenomena of Christmas merchandising making an appearance earlier and earlier in the year. The creep will be creepier this year as retailers try to offset the impacts of the current economic climate by elongating the season. In the UK, people are planning on spending £4.4b less on non-essentials this Christmas. Australians are already being warned to rein in Christmas spending after yesterday’s RBA announcement. In the US, retail giants like Target, Amazon and Walmart are all bringing seasonal sales promotions forward. Last week Reddit users in New Zealand went off about the appearance of Santa and reindeer-themed chocolates on sale at a Countdown supermarket. Ho, ho, ho.