One Question Quiz
Reserve Bank governor Adrian Orr (Photo: Getty Images)
Reserve Bank governor Adrian Orr (Photo: Getty Images)

The BulletinNovember 23, 2022

Financial stress biggest factor impacting people’s mental wellbeing

Reserve Bank governor Adrian Orr (Photo: Getty Images)
Reserve Bank governor Adrian Orr (Photo: Getty Images)

As we await confirmation of what could be to be the biggest lift in the OCR since 1999 today, financial stress takes the top spot in a new survey of New Zealander’s mental health, writes Anna Rawhiti-Connell in this excerpt from The Bulletin. To receive The Bulletin in full each weekday morning, sign up here.

 

Financial stress most impactful factor on mental wellbeing

new Ipsos survey of New Zealander’s mental health out this morning moves financial stress into the top spot for factors impacting people’s mental wellbeing. The survey compares three years of data and this is the first year financial stress has been ranked ahead of stress caused by relationships. Of those surveyed, 45% said concern about finances was the most impactful factor. For Māori it was 57%. Today’s offical cash rate (OCR) announcement will add to that concern but as ANZ chief economist Sharon Zollner says (paywalled) “the central bank’s inflation-targeting credibility is on the line” so the risk of a hard landing and the resultant impact can’t compete with the possibility of regret of “hiking too slowly and wishing you’d gotten on with it.”

Forecast arguably more important than rate announced today

Today’s OCR announcement is the last for this year. We don’t get another one until February. interest.co.nz’s David Hargreaves has a good piece on why the accompanying monetary policy statement (MPS), which forecasts where the peak OCR will be, is arguably more important for the Reserve Bank (and interest rates) than the rate announced today. Many economists are picking the Reserve Bank to lift the rate by .75 basis points (bps) to 4.25% but some still think .50bps would be enough. A lift to 4.25% would be the largest since 1999. As it’s the last OCR-related Bulletin of the year, we’ll go to the charts. The worst earworm, and possibly the worst song of the 20th century, Blue (Da Ba Dee) was number one at the time. Don’t click that link.

Not all economists agree the Reserve Bank needs to go to 4.25%

There is always some degree of argument about where the OCR will, and should land, but there seems to be a bit more concern about the inevitably of today’s announcement. Kiwibank’s chief economist Jarrod Kerr is worried we may get a rate that’s too high as the reality of higher interest rates and recessionary conditions overseas bed in. 60% of Kiwibank’s mortgages are set to roll over to new rates over the next six months. When asked if lifting to 4.25% was necessary, economist Shamubeel Eaqub said (paywalled) “Absolutely not.”

Black Friday and Cyber Monday a potential barometer

With the imported retail extravaganzas Black Friday and Cyber Monday looming, spending figures over this period will be watched with interest. Shoppers spent $248.2m in the four days from Black Friday to Cyber Monday last year, a 7% increase on the previous year’s sales. ASB economist Mark Smith was pessimistic about this year’s sales outlook. He said he did not expect to see similar levels of spending growth because sales last year had been boosted by post-lockdown shopping spikes. Retail NZ chief executive Greg Harford took a more optimistic, but tempered view saying “consumer confidence is not great at the moment” (paywalled) which “means that customers are increasingly focused on securing fantastic deals. In this context, Black Friday’s likely to go well, but things might be slower into December.”

Keep going!