The long-standing financial pressures that many businesses and households have been enduring are here to stay for a while longer. However, the latest Official Cash Rate (OCR) announcement in July when the Reserve Bank of New Zealand (RBNZ) decided once again to maintain the OCR at 5.5 per cent, has been a cause for optimism, not as a result of the level of the OCR, but due to the softening of the RBNZ's economic narrative.

The rather sobering predictions that interest rates may not be cut until late 2025 have been somewhat tempered as the RBNZ’s tone and language changed from interest rates needing to remain restrictive for a "sustained period" in May, to "policy needs to remain restrictive, but the extent of this restraint will be tempered over time consistent with the expected decline in inflation pressures". While this change may not on the surface mean a great deal to you or I, it has piqued the interest of economists with some predicting that there may be a reduction in the OCR in August which could signal a reduction in interest rates in November.
Whilst these are merely predictions, it does provide some hope that the light at the end of the tunnel is moving closer, which is a welcome change following recent indications that financial stress was becoming increasingly significant for more businesses and households. The pressure being created due to the ongoing cost of living crisis has resulted in a noticeable decrease in consumer spending, as households juggle their finances to ensure that in the first instance, they can cover the cost of the essentials.
This reduction in discretionary spending has put additional financial stress on the business sector with dire consequences for some. Credit bureau Centrix reported that company insolvencies rose to 269 in May, an increase of more than 100 on the same time last year. Sadly, of the 490 liquidations recorded in the first quarter of the year, 259 were in Auckland, illustrating that many of our local businesses are still doing it tough.
There are also other factors outside our control that have contributed to increasing financial stress and which have kept inflation at a level higher than predicted for a longer period of time, thus making the RBNZ reluctant to reduce the OCR to take the pressure off interest rates. The main contributors have been the increases in council rates and insurance premiums which appear to have gone up across the board.
Finally, as it appears that the future isn’t quite as gloomy, please keep supporting our local businesses by shopping local and using locally available goods and services.
 
businessnh.org.nz
09 968 2222
027 479 9563
kevin@businessnh.org.nz