Financial Pressures Remain

There have recently been a number of announcements that unfortunately indicate that the long-standing financial pressures that many businesses and households have been enduring are more than likely here to stay for a while longer. In April, the Reserve Bank of New Zealand (RBNZ) decided once again to maintain the Official Cash Rate (OCR) at 5.5 per cent which was welcome news for us all. Additionally, following this announcement, the latest Consumer Price Index (CPI) information from Stats NZ saw a drop in inflation to 4 per cent, its lowest rate since June 2021, down from 4.7 per cent in the December quarter. Whilst this is welcome news for both businesses and households, the rate of inflation is still falling too slowly for the RBNZ’s liking, so it reiterated the need for the OCR to remain at a ‘restrictive level’ for a sustained period, meaning that there is little chance of a significant reduction in interest rates until late this year or more likely early next year.

The ongoing difficult economic climate as a result of these figures and interest rates remaining elevated, has seen the financial pressure on businesses and households gradually increasing. Indeed, the growth of the economy has been described as feeble by the RBNZ with other recent data illustrating the extent of the problems caused by the intensifying financial stress. Consumers have found their level of disposable income declining, resulting in a 1.9% reduction in retail sales in the December 2023 quarter. In addition, small to medium-sized businesses recorded a fall in productivity last year and the Companies Office recently reported that 282 companies went into liquidation, receivership or voluntary liquidation last month, the highest number in nine years. With unemployment also on the increase, these are all indications that business and household resilience will be further tested in the months ahead.
In Auckland, these widespread financial pressures are exacerbated by higher house and fuel prices and the probability of a 7.5 per cent rates increase along with a possible 25 per cent increase in water rates. The current difficult situation means that more people are experiencing financial hardship with little or no respite predicted for quite some time, so if you’re finding your financial situation is becoming unsustainable, I would advise you to be proactive and have a chat with your bank to work out a solution. Hopefully, the resilience that people have built up during and post the pandemic will enable those experiencing significant financial difficulties to find their way through to what will hopefully be better times ahead.
In closing I would ask that you please keep supporting our local businesses by shopping local and utilising locally available goods and services.
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