Tim Dower: Latest OCR rise further proves the economy will be a major election issue

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Recorded05 Apr 2023

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Another half-percent on the OCR, which was harsher than most pundits had predicted and takes the cash rate to 5.25 percent. 11 hikes in a row now, yet inflation is still painfully high. The RBNZ says employment is also still beyond what's sustainable and it says recent weather events have pushed some prices even higher. The fact the economic pundits were caught off guard is more than a bit of a worry. ”No one saw this coming”...that's Imre Speizer at Westpac. Capital Economics is now picking a protracted recession, saying it'll be so sharp that rates will have to be cut again by the end of the year. The NZIER says capacity constraints are easing and now is not the time to be adding further interest rates increases it says. And on it goes. Point is; these guys do tend to be ahead of the curve with what they project. In the main, they're pretty good at weighing up exactly where we are now, rather than looking at where we were two or three months back and getting out the smoke and mirrors. And where we are now is in a recession. House prices are tumbling, the employment market is weakening and GDP is in decline. People are moving off cheap home loans and wondering where they'll find hundreds more for the mortgage, plus hundreds more to feed the family and run the car. So what we're hearing now is a fear the recession that RBNZ wanted, the recession it says we needed, won't be short, or shallow. Conclusions? After the car crash caused by printing money for the pandemic, we've got a wall of debt to deal with and a mountain of pain to come for ordinary kiwis. What we can see now is that the fallout will be there for all to see, in time for the election. Will all that translate into votes on October 14th...well...that's one for the political pundits.See omnystudio.com/listener for privacy information.

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