Kerre Woodham: What will it take to bring NZ out of its funk?

Finance Minister Nicola Willis all but invoked the old adage ‘the beatings will continue until morale improves’, when commenting on the state of the economy yesterday. In a stand up with Prime Minister Christopher Luxon after the Reserve Bank cut the OCR by 25 basis points to 3%, she blamed the sluggish economy on doomsayers from the opposition benches who were talking the economy down, and all but instructed Kiwi households to be more jolly.  

“I'm always conscious that households listen to merchants of misery everyday, most of whom sit on the opposition benches, who like to be doomsayers and talk down the New Zealand economy. I think it's been a really tough time for Kiwi families, there's absolutely no denying that, but we kind of have a choice – do we talk ourselves into an ongoing funk? Or do we look ahead and recognise that things will get better?” 

“People need to feel it, and I fully appreciate that. You know, some parts of New Zealand are feeling it, and other parts are not.”  

So that was Nicola Willis and Christopher Luxon. All well and good, but on the same day she told us to pull up our socks and perk up, Fletcher Building announced a $419 million loss. Kitchen Things, a premium appliance store that goes back to 1986, announced it was closing 12 stores (there is a Kitchen Things in Hamilton that's trading by itself and doing very well and would appreciate the support) and they asked ASB to appoint receivers. And Carter Holt Harvey is proposing to close its Nelson sawmill with the loss of 142 jobs.  

Willis and the rest of her government are exasperated and frustrated that things have not got better faster. When you're elected on your promise to turn things around, voters, not unreasonably, expect to see results. And yes, it was always going to be a big job, but they said they were up to the task, that they could do it. I don't think it is the opposition benches being doomsayers. They've done their damage. They're not saying much of anything at all. Labour knows all it has to do is stay schtum – the moment it opens its mouth and gets into trouble. So all they're doing is watching the Government trying to put its shoulder behind the big, sluggish beast that is the economy, and they're shoving it, and they're pushing it, and you've got the Finance Minister out the front dangling her carrots saying come on, up you get New Zealand economy, let's get cracking. And it's hibernating. It's in hibernation and it's not moving. And that must be very frustrating.  

There's a very good piece by Danyl McLauchlan in the New Zealand Listener, where he says at the moment the Coalition Government really only has itself to blame. I put that same question to Christopher Luxon when he was in. You're just waiting for the economic cycle. You're not doing anything magical or brilliant or wonderful. Yes, I like what you're doing with education very much. I like what you're doing with law and order very much. But when it comes to the economy, so far all I can see is that you're waiting for the natural cycle. There's not a lot going on. The Reserve Bank is confident lower interest rates will eventually help that inert, sluggish economy get off the front porch and start moving. It's identified numerous reasons why the cuts it's delivered in a year haven't spurred as much growth as some expected. That said, the Chief Economist Paul Conway said yesterday it's not our job to grow the economy. We're here for price stability. He said if you want to get growth going in the long run, it's about improving productivity in the economy. Monetary policy is not the instrument for that. We're about controlling demand to keep inflation low and stable. Don't look at us, he was basically saying, there is only so much that we can do. And sure, by lowering interest rates, by lowering the cash rate, thereby allowing banks to lower mortgage interest rates, that will leave some people who are coming up to setting mortgages with a bit more money in their pockets. It will allow some people to borrow money a bit more easily.  

But what is it going to take? I think people are a bit shell shocked after the past four years. And it is an economy of two halves – some people are doing really, really, really well, and good on them. But others, their pay packet arrives in their account and whoosh out it goes. You think you're getting ahead and then in comes the rates bill, or the insurance bill, or school fees, or what have you, and there is no extra for households to be jolly on. Others who might have got their noses ahead and have seen business start to pick up don't want to go through that again, so they're stockpiling like sensible squirrels. There was a lovely woman who rang in a couple of days ago and she was in painting and decorating. She said, I love people having money. I love people who've earned a lot of money, and have worked hard, and been lucky, or however they've got their money, because they spend it with us. And without them spending, we don't have a company. I don't have a business.  

That's right. You've got to have that extra money so that the money-go-round can continue. And right now, people either don't have that money, or if they do, they're a bit nervous about spending it. I would love to hear from you if you are in business, if you are a member of a Kiwi household, where are you at? Are you in a funk? I don't think I'm being talked down by the opposition. That's not how I feel. They're not ruining my buzz, they're not dragging me down. I just need to get ahead of the rates and the insurance. The mortgage rates have come down a bit, so that's good. I think 2026 will be okay, but that won't be any thanks to the Government or what it's done to be perfectly honest. 

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