There is carnage on the high street with huge numbers of retailers and restaurants closing. Many in business are doing it tough right now. New Zealanders up and down the country are struggling with high interest rates on their mortgages. How did it all come to this? The story starts with the Reserve Bank Governor getting over-excited & printing $50 billion cash, flooding the country with liquidity & slashing rates close to zero in 2020-21. That magnitude of monetary expansion was never needed when the government was con-currently engaged in a fiscal expansion (financed by debt) of unprecedented scale. This Blog said so at the time, without the benefit of hindsight. High inflation inevitably ensured. In a panicked reaction, our Reserve Bank Governor promised to "engineer a recession" to flatten demand to bring the inflation he created back down again. According to news out yesterday, reported world-wide on Bloomberg, NZ now faces "a triple-dip recession as high interest rates curb spending & investment, according to Westpac Banking Corp. Gross domestic product likely shrank 0.6% in the second quarter & will shrink 0.2% in the third, the bank’s economics team said .. that would be the third instance of two consecutive quarterly contractions since the end of 2022". Yes, sirs & madams. Turns out our incompetent Central Bank never did "engineer a recession" to kill inflation. It engineered three - and killed three birds - jobs, the economy, and cost-of-living - with one stone, the OCR, instead.
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