Strap yourself in tightly, latest commentary of the economy from Bagrie and Alexander

A recent report from ASB outlines a concerning scenario for Kiwi households, with an expected average weekly cost increase of $115 in 2023, followed by a $70 increase in 2024

The economic insights from Cam Bagrie and Tony Alexander for 2024 reveal a complex and evolving economic landscape in New Zealand.

Cam Bagrie's analysis indicates a cautious optimism with the arrival of a new government, marked by a significant rise in business confidence to the highest level since mid-2017.

However, he warns against overreliance on this sentiment as a solid economic indicator, emphasising the need for tangible actions and policies to manifest positive economic outcomes. Bagrie highlights the enduring issue of inflation and the necessity of addressing it, despite the potential for short-term pain. He also points out the resilience of New Zealand's economy, as evidenced by its AA+ credit rating, but underscores the critical need for addressing key areas such as education, health, infrastructure, and law and order. He advises businesses and households not to expect all solutions from the government, suggesting that the seeds of economic upswing will be sown by businesses, and that challenging times might lead to necessary changes and innovations​​.

Tony Alexander's perspective, on the other hand, focuses on the unpredictability of economic changes and the importance of adaptability. He discusses the impact of the government's budget announcement, which followed the trend of increased spending in election years, and its potential to boost the New Zealand economy by approximately 1.7%.

Despite a recent hike in the Official Cash Rate (OCR), he notes a general optimism about inflation and a potential for interest rates to fall more rapidly than predicted. Alexander also touches on the housing market, observing a positive trend with increasing sales and plateauing house prices, suggesting a stabilization in the market. He anticipates that the housing market will be influenced by the outlook for interest rates, with the expectation that the cash rate will remain at 5.5% until around September 2024 before gradually decreasing, which might lead to increased real estate activity​​.

These insights from Bagrie and Alexander provide a nuanced understanding of New Zealand's economic situation in 2024, highlighting the importance of government policies, business resilience, market adaptability, and the interconnectedness of various economic factors