The Reserve Bank of New Zealand must have a death wish.
New Zealand’s economy was already experiencing a technical recession at the end of 2023 and a very deep per capita recession:
Consumer spending has crashed. Real per capita retail sales have plunged 12.4% below their peak, as illustrated below by Justin Fabo at Antipodean Macro:
The composite PMI points to a deepening recession when the official GDP data for Q1 is released:
Meanwhile, New Zealand’s labour market is deteriorating amid record immigration-driven population growth.
As a result, the number of applicants per job ad reported by Seek has exploded:
And New Zealand’s unemployment and underemployment rates are rising, with more to come:
On Wednesday, Justin Fabo at Antipodean Macro reported that New Zealand company liquidations have shot up:
Yet, despite the clear weakness in New Zealand’s economy, the Reserve Bank lifted its official cash rate forecasts in its latest Monetary Policy Statement, suggesting rates have not yet peaked:
This comes despite the Reserve Bank also raising its unemployment forecast to above 5%:
If the Reserve Bank follows through and lifts the official cash rate even higher than its current level of 5.5%, New Zealand will be plunged even deeper into recession.
