Speaker 1: Kyota. I'm Chelsea Daniels and this is the Front Page,
Speaker 1: a daily podcast presented by the New Zealand Herald. The
Speaker 1: financial year is coming to an end and that means
Speaker 1: from next Tuesday a lot of kiwis will be getting
Speaker 1: more money in their wallets. April first is when the
Speaker 1: annual General Adjustment takes place, when benefits and minimum wage
Speaker 1: increases to account for wage growth or inflation. While benefits
Speaker 1: are getting a two point two two percent rise and
Speaker 1: Super and the Veteran's Pension gets a three point five
Speaker 1: to one percent increase, minimum wage is only going up
Speaker 1: by one point five percent As people continue to feel
Speaker 1: the sting of the cost of living crisis. What impact
Speaker 1: will these changes have and how well is our economy
Speaker 1: performing at the moment? To talk us through it all
Speaker 1: today on the Front Page where joined by Enzad Herald
Speaker 1: Business Editor at Large Liam Dan. Liam, let's start with
Speaker 1: the minimum wage. It's going up one point five percent
Speaker 1: to twenty three dollars fifty. That's not in line with
Speaker 1: inflation and instead in line with the NZ first National
Speaker 1: Coalition agreement to moderate those increases. What sort of impact
Speaker 1: is this lower increase than usual going to have? It
Speaker 1: was two percent last year and it impacts between eighty
Speaker 1: and one hundred and forty five thousand workers.
Speaker 2: Hey yeah, I mean it's a very deliberate thing to
Speaker 2: take it up by lower than the rate of inflation,
Speaker 2: because I guess the argument is, you know, I've had
Speaker 2: some big minimum wage increases during the labor government period.
Speaker 2: The argument is, whether it's you believe it or not,
Speaker 2: that in doing that, they've increased business costs and added
Speaker 2: to inflation, and you get into kind of a a
Speaker 2: spiral of inflation where so you know, you're going to
Speaker 2: the cafe to get coffee, if the workers there, if
Speaker 2: the wages have gone up significantly, then you're paying more
Speaker 2: for the coffee. Just that increases inflation, so your wages
Speaker 2: have to go up to cover the inflation. And so
Speaker 2: they're trying to push back against that inflationary spiral. I mean,
Speaker 2: there'll be listeners who will point out that that seems
Speaker 2: a bit unfair. You know, we're looking at the people
Speaker 2: who are earning the lowest amounts in the economy. But
Speaker 2: it's in a different environment to when minimum wages were
Speaker 2: going up previously. We've got basically unemployment is rising. There's
Speaker 2: a shortage of jobs, and so you'd imagine what we're
Speaker 2: starting to see wage growth more diminished across the board,
Speaker 2: So people aren't getting the wage rises they would have
Speaker 2: got because they just don't have the ability to switch
Speaker 2: job the same way. So I guess that is in
Speaker 2: line with a trend for lower wage growth, and the
Speaker 2: hope would be that people are still able to by
Speaker 2: beating the inflationary cycle, getting the economy going, people are
Speaker 2: able to get better jobs and they're more higher paying
Speaker 2: jobs out there, So that'd be the government's logic for that.
Speaker 1: The other main increase is for the support for beneficiaries.
Speaker 1: Raddle off some numbers for you here. Job seeker support
Speaker 1: is going up roughly two point two two percent. For
Speaker 1: sole parents, that's an increase of nine dollars to five
Speaker 1: hundred and five dollars eighty For couples with children, that
Speaker 1: increases seven dollars and six cents to three hundred and
Speaker 1: twenty four dollars sixty one. For me bel over twenty
Speaker 1: five without kids, those increases bring them to three hundred
Speaker 1: and sixty one thirty one if single, and three hundred
Speaker 1: and seven forty two if in a couple. For veterans
Speaker 1: and those on super they're getting a three percent increase,
Speaker 1: bringing it up to one thousand and seventy six dollars
Speaker 1: and eighty four cents a fortnite and eight hundred and
Speaker 1: twenty eight thirty four for those in couples. The government
Speaker 1: has touted these increases as reflecting the cost of living,
Speaker 1: but these happen every year, don't they.
Speaker 2: Yeah. I mean, look, they're basically in line with inflation
Speaker 2: and a little bit pets, a little bit more generous for superinuitants.
Speaker 2: But yeah, again, you've got a government that's struggling with
Speaker 2: balancing the books, doesn't have a lot of money, is
Speaker 2: actually dealing with more people on benefits because of the
Speaker 2: situation with unemployment, so they're looking at a much higher cost.
Speaker 2: I think they obviously felt politically that the minimum they
Speaker 2: could do would be to match inflation and not have
Speaker 2: those beneficiaries going backwards, because they really are some of
Speaker 2: the poorest people out there. But yeah, look, it's in
Speaker 2: a very tough environment for the government. They just don't
Speaker 2: have a lot of money to spend, unless, of course,
Speaker 2: they were to sort of change their debt limits and
Speaker 2: all that sort of thing. But politically there's a lot
Speaker 2: of pushback against that, a lot of concern about the
Speaker 2: level of national debt. So they've got these constraints they
Speaker 2: I guess, you know, it's a center right government. It's
Speaker 2: really trying to restrict the sort of relative value of
Speaker 2: benefits relative to work. I mean, they're trying to create jobs.
Speaker 2: They're trying to create incentives for people to find jobs.
Speaker 2: The flaw in the argument is the rising unemployment. They
Speaker 2: need to be creating jobs so that there are alternatives
Speaker 2: there for people on benefits, and se to be several
Speaker 2: months away from that.
Speaker 1: People.
Speaker 2: You know, the economists don't see unemployment peaking until the
Speaker 2: second half of this year, or perhaps perhaps earlier, perhaps
Speaker 2: in the middle of this year, and then hopefully we'll
Speaker 2: see some employment creation and a more flexible job market,
Speaker 2: and that will mean that people have more opportunity.
Speaker 3: Our strong expectation is that those who are able to
Speaker 3: work should work, and that more people who are working
Speaker 3: and the fewer who are on welfare, the better for
Speaker 3: them and their future, the better for their families, the
Speaker 3: better for the economy, and the better for New Zealand.
Speaker 3: We will do everything everything that we can to support
Speaker 3: people off welfare and into work and ultimately a better
Speaker 3: life for themselves and for their families. Under our government,
Speaker 3: we are making clear our expectation that those who can
Speaker 3: work should be taking all reasonable steps to find a job,
Speaker 3: and those who do not will face consequences.
Speaker 1: And politically as well. I guess they're not going to
Speaker 1: be losing any of their voter base by keeping beneficiary
Speaker 1: increase is at a minimum.
Speaker 2: Hey, you'd imagine not a huge amount. I can't Politically,
Speaker 2: I'm not sure what the split is for beneficiaries voting
Speaker 2: for center right parties. But yeah, I mean there is
Speaker 2: some politics to it. I mean it certainly they want
Speaker 2: to be seen to be disincentivizing the benefits and encouraging
Speaker 2: people to look for work, to get into work. That's
Speaker 2: been a real mantra for the government. As I say,
Speaker 2: just that slight flow in the problem that the unemployment
Speaker 2: rate is rising, there are more people going on to
Speaker 2: job seeker benefits because there isn't the employment being created
Speaker 2: right now now. The government will argue I'm sure that
Speaker 2: growth is coming, that we've seen the economy come out
Speaker 2: of recession. The thing is, say this a lot. The
Speaker 2: labor market tends to lag. It's one of the last
Speaker 2: things to turn in an economic cycle. So, you know,
Speaker 2: touch Wood hopeful that in the next few months will
Speaker 2: see some progress there.
Speaker 1: Power prices are also going up a lot. Actually from Tuesday,
Speaker 1: the average household's bill will go up by ten dollars
Speaker 1: a month this year, and then for the next four
Speaker 1: years it'll go up by five dollars a month. What's
Speaker 1: happening behind the scenes to necessitate this change.
Speaker 2: Yeah, that's going to feel quite rough to a lot
Speaker 2: of households. Well, there's a few different things. One is Transpower,
Speaker 2: the lines company that looks after the national infrastructure grid,
Speaker 2: has said that look at they've got to go up
Speaker 2: by ten dollars a month, and so those charges will
Speaker 2: be passed through to consumers via the power companies. So
Speaker 2: that's part of it. But also some of the power
Speaker 2: companies I've seen, for example, Mercury has said, you know,
Speaker 2: because of other factors like needing to invest in more
Speaker 2: power generation and invest in more you know, I guess
Speaker 2: that means wind farms, solar, all that sort of stuff,
Speaker 2: they need to put prices up. And also it's been
Speaker 2: a relatively dry summer, so lakes are low, so the
Speaker 2: wholesale prices are up a bit as well, so people
Speaker 2: are going to I mean that's more more of a
Speaker 2: gradual thing, but combined, people are going to feel that.
Speaker 2: You know, people are still very sensitive about inflation. We
Speaker 2: talked before about benefits going up by the inflation rate. Well,
Speaker 2: you know, the inflation rate isn't just a uniform thing
Speaker 2: that people experience. They experience it differently. And some people,
Speaker 2: if they're paying a lot for power, and if they're
Speaker 2: also facing increases for council rates and insurance bills, maybe
Speaker 2: feeling like inflation is still a real problem and they're
Speaker 2: really still feeling the cost of living crisis. The official
Speaker 2: stats will tell you that it's back under control at
Speaker 2: two point two percent an average two point two percent,
Speaker 2: which is about where central banks want inflation to be.
Speaker 2: But I think they really need to keep it down
Speaker 2: there for a long time before people start to feel
Speaker 2: like they've got through this sort of cost of living crunch.
Speaker 2: I think generally people are feeling like there is still
Speaker 2: a cost of living crisis out there.
Speaker 1: The interest on student loan payments is also going.
Speaker 2: Our pay Yeah. I don't think it's the interest so much,
Speaker 2: it's the amount that you have to pay so while
Speaker 2: you're in New Zealand, student loans are interest free. But
Speaker 2: what they've got it done is there is an incremental
Speaker 2: increase to the amount that you'll have to pay out
Speaker 2: of your wages. So effectively they're saying to people that
Speaker 2: you'll have to pay them back a little bit faster.
Speaker 2: I don't think it's a lot. I think it was
Speaker 2: like something like a dollar twenty a week or something.
Speaker 2: But that's possibly you could say a good thing because
Speaker 2: you know, okay, it's another squeeze on your wallet on
Speaker 2: the weekly basis, but not by a huge amount. But
Speaker 2: it does mean that you're actually paying off the principle
Speaker 2: faster and getting that loan under control. So I guess
Speaker 2: the government is keen to get the balances down, so
Speaker 2: they haven't adjusted the thresholds that would sort of keep
Speaker 2: the extra payments from going up. They've left it there
Speaker 2: so that you are having to pay a little bit more.
Speaker 2: But yeah, if it helps people get their loans paid
Speaker 2: off quicker, then that's not such a bad thing.
Speaker 1: And this one won't impact the average keyw but the
Speaker 1: active investor plus visa is seeing some changes as well.
Speaker 1: I believe what is that.
Speaker 2: This is part of a policy by the government to
Speaker 2: effectively attract more wealthy people into New Zealand with the
Speaker 2: hope that they'll be investing in the productive end of
Speaker 2: theonomy and creating the jobs which we talked about needing earlier.
Speaker 2: So they've introduced two new investment categories, Growth and Balanced.
Speaker 2: And so if you've got a minimum investment of five
Speaker 2: million dollars and prepared to put that into what they
Speaker 2: consider sort of highly productive parts of the economy, so
Speaker 2: like tech startups and all that sort of thing, investing
Speaker 2: in New Zealand business basically, then there is a visa
Speaker 2: a immigration visa category available to you to come and
Speaker 2: live in New Zealand. There's also a sort of a
Speaker 2: balanced category for investors over a five year term. The
Speaker 2: growth ones over a three year term, the balanced one
Speaker 2: allows you to have a bit more sort of boring investment,
Speaker 2: so that includes property and bonds and things, but you've
Speaker 2: got to bring in ten million dollars. And I guess
Speaker 2: this is part of a view that you know, we
Speaker 2: need some more dynamic capital in this economy. You know,
Speaker 2: we've got the banks that will lend for housing and
Speaker 2: for some business stuff, but we don't have a large
Speaker 2: amount of capital that it's going into startups and new business,
Speaker 2: and often that into the economy is finding it harder
Speaker 2: to get money to get up and running, to get
Speaker 2: things going. And so yeah, I guess the government's hoping
Speaker 2: that that will bring in these kind of wealthy individuals
Speaker 2: and they will be able to push along our productivity
Speaker 2: in the economy.
Speaker 4: It is solid and the numbers do not lie. Not
Speaker 4: only was it a positive number, but it was a
Speaker 4: far bigger number than anyone was predicted. So let's take
Speaker 4: the good news when it comes. Mike. There's always someone
Speaker 4: who can think of a nancy negative way of looking
Speaker 4: at it. But actually, this is an economy that has
Speaker 4: been bouncing along the bottom for a very long time,
Speaker 4: and now we are turning the corner. Let's celebrate that
Speaker 4: it's set to continue. Let's have a positive mindset.
Speaker 1: Liam. All these cash boosts and changes are welcome for
Speaker 1: the economy, I'm sure, But how is it actually performing
Speaker 1: at the moment. We were in recession a few cycles ago,
Speaker 1: and I understand from the last data we just weeaked
Speaker 1: out of it.
Speaker 2: Oh it wasn't a bad it was the bad results.
Speaker 2: There was zero point seven, So We definitely bounced out
Speaker 2: of recession. We didn't bounce back to where we were previously,
Speaker 2: because the two previous quarters saw the economy shrink by
Speaker 2: about two point one percent. So we back up zero
Speaker 2: point seven percent. We are hopefully on a path of
Speaker 2: more sustained growth, so perhaps a few more quarters and
Speaker 2: the economy will be as big as it was before
Speaker 2: we went into recession. So it actually takes a while
Speaker 2: to come back to that level. Yeah, so it's it's
Speaker 2: still feels like a tough economy because you know, that
Speaker 2: was a big recession. They were talking about it being
Speaker 2: the biggest slump not counting the COVID crunch since since
Speaker 2: nineteen ninety one, which was a really rough time. But
Speaker 2: it is progress, so is it is a first step
Speaker 2: on the path of recovery. So we have inflation under control,
Speaker 2: hopefully again touchwood that doesn't flare up again. We've got
Speaker 2: the economy out of recession. Really that the last piece
Speaker 2: of the puzzle is probably jobs and to some extent,
Speaker 2: confidence in the economy. So I think consumers in particular
Speaker 2: are still feeling nervous about the state of the economy.
Speaker 2: We've seen that in some consumer confidence surveys recently that
Speaker 2: they just don't quite match where some of the other
Speaker 2: more positive economic data is sitting. And I think that's
Speaker 2: probably twofold one. That overhang of inflation. People still feeling
Speaker 2: like even though the stats tell us inflation is under control,
Speaker 2: it still feels like there is a cost of living issue.
Speaker 2: And then it's that uncertainty around jobs. People aren't confident
Speaker 2: about switching jobs. They may be worried about their own job,
Speaker 2: and in fact some people are losing their jobs and
Speaker 2: the numbers on job seeker is going up. So until
Speaker 2: that piece comes into place, and I really, you know,
Speaker 2: be hopeful that we see at peak and that some
Speaker 2: of this positivity from growth coming back to the economy
Speaker 2: flows through. So you know, it's a sort of cautiously
Speaker 2: optimistic tone. Yeah, And of.
Speaker 1: Course the ocr was cut further last month. What are
Speaker 1: economists predicting in terms of more cuts at the moment,
Speaker 1: especially now that Adrian Or is out as a Reserve
Speaker 1: Bank governor.
Speaker 2: Yeah, I mean it was interesting to see the governor go.
Speaker 2: It was a big story, but I don't think it'll
Speaker 2: change the outlook for the Reserve Bank in the near future.
Speaker 2: They've sort of penciled in a twenty five basis point
Speaker 2: cut next month and then another one in May, and
Speaker 2: that might be where they pause, so you know, so
Speaker 2: that's another fifty basis points to come out. But economists
Speaker 2: are saying, well, it's not necessarily going to drop mortgage
Speaker 2: rates that much further because they're already priced in.
Speaker 3: There.
Speaker 2: Some movement on international borrowing costs also also affecting things,
Speaker 2: so in some ways, you know, it might be getting
Speaker 2: to the point where some of the best mortgage rates
Speaker 2: we're going to see for a while out there now
Speaker 2: or very soon. And an interesting phenomenon economists have noticed
Speaker 2: is that there is a really high percentage in historic
Speaker 2: terms for New Zealand of people on either floating mortgage
Speaker 2: rates or on really short term fixed rates because people
Speaker 2: have been holding off fixing longer because they're hoping that
Speaker 2: the rates will come down further. And that's probably made
Speaker 2: sense for the last few months. That means that there's
Speaker 2: actually a lot of people who aren't yet getting the
Speaker 2: full benefit of the rates cuts. They're they're sort of
Speaker 2: holding off locking in and to take the benefit. They
Speaker 2: want to wait until they sort of get the best deal.
Speaker 2: And I think it will become apparent to more people
Speaker 2: that it's time to lock in fairly soon. I mean,
Speaker 2: I don't want to pick it exactly, but you know,
Speaker 2: we'll see a lot of people locking into those lower rates,
Speaker 2: and so that's where money's going back into people's pockets,
Speaker 2: and that's really going to help assist with the recovery.
Speaker 2: So we haven't yet seen it boost house prices much,
Speaker 2: for example, and then and that may be to do
Speaker 2: with people holding off on booking in those lower rates.
Speaker 2: But you know, some of the things we've talked about
Speaker 2: for April one this year, certainly not as much money
Speaker 2: coming back to people, some things like the power prices,
Speaker 2: money coming out of people's pockets. But if we see
Speaker 2: a large number of mortgage holders fixing on lower rates
Speaker 2: over the next few months, then that's going to be
Speaker 2: a lot more money coming into the households and that
Speaker 2: should hopefully boost consumer confidence and add to the momentum
Speaker 2: in the economy, which is just still pretty fragile at
Speaker 2: the moment.
Speaker 1: Thanks for joining us, Liam, Cheers. That's it for this
Speaker 1: episode of the Front Page. You can read more about
Speaker 1: today's stories and extensive news coverage at enzdherld dot co
Speaker 1: dot MZ. The Front Page is produced by Ethan Sills
Speaker 1: and Richard Martin, who is also a sound engineer. I'm
Speaker 1: Chelsea Daniels. Subscribe to the Front Page on iHeartRadio or
Speaker 1: where if you get your podcasts, and tune in on
Speaker 1: Monday for another look behind the headlines.