If we don’t slow down on the spending then it’s going to mean higher interest rates, a deeper recession and more job losses - that’s the message.
Some of us clearly aren’t getting it.
In the first three months of the year spending on hospitality was up $933 million (32.3 per cent) compared with the same quarter a year ago.
Ok, year-on-year comparisons still aren’t great. We weren’t locked down in the first quarter of 2022 but we were busy actually catching Covid and it wasn’t a great time for going out.
How about a month-on-month comparison?
Well, non-retail spending - which includes travel - was up 11.4 per cent in March compared to February. And spending on hospitality was up 14.5 per cent from February.
That’s quite a rise, especially when the numbers are supposed to be going down.
Of course, the weather was awful in February. Economists make the point that there has been a rebound effect, with people keen to get out and about after feeling short-changed on their summer fun.
That still seems a bit weird to me. Surely at this point, the Reserve Bank’s message should be getting through: batten down the hatches there is a recessionary storm coming.
I don’t want to blame people for having a good time.
But, if we look at who is least likely to be feeling the heat from the Reserve Bank’s monetary tightening then, well, I blame the young...and the old.
You certainly can’t expect the young to do what they are told.
As a parent of teenagers (and having been one myself), I can attest that being reckless goes with the territory.
In fact, when you look at all the moving parts of this economy, young people continuing to go out and “get on it” is probably one of the few non-variables.
They’ve just been locked down for two years and then the weather ruined February.
Also, they have jobs and they mostly don’t have mortgages to worry about.
Saving seems pointless enough at the best of times when you’re young. Telling them the world is going to hell in a handbasket is just an inspiration to live even more in the moment.
So, how about the old then? Let’s say the over-50s (so I can include myself and not be accused of ageism), we’re a sensible bunch, aren’t we?
We do tend to have our mortgages paid off though, or at least paid down and under control.
In fact, the older we get the more likely we are to have savings and then higher interest rates just mean better returns.
As you get closer to 65 the threat of losing your job diminishes (who hasn’t done the maths on driving an Uber).
Also, let’s be blunt, the older you are the less inclined you are to delay spending on experiences.
Time is the ultimate commodity. So forgive me if I splash out on a holiday catch-up with my old high school buddies - I’m old enough to understand how precious these times are now.
But if we can’t rely on the young or old to curb their spending, who will do it?
The reality is that we’re going to be putting the squeeze on people in their 30s and 40s - people with young families and large mortgages.
And even that group may be buffered from direct impact by the strength of the job market.
The latest Trade Me figures show New Zealand’s job market remains strong with salaries at record highs and a number of job listings still solid.
The data showed the average salary at the end of the first quarter was a record $68,316, up from 2022′s high of $67,562.
So it looks like, for now, young professionals are keeping up with the pace in this wage-price spiral.
Where does this leave us?
Basically, it leaves us with an economy that is proving very difficult to slow down.
We’ll find out more detail on exactly how difficult next Thursday when inflation figures are released.
It’s hard to be sure but expectations are that - unlike in the US and Australia - we’re going to see the topline inflation stuck at high levels.
Worryingly, I think the problem is starting to go beyond some of the obvious drivers now, such as external stuff like oil and supply chains and even the Covid stimulus.
I think it’s starting to look like entrenched behaviour.
But hey, if we’re all still partying and travelling why does it matter?
Sadly, it matters a lot more than most people realise.
Our current account deficit - the gap between what the nation spends and what it earns - is now 8.9 per cent of GDP.
That has to come down or we’ll start to risk the party-pooping attention of agencies that could push up the cost of borrowing and push down the value of our dollar.
The longer we carry on with the productive end of our economy failing to keep pace with the non-productive end, the bigger the job we’ll have to do to rebalance the economy.
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