We’re locked in a divisive culture war we didn’t ask for, fuelled by angry online views that
don’t really reflect the way most of us are feeling.
The world’s economic growth is slowing under assault from the biggest upheaval of the US trade policy in almost 100 years.
Nobody knows what to expect next from the White House or how seriously to take each new proclamation.
Locally, we’re still counting the cost of our Covid response, and the Government looks set to deliver the tightest Budget we’ve had in about a decade.
On the local front, the economic recovery has faltered, and we’re again being told the return to meaningful growth will be slower than hoped.
On top of all this is a layer of confusion and uncertainty about where technology is leading us.
Artificial intelligence is exacerbating fears about job security.
Social media is accelerating social dislocation and robbing us of our attention spans.
Phew ... That’s a rough start for a column that is supposed to be self-consciously upbeat.
I think it’s going to get tagged as part of the Herald‘s On the Up editorial campaign.
I should say, for the record, that’s not why I’ve tried to write something optimistic this week.
Rather, I’ve been out speaking to business associations and Rotary clubs in the past few weeks. It genuinely concerns me how gloomy people are.
I feel it in my own social life too – conversations quickly turn to US politics, the economy and AI. Needless to say, they seldom land anywhere good.
I worry that the gloom becomes self-fulfilling.
I’m not saying we shouldn’t be discussing the bad stuff.
But the barrage of negativity coming at us is making it harder to overcome, not easier.
We have to retain some optimism and confidence so we can find a way through.
So let’s put all that grim stuff in a box this week and shove it down the back of the cupboard under the stairs.
Instead, here are five economic bright spots that are worth thinking about - if just to remind us that things can (and usually do) get better.
Commodity prices are booming.
This is no small thing. New Zealand’s economy remains underpinned by agricultural exports.
Dairy prices were up 4.6% across the board in the latest global dairy trade auction.
That prompted ANZ economists to revise up their farmgate milk price forecast for the 2024-25 season (from $9.85 to $10.00/kg milksolid) and the 2025-26 season forecast (from $9.00 to $10.00/kg milksolid).
This is expected to inject an extra $10 billion into the economy in the next two years (above and beyond the usual billions that dairy brings in).
Meanwhile, beef prices are also soaring.
New Zealand red meat exports during March achieved record values for any month, with sales worth $1.26 billion, according to the Meat Industry Association.
Values were up 34% compared to March 2024.
New Zealand isn’t going to slip back into recession while we’re seeing those kinds of prices for agricultural commodities.
It’s going to take time for the returns to flow from the rural sector through the rest of the economy.
We all want to see unemployment falling, consumers spending and retail and hospitality humming again.
But if this was just being stimulated by Government spending or another house price boom, we’d be right back in the inflationary debt cycle we’ve just been through.
So, this is the right sort of recovery.
The Crown accounts have improved
“The majority of the key fiscal indicators for the nine months ended 31 March 2025 were better than forecast.”
Those are Treasury’s words, not mine.
The numbers are still horrible.
The Government’s main operating indicator, the operating balance before gains and losses, showed a deficit of $6.6 billion. But it was $0.5 billion smaller than forecast, largely because of lower-than-forecast core Crown expenditure.
Net core Crown debt was $2.1 billion lower than forecast at $182.0 billion, or 42.6% of GDP.
It’s not much, but that’s the first time the accounts have been better than expected for a long time.
Unemployment didn’t rise
Unemployment didn’t rise in the first quarter of the year.
There are all sorts of reasons why it was still an ugly set of labour markets.
Total hours worked fell, more people have had to settle for part-time work, and wage growth is slowing.
But let’s step back a bit. It didn’t rise! Fewer people lost their jobs than we thought they would. That’s good.
And, as a bonus, all that negative stuff means it was still disinflationary.
It will help keep inflation in check and means the Reserve Bank can keep cutting interest rates.
Interest rates
With no fiscal stimulus coming in the Budget to save the domestic economy, monetary policy is going to have to do the heavy lifting.
The good news is that the RBNZ still has plenty of scope to keep cutting. The OCR is still 3.5% – relatively high by the standards of the past 15 years.
In February, forecasts were that the RBNZ would pause at 3.25% (ie with just one more cut later this month). That would have meant mortgage rates were more or less as low as they were going to get.
Now, most economists expect further cuts through the year, which should keep downward pressure on mortgage rates.
ANZ has forecast the OCR will go to a low of 2.5%. KiwiBank has suggested that, if the worst-case scenario plays out for trade wars, it could go as low as 1.5%.
Markets have settled
Against my better judgment, I checked my KiwiSaver. It’s recovering surprisingly well.
Markets have settled down in the past few weeks. Investors have digested the likely impact of the Liberation Day tariffs and assessed the prospect that they’ll be mitigated by trade talks.
I realise I could be delivering a commentator’s curse here.
I don’t think we’ve seen the end of the tariff turmoil yet.
There’s a deadline for Donald Trump’s pause on reciprocal tariffs coming up in July.
I expect we’ll see a few more days of unnerving Wall Street panic before we get back to anything like a bull market or even a period of stable growth.
But for all that, the initial shock of Liberation Day has been absorbed without a GFC-level meltdown.
That’s promising.
Let’s stay realistic.
The bad news isn’t going anywhere. Some of these big worrying global trends might just be part of our new normal, whatever that is. We just have to deal with the world we live in.
But optimism is a powerful human motivator. The most successful businesspeople have it in spades.
We should treat whatever snippets of good news are out there as fuel for our optimism.
Let’s not let them get lost in the mire of negativity.
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.
