Navigating Economic Limbo
If I were a betting man … I’d be putting a bob each way on the economy doing exactly what it’s doing right now … going nowhere fast and for a bit longer yet.
Save for picking over old bones, Covid was an anomaly that threw a lot of things out of gear, caused a lot of grief and things are still settling down to what will ultimately be their new levels.
The great news is we’re coming out the back end of it with inflation down from its heights of 7.6% in 2022 to 4.0% last quarter down from 4.6% in the previous so its progressively heading in the right direction with purpose and towards the Reserve Banks (RBNZ) ultimate goal of around 2.0%.
The word on the street…as inflation heads toward the 3.0% mark then the RBNZ can look at progressively dialling back the Official Cash Rate (OCR) currently at 5.5% where its been since May 2023 (yep, that’s a year there) with interest rates following in due course….we’re expecting this to start moving back by the end of this or start of next year and progressively easing to 3.5% to 2.5% with floating interest rates following and settling a couple to three percent above that with all being well in the world…its likely to take through to end of 2025 or a bit more to get there which would be around 5 years from the Covid event that started it all which is about right for full recovery from a significant economic event.
So RIGHT NOW…we’re in a kind of limbo phase … not going back and not going forward … things are still tightening a wee bit with some business’s feeling the economic effects having been geared up for more buoyant markets and having had to scale back or in some cases unfortunately wind up which is sad when it’s largely not of their own making … the take away from that is you have to keep your wits about you and finger on the pulse to ensure you’re scaling to meet market conditions … which can be akin to reading tea leaves but there are economic indicators we can dial into that can assist in keeping pace.
It just takes time…good times don’t last and nor do bad as those of us that have been around the ridges a while can attest to and this, albeit of a rather one off nature, is another cycle we have to go through and like all the others … it’s just time.
There are some things we can do…to alleviate pressure and prepare for the impending and eventual upturn such as:
Take it easy on debt … adding more debt right now is not a good idea unless it’s for progressive purposes
Restructuring current debt can alleviate pressure on your cashflow – we have facilities for example that can -
Take existing plant and equipment back out over 7 years thereby reducing payments
Restructure payments to have either zero or interest only payments over off season months
Consolidate business and personal loans to ease cashflow
Keep an eye on the horizon…there are good times coming…they always do and never not…booms become busts and then recover…the ideal is steady progressive recovery rather than taking off and going mad again and repeating the whole process … good strong manageable recovery serves us all best.
