OPINION: The ‘real’ recession in the New Zealand economy will require a jump in unemployment. That could be bad news for Australia’s big banks.
Sharon Zollner, ANZ New Zealand’s chief economist, cautions Chanticleer against reading the recession news as a sign the Kiwi economy has rolled over; Cyclone Gabrielle, which smashed the North Island in February, weighed heavily on activity in the March quarter.
Zollner has another rate rise pencilled in, and notes the RBNZ is working against a couple of key tailwinds for economic growth: higher fiscal stimulus ; surging immigration; signs of stabilisation in the property market; and record low unemployment. Whether the New Zealand central bank can engineer a slowdown without hurting the labour market is also a burning question for Australia’s big banks.
But the combination of fixed-rate loans and surging house prices during the pandemic – Kiwi property prices surged about 40 per cent over the period – creates a real pain point for the economy and the Kiwi subsidiaries of Australia’s big four.Borrowers who bought a home in 2021 when prices were peaking are coming off loans priced about 2.5 per cent and onto new loans priced about 7 per cent.
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