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Economic Weekly: Nail-biting decision week

This is going to be a pretty momentous week for decisions by the powers that be.  Monday 4pm brings the next decision on Alert Levels and a ‘roadmap’ out of lockdown.  Wednesday 2pm is the moment we see whether the RBNZ delivers its first OCR increase in seven years, notwithstanding the current Delta outbreak won’t be stamped out at that point even if the Alert Level decision and the ‘roadmap’ will at least be known.

This afternoon’s Cabinet decision on Alert Levels has to be one of the toughest to make yet.  New cases are if anything picking up in pace along with rising ‘unexplained’ cases.  The virus has clearly leaked out of Auckland, with parts of Waikato now at Level 3.  It appears increasingly risky to ease Auckland’s Alert Level 3, as doing so right now strongly suggests COVID would get even more entrenched in the community.  But seven weeks of restrictions are taking their toll on people and businesses alike.  Fatigue, rule-breaking and financial pressures are rising. 

The Government will today lay out its ‘roadmap’ out of lockdowns, which sounds like it will involve vaccination targets for the easing of restrictions (particularly those that pop household bubbles).  Should the plan for Auckland require ongoing Level 3 style restrictions be extended for potentially weeks, then providing added financial support for businesses would be prudent to give businesses some further means to survive until they are able to trade with more freedom.  NZ is poised on the knife-edge of heading down Australia’s patch, where elimination is over for key states and restrictions are retained to buy time for vaccinations to hit high population thresholds by slowing COVID’s spread.  If NZ heads that way, then restrictions risk being in place for longer to take pressure off the health system.  But other pressures will build.

The RBNZ’s Wednesday decision looks more straightforward, though not without its own risks of hindsight being a cruel judge.  We still expect the RBNZ to lift the OCR this week, as noted in more detail in our preview.  There’s no doubt the lengthy shift up Alert Levels has added a lot of new uncertainty into the mix.  But, given the medium-term outlooks for inflation pressures and labour market tightness, cautiously tightening monetary policy is still the ‘least regret’s approach – at least for now.

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Jane Turner

Senior Economist

Originally hailing from sunny Nelson, Jane moved to Auckland to join the ASB team in 2008.  As Senior Economist, Jane's main focus is co-ordinating the team’s macro-economic forecasts.  In this key role, Jane was thrilled by the team’s twice consecutive win of the Consensus Economics Forecast Accuracy award.   

During her decade-long career in economic forecasting, Jane has gained a thorough knowledge of the New Zealand economy.  Her current focus is on New Zealand GDP growth, including both manufacturing and the construction sectors.  She has spent time forecasting most sectors of the economy, including inflation, trade, housing, labour and financial markets.

Prior to joining ASB, Jane honed her macro-economic forecasting skills at the Reserve Bank of New Zealand.  Jane is a qualified scarfie, attending Otago University and graduating with a Bachelor of Commerce in Economics with 1st class honours.  In 2014, she took a career break from ASB to travel the world and learn to snowboard.

Mark Smith

Senior Economist

Mark joined ASB in 2017, with over 20 years of public and private sector experience working as an economist in New Zealand and the UK.

His resume includes lengthy stints at ANZ and the Reserve Bank of New Zealand, and he has also worked at the Bank of England, HM Treasury and the New Zealand Transport Agency. Mark's areas of specialisation include interest rate strategy, macro-economic analysis and urban economics.

Born and bred in the Waikato, Mark studied at Waikato University where he graduated with a Master of Social Sciences, majoring in Economics.

Mark's key strengths are the ability to use his extensive experience, inquisitive nature, analytical ability, creativity and pragmatism to dig a little deeper and to deliver common sense solutions to tackle complex problems.

When not at work Mark likes to travel, keep fit and spend time with his friends and family.

Mike Jones

Senior Economist

Mike joined ASB in 2019 armed with almost 15 years of experience in applied macroeconomic and financial markets analysis.

Mike's career has been all about distilling the risks and opportunities of economic and financial market trends for business. Basically asking the "what does it all mean" question. Mike's enthusiasm and skill for drawing out practical, commercial insights from the murky world of economics has been honed over a relatively broad base of experience.

After spending the early part of his career on the tools at the Reserve Banks of both NZ and Australia, Mike had a lengthy stint at BNZ where he was NZ’s top-ranked currency strategist. His regular and topical macro research also saw him pick up several FX forecast accuracy gongs from Bloomberg.

Drawn in by the prospect of putting strategy into practice, Mike moved from Wellington to Auckland in 2013 to join Fonterra as GM Treasury Risk Management. In this role, Mike lead Fonterra’s macroeconomic research output, and was responsible for the strategy and execution of Fonterra’s foreign exchange, debt, and interest rate hedging programmes.

mike.jones@asb.co.nz