Muddle, Bubble, Toil, or Trouble?

The line above could almost be interpreted as the menu of economic outcomes available to the Reserve Bank, as it continues to ponder which alternative policy tool, if any, to deploy next. The show-stopper among these – a negative OCR – is looking a little less likely than it was a month ago. Not only has the economy continued to impress with its post-lockdown resilience, but certain sectors are positively humming. This highlights the uneven way COVID stimulus has filtered through the economy, and the care required in applying it. Beset by supply-side rigidities, stimulus has simply inflamed the excess demand obvious in the housing market (see ‘Chart of the Week’). Our latest Home Economics publication last week marked up our house price forecasts significantly. Equity markets, too, remain on a tear with the NZX50 up 46% since March. The risk is thus increasing we end up with “bubble”-like conditions in some sectors, even as others continue to “muddle”.

The weekend delivered an outright majority to the Labour Party. It’s the first time under the MMP electoral system that one party won enough seats (>60) to govern alone (acknowledging the results are not yet final). The result wasn’t a complete surprise given pre-election polling, and financial markets have taken the outcome in their stride. The emphatic result means we’re unlikely to see weeks of coalition wrangling as in past elections, something that can drag on business and financial market sentiment. Attention should move on quite quickly. We’ll provide a full run-down on our take in a note to be released later today. 

Attention this week will be on the US election, and in particular the rising chances of a Democratic “clean sweep” of the White House, Senate, and House. Locally, Friday’s CPI and tomorrow’s QSBO will be worth watching. We expect the former to reveal a lift in annual inflation to 1.7% yoy.

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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.