The Kākā by Bernard Hickey
Aotearoa Inc stuck in suspended animation

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Aotearoa Inc stuck in suspended animation

Economy in state of suspended animation as Govt funding freezes and job cuts combine with high OCR for rest of 2024 to keep GDP and housing market in contractionary territory
The Transport Minister has set a hard 'fiscal envelope' of $6.54 billion for transport capital spending. Photo: Lynn Grieveson / The Kākā

TL;DR: The economy is settling into a state of suspended animation as the Government’s funding freezes and job cuts chill confidence and combine with stubbornly high interest rates to extend the recession of late 2023 through the rest of the year.

Here’s my top six ‘pick ‘n’ mix’ of links to news, analysis and opinion articles, announcements, official reports, reviews and research in the last 24 hours or so to 8:48 am on Tuesday, May 14:

  1. Transport Minister Simeon Brown yesterday announced a new class of RONS called the RORS, which is Roads of Regional Significance. He also set a hard 'fiscal envelope' of $6.54 billion for transport capital spending and put two big projects on ice: Brougham St in Christchurch and State Highway 22 near Drury. Cantabrians are very unhappy. The Press-$$$ Keiller MacDuff

  2. Associate Education Minister David Seymour will announce today he is creating a new Government department for charter schools. Stuff Bridie Witton

  3. The BusinessNZ-BNZ survey of services firms found another fall in April into even more contractionary territory. BNZ said yesterday the combined PMI-PSI leading indicator of activity suggested an extended recession through 2024 and further rises in unemployment.

  4. Despite the contractionary signs, the RBNZ is unlikely to have room to cut the OCR any time soon because domestic services inflation is remarkably sticky. The main culprit is rent. Selected price indices data for April yesterday showed the flow measure of Auckland annual rent inflation slowing, but still over 10% in the rest of the South Island.

  5. In another sign of happens when both sides of Parliament stretch a health system to breaking point with decades of sinking-lid funding to keep the size of Government under 30% of GDP, the Health and Disability Commission reported on a case of a junior doctor who was the only one on duty for "more than 50" patients in Gisborne Hospital the night an elderly man died. RNZ Rowan Quinn

  6. The deglobalisation keeping inflation higher for longer will get a bit worse later today. Joe Biden is expected to quadruple tariffs on electric vehicles from China from roughly 25% to 100%, and raise other tariffs on key industries including semiconductors, solar, and batteries. ABC America

The best of the rest

News links from Aotearoa’s political economy

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The Kākā by Bernard Hickey
The latest daily snapshot of the news, detail, insight and analysis on geo-politics, the global economy, business, markets and the local political economy for citizens and decision-makers of Aotearoa-NZ.