Kiwi businesses and households under recessionary pressure

Interest rates are set to remain stable with the Reserve Bank today, keeping the Official Cash Rate at 5.5%.

The OCR now hasn’t moved since May last year. The technical recession has become an actual reality for many New Zealanders as a gloom has settled in over households and businesses.

In March, 282 companies went into liquidation, receivership or voluntary administration — the highest since 2015.

The latest casualty of public sector job losses were conservation workers, with the department proposing to cut 130 roles.

Wellington chamber of commerce chief executive officer Simon Arcus said there was a “lot of uncertainty” and fear in the capital.

“It’s really hard to know until the stats about mortgage hardship or people applying for benefits or other things to come through to know exactly what the impacts are going to be.”

Almost 2500 jobs have already been lost across the public and private sector this year.

“Public sector workers, they aren’t going out for lunch or [grabbing] a bite to go shopping, and it does have a cumulative impact day-to-day,” Arcus said.

First Retail Group managing director Chris Wilkinson said people were changing the way they shop for groceries as a result of pressures on household budgets.

“People are thinking twice those [about] those items they buy daily such as coffee —people are being really purposeful in their spending.”

This means some businesses are struggling to survive, particularly in retail.

“It is something of a scale that most haven’t experienced so it’s very much new territory.”

One of New Zealand’s most well known fashion designers Kate Sylvester was shutting shop next year, after three decades.

Meat-alternative business Sunfed was also closing, saying the plant-based bubble has burst.

“With unfavourable market conditions … I had to make the responsible decision of shutting the company down in a solvent orderly fashion,” said Sunfed founder and CEO Shama Sukul Lee.

All of this gloomy news was one of the reasons the Reserve Bank has kept the OCR on hold.

Inflationwas still too high. Business confidence was weak and could lead to more unemployment and financial stress than expected.

PwC partner John Fisk told 1News increased interest rates, cost of living increases, costs of imports for a lot of people are coming up, and it was resulting in a pressure they were seeing.

“That results in an increasing number of formal appointments of liquidators.”

Construction, retail, and agriculture businesses were the industries facing the toughest headwinds.

“We are really seeing the results of what a recession is. What we’re seeing at the moment is a lot of businesses putting their hands up saying, ‘look we’re facing trouble’, and that’ll take some time to work through the system.”