Last month’s 25 basis-point relaxation of the Official Cash Rate (OCR) by the Reserve Bank, the first reduction in interest rates since late-2021, provides a glimmer of hope for long-suffering mortgage holders, and for business borrowing.
The OCR is New Zealand’s primary tool for controlling inflation, which the Reserve Bank is now confident will be back inside the required 1-3% range.
Following the surge in inflation which resulted from the former Government’s moves to provide a Covid-related stimulus to the country’s economy, New Zealand has basically been forced into a recession to curb consumer spending. That was achieved by a series of OCR increases, from a low of 0.25% in 2021 to 5.5% in May 2023, where it stayed.
As we all know, higher interest rates have contributed to an already difficult economic climate and we’ve been waiting for a pivot point which provides some certainty that rates will continue to track down. Many individuals and businesses have been doing it tough, but assuming that inflation is now under control, we can look forward to better times ahead and a slow transition back to a growing economy.
That should see a gradual recovery in business and consumer confidence and in that regard, I note that last month also saw the first increase in job advertising on SEEK in the past year. Without ‘over-egging’ the significance of that, it does perhaps indicate that the business sector is starting to move out of survival mode and looking to dust-off its growth plans.
With the Government’s personal tax cuts now in place and lower residential mortgage rates starting to flow through, it would be natural to see a modest increase in consumer spending, which would be very welcome for the retail and hospitality sectors in particular. Let’s hope that does eventuate and that we can all build towards a more buoyant economy towards the end of 2024.
Tauranga City Council’s new governance ‘team-of-10’ are acutely aware that the industrial rate introduced for the start of the 2024/25 year has made a tough time even harder for some businesses. While that’s regrettable, the decision made by the Commissioners as part of the 2024-34 Long-term Plan was part of a progressive change in the city’s rates structure designed to make the overall rates approach fairer, aligning costs with the benefits different sectors derive from Council services and in particular the transportation activity.
I have no doubt that the timing of this has been unwelcome for some, and that it will be of little consolation that the recent changes in commercial and industrial rates are simply bringing Tauranga more into line with the rating policies that have long-existed in other metropolitan centres.
On a more positive note, Council has fixed the proportion of general rates to 65% residential, 15% commercial and 20% Industrial for the foreseeable future, which does provide certainty for each sector, and will moderate the impact on rates arising from large swings in future property market revaluations.
The team-of-10 is now charged with overseeing the delivery of the Long-term Plan and ensuring that all ratepayers see real benefits flow from the Council’s investments in new and improved infrastructure, which aim to create a more vibrant city that current and future residents will want to live, work, and play in, and businesses will want to invest in.
Nga mihi
