Q&A: Rates, inflation and economic ‘tough love’ - Liam Dann answers your questions

New research has found that nearly half of all New Zealanders are in a tight financial spot - and the Reserve Bank’s OCR call yesterday won’t do anything to ease their pain.

Mortgage rates are just part of the equation. Rents began to creep up again in December - and food, fuel, power and insurance costs remain high.

It’s a tricky economic spot for the new coalition Government to find itself in - something Prime Minister Christopher Luxon has been at pains to point out. It’ll require “tough love”, Luxon says - presumably delivered by Finance Minister Nicola Willis in her first Budget in May.

The Herald’s business editor-at-large, Liam Dann, says the pessimistic rhetoric makes political sense, but it’s important to keep an eye on the big picture.

“Recession has arrived on schedule but the economy is not collapsing,” Dann wrote in a column on Sunday. “This is all going to script. Unemployment is likely to tick up above 5 per cent. We’ll see more business failures and mortgagee sales, but inflation will fade and rates will fall.

“The political upside in the economic doom and gloom is that Luxon and Willis will be able to point to some immediate wins when the cycle inevitably turns. But they can achieve that by doing nothing other than ensuring the country ticks over in an orderly fashion.

“That would be terrible for the country and, by Luxon’s self-imposed benchmarks, is not good enough. What we need is a Government that is brave enough to tackle the big structural issues in the economy.”

We asked Liam Dann to join us this morning for a live chat about those big structural issues - plus the smaller, everyday issues like mortgage payments and very expensive cheese. Dann’s launching a new column next week to answer readers’ questions about the economy - if there’s a topic you’d like him to tackle, let us know in the comments section below.

• Thanks for your great questions - submissions are now closed. Keep an eye out for Liam’s new column next week.