Editorial: Making the most of the next few months - because it could get tougher

Taking a bike trip is a way to get out without costing anything. Photo / Michael Craig

Editorial

EDITORIAL

Summer has at least a couple of false starts before it gets under way for real.

The start of Daylight Saving in September and the long Labour Weekend holiday just gone stir anticipation for the heat ahead, but while the days can be sunny, the temperatures aren’t quite there yet.

This past holiday weekend would have given many people a taste of how in pleasant weather it’s possible to get out and about and do things at little cost. Going for a bike ride or surf, taking a dog for a walk in a reserve, having a picnic in a park.

Trying to enjoy the outdoors in better weather - but cheaply - is something families will be thinking about as economic forecasts suggest even tougher times lie in wait a bit further around the corner.

Inflationary prices for basics like food and fuel for months have had people thinking of ways to save from cutting out unnecessary car trips to being more careful about the grocery spend to putting in small backyard vegetable patches.

The pandemic’s initial onslaught brought home the desirability of having a savings fund in reserve, and people have returned to reining in spending under the economic pressures.

Inflation is sticking around with the annual rate at 7.2 per cent, boosting the odds of mortgage rates rising higher as house prices fall, in common with other countries around the world. A lot of households will be worried about the looming end of their fixed-rate terms in these conditions.

Stats NZ data last week showed both that the property drop and declining investments had sliced into household wealth, but that people had been spending less and saving pay rises.

The figures covered the three months to the end of June and the net worth of households fell nearly $89 billion, down 3.7 per cent on the previous quarter. There had been a growth in household savings of $2.1 billion.

The global outlook is likely to continue to be a drag on what happens here with a key driver of the current problems, Russia’s war in Ukraine, having no end in sight. A general recession around the world is considered likely in coming months.

In Europe, under pressure from inflation, cost of living, energy costs and shortages, there’s months of winter discontent to get through. Inflation is at 8.2 per cent in the US, 9.9 per cent in the eurozone and 10.1 per cent in Britain. A wave of protests and strikes are under way which carry political risks to governments, even though €576 billion has been spent by European governments on energy relief in the past year.

Here, the economy is the election ground that’s already being fought over with the Government having ruled out more inflation relief to keep a lid on spending and National’s tax plans attracting more scrutiny.

A key difference so far with this economic squeeze in New Zealand compared to past financial crises has been that unemployment is low and stable. For the past two quarters it has been 3.3 and 3.2 per cent.

That has meant that while people have been under budgeting stress, and have had to cut back and juggle bills, they’ve at least had a cash flow to stay afloat.

People will look for ways to muddle through and save over summer, in case the outlook takes a turn for the worse.