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Opinion: Surely Adrian Orr’s job is almost done. We’ve had enough and we can’t take it any more.
Orr is the man in charge of setting the Official Cash Rate (OCR), which governs how banks set their interest rates. So effective and single-minded has he been in bringing inflation under control that he might be eligible for a performance bonus.
But I’d find it hard to give him that bonus because, to me, he’s effectively sucked the life out of our economy and the spirit, enterprise and get-up-and-go of our people. He’s arguably done too good a job, so he’s become an easy figure to blame for rising unemployment, widespread redundancies, jobs not being filled and the businesses that have gone to the wall and will never come back.
In just the past three months, 629 companies went into liquidation - a 36.1% increase in comparison to the same quarter last year when 462 companies closed their doors. For the same quarter in 2022, it was just 312 businesses. That then adds up to a staggering 101.6% increase in business failures in just two years.
I spoke to Keith McLaughlin, chief executive of credit agency Centrix, whose family founded debt collection agency Baycorp in 1956. For almost 50 years he’s been up close and personal with how well the NZ economy is doing, and hands down he says this period is the worst he has ever witnessed.
It’s fair to say for anyone under 60, these are the toughest economic conditions we’ve faced in our lives. Tougher than the 2008 Global Financial Crisis, worse than the late 90s Asian Financial Crisis, hugely different to the 1987 share market collapse. Want to go back beyond there and you might have to ask the boomers – who are the only ones who potentially can’t see why we are moaning so much.
That’s because many of them have assets which, until recently, have generally been doing well; they have cash in the bank on high interest rates, no mortgages and a guaranteed income via NZ Superannuation. So, this is not an economic collapse where everyone has been affected. It’s more generational, which can cause other societal issues.
Of course, you’ve got to factor in the extraordinary technological changes that underpin these economic tough times. Uncertainty makes it much harder to know where and when to invest while rapid change and rise of artificial intelligence adds more complications. There might be excitement about what’s possible, but that’s if you can survive the economic pile-up.
The uncertainty this causes has made things worse in the boardrooms and offices of decision-makers. Perhaps that sentiment hasn’t always been in the data that Orr relies on to set the market conditions.
So, am I saying he is out of touch with the real struggle going on? Yes, I am. Am I saying had he visited the shop floor more often he would be more alarmed at how his scorched earth policy has impacted Kiwis? Yes, I am. Am I saying he should cut the OCR now? Yes, I am. Do businesses need a signal like this to get going again? They sure do.
I accept I might be tainted in my views because I work in an industry where revenue has all but dried up and getting money in the door is much harder than the cold ruthless act of getting labour costs down.
But then I look at the hospitality sector, where high-profile cafes and restaurants are lights out and thanks for the memories. It’s the same for retail where, according to a Retail NZ survey, almost 43% of retailers now have no idea how they will navigate the next 12 months and believe they are likely to close within a year. That is up from 37% just three months ago. More than 70% have failed to meet sales targets this year.
Many more of New Zealand’s high-profile bosses look ashen faced when asked if more jobs are set to go.
From where I sit, I see too much defeat. For economies and people to do well, money must flow. But it has stopped.
C’mon Adrian, let’s go!
I believe he kept the OCR at the record low of 0.25 for far too long and that former finance minister Grant Robertson was disingenuous about whether this was inflationary. When inflation started to move with pace, Orr had to act far more aggressively and with haste because he had been far too slow to move in the first place.
In my opinion, Robertson, too, waited far too long to attempt to pull things back. It was too little, far too late and the punishment was about to be handed out.
We’ve battled these toxic conditions now for two years - and the pain is very real. Yet, Orr seems to sit unmoved by it all. All the latest figures and forecasts, and reports of economic activity from Treasury through to the commentary provided by the big banks, show the economy has slumped again.
We have to change the tune, rewrite our narrative and for the sake of our economy and our jobs, Orr must cut the OCR this month. The banks have already factored it in and moved, so what’s he waiting for? Doing nothing is getting harder to justify and the economy dies a little more with each delay.
If it continues for too much longer, some business leaders fear it will cause permanent damage to our economy. So, Orr must loosen his grip now. It will take time to rebuild confidence and for the benefits of lower interest rates to have an impact.
Let’s all just hope the $14 billion of tax cuts aren’t inflationary because that could be a reason Orr keeps the OCR higher for longer.
