I've really struggled to form a firm opinion in my mind as to what sort of year this has been.
Good? Bad? Indifferent? Well, for me, probably indifferent. But one interesting thing about the current environment is that things are clearly not equal for everybody.
At a surface level, it has felt like not that much has happened. Certainly not when compared with the tumult of, say, 2020.
But taking things at a surface level can be misleading as well. The reality is that much more happened this year and at much more pace than the mind immediately registers.
I had, for example, forgotten till I sat down to write this that the Prime Minister of this country at the start of the year was Jacinda Ardern. By the end of January she wasn't, so, I suppose it was easy enough to forget.
You get the idea though. We go through our lives day by day (hopefully) taking things in our stride and then at the end of the year we can realise we've actually gone through a fair bit and a lot has changed.
As has been my recent custom, at the end of last year I had a two part look at what I was expecting of this year.
The first part looked at the general economic picture, while the second one looked at some more specific parts of the picture, including the election. So, how has this year compared with my expectations?
If there's been a big surprise for me this year it is the ferocious speed with which inbound migration has emerged once again as an enormous issue. I had certainly seen it as one to very much watch for the future, but more so probably once we had the seemingly inevitable National-led Government in place.
But, no. One of the later acts of the dying Labour Government was, having said we couldn't just 'turn the tap on' again to inbound migration, then itself turning on every tap in view and leaving them all on.
Statistics NZ says we had a record overall net migration gain of 118,800 people in the 12 months to September.
It is too early to know just exactly will be the impact of this inbound migration explosion. We just know there will be one.
The Reserve Bank, our inflation fighter in chief, has been mightily surprised too by the migration torrent. After trying to play down the potential impacts earlier this year, it went big on the - still largely unquantifiable at this stage - risks in its last Official Cash Rate review of the year on Wednesday, November 29.
We can say what we want about the RBNZ, well, turning on too many taps (cash, anyone?), during the pandemic, and the fact it was slow to react to the surge in inflation, but taking this year in isolation - actually, it has had a good one. A fine one.
Go back about a year to the RBNZ's last Official Cash Rate Review of 2022 and things were not looking flash at all. The September quarter Consumers Price Index (CPI) showed annual inflation for the year to September 2022 at 7.2% - much higher than expected and only just down from the peak level of 7.3% seen in June 2022. The worrying factor about the September figures was the strength of domestically generated inflation pressures.
So, in its November 2022 review, the RBNZ hiked the OCR by a record (for a hike) 75 points to 4.25%.
That's proven to be kind of a turning point. Pretty much since then, economic data - that had been constantly surprising the RBNZ on the high side - started to behave more in line with expectations.
Consider some of the forecasts that the RBNZ made in its November Monetary Policy Statement of last year.
It forecast the OCR to peak at 5.5%. That's where it is now and it IS likely to be the peak.
It forecast inflation to be 6.0% by the September quarter of this year. Inflation actually came in below that at 5.6%.
The labour market has lagged. The RBNZ has been a quarter behind with its predictions of unemployment. It forecast unemployment to rise to 3.6% in the March quarter of this year and to 3.9% in the June quarter.
In fact we saw unemployment hit 3.6% in the June quarter and, yes, 3.9% in the September quarter. But the trend is now definitely going in the right direction, and quickly. Although it is interesting to note that this is clearly a product of that massive migration surge, something that the RBNZ would not have factored into its earlier unemployment forecasts.
Anyway, one area that the RBNZ has been wrong in - and would be very happy that it is - was in its pick last year that NZ would go into recession from the June quarter onwards. It hasn't, and now there seems every chance it might not - even if economic activity isn't exactly shooting the lights out.
If the RBNZ can get inflation to keep heading in the right direction without a recession, it will surely take that. And this now does seem a possibility.
Which is not to say people aren't doing it tough. My biggest concern was how much cumulative damage might be done by mortgage rates that rose so fast in such a short time.
Notwithstanding the RBNZ's pre-summer holiday 'hawkish' blast - which I just take as a warning to the wholesale interest rate markets not to get ahead of themselves - I still think it is likely the OCR will not go any higher than 5.50%. There is, therefore, some hope mortgage rates might now have just about peaked.
Looking at the RBNZ monthly data for average 'special' fixed mortgage rates tells us that as of October this year (latest available month) the average one-year 'special' rate was 7.26%, while the two-year was 7.01%. In October 2022 the figures were 5.8% and 6.09%. In October 2021 the figures were 3.16% and 3.66%.
They've risen a lot, but the rise has slowed and gradually everybody that was on those cheaper rates are rolling over. And the impressive thing is that mortgage delinquencies to date have not been rising at anything like alarming levels.
Most people are at least coping.
Obviously a major concern was whether we may seen sufficient numbers of people battling mortgage woes that this would produce a wave of forced house sales. There certainly seems to have been some. But not to the extent that extreme downward pressure has been put on prices.
Indeed, prices have stabilised and even risen a little though there appears to have been a 'wait and see' approach more recently as people await the outcome of the election. And justifiably so, it would seem.
I'm not at all surprised, but nevertheless disappointed with the election outcome. It's the classic MMP minestrone soup outcome. Lots of things all chucked in together, when arguably the country might be better served with one clear, strong, policy direction. Well, here's hoping that the various voices in the new administration can all sing the same tune. The start has not been promising though.
Hey, our economy, in spite of everything, is doing okay. Here's hoping the new Government will help and not hinder that.
So, all right, how do I think we've done this year? Well, I think we've done all right, you know? It looked like it could all be a lot worse.
I'm prepared to conclude that the RBNZ did know what it was doing and that its 'medicine' is working, even if it is not yet that convinced itself.
All of which leads us nicely into the year ahead.
I will be outlining some of the things that I'll be looking out for in 2024 in the next few days. So, watch for that.
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50 Comments
An average year overall, but my guess is that in another year we will look back more fondly at 2023.
The last few years have been getting worse and it feels like next year will be the precipice.
EIther the trend continues it's merry decline or it crashes.
Re the new government, there is a lot to fix - although I suspect most of it is terminal. So I see why the 100 day plan didn't address anything of actual importance. 3, 6, or even 9 years is unlikely to resolve the fundamental issues impacting Health, Education, Economy, and Environment. So we will plod along until we don't.
The new government offers less than labour. Luxon is a manager, not a leader, and like most managers he will prioritise today's mood over any sort of long term vision. There is not one thing in the government's agenda that addresses our long term problems, in fact they have even gone as far as reversing some of Labour's few farsighted policies - for what? A few rent seekers and ticket clippers getting their mojo back, so far as I can tell - well represented in the comments here!
Financially speaking, not a bad year for me.
Business performed better than expected (although not as good as the mad post-Covid year, but then again I wound up in the cardiologists office from the stress of trying to keep up) and I achieved my goals I had set - most notably achieving a certain level of profit while ensuring I actually had time off to spend with the family and working 6 days max - so I treated myself to a new-to-me 'fun' car as I'd promised at the start of the year. Probably an awful financial decision but it makes me happy, whatever.
Personal finance-wise, making progress on the mortgage and growing some investments (not property). Could probably do with cutting more spending but I figure you have to enjoy life to some extent. For example we had our first overseas trip since Covid, and the memories from that are worth more to me than whatever the compounding growth of that $20k would have been in my index fund.
Also crossed 20kg lost since I started taking my health more seriously in early 2021, so that's a win too. Down to 80kg from 100 and feeling much better. Up for a new wardrobe next as I look like a radiation poisoning victim in my old clothes.
Election ... whatever. I did ok financially under the last government and don't think much will change under this one. I'm not a LL so no real skin in the game, and I don't actually think Labour is as business unfriendly as some claim. However, I think ultimately Labour deserved a spanking as they wasted such a big majority on pointless distractions. I am also really enjoying Winfield Peters ripping into the media ... I think they know their model is marginal without govt cash.
Thanks. That's my #1 achievement I'm proud of.
Considering that most of the thanks lies with my dog (some collie cross farm mutt) I'd have to say that she is the best investment I've ever made.
Costs me a bit on food, vet bills and the stress of having a dog that tries herding the toddler around the house, but every morning at 5.30am - come rain or shine - we're out walking and the same again in the evening.
"massive migration surge, something that the RBNZ would not have factored into its earlier unemployment forecasts"
Speaks volumes about what kind of story 2024 will be.
Yes - 2023 has proved a rewarding year for us and entirely within expectations. Looking forward to 2024 as it will open up opportunities aplenty for the patient savers amongst us.
Election provided some entertainment. I feel very happy I voted for the Marlborough Man. He is providing me with much light hearted entertainment. My business is doing better than I expected, marginally down on last years sales and we upped the body count by 1 over the last 12 mnths, and contemplating looking for another. I spent 6 months sailing around the South Pacific, starlink is your friend, Id like to publicly thank Elon for his service over this time. Also learnt to live with very little for long periods. Still havent bought a house, not high on the life agenda. Still have unfinished vehicular projects that need some love. Restaurants are officially very expensive.
Well living in Hawkes Bay the cyclone kinda sucked. Or blew, I guess.
Property value irrelevant, I'm not buying or selling any time soon. Land is productive and harvesting time is nearly here, so hoping for a nice lump of cash shortly, as long as the weather holds out. For me it's about yield in the truest sense, not imaginary gains.
Personal health has been up and down, currently up, so happy with that. Family all well, so happy there too. The children are growing like weeds, but on the flipside the weeds growing like the children.
Financially treading water but being carried slowly to dry land by the tide. Income has gone up but has almost been outpaced by rates and insurance increases.
Cautiously optimistic about the future, everyone's gotta eat.
I recall in the 70's and we had drought, and yes it was hard. But we were young, and so we worked, seven days all hours and later we discovered we'd lifted the income on the farm by 35% one of the toughest times in farming, on farm inflation and more. You will be fine. Believe it.
Puts it into perspective how good people have it when their biggest problem was the wrong political party in power. Out comes the hyperbolic "woe is me" comments about Labour's 9 years of tyranny.
Not advocating for Labour by any stretch, but it wasn't nearly as bad as the theatrics lead you to believe. And a good chunk of the worlds population would trade problems in a heart beat.
I guess watching my loved husband go time and time again to the Doctor, and only now getting a blood test, and then waiting two weeks to get a follow up appointment on the Medical Practice request to see the Doctor urgently, to learn he has now an extremely low platelet count and high iron levels and being refered to a Specialist. It's December.
Back in the day GP's fought for you. I am looking now to discover ways to lower his ferritin levels. I guess just feel isolated knowing he now has thromocypenia and high iron.
When will any appointment come? anyone's guess.
Sorry to hear all that but I don't get how this relates to Labour. We've just voted in a government that will most likely have worse public services including health. We also vote against any capital gains taxes so we shouldn't expect the same services as other countries.
This year is shaping up to be my 3rd best year ever (maybe tied with 2020 even). Around 130% return on investment (at least for crypto), but even the boring stuff is doing well (16% on equities for example)
That said to put things in perspective:
1) In 2021 I made twice as much money as every year in my life combined (and I have a bit of grey hair and have had a decent income for a while)
2) In 2022 I lost more money than the entirety of the earnings over my life again (excluding 2021).
My only problems is that I am still having to grapple with tax stuff from the whole saga and it might be months before that is put to bed. And then the 2023 / 2024 year tax dramas start.
Bought a business Jul 2022, distressed sale, asset purchase only, a turn-around project for me, service industry, public facing.
Grew customers and revenue by about 20% in second half of 2022, broke even for first time in Mar 2023.
After one year, growth of about 50% by July 2023, then has flatlined since, with small drop (5%) in the last month or two.
Every month this financial year operating cashflow has been in surplus; 6 out of 8 months have also been P&L positive.
Strategies in place to increase customers and revenue (some customers still on historic lower pricing to address, yes, we are one the bad businesses still putting up prices, sorry RBNZ, will continue to do so, too).
I need a holiday, and some sun.
Thanks, David. Looking forward to the forward looking Part 2.
The NZH pretty neatly summed up where we're at with the headlines this afternoon ...
- Redundancies, resignations hit biggest group of Mitre 10 Mega stores
- 'Really tough': This restaurant used to seat 130. Now it's lucky to get 30
- TVNZ shake-up - nine top roles gone
Meanwhile our new government is focused on the really important stuff ...
Now imagine if the median rent in this country was $480 per week instead of $580 per week.
Would open this restaurant and many others up to more people capable of spending up to $100 per week on a nice meal out. But no, Landlords leveraged up and can barely afford to bring their businesses up to minimum health standards with what remains of their takings.
This year has been for us, boomers awaiting on Services. Which have not materialised. Costs seeing the GP, and travelling further afield for Lab Tests. Hanging onto our money, has seen a small 2.4% drop in the value of our investments.
It has been a year without going fishing, seeing very few people and so we have said with wryly, the JA legacy us as a couple more isolated and gardening more.
How honest is that?
So we look forward to our engineering son arriving from Antwerp after Xmas. He said he thought he'd get here every five years. JA ensured we didn't get the 5 instead its going to be seven years since we saw him physically.
The year started with the fantastic news that Jacinda Ardern had done a runner after getting sick of having to skulk around the country avoiding angry people, and then got much better again in October. Celebrated the election with a bottle of Pegasus Bay Maestro that had been kept in the cellar for such special occasions.
Fortunately I did not have to use our rundown healthcare system, which I probably wouldnt have been able to access anyway since I am the wrong race; and this made a nice change from the 7 weeks I spent in agonising pain without the use of my arms during 2020 when Jacinda Ardern decided that diagnostic scans and physiotherapists were non essential services.
Money wise, the Santa Rally is on for the share market, so hopefully I will end the year better off than I started. Those rates and insurance bills are really starting to bite now.
A small part of me was disappointed I don't have to move back to Australia to escape another 3 years of Leftist Extremism - I had a really lovely apartment on the Gold Coast with ocean views and an infinity pool all picked out. But if the change of Government doesnt right all the wrongs committed over the last 3 years, then I'll probably be looking offshore again as the younger generation will be all grown up and the older one is now settled in a retirement village.
I'm currently nursing a hangover due to having consumed what I think was my body weight in Cloudy Bay wines last night. I can highly recommend their 2023 Sav. Merry Christmas all.
My GP charges $21 a visit, but the nurse will issue almost any drug I have been issued before for a $11 fee, I am seeing public rhumatology SP ( Joints arthritis) and on pharmac injectable drugs at god knows what cost ( i see it as a tax rebate)... the public system is hard to manage but great once in... I am as white as a white thing... no easy access for me....
Been a pretty good year overall for me.
Unfortunately my mother died, but she had dementia, so it wasn't unexpected and a poor quality of life.
I like property, so I bought a couple of acres outside of Auckland in an area I think will boom, I'm going to build a new house there next year, so I'm looking forward to that.
My kids are both in Australia, they're thriving and having a good time. One has been there for years, but I encouraged the younger one to go recently because I've been so pessimistic about NZ's future, but hopefully that'll change with the new govt. and they'll slash and burn their way through socialist red tape.
I've even been talking with my wife about migrating to Aussie - endless talk of increased taxes..death taxes, income taxes, capital gains taxes, property taxes, land taxes...reminds me of Bill Rowling and Piggy Muldoon..how depressing it's been seeing the Labour stalwarts with their maori party buddies waffling on about new taxes on TV. But that's all over and I'm enjoying the news without reading how they're going to squeeze the so-called 'rich'.
I'm very optimistic about the next few years.
The cyclones started the year with suffering all around and I did not escape that as some part of the house was damaged for two family members. The drawn out Insurance settlement process was frustrating but understandable due to the massive scale of damage.
Once that was behind, it became entertaining as the election campaigning kicked in and it was fun reading the speculations daily.
The actual election and the result almost became an anti-climax, but Winston resurrected the interest.
Now, it is going to be a quiet run up to Christmas and 2024.
Not much change in personal financial circumstances. Two overseas trips were done well. Thanks Covid, for staying away.
Moved to the UK for a project only to get screwed around - and then the key people driving my coming on board were made redundant. Cost me tens of thousands of pounds in airfares, 6-month rental etc. Though made potential useful future contacts. Returned to NZ only to have a new project fall flat due to tall poppy syndrome and provincial favouritism. This place is an inward-looking cesspit sometimes. A challenge for outliers.
Still, I am a risk-taker and some things came good. A six figure forex position moved my way. Managed to unlock extra value in a land purchase. Plus ongoing house reno revealed wonderful bones in a neglected house. In my creative practice, did well in a contest.
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