NZ dollar

If you've been keeping an eye on the global economy in recent weeks, you might be feeling more than a little nervous. The world's major central banks are ...

There’s a relatively small probability of it happening in the near term but if it were to materialise the implications are massive.” The rest of the week will – hopefully – be far less dramatic, but potential fall-out from the UK developments will have eyes glued to screens around the world. If it doesn’t then the negative consequences can be absolutely dire.” The last time New Zealand or most of the rest of the world had a good supply shock was the oil shock of the 1970s and then it was just oil. NZ interest rates are higher as a result of what has happened, from some combination of the government debt focus or concerns over the risks of any added fiscal stimulus for RBNZ action. But if you look at the unemployment rate it’s 3.3% mow compared to 11% in the early 90s.” “The fact we haven’t seen inflation like this at such a global level for such a long time reiterates that what we continue to see is a supply challenge with a huge amount of demand stimulus to try to counter. That could prompt global markets to reassess the situation, he said, and start asking questions about things like global asset prices. We’re starting to see co-ordinated action across central banks to get in front of the runaway train they themselves released by overstimulating during the Covid period. “What has happened in the UK is a reminder that fiscal credibility, such as realistic plans for returns to surplus and a focus on the quality of spending and tax policies, are important for governments. The broadness of the challenges is coming through really sharply.” Everyone is increasingly uncomfortable – we’ve let that cat out of the bag and it’s very hard to get it back in.