auckland harbour

Article by NZ Herald Business

Key points

  • CBA chief economist offers an assessment of the economic prospects of both nations over the next two years
  • HSBC chief economist for ANZ — who famously dubbed New Zealand a “rock star” economy in 2014 — says NZ can no longer claim that title
  • He sees New Zealand dipping into recession early next year, whereas his forecast for Australia is to avoid recession
  • The big issues on both sides of the Tasman are inflation and labour shortages.

“In all the meetings I’ve had here in New Zealand, the number one topic is labour – as in not enough of it,” says Stephen Halmarick, chief economist at Commonwealth Bank of Australia.

Halmarick – one of two Aussie economists touring New Zealand this month – offers an upbeat assessment of the economic prospects of both nations over the next two years.

Also across the Tasman for his first post-Covid visit was HSBC chief economist for Australia and New Zealand Paul Bloxham.

Bloxham – who famously dubbed New Zealand a “rock star” economy in 2014 – says we can no longer claim that title.

He sees this country dipping into recession early next year, whereas his forecast for Australia is to avoid recession.

Halmarick relies on ASB’s forecasts for his New Zealand outlook (CBA is ASB’s parent company).

But he is very comfortable with their view that New Zealand will avoid recession, which is in line with CBA’s outlook – one he concedes is among the most optimistic among the big bank economists.

GDP forecasts aside, both economists broadly agree on the issues and trends facing the two economies.

There is a slowdown coming in both markets as interest rates rise.

And the big issues, on both sides of the Tasman, are inflation and labour shortages.

Firms in New Zealand are worried about not having enough workers and they are concerned about it all getting worse as the Australian labour market tightens, Halmarick says.

Both countries have seen border closures restrict the flow of migrant workers and both are now seeing demand for labour soar.

As in New Zealand, Australia’s net migration is still a long way short of where it was pre-Covid, he says.

That sounds ominous for Kiwi companies fearful that worker shortages here will only get worse as our workers are drawn to Australia’s job opportunities – and its typically higher wage rates.

“The brain drain does present New Zealand with challenges,” says HSBC’s Bloxham.

“Both countries have super tight labour markets at the moment and both face this labour shortage challenge. And in Australia’s case, the border’s reopened and we are getting workers starting to flow.”

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Article first published by NZ Herald — Aussie v NZ: Who’s better placed to face the economic slowdown? Available at: https://www.nzherald.co.nz/business/aussie-v-nz-whos-better-placed-to-face-the-economic-slowdown/QVUAGMVJ7UMCX3CR4HIHPDQMKY/ [26 August 2022].