Economy

New Zealand’s economy shrinks in Q4, changing rate outlook

Published

2 years ago

March 15, 2023

WELLINGTON — New Zealand’s economy missed forecasts for growth in the fourth quarter and instead shrank 0.6%, official data showed on Thursday, raising the chances of a recession and making further interest rate hikes less likely.

Gross domestic product (GDP) failed to meet analysts’ expectations of a 0.2% contraction in the December quarter and was well below the Reserve Bank of New Zealand’s (RBNZ) forecast of 0.7% growth. It was a reversal from revised growth of 1.7% seen in the third quarter.

The weakness in the economy is broad-based and conditions are already recessionary for manufacturing, retail, trade and accommodation, according to the Statistics New Zealand data.

The central bank and treasury had both forecast the country would enter a shallow recession in the second quarter of 2023.

Economists said the weak data released on Thursday meant it was possible the country was already in recession, particularly given the impact that severe weather in January and February was likely to have on the economy.

“The outlook for Q1 remains gloomy,” Capital Economics said in a note.

New Zealand spent two quarters in recession in 2020 because of tight restrictions when the COVID-19 pandemic hit, but prior to that the economy had not contracted since late 2010.

Regardless of whether the country is entering a recession, the economy is much less overheated than the Reserve Bank of New Zealand (RBNZ) had expected.

The central bank has undertaken its most aggressive policy tightening since 1999, when the official cash rate was introduced, lifting it by 450 basis points since October 2021 to 4.75%.

The market is betting the RBNZ’s plan to hike the official cash rate (OCR) by a further 75 basis points this year to 5.5% by the third quarter will be pared back.

“We see no need for the RBNZ to go to 5.50%, which would risk causing unnecessary losses in activity and employment,” Citi analysts said in a note, predicting GDP contractions in the first and second quarter.

NZ bank bill futures have surged as the market priced in a lower peak for RBNZ rates. The market is now 50-50 on whether the RBNZ hikes 25 basis points (bps) in April, while the terminal rate is seen at 5.11% rather than the bank’s projection of 5.5%.

The New Zealand dollar was down before the data but extended the fall to be off 0.6% at $0.6145. Two-year swaps are near a two-month low of 4.925% having fallen sharply overnight as bank sector concerns drove down bond yields globally.

ASB Bank said in a note that the data weakness and increased financial market jitters overseas suggested less urgency for RBNZ rate hikes.

“Uncertainty is elevated, but we have shaded down our 50 basis point April OCR call to a 25 basis point hike,” the note said. (Reporting by Lucy Craymer; Editing by David Gregorio, Stephen Coates and Jamie Freed)

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Economy

Minimum wage to hire higher-paid temporary foreign workers set to increase

Published

3 days ago

October 21, 2024

Anne Joseph

OTTAWA – The federal government is expected to boost the minimum hourly wage that must be paid to temporary foreign workers in the high-wage stream as a way to encourage employers to hire more Canadian staff.

Under the current program’s high-wage labour market impact assessment (LMIA) stream, an employer must pay at least the median income in their province to qualify for a permit. A government official, who The Canadian Press is not naming because they are not authorized to speak publicly about the change, said Employment Minister Randy Boissonnault will announce Tuesday that the threshold will increase to 20 per cent above the provincial median hourly wage.

The change is scheduled to come into force on Nov. 8.

As with previous changes to the Temporary Foreign Worker program, the government’s goal is to encourage employers to hire more Canadian workers. The Liberal government has faced criticism for increasing the number of temporary residents allowed into Canada, which many have linked to housing shortages and a higher cost of living.

The program has also come under fire for allegations of mistreatment of workers.

A LMIA is required for an employer to hire a temporary foreign worker, and is used to demonstrate there aren’t enough Canadian workers to fill the positions they are filling.

In Ontario, the median hourly wage is $28.39 for the high-wage bracket, so once the change takes effect an employer will need to pay at least $34.07 per hour.

The government official estimates this change will affect up to 34,000 workers under the LMIA high-wage stream. Existing work permits will not be affected, but the official said the planned change will affect their renewals.

According to public data from Immigration, Refugees and Citizenship Canada, 183,820 temporary foreign worker permits became effective in 2023. That was up from 98,025 in 2019 — an 88 per cent increase.

The upcoming change is the latest in a series of moves to tighten eligibility rules in order to limit temporary residents, including international students and foreign workers. Those changes include imposing caps on the percentage of low-wage foreign workers in some sectors and ending permits in metropolitan areas with high unemployment rates.

Temporary foreign workers in the agriculture sector are not affected by past rule changes.

This report by The Canadian Press was first published Oct. 21, 2024.

— With files from Nojoud Al Mallees

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Economy

PBO projects deficit exceeded Liberals’ $40B pledge, economy to rebound in 2025

Published

7 days ago

October 17, 2024

Anne Joseph

OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.

However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.

The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.

Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.

The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.

The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.

This report by The Canadian Press was first published Oct. 17, 2024.

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Economy

Statistics Canada says levels of food insecurity rose in 2022

Published

1 week ago

October 16, 2024

Anne Joseph

OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.

In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.

The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.

Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.

In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.

It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.

This report by The Canadian Press was first published Oct 16, 2024.

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