Out-of-touch Reserve Bank Putting Unemployment Ahead Of Wellbeing

FIRST Union is seeking answers on how rising unemployment, slower wage growth and less affordable housing can be squared off against the Government's commitment to the wellbeing of New Zealanders following today’s unexpected 50 basis point Official Cash Rate (OCR) hike.

"After eighteen months of hardship and austerity for many of our members, the Reserve Bank has today chosen to double-down, piling pressure onto working people across Aotearoa," said FIRST Union Researcher and Policy Analyst Edward Miller.

"The most vulnerable parts of our community - low-income workers with weak employment security, as well as heavily-indebted households - will be the primary victims of this continued assault, while the wealthy will enjoy rising returns on their savings."

In its February Monetary Policy Statement, RBNZ suggested unemployment needed to rise to 5.7 percent to quell inflationary pressures, meaning another 75,000 job losses. The impacts of monetary policy tend to lag decisions by around 12-18 months.

"We’ve already seen recent redundancies at Xero, Sky TV, Mediaworks and The Warehouse Group, but these are just the tip of the iceberg as the cost of borrowing continues to rise sharply for businesses and households," said Mr Miller.

"In many of our industries - including construction, manufacturing and logistics - the visible impact of redundancies will be masked by the rampant use of the labour hire industry."

Miller said that rates hikes are hitting the construction sector particularly hard.

"The rate of residential building consents is falling off a cliff, while together the construction, engineering and consulting industries now account for 40 percent of liquidations this year."

"Meanwhile, housing affordability is even worse than during the pandemic when prices were skyrocketing, with falling prices more than offset by rates hikes. Demand for emergency housing remains very high."

"Yesterday the Reserve Bank of Australia wisely chose to hit pause on rates hikes. Meanwhile, the European Central Bank is looking much more closely at the contribution of profit margins to price hikes."

"We need an urgent rethink of how we respond to inflation that is consistent with this Government's Wellbeing Framework, because it’s growing increasingly clear that RBNZ alone certainly do not have the answers."

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