Potential impacts on NZ economy
Donald Trump’s re-election victory, securing both Congress and key states, could make “You’re fired” a common phrase again, as proposed tariffs up to 20% on imports and 60% on Chinese goods are set to influence economies, including New Zealand’s, ASB economists said.
Potential effects of tariffs on New Zealand
The specifics of the tariffs will determine their impact on New Zealand, particularly in areas like export pricing and consumer costs. With Chinese goods possibly redirected to other markets, New Zealand could see cheaper imports.
However, overall global growth may soften, while inflation could rise, which could temper the US Federal Reserve’s interest rate cuts, according to ASB’s chief economist, Nick Tuffley (pictured above).
Geopolitical tensions and financial markets
Trump’s approach to international relations may bring shifts, with possible reduced support for Ukraine and Europe, tougher policies toward Iran and Hamas, and persistent pressure on China.
Initial market reactions showed a boost in US stocks, declines in exports from China and the EU, and rising US interest rates.
NZ labour market shows signs of strain
New Zealand’s recent labour data aligns with expected trends, showing a 0.5% drop in employment.
“The small rise in unemployment is understating the slack in the labour market,” Tuffley said, with fewer people actively seeking work due to job challenges.
Wage growth also remained lower than anticipated.
No urgent rate cuts for RBNZ
The Reserve Bank (RBNZ) remains in no rush to cut rates further, feeling comfortable with the current inflation outlook.
RBNZ Deputy Governor Christian Hawkesby highlighted that Trump’s policies could add to inflation pressures, supporting a gradual pace in rate cuts.
The OCR is expected to be reduced by 50bp in November, with further reductions likely to follow in 2025, depending on global events.
Looking ahead: Economic data on the horizon
This week, the focus will be on New Zealand’s inflation expectations and monthly price indicators, which are likely to show steady inflation levels near 2%.
October’s REINZ property figures may signal a pickup in sales and mortgage activity, though prices are expected to stay relatively flat in the short term, ASB reported.
Read the full ASB report here.
Get the hottest and freshest mortgage news delivered right into your inbox. Subscribe now to our FREE daily newsletter.
