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Here we go again

  • Opinion
  • March 14, 2019
  • Satish Ranchhod
Here we go again

Spending appetites are being supported by low interest rates, a firming in the housing market and increases in households’ disposable incomes. However, slower population growth means that overall spending levels aren’t likely to rise as quickly as they did in recent years.

Following rapid gains of 5 to 6 percent per annum through 2016 and 2017, annual nominal retail spending growth slowed to a more moderate pace of 4 percent over the past year. That slowdown came against a backdrop of a cooling housing market and a fall in consumer confidence, which saw many households putting away their wallets.

Looking ahead, another year of moderate growth is on the cards for the retail sector, with nominal spending levels set to rise by around 4 to 4.5 percent over 2019.

Among the factors continuing to support spending is the low level of borrowing rates. The back half of 2018 saw the Reserve Bank signal that, under its new dual mandate, it’s willing to tolerate a bit more of a pickup in inflation (at least temporarily) in order to shore up economic growth. Consistent with that change, we now expect the RBNZ will keep the Official Cash Rate on hold through to November 2020 – a longer pause than we previously anticipated. The resulting falls in mortgage rates have seen the housing market firming again and have boosted spending appetites, particularly for furnishings and other durable household items.

A strengthening outlook for household incomes is also helping to support spending appetites. With the economy in good shape, employment has been rising. And looking to the next few years, we expect that unemployment will remain low, at rates close to 4 percent. At the same time, wage growth has started to pick up, and it’s set to rise even further over the next few years.

But while the above factors will help to bolster households’ spending appetites, growth in overall spending levels is being restrained by a changing outlook for net migration and population growth. In recent years, the combination of strong inflows from other countries and low departures of New Zealand citizens saw population growth soaring to rates of over 2 percent per annum. That provided a powerful boost to spending levels. It also played an important role in helping businesses source skilled labour.

However, while net migration is still elevated, new arrivals into the country have levelled off and many of those who arrived in recent years are now returning home. Those developments have seen net migration trending down since mid-2017, and we expect it will continue falling over the next few years. Just as the earlier run up in migration provided a boost to demand in previous years, the slowdown now in train will be a drag, moderating an ‘easy’ source of demand growth that many businesses have been enjoying.

Putting the above factors together leaves us with a picture of continuing, but moderate spending growth over the coming year. But at the same time, many retailers will find themselves wrestling with rising costs, particularly with regards to wages. Base wage rates in the retail sector rose by 2.2 percent over the past year - the fastest pace of increase we’ve seen since the financial crisis. We expect that wage rates in the retail sector will continue to push higher over the coming year, in part due to the planned $1.20/hour increase in the minimum wage scheduled for April.

On top of that, competitive pressures in the retail sector remain strong, with continued growth in online trading and other ecommerce developments driving changes in business models. That’s limiting the ability of retailers to push up prices and means that scope to expand margins is likely to remain limited for some time.

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Kiwi Property makes $138m net profit for the year

  • News
  • May 21, 2019
  • Radio New Zealand
Kiwi Property makes $138m net profit for the year

Kiwi Property has reported a strong full year underlying profit, as it continues to reinvest in its Auckland retail and office properties.

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Thankyou’s latest campaign combines scent and charity work

  • News
  • May 21, 2019
  • StopPress Team
Thankyou’s latest campaign combines scent and charity work

Australian charity product organisation Thankyou has launched its latest Kiwi campaign, combining that fact that 100 percent of its profit goes towards helping end global poverty with its use of perfume-grade botanical oils in its products.

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From edible insects to beautiful homeware: Made of Tomorrow’s co-founder talks its new venture

  • Design
  • May 21, 2019
  • Idealog
From edible insects to beautiful homeware: Made of Tomorrow’s co-founder talks its new venture

Most people would be in agreement that bugs, planters and room dividers don’t have much in common, but Matt Genefaas and Dan Craig would beg to differ. The two juggle running an edible insect company, Crawlers, as well as a homeware company, Made of Tomorrow. Genefaas has a chat about what the new furniture range, Space Between, was inspired by, as well as how him and Craig spend their days in slashie roles moving between pushing dried insects to the world, as well as polished mirrors and space dividers.

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Zavy and The Register have worked together to create a scoreboard that compares how the top 25 traditional media advertising spenders in New Zealand have performed on social media over the past 30 days, updated in real time.

 
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Why is the next generation so anxious? Here's how young founders can avoid burn-out

  • Opinion
  • May 21, 2019
  • Jennifer Young
Why is the next generation so anxious? Here's how young founders can avoid burn-out

There may be good reason to be concerned about our young entrepreneurs. Millennials and Generation Z have been labelled generation burn-out, generation snowflake and described as narcissistic, entitled, tech-dependent and fragile. They’re also oversaturated with headlines about the raft of issues like climate change they have to tackle, plus concerns about the impact of technology and social media on their mental health. Jennifer Young explores possible reasons why the younger generation is so anxious, as well as what young founders can do to avoid burn-out.

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Vodafone NZ sold to private investors for $3.4b

  • News
  • May 21, 2019
  • Radio New Zealand
Vodafone NZ sold to private investors for $3.4b

Infrastructure investor Infratil is teaming up with a Canadian investment firm to buy the local operations of Vodafone for $3.4 billion.

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Readings present revised plan for Courtenay Central

  • Property
  • May 16, 2019
  • Radio New Zealand
Readings present revised plan for Courtenay Central

The company that owns Courtenay Central in Wellington says it has big plans for redeveloping the complex - which is closed due to earthquake risks.

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