Financial strain to persist until 2025 – Infometrics

Economic downturn impacts households

Financial strain to persist until 2025 – Infometrics

Economic pressures are becoming a tangible reality for many this year, as households grapple with escalating mortgage rates and a series of job losses.

According to Infometrics, economic challenges, including a brief period of negative growth in GDP and private consumption, are expected to continue impacting household finances through the middle of next year.

“The economy is being hit harder than expected a few months ago, with hopes of a soft landing disappearing in a flurry of housing market stress and rising unemployment,” said Gareth Kiernan (pictured above), chief forecaster at Infometrics.

Inflation and migration trends

Recent data indicated that inflation pressures are easing, though risks remain due to factors like rising oil prices and wage growth.

Infometrics anticipates inflation will fall below 3% by early 2025, allowing for potential cuts to the official cash rate.

Changes in migration policy are also expected to influence the labour market, with stricter entry criteria reducing the influx of new workers and potentially stabilising the number of New Zealanders moving to Australia.

Outlook for 2025 and beyond

Despite the ongoing economic strain, there is a glimmer of hope for recovery in the medium term.

“It’s probably another 12 months before it will feel like the worst of the downturn is behind us,” Kiernan said in a media release. “Both households and businesses will need to keep a close eye on costs and spending until mid-2025.”

From then until 2027, factors such as lower interest rates, a less contractionary fiscal policy, and an improving global economy are expected to drive a resurgence in economic growth towards 3% annually, Kiernan said.

For more detailed insights, Infometrics’ full forecasts can be found on their website under the Building and Transport forecasts sections.

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