The SME Stream

Well, that Official Cash Rate decision is probably one of those moments where you find out whether you're a glass half-full or glass half-empty person.

Because on the bright side, the Official Cash Rate didn’t go up. On the downside, it looks like it’s definitely going up next time. So yes, it’s a reprieve - but it’s only a reprieve for six weeks, excuse me, before the screws on the economy start turning again.

Thanks to the new transparency rules at the Reserve Bank - which, frankly, we should all love - we know that the committee voted and it was split right down the middle. Three members of the committee wanted the OCR to stay at 2.25 percent. Three of them voted for it to be raised by 25 basis points immediately to calm down inflation pressures.

But Anna Breman, who is the governor, has a casting vote. She said it needs to stay, so it stays put.

But they didn’t hide the fact that it is going to go up sooner than they had thought just three months ago. And it will go up by more than they thought just three months ago.

Much of it appears to hinge on what businesses do with prices from here on in. Because what the Iran war is doing to prices is so widespread - and so many prices are going up, from fuel to fertiliser to food - that it runs a higher risk that businesses start jacking up more prices in a second round of increases. And that is what they’re worried about at the Reserve Bank.

So economists are now calling for three hikes in quick succession from here: July, September and October.

Now, there are two problems with that. The first: all three hikes are before the election in November. National, especially, should be sweating, because poorer voters are not happier voters - they are voters who turn to New Zealand First.

The second problem - and this is probably the biggest of them all - is what this is going to do to our recovery, our economic recovery.

We are probably in negative growth this quarter. Next quarter is probably not that flash but at least positive. Entire sectors, like construction, are still struggling to get back on their feet. Unemployment is still in the fives. The Iran war is still pushing up fuel prices and therefore pushing up the price of everything.

So, glass half full: at least we get another six weeks before the screws start turning.

Glass half empty: when they tighten, they will be tightening fast on an economy that doesn’t need that kind of pressure.

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The Government's announced a $1.2 billion gas transition loan scheme – a big bet on keeping some of New Zealand’s most gas hungry businesses afloat. 

Finance Minister Nicola Willis says the government will guarantee 80% of each loan, with about $48 million set aside to cover potential losses. 
 
It’s being framed as a lifeline: help gas‑heavy manufacturers and processors stay open, protect jobs, and ease pressure on a shrinking and increasingly expensive fuel. 

But behind the headlines, big questions remain.

Who really benefits, who foots the bill, and will any of this cost creep its way into your power bill or tax bill? 

Today on The Front Page, journalist and publisher of The Kākā, Bernard Hickey is with us to unpack whether this scheme is an economic rescue mission, a political pivot, or something more complicated.

Follow The Front Page on iHeartRadio, Apple Podcasts, Spotify or wherever you get your podcasts.

You can read more about this and other stories in the New Zealand Herald, online at nzherald.co.nz, or tune in to news bulletins across the NZME network.

Host: Chelsea Daniels
Editor/Producer: Richard Martin
Producer: Jane Yee

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Thursday's Budget is being illed as 'grown-up' with no lolly scrambles under a cloud of tough choices ahead. But with rising mortgage costs and stubborn inflation, will the Government deliver something people can actually feel in their wallets? Liam Dann and Tamsyn Parker unpack what’s been revealed ahead of Budget day and what might still be hiding in the numbers.

Plus, are mortgage holders already trapped by rising rates, and is AI becoming a convenient excuse for job cuts?

The Economy of Everything is brought to you by NZ Herald in partnership with CMC Markets.

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ConsumerNZ's Jon Duffy tells Herald NOW Business why Kiwis feel better about KiwiSaver even as many are dipping into savings.

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Rural lending specialist Rabobank expects the 2026-27 dairy season to be another strong one for farmgate milk prices, but says rising inflation will take its toll.

After a string of strong Global Dairy Trade (GDT) auctions, Rabobank expects a robust opening milk price from dairy co-op Fonterra of $9.50 to $10.00 per kg of milksolids for the 2026-27 season.

However,  the bank said the inflationary impacts of geopolitical disruption were likely to squeeze farmer margins in the new season.

The Country's Jamie Mackay explained further.

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An economist believes the Reserve Bank should raise the Official Cash Rate today to control inflation. 

The bank will release its first Monetary Policy Statement since war broke out in the Middle East, with most expecting it to hold at 2.25% and not rise until September. 

But Westpac Chief Economist Kelly Eckhold told Mike Hosking inflation was already at 3.1% before the war, and we'll likely spend time above 4% this year. 

He says six years of this decade will have seen inflation over 3%. 

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Paul Spain from Gorilla Technology on the $24 billion hi-tech industry.

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Business NZ says a new loan scheme to help businesses ditch gas is a necessary step.   

This year's Budget funds up to $1.2 billion in guaranteed bank loans to help businesses transition to renewables. 

Potential losses are accounted for with $48 million set aside. 

Business NZ Advocacy Director Catherine Beard told Ryan Bridge it's still a loan business will need to pay back, but it will help. 

She says the barrier for businesses trying to move away from gas is often capital expenditure, so they're in favour of lowering that hurdle. 

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Conferences on our shores are driving up international delegation numbers, which have surged more than 50% annually.  

According to Stats NZ, arrivals are near pre-Covid levels, with more than 16 thousand people coming in the first quarter.  

International delegates contributed more than $54 million to the economy, with visitors spending an average $500 per day.  

Business Canterbury CEO Leeann Watson told Ryan Bridge with last week's Air New Zealand expansion in Christchurch, there are more options. 

She says having direct flights between Christchurch and Singapore, Perth and Tokyo, will make a big difference. 

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If the Post is to believed this morning, the Government is considering a business growth fund whereby some crown agency would pick winners and probably a few losers with financial backing. 

Chalmers did this in Australia. 

There was apparently a meeting in April between Willis and Chalmers to talk about us joining his fund. 

We're talking about minnows with revenue between one and ten million. 

Unless the gas transition guarantor was the start of some kind of paradigm shift in the way this government thinks about private enterprise, then investment decisions in the private sector would be left to, well, the private sector. 

Capital funds and even KiwiSaver.

We have about 5% of KiwiSaver funds invested in private equities. The Aussies are apparently more like 15 to 20%. 

Fund managers have been making noises about changes needed to help encourage such investments. 

So why don't we? If needs be. 

The other unusual one this week was the Golden Visa. Apparently, there aren't enough investment opportunities out there to soak up the billions these guys want to pump in to score bunker in Queenstown with mountain views. 

So now you can donate to charity or even help fund a DOC walking trail upgrade.

Erica Stanford told me yesterday they're looking at broadening out the types of investments that qualify. 

We ether have too many investment opportunities and not enough capital, or not enough capital and too many opportunities. 

Or we have regulatory settings that are stopping one from feeding the other, in which case, government ought cut through them before picking its own winners.

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