OPINION:

One of the better New Year’s resolutions doing the rounds is to be more optimistic.

We’re not talking about a “she’ll be right” attitude. You still need to make things happen in your life.

It’s more about ditching the negativity and taking a glass-half-full approach to what lies ahead.

Because, for many New Zealanders, it’s hard not to feel gloomy as we start the new year.

Inflation may be falling but the cost-of-living crisis continues. People were feeling the pinch before the added costs of the festive season.

Alarm bells were ringing in the run-up to Christmas, with Inland Revenue figures showing more people in financial hardship are withdrawing their savings from KiwiSaver.

Last November, 3270 members withdrew a combined $24.8 million in savings due to financial hardship, almost double the $13.2m that 1880 members withdrew in November 2022.

Those with home mortgages are saddled with increasing interest bills, while council rates are on the rise as well. News that Hastings District Council is on track to reach almost $400m of debt by mid-2024 due to cyclone recovery costs came as a big shock with bigger rate rises on the way. As they are in many other regions.

Borrowing costs are the biggest problem for households and businesses. According to the Reserve Bank, as of the end of November 62 per cent of the country’s fixed housing debt (worth $318 billion) was due to be refixed within the next year.

This includes housing debt taken out by owner-occupiers, investors and businesses. It doesn’t include debt that’s floating, and a reasonable portion of that debt would have already moved to a higher rate.

The economy has contracted in three of the past four quarters with economists calling the September quarter GDP decline of 0.3 per cent, or 0.9 per cent on a per capita basis, an “unpleasant surprise”.

The new finance minister, Nicola Willis, described the economic landscape as a “toxic trifecta” of high interest rates, lingering high inflation and the insecurity of a recession.

Add to that the huge deficits in infrastructure, from housing to roads, and the woeful state of the education system and the picture looks decidedly bleak.

But there is cause for optimism and relief is on the way, at least for interest rates with most economists picking a reduction in the official cash rate (OCR) later this year.

Inflation has been falling faster than expected both in the US and in New Zealand and we have seen some pullback in fuel prices. The main risk to inflation appears to be violence in the Middle East.

There is fiscal stimulus on the way, depending on the final shape of National’s promised tax cuts and the scale of the spending cuts are required to deliver them.

And while an economic recovery may be bumpy rather than smooth, confidence is returning among business owners. The ANZ Business Outlook survey for December showed a lift in both expected and experienced activity.

The survey suggested the outlook was improving while the backward-looking questions suggested that experienced activity may also be past the worst, ANZ said.

So while low growth and high interest rates paint a downbeat picture in the short term, there appears to be some light at the end of the tunnel.