The encouraging news for the steel industry and New Zealand´s business community at large is that the Reserve Bank of New Zealand (RBNZ) held its official cash rate steady at 5.5% last week, rather than raising it. The bad news is the RBNZ is not yet seeing enough evidence of its handiwork and has therefore declared its cash rate will “remain at a restrictive level for a sustained period of time.” And it might even go up. In its statement, the Bank acknowledged that interest rates are restricting spending in the economy and consumer price inflation is declining. However, like so many central banks around the world, the RBNZ is terrified of easing monetary policy too early: thus allowing inflation to reverse its descent. So it intends to wait until proof appears that inflation is plummeting towards the desired 1 – 3% target range, even though the business community is screaming that abundant statistical and anecdotal evidence is in plain sight to demonstrate that enough medicine has already been administered. In this

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issue of New Zealand News, we offer two examples. First, in mid-November Vulcan made a presentation at the UBS Australasia Conference in Sydney. It said that in the first four months of its 2024 fiscal year (1 July – 31 October of this year), revenue had declined by 9% on the corresponding period in FY2023. Revenue dropped from NZ$438 million to $400 million, driven by lower average selling price and volume. Vulcan said its EBITDA for the four months in question had dropped from its FY2023 figure of $82 million to an FY2024 level of $58 million: thus, down by 29%. It blamed a combination of lower volume, margin and inflation impact on operating costs. As for the future, Vulcan said high interest rate levels are expected to limit the extent of any recovery in New Zealand, where trading was variable in the first four months of FY2024. Indeed, any recovery, if it comes, would materialise in the second half of 2024 and would likely be tepid.

In terms of steel usage linked to a core activity within the economy, the number of dwellings consented each month gives further evidence of a deep slowdown. Stats NZ reports there were 3,060 new homes consented in New Zealand in October 2023, which is down 14% compared with October 2022. Within that figure, there were 1,255 stand-alone houses consented, down 19% on October 2022; and 1,805 multi-unit homes consented, down 11% over the same period. “Fewer new homes were consented in each month of 2023 so far, compared with the same month of both 2022 and 2021,” says Stats NZ´s construction and property statistics manager, Michael Heslop. There were 39,900 new homes consented in the year ended October 2023, down 21% compared with the year ended October 2022. “The annual number of new homes consented has continued to decrease from its peak of 51,015 in the year ended May 2022,” Heslop says. The four regions with the highest number of new homes consented in the year ended October 2023 were: Auckland with 16,669 (down 24% compared with the year ended October 2022); Canterbury with 7,250 (down 17%); Waikato with 3,737 (down 24%); and Wellington with 3,114 (down 16%).

So, whereas the Reserve Bank of New Zealand is still looking for conclusive evidence that its restrictive monetary policy has done its job, the rest of New Zealand is a step or two ahead.