Reserve Bank Governor Voices Concern Over China's Economic Slowdown

Reserve Bank Governor Adrian Orr has expressed his concerns regarding the economic slowdown in China, saying it is a major issue that "keeps him awake at night."

Orr made the comments at a business lunch organised by Business Canterbury, formerly The Canterbury Employers Chamber of Commerce.

During his speech to the Canterbury business community, Orr pointed out the demographic and social challenges facing China, including "an elderly population" and the absence of "social security nets that enables sophisticated tax regime."

He said that while China is currently growing at 5%, “that growth is getting slow."

Orr highlighted the need for innovation to sustain growth, saying “you can't just keep making the same things. You have to actually do better things, and be innovative and challenge."

He linked these economic shifts to broader global tensions, mentioning, "that is what's creating a lot of geopolitical tensions, trade wars, Chip wars, all these actions are a drive for innovation."

The Governor highlighted the implications for global inflation, cautioning against reliance on cheaper goods from China as a long-term strategy: "You know, we've run the course."

Orr said lower productivity would contribute to a lower rate of potential growth of the economy.

This would limit the rate at which the economy can sustainably grow without generating inflation. 

He said strong net immigration is contributing to demand, with the recent increase in rent inflation an example.

However, net immigration also means that there are more workers available, boosting the supply capacity of the economy.

Businesses were reporting that it has become much easier to find workers.

In general, capacity pressures in the labour market have eased. 

When asked to describe New Zealand's economy succinctly, Orr confidently labelled it as "sound and stable," offering a brief but positive outlook amidst global economic uncertainties.

When Chris Lynch Media spoke to Canterbury Business members, many said their sector was doing well, particularly in the digital and IT space.