Is this really the recession we needed to have?

If you thought things were already bad with mortgage rates soaring, house prices plummeting and the cost of living skyrocketing, it’s hardly comforting to hear Reserve Bank Governor Adrian Orr tell us things could be worse.

The Reserve Bank has apparently run numerous scenarios including the cash rate going over 7%, unemployment hitting 9%, and house prices falling 45%.

According to Orr, the financial system would remain stable in those circumstances. Good news.

Not such good news would be the trail of wreckage in people’s lives and livelihoods.

Fortunately, no-one is predicting – yet – that things will get that grim. But then there are a lot of things the experts failed to predict since Covid.

One thing is certain: Life is going to get pretty tough for a lot of people who are already doing it hard.

‘‘Without a doubt there will be some households who will need to be talking very quickly with their banks around making sure they have strong relationships,’’ Orr told MPs this week.

That might be sound advice for middle to upper-income earners who have mortgages and a good credit history, and stable income going into their bank account each week.

How do you build a relationship with your bank when you can barely scrape enough money together each week to get by? When bills are something you shove in a drawer because opening them just fills you with despair? When pay-day lenders are your only contact with the financial system?

These are people with no experience of the bank lending a sympathetic ear. They see them as something to fear.

It’s worth remembering, of course, that interest rates during the GFC peaked at 10.5% while unemployment hit 6.1%. We survived.

But the big question mark is whether this is a recession we could have avoided.

The Reserve Bank governor has already admitted he is deliberately engineering a recession to save us from ourselves and our profligate spending.

That’s a big call. Older New Zealanders and those with long memories will consider it an even bigger ask to trust that Orr knows what he’s doing.

We know what a deep recession feels like.

In the 1980s and 1990s we saw whole communities left devastated by swathes of workers being thrown on the unemployment scrapheap. Factories, and small businesses and manufacturing outlets closed their doors. An axe was taken to Government work like the railways. Rural and provincial New Zealand were hardest hit. The generational effects of entrenched unemployment and poverty are still being felt.

No-one is predicting New Zealand will descend to those depths again, but any recession has collateral damage. Which is why it is becoming increasingly important that there is an inquiry into the Government’s Covid response, including the economic response.

If mistakes were made, we need to learn from that.

And if it turns into a blame game, so be it. That’s accountability.

While the Government basked in the glow of a feel-good economy fuelled by cheap money and the artificial wealth effect of inflated house prices, countless warnings that there would eventually be a price to pay – some even likened it to a slow-motion train wreck – were ignored or talked down, including by the Reserve Bank.

Which is why Orr’s flippant advice to people to ‘‘cool their jets’’ on wage demands and spending doesn’t sit well, especially if you have no choice about spending more when groceries, petrol and other fixed costs keep rising.

We all feel let down.

And the front line of the fight against inflation will likely be the same as always – the working poor, the middle classes and the small business owners.

Those with long memories will consider it an even bigger ask to trust that Orr knows what he’s doing.