Are we at peak misery?

New Zealand is more miserable than it has been for a while, but we may be approaching peak misery.

The misery index is an economic indicator that measures a country's unemployment rate and inflation rate together.

It is currently at 9.5 percent, a level not seen in more than three years, but based on forecasts, it should start to fall from early next year.

Miles Workman, senior economist at ANZ, said that was his forecast. "We expect the unemployment rate to remain unchanged at 5.7 percent and CPI inflation to accelerate to 4.5 percent year-on-year in the fourth quarter. It'll hopefully be downhill from there."

BNZ chief economist Mike Jones said he was hopeful the country was at or near the peak.

"There's no doubt the current macro environment remains difficult for consumers. The labour market is clearly weak, and high inflation continues to eat away at household purchasing power. For the current quarter, we're forecasting an unemployment rate of 5.5 percent and annual inflation of 4.3 percent. Combined, that would put the misery index at 9.8 - a level that's only been exceeded a few times in recent history.

"But a less miserable consumer backdrop beckons for next year. We expect both unemployment and inflation to fall, and both are important preconditions for consumers to feel a little more confident.

"There's always a risk that another unexpected shock delays that improvement, but recent developments in energy and fuel markets are at least encouraging."

Simplicity chief economist Shamubeel Eaqub said what the misery index was trying to measure was the state of household finances compared to jobs, income and the cost of living.

"Currently a net 18 percent of people say finances are bad. On the Reserve Bank's forecasts it starts to get better from early next year, but does not get into positive territory until the beginning of 2028."

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