Finance Minister is gushing but some economists are less bullish

Finance Minister Grant Robertson went on the offensive this week to counter the gloom engendered by political opponents and business  leaders about the state  of the  New Zealand economy.

He  cantered  through a  field of  positive  statistics  to  show   everything is  hunky-dory—- well, almost everything.

Yes, there  are  some problems  over low levels of productivity,  the challenges of   digital  change, and mixed signals over  future tax and  workplace legislation.

But Robertson  in  his  speech in Auckland   accents  the positive :

  • Our terms of trade are near a record high;
  • Our stock market is up around its record high;
  • Building consents in the June quarter were up 7.5%, pointing to robust residential investment in new housing:
  • Business investment was up 5.5% in the latest GDP data.

This has led to solid employment growth, with 94,000 more people employed in the year to the end of June. Unemployment sits at 4.5%, with projections of it heading towards 4% over the next few years.

“Last week’s employment statistics also showed the highest employment rates ever for Maori and women, and we’ve seen a fall in the number of young people not in employment, education or training.  Last week’s ANZ Job Ads series was up 4.7% in July from a year ago.

“And we are seeing wages start to rise as working Kiwis share more in the benefits of economic growth.That is where we are now.That is not to say that everything is perfect or there are not challenges and risks that we must face”.

While  the terms of trade  are  high — and the  NZ  dollar  has  edged down  8%  since  mid-April — the dollar is   still over-valued.  Commodity  prices  in the export trade   are generally flat on a year  ago,  but the  key  dairy price index is down  7.1%  over the  12  months.

ANZ   Bank economists   think   the  data   flow  is suggesting  the  peak  has been passed in the  commodity boom.

As  for the sharemarket, it  may too  have   reached a  peak. International  markets  are  edgy  as  the  threat  of  trade  wars  worry investors.  “The Economist”  says   despite  generally   strong economic data  there is reason to  heed the   warnings signs  flashing  around bond markets.

Robertson  says   the concern  about the international picture “is something I share and which the government will continue to monitor”.

But, he  adds,  there is every reason to be optimistic about New Zealand’s future economic prospects, “and this government is committed to working alongside the business community to develop them”.

The difficulty  is  that within the  messages  the  government   is  delivering,  the business community   finds  it hard to discern a  coherent  narrative.

The  government   without consultation  shuts   down future  oil and  gas exploration.

Employment   law  reform   appears  weighted in  favour of  unions  and  not   enterprise.

More  than  $2 billion is laid out for  first year   tertiary education students’  fees   but  several  polytechnics  and at  least  one  university are in  financial  strife.

As  economist Michael Reddell says   in his blog:

  “ There is little sign that anyone near the top of government really has a sense of what might make a useful and substantial difference to the medium-term performance of the New Zealand economy.  You will, for example, never hear them talk of a real exchange rate out of line with the relative productivity performance of the New Zealand economy, or show any understanding of how that might come about. 

“In practice, they seem wedded to much the same failed economic strategy as the previous government –  notably the “big New Zealand” rapid inward migration strand –  made worse, at least in prospect, by things ranging from large increases in minimum wages to aggressive headlong pursuit of net-zero emissions targets with not a decent cost-benefit analysis in sight”. .

Robertson insists the fundamentals of the NZ economy are strong.

We are in surplus – projected to be $3.1bn this year, rising to $7.3bn by 2021/22. Net core Crown debt is low compared to international trends, and our Government is committed to reducing that to 20% of GDP over the next five years. Over the forecast period we are set to see GDP growth average around 3%.”.

But  sceptics   see  problems   looming  for the  government  on its  fiscal performance  as  it  meets the  demands of the  nurses,  soon  to be   followed   by  primary teachers  (will they agree to anything  less than  the nurses?)  and then  by secondary teachers.

What then  about the police, fire  service  and  other   elements  in the public  sector?

The  government   says  it is  going to  fix the infrastructure  deficit. But the construction  sector  is  in  a   mess,   skills  are  short,  and the flow of   workers   to   higher  wages  in Australia is beginning to accelerate  again.

Sure, the government  says  next year’s  Budget will serve as a broader nationwide stock-take than the traditional Budget, which focussed on economic and fiscal information. Robertson says his vision is for the Budget to become an annual update showing how we are doing as a nation, as well as the Government’s plan for improving the nation’s wellbeing over the years ahead.

The well-being approach to the Budget process is part of taking a longer-term view of the impact of Government policies on the New Zealand economy and New Zealanders. It’s about budgeting for the future

The Budget will also include a Living Standards Dashboard,   which  Robertson    says    is about  “measuring our success”.

But how much will it mean if  real  GDP per capita continues to  slide?

One thought on “Finance Minister is gushing but some economists are less bullish

  1. Please inform us how Robertson is qualified to make these statements. One needs to take a look at how businesses run, not listen to a ex-unionist and political activist with an agenda that makes commerce cringe.
    Currently we are seeing business failures as the result of higher wages, ridiculous and repressive work and safety laws, being enforced by envious bureaucrats of a strong left-wing persuasion; in fact, total operating/compliance costs are rocketing out of control.
    Even domestically, we are seeing an increase in living expenses, that in 12 months will have many struggling, not to mention rates, insurance, property maintenance, etc.
    NZ is in a very precarious position currently.


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