Grant Robertson, perennially exuberant as finance minister when it comes to telling the country how well the government is handling the economy, has been in top form on the subject in Parliament in recent days.
Whether the same buoyancy is being felt in every sector of the economy could be another story.
But here’s how Robertson was responding in the House this week.
On Tuesday he was saying the government’s efforts to secure the economic recovery have been reflected in the latest measure of the country’s economic health. Statistics New Zealand reported last week that GDP rose by 1.6% for the March 2021 quarter, exceeding the expectations of even the most optimistic commentators.
“New Zealanders confidence in the recovery saw a boost in retail spending, particularly on big ticket household items, hospitality, and holiday accommodation. Importantly, activity in the construction sector returned to near record levels, while business investment in plant and machinery jumped by over 15 percent. The higher COVID-19 alert levels during the quarter only had a limited impact on the economy thanks to the quick response which provided cash flow and confidence. Quarterly activity in March has now exceeded the December 2019 quarter pre-pandemic level.
“Nevertheless, the data does show the volatility that NZ has to deal with during the pandemic. This 1.6% increase followed a 1% decline in the December quarter and a record 14.1% increase in the September quarter”.
To a supplementary question, Robertson reinforced the message of how much kudos the government should get for its performance:
“This result is further evidence that our public health strategy of going hard and early to beat COVID was also the correct response for the economy. Getting our economy back up and running either without COVID in the community has meant households and businesses can move about and operate more freely than in many other countries.
“The NZ economy was 2.4% above where it was in the March quarter last year, outperforming the countries we compare ourselves with. In the same period, Australia rose by 1.%, the United States by 0.4%, Canada by 0.3%, while Japan declined by 1.5% and the United Kingdom by 6.1%. The global economy is recovering, but the ongoing and uneven impact of COVID-19 means that the environment will remain volatile for some time”.
And to another patsy supplementary on how commentators had received the latest news he said:
“We’re doing it in real time here, but, previously, the ANZ economist called the result ‘eye-popping’, and noted that ‘the rise in GDP confirms that NZ has seen a spectacular economic recovery.’ That sentiment was reflected in other commentaries. Kiwibank said, ‘The report was stronger than expected, pretty much across the board. And the economy has confidently returned to pre-COVID levels.’ And as the ASB noted this year, ‘unexpected strength of quarter one GDP growth adds to the weight of evidence that the NZ economy is on very firm footing, despite the global pandemic.’
“This government’s economic recovery plan is working. We are supporting businesses and workers to succeed, despite the uncertainty of COVID-19 and the naysayers on the other side of the House.”
Obviously entranced with his success, Robertson was back on his hobbyhorse the next day. This time he was citing the latest Westpac McDermott Miller survey as showing consumer confidence is on the rise, up 1.9 points to 107.1 in June.
“This is just below the survey’s long-term average of 110.7. A score above 100 indicates that more people are optimistic than pessimistic about the economy in the coming year. Not only are New Zealanders more positive about the outlook for the economy, they also expect their own financial situation will continue to improve. The survey does, however, show that the rise in confidence is uneven, which is in line with the different impacts of COVID-19.He then went on to point out how the economic recovery has been supported by the manufacturing and services sector.
“The BNZ Business New Zealand Performance of Manufacturing Index (PMI) remains firmly in expansionary territory, rising 0.3 points to 58.6 in May. The index compares very favourably to its long-term average of 53.1. The BNZ Business New Zealand Performance of Services Index (PSI) stood at 56.1 in May, and while the index did decline from its highest ever recorded level in April, it is still above its long-term average of 53.9. BNZ economists noted that the current strength in the PSI and PMI say good things for economic growth over the coming quarters.
“ While our economy is robust, the ongoing COVID-19 pandemic means the environment does continue to be volatile, as we discovered with the alert level change in Wellington today. We cannot be complacent”.
Delivering a bit of reassurance over what support is available to businesses and workers if there is a change in alert level such as that which happened in Wellington, Robertson said there continued to be both the Short-term Absence Payment and the COVID-19 Leave Support Scheme, which are designed to support people if they have to either take tests and self-isolate or if they have COVID and they have to take time off work.
Were the alert level change that has happened in Wellington to last longer than seven days, this would trigger the resurgence support payment that is available for people right across NZ if alert levels rise.
If most private-sector economic forecasters are predicting a continuation of stronger GDP growth for the NZ economy over the next 12 months of up to 5%, not all of them see it that way.
According to one authority, the productive base (agribusiness, primary exports, construction and manufacturing) of the NZ economy is facing major growth constraints in the form of severe labour shortages, a broken supply chain and government regulatory change. Remove the GDP growth that comes from foreign tourists and immigrants and the picture is far from rosy.
Whether strong consumer spending financed by increasing debt on appreciating house prices is a sustainable economic model is a moot point.
NZ has had to learn some harsh lessons from debt-fuelled spending splurges in the past and it seems the current government has no institutional memory of such past policy errors.
Moreover rural economists are pointing to how morale has fallen sharply in what they regard as the productive export base of the economy. Some believe this has been reflected in the currency markets where the NZ dollar which was trading above 73USc in March dipped below 70USc last week.
For a range of reasons, including the sensitivity of both country’s top commodity prices, NZ’s currency and the AUD tend to fly high when people are optimistic and get sold off when markets turn cautious.
Last Thursday’s surprisingly strong NZ GDP growth number of 1.6% for the March quarter only very briefly lifted the Kiwi 40 points from 0.7050 to 0.7090.
Where the rural sector, to which the PM Jacinda Ardern was paying tribute at the Mystery Creek Fieldays last week, should be planning on increasing production, it is fully engaged, (and depressed by what it sees as the hostility of the government) in its climate change measures.
The government in the eyes of many farmers is attacking the agricultural productive base with water/carbon costs and now climate change targets that require a 15% reduction in livestock numbers.
On a broader front, industry leaders are increasingly concerned with what they regard as the erratic policy framework being imposed by the Ardern government. The prime example cited is the $700m Auckland harbour bridge for walkers and cyclists while the government (until today) could find only a few hundred thousand dollars for relief of flood-stricken Canterbury farmers.
Perhaps this explains the decision announced this afternoon to inject a further $4 million into relief funding to support flood-affected Canterbury farmers and provide an additional $100,000 to the Mayoral Relief Fund to support Canterbury communities. .
But while Point of Order admires the Finance Minister’s sustained ebullience about the state of the economy, there has to be reservations on whether we are being quite as successful as he maintains.