Robertson relishes responding to patsy questions and enthusing about the economic outlook – but is he missing some grim realities?

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.

     

One thought on “Robertson relishes responding to patsy questions and enthusing about the economic outlook – but is he missing some grim realities?

  1. This country is like the neighbours down the road with the flash house, brand new SUV and cabin cruiser who have maxxed out their credit cards and other borrowings to “afford” their affluent but unreal lifestyle. Robbo thinks he has found the secret money tree and all will be well, one hundred billion dollars of debt and counting. Meanwhile, just over the horizon, the hungry beast of inflation and the dread spectre of interest rate hikes are beginning to stir, scenting fresh blood. Even as this government and its climate commission quacks plot to kick away the underpinnings of what remains of the economy.

    Liked by 3 people

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