Listen to economists, and you will hear that New Zealand is ploughing through rough waters. Inflation expectations are soaring, business confidence is falling, investment intentions are down.
In fact, the ANZ Business Outlook data for November record declines in all forward-looking activity indicators except employment intentions. A net 9% of firms expect lower profits ahead.
This is likely related to extreme cost pressures, with a net 89 % of firms reporting higher costs.
If you want an antidote to this pessimism, listen to Finance Minister Grant Robertson in Parliament – the story he tells is very different.
Answering a “patsy” from Mana MP Barbara Edmonds, Robertson celebrated the resilience of the NZ economy which – he said – had been demonstrated by last week’s Statistics New Zealand job figures for the September 2021 quarter.
The data showed the unemployment rate fell from 4% in June to a record-equalling low of 3.4% in the September quarter, last recorded in December 2007.
Robertson went on to tell his admirers the number of unemployed fell by 18,000 to 98,000. The last time it was under 100,000 was in the September 2008 quarter.
The unemployment rate is now 14% below where it was in the pre-COVID-19 December 2019 quarter.
The unspoken bit here – the way we heard it – was that this was all due to Robertson’s economic management prowess.
He went on to tell Parliament the data also shows that the economy continued to add jobs, with 54,000 more people in employment than in the June quarter. The number of people in employment is up by 115,000 since the September 2020 quarter, when unemployment peaked at 5.3%.
Edmonds then asked what else the report said about the state of the labour market and its impact on the economy?
Robertson told her Statistics NZ reported job growth was driven by full-time and permanent employment.
On an annual basis, the construction industry remained a strong driver of employment, while quarterly growth in professions such as health, engineering, science, and transport were all strong.
With the second half of the September 2021 quarter affected by the lockdown restrictions, actual hours worked dropped 6.6% over the quarter as industries such as accommodation and food services and retail trade were less able to operate.
The ongoing impact of the pandemic is likely to result in unemployment rates moving around a bit, but Robertson said he believes the balanced approach taken by the Government has supported the strong employment results that we are seeing.
Edmonds: What reactions has he seen to the employment data as an indicator of the strength of the economy?
Robertson: Economists had expected the unemployment rate would fall in the September quarter, but the figure of 3.4% exceeded all expectations. The result is also well below the Budget 2021 update, which forecast unemployment to be at 5.3% in the September 2021 quarter. Westpac’s economists said, “The September quarter labour force surveys marked another stunningly strong data point for the NZ economy.” ANZ said the data reinforced that the labour market has been incredibly resilient in the face of higher alert levels, and Kiwibank’s economists said, “Not a single headline metric hit a bum note.” Employment surged, unemployment fell, underemployment dropped, participation rose, and the lion’s share of the gains came from female employees. They said the demand for labour was expected to remain strong. This is a good result, and a testament to the hard work of businesses and workers right across New Zealand.
ACTs leader had a go at undermining Robertson’s good cheer.
David Seymour: Has the Minister of Finance seen any reports that in the last year, wage growth went up 2.4%, inflation went up 4.9%, and does he think that might be why more and more New Zealanders are concerned about the cost of living under this Government?
Robertson: New Zealanders have always been concerned about the cost of living and the rising prices around New Zealand. I would note the member’s new-found support for lifts in the minimum wage, which I’ll note for next time.
Next afternoon Opposition MP Michael Woodhouse tried to puncture Robertson’s ebullience by asking whether he would rule out raising taxes in order to pay for the extra spending promises the government had made.
Robertson replied sharply the government had made clear it will not be raising taxes in this term.
As if anyone could doubt it, eh?
Woodhouse then asked whether the government remain committed to light rail in Auckland, the preferred option for this having an estimated cost of $14.6 billion, and, if so, how does he plan to pay for it?
Robertson was again abrupt:
“In answer to the first part of the question, yes.”
Woodhouse: Does the government remain committed to rapid transport in Wellington, the cheapest option of which being $5.8 billion, and, if so, how does the government plan to pay for it?
Woodhouse: Can he confirm that since he has been finance Minister, NZ’s debt has increased over $40 billion—that’s public debt—but in just one week of announcements, he’s added another $35 billion worth of spending on to the debt pile he’s already incurred?
Robertson was at his Olympian peak in his reply this time:
“I can confirm there’s been a global pandemic, and, in light of that, the government has indeed taken on more debt in order to support New Zealanders’ lives and livelihoods through that. We continue to have one of the lowest levels of net debt in the world—lower than Australia, lower than the UK, lower than the US, lower than the euro area.
“We will continue to borrow where we need to.
“In answer to the second part of the member’s question, he should actually take a look. Money has already being provisioned for Wellington’s rapid transit and also for parts of the Auckland rapid transit as well.”
After that, to get a measure of the perspective from the hard world of commerce, we might need to return to those ANZ economists to ask what they learned about the business climate:
They say their survey shows an understandable wariness as we move into a Covid-endemic world.
The one certainty is that costs are through the roof.