The PM will return to a country where the flagging economy is running out of the resources it needs to grow

Prime Minister Jacinda Ardern will almost  certainly  have  earned  a  bounce  upwards  in  her party’s  polling after  her mission  in  Europe, where,  as a  result of  her  “Captain’s  Call”,  New Zealand  has  accepted  the  terms  of  the  EU free  trade  deal.

The  outcome is   positive  for  some  sectors, though  not for  the  dairy  and  meat  producers. NZ’s  negotiating team,  led   by  the  redoubtable  Vangelis Vitalis,  did  a  remarkable  job in securing  as  much  as  they  did,  but  the  disappointment  over  the  lack of  any  significant gains  for the  dairy  and  meat  industries   could have  justified  the  government  flagging  it  away.

If   the  plaudits  for  the  government  are somewhat muted, it’s on the  home  front that black   clouds   have been  gathering.

Those  may dull  the  homecoming  for  Ardern after she engages in more trade-related talks in Australia.  The  reports   on  the  economy awaiting her are  downbeat, if not chilling. Continue reading “The PM will return to a country where the flagging economy is running out of the resources it needs to grow”

Oops – our well-being is likely to be bruised as NZ slips down international rankings and we slump on economic performance

For long  enough   New Zealanders  have liked  to  think  they  enjoyed  one of the highest living  standards in the  world. More recently those  familiar  with what  is  happening in those  countries  which are  leading the  world have  understood  NZ has  been  slipping  down  the  ladder.

Under  a  Labour-led  government,  the  slide  has  accelerated. Now   as  inflation  surges,  and  recession is looming on the  horizon, new  questions are   being  asked    about  the  economic  stewardship   of  the Ardern  government.

Has  too much  been  left  to  the  Finance  Minister  Grant  Robertson?  How   has  he  done   in  his   fiscal management?. Why  is  inflation  burning  so  fiercely? What  has  happened  with  his  concept  of  “well-being”?

One  of NZ’s  most experienced  economists, Bryce  Wilkinson, has  drawn attention to  the  latest  rankings of 63 of the world’s leading countries by the Swiss Institute for Management and Development (IMD).

Back in 2017, New Zealand ranked #16 – ahead of Australia at #21.

Five years later, New Zealand has fallen to #31, while Australia is ranked #19. Continue reading “Oops – our well-being is likely to be bruised as NZ slips down international rankings and we slump on economic performance”

Poverty and pessimism – slump in consumer confidence brings more unpalatable news to Robertson and the Govt

When the  country’s  newspapers devote  their  cover  pages  to  advertisements  captioned “The  cost  living crisis”, it’s not something  that  makes palatable  reading  for  government ministers.

When the advertisements come from an organisation like Kidscan, appealing for donations “to make sure children in poverty get the food they urgently need this  winter”, those ministers may well choke on  their morning lattes.

Prime Minister Jacinda  Ardern  has  other  weighty  issues  on  her  mind – at least for now – as  she  prepares to fly off  to  Europe to  talk  trade  in  Brussels with the  EU and  security in  Madrid   with  NATO.

But  for deputy Prime  Minister Grant Robertson,  left  to  mind the  shop while she is away, the media’s highlighting of a cost-of-living crisis and the persistent challenge of child poverty could  dampen  his normally  cheery  optimism on  the  state  of  the  economy.

Yet  another  dampener would be the latest Westpac McDermott Miller Consumer Confidence Survey, which has  recorded the lowest reading on NZ consumer confidence since the survey began in 1988. Continue reading “Poverty and pessimism – slump in consumer confidence brings more unpalatable news to Robertson and the Govt”

Latest food price figures reinforce the economic-performance criticisms Opposition can fling at the Govt

“America’s next downturn  may have a mild flavour—but a bitter aftertaste”.  So  ran a headline in The Economist.

Juxtapose that to New Zealand, and  we  could be  served  a  double dose  of the bitter  aftertaste.

The  problem  here is  that the  authorities apparently didn’t  see it  coming and  now,  as  it  arrives, they could  be  slow  out of  the blocks in dealing  with it.

Prime Minister Jacinda Ardern kept  denying  there was a  cost-of-living  “crisis”.

After its impact nevertheless could be seen to be hitting  home, the Finance Minister  tacked on  to the  budget  some  measures he  hoped  would assuage  any  pain being  felt by  New Zealanders — although  the  queues  at  foodbanks  were already  lengthening.

The latest food price index shows a 0.7% increase in food prices for the month of May.  Food now costs 8.9% more than at the time of the last election and fruit and veges cost 16% more.

That  has  given Opposition parties a  free  hit  at the  expense of the governing party. Continue reading “Latest food price figures reinforce the economic-performance criticisms Opposition can fling at the Govt”

Mortgage holders will wince as RBNZ takes another shot at bringing inflation back into the target zone

The  Reserve Bank  has  raised  the  official cash  rate  to  2% – but will  that  slay  the  inflationary  beast roaming  the  countryside.? 

Point of  Order   doesn’t  think  so.

Reserve Bank governor  Adrian  Orr made  the right  belligerent  noises  as  he  fired  the  bullet  today  but  he  needed  a  fiscal -policy volley  from  Finance Minister Grant Robertson  to  demolish   the  monster.

Inflation, according  to Robertson,  is  all  due  to overseas  factors — the  war  in the  Ukraine, supply  chain  congestion,  China’s  economic  problems,  you  name  it  — but  little  has  been  done  to  contain  it in  the  term of  the  Ardern  government.

As Professor  McCulloch pointed out  in the  NZ  Herald with reference to a  document  signed  off   and “agreed by”  the Finance Minister and Reserve Bank Governor, it says inflation in NZ is to be held at 1 to 3 percent over the medium term. Continue reading “Mortgage holders will wince as RBNZ takes another shot at bringing inflation back into the target zone”

Robertson tackles the cost-of-living crisis which the PM did not recognise – now let’s see if he can steer clear of recession

Prime  Minister Jacinda  Ardern  early in March  insisted  there was  no  cost-of-living “crisis”  in New  Zealand. Now  her  right-hand  man, Grant Robertson,  has presented  a  budget which he  proudly  claims  deals  with that  very  same “crisis”, giving  away $1 billion in an emergency cost-of-living  package.

About 2.1 million New Zealanders will get a $350  payment spread  over  three months, while fuel tax  cuts  and half-price  public  transport continue  for  another two  months.

Will  that  be enough  to relieve those  suffering  in what Labour now  accepts   is a crisis?  And  will  it  halt  Labour’s  slide  in  the  polls.

On  that,  opinions  are mixed, with Labour’s  partner  in government  being the most  expressive  in  their  doubts.  Here’s what a Green Party press statement had  to  say  on the  subject: Continue reading “Robertson tackles the cost-of-living crisis which the PM did not recognise – now let’s see if he can steer clear of recession”

Two key economic issues that should be tackled in Budget 2022 – but don’t hold your breath, folk

Two  of  New Zealand’s principal economic    issues   are  its  low  productivity and  high effective   corporate  tax  rates.

So will the  Ardern  government  tackle  these   issues   in  Budget  2022?

Finance  Minister  Grant  Robertson  could   write  himself   into   NZ’s  economic  history  if  he  did  so.

Sadly,  Point of  Order  suspects  he  might  go  for  what are  quick-fixes  (if he  does  anything at all)  that  do  little  to  raise  investment levels  and  lift  productivity  to stop NZ  falling   further  behind other  advanced  economies..

The  OECD in  its annual  review   of the  NZ  economy attributed  the low productivity rate  to muted product market competition, weak international linkages and innovation, and skills and qualifications mismatches.   Continue reading “Two key economic issues that should be tackled in Budget 2022 – but don’t hold your breath, folk”

“Considerable uncertainty” clouds the outlook as Robertson prepares to present 2022 Budget

Is  the  NZ  economy heading for  a  hard  landing?  As  the  country  awaits  the  presentation of Budget 2022, the omens  are not  good.

The ANZ Bank, in its  latest quarterly economic  forecast,  says  many  commentators   are talking  about the risks of  a  recession. It’s  a valid concern,  as  it is  clear  that  the  impact of  hikes in the  official cash rate (OCR)  has  already reverberated through the  housing  market  through  higher  mortgage  rates.  The  bank’s  economists  say this adds an extra layer of  concern  over  and  above fears  about the  cost  of  living  and  sustainability of  asset  prices  (via  KiwiSaver balances  and the  like).

“However  it is  imperative that  the  Reserve  Bank gets  on top of  inflation quickly. Going hard should, in theory, lessen   the  need to  hike by  more in total and that has been a  key RBNZ message.

“ Raising  rates  aggressively   while  consumer  confidence  is  around record  lows and  housing  retreating  might seem counter-intuitive,  but  the policy  choice  is  between some  pain now  or  probably  more  pain  later. Indeed  not  hiking aggressively now  would  itself be risky.

“If  bond  market  participants  sense  that  central banks are going soft on containing  inflation, long-term interest  rates  are  likely  to  rise  even more  sharply  over time  as investors  seek  inflation compensation. This  is what happened  in the  1980’s  and it is  crucial that  this  is  avoided this  time  around so  as to avoid a  deep  and prolonged  period  of  stagflation.” Continue reading ““Considerable uncertainty” clouds the outlook as Robertson prepares to present 2022 Budget”

Why several Labour MPs (whose futures are in electoral jeopardy) will be hoping for miracles in this year’s Budget

Finance Minister Grant Robertson managed  to  put  a  bold  face on  his  fiscal management  last week  when he  presented  the  latest set of Crown accounts, saying they   “are continuing to reflect the strong position New Zealand is in to manage the challenging global environment”.

Tax revenue in the  nine months  to March  was $2.7 bn above forecast at $78.6bn, due to better-than-expected corporate profits and a strong jobs market.  This was partly offset by lower GST returns.

Core Crown expenses were close to forecast at $92.6bn.

The operating balance before gains and losses (OBEGAL) deficit was $8.1bn, $4.1bn  below that forecast in December’s Half Year Economic and Fiscal Update.

Robertson commented approvingly:

“This result shows the strong position New Zealand finds itself in, despite the uncertainty and volatility of the Ukraine war, the pandemic and ongoing supply chain disruptions in critical trading hubs like China. It is further evidence that our strong health response has been the right one for the economy”.

Robertson concedes there are significant challenges for families and business right now. Continue reading “Why several Labour MPs (whose futures are in electoral jeopardy) will be hoping for miracles in this year’s Budget”

Budget 2022: Robertson must weigh the need to curb state spending against the urge to win popular support

The Ardern Government’s  popularity  appears  to  be  waning, according  to  recent  opinion polls – and  even  news  media  which previously were  unduly friendly  (no doubt influenced by the succour from state subsidies)  are   now  finding   flaws  in  ministerial performance.

A  column in Stuff  by  its  experienced  Kevin  Norquay has skewered  the  Ardern  team’s  propensity to  call  on New Zealanders to “be kind”, “listen to the science”, and boast “we’re so transparent”.

Norquay  likened the  Ardern-Robertson government to a “friend” who would like you to look the other way while it gets on with doing what’s good for its own best interests, such as getting re-elected. Continue reading “Budget 2022: Robertson must weigh the need to curb state spending against the urge to win popular support”