Robertson is confident about the benefits of spending – but what’s the story about the downside from borrowing?

So is the government succeeding in steering the country through the Covid-19 crisis and what it calls a “one-in-100-year shock”. And just what is it costing?

These are questions which will be uppermost in the minds of voters when they cast their ballots in next month’s general election.

Finance Minister Grant Robertson in Parliament this week assured the nation it is weathering the immediate impacts of Covid-19 “better than expected” — even though the full impact is yet to be felt.

He reckons the employment data this week shows the government’s plan to protect jobs and cushion the blow for businesses and households has protected the labour market from the worst effects of Covid-19.

According to Statistics NZ, the unemployment rate here ranks at seventh in the OECD, better than the OECD average of 8.4% and well ahead of Australia (7%) and the US and Canada (both at 13%).

Furthermore, the employment rate of 76.8% is currently fifth in the OECD, well above the average of 68.6%. Continue reading “Robertson is confident about the benefits of spending – but what’s the story about the downside from borrowing?”

Robertson is sounding chirpy while business leaders express anxieties about the economic outlook

As Auckland business leaders and the city’s economic development agency hold a day-long summit to thrash out a Covid-19 economic recovery plan,  Finance  Minister  Grant   Robertson   is  singing  from a  different   song- book.

He  reckons  NZ’s   economy    is  doing well    and

“ … as we look ahead, there are a number of areas where the government’s support will continue, including investing in our people through policies to close the skills gap, creating jobs, preparing for the future, supporting small businesses and entrepreneurs, and positioning NZ globally to continue to trade with the world”.

While  Auckland  business  leaders  are  concerned  at the fragility of  the  city’s  economy  with 150 Auckland businesses a day  contacting a Covid-19 support line asking for help, Robertson  cites consumer  confidence  surveys  which show consumer confidence remained steady in July after resurgence through May and June. Continue reading “Robertson is sounding chirpy while business leaders express anxieties about the economic outlook”

We Kiwis are wealthier (per capita) than the Saudis? Indeed we are, according to a new natural capital study

New Zealanders  have  more  to  celebrate  than   being  virtually  Covid-free, or having  Jacinda Ardern  as  prime  minister.

According  to  a  report  in the London  “Economist”, NZ  has  more natural  capital per person ($US380,000)  than  oil-rich  Kuwait  ($US362,000)  or  Saudi Arabia  ($US180.000).

The  study which produced this  ranking   is  the  work of  economists  attempting to put a  dollar  figure  on the  value of the world’s land, forests, fisheries, minerals,  and  fossil fuels, or  what is left of them.  Their  work has  fed  into the inclusive  wealth project, initiated  by the United  Nations, directed by  Managi Shunsuke of  Kyushu  University and  advised by  Sir  Partha Dasgupta  of Cambridge.

They  estimate the  world’s  natural capital  amounted  to  over  $US91trn in  2014, or  over  $US13,000  per  person.   The  world’s  natural  capital  is  predicted to   decline   by a  fifth by  2040.

On  average,  countries  with  more natural  capital  tend  to have a  higher GDP  per person.

The  “Economist”  wonders  whether  this  is a  curse or  a blessing.  It  says  some  economists argue that  natural  bounty raises  the  level of  GDP  but  slows  its growth  rate:  it  provides an additional, steady stream of  income  that grows  less  quickly  than  the  rest of  the  economy.

Those  authorities   who carried  out  the  study    have  calculated  the future trajectory of  natural capital  under  a  variety of  scenarios.  In  a  future of  continued high energy demand,  carbon emissions can be expected to grow  by 7% in high-income  countries  and by 44% in the rest of the world over the  next two  decades.

In such a  scenario, the  world’s people  will  continue to grow  wealthier,  but natural  assets  will  diminish  rapidly as a  share  of the  portfolio. According to these projections  only  12  countries  will increase  their  stock of  natural  capital over the  next  two decades.

Point of  Order   suspects  this  will  not  provoke  a  “gee, whiz”   reaction from  NZers—but  certainly  there  is  some  food  for  thought  there.

We must wait a few months to establish if Robertson’s insouciance about the economy is justified

New Zealand may be  heading  into  the  deepest   recession  since the Great Depression but  Finance  Minister   Grant   Robertson  is  not  fazed   at the  prospect.

Exuding a resolute spirit that has to be admired, he  has been  reassuring  the  nation  that the government’s

“ … swift and decisive response to COVID-19 has put us in a good position compared to the rest of the world.”

And:

Our strategy of going hard and early is paying dividends with a far less restrictive environment for businesses and consumers, allowing NZ a head start for kick-starting our economic recovery.”

 And:

“Our policies  have given us the opportunity for NZ to be one of the most open economies in the world at the moment.” Continue reading “We must wait a few months to establish if Robertson’s insouciance about the economy is justified”

Labour is looking like a shoo-in for re-election – but it could be nobbled by economic challenges

New Zealand’s 2020 general election, experts  are telling  us, will be like no other in  history.  And,  if opinion polls  are  to  be  believed,  Labour  is so far  ahead,  its  strategists  only  need to   keep  Jacinda Ardern front and centre of the campaign  for the  party to break out the  champagne  on the night of September  19.

Jack Vowles, a  professor of  political science at Wellington’s  Victoria University, says the election comes in the wake of a remarkable government-led act of building collective solidarity that has sacrificed businesses and livelihoods in the cause of protecting those who would have been most vulnerable to Covid-19.

 “By a combination of luck and good crisis management, the elimination policy has worked. NZ is among the first Covid-hit countries to return to near normality.In the process, the popularity of Jacinda Ardern and her government has soared. The initial response to a crisis of this magnitude tends to raise support for governments.

“But in NZ the increase has been stratospheric, raising Labour’s support to levels as high, if not higher, than for any party since the advent of the Mixed Member Proportional electoral system”.

 Claire  Trevett  in the NZ  Herald, declares the  Jacinda  Ardern v Todd Muller contest a  mismatch:

“ … in terms of  current profile it is akin to  Phar Lap  taking on the stable  donkey”.

 Professor   Vowles  argues the extraordinary events of the past few months have set the scene for another potential reward for exemplary leadership – an outcome deeply feared by Labour’s opponents.

Potentially, it could lead to another long period of Labour-led governments and the crowning of Jacinda Ardern as one of NZ’s greatest prime ministers.

“Or not. If a week is a long time in politics, 100 days is an eternity”.

As  Point of Order sees  it,  Ardern’s  popularity  could  overwhelm   not  just  National  but  NZ  First as well—and possibly even the Greens.

NZ First leader Winston  Peters has  sensed  an avalanche  may be coming.  But  when he   sought  in recent  days to carve   out  his own shield  against it,    by  demanding an  immediate  move to level one and  for  trans-Tasman  travel to  begin,   all  he  got  was a cool stare from Ardern.

Even  when NZ  First  kicks  up  really  rough,  as  it is doing  over one of  Labour’s  pet  projects — Auckland light  rail — it  may  not  get  much attention  from voters.,

NZ , of  course,  now  faces   another   challenge,  as  deep  if not  deeper than  the  pandemic  which – in being  successfully  vanquished – has  drawn  global  admiration.

The  government   believes   it   already   has the  answers  to  the  economic fallout from  the measures it had to  take to protect  the nation’s  vulnerable.  It  will  drive home the  $50bn spending plans to try to  stimulate  the economy  and shore up  jobs and businesses.

It is   using a  familiar rubric,  “Unite  for  Recovery” ,  with the  kind of  catchy lines  that worked  so well during the  Covid-19 crisis.   How  long  will  phrases like “be agile“, “new normal“,  “innovate”, “pivot”, “shovel ready”, “unprecedented”  resonate?.

Whether  those   who lose their jobs   and  have nothing better to  do than sit in front  of  the  screen  day  after  day  will  find any comfort   from  this    podium language  is less  certain.

Where   Ardern   can again win adulation with  her   “captain’s calls”  in  the  next phase  hinges  on    just  how  competent   her ministers prove to be   when put to the test.

It’s  a  chance  for   those like Phil  Twyford, Kelvin  Davis, Iain Lees-Galloway, and David Clark , who have not  exactly covered themselves in glory, to redeem  themselves.  But  does anyone expect Twyford  can do any better  as Minister of  Economic Development  than he did  with  KiwiBuild  or  the  Auckland  light  rail project?

So  far  there  has been  little  evidence  of  Cabinet  working   as a team  to   formulate a coherent  plan.   

The OECD estimates that NZ’s GDP will fall by 8.9% this year, worse than the OECD average of 7.5%.  It  predicts   the unemployment rate  will rise by 3.8% compared with 2.2% in Australia.

National’s Paul Goldsmith says  the  OECD’s  figures  show  NZ  is likely to experience a bigger economic shock from Covid-19 than Australia and other OECD countries despite being in a better position than most to manage the crisis.

“NZ had huge advantages in terms of isolation, distance and small population, yet our extremely heavy lockdown has resulted in a worse economic outcome than most”.

Will  this  message resonate   during  the  campaign?  Ardern’s   luck  may  hold   and  NZ   will  again  out-shine others.

But  doling  out  funds  to  keep  the  Waitomo  Caves  open  or  Whale  Watch  in Kaikoura  operating   won’t  cut it.

The  primary  sector  on whose  exports   the country  is now  even more heavily dependent  is  seeing  its  profit margins  squeezed   by  a   rising   dollar.    Where  monetary  policy  should be  deployed to  drive  it   down  from  the  65USc  level  to – let’s say – 55USc,  both the  Reserve  Bank  and the Finance  Minister   Grant  Robertson  are sitting  on their hands.

Perhaps Robertson  has a mental  block  after chanting  for the  last  18  months   that   NZ’s  economy  is  outperforming   most  OECD  countries.

As an export-led economy  the government  is  now   telling its own people at every turn they should “Buy NZ Made”. Every advertisement seems to emphasis “buying local”, “team of 5 million”, “we can get through this together”.

David  Parker’s    trade  recovery  plan   produced   only  hollow  laughter  from   the   country’s   cowsheds.

The government  even  appears  reluctant   to take advantage of  the country’s top-level health status and  extract financial gains for the economy.  Surely  administrative  controls  are  now  strong enough for  the borders  to be  opened, at  least  to  countries   where the  pandemic is no longer a threat.

Those  with  business  interests should be welcomed back to NZ with strict self-funded obligations – international students, America’s Cup sailors, specialist employees.  Given  a   choice  of  studying  at  an American  university  or   one in the  UK at present,  many  international students might see  NZ  as a  better  option.

Debt management  poses  another   problem  for  the  government.   The  NZ  Herald, in  an editorial  headed  “Markets give ammo for  higher taxes” ,  contends   the  obvious  solutions  of  higher taxes on  wealth, capital  gains and even  redistribution  run  counter  to  what economies  need  right now.

Unless   the government   can  frame  a  comprehensive  economic  plan, which puts  NZ  back on  the road  to  growth and  prosperity, and offers hope to  those who have lost their jobs, it  may  find the   popularity  it  won  in   vanquishing Covid-19  evaporating  as  fast as it  arrived.

 

 

While some people are queuing for food parcels or the dole, others are prospering from NZX investments

A slight bounce in the economy is brightening the outlook as the country heads into the winter months, Radio  NZ  reports.

Retail spending is up and NZ shares rose on  Thursday for a third day running.  Key indicators have led some economists to point to a faster recovery than expected.

Finance   Minister  Grant   Robertson,  never  afraid  to  cite how  well  the economy has  done  under his  stewardship,   told  Parliament  earlier in the week:

We are already seeing a significant lift in economic activity from moving from alert levels 3 and 2”.

Robertson reported  the  weekly   economic update from Treasury showed improvements in economic activity.

Heavy traffic movement is now only 5% below its normal levels, while electricity demand is now above pre-COVID levels, and electronic card spending during level 2 has been nearly equal to pre-COVID levels. Continue reading “While some people are queuing for food parcels or the dole, others are prospering from NZX investments”

Parker has kept the trade channels open – now let’s see how Robertson’s budget can boost production

Audrey  Young, political editor  of the  NZ  Herald,  writes   that  Jacinda Ardern  has  her  A team to handle  the Covid-19 crisis and then her  AAA team.  There are  four members in the A team – herself,  Grant Robertson, Winston Peters and David  Parker.

They are  keeping watch on the  bigger picture to how  NZ emerges from the crisis. Her  AAA  team  has one member, Robertson”.

Point of  Order  won’t  quibble  with Young’s  arithmetic  on the  AAA team because the point  she is  seeking to make  is valid:  Robertson  is  now  the undisputed leader  in Labour’s   bus test — the  informal test that answers who would  take over  if the leader accidentally  fell  under a  bus.

It would be Robertson, no question. Kelvin  Davis is deputy in  name  only”.    

As  Young notes,  when  Robertson  deputises  for  Ardern, it is  an  effortless  switch.

Robertson will  consolidate  his  position  in the  Labour  hierarchy  if he succeeds  this week in  building a smooth  road to  recovery  in  this week’s  budget.

Behind  the Ardern-Robertson   leadership  in the  Covid-19   crisis,  David  Parker  has  supplied  much of the  intellectual  grunt. Continue reading “Parker has kept the trade channels open – now let’s see how Robertson’s budget can boost production”

Budget aims at recovery and rebuilding – but brace for prolonged deficits and a burgeoning of public debt

Finance Minister Grant Robertson has warned the numbers in his 2020/21 budget are “sobering”.  He  reckons, though, that the price being paid to fight the Covid-19 virus has been worth it.

By getting on top of the virus,we have maximised our chances of getting things moving faster than many other economies which could be seriously crippled for months or years…. we can celebrate our success so far in fighting the virus”.

That  may be  cold comfort  for those joining the dole queue  or  those  whose businesses  have been  shattered.

Robertson   concedes   there  has been  criticism  of  the wage  subsidy scheme which has paid out more than $10.6bn to support 1.7m employees.  Given the circumstances of its establishment, he says  it was never going to be perfect  but  he stands  by  it.

Unlike many countries, we got money into the pockets of Kiwis right away, kept them in work and supported the businesses who urgently needed it. I know that we saved jobs by this action”. Continue reading “Budget aims at recovery and rebuilding – but brace for prolonged deficits and a burgeoning of public debt”

Now let’s see how Robertson harnesses the powers of the state to revive the economy

Finance Minister  Grant  Robertson,  who only four  months ago  would have  been quietly rejoicing at the prospect of presenting an election-winning  budget,  now has the challenge of framing a  programme to  salvage  the  economy.  It will be a  formidable  task,  even  if at the time of presentation the country is  in sight of  freeing itself  from  the  blight of  Covid-19.

He says  he  has  a strong personal  belief  in  the  power of  the state  to  do  good.   And   certainly  the  Ardern   coalition   has  deployed  the   power of  the state  effectively  in the campaign  against the  Covid-19  pandemic.

If  Robertson  can  do the  same  with the  economy,  he  will win a  place   in  history.  But   with  economists  predicting  unemployment will soar  above 10% of the workforce,  and consequently  inequality  set to deepen,  many New Zealanders could be  disadvantaged for  life.

Already Robertson is getting  plenty of advice   on what   his priorities  should be.  Labour’s  coalition supporter, the Green Party, is calling is calling for an “ economic stimulus package fit for the 21st century that puts people, climate, and nature first with significant investment in nature based jobs”.   Continue reading “Now let’s see how Robertson harnesses the powers of the state to revive the economy”

Covid, the US and the politics of economic recovery

Horrible news that more than 15% of the US workforce has filed jobless claims since mid-March is apt to be misinterpreted.  

Covid-19 is also an economic shock – and we are working through an economic adjustment.  This process works fastest and is seen most clearly where market forces – generating signals and guiding the adjustment process – are strong.  The recovery is also likely to be stronger. Continue reading “Covid, the US and the politics of economic recovery”