The IMF is still optimistic.  Someone needs to be

Britain’s latest irritation is a shortage of drivers.  What could it be: foreign truckers repatriating to Bulgaria post-Brexit; a shortage of motorway lavatories?  

The Daily Telegraph thinks it might also have something to do with the backlog of 56,144 licence applications that built up during Covid.

Which persists because staff at the licensing agency don’t want to go to the office.  And management can’t let them handle personal data at home.  An upsurge of strikes certainly isn’t helping either.

Not everyone responded with due gravity.  When the government issued a friendly reminder to existing licence holders, one German-qualified holder let it be known: 

I’m sure pay and conditions for HGV drivers have improved, but ultimately I have decided to carry on in my role at an investment bank”

Welcome to the post-Covid world.  Not just in Britain – supply disruption, rising inflation and interest rates creaking upwards are global phenomena.

The IMF has issued a double adverb warning for central banks to be “very, very vigilant” over inflation risks.

The job of markets is to adjust.  This is how economic growth happens.  

And after a global disruption of supply and demand on the scale of the 1970s oil price shocks, or the exit from controls after the second world war, it looks like there is lots of adjustment to be done.  

Which is perhaps one reason the IMF is a little less optimistic in its latest World Economic Outlook:

“The global economy is projected to grow 5.9 percent in 2021 and 4.9 percent in 2022, 0.1 percentage point lower for 2021 than in the July forecast.”

It says:

“The downward revision for 2021 reflects a downgrade for advanced economies—in part due to supply disruptions—and for low-income developing countries, largely due to worsening pandemic dynamics.”

And:

“The fault lines opened up by COVID-19 are looking more persistent—near-term divergences are expected to leave lasting imprints on medium-term performance.”

No wonder it feels:

“Policy choices have become more difficult, with limited room to maneuver.” 

Which is worth some reflection.

Politicians everywhere might feel that their policy choices have always been more difficult, particularly after the global financial crisis.  But for the last ten years, they have had the benefits of low interest rates, rising house prices and easy debt increases.

Now they are reliant on the workers and businesses in the private sector to deliver the necessary productivity growth, while also absorbing the costs of more regulation (that’s you climate change) and higher taxes.

While keeping the workers (when they are working) at Britain’s licensing agency happy.

The IMF is optimistic. Policy choices may be getting more difficult yet.

Perhaps most difficult in those countries where government policy has so far been most successful in cushioning voters against change.

Lift in commodity prices gives boost to the economy – here’s hoping we can keep on shipping our goods to market

New Zealand’s Covid-battered  economy  is  once  more sustained   by  its  primary  industries, as  international tourism languishes  and  earnings  from  its  international education arm are  all  but  invisible.

Despite  high  charges    for   shipping,     an  exchange   rate stronger  than   exporters  would  like   and  (some  would  say)  a  government   which  does  little  to  encourage  farmers, output  from the  rural  regions   is   again pumping  the  lifeblood   into   an  economy  which might otherwise be  gasping for air.

News  from  the  ANZ  this  week indicated  its  World Commodity Price Index lifted 1.5% in September, partially unwinding the previous month’s fall. The lamb sub-index is now at a record level, driven by stronger prices for all cuts.

ANZ Agri Economist Susan Kilsby reported dairy and forestry both regained some ground and aluminium and meat prices  were strong. Continue reading “Lift in commodity prices gives boost to the economy – here’s hoping we can keep on shipping our goods to market”

Boris keeps on gambling

Boris Johnson has done a great service for politicians everywhere by testing the political waters for tax increases.  He and his Chancellor of the Exchequer, Rishi Sunak, are ratcheting up Britain’s taxes to pay for care homes.  And Covid of course.  Pretty much everything it seems.

The new tax is not really that new: a levy on labour incomes (i.e., salaries, wages and self-employment) of 2.5 percentage points, with an increase in dividend taxes of half that. Boris – with flagrant disregard for Econ 101 – claims that business will share this burden. Sorry Boris and Rishi – labour taxes fall on labour.

Meanwhile, the Financial Times gloomily opines that the move will raise the UK’s tax burden to the highest level since 1950 – about the time when Boris’s hero, Winston Churchill, was heading for a second term as PM.

Boris has a reputation for being better on the strategic than the tactical decisions.  So, will the tax increase work?

Continue reading “Boris keeps on gambling”

NZ economy must remain nimble and agile, says Robertson – but then NZ went into lockdown and a hobble was applied

It   seems   an aeon  ago,  but it  was  only  last  week that  New Zealand’s wellbeing-focused government was  contemplating   how  to connect the country safely   with the rest  of the  world.   Now, achingly,  the  question is how  long the  lockdown  will last.

Whereas  last  week   the  headlines (like   this one from Newsroom) chorused “Covid success  weighs on Ardern’s  shoulders”, feelings among the  team  of  5 million might now be  deepening over why  such  a  relatively  small percentage  of  the population  is   fully  vaccinated. 

Or  why  the  elderly, in particular, are  not  queueing  for  booster  shots.

NZ,   by  some counts, has  had the slowest  vaccination rollout in the developed world.

The  PM’s  insistence that her government’s Covid response and recovery path has been dictated by the “best evidence we have about how to protect people’s lives and livelihoods’’  accordingly rings  a  bit  hollow. Continue reading “NZ economy must remain nimble and agile, says Robertson – but then NZ went into lockdown and a hobble was applied”

Robertson relishes the patsy questions – when the Opposition quiz him, he is not quite so ebullient

Finance   Minister  Grant  Robertson  can’t  resist  seeing  the  sunny side of  the  economy.  When Parliament  resumed  this  week, he  was   first  up  at  question  time  to  tell  New Zealanders that –  thanks to a strong  export  performance – the economic  recovery  is  going  well.

But  Robertson  didn’t  sound  quite   so  ebullient  when later  he  faced  some  harder  questions  from the  Opposition   benches.

Clearly  the party’s  internal  polling  has  shown rising  dissatisfaction on issues  outside  the Covid  realm, a trend reflected in  polls  like  those  of  Newshub  Reid Research,  which indicated  support  for  Labour had  fallen  nearly  10 points  from  the previous  sampling.

Even  inside Labour there  have  been  rumblings, as  indicated  by its elder  statesman Sir Michael  Cullen contending  the  $15bn  Auckland light  rail  project could be a disastrous waste of taxpayer  money.  And it has been  followed by suggestions the  government itself  is  backpedalling  on the proposed  $700m  Auckland bridge for  cyclists  and  walkers. Continue reading “Robertson relishes the patsy questions – when the Opposition quiz him, he is not quite so ebullient”

Rising prices raise the prospect of householders bringing Ardern down from the clouds of adoration

The Labour  government has  floated  skyward on  a  cloud of public  adoration  for  many months  now and,  given the  conviction of  those  who  believe Jacinda Ardern  can  do  no wrong,  may  do so   for  as  long again.

On  the other  hand, harsh  realities  may  be  hitting  home,  at least  in  some  households.

This  week  Statistics  NZ  reported consumer prices rose a massive 1.3% (quarter on quarter) in the June quarter.  This was stronger than the  expectation of a 0.9% lift (3.0% year on year).

Annual CPI inflation rose to 3.3%, breaking through the top of the Reserve  Banks target band, and a post-2008 high.

ANZ  Bank  economists  had  one  word  for that:  “Monstrous”. Continue reading “Rising prices raise the prospect of householders bringing Ardern down from the clouds of adoration”

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

The Aussies are aiming for economic growth but the Ardern Govt (clucking about wellbeing) seems to prefer Zombification

Is the  reality  of the  Ardern  government’s  policies   beginning  to  hit  home?  A slow, tentative  return  to  what might be regarded  as pre-Covid   normality  is  coming  into  sharper   focus as  government  fumbling, particularly  over the Covid  vaccination rollout, stirs  anger in  communities.

Just  as  Finance  Minister Grant  Robertson  extols the performance  of  the  economy  under his  stewardship, Kiwis are waking up  to  how  much better Australians  are  doing. We  shrank by 1% in  the  last  quarter of 2020 while  Australia grew by 3%.

The  international tourism  industry,  which pre-Covid had become NZ’s top foreign exchange earner,  is  virtually dead, and the  absence  of  international students  is  dealing  a  body blow to educational  institutions, even  down  to  primary  schools.

Even  more  concerning are ominous signs that things may  get  worse. A  headline  this  week pointed  to  the fact  that exporters  can no longer make forward freight bookings between Australia and NZ as international shipping companies abandon the relatively remote and marginal trans-Tasman routes in favour of profitable routes between China, Europe and the United States. Continue reading “The Aussies are aiming for economic growth but the Ardern Govt (clucking about wellbeing) seems to prefer Zombification”

A budget to keep the Jacinda bubble from bursting might blunt NZ’s productivity and spur Kiwis to better themselves in Oz

Finance  Minister  Grant  Robertson  won’t  want to do anything  to disturb  the  waves  of  euphoria  washing  over  New  Zealanders when  he  presents  the  budget  this  week.  The  country is  still basking    in  the  recognition accorded  the Prime  Minister  with  the  top spot in Fortune magazine’s list of the world’s greatest leaders.

The annual list, which was published on Friday,  praised Ardern’s leadership during the Covid-19 pandemic as well as her “world-leading climate and gender-equity policies”.

Fortune magazine has been ranking and publishing top 50 world leader lists since 2014. Although Ardern has featured on it in the past, this is the first time she has been ranked  number  one.

Even  one-time National   supporters  line  up  in  the  queue   of  Ardern  worshippers.

So  Robertson   will  strive to  avoid  any  discordant  notes in  the  budget.  Yet  the  fact  is  that  the  NZ  economy,  though  it   has  survived the  Covid   pandemic  with  a  surprising  degree  of  success,  is  facing  many  challenges,  some  of  them  with  very  sharp  edges, as  it  moves  into  the  next  cycle. Continue reading “A budget to keep the Jacinda bubble from bursting might blunt NZ’s productivity and spur Kiwis to better themselves in Oz”

Aussie Budget is worth reading, if you want a steer to where Robertson will take us next week

New  Zealanders  who  want  a  preview   of  Finance  Minister  Grant   Robertson’s  budget  next week  need  only take a  quick  read   of the  latest  Australian   budget  presented  in Canberra  last  night.

The  Liberal-National  coalition  is  promising a  huge  spend-up,  with  the   Federal Treasurer, Josh  Frydenberg,  being immediately accused  of  delivering a  “Labor-lite” document.

As  in  NZ, Australia’s is a  deficit-laden budget as the leadership strives to sustain a recovery from a coronavirus-induced recession.

Setting  the scene, the Federal government  reminds  the voters: Continue reading “Aussie Budget is worth reading, if you want a steer to where Robertson will take us next week”