National’s mismanagement of the economy has left us in the economic doldrums. Here’s Brian Rudman:
Unemployment is heading back above 6 per cent, having never fallen below the 5.5 per cent recorded in September last year. Growth also peaked last year. It has been boosted by a surge in net immigration but that also means that in per capita terms, gross domestic product growth is a lot less than the headline rate.
By the latest June quarter, annual growth in expenditure GDP was 2.7 per cent but only 0.4 per cent per capita. And the Reserve Bank, in its latest monetary policy statement, now expects the output gap to remain negative for two more years. That would make nine – nine! – straight years in which the economy produced less than it could have. If that was as good as it gets, it wasn’t all that good.
But on the Reserve Bank’s forecasts, households face the unpleasant squeeze of a labour market which is weakening while inflation rises towards 2 per cent. In last week’s statement, the bank has slashed its forecast for economic growth in the current year to March 2016 by more than a percentage point, compared with what it thought in June.
So we are left with a picture of a cycle that never really came close to overstretching the economy’s resources and creating a seller’s market for labour. And now it is clearly on the downward slope.
Former Reserve Bank economist Michael Reddell now blogs as Croaking Cassandra. Earlier in the week he had this to say:
[Australian PM] Turnbull is quoted as saying
“John Key has been able to achieve very significant economic reforms in New Zealand …
I grabbed a piece of paper from my bedside table and starting trying to jot down on the back of the envelope the “very significant economic reforms” in New Zealand over the last seven years.
It was a short list. I couldn’t think of any.
New Zealand has made no progress in closing gaps with Australia over the seven years John Key has been Prime Minister – not on GDP per capita, not on national income per capita, and not on productivity either. If anything, we’ve drifted further backwards.
I’ve said it before and I’ll say it again – Labour is the party of economic competence in NZ.