- Date published:
1:34 pm, February 1st, 2011 - 44 comments
Categories: Economy, national - Tags: economy, recession, recovery
I don’t think the global economy is out of the woods yet. Not by a long shot. But pundits are talking up any sign of “recovery” as good news. Here in NZ for example:
Brighter economic times ahead
Cheer up Kiwis, because 2011 is looking like the brightest economic year since the global financial crisis plunged the world into recession three years ago.
Hurrah? Not really:
Treasury has this afternoon released a series of figures and commentary on the state of the economy so far this year. It’s hardly a cause for celebration, with growth expected to be 0.9 per cent less than earlier forecast, but it’s growth all the same. Treasury said it expected real economic growth in 2011 of around 3 per cent, which was better than the 1.5 per cent recorded in 2010 and the -1.7 per cent decline in 2009.
Prediction, the Nats will try to attach themselves to any good news this year like a bucket full of leeches, and claim the credit. They don’t deserve any. When the economy eventually claws its way back to health, it won’t be because of anything that this worse-than-useless government has done. What has been their contribution? Tax cuts that spectacularly failed to “kick start the economy” and bring us “roaring out of recsssion” (because – pssst! – tax cuts don’t cause growth). Cuts to jobs, public spending, and saving that did more harm than good. Oh – and the cycleway. Let’s not forget the cycleway.
Any good news we have seen recently, or will see in the near future, is due to external factors, not the Nats. Continuing the article above:
The good news stemmed mainly from historically high food prices and a one-off hit from the Rugby World Cup. New Zealand commodity prices continued to climb, the Treasury found, with one measure, the ANZ Commodity Price Index, at its highest since it began in 1986. Further increases were possible early this year as dairy prices in two global DairyTrade auctions showing a combined increase in sale price of 8.5 per cent. Rugby World Cup – “a key one-off event” – would boost the economy across the September and December quarters.
Like the anticipated blip from the RWC, the other occasional source of good news is returns on investments set up by previous Labour governments. Last week it was announced that the Government’s five-month operating deficit had been nearly halved due to the strongly performing NZ Super Fund and a turnaround in ACC’s accounts. (Same story last year.)
So keep it mind people, when you head out to vote this year. The NZ economy will eventually recover. Not because of the Nats, but in spite of them.
You forgot the 8 year roll out of Broadband
Welcome back r0b. You are being far too positive.
I was totally pissed to see this all over the news like baby shit (but smellier) for the last few days. The best news National have given us on the economy is that there is no good news.
Building consents are down to their lowest levels since 1965, in spite of the earthquake in Christchurch. That’ll be why Aussie firms are poaching NZ workers, even though Gerry doesn’t see it happening.
The NZ economy will eventually recover. Not because of the Nats, but
in spite of thembecause they were voted out and someone (anyone – please!) with an idea on how to run a country was elected. FIFY
Captcha – fingers. National’s approach in one word.
That building consent figure is truly alarming. Thats despite very high record commodity prices, very low interest rates and before the Nats shrink the economy a lot further with their spending cuts.
Heard much the same nonsense from economists at the start of last year- why does no-one call them in on their failed forecasts?
People have been trying but, unfortunately, the MSM don’t listen to non-mainstream economists despite the fact that they’re often right and the mainstream ones are usually wrong. It’s another case of failure by the 4th estate (unless you’re JKeyl and Hide).
Brent oil has just hit $100, up from $70 just 6 moinths ago, and a 40% increase.
Unless something very peculiar happens in the next week or so , the next round of economic collapse is on its way.
Yeah, heard that but haven’t seen it on any of the sites and gadgets I use to monitor oil price.
Still shows oil @ US$92.12, Desktop gadget shows US$91.95. I don’t think they use Brent Crude as their benchmark though.
They use west texas intermediaries, while AFKTT is talking about brent blend. Different grades of oil. There are other blends around too, one called tapis that is currently at $101/barrel also.
The different blends reflect local conditions, eg the price of brent would’ve gone up more than WTI during England’s cold snap, as well as different grades of oil – tapis is lighter and sweeter than WTI, so trades at a premium.
Thanks for the cool gadget
Clearly the last bump in crude prices is due to unrest in Egypt and the ME generally, not a supply-side crunch leading to increased prices, as you’re trying to infer.
They were talking on National Radio this morning, but unfortunately didn’t repeat it at the 8:30 or 9am news round-ups, that it seems likely the economy contracted by 0.4% in the December quarter, and that we’ve therefore entered a “technical recession”.
So this forecast of 1.5% growth in 2010 may be just a bit too premature.
So burt and the lads will soon be blaming Key for “leading us into recession” I spose….oh no silly me, I forgot, it’s only bad when Labour does it eh burt?
Anyhoo, seems we’re only tottering on the edge of the money cliff because China & co are amassing hard commodities and the parasitical speculative reef fish are along for the ride. The heyday (and hayday) for our agriculture is well into its last piss-up. It was never rocket surgery, and if the landed gentry think the developing world will sit back and watch them continue to cream it, they’re in for very stiff cheese. Within a couple of years. Tighten them belts – and get ready to walk like Egyptians.
But if the contraction was true then Marty’s forecast was spot on.
What did Treasury predict? ah, here they are 31/1/11 (a couple of days ago):
Might as well see who’s the luckier fortune-teller staring into the scrying-glass.
“Any good news we have seen recently, or will see in the near future, is due to external factors, not the Nats.”
Replace Nats with Labour and you’ve got the exact thing the right whingers were saying three years ago.
Personally I’m coming to the conclusion that neither National or Labour are capable of doing much more than running NZ into the ground and a serious alternative is needed soon
Except while the rest of the world recovers, GDP in NZ keeps declining. As everybody else climbs out of the mud (or in Australia case- washes the mud off) NZ seems to be slidingback into the morass.
You’d have to say that neither side seems capable of facing up to the fundamental truth- we spend too much propping up our property prices. Maybe one day a leader who will tell us the truth will emerge.
“Except while the rest of the world recovers”
Are you talking about this world?….planet earth?
Ok perhaps I have low standards- but at least some countries are experiencing GDP growth now.
“Ok perhaps I have low standards”
Haha, me too…these days if I can afford a loaf of bread every second day, I’m happy
“Ok perhaps I have low standards”
Haha, me too…these days I’m happy if I can afford a loaf of bread every second day
Except that Labour actually did stuff. It eliminated government (net) debt. It encouraged savings in ways that invested in the local economy (Kiwi Saver). It lifted families out of poverty to give them more spending power (WFF – like tax cuts only for low income families). It invested in education at all levels, including apprenticeships. It planned for the future (Cullen Fund). It invested in local infrastructure including public transport (Kiwi Rail). It put together a significant stimulus package to head off the recession (which the Nats claimed credit for). In short, Labour wasn’t sitting back and hoping for the best. Labour did stuff.
But National? A cycleway.
Don’t forget the 9-day fortnight!
You’ve also conveniently forgotten the “tax switch” that is “revenue neutral” while simultaneously making “everyone better off” and “fully compensates for the GST increase”.
I agree Cullen did do a good job keeping the government in surplus and Kiwisaver was a positive step. He also stepped in at the start of the global recession. But supporting public transport? They spent many times more on motorways than on the Wellington and Auckland commuter systems.
and WFF- who did that help- the working class or middle class swing voters?
And what did they do for NZ manufacturing? High interest rates to quell private borrowing for spiralling house prices and the resultant high NZ dollar- do you really think they handled that well?
Regional fuel tax for Auckland, was a pretty big deal for Auckland in planning and rolling out public transport – cut by the Nats of course.
It was replaced by national fuel taxes, not entirely sure what the revenue is earmarked for, though.
Rob, I’m not trying to defend SohnKey and agree 100% with you but much of your post can be dismissed by my original arguement.
And the Cullen Fund although an excellent idea will go down in my books as one of the great wasted opportunities. Billions of dollars that could be going into NZ startups or buying into our exporters and manufactuers (on the provision of job creation) and instead the vast majority of it has gone overseas. Yes I know it will come back but IMHO the money could be doing much more good in the short-medium term
The Cullen Fund’s goal is to beat the government bond rate by at least 1%. Clearly they figured if they invested in NZ companies, this wouldn’t happen.
A CGT and capital controls would also have been very helpful for stabilising our exchange rate, reducing private debt levels and helping our real economy industries.
This means that many more high paying manufacturing/high tech jobs would have been secured in this country.
These steps could all have been implemented years ago, and they should be implemented ASAP by Labour.
You are mentioning the elephant in the room which are current leaders are fearful of mentioning. Will Goff and Cunlifffe have the guts to go with it? Don’t count on it.
And trying to fight inflation with interest rate inflation.
Killing productive businesses every time they almost stood up.
National has done a good job of reducing the budget spend from $2.2 billion during the Cullen era to around $1 billion, while maintaining most of Labour expensive entitlement programmes.
Not a good job once you add in the $500M per month Bill and John are spending on unaffordable income tax cuts focussed on the rich. Tax cuts causing us to bleed debt to foreign creditors.
I believe your figures are incorrect.
The tax rate drop from 38% to 33% for people earning over $70K (about ~20K people) = $500 million PER MONTH!!
Get another napkin out and work your figures out again.
10% of NZ’ers earn over $70K p.a.
Straight away, that is way more than the ~20K people you talk about. If you were correct, that would mean that there are only 200,000 earners in NZ.
So you are not correct. I am.
Colonial Viper – take your silence as a concession.
FWIW NX, I agree with your point vis the $70k plus tax take, while disagreeing with your starting premise that the current government are anything other than economic cockblockers.
Fair enough – that is in the realm of opinion.
My only problem was Viper’s ludicrous claim that National had given a tax break of 6 billion per annum to people earning over $70k.
You don’t even have to be a math wizz to crunch the numbers on the treasury website.
Hey yeah, I got the $6B per annum figure wrong, I attributed the Government’s entire net borrowing to the tax cuts for the wealthy which is clearly not correct.
However as a moral victory, you did get the number of people earning over $70K p.a. wrong by a factor of about 18. Which I see you amusingly attributed to a “typo” because “~20K” could easily be mistakenly entered instead of “~370K” as the keys are right next to each other 😛
DUde you get your numbers out by a factor of 18x and you put your own error down to a “typo”? How generous to yourself!
Whereas I only got my figures ($500M vs $70M) out by a factor of ~7, I’m the paragon of accuracy here 😛
Well, I did correct myself 40mins later.
Typo – number of people earning over $70k is around 350k (370,000).
So a tax cut of 5% for ~370k people = $500 million per month???
500,000,000*12= $6,000,000,000 (six billion dollars)
So obviously you’re either deluded or lying.
FYI – I calculated the tax break for people earning over 70K at around the $70 millon per month mark.
However this, of course, doesn’t take into account the rise in GST increase & the changes to the Trust laws (something Labour never did). Plus, when you lower the top rate, there is less tax avoidance. So, I suspect the amount is probably around the $40 mill mark per month. Much of this money is probably reinvested in something, or used to pay down debt. So it’s not actually ‘lost’.
I think NACT will massage the figures or do some fast talking about how things grew slightly or were neutral to try and win and then if re-elected all of a sudden growth will be forecast to be about to drop off a cliff so a scythe can be taken to funding for health and education, and the main course that John and Paula have been salivating over, slashing benefits.
Classic NACT bait and switch.
Sorry, but I don’t find ‘historically high food prices’ anything to be happy about. The riots/revolutions in Tunisia and Egypt have as one cause the fact that food is being priced off people’s tables, and in less developed parts of the world people are starving to death because they can’t afford to eat.
I came to New Zealand twenty years ago because it was – and and still is – one of the few places on the earth with a food surplus, and in its isolation is unlikely to be swamped by desperate, starving masses on the move.
If the dollar returned to its ‘natural’ level the country’s overseas debt – including sovereign debt – would increase by 10% overnight and petrol would be $2.25/litre so it’s very much in the govt’s best interest to keep the dollar up. But that’s not difficult because currency speculators can see that New Zealand will always have something to sell which the world wants. Not cars, planes and guns like the USA, or cheap plastic tat and computers like India and China. Food.
The world can feed itself! NZ exports food to wealthy people who were not heavily in debt and needing to export themselves out of their hole, with high oil inputs and stable climates – which is nolonger assured will push up the cost of growing food here. So its not a given that food spikes will mean food shortages, rather if the market adjusts to higher oil and climate uncertainty governments are likely to invest heavily in more not less food and drive down food prices in a coulpe of years, add in the long sea voyage to Europe and possible say good by to added value, and we go back to a bulk commodity lamb freezer. The other side of the currency exchange is that for farmers to buy oil they need to get their food to market and their profits back, so there has to be someone on the other end of the trade, someone willing to sell NZ dollars and buy US dollars (and no thats not more exporters!). Thats people consuming foriegn goods, or people paying foreign debt. And that’s the NZ game, do we want to be able to buy stuff or pay off debts, and looking at the last thirty years it seems Douglas wants us to owe people money rather than have more money to invest, save, and buy stuff. Because the currency brokers run our parliament, now for the first time in a generation we have a chance to shift the game, introduce a CGT and kiwis from across the globe will return because they will know that the system isn’t rigged anymore, that their money in growing a NZ manufacturing base, etc.