Playing catch up?

Written By: - Date published: 12:39 pm, August 23rd, 2009 - 17 comments
Categories: economy - Tags:

In the 1980s and early 1990s, during the Right’s neoliberal economic revolution, New Zealand’s economic output per person stalled – growing just 0.01% per year between 1984 and 1992 – and fell behind Australia’s economy, which grew 1.84% per person a year over the same period. Between 1999 and 2008, the New Zealand’s GDP per capita actually grew faster than Australia’s (2.00% vs 1.87%) but when we’re so far behind the gap continues getting bigger even if we grow a little faster.

catch up to australia
(source: IMF WEO)

So, what will it take to catch up Australia by 2025 like Key is promising?

Let’s assume Australia keeps growing at 1.74% per person on average like it has the last 30 years. To close the gap, New Zealand would have to grow at 4%.

That’s more than three times the average we’ve managed since 1980. It’s more than twice what Australia managed. Barring total disaster for the Aussies that somehow bypasses us or the discovery of the world’s largest reserves of pixie dust in the Bay of Plenty, it’s not going to happen.

Don Brash and the other right-wing cronies on the 2025 taskforce can do the maths. They and the Government must know their stated goal of catching up to Australia isn’t realistic. In reality, the goal’s just an excuse that can be given for implementing the same old failed rights wing policies, a cover for tax cuts for the rich, cuts to social services, lower wages, and worse working conditions.

The Right’s agenda has never been about growing the economy faster (if it has been, it has been a spectacular failure). It’s about getting a bigger slice of the economy for the wealthy at the expense of everyone else. So are they really trying to play catch up with Australia now, or is there another game afoot?

17 comments on “Playing catch up?”

  1. bobbity 1

    “The Right’s agenda has never been about growing the economy faster (if it has been, it has been a spectacular failure). It’s about getting a bigger slice of the economy for the wealthy at the expense of everyone else.”

    Do you really believe that ? Or do you think if you repeat another 100 times that somehow it will become reality ?

    • IrishBill 1.1

      Every time the right have been in power over the last thirty years economic growth has shrunk and wealth has been distributed upwards.

      Yet they keep pushing the same policies each time they are in power. They’re either incredibly stupid (and even a leftie like me doesn’t believe they’re that dumb) or they are, as Marty says, more interested in distributing wealth upwards than in growing the economy.

      But I get the feeling you’d rather ignore the evidence and resort to snide remarks based on your prejudices.

  2. Maynard J 2

    Key is being pretty chummy with Rudd.

    If we join the Australian confederation, we will have caught up by default – our average wage will be exactly the same, statistically 😉

  3. tsmithfield 3

    I actually agree that catching Australia is pretty well impossible. Australia is absolutely loaded with commodities that have been in high demand over the last few decades. The Chinese economy is being credited a lot for the growth in the Australian economy as they have been consuming Australia’s resources like nothing else on earth. If the Chinese economy was to crash though…

    I suspect if you did a multiple regression and included the increase in commodity prices in the equation you might find the gap is a bit closer.

    • lprent 3.1

      ts: Your history is crap. The Chinese have only really become a major market much this decade. The Japanese were a rising market for their goods in the 70’s and 80’s. However as was pointed out in the post, the aussies kept rising through the 1990’s unlike us. If you ever care to look at their stats for the period, you’ll find that an increasing proportion of their GNP has come from non-commodity products, same as we have, but they have had a less bumpy ride doing it.

      The main reason appears to be because we keep getting attacked by our internal economic ideologues trying to drive NZ into being a low wage, low employment economy. It is pretty noticeable that the Nats always have increased unemployment and an economy that gets more fragile because they usually try to gut the infrastructure (physical and human) required for long-term growth. Here we have a national party who think like shopkeepers – short-term and seasonal.

      The aussies keep trying for a robust high wage economy, high employment, and being forward looking and it tends to work. Even the right in aussie thinks longer term than the next election there.

  4. RedLogix 4

    absolutely loaded with commodities that have been in high demand over the last few decades.

    Well the last decade in fact, the same period while NZ was managing slightly better growth than Aus. The point is that the gap opened up in the mid 1980’s and 90’s when we notoriously implemented the neo-classic dogma and Aus did not.

    More of the same will not close the gap.

  5. tsmithfield 5

    Redlogix, its not only the commodities.

    Australia also has huge advantages in terms of economies of scale. For instance, Sydney has one port but a population the size of New Zealand. Whereas, New Zealand has multitudes of ports to serve a similar population size. So, in New Zealand, we tend to have a lot more duplication of resources. Also, Australian companies tend to be bigger on average, so they have better buying power etc.

    Just the fact that Australia is a lot bigger than New Zealand, population wise, gives it huge economic advantages in itself.

    Dicking around with our economic policies won’t change any of the fundamental differences between Australia and New Zealand.

    • IrishBill 5.1

      So if they have so much of an advantage how did we start catching up to them a little in the last decade?

      • We didn’t. The “gap” increased a little both in absolute and relative terms. Check the source cited under the graph if you don’t believe me.

        (For the record: I happen not to believe economics-by-league-table is very interesting to start with, but if we’re gonna do it, then we should do it right.)

        EDIT: re-checking the data, I see I was wrong about relative-terms if we cherry-pick the ten-year mark—the Asian Crisis hurt us bad—. My mistake.

  6. infused 6

    I like your posts. I think you guys all post from a template.

    * Some graph.
    * Something that happened in 1990’s
    * What Labour did in 2000-2008
    * Some retarded conclusion with no evidence
    * ????
    * profit

    Playing your game is no different. Great to see Helen take us to the top half of the OCD. Oh no, that’s right, we dropped.

    The only agenda Helen had was getting in to the UN.

    • IrishBill 6.1

      I see you also have to resort to personal abuse. I guess that’s what happens when the evidence goes against you.

      Let me guess, you next argument will be the “National won so they can do whatever they like” one. Desperate. Desperate and dull.

      • lprent 6.1.1

        It is pretty predictable and boring listening to the broken record of the nutters from the right..

        You have to wonder if they’re working their comments off a template. Helen (ignoring the clueless idiot who is the current PM), OECD ratings (ignoring the abrupt drop that National did in the 90’s), retrospective legislation (ignoring that it is common and Nats have done it several times since the election), etc, etc..

        But hey, since they are so stupid about some things they have to be repeated many many times… It is the only apparent way for the message to penetrate. Over the next few years I’m expecting that we will repeat it – pretty much with an increasing “I told you so” as the NACT’s shed ministers, members, parties and what remains of their principles.

  7. You guys are all wide of the mark.

    The NZ economy did well until 1974 when the first petroleum crisis caused all sorts of havoc. Muldoon (Nnational party PM) came to power and wrecked the economy. He bet big on his “Think Big” projects and on the Springbok tour to remain in power. Think Big failed miserably and wrecked the economy and the tour wrecked the community consensus that we had.

    The 4th Labour Government received a hospital pass. Douglas made the wrong decision and tried to privatise everything, Lange should have been stronger but Labour certainly did not fix things although arguably they did not make things worse.

    Richardson and Bolger came to power and caused huge damage to our social infrastructure. Helen and Michael just about repaired the damage caused by Muldoon, Douglas, Richardson and Bolger but got snared up in the battle of advertising bureaus.

    NZ will never catch up to Australia, unless there is huge investment in education and research for the next 15 years.

    Remind me on this current Government’s approach to education and research spending?

  8. Bill 8

    The 3rd world/South/ developing world will never catch up with the so-called developed world for the very same reasons outlined. We know this. And when a 1st world, Western, developed nation wilfully kneecaps itself, it will never catchup.

    The elites will be just dinky though. In fact they will be better off than before national impoverishment and more on a level with elites from other countries.

    Here’s the obvious point. Elites of a poorer nation can only attain a level of wealth comparable to the elites of a wealthy nation if they bleed their own nation. Elites of a wealthy nation might imagine they can get ahead of the game by impoverishing/ bleeding their own nation at a faster rate than elites of other nations.

    Welcome to NZ, a fast track to third worldism for the greater good of the tiny minority. It’s a done deal. The lag is locked in and as always was predicted the third world has moved over borders and landed on your doorstep. The gap and inequity (internally as well as that comparative to other countries who have been slower on the downward spiral) can only grow.

    Welcome.

  9. Greg 9

    I saw some interesting stats out of America concerning the comparison between left wing and right wing presidents and economic growth. (Its in hard copy so I can’t link to it on the web – call it a bluff if you wish) Basically Republican presidents tend to have lower economic growth during the first few years of their reign, but then they leave office with economy growing at a significantly higher rate than the democrats do. Suggesting right wing policies are of benefit in the long term, while left wingers tend to focus on the short.

    I wonder if the same logic can be applied to New Zealand?

  10. Greg 10

    The data I have had a different take on it. Basically it acknowledged that short term economic growth was larger under the democrats, but by the end of their reign it was almost always decreasing. Republican presidents had the reverse effect.

    The data linked to above is only concerning the average for the whole administration. It did not take into account whether it was increasing or decreasing at the end of their reign.

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