Shallow recession this year but the future looks tough

Written By: - Date published: 12:03 pm, September 26th, 2008 - 42 comments
Categories: climate change, economy - Tags:

We all knew New Zealand was in recession in the first six months of this year. The official figures have confirmed this. The surprise though is on the upside. The consensus had been that the economy had shrunk 0.5% in the quarter. In fact, it was 0.2%. Remember that this figure occurred during the height of the latest oil price spike. Petrol increased 13% in price over this period. So, the fact that our economy could weather this storm better than expected speaks to its underlying strength.

Conditions have improved in the last few months. But things look set to get tougher in coming years. The current credit crunch and the global waves of volatility moving from one market to another (housing, shares, oil, gold, commodities, food) are signs of the global economy reaching the limits to growth. In the next few years we will face ever higher oil prices as peak oil hits and shortages of other resources will flow from that (as an example, there is now a waiting list for the huge tyres mining trucks use: the ingredients are oil and rubber, there is not enough oil, and rubber plantations are being replaced by palm oil grown as biofuel). We will also face a demographic shock as the baby-boomers retire: the housing market will tank, the workforce will stop growing, while the number of dependents will rise. Larger than all of these concerns, climate change is happening more rapidly than anyone predicted. In the last few days, plumes of methane gas have been reported rising from the Arctic Ocean; it appears the undersea permafrost is melting. If you don’t understand the implications of that, I’m afraid you will in the coming years.

42 comments on “Shallow recession this year but the future looks tough”

  1. Ooh oops, we haven’t had the first bailout passed or it appears the banksters need another US$ 500 billion.

    John Key, managing director for debt and bonds and derivatives anybody?

    US radio and tv presenters are calling for the arrest of Paulson, Bernanke and the other Wall street banking scheisters and here we are going to elect one of the scheisters in as a prime minister because “They want to give him a chance and people can chance even though he is a proven liar and investment banker/gambler.” Mindbogling.

  2. John Stevens 2

    Clark is a proven liar as well so it is all even.
    Doone
    Speedgate
    Paintergate
    Winston
    Can’t really call Cullen a money man, he is a history teacher.

  3. Billy 3

    Ev,

    Congratulations. You have been quite restrained on 911 and depleted uranium in the last little while.

    Now could you please shut up about the so-called international banking conspiracy.

    Thanks. That’d really help me out.

  4. Felix 4

    Dr Cullen has a phd in Social and Economic History. He’s also been Finance Minister for about 8 years.

    But “history teacher” is what you’re going with? Riiiight…

    And don’t use “gate” to denote a scandal, it makes you look ridiculous. It’s like you don’t know how to write English good.

  5. lukas 5

    anyone know what the solicitor general is being investigate for?

    captcha- obvious damages…. is that our first clue?

  6. Quoth the Raven 6

    In the midst of this economic crisis does anyone actually think National’s idea to increase borrowing is good?

  7. Pat 7

    “In the midst of this economic crisis does anyone actually think National’s idea to increase borrowing is good?”

    Yes. Increased spending on infrastructure improves productivity and provides contracts/work for businesses (when they sorely need it), which increases demand for jobs, which increases wages and immigration, which increases overall tax revenue, which increases government spending on social services.

    Just my personal opinion.

  8. John Stevens 8

    Felix – ‘don’t use gate…’ wtf, heard of watergate??????
    With a cats name you don’t need to tell me how to write English. I have more than adequat skill levels at that my friend.
    In the 1990s HC wanted spending as a percentage of GDP to increase from the level of near 50% it was at so it’s a bit rich to say otherwise now.
    This country needs productivity increases to survive so investment is needed.
    Labour don’t know what investment is but they know how to spend.

  9. Billy 9

    John Stevens,

    This comment is the last word on the use of “gate” to describe a scandal.

    It is a little unimaginative.

  10. Billy,

    John Key is a lying scheister and he has made his money selling crap to pension funds and mum and pop investors with the Wall street binds and Derivatives ponsy scheme and a 47 floor building twice reinforced to withstand a nuclear blast does not collapse in a freefall speed of 6.5 seconds in a cloud of dust into it’s own footprint after a couple of hours of light office fires.

    So get fucked OK? Jeez.

  11. Billy 11

    Ev,

    I think everyone is well aware of your views on this and the two other topics you consider explain everything that has ever happened in the history of the world.

    So, really, there is no need to go on about them on every thread.

  12. And Billy,

    Why don’t you add something to the debates here instead of you pathetic baiting. Your getting to be quit boring.

  13. Billy 14

    That’s it, Ev. I am the boring one.

  14. Matthew Pilott 15

    Billy – I’m not sure which ‘gate’ comment you were referring to, there were several funny ones.

    Funny, I’d almost forgotten Absolute Power exists – you read it?

    I have a new one – knobshinegate – for everyone who uses “-gate” as a suffix to a ‘scandal’ – coz they are.

    Trav – Will you be watching “Sunday” on TV1 this…Sunday?

  15. r0b 16

    “In the midst of this economic crisis does anyone actually think National’s idea to increase borrowing is good?’

    Yes. Increased spending on infrastructure improves productivity

    As long as the benefits outweigh the costs of servicing the debt,
    yes it does. But increased spending on tax cuts does not improve productivity. So – is National’s idea to increase borrowing for tax cuts good?

  16. Don 17

    Lukas, since everyone else seems intent on regressing to the kindergarten, I’ll answer your question. He is being investigated over a breach of section 111 of the Crimes Act, which is to do with issuing a false declaration. From what I understand of the background to the case he could well be in for the high jump.

  17. Pat 18

    Rob – I arrange loans for a living, so it is pretty simple:

    Borrow $500M, and infrastructure spending does not increase by $500M = money was borrowed for tax cuts = National not re-elected.

    Borrow $500M and infrastructure spending increases by $500M = increased tax revenue = that’s how tax cuts were funded.

    By the way, John Key gets to sit in traffic on the North Western motorway on the way to his Helensville electorate, so he gets plenty of time to contemplate the non-productive costs for all the business vehicles stuck in the same traffic. The Greens don’t like it, but the economy needs better motorways. Try being a plumber on a bicycle.

  18. Matthew Pilott 19

    The Greens don’t like it, but the economy needs better motorways. Try being a plumber on a bicycle.

    So what if everyone who lived within 200m of a public transport access point, and worked within 200m of a public transport exit point, and did not have to carry more than 5 kilos of tools to work each day, used public transport?

    Apart from the immediate collapse of the public transport system due to a lack of capacity?

    So, what would it cost to improve said capacity vs cost of improving motorways, thus encouraging road usage, thus increasing car usage, thus necessitating better roads, and so on?

    On your other point, if $500m borrowed and taxes cut by $500m over Labour’s cuts, and Labour weren’t going to borrow anything, tax cuts funded by borrowing = poor strategy at present.

  19. Pat 20

    “On your other point, if $500m borrowed and taxes cut by $500m over Labour’s cuts, and Labour weren’t going to borrow anything, tax cuts funded by borrowing = poor strategy at present”

    Matthew – the Labour line is that National is borrowing for tax cuts. National says they will borrow to spend on infrastructure.

    Retrospectively, it will be easy to see who was telling the truth. Just look to see whether all the large motorway projects get brought forward.

  20. Felix 21

    I think it was this piece of gold from SP:

    “The habit of labelling every mini-scandal ‘x-gate’, no matter how minor or whether it has any similarities to Watergate, is the single worst aspect of New Zealand political debate, except for Peter Dunne.”

    And sorry John, but it is retarded. The only appropriate use I can remember is “Whitewater-gate” scandal in the U.S.

    (When you do it like that it’s called a pun, John)

  21. Pat 22

    Matthew – on the other point. The whole issue needs some lateral thinking and fresh ideas, plus a sea-change in our habits.

    Why does everyone stop and start work at the same time? = traffic conjestion.

    Why do schools start and stop at the same time? Why do parents drop their kids off and pick them up in their cars?

    Plus fixing/completing the motorways also means adding the bus lanes and associated park’n’ride infrastructures, safe cycle lanes, bybassing of conjestion points, and access and parking to train stations.

  22. Matthew Pilott 23

    Pat, I reckon if they give greater tax cuts, but then borrow and bring forward spending, it’s still borrowing for tax cuts. It is forgone income, in a backward sense, and forgone income they will need to borrow to cover.

    Some of those ideas are great – I know the public service is looking at flexible start times in order to reduce peak road demand (shouldn’t the private sector be leading the way?) and you are right – things can’t stay as they are indefinitely.

    I generally suspect the majority of motorway construction is purely roading – some of this is necesary, but it’s not the whole answer. So th eeconomy doesn’t need new motorways – it’s an expensive and short-term solution. Fortunately, we’re getting on the right track, electrification of rail, new busways: that’s what will make a real difference.

  23. Pat 24

    “Pat, I reckon if they give greater tax cuts, but then borrow and bring forward spending, it’s still borrowing for tax cuts. It is forgone income, in a backward sense, and forgone income they will need to borrow to cover”.

    Your argument only works because you are ring-fencing these things together. You forget that the flow-on effect from better infrastructure is greater tax revenue.

    We could go on for hours but I suspect this is a philosophical argument that you and I would never agree on.

    Also, I admit my view on motorway infrastructure comes from the point of view of a business owner in West Auckland. Completing the motor connections (Waterview/Hillsborough, Hobsonville) is required before the associated commercial land can be developed. 70% of Waitakere residents travel to work somewhere else in Auckland. We need these people working where they live.

  24. Matthew Pilott 25

    It’s not specifically ring-fencing those two elements of goverment finance. If they cut revenue (taxes) and need to borrow anyting, then they are borrowing for taxes. Although if they are specifically borrowing for infrastructure, then I’d point to the other side of the balance sheet, to where the revenue was cut.

    Put it this way – if they could invest in that infrastructure without tax cuts and without borrowing, then we get the flow-on benefits, without the cost of borrowing.

    We need these people working where they live.

    Who planned that city anyway! I guess that’s what happens when you get no regional planning and a series of medium-sized towns in close proximity…

  25. Draco T Bastard 26

    Pat:

    Plus fixing/completing the motorways also means adding the bus lanes and associated park’n’ride infrastructures,

    We don’t want the buses on the motorway any more than we want the cars on the motorway. We should be making those bus lanes as light rail instead – it carries more people than buses, it’s far more efficient and less polluting. Have the car parks for park-n-ride and have the buses feeding from the suburbs to the closest train station.

    IMO, National are borrowing for tax cuts as it’s highly unlikely that the infrastructure that they invest in will be able to pay for the interest that will be charged on the borrowings especially considering the credit crisis and recession that the world seems to be in ATM.

  26. ramsey 27

    Nice linkage of John Key to Global Warming.

  27. ramsey 28

    By the way, you website tried to install a .jar trojan onto my PC, why is that?

  28. Felix 29

    It’s because you touch yourself at night.

  29. The comments on this post read more like Kiwiblog than the Standard.

    I’m amazed anyone still trots out the painting thing with a straight face.

    I don’t see how anyone can think trying to raise money for kids is bad compared to lying about owning 100,000 shares of TranzRail while seeking sensitive commercial information about that organisation.

    How a speeding cop makes Clark dishonest is equally unclear.

    If this is the worst these folk have against Clark then she must be a saint.

    Whereas: National wanted to whore the lives of Kiwi soldiers in the invasion of Iraq so we might get an FTA with the USA.

    Whereas: National has – serially – attempted to deceive voters as to their real policy intentions after the election (2005 and today)

    Whereas: National wants to introduce PPPs on a vast scale – despite overwhelming evidence PPPs lead to higher costs, less service and reduced transparency with public money…..precisely at a time when crony capitalism has been shown to be another name for corruption and a recipe for failure.

    Winston Peters is master of his own fate. Trying to hold Clark or anyone else responsible for that is simply wrong……and being wrong does seem to be a defining characteristic of National’s crew of party hacks.

  30. T-Rex 31

    http://www.kiplinger.com/features/archives/2008/09/how_the_financial_crisis_started2.html?kipad_id=5

    I strongly recommend the above to anyone nearing panic over the state of the international economy, or just anyone who’s interested in the background.

    To all those who thing CEO’s are acutually worth all the money they’re paid – What do you think the CEO’s of all these banks were taking home? And what do you think they deserved to be taking home in retrospect, considering the standard of their corporate guidance?

    Let’s take the case of Robert Willumstad, CEO of AIG. An annual salary of -$95Billion seems pretty reasonable to me in light of the reduction in market cap he’s overseen…

  31. jbc 32

    Steve W,
    At the risk of sounding like a Kiwiblogger [don’t like the atmosphere over there actually] I’ll just say that those Clark things, while relatively harmless, do show that she can tell fibs when she thinks it best (I didn’t know we were speeding).

    I guess that’s the point. It just adds some perspective to the Clark / Peters / Key honesty finger pointing Mexican standoff. [I think Winston has already been shot but refuses to play dead.]

    Back on topic, SP has a bloody good post covering so many things at once (although education was left out – surely an important economic factor). Could easily be dozens of topics under similar headings. All things that affect the bulk of New Zealanders.
    It’s a shame that so much media and public discourse gets wasted on (in my opinion) less important politics when many important issues get sidelined or politicised.

    All of SP’s points have the potential to impact people just as much (probably more) than their pay packet. They are even more important factors if you are jobless.

    I understand this is “The Standard” and I have read the About/FAQ. I don’t know where SP and others find the time to write – but some more posts from the fellow Standardistas with their views on similar apolitical topics would be welcome for the “free thinkers” among us (unless of course you prefer to keep the site as a conversation along other lines). You never know, you might broaden your influence. I might appear here like a Nat – but I’m not that simple. That probably applies to most NZers.

  32. T-rex 33

    “I’ll just say that those Clark things, while relatively harmless, do show that she can tell fibs when she thinks it best (I didn’t know we were speeding).”

    Absolutely. I don’t like it, but i’m prepared to put up with it because, as far as I can tell, she hasn’t actually lied about anything that actually matters. I’m sure she WOULD if she had to, but at least she conducts herself in such a way that she doesn’t need to. I mean speeding is not too flash, but to be fair she did have a police escort. The painting thing is the ultimate in irrelevance – I couldn’t give a flying f*ck in a thunderstorm if she rips off a bit of sh*tty artwork for charity once a week. And as for Peters – she wasn’t open, but why should she be? It’s his grave, he’s been digging it just fine.

    I’m worried about Keys lies because they seem like they could have a bigger impact were he prime minister – Insider trading being an obvious issue. And the part that really bothers me is that I think he genuinely believes he’s not really doing anything wrong, at least not for his customary values of wrong.

    Anyhow, totally agree with you. If we could get more attention on the big issues it might help with drawing peoples focus away from the bullsh*t and onto the policy. I like Clark more than Key, despite thinking she’s pretty arrogant and has started to think of herself as “indispensable” which is always a bit of a worry, but the reason I’m supporting the left (and via Green, not Labour) is that 95% of their policy is just flat out better. National is flaky, and on the key issues don’t even believe in the policy promises they’re making. That points to a far more dangerous future for all of us than personality issues with a PM who despite possibly being a bit more full of her importance to the process than would be ideal is, ultimately, doing a pretty awesome job.

  33. T-rex,

    Hear, hear.

    Especially with the economic meltdown not being a paltry US $ 700 billion. That’s just how much they can have outstanding at any given time if the bailout gets passed.

    The actual amount of speculative crap that John Key and his Wall street mates have ratcheted up is closer to a Quadrillion (1000 trillion).

    I don’t want a man who is that irresponsible borrowing more money from his mates to bail them out and gets us in debt.

  34. T-rex,

    Thanks for the link, it’s a good article.

  35. T-rex 36

    No problem, pleased you liked it – thought it was a good summary.

  36. T-rex 37

    THIS though… this is hands down the coolest idea for a resolution I’ve seen so far:

    http://www.overcompensating.com/posts/20080924.html

  37. yukkity 38

    [lprent: stupid troll. ]

  38. lprent 39

    jbc:

    I’ll just say that those Clark things, while relatively harmless, do show that she can tell fibs when she thinks it best (I didn’t know we were speeding).

    Ummm – I’ve seen Helen a lot over the decades. She always has her nose down reading or working on something. It is what she does. I saw her on TV at the netball the other night, and she was working, probably on her speech.

    I’ve also worked with her a lot over the years on local campaigns. She doesn’t micromanage unless people raise issues or something shows up that indicates a problem.

    I believe the “speeding” thing because she simply would have said that she’d like to get to X by Y, and if there wasn’t any discussion, then gotten down to work. Those cars and for that matter roads are pretty smooth so there wouldn’t have been anything much.

    She doesn’t lie, but she will not always help reporters or opposition MP’s out if they don’t ask the right questions. That is pretty legitimate.

    It’s a shame that so much media and public discourse gets wasted on (in my opinion) less important politics when many important issues get sidelined or politicised.

    Agreed. But that is the state of a “talkback” media. They assume that the population isn’t capable of adsorbing anything more. I suspect that is where they are wrong.

    I don’t know where SP and others find the time to write

    With difficulty. I find that writing stuff that isn’t code takes me quite a while. But I can shove thousands of lines of code together in a short period of time. Different talents. I like moderating 😈

    People pretty much contribute whatever time they can spare. At this point most are concentrating on stuff to do with the campaigning of the ‘left’. If they are going to spend time on this rather than grass-roots then they use it as effectively as possible. I know I do.

    I’d expect that after the election there will be more wide ranging pieces, and for that matter that we’d be able to pick up more posters. At present all of the really interesting people are engaged and so are we about having time to find them.

    I might appear here like a Nat – but I’m not that simple. That probably applies to most NZers.

    Who is simple in their beliefs? However around here you tend to get concerted attacks by the goon squad from the rabid right whenever you show any intelligence in posts.

    As you probably remember I’m probably the most right of lefties you’re likely to meet outside of Act. It is just that I recognize that you have to work with people to do things. Act seems to want to coerce.

    Incidently there was a lovely line that Wilson said the other night (referring to Act). Something like Labour has had to provide the ideas for both the Left and the Right.

  39. randal 41

    morning all…must answer John Stevens and his crude allegations denigrating the Prime Minister Helen Clark and the Minister of Finance MIchael Cullen. this is the same line being promoted on twiedmee this morning as if these people suddenly got lucky and elevated to the highest positions in the land because of some mumbo jumbo that john stevens cant understand. Well all I can say is if New Zealand gets boy racer turbo capitlaism on the 8th then we are all stuffed john stebens included.

  40. Randal,

    We’re stuffed anyway. Ye biggum financial tsunami can no longer be avoided. The economic growth of the US was not through wealth producing middle class jobs.
    Those had been outsourced to China but in the finance industry. Speculating with securities, hedging and betting to the tune of a quadrillion and selling predatorial mortgages to unsuspecting idiots who believed you couldn’t loose with owning your own home because the prices would always rise followed up by tricking people into taking on ever more debt to borrow cheap shit made in China.

    America is bankrupt because the banksters have been running amok in a totally deregulated market and now those same criminals want the bankrupt Americans to cough up to bail them out while still retaining the right to foreclose on them.

    the FBI is investigating Fanny and Freddy and a couple of other subprime lenders and as far as I am concerned they should put all of them in jail.

    And here they want to vote one of those irresponsible gamblers to become the next prime minister even though he already tells us he’s going to borrow money to pay for tax cuts. Go figure.
    It is absolute mayhem and if George Bush looks like a deer caught in the lights that is because he really is petrified. not because of the economy because that’s a goner no matter what but because he and his banking mates really don’t want to be found out.

    Captcha: penny thousand. No not even that is gonna help. LOL

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