If New Zealand’s economy could be powered by empty promises and pollyanna-ish optimism, then John Key would have the best economic record in the country’s history. Actually, he has one of the worst. Vernon Small today mocks Key’s unwillingness to put a downer on the RWC vibe by confronting the emerging global crisis.
His deputy Bill English will return from the International Monetary Fund today with tales of debt woes, double-dip recessions and fears the global slowdown will peg back our key export markets in Asia. But yesterday the prime minister was looking on the bright side of life:
Our country sits close to some very strong economies. The chances of Greece defaulting on its debt are “better than 50 per cent”. (As in, higher than 50 per cent? Or worse than 50 per cent? Some even say 90 per cent, or inevitable. But that is not the Key way.)
A double-dip recession? Unlikely. And there is no reason to resile from plans for a Budget surplus by 2014-15.
The worst news was that the pesky crisis had killed his weasel-cunning plan to return to surplus even earlier. In Keyland even when things get gloomier, they don’t get worse; they just stop things getting better.
So there will be no cuts to programmes, no spike in taxes, no stimulus package, no plans for U-turns if countries default. Just a can-do PM who will “roll with the punches”, stay optimistic about Asia and trust that investors will be “discerning” (unlike in 2008) between good and bad companies, good and bad countries.
You would think that with a better-than-even chance of Greece defaulting he would be twisting advisers’ arms to forecast its impact, and prepare contingency plans. Not yet, it seems.
Why would you need to be forecasting and preparing for the downside when downsides are impossible, eh Mr Key? As long as China keeps growing…. oops:
As the American economy appears to teeter on the edge of another recession, Europe struggles with a financial crisis and emerging markets like Brazil and India show new weaknesses, China may appear to be in better shape than most countries, economists say. But “better” is relative.
On the surface, economists at the International Monetary Fund and most banks are still estimating China’s growth rate to be over 9 percent this year. China continues to run very large trade surpluses. New construction starts have soared with a government campaign to provide more affordable housing.
And yet, the country’s huge manufacturing sector is starting to slow and orders are weakening, especially for exports. The real estate bubble is starting to spring leaks, even as inflation remains stubbornly high for consumers — despite a series of interest rate increases and ever-tighter limits on bank lending.
Because China’s mighty growth engine has been one of the few drivers of the global economy since the financial crisis of 2008, signs of deceleration could add to worries about the global outlook.