- Date published:
11:47 am, October 23rd, 2017 - 51 comments
Categories: accountability, climate change, Dirty Politics, economy, Economy, education, Environment, global warming, health, housing, labour, national, poverty, useless, water - Tags: challenges, dirty politics, economic genius, economy, education, Environment, health, history, homelessness, list, poverty
This post is too long to read. Its purpose is to serve as reference material, a “one stop” snapshot of where we are as a country. The mess that the new government inherits. The consequences of the nine long wasted years of National. The magnitude of the challenge ahead of us.
I hope that it will serve as a useful source for other authors or anyone trying to deal with the onslaught of lies and spin that will be flung at the new government. It’s not finished, I just ran out of steam, sorry ’bout that.
I’ll spend longest on “the economy”, because that’s the area where the new government is most likely to be attacked.
Having been left in a strong position by the previous Labour-led government (according to Bill English), the Nats promised an “aggressive” recovery, that we would be “roaring out of recession”. What happened was the opposite.
I summed up National’s first three years here:
How we got where we are
Also worth remembering from our archives, the near double dip recession, the rising unemployment, the credit downgrades, the fall in the dollar and the like:
Roaring out of recession
National cause of dire economy
English lashes out
Key’s economic bravado now reduced to whining
In short, National delivered us the slowest recovery from recession in the last 50 years. The “growth” that we do have is mostly just a reflection of increasing population / immigration, in per capita terms we’re almost standing still. Our productivity is weak. It’s a debt fueled housing bubble fueled accident waiting to happen.
To the extent that the economy did recover it did so not because of the Nats, but in spite of them. As usual the fruits of the recovery went to the rich, not to wage earners. The multiple failures of the neoliberal paradigm.
Anyway, here’s what’s in the news at the time of the incoming government of 2017:
Opinion is divided between economists on whether the country is heading for an economic slowdown or just taking a breather for another period of solid growth.
Certainly, economic growth has settled. A year ago the economy was growing at an annual rate of 3.3 percent, driven by a booming construction sector, record immigration and record numbers of tourists. That’s slowed to 2.5 percent in the June quarter, but foreign visitors and settlers are still providing the momentum.
The end of last year and the start of 2017 were on soft side, with the building industry finding it tougher to find staff to get jobs done, and some projects being delayed because they have become uneconomic.
Business and consumer confidence have taken a hit in recent months. The NZ Institute of Economic Research’s quarterly business survey of business opinion slipped 10 points to a net 7 percent optimism level, with everything from bad weather, politics, to a weaker housing market being blamed. But it’s not universal, worker confidence has perked up to its highest level in nearly a decade.
Growth in house prices has fallen to around 2 percent in the past year from 10 percent, which reflects Auckland’s market slowing, but homeowners are still sitting on solid gains and are still showing confidence about buying big ticket items.
The economic pie has been inflated by the record immigration, which has stoked domestic demand and consumption, although the share of the pie per head of population rose less than 1 percent in the year to June.
Wages have risen on average 1.6 percent in the past year, just keeping pace with inflation, but unless workers are in a sought-after trade or sector, the chances of significant rises are limited.
Slowing, even falling, house prices makes consumers cautious about spending, and reduced immigration keeps a lid on the services sector.
“There are risks to the economy and they are a little bit to the downside, from slower housing, reduced immigration, and other drivers such as construction that are peaking,” said ANZ senior economist Phil Borkin. …
Whoever forms a government this week, they may come to curse the timing. After a long, robust run, there are signs of a slowdown in the New Zealand economy.
The 2.5 per cent annual growth rate achieved in the year to June, and announced in the last week of the election campaign, was unexceptional by the standards of the last five years. It should arguably have been ammunition for the Opposition parties in the lead-up to polling day but, oddly, they failed to bite.
The factors are mainly domestic. If anything, the global economy is performing a little better now than it has been.
But in New Zealand, there’s mounting evidence that the two main sources of recent economic strength – housing and inward migration – have run their course, at least for the moment.
If Jacinda Ardern became prime minister and the economy tanked, she might get an unfair amount of the blame.
So, for a new government of any political stripe, there are political risks in this somewhat less vibrant domestic economic environment.
It will be all too easy to blame political change rather than economic circumstances if, by Christmas, the shine seems to be coming off the rock-star economy. …
Our national debt has topped half a trillion dollars and is still rising, despite signs that the pace of borrowing is starting to ease.
The Herald has tallied the country’s total gross debt – combining household, business, agricultural, central and local government debt.
The grand total of $528.7 billion is up 7.3 per cent from a year ago.
The latest Reserve Bank figures (for the year to April 30) show household debt has topped $250b, driven by rising property prices and an increase in consumer borrowing. That’s an increase of more than 60 per cent in 10 years.
As well as continuing vulnerability to international shocks, New Zealand now faces a risk to economic growth as the borrowing trend slows, Ranchhod says.
“With interest rates set to continue gradually rising over the coming years, we expect house price inflation will remain modest through 2017 and 2018. That’s likely to continue dampening credit growth, and will weigh on spending and economic activity more generally.” …
It’s hard to know if all the turmoil of global politics has eased off in the past few weeks or if I have become more numb to it.
The risk of a crash is always lurking though. Timing is the thing, not predicting that the boom times will end.
There’s always an end.
Immigration has come down from its record peak, with one economist saying the economy could slow as a result.
The country’s economic growth in recent years had been largely due to high immigration, so a slow-down in those numbers could also slow the economy, Mr Stephens said.
“[High immigration] has led to some distributional issues with a lot of low-skill immigration coming in and maybe keeping low-end wages down.”
This month we should find out what sort of Government we’re in for over the next three years. Someone is going to come out on the wrong side of the negotiations, and it may not be a terrible battle to lose.
The economy has been running hot over the past few years, but this might be coming to an end, regardless of potential policy change.
Migration has had a significant influence in recent years, with population growth running at the highest levels since the 1960s, boosting economic activity.
Early signs are emerging this may have peaked, such as a pickup in the number of non-residents leaving in the past few months. If this trend continues, it could dent the domestic growth story heading into 2018.
Slowing house-price inflation is another factor. Many have put recent softness down to election uncertainty but I don’t buy that entirely.
Tourism and construction also look close to their respective peaks, so it’s hard to see those sectors adding much more to the growth picture during the next three years.
None of these issues is a show-stopper on its own, but combined they could have an impact.
A few less people, sluggish house prices and a small but steady rise in borrowing costs could quite easily dent our outlook.
If it all pans out that way, the tax take could end up a little lower than expected, making the government books look less rosy. We’d see some heat come out of the NZ dollar, adding to price pressures on things like fuel.
Who wants to preside over an economic slowdown, rising interest rates, a housing market that’s run out of puff and missing your surplus forecasts?
Want to cheer yourself down? Take a look at the Treasury’s newly updated projections for the long-run outlook for the Government’s finances.
What the Treasury officials do is take existing policy settings as given, then make projections about big drivers like the age structure of the population and labour productivity growth. They assume the tax take relative to the size of the economy will remain about where it is (29 per cent of gross domestic product).
Then they extrapolate forward, to see what happens to big fiscal numbers like the primary balance (revenue minus spending, excluding interest costs) and the size of the public debt.
It is OK for a few years and then it gets ugly. … if nothing changes on the policy front, and if the projection’s assumptions hold good, we would be looking at a primary deficit of 4 per cent of GDP in 30 years’ time and net debt of 94 per cent of GDP.
That sort of trajectory is not remotely sustainable, especially when most NZ government debt is held by non-residents and the household sector is up to its nostrils in debt.
The projections also assume labour productivity will improve at an average annual rate of 1.5 per cent. Unfortunately, the average over the past decade was just 0.9 per cent. The difference between 1.5 and 0.9 per cent gets pretty material if it continues, compounding for 30-40 years. …
Other recent headlines:
New Zealand’s economic growth driven almost exclusively by rising population
Nation of Debt: Ready, set, crash – could New Zealand be next to fall?
Second quarter of slow growth for economy
NZ economy grows smaller-than-expected 0.5% in 1st quarter
Higher NZ deficit disappoints and surprises banks
Big Read: Hey! Where did my pay rise go?
NZ’s weak productivity in OECD’s sights
A cure for a productivity recession
Economy not meeting the needs of working people – where is the Governments strategy?
Our environment’s crucial role in the economy
NZ economy growing, but house prices a risk – OECD report
Prime Minister Bill English admits wage growth isn’t ‘hot’
NZ’s wealth divide continues to grow – report
NZ’s Rich List revealed: ‘The rich are getting richer – there’s no question about that’
The rich are getting richer
Is National really better than Labour with the Government books? Well, not really
National and Labour’s nine years in charge – what the data shows
Housing and homelessness
Investment bank Goldman Sachs says there is a 40 per cent chance New Zealand will suffer a housing market “bust” in the next two years.
It has put out a report that looks at housing markets in the G-10 countries, according to Bloomberg. It reportedly found New Zealand’s was the most over-valued and at risk of correction. …
Tighter lending restrictions means more “heartbreak” for home buyers who are seeing sale and purchase agreements on a new house fall over at the last minute when they are unable to get finance.
Sales nationwide have been sluggish, listings are down and sale times have been extended, says the head of one of the country’s larger real estate firms – Century 21.
Meanwhile, anecdotally the property market has seen a rise in the number of Kiwis unable to go through with a conditional offer on a house as lenders err on the side of caution and refuse finance.
Auckland’s housing market stalled in the last three months with property values falling by 0.6 per cent and buyers unable to get finance being blamed.
The QV House Price Index showed Auckland values only rose a meagre 0.8 per cent in the last 12 months – the slowest pace of annual growth since April 2011.
Despite the drop, the average current value now stands at $1,039,066 – putting most houses out of the reach of first-home buyers. …
Inflation data out today shows the cost of construction in Auckland rising at a rate 6.8 per cent year – an ominous sign for the new Government regardless of its political colours.
Both major parties have promised historic programmes of residential construction to relieve Auckland’s housing shortage and affordability issues.
But today’s data suggests the industry is already bumping up against capacity issues, making any acceleration in building very difficult – or costly – to achieve.
The latest REINZ House Price Index showed Auckland prices down 0.7 per cent in the year to September.
It is a dynamic that adds risk around delays and timing as rising costs and stagnant prices alter the financial equations for developers and have the potential to create funding issues if they have not been adequately factored in.
It may also deter private sector developers at a time when expectations for new house building are extremely high.
I’m going to say it: The housing party is definitely over. It probably already was. The real estate industry claimed that the slowdown of recent months, with turnover down more than a quarter on the year before, was due to little more than pre-election uncertainty. But the change has felt more fundamental than that.
The banks have cut down their mortgage lending dramatically and borrowers have been turned away for deals that might have been a sure bet just six months or a year ago.
Loan-to-value restrictions layered on top of that bank caution kept many budding property investors out of the market, now they are required to have at least 40 per cent equity in any deal.
The current housing market conditions should be seen as the new normal for the next couple of years, at least. Whether we’re talking a plateau in prices or a more significant fall from here will remain to be seen. There are predictions of as much as 10 per cent or 13 per cent price falls over the next three years. …
Some New Zealand construction companies will begin to fail in the next 12 months as the impacts of a new law begin to bite.
So says James MacQueen, advisory partner in the construction and real estate sector for business advisory and accountancy firm BDO. He says the sector is largely unaware of the impact of amendments to the Construction Contracts Act which came into force on March 31. …
Other recent headlines:
One in 100 Kiwis homeless, new study shows numbers quickly rising
Calls for increase in social housing as nearly half of the homeless are children
Families with children now 53% of NZ’s homeless
Calls for increase in social housing as nearly half of the homeless are children
New Zealand housing crisis forces hundreds to live in tents and garages
Work and Income sent families to garages
Minister vows to hold slumlords to account
Anger over ‘slum landlord’ Government
Housing NZ to look into slum claims
The slums of Jebson Pl
Slum warning over Auckland CBD
Government abandons social housing target of 65,000
NZ housing market crash warning
NZ house prices look set to fall 12% by 2020 as rates rise and population growth eases, Infometrics says
Urgent housing need ‘big concern going into winter’
Agency that put up rent ‘week on week’ accused of price gouging
House prices rose $90 a day outside Auckland
Will the Budget help mums and dads sleeping in cars?
Housing market could collapse on 7 percent mortgage rates
Housing affordability plummets across New Zealand
Auckland housing affordability tumbles
Housing affordability ‘crisis point’
Auckland houses ‘severely unaffordable’
‘I see no way of ever being able to own my own home’
Loans for first homes jump 43% in 2 years
NZ ‘half a million houses’ short
Auckland needs to double number of new homes – data
Young house hunters should just give up
New HAM measure is powerful but won’t stop the spin
Homelessness to reach a new crisis point this winter
Fast-growing numbers of homeless putting pressure on freedom camping
Housing New Zealand waiting list quadruples in Palmerston North
Homeless families: ‘We’ve got nowhere to send them’
No further homeless policies needed – Govt
New Zealand’s most shameful secret: ‘We have normalised child poverty’
Most homeless are working poor – Otago Uni
Number of New Zealand children hospitalised with malnutrition doubles as food costs bite
Poverty NZ’s ‘new normal’ – report
Working poor at ‘crisis’ point
A third of NZ children live in poverty
Research finds pockets of extreme poverty
Third world diseases affecting NZ children, says doctor
Housing crisis blamed for Auckland’s rheumatic fever rates
Findings on disease rate ‘a disgrace’
Shock look at NZ’s child poverty
Poverty blamed for leap in infectious disease admissions
Disease figures a national ’embarrassment’
Auckland homelessness: Rough sleepers tally doubles
Demand high at Auckland City Mission
Hamilton plan to ban rough sleeping
Big hike in food parcel demand – Salvation Army
Work and Income sent families to garages
A week at Te Puea (and Marae has fears of ‘smear campaign’)
Steep rise in child poverty
Income inequality: How NZ is one of the worst in the world
I used to write a series called Poverty Watch.
New Zealanders are being asked to think of the health system when they cast a vote this September. A nurses’ union released an open letter saying “it’s getting harder to do the work that we trained for”.
“Health underfunding means that sometimes we’re not able to give you the best. We are often short-staffed, rushed, and need a little more time to give you care,” the letter says.
“We are sad sometimes because of what we couldn’t do for your tamariki, your grandparents or your neighbour. Many of you are feeling frustrated by delays in getting the healthcare you deserve and expect. We are frustrated, too.”
The letter tells voters who they back is a personal choice and doesn’t name any political parties, but makes clear the organisation’s position that health funding is not adequate under the National-led Government. …
Patients and healthcare workers say they have been left frustrated and disappointed by “inadequate” funding for health in the 2017 Budget.
They said the Government’s announcements on Thursday would not go nearly far enough in addressing concerns about overworked staff, access to new medicines, and access to mental health treatment.
The Government said total health spending would be a record $16.77 billion in 2017/18 – an increase of $879 million, with an overall increase of $3.9b over the next four years.
However, the record claim does not take inflation into account, and sidesteps the fact that almost half the spending will go toward mandated wage increases as part of the pay equity settlement. …
“The Government needs to demonstrate its commitment to the health of all New Zealanders by addressing the high levels of unmet health need as a matter of priority.”
“The Nurses Organisation says hospital patients are soiling themselves because there aren’t enough nurses to help them to the bathroom.”
“Labour claims that health has been underfunded to the tune of $1.7 billion over the last five years…”
“New Zealand’s health budget has been declining for almost a decade and could signal health reforms akin to the sweeping changes of the 1990s, new research claims.”
“Hospital beds for people suffering from extreme mental distress are stretched to breaking point, with double as many people being seen for crisis assessments as there are bed nights available.”
“The problem was a lack of funding as more people accessed mental health services and Auckland struggled with an increasing population and rising house prices…”
“Dr Mackay says funding levels for health are a “disaster waiting to happen…””
“Rural Health Alliance Aotearoa New Zealand (RHAANZ), representing over 40 rural based organisations, says the country’s rural health and social workforce is in crisis.”
“Nearly a third of orthopaedic patients referred for a first specialist assessment are being turned away from Dunedin Hospital, and the situation is becoming “untenable”…”
“New Zealand’s public health system, which was once the pride of the developed world, is clearly ailing.”
“Our national health system was once the envy of the world; it is no longer. The facts show that we underperform in many areas.”
Other recent headlines:
Serious mental health shortcomings exposed in Auditor-General report
Mental health wards ‘discharging people to caravan parks’
Teens waiting more than eight weeks to get mental health care
Children forced to wait more than a year for dental check-up
Blow to 400 patients as cancer nurse funds axed
Auckland’s crumbling mental health services
Chch mental health funding slashed despite overwhelming demand
Chch mental health cuts ‘put lives at risk’
Mental health services facing cutbacks (ODT)
Cuts to mental health acute care ill-advised say psychiatrists
Coleman’s cuts create crisis
The stark reality: New Zealand no longer has a functioning Mental Health Service
Half a million Kiwis not receiving healthcare because of cost
Dumbing down a generation: Performance of NZ schoolchildren plummeting
NZ 10-year-olds worst at maths in English-speaking world
Children’s learning not improving under National Standards measurements
The trouble with NZ’s primary schools
What PISA tells us about grade inflation in NCEA
Why no one wants to teach in New Zealand
National standards pass rates plateau as distress rises
Tertiary enrolments fall as cost of living rises
Schools to axe core subjects as shortage of specialist teachers reaches ‘crisis point’
Education funding cuts laid bare
Hundreds of schools over capacity or at risk of overcrowding
NZ tumbles in education ranking
Teachers’ unions warn strikes over pay likely in 2018
Immigration scam: ‘Corruption, organised crime’ with student visas
NZ dream turns to nightmare for international students
Student visa fraud: ‘It’s not about education’
Student visa scam – It’s the tip of the iceberg
The Big Read: The $25 million student funding scandal
More tertiary providers under investigation by Serious Fraud Office
Water infrastructure needs billions in investment
‘Damning’ rivers and lakes report: Nitrogen levels rising, fish threatened
NZ needs to act now on rivers, top official warns
Dairy continues to damage water quality
North Canterbury drinking water making people sick, residents say
New water guidelines labelled “sneaky backdoor attack”
Federated Farmers: It’s damn lies and alternative facts
When the river runs dry: The true cost of NZ water
National is ruining our rivers
Majority of waterways not covered by freshwater policy
Diving into the muddy water of ‘swimmable’
Unswimmable lagoon now deemed swimmable under revised standards
Fourth group quits water forum
Dirty water: Swimmers warned off beaches
Gastro outbreak hits Hawke’s Bay
‘Widespread’ vomiting and diarrhoea gastro outbreak in Havelock North
Animal faeces in water supply may be causing Havelock North gastro outbreak
Gastro bug in Hawke’s Bay water may have claimed a life
About $19b of property at risk from climate change effects
The great climate change rort
ETS proposals ‘last nail in coffin’ – expert
The release of the September Consumer Price Index (CPI) by Statistics New Zealand shows that incomes are not keeping up with the cost of living. “Prices are rising faster than wages, and some of the biggest price rises are basic necessities for the lowest paid” said Sam Huggard, Council of Trade Unions Secretary.
Prices rose 1.9 percent in the last year, mostly driven by the escalating cost of food and housing. “Food and shelter are the most basic and unavoidable costs, but they make up a bigger percentage of the budget for families earning the least” Mr Huggard said. “Even petrol prices have risen faster than most costs and wages over the last year. Those who are struggling to get by are trying to keep up with higher relative inflation than people who have a bit more financial flexibility.”
Full Statistics New Zealand figures are available at www.stats.govt.nz/browse_for_stats/economic_indicators/CPI_inflation/ConsumersPriceIndex_HOTPSep17qtr.aspx
Gordon Campbell on the Peters/Ardern triumph
In reality of course, Labour /NZF have absolutely nothing to learn from National when it comes down to economic management. The last time Labour was in power it ran nine years of surpluses and – rather than spend up large – it paid down government debt to an extent that enabled New Zealand to survive the Global Financial Crisis in good shape. What Labour/NZF have inherited is nine years of National’s neglect of glaring social problems and inequalities. That will require government spending, to redress the social deficit. That’s a good thing – and the stimulation is likely to be useful in the context of a slowing economy. The work of renewal begins immediately. …
Jacinda Ardern upbeat but ‘inheriting a lot of problems’
Clark said the incoming goverment would be different from National because it had an explicit commitment to a fairer New Zealand including addressing key issues such as housing, mental health and water quality.
“They have challenges but I’m absolutely confident they will be focused on fixing those problems.”
“Jacinda, Winston Peters and the Greens, they inherit a lot of problems. Who would have thought in our lifetimes we would see home ownership in New Zealand fall to 50 percent. Who would’ve thought we’d see the degree of homelessness. Who’d have thought we would see what’s happening to our water and the level of pollution.”
“So they have challenges but I’m absolutely confident that they will be focussed on fixing those problems.” …
And the rest:
Duncan Garner: After nine years in power, why is National’s report card so full of fails?
Climate change is coming for the economy, and New Zealand needs to adapt
Politics in crisis and trust issues: How Kiwis feel about how the country is run
‘This community is in crisis’ – Northland community leader calls for State of Emergency over deprivation
NZ ranked near bottom on children’s rights
New Zealand tumbles down the political corruption table
High-profile deals behind corruption slide – report
Official crime stats reveal burglaries and crime rising
Food bank pantries bare, emergency food grant dropping – report
CYF facing ‘unfunded cost pressures’ of millions, Government admits
Lifeline faces closure as Government rejects pleas for funding
Suicide rates highest since records began
NZ suicide stats highest ever recorded
The highest rate of teen suicide in the developed world
The Horror of NZ’s Suicide Rates
Prime Minister Bill English ‘puzzled’ by high numbers out of work and education
Bill English describes some Kiwis looking for work as ‘pretty damned hopeless’
The culture that National leaves behind:
How much information is being withheld from us?
National’s long history of intimidation
Another term of Nats bad news for democracy
Nats – lousy at government – “brilliant” at opposition
Joyce’s fiscal hole lie
There’s – quite a lot for the new government to deal with…