There’s something I’d like explained.
Why is it that right now some countries can have weak governments and the economies just surge ahead? Why is political agency shearing away from economic change?
New Zealand appears to be generally protected from the vicissitudes of economic instability so long as our key markets are doing fine. New Zealand is very, very closely integrated into the economy of Australia. As Deloittes noted in October last year:
Unlike its politics, Australia’s economy remains on a steady trajectory. Six changes of prime minister in as many years … would suggest something is amiss Down Under. But unlike in other countries with a high degree of turnover at the top, Australia’s economy continues to perform. Annualised growth has been over 3 per cent across the first half of 2018.”
The Reserve Bank of Australia issued its November forecast was optimistic:
GDP growth is now expected to be around 3½ per cent on average over 2018 and 2019, but to ease in the latter part of the forecast period as production of some resource commodities stabilises at high levels. Headline and underlying inflation are both expected to rise to be a little above 2¼ per cent by the end of 2020. The global economic outlook remains positive. Although growth has slowed in some economies, it remains above trend in the major advanced economies.”
It’s as if Australia’s weak politics had no bearing on the performance of its economy.
The NZ Treasury’s forecasts are about the same as Aussie’s, naturally.
New Zealand’s political management of the economy is not weak, but it’s not strong either. It’s stable for a coalition, making efforts in areas fully within its power, but holding back its real capacity to fund major alterations to how we live and work within the economy. Kinder, more thoughtful, more interested, but that’s about it.
As Duty Minister Chris Hipkins said on RNZ this morning about fixing the ongoing housing affordability crisis, “We also knew that it was going to take some time to do that. You can’t magic up thousands of houses overnight.”
A year in, that’s not a red-blooded endorsement of the effectiveness of political management on the economy.
All very well for the government to be accused of “dithering”, but the Coalition is deploying most existing instruments. It will of course take years to tilt the entire housing market. They are doing an honest job but it is currently too big for them.
Today Prime Minister Theresa May sought to give confidence to Prime Minister Ardern that trade between the two countries will continue through Brexit. Theresa May is such a political undead that any paper she signs means nothing.
Theresa May’s appalling political management of the U.K. economy is now so fuzzy that actual government has been reduced to white noise.
At least for Australia and New Zealand, the scope in which the government acts and can change the economy remains largely set. That should be reassuring: the Australasian economy is strong and trucks along irrespective of changes in political leadership.
But that evidence of economic stability irrespective of leadership also means we here should expect less from government.
Then there’s the perplexing example of the United States. The tax cuts that Congress approved in December 2017, along with the spending increases it approved in February, amounted to a sizeable Keynesian stimulus package.
According to the Peterson Institute for International Economics, the tax cuts and spending increases are adding about two hundred and seventy-six billion dollars in spending to the economy per year, about 1.4 per cent of GDP.
Sure, the stimulus had an effect, but it’s really hard to figure out why the U.S. economy is booming when their political leadership has shot its tax bolt and is now going completely crazy.
Don’t even get me going on China. Economic growth is strong by almost any measure except their own, but their great autocrat Xi Jinping has called his key leadership together today and issued quite dire portents and threats to their very leadership let alone their economic performance if stuff doesn’t change:
The party is facing long-term and complex tests in terms of maintaining long term rule, reform and opening-up, a market economy, and within the external environment,” Xi said, according to Xinhua. “The party is facing sharp and serious dangers of a slackness of spirit, lack of ability, distance from the people, and being passive and corrupt. This is an overall judgement based on the actual situation.”
With all that leadership’s direct and indirect economic controls, they see the red warning lights going on.
So much control, so much politics, so little effect.
All I have is: right now this just doesn’t add up.