Opponents of the current Labour government want you to know that New Zealand could be one of the slowest growing economies in the entire world next year.
And, it’s true — the International Monetary Fund has forecast a dismal 0.8% increase in real gross domestic product during 2024, while some countries enjoy 1%, 2%, or even 3% growth.
New Zealand would indeed be in serious trouble if that growth trend continues in the medium or long term. But it isn’t, because it won’t.
After a painful year living with high interest rates freezing out inflation, the country is expected to resume business-as-usual GDP growth at a healthy (if not hearty) 2.5% thereafter.
If you average IMF’s New Zealand real economic growth in local currency from 2021 to 2028, you get an annual growth rate of 2.5%. Not dissimilar to many other comparable countries.
It's hard to work out which countries to compare ourselves with, as Aotearoa is a very small, advanced economy based in a remote part of Asia-Pacific, with a Eurocentric society.
But here’s a sample platter of average GDP growth rates: Taiwan 2.9%, the United Kingdom 2.5%, Singapore 3.3%, the Netherlands 2.2%, Israel 4.4%, Australia 2.6%, Japan 0.9%, and the United States 2.3%.
You can see that while we are not leading the pack, neither are we falling far behind. And it's a similar story on inflation; not winning the race but not losing it either.
Net debt as a percentage of gross domestic product is lower than in Australia, Israel, and the Netherlands but higher than in Denmark, Canada, and Taiwan.
All this is intended to say: the sky isn’t falling. The way some politicians talk you’d think it was an economy in ruins, riddled with unmanageable debt, and one election away from collapse.
Labour’s Grant Robertson’s recent assessment of the country’s performance, at a finance debate on Thursday night, was probably about right.
“Over the last few years New Zealand has faced a lot of challenges … and we’ve actually done, okay,” he said.
But National’s Nicola Willis was also correct in her retort: “okay isn’t good enough”. Voters do have the right to demand better than ‘okay’.
New Zealand’s best-in-class health performance during the pandemic could’ve set the stage for an economic outperformance as well.
But an overreaction from fiscal and monetary policymakers meant the economy overheated and now has to make a pit stop to cool-off. That’s why GDP growth will be so slow in 2024.
The economy was growing before the pandemic and it will grow again after, regardless of which Chris captures the office on the 9th floor of the Beehive.
National has yet to stake out a position on fiscal policy, beyond its promise to deliver tax cuts come hell-or-highwater, but it has expressed a hunger for economic growth.
It thinks lower taxes, lighter touch regulations, and big investment in infrastructure is the path to prosperity. Pretty standard stuff from the centre-right.
Labour’s plan to grow exports, refocus tourism on big spenders, and make big investments in infrastructure is also kinda vanilla.
The Act and Green parties, as prospective coalition partners, could shake things up. They are winning a high share of the vote, which does suggest there is appetite for serious change.
But the lack of big economic reform from the two majors might hint at a secret: they don’t really think things will be all that bad beyond 2024…
After that, all the next Government has to do is transition to a net zero economy, survive a geopolitical contest between two superpowers, and fill a 30-year infrastructure deficit.
All without borrowing any money. No pressure.
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