By Alex Tarrant
Economic problems in the Eurozone, a sticky domestic recovery in the jobs market, the Canterbury Earthquake and adverse weather have been blamed by Prime Minister John Key as factors behind the "fairly anemic" growth in the New Zealand economy in the second half of 2010.
"There’s been a lot of different factors out there. It’s been a much stickier recovery than people actually thought. If you look in Europe and the United States the expectations were there would be much stronger growth there," Key told media in Wellington this afternoon.
"There’s been a number of different factors – we’ve seen Canterbury, in terms of the earthquake, had quite a big impact on the Household Labour Force survey, and on growth in Christchurch which has been negative," he said.
"We also had at one point there some climatic conditions – we lost a lot of lambs in the South Island," Key said.
"But at the end of the day New Zealand grew last year. It was growth that was a lower level than clearly we want. We also created 27,000 jobs as an economy last year. Again, less than we’d want for the population growth.
"All we can do is work within the global conditions we’re in and have a program for lifting overall growth.
"If you go back to the program we’ve got - whether it’s around tax, or infrastructure investment, or skills, or labour laws, or any of those other issues - as a combined package in my view they’re the right long-term recipe for growth," Key said.
"I think you can’t measure these things day-by-day or quarter-by-quarter, you have to measure them over a reasonable period of time," he said.
2010 growth could have been 6%
"The Reseve Bank themselves will tell you will tell you that if New Zealanders had consumed in 2010 at the same rate that they drew down debt in 2007, growth would have been nearly 6% last year," Key said.
"Now we actually don’t want them consuming debt at those levels, we’re actually very happy with the rebalancing that’s going on," he said.
"But what drove growth in that period from 200 to 2008 was unsustainable. It was consumption and it was debt fuelled, and it was spending other people’s money. That is not a long term recipe for the New Zealand economy. That has to be around investments, savings and lifting the tradable sector."
Technical recession can't be ruled out
Repeating comments from this morning, Key said he could not rule out that New Zealand had two consecutive quarters of negative growth in the second half of 2010 after GDP shrank 0.2% in the third quarter. Figures for December quarter GDP are due on March 24.
"I can’t rule that out. If you look at what the economist predictions are for the last quarter, they fluctuate – I think at the top end some have been plus 0.9 [percent GDP growth from the third quarter] and some economists have been negative, so look, you can’t rule out a technical recession," Key said.
"Obviously we’re hopeful that hasn’t been the case," he said.
"Whatever happens, you’d have to say that growth in the last six months of last year was fairly anemic and on that basis clearly we want the economy to be going faster. We believe we can do that by lowering interest rates, or at least keeping the pressure off the Reserve Bank so that interest rates can stay low, encouraging investment," he said.
Need to preserve credit rating
The situation in Europe did not help, Key said.
"Europe also indicates to us how important it is that we preserve our credit rating, and that’s we’re taking the steps that we are," he said.
'Businesses starting to employ people again'
Businesses created 27,000 jobs last year, Key said.
"They are starting to [create jobs], but they need the right signals internationally as well, and they’re starting to see that," he said.
"My sense of being around in the first few months of this year is confidence is actually starting to return. Unemployment’s always a lagging indicator."
But don’t they also need the right signals nationally as well as internationally, I asked
"Well the signals they want are the ones that we’ve been giving them," Key said before launching into a list of signals.
"That the government’s not going to crowd them out, that the government’s going to be careful with the legislation and regulation it passes, that it is going to be predictable in terms of things like its emissions trading legislation."
"That it is going to have flexible labour markets, that it will be investing in infrastructure, that it won’t be crowding them out by borrowing too much money each week, that we are going to get back into surplus earlier, that we have a tax system that has integrity, that we are going to run a leaner government service, that we are reforming the Resource Management Act, that we are looking at the critical issues of water, that we have resolved some of the issues around electricity, that we are looking at a mixed ownership model to have better productivity," Key said.
"I can go on if you want me to. There is no one single fix. If I could just click my fingers and do it, we’d all do it, but it ain’t as simple as that," he said
"An economy’s a very complex issue, but overall if you look at the settings we’re on, I think the reason the business community is supporting us, in the way we see through Mood of the Boardroom and other public reports, it is because there is a whole package there that is coherent.
"If you contrast that with the previous administration and the now Phil Goff-led opposition, he wants to spend more money and borrow more money, and I don’t think that’s going to take us anywhere, other than further into debt," Key said.
(Updates with video, 6% possible growth coments, Businesses employing people again)
27 Comments
This is how the US government manages reporting GDP numbers (and weeks earlier than here):
Finally, there is the Government's "estimate" of 4th quarter GDP, which was glorified and worshipped by the media. The stock market initially did an end zone dance, but then sold off. Now why would that be? I'll direct everyone's attention to an excerpt from the highly regarded King report, which explains the farce that is the Government GDP calculation:
"The Q4 GDP estimate is a total fraud. The BEA made the estimate with only two months of data. Though the usual suspects emphasized that the decline in inventory growth subtracted 3.70 percentage points from GDP, they ignored that fooling with the deflator added 1.77% percentage points and goofy trade accounting added 3.44 percentage points to GDP.
The fraud in the GDP report is evinced by the fact that despite roaring inflation in Q4 government toadies reduced its inflation measure, the GDP Implicit Deflator, to 0.26% in Q4 from 2.03% in Q3!Even the bogus CPI shows 2.6% inflation in Q4!!! And PPI shows 4% inflation!!!! The most infuriating and disgusting scam in the GDP report is that the BEA states inflation at 0.26% to overstate GDP and then it puts import inflation at 21.8% annualized.
The toadies at the US Ministry of Truth report negligible inflation to overstate GDP and also report huge inflation in imports, which allows the deceivers to reduce imports, which increases GDP. The sharp decline in imports grossly conflicts with the biggest surge in consumption in years – unless the trade deficit has suddenly disappeared!!!!
Consumer Metrics Institute: Ironically, the flip-side of the low "deflater" being used for the entire economy is the extremely high 21.8% annualized "deflater" that was used to inflation-adjust the amounts of goods that were imported during the quarter. This huge spike in the imported goods "deflater" (up 31% from a -9.2% dis-inflationary number used in the third quarter) partially explains the dramatic drop in reported imports in the GDP equation (and that consequently boosted the overall GDP growth rate by over 4.9%). Given the recent movement in commodity prices (especially oil) it is hard to quarrel with the 21.8% number per se (even if it brings the 0.3% overall "deflater" into question), but the impact of that "deflater" has certainly added to the noise present in this GDP release, if not to the headline number itself."
Next time you see a bullish economic report from the Government, remember that they are usually fabricated from estimates, incomplete data and outright data manipulation. Yes, Bernanke is either completely stoned or a calculated liar. And, yes, the farce continues...
Key needs more spuds:
http://earlywarn.blogspot.com/2011/01/expensive-potatoes-cheap-french-f…
So John, its the fault of everyone and everything except you and your govt?
To be fair, the external influences HAVE been significant. but just as significant in my view are the still major structural issues in the NZ economy that the govt have only tinkered around the edges of.
Its just not good enough nor urgent enough, they need to be much bolder
(PS the comment about "it could have been 6% growth" was really LAME)
"It’s been a much stickier recovery than people actually thought."
So we know Key doesnt read interest.co.nz, or at least when the perverbial was hitting the fan..The general consensis was this to be either a long flat U recovery or a double banger W recovery.
With most of the debit being private consumption rather than government it makes it even more diffiuct to directly reduce... this doesnt excuse the government leading by example in many areas of not just cutting budgets, but making high profile areas like Conservation far more efficient, And also turning back many of the basic causes of our debit, youth unemployment that are an inherant result of social engineeering/ expectations withing the education system of our youth, of the last few decades
One can fiddle the books, play with stats, swap money , take from paul...but at the end of the day day it still comes down to what is happening on the 'factory floor'
If key/English could do as well on the 'factory floor' as they do in the 'board room' recovery and the position NZ would be when recovered would be far more advanced.
So much more of NZs issues are social, at grass roots, within our education system, conservation..and not at the accouncy level now.
When Key 1st stated out his aim was to put NZ in a position thru the recovery period to take full advantage ahead of most other countries....now he has to look at the 'Social' issues rather dramtically...and that doesnt need to be cut backs or Ruth Richinson style at all.
It's actually quite simple to get growth in the economy it just involves going back to the old model where people deposited money in a bank, a bank would then have experts who would identify products and services to invest in. The bank would then pay interest to the depositors based on there success.
With more than one bank the market becomes efficient, people have choice and small investors don't have to be experts in shares, property ext... to be part of the market.
The idea that banks borrow money from of-shore and lending at a higher rate as a carry trade is just plain lazy banking and should be stopped.
me - yes, some of us think we could 'do better'.
We're even far enough down the track to have ascertained what 'better' might mean.
It's always a good idea to do your homework, and sift out the wheat from the chaff - dispassionately. Another good idea is to stand back and get the big picture.
Then, you find you're in as good a position as any, to see what is needed. On the law of averages, if change is the only constant, you will be right more often than a non-thinker or a conservative-thinker.
Me..That has to be very narrow un researched and shows very little understanding of what is read
1/My comments are not negative, but rather positive in that suggest further directions this country must go in
2/egotistically dissmissing Key...superior....no again have not dismissed Key, rather I have done the opposite from before he was even elected
3/Think can do better..If that was the case I would have taken up the opportunity to actually run or partiment a few decades back
I suggest Key is doing ok...but has to go further, changing social thinking to actually achieve his goals....something that very few people have not really considered in real terms....yet they do point out that the social current social thinking is a base cause of why we are in the position we are and is a major social issue.....yet only relate to it in terms that an accountant would, rather than a historian or a person who majors in motivation to reach future objectives at the factory floor level.
"but that's a joke"
I suggest the joke is somewhere else
Nick:
"It makes one think. It's not whether you agree or disagree with what posters write, but whether it challenges your beliefs """"
THAT is what it is all about.
Hugh is entirely right, except for one thing - housig affordability isn't the issue.
Big picture, Hugh. Stand back some.
Your day's homework:
http://earlywarn.blogspot.com/2011/02/why-oil-matters-more-than-rubber…
The Key? Don't take 'economy' for gospel.
With intelligence, and hindsight!
'We will never surrender' vs 'my kingdom for a horse'.
I suspect we won't get there - for the same reason that the majority of the USA still rejects evolution - we don't want to know.
The climate change 'debate' is a good example. 97% of scientists think it's happening. 3% don't, presumably, or aren't sure.
Does that percentage reflect in the media?
So we open up the Queensland coalmines to 'get back on our feet'. Truly the 'age of stupid'.
No, I'm not holding my breath! I think we're too dumbed-down, too conditioned to consume, to intertwined into a system which can't voluntarily morph in time. With too many still pushing for more deckchairs, totally oblivious.
Still, it's worth trying to educate - might as well stay optimistic/proactive.....
A bit unrelated but can anybody tell me why they continue with encouraging immigration into NZ? The unemployment rate is rising while one of our largest problems is productivity. I would have thought the approach would be to train, find work for the unemployed and encourage more efficient manpower deployment. (from what I observe there are a hell of a lot of people engaged in work that should not exist and indeed they just clog up the system making work for those are actually doing something useful) Are the Govt so desperate that they are still trying to keep the ponzie economy going (or re-stoke it). Surely they must realize that all pyramid schemes end in disaster.
Why is the price of housing viewed as a measure of how well the economy is progressing? I would have thought that it is no different to any item that we need to live. The more affordable it is the better. The high cost of food, cell phone calls and housing all must be paid for at some point by what we produce. We seem to be wanting to significantly increase our living costs and thereby undermine the compeditativness of our income producing businesses.
What's worse Chris-M, is the 'hidden' unemployment encouraged by zero-interest student loans, that goes on behind immigration. We're keeping those who would otherwise have no choice but to work out of school, to claim a loan ( read that as ...debt) , in effect deferring their entry onto the unemployment roll. The next few years are going to see an increasing number of our 'educated' young arriving, finally, on the job market ; older ; with little job prospect ( they will expect a better job, now they are 'qualified') and a heap of debt. The only viable option is to emmigrate, themselves, leaving the country with the unpaid cost of their deferred employment.
"A bit unrelated but can anybody tell me why they continue with encouraging immigration into NZ? The unemployment rate is rising while one of our largest problems is productivity. I would have thought the approach would be to train, find work for the unemployed and encourage more efficient manpower deployment."
No not unrelated..I refer to this above...we have a around a 20% unemployment rate in our under 25 yr old group...because they dont want to get their hands dirty because the education system aludes to everyone going to uni or a desk job.
So we need to bring in immigrants to milk the cows, paint the houses, drive the taxis, to pay enough taxes to pay for the benifits of those not working and there is still the BB retirement issue hanging over our heads.
And it all comes back to social attitudes, work ethics as the result of decades of social engineering.
Nicholas, you have now got me going on the madness of student loans, zero rated or otherwise. Their use in respect of fees and texts is fine and significantly less than the $150 or per week living allowance loan. I cannot understand is why they extend a living cost loan to 18 year olds, fresh out of high school so that they can (more often than not) go flatting in the same city that their parents live in. Basically this is providing funds (and enticement) for a lifestyle choice, and not a very wise one at that. They generally do not appreciate the costs or consequences of what they are taking on. It is nothing to do with education and in fact makes education a whole lot more difficult because in the first year or so they are faced with
- Learning in a whole new environment that requires more self direction
- Learning to live independently with all the new stresses and temptations that go with it
- Having to cope with all this while living with a bunch of other young folk going through the same stresses.
As you say, it throws a whole lot more unnecessary debt and costs into our economy that have to be paid for at some point by the dwindling productive sector.
I dont have an issue with student loans...rather I have an issue with Uni classes that start out with 140 odd students, then by the end of the yr down to 100, end of the following yr 65, then 40 graduate.
That one hell of a lot of tax payer money going to a lot of people who because dropped out, is a total waste...and most of it will never be recovered.
Many of these have almost been forced, excessivifly encouraged into Uni, rather than encouraged into the trades...with qualification.
OH yeah sry that will not work, we no longer have the Otahuhu rail yards that used to train most of our tradesmen...nor do we have the teachers in high schools qualified to prepare these "technical " students for going into a trade.....But we do have pre trade post school coarses that if you ask anyone been thru are a waste of time, and ask any tradesman the quality of student the put out and thats -ve to.
All unitimately at the taxpayers expence.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.