- we're technically out of recession, with actual GDP growth
- the Cullen Fund bounced back from its earlier losses to post healthy gains in the later part of the financial year
- Fonterra announced an increase in the payout forecast, meaning dairy farmers will have more cash in their pockets
- Our current account deficit has shrunk significantly.
- the GDP growth was only 0.1%. Better than negative, but still flat
- imagine how much happier the taxpayer might have been with the Super Fund result had the miserable Nats not suspended all contribution payments. They say they can't afford to put money into the fund unless they borrow. There are two schools of thought on this issue. One says you never borrow to invest, ever. The other says you buy up big when the market's at the bottom. This "recovery" might prove to be a false one, but if it really is the beginning of something, the Nats may well be ruing their decision to suspend contributions
- the Fonterra payout is a projection only. Dairy prices are still highly volatile
- the shrinkage in the current account deficit was partly due to a large one-off tax payment by the BNZ, and due to lower returns on investments by overseas investors. Hardly matters to get excited over.
- the NZ dollar is way too high. It was trading above US73c earlier today. Exporters are suffering enormously, and this affects every sector of the economy. The dollar rises and falls, staggering about like a drunk man. And the NZD is one of the top eight currencies traded in the world, even though we're a miniscule economy by world standards. Clearly we're at the whim of currency speculators. I don't know what the answer is, not being one of those fancy-pants economologists, but surely we need to look at some form of currency control, or at pegging our currency to a less volatile one. But that won't happen - not in the short to medium term. Our PM used to buy and sell money, and is unlikely to support any form of currency control. But we should at least be prepared to talk about the idea
- we're addicted to real estate. There's no easy fix to this. A capital gains tax might help, but it's unlikely to itself be enough. And it would be political suicide for any party to introduce, unless the other main party agreed to go along with it. Labour has indicated it's prepared to talk about the issue, but John Key has more or less rubbished the idea
- there are few incentives to invest in research and development. The R&D sector has been starved for years. And both political parties are at fault. Labour at least had the sense to introduce an R&D tax credit, but the accountants who run National Party policy squashed that fast. The Government's approach to innovation has, it's fair to say, been underwhelming.
We'll probably muddle along, as we always do. The trouble in this country is we don't have the visionaries in power prepared to lead us in the right direction. And that's not a dig at the Nats, because Labour didn't exactly shine a light.
Even if the recession is over (and I'm yet to be convinced), I predict a long period of minimal growth and tepid business confidence.
But then economics is basically crystal-ball gazing, so I could be hopelessly wrong. If I am, don't be too hard on me. I'm not paid a cent to write this stuff. Most of the economists we hear daily in the news media are hopelessly wrong all the time, and yet we still listen to them.
But I'm not personally worried. Powerball's at $20 million this Saturday, and I'm pretty sure I have the winning numbers.
You have hit almost all the structural nails on the head. We are de-industrialising in an almost exact repeat of the disaster of the over-valued pound in UK in the post-Great War and all our financial institutions are owned by foreigners, yet somehow people like Fran O'Sullivan can't work out why we have a chronic foreign debt problem.
ReplyDeleteThe trouble with the idea of a CGT is it is a typically Kiwi proscriptive approach. Don't like what someone is doing? PUNISH THEM!! On the other hand, the chances of any meaningful reform of our economic levers are about zero.
To demonstrate my point, how about we first pass strong anti-corruption and regulatory laws for our finance sector (imagine how all the go-to guys for economic opinion - the bank economists - would react to that) and follow that up with strong anti-monopoly laws (imagine how Telecom, APN, Fairfax and Sky TV would react to that). In other words, that'll never happen. But let's speculate, because that is fun. Put in place a CGT. That in itself didn't stop the property bubble in countries that have a CGT. But I tell you what would - banning non-residents from owning land in New Zealand. Every country that has those sorts of laws didn't have much of a property bubble. But that would never fly, because New Zealand's chattering classes of both left and right have a cargo cult mentality and a cultural cringe that manifests itself in economic defeatism and a naive belief foreigners only come to rescue us. Heaven forbid we do anything that, you know, actually looks after New Zealanders who live here but may upset some cuddly foreigner.
The bottom line is politically New Zealand is now structurally (if not just yet fully economically in terms of wealth distribution and infrastructure – but the trend seems irreversible with the entrenched neo-liberal economic policy settings we have) a third world country. Most of the (largely white) elite have little idea of how poor many New Zealanders are, and more and more don’t care. The white, smug and privileged baby boomers and Gen Y's who dominate our media like Bill Ralston or Russell Brown either willfully ignore this, or are effectively in denial, or lack the bottle to discover or discuss the realities of living in this country for most people.
And as befitting a third world country, a crony capitalist elite, eerily reminiscent of the South American white Castilian elites that also prospered under neo-liberalism, wield all the power now in NZ. Sadly, I don't think anything short of our own Bolivarian Revolution (velvet or otherwise) can now shift them.