I and every economist with a bit more than pudding between our ears saw the economy crashing coming mainly because of the Reserve Bank doing this and this clown doing everything I’ve accused him of in this.
Grant and Jacinda started this with REALLY bad economic management, which all the lefties thought was “really good”, and the Reserve Bank finished it by not knowing their monetary policy and completely delivering to whatever stupid monetary policy the Ardern government wanted (yes, I’m talking about the “Large Scale Asset Purchase programme”, the dual mandates for employment and inflation, and then for house prices and inflation, the Monetary Committee without monetary economists on it, and then the overly aggressive monetary tightening – all of this happening under Adrian Orr’s watch) .
And Luxon’s National Government can wear some of the blame (but not all) because they’ve tried to make some of Labour’s policies work. But I also acknowledge they’ve done a lot to repeal and reverse Labour’s stupidity too, and they’re making much more sense economically than Labour ever did.
New Zealand has been weak for FIVE quarters
GDP, published back in September, showed weak and negative GDP since September 2023. Today’s GDP has increased the December 2023 and March 2024 values, compared to September. However, the timeseries needs to be viewed from that longer perspective of more than just this and the previous declining quarter. And looked at as a longer series, I’d be inclined to call this five quarters of stagnation and/or declining economy activity.
You’ve got to ask, if I realised this, how the did the government’s highly paid economic boffins miss this?!?
And the problem is structural
By structural I mean New Zealand’s productivity is negative and falling. This was apparent in April here: labour productivity.
That is the canary in the cage suffocating down in the mine shaft.
Those productivity results are long term indicators of a misperforming economy.
They are the culmination of badly educated students coming through our education system for decades from low productivity teachers operating in a protected and poorly performing sector.
The productivity stats are the effects of non-competitive sectors becoming more and more important in the structure of the economy, and consuming more and more resources which are forceably extracted from the productive sector by government taxation policy.
These growth declines are the tip of a series of long term poor results which will show themselves as New Zealand slipping further against it’s OECD peers in rankings across a range of different measures.
Failing health and education need to be cauterized
For clarity, New Zealand’s non-performing sectors are health, education, and finance.
The falling productive health and education sectors are consuming financially more and more of taxpayer funds. Unless they are both restructured, and quickly, New Zealand will become poorer and poorer as it keeps pumping money into failing institutions.
The failing bank sector misallocates credit to the housing sector, and away from the productive sector because of perceptions of credit risk and a lack of competitive hunger in the banking sector.
National is doing good in the banking and education sectors, but it is to blame in the health sector. Health New Zealand, structurally, CANNOT work, and the sooner the sector gets restructured again, the sooner it’s performance will turn around.
Education is being cleaned up by National as it rewinds of labour’s centralisation policies. And the recently announced reforms to the Reserve Bank’s focus is well overdue, and something that the Reserve Bank should have actually done to itself.
Something that needs considering when the Minister of Finance is wondering about the qualities of the next Reserve Bank Governor, they should think: is this person trying to make New Zealand a world leading economy?
Or is this person waiting for a steer from someone else (politically appointed) to tell them, the leader of the independent organisation what it needs to do to be successful in the field of monetary economics.
… Yeah…
But it will now take a decade to reverse and change the course of this ship.
The blame lays with both main political parties
Despite anything the current government does, New Zealand will be screwed for the next decade. This is the legacy of the Clark, Key, and Ardern governments.
Which makes me wonder if the problem is actually with a mis-performing electorial system, but I digress.
All of these government’s did not do enough to ensure New Zealand’s policies created a continuously competitive economy operating at its peak as was most possible. Both of the two main political sides let unions rule the roost in the health and education sectors, and sapped New Zealanders of world leading skills and education.
Ultimately, it meant the workforce pipeline heading into industry was (and still is) technically and skills-wise, under-cooked.
This is not New Zealand’s century
And our best and brightest leave for America and or other greener pastures.
And our sick don’t get treated because the well paid workforce is on their union break.
And our earners are taxed, taxed and more taxed.
And our start ups struggle for funding in New Zealand (but not in silicon valley).
This train wreck has been 20 years in the making. And, if the political will is there, another 20 to unwind.
The problem is New Zealand doesn’t live in isolation. We compete against every country in the world. So improvement means comparative improvement against the policies of other countries.
And in the long run, we don’t have the luxury to think the solutions are beyond our control. We can’t be passive observers to this messed-up world which we have let happen, possibly through our own ambivalence and trust in government and our elected officials knowing best.