There is a strange op-ed in the Dominion-Post this morning from Kirk Hope, the new chief executive of BusinessNZ. I can’t yet see it online, but the point of the piece seemed to be that there is (a) more to New Zealand than dairy, and (b) New Zealand isn’t in a recession.
If he’d stopped there, I’d have no problem with the story. But he went on to paint a rosy picture of how New Zealand is doing, and has been handling things, relative to other countries.
There is, for example, the claim that our rate of GDP growth (2.5 per cent in 2015)
“…is better than most developed countries. The current rate of growth in the United States is 2.4 per cent, while in Britain it is 2.2 per cent, in Germany 1.7 per cent and in Japan 1.3 per cent.”
Was he perhaps not aware that New Zealand has been experiencing considerably faster population growth than all these countries? Using the 2015 population growth data from the IMF WEO database, here is how per capita GDP growth looks for those five countries.
Spot the disappointing performer. It gets worse, of course, because our terms of trade have been falling. Real per capita national income actually fell a little in New Zealand last year.
In the short-term, it isn’t a disastrous performance (and there are countries we’ve done better than), but it isn’t very good either.
Amid his rampant optimism, Hope also injects this argument:
“Just as importantly, we are fortunate to have escaped one of the key mistakes made in other parts of the world in the aftermath of the global financial crisis. While other countries chose to expand their money supply with quantitative easing to shore up their economies, New Zealand instead opted for investing in infrastructure – roads and broadband – which is a far more growth-enhancing approach”.
Of course New Zealand didn’t do any quantitative easing. Other countries did so only when policy interest rates got to around zero and they concluded that they couldn’t do anything much more with conventional monetary policy.
But which of Hope’s countries has cut interest rates further since 2007/08?
Why, New Zealand.
And what of the money supply itself? Well, of the five countries, New Zealand has had the second fastest rate of money supply growth.
The euro-area as a whole has had money supply growth even weaker than the UK’s – a mark of the problems the euro region has had.
As for “investing”, I suspect that few of Hope’s own member businesses will have been undertaking projects on quite such shaky or non-existent cost-benefit analyses as those which underpinned much of the public investment that occurs in New Zealand. I’m still flabbergasted at the memory of asking a senior minister at a seminar a few years ago why there had been no cost-benefit analysis for one major initiative and being told, with a smile, that it was because he already knew the answer.