I’m tied up with some other stuff for much of this week, so if there is a post each day it is likely to be a fairly short one.
Today, I wanted to show just a few charts – mostly updates of ones I’ve shown before.
In yesterday’s Sunday Star Times, I read Rod Oram’s column. It was headed Australia’s Delusions Run Deep, on some of the economic challenges Australia undoubtedly faces. It was fine, as far as it went, but it did bring to mind the words
“Why do you look at the speck of sawdust in your brother’s eye and pay no attention to the plank in your own eye?
Whatever Australia’s challenges, it remains far richer than New Zealand. We rather take that as given these days, but through most of our modern history there was no such gap. And there is nothing suggesting that yawning gap is about to begin to sustainably close.
Even over the shorter-term the comparisons don’t flatter us. Here is real GDP per hour worked (ie labour productivity) for the two countries since the end of 2007 (ie just prior to the recession).
The big differences aren’t about the recession period (our recession was worse than the Australian (income) recession) but are actually apparent in the last few years. In short, on the official numbers – and always subject to revisions – there has been no productivity growth at all in New Zealand for the last four years. And yet those were the years when, for some reason, people – even Australians – started talking about “rockstar” economies on this side of the Tasman, and our Prime Minister (and his acolytes) having been telling us how well New Zealand has been doing, with any stresses “quality problems” and “signs of success”.
At present New Zealand’s unemployment rate is exactly the same as Australia’s – both at 5.7 per cent. But in the decade leading up to the 08/09 recession, Australia’s unemployment rate had averaged 5.9 per cent, while ours averaged 5.2 per cent. Australia’s unemployment rate is actually a little less bad than average, while ours is worse.
The HLFS has been running for 30 years now. Over that time, Australia’s unemployment rate has usually been above New Zealand’s – and they have a more heavily regulated labour market so that is what one should expect – but not now.
But turning back to the New Zealand national accounts, the media coverage did note that per capita real GDP growth has been very slow. But no one seemed unduly bothered. Of course there is some quarter to quarter variability in the series, and the data are revised over time, but the simple fact is that, on the official data we currently have, and averaging the production and expenditure measures of GDP, there was no real per capita growth at all last quarter. And yet this is supposed to be some sort of success story? Even in the last full year, real per capita GDP growth has been only around 0.6 per cent in total. It remains something of a mystery to me why the Reserve Bank and Treasury expect growth to pick-up from here.
And here is the (rough and ready) breakdown of per capita GDP into its tradable and non-tradable sector components.
Tradables here includes primary production, manufacturing and exports of services. Non-tradables is the rest. So the tradables sector, as captured here, includes the booming (subsidized) export education sector and the booming tourism sector. And yet there has been no overall growth in tradables sector real GDP per capita for more than 15 years.
Successful economies, building on a sustainable footing, do so by selling more and different stuff in competition with the best the rest of the world has to offer. That doesn’t describe New Zealand at all – under this government or its predecessor.
- no productivity growth
- a continuing high unemployment rate
- ruinous house prices, and
- a tradables sector that has achieved no per capita growth for 15 years.
And yet, so our ministers and officials tell us, our immigration policy is a “critical economic enabler”. Frankly, it seems bizarre that, as a matter of policy, we bring more and more people – many of them just not that skilled anyway – to such an underperforming place. It is as if theory trumps experience. New Zealanders pay the price for these political and bureaucratic preconceptions, and for an unwillingness to look out the window and recognize that all is far from well with New Zealand’s economy. Even Australia, for all its challenges, just keeps doing better.
UPDATE: After finishing that post, I noticed this chart in the Westpac consumer confidence report. Respondents aren’t always correct in their expectations, but at present they (potential voters all) don’t seem remotely optimistic about the medium-term outlook for New Zealand.