Still no better than middling

The Minister of Finance greeted yesterday’s GDP numbers with the claim that

“While growth has softened in this latest quarter, the continuing trend is [with] consistent ongoing growth ahead of most other developed countries.

In the case of total GDP, that is no doubt true.  It is what happens when your country has had population growth of 2.1  per cent in the previous year.

But where do we sit in terms of growth in real GDP per capita?

The OECD doesn’t have data yet for all member countries, but here is how our GDP per capita growth compares, focusing on the December 2016 quarter over the December 2015 quarter, for the countries there are data for.

real GDP pc 12 mths to dec 16

And here is the same data for the full year to December 2016 over the full year to December 2015.

real gdp pc ann ave to Dec 16

Neither comparison is intrinsically better than the other.  Between them, really the best one can say is that New Zealand has been no better than the median country over the last year or so.  That’s nothing to write home about…….especially as our data suggest we’ve had negative productivity growth over the last year (whether one uses the point to point or annual average measure).   That means all our pretty modest per capita GDP growth over the last year has resulted from throwing more labour and more capital at the economy, and (less than) none at all by using resources smarter and better.

But according to the Minister

“This week’s statistics on economic growth and our external accounts show the benefit of the Government’s sensible, consistent economic management,” Mr Joyce says.

9 thoughts on “Still no better than middling

  1. The solution is obvious. We should instruct the statisticians to include the unrealised capital gains on housing in the definition of national production, thus increasing our GDP per capita to ranking in line with our Olympic medals per capita.

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    • Actually, what we should be doing is including within our export GDP the sales of land and houses from locals to foreigners because the sale brings in valuable foreign currency and adds to our foreign currency reserves.

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      • among the other problems with that option, it makes no difference whatever to our foreign reserves. We have a floating exchange rate, and the Reserve Bank decides what level of reserves to hold quite independent of the ups and downs of market willingness to buy NZ assets.

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  2. If you add the 10 million cows that generates only $10 billion in export GDP, that should put us at the very last on the list.

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    • This then raises the question whether we have ever been a high productivity economy. At the peak, we had $70 million sheep. Currently of course those numbers have dropped dramatically to around 30 million sheep but an increase in dairy cows to 10 million. Cows produce 15 times the waste dung of a person. And this does not factor in the methan gas emissions that add to greenhouse gasses and destroys the ozone.

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    • This analogy becomes clearer if we compare the output of a tractor and one farmer compared to say 20 bullocks to plough a field with one farmer. Productivity per capita is the same for both as there is only one farmer however the reality is a tractor with one farmer is far more efficient than a farmer with 20 bullocks to plough a field.

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  3. With NZ banks having a monopoly over their installed base and a competition watchdog, the Commerce Commission overpaid fat and useless, the result is monopoly profit in the hands of our largest banks. HSBC has been dutifully competiting on the fringes but our main banks are just ignoring the competition because the installed base of existing clients are just too lazy but many banks clients have been cornered into a 60% LVR that makes it impossible for them to move because they have borrowed on 20% or 30% equity. Now that 40% equity is required they are captive clients unable take advantage of any competitive interest rate offerings.

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    • The higher interest rate regime in NZ has led to decimation of our productive industries and left us to service industries like tourism and international students that can weather our unusual monopoly interest rates which tends to run higher than our global trading partners. This makes our productive industries uncompetitive.

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