I was exchanging notes with someone earlier this afternoon about how the government has lapsed into blather and “making it up” in so many areas. I was pointing out how doubly sad it was because when the government had first taken the office, the then Minister of Finance – now Prime Minister – seemed to have a real concern about some of serious underlying imbalances and indicators of underperformance. I used to help provide material to his office in support of that.
It is hard to track down old ministerial speeches that far back. But take the 2009 Budget speech as just one example. The Minister of Finance said
Indeed export volumes have on average grown by less than 2 per cent annually over the past five years. It has been hard being an exporter in recent times.
in the long term New Zealand must balance its economy in favour of more investment and jobs in internationally competitive industries.
So how has New Zealand done since?
The Minister delivered this speech in May 2009, so presumably the latest data he had available was that to December 2008 (right at the worst of the recession). In the five years to December 2008, export volumes had indeed – even with subsequent data revisions – increased by a bit under 2 per cent per annum.
Export growth had certainly been falling away quite sharply over the previous few years, and those peak growth rates from the five years to 1995 (almost 8 per cent) and to 2003 (almost 6 per cent) were distant memories. But perhaps a fairer benchmark might not be growth rates to the depth of the severe recession, but perhaps in the five years to the end of the boom. That seems doubly so because the Minister was arguing that the boom had been severely unbalanced, an opportunity wasted etc. In the five years to December 2007 (the last pre-recession quarter) export volumes had grown at an average annual rate of 2.7 per cent.
And how are things now? In his Budget last week, the new Minister of Finance asserted that
Under the Government’s strong economic leadership, New Zealand is shaping globalisation to its advantage. We’ve embraced increased trade, new technologies, innovation and investment.
In the last five years, export volumes have grown at an annual average rate of 2.83 per cent. It is a little better than those five years to December 2007. But if 2.7 per cent annual growth was unsatisfactory, it must be hard to regard 2.83 per cent with equanimity. Average export growth rates have been much lower under this government than under its predecessor. Not exactly “shaping globalisation to our advantage……embraced increased trade”.
Now, of course, exports aren’t everything, and we only export so that we can import. But it is a pretty meagre result. At least back in 2009, the government could face the challenges squarely (they happened on someone else’s watch). By now, eight years on, all they seem to have left is falling back on rhetoric, and hoping no one notices the data.
As the (now) Prime Minister noted in 2009, it had been “hard to be an exporter in recent times”. The real exchange rate had increased a lot during those boom years. In his 2009 Budget speech the Minister was welcoming the sharp fall in the exchange rate. Unfortunately – given the lack of sustained productivity growth to match – that proved rather fleeting, and it has averaged just as high in the last seven years or so, as it did in the last few years of the previous government’s term.
Real exchange rates aren’t things that ministers or governors directly control. They reflect the balance of (tradables vs non-tradables) forces in the economy. That balance here – still – makes it hard to manage much export volume growth from New Zealand.