Slightly less-bad news

As foreshadowed earlier in the week, when Statistics New Zealand yesterday released the latest GDP numbers, there were also some quite significant revisions to the numbers for the last few years.  This happens every year at this time, reflecting the addition of various bits of data that are only available with quite long lags, and sometimes the use of new data sources.   My impression has been that these annual revisions have, at least in recent years, tended to revise up history, and it was clear from what SNZ had already told us that this year would be no exception.   (These revisions tend not to have any great implications for monetary policy –  inflation already is what it is whatever the statisticians belated tell us last year’s GDP was.)

This is the latest picture for annual growth in real GDP per capita.

sept 19 GDP 1

The various revisions suggests that per capita growth in real GDP for much of this decade hasn’t been too bad, averaging around 2 per cent from 2011 to 2017.   But (a) the preceding recession had been quite deep and long, and (b) the run of per capita growth looks pretty subdued when compared to what we saw for several years in the 90s and 00s.   More recently, annual growth in real GDP has fallen away to a point that no one should really be comfortable with.

But the data do bring some end of year good news (of sorts) for the Minister of Finance.   In Parliament on Wednesday he clarified that he was boasting that under this government annual growth in real GDP per capita had risen from 3rd worst in the OECD to only 5th worst in the OECD.  It seemed –  and still seems –  almost incomprehensible thing to boast about, especially when you and your leader have gone round the country boasting that we were doing better than most of our peers.   On those numbers, quite clearly we weren’t.

But as I noted when I wrote about this earlier in the week, the revisions were coming.    In both (calendar) 2017 and calendar 2018, growth in real GDP per capita was – so we are now told – 1.6 per cent (using an average of the production and expenditure GDP measures).    On those numbers, New Zealand’s growth would have been 26th in the OECD (of 36 members) in 2017, and 21st in 2018.       Even more of an improvement than the Minister claimed.   But…..in both cases still quite a bit worse than the median OECD country.  In other words, even in real per capita GDP terms, the gaps to the rest of the advanced world have widened and worsened, in both years under both governments (realistically of course, individual governments only have very limited impact on individual year outcomes).  And per capita growth has slowed this year.

What about (labour) productivity?  In my post on Wednesday I noted that the productivity numbers would be revised up and that the revision could be as large as 2 per cent.    On my preferred measure of real GDP per hour worked (using averages of the two GDP measures and two hours measures), the revision for calendar 2018 was exactly 2 per cent.   Here is how my regular chart looks with the old and new data shown.

GDP phw to sept 19

It is hardly stellar growth, but it is certainly better than nothing (“nothing” being roughly what the earlier data suggested we’d had for several years).   It lifts us just above Lithuania in this chart I showed the other day

OECD real GDP phw 2018

But that was data for 2018.   When I checked the productivity growth rates for Lithuania, Israel, the Czech Republic and Poland for the last few years, they were each materially faster than New Zealand’s (even with our data revisions).  Unless something pretty startling happens (a) in the Dec quarter data for New Zealand or (b)  there is a very sharp slowing in productivity growth in those other countries for 2019, it isn’t at all inconceivable that when the 2019 comparisons are available in the middle of next year, we could have slipped behind all four countries.

Bottomline?  There have been revisions upwards, and they should be unambiguously welcomed.      But we are starting a long way behind the group of advanced countries we typically like to compare ourselves too, and yet we have mediocre at best productivity growth and –  before the latest slowdown –  we have had per capita income growth less than that of the median advanced country.     We are still making no progress in closing those gaps, and often they are widening further.  That shouldn’t be a great surprise, given that our governments keep on with the same policy approaches that have failed to generate any reconvergence for the last 25+ years, failing to reverse the relative decline that began perhaps 70 years ago.    There is no light in that darkness.

This is my last post for the year. I’ll be back sometime around mid-January.  In the meantime Christmas wishes to my Christian readers –  celebrate the Incarnation (God made flesh) joyously –  and best wishes for the New Year to all.

I see that Alexandra Ocasio-Cortez is (quite aptly) quoting Scripture today.  I’ll leave you with an extract with something more of Advent/Christmas theme, Mary’s song of praise,  recorded in Luke 2 and known as the Magnificat

My soul doth magnify the Lord,
and my spirit hath rejoiced in God my Saviour.
For he hath regarded the lowliness of his handmaiden.
For behold, from henceforth all generations shall call me blessed.
And his mercy is on them that fear him throughout all generations.
He hath shewed strength with his arm.
He hath scattered the proud in the imagination of their hearts.
He hath put down the mighty from their seat
and hath exalted the humble and meek.
He hath filled the hungry with good things.
And the rich he hath sent empty away.
He remembering his mercy hath holpen his servant Israel
as he promised to our forefathers Abraham, and his seed forever.
Amen.

 

10 thoughts on “Slightly less-bad news

  1. Hi Michael

    Thank you for your past year of blogging on all things economic with a few variations thrown in to add flavour and spice.

    I leave you with this Orthodox Christian Chant “In the Dark Night” about the Birth of Lord Jesus Christ, by the Monks of Svetogorskaya Lavra in Ukraine. This expression of worship demonstrates the reality of Christ in an entirely different cultural context. Enjoy!

    Every blessing.
    Brendan

    Liked by 2 people

  2. Michael, you often use PPP-based measures to standardise across the OECD. I was wondering if you might do a post on your thoughts on the implied PPP rates being used; strengths, weaknesses and whether the implied PPP rate for New Zealand is appropriate.

    My suspicion is that those PPP measures may not be that appropriate for us. Our currency fundamentals appear to me to be fundamentally stronger than in the 1970-2005 period; our C/A deficit is materially lower (and may fall given the recent decline in NZ bond yields and rise in ToT), the NIIP is down from around 85-90% of GDP to around 55% now and the structure of our external liabilities is much less risky, our ToT is much higher, RBNZ has cut rates to just 1% but kiwi remains in the mid-60’s. It seems to me that our equilibrium exchange rate is fundamentally higher and this could influence the PPP rate used and therefore Comparisons. Just taking an average PPP rate over a long period may be totally inappropriate.

    So interested in your thoughts …

    Liked by 1 person

  3. Productivity and God… interesting segue way!

    On Fri, 20 Dec 2019 at 9:28 AM, croaking cassandra wrote:

    > Michael Reddell posted: “As foreshadowed earlier in the week, when > Statistics New Zealand yesterday released the latest GDP numbers there will > also some quite significant revisions to the numbers for the last few > years. This happens every year at this time, reflecting the additi” >

    Like

  4. In a post earlier this year you mentioned that Statistics New Zealand was one of the few national statistics bodies that was not part of the relevant international statistics consortium – is this something that should be looked at?

    It seems to fly in the face of New Zealand’s mantra of a ‘multi-national’, collaborative rules based order by not being a member. As well as the potential charge that our statistics methods and data aren’t quite like for like.

    Thank you for another thought provoking year Michael. Merry Christmas and happy New Year.

    Like

  5. Why go fast when you can go slow

    In 2003 The Reserve Bank of Australia intervened to regulate Debit and Credit card Merchant Fees, which saw those fees for retailers drop from around 1.5 percent to 0.7 percent
    https://www.newsroom.co.nz/2019/10/07/846601/banks-on-notice-over-no-paywave-dysfunction-1

    Meanwhile 16 years later

    PaymentsNZ
    Shareholders are ANZ, ASB, BNZ, Citibank, HSBC, Kiwibank, TSB Bank and Westpac
    Payments NZ is a limited liability company

    From PaymentsNZ web site
    Formed in 2010 by the industry with support of the Reserve Bank, we govern New Zealand’s core payment systems and we work with the industry to lead the future direction of payments in New Zealand. Today, the systems we manage transact over $6 trillion annually

    Jawboning and Letter Writing NZ Style
    The previous National Government looked at the issue in late 2016 and early 2017 but did little more than give the banks a telling off. Then-Minister Paul Goldsmith asked his officials to investigate and his successor Jacqui Dean sent a letter to Payments NZ, which operates the system on behalf of the banks, telling them to do more to open up pricing information and be more open to innovation.

    New Labour Commerce Minister Kris Faafoi wrote to Payments NZ in April last year again asking for more progress. His patience is starting to wear thin and he wants to see evidence within weeks that the banking and payments system is serious about opening up.

    Like

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