The part Jordan left off
May 30th, 2006 at 9:04 pm by David FarrarJordan has a graph up comparing Real GDP between Australia and NZ from 1977 to 1998. He uses this to blame everything on the nasty right wing reforms and says the more sensible policies of the last few years have closed the gap.
Now let’s look at the three periods in turn – pre 1984, 1985 – 1999 and 2000 onwards.
Jordan shows a similar GDP growth up to 1984. So does this mean he thinks Muldoon was right? Does he hanker for the days of the state setting wages, prices, rents and interest rates? The days of import controls and subsidies?
Then we have 1984 – 1999. It always amuses me as people try to treat this as one period with one Government. There were in fact two, arguably three Governments in that time with very different policies.
Yes from 1984 to 1990 GDP slipped relative to Australia. Well Labour was in power then and sure they did some things right, they also did a fair bit wrong. Then National came into office in late 1990 and by 1992 you see the GDP growth start up and looking much the same rate as Australia. Kept this up until 1996 when we got hit by the Asian crisis and Winston.
But anyway that isn’t even the main thing I wanted to touch on. I was intrigued by why the graph stopped in 1998. Jordan says he hasn’t had time to update it. Well it took me a few minutes but below we see Real GDP, seasonally adjusted, from March 2000 to December 2005. They both start from a base of 100 in March 2000.
Oh yes one can see how well Dr Cullen is closing that gap. Now remember Jordan said “The more sensible policies since have led us to slightly catch up in terms of growth – particularly over the past five years.”
Yeah Right.
UPDATE: The Australian line looks to be based on nominal, not real, GDP which makes the current graph invalid. It was meant to be real GDP but somehow grabbed the wrong data series. WIll do an updated post later with the corrected figures.
No tag for this post.
May 30th, 2006 at 9:25 pm
DPF, I think you are being unpatriotic.
Vote:May 30th, 2006 at 9:26 pm
David, this is all very interesting but its little more than a pretty picture. What is the data upon which this index is based? I’m really interested in any discussion of policies that stimulate productivity, however you want to measure it, but in the absence of credible and independent data this discussion could quickly degenerate.
Vote:May 30th, 2006 at 9:35 pm
Im not impressed by either yours or Jordans graphs. Comparing Aus with NZ is fundamentally flawed. Why not compare us with say Norway? Now there is a country that has done well….the highest GDP per person in the whole world at U$42,400. Oh you say, not fair, they have all this oil!
Uh well guess what, Australia has enjoyed a mineral wealth boom almost unprecendented in history. A boom that is only set to get faster now copper and aluminium have doubled in price just these last few months. On that basis NZ has done rather well just staying vaguely in touch. Imagine if timber or dairy prices had doubled since January…imagine our dairy exports alone had doubled to $50b!! Of course NZ would be doing as well as Aus.
It is a complete fantasy to imagine that we can taxcut our way to prosperity and parity with Aus…they have an income we simply do not have. Get over it, or get over there….but leave off the DiggerDon whining.
Vote:May 30th, 2006 at 9:37 pm
Just wait – Jordan’s using an index which basically shows changes in GDP since the base year which was 84. What’s he trying to prove?
Yes, Australia
Vote:May 30th, 2006 at 10:19 pm
Logix ,
For the record Bermuda is the richest country in the world
http://cia.gov/cia/publications/factbook/rankorder/2004rank.html
Whats your excuse that they are richer than us?
They are a only a pissant little island with nice beaches, no oil or minerals there
We have plenty of those
Or can you please parrot Cuntlen’s excuses for the other 37 countries that are also richer than us?
Excuses,excuses, thats all this pathetic guvamint and their sychophantic lackeys can offer us
Vote:May 30th, 2006 at 10:34 pm
C’mon, Carters graph, curiously ending at 1998 is rather suspect don’t you think ?. DPFs graph shows the post 9-11, high export commodity price, halcyon period which started to taper off last year.
Labour have basked in the afterglow of the Douglas/Richardson reforms and good export prices. They are now being exposed as nothing more than a pack of elitist academics enacting out their ’60s student politics on a real nation, in century 21.
Question: How many of the “failed policies of the past” which placed the economy on “marked time in the 1990′s” have Labour undone ?
Vote:May 30th, 2006 at 10:41 pm
Be interesting on seeing how aftertax incomes have compared since the change in Government in 2000. The Australian Government has made a number of adjustments to taxes, this Government has done absolutely nothing. I suspect that the graphs would show a worse trend that the one posted above.
Vote:May 30th, 2006 at 11:48 pm
Australia surged ahead of us – despite higher taxation AND the imposition of health insurance and compulsory super.
Of late they have cut taxes again and again (which is great news for the rest of the world’s exporters, but of concern for them as they have a high trade deficit already), but their higher incomes came first – and these occured, while they had higher taxation.
PS The disposable after tax income “standard of living” for us has declined relative to Oz since 1999. Given the amount of money we have spent in sustaining public services, repaying debt, funding infrastructure investment and saving into the Super Fund. But we now have a more secure base for future “growth”, thanks to Cullen. The question is over finding the right policies to fuel “it”.
Vote:May 31st, 2006 at 6:39 am
Paul and Logix – you are missing the point.
Jordan is the one who drew up a graph and tried to claim it is all the fault of the reforms, and things are now better. I’ve merely added on the missing years to his graph so people can judge his claims in context.
Vote:May 31st, 2006 at 8:13 am
David, Jordan didn’t put the graph together, it comes from a paper by Paul Dalziel (jordan should have included the title of the paper for full disclosure: “New Zealand’s Economic Reform Programme was a Failure”) in 1999, hence the timeseries ending in 1998.
Your chart doesn’t add anything to Jordan’s because you have a different base year, you don’t continue his (no I haven’t bothered looking at whether Jordan’s timeseries can be continued.) so your graph is misleading as a rebuttal to his.
“Lies, damn lies and statistics.”
Vote:May 31st, 2006 at 8:15 am
In that case DPF you are being as dishonest as Jordan was stupid. Why not go to the horses mouth for this information?
http://www.rbnz.govt.nz/keygraphs/Fig2.html
and
http://www.rbnz.govt.nz/keygraphs/Fig2b.html
Vote:May 31st, 2006 at 8:33 am
“ANZ National Bank chief economist Cameron Bagrie said if the present “grumpy growth” was as bad as it got, that would be seen as a good news story in a couple of years.”
Now that the ANZ agree with Cullen’s long standing economic predictions, and not with Brash’s doom and gloom recession calls, will we see a bit more credit being given to what Cullen says (including the fact that he seems to be more correct than the treasury regarding student loans)?
http://stuff.co.nz/stuff/0,2106,3685050a13,00.html
Vote:May 31st, 2006 at 8:53 am
Noddy:
So, bank chief economists are credible when they agree with Dr Cullen but when they don’t… well, they’re lying corporate whores who are just trying to protect their market share? Cullen can’t have it both ways, and neither can you. I think the appropriate stance is to take any economic prognostication (or anything that comes out of Cullen’s mouth) with a grain of salt, a lime wedge and a whole bottle of tequila.
Vote:May 31st, 2006 at 9:18 am
Jordan presented his graphs with the first year of the 4th Labour Govt as base=100 for both countries. I did the same for the fifth Labour Government.
Vote:May 31st, 2006 at 9:27 am
Craig, well, there was supposed to be a touch of irony in my post. That being said, now that the election is over it seems that these economists are keener to back up the line of analysis that was pretty obvious at least year or so ago.
Vote:May 31st, 2006 at 9:41 am
Dalziel’s graph does set a base date at 100 true, but it backdates the data to give a reasonable comparison. Interesting to base it at (say) 1975 or whatever.
He also breaks his data into three periods, prereform (1978-84), reform (1984-1992) and recovery (1992-99). Not controversial is it? What is controversial is what to call the post 1999-period? Answers on the back of a postage stamp with bonus points for no swearing
Vote:May 31st, 2006 at 10:05 am
Thanks for the source PabloR. DPF, rebasing to year that suits you makes you no less disengenous than Jordan. I’m not missing the point, neither of you made a meaningful one.
The only data I’ve seen recently is the Stats data which shows productivity at a rate slightly above previous Treasury figures. This threads got off to a bad start which is a pity.
Vote:May 31st, 2006 at 10:06 am
Dalziel’s time periods makes more sense than Jordan’s who puts 1984 – 1999 in one period, which is just crazy.
I have not criticised Dalziel’s work, I am criticising Jordan’s spin.
Vote:May 31st, 2006 at 10:17 am
I’ve merely added on the missing years to his graph so people can judge his claims in context.
No you haven’t, you have created an entirely new graph.
Jordan presented his graphs with the first year of the 4th Labour Govt as base=100 for both countries. I did the same for the fifth Labour Government.
Yes, but the big difference is that jordan’s graph includes a steady baseline pre 1984. Yours does not. You’ve fudged that data within an inch if its life.
Vote:May 31st, 2006 at 10:30 am
Oh the sniping is amusing, but the interesting thing is not a single person has commented on the substance of whether they agree with Jordan that things have been better since Labour got elected.
Vote:May 31st, 2006 at 10:37 am
Andrew, well put.
David, lets have the discussion based sensible data. Dalziel’s is useful but doesn’t show recent years. That being the case, use the Stat’s NZ stuff. Rebasing is produces absurb figures, Australia’s had 40+% GDP growth, yeah right!
Vote:May 31st, 2006 at 10:47 am
“Oh the sniping is amusing, but the interesting thing is not a single person has commented on the substance of whether they agree with Jordan that things have been better since Labour got elected.”
Well if you want to discuss it based on personal opinion that’s fine, but you used data to prove your point and your data is just as dodgy as Jordan’s.
Have things got better? Well anyone right of centre will say no, anyone left of centre will say yes. BOCTAOE.
Vote:May 31st, 2006 at 10:52 am
If David’s graph started at around 1990 then one would get a “flat baseline” but that seems a bit irrelevant anyway. Fixing the year at which one sets the 2 GDPs to be 100 is arbitrary.
I’d like to see the graph without the scaling and for a longer period of time. Plotting selective data with altered scales can be pretty misleading.
But since National is not planning on anything like the massive restructuring of the 80′s then it’s hard to see the sense of this sort of comparison anyway.
Vote:May 31st, 2006 at 10:59 am
David, I think a graph like Jordan’s can’t be interpreted in terms of policy. Assessing policy based on two lines is silly. Sure, there are points in time where things change. There is a good baseline in Jordan’s graph pre 1984 and things change after that. But they had to. NZ was deep in the pooh when Muldoon handed over his
Vote:May 31st, 2006 at 11:05 am
Jordan’s biggest flaw is not that he discounted recent data–which is serious on its own. The main flaw is his assumption that New Zealand pursued a radical reform plan during the 80′s, but Australia didn’t.
The Hawke/Keating government was extremely successful in radically changing the scope of the state sector, public finances, reserve bank reform–and where New Zealand failed in the 1980s–Labour market reform. Ironically, it took an Australian union leader to make far more radical changes to defeat the excessive dominance of corrupt organised labour.
New Zealand’s public sector performance improved dramatically throughout the 4th labour government. It was only when the most dramatic piece of economic transformation in New Zealand–the employment contracts act–came into play in 1991 that we started to experience significant economic growth.
As others have observed, the current labour government has not meddled with the core instruments of economic management. Where Australia has continued to improve its economic fundamentals since 1996, we have lagged behind, to our detriment.
Vote:May 31st, 2006 at 11:14 am
What Jordan’s graph shows is ‘The Mother of All Budgets’ kept us growing at the same rate as Australia, when we dumped the Richardson reforms in 1996 we started to drift again.
Bring back Ruth!
Vote:May 31st, 2006 at 11:16 am Vote:
May 31st, 2006 at 11:30 am
The debate between NZ and Australia is whether we should have pursued the “blitzkrieg” of Rogernomics where any vested interests were seen as the enemy (as well as any dissenting voices) or whether the more collaborative approach used by Australia would have worked better for us. Impossible to know of course.
Vote:May 31st, 2006 at 11:51 am
PaulW, I doubt the ECA did all that you and IP claim, really. Other reforms here and globally had a much greater affect. One of the reasons Cullen is able to boast about the WTO report today is because of the flexibility in our economy (introduced in the 80s and 90s) that this Labour Government has retained.
I think a constant cry for never ending reforms without matching public investment in infrastructure, education and health is where IP and his ilk are on weaker ground. Without this we will just see a steady decline in our country’s fortunes.
Vote:May 31st, 2006 at 12:23 pm
Of course growth came right after the restructuring of the mid-late 80′s. Once one pushes unemployment up to 10%, things can only improve. Richardson can take no credit for that, only the choice to take a billion off the laid off in benefit cuts and (via Birch) give this money to those still in jobs via tax cuts. I wonder how much of the later crime and health problems amongst Maori come from that decision.
National in the 90′s neglected infrastructure and worker training (Birch over-corrected his Think Big ideology, by becoming an investment phobe). They did not build any lasting base for future growth. Once they benefitied from the dead cat bounce in the early to mid-90′s, they were left blaming Peters till they were correctly removed.
Given the amount of money Labour has spent in sustaining public services, repaying debt, funding infrastructure investment and saving into the Super Fund, we now have a more secure base for future “growth”. Thus Labour has helped us recover from the weakness of the 1990′s National governance.
The question is over finding the right policies to fuel “it”.
The next election will be about improving on Labour’s platform for growth AND how to fuel/get more growth.
Vote:May 31st, 2006 at 12:25 pm
Noddy, I do think that some of the apparent gains attributed to the ECA were unsustainable because they were largely one-off. Achieving long-term MFP growth in NZ is as much a function of savings and investment levels, something regularly argued by the likes of the NZ Institute, as it is labour flexibility. Australia’s labour market is significantly less flexible today than NZs is or has been since the ECA and subsequent reforms but Australia enjoys higer average productivity…
I agree that infrastructure investment is critical, and am pleased to see it in the last budget.
Vote:May 31st, 2006 at 1:07 pm
David you have used nominal GDP for the Aussie figures. No wonder the figures look so out of whack. Redraw your chart using real GDP and you will have a shock to the system.
I used OECD figures, the codes are:
Vote:AUS.LNBQRSA.2003-04.S1__Gross domestic product
NZL.LNBQRSA.1995-96.S1__Gross domestic product
May 31st, 2006 at 1:29 pm
Actually both GDP tables were in constant dollars, hence real not nominal.
Vote:May 31st, 2006 at 1:36 pm
OK, what was your source? (I believe you)
Vote:June 1st, 2006 at 10:09 am
That’s pretty impressive – I’m not surprised the Australian Economy is doing better than NZ, but sustained economic growth of 7% a year for six years in a first-world economy is incredible.
Vote:June 1st, 2006 at 10:56 am
Actually having now checked it looks like I have used a nominal series. Weird, because I remember looking for the real GDP series, and selecting it for download. I must have fucked it up somewhere.
What I’ll do is post an update on the corrected figures, once I have them. I may also try changing the scale so it fits onto the original graph by Jordan.
Thinking more about it, real GDP per capita is probably the more useful measure anyway as population changes can make an economy look like it is growing faster than it really is also.
May take me a while to do the new graphs but I will.
Vote:June 1st, 2006 at 11:10 am
Well Graeme , it seems you are right the figures were incredible, and just plain wrong, as many pointed out.
I said before, check out the Reserve Bank data. Shows NZ GDP growth as very credible over the last few years and often ahead of Australias, seeing as we seem so worried about Aussie (although growth there benefits us greatly as it gives us a bigger market to sell to).
http://www.rbnz.govt.nz/keygraphs/Fig2b.html
Per capita GPD growth is worth looking at but our population has not been growing as fast as GDP so gains certainly would have been made there as well.
Vote:June 1st, 2006 at 11:34 am
Its good we’re getting to a point where we have agreed and credible data on which to base the discussions.
The Stats NZ report is also very good as is the recent IMF report on NZ, http://www.imf.org/external/pubs/ft/scr/2006/cr06160.pdf, (Australia’s is slightly older, they’re about to arrive to do another review). The IMF report shows GDP averaging 3.5% growth p.a. for the last five years – very credible as Graeme and Noddy say.
Vote: