Economist disagree – shock horror
March 19th, 2008 at 10:33 am by David FarrarBERL have come out and said they disagree with the BNZ about NZ going into recession.
It reminds me of the three economists having an archery contest. The first one has an arrow hit a meter to the left of the bullseye, the second one then goes and hits a meter to the right of the bullseye and the third one yells out “Bullseye” 
Less common is the different stances of the PM and Finance Minister. Helen was all “the economy is strong, no problems” while Cullen admitted NZ may have a small recession.
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March 19th, 2008 at 10:38 am
“BERL have come out and said they disagree with the BNZ about NZ going into recession.”
Most economists do disagree with the BNZ story – at the moment. The BNZ story is a fair story, however the difference in economists expectations about economic growth stem from differences in what economists think will happen in the credit market – specifically where wholesale interest rates will be in a years time.
Vote:March 19th, 2008 at 11:02 am
Reproduced from prior blog as it’s about this:
I think the talk of recession in NZ is overstated. I think it is politically advantageous to scare-monger. Hard to sell property? yes. less disposible income? joblessness up? interest and fuel rates up? yes.
Vote:However a need to ’sell state assets’ no.
Lots of surplus to cushion us? yes? adequate welfare provision?
Yes.
On balance and I agree with Cullen on this, times will tighten,, but we will have to tighten with them.
By the by, the single biggest inflationary issue facing us it high interest and high property both of which which must take a fall.
This situation should be squarely laid where the blame belongs however: With Michael Cullen and his $60,000 taxation band, and subsequent villification of ‘rich-pricks’ by suggesting we raise interest rates because of these mum and dad investors who attempted to circumvent his stupidly low threshold by investing in tax-depreciable investments. It was in response to this he brought in kiwisaver, because even he realised that unless there is some kind of alternative, people will continue to buy investment properties as a surety against poverty in their old age.
The other stuff obout international influences on the tax-payers’ pockets and mortgage rates, is , IMO ‘globalony’
March 19th, 2008 at 11:31 am
BERL is a front organisation for the unions, the Labour Party, the Greens and Jim Anderton. Of course it is talking up the economy.
Vote:March 19th, 2008 at 11:57 am
Yeah, i saw that on their website.
Vote:March 19th, 2008 at 12:05 pm
Lee C
Regardless of our domestic situation, we are inevitably tied to overseas markets – especially the US. A great example of this is this morning when our sharemarket responded so quickly (up one and a half percent) on the back of the Fed cutting their interest rates.
We are heading for a recession and not just a technical one because of the rapidly worsening US markets which have a more significant way to fall before they start bottoming out and gaining economically once again. The flow on effect that this has is with our second tier finacial markets which in recent times have gained a hold on a significant portion of Kiwi’s equity.
When – and not if – this continued failure happens, a great deal of the internal wealth of the country will be lost and subsequently, we will find ourselves in a worsening condition – elderly population, no savings in general, a younger population with a growing negatively geared equity position, higher commodity prices with higher unemployment.
The past few years we have run hot on a domestic growth position and with a deteriorating domestic outlook coupled with massive uncertainty overseas, I think we are in for a harder landing than quite a few suppose.
I also read palms.
Vote:March 19th, 2008 at 12:13 pm
Then there’s the story of the three guys on a lifeboat after their ship has sunk. They have a can of food but no can opener. Two of the guys want to throw the can over the side, but the third guy, an economist, says “let’s assume we have a can opener…”.
Vote:March 19th, 2008 at 12:36 pm
“BERL is a front organisation for the unions, the Labour Party, the Greens and Jim Anderton.”
They are left of centre but they are definitely independent – I don’t think it is fair to say that about them.
“Two of the guys want to throw the can over the side, but the third guy, an economist, says “let’s assume we have a can opener…””
The can opener joke is definitely the best economics based joke ever
Vote:March 19th, 2008 at 12:44 pm
LeeC – I think the “rich pricks” remark was aimed at someone with a net worth of about $60 million (someone who really can’t have anything in common with 99.9% of kiwis), and who had been making digs at a women because she chose not to have children – a little different from someone who earns $60, 000. Cullen himself earns over twice that amount.
Otherwise I agree with you that we are well placed in terms of macro-economic fundamentals to withstand any credit based recession, if indeed it comes at all.
Vote:March 19th, 2008 at 12:48 pm
rogered gnomer – I thought the “rich pricks” remarks were directed at the fuckwit at IRD that misplaced $600 Million !!!
Vote:March 19th, 2008 at 1:09 pm
Economists views may be based on more information than most of us have access to but that is no guarentee that their views will prove correct. The last two recessions were caused by overlending to the property market as is this one and so far no economist has addressed the issue of why the results this time will be different to the last two. As future events depend more on peoples perceptions than facts, and their current response is similar to pasts ones, namely a lack of trust in the financial and political systems with risk aversion gaining widespread popularity, I believe the results will also be similar.
Vote:March 19th, 2008 at 4:13 pm
Since you’re not surprised that highly trained economists can’t agree who’ve studied the topic at university and then honed their understanding by working in the field, you surely can’t be surprised that a history teacher and a university polsci lecturer, neither of whom have any real world experience, can’t figure out what the hell will happen next?
It always amuses me that governments ensure the Attorney General is a lawyer because of course that’s so important whereas the entire economy can be put into the hands of any buffoon who can’t figure out their bar tab at Bellamy’s. Case in point: Winston was once Treasurer, remember?
Not so much a case of the blind leading the blind and the blind drunk leading the blind
Vote:March 19th, 2008 at 4:22 pm
Central banks have done very well since the 1930′s in preventing another similar depression – thanks in large part to Milton Friedman’s theories. If something new happens now to beat all the known tools in the book, and we get another “big one”……..
Vote:who’s gonna call this one correctly?
March 19th, 2008 at 6:45 pm
Even if the rest of the world dodges a recession NZ will not be as lucky. The government is like an elephant on a tight rope, very finely balanced but still pigging out to the max. Something will have to give and you can be asured the result will be a big fucking mess.
Vote:March 19th, 2008 at 8:12 pm
Correct nome, Cullen was directing the term ‘rich prick’ at John Key, I was hoping to infer by that ‘rich-prick’ reference that Michael Cullen has an ideological issue with people earning enough money to be able to purchase investment properties, and that he was not above implying that they should be villified for doing so recently when the issue of Capital Gains Tax was raised for discussion. Even that renegade tory Michael Laws took up the cudgels to reiterate this theme, so it was obviously quite effective.
Vote:While I’m at it I would also suggest that Cullen has a borderine sociopathic streak – ie devoid of conscience or empathy – It’s a bit like when someone calls someone a ‘fucking queer’ under provocation – it is a relatively safe bet to claim that that lapse of manners was caused at least in part by an attitude which is coloured by an innate and usually repressed homophobia. Similarly if one uses the term ‘chinless scarf-wearer’ to denote a religious following it is likely they would be at home with ‘dirty towelhead’to describe another, if it were acceptable within that circle of peers. My point here being that the language we use often betrays our inner sentiments, and that the fact we use certain acceptable forms of vocabulary to attack people indicates a predisposition towards aggression and in Cullen’s case, bullying, too.
Cullen also displays a rather snide passive-aggressive personality, using his ‘superior’ education to try and belitttle or silence dissent. If he was down your local pub, he’d be the guy that no one really liked, but who commands enough of a threat of dealing public humiliation that he would be tolerated. (And insulted behind his back).
Case in point – his jibes at Keith Lock(e)? today. I mean WTF was that uncalled for insult intended to achieve, other than trying to cower someone into silence? So, although you were correct in the substance of your reply, my intention was to actually ‘dog-whistle’ some of the above opinions I hold about Michael while I was at it. I like to try and pack a lot in. Sorry.
March 19th, 2008 at 11:06 pm
Economists are little better at predicting the future than anyone else. This has been proved time and again.
Economists should be able to better explain the economy and the likely results of policy changes than non-experts, but picking turning points is notoriously difficult to do – and they can normally be seen only with the benefit of hindsight.
Why some economists will say things like the housing market will look very bleak over winter but is likely to pick up in spring is beyond me.
Having said that, it was obvious that the housing market was overheated and this was at least in part caused by tax distortions.
I wonder if those dorks at Treasury still think there was no savings problem in NZ because it was quite rational to rely on housing investments.
Vote: