NZIER calls stagflation

July 8th, 2008 at 11:57 am by David Farrar

is the nightmare of the 70s – high and negative .

has just put out its quarterly survey of business opinion.

Statistics New Zealand recently reported that real Gross Domestic Product (GDP) fell by 0.3% in the March 2008 quarter. Indicators of domestic trading activity from the latest QSBO suggest economic activity declined further in the June quarter and is likely to decline again in the September quarter which will make it three quarters of negative economic growth in a row.

That takes it beyond a technical to a full . They says firms are more negative abotu their own activity and their trading activity since 1998 and 1982 respectively.

Now what about inflation:

The net balance of firms intending to increase selling prices in the next three months has increased. The balance was 45% in the March survey and 49% in the June survey. The 49% figure is the highest since March 1987. The net balance expecting an increase in costs has increased from 62% in March to 71% in June. The 71% figure is the highest since December 1986.

This is why their press release refers to stagflation.

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42 Responses to “NZIER calls stagflation”

  1. stephen (4,063 comments) says:

    This DPF person is a prolific poster, truly.

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  2. polemic (460 comments) says:

    Is it possible that the VRWC is not responsible for the current economic climate in NZ ?

    Is it therefore possible that the Labour Party and Helengrad are major contributors to this ?

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  3. David Farrar (1,902 comments) says:

    Only when sick and unable to leave home!

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  4. stephen (4,063 comments) says:

    polemic, then who is to blame for the good times we had?

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  5. burt (8,316 comments) says:

    The economy is in recession and the govt are still posting a surplus…. what is wrong with this picture? How can we claim that there is anything credible about Dr. Muppet’s Cullen’s economic management when this is occuring?

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  6. Ross Miller (1,706 comments) says:

    Is the difference between a technical recession and the real one much like the difference between being a little bit pregnant and well, you know?

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  7. roger nome (4,067 comments) says:

    DPF:

    Inflation in the late 1970s through to the mid-1980s was in the neighbourhood of 8-15% annually. Is anyone really predicating that level of inflation? I’ve seen 5% inflation mentioned as a possibility, but you could hardly call that “high” inflation in NZ’s historical context.

    Otherwise it’s a very interesting post. National could well inherit a poisoned chalice if it wins the next election. Unemployment is set to go skywards, in the next couple of years, and we all know that unemployment kills governments. (unless it’s FPP and you can win with 35% of the vote – i.e. National in 1993). Could be a good time for the left to go into opposition, get some new blood in, a new sense of purpose and direction, ready to rule the treasury benches again in 2011.

    [DPF: You are partly right. I think National will have a very challenging time if they win Government due to the weak economy]

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  8. Ross Miller (1,706 comments) says:

    Newsflash … Woger in conceding the election calls for “a new sense of purpose and direction” in Labour.

    With ‘friends’ like this Helen’s mob sure doesn’t need enemies.

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  9. Kimble (4,443 comments) says:

    Thats right, Nome, get your excuses and consolations ready. “Oh but we WANTED to lose that election.”

    Unfortunately, the most likely way the general public would blame National for higher unemployment is if National promises to bring it down, and they certainly arent doing that. Actually listen to what Key is saying sometime and you will hear warnings about difficult economic times to come, and hope for the future beyond that.

    Labour of course has blamed National for everything bad for three straight terms now, so if you assume it has been effective then you have to further assume the public is used to the idea that current woes are the faul of the previous regime.

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  10. JiveKitty (778 comments) says:

    Labour can’t be wholly blamed for the state of the economy (the world economy isn’t exactly making things easy), and to be honest, recessions are expected — there is a thing called the business cycle after all. It’s how a government deals with recessions (ie, cushioning policies, and policies to encourage economic growth) which show a government’s mettle. Stagflation is especially hard to deal with, and Labour don’t seem to have any answers. National will have a very hard time if they become the government, and will probably have to make some very hard decisions.

    As to the Budget Surplus, people don’t seem to understand that it’s not a cash surplus that the government has. It’s an operating surplus. While the 2008/09 operating surplus is said to be $3.1b, there is a cash deficit of $3.5b. The surplus comes about because of accrual accounting methods, so it looks good on paper, but it doesn’t actually leave a lot of room to manouevre if a government is going to be reasonably prudent.

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  11. baxter (893 comments) says:

    Stephen……….We didn’t really have the good years. The Goverment raised taxes and stole all our money. The rest of the world had good years as their Goverments lowered taxes, while we fell down the OECD table to second last. CULLEN re-assures us that all is well but the financial fool together with the rest of his party are deluding themselves.As BURT says they are running a five billion dollar surplus , twice what they budgeted for while businesses are collapsing around them through no-one having any money in their pockets.

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  12. burt (8,316 comments) says:

    baxter

    The supporters of Dr. MuppetCullen claim that he is doing a fine job or flattening the peaks and troughs of the business cycle, saving money from the good times (peaks) to plough back into the bad times (troughs). Yet what we actually see is the govt reaping money from us during the troughs which actually makes the troughs deeper. Yet the partisan fools still parrot the party lines and take no notice of what is actually occurring. Hopeless – who gave people with so little ability to understand anything the power to vote?

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  13. stephen (4,063 comments) says:

    Baxter, good point re: tax, though incomes did grow X% (?), if nothing else. pretty damn sure we arent second last either.

    What National’s policy on company tax anyway?? Traditionally, if nothing else.

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  14. roger nome (4,067 comments) says:

    “Ross Miller”

    Sorry to learn that you have a lisp. You know, you can get speech coaching for that.

    “Kimble”

    I’ve never voted for Labour, I’m just giving my honest opinion as a free-thinking individual. I know it’s hard for a partisan parrot like you to consider that possibility, but it’s the truth

    Also, I don’t think that a National-led Government will be better for NZ than a Labour led one, I just don’t think there will be much cause for National to celebrate if they do win. Also, there would be plenty of positives for the left to take from a loss.

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  15. big bruv (14,156 comments) says:

    “Also, there would be plenty of positives for the left to take from a loss.”

    Such as????

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  16. JiveKitty (778 comments) says:

    ““Also, there would be plenty of positives for the left to take from a loss.”

    Such as????”

    Here are two positives for the left:

    1) New blood coming through to lead because of disillusionment with the old leadership’s failure to hold on to power. Probably a good thing for the left if this happens, because it seems many heavies on the left are well-past their use-by date, and increasingly out of touch.

    2) The right inherits an economic situation which is going to be increasingly hard to deal with, leading to a good possibility of only a short-term in power.

    There are probably more.

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  17. roger nome (4,067 comments) says:

    Baxter:

    “We didn’t really have the good years. The Goverment raised taxes and stole all our money. The rest of the world had good years as their Goverments lowered taxes”

    That’s just plain stupid. i.e. According to the OECD NZ has the second lowest level of tax on “mean income earners” in the developed world.

    http://en.wikipedia.org/wiki/Image:Income_Taxes_By_Country.svg

    Don’t let the facts get in the way of your deceitful propaganda though.

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  18. roger nome (4,067 comments) says:

    Baxter:

    “We didn’t really have the good years. The Goverment raised taxes and stole all our money. The rest of the world had good years as their Goverments lowered taxes”

    That’s just plain stupid. i.e. According to the OECD NZ has the second lowest level of tax on “mean income earners” in the developed world.

    Don’t let the facts get in the way of your deceitful propaganda though.

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  19. JiveKitty (778 comments) says:

    Did they make steps to raise the brackets as inflationary pressures impacted on real levels of income? I know it’s costly to do regularly, but they should’ve done it at least once every so often (if they didn’t, that is).

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  20. side show bob (3,660 comments) says:

    So how much has this little report cost the taxpayers? If the NZIER had come to our local hotel, had a few beers with the locals we could have told these people what they wanted to know for nothing. Jez, it’s hardly breaking news.

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  21. roger nome (4,067 comments) says:

    “JiveKitty”

    Yeah – when parties are in opposition they tend to do a lot of self-examination, and usually have a change of leadership, so are more easily able to change course. I mean, look at what happened to Labour between 1989 and 1993. A complete change in direction.

    Also, National has promised to be Labour-lite if it wins office, so unless it turns around and back-tracks on its promises (in which case it will be punished by the electorate) we are set to have a de-facto Labour Party government anyhow. Like I said, it’s pretty much all positive for the left and all negative for the right. The fact is, the pendulum is still swinging leftward (people don’t want right-wing economic change), and National can do little to stop that.

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  22. Kimble (4,443 comments) says:

    “Probably a good thing for the left if this happens, because it seems many on the left are well-past their use-by date, and increasingly out of touch.”

    Yep, thats what Labour needs, a brand new crop of out-of-touch representatives driven by an irrelevant, stagnant ideology that hasnt provided a new idea in decades and has one solution for everything: spend more of other peoples money.

    = Progress

    Lets consider what some of these “fresh” ideas might be.

    More Union power. If not unions then some sort of rebranded unionism. Essentially collective bargaining by employees, with restrictions on individual bargaining.
    Protect local industries by restricting international trade, subsidies and tarrifs.
    Ignore inflation, controlling it makes people unemployed.
    Centrally managed wage controls.
    Increased taxation to improve our Gini coefficient.
    Renationalisation of…
    State instruction on the correct raising of children.
    Increased State power to control non-communical diseases such as obesity and libertarianism.
    Hate speech laws.
    An EFA mk II, making it so participation in the democratic process can only be afforded by the most rich, who (ironically) are explicitly prohibited from doing so.

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  23. roger nome (4,067 comments) says:

    Jivekitty”

    “Did they make steps to raise the brackets as inflationary pressures impacted on real levels of income?”

    The figures are right there in front of you. NZ is a low, personal income tax country.

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  24. roger nome (4,067 comments) says:

    “a brand new crop of out-of-touch representatives driven by an irrelevant, stagnant ideology that hasnt provided a new idea in decades and has one solution for everything: spend more of other peoples money.”

    Redbaiter?

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  25. roger nome (4,067 comments) says:

    “Lets consider what some of these “fresh” ideas might be.”

    No, don’t kimble. You’re just embarrasing yourself.

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  26. big bruv (14,156 comments) says:

    Note that Roger the liar did not say “NZ is a low TAX country”

    Would it be possible for you to come here and tell the truth for an entire day Roger?

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  27. Kimble (4,443 comments) says:

    “National has promised to be Labour-lite if it wins office”

    BAHAHAHAHA! This is the guy that was complaining that National hadnt released enough policy! Now he knows enough of it to determine precisely how they will act when they take power?

    “That’s just plain stupid. i.e. According to the OECD NZ has the second lowest level of tax on “mean income earners” in the developed world.”

    Of course, when NZ had the highest surplus in the world and Labour refused to cuts taxes, well, that little factoid didnt get in the your way, did it Nome?

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  28. Kimble (4,443 comments) says:

    What you find embarassing, Nome, is that this quote defines your position perfectly.

    “More Union power. If not unions then some sort of rebranded unionism. Essentially collective bargaining by employees, with restrictions on individual bargaining.”

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  29. JiveKitty (778 comments) says:

    Roger Nome, that doesn’t really answer the question.

    Kimble, I don’t know that you’re right about that. Your apparent anti-left bias might get in the way. The aim is to get re-elected, and maintain a grip on power, not to get re-elected and blow it with policies which have failed hugely in the past (as a high level government control in the economic sphere has). Many of the policies you mention would be more likely to be Green policies than Labour policies, and Labour are the ones most likely to be affected by a loss of power at election time. They are not going to gravitate further to the left in an attempt to regain power. That would alienate even more of the electorate. While the Greens can afford to alienate most of the electorate, Labour cannot.

    As well as this, it will likely come down to how well National manages the economy, should they win the election, rather than social policy. It won’t matter, to a large extent, what Labour proposes if National fail, because disillusionment will set in. The problem is that National may find it hard to succeed in the short-term if they implement policy which will be successful in the long-term.

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  30. roger nome (4,067 comments) says:

    Kimble:

    “Now he knows enough of it to determine precisely how they will act when they take power?”

    God you’re an idiot. Did you knot read the part: “unless it turns around and back-tracks on its promises”?

    “when NZ had the highest surplus in the world and Labour refused to cuts taxes, well, that little factoid didnt get in the your way”

    That Labour had a conservative fiscal policy is beside the point. We are still a loww personal-income tax economy.

    Bruv:

    “Note that Roger the liar did not say “NZ is a low TAX country”

    There’s no lie, liar. We were talking “our” income tax. Remember Baxter said “The Goverment raised taxes and stole all our money”, so I quoted personal income tax, and I’m assuming not many people here own corporations – unless Baxter and you are under the delusion that we all own a corporation?.

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  31. roger nome (4,067 comments) says:

    This is the complexity of thought that goes through kimble’s head when he thinks about Labour.

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  32. JiveKitty (778 comments) says:

    I love that advert. It was awesome, and incredibly amusing. We should have sophisticated electoral advertising like that these days.

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  33. roger nome (4,067 comments) says:

    Sorry JiveKitty, I thought it was a rhetorical question, seeing as it’s pretty common knowledge that brackets weren’t adjusted with inflation. I was just making the point that personal income tax id still very low in NZ compared to other developed countries.

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  34. roger nome (4,067 comments) says:

    Jivekitty: Entertaining perhaps, but very deceptive and simplistic. Pretty similar to kimble’s rhetorical crap in those ways.

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  35. JiveKitty (778 comments) says:

    Yeah, I was pretty sure they weren’t adjusted, but I was making sure without actually bothering to check.

    We’d all rather have entertainment value over facts when it comes to politics, I’m sure. At least, that’s often what we seem to get. It’s more dressed up than that advert, but it’s pretty much the same kind of crap.

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  36. burt (8,316 comments) says:

    And now the socialist apologist works a full circle…

    roger nome

    Wage are too low – correct?

    So how do you support a govt that has presided over mean wage stagnation compared to our trading partners… Oh I know… with a line like this: “That’s just plain stupid. i.e. According to the OECD NZ has the second lowest level of tax on “mean income earners” in the developed world.”

    Second lowest on mean income earners because our mean income is so friggin low… Wow – thanks Labour, keeping our taxes low by keeping our earnings low… That’s like saying a govt that removes all criminal laws from the law books has created a country where there are no criminals – brilliant!

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  37. getstaffed (9,186 comments) says:

    workingman- you will note that nome quoted wikipedia – that well established source of authoritative data. if you’re a desperate labour troll that is.

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  38. paradigm (452 comments) says:

    I’m getting annoyed with people continually labelling national as “labour lite” as this seems to be little more than repeating the catchphrases of the labour propaganda machine. Perhaps in the interest of fairness, we should consider the opposite spin angle and refer to labour as “national obese”. After all, Labour does “nick” at least as many policies from the nats as the nats do from labour.

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  39. OECD rank 22 kiwi (2,753 comments) says:

    Rod Emmerson has a brilliant cartoon in todays NZ Herald.

    “Stagflatulation”.

    Brings a whole new meaning to the term “Gunning for Clark”. :D

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  40. stephen (4,063 comments) says:

    paradigm, you’ll see “labour lite” coming from those in ACT and right of ACT too if you look hard enough! They’re fairly disgusted.

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  41. paradigm (452 comments) says:

    stephen:
    You are quite correct, however the fact that journalists just repeat it without thinking does become annoying. People treat tax relief as a single policy, and comment that aside from tax, national and labour don’t seem to far apart. Taxation strategy is enormously important and should in its self be sufficient to distinguish the two parties.

    To be honest, labour lite or not the overall position national is taking right now is where it needs to be to win an MMP election. After MMP was introduced they went too far right wing and severely weakened act in the process. They would have been better served pushing toward the centre to take some votes from labour even if some of their traditional core transfer to act, and then form a coalition with act and use the coalition agreement conditions go back to the right.

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