What will growth reach?

August 20th, 2013 at 6:29 am by David Farrar

Stuff reports:

New Zealand’s strongest service sector performance since October last year could signal falling unemployment and of as much as 5 per cent in the next year, according to the latest BNZ-BusinessNZ survey.

The Performance of Services Index (PSI) for July was 58.1, up three points from June and the highest level of activity since October 2012.

A result above 50 indicates services activity is expanding, while an index below 50 is indicative of a contraction.

July’s value was the highest recorded for the month since the survey began in 2007, and the most positive overall since October last year.

New orders in the services sector, a category of the PSI, were particularly strong, increasing 3.2 points from June to 63.1.

This was the highest level since November 2007, and was reinforced by strong activity and sales results, which were up 4.2 points to 61.8.

BNZ economists said the PSI results added to the story of accelerating economic growth.

“Indeed, the chances of getting 5 per cent GDP growth over the coming 12 months cannot be taken lightly,” BNZ said.

 That is probably too optimistic, but it has to be said most of the key indicators are now pointing towards strong growth in the next year or so. If that occurs, then we should see unemployment drop down also.

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18 Responses to “What will growth reach?”

  1. OneTrack (3,107 comments) says:

    This can’t be right. I demand an inquiry.

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  2. bringbackdemocracy (427 comments) says:

    Oh joy. Does that mean blue Labour can do something about the bloated public sector.

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  3. Manolo (13,778 comments) says:

    Does that mean blue Labour can do something about the bloated public sector.

    You must be dreaming. Wait for Whanau Ora and Families Commission take 2 once Labour Lite stitches a few deals with its coalition partners.

    And please do no to forget WFF is “communism by stealth” either. Blue Labour is unprincipled as its red counterpart.

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  4. wreck1080 (3,917 comments) says:

    Sweet — should mean my house will rise in value woohoo.

    And, auckland houses selling for 1 million above CV should become the norm.

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  5. Cunningham (844 comments) says:

    Man, what a bunch of whingers the above posters are! Seems even positive news can’t snap some people out of their negative mindset.

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  6. Simon (724 comments) says:

    Household debt at record highs & State set interest rate at record lows.

    A lot of forward demand in the economy because of credit expansion. The rate of credit expansion exceeds the rate of economic growth. It cant continue.

    What a mess. When the economy crashed last time OCR was over 8%. The State crashed the interest rates last time & then the State tripled its debt. What are the Statist bozos going to do next with OCR at 2.5%?

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  7. Black with a Vengeance (1,865 comments) says:

    Don’t suppose it can predict where these jobs will come from ?

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  8. Cunningham (844 comments) says:

    Black with a Vengeance (1,402) Says:

    Don’t suppose it can predict where these jobs will come from ?

    Maybe you can pull them out of your a**. Seerms to be where most things you say come from.

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  9. YesWeDid (1,048 comments) says:

    Given that New Zealand’s growth was only 0.3% in the March 2013 quarter it’s hard to see us getting to 5% GDP for the next 12 months.

    DPF, why do you post these ‘surveys’ of economic performance rather than actual hard economic data? Is it you cherry picking the good news stories?

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  10. EAD (1,087 comments) says:

    @ Simon 8.27am – spot on there. An economy built on an illusion of wealth is hardly a sound structure.

    Just look at the latest RBNZ figures for annualised credit growth http://www.rbnz.govt.nz/statistics/tables/c5/.

    Agriculture & household credit growth both growing at over 5% per annum. Rather than growth based on increasing productivity making goods cheaper, all this so called “growth” we have is an illusion built on the sands of credit

    The “wealth illusion” of asset inflation is seductive, which is why central banks in charge of a fiat currency and subject to no external disciplines so often drift in that direction. Politicians smile in satisfaction and powerful banking lobbies cry for more of the miraculous crack cocaine of cheap credit that keeps the economy “growing”. Eventually however the effects of the drug wears off and and the many people who thought their new found riches were real find out they were actually swimming naked as the economic tide goes out.

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  11. EAD (1,087 comments) says:

    It always amazes me how people don’t see that see that the global economic system based on fractional reserve banking and zero cost basis “money”/debt creation using full fiat notes, is the fundamental essence of a Ponzi that enriches the few.

    http://www.zerohedge.com/news/2013-07-31/financial-system-doesnt-just-enable-theft-it-theft

    Just about all of society’s productivity get’s sucked up to the 0.1% banking class (under the guise of government’s always understated “inflation” measure) whilst the average sucker thinks he is getting wealthier with 3% p.a. pay rises and a “rising house price”. What no more than about 2% of the population can understand is that what is really happening is that the VALUE of your house price is not rising, but merely the denominator in which it is measured (NZD) is increasing exponentially in order to keep the Ponzi debt-based money system afloat whilst all your wealth gets transferred to the banking parasites who create the “money”. Like any Ponzi scheme, it will collapse in the end as the debt that get issued to pay the interest on existing debt eventually collapses the system. In the meantime we will continue to get “growth” as measure by the fatally flawed “GDP” measure until such tipping point is reached.

    Take the red pill & welcome to the Matrix

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  12. Black with a Vengeance (1,865 comments) says:

    Whinging about whingers and straight out insulting people ?

    Jeez, you’re a fucking idiot Cunnnigham!!!

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  13. Weihana (4,537 comments) says:

    EAD (52) Says:
    August 20th, 2013 at 9:12 am

    Like any Ponzi scheme, it will collapse in the end as the debt that get issued to pay the interest on existing debt eventually collapses the system.

    When? “in the end” is not much of a prediction and could be equally applicable whether 20 or 200 years from now.

    Given that fractional reserve banking, credit and fiat currency are not new creations I suspect it could be a long time waiting.

    In the meantime we will continue to get “growth” as measure by the fatally flawed “GDP” measure until such tipping point is reached.

    Growth is measured as a percentage change in real GDP over time, thus accounting for inflation. We are richer than 20, 40, 60 or 80 years ago… in real terms. That there exists an unequal distribution of outcomes is not evidence that living standards overall have not improved.

    http://www.rbnz.govt.nz/statistics/key_graphs/real_gdp/

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  14. Cunningham (844 comments) says:

    Black with a Vengeance (1,404) Says:

    Jeez, you’re a fucking idiot Cunnnigham!!!

    Mate I have no time for people like you who are so partisan in your views that you refuse to even acknowledge any positive news because your crowd aren’t in government (it happens on both sides). I support National but am more then happy to criticise them when I don’t agree with something they have done.

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  15. Sir Cullen's Sidekick (890 comments) says:

    Good. All good for Labour-Green to take over in 2014. Check the latest Roy-Morgan poll. National heading for defeat.

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  16. Weihana (4,537 comments) says:

    EAD (52) Says:
    August 20th, 2013 at 9:12 am

    It always amazes me how people don’t see that see that the global economic system based on fractional reserve banking and zero cost basis “money”/debt creation using full fiat notes, is the fundamental essence of a Ponzi that enriches the few.

    http://www.zerohedge.com/news/2013-07-31/financial-system-doesnt-just-enable-theft-it-theft

    To address some of the points raised in that link:

    This apparent benefit evaporates if wages do not rise along with the price of goods and services. If earned income stagnates during inflation, the purchasing power of wages declines. If it took two days’ earning to pay for groceries and gasoline before inflation, now it takes three days’ wages. The wage earner is measurably poorer thanks to inflation. How much poorer? Take a look:

    The chart appears to represent the US. For New Zealand trends can be found here:

    http://www.msd.govt.nz/about-msd-and-our-work/publications-resources/monitoring/household-incomes/

    New Zealand household income rose about 3% pa in real terms from 1994 to 2009.

    But regardless, that wages may stagnate in real terms does not imply that central banking is the problem. I note that the graph you cite uses median incomes. Perhaps average incomes do not show the same trend which may suggest that what is being witnessed is rising inequality (for whatever reason).

    The advent of unlimited credit and leverage…

    Credit is not unlimited. I cannot go to the bank and obtain 100 million in credit because I could not sustain it and the bank knows that. Problems arise when credit gets out of control, which is not the same as saying that credit is inherently out of control because of fiat money or fractional reserve banking.

    Needless to say, those with access to leveraged credit and the issuance of fiat money have the power to make claims on resources without actually having produced anything of value or earned tangible forms of wealth.

    Those with political power and wealth naturally have monopolies on the issuance of credit and paper money, as these enable the acquisition of real wealth without actually having to produce or earn the wealth.

    John Key (or Barack Obama) cannot go print money for himself to put in his own bank account. People who have access to more credit generally have produced more value which has made them wealthy.

    This system is intrinsically unstable, as the financial claims of credit and fiat money on limited real-world resources and wealth eventually exceed real-world resources, and the system of claims collapses in a heap. Though this end-state can easily be predicted, the actual moment of collapse is not predictable, as those holding power have a vast menu of ways to mask their expropriation and keep the game going.

    The economy is inherently unstable. Central banking provides a relative level of stability that improves on the absence of such.

    https://en.wikipedia.org/wiki/Panic_of_1907

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  17. Viking2 (11,471 comments) says:

    Yep July was a cracker but August has crashed again.
    Few ships in POT. Wharves empty, goods not going.

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  18. EAD (1,087 comments) says:

    Weihana @ 11.05am

    The problem with Central Banks is that they create false impressions of wealth by debasing the money supply. Debasing the money supply destroys the price signal that capitalism relies on in order for economic actors to make decisions. When prices changes or when booms are in full swing, people end up making capital allocations based on false information and the result is mal-investments. The reality is economics is not the fiscal rocket-science you make it sound which requires a small number of wise men in central banks constantly manipulating the price and quantity of money in an economy in order to steer it in the right direction. Capitalism itself is based on good old-fashioned honesty. The money at the heart of it must be both an honest store-of-value and an efficient medium of exchange. It ceases to be so when the inherent deceits of fractional reserve banking allow trillions of false credit to be pumped into the system, thus forcing up prices (booms) which inevitably lead to over-valued commodities (busts).

    When people say that the economy is growing I always check what is happening with credit growth and remind myself of the world’s greatest ever Economist, Ludwig Von Mises immemorial quote:

    “The wavelike movement affecting the economic system, the recurrence of periods of boom which are followed by periods of depression, is the unavoidable outcome of the attempts, repeated again and again, to lower the gross market rate of interest by means of credit expansion. THERE IS NO MEANS OF AVOIDING THE FINAL COLLAPSE OF A BOOM BROUGHT ABOUT BY CREDIT EXPANSION. THE ALTERNATIVE IS ONLY WHETHER THE CRISIS SHOULD COME SOONER AS THE RESULT OF A VOLUNTARY ABANDONMENT OF FURTHER CREDIT EXPANSION, OR LATER AS A FINAL AND TOTAL CATASTROPHE OF THE CURRENCY SYSTEM INVOLVED”

    We are heading for an enormous bust, which will begin to manifest itself in the next 6 months and will make 2008 seem like a minor dip. T-bill yields are heading up and real money (gold) is heading to the East as stupid Westerners delude themselves that the pieces of paper they call “money” is actually worth something whilst smart Asians are buying real money hand over fist.

    http://www.zerohedge.com/news/2013-08-20/gold-flooding-out-london-switzerland-alarming-rate

    Buy gold, buy real money – it’s the only way any of us are going to get out of this one alive.

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