Are we ready for growth?

October 21st, 2013 at 9:00 am by David Farrar

Lian Dann writes in NZ Herald:

New Zealanders need to brace themselves for an economic boom.

It sounds crazy because good growth sure beats a recession, but after five years in the doldrums we may not be prepared for the strength of the rebound that economists are now tipping.

Next year the country will be “firing on all cylinders”, says Paul Bloxham, HSBC’s Sydney-based chief economist for Australia and New Zealand, in his latest report.

Bloxham is confident that we’ll be booming next year with GDP growth headed for 3 per cent and beyond.

His report, titled New Zealand’s boom, sets the tone for the way the rest of the world is starting to look at us.

Last week ANZ economist Cameron Bagrie noted that latest business and consumer confidence surveys were so strong they pointed to of around 4 per cent by early 2014. 

Bagrie was sceptical about that happening and suggested the economy might “blow a gasket” if it were to accelerate so fast.

But he concluded that New Zealand could be on track for GDP growth above 3 per cent, putting us amongst the strongest performers in the OECD. “It’s been a long time since New Zealand can claim such rock star status,” he said.

Even the IMF expects the growth to pick up to 2.9 per cent next year – ahead of the our Western trading partners (including Australia) and not far behind Asian nations like South Korea and Singapore.

I have to say it would be a nice problem to have! I’d rather have too strong growth than too weak growth!

So why the predictions for strong growth?

The reasons we’re on the up are simple. prices have stayed at record high through a period of concern about Chinese growth which caused hard commodity prices to fall. Meanwhile, we are on track for record production. That’s a huge boost to an economy that gets about 20 per cent of its income from cows.

Then there is the Christchurch rebuild, which should be kicking into top gear and boosting domestic activity.

I am not sure it is correct to say we get 20% of our income from cows. Dairy does represent around 20% of exports but that is only around 3% of GDP, and I think most people would regard a reference to national income as being GDP not exports.

Tags: ,

43 Responses to “Are we ready for growth?”

  1. Camryn (543 comments) says:

    Please, please can we keep National in government to make sure that this growth isn’t wasted away before or as it happens? Let’s keep “growing the pie” and see how that goes for improving everyone’s circumstances for a damn change.

    Vote: Thumb up 20 Thumb down 1 You need to be logged in to vote
  2. dime (10,125 comments) says:

    One year of growth and then what?

    The left get in? *shudder*.

    It would be nice to get another term of national.

    Maybe Key needs to give more “tax cuts for the rich”.

    Vote: Thumb up 12 Thumb down 0 You need to be logged in to vote
  3. Camryn (543 comments) says:

    To use a racing analogy, National has been building up our national nag after years of overfeeding and horrible track conditions. It’s finally getting into form and looking to win some races… and the Left wants to cut it up and eat it.

    Vote: Thumb up 17 Thumb down 0 You need to be logged in to vote
  4. MT_Tinman (3,259 comments) says:

    I am not sure it is correct to say we get 20% of our income from cows. Dairy does represent around 20% of exports but that is only around 3% of GDP, and I think most people would regard a reference to national income as being GDP not exports.

    Why?

    GDP is basically meaningless – how does one judge the value of a judge’s deliberations, a winewaiter’s service, a tour guide’s knowledge etc.?

    What we sell (our exports) is what we earn.

    Vote: Thumb up 7 Thumb down 1 You need to be logged in to vote
  5. thePeoplesFlag (257 comments) says:

    Hidden due to low comment rating. Click here to see.

    Unpopular. Like or Dislike: Thumb up 1 Thumb down 31 You need to be logged in to vote
  6. Jimbob (641 comments) says:

    You may have to talk to an economist DPF, he or she should be able to inform you of the correct numbers. Do not forget that overseas income is multiplied many times to get the real revenue for NZ, where as internal income has a multiple of only one.
    From what I can remember, Agriculture and Horticulture, and fisheries produce well over half of NZ’s GDP.

    Vote: Thumb up 7 Thumb down 0 You need to be logged in to vote
  7. JC (973 comments) says:

    “Dairy does represent around 20% of exports”

    And in fact export “services” is a point or two higher.. our largest export.

    I make the point because this is the “diversification” the pessimists preach we don’t have.. its here, its growing and its spread across industries.

    JC

    Vote: Thumb up 6 Thumb down 0 You need to be logged in to vote
  8. mandk (1,018 comments) says:

    @ thePeoplesFlag,
    Economic growth and prosperity are bad news for your lot, aren’t they?
    Lefties only survive in power by cruelly trapping people in benefit dependency.
    Socialism is the real enemy of people on Struggle Street.

    Vote: Thumb up 19 Thumb down 1 You need to be logged in to vote
  9. dime (10,125 comments) says:

    “If “growth” is simply increased profits for foreign owned corporates, the banksters and 1% then excuse me if I am less than impressed. ”

    lol well as sad as this is. Dime is a 1%er (income). Dime will be impressed :)

    Ponder this though – if we werent so far left and poor as fuck, Dime would be no where near the 1%.

    Vote: Thumb up 8 Thumb down 1 You need to be logged in to vote
  10. gazzmaniac (2,307 comments) says:

    All it means is that New Zealand will start to catch up with Aussie.
    There is a long way to go, but if it is sustained then maybe NZ will get there. Aussie hasn’t had a recession since 1991 remember, and they’ve just elected a conservative government which will set in place the seeds of new growth.

    Vote: Thumb up 4 Thumb down 2 You need to be logged in to vote
  11. anonymouse (722 comments) says:

    Dairy does represent around 20% of exports but that is only around 3% of GDP,

    The raw payout is likely to be at least 6 per cent of GDP alone in 2013/14,
    ($8.30+.32 * 1.5 billion kg ms +5% production bounce from last season’s drought)
    add a few multipliers of farmers spending that in the local economy, and Dairy would be well over 10 per cent of GDP, so its certainly higher than 3 %

    Vote: Thumb up 5 Thumb down 0 You need to be logged in to vote
  12. flipper (4,218 comments) says:

    But David…
    ALL that “brighter future” stuff National promised in 2011 was a crock of gold at the end of the Rainbow (pun intended), was it not??? Only problem for the MSM is that the gold is real…..

    Sure, over the few years there will be growing pains.
    And the MSM will do its best (witness the Herald’s conspiracy with Labour, red melon Greens, unions, and other APN publications to run rest home “scandals” next month, and TV One’s crusade over Rotorua timber mill – foreign owned – that wants a guaranteed market in Christchurch) to unseat National.

    The reality is that for five (5) years English and Key have struck a balance between belt tightening and expansion, weighed down by earthquakes and droughts, and put the country into a position where a steady hand, and a unwavering course, will see us progress to real prosperity. Everyone including all the wankers supposedly represented by Minus T, the red melons and unions, has benefitted. All those that really work, including those retired, have played their part.

    The liarbores, red melons, Stalinist unions, and the left wing MSM, would see all that lost for the sake of helping the ambitions of professional politicians that have never worked outside a tax/ratepayer funded existence. And if the academic smart arses really used their supposed brains, they would realise that the red melons will take us back to sack cloth and ashes – and a subsistence economy.

    Vote: Thumb up 19 Thumb down 1 You need to be logged in to vote
  13. wreck1080 (3,970 comments) says:

    So, high commodity prices and an earthquake rebuild — sounds a little fortunate rather than by design.

    Vote: Thumb up 1 Thumb down 19 You need to be logged in to vote
  14. Manolo (14,070 comments) says:

    The alliance of communist Greens and socialist Labour could well put a painful end to these fancy dreams.
    Reality bites, unfortunately, although there is time for Smile-and-wave and Labour-Lite to reverse the trend.

    Vote: Thumb up 6 Thumb down 1 You need to be logged in to vote
  15. nasska (11,813 comments) says:

    Exports, most from the farming sector, pays the bills….everything else is churn.

    Vote: Thumb up 7 Thumb down 0 You need to be logged in to vote
  16. OECD rank 22 kiwi (2,753 comments) says:

    Turning Cows into Windmills for the favour of Gaia. :idea:

    Vote: Thumb up 5 Thumb down 0 You need to be logged in to vote
  17. James Stephenson (2,228 comments) says:

    sounds a little fortunate rather than by design.

    “It seems to never occur to fools, that merit and good fortune are closely united” – Goethe

    alternatively:

    “In my experience, there’s no such thing as luck” – Kenobi

    Vote: Thumb up 8 Thumb down 0 You need to be logged in to vote
  18. Daigotsu (466 comments) says:

    @dime:

    “Never trust a motherfucker who refers to himself in the third person”
    – Jesse Custer

    Vote: Thumb up 0 Thumb down 1 You need to be logged in to vote
  19. Cato (1,095 comments) says:

    It would be frustrating if, having put us into recession, Labour come along again and sow the seeds for another one while being buffered by the good fundamentals laid down by the present government.

    And, of course, you can’t build long term prosperity around reconstruction after natural disasters. If there’s one weakness this government has, it’s an apparent weakness for Keynsian sugar-highs like the Rugby World Cup, blockbuster movies and so on.

    But we’ll only become rich in the long term if we have a stable economy that imposes generally low taxes on business activity. Mild corporate welfare doesn’t advance that, but it probably doesn’t do that much actual harm. The present Labour/Greens ujamaa mindset, on the other hand, would actively undermine it.

    Vote: Thumb up 14 Thumb down 0 You need to be logged in to vote
  20. wreck1080 (3,970 comments) says:

    @James Stephenson

    Actually, there is such thing as luck and unforeseen events.

    Firstly, I doubt the earthquake rebuild was a ‘planned’ event. While it was a tragedy it is boosting growth.

    Millk prices go up and down as dictated by world markets. I’m not sure NZ has much control over milk prices . The farming economy goes up and down with the global economic tide.

    Our economy is still farming based. And, I believe having so much of our economy concentrated in one industry is unhealthy. Just look at the effect a false botulism alarm caused!!! Where no one was even harmed!!! Imagine a foot and mouth scare!!

    Vote: Thumb up 2 Thumb down 7 You need to be logged in to vote
  21. emmess (1,433 comments) says:

    Only a fool would vote for this lot if they want a fatter pay packet …..

    Yes, the Green Party have a plan for fatter pay packets. So fat in fact you will need a wheelbarrow to carry it.
    There is slight problem though.

    Vote: Thumb up 11 Thumb down 0 You need to be logged in to vote
  22. wf (466 comments) says:

    Farming goes on year-in and year-out providing a stable base to the economy. It’s hard hands-on work, and anyone who thinks not, should try it. For a year or 10.

    All my fairly long life, there have been people grizzling about its importance to the national lifestyle, but haven’t come up with anything to replace it.

    It’s the original source of politics of envy, where people who KNOW NOTHING about the work involved feel free to criticise those who do. Words are cheap.

    Vote: Thumb up 11 Thumb down 0 You need to be logged in to vote
  23. greenjacket (487 comments) says:

    Wreck1080: “Our economy is still farming based. And, I believe having so much of our economy concentrated in one industry is unhealthy.”

    WTF? How is reliance on a successful industry “unhealthy?”. Do you actually understand how the New Zealand agricultural sector (which actually comprises several different industries) works?

    First, it is not farming based – the success of the agricultural sectors is because the NZ agricultural sectors have embraced very advanced processing. For example, the NZ dairy sector is world leading because it has created a whole lot of off-farm attributes (international customers prefer to deal with NZ dairy companies because they know they get a precise quantity of what they want, precisely to spec, at the time they want it delivered). The NZ kiwifruit industry achieves much higher prices than competitors because of its quality control systems, logistics and marketing – all off-farm attributes. The meat sector is internationally competitive because it sells highly processed premium chilled cuts – again, off-farm attributes.

    Secondly, the success of the agrcultural sectors has massive spinoffs for the rest of the economy. For example, the biggest subset of machinery exports is agricultural related machinery. The high productivity of the meat processing industry has led to New Zealand developing world-leading robotics technology firms. The success of the dairying allowed an electric-fence manufacturer to corner the world market in electric security fencing. The list goes on.

    Vote: Thumb up 9 Thumb down 1 You need to be logged in to vote
  24. Cato (1,095 comments) says:

    “It’s the original source of politics of envy, where people who KNOW NOTHING about the work involved feel free to criticise those who do.”

    Not just the work, but the risks to the individual farmer, small businessmen most, not considered ‘too big to fail’ and whose livelihood’s are almost entirely dependent on a) working bloody hard, b) global demand and supply and c) the weather – the last of which is completely out of their control.

    Vote: Thumb up 5 Thumb down 0 You need to be logged in to vote
  25. Dave Mann (1,251 comments) says:

    Being a self-employed businessman, I would LOVE to believe that New Zealand is perched on the brink of a fantastic recovery which will blow everybody away and give everybody economic orgasms….. but on my reading of the business environment (in Auckland anyway), this sounds like a load of bullshit. Somebody thinks that if they keep predicting it, it will happen.

    Business ‘confidence surveys’ are more like confidence ‘tricks’. Thousands of respondents think “fuck, it can’t get any WORSE.. it MUST turn around ONE DAY” and somehow this magically transforms into some economist prick predicting an upturn. Its crap.

    Vote: Thumb up 2 Thumb down 12 You need to be logged in to vote
  26. Sir Cullen's Sidekick (895 comments) says:

    Good news. Good timing for David Cunliffe and Russel Norman to claim all the credit….

    Vote: Thumb up 4 Thumb down 1 You need to be logged in to vote
  27. Tom Jackson (2,553 comments) says:

    Then there is the Christchurch rebuild, which should be kicking into top gear and boosting domestic activity.

    Good old Keynesian stimulus.

    Vote: Thumb up 0 Thumb down 11 You need to be logged in to vote
  28. flipper (4,218 comments) says:

    Tom Jackson (1,655) Says:
    October 21st, 2013 at 11:34 am
    ****

    C R A P…. that is what you and your idiot comrades advocate.

    English/Key have done an amalgam of Friedman and Keynes.

    You want to see Keynes. go look at the PIGS, and the rest of Europe (minus Germany), and the US.

    S T F U m- idiot.

    Vote: Thumb up 11 Thumb down 0 You need to be logged in to vote
  29. mandk (1,018 comments) says:

    For anyone interested, the EMED October 2013 Consensus Forecast has NZ growing faster than Aus, USA, Canada, Japan, UK and Euro area (i.e. every other advanced economy) in both 2013 and 2014.
    The same forecast suggests our unemployment rate in 2014 will be lower than any advanced economy other than Japan.

    Vote: Thumb up 3 Thumb down 0 You need to be logged in to vote
  30. wreck1080 (3,970 comments) says:

    @greenjacket — You completely altered what I said.

    This is what I said…

    “I believe having so much of our economy concentrated in one industry is unhealthy”

    This is what you say I said…

    “How is reliance on a successful industry “unhealthy?””

    How on earth can I debate against someone who changes my argument to something completely different but which suits you better to make a long rambling statement.

    A foot and mouth scare would put NZ out of business for a long time.

    My point is that we need a more balanced economy.

    Read this , for a view similar to mine…

    http://www.nbr.co.nz/article/fonterra-crisis-and-real-problem-new-zealands-economy-ck-143963

    I’m amazed at the number of ‘all eggs in one basket’ economic illiterates on kiwiblog.

    Vote: Thumb up 0 Thumb down 6 You need to be logged in to vote
  31. Simon (763 comments) says:

    Credit growth (both private & State) has far outstripped economic growth. National are economic failures as the present model of economic growth is unsustainable.

    Vote: Thumb up 0 Thumb down 15 You need to be logged in to vote
  32. flipper (4,218 comments) says:

    Wreckkkkkkkkkk….

    Name your alternative baskets, Dipshit.

    In 20 years they could include coal and oil.

    But use your brain, instead of a text book, and don’t talk about knowledge explosion crap……

    Vote: Thumb up 7 Thumb down 0 You need to be logged in to vote
  33. seanmaitland (501 comments) says:

    @wreck1080 – creating a ‘problem’ out of having a stellar performing export industry is lame – something I’d expect a Green or Labour politician to come up with.

    Name 5 other countries that have this mythical ‘balanced’ economy where they are expecting world class economic growth over the next period?

    Vote: Thumb up 7 Thumb down 0 You need to be logged in to vote
  34. seanmaitland (501 comments) says:

    @Simon “Credit growth (both private & State) has far outstripped economic growth. National are economic failures as the present model of economic growth is unsustainable.”

    The predicted surplus for next year, and the several hundred million in extra corporate tax this year must make you pretty uncomfortable then mustn’t it? What rhetoric are you going to bleat about next year when your existing lies don’t pan out?

    Vote: Thumb up 3 Thumb down 0 You need to be logged in to vote
  35. Tom Jackson (2,553 comments) says:

    S T F U m- idiot.

    Why? It’s too much fun to mock economic and political illiterates such as yourself. :)

    Vote: Thumb up 0 Thumb down 6 You need to be logged in to vote
  36. RightNow (7,012 comments) says:

    “It’s too much fun to mock economic and political illiterates such as yourself.”

    You know there’s no evidence that you have a clue about either politics or economics, and you haven’t presented any form of cohesive argument in this thread. On what basis do you think you’re the one doing the mocking?

    Vote: Thumb up 3 Thumb down 0 You need to be logged in to vote
  37. Colville (2,300 comments) says:

    If NZ did have a foot and mouth outbreak would it be so bad?
    A “lot” of livesstock goes on the bonfire yes but exports ? you cant spread foot and mouth thru a chilled leg of lamb can you?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  38. Colville (2,300 comments) says:

    Next 5 years all that timber that was planted in 1990 – 1995 comes on track too…. utterly fucktonnes of logs. Mine included :-)

    Vote: Thumb up 1 Thumb down 0 You need to be logged in to vote
  39. Bogusnews (477 comments) says:

    Dave Man,

    I’m a self employed business man as well. I’ve noticed a significant change in about the last six months with companies.

    This is fantastic news. I note the first page of comments over at the herald are from whining, bitching no hopers all trying to tear it down. Prosperity is bad news for the ones who want to keep us dependent.

    Vote: Thumb up 3 Thumb down 0 You need to be logged in to vote
  40. gazzmaniac (2,307 comments) says:

    Colville – will that timber create a glut?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  41. MT_Tinman (3,259 comments) says:

    Colville (1,237) Says:
    October 21st, 2013 at 3:32 pm
    Next 5 years all that timber that was planted in 1990 – 1995 comes on track too…. utterly fucktonnes of logs. Mine included :-)

    Fantastic stuff.

    If the government of the day actually allows you to harvest the logs (not a given) who is going to buy them at anything other than bargain basement prices when there will be, by your own description, a glut of wood on the market?

    Vote: Thumb up 0 Thumb down 1 You need to be logged in to vote
  42. hj (7,066 comments) says:

    So farming is still the backbone of the economy but what about the people servicing sector?
    Government policy is the result of lobbying and not necessarily in the best interests of the rest of NZ.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  43. Cato (1,095 comments) says:

    @MT_Tinman – doesn’t that rather depend on whether the increased supply out of New Zealand will be of sufficient size to depress the global market for timber. I’m not an expert, but I would have thought that the now recovering US housing market, when added
    to the increasing demand from China, would gobble up the increased supply.

    That being said, I’m not knowledgeable about that sector.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote