Strong economic growth continues

June 19th, 2014 at 1:00 pm by David Farrar

The Herald reports:

New Zealand’s economy grew at a 3.3 percent annual rate in the first three months of the year, the fastest first-quarter pace in eight years, supporting the central bank’s view that it must press on with interest rate increases to keep inflation at bay.

The economy grew 1 percent pace in the first three months of the year, from an upwardly revised 1 percent gain in the fourth quarter, marking three quarters of growth at 1 percent or above, Statistics New Zealand said. Quarterly growth was below the 1.2 percent expected in a Reuters poll of economists although the annual rate beat the forecast for 3.1 percent.

Three quarters in a row with growth above 1%. If the next quarter is the same, then we’ll be over the 4% growth mark.

 

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23 Responses to “Strong economic growth continues”

  1. anonymouse (705 comments) says:

    Over the past year gorwth was 3.8 per cent.

    Its bloody hard to see how a government can get tossed out with figures like that, let alone when you compare it to the rest of the world, or look at what the state of the opposition is…..

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  2. RRM (10,101 comments) says:

    supporting the central bank’s view that it must press on with interest rate increases to keep inflation at bay.

    Oh goody… we already spend nothing on anything more than the bare basics, in order to pay the mortgage… I can’t wait for things to get even tighter!

    :neutral:

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  3. Neil (577 comments) says:

    RRM1.38pm. I can understand your frustration however the big concern is building activity. With the ChCh earthquake and the washup from the GFC it is going to put pressure on labour,products and wages in this area. It flows throiugh very quickly from there. Immigration also puits some pressure on in certain areas.
    I would say however that NZ has not moved ahead so quickly for years so I suppose its a new situation.
    Excessive government spending has always been a problem in NZ, both from Labour and National. I think the present government are trying to be prudent.

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  4. Ed Snack (1,940 comments) says:

    RRM, whereas, having bloody well paid off my mortgage (and it took a while) I can’t wait for interest rates to go a little higher so I’m no longer earning only marginally more than the inflation rate after tax on surplus money ! Us “savers” have been subsidizing you “borrowers” for quite long enough. Anyone would think that there was no real “time-value” to money at current rates, that is that a $1 today is worth no more than a $1 in 10 years time, which ain’t realistic. (YMMV !)

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  5. lastmanstanding (1,310 comments) says:

    Ed Snack is right on the money. Those of us with TDs are subsidizing those with mortgages. Fact is some of us had mortgages in the 1970s and 1980s with interest rates in the mid to high teens sometimes over 20% and were told to suck it up get on with it and live within our means if we complained. Current gen wants 4/5 bedrooms 3/4 bathrooms all the toys etc etc.

    Wheres the incentive to save when returns barely cover inflation rate. Gen X and Gen Y should be welcoming us BBs saving for our retirements otherwise given our numbers and therefore voting strength Gen X and Gen Y might be paying higher rates of income tax to support BBs. Plus add in medicare costs for BBs and short sighted Gen X and Gen Y should think carefully what they wish for.

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  6. Unity (643 comments) says:

    It’s great that the economy is going well. However, what is happening under the layers is what concerns me. This country is becoming an apartheid State and billions of dollars are being spent on racial initiatives, most of which will change absolutely nothing for the better, but for the worse. So, good economy or not, this country is not going to progress until we stamp out all racist initiatives and start treating everyone equally under the law. Special treatment should be based on need and not race.

    Therefore I will be basing my Party vote in the coming election on who will stamp out all this racial privilege. Imagine how much better the economy would be if those billions of dollars syphoned off onto racist initiatives were spent for the well-being of everyone.

    My other grip is overwhelming referendums on certain subjects which are ignored by Key and his cohorts. Binding referenda are my second ‘must-have’ so we can claim our democracy back.

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  7. Dave_1924 (121 comments) says:

    On behalf of the Libaour Government in waiting I would like call this out as a disgrace and a crisis. 1% per quarter is not enough and we will deliver 1.5% per quarter.

    Did I say that right Matt?

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  8. stephieboy (3,533 comments) says:

    Unity, what evidence is there at that we are working towards separate toilet, parks, beaches and other amenities that featured in the old South Africa .??

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  9. seanmaitland (501 comments) says:

    @Ed Snack etc, you guys are being foolish relying on TDs as investments. Theres so many other better investment options out there.

    On the other hand, I thank you, as you’re the reason in 5 years I’ve gone from having no investments other than my home, to having an investment property that is making $1000 gross profit a month. With 30 years til my retirement, that little avenue will be a nice little earner.

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  10. Unity (643 comments) says:

    Special privilege based on race is apartheid, stephieboy. Just look up the dictionary. You don’t have to go the whole hog like Africa to have apartheid herre. The rest of us are becoming second class citizens in our own country.

    Just to give a for instance. I have a daughter who wanted to become a Chef. She had to buy absolutely everything from clothing to her knives. Another person also training but who happened to have some Maori blood, had everything provided by the State. Part way through the course this part-Maori person decided she didn’t want to continue but thought she would like to do nursing instead so again everything was provided. She didn’t finish that course and wanted to go back to training to be a Chef and again everything was provided. Now how is that equality or even fair? My daughter had to struggle but this other to-and-froing person had it all handed to her on a plate.

    As an aside, this part-Maori person had more European blood than Maori, so why couldn’t her European side have enabled her to get through by her own efforts, if the Maori side couldn’t??!! The whole system is unfair and causes resentment.

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  11. OneTrack (3,374 comments) says:

    stephieboy – “Unity, what evidence is there at that we are working towards separate toilet, parks, beaches and other amenities that featured in the old South Africa .??”

    Why do we need racially allocated seats in parliament and a racially selected Statutory Board on the Auckland City Council, ……?

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  12. Longknives (4,962 comments) says:

    “Unity, what evidence is there at that we are working towards separate toilet, parks, beaches and other amenities that featured in the old South Africa .??”

    Maori seats, Maori Party, Maori grants at University, Maori Schools, Maori sports teams, Maori quotas at Med School, Law School etc, Court Cases being heard at Maraes (A step towards separate justice systems and a disturbing Elephant in the room that nobody seems to want to talk about..)
    And try going to various Beaches in the far North if you are pale-skinned…

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  13. Ed Snack (1,940 comments) says:

    Sean, a little in a TD is useful if you need spare cashflow at some point, easier to get to in a hurry. But too low an interest rate drives investment into inappropriate projects.

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  14. hj (7,181 comments) says:

    “New Zealand’s economic expansion in the latest quarter was helped by a 12.5 per cent rise in construction, which accounted for two-thirds of GDP growth and marked its largest increase in 14 years.”
    ….

    While immigration played a key role in house inflation in the three years after 2001 (Reserve
    Bank 2007), it is unknown to what extent on-going immigration continued to drive price rises.
    The housing boom has meant good profits for many New Zealand companies supplying
    materials and building services, but it implies investors would rather invest in their country’s
    homes rather than its businesses (Bollard 2005). The high returns for property has attracted
    finance and reduced the capital available for productive investment (Moody, 2006). The
    consequence is investment is going in to industries with limited capacity to increase per capita
    incomes. For example, real estate and building are domestically bound and do not have the
    market potential of export industries. They also have less opportunity to increase productivity
    through new processes and products. The irony is, as these sectors grow, they have incurred
    skills shortages which in turn has increased demand for skilled immigrants. The Department
    of Statistics ‘Long Term Skill Shortage List’ of 28/3/2006 includes carpenter/joiner, plumber,
    electricians, fitter and turners, fitter welders; all indicative of a nation building its
    construction/property sector.
    There is a danger that a sector of the economy is being augmented that is totally reliant on a
    small domestic economy. Not only do these industries have limited potential for per-capita
    growth but ‘deriving growth via factor inputs such as labour places pressure on infrastructure
    such as transport and land supply, and ultimately have a further negative impact on growth
    (ARC 2005). Finally, as the sector gets larger, it gains in lobbying/political strength and can
    lobby for immigration regardless if it is the best interests of the economy as a whole. This
    could be seen in Canada where the development industry has lobbied hard for high sustained
    immigration levels (Ley and Tutchener 2001).

    DISCUSSION PAPER

    NEW ZEALAND IMMIGRATION POLICY

    Dr Greg Clydesdale (PhD)

    Senior Lecturer
    Department of Management and International Business
    Massey University – Albany

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  15. hj (7,181 comments) says:

    NZ PM Defends the Population Ponzi
    http://www.macrobusiness.com.au/2014/05/nz-pm-defends-the-population-ponzi/

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  16. polemic (460 comments) says:

    So in the light of strong economic growth lets keep the immigration coming in.

    The growth of NZ will continue to climb and we will then be able to live with an improved quality of life and the greatest benefactors will often be those that don’t realise how good it is for them.

    The low income and blue collar workers and families – “the Battlers” they will get better schools and hospitals and roads and more affordable housing…. Yes not in Epsom but overall they will be better off.

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  17. RRM (10,101 comments) says:

    Ed – I don’t know what you want me to say… congratulations on being older than me?

    Yes mortgages are unprecedentedly cheap right now… given my generation has to pay ours off at the same time as trying to save enough to fully fund our own retirements, whilst simultaneously paying for our parents’ whole generation to have a free pension for life, it is pretty lucky for me interest is low, or I’d be getting absolutely nowhere!

    But if there’s one thing my kids have taught me, it’s that there’s nothing attractive about a whinging contest! ;-)

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  18. Chthoniid (2,047 comments) says:

    @hj

    That’s pretty dated research there, and does not appear to have been published in a peer-reviewed journal. Greg left Massey a while ago btw.

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  19. Viking2 (11,683 comments) says:

    anonymouse (683 comments) says:
    June 19th, 2014 at 1:29 pm

    Over the past year gorwth was 3.8 per cent.

    Its bloody hard to see how a government can get tossed out with figures like that, let alone when you compare it to the rest of the world, or look at what the state of the opposition is…..
    ============
    Its easy when you borrow 75 billion dollars.

    and look at the exchange rate today. Zoom up to .87 us.

    Ihave noticed that there are a lot less logtrucks rolling thru town the last 3-4- weeks. Piles on the war waiting. Prices down 20% and lots of forestry layoffs.

    Accommodation industry round here gone dead and more than a few businesses the same.

    But its all good in the Beehive. (well this week)

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  20. hj (7,181 comments) says:

    The macroeconomic effects of immigration in New Zealand are uncertain. There are
    plausible arguments but as yet no evidence for large positive or negative impacts of
    immigration. Some economists and geographers argue in favour of high rates of
    immigration on the grounds that migrants can boost productivity through scale,
    agglomeration and innovation. In contrast, some macroeconomists argue that in a low
    savings economy, the resource pressures associated with high migration put persistent
    upward pressure on real interest and exchange rates, leading to a re-allocation of
    resources from more productive tradable sectors to less productive infrastructure, and
    reducing productivity growth.

    The lack of evidence is not symmetric. New Zealand has had high levels of inward
    migration for 20 years now. Arguments for large positive effects invoke the possibility that
    there are long lags, or that more positive effects will occur once some higher population
    threshold is reached.
    In this case there is presently no evidence, but a possibility that
    positive effects will eventually be reaped. In contrast, stylised facts such as real interest
    rates that are high by international standards and a real exchange rate which has not
    adjusted to the sustained deterioration in New Zealand’s relative productivity performance
    are real and demonstrable, but cannot be definitively linked to migration policy.

    The complexity of causality means it may not be possible to settle these arguments
    empirically in New Zealand. The most robust available evidence points to migration having
    small effects, some of which are positive (such as improving fiscal balance) and some
    negative (such as labour market competition for the higher skilled). The large productivity
    benefits hoped for when the scale and skills focus of migration were increased in the early
    1990s have not been realised. Why not?

    New Zealand’s immigration policy and operations are well-regarded among OECD
    countries. Most recent debate has centred around second-order issues, including the
    merits of an even greater focus on skills; whether favouring immigrants who assimilate
    easily compromises potential gains from difference; and the value of settlement
    assistance.

    Immigrants have been skilled and numerous, and have adapted well to New Zealand, but
    scale and agglomeration effects have yet to be realised. The failure to develop a “high-
    skill” economy is highlighted by emigration of skilled residents. The new consensus is that
    initial expectations were too high and factors other than migration are more important in
    driving productivity and living standards.

    It may be that some benefits of migration, such as those resulting from increased
    international connectedness, could take longer to accrue in New Zealand than previously
    anticipated. Indeed, it cannot be ruled out that immigration could still drive growth and
    productivity in the longer term, through channels such as education and training
    decisions, skill and diversity spillovers, trade, entrepreneurship, and clustering. Although
    scale, agglomeration and diversity effects could be substantial, the size of population
    required to achieve these effects is unknown.The workability of a scale, agglomeration
    and diversity strategy in New Zealand, including whether sufficient population growth is
    achievable, is also unknown.

    It is also possible, although yet to be confirmed empirically, that immigration has led to
    adverse macroeconomic effects, skewing growth away from tradables sectors, without a
    sufficient offsetting productivity dividend. Moreover, although the evidence on these points

    41.
    is not firm, on balance it seems likely that immigration over the last 20 years has
    exceeded the economy’s adjustment capacity in some areas, for example, by
    exacerbating housing market pressures.
    A first-best solution would address the underlying
    causes of low savings rates or slow responsiveness to increased housing demand, but
    these have so far proved to be rather intractable policy challenges in New Zealand.

    From the current position, a least regrets approach would seek to improve the economy’s
    capacity to adjust to population increases; set immigration targets with this capacity in
    mind (which might involve second-best reductions in immigration levels); and undertake
    further work to develop a better understanding of the likely effects of substantially
    increasing or decreasing immigration levels.
    Impacts from all levels of immigration need to
    take into account the range of benefits and costs illuminated by the Treasury’s Living
    Standards framework.

    http://www.treasury.govt.nz/publications/research-policy/wp/2014/14-10
    Migration and Macroeconomic
    Performance in New Zealand:
    Theory and Evidence
    Julie Fry
    New Zealand Treasury Working Paper 14/10

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  21. hj (7,181 comments) says:

    Speaking of Dated Research

    John Carran, 2 April 1996

    “Vehement opposition to immigration, particularly from Asian countries, in New Zealand from an ill-informed and xenophobic rabble persists despite overwhelming evidence that immigration will improve our long term economic prospects.
    In 1988 The Institute of Policy Studies published detailed research by Jacques Poot, Ganesh Nana and Bryan Philpott on the effects of migration on the New Zealand economy. The research, which abstracted from the social and environmental impact of immigration, concluded that “…a significant migration inflow can be beneficial to the performance of the New Zealand economy and subsequent consumption and income levels.” The authors point out that this is in general agreement with Australian research on the economic consequences of immigration.


    Of course there is more to life than attaining economic excellence. The social and environmental impact of immigration also needs to be considered. But here the reasons given for restricting immigration range from pathetic to extremely dodgy. Most of the accusations are barely disguised racist piffle backed by tenuous rumours and cloudy anecdotes. Winston Peters’ stirring of the masses has exposed the ignorance and racial biases of a small and distasteful section of New Zealand society. These people yearn for a cloistered, inhibited, white (with a bit of brown at the edges) dominated utopia fondly envisaged by racists and xenophobes everywhere.


    http://www.gmi.co.nz/news/1021/opposition-to-immigration-why-let-the-arguments-get-in-the-way.aspx

    Savings Working Group
    January 2011

    “The big adverse gap in productivity between New Zealand and other countries opened up from the 1970s to the early 1990s. The policy choice that increased immigration – given the number of employers increasingly unable to pay First-World wages to the existing population and all the capital requirements that increasing populations involve – looks likely to have worked almost directly against the adjustment New Zealand needed to make and it might have been better off with a lower rate of net immigration. This adjustment would have involved a lower real interest rate (and cost of capital) and a lower real exchange rate, meaning a more favourable environment for raising the low level of productive capital per worker and labour productivity. The low level of capital per worker is a striking symptom of New Zealand’s economic challenge.

    http://www.treasury.govt.nz/publications/reviews-consultation/savingsworkinggroup/pdfs/swg-report-jan11.pdf

    I’d say the Governments position in the face of the evidence is an endorsement of Greg Clydesdale’s views (lobbying power – influence).

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  22. hj (7,181 comments) says:

    Why don’t the one-eyed useless elite at Radio NZ do some reading other than points of view that confirm their biases?

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  23. lazza (401 comments) says:

    Nd Construction (housing inthemain) up 12or more % last qtr. Lets hope news of this progress counteracts the other (opposition’s) view that “nothing” is happening to stimulate house building.

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