First: yes, the economy is coming off recent highs. But no one is seriously talking about a recession, apart from the opposition parties, who are rather keen on the idea.
Oppositions always celebrate bad news. That is one reason being in opposition is pretty miserable.
Both the Treasury and the Reserve Bank forecast roughly 3% annual growth in GDP for each of the next three years, and are now both, no doubt, hurriedly revising that outlook.
But this is a slowdown in the pace of current growth, not negative growth – not a recession, in other words.
2.5% growth is not a recession!
Firstly, the economist who suggested the idea – ANZ Bank’s chief economist Cameron Bagrie – did not quite say what people are saying he said.
Mr Bagrie suggested the government should “get its thinking cap on” and consider bringing forward the tax cuts planned for 2017.
That’s my idea of a fiscal stimulus.
But calls for bringing forward tax cuts, and providing rates relief, are a long way from what either the Labour or Green parties mean when they talk of “fiscal stimulus.” Both those parties want a higher spending track – although Labour, inconsistently, also wants to re-start putting nearly $3 billion a year into the NZ Superannuation Fund.
This is the opposite of a stimulus – to spread its risk and get the best return to pay for future pensions, the fund invests most of its money offshore. Nor is it at all clear where the $3 billion that would have to be diverted from current spending is going to come from.
It was Labour’s high spending track that got us into deficit. In their last three years they piled on the spending, and then hit recession even in advance of the GFC.
Mr Bagrie also warns that New Zealanders should not talk themselves into a recession.
“Economic challenges for New Zealand clearly exist. But there is an inherent danger that we talk ourselves into a hole. Confidence can be fickle and small open economies can be prone to moving in a stop-start fashion. One of the challenges can be to keep ‘Chicken Little’ style analysis at bay.”
The Labour and Green parties need to contain their frivolous, irresponsible joy at the recent run of bad news and take heed of that advice.
I’m not sure anyone takes what they say on the economy very seriously anyway, so does it matter what they say?