At least we’re beating Mississippi!

April 8th, 2016 at 10:00 am by David Farrar


From The American Catholic.

North Dakota looks nice. You can pop over the border to Canada. It has low population density and low unemployment.

Nice weather in summer but very cold in winter.

GDP growth remains strong

December 17th, 2015 at 1:00 pm by David Farrar

Stats NZ reports:

The New Zealand economy grew 0.9 percent in the September 2015 quarter, following an increase of 0.3 percent in June, Statistics New Zealand said today. The September quarter increase was driven by growth in the service industries and manufacturing.

“The increase this quarter follows lower growth earlier in the year, which has brought the annual growth down to 2.9 percent,” national accounts manager Gary Dunnet said.

2.9% annual growth is very decent.

And the main increase has been in manufacturing. Even since Labour, Greens and NZ First declared manufacturing is in crisis three years ago it has grown 6.7% in real terms.

3.3% annual growth

March 19th, 2015 at 12:00 pm by David Farrar

Stats NZ reports:

New Zealand’s economy grew 0.8 percent in the last three months of 2014, led by retail and accommodation, Statistics New Zealand said today.

Combined with increases in real estate services and manufacturing, this boosted growth for the December 2014 year to 3.3 percent. This is the highest annual increase since 2007, before the global financial crisis.


Manufacturing activity was also up this quarter, with an increase of 1.0 percent.

That manufacturing crisis continues.


A useful graphic to put the sectors in perspective.

The annual growth by sector is:

  1. Construction +11.7%
  2. Retail +7.0%
  3. Mining +5.6%
  4. IT/Comms +4.5%
  5. Public Admin +4.2%
  6. Primary Industries +4.1%
  7. Health +3.4%
  8. Financial +3.0%
  9. Professional +2.9%
  10. Real Estate +2.3%
  11. Manufacturing +2.0%
  12. Wholesale +1.8%
  13. Arts +1.5%
  14. Education +0.7%
  15. Transport +0.4%
  16. Utilities -2.2%

So while construction helps, this show many sectors also booming.

Regional GDP growth

March 11th, 2015 at 12:00 pm by David Farrar

Stats NZ has released the growth in GDP in each region. This is nominal so not comparable to national GDP growth which is real. However it does allow us to see how much each region has grown economically.

In order of best to least best:

  1. Southland 11.0%
  2. Canterbury 10.6%
  3. Marlborough 10.3%
  4. Waikato 10.1%
  5. West Coast 7.8%
  6. Tasman/Nelson 7.8%
  7. Northland 7.7%
  8. Taranaki 7.2%
  9. Hawke’s Bay 6.4%
  10. Otago 6.3%
  11. Gisborne 5.9%
  12. Manawtau-Wanganui 5.6%
  13. Bay of Plenty 5.4%
  14. Auckland 5.1%
  15. Wellington 4.4%

Good to see so many provinces doing well. including Northland.

GDP up 1.0% in last quarter

December 18th, 2014 at 11:09 am by David Farrar

Stats NZ reports:

Gross domestic product (GDP) was up 1.0 percent in the September 2014 quarter, Statistics New Zealand said today. The growth was driven by primary industries, which increased 5.8 percent

“This is some of the strongest growth in primary industries for 15 years,” national accounts manager Gary Dunnet said. “Milk production had a good start to the season, while oil exploration, and oil and gas extraction also grew.”

The key drivers in the September 2014 quarter were agriculture (up 4.7 percent), and mining (up 8.0 percent). In contrast, forestry and logging was down 4.0 percent.

Manufacturing activity also grew (2.0 percent), led by increases in metal product manufacturing (up 4.9 percent), and machinery and equipment manufacturing (up 3.7 percent).

“Service industries were mixed this quarter, with rises in telecommunications and retail being offset by falls in transport and business services,” Mr Dunnet said.

GDP growth for the year ended September 2014 was 2.9 percent.

That’s pretty solid growth. Manufacturing up 2% is a weird sort of crisis.

Seven year high in GDP

September 18th, 2014 at 11:30 am by David Farrar

Stats NZ has just released their GDP figures for June 2014. They include GDP growth of 3.5% (highest since 2007) and manufacturing GDP growth of 3.1% for the year

Stats NZ comments:

Strong growth in service industries saw gross domestic product (GDP) rise 0.7 percent in the June 2014 quarter, Statistics New Zealand said today.

“Services make up about two-thirds of the economy and all 11 services industries increased this quarter,” national accounts manager Gary Dunnet said. “The biggest increases were in industries that include advertising, employment services, and software development.”

Overall, services increased 1.4 percent, the highest growth since the December 2006 quarter. Business services (up 4.2 percent) was the main driver, although accommodation and food services increased 3.0 percent. These increases were partly offset by a 3.1 percent decrease in primary industries, where agriculture, forestry, and mining all fell.

GDP growth for the year ended June 2014 was 3.5 percent. This is the highest annual growth since the September 2007 quarter.

Do you think we’ll have a stable growing economy if we have a Government comprising Labour, Greens and Winston – and propped up by Internet Mana? Labour trying to govern with only 25% of the vote or so?

Hosking on the GDP figures

June 24th, 2014 at 3:00 pm by David Farrar

Rob Hosking at NBR has a look beyond the 3.3% GDP growth figure. He says the more important data is:

  • Real national disposable incomes are up 7.3% over the year (largest increase since 1987)
  • Final private consumption rose only 2.7% (3.5% was expected)
  • Hence people are saving, not spending, the increased incomes
  • This will, if continued, see NZ’s external debt reduce

I can only presume Labour have been saying we have a savings crisis, which is why the situation is improving.

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.


What will the building boon do for GDP?

June 5th, 2014 at 10:00 am by David Farrar

Stats NZ reported:

Both residential and non-residential building activity volumes grew strongly in the March 2014 quarter, Statistics New Zealand said today. 

“Overall building activity increased 16 percent in the March 2014 quarter,” business indicators manager Neil Kelly said.

Non-residential building activity volume grew a seasonally adjusted 17 percent, just ahead of 15 percent growth in residential buildings.

This is great. We need more homes, and they are being built. Expenditure on new residential buildings are up 58% from two years ago. And residential building consents up 30% on a year ago.

Westpac comments:

Instead, it appears that the country went on a building spree worthy of the characters in ‘The Lego Movie’. Building work put in place saw the biggest quarterly increase on record (going back to 1990 by volume and 1981 by value). The level of activity is now about 5% below the peak reached in the middle of last decade’s boom, and is on track to exceed those levels during this cycle, with the post-earthquake rebuild in Canterbury still ramping up.

This was a huge surprise relative to our forecast, with major implications for the March quarter GDP figures, to be released on 19 June. The construction sector contributes about 5% of GDP (though that includes infrastructure work, not covered in today’s release), so a 10% upside surprise for the sector equates to a 0.5% upgrade to our GDP growth forecast, all else equal. Until now we felt that there were modest downside risks to our forecast of 1.1% GDP growth; now the risk appears to be to the upside.

We await the GDP results with interest.

Good economic growth

March 20th, 2014 at 3:00 pm by David Farrar

Stats NZ reports:

Strong growth in manufacturing saw gross domestic product (GDP) rise 0.9 percent in the December 2013 quarter, Statistics New Zealand said today.

Manufacturing activity grew 2.1 percent, driven by increases in food, beverage, and tobacco, and machinery and equipment manufacturing. Manufacturing activity is now at its highest level since March 2006.

And Labour/Greens/NZ First/Mana’s manufactured manufacturing crisis receives another death blow.

Dairy farming and dairy product manufacturing both fell this quarter, after strong increases last quarter, when production rebounded from the drought earlier in 2013.

So those who claim the economic growth is all about dairy, are wrong.

Also Labour have been saying forestry is in such dire straits that it needs all sorts of tax breaks and incentives, plus 1,000 long-term unemployed to be working in it (surely a nomination for a Darwin Award for policy, considering the already far too high accident rate). So what has happened to forestry primary product exports in the GDP? They’re at $552 million, up from $495 million a year ago – an 11.5% increase!

Also if you look at the long-term series in constant prices for forestry and logging, the GDP in 1995/96$ was $1.604b for 2013. In 2008 it was $1.199b so that’s 33.8% higher!

Also the MPI series on log exports shows they were only $711 million in 2008 and today are $2.35 billion.

I guess Labour will claim that we should be making more products here, rather than exporting logs, but you know what – you sell to match demand. If the demand is for logs, then you sell logs. If the demand is for wooden tables – you sell wooden tables.

Economy grows 1.4% in last quarter

December 19th, 2013 at 4:00 pm by David Farrar

Stats NZ reports:

Rebounding dairy production drove a 1.4 percent increase in gross domestic product (GDP) for the September 2013 quarter, Statistics New Zealand said today. This increase in GDP is the largest since the December 2009 quarter.

The strong increase in dairy production was the main contributor to a 17.0 percent rise in agriculture, which makes up about 5 percent of the New Zealand economy.

Not bad.

People will recall how the future Labour/Greens/NZ First/Mana Government have been saying manufacturing is in crisis.

Manufacturing GDP also increased 1.5% in the last quarter.

Also recall how Greens/NZ First and Mana (not Labour) all opposed the FTA with China. Well also reported today:

For the first time, China has surpassed Australia as New Zealand’s top goods export destination on an annual basis, Statistics New Zealand said today. …

The trade balance for November 2013 was a surplus of $183 million (4.1 percent of exports). This is the first trade surplus for a November month since 1991. This follows a trade deficit in October 2013, which was the lowest deficit for an October month since the mid-1990s.

Things are looking good – if we keep the right policies.

1.5% quarterly GDP growth!

March 21st, 2013 at 11:39 am by David Farrar

Stats NZ reports:

Gross domestic product (GDP) rose 1.5 percent in the December 2012 quarter, the strongest quarterly growth since December 2009, Statistics New Zealand said today.

“Fifteen of the 16 industries recorded increases in the last three months of 2012, reflecting the broad-based nature of growth in this quarter,” national accounts manager Rachael Milicich said. …

Economic activity for the year ended December 2012 was up 2.5 percent. This is the highest annual growth in GDP since March 2008, when the economic recession began.

It’s only one quarter, but hopefully the a start that can be sustained.

Also pleasing is private consumption is up 1.5% this quarter while government consumption is down 0.7%. Yay.

Exports went up 0.9% and imports dropped 2.0%.

One index to rule them all

July 2nd, 2012 at 4:00 pm by David Farrar

Philip Booth blogs at the IEA:

The UNDP held a forum this week entitled: ‘Beyond GDP: Measuring the Future We Want’. What they actually mean, of course, is ‘measuring the future the UN wants’. The best way to ensure that we get the future we (the people) want is to have a free market, governed under the rule of law, with good protection for property rights (including, where appropriate, property rights for environmental goods). The seven billion people in the world all want a rather different future from each other. We can only achieve those different aspirations if we are free.

That is not to say that an argument cannot be made for the subsidisation of, for example, education and health care for the poor and for other forms of assistance through government. However, the success of the human race as a whole cannot and should not be measured by some kind of unified aggregate index.

Specifically, Helen Clark has proposed that the UN develop an index that combines: ‘Equity, dignity, happiness, sustainability’ arguing that ‘these are all fundamental to our lives but absent in the GDP.’ Just because something is fundamental to our lives does not mean that we need to measure it and combine it with other variables into a single index measure. Relationships are fundamental to our lives, but do we need to measure the success of the relationships of seven billion people and combine that measure with other data into some kind of aggregate index? Indeed, it is interesting that the best conditions for GDP growth in the history of the UK were created before we even started measuring GDP.

It is just about possible, nevertheless, to make a coherent case for measuring GDP. GDP does, at least, make a reasonably rigorous allowance for trade-offs that different people make in their everyday lives. If I give up £1 worth of apples to buy £1 worth of oranges and Mark Littlewood does the opposite, it can (within certain bounds of reasonableness) be said that we both have £1 of utility from the transaction. Austrian arguments can certainly be made regarding the undesirability of aggregating data and the fact that all transactions involve consumer surplus, but there is some reasonableness and consistency there.

We can also look at other statistics such as working hours, travel time, leisure time, carbon footprint (if it is thought necessary), and so on, to obtain a more comprehensive picture if we wish. However, once we try to produce an aggregate index of everything that is important, the index will lose all meaning. How can we trade off a small increase in reported happiness for somebody in Zambia for an extra £500 a year of national income per head in New Zealand? How can we trade off a tiny change in the Gini coefficient in Rwanda with a small change in the stability of marriages in India, and so on? These things have completely different values to different people.

Even trying to track one of these datasets is problematic. As the IEA’s monographs on happiness economics showed, well-being measures are suspect. There is no clear indication of a relationship between reported well-being and almost any other reasonable indicator of social progress.

Overall, we have the biggest folly imaginable: the body that some would desire to be a world government attempting to measure in a single index number everything that matters to everybody.

GDP does record economic activity only, and that is not everything – absolutely. But trying to come up with one master index will never work, because as the IEA states, we all value different things.

Strong growth

June 21st, 2012 at 12:16 pm by David Farrar

Stats NZ reports:

Economic activity, as measured by gross domestic product (GDP), grew 1.1 percent in the first three months of 2012, Statistics New Zealand said today. This strong growth follows revised growth of 0.4 percent in each of the previous three quarters.

Compared with the March 2011 quarter, economic activity in the March 2012 quarter was up 2.4 percent. For the year ended March 2012, economic activity was up 1.7 percent compared with the year ended March 2011.

“This quarter we saw growth spread across a number of industries, while in previous quarters the industry picture had been more mixed with growth in some industries offset by falls in others,” national accounts manager Rachael Milicich said.

The main contributors to the increase in economic growth this quarter were, by industry:

  • manufacturing (up 1.8 percent), due to increases in primary food manufacturing and metal product manufacturing
  • business services (up 2.0 percent), which include professional, scientific, technical, administrative, and support services
  • agriculture (up 2.3 percent), mainly driven by an increase in milk production.

The market was expecting growth of 0.5% to 0.6% so this is an excellent result. The annual figure is very respectable also. The Government will be pleased. The challenge is to keep growing, and to have it sustainable.

People may wish to ponder how a significant factor in the growth was an increase in milk production, and the official Green party policy is to kill (or make magically disappear) every fifth cow, which presumably would decrease milk production by 20%.

Measuring GDP

March 27th, 2012 at 12:00 pm by David Farrar

Damien Grant in the HoS, wrote about a recent paper by Reserve Bank Governor Allan Bollard on measuring GDP. I hunted down the paper, which is here. Basically it details the differences between how NZ and Australia measure GDP, and that if we measure GDP like Australia does, then the gap would be only 20%, not 30%. This is roughly what the purchasing power difference is.

This doesn’t mean we actually get any richer by changing how we measure GDP, but that how we place on the global league tables would be a fairer reflection.

Bollard states some key differences are:

  1. According to the report and a survey of country practices, of the 45 countries surveyed, New Zealand and Japan were the only countries that made no explicit estimates of unobserved activities (such as cash jobs, growing your own vegetables, illegal activities) in the estimation of GDP. Taking Australia as a benchmark, where explicit estimates are not made for illegal activity, but are made for the underground economy and household backyard production, we believe GDP in New Zealand could be underestimated by 2 percent.
  2. Most countries treat Financial Intermediation Services Indirectly Measured in a way that increases GDP by allocating the service to the sector that uses or consumes it. In New Zealand all financial services are assumed to be used by businesses in the production of other goods and services.We estimate the impact of this at approximately 2 percent of GDP.
  3. The lack of quality adjustment of residential buildings leads to an understatement of GDP. If we assume a similar growth path to Australia for New Zealand, we estimate the approximate ballpark for GDP could be 1.5 percent higher.
  4. Statistics NZ plan to introduce SNA 2008 in 2013-14. This is similar timing to other countries around the world. It is difficult to estimate the impact that new international standards will have on New Zealand’s national accounts and GDP. We estimate approximately a 3 percent increase in GDP.
  5. A country’s GDP can be estimated three ways, using the production method, the income method, or the expenditure method. In Australia, all three GDP measures are available on a quarterly basis, and instead of elevating one measure over another, the quarterly GDP movement is calculated by averaging the movements of the three measures.

Bollard concludes that our actual position on the OECD league table would jump us over Korea, Spain, Italy to around Japan’s place, if we measured GDP like Australia does. He argues that reducing measurement differences is important because:

  • Households may not make optimal decisions regarding employment, training, migration, saving and investment if they believe that our GDP per capita is significantly lower than it actually is, and that they might be better off elsewhere.
  • Financial markets need accurate measures of New Zealand’s ability to borrow and repay debt. This impacts our financial institutions and our sovereign borrowing. Measuring New Zealand’s GDP properly is a key concern of credit rating agencies.
  • We need well-focused informed economic and social policy. Clearly it is more difficult to know whether these are working if there are doubts about the level of GDP per capita, and whether our measure is truly comparable with that of other countries, including that of our large trans-Tasman neighbour.

And he concludes:

New Zealanders rightly worry about the extent to which New Zealand incomes have drifted below the world’s highest in the last 40 years, but how large is that drift, and how have the gaps changed in more recent times? For helping answer those questions, good and economically comparable data are vital. This paper does not answer the question “are we closing the trans-Tasman gap”? However it does argue that the gap is not as wide as most people think.

At the 2012 annual leader’s meeting, the Prime Ministers of Australia and New Zealand agreed that, to promote further reform and economic integration, the Productivity Commissions of each country would conduct a joint study on the options for further reforms that would enhance increased economic integration and improve economic outcomes. Given this aim, a useful contribution could be to improve harmonisation of statistical measurement in Australia and New Zealand, where appropriate, to improve data comparability.

I had no idea that the measurement differences between countries were so great that they could make a difference of 10% of GDP.

Why some countries go bust

March 20th, 2012 at 9:00 am by David Farrar

An interesting article in the NY Times on why some countries go bust:

Over the centuries, proposed answers have varied greatly. Smith declared that the difference between wealth and poverty resulted from the relative freedom of the markets; Thomas Malthus said poverty comes from overpopulation; and John Maynard Keynes claimed it was a byproduct of a lack of technocrats.  …

Jeffrey Sachs, one of the world’s most famous economists, asserts that poor soil, lack of navigable rivers and tropical diseases are, in part, to blame. Others point to culture, geography, climate, colonization and military might. The list goes on.

But a different theory:

Now, in their new book, “Why Nations Fail,” Acemoglu and his collaborator, James Robinson, argue that the wealth of a country is most closely correlated with the degree to which the average person shares in the overall growth of its economy. It’s an idea that was first raised by Smith but was then largely ignored for centuries as economics became focused on theoretical models of ideal economies rather than the not-at-all-ideal problems of real nations.

I don’t see this as contradictory to what Adam Smith said, but complementary to it.

Consider Acemoglu’s idea from the perspective of a poor farmer. In parts of modern sub-Saharan Africa, as was true in medieval Europe or the antebellum South, the people who work the fields lack any incentive to improve their yield because any surplus is taken by the wealthy elite. This mind-set changes only when farmers are given strong property rights and discover that they can profit from extra production. In 1978, China began allowing farmers to benefit from any surplus they produced. The decision, most economists agree, helped spark the country’s astounding growth.

Absolutely. Those who for 100% state ownership should look at the massive difference it made in China to allow people to gain reward for their efforts beyond what the state mandated they should get.

According to Acemoglu’s thesis, when a nation’s institutions prevent the poor from profiting from their work, no amount of disease eradication, good economic advice or foreign aid seems to help. I observed this firsthand when I visited a group of Haitian mango farmers a few years ago. Each farmer had no more than one or two mango trees, even though their land lay along a river that could irrigate their fields and support hundreds of trees. So why didn’t they install irrigation pipes? Were they ignorant, indifferent? In fact, they were quite savvy and lived in a region teeming with well-intended foreign-aid programs. But these farmers also knew that nobody in their village had clear title to the land they farmed. If they suddenly grew a few hundred mango trees, it was likely that a well-connected member of the elite would show up and claim their land and its spoils. What was the point?

Which reinforces the need for clear property rights.

Acemoglu, Robinson and their collaborators did not come up with the idea that incentives matter, of course, nor the notion that politics play a role in economic development. Their great contribution has been a series of clever historical studies that persuasively argue that the cheesiest of slogans is actually correct: the true value of a nation is its people. If national institutions give even their poorest and least educated citizens some shot at improving their own lives — through property rights, a reliable judicial system or access to markets — those citizens will do what it takes to make themselves and their country richer. 

And this is why we should do what we can to improve educational outcomes for the “tail” and why we should encourage people from welfare into work.

This suggests, among other things, that instead of supporting one-off programs promoting health or agricultural productivity, the international community should focus its aid efforts on deep political and economic change.


Acemoglu and Robinson are on the pessimistic side of optimism about the United States’ chances of a resurgence. Congress, they told me, is too heavily influenced by the wealthy, and the advent of super PACs has only given elites more power. Yet Acemoglu surprised me when he said he was encouraged by the rise of the Tea Party and Occupy Wall Street. While neither has an especially coherent or subtle economic agenda, both show that, however frustrated they might be, large numbers of Americans still believe they can influence the political process to improve their fortunes. Since the future of American economic health lies in its people, Acemoglu explained, as long as Americans believe they can influence the process, they will.

I think the future is fairly murky for the US.

GDP Correlations

February 4th, 2011 at 1:00 pm by David Farrar

The PAP Blog has some great charts showing the correlation between high GDP and 17 measures ranging from corruption and poverty to resources and education. Their findings:

  • low levels of GDP and high levels of corruptions are correlated
  • poverty reduction and per capita income growth performances are correlated
  • countries with lots of natural resources tend to do worse than countries with less resource wealth, both in terms of economic growth and in political, social and human rights terms
  • economic freedom is correlated with income
  • Rule of law is correlated to GDP per person
  • There is only a partial correlation between democracy and economic growth but stronger correlation between democracy and level of GDP
  • countries which have experienced a transition to democracy experience higher average growth after the transition
  • GDP per capita and enrolment rates in secondary education are correlated
  • As per capita income increases to around US$5,000 per annum, environmental quality falls, but then from around $8,000 per capita onwards, the environmental quality rises again
  • GDP and happiness is correlated
  • Unemployment is negatively correlated to GDP growth but not to GDP level
  • Countries with more equal land distribution tend to grow faster
  • GDP per capita is correlated to percentage of population who donate to charity
  • GDP is correlated to individualism in a country
  • Wealthier countries tend to have less income inequality
  • GDP growth is correlated to incumbent Government’s being re-elected

The above is one reason I find it amusing when certain MPs rail against GDP and GDP growth. I guess they think it is call coincidental, and none of it causative.

The light at the end of the tunnel is not a train

March 25th, 2010 at 1:12 pm by David Farrar

The Herald reports:

New Zealand’s economy accelerated in the fourth quarter, growing at the fastest clip in two years as manufacturing revived and companies built up inventories that had run down through the recession.

Gross domestic product expanded 0.8 per cent in the final three months of 2009, according to Statistics New Zealand, matching the median in a Reuters survey. Growth in the third quarter was revised up to 0.3 per cent from 0.2 per cent.

Well heading in the right direction but a fair way to go.

Goff complains about unemployment

January 16th, 2010 at 4:16 pm by David Farrar

NZPA reports:

Closing the gap with Australia and stemming the trans-Tasman brain drain is one of the Government’s main long-term aims but Labour leader Phil Goff said the reverse was happening.

“Australian employment figures have soared for the fourth straight month and the jobless rate has fallen to 5.5 percent, a full percentage below New Zealand’s unemployment,” he said.

“For the first time in more than a decade, Australian unemployment levels over the past six months are lower than New Zealand, with Treasury forecasts that New Zealand’s unemployment will continue to grow.”

Now it is true that unemployment is now higher in New Zealand than Australia, and this is not good. Unemployment is a lose-lose. Having able bodied people not working means we don’t achieve as high economic growth as we could, and it is bad fiscally as it means less tax paid, and higher welfare payments.

But unemployment tends to rise when economic growth falls away. Not straight away but normally with a lag of six to 12 months or so. So let us look at economic growth between NZ and Australia.

So why does Australia now have lower unemployment? Because New Zealand went into recession, and Australia did not. And no this was not a post credit crisis recession. New Zealand’s economy started shrinking in the first quarter of 2008, and kept shrinking until the second quarter of 2009.

Now people may be wondering who was responsible for the economy in the first quarter of 2008. Well a Phil Goff was an Associate Minister of Finance. So when Phil wonders why Australia now has lower unemployment than NZ, he doesn’t have to go far to ask how come.

The recession is over

September 23rd, 2009 at 12:24 pm by David Farrar

Just. Stats have growth of 0.1% for the June 2009 quarter. At the beginning of the year the assumption was we would be in recession for all four quarters of 2009.

So the recession lasted five quarters – four of them in 2008 and one quarter in 2009.  Of course unemployment will not turn about for some time, as firms that have been losing money and laying off staff will want many months of growth before they are confident to expand.

And the US may still implode, and drag other countries down again.

The deficit in the Crown accounts will still be with us for some time, but with an early exit from the recession it is possible the Half Year Fiscal Update in December will be less doom and gloom than in the budget.

The recession gets worse

December 23rd, 2008 at 11:28 am by David Farrar

There is now nothing “technical” recession. In the first three quarters of Labour’s final year in office, the economy shrunk 0.9%, with the third quarter contraction being a large 0.4%.

Agriculture is keeping us going with 6% growth last quarter. However fishing and forestry declined by 6.6% and construction by 1.2%. Govt Admin went up 0.6% however!

Will the 4th quarter also extend the recession? I’d say it probably will.

With no economic growth, less tax is paid. With less tax revenue, there is less money for stuff such as schools and hospitals. Remember this the next time the Greens rail against economic growth.

A goal for 2025

November 5th, 2008 at 5:31 pm by David Farrar

Lloyd Morrison has proposed a goal for New Zealand – to be in the top ten countries in the world by 2025 for GDP per capita. He writes:

New Zealand lacks a common purpose. No one knows exactly what we want. We hanker for a return to the times when we were one of the wealthiest countries in the world. We want everyone to be better off, knowing that individual wealth does not result in freedom from crime and the social fallout of excessive disparity. However, there is no clearly articulated goal we are pursuing and no solid plan of how we can get there.

As a result, there is no definition or accountability for policies or policy-makers. Policies are often clothed with loose positive objectives and ultimately ineffective aims. There is no co-ordinated accountability for these policies (or politicians) in terms of their ability to contribute towards a common measurable outcome. Consequently, we continue our steady decline. As the attached analysis shows, current forecasts have our GDP per capita slipping below Kazakhstan and Botswana by 2025.

I’ve been discussing this with colleagues and friends, and we believe that NZ needs to embrace a common objective that will provide the means to deliver what we are seeking as a nation.

Whatever the objective chosen, it needs to be simple, clear, measureable, understandable, aspirational and, most importantly, catalytic in terms of driving positive change that makes the outcome achievable.

We’d like to stimulate a broader discussion over what that goal should be for NZ. To kick-off the debate, here’s our starter for ten: NZ should aim to be back in the top 10 countries in the world based on GDP per capita by 2025. Not just the OECD, the world. Unachievable? No way. Ireland, Korea, Singapore and Taiwan all achieved the required level of growth over the last twenty years. It will take real collective commitment and more creative thinking about our economy – but that’s exactly what an ambitious goal will generate.

I’m hoping you’ll participate in a broader discussion about an aspirational, measurable goal for New Zealand. Please read the attached document. Pass it on to your friends. Participate in the debate by emailing or contributing to the forum on If you agree with what we’re proposing, show your support. If you don’t, please share your ideas for a national goal. Together, let’s take the first step in defining and delivering a better future for New Zealand.

Lloyd has out together this (a-measurable-goal-for-nz-short-2) presentation that is worth reading and also an FAQ – a-measurable-goal-for-new-zealand-_2_.

If you don’t like Lloyd’s goal, then suggest one of your own.

The recession is now official

September 26th, 2008 at 4:34 pm by David Farrar

Stats NZ confirmed today the New Zealand is in recession for the first time since the Asian crisis in 1998.

The economy in the last two quarters is around $300 million smaller than the last quarter of 2007.

But the worst may yet be to come. The second quarter drop was 0.2%. And expectations for the third quarter are now as bad as a 0.5% drop. That would be a 1% drop over nine months.

Halfway to a recession?

June 18th, 2008 at 2:43 pm by David Farrar

Dr Cullen has told the Finance and Expenditure that he beleives the economy shrank in the first quarter of 2008. NZPA reports:

Dr Cullen told the finance select committee today that economic data since the May budget was far more gloomy than Treasury predicted.

“It is now quite clear that the quarterly GDP figure for the first quarter (of the 2008 year) almost seems inevitably to be negative,” Dr Cullen said.

A recession is negative growth over two quarters, so if this is true then the June 2008 GDP figures may put NZ into recession. The March 08 figures are out on 27 June so the June 08 figures should be out at the end of September – likely to be the beginning of the election campaign.

Economic Freedom Benefits

April 14th, 2008 at 2:13 pm by David Farrar

Paul Walker blogs on the benefits of economic freedom, and mentions Hong Kong and Cuba:

An interesting point of comparison is that in 1958 Cuba’s per capita GDP was $3,170 while Hong Kong had a per capita GDP of $2,924. Since then these two countries have followed very different development paths in terms of economic freedom . Today Cuba is one of the poorest countries in Latin America, very different from today’s Hong Kong.

So in 1958 Cuba had a higher GDP per capita than Hong Kong. And today?

Hong Kong is US$41,944 (PPP) compared to around US$4,500 for Cuba.

Cuba has a state which is basically 100% of GDP. In Hong Kong it is under 20%. In NZ it is 42%.