Charismatic

Thinking about recent economic events are we catching the recession?

Our main export commodity has hit a 5 year low, employment growth is stalling along with wage growth and house prices in some parts of the country have been...precarious for a long while. However net migration is still strong with the UK in a real economic nosedive and European countries not much better. Inflation is also low so RBNZ have some room to trim rates and at least soften any landing.

The exchange rate is starting to reflect that slightly more muddled picture.

chocolate cake

It always looked like the NZ 'rock star' economy and growth was been largely built on the Christchurch rebuild and the dairy boom. The former is a one off, and the latter has taken a dive since, though will rebound in time. We barely seen the fall in dairy prices reflected in milk, cheese and butter in the supermarkets.

As for interest rates, the rush to raise NZ base rate last year always looked foolish against a static situation elsewhere, and similarly the so called experts advising people to look at interest rates fixes for 3 and 5 year.

jmh

This is a good article which makes some good points:
Paul Glass: Rockstar economy all smoke and noise - Business - NZ Herald News


Headline real GDP growth was a very impressive 3.5 per cent. However, population growth was 1.6 per cent so per capita GDP growth was only about 1.8 per cent.

Commodity prices - in particular dairy - had a big run up in 2014 resulting in a positive impact of around $5 billion to nominal GDP. Working out the contribution to real GDP growth is difficult, but if we assume about half of this fed through directly into GDP, then that accounts for about 0.9 per cent of growth.

Likewise the Christchurch rebuild got into full swing and probably added a further 0.6 per cent. So real GDP growth per capita, excluding the one-off effects of surging commodity prices and the Christchurch rebuild, was about 0.3 per cent.

Not quite so flash.

Charismatic

Interesting opinion article thing actually. Regardless we've had a pretty good run of luck .

scot47

Maybe if you agreed to Japanese annexation things would improve. Mind you they are having a tough time too. Emigrate ? But where to ? The whole world is in a tail-spin.

The optimism that we took for granted is now a thing of the past. Doom, gloom and despair. Even for rock stars.

Charismatic

Looks like things are really slowing now, 0.2% GDP growth (consensus had been about ~0.6%) for March quarter and RBNZ has cut rates by 25bp.

Charismatic

CPI appears dangerously close to recession as well, the target is 1-3% but at the moment inflation has declined to 0.3% which means RBNZ will likely cut rates.

Perhaps New Zealand would actually benefit from a period of creative destruction however as by productivity measures New Zealand has a lot of room for improvement?

Charismatic

Chinese currency devaluation will disadvantage undiversified New Zealand exporters. However the low cost of energy will provide some relief.