Finance Minister Bill English is encouraged by signs some of the imbalances handicapping New Zealand’s economy for the past five or six years are easing,
It’s an indictment on the spend and tax policies of the previous government that the tradeables side of the economy – exporting and import-competing industries -went into recession about six years ago.
At the same time the non-tradeables sector – government and domestic industries – grew by about 12 per cent.
That’s a recipe for disaster but measures introduced by this government are having a positive impact.
Mr English identified a number of indicators which suggest New Zealand’s economic imbalances are at least stabilising.
“First and foremost, the economy is now growing, as opposed to shrinking as it did in Labour’s last term. The Budget also forecast 170,000 new jobs over the next four years and average household incomes to rise by about $7000 in that time.
“Second, the tradeables sector grew 3.4 per cent in the nine months to March 2010, compared with just 1.2 per cent growth in the non-tradeables sector. This is the largest positive gap between the two sectors over a nine-month period since December 2002.
“Finally, New Zealanders are being more careful with their spending. Per capita private sector consumption increased by only 1 per cent in the past year, after consistently increasing by more than 4 per cent, year on year, between 2002 and 2007.
“Reserve Bank figures show household debt is also easing for the first time in more than a decade. After increasing rapidly from 100 per cent of disposable income in early 2000 to a peak of 159 per cent in mid-2008, household debt has eased to 155 per cent of disposable income.”
Mr English emphasised that these were only early signs of the economy rebalancing and more work was needed to build this momentum, particularly with New Zealand – households, business and the Government – owing almost $170 billion in debt to the rest of the world.
We’re on the right track but only a short way into the journey back to budget surpluses and sustainable growth in the tradeable sector rather than artificial growth spurred by a property bubble, government spending and consumption funded by borrowing.
My parents, like most of their generation, went through the Depression and never forgot the lessons they learned. Too many people either didn’t learn from the 1980s or forgot the lessons and the global financial melt-down was a sharp reminder of the dangers of that.