Slower growth still growth

Chicken Little would feel right at home with opposition politicians and media who are wanting us to believe the sky is falling.

This season’s dairy payout was low and next season’s might not be much better but banks aren’t going to be forcing farmers out of business.

Providing farmers are prudent and work with their banks they’ll get through.

Dairying is a large part of the economy and those who service and supply farmers will find business tougher as farmers spend less, but the impact of that still won’t push us into the recession some of the gloomier forecasters would have us believe is coming.

Trans Tasman puts it into perspective:

“Complacency” is what Labour finance spokesman Grant Robertson called John Key’s attitude to the economy this week. His leader Andrew Little went further, saying NZ faces a “perfect storm” of economic bad news. Both called for the Govt to do something, although just what remained a bit vague, apart from a generalised call for more spending to stimulate the economy. Key’s “What? Me Worry?” persona can grate at times, but this is all a bit over-egged.

Much of the egging came from the media, of course, with broadcasters being the worst. One has come to expect a certain amount of arm-wavy economic illiteracy from TV news, but what was more surprising was hearing Radio NZ follow suit, discussing the economy as if a recession 
is imminent.

Essentially there is a buy-in to the Green Party co-leader Metiria Turei’s claim the Govt needs to “start spending again” to avoid a recession. It’s a statement which appears oblivious to the Govt loosening the fiscal purse strings in the May budget, and also of the fact no reputable economist thinks a recession is imminent. Rather, it is a slowdown from a bit more than 3% to probably around 2% growth in GDP.

This means both Treasury and the Reserve Bank’s most recent forecasts are wrong, and not in a minor way. The presumption of 3% GDP growth this year, and for the next two years, now looks just that – highly presumptuous.

But it is not a recession. Growth is still happening. It is just considerably slower than expected. Interest rates and the NZ dollar are adjusting – finally – to take account of this.

Growth may be slowly, but slow growth is better than no growth and still, thankfully, there’s no imminent danger of the sky falling.

One Response to Slower growth still growth

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