Does New Zealand suffer from Woody Allan syndrome?
Sebastian Edwards of the University of California and National Bureau of Economic Research thinks so.
The way New Zealanders’ think about the economy reminds me of Woody Allen. . .
As Woody, many New Zealanders worry a lot. They worry about the economy and about the country’s position in the world. They are convinced that things are going downhill, and believe that the future looks rather bleak. And yet, by almost every possible metric New Zealand is a success: it is at the very top of the World Bank’s Doing Business ranking, according to the PISA test it has one of the strongest educational systems in the world, and Transparency International assures us that it is one of the least corrupt countries in the globe. And then, of course , there is the All Blacks! What else can you ask for?
In fact, in almost every country I give speeches – and I do it very often –, I hear people say, “If we only were more like the Kiwis.” . . .
Finance Minister Bill English told the National Party conference there isn’t a silver bullet but the changes the government has made are having results.
There is still more to be done but New Zealand has weathered financial storms and natural disasters and the outlook is brighter.
The BNZ PSI – Performance of Service Index – was the highest for July that it has been for that month since records began in 2002.
Fasten your seatbelts. Not because of another bout of turbulence. But because of the acceleration the economy looks to be firmly embarking upon. Such is the strength of today’s Performance of Services Index (PSI). At a seasonally adjusted 58.1 for July it kept good pace with last week’s Performance of Manufacturing Index (PMI), of 59.5. Combined they point to GDP growth quickening to quite a strong pace. . .
Hon BILL ENGLISH (Minister of Finance): It is reasonably clear now that consumer confidence and business confidence is becoming stronger. The BNZ-Business New Zealand Performance of Manufacturing Index increased 4.3 points to a seasonally adjusted 59.5. This is the highest July reading since 2002. This is clearly an indication of the kind of thing the Opposition calls a crisis in manufacturing, where it is expanding faster than it has in the last 10 years. Consumer confidence also rose over the last couple of months.
Maggie Barry: How is the improvement in consumer and business confidence being reflected in other economic indicators such as job advertising and retail spending?
Hon BILL ENGLISH: I think it is important to remember that businesses and households remain cautious overall about their spending and investment decisions, and any one of these indicators can fluctuate from month to month, reflecting that caution. However, there are signs of improvement on the back of a gradually improving economic outlook. Job advertising across newspaper and internet increased by 3.5 percent, seasonally adjusted, in July, and the ANZ Job Ads index is now 4.5 percent higher than a year ago. Of course this is not yet happening fast enough, because there are still too many people without jobs. That is why the Government intends to persevere with its Business Growth Agenda to assist businesses to make the decisions that will allow them to invest and employ.
Maggie Barry: What were some of the contributors to the overall improvement in the BNZBusiness New Zealand Performance of Manufacturing Index in July, and how was this interpreted by analysts?
Hon BILL ENGLISH: The improvement was reasonably broad-based across the whole manufacturing sector. Food and beverages had a reading in the manufacturing index of 69.6, which is very high. Petroleum, coal, chemical, and associated product manufacturing was 65.8. Machinery and equipment was also strong. BNZ economists confirmed that they had maintained a positive outlook for the domestic manufacturing sector for some time, linked to an upswing in construction and broader domestic demand improvement. So this is simply further evidence that a recovery is under way. It is still gradual, and still not yet leading to a sufficient decrease in unemployment, but the signs are promising.
Maggie Barry: How does the state of New Zealand manufacturing compare with the manufacturing sectors of other countries?
Hon BILL ENGLISH: It depends on who you listen to. If you listen to Labour and the Greens, they say New Zealand manufacturing is in a crisis. However, if you look at the facts, according to the manufacturing indexes New Zealand has one of the highest readings in the world. The New Zealand performance of manufacturing index is 59.2. A reading above 50 means expansion. In Australia, the performance of manufacturing index is only 42, which corresponds to a slower growth outlook in Australia and a higher exchange rate. China’s performance of manufacturing index is just above 50, as is Japan and the eurozone. In the UK and the US it is 54 and 55, which is positive, but not growing as fast as New Zealand manufacturing. If this is a definition of a crisis, then we would be pleased to have more of them.
Canterbury dominates the year-on-year economic landscape, increasing 6.6 percent in the twelve months to June. Auckland and
Waikato jointly recorded the next fastest growth rate of 3.5 percent. The West Coast and Southland trail the regional rankings with a 1.3 percent rise in economic activity. While weak relative to the rest of the pack, they do however represent the strongest rates of growth at the bottom of the regional rankings for six years.
Over the past 12 months the rebuild in Canterbury has seen the region post very strong growth in employment, dwelling approvals, commercial building consents, new car registrations and retail trade. Nationwide economic activity increased 3.4 percent – representing the strongest annual average rate of increase since March 2005. The North Island economy expanded 3.1 percent,
while the South Island economy grew 4. percent.
It’s time to look on the bright side and count our blessings but it’s not time to relax.
We’re not yet at the destination of sustained growth, low unemployment and reduced debt – private and public – but we’re heading in the right direction and the economy is growing.