Five years of recession for trade sector

05/06/2009

Finance Minister Bill English said New Zealand’s tradeable sector has been in recession for five years.

“There’s really been no increase in our tradeable sector output since 2003.”

Growth had come from consumption in government.

Another indictment on nine years of wasted opportunity and over spending under the previous administration.


Ask not what the Budget can do for you . . .

27/05/2009

What can we do?

I’ve been asking this question of people who ought to have the answer – an economist, an accountant, politicians, business people . . .

They’ve all given a similar answer: if you’re in business the best contribution you can make to counter the recession is to employ people.

Do all you can to ensure your business retains it’s current workforce and if possible create new jobs, even a part time one because a bit of part time work here and a bit there can turn into fulltime employment.

Are they right?


Nat plan hard times package

26/10/2008

John Key repeated on Agenda what he said on TV 1 news last night, National is planning a package to provide short term relief  for people who lose their jobs in the recession.

It would help cover pressing bills such as mortgage repayments or rent.

Key is not disclosing further details, but it is thought people would be able to apply for an interest-free loan.

He told Agenda there is no question New Zealand is in recession and details of the package would be released next weekend.

A transcript of the interview will be on line here later.


Britain officially in recession

25/10/2008

Britain’s economy is shrinking for the first time in 16 years, confirming it is in recession.

The toll from the credit crisis and housing crash has ended Britain’s longest unbroken run of growth since quarterly records began in 1955. City analysts gave a warning that the economy could shrink at an even faster pace in coming months.

Figures for gross domestic product revealed a worse-than-expected fall of 0.5 per cent over the past three months. A recession is defined as two consecutive quarters of negative growth, but a further contraction is inevitable.

We aren’t as dependent on Britain to buy our produce as we were last century. But it’s still a significant market for our exports so if the Brits tighten their belts we’ll feel it too.


42 more sleeps . .

27/09/2008

. . . until the election and we’re officially in recession.


Greens want to slam door on foreign owners

25/08/2008

The Green Party’s concern that foreign speculators are making it more difficult for would-be first home owners to buy a property has prompted co-leader Russell Norman to call for a ban on foreign ownership.

“We believe land should be owned by New Zealand citizens and residents only and our laws should be changed to say that,” Dr Norman said.

“Why should we allow Singaporean, Australian or American speculators to buy investment properties in our country, shutting first-time home buyers from the market.”

The question of whether overseas buyers were making it difficult was discussed at a recent farm forum. The panelists – two farmers, an accountant and a farm advisor, were adamant that foreign investment in land was a good thing.

If it boosted prices, vendors recieved more for their properties which they were able to reinvest elsewhere in the economy.

The new owners farmed the land so that they and/or their staff became part of the community contributing not just economically but socially too. If they chose not to keep the farm, it  was put on the market and available for another purchaser from New Zealand or elsewhere because no matter who owns it, they can’t take land away.

What people do with land is a matter for local and central governments through district and regional plans and the Resource Management Act. Foreign owners already have to satisfy the Overseas Invesment Commission before they buy farmland and that is a sufficient hurdle.

Norman isn’t talking about farm land though, he’s talking residential property where the market has already slowed up, even in North Otago which has been insulated from the recession by the positive influence of dairying.

Banning foreign investors would only add to the difficulties would-be vendors are already facing and slash the value of investments people have made in their homes.

Update: Bernard Hickey blogs at Show Me the Money that house prices in Mt Eden/Epsom have fallen 30.4% in the three months to July.


No recession here

16/07/2008

While city papers are full of stories of impending doom, The Oamaru Mail front page lead is headline: No recession here.

The Herald reports that motor vehicle retail sales dropped nearly 15% from April to May and 11.6% since last September.

But the Mail (not on Line) reports that North Otago sales are still holding up.

… Peter Robinson manager of North Otago Motor Group said Oamaru was bucking the trend despite rising fule prices and talk of recession.

“We are definitely going better here and talking with counterparts, it seems the rural and provincial guys are feeling better than the city guys…

He said the company had seen a  rise in sales since last year and had already sold 15 vehicle s this month.

“For us in North Otago it’s driven off the back of good agricultural returns. That puts a positive spin on everyone’s business and it flows through to us.”

Mr Robinson said he expected things to get even better due to good conditions in the agricultural sector and tax cuts expected later in the year.

A vehicle dealer we spoke to in Ashburton at the weekend was equally positive about business in Mid Canterbury and he too credited agriculture for it.


Promise less, prepare for worst

15/07/2008

 SOMETIMES the best way to make voters forget their ills – real and imagined – is to promise them less and prepare them for the worst case.

If politicians followed the rule of the possible when talking to the public, they would be better able to sell reforms. Perhaps they could even keep the electorate on side in the event of recession.

This advice come from George Megalogenis, senior writer for The Australian and is applicable this side of the Tasman too.

Remember the shock of Paul Keating’s “recession we had to have” press conference in November 1990 came not from the news itself, but from the denial of reality that preceded it. The then treasurer had repeatedly said that there would be no recession.

Imagine, for a moment, that Australia’s luck finally runs out, and a recession that may be engulfing the US and Britain reaches our shores by the end of the year, or early in2009…

Obviously, Kevin Rudd won’t want to talk the local economy down when the chances of recession seem low. But how would he go about changing the national conversation if things suddenly went pear-shaped? The Prime Minister would, of course, blame the previous Coalition government, and the rest of the world, in that political order.

Yet the lesson of recessions past is that governments lose credibility long beforehand, by overselling their ability to run the economy. They claim credit for the positive numbers, then look for scapegoats when the national accounts throw up a couple of quarters of negative growth.

It is a little difficult to remain credible when you claim the credit for economic growth which largely happens in spite of your government then deny responsibility for a downturn which is happening, at least in part, because of your policies.

The truth, if any leader were prepared to admit it, is the role of government is limited when the economy is humming. Stay out of the way of the market, take the opportunity to secure reform because change is easier to implement in good times, and keep a lid on expectations. The last bit is always the hardest, because in good times leaders err on the side of the bribe.

That brings to mind interest free student loans and a variety of other baubles we tax payers are funding.

It is only in recession that governments are really called on to manage the economy. They provide the safety net for those who lose their jobs and the public investments to prop up demand.

Sadly, we are cursed with politicians who spruik their expertise when it is not required, and who dodge their responsibilities when systems and markets fail.

Who does that remind me of?

 

p.s. I had to look up Spruik so in case you don’t know what it means either here’s a couple of definitions:

From Encarta  – to promote goods services or a cause by addressing people in a public place;

And from Wordsmith – to make an elaborate speech, especially to attract customers.


Tui Truth

08/07/2008

Yesterday’s drive through Southland provided a tale of two countries.

Radio news was telling us that New Zealand is in recession but our eyes were seeing another story. The wee towns we passed through were bustling, growing for the first time since the wool boom of the 1950s; and new houses are springing up everywhere.

A sign on the outskirts of Winton provided the explanation: No-one wants to be a dairy farmer. Yeah right.


Recession Similar But Positively Different in Provinces

04/07/2008

Brian Fallow  quotes Split Enz: History never repeats.

There is always some difference that makes a difference. But the similarities can be instructive, too.

A couple of Reserve Bank economists, Michael Reddell and Cath Sleeman, have been looking at six previous recessions in New Zealand – the imbalances which preceded them, what triggered them and what made them worse.

They draw no conclusions about the situation now, beyond saying that “there is nothing in the material in this article to suggest any greater reason for optimism” than the downbeat view expressed in the bank’s June monetary policy statement.

They note the mitigating factors – fiscal stimulus and commodity boom – but say these factors “have much to mitigate”.

By my count 12, maybe 13, of the 17 recessionary factors they list are at work now, two of them – a global credit squeeze and a large rise in oil prices – in spades.

The recession which made the deepest impression on me was that of the mid 1980s. There are several differences between then and now.

Our economy was a mess before then – subsidies, tarrifs and import duties protected producers and manufacturers and increased costs for consumers; just about everything was regulated and/or taxed. Then came the 1984 Lange Government and Roger Douglas’s first budget.

Subsidies ended and farmers were brought kicking and screaming into the real world. The dollar was floated and rose on the back of high interest rates – at one stage we were paying more than 25% on seasonal finance –  inflation raged, commodity prices fell but tarrifs kept the price of inputs up and the labour market was still heavily regulated.

North Otago was particularly hard hit by the ag-sag because too many farms were too small to be economic anyway and there was not much irrigation so we were forever suffering from recurring droughts. At one stage it cost more to transport stock to the freezing works than they were worth. Property prices plummeted and a lot of us were technically bankrupt, owing more than the value of what we owned.

As farmers retrenched those who worked for, serviced or supplied us were hit too and the problems spread to provincial towns. Meanwhile cities were booming on the back rising property prices and the sharemarket. It was only when the market crashed in October 1987 that cities began to feel the country’s pain.

A lot of economic fundamentals have changed since then. A small economy like New Zealand’s will always be at the mercy of international factors, but thanks to those “failed policies of the 80s and 90s” we are in a much stronger position to withstand the worst impact of them.

Another difference is that this time the problems are starting in the cities and, the impact of drought aside, the country is still doing well. Even though sheep farmers have had an appalling season, falling income has been cushioned by rising land prices.

While people are worried about what’s happening elsewhere, the North Otago economy is still growing and property prices are rising. There hasn’t been an empty shop on the main street for a couple of years and a retailer told me he’d paid more GST in the past two months than at any other time since he’d been in business.

People on low fixed incomes, and some earning more, are struggling with steeping rising prices of fuel and food. But the district’s economy as a whole is benefitting from development associated with increased irrigation and the dairy boom.

If we are in a recession right now, as many economists believe, it won’t be official until the June GDP figures are released in September.

And if the statistics mirror anecdotal evidence they will show that this time the recession is starting in the cities and the picture in the provinces is sitll pretty positive.


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