In response to parliamentary oral question 7 today, economic development Minister Steven Joyce tried to deflect today’s announced cut to New Zealand Institute of Economic Research (NZIER) 2012 growth forecast to a “stagnant” 1.5%, by saying this was all due to the supposed increase in the domestic savings rate.
Perhaps he was hoping that, as the NZIER publication is subscription-only, it was not going to be available to the Opposition, or to the public, and we would be unaware of his spin.
The problem for him, though, is I had the report in my hand and then I sought to table it.
National withheld leave for me to do so, to prevent you from judging for yourself.
In the report, under the heading “Half way through seven years of famine”, the overview states:
“The economy is stagnant. There is little economic growth and the outlook is challenging…”
NZIER ascribes this to six main drivers:
- No interest rate increases – due to growing global risks – resulting in possible Reserve Bank of New Zealand rate cuts if Europe’s crisis worsens. (NB: lower interest rates are not normally seen as an impediment to growth);
- Fiscal headwinds – the Government is “withdrawing stimulus” and this will “slow the pace of economic growth”;
- Slowing global growth – arguing the Government is over-banking on optimistic growth scenarios in Australia and China;
- Migration drain – noting the “net (e)migration is a persistent drain. This is hollowing out ..young people.. and will get worse as baby boomers age”;
- Household saving – “For households the economic picture will remain drearily similar. There will be few new jobs and wages will eke out small gains compared to living costs”;
- Businesses need to tread cautiously – “Because the economy will be flat, growth in sales must be from increased market share. (NB: by definition, this is a zero-sum game).
The NZIER report is cogent and sobering. It shows that the long-promised recovery is still just as far away as ever.
What it does not say is that the stagnant economy results from increased saving, or even substantially so.
To say New Zealanders are saving their way to recession is also sickeningly out of touch with the vast bulk of New Zealanders who are doing it too tough at the moment to be able to put much away.
All in all a case of spin, damned spin – and what Mr Joyce thinks he can get away with in Question Time if no one is checking.