Near-zero gross domestic product (GDP) figures for the December 2010 quarter prove how badly the New Zealand economy is stuck in a rut.
Treasury and the Reserve Bank had both forecast zero growth for the quarter. I have taken the view that was about right and that minor variation either side would not change the story.
It doesn’t. Today’s 0.2% is within a shade of that, and is still subject to revision.
The big picture is that the economy is going nowhere because National has no plan.
A breakdown of the statistics is instructive – wholesale trade is down, retail is down, accommodation and restaurants are down, confirming the message that businesses in New Zealand towns and cities have been giving us — that for them 2010 was even worse than 2009.
Cost of living pressures were also clear. Goods and services purchased by Kiwi households are almost flat even though prices rose 2.3 percent in the December quarter alone. This shows Kiwi families are hard hit by the rising cost of living and are having to tighten their belts month by month.
There is no good news on the external side either. Imports rose faster than exports, and the fastest-rising export, raw logs, effectively represents exporting Kiwi processing jobs along with the timber.
Kiwi families and firms are borrowing more than ever before to stay afloat, and the Reserve Bank says this will continue until 2013.
Bill English is presiding over an old-fashioned slump, and clearly has no idea what to do about it.
Last week he wanted to put the whole cost of the earthquake on the country’s credit card, but Prime Minister John Key rolled him a few days later when announcing a zero budget this year.
Economics 101 says that savage budget cuts in the middle of a deep recession will only put more people out of work, undermine confidence, reduce demand and drive down tax flows.
This isn’t a plan. It’s a recipe for continuing economic failure.