.....but O’Connor is doing his bit to put things right with CPTPP talks
The bothersome economic news today is that New Zealand’s GDP fell by 0.6% in the December quarter, weaker than market forecasts of a fall of around 0.2% and much weaker than the Reserve Bank’s assumption of a 0.7% rise.
This followed the even-more-bothersome news yesterday that the country’s current account deficit has blown out sharply over the past two years to hit 8.9% of GDP by the end of 2022, the biggest deficit as a share of GDP since the mid-1970s.
As Westpac economists pointed out, the current account deficit is a symptom of a country that is living beyond its means.
Monetary and fiscal stimulus in response to the Covid shock has left the economy overheated, as demonstrated by the extremely tight labour market and the surge in inflation. Essentially, we haven’t adjusted our spending patterns to reflect either the shortfall in our export income or the rise in the cost of living.
Westpac gave us much to muse on, as we consider our options for getting the books into better shape:
– There is limited scope for increasing our export volumes, given the increasing environmental pressures on the agricultural sector;
– Capacity remains an issue in the tourism sector, and growth in overseas visitor numbers will slow from here;
– We can’t do anything about world prices for our exports or imports, or the cost of shipping.
So the remaining avenue is to reduce our import spending to more sustainable levels. That’s one of the things that tighter monetary policy will achieve over time. But the scale of the current account deficit is a symptom of how overheated the economy has become in the first place, and how much of an adjustment in demand will be needed.
Obviously, every little bit helps and Damien O’Connor, Minister of Trade and Export Growth, is on the case.
He has announced New Zealand is set to host Trade Ministers and delegations from 10 Asia Pacific economies at a meeting of Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) Commission members in July.
New Zealand is the chair of CPTPP this year and the Ministerial Meeting, held in Auckland, will be the centrepiece of our host year, O’Connor said.
“Trade is a major priority for this Government as we know that trade grows businesses, creates jobs, and boosts our economy. One in four New Zealanders’ jobs depend on exports.”
The statement was on a hiding-for-nothing when it comes to winning big headlines. It was posted on the Beehive website along with news that Police Minister Stuart Nash had tendered his resignation.
The latest Beehive posts at time of checking this morning were:
The Government is providing a further $25 million in grants to help more businesses in cyclone-affected regions with the clean up and get them back up and running.
Over 160,000 people have become New Zealand residents now that 80 per cent of 2021 Resident Visa (2021RV) applications have been processed.
This morning I was made aware of a media interview in which Minister Stuart Nash criticised a decision of the Court and said he had contacted the Police Commissioner to suggest the Police appeal the decision.
The Government’s sharp focus on trade continues with Aotearoa New Zealand set to host Trade Ministers and delegations from 10 Asia Pacific economies at a meeting of Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) Commission members in July.
Damien O’Connor reminded us that since 2017, the Government has secured four new Free Trade Agreements and upgraded three more.
The proportion of our exports now covered by FTAs has increased to 73.5 per cent, up from only 52.5 per cent.
CPTPP economies represent $17.3 trillion of global trade
“… and our membership has saved kiwi business $300 million in tariffs in just the first two years. In the primary sector there have been massive gains – significant exports such as kiwifruit and wine saw all tariffs eliminated immediately.”
The seventh CPTPP Commission in Auckland will be the biggest international meeting New Zealand has hosted since the pandemic.
For more information, see www.mfat.govt.nz/cptpp.
Point of Order is a blog focused on politics and the economy run by veteran newspaper reporters Bob Edlin and Ian Templeton
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