New Zealand is the only country in the world I know of in the midst of what is now shaping up to be a "triple dip recession". GDP growth forecasts have been downgraded. Our GDP is now expected to barely change in 2024 - only by about +0.2% and to drop by -0.4% next year. By comparison, Global Economic Growth is running at 3.2% this year, and is expected to rise to 3.3% next year. The latest updated GDP growth numbers put NZ at around 183th position out of 190 nations, one of the slowest growing on the planet.
Below us in 2024 are Yemen at -1% (in civil war), Estonia at -0.5%, Haiti at -3% (in civil war), Puerto Rico at -0.2%, Sudan at -4.2% (in civil war), Kuwait at -1.4% & Argentina at -6%. How did it happen? The Reserve Bank stuffed up monetary policy on an industrial scale. It went berserk printing money from 2020 to 2022; then went berserk reversing itself and hiking rates in a scorched earth blitzkrieg until yesterday, over-reacting every time. Yet if you read the Monetary Policy Statement it just released, its sleazy, mealy-mouthed, deceptive commentary, using weasel words at every opportunity, makes it look like it has been doing a fine job, and that nearly every other country is experiencing the same issues. That's a flat-out lie.
Take for example, these lines in its August 2024 Monetary Policy Statement: "Global growth remains below trend across advanced economies". Note the underhand "below trend" sneakily inserted. In fact, global growth is far outstripping NZ and no economist even knows exactly what is "trend" line growth since calculating trends is subject to huge statistical debates. The RBNZ slings off at China, saying its "Growth has been softer than expected, due to a depressed property market & weak consumer demand". China is growing at 5%, leaving us in its wake. The Reserve Bank then puts down the US economy with more weasel words, saying it shows "emerging weakness" and there's "nervousness about US economic prospects". The US has been booming, at just under 3% GDP growth. Since Covid broke at the start of 2020 until now, its share-market is up 37%. NZ's stocks have barely changed, on average - up a tiny 4% over that 4-5 year period and down big-time in real terms (accounting for inflation). For many of our biggest companies, its carnage: Air NZ is down around 70% since the start of 2020, Fletcher Building down 40%, the Warehouse down over 50%, Ryman Healthcare 70% down, and even monopoly Auckland Airport down nearly 15%.
Why can't the RBNZ call a spade a spade? Why twist the truth in ways that would even make a Propaganda Chief of a Third World Dictatorship blush with embarrassment?
Sources:
Take for example, these lines in its August 2024 Monetary Policy Statement: "Global growth remains below trend across advanced economies". Note the underhand "below trend" sneakily inserted. In fact, global growth is far outstripping NZ and no economist even knows exactly what is "trend" line growth since calculating trends is subject to huge statistical debates. The RBNZ slings off at China, saying its "Growth has been softer than expected, due to a depressed property market & weak consumer demand". China is growing at 5%, leaving us in its wake. The Reserve Bank then puts down the US economy with more weasel words, saying it shows "emerging weakness" and there's "nervousness about US economic prospects". The US has been booming, at just under 3% GDP growth. Since Covid broke at the start of 2020 until now, its share-market is up 37%. NZ's stocks have barely changed, on average - up a tiny 4% over that 4-5 year period and down big-time in real terms (accounting for inflation). For many of our biggest companies, its carnage: Air NZ is down around 70% since the start of 2020, Fletcher Building down 40%, the Warehouse down over 50%, Ryman Healthcare 70% down, and even monopoly Auckland Airport down nearly 15%.
Why can't the RBNZ call a spade a spade? Why twist the truth in ways that would even make a Propaganda Chief of a Third World Dictatorship blush with embarrassment?
Sources:
https://www.rbnz.govt.nz/-/media/project/sites/rbnz/files/publications/monetary-policy-statements/2024/aug-140824jvb/mps_report_aug2024.pdf
Professor Robert MacCulloch holds the Matthew S. Abel Chair of Macroeconomics at Auckland University. He has previously worked at the Reserve Bank, Oxford University, and the London School of Economics. He runs the blog Down to Earth Kiwi from where this article was sourced.
Professor Robert MacCulloch holds the Matthew S. Abel Chair of Macroeconomics at Auckland University. He has previously worked at the Reserve Bank, Oxford University, and the London School of Economics. He runs the blog Down to Earth Kiwi from where this article was sourced.
2 comments:
Central banks collectively will inflate even more moving forward. Central banks will continue to increase the global “money” supply (further devaluing the currency), and continue to keep rates artificially suppressed. This mechanism will further distort asset prices way beyond what we are seeing now. Moreover, you can expect that economic conditions will continue to worsen and the Middle-Class will get squeezed even harder, while the top 1% and 2% will get richer than ever via the "Cantillon Effect".
We can fully expect that any kind of reality with regard to a real economy, and a market with a true price discovery mechanism behind it, will continue to elude us.
Professor, have you noticed that over the past few years, and probably for longer, we have been cursed with a collection of ideologues, idiots, or incompetents, (some being all three) in the highest positions of Govt and commerce. I am not at all surprised at our woeful situation. Sadly I fear that there will be little improvement that can be hoped for.
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