Dieuwe de Boer: It's The Economy, Stupid

New Zealand is in a recession and we have been for two years now. Our per capita recession has surpassed the Great Financial Crisis in length after contracting for seven consecutive quarters.

I'm not a fan of GDP as the be all and end all economic figure, but a decline in our yearly economic activity by 0.5% is a serious thing, even more so when you factor in that our per capita GDP has shrunk by a massive 2.7% in that time.

GDP encourages countries to import more economic units who can then increase the total money creation and spending power.

It's possible for a country to do well with a shrinking GDP, but only if the per capita GDP is still growing. This could even be good in a country with a declining population. From that perspective the per capita number should be considered far more important since it cannot be fudged via migration. Of course, it still has serious flaws. Events like the Christchurch Earthquake were great for GDP since the government spent lots on the rebuild. We call that the "broken window fallacy" since the lost opportunity cost can't be measured.

GDP focused policy discourages saving since politicians and central bankers want to get and keep people spending.

Other metrics paint an even worse figure, as Hooton wrote behind the Herald paywall:

Disposable income per capita is worse, already down 6.2% compared with September 2022.

In 2024 dollars, a four-person household is over $1600 a month worse off than two years ago. Give or take a few dollars, they’re no better off than six years ago.

Mass migration at net 67,000 in the past year with high inflows and outflows 200,000 in and 133,000 out. We're rapidly replacing higher skilled NZ workers with lower skilled economic migrants from China, India, and the Philippines. The higher skilled ones seem to figure out that NZ is a poor country by Western standards and move on quickly. This creates a vicious self-perpetuating cycle that politicians refuse to appreciate.

The median price of a house in Auckland sits just shy of a million dollars, with a cooler three-quarters of a million New Zealand wide. High migration and low interest rates threaten to push them up again. Even now they have barely declined to 2022 levels.

The Reserve Bank of NZ is making interest rate cuts to help stimulate demand, to increase borrowing by making it cheaper. This risks increasing inflation again. The US Federal Reserve made a big cut this week of 0.50% and already asset prices saw an immediate surge. The US is now paying 1 trillion dollars in interest payments on the federal debt. Of course, as long as they can keep their 11 nuclear-powered aircraft carriers afloat then the US dollar and its economy have practically unlimited value.

As a wise man once said: Making predictions is hard, especially about the future. However the government should be careful it's not sleepwalking the country into the final act of a disaster decades in the making.

Dieuwe is the editor of Right Minds NZ. - where this article was sourced. In addition to conservative politics and reactionary thought, he likes books, gardening, biking, tech, reformed theology, beauty, and tradition.