In the Half Year Economic and Fiscal Update; the HYEFU, released on Tuesday, Treasury believes the former. Things are difficult, with economic growth in the current fiscal year (ending in June 2025) expected to be just 0.5%, but will bounce back to 3.3% the following year.
Sadly for the economists at Number One the Terrace, the quants at the Department of Statistics debunked that optimism on, let me see, Wednesday. Our economy shrank one percent in the September quarter and all indications are the economy continues to contract. It would require a heroic surge in productive output in the remaining six months to get us to half a percent economic growth this fiscal year.
The forecast wasn’t pretty even with this optimistic growth forecast: “Core Crown expenses grow from $139.0 billion in 2023/24 to $162.9 billion by 2028/29. The growth in core Crown expenses is driven by three key factors – increases in benefit expenses, increases in finance costs and forecast new spending.”
Meanwhile, revenue rises, mostly due to that imagined economic growth. The deficits, expected to fall from 2.4% of GDP in the current year to 1.8 in the next and surplus by 2028 are based on those economic growth figures that are wilfully optimistic.
And then we have the issue of productivity; the amount of output we produce for every hour of labour. According to Treasury’s analysis productivity growth averaged 1.4% each year between 1993 and 2013 but only 0.2% annually over the last ten years.
There are many drivers of low productivity but our failure in education is the greatest. A 2022 study of NCEA graduates showed only a third passed the required level of literacy. Illiterate workers are less productive than literate ones, and therefore get paid less and pay less taxes.
Treasury is live to the problem. In a report in May it looked into the impact of low productivity on its forecasts and projections and if this can be improved. The authors looked abroad, considered developments like Artificial Intelligence, and concluded: “…New Zealand may not be well-placed to successfully absorb new productivity-enhancing innovations given falling educational attainment, our relatively low managerial capability and low, albeit growing, levels of research and development.”
Coming back to Treasury’s HYEFU, they anticipate a return to 1 percent productivity growth but give no data indicating a revival in the output of kiwi workers and managers. The numbers also preclude any economic shocks. Like. An earthquake, plague, overseas war or Chris Hipkins becoming Prime Minister again; and at least one of those is probable in the near future.
At some point we forgot that actions have consequences. As a result we are living with the cumulative impact of poor economic decisions spanning three decades.
We have a generous social welfare system that rewards indolence and a progressive taxation system than penalises effort. We institute a complex set of rules around development that hinders building. We have become focused on a person’s ancestry and gender and not their capability.
We discourage mining and exploration and overseas investment and are reluctant to allow foreigners to buy and develop land. Most damaging; New Zealand values ideological conformity over the truth. We cancel those we disagree with rather than engage in debate which means we will not tackle any of the really hard issues.
The current government is making progress; Erica Stanford, Chris Bishop and Simeon Brown are all making improvements in education, construction and transport respectively, complementing the work done by Seymour on foreign investment and charter schools, but these are but the Three Hundred against the size of the problems our country is facing.
The Crown will not cut spending to match the fall in revenue and will eventually raise cash with new and economically destructive taxes on capital when debt becomes too expensive. The Treaty will continue to be used as a means of extracting economic rent from one sector of society against another and not just addressing past wrongs. We will not make the reforms in health needed to lift a moribund system where we ration access to health by seeing who dies on a waiting list and nor will we tackle the Universal Basic Income we pay to those over 65.
And the teacher unions can be confident that education reforms will not alter the single-payer model that is responsible for the current malaise.
Treasury’s forecast assumes a cyclical fall in output that will reverse itself without any structural change. It is more probable that we are in the early stages of a transition from a middle income to a low-income economy that we are now unable and unwilling to prevent.
The challenge we face as a nation, and for those who we elect, is that our default response to any crisis is increased government intervention paid for with higher taxation and increased debt. Which is what the public wants and, being a democracy, is what we will get......The full article is published HERE
Damien Grant is an Auckland business owner, a member of the Taxpayers’ Union and a regular opinion contributor for Stuff, writing from a libertarian perspective
Meanwhile, revenue rises, mostly due to that imagined economic growth. The deficits, expected to fall from 2.4% of GDP in the current year to 1.8 in the next and surplus by 2028 are based on those economic growth figures that are wilfully optimistic.
And then we have the issue of productivity; the amount of output we produce for every hour of labour. According to Treasury’s analysis productivity growth averaged 1.4% each year between 1993 and 2013 but only 0.2% annually over the last ten years.
There are many drivers of low productivity but our failure in education is the greatest. A 2022 study of NCEA graduates showed only a third passed the required level of literacy. Illiterate workers are less productive than literate ones, and therefore get paid less and pay less taxes.
Treasury is live to the problem. In a report in May it looked into the impact of low productivity on its forecasts and projections and if this can be improved. The authors looked abroad, considered developments like Artificial Intelligence, and concluded: “…New Zealand may not be well-placed to successfully absorb new productivity-enhancing innovations given falling educational attainment, our relatively low managerial capability and low, albeit growing, levels of research and development.”
Coming back to Treasury’s HYEFU, they anticipate a return to 1 percent productivity growth but give no data indicating a revival in the output of kiwi workers and managers. The numbers also preclude any economic shocks. Like. An earthquake, plague, overseas war or Chris Hipkins becoming Prime Minister again; and at least one of those is probable in the near future.
At some point we forgot that actions have consequences. As a result we are living with the cumulative impact of poor economic decisions spanning three decades.
We have a generous social welfare system that rewards indolence and a progressive taxation system than penalises effort. We institute a complex set of rules around development that hinders building. We have become focused on a person’s ancestry and gender and not their capability.
We discourage mining and exploration and overseas investment and are reluctant to allow foreigners to buy and develop land. Most damaging; New Zealand values ideological conformity over the truth. We cancel those we disagree with rather than engage in debate which means we will not tackle any of the really hard issues.
The current government is making progress; Erica Stanford, Chris Bishop and Simeon Brown are all making improvements in education, construction and transport respectively, complementing the work done by Seymour on foreign investment and charter schools, but these are but the Three Hundred against the size of the problems our country is facing.
The Crown will not cut spending to match the fall in revenue and will eventually raise cash with new and economically destructive taxes on capital when debt becomes too expensive. The Treaty will continue to be used as a means of extracting economic rent from one sector of society against another and not just addressing past wrongs. We will not make the reforms in health needed to lift a moribund system where we ration access to health by seeing who dies on a waiting list and nor will we tackle the Universal Basic Income we pay to those over 65.
And the teacher unions can be confident that education reforms will not alter the single-payer model that is responsible for the current malaise.
Treasury’s forecast assumes a cyclical fall in output that will reverse itself without any structural change. It is more probable that we are in the early stages of a transition from a middle income to a low-income economy that we are now unable and unwilling to prevent.
The challenge we face as a nation, and for those who we elect, is that our default response to any crisis is increased government intervention paid for with higher taxation and increased debt. Which is what the public wants and, being a democracy, is what we will get......The full article is published HERE
Damien Grant is an Auckland business owner, a member of the Taxpayers’ Union and a regular opinion contributor for Stuff, writing from a libertarian perspective
13 comments:
The dark plan is coming home to roost. NZ's decline is complex, spectacular - and tragic. Let those committed to an ethnocracy and identity sort out their self-inflicted mess - without the expected support of the long suffering tax payers.
Production is easiy increased. One third of citizens should take up teaching Old English (or Highland Papuan, or Patagonian or Phoenician etc) and the rest students. After a few months raise prices, hence productivity. Apart from tourism modern NZ seems to have little going for it. A welfare ridden disproportionately increasing low IQ, low application component work force, and increasing internal division. My concern is that current National will be blamed and punished so that NZ then becomes totally ruled by maori, reducing the country to full 3rd world status and a situation like Zimbabwe. Even conquest by the Chinese might not save us as much of the available workforce is inferior to most of Asia and not worth developing.
Robert you are so right. Our workforce is unskilled to the extent that stop go workers are deemed skilled. Just take a moment when you are in any town or city and observe. Racial division is factor and add to that the huge number of migrants and NZ certainly has a problem
Yes there is no reward for effort but overseas investment for National means even more corporate dominance when there should be opportunity for kiwis to flourish .Setting up a small business is too tough with the current system.
Damian, you and your flambouyant colleague successfully ran "election debates" at the appropriate times . Debate is what is needed on very direct issues that ghost past the public but are anchors against NZ productivity. Why not debate "zero carbon" and invite PM Luxon to define his fantasy. Debate "productivity" and define who and what can be classed as productive, inviting export vs unemployment . Debate "indigenous " and invite ethnicity vs birthright. There is an absence of worthy television now and an opportunity to make a real political direction awaits .
Damien has nailed it. But sadly the key line has been clipped from the end, which underscores the folly of leaving punchlines for the end.
So here it is (the really telling point is in his last sentence):
The challenge we face as a nation, and for those who we elect, is that our default response to any crisis is increased government intervention paid for with higher taxation and increased debt. Which is what the public wants and, being a democracy, is what we will get. But. If I may suggest, it isn’t a cure. It is how we got here.
Who we elect is predetermined by the 'democratic voting scam'. The corporate deep state offers us two dominate parties to choose from, red or blue. It makes no difference to the deep state, as their agenda is already set. We don't get to vote for the CEO or the board. The deep state chooses them. Democracy gives us selections, not elections.
The question posed ended with "are we on the precipice of something darker?" I would say that the answer is oh yes and with bells on! This is a variant of a previous post to this forum. With the limits to growth inexorably working away in the World, our politicians who still think we can grow our way out of the pooh are totally deluded. The 2023 Recalibration of limits to growth: An update of the World3 model is at: https://onlinelibrary.wiley.com/doi/full/10.1111/jiec.13442 Figure 3 is quite telling as it would appear the modelling is indicating that our World (not just little NZ) has already jumped off the Seneca cliff when it comes to Industrial Output. The old paradigms and 'normal' behaviours of economies will gradually prove to be completely ineffectual as this new reality really sets in and the overshoot leads to an eventual collapse of production and our living standards. A very hard lesson on survivability is inevitable. People talk of soft landings and hitting the bottom of the curve, how we deal with it carrying on its downward path after that 'bottom' is the billion dollar question. Denial is pure hopium for the masses. Personally and for the sake of New Zealand as a whole, getting us as close as possible to a soft-ish landing will require an urgent, complete shut down of the Maori elite gravy train with a sudden end to all further claims and settlements - we in New Zealand simply cannot afford to mess about with this any more! It will also require a calculated approach to looking after ourselves when our 'energy slaves' in the form of fossil fuel start to take a long holiday (oh heck, they already have ...). Our fiat currency is tanking, cost of living is rising and any incumbent government will no doubt bear the blame, so they need to stop the self inflicted haemorrhaging of the NZ economy. However, this downward trajectory is beyond the control of our politicians who continue to emulate King Canute in trying to control the tide. Here, National will fail in this endeavour and likely open the door to our other brilliant fiscal managers who also don't have a Scooby Doo (clue).
The fiscal issue is VERY easily solved . STOP SPENDING. Anyone who is employed from grave digger to astronaut or manages a family could be Minister of Finance of New Zealand and return NZ to a strong fiscal position. Cancel half of the Ministeries and Government Departments and reduce funding for the rest until the desired Government spending is below income. Simple . Just like any other business or family . Are you listening PM Luxon.
I, for one, concur Anon@3.36. Of the many things we urgently need to address, the Treaty gravy train must be a priority. It's hard enough battling what lies before us -immeasurably more so if we are to be divided!
No-one should have a free lunch, much less an automatic seat at the table. We all are equals, or so we should be. For goodness sake, make it so.
Mr Luxon, are you awake? Are you listening? Are you compos mentis? If so, with all due respect, do you get this?
Anon @ 3.36 again: Just like to add that I do not support the essentially political hijacking of LTG by Greenpeace and the Greens. Their approach to all this via climate alarmist BS simply compounds the problem with what is a further tranche of economic vandalism. The old saying of throwing the baby out with the bathwater is probably apt in that regard. We humans, mainly by failing to keep it in our trousers, have placed ourselves between the proverbial rock and a hard place and it will require a huge amount of logical/lateral thinking to deal with the pain of the future.
TRUMP ISSUES "GREAT DEPRESSION" WARNING. He Is 100% RIGHT.
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