The economy is in trouble

Photoshopped image credit: Luke

The September quarter GDP result was published right on Christmas and went largely unnoticed. Mike Hosking didn’t miss it though, and as he reports, the news is all bad for our economy from here. quote.

From China to Brexit, to the shutdown, the pending votes in Australia, the mayoral stabbings in Poland, the migrant crises in various parts of the globe, there is much to suggest the planet has fiscal trouble.
And the key to all of that for us, is can we weather it? Are we robust enough in the dark days to not sink with the rest of them? This is the great test for our government this year.

Last time we talked about our growth rate was when the second quarter numbers were released and they were an outstanding one per cent. One per cent for the quarter was not just an excellent number, it was well beyond just about anyone’s estimates. end quote.

I said at the time that the second quarter GDP result was a hangover from the fiscal competence of the previous government. Like a cruise liner, it takes a long time to slow down the economy, and almost one year on, the full effects of this government’s policies were not being felt. That has all changed now. quote.

Quarter three’s number was 0.3, that’s a shocking figure. It was the figure sadly many had predicted, many had seen the third quarter as slow, and many are suggesting the fourth quarter won’t be a lot better.

Quarter one was 0.5, quarter two was one, quarter three was 0.3. That’s 1.8 per cent growth for the year.
What we need, what we have had, is something well into the threes. And to get well into the threes, we need the fourth quarter number to be at least 1.7 per cent.
Do you think we are going to get that? No, we are not, and not even close.
end quote.

We will be lucky to get 0.5% in the fourth quarter. That will be growth for the year of 2.3% – a far cry from the excellent numbers we were seeing under the previous government.

This government constantly plays down the significance of GDP, claiming to focus on ‘wellness’ rather than traditional economic indicators. What they conveniently forget is that ‘wellness’ in the economy translates into ‘wellness’ in the community. A robust economy provides its citizens with a better life. A struggling economy cannot do that. Ask the citizens of Venezuela. GDP and ‘wellness’ go hand in hand. quote.

These are worrying, anaemic numbers, and not nearly robust enough to be able to handle any sort of global downturn, and certainly not with the level of government spending the incumbents are currently indulging in.

Growth is everything. It’s your tax take, it’s your surplus or deficit, it’s your ability to spend in an election year, it’s your credit rating, it’s your economic credibility.

End quote.

That is why it is economic sabotage of this government to take the focus away from GDP and onto feelgood issues that are nothing more than hot air. It demonstrates their naivety at the very least. quote.

Without growth, a government has nothing, except the ability to sink into debt and try and hoodwink the punter that it’s not as bad as they think.

Here we are, staring down the barrel of a growth rate that?s a direct reflection of a government that?s been happy to spend and promise like a drunk.

Newstalk ZB end quote.

There is no nice hangover from the previous government that Grant Robertson can congratulate himself with any more. From here on, the economic management of this government itself will be on show. Once voters are hit in the pocket, everything will change for this government. Cute photos of Neve will not save Jacinda then.