Over the last couple of months I’ve lost track of the number of comments I’ve seen, from outlets that really should no better, about New Zealand’s economy at present being the envy of the world.
Radio New Zealand’s Checkpoint seems a particularly egregious offender, but that might just be because I often have it on while I’m making dinner. But I’ve seen similar lines in the Herald, from Business New Zealand and a variety of other outlets.
The people running this line, when they aren’t just running propaganda, seem constantly to lose sight of just how much of our real GDP growth – itself not that impressive by the standards of previous growth phases – is accounted for by our very rapid population growth, in turn the result of our large (but fairly stable) inward immigration programme, and the reduction in the net outflow of New Zealanders.
Quarterly real per capita GDP data isn’t easily available for many countries, but the other day the IMF released its latest World Economic Outlook. I had a look at how New Zealand is estimated to have performed over 2013 to 2016 relative to the IMF’s set of advanced countries. Over this period, only two of these countries – Israel and Luxembourg – are estimated to have had faster population growth than New Zealand.
Nothing to write home about
Of course, we only have hard data to mid 2016, and even that will be subject to revision for some time. But that is so for all these countries too. Take the last three years together and New Zealand just doesn’t stand out. It isn’t necessarily a bad performance, but nothing much to write home about. And recall that we don’t exactly have the highest level of GDP per capita among these countries – the aim, for decades, has been to catch up with the rest of the advanced world. Over this three year period, we’ve made no progress at all.
We’ve had things working for and against us over that period. The terms of trade have been high, but fell back quite a way from the peak, especially dairy. We’ve had a significant boost to demand and activity from the Christchurch repair and rebuild process. We’ve had a big (largely exogenous) boost to tourism, and a significant boost to export education. We’ve had no constraints (other than self-imposed ones) on our ability to use monetary policy flexibly. And we’ve had a massive boost to demand from the unexpected rapid growth in the population. And yet, once again, we’ve made no progress in closing the gaps.
And, of course, our productivity performance in recent years has been even worse.
No productivity growth at all in the last four years or so (even ignoring the last observation, where there is an unfortunate discontinuity in the HLFS hours worked series).
New Zealand the economic envy of the world? I think not.