‘Recession likely’, or not

Different views on the likelihood of a recession.

Forbes: New Zealand, An Economic Success Story, Loses Its Way

On September 23, the people of New Zealand elected 37-year-old Jacinda Ardern as prime minister, the youngest prime minister in New Zealand’s history. Ardern has brought youthful energy to New Zealand politics, but her scary rhetoric during the campaign (like calling capitalism a “blatant failure”) has some people wondering if she will take the country back to the bad old days of the 70s and early 80s.

One of Ardern’s first acts as prime minister was to ban foreign ownership of residential real estate; New Zealand has, by anyone’s measure, one of the biggest housing bubbles in the world. Banning foreign ownership of property sets the country up for a possible real estate crash.

Ardern also opposes high levels of immigration, along with her coalition partner, Winston Peters. It is set to drop dramatically. Immigration, especially skilled immigration, has been a big contributor to economic growth over the years.

It seems likely that New Zealand will experience a recession during Ardern’s term. Nobody is predicting a return to the bad old days of the 70s, but New Zealand will probably lose its status as one of the most open, free economies in the world. It takes decades to weaken an economy, just like it takes decades to strengthen it. But investors will probably want to avoid New Zealand for the time being.

Jared Dillian is the author of All the Evil of This World, and the editor of the 10th Man newsletter for Mauldin Economics.

Liam Dann (NZH): What Recession? Local economists pick good growth

The verdicts are in and despite what Forbes contributor Jared Dillian says, there are no economists picking a recession for Jacinda Ardern’s Government.

Most of New Zealand and Australia’s major economics teams have now reassessed their economic forecasts to factor in the effect of the new Government.

The loose consensus – bearing in mind no two economists ever agree – seems to be that GDP growth is going to be less flash than previously expected next year.

But it’s not crashing through the floor either. Growth forecasts between 2.4 per cent and 3.2 per cent for 2018 still look pretty good by international standards.

Apart from a few random think pieces though – written by offshore commentators who can’t quite believe New Zealand changed Government with the accounts in such good shape – most of the economic and financial community still seems pretty relaxed about the new regime.

It’s very early days to see what the Government will do, and what the economy will do.

And as far as the economy is concerned, it is most at risk from overseas influences.

32 Comments

  1. Tipene

     /  November 22, 2017

    Economists tossing coins in the air again, and expecting us to take what they say as gospel.

    Happenstance can’t be “predicted”.

    • duperez

       /  November 22, 2017

      We know what gospel is when it comes to there being a recession. It ain’t anything to do with tossing coins, listening to economists or happenstance. Whether or not there’s going to be a recession is down to which side of the political fence one sits on.🙃

  2. Corky

     /  November 22, 2017

    ”And as far as the economy is concerned, it is most at risk from overseas influences.”

    Exactly. The question is” how much fat is on our bones should a global recession hit? I believe Labours spending will have us in an anorexic condition to face a recession. Before that will be investor confidence crashing and money moving off shore.

    • Blazer

       /  November 22, 2017

      we just borrowed 100 bil to get of the last one!Who is responsible for these..recessions?

  3. patupaiarehe

     /  November 22, 2017

    Ardern has brought youthful energy to New Zealand politics, but her scary rhetoric during the campaign (like calling capitalism a “blatant failure”) has some people wondering if she will take the country back to the bad old days of the 70s and early 80s.

    In the “bad old 70’s’, a labour only boilermaker was getting $35/hour doing project work, and could buy a house in Auckland for a 5 figure sum. Today, he will get $50/hour, and no change from half a million for the same.

  4. Alan Wilkinson

     /  November 22, 2017

    ”And as far as the economy is concerned, it is most at risk from overseas influences.”

    Because exports are a large proportion of GDP overseas influences are always important. However they are relatively unpredictable compared with the known preferences of the Left for taxing and regulating heavily. Trump has already shown deregulating has a quick positive impact on the economy. There is no reason to presume the opposite actions by Labour will not have an equally quick and negative impact on our economy. Labour will employ more paper pushers and bureaucrats dedicated to stopping people doing things. They will take more money from employers and investors and stop them using it to do things. Then they will employ more people as social workers to look after people who don’t have jobs because they are not allowed or don’t have money to do things. And they will pay more people more to do nothing so more people won’t want to do anything. Finally they will use some of the money taken from people who wanted to do things for Government agencies to try to do things. But inevitably they will be less efficient than people using their own money to do those things.

    All these things add up to saying that while overseas influences may cause big unpredictable economic swings the totality of Left policies makes a downward trend inevitable and the only question is how far and fast they are implemented.

    • Blazer

       /  November 22, 2017

      A long detailed post revealing you know absolutely nothing about the NZ economy or how things work.De regulating lead to the GFC,I thought even a complete novice like you ,understood this.

    • Corky

       /  November 22, 2017

      You paint a horrid picture, Alan. I’m down ticking you for ruining my apple crumble pudding and giving me indigestion. Man, this government is a nightmare. And they are yet to do anything.

      • Blazer

         /  November 22, 2017

        As I understand it Al is a scientist, not an economist,and is most likely a 1 dimensional nerd who knows absolutely everything about an obscure subject no one is ..interested..in.

        • Alan Wilkinson

           /  November 22, 2017

          No, I don’t know anything about you, B.

          • patupaiarehe

             /  November 22, 2017

            • patupaiarehe

               /  November 22, 2017

              If your reply to my comment is a ‘stinky thumb’, the score appears to be:
              Alan: 1 Blazer: 0

            • patupaiarehe

               /  November 22, 2017

              Just when I thought public opinion was against me, I scrolled up & saw how many upticks Alan’s comment now has… 😀
              Seriously Blazer?! You are obviously not the only individual here who knows how to point the thumbs in their favour, so don’t waste your time doing so. Formulate an intelligent comeback, you are quite capable of doing so. Downticks are a…lazy…option 😛

            • Alan Wilkinson

               /  November 22, 2017

              I hadn’t given any ticks here, patu, but I’ve given that an uptick now.

            • patupaiarehe

               /  November 22, 2017

              I expect you are rather amused, Sir Alan. 😀

            • Alan Wilkinson

               /  November 22, 2017

              Indeed, patu. Like your smiley friend, I was looking forward to a reply and my wife wanted to know why I was grinning.

            • patupaiarehe

               /  November 22, 2017

              Don’t pretend you thought you would get one! As I said earlier,
              Alan : 1
              Blazer : 0
              Well done, e hoa

          • Blazer

             /  November 23, 2017

            [Deleted, petty and personal. PG]

            • Alan Wilkinson

               /  November 23, 2017

              [Deleted response as comment has been deleted. PG]

        • david in aus

           /  November 23, 2017

          Ad hominem attacks says alot about you Blazer. Can’t make an argument without attacking the person. Poor form.

          • patupaiarehe

             /  November 23, 2017

            Here is some friendly advice for you David, since you are new here.
            1. Don’t feed the troll
            2. Don’t feed the troll
            3. Refer to the above

          • Blazer

             /  November 23, 2017

            It is poor form to attack the messenger.Indeed Al spends alot of his time here throwing pithy vitriol,like ‘loony left’,’idiots’ etc at anybody who does not agree with his narrow view of the…world.I always have some ad hom epithets handy, ,just to keep a little balance and remind some, of what easy targets they…present.

          • I don’t want to have to intervene but if you need baby sitting so be it.

  5. I don’t want to have to intervene but if you need baby sitting so be it. As I’ve explained enough already I may just delete.