Inequality has made New Zealand poorer – OECD

A lack of improvement in productivity has been cited as a problem for New Zealand – is that why we feature poorly here?

Rising inequality holds back economic growth — according to a recent report by the Organization for Economic Co-operation and Development (OECD).

The organization, which is primarily composed of high-income countries, analyzed economic growth from 1990 to 2010 and found that almost all 21 examined countries missed out on economic growth due to rising inequalities. (We take a closer look at the countries that were hardest hit in the second half of this post.)

“When income inequality rises, economic growth falls,” the authors of the report concluded.

They explained their findings by pointing out that wealth gaps hold back the skills development of children — particularly those with parents who have a poorer education background. In other words: A lack of access to high-quality and long-term education among poorer citizens in many OECD countries hurts the economy.

Generally I though access to education was good in New Zealand.

Are failures due to financial inequality, or to an inequality of encouragement of parents and ambition of children and young adults. Lack of hope?

RNZ (June 2017) – NZ’s weak productivity in OECD’s sights

New Zealanders enjoy high living standards, but the country’s low labour productivity continues to be a weakness, the latest OECD report says.

In its latest two-yearly review of the economy, the Paris-based organisation forecast robust growth of about 3 percent over the next couple of years, and noted the government’s healthy financial position.

Overall, New Zealanders enjoyed high living standards, with all components of the Better Life Index stronger than the OECD average except for household disposable income and wealth.

“New Zealand’s robust economic growth and high levels of well-being are enviable, even among the highest-performing OECD countries,” OECD chief economist Catherine Mann said.

However, labour productivity remained an Achilles heel for New Zealand – and well below leading OECD countries.

“Improving productivity growth is a major long-term challenge for improving inclusiveness and living standards,” the report said.

New Zealand’s persistently low productivity has long puzzled the OECD, despite expectations the far-reaching reforms of the late 1980s and early 1990s – which the OECD championed – would reverse that.

It blames the weak performance on the country’s distance from its main markets, relatively small population, weak capital investment and a lack of competition internally.

Stuff (September 2017) – Shamubeel Eaqub: New Zealand has a productivity problem

We are working harder to grow the economy, but we aren’t getting much better at it. Poor productivity has plagued New Zealand for the past 40 years.

We have a productivity problem. The problem is not new, there are no easy fixes, and doing more of the same will most certainly not fix it. We should not pretend that any of the political parties have a convincing plan to fix it.

Treasury forecasts

Bill English will have a sound financial foundation to build his government on.  The latest Treasury forecasts were released today (by English).

  • Economic growth – 3% average over the next five years
  • Unemployment to drop to 4.3% by 2020/21
  • 150,000 jobs to be created
  • Average wage to increase by $7,500 to $66,000

Treasury forecasts solid growth, stable finances

Treasury’s latest forecasts show the Government’s programme of responsible economic and fiscal management is delivering benefits for New Zealanders, Finance Minister Bill English says.

“Economic growth is expected to average around 3 per cent over the next five years – considerably stronger than forecast in Budget 2016 – supporting more jobs, falling unemployment and higher incomes,” Mr English says.

“The more positive outlook for the economy is driven by high levels of construction activity, exports (particularly tourism), a growing population and low interest rates.”

The 2016 Half Year Economic and Fiscal Update forecasts unemployment to  drop to 4.3 per cent by 2020/21. Over the same period Treasury expects another 150,000 jobs to be created and the average wage to increase by $7,500 to $66,000.

“While the recent Kaikoura earthquakes have had a major impact on affected families and businesses, they are not expected to disrupt the overall momentum of the economy,” Mr English says.

“However, the earthquakes do highlight the importance of paying off debt in the good times so that the Government can support New Zealand communities in challenging times.”

Treasury estimates the total fiscal cost of the earthquakes will be about $2 billion to $3 billion, some of which will be funded by insurance proceeds or existing funds. Net costs of $1 billion have been included in this year’s forecasts.

The operating balance before gains and losses (OBEGAL) is forecast to be $473 million in surplus this year, rising to $8.5 billion over the forecast period.

The Half Year Update shows net debt peaked as a proportion of GDP in 2015/16 – a year earlier than previously expected – and is expected to fall to 18.8 per cent of GDP by 2020/21.

Mr English says the accompanying Budget Policy Statement confirms the operating allowance will remain at $1.5 billion for each of the next four Budgets.

The capital allowance for Budget 2016 has been increased from $900 million to $3 billion in Budget 2017 and to $2 billion in future Budgets to provide for a number of high quality infrastructure and investment projects.

Contributions to the NZ Super Fund are forecast to restart in 2020/21 once net debt falls below 20 per cent of GDP.

The Half Year Economic and Fiscal Update and Budget Policy Statement can be found hereand here.

Q & A today

Today on NZ Q & A (TV1, 9 am):

Hawkes Bay water bottling

Whena Owen returns to Hawke’s Bay where she finds growing tension over the region’s burgeoning water bottling business.

Water bottling, especially for export, and especially with foreign owned companies involved, its a very contentious issue.

It’s also quite complex. Currently water is free for everyone in New Zealand, unless you choose to buy a supply that has cost money to provide it to you.

If water was charged for who would receive the income? The property owner where the water was sourced? The property owner of the source of the water? The Government? Iwi?

Should we all pay for all of the water we use?

Is rain free? Or could it be taxed?

Immigration and economic growth

Political Editor Corin Dann sits down with Treasury Secretary Gabriel Makhlouf – his take on the immigration debate plus the risks facing our economic growth.

Waikato War defined New Zealand History

We have the first look at a new book that claims the Waikato War was the defining battle in New Zealand history – not Gallipoli. Historian Dr Vincent O’Malley talks about The Great War for New Zealand with Dita de Boni.

http://www.nzhistory.net.nz/war/war-in-waikato

I don’t think the Waikato wars can be defined as ‘the defining battle in New Zealand history, but it is a very significant period in our history that deserves more attention and commemoration.