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.

NZ ‘heading in the right direction’

The latest Roy Morgan poll shows that a clear majority think that New Zealand is ‘heading in the right direction’.

“Generally speaking, do you feel that things in New Zealand are heading in the right direction or would you say things are seriously heading in the wrong direction?”

  • Right direction 55.5%
  • Wrong direction 29%


Meanwhile there has been some positive news over the last week or so.

RNZ: Tax take puts govt back in black

Excluding investment gains and losses, the operating surplus stood at $222 million for the three months to September 30, compared with the $503m loss that had been forecast in May’s budget.

That comes after the government recorded a $1.8 billion surplus in the June 2016 year – four times more than forecast.

The growing economy has again boosted tax revenue for the most recent quarter, which came in above expectations at $17.3bn.

Treasury said the improvement was being driven by a higher corporate tax haul and stronger GST returns from building work and tourists.

Expenses remained close to expectations, at $18.9m.

If investment gains and losses were included, the operating surplus was a larger than expected $2.3bn.

Net debt totalled $63.1bn, or 25 percent of the value of the economy.

Economists are picking the faster growing economy will translate into bigger surpluses in coming years.

RNZ: Unemployment drops to lowest level since 2008

Official figures show the unemployment rate declined to 4.9 percent in the three months to September, or 128,000 people, the lowest rate since December 2008.

That compares to a revised 5 percent jobless rate in the previous June quarter.

“The number of people employed in New Zealand was up 35,000, or 1.4 percent, in the September 2016 quarter,” Statistics New Zealand labour and income statistics manager Mark Gordon said.

“This strong growth in employment, coupled with few unemployed people, pushed the unemployment rate below 5 percent for the first time in nearly eight years.”

Employment outpaced the growth in the number of people entering the workforce, which rose 0.7 percent, or 24,000, to 3.379 million.

Unemployment fell by only 3000.

New Zealand has been ranked the top country in the world for doing business in the World Bank’s 2017 Doing Business Report.

The report, which examines regulations that enhance or constrain business activity, assesses 190 countries and ranks them according on the impacts of their regulatory environment on business.

The report is made up of ten different indicators that affect the life of a business. New Zealand ranks first in half of these including starting a business, dealing with construction permits, registering property, getting credit, and protecting minority investors.

The report also notes:

  • New Zealand’s strength in procurement through our online procurement process (GETS)
  • New Zealand is world leading in ease of starting a business with the smallest number of procedures required and the shortest time to start a new business.
  • New Zealand has made the process of paying taxes easier and cheaper.

Newshub: New Zealand best place to live in the world – study

A survey conducted by London-based think-tank the Legatum Institute considered 104 factors before coming to the conclusion that New Zealand should be crowned the top country on its Prosperity Index.

The Index calculates just how much prosperity a country delivers given its wealth – looking at its per capita GDP and the number of people employed, among a myriad of other variables.

The Index said New Zealand was unrivalled in its ability to turn its wealth into prosperity, describing Aotearoa as model country for delivering “wellbeing and wealth”.

We took top spot on account of our social capital – which measures personal relationship and social network support – and economic quality – which looks at macroeconomic indicators, financial foundations for growth and the economy’s openness.

We were also deemed to have the world’s second best business environment and governance, and were third best in personal freedom.

Our success has been put down to a few factors – with our place in the Commonwealth, our strong civil society and wide open markets all significant, the Legatum Institute says.

While there’s obvious room for improvement New Zealand is doing relatively well.

Are some people too lazy to work?

Laziness, drugs and work ethics have come up a lot recently, and this is in part associated with immigration, with questions asked about why immigrant workers are needed or allowed when there are many unemployed New Zealanders.

This was touched on Q & A last weekend in an  interview with Immigration Minister Michael Woodhouse.

CORIN How, then, can we have a situation where there are 15,000 unemployed labourers in New Zealand, yet 6500 labourers were given work visas. How can that be?

MICHAEL Yeah, look, very good question, and I constantly check to make sure that our skills shortage lists are regionally targeted.

CORIN You’re part of a government that believes in market economics here. Why can’t you let the market do its job? So if there’s a shortage in labourers, a low-skilled job, employers will have to pay more and New Zealanders in other parts of the country will move to where the work is. Isn’t that how the market works?

MICHAEL Well, it can. I think what you’ve done is presuppose that money is the only barrier to people moving to work. Now, what we know and what we’ve said and listened to employers about is that that is one of many barriers.

Geography is definitely one. Skills, attitude, recreational drug and alcohol all prevents some of our young New Zealanders from gaining work.

Now, the Minister of Economic Development, Minister of Social Development and I are working really hard with industry in occupations like truck driving, horticulture, construction, all to make sure that New Zealanders are as ready and able as they can be.

CORIN I’ve got to come back. Why can’t you take some of those people, the hundred or so thousand unemployed, why can’t you get some of those people to move and work? Why not say work for the dole?

MICHAEL Oh, look, we’re certainly incentivising it. I think work for a dole is a bigger step. If we want to have a conversation as a country, let’s do that, but I’m convinced—

CORIN Have you considered it? Have you looked at options like that?

MICHAEL Well, that’s a question better put to Minister Joyce and Minister Tolley. What I know is that they’re working extremely hard with employers to make sure that young New Zealanders are at the front of the queue for those jobs. But, look, we have to have an honest conversation.

When we have 5.1% unemployment, and in some parts of the country significantly lower than that, we are really starting to get to full employment, and for those who are ready, willing and able to find a job and if they want to move to a job, they can definitely find one.

John Key was asked about this on RNZ – Immigrant workers needed due to NZers’ work ethic, drug use – PM

Speaking on Morning Report today, Mr Key admitted high immigration was putting a strain on the country’s infrastructure, but the government would continue to bring in large numbers to fill jobs.

He said this was partly because many employers could not get New Zealanders to work due to problems with drugs or work ethic.

“We bring in people to pick fruit under the RSE (Recognised Seasonal Employer) scheme, and they come from the islands, and they do a fabulous job. And the government has been saying ‘well, OK, there are some unemployed people who live in the Hawke’s Bay, and so why can’t we get them to pick fruit’, and we have been trialling a domestic RSE scheme.

“But go and ask the employers, and they will say some of these people won’t pass a drug test, some of these people won’t turn up for work, some of these people will claim they have health issues later on. So it’s not to say there aren’t great people who transition from Work and Income to work, they do, but it’s equally true that they’re also living in the wrong place, or they just can’t muster what is required to actually work.”

Chloe King responded – see “I am a low waged worker” – taking offence at being criticised despite being a worker herself.

How much of a problem is laziness, work shyness, drugs and lack of work ethic? This morning Q & A explores this further:

Are some young New Zealanders too lazy to take up the jobs that migrants will do? That’s what Immigration Minister Michael Woodhouse suggested on Q+A last week. Jessica Mutch takes up the debate with a farm employer, a long time unionist and an advocate for young workers.

Employment up, unemployment down

The quarterly Labour Market Statistics for the June 2016 quarter were released yesterday by Statistics New Zealand..

Under key facts, labour market at a glance.

  • Unemployment down to 5.1 percent in the June 2016 quarter.
  • Large increase in employment but partly reflects improvements to the HLFS, including better identification of self-employed people.
  • Wage inflation remains subdued.

In short unemployment is down, the number of people in employment is up, and wages are hardly moving for most people.

Unemployment down slightly

The seasonally adjusted unemployment rate decreased to 5.1 percent in the June 2016 quarter (from a revised 5.2 percent in the March 2016 quarter). There were 1,000 fewer people unemployed over the June quarter, down to 131,000.

In seasonally adjusted terms, there were 2,000 fewer women unemployed in the June 2016 quarter. Their unemployment rate decreased 0.3 percentage points to 5.4 percent. The unemployment rate for men decreased 0.1 percentage point, down to 4.7 percent.



The June 2016 quarter estimates suggest employment growth of 2.4 percent (58,000 people), and that the employment rate has reached 66.2 percent. However, some of the changes to the redeveloped HLFS need to be considered when interpreting this quarter’s results. Overall, the new survey appears to be estimating a higher level (or stock) of employment than the previous HLFS.


New labour index

The Reserve Bank is introducing a new labour index that puts less importance on the unemployment rate in an increasingly complex labour market.

ODT reports on a speech by Reserve Bank deputy governor Geoff Bascand in Dunedin yesterday.

New labour index more sensitive

The Reserve Bank has introduced a new labour market index in response to the varying and, at times, contradictory information provided by a wide range of labour market indicators.

Reserve Bank deputy governor Geoff Bascand said in a speech in Dunedin yesterday rapid growth of the workforce, boosted by new migrants, women and older workers, had helped create strong economic growth over the past four years, without driving up inflation.

The main drivers of the rapid growth in labour supply had been population and increased participation.

“Over the past four years, New Zealand’s population has grown by a quarter of a million people, with over half that number coming from net migration.”

The economy had expanded steadily since 2011 and created 180,000 extra jobs but the unemployment rate had declined only modestly, Mr Bascand said.

Quite a few more jobs but more immigrants and returning Kiwis looking for work.

Mr Bascand identified large flows from non-participation into employment, flows that were much higher than those witnessed in other countries.

About two-thirds of the newly employed were non-participants in the previous quarter.

That is a significant shift into employment.

The largest recorded surge in migration in 100 years had contributed to housing and consumer demand and job growth but without the inflation pressures accompanying the previous wave.

Because migrants increased overall spending in the economy, and also increased the labour supply, the net effect on inflationary pressures could be ambiguous, he said.

“Higher labour force participation by women and older workers, together with the characteristics of this particular migration cycle, go a long way to explaining why wage and non-tradeable inflation pressures have proven less than expected.”

Much of the current surge of migration was explained by weakness in the Australian and world economies, making New Zealand a relatively more attractive place to live, Mr Bascand said.

“Because our labour supply has increased at a time when businesses are facing lower world demand, it results in lower wage and inflation pressure.”

Employment and unemployment rates.


That shows a flattening in employment when New Zealand moved into recession around 2007 and a reduction when the Global Financial Crisis hit soon afterwards.

Since 2013 employment has trended upwards again and unemployment has dropped a little.

I don’t know how the new labour surveying will affect ongoing comparisons.

Wages have recently been rising slightly faster than the lowest inflation rate since 1999.



Unemployment drops significantly

The unemployment rate has dropped significantly to 5.3% for the December quarter, down from 6% in the previous quarter and the lowest it has been since March 2009.

Employment grew 0.99, although the participation rate fell 0.3 to 68.4%.

NZ Herald reports Unemployment drops sharply to 5.3pc, near six-year low.

Record inflows of migrants have kept the labour force expanding over the past year, helping limit wage growth in a benign inflation environment, even as employers complain about the difficulty of finding staff.

And wages have risen by more than the inflation rate.

The labour cost index, also released today, showed private sector ordinary time wage inflation rose at an annual pace of 1.6 percent in December, meeting economists’ expectations, and more than the 1.5 percent pace recorded in the public sector. Wage inflation rose 0.4 percent in the quarter across all sectors.

Good news for job seekers, good news for the Government and good news for the economy.

But No Right Turn 28,000 unemployed under National and The Standard manage to find bad news in it, and the comments at The Standard are generally pissy about it.

Unemployment and the economy

It has been reported that unemployment is up and could rise more. NZ Herald:

Unemployment up to 6pc – employment falls first time in three years

New Zealand employment unexpectedly fell for the first time in three years in the third quarter, driven by a decline in part-time workers, and the participation rate declined further from a record high.

Employment fell 0.4 percent in the three months ended September 30, for an annual gain of 1.5 percent, Statistics New Zealand said. The participation rate fell to 68.6 percent from 69.3 percent. The kiwi dollar fell to 66.52 US cents, compared to 67.05 cents immediately before the release.

Employment growth had been expected to grow 0.4 percent in the latest quarter, according to a Reuters survey, while the participation rate was expected to hold at 69.3 percent. The government data did confirm expectations for an increase in the unemployment rate to 6 percent from 5.9 percent, which both the central bank and the market had expected.

However in my day job I have contact with businesses and a number are reporting record sales in November. Is that a blip? Industry specific? Or a sign of recovery that may reflect in later employment statistics?

What signs are you seeing?

Wellington to Invercargill: “Small shithole town. Fuck them”

That’s not from the Government, who have agreed to spend $30 million on keeping the Tiwai smelter going at least until 2017.

It’s not from David Farrar at Kiwiblog, who is expresses his disappointment relatively reasonably.

Rio Tinto screws taxpayers for $30 million

I’ve got no problem with the pricing agreement between Meridian and Rio Tinto, as that is a commercial contract.

But bloody annoyed they screwed $30 million from the taxpayers as a subsidy. I think the Government shouldn’t have given them a cent. If the smelter closes, so be it. It is not the job of taxpayers to subsidise unprofitable industries.

I can understand that from an ideological point of view and have some sympathy for Farrar’s sentiments. But Farrar lives and breathes in Wellington.

But most of the other commenters on Kiwiblog are more angry and more blunt. Especially one Wellingtonian, RRM (he lives a bit of a train ride out of Wellington but works in the capital).

I commented at Kiwiblog:

Don’t forget that Bill English is Clutha/Southland MP – and he will be (or should be) well aware of the growing anger in the south over jobs being moved north and the amount of money being spent of things in the North, especially Christchurch (much of that is understandable) but particularly Auckland.

If Tiwai closed English may not want to venture south, there would be a huge outpouring of angst and anger.

Then an outburst comes from RRM:


Population of Invercargill = 53,000 according to Google.

It’s no secret that it’s a small shithole town at the arse end of the world, with limited employment opportunities, it’s always been that.

The aluminium smelter is a lucky score for them but by rights it should be nothing more than a service centre for the dairy farmers and a few fishing boats.

You’d have to be mad to move there. mad, or retired.

Fuck them.

I replied: RRM – that’s pretty much the Wellington attitude that many down here presume. Perhaps you should start building a lot more windmills. And hope that cold says aren’t calm.


When you say it like that, I realise how selfish I’m being. OF COURSE I should continue to subsidise the lifestyle of Invercargill people. If they want to be basically morally equivalent to beneficiaries or prison inmates, let’s formalise that with a cheque for thirty million dollars.

There, now we own you, you mangy Catholic Scots dogs. Show us a little highland fling now. Go on.

That’s from someone who’s livelihood is in a city that is far more supported by Government spending than any other. Who commutes to work on Government subsidised transport.

And from the thumbs up responses, his views are shared by others from the north.

No wonder the South is getting very annoyed at the gutting of the provinces. Just this wek sightly to the north Dunedin mayor has called for a summit over the announcement the agricultural research in the south (centred at Invermay) is going to be moved north.

Unemployment surges

Southland’s unemployment rate has increased by more than 50 per cent from the March quarter to the June quarter, new figures show.

Invercargill Deputy Mayor Darren Ludlow said the increase in unemployment was a disturbing trend and reflected the flow-on effects of job losses at the Tiwai Pt aluminium smelter.

Southland businesses continued to struggle after the global financial crisis, he said.

It’s hard enough with the downsizing of the Tiwai workforce.

Slightly further north:

Otago unemployment up 37% on year ago

As Otago struggles with layoffs and reduced hours for manufacturing workers, the region’s unemployment rate continues to climb, rising 37% in the year to June.

“Small shithole town. Fuck them.”

And there’s a common feeling that this is how Wellington views the south in general – as well as other regions like the west Coast, the East Coast and Northland.

And they wonder why agriculture and horticulture has trouble attacking New Zealanders to work down here.

If Tiwai closed there would be a huge outpouring of angst and anger from the south. And the frustration and annoyance is growing regardless. The Tiwai news is a relief, but just a pause in the growing concern.

Southerners are already murmuring about politics – see Call for South to form own party. Will they get annoyed enough with Wellington to say “Big shithole Parliament. Fuck them!”

David Clark’s unemployment claims disputed

In an opinion article promoting his $15 minimum wage bill, Minimum wage increase: results may surprise, David Clark stated:

But the relationship between minimum wage and unemployment is not clear cut. Let me give an example. Over nine years between 1990 and 1999, the National government increased the minimum wage by a total of just 70c.

Unemployment soared. By contrast, when Labour increased the minimum wage $5 over the following nine years, unemployment plummeted to the lowest levels in the OECD.

He’s right, the relationship is not clear cut, despite his attempt to suggest there’s a link favourable to his bill. I think unemployment rates tend to reflect international economic conditions.

But Clark’s claim on 1990’s unemployment rates has been disputed on the ODT website:

Fiction or fact?

Submitted by photonz on Wed, 22/08/2012 – 9:53am.

David Clark says “Over nine years between 1990 and 1999, the National government increased the minimum wage by a total of just 70c. Unemployment soared.”

Unemployment over the decade went from 7.2% at the start of 1990 and finished at 7.3%at the end of 1999.

Clark made the same claim on his Facebook page so I asked him about it there:

That’s a poor, dismissive response.

I searched for unemployment statistics and found this:

That seems to refelct what ‘photonz’ claimed in the ODT.

Clark is partly right, unemployment did ‘soar’ in the nineties, but it also came down even more, so his claim is nonsense. The rate tyhen rose a little but was then trending down again when National lost the election in November 1999.

And the rise in unemployment in 1990 was well under way when Labour were in government, having gone from 7.3 in January 1990 to 8.1 in November, continuing to rise to 11.2 in October 1991. The ‘soaring’ began under Labour.

Sloppy or deliberate deceitful?

Clark’s claim that “Over nine years between 1990 and 1999, the National government increased the minimum wage by a total of just 70c. Unemployment soared.” is not supported by facts.

This looks like either very sloppy cherry picking of small trends and applying them to larger time periods – crude political point scoring?

Or deliberate misuse of statistics.

I’ll ask Clark to explain – it’s possible he has some other statistics which measure unemployment differently.


David has responded on Facebook, he doesn’t dispute those statistics. Incredibly, he claims they support his view:

David Clark for Dunedin North Pete when unemployment ranges between 6 & 11% despite stingy minimum wage increases, and it then drops when more significant minimum wage increases are introduced, I think that pretty clearly illustrates my point.

What the data shows is that during a time of “stingy minimum wage increases” unemployment DROPPED from 11% to just over 6%. I don’t see how that illustrates his point.

I doubt David is deliberately cherry picking data to fit his argument, it looks more like he just thinks the data says what he wants it to say.

It’s amazing hat for one of Labour’s main election policies their supportng research is still so shallow and flaky.