Trans Tasman's Political Pulse - 25 May, 2017

Economic Performance: NZ Is Travelling Toward Steady, Prolonged Growth

INSIGHTS ABOUT THE NEWS - You wouldn’t know it reading local newspapers, but NZ is on an economic roll, which puts it in the fast lane toward more than a decade of uninterrupted growth.

It shoves Opposition parties onto the back foot: is it credible to claim the Govt is failing in its economic management? Even a clipboard of appealing proposals doesn’t cut it, against a Govt which is not only piling up surpluses, but delivering more jobs than ever before in NZ’s recent history.

Political stability has been an essential element in NZ’s success. One of the country’s most respected commentators Brian Gaynor noted last week the recent political turmoil in the US clearly indicates the bicameral, federal system of Govt can result in serious political instability.

He goes on to argue Australasian evidence demonstrates NZ’s unicameral structure is working much better than Australia’s bicameral system from both a stability and financial performance point of view. He writes “NZ has had only 3 PMs since 2000 while Aust has had six, and the recent Australian Budget, compared with NZ’s, clearly shows the NZ Govt is managing its financial affairs more effectively than the Aust. Federal Govt.”

But, as Trans-Tasman sees it, the political system and skilled fiscal management are not the only elements in the construction of a new, unfamiliar highway- NZ is travelling toward steady, prolonged growth.

The economy is more broadly based, with tourism, international education, and the spectacular performance of companies like F&P Healthcare (with revenue from overseas markets reaching $850m) and Xero ($295m) now complementing the primary sector. On top of this, the terms of trade are improving and set to boost economic growth.

ANZ Bank economists noted this week, as a rough rule of thumb, a 1% change in the terms of trade boosts real GDP growth by 0.15 percentage points over the subsequent two years. So the roughly 10% uplift in the terms of trade in the 12 months to September this year should provide a real growth boost of around 1.5 percentage points over the next two years.
For analysis and further updates see this week’s edition of the Trans Tasman Political Alert

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