Shamubeel Eaqub: Questions in economic entrails
OPINION: Recently released economic activity data begs some big questions.
The headline figures will inevitably lead to bickering about how good or bad they are, depending on which side of the political spectrum you sit. Political parties should not be judged on economic activity on their watch, their policies mostly take many years to take effect.
But the growth figures, or more importantly the entrails, made me want to ask some significant questions.
The most striking for me was the need for a broad conversation on population strategy and immigration, and why the benefits of growth are not spilling over to citizens more widely.
* Damien Grant: Me, the Mad Butcher and my secret for staying sane in traffic jams
* Nadine Chalmers-Ross: Why I love (and hate) The Bachelor
* Alison Mau: It's time to teach teenage boys about consent – whether they like it or not
I worry about what will happen to Canterbury, now the rebuild has peaked. I worry about growth in exports like dairy and tourism without looking at environmental constraints.
The New Zealand economy grew by just over 3 per cent in 2016. That was the second best year since the recession in 2008 and 2009, when the economy shrank in each year.
The broad measure of economic activity reported in press releases is deceptive. Much of the growth in recent years has been from population growth. Economic activity per person, which is a slightly better measure of prosperity, has grown by less than 1 per cent a year, for the last two years. The broader trend in recent years has been lower than the 'normal' we have seen in the 1990s and first half of 2000s.
Since the recession of 2007 and 2008, New Zealand seems to be trapped in low growth in economic activity person. Growth in the economy is not improving the lot of New Zealanders. This asks two obvious questions.
First, we need to seriously revive the questions of productivity and how we can encourage it with education and entrepreneurship. I am convinced our debt and housing dominated economy will not deliver long term prosperity.
Second, so much of our recent economic growth is because of population growth. Yet, we have no population strategy. When there is a mismatch between growth in population, and the growth in the economic prosperity of citizens, there is a potential for a significant backlash – whatever the merits of immigration may be.
In the economic accounting, the earthquakes in Canterbury are mainly counted in terms of the clean up and rebuild. There was so much construction that Canterbury poured a quarter of all concrete in New Zealand in 2014, up from 15 per cent before the earthquakes. But since 2014, construction work and concrete use has been falling. The construction boom is slowing and no longer boosting economic growth in Canterbury, or nationally.
I worry about how the Canterbury economy will cope now that the rebuild has peaked. Will the traditional industries revive?
Elsewhere, economic growth is spreading. Measured by jobs for example, Auckland has been the strongest recovery since the recession in 2008, but there is also a spring in jobs in the regions. Rising commodity prices and better weather conditions have helped boost rural production, processing and related activities. Dairy exports have increased by 80 per cent since the recession. Massive increase in tourism has also helped.
Both the increase in tourism and dairy in the past decade, begs a huge question of environmental sustainability. Both industries are intensive. Whether it's cows or tourists, putting lots of them on concentrated areas leads to tension.
In Iceland, which has also experienced a tourism boom in the last decade, there is a public backlash against tourism, because of the crowding at pristine environments and shortage of rental properties for locals.
We can celebrate the growth in the economy and in some industries, but we need to put that in the context of environmental and social limits. And where there are costs, we should manage those – a job for politicians.
The economic data is good at the superficial level. The details are more modest. More importantly, the makeup of the economy and changing mix should raise some big issues for all of us to think about.
- Sunday Star Times