Opinion & Analysis
Is the National government an economic success?
OPINION: Certainly in 2008 National inherited a poisoned chalice. Not in my lifetime has a government had so much international and local adversity to contend with.
National, led by John Key, has had to deal with the Global Financial Crisis, and the Canterbury earthquakes.
No government since the governments of Michael Joseph Savage and Peter Fraser have had to deal with an equivalent situation, and it is widely believed that National has been a good steward and led us through this crisis relatively unscathed.
Certainly our banks were, and are, in better shape than other nations and NZ was able to avoid "quantitative easing", printing money.
But is this belief that we have done better borne out by some simple comparisons of some hard statistics with other nations?
Simple answer is no. We are not among the Pigs (Portugal, Iceland, Greece and Spain) nor are we as bad as the USA where it started.
However, Australia has fared much better than us through the GFC despite the folklore to the contrary, and Australia was led by a Labour government.
It seems that crisis is indifferent to politics so long as the politics delivers up leadership.
The US has the problem of political inertia and a leadership vacuum, whereas NZ and Australia have political systems that sort of work.
MMP leaves us weaker than Australia on the ability to deliver up leadership.
Like all arguments, it has to start with some assumptions. Mine are these.
The cost of the GFC to the world is the sovereign debt accumulation that future workers will have to repay plus the cost of jobs lost (or not created). Fair assumption?
As we are running up to an election, I will analyse some of the hard numbers across three economies - NZ, Australia and the USA - and seek out some questions that are relevant to our election in September.
These number a are extracted from labour force surveys in each country, and from the financial statements produced each year by the crown. They have, for NZ and Australia, a June balance date, and for the USA are to September.
I have used the 2007 year as the last year before the world started falling apart and I have used 2013 as the year the world started turning upwards and started coming out of the GFC.
To put some context to these numbers, all three countries have similar demographics, such as aging populations, baby boomers approaching retirement, and relatively low birth rates.
All are countries that are attractive for differing reasons to migrants, and it is clear that Australia comes first in winning the race to attract migrants, and by a very healthy margin.
All are democracies and all are first world economies. All have a welfare state but with quite different levels of support. The US is a technological industrial economy and Australia and NZ are resource-based economies (in our case agricultural resource mostly). The US is not resource-poor either.
So, five hard numbers over the intervening six years, are a guide.
- GDP growth
- Work force growth
- Job creation
- Increase in debt per current employed worker.
- Unemployment head line numbers
Measure NZ Australia USA
GDP growth between 2007 and 2013 27.35% 68.84% 21.31%
Increase in total work force 6.95% 10.93% 6.06%
Increase in jobs 3.25% 11.61% 2.04%
New jobs to increase in workforce ratio 30.70% 68.95% 22.25%
Increase in debt per worker at 2013 measure date NZ$29,595 A$20,985 US$44,230
Increase in debt per new job created NZ$941,525 A$201,730 US$2,208,740
GDP per worker 2007 NZ$50,604 A$102,792 US$90,616
GDP per worker 2013 NZ$60,257 A$148,867 US$107,654
Headline unemployment 2013 6.2% 3.7% 5.3%
Headline Unemployment 2007 4.3% 7.5% 4.6%
( our numbers exclude asset sales but would not make us worse than the US)
For Australia even the bad times are good. The reason appears to be that they attract more immigrants and get those immigrants working . We on the other hand attract immigrants and don't get them working.
We are the top of this small league table on the growth in declared unemployment.
Conclusion, National cannot campaign on being exceptional financial managers, but equally labour can't campaign on them being an abject failure either. What is relevant is the lost opportunity of immigration. Maybe Winston has a point.
Note the net cost to the government in each country for creating a new job!
The next blog will be to analyse where each country spend the pile of debt that they have accumulated for the next generation of workers.
Bruce Sheppard is the founder of the NZ Shareholders' Association. He was also a member of the FMA establishment board.