From global food basket to 'Foodbank Nation' - a year of lost opportunities

Tuesday, 21 December 2021

Community foodbank services have been swept off their feet by the demand.

OPINION: For economist Susan St John, one story sums up a lot about the economy this year: foodbanks.

As the months wore on, inflation ticked up, and the trickle of stories about foodbanks started to build up too.

In Canterbury, white-collar workers reportedly struggled to pay the mortgage and turned to foodbanks, which were able to meet only a quarter of available demand, and during the latest lockdown nearly one-third of the total Pasifika population of New Zealand received a food parcel.

It was like we went from being the world’s food basket to being a nation of foodbanks, where that is almost the preferred way of helping people out. And while the shift might seem sudden, the underlying currents have always been there.

“Covid has exposed extreme need, lots of people going to foodbanks who have never been there before,” St John says.

“What that indicates is that people are running down their balance sheets in a way that is going to make it incredibly difficult to recover.”

When she says people are running down their balance sheets, St John is clearly not talking about everyone.

Reserve Bank statistics from October show household savings are sitting at their highest levels. A fresh set of statistics on this will likely come out soon, but you probably shouldn’t expect any great change.

The number of Teslas on the streets of central Auckland seem to have doubled (Tesla tells me it isn’t able to provide statistics on the number of cars it has sold during lockdown, but a spokeswoman didn’t correct my observation that there are a lot more around all of a sudden). There is also no shortage of people taking a punt on cryptocurrencies, and non-fungible tokens. Some people clearly have money to burn.

It’s likely part of the K-shaped recovery, so named because some parts of the economy head upwards, while others do not (the part of the “k” that points upwards, versus the part that points downwards).

Plenty of Teslas seem to be rolling around Auckland city after this latest lockdown.

So, why the growth in foodbanks? After all, the government books are in good shape, a half-yearly fiscal update shows it has borrowed less than expected, and took more in taxes thanks to strong economic growth. The Government has enough money to pay people who have fallen on hard times so that they can buy food for themselves.

Yet there’s a good argument that more cash might just have been gobbled up by landlords.

Speaking of which, there was a growing opportunity this year to fix the housing shortage with loans taken at more favourable terms than in the past, to build more houses and fund more infrastructure.

Bond buyers were scouring the globe for debt attached to any country with a good credit rating, for bonds that also did not carry too pitiful a yield. A lot were happy if they could find a bond that did not carry a negative yield (where the bond effectively returns less than the buyer invested in it).

Economist Leith van Onselen argues there’s a ‘miserable’ period ahead for New Zealand’s economy.

The Government did lock in lower interest rates for longer by taking out a new longer-term debt instrument, but Auckland Council was ahead of it, and issued a 30-year green bond first. If the Government had been as quick as Auckland, it could have secured an even better interest rate.

The Treasury is predicting a sharp slowdown in house price growth, but the only people who appear to be thriving at the moment are those already on the property ladder.

Then the Reserve Bank continued to keep interest rates on government debt low, or stable, by buying bonds from institutions who had already purchased them.

This quantitative easing was partly compensation for not being able to implement negative interest rates, partly also an attempt to avert a Global Financial Crisis-type situation where nobody could borrow money because government bonds – to which other debt is benchmarked – could not be sold.

Turns out this assessment of things was wrong. The economy was not suffering from a liquidity crisis, or an across-the-board shutdown in demand; it was instead suffering from a series of supply shocks caused by Covid-related shortages and supply chain issues.

All of this extra stimulus drove asset prices upwards, while people sitting at home were bored and ordering more stuff than ever, causing even more problems in the supply chain.

This rippled right through the most in-demand sectors, including construction, which was operating at maximum capacity and could not expand without more skilled personnel and materials.

If this feels like too much of a downer for the holiday season, it need not be. If you are reading this, then chances are there is more money in your bank account than you have seen in there before, you have been double-vaccinated, and have never experienced a Covid-19 death in your family.

Yes, your kids might not be able to afford a house, but the value of your own home is not looking too shabby at all.

In the K-shaped economy there are plenty of people who are still happy enough. They are, after all, on the right part of the K.