The Annual Report: How NZ economy has changed a year into the Government
Saturday, 23 November 2024
This analysis is part of The Annual Report, a Post series marking the first year in of the coalition Government.
ANALYSIS: Politicians don’t have control over the economy, and perhaps less influence than many would care to admit.
But they are quick to claim the accolades and often need to carry the can when unemployment or inflation rises or falls.
So one year on from assuming power, how are the numbers looking for the coalition Government?
The economy has shrunk slightly, despite population growth
GDP in the three months to end of June was about 0.1% lower than in either the September or December quarters last year.
The figures look worse on a “per capita basis”, given that the population has been rising.
GDP per capita was down about 1.5% on the three months to the end of September last year.
Unemployment has risen, but from a moderate base
People are about 20% more likely to be officially unemployed and 13% more likely to be receiving Jobseeker support.
Stats NZ estimates there were 118,000 unemployed during the three months to September last year, when the unemployment rate was recorded at 3.9%.
That edged up to 122,000 people, or 4%, in the December quarter, which is arguably the more relevant starting point.
Official unemployment was last recorded at 4.8% in the three months to the end of September this year, when 148,000 people were deemed officially unemployed.
Reflecting that, the number of people receiving Jobseeker support stood at 204,765 at the end of September, up from 181,509 at the end of September last year.
Inflation move depends on starting point, but pay is higher
Annual inflation has fallen sharply to just 2.2% in the three months to the end of September, from 5.6% in the same period last year.
In retrospect, inflation appears to have been tamed about the same time that National was forming a government.
Stats NZ samples prices over a three-month period, rather than just at the end of each quarter.
It reported prices rose 1.8% during the three months to end of September last year, compared with the previous quarter, but only 0.5% during the three months to the end of December last year.
Quarterly inflation was last measured at 0.6% in the three months to the end of September, and at 0.4% and 0.6% in the two intervening quarters, so quarterly inflation has been fairly static over the past year.
Average hourly earnings were $42.06 an hour in the three months to the end of September when overtime rates were included, up 4% on a year ago, or up nearly 1.8% in inflation-adjusted terms.
That is not counting the fillip from adjustments to income-tax bands.
Interest rates have fallen sharply, but house prices are a little weaker
The official cash rate was 5.5% when the Government formed and has since fallen to 4.75%.
One-year fixed mortgage rates averaged about 7.3% at the start of November last year and are now down to about 5.9%, saving someone with a $500,000, 25-year mortgage about $100 a week.
Falling interest rates haven’t yet pushed up house prices.
The average home cost $902,231 in the three months to the end of October, down 1.6% from $917,017 last November, according to Quotable Value.
Net migration has fallen off a cliff
Stats NZ now knows with a fairly high level of confidence that about a net 6670 people immigrated to New Zealand in November last year.
It estimates with less certainty that fell to 2964 in the month of August, continuing the steady downward trend in net migration that kicked off in March last year.
Import, exports and the dollar unremarkable, shares higher
The country recorded a $2.1 billion trade deficit in September, down from $2.4b the same month a year prior.
That continued the trend towards slightly lower deficits under the coalition Government.
Kiwis travelling overseas will find the value of their money very little changed since it came to office, with the Kiwi dollar trading a fraction down, about A90c, US59c and €0.56.
The NZX Top-50 Index stood at 12,796 on November 21, up 15% over the year.
Government debt has risen and its deficit is still a headache
Net core Crown debt stood at a little under $178b at the end of September.
An exact comparison with a relevant month is difficult because the Government’s preferred way of measuring its debt has changed.
But that was up from $155b in June last year.
It ran an operating (Obegal) deficit of $4.2b in the three months to the end of September.
That compares with a $2.5b deficit run up by the former government during the same period last year.
But business and consumer confidence on the rise
Last month, a net 66% of businesses believed the economy would be in better shape in a year’s time, according to an ANZ survey, compared with a net 23% in October last year as bosses waited for the coalition Government to form.
The bank’s index of consumer confidence showed a smaller improvement, standing at 91 points last month versus 88 points a year prior.
The economic data suggests that overall, businesses were premature in being upbeat last year – unless perhaps they were very focused on interest rates.