Robertson’s nervous wait for this week’s GDP data

Business

After years of slamming the previous Government for low GDP per capita growth, the Finance Minister is looking down the barrel of yet another very bad quarter of per person growth

18th Jun 18, 12:31pm by Jason Walls

Finance Minister Grant Robertson will be waiting nervously for this week’s GDP figures, as forecasts show the numbers aren’t likely to paint “a pretty picture.”

GDP per capita – an area Robertson was particularly critical of the previous Government’s record on – is expected to continue its decline on Thursday, when first-quarter GDP data is released by Stats NZ.

ASB’s forecast for per capita economic growth shows it dropping by 0.1% over the quarter, cancelling out the previous quarter’s 0.1% lift and leaving economic activity broadly flat over the six months to March 2018.

That’s comprised of a 0.4% increase in GDP growth in the quarter, minus the 0.5% increase in population over the same period.

“It’s not a pretty picture for per capita GDP growth right now. We’re essentially growing at the rate of population,” ASB senior economist Jane Turner says.

Last quarter, GDP per capita fell to just 0.1% - down from 0.2% the quarter before that.

In Opposition, Robertson’s biggest criticism of the economy was the per capita growth figure.

“After nine years, National is asleep at the wheel. The economy is going backwards on a per person basis…” he said this time last year, after GDP data showed per capita growth falling for the second quarter in a row.

Speaking to Interest.co.nz before the election, he was making similar points.

“There are some good, solid indicators in there,” Robertson said, when asked about the economy. “But then there are other ones, like GDP per capita, which is not so good… The argument is, are people getting a fair share in prosperity?”

Recently, Opposition Finance Spokeswoman Amy Adams took aim at Robertson over this issue in the House.

In response, Robertson quoted Former Finance Minister Steven Joyce, saying “it pays not to look at quarter-by-quarter analysis when it comes to GDP per capita growth.”

Speaking to Interest.co.nz on Monday, Adams said for all his “big talk about not relying on population growth for economic growth, it is clear that that is exactly what he is in fact doing.”

The rest of Thursday’s GDP numbers are not expected to be much to write home about either.

Westpac is expecting just a 0.4% quarterly increase – “this would mark a third consecutive quarter of subdued growth in activity,” Senior Economist Michael Gordon says.

“In recent times we’ve been highlighting that New Zealand’s economic cycle has now entered a more mature phase, with earlier drivers of growth such as house prices and construction activity having passed their prime.”

Westpac’s forecast is well below both the Reserve Bank and Treasury’s 0.7% quarterly growth picks.

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45 Comments

by Zack Brando | 18th Jun 18, 12:37pm 1529282276

GDP is a crude measure at best.

by antonymouse | 18th Jun 18, 12:49pm 1529282942

Some years ago I posted a little quip on the value of the GDP measurements.
For those that didn't see it, here it is again.
It's as appropriate as then.

GDP tracks consumption; it is ridiculous to say that an economy grows when people consume more. This makes sense to even small children who understand that you "grow" or get richer by saving not spending.

The following joke perfectly explains the ludicrosity of GDP.

Two Keynesian economists, John Maynard Keynes and Paul Krugman, were walking down the street one day when they passed two large piles of dog shit.

Keynes said to Krugman, "I'll pay you $20,000 to eat one of those piles of shit."
Krugman agrees and chooses one of the piles and eats it.
Keynes pays him his $20,000.

Then Krugman, feeling richer, says, "I'll pay you $20,000 to eat the other pile of shit." Keynes, feeling bad about the money he lost says okay, and eats the shit.
Krugman pays him the $20,000.

They resume walking down the street.

After a while, Krugman says, "You know, I don't feel very good. We both have the same amount of money as when we started. The only difference is we've both eaten shit."

Keynes says: "Ah, but you're ignoring the fact that we've increased the GDP by $40,000.

That is really all you need to know about GDP... it's all dogshit.

by J.C. | 18th Jun 18, 1:38pm 1529285924

That is really all you need to know about GDP... it's all dogshit.

Not if you're a populist govt who wants to paint a picture based on immigration-driven GDP data. It can actually be quite powerful as to how good things are economically, even if that is not being felt in h'holds or in businesses.

by NorthernLights | 18th Jun 18, 1:43pm 1529286220

Was that necessary JC ?
Regardless of your metaphor the world uses GDP as a guide regardless of its consumption attributes which are only part of the GDP equation.
A more important figure is global debt today not NZs GDP and what strategies NZs govt has in place when GFC2 hits. For starters NZers savings bank deposits remain uninsured today ?
This should be dealt with by this new government immediately

by J.C. | 18th Jun 18, 3:02pm 1529290933

I think you missed the point. NZ's GDP is being goosed by immigration without any accompanying investment in infrastructure and housing; therefore, living standards are going down. GDP is still used by institutions as a broad indicator of economic growth.

by NorthernLights | 19th Jun 18, 3:51am 1529337085

JC yes I agree Aucklands standard of living is down that’s the reason I took the offer I couldn’t refuse & live elsewhere in the world.
GDP is merely a guide & includes many factors but you appear to already know this
NZ will soon be experiencing heavy investment in infrastructure from China so even the CCP realizes there needs to be an investment made to improve Auckland
Good Luck

by Advisor | 18th Jun 18, 1:28pm 1529285339

Haha. That is exactly what GDP is all about.
Economists and bankers push us to consume more even if we have to do so on borrowed money.
I agree with your point on consumption vs savings.One of the biggest fallacies of GDP as a measure of economic growth and success is the paradox of thrift.
Our national savings rate in 2016 and 2017 were at worrying levels of -2.8% and -3.2% of disposable household income, which means we are borrowing and cannibalizing our past savings at an alarming rate. If our average earners were to become financially prudent and hold larger parts of their income in savings and spend less would improve overall financial well-being but from a macroeconomic perspective would lead to a fall in aggregate demand and cause a nationwide recession.

by David Chaston | 18th Jun 18, 2:02pm 1529287335

Just for the record, GDP doesn't just track "consumption". That is a superficial definition. It measures the output of an economy, the final goods and services that are bought by the final user. You can measure it in three alternative ways, each of which should give the same result.

First, by a production approach. Secondly, by an income approach. Or thirdly, by an expenditure approach (which is where the myth of 'consumption' comes from). In fact 'consumption' is only one of four elements in this third approach, the others being 'investment', 'government spending', and 'net exports'.

Perhaps the reason the 'consumption' myth survives is that the third 'Expenditure' approach is the most timely one as far as measurement goes, so it gets reported first.

This is not to say that GDP isn't a flawed measurement of economic activity. I agree it is. But it is not because it is focused only on 'consumption'; it is because in a modern economy, so much economic activity seems to get missed in the traditional measurement processes (think, about the building of the value of intellectual property for instance, or the inherent growing values in software-based activity, etc). And the unpaid / sharing economy gets missed altogether. Or values-based activity.

Having said that, no-one has come up with something better that GDP ... yet.

Grant Robertson is going to try with his brave attempt to produce his 2019 Budget on a 'well-being' basis (Treasury started this work in 2015. And they have started to monitor 'living standards' more intensively.) These sorts of initiatives need to be tried and tested before we can start to claim there are better ways to meaure an economy's output than GDP.

by Hamish | 18th Jun 18, 2:00pm 1529287201

'And the unpaid / sharing economy gets missed altogether. Or values-based activity'

I've been working a 4 day/32 hour week for the last 2 1/2 years. By choice. I've not been happier since I started working in an office. Not sure what that's done to GDP though.

by David Chaston | 18th Jun 18, 2:04pm 1529287448

GDP is an output measure, not an input measure.

by Noncents | 18th Jun 18, 8:00pm 1529308835

"It measures the output of an economy, the final goods and services that are bought by the final user."

Sounds like consumption to me.

by JimboJones | 18th Jun 18, 2:33pm 1529289196

I would say it is a fairly good measure. If you list countries by GDP per capita, the rich countries come at the top and the poor countries at the bottom. https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita
If you look at the countries ahead of us I would say most of them are genuinely richer and the countries below us are genuinely poorer.

by Kate | 13th Jul 18, 9:38pm 1531474691

Wealth (GDP per capita) is but one measure of success. Check out the Happy Planet Index http://happyplanetindex.org/

(New Economics Foundation) where Costa Rica repeatedly performs 1st in the world;

http://happyplanetindex.org/countries/costa-rica

by Boatman | 18th Jun 18, 9:16pm 1529313416

Even if GDP is a crude measure of our economic success and growth , its a bit like democracy ........... until something better comes along we should probably stick with it

by steven | 20th Jun 18, 2:34pm 1529462083

hence why converting it to gdp/per capita is an improvement.

by powerdownkiwi | 18th Jun 18, 1:16pm 1529284568

Yes, it's a nonsense measure. As is any count which avoids including realities.

But it is a count, and some of it involves some of the real-time planetary draw-down. And - given that it's 'growth' is quoted in percentage terms, we're in exponential territory. Per-head real growth - per-head resource availability and energy availability - actually peaked about 1980, globally.

If Robertson is attempting to kick that outdated can further down the road, not only is it sad to see, but it's just wasting time.

And there ain't much of that left now.

by Didge | 18th Jun 18, 2:29pm 1529288978

We need much more of your input Powerdown.

by PocketAces | 18th Jun 18, 2:39pm 1529289555

I'd have just said "growth schmowth", it's time to learn to live without it, past time, actually.

by Shoreman | 18th Jun 18, 1:41pm 1529286061

No excuses now, their in the driving seat stand up and be counted Robertson....

by Didge | 18th Jun 18, 1:57pm 1529287037

Nine years of stupid growth in house prices and subsequent huge rent increases was surely going to catch up with the NZ economy, especially that of Auckland. So stand up and be counted National party and its myopic and/or selfish supporters.

by Ex Expat | 18th Jun 18, 2:03pm 1529287381

Those of us with the smarts knew the COL was stuffed from the day they published these https://www.labour.org.nz/fiscalplans-forecasts As my boss used to say, "suck it up Princess and deal the hand you have, not the one you wanted" That's what realists do.

by Didge | 18th Jun 18, 2:15pm 1529288140

"Those of us with the smarts" What arrogance, especially from the imbecile myopic cohort that helped to bring the entire NZ economy to the verge of a possible depression.

by Yankiwi | 18th Jun 18, 2:33pm 1529289234

There are serious issues with the fiscal plans that Labour put forward prior to the election. Anyone conversant with the history of NZ GDP growth understood the porkies that were in their fiscal plan. The concept of averaging around 4.5% GDP increase per annum over the five years after election... well, pull my other finger.

As to house price increases, the Labour government prior to National had larger price increases by percentage terms. Housing unaffordability causes are not confined to a single party or government. It seems that all are complicit as based on history. Blaming one party or the other results in further division, but doesn't result in improved affordability. Kiwibuild looks like it is on the same trajectory of housing numbers gain as what the National government was doing (which of course, was not much at all). Serious measures such as the implementation of a real capital gains tax, foreign buyer restrictions, etc. well, I am am waiting and am likely to be waiting for a very long time.

by Foyle | 18th Jun 18, 3:55pm 1529294143

National's building consents rate 2011-2017 (up from ~11000/year to 33500/year in fairly linear manner) actually looks like it could well exceed the Coalition's build rate (including kiwibuild fiasco) if the 3-4000/year annual increases had continued. Lets wait and see what the Coalition actually manage vs their promises.

by Ex Expat | 18th Jun 18, 2:38pm 1529289516

Budgeting 101. A pity more lefties don't take the course. Their lack of those budgeting skills is palpable. The upside of their incompetence is that my employment prospects in corporate financial advice get better with every passing day.

by Retired-Poppy | 18th Jun 18, 3:09pm 1529291358

Ex Expat, besides your beliefs, we can't risk any of the worlds 7.6 Billion population, believing you are of a higher order - can we?

Your "those of us with smarts" comment got completely lost in translation. It should have read "all members of the COW have been left smarting"

by Shoreman | 19th Jun 18, 10:27am 1529360860

Look at the facts Didge let's all look for a better outcome than just blaming the last Government !
2008 to 2017 the HPI increased 69%
1999 to 2008 the HPI increased 102%
1990 to 1999 the HPI increased 49%
No matter how far you go back in History Labour has the worse record for HPI on their watch.
Personally I see a capital gains tax on ALL capital gains ( not just property ) includes family homes, business sales everything, modeling on this suggests it to be very effect at 5-7%. I feel everyone across the political system could accept this ? your thoughts ? and it would be a massive windfall for the Government coffers that could allow the Government to seriously make inroads to making a better life for all Kiwi's !

by steven | 20th Jun 18, 2:38pm 1529462296

9~18 (HC's Govn was little better) years of doing nothing to control a runaway train. Enough voter un-willingness, legislation, trade agreements and other constraints stopping drastic actions mean really Labour is not going to do well.. Even given that its better than more years of do nothing National.

by Didge | 18th Jun 18, 2:28pm 1529288891

By the way the words 'there', 'their' and correctly the contraction 'they're' have very different meanings.

by kane02 | 18th Jun 18, 3:13pm 1529291630

those that say GDP is a nonsense measure are imbeciles. it is internationally recognised as a measure of how an economy is performing. to say its inaccurate, or whatever is a nonsense. what’s more NZ takes a very conservative approach to GDP as opposed to other countries. Australia for example include an amount (guesstimate) for the black economy. We don't. Internationally economists factor these things in. To then turn this around and say Robertson’s "wellbeing " measure is more accurate is just plain silly. Unless it is recognised internationally no one will care. and as far as I’m concerned it will be a waste of time, money and effort and get consigned to the scrapheap.

by Zack Brando | 18th Jun 18, 10:29pm 1529317752

@ kane02

The creator(s) of GDP said it should NOT be used as a primary measure of growth. So do you also consider the creators of the GDP measure to be "imbeciles"? If so, what does that say for your beloved measure!?

by kane02 | 18th Jun 18, 10:19pm 1529317194

What a load of crock @ Brando. I suppose you would prefer to measure nz performance against how “you feel”? Haha what a joke.

by Zack Brando | 18th Jun 18, 10:25pm 1529317524

The modern concept of GDP was first developed by Simon Kuznets for a US Congress report in 1934. In this report, Kuznets warned against its use as a measure of welfare.

https://en.wikipedia.org/wiki/Gross_domestic_product#Limitations_at_int…

by Ocelot | 19th Jun 18, 3:39am 1529336364

He's totally right it's a bad measure of welfare. You can have plenty of money flow but poor equality.

But it's still the only and best measure of economic growth or contraction. Which are vital for monitoring which direction the volume of money flow is heading.

by Didge | 18th Jun 18, 3:41pm 1529293298

It is of course very true that there was a house price boom under Labour but National in the following nine years allowed the situation to become a horrendous risk to our entire economy. If Labour does not show a vast improvement regarding housing supply, I will once again be a protest voter. Two party systems do not work but kiwis have yet to wake up to the real power of MMP.

by PocketAces | 18th Jun 18, 3:43pm 1529293435

The boom in prices under Clark's Labour came after a number of years of prices being quite severely suppressed.

by Yankiwi | 18th Jun 18, 7:03pm 1529305412

I would recommend looking at the data prior to making such specious claims.

I would suggest looking at the data here: https://www.rbnz.govt.nz/statistics/key-graphs/key-graph-house-price-va…

It is best to download the xls spreadsheet data via the download link available in the above URL.

For consistency purposes, I looked at the HPI in the spreadsheet data for 9/2017 and compared it to 9/2008, and then compared that to 9/1999. In order to see the "severely suppressed" prices claimed by PA above, I added another data point for 9/1990. In all, four dates, three deltas.

2008 to 2017 the HPI increased 69%
1999 to 2008 the HPI increased 102%
1990 to 1999 the HPI increased 49%

Yes, the nine years prior to Clark's Labour was the least of the three, with far and away the largest gain being in the aforementioned Clark Labour government. I'd politely suggest that a 50% gain in nine years should not be considered to be that the prices were "severely suppressed". If this description is to be accurate, then what price change in 9 years should be considered to be normal? Would it be the ~70% of the most recent 9 years? Or god forbid, the 100% of the Clark years?

by Roger Witherspoon | 18th Jun 18, 5:54pm 1529301249

Good to see the message that GDP per capita growth being non existent has eventually been recognised. We have been deluding ourselves we have been doing well, when all we have been doing is borrowing more and flogging our assets to foreigners and new residents fresh off the plane.

I suspect the next act in the saga will be a surprise drop in the NZD and an all too brief period of export profitability. I doubt if we will have the wit to resist the easy money of borrowing, and flogging residency and assets for long though. A leopard does not change it's spots and bankers make the rules in our debt farm economy. Yet there is hope...

by JB | 19th Jun 18, 7:34am 1529350444

When you have borrowed up to your eyeballs and aren't prepared to QE or just print baby print, then flogging our assets to foreigners is the only option to fund our 47 consecutive years of current account deficits.

Buffett - …. Eventually will lead to a nation of sharecroppers not shareholders !

by Boatman | 18th Jun 18, 9:25pm 1529313922

What a bloody fiasco ........Robertson my be in the driving seat but he does no have his seatbelt on, Winston is sitting in the back seat on top of the steering wheel , Shane Jones is behaving like the drunk passenger at a Police Roadblock shouting obscenities at the Constable, Jacinda is banged up the solo-mum in the passenger seat being rushed to hospital , and the Greens are sitting on the roof , either all high on meth or smoking crack singing the lyrics of the Bob Dylan song .......... The times they are a changing .

by Shoreman | 19th Jun 18, 10:19am 1529360343

Brilliantly said Boatman I'd love a round up of the day in such a format everyday Thankyou !!!!!!!!!!!!!!!

by skudiv | 19th Jun 18, 8:27am 1529353666

What happens when you stuff more people into courses and uni where they are even less than productive, not to mention living on free handouts.

by bilbo | 19th Jun 18, 9:27am 1529357278

To be fair even if Labour trained rocket surgeons they'd go overseas. Why live in a country where every dollar goes half the distance. Housing, food, healthcare all poor value for money here.

by bilbo | 19th Jun 18, 9:20am 1529356837

Better call up immigration NZ and import some more GDP growth. Oh wait.. it's per capita and productive people don't want to live in some bung-hole monopoly island that only rewards rent seekers and box tickers. Plan B: pay people to dig holes and filling them in again (as long as it's not oil exploration).

by waymad | 19th Jun 18, 12:01pm 1529366470

Well, common taters, to return to the Finance Minster's nervous wait for GDP, hows about them Nurses? 15% not enough it seems to avert 1951. And then there's the Teachers, the allied/administrative tertiary staffers, the Universities, the Police, Defence. Then it osmosicises (this might be a neologism but yer get the gist - it leaks out sideways) to local government, private health, the aged care sector, the private welfare agencies - and all because relativities have been upended.

Thing is, that if'n yer trumpet a Massive Fiscally Conservative Surplus from the rooftops, all a them Peasants scruffling through the dumpsters in the alley are gonna look up and say 'I want me some o'That!'

Raising expectations like this, and being known to be beholden to the TU's (what's left of 'em - but they are embedded in the Public Sector) is just Act 1. Nurses are gonna cost us 0.25 billion per year on the existing offer, over which they are striking. I don't begrudge them one cent, given the conditions they work under, the low standards of behaviour of far too many of those presenting for or under treatment, and the occasionally terrible buildings they have to work in.

But once ya lets this snowball loose at the top of the peak, where does it stop? And what, the Hon FM must be thinking, is that Snowball gonna do to his Fiscally Conservative Surplus? Downhill, all the way....