Key's 2013 goal: Cut unemployment

PM Key says goal for 2013 is to reduce unemployment rate; Acknowledges NZers "cut us a fair bit of slack" due to headwinds

17th Dec 12, 8:38am by Alex Tarrant

By Alex Tarrant

The government's number one goal for 2013 is to reduce New Zealand's unemployment rate, Prime Minister John Key says.

Unemployment hit 7.3% during the September quarter, its highest rate since 1999. When the figure was released in November, Key said he was surprised by it, as anecdotal evidence had pointed to jobs growth during the three months.

Speaking on TVOne's Breakfast programme on Monday morning, Key acknowledged New Zealanders had cut the government "a fair bit of slack" this year over the economy due to the headwinds it had faced.

But, "in the end, we've got to get on top of that unemployment number," Key said when asked about challenges in 2013.

Consumer confidence up, but pessimism about next year

Later on Monday morning, the Westpac-McDermott Miller Consumer Confidence Survey for the December quarter showed there were more consumers who were pessimistic about 2013 than there were optimists.

However, expectations for the economy over the coming year was only one component in the survey, which showed headline confidence up 8.6 points on the previous quarter, to 111.1.

The headline survey reading is a balance of optimistic/pessimistic responses to five questions: how households’ financial situation has changed over the past year; whether now is a good time to buy a major household item; households’ outlook for their financial situation over the coming year; and their near-term and longer-term outlook for the New Zealand economy as a whole.

Westpac said All the components of the survey improved in December from September:

• While households continue to describe their financial situation as poor on balance (a net 12% said their situation has deteriorated over the past year), they are a lot less gloomy than three months ago (when a net 22% said things had got worse). In fact, this is the least downbeat that households have been since December 2007, shortly before New Zealand went into recession.

• Looking ahead, households are now also cautiously optimistic for their financial situation, with a net 8% expecting things to get better over the coming year – up from 2% in September, and the highest since September last year (in the lead-up to the Rugby World Cup).

• When it comes to the wider economy, households continue to be pessimistic for the near term (a net 6% expect mainly bad times over the year ahead) and optimistic for the longer term (a net 37% expect mainly good times over the next five years). But on both counts this is again the most upbeat result we’ve seen since September last year.

• Given the sharp lift in overall sentiment the increase in households’ professed willingness to spend was relatively small – a net 29% said that it was a good time to buy a major household item, up from 27% last time. Even so, this is again the highest since September 2011 and, before that, mid- 2010.

• Reflecting the improvement in households’ personal and economic outlook, the Expected Conditions Index rose from 102.7 to 112.9, the highest since September last year. The Present Conditions Index didn’t rise quite so much in the quarter – from 102.3 to 108.5 – but overall is now the highest it’s been since December 2010 (when it was also 108.5) and, before that, December 2007.

Consumer confidence

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Source: ANZ Roy Morgan

Source: McDermott Miller

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19 Comments

by Stephen L | 17th Dec 12, 10:52am 1355694771

The only plan to reduce unemployment is presumably to build more houses in Christchurch and Auckland. Given the issues in each city, there is some merit in doing so. What doesn't really make sense is ignoring the effects of the exchange rate on all our tradeable industries, such that this building activity (assuming it does actually get under way) necessarily has to be on the back of foreign debt, and a considerably worsening current account.

Given clear overcapacity in the economy, there is plenty of scope to manage both extra building, and saving manufacturing, tourism, and import substitution industries, without blowing out the current account. But our government and RB policies seem determined not to even consider the options that the rest of the world are implementing (and that the OECD is advising Australia to undertake in terms of its high dollar).

I see a separate report suggesting the current account will plateau this week at "only" 4.9% of GDP. Still very damaging; and given most recent stats have disappointed negatively, you would think at risk of being worse still.

by ngakonui gold | 17th Dec 12, 11:08am 1355695713

Surely the goal every year not just 2013 should be to lower the unemployment rate.

by south paw | 17th Dec 12, 11:15am 1355696105

If Key is really serious which I doubt he is, at least it will be a refreshing change from what his party has done so far.

Maybe they will start paying NZers to leave the country, again.

by steven | 17th Dec 12, 11:59am 1355698763

Practically though you can never get zero un-employment. The Left tried that in the 1970s (in the UK at least) using their own concoction of quasi-keyensian economics and we had inflation and then increasing un-employment as the result, it failed absymally.

Beyond that there is a "natural" or "structural" un-employemnt rate below which it is pretty much impossible to go. This is due to the person(s) having the wrong skills for the job(s) on offer, not capability to learn it, and/or not where the job is.

Its probable that rate is at its lowest 3% and 5% is more likely.

regards

by Hevi Groswaite | 18th Dec 12, 9:40am 1355776812

"Practically though you can never get zero un-employment."

Germany experienced negative unemployment (there where more jobs than workers!) during the second world war. Zero unemployment is possible, but undesirable! It's immidiate effect would be to raise wages, God forbid, thereby clawing back the share of revenue lost to capital over the last few decades.

Regards,

HGW

by Christov | 17th Dec 12, 11:17am 1355696223

It may be less of a challenge for our illustrious Prime Minister to simply direct the Governor to remove the Unemployment rate from the reporting shedule altogether.....avert downgrades, keep that lolly pouring in, think of all the positives.

How's that cycle track coming along the John Boy..?

Head winds..? you mean the expulsion of bullpucky fouled air emitted from your oriface in the course of relating the state of the Nation as you see it going forward....yes ,that is head wind.....

by Alex13 | 17th Dec 12, 11:51am 1355698314

What an awful comment. Take it easy, man...

by Christov | 17th Dec 12, 12:26pm 1355700382

Apologies Alex13 if the comment was a tad on the awful side, and it probaly was, just reflecting the level of discontentment, dissatisfaction, disillusionment with the man in his role as Prime minister, hell even Minister of Tourism for that matter,

I would suggest if he had focused the energy , time and commitment to unemployment he has obviously devoted to sale of Assets I might give him some benifit of the doubt.

But, then Alex I not only doubt it , I guarantee, it's just ramble.

hey , It's Christmas , I'll try cheering up a bit more. Cheers.

by steven | 17th Dec 12, 12:50pm 1355701816

Do a clinton...remove the %s not actively looking as they have given up...guestimates suggest thats 1-1/2 to x2 again at least the actual US reported rate.

regards

by Ralph | 17th Dec 12, 11:41am 1355697699

Well he's right on the money really. When you're a nation who has driven up their housing prices with seemingly unlimited credit and owe banks bazzillions like we do everyone must keep working.

One of the things the Christchurch earthquakes showed us was even if your home collapses and hundeds die, creditors still want to get paid.

by steven | 17th Dec 12, 12:00pm 1355698849

"creditors still want to get paid." yes, and if (when) we have a Greater Depression caused by right wing vooddoo economics the same applies.

regards

by Ralph | 17th Dec 12, 12:10pm 1355699451

Maybe we should follow Bernards example and pay down our debt?

by steven | 17th Dec 12, 12:34pm 1355700840

I have as much as possible 2.5 years back, I sold all my shares etc. So BH is really following PDK and myself.

;)

Be that as it may, you know ppl can make their own minds up...lots are doing the opposite if the housing boom in Auckland is any indication.

If the gloomsters are right then a big % of ppl who I assume are good earners (as they have been buying more or bigger houses) are going to be in dire straights if this goes pear shaped.....

If it doesnt well they'll make a "killing" just who they will sell to I wonder....

regards

by notaneconomist | 20th Dec 12, 10:40am 1355953207

Correct Ralph - and some of the worse demands came from the public service. If a business's books were sitting at the accountants and the building was stuffed the IRD gives very little reprieve. If you didn't fall over in the earthquakes the bureaucrats will certainly have you on your proverbial rear.

My prize for public service - Bully of the Year 2012 is awarded to ACC !!!!

My prize for public service - Most Dysfunctional Organisation of the Year 2012 is awarded to EQC

by Stephen Hulme | 17th Dec 12, 12:17pm 1355699844

But, "in the end, we've got to get on top of that unemployment number," Key said when asked about challenges in 2013.

Along side running a budget surplus for the 2013/14 year? Yeah Right! - just another promise to be broken.

by iconoclast | 17th Dec 12, 12:32pm 1355700761

SH: promise? promises? how do you arrive at such conclusions?

Don't be misled.

It's a goal. Not a visionary goal. Not a promise. Simply words. Sounds good. Goals can be unachieved. Unachievable even.

As the power of the traditional news media diminishes and what transpires as social media, words can be uttered today and forgotten tomorrow. You're not supposed to remember what was offered up as breadcrumbs, to pacify the proletariat, in the guise of serious intent.

It's not even a plan. There is no detail (in the article) on how the goal is to be a achieved. A plan has steps to be undertaken, milestones that can be measured.

by Stephen Hulme | 17th Dec 12, 1:10pm 1355703031

Incredulity aside, here is another promise about to be broken in the not too distant future.

Fonterra AGM: 'Taf will make us stronger' - I guess both the farmer and Fonterra previously claiming the milk money shares as equity made it difficult for the banks' funding such shares. Has the problem really gone away?

by Matt in Auck | 17th Dec 12, 7:09pm 1355724584

I'd like to know how Mr Key plans on reducing unemployment.

Oh thats right, the market will eventually come through and save us, the govt doesn't have to do a thing!

yeah right

by Hevi Groswaite | 18th Dec 12, 10:12am 1355778749

Could all this negativity tauted by the 'talking heads', together with the appropriate solution to be taken by the 'powers that are', be a way to anchor inflation expectations on the near term whilst hoping to remain in power?

Bernanke has effectively piped the tanker directly to the burner, so to speak, by doubling down on the purchases of QE III. All that 'twisting' has done the job, albeit temporarily, on long term inflation expectations. With all that fuel any unhinging of expectations will result in an enormous fire whose consequence would be a rapid rise in interest rates, highly undesirable for a nascent recovery.

Good times are nigh!

HGW