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After one year, we look at the economic benchmarks we set when the Labour-NZ First-Greens government took office. It's early days still but the review reveals some trends

After one year, we look at the economic benchmarks we set when the Labour-NZ First-Greens government took office. It's early days still but the review reveals some trends

By David Chaston

A year ago we recorded some benchmarks when the new Government was formed.

These are economic metrics and as such only part of how we should review progress.

But as it is the economic side of life that we cover, we can look at life through that lens.

The improvers:

The government's net debt is significantly lower, down -13.3% in one year.

Exports are up +11.4%, but when measured on a world price basis, the gain is only a tiny +1.9%.

As a proportion of annual GDP, our overseas liabilities have fallen.

GDP growth is up.

Inflation is unchanged.

Mortgage interest rates are lower.

House prices are still rising, up +5.9% (although they have fallen in USD terms).

Tax rates haven't changed.

Immigration is lower.

The population is up +1.4%.

Where things have got weaker:

Consumer confidence is markedly weaker, even though there are still more optimists than pessimists.

The Crown surplus is lower, both because taxes collected are lower and spending is a little higher.

Our exchange rate is lower by -4.9% on a TWI-17 basis. That means our incomes need to be this much higher just to ensure their buying power is not slipping on an international basis, and of course we never got anywhere near that.

Our current account deficit has risen, both in NZD terms and USD terms. It is even higher as a proportion of GDP.

There is no improvement in our jobs market. Gains that we have had for years have stopped.

Median household incomes for the 35-39 age cohort are up only +2.2%, but on an internationally benchmarked basis down -7.9%. Compared with other countries, our household incomes have fallen severely.

Renters are paying +12.5% more for a median three bedroom house.

The health budget is lower (although that is mainly because we had to write off some debt for some DHBs in the prior year who couldn't manage their affairs properly).

Tax rates haven't changed. (Although taxes have gone up noticeably on fuel, and some other user charges.)

There are more people on a public-funded benefit.

The population is up +1.4%.

The scorecard

Ok then, how is the balance of these changes? It will depend on your point of view of course and how you weight them in importance. We are not saying that the 'improvers' are all the result of the new Government's policy actions, nor that the weaker items are as well. All we are recording here is what has happened on their watch.

First up, there are marginally more 'weaker' than 'improver' items. The raw score is 10 improvers with 12 weaker, if you will allow for some items being in both categories (!)

But rather than set out what we think, we would like to hear how you would analyse and assess the progress. The comment facility below is where you should record your judgment.

Here is the data:

Benchmark updated: 19-Oct-18 Source NZ$   NZ$ US$   NZ$ US$
    2008   2017   2018
Consumer confidence ANZ-Roy Morgan 102.3   126.3     117.6  
Crown surplus (bln) Treasury -$0.5   +$12.3 +$8.8   +$8.4 +$5.5
Exchange rate TWI-17 RBNZ 63.3   75.6     71.9  
Government net debt bln Treasury $10.2   $66.3 $47.5   $57.5 $37.6
Country's net overseas liabilities % GDP RBNZ -80.4%   -58.5%     -52.1%  
Exports (Goods + Services) bln pa Stats NZ $45.0   $71.8 $51.4   $80.0 $52.4
Current account deficit bln Stats NZ -$14.1   -$7.5 -$5.4   -$10.5 -$7.0
C/A as % of GDP Stats NZ -7.5%   -2.8%     -3.6%  
Unemployment rate Stats NZ 4.1%   4.6%     4.4%  
Employment rate Stats NZ 65.4%   67.8%     67.5  
Participation rate Stats NZ 68.0%   70.6%     70.6%  
Inflation / CPI Stats NZ +5.1%   +1.9%     +1.9%  
Official cash rate RBNZ 7.50%   1.75%     1.75%  
2 year fixed mortgage rate (avg) 8.56%   4.78%     4.48%  
GDP growth Stats NZ -1.7%   +2.7%     +2.6%  
Median income, week Stats NZ $919   $1,807 $1,294   $1,846 $1,192
Median house price $(000) REINZ $335   $525 $376   $556 $363
Median rent $/week 3br house MBIE $295   $400 $286   $450 $294
Health spending (bln) pa Treasury $11.9   $18.4 $13.2   $16.5 $10.8
Income tax rate (max) IRD 39%   33%     33%  
GST IRD 12.5%   15%     15%  
Annual net permanent migration (000) Stats NZ +4.3   +72.1     +62.7  
Core public service (000) FTE SSC 45.9   48.9     n.a.  
Number of people on a benefit (000) MSD 269.6   277.2     284.3  
Population (mln) Stats NZ 4.270   4.818     4.885  

The US dollar equivalents are recorded so that these benchmarks can be assessed on an exchange-rate adjusted basis. (2017 is NZ$1 = U$0.7163, 2018 is NZ$1 = US$0.6544.)

Deputy Prime Minister Winston Peters can claim "one year on, and New Zealand has a brighter future" but the evidence is that their first year has been a non-transformational toss-up, one where we simply marked time while other countries got further ahead.

My view is that, based on the benchmarks above, we have gone from being a nondescript "quite good" to "decidedly average", and that is being generous. New Zealand should be able to do much better than that. It continues to be disappointing to keep on slipping back internationally.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.


Predictably, given my antipathy to the COL, I think the last year has seen the start of the great stagnation, in a financial sense. I think we are rudderless and gliding on past momentum. It will be interesting to see what happens if sharemarkets and other assets start to really drop. I suspect that much of NZ, let alone some of the political leaders, will not know what to do as it’s been so long since we had a real shakeup. I’ve taken Retired Poppy’s advice and shifted my Kiwisaver to cash, trimmed the family budget and will hunker down.


It’s more like a transition. Under National the economy was juiced up on population growth and rising house prices. This growth was unsustainable and creating massive infrastructure and wage problems that we have only seen the start of. We need to transition to sustainable growth in productivity and real external competitiveness. This is going to be painful. If it’s a stagnation that is actually a win.


Yes but has it been a transition for the better, NO.

However I agree with your Second to last sentence.BUT have we the right Politicians in place to achieve this ????


Everybody else is absolutely clueless and you're this big messiah of the financial world.


This statement is incorrect:

The health budget is lower (although that is mainly because we had to write off some debt for some DHBs in the prior year who couldn't manage their affairs properly).

Health spending is higher, both on a total vote health basis and in terms of what is allocated to DHBs.


Not right. I think you are referring to the 2018/19 budget plan rather than what actually happened over the past year. Health details are here.


Thanks I’ll have a close look.

But yes I am using the 18/19 year budget because .... that is the budget. It’s also the first financial year where the govt has full control over the expenditure.

I’ll have another look at the tables from Treasury but I’ve looked at the health budget every year for the last 5 years and it never goes down no matter who is in government.


Also if you are using 16/17 as a comparison point, I’d caution you to take care this isn’t distorted by the pay equity settlement.


So 2016/17 has about $2.5B of unusual capital expenditure - presumably the debt correction you spoke about.

I don’t think it’s accurate to make statements without adjusting for that. If you normalise that line you get (based on your table):

• 15/16 - $15.3B
• 16/17 - $15.9B (adjusted -$2.5 for extraordinary capital)
• 17/18 - $16.5B
• 18/19 - $17.3B (adjusted -$0.9 for extraordinary capital)

That shows a continual increase and the 18/19 budgeted increase greater than the proceeding years.

I expect the increase in 19/20 to be very big, especially given 18/19 will probably overshoot budget.


All said & done, and apart from some basic political naivety, the CoL has done okay. Considering they didn't have a clue in the beginning, they've got through the first 12 months relatively unscathed. For a bunch of communists, nationalists & socialists, that's pretty good. I'd probably have to give them a 9 for entertainment value but the oil & gas thing & the student thing were just immature politics. I'm a Nat voter, and always will be, but right now, all parties appear to be in the right places. For now.


I concur with the 'gliding on past momentum' meme. For all the painfully idealistic blather, there is much more of the 'we are the Gubmint and we are here to Help' meme, than there is genuine productivity growth. Two aspects jump out for me. Firstly, immigration is still far too high, and still unfocused at that. This drives everything from low productivity to infrastructure woes. Secondly, the much-heralded 'transition' seems to consist of an inglorious mix of Captain's calls unmoored from any advice, and a rush to hand out tax dollars to all and sundry. Tertiary year one is already a crock, the queue for pay rises in the name of Equity, but really FOMO, is long and growing. Meantime business and wealth creation are regarded as little more than cash cows to fund the Munny K-line sprayer. But look on the bright side. There are approaching 200 working groups, who will tell us, in the fullness of time, what is Best for Us...


Skill shortages are still where they were as the construction industry hits peak capacity with little room to grow any further.
The ruling parties insistently promised pre-election to deliver more skill-targeted migration but other than a tweaking of post study work visa on level of qualifications, not much has been done on the skill aspect.
We can train some of our existing working population in trades but not in design or engineering, for which we have to rely on overseas talent.…