The NZ economy may have been coined the 'rockstar' economy in 2014, but not everyone benefited from this growth, says the Finance Minister as he explains how his 'wellbeing budget' aims to change this

The NZ economy may have been coined the 'rockstar' economy in 2014, but not everyone benefited from this growth, says the Finance Minister as he explains how his 'wellbeing budget' aims to change this
Finance Minister Grant Robertson

Finance Minister Grant Robertson is shunning the “rockstar” term famously used to describe the New Zealand economy by HSBC Australia’s chief economist Paul Bloxham.

Bloxham first gave the New Zealand economy the accolade in 2014, saying it was the world’s “rockstar” performer of that year.

Then in April he told the AM Show: "It's still rock and roll to me in the sense that you guys are still doing quite well when you compare New Zealand to the rest of the world."

However, speaking at a Wellington Chamber of Commerce event on Tuesday, Robertson dismissed the label to make the point that not everyone in New Zealand had benefited from strong economic growth experienced in the past.

He made the comments in the context of setting the scene to describe his “wellbeing budget,” to be delivered on May 30, which would see him use a new framework to consider more than economic factors when allocating taxpayer money.

“While it is very flattering and the New Zealand economy is strong and we are doing better than many of our peers, I think it is a term best avoided,” Robertson said.

“For many New Zealanders the use of this phrase was jarring when they heard it several years ago.

“Sure, we had – and have – GDP growth rates that many other countries around the world envied, but for many New Zealanders, this GDP growth had not translated into higher living standards or better opportunities.

“How could we be a rockstar, they asked, with homelessness, child poverty and inequality on the rise? This gap between rhetoric and reality was in many senses the defining issue of the 2017 election, and what led to the formation of the Coalition Government.

“This gap between rhetoric and reality, between haves and have-nots, between the elites and the people, has been exploited by populists around the globe.

“It is a long-term view of mine, and the parties that make up this Government, that we need to close this gap in an inclusive, not exclusive way, because it is the right thing to do and because we need to do so to ensure the public keep faith and trust in government.

“To do this we need a different view of what constitutes success.

“GDP remains an important measure of activity in an economy, but it doesn’t tell us about the quality of that activity.”

Interestingly, Robertson avoided mentioning GDP per capita, despite repeatedly using this measure to criticise the previous government for relying on population growth, rather than improved productivity, to prop up the economy.

GDP per capita increased 0.9% in the December 2018 year – the lowest annual growth since 2011.

“We need prosperity, but we also need to care about how we sustain and maintain that and who gets to share in it,” Robertson said in his speech, as he continued to explain his wellbeing approach.

“Previous budgets have essentially been a contestable fund. Individual agencies would develop and submit bids. The Finance Minister and a small group of other Ministers then made relatively arbitrary decisions on what would and wouldn’t be funded.

“But this year multiple agencies and Ministers have been expected to contribute towards the budget priorities, and to show how their proposals are contributing to overall wellbeing...

“We know that the old silo approach has not worked. Complex issues like mental health, climate change, the future of work and child poverty require a multi-agency collaborative approach. We have been strongly encouraging collaboration among agencies in the development of Budget bids.”

Robertson said a wellbeing approach also means looking at “intergenerational outcomes”.

“We have to think about the long-term impacts on future generations at the same time as meeting the needs of the present.”

The wellbeing budget priorities are:

  • Creating opportunities for productive businesses, regions, iwi and others to transition to a sustainable and low-emissions economy;
  • Supporting a thriving nation in the digital age through innovation, social and economic opportunities;
  • Reducing child poverty and improving child wellbeing, including addressing family violence;
  • Supporting mental wellbeing for all New Zealanders, with a special focus on under 24-year-olds; and
  • Lifting Māori and Pacific incomes, skills and opportunities.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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11
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There are rock stars like Bruce Springsteen & others like Gary Glitter. Thus the description encapsulates from great to sick. Stupid slogan at the time (and at any time for that matter, think Ireland) and Robertson is completely correct to debunk it. Nothing but a fake headline the media adopted to sell themselves I would suggest.

I mentioned this in a comment last week when some of the cheerleaders suggested that bank economists would never make such statements and put their personal reputation on the line. My response was that the general public would never challenge Bloxham and the media love having Bloxham as a go-to pundit.

At the end of day. Bloxham knows he can disappear with a fat pay cheque. Ultimately he's not responsible for disrupting public sentiment.

"Supporting a thriving nation in the digital age through innovation, social and economic opportunities;" good

Labour are great at abstract ideas that don't translate to anything in reality.

The wellbeing budget priorities are:

Creating opportunities for productive businesses, regions, iwi and others to transition to a sustainable and low-emissions economy;
Supporting a thriving nation in the digital age through innovation, social and economic opportunities;
Reducing child poverty and improving child wellbeing, including addressing family violence;
Supporting mental wellbeing for all New Zealanders, with a special focus on under 24-year-olds; and
Lifting Māori and Pacific incomes, skills and opportunities.

Seems pointless to me when you aren't addressing the root of these issues; unaffordable housing.
So long as all the economic benefit of fiscal or innovative stimulus is primarily capitalised into property values, poverty, real incomes, and economic opportunity are going to continue to suffer.

True. A good example of how well a low property price-to-income ratio works along with good public infrastructure to attractive productive industries is the tech sector in the US relocating from expensive San Francisco and Seattle to cheaper and more commuter-friendly locations such as Dallas-FW, Houston, Raleigh-Durham, Portland OR.
We can't promise high wages or fast-track career growth to overseas talent like other Western nations. All we had was a somewhat high quality of life and peace of mind; features that are fleeing our major population centres rapidly since 2014. What now?

Helen Clarke added rent and income subsidies to low, and more importantly the lower middle income earners.
"saying it was the world’s “rockstar” performer of that year."
Yes an economy measured on GDP type stats, not stats as to the economy being there to support the countries citizens.
The problem is not unaffordablity.. that imply s that goods services are to expensive (thu in some cases maybe)
The problem is a lack of income, wage salaries to the countries citizens.
The Target should be to have incomes of the middle 50% of wage salary earners raised in such a manner the subsidies of the lower part of the 50% would no longer be required.
The 1st sign that the wage/ salary is being corrected would be when these subsidies could be removed from the low middle income earners...Goods houses become affordable , the economy grows, tax take increases and well beings increases and social issues decrease.
Targeting.. ie transferring income by taxation type redistribution to the lower 25% sector to correct "poverty has never worked and historically ends up on a never ending circle.. which we are already on.. eg the clarke step extending working for families subsidies to the lower part of the middle 50%..
This well being just going to be another short sighted step further down the same path, or a re think and correction of a repeating sequence of events going back 40/50 yrs?

If goods/services aren't unaffordable as you say, then the issue is that basic necessities take up too high a proportion of a basic wage. Therefore a higher standard of living becomes unaffordable. Do the subsidies you mention enable the "poor" or do they enable the already well off? How do we encourage/support those at the "bottom" to live within their means whilst at the same time bombarding them with advertising and marketing propaganda, manipulating them to buy more? How do we encourage/support entire societies to live within their environmental means for the same reason?

If forced governmental redistribution isn't the answer how do we encourage/support voluntary redistribution by those who have enough?

Rather than telling the "unskilled" to make themselves more "valuable" how do we instead value them for doing the work that most of us don't want to do?

How do we increase low to middle incomes without increasing the cost of goods/services? The cost plus pricing model doesn't allow that unless we apply maximums.

Techno economy. Lots of trance-like flailing around to a repetitive beat

12
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This country needs a new attitude. Perhaps instead of demanding their rights, they could be grateful for what they have already been given. And they have been given a lot. If I was going to be poor, New Zealand is one of the first places I'd think of. Okay, it's not quite as warm as Australia, so you may not need half the wardrobe you would here, but this nation has been a very successful nursery (tax sponsored) creating many tens of thousands of poor people. Globally we rank right up there. As a result we have some of the best ranges of no-hopers, family abusers, lay-abouts, thieves, thugs, drug smugglers & other nér do wells, per head of population in the OECD.

If I borrow $2million from the bank, and pay myself $200k a year from it, then I’m sure my mates will think I’m a bit of a rockstar too.

It sounds like you hold this as an example of something that is easy to do .. and yet not many people seem to be able to pull it off , not for the lack of trying.

It’s an analogy.

yes , a very poor one .

Why do you suggest that? Our rock star economy is built on people borrowing money to buy existing houses. The economy effectively grows itself on borrowed money with nothing much being produced. A bit like if I were to take out a large loan, chuck it in a savings bank account and set up an automatic payment to myself every month to live on.

What utter bollocks !

Where on the planet is success in any field evenly distributed ?

Apart from a feeling of national pride , I dont share in the success of Team New Zealand Yacht crew , nor do I share in the success of the All Blacks , but I do feel good when they succeed.

We did not share in the success of the Australian decades long resource boom , but do we resent it ?

We should embrace and encourage our achievers in ANY field, and that includes the business sector.

The truth is our economy did not get smacked like others by the GFC , most of us were able to find work .

And our economic success is thanks the Bill English and Dr Alan Bollard who , along with John Key steering this good ship through a terrible storm.

We saw stellar growth in GDP over the period 2008 to 2018, a Trade Surplus , a budget surplus , almost Zero Inflation , fuller employment than ever before and the lowest costs of borrowing in my lifetime .

Now if you were not able to take advantage of all these factors , then that's no ones fault but your own

18
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We did not get hit by the GFC significantly because our banks and funds weren't mixed up in toxic instruments as those overseas were. And the only significant GDP growth we saw seemed to be due to importing more people.

Kind of correct. Aussie banks tapped #18 nillion in bailout liquidity.

https://thewest.com.au/business/finance/banks-have-conveniently-short-me...

SSSSHHHHHH not everybody wants to hear the truth.

Totally agree. Robertsons language in my mind implies that the data coming through may be “rough”. And he is trying to soften the public perception of where the economy is heading. I have very little confidence in this government. And nothing they have done to date has changed my mind. JA is once again MIA.

I don't see why anyone who's been negatively impacted by the housing bubble over the last 10 years would celebrate the 'success' of older generations and the wealthy ripping away their hopes of stability and a better life via massively inflated housing prices, and resisting tooth and nail any attempts to address the problem.

Blaming the victim as you do is appalling. Someone has to pay the higher mortgages and rents for this 'success'.

Indeed. Taking that perspective means that were young Kiwis to apply political pressure to turn the housing affordability situation around and cause house prices to revert to a more historical average, then this would be a success that older Kiwis should celebrate with them. Seems hard to imagine that success being celebrated by many on here.

Boatman,

Well,nobody could accuse you of an excess of charity towards the less fortunate in society. I,like you,am one of the lucky ones and having chosen to make NZ my home over 16 years ago,I am very happy to live here in Mount Maunganui.
However,the picture is less rosy for others. We have the highest youth suicide rate in the developed world. We score very poorly in youth asthma mortality rates,in obesity and diabetes rates. Our environmental score card isn't looking too flash either,while our building industry is a disgrace. Why have we put up tens of thousands of crappy,leaking buildings?
One of Key's 'big ideas'(apart from the flag fiasco) was to turn us into a major Pacific financial hub. What he meant by that was that NZ was to become a serious player in the tax haven stakes. had it not been for the Panama Papers,he might just have succeeded.
In your cosy little world,everyone who does not prosper is a loser,a bludger on society. Perhaps you should spend some time at your local foodbank as a volunteer. It might just open your eyes,though somehow,I doubt it.I feel a little sorry for you.

Labour hates productive small businesses, so this is a pretty unusual announcement. Their policies should be about moving away from creating large monopolies and stop being abusive to small businesses.

Remember last year when Jacinda ran scared of falling business sentiments and created a Business Advisory Council. The the overwhelming majority of members appointed to this council represented large businesses: Xero, Air NZ, McKinsey, Westpac, Mercury, NZ Steel etc. If doesn't show indifference towards the voice of small businesses in NZ, I don't know what does.

The media played up her talk at some dinner event as some sort of connection with the business community. Somehow this was supposed to improve business confidence. I've only had one Labour MP even express interest in talking to me but that only appears to be for the purpose of them taking a jab at a local Council, which doesn't interest me at all as there are more serious issues to address.

In fairness it is often difficult to identify small business people with the time and inclination to participate in this sort of activity. By definition they're usually very busy and focused on daily minutiae

We are like other western countries such as Australia where wage growth is low. The disparity between those at the top and the bottom will always be evident.
Middle NZ who are in the workforce and don't have children are being squeezed.

We have 4.2% unemployed when employers are looking for workers, in Hawkes Bay there is a severe shortage of fruit pickers, in one suburb the unemployment rate is 18%
We have women continuing to have children that they cant afford to keep, these children will become part of the poverty stats.

Drugs are another issue affecting more people who are not contributing to society.

Until the government addresses some of the above the disparity in wealth will continue to grow.

Rockstar economy on a cocaine credit binge, with the crash to come...

Rockstar, sure. But I'd like to know what kind he was referring to. The kind that resisted the lure of drugs and alcohol, thought of the future and still tours today like, U2!
Or....
The kind that sold its soul for the big payday with the record label but couldn't sustain the demands on their body and soul and ended up dead from a self inflicted shotgun blast to the face, laying undiscovered for 4 days...
After a decade of the National party and sell out baby boomers I can see the tour tshirt from here...

Personally U2s music hasn't aged well with me. Nirvana has and Foofighters even more.

Labour unfortunately, always disappoint for Left people.
This is because, esp with no overall majority, they have to work with the existing 'system' which is stacked against any change in philosophy that counters meme of 'realism' and pro business. Without tax change, you will not have enough revenue. Without redistribution, money is continually sucked up by a biased system, to those who earn income from property, the ownership of which (land and houses) continues to be concentrated more and more for the top 30% of population. As earnings fail to keep up with living costs (properly assessed, not excl anything like petrol and housing that keep rising) people can only maintain expected lifestyle by borrowing. When interest rates cannot go down any further, this cannot continue.

rock star economy = high on drugs (real estate bubble) and therefore with a short life expectancy

what about productivity growth

The first rule of productivity growth is you don't talk about productivity growth.

Has been the case since Key left the campaign trail and became PM, and doesn't seem to have changed much since. Politicians are over-wedded to the false measure of GDP alone and reluctant to confront GDP per capita or productivity.

Humm... I wonder how much of our Rockstar Economy at that time (under National) was dependent on GDP growth from property sales? Considering that our "GDP growth had not translated into higher living standards or better opportunities".
Could we have experienced some thing similar to what the Canadian's are going through to have gotten to our 'Rockstar' Multi Million dollar house prices? Here's an interesting article for you from Better Dwelling:
Canada Would Be In A Recession Without Money Laundering, Over $200 Billion Money Laundered Across Canada Over 5 Years.
https://betterdwelling.com/canada-would-be-in-a-recession-without-money-...
The amount of cash laundered over a five year period tops a couple hundred billion. In 2015, the model estimates over $41.2 billion cash was laundered, up 9% from 5 years ago. This represents 2.13% of GDP, a fairly consistent number seen over the five year period. From 2011 to 2015, the total estimated amount of money laundered is $200.5 billion. This excludes reinvestment, typical in the layering and integration process of money laundering.