By Alex Tarrant
We are in the proverbial. We have been back in the proverbial for at least six months and we will likely stay there for some time.
That was basically the message from Finance Minister Bill English to Parliament’s Finance and Expenditure Committee today.
Yeah, he joined the Prime Minister in saying they could not rule out there was a technical recession in the second half of last year, but he went further.
The recovery is going to continue to have some challenges.
Sure, getting heavier..
If you thought that households actually need to reduce that level of debt, then there would still be some considerable adjustment for the economy to go through.
Where we were talking about economic growth, then that build-up of debt has been very substantial, and even holding it flat means that in the short term we wouldn’t be expecting consumer spending or the housing market to pick up in a big hurry.
Consumer spending and the housing market were generally the drivers of growth out of a recession, and were to a large extent absent this time around, he said.
Righto. Let's look at that last one in parts:
"If you thought households actually need to reduce that level of debt..."
Er, yeah I do. But you don't need to listen to me on this one because your government is still saying private debt in this country is too high.
"...then there would still be some considerable adjustment for the economy to go through."
Considerable adjustment.
Thesaurus: Considerable
Part of Speech: adjective
Definition: abundant, large
Synonyms: ample, appreciable, astronomical, big, bountiful, comfortable, commodious, extensive, goodly, great, hefty, huge, large-scale, lavish, major, marked, much, noticeable, plentiful, pretty, reasonable, respectable, sizable, substantial, tidy, tolerable
Antonyms: inconsiderable, insignificant, little, slight, small, undistinguished, unnoticeable
My favourite synonym above is astronomical, but that might be being a bit mean to the Finance Minister. How about major?
Right, so there are still some major adjustments to come.
John Key good cop: Bill English bad cop
But no worries, because the PM's much more optimistic about 2011. He's had some good vibes, and hey, businesses are regaining confidence to employ people again.
Key is ruthless with the negatives, brushing them aside like King Kong swatting at fighter planes. A slow down in Australia and the chances of an asset bubble bursting in China may be slight worries, but we shouldn't talk ourselves back into recession, so shhhh.
Back to jobs. More employment means ordainary folk might be a bit more confident themselves, they might even start spending a bit more and because we've got such a skilled workforce we'll have higher paid jobs, pay that debt down and maybe the major adjustments might not be so major after all. Hell, they might even be inconsiderable, insignificant, little, slight, small, undistinguished or unnoticeable.
So let's recap on the government's jobs plan.
Key says the government’s plan to create jobs is to create the right environment, through changes in regulation, to give businesses confidence to employ more. And it's Ok, government's doing its bit. He told me so on Monday.
Our strategy for job creation is to build the economic conditions that will give businesses the confidence they need to hire more workers.
Cool. So let's throw the ball to English and he can tell us where the jobs will be.
Looking ahead over the next few years. Because our non-tradable sector has had a lot of debt, it’s got to clear out that debt, it’s got households being careful – you’re going to have relatively low job growth in that area, which is actually about four times the size, in job terms, as the tradable sector," he said.
So we’re going to need to see, off the back of these high commodity prices, fast job growth in the tradable sector to see unemployment sustainably drop.
You will get growth from the non-tradable sector, but nothing like as fast as it was in the last decade.
Wait, hold on. You're saying over the next few years the government is basically relying on one fifth of the economy to create all those jobs because the other four-fifths have too much debt?
Jeepers. Well I sure hope the productive sector of the economy doesn't have too much debt either. What's a big productive sector in New Zealand that exports stuff to the rest of the world...oh I know, the agricultural sector. Let's have a look at that.
Think it's all good down on the farm? Think again. Property values are plunging, and the crisis could yet hit the cities too. If you asked a city-dweller, most would probably guess that things were pretty good down on the farm right now. Sure, the value of the NZ dollar remains stubbornly high, but meat and wool prices finally appear to be improving, and dairy farmers are widely perceived to be creaming it reports The NZ Herald.
While that should translate to a healthy income for most dairy farmers, in inflation-adjusted terms the payout has mostly fallen since the 1970s, with only a very recent rise. And in the meantime, like their city cousins, many farmers have committed themselves to huge amounts of debt.
Ha, surely you doth but joke. This is the tradable sector, you know the part of the economy that doesn't have so much debt that it won't employ people. They will use their high export prices and good returns to expand, create jobs so that we will all be saved.
This period could give NZ farmers an ideal opportunity to repay a good proportion of their debt burden, which has been it's weakness for years.
Not listening, not listing. Tralalala. Jobs jobs jobs. La la la.
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