Confidence in the economy is wavering, and there are at least five key reasons, most related to some big public policy changes, and how households have reacted to the consequences

Confidence in the economy is wavering, and there are at least five key reasons, most related to some big public policy changes, and how households have reacted to the consequences

Business confidence is falling fast.

But Government ministers say that is an over-reaction. They point to the growing economy. They point to rising wage settlements, both for minimum wage workers and Government health and education workers. Economic growth and higher payrolls are not being properly accounted for, they say. They are about to start a charm offensive, trying to head off another 'winter of discontent' in the business and investment community.

However, this week's business PMIs were a disconcerting look at actual business activity, even if they weren't the first. Factory expansion has essentially stalled in July.

Worse, last week's retail sales data for July was probably more damaging - even if most analysts missed a key aspect. And that was, rising spending is essentially because the amount we pay for petrol leaped in July. For Aucklanders it was worse - because the 11.5c/L regional fuel tax kicked in. That spending is crowding out other spending. We are having to cut back, and the bite will get sharper.

This is what business is seeing. Business confidence is a leading indicator. Economic growth reports are among the last data to reflect what is going on. (One mimic, ANZ's Truckometer which is a good forward indicator of economic growth is wavering.)

Here at we watch economic data closely, in hundreds of detailed series.

To get a fix on what might be behind the business apprehension, we have built a key table tracking the fortunes of a representative household budget over the past year. It shows why the Government ministers should change their tune and take the confidence warnings seriously.

We have drawn together a simplified household budget for a median aspirational family. As regular readers will know, we monitor home loan affordability in a number of key ways, for first home buyers (25-29 year old couple, no kids), and first rung buyers in two scenarios; firstly 30-35 year olds with one child of 5 yrs, and one partner only working half time (they sold their first home and used the capital gain to trade up to a median price home). The second scenario is for a 30-39 year old couple with one child, both working full time - who also sold their first home, but traded up five years later.

We can use the income and spending of the 30-35 year old median household to test how they have fared.

And the answer is, they have mostly gone backwards, especially in Auckland. We looked at their likely household budget both as renters and homeowners. It gives a sober, concerning picture.

      June 2017   June 2018   change
      NZL Akl   NZL Akl   NZL Akl
      $ $   $ $   % %
Gross household income 86,802 90,648   88,904 92,843   2.4% 2.4%
- income taxes     16,777 17,984   17,437 18,673   3.9% 3.8%
- KiwiSaver   3%  2,604 2,719   2,667 2,785   2.4% 2.4%
      --------- ---------   -------- --------   ----- -----
Net in-hand household income 67,421 69,944    68,800 71,384   2.0% 2.1%
- groceries     21,948 21,948   21,441 21,441   -2.3% -2.3%
- rent     21,840 31,200   23,400 33,800   7.1% 8.3%
- petrol 40 L/wk 3,574 3,574   4,331 4,570 ** 21.2% 27.9%
      --------- ---------   --------- --------   ------- -------
Net disposable income 20,059 13,222   19,628 11,573   -2.1% -12.5%
- groceries     21,948 21,948   21,441 21,441   -2.3% -2.3%
- mortgage payment   23,709 31,874   24,417 32,339   3.0% 1.5%
- insurance (house only) 750 1,398 * 884 1,648   17.9% 17.9%
- property rates     2,454 3,550 * 2,476 3,990 * 0.9% 12.4%
- petrol 40 L/wk 3,574 3,574   4,331 4,570 * 21.2% 27.9%
      -------- --------   -------- --------   ------ ------
Net disposable income 14,986 7,601   15,251 7,397   1.8% -2.7%

Remember, this is not the budget of a family on struggle street, even if there are warning signs here. Nationally, half the people on this group will be doing better, half worse. But at the median, they are generally slipping backwards.

Firstly, the +$1,504 extra the main-earning partner got as a pay increase over the year attracted 30% in income tax. Bracket creep hurts earners in this range disproportionately. This is why after-tax income rose slower than the gains in the gross earnings. Cancelled tax cuts eliminated any relief.

Secondly, renters have been hard-hit by increases (for three bedroom houses). Hopefully KiwiBuild will one day address the severe supply/demand imbalance.

Thirdly, rising crude oil prices pushed up petrol prices. In this 2017-2018 year a high exchange rate actually kept a lid on increases. But since June 2018, two major events have occurred. The NZ dollar cost of crude as risen as oil prices climb, plus on July 1, Auckland imposed its 11.5c/L regional excise tax. And then, in the past two weeks, our exchange rate has taken a sharp -3% fall which will add further at-pump cost.

Fourthly, there has been a noticeable jump in house insurance costs. Some of that is because insurers are becoming both more risk averse, and targeting risk in their premiums. But actually a bigger effect is that EQC payments along with the Fire Service Levy have jumped significantly, swelling insurance bills.

And finally, property rates have been rising. Generally, the overall effect is minor across the country. But in Auckland, even though the overall cost among everyone rose about +3%, for many homeowners, they have been slugged hard from the re-balancing share as a result of revaluations. Among the fastest rising valuation have been areas where previous values were modest and occupied or bought by workers on modest means, as in this example. The extra Rates bite has been substantial.

These five factors are characterised not by rises from the private sector, rather by policy decisions from the public sector. The extra costs involved have resulted in lower dollar disposable incomes for most mid-earning, aspirational households.

It is this hurt that businesses are picking up in their order demand. They know households will be increasingly restrained in 2018 and 2019.

Ministers pointing backwards about how good it has been are seriously missing what is going on now, and how tough it may get for many (but not all) over the next year. It is the mid-income taxpaying families who don't work for the government who are pulling in their spending. And that is exactly what the latest set of Government accounts to May, 2018 show: company tax receipts fell -$261 mln or -2.3% below forecast levels, an early sign that all this stress is starting to flow through to the wider economy.


1. Income is age and gender specific, from the Statistics NZ LEEDs series, essentially the PAYE database of all employed people in New Zealand.

2. Income tax is straight from the IRD rates.

3. Groceries are from our monitoring of a healthy shopping list, for 2.5 people. The detail is here.

4. Rent is from the MBIE data we are supplied monthly. Detail here.

5. Petrol is also from MBIE monitoring, UL91, discounted. However, for Auckland 2018 we have loaded the 11.5c/L regional petrol tax even if it didn't come into force until July 1, 2018. We are assuming a weekly fill up of 40 litres. Auckland Transport will crow about the huge increases in public transport ridership, but as anyone who lives in suburbs within 10 kms of the city centre will know a huge number of riders are also driving. They drive to neighbourhoods for free parking and ride buses or trains from there, given the large increases Auckland Council has imposed on inner city parking. Bus ridership increases are not at the expense of car use.

6. Mortgage payment data is straight from our home loan affordability database, and related to the median house values involved, and accounting for the first-step transactions mentioned above.

7. Property rates have been determined from actual houses at the median values, after reference to the relevant Council rates database.

8. House insurance is by an online quote for the same reference house, escalated by the Stats NZ CPI component for house insurance.

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?

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.


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This is a really interesting analysis.

A few thoughts that come to mind are:
- Have rents really increased by 8.3% over the year? Is this only new bonds or all renters? Landlords, have any of you increased your rents by this much?
- The home owner (who somehow saved for a deposit and own their own home earning $93k per year and with $11k-$13k disposable income per year), has made probably $100k-$300k in equity over the past few years and is now deeply concerned about having $204 less disposable income per year?? That doesn't make sense to me. That same home owner probably purchased a new car "on the house" as well.

I don't have any evidence to refute the table but my gut tells me this isn't the root cause of low business confidence. If consumers are spending less, might it have a lot more to do with slowing in private debt and lower inflows of offshore capital (much of which ends up being spent in the economy)?

Of course the Government should be concerned about the trajectory of the economy, but equally it doesn't look 100% to blame.

Your inclination to trust your gut instead of the data explains a lot about many of your previous posts. Facts don’t care about your feelings, sorry.

I don’t know whether you could truly classify the above as “facts” – no particular science or peer-review involved - more likely an “” estimated and “simplified household budget for a median aspirational family.”

And from there we simply overlay our own personal biases.

Business doesn't care about the price of your assets. If you don't have disposable cash then how are they supposed to win your business?

Also, everyone needs a place to live in. Being property asset rich doesn't mean anything if you have to sell your property to buy a new place, unless you're cashing up and now going to rent. It doesn't increase your cashflow as you're buying in the same market.

So yes, the less disposable cash would bite.

Kiwis use their homes as ATMs. At $200 per year it would take a homeowner 5 years to even realise their credit card balance seems about $1000 higher. That's IF the actual reduction in cash flow is $200. If it's higher then definitely that would bite.

So your disbelief outweighs the data supplied? not sure where we can get better but a strawpoll is pointless IMHO.

Value of house [increase] is immaterial as you cannot realise it, but if nothing else this should be boosting ppls confidence ie I cant see it being negative?

I can only give myself as an example but its inline with the article.

This month, $40 pay increase, rates up $38, train up $2, bus up $2, bye, bye pay increase.

Meanwhile petrol has climbed, I dont use a lot so cant quantify it, about $20 a month.

On the horizon, most spring's as the huge bills of winter start to drop the power companies push up the price per kwh thus trying to hide the gouging.

Insurance due in September that will be significant be the sound of things.

So for the next year I will have less to spend, now that will be impacting business confidence if I am typical and this cant be laid on Labour's doorstep.

Other aspects, externally a trade war, oil likely to keep climbing as supply drops (whether artifically due to OPEC, or naturally, post peak oil world)

"Locally", big organisations like Fonterra a mess.

Frankly I am left wondering what exactly is Labour's fault here, not much.

I don't disagree with any of your points, nor any specific piece of data that David presented.

I am questioning whether there is more to it than just household budget pressures - which are presented as being the problem "in one table".

In Australia for example household budget pressures have been immense and yet business confidence has been at record highs.

There has been pressure on household budgets for years now in New Zealand and yet it's only now that business confidence is sagging?

In Australia for example household budget pressures have been immense and yet business confidence has been at record highs.

I see many articles that Australia business confidence is decreasing in the last 3-4 months in a row !
Did u mean its not reducing by much ??

You can’t eat equity. Well you can but you have to sell the asset. If everyone tries to do that at once Auckland will have a problem.

Actually, as a nation you can eat equity. When we sell all of our assets that's exactly what we're doing.

Zombie Ponzi

No one has mentioned it but if homeowner disposable income has become as tight as it appears, then just a small rate increase, 1% or so could actually force a collapse in discretionary spending. Adrian's message is that these rates are akin to a stay of execution. No wonder the MSM have gone so quiet on the adjustments taking place in the housing market over the last quarter.

CJ009 posted this yesterday...

Page three makes really interesting reading. Ignore the 12 month data and look at the 3 month change right down the list. Where growth has been positive yearly the 3 month has seen a rapid decline in rate of growth. Where growth was negative the 3 month has seen a rapid increase in the rate of decline. It's a world wide change in sentiment/credit availability and no where has been immune. The taps are slowly turning off.

I agree Nic, and many thanks for the link.

Zombie Ponzi

I forgot to add that this data is for 1st quarter and if it were accurate for then would already be 5 months out of date now that we are in August. It's actually more likely 8 - 9 months out of date.... consider; a deal that happened in November last year probably didn't complete and get recorded until Feb this year.. and this set is to March...... There is likely to have been 8 more months of softness worldwide that has not yet been reported in figures such as these.

I always used to struggle with Land Registry info in the UK which often took 3 months (post sale completion) to be recorded... the deal had been done 3 months before that so prices were often reported 6 months too late.. It's just the nature of housing and so many individual transactions that take time to effect and filter into the figures... So few realise that there is a lag in the data.


To an extent, I could agree with Zombie.
How many of these added costs can be landed on the Coalition? I suspect no more than if the Nats had been in power.
Frankly the accumulated burden of unfettered immigration rears its continued festering head and it is too late to rectify short term. You can blame Nats for starting the surge, Labour for adding to it and Key and co for making it really bad.


The Nats allowed a sudden inflow of low skilled migrants to enter the country who take more from the system in public services than they put back in as taxes and economic contributions.
Now the average New Zealander has to shell out more per capita in regular expenses and taxes to make up for the shortfall from migrant workers.
Why blame all of it on the coalition?!


"Why blame all of it on the coalition?!"
Because they were elected on promises to slash immigration, and they have not.

I am all for deep cuts in migrant numbers too but for now we are stuck with a huge influx to keep our low-productive, sweatshop economy growing.
I still think the coalition can do more in terms of increasing wage thresholds for residence visa applicants. Michael Reddell published an analysis last year on the marginal cost of infrastructure growth per new migrant in Auckland being more than the additional tax take from a migrant making $49k a year (current threshold for residence visa). This does not take into account those temporary migrants earning minimum wage who still use New Zealand's social and economic infrastructure.
Therefore, the deficit from new migrants is being passed on to the remaining taxpayers.

Agree, Labour needs to act for the benefit of more NZers than just those needing low wage employees (or tenants). Continuing the tactics of the last decade that have pushed up housing costs and down wages will not result in more consumer spending - housing costs are becoming too burdensome for too many Kiwis now.

I agree with you but unfortunately this stretches way beyond migrants crowding out New Zealanders for housing infrastructure. One can identify more serious consequences from imminent well-being issues at a closer look into the state of our public services from this unending rush of people coming in.

The queue for school enrolments in Auckland and for emergency medical services nationwide are longer than ever. Doesn't seem like this government actually cares for its people as much as it claimed pre-election.

The queue for school enrolments in Auckland and for emergency medical services nationwide are longer than ever. Doesn't seem like this government actually cares for its people as much as it claimed pre-election.

How would those things be fixed in one year after being created over a decade?

The argument against low wage immigration has been made by Michael Reddell but also by more famous economists such as Paul Krugman and Herman Daly. Rarely it can be useful when there is a new resource to be exploited (ref the Gold Rush or putting farm animals on ex-Maori or Red Indian land) but it is invariably a kick in the teeth for your own low paid workers.
The cost of a permanent residents visa is far too low and the wage threshhold also too low. Even if the majority of Kiwi taxpayers are happy to subsidise low wage immigrants then the numerous reports on worker exploitation, rorts and corruption should make us think again.

Going short Australasian retailers tactically an astute move.
New Zealand was top of the OECD list regarding household gross expenditure for housing in 2017. (Oddly enough it sneaked into a Zerohedge article.) Looking at the figures ,is it any wonder why home ownership rates are plunging and with the exception of the East Cape, Auckland sits atop of the pile.

Admittedly it’s not an income / expense item, but I wonder if we may also have already started or will soon start to feel the downside of the “wealth effect”.

This can be quite damaging – and an inherent danger of booming asset classes that subsequently face stagnation or worse, reversal.

Definitely not a good problem to have - aye John.


Those grocery costs are horrific, and nothing to do with government.
Land of the long rip off!

Am I missing something - $422 per week on groceries for a couple with a 5 year old?

My good wife and I would struggle to get to $300 – and that’s with a reasonable lack of conscious spending.

What on earth is the 5 year old getting up to?

Heh, my gf and I are spending 200 a week on groceries.

They’re probably not cooking much, that’s basically our situation, we eat out once or twice a week, and only make it to around 250 p.w.

Could eat out more or could keep hammering the mortgage to be mortgage free by 40... easy choice :)

$200 per week here, couple with a 2 year old. And we don’t scrimp......well maybe we do....$422 per week wow.

Here's the shopping list used to come up with that number;

A lot of goods in there that would likely last 2-3 weeks, as opposed to need to be repurchased weekly.

And the thing about that list - it's food only. Imagine if you add in all the non-food items one needs on a regular basis.

That's exactly what I was going to say Kate. The list looks like a very healthy diet, but no provision for consumables (most of which are imported). I guess people will just have to cut back on brushing their teeth, wiping their arse and wearing deodorant to work.... The future of NZ stinks!

I just tallied up all our expenses with Countdown, Pak N Save, New World etc between 13/6/18 and 8/8/18 (8 weeks). $223.32 per week average, 2 adults and 1 toddler. That includes all food, non-food, nappies, baby food pouches (2 - 3 per day), box of beer a week.

Maybe groceries are cheaper in the Wairarapa?

No beer on that list; I was taught that "When there is a Beer in the house, there's a Meal in the house"

My spend for 3 was $350 a week easily when I include all food and I'm told I am tight with the food bill.


Don't get me wrong, the economy is important. However I think things have been biased to employers for too long. What's happening is rebalancing. It's pulling the economy down, a bit, but it's necessary.

Without employers, there are no jobs. Without employees there are no businesses

Indeed. Without employees with spending power there's no great revenue for businesses.


Summary to much debt from stupid house prices (assets in general, farms, shares and classic cars), from policy promoting domestic and foreign speculation. Inflation raising its head and simply no fat left to cover it.


That's what happens when you keep kicking the can down the road.
It's recalibration time.
We need it

not just house prices, farm prices also IMHO.

Agreed - edited

You cant recalibrate a Ponzi scheme.
Recalibration is to admit we dont have the income to support our standard of living... and to follow Greece & Venezuela...
More Debt is all we have.

Consumer spending in NZ is already fighting for air. This is obvious from manufacturers and retailers offering more price discounting than any other comparable countries.

It is to be expected that consumer spending drops.

People have only a limited amount of discretionary income.

When mortgages (due to price increases) or rents go up people need to cut back and it all comes from discretionary spending.

So why are we surprised that consumer spending is going down? Why are we surprised that GDP might grow slower?

If the problem is high accommodation costs impacting discretionary spending why would we blame the current government?

One final note. Gas prices need to be investigated. Gas prices in Wellington today $2.30. Gas prices up the road in Otaki about $2.17. Where does the gas land? Wellington.

Everyone talks about mortgage rates but homeowners are taking a kicking on local rates and insurance in terms of the change in costs!

Seriously what a f#%%ed up country we've become:

Nah Fritz that's just to help pay for the rent!

Ha ha. Well anything goes in the NZ of 2018. What a deprived place

Depraved as well.

David, interesting analysis.
I was until early this year a teacher in NZ on the top scale ($78k) - my wife worked part-time and we had 3 children under 6 in a modest 3 bedroom home in provincial NZ.
I question how many families in the 35-39 age group have just the child. They don't cost the earth to raise but I know many families in that age group with 3 children - some of them approaching the costly teenage years.

We managed but like many others in the lower 50% of median income - a credit card was occasionally necessary.

The figures above suggest a glaring problem - the ratio of mortgage repayment to net income.
For Aucklanders 45.5% of their NET Pay paying off their mortgage - compared to 35% for the rest of NZ.

Policies aside, NZ'ers have little idea on what makes an affordable home based on their salary and are clearly fooled into believing they can afford a home beyond their means by mortgage brokers and banks.

Coincidently, every quarter our Aussie owned banks report increased profits year on year (ASB the other day was around 10%?)

I'm not surprised NZ citizens are picking up sticks and looking abroad- again.

If all the people overseas are having three children too, then there's no point in going there either.

Wealth is essentially personal access to parts of the planet - more persons equals less planet per person.

That so many people aren't thinking this through, this late in the global overshoot, is a sad indictment on our species and may well be our epitaph.

The physical planet can only support around 1 billion at our level of consumption/pollution, what you are experiencing is the financial representation of the widening shortfall.

Think laterally - there are still ways around it - but they're being shut down by a combination of rule-tightening and absolute depletion.

Out of interest, what are your thoughts on the population size in NZ, with and without fossil fuel import?

Doomed, doomed I say. <- Abridged version. No need to thank me. :)

Probably less than at present, maybe 1-2 million best.

We have to remember that when tribes skirmish and the winners indulge in a post-battle protein gain, they're probably fully populated. That was by 1800.

We have the advantage of a wider range of foods, bred to extremes, and we have a bit more science too (although sometimes I wonder!). But our topsoils are depleting, aquifers too, quality likewise. Our backing biodiversity (some call it 'ecosystem services' but that's a dangerous label) is vastly depleted too.

And we'd have to triage infrastructure - like Cuba had to. So a reduction, hopefully controlled! Most people just don't get how much would have to be applied to agriculture - the same people who talk about 'returns on labour or labour productivity. The reality is that one fit man, doing a year of 40-hour weeks on a rowing-machine, equates to about 14 litres of petrol in work output.

And it's not just numbers, it's proximity. How do we get food into, and wastes out of, Auckland?

Thanks for the article, with some good data showing the issues of a reduction in disposable income due to several factors. I certainly feel the fuel cost increase, tax bracket creep, insurance increases, rates increases, and more eroding my budget. It is hard to find any cost changes that are at or below inflation, which begs the question of just how one should define inflation!

Reading many of the above comments shows a bit of willful delusion. There is plenty of blame to go towards both present as well as past government. Trying to blame just the party ya don't like is a worrying partisan blindness.

Yes thats a good set of points you have raised. Me? I'm going with the theory that the highly effective 'success story' window dressing that the previous govt was in fact so successful at has now dried up. What people are seeing, quite rightly is how unsustainable life in NZ actually is. Infact, I think it has been for a very longtime, we just cover off the shortfall with cheap debt and by kicking the can down the road.

Excellent household break down.. maybe not have everything, but certainly more than good enough to indicate trends. And trends over time.
This is interesting, essentially the critical part of everything...
Real growth is based on productivity stimulated by disposable income from the middle income 50% (as represented in data above) of the population.
We can either keep importing ppl to create this demand, or move from importing them to enabling the middle 50% of the population to spend more.
Not on fuel taxes, not on insurance type stuff but on houses (and the goods/ services) required to build them, clothes, toys, boats .. Espec on locally produced goods.
Increasing incomes by taxing , redistributing (rent /income subsidies) does nothing other than remove a little debit from the lower income. Thu it is a populist political sort term vote catcher. And increasing min wage also has little effect. Both are a catch up from way behind in their ability to to increase disposable income to stimulate productivity and growth.
Increasing taxes,, or introduction or more taxes.. eg fuel tax, again hurts disposable income and productivity by reducing disposable income.
This is a 2 edged sword problem.
1/ Government has to recognize that the middle 50% of the population doesn't have the income to stimulate or increase demand for productivity. And if they are below 'the line' the bottom 25% are so far any increase is catch not even increasing disposable income.
2/ Business have to recognize that if they want to grow, they will have to re think how their salary and wage budget gets distributed around their employees... or pay peanuts and have a damn good long term export market to sell into.
Bottom line, no politician has the balls to go down the route to increase the middle 50% of the population to take home 50% of the national wage salary cut of the cake.. which then drags the bottom, taxation sourced income of the bottom 25% of the poipulation up enough to remove those subsisties.
And no business, at least larger companies, local body and central governments have the balls to go on a policy.. real pilicy of increasing their middle income disposable incomes.
So where does that leave us?
After decades of whittling away at the middle 50% (and low income) , so much so governments then need to tax everyone and redistribute with income subsidies just to exist.. It then comes to a piont that if that trend continues we start going into a serfdom type economy.. the lower income 25% make a lot noise but since dont vote are listen to but not actioned on. The 'silent' middle 50%, complain for a few decades of the trend.
Then a point comes where that middle 50% suddenly says enough is enough...(teachers, nurses and thats just the start) hit the streets.
Business and government sees the middle income wage bills increase, bitch about inflationary pressures, unaffordable etc.. cant see the long term fforest for the trees.
Till they do start to increase disposable income , to stimulate real demand for their products/ services, and therefore productivity.. Well we have seen it happen before , the Muldoon yeats, the rise of 'unions'.. BECAUSE that is the only place the 50% can go to get back to an income that does have a real disposable proportion to it.
Keep in mind the numbers David has above do not include car replacement, depreciation , clothes, basic entertainment...add those in and we will find disposable income for the middle income is very little and far too many of the 50% are on the cusp of nil disposable.

Well said

This would explain why I bump into more and more ex-Aucklanders in our tiny neck of the woods. And not a single one of them voicing any regrets or talking about 'well back in Auckland we could.....'

Auckland has got lots of great attributes. The climate is pretty good, it's got a good cultural scene and great food. The people are generally pretty open minded and non- parochial. It has the most career opportunities. There's lots of awesome places to get to within 3 hours drive. The harbour is beautiful. Unfortunately cost of living and over population (at least relative to infrastructure and housing investment) is starting to weigh heavily on Auckland's benefits.

They are smart people. No one wants to hear how much you miss where you were, if that’s the case. It’s a pointless conversation. Choose to live where you are or move. Whinging to a local is pointless and disrespectful.

Now all the media/economists are worried about house prices not rising (still the lessons not sinking in), soon the temptation for government to boost house prices will kick in as the see the wealth effect disappearing. What we continue to see is costs rising beyond official inflation (taxes, levies, rates, insurance, fuel etc etc etc) negative real wage growth and for years households and the government borrowing it against increasing house values (government debt is low because citizens are leveraging their houses to pay increasing taxes and maintain lifestyle)
So the risk of even a stall in house prices is huge but the only way to get back from the precipice is too increase real earnings above true inflation. Can't tax your way to that, and flooding the country with immigrants doesn't help either.

Great article David Chaston, very well done!!!

I think business confidence is also down simply because businesses see higher expenses in the future, namely higher wages and petrol prices (= higher shipping/freighting cost) and no way to increase prices. Therefore lower profits, if any.

Your household net disposable of $7397 is perhaps conservative. Once you include power and gas, car insurance, school fees for example that amount would end up around $5000.

It’s simply terrible and the previous National govt are responsible for allowing house prices to skyrocket meanwhile allowing far too much immigration which effectively kept wages down.

And now we’re entering a period of enconomic slowdown brought on by a PM who’s asleep at the wheel. The next 12 months will be interesting.

Who would move to Auckland unless an employer was willing to make up the living cost difference.

Only a matter of time before the RB cuts rates.

About 35'000 people pa

Keeping in mind that internal migration in Auckland is negative.

How can you possibly know that?

Table 42, Internal Migration Report - updated tables 2013 census - Regional Council areas

Oh, great.
Data from 5+ years ago.

Actually. No. It's pretty stupid to use that as your basis.

Estimates suggest net internal immigration loss of 14,000 from Auckland in 2015-16.

That's all preliminary IDI stuff, though.
I wouldn't bet the house on it.
Plus, they 40+ age group is weighting this. Under 30's is likely positive, which is where all the real productivity comes from.

I am a reluctant super annuitant. I live in a rural area so drive more than most. My fuel bill has gone up by
@$5-6 a week, a special rate of $150 has been imposed by our clueless local board to pay for stuff in areas far from where I live, my ACC rates have gone up @$100 a year. That's around $550 a year, or a fortnights super on my rate. Essentially a 4% pay cut. Thankfully I don't have to live on just super. And of course, that stupid untargeted winter heating allowance helps. I lean left but despair of the daft decisions this government is making. One term is looking very likely. The oil and gas ban is particularly stupid, random and confidence sapping. We will still need the stuff even if we are driving electric cars. Our emissions are minuscule next to China, India, the US and many others and have essentially zero impact on the climate. Please note that I am not saying we should not change to cleaner energy, only that we should do so in a structured, transparent way without wildcard confidence sapping policy shifts. No need to cut our nose off to spite our face.

Pietro - the sad truth is that your- and my - generation lived byond what was sustainable. And we assumed it was forever.

But endless growth on a finite planet isn't possible. I understand the bewilderment that is almost endemic, at all levels of society. But no Government, from whatever Party, can stop what is happening. Older folk are trapped in non-energy-efficient housing (that's most of it in Nz ) and can't 'afford' the warmpth they have become used to. But they only had that ease for a generation, if they thought about it.

That oil and gas - a one-off finite resource - has to be calculated as if every generation can have equal access to it, which makes it that precious and that rare in litres/head, that you wouldn't be able to affords it.

And in terms of change, try reading Will Cattons' Overshoot (1980). We are already too late, orders-of-magnitude so. No matter how fast the change is made, it'll be too slow.

The planet may be finite but our resourcefulness certainly isn't, when oil and gas finally disappear (won't be in my lifetime) we will have found other ways to acquire/produce energy. There is plenty for everyone on planet earth.

How can such a statement be made in this visual-image-sharing age?

We aren't even being long-term sustainable in this country, even without the fossil fuel draw-down.

But the fact that comments like that can still be made, reflects the abject failure of academia (siloed, silenced) the media (denial, belief and vested-interest) and politicians (only as good as the voters are educated by the first two) to explain the overarching problem.

You must be over 70?

No, he's just not a DGM. I'm under 50 and I agree entirely with his post as regards to energy. Plenty of sunlight, wind and tidal energy, plus geothermal. We will find ways to harness it. And then there is Nuclear if needed too.

not very pragmatic for a pragmatist - by talking this fairy tale nonsense you are guaranteeing doom and gloom

What percentage of our energy needs are currently met by hydrocarbons? Please fuel for vehicles, factories and generators etc.

I'm sure you have this figure off hand, and I'll receive it shortly. Because there's no way you made a confident, authoritative statement about such a topic without knowing your stuff. So I eagerly await.

Wow, go easy pdk,

Firstly what has "visual-sharing-age" got to do with finite reserves of oil?

Secondly, I have faith in mankind to evolve and find ways to overcome adversity, like mankind has done for many thousands of years

Thirdly, no I'm not over 70, not close either

Visually, you can see escalating refugee streams, and the sprawling struggling slums. Oh, silly me, of course it was their failure to adopt free-market, low regulation policies. Or maybe democracy?

Faith? I recon that may be a flaw in our cranial makeup. There was probably a fair share of it on the Titanic too - didn't help. Mankind has actually repeat-overshot his (their) resource base - and did so at extremely low population numbers. This is not linear - there were only 1 billion at the start of the Industrial age.

I'm really surprised that such thinking still persists - thirty years ago I'd have thought we'd have had time to change - now I just teach the young survival skills ; food production being the first of them.

take the time - best thing you'll ever read.

Excellent stuff PDK. These boys seem to come up with he same narrative - that there is heaps of cheap energy just around the next technological corner.

One simply has to ask why are the US and other world players maneuvering to fight for for diminishing resources if such break throughs are likely?

Good on them though.....saves worrying about anyone but yourself I guess.

Tim Morgan...
Perpetual pessimist with no formal training in economics, mathematics or physical sciences.

Seems legit, huh.
Talk about confirmation bias.

.seems to have done okay without such.......

Dr Morgan read history and political philosophy at Emmanuel College, Cambridge before joining stockbrokers Wood Mackenzie as a trainee in 1982. He moved to Montagu Loebl Stanley the following year, shortly thereafter assuming responsibility for the firm’s oil and gas research. In 1985, he joined the stockbroking subsidiary of Exco, which became part of Banque Indosuez in 1986. After a short period with a boutique broker, he established an energy sector research consultancy in 1990. During this period he developed the value-based VVM™ analysis system. Between 1995 and 2006, Dr Morgan was consultant energy analyst at stockbrokers Collins Stewart. He joined Shore Capital Group, again as a consultant energy analyst, in May 2007, but, in February 2009, was invited to formalise a role that he had been carrying out for some time – that of economic and market strategist. had a legimtate career

There's nothing wrong with being self taught.

It's just having formal training stops you from making stupid mistakes. We see this almost on the daily with the energy doomsters that post here - PDK's Gaussian mishap the other day being a perfect example of how blindly regurgitating other's work makes only makes you look smart to the stupid.

Read that economist piece I posted - it highlights some pretty serious schoolboy errors in the report the "Perfect Storm" published.
A report, I might add, that is uncited at all by any other formal publications.

That was a description for people to recognise - I could have described it as a bell-curve or Paddington-Bear's Hat.

But what was more interesting, is that you didn't challenge the point being made. Very, very telling, methought. No rebuttal of the way a Seneca Event develops through attempting to increase extraction exponentially. And it that's an essential resource with no equivalent replacement and the whole of your society depends on it? Running full-noise at the top of the curve with a never-bigger collection of infrastructure to maintain and a never-bigger collective debt?

Why the need to refute, Nymad? Personal fear, or you being paid?

And I could say that your link was tame to the point of pathetic. Was that it? The best you got?

Here's another - quite reasonable at math:

But of course, somehow he won't be qualified. Or peer-reviewed. Or something else.....

Go back and read my comment.
I did challenge you. It was on the point of the way you didn't realise that the hubbert curves and Gaussians were fundamentally different things. And that resource extraction should be thought of as a convex function with fixed integral value. Not as you put it, (abv) 'changing the Gaussian function.'
See. Some basic training in economics/econometrics would have avoided this faux-pa. You can't possibly expect to convince people who are familiar with concepts if you cannot explain your position in a logical manner.

I have no fear. If you can convince me with something reputable, I'll change my opinion.
A PhD tends to make you a stickler for that sort of thing, unfortunately.

I don't disagree with that guy -
Most definitely qualified.
However, he avoids the point that economists make. Although resource is finite, technology isn't. That's what we are arguing.
No one is saying the world isn't finite. As I have said before, that's a blogger buzz word that you seem intent on repeating ad infinitum. Again, blindly repeating the words of your messiahs.

I'm sorry I couldn't find anything better on the Tim Morgan report. It seems that everyone just takes it as such a joke that they don't even bother responding to it.


But technology can't do indefinite displacement within a finite sphere of operations. It can only process, and there are limits to the efficiency with which you can process things (laws of thermodynamics - the reason ice's still need radiators or finning......

I have long thought that the problem with universities is their failure to mesh disciplines. I used to call it 'interdisciplinary genuflection'. I think it's a fatal flaw. But prove me wrong. Read all that 'do the math' stuff - it's not a lot, you'll do it in a night or two. Then rebut. I'll be fascinated.

I have long thought that the problem with universities is their failure to mesh disciplines. I used to call it 'interdisciplinary genuflection'.

You obviously have no idea about what the state of research is today.
Look at any economics, statistics, mathematics, computer science, engineering science department at any university in New Zealand (or abroad). There is no such thing as silo research agendas among the graduate students and faculty. So much focus put on interdisciplinary studies these days.
Again, another blogger buzz phrase popularised by people who have no idea.

Read all that 'do the math' stuff - it's not a lot, you'll do it in a night or two. Then rebut. I'll be fascinated.
Again, read what I say. I'm not disputing the math.
I'm disputing the lack of consideration for economic theory. Ironically, this is a perfect example of your 'interdisciplinary genuflection'.

Also, about the math... I love this admission...
The approach is often playfully quantitative, with the aim of arriving at a fresh perspective on our world. Posts stress estimation over exactness
...Many estimates will leave out small contributions to the problem, but these tend not to change the overall conclusions: ballpark is often all we need.

Like I said, call it a fault of mine, but I'm a stickler for robust stuff.

That's good.

I'd stay away from economists who advocated technology, on that basis. Seems to me that's out-of-discipline amateur time.

In simple terms, energy is required to do work. Technology can only facilitate that, and we can only better the facilitation (get efficient) within the laws of physics. Low-grade heat - too low to be worth retrieving - is the usual end-game. Classic EROEI problem.

Presuming you mean technologies plural (from genetically engineering animals/plants to represent less sunlit ground, to more efficient transport. Problem is, you still need to produce food and you still need to lift a real tonne across the Rimutakas. Diminishing-returns is what you are facing. You also have the problem of a collection of current-technology infrastructure - never-bigger, all aging - which you'd have to replace. Energy-wise, you're too late to effect the morph - we're using all we can pump, full-noise. So we're into triage territory - running a growth-requiring financial system.

People like you could be useful and proactive - but believing that (yet to be invented, developed and proved) technology can solve the overshoot/depletion dilemma at this late stage, .....sorry, :)

Your waffle is an overshoot.

Read what economists fundamentally argue and the dynamics of population growth in nature.

The world isn't coming to an end.

Thw world, no. Never said it was.

But growth-based economics might have reached an evolutionary dead-end


If it hasn't, then it needs to

There is one thing that is going on right now, that points straight to us having outgrown the planet's capacity to sustain us, and that is the 6th great extinction, all down to us. You do not need graphs or an economics degree to put two and two together there.

pdk, I think you're being serious in your posts. I'm sorry you have such a catastrophically dark view on life but of course you're entitled to it. Just please don't "teach it to others" as you say, that would be too cruel.

To bury ones head in the sand is the catastrophe - it's worse than religion because people do hear voices in their head and talk to imaginary friends whereas energy alternatives to petroleum ...

Doom and gloom will only happen if we allow it too by believing in fairy tales.

Absolutely agree with you

I am not sure if you mislead on purpose or simply dont understand the decay curve & cost v demand. I think its mislead if only yourself. ie there will always be some oil and gas, the problem is long before we can use it all up we wont be able to afford it as an economy. So sure the likes of BIll Gates wont blick at $100 a litre the rest of us on the other hand I dont think will go past $10 a litre. This unless you are 70+ will happen in your lifetime.

So its not a case of "finally disappearing" its a case of affordability, this unless you are 70+ will happen in your lifetime. "found ways" again your belief in what you think science can accomplish is misplaced due to scale and time frame.

Sure oil may become too expensive to use economically, that's great news because there are much cleaner energies out there.
Surely you have heard about ever improving solar captors, they will keep becoming more efficient and cheaper as time goes by.
What about giant wind mills, again no pollution or depletion of reserves, their efficiencies are also continuously improving.
Surely you're heard about electric cars, and cleaner Hydrogen vehicles are the future.
Harnessing energy from tides is also an option.
And then there is the future energies we're not aware yet.
Don't worry, there is plenty of energy for everyone!

Where I do agree with you and pdk is the ever-expanding human population on the planet is a problem for pollution and eco systems, the animal kingdom, the fauna and the seas. I have long been advocation one simple solution: maximum 2 children per 2 parents to stop the increase in population

I've been off-grid for 14 years, stopped at two kids, and you're right ..........but that proves you wrong.

Let me explain: If there were no planetary limits, you could have as many kids as you wanted, right? So what's the reason to limit population? It's the carrying-capacity of the global paddock. It's as simple as that.

What we have learned in the interim ten years from the Peak Oil thing, is that there is an upper limit to what can be paid/demanded for oil. I used to thing like Goldman Sachs that oil would go to $200/barrel. I now know that energy is needed to do the future work that repays the debt that is money, and is Capex. So there is a limit to what can be charged........ because there's a limit to what can be repaid...... Show me the economist who follows that one...... :)
And if you overstock a paddock, it deteriorates, being able to stock less and less..... Just logic, really, with a bit of exponential math thrown in.

Despite your overly intellectual/theoretical posts, you don't seem to make the difference between overpopulation (= the real problem) and oil reserves (= finite energy which can be and is being replaced by alternative forms of energies).
It's not as complicated as you want to make it look.

"Western countries reduced their production without making corresponding reductions in their consumption. Corporations' outsourcing of production to emerging economies boosted their earnings (and, consequently, the incomes of the minority at the very top) whilst hollowing out their domestic economies through the export of skilled jobs." - Tim Morgan.

Why would an employer move to Auckland?

supply of employees, quantity to pick from, and until recently could get import cheap if needed

Agreed, I would add 1.5 Million local potential customers and many local businesses to trade with

Do all politicians use Electric means to drive things, they still use thirsty BMWs and fly "First Class"...then put it on your Bill.

Do they own rental houses by the score..."yes"...they do.

Do they put us further into debt, to pay their wages of sin and desire...Naturally. they do. Corruption takes many forms, and printing munny is one of em....They owe it, we gotta pay it...some call it inflationery ...I call it like it is...Gotta keep the ball is an up hill struggle for some...and a roading contract for others.

Do banks encourage debt, of course they do....

Do people "Save" any more, of course they don't.

Do people borrow off shore, then bring the debt to NZ....of course they is "marginally" worth it..

Particularly now...the exchange rare has dropped..."Marketly"...and some.

Do Farmers say cheese or want their 'Bread and Butter" protected....and smile.

It is all called economics...but not it is called debt, not munny.

Do have a think about where it it flows and goes....

Being an econo-missed is snot easy these have to have a nose for the truth....but tell porkies..

Bless you......thanks for the munny......

My printer is working over time......The Fed...The Reserve Bank....the end.

The thing is, this is all on the back of really low interest rates!

To those who have high debt, this is your opportunity to pay down debt!! The RBNZ knows that to tighten now would cause significant pain to the economy and even lessen the amount of money available for consumer spending.

How long can we keep the OCR this low or go even lower while the rest of the world is raising rates??? Our currency is weak as a result but that is fine for our exporters but pushes up all those imported items we love so much.

There may only be a couple of years at low interest rates left, so those with high debt should pay down as much as they can and minimize their discretionary spending as you never know when external pressures will push interest rates up and take it out of the RBNZ's hands. If we are already seeing consumer spending having an effect , then you aint seen nothing yet......

How long? for ever. No, not " a couple of years" we have gone past the maximums, into overshoot, this means huge declines in the future but expanding costs.

Yawn... Ten years on, same story Steven/thing/thingy..!searchin/nz.general/Thing$20peak$20oil/nz.general/cB62LZOmT6o

Sorry Pragmatist. We were sooooooo wrong. Ten years eh? That's

In that time, light sweet crude has indeed proven to have plateaued. And in case you haven't noticed, we've gone down the list of 'best remaining options' to the point of fracturing rock, extracting from tar-sands.......

Peak Oil was always about LSC, but in hindsight the EROEI/net energy story was the overrider. And in $$$$ terms, debt overhang is the co-rider. Doubled in that ten years, hasn't it? All we did was waste them. The possibility that most folk might be cranially-wired not to understand the problem has been investigated by no less than a space physicist:

His other stuff might be of interest too.....

Couldn't be bothered searching longer, but Steven had predicted $20/litre petrol by years ago.. same stuck record, just as wrong now as he was 15 years ago, and for the same reason. Failure to understand that technology advances in finding and economically extracting resources we need.

Economically? That's the whole debate right there. We can't afford the next (lower) EROEI return. It's not good enough to sustain BAU, even now. Imaging if the price went up enough to pay them a divvy?

Not very pragmatic for a Pragmatist - you are the problem not the solution. What technology even comes close to petroleum? Let's hear the technology fairy tales to back up your crystal ball cynicism.

Have you never heard of an increasing number of houses being self sufficient energy wise?
Have you not heard about electric cars with Hydrogen cars coming?
What about enormous amounts of solar captors in OZ for example
Giant windmills in Spain and other countries in Europe, in California?
Damns all over the world?

I know you are going to say "yes but they are not as efficient as oil", no they're not YET, but they will of course be, mankind has always been ingenious enough to find ways.

As per my post above, the real problem is not lack energy, it's overpopulation of the planet.

pdk, you have a real obsession with oil, did you used to work in the petroleum industry? It seems you don't know of any other energy sources