The new economic year is only a few days old worldwide, but it is shaping up to be a turbulent one both in New Zealand and abroad. As the year begins it is useful to look at the events going on around the world and in New Zealand to help better understand why the start to 2016 has been so turbulent.
Since New Zealand began returning to work after the Christmas festive period a wave of bad economic news from both here and abroad has been going past. Shares plunging in China so far that on consecutive days trading has had to be stopped and a major electronics retail chain imploding are just two events that have economists on edge.
The Saudi Arabian decision to assassinate a key Shi’ite cleric causing a violent reaction in Iran where the Saudi Embassy was ransacked and a consulate attacked in Tehran has led to several countries severing diplomatic and/or economic ties with the Islamic Republic. When coupled with ongoing uncertainty about the war against Daesh in the Middle East and the continuing fallout from Turkey shooting down a Russian combat aircraft, no one can honestly say they know how the region will affect global economics.
But New Zealand has its problems as well. The major electronics retail chain Dick Smith has had to be put into voluntary administration for the foreseeable future whilst the company tries to address a red ink surge on its balance sheet. Although nothing has been said about winding it up, the hundreds of staff in New Zealand whose future suddenly looks cloudy are rightfully nervous, especially given the criticism regarding the sale of vouchers are not going to be honoured. Employment has remained stubbornly high at around 6% and the New Zealand dollar has lost considerable buying power in the last 12 months. The brief surplus that the Government boasted about getting is gone and replaced with a $400 million debt.
The Government’s much coveted Trans Pacific Partnership Agreement with eleven other countries including the United States, China and Japan will be signed in February. Widespread protests are planned to greet this event. This is despite the Republican majority leader Mitch McConnell telling President Barak Obama to not bring the T.P.P.A. for signing before the 2016 Presidential election, which will increasingly distract both Republicans and Democrats from now until November. Because New Zealand has its own elections in 2017, no sooner will President Obama’s replacement have been sworn in than the electioneering will start in New Zealand.
As the world economy wobbles its way through the first week of 2016, many eyes must be looking to the economic gods for inspiration. But will they find any?