A new report out shows bleak manufacturing figures. Some have suggested that these mean the New Zealand economy is slowing down.
In some respects I am not dreadfully surprised there are economic jitters at the moment. A smorgasbord of issues exist across the world at the moment, ranging from concerns of another potential conflict in the Middle East, to souring relations between China and the United States to lingering concerns about a banking sector melt down and what kind of Brexit Britain will achieve (or not).
What does all of this mean for New Zealand? Being a small nation that is considered to have one of the more open markets in the world, we are vulnerable to being buffeted by strong economic currents originating in other countries:
- Concerns continue to linger about a potential financial sector melt down. Whilst the Dodd-Franks laws in the United States were a good start in terms of reforming the banking sector, there has not been any substantial follow up in any of the major markets.
- Britain continues to lurch in a very round about way towards whatever form of Brexit it eventually takes – hard Brexit, soft Brexit, or something else, we really do not know. This is of particular importance to New Zealand as the U.K. has strong economic ties with New Zealand and a messy exit has the potential to upset trade.
- Worsening Sino-American relations between the two super powers are not helping either. The virtual alienation of Huawei telecommunications company, which the United States alleges spies for the Chinese Government has seen billions of dollars wiped from its value, whilst at the same time immense pressure has been placed on western nations to block Huawei. As a nation with billions of dollars in trade with China each year, and Huawei being a significant player in the cellular phone market, New Zealand cannot help but notice this.
- Tensions are high over alleged placement of mines in the Straits of Hormuz by Iran, which have gone on to damage several oil tankers. The resultant uproar has seen Japanese Prime Minister Abe Shinzo visit Iran to try to act as a mediator, lest there be a military confrontation. Whether the oil tanker attacks cause a spike in oil prices I am not certain, but it will potentially make owners of tankers think twice before ordering their ships into the Persian Gulf.
Just yesterday though, it was acknowledged that New Zealand’s unemployment rate is down to a 10 year low. One problem now being faced is not whether there are jobs to go about, but where to find the labour that can competently fill those jobs. As a result some inventive measures are being worked out, such as enabling factor workers to transfer temporarily to other factory jobs if their normal industry is having a quiet period. New Zealanders are hanging on to their jobs rather than changing because of concerns about continuity of income, rents and bills. Every day expenses such as food and fuel appear to further undermine what income we have.
As yet Government policy has not really taken effect. Kiwi Build was well intentioned, but is still not in tune with affordability and is thousands of houses behind schedule despite the media attention and promises of legislation change to speed things along. Add to that, the Government’s tax policy has been a cop out with the refusal to implement a Capital Gains Tax joining the ranks of a host of other tax measures that have been introduced and then abandoned for fear of being an election loser.
The “well being budget” was overshadowed by the claims by National that it had all sorts of details about it that were meant to still be under wraps. Still it managed to introduce $1 billion of investment in the railways to make up for the lack of investment by National. It also set aside funding for supporting the introduction of compulsory product stewardship schemes. In addition there was money set aside to assist with vocational education by supporting apprenticeships and trade training.
In an increasingly cautious global context it might be that New Zealand’s economy is not doing so badly after all. But you would not know it from the inside looking out.