It seems worth remembering how far we have come. Photo / 123RF
It seems worth remembering how far we have come. Photo / 123RF
COMMENT:
I have a school reunion coming up.
It's 30 years since my final year of high school.
It doesn't seem so long since I was sitting in 7th form economics contemplating an impossibly bleak future, based on my teacher's gloom-laden lectures on the perilous level of government debt andrising unemployment.
Let's ignore the fact that I was a distracted surfer with a bad blonde haircut, prone to sitting with the most disruptive kids in the room.
It had been up as high as 15 per cent a couple of times in the 1980s, only falling because of the economic slump after the 1987 crash.
GDP growth (to June 1989) was 1.1 per cent that year and we were grateful for it. New Zealand's economy was still coming back from the post-crash recession.
The bad news - which would not have surprised New Zealanders in 1989 given the battering the economy had been taking for more than a decade - was that another recession was about to hit.
Government stimulus was not an option to get us through it - we didn't have any money.
A close approximation of the author in 7th form economics class, Sean Penn as Jeff Spicoli in 80s film classic, Fast Times at Ridgemont High.
Around this year's Budget there was debate about whether we should keep core crown debt to 20 per cent of GDP - or relax and let it blow out to 25 per cent.
What a privilege to even have a choice.
In 1989 core crown debt was above 55 per cent of GDP.
It had peaked at close to 70 per cent in 1985 and was coming down only thanks to an austere programme of cuts to social services and the high-profile sell-off of public assets.
For a kid about to leave school, unemployment stats were the worst.
The unemployment rate had been rising steadily since 1985 and was sitting around eight per cent - on its way to a peak above 10 per cent in 1992.
The oppressive thing about high unemployment is that it lowers the horizons of young people.
The prospects of landing a dream job seemed slim. Any job would do.
It has struck me that were I to time-travel back and share New Zealand's current economic statistics with Mr Shaw, he would be gobsmacked by the nation's success.
At face value it would seem like we live in an economic utopia.
Inflation has been conquered - if anything its on the low side of the Reserve Bank's 2 per cent target.
Unemployment has been conquered - at four per cent, safely below the margin economists consider effective full employment.
GDP growth has been steady - ranging between 2 and 4 per cent.
We have lived without a recession for more than a decade. An unthinkably positive scenario 30 years ago.
And the government surpluses are an expectation. If things turn bad, the state can spend more.
We certainly have a greater degree of economic stability than we did back then and I don't think we should take that stability for granted.
But economic stability has come at a social cost.
You've only got to imagine what our 1980s selves would make of the encampments of homeless people on our inner-city streets to see that this is not a utopia.
I don't think either of our main parties take that stability for granted.
Finance Minister Grant Robertson reading his Wellbeing Budget 2019. Photo / Mark Mitchell
Finance Minister Grant Robertson is the same age as me and also remembers the trouble those terrible macro-economic indicators caused for New Zealand.
But the marked change in data highlights why it is hard to quantify New Zealand's economic problems right now.
It explains why we have governments - here and around the world - reaching for new measures like wellbeing targets.
Wellbeing aside, there is another number that would have made jaws drop in the 1980s.
Our private debt levels.
Household debt is currently sitting at around $280 billion - more than 13 times what is was in 1989.
By comparison our GDP is only about five times larger than it was 30 years ago.
Broadly, much of the western world has just become far more comfortable living in debt.
Ironically we no longer have high inflation to erode away the real value of our debt. We are stuck with it.
But New Zealand is up to its neck in it and given the smaller, export reliant nature of our economy, is more vulnerable to shocks than many larger nations.
When organisations like OECD and IMF write economic reports about New Zealand, as they did last week, that is what they tell us.
Not that we need them to. We know it.
It seems the wheels are now turning slowly towards a regulatory regime that could slow bank-lending growth in New Zealand.
The counter point is some legitimate fear about what this could cost the economy.
That debate is far from done.
Meanwhile, it seems worth remembering how far we have come. What we have fixed and what, perhaps, we have lost in the process.
