In 2004 PM Helen Clark and her deputy Michael Cullen battled low business confidence despite a booming economy. NZH File Photo
In 2004 PM Helen Clark and her deputy Michael Cullen battled low business confidence despite a booming economy. NZH File Photo
Opinion by Liam Dann
Liam Dann, Business Editor at Large for New Zealand’s Herald, works as a writer, columnist, radio commentator and as a presenter and producer of videos and podcasts.
But a look back at the economic data of the day shows the economy that the Herald on Sunday was launched into was very different to the one we've got now.
Houses were about half the price but mortgage rates were double.
The economy was booming – with GDP growing at more than 5 per cent a year.
Some things weren't so unfamiliar; there was a Labour-led Government and guess what? Business didn't like it.
The net confidence figure on the National Bank (now ANZ) Business Outlook Survey was negative 21 per cent in October 2004.
That compares with an even gloomier 51 per cent (negative) in the Survey last week.
Business confidence actually stayed in negative territory right through three more years of solid growth under Helen Clark and on into the 2008 global financial crisis.
Unemployment was also relatively low in 2004 - 4.2 per cent then versus 3.9 per cent now.
In 2004 New Zealand was still enjoying the first flush of the dairy export boom, underpinned by the China free trade agreement.
We were in the early days of a big surge in tourist numbers - off the back of the wildly popular Lord of the Rings films.
The housing market was also in good shape. There was growth but prices were still relatively affordable for first-home buyers.
According to One Roof/Valocity statistics, the national median house price was just $253,000, compared to $560,000 now.
In Auckland - unsurprisingly - the contrast is even more extreme.
In 2004 the median house price within the old Auckland City limits was $360,000; in 2019 it is $915,000.
That's not to say it was always easy or stress-free to buy a house in Auckland. Although it was still possible, which it isn't for most younger people now.
ECOTIMEMACHINE
The difficulties in the housing market back in 2004 were more to do with cash flow than the size of the deposit.
There were no Reserve Bank loan-to-value ratios in 2004 and - pre-GFC- the banks were generally more relaxed about lending on a 10 per cent deposit.
The hard part of the housing equation was interest rates.
When it comes to monetary policy, 2004 really was another age.
The official cash rate in New Zealand was 6.5 per cent, putting the floating mortgage rate at about 8.5 per cent, or 7.5 for a two year fixed.
Rates would keep rising into the GFC as the Reserve Bank struggled to keep inflation down and the economy from overheating.
We have the opposite problem these days.
Inflation has more or less disappeared from the economy, possibly due to the dramatic rise of the internet, which has made everything cheaper for consumers.
The downside of that is that wage growth hasn't been that flash either - although it has improved.
The average household income was $60,433 in 2004, it's $107,647 for the year ended 2018 (latest available).
Were we a richer nation? That's highly subjective when you deal in averages and medians.
Nominally, we were wealthier.
The kiwi dollar was worth US68c compared to US63c now.
The Reserve Bank governor in 2004, Alan Bollard, flanked by deputy governor Adrian Orr (now governor), left, and assistant governor David Archer. Photo / File
But if you view the strength of the kiwi as a measure of the country's relative economic success then, again, it comes down to the direction of travel.
The kiwi would hit US80c before crashing in the GFC.
GDP per capita as at the June quarter of 2004 was $43,159.
As of June this year, GDP per capita was $51,407, including adjustment for inflation, an increase of about 19 per cent.
At least we've been heading in the right direction, but that's not really so flash when you consider the rate of top-line GDP growth across the past 15 years.
Growth has been flattered by an immigration boom, which has seen New Zealand's population rise from 4.06 million in June 2004 to 4.94 million.
That's a staggering 21 per cent increase.
But what's even more staggering is the extent to which this was a surprise - although it goes some way to explaining why we've ended up with a housing shortage and an infrastructure deficit.
A national population projection published by Stats NZ in December 2004 estimated that New Zealand's population would hit 5.05 million by 2051.
In fact, we're on track to hit that number by 2021 - 30 years ahead of schedule!
It's not surprising we've struggled to cope with the rapid rate of population growth.
So New Zealand is a more dynamic place and it is a wealthier place.
But the greater wealth has been underpinned by commodity exports, tourism, house price growth and population growth.
We haven't markedly improved our productivity, our fundamental ability to create wealth.
And we've become a less equitable place.
The challenge for the next years is to address these issues while we continue to grow.
