Collectively, New Zealand's net household wealth is $2,207,094,000,000. Photo / Sylvie Whinray
OPINION:
As we say goodbye to 2023 and welcome in 2024, it’s a good time to catch up on the very best of the Herald columnists we enjoyed reading over the last 12 months. From politics to sport, from business to entertainment and lifestyle, these are the voices and views our audience loved the most. Today it’s five of the top columns from Liam Dann.
New Zealand is still a rich country. It’s easy to forget that, in a grim, wet winter with the warming monetary stimulus of the pandemic being cruelly turned off.
Collectively, our net household wealth is $2,207,094,000,000. That’s a big number. I had to check it several times. Yes, it is $2.2 trillion. And we’re not a big country.
The update on our collective wealth, released by Stats NZ last week, was bad news, of course. Our total net wealth has been falling for five successive quarters - having peaked in December 2021 at $2.43 trillion.
On paper at least, we’ve never been as wealthy as we were at the height of the pandemic. Now we’re going backwards at pace. But we’re still a long way off the kind of dire third-world status some of the more extreme political commentators like to imply.
We are still a lot wealthier than we were prior to the pandemic ... or prior to the arrival of the Labour Government in 2017. The catch is that most of the new wealth created since 2020 isn’t real.
It’s the wealth that comes from borrowing. The Government borrowed billions, the Reserve Bank slashed interest rates and we borrowed billions more.
With our wealth tied largely to the fortunes of our housing market and (to a lesser extent) our KiwiSaver funds and retirement savings, it’s not surprising we’re going backwards now.
But that’s not the really bad news. The really bad news is that our wealth remains artificially inflated and almost certainly has further to fall. Read more >
With unemployment still near record lows at 3.4 per cent and the average hourly wage up by 7.6 per cent - well ahead of inflation - why does everyone feel so grumpy about the economy? Is it the weather? Is it house prices? Is it political?
Even some headline-grabbing numbers that look bad at first glance aren’t really.
Company liquidations are on the rise. Hardly surprising given the terrible state of the economy, right? Well hang on, it turns out they are still well short of numbers that were normal pre-pandemic.
The number of households behind on their mortgage repayments is up 26 per cent on the same time last year. Shocker, right? Again, a step back to look at a longer version of the graph shows us that we haven’t yet surpassed pre-Covid levels.
The reality is that on paper this economy remains very strong. But anecdotally that bit of paper might as well be floating in a puddle outside an empty downtown food court.
ANZ chief economist Sharon Zollner addressed the issue last week. Speaking at the Financial Services Council conference, she highlighted an economic concept called the Misery Index to explain the phenomenon. The index simply adds together the two worst economic phenomena - inflation and unemployment - to give a sense of how tough life is for people. While inflation is horribly high, job security is extremely good right now. So the misery index is not historically high.
I think there are also cyclical reasons why we’re feeling bad now. An issue for sentiment is the direction of travel for the economy. We’re constantly being told that things are going to get worse.
It doesn’t help that our economic data is almost always out of date by the time we get it. A lot of the numbers we’re seeing now - including bank profits - capture the tail end of the stimulus-fueled boom.
People feeling grumpy about the economy but annoyed by the ongoing strength of the economic data can take heart. It is going to get worse. But conversely, by the time the top-line economic numbers, like unemployment, are actually terrible, inflation will be down.
We’ll be looking out at the other side of this cycle and feeling a bit more optimistic - possibly even thinking we’re rock stars again. Read more >
Wow, I didn’t expect New Zealand to get back on track so quickly.
It seems like only a few days ago that we were staring into the precipice of fiscal oblivion and stagflation. Now we’re talking about a soft landing. Also, the weather has improved and both the All Blacks and Black Caps are in fine form.
I’m being facetious of course. The precipice is still there. We’re still just an oil shock or a dry summer away from recession. And don’t get me started on the potential for the cricket and rugby results to turn on us.
But it’s true that the economic data of the past few weeks has started to come in ahead of expectations. That’s prompted a number of local economists to shift their forecasts into more positive territory. We’re starting to see the term “soft landing” crop up a lot more in economic commentary - both here and in the US.
After all the gloomy economic hyperbole we’ve endured from some quarters in the past year, it is worth noting that most market economists always remained fairly sanguine about the scale of economic challenge facing New Zealand.
To me, it was always about jobs - getting inflation back down to target range without causing high levels of unemployment. Beyond that, whether we are technically in a recession doesn’t really mean very much.
Forecasters like Kiernan at Infometrics now think we might skip recession altogether, which would be a remarkable achievement from a macro-policy point of view. I don’t know if I’m that optimistic yet.
But, broadly, things are following the script. It’s starting to look like Prime Minister Christopher Luxon and his new government will arrive on the fair winds of a cyclical recovery. So good luck to him - hopefully those tailwinds pick up and we get our soft landing. That will provide Luxon with an opportunity to do more than fight economic fires and deliver the kind of economic transformation he talked about on the campaign trail. Read more >
New Zealand’s immigration records are tumbling ... again!
We had a record net migration gain of 96,200 in the July 2023 year, according to Stats NZ data last week. The net migration rate has hit a new annual high every month this year and probably will continue to for several months yet.
Is this a historic demographic trend threatening to reshape our society and economy, or just a temporary symptom of post-pandemic weirdness? It’s probably a bit of both.
The huge surge in arrivals this year has to be related to the fact our borders were closed for two years. So, too, does the large exodus of New Zealand citizens.
But there is also a bigger trend at play. If we step back and look at the net migration figures for the past 30 years or so, we can see average net migration has been on the rise.
Last week, global investment bank UBS crunched some numbers as part of a look at the New Zealand economy. The country’s population has lifted by about 50 per cent since 1991 to 5.2 million, it noted. UBS expects it will reach 8.3 million by 2073, based on Stats NZ’s “high migration” scenario of ~50,000 net per year.
I watch immigration data closely because it has a huge bearing on the short-term economic outlook. But I pay more attention to it than some other economic indicators because it is so interesting in its social influence.
The biggest reason that I’m generally in favour of steady net migration gains is because I think new people and different cultures add vibrancy and energy to this country, which is still young and relatively underpopulated.
There are obviously short-term economic benefits too, but they are not one-sided. People are the economy. They spend money and create wealth, so more of them boosts GDP.
But they also need somewhere to live, they drive on the roads and require medical services. So more people means more pressure on crucial infrastructure.
That’s fine as long as our governments aren’t lazy about booking the economic gains without investing for the population growth. Unfortunately, guess what, they are! New Zealand governments have been very slack on this front. The last National government was one of the worst. Read more >
When it comes to maintaining competition in the sectors that Kiwis really care about, the Commerce Commission has been a terrible failure. Across the past 22 years, it has allowed major consolidation levels in the three sectors that account for the biggest costs in our lives - our groceries, mortgages and petrol.
Major players have been allowed to buy their rivals despite (in every case) public opposition and fears that these moves would lessen competition and cost consumers in the long run.
Now the “long run” has arrived, with inflation adding an extra layer of public concern and urgency around prices, the Government is desperately trying to get more competition into these sectors.
In the election campaign there was bipartisan political consensus about the lack of competition in these sectors costing Kiwi consumers.
We have special market studies into fuel pricing and personal banking, and we’ve got a newly appointed Grocery Commissioner. We hear talk of attempts to entice new players into these markets with incentives.
Last week Foodstuffs - one half of our supermarket duopoly - applied for Commerce Commission permission to consolidate its internal structure.
It wants to merge its North Island and South Island co-operatives into a single national business which it says will bring cost savings that it will be able to pass on to consumers. In other words: trust us, we’ll look after consumers.
A look back at the big decisions of the past two decades suggests the Commerce Commission has been all too ready to do just that. Read more >
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.
Liam Dann takes a deeper dive into the week's economic news