We have three of the four horsemen of the economic apocalypse, writes Richard Prebble. Photo / Roger McClean
We have three of the four horsemen of the economic apocalypse, writes Richard Prebble. Photo / Roger McClean
OPINION
We have three of the four horsemen of the economic apocalypse: inflation, high interest rates and recession. Soon the fourth horseman, unemployment, will join them.
The Prime Minister says the recession “is part of a global economic downturn”. His Finance Minister blames the weather.
The problem with spin isthat the spinners believe their own spin. They avoid hearing anything that contradicts their claims.
At Fieldays, Chris Hipkins said he had not met anyone who was negative. How could that be? The May Roy Morgan poll revealed that 54.5 per cent of us believe the country is “heading in the wrong direction” compared with about a third, 34.5 per cent, who think it is going the right way.
Advisers learn not to contradict the spin. The Reserve Bank said any recession would be in the second half of the year. On May 18, the Treasury predicted New Zealand would not go into a recession.
Stats NZ has revealed that when those predictions were made, the country was already in recession.
If the Reserve Bank had realised the country was in recession, would the bank have lifted interest rates?
Both the Treasury and central bank have been issuing absurdly optimistic forecasts - inflation would be transitory; printing $50 billion would not cause inflation.
In denial? The Prime Minister Chris Hipkins (left) says the recession “is part of a global economic downturn”. His Finance Minister Grant Robertson (right) blames the weather. Photo / Supplied
Now the spin is that this is a “technical” recession. It is not a real recession because employment is strong. But Stats NZ tells it as it is. There is double-digit food-price inflation. “Total retail card spending fell $113 million (1.7 per cent) in May 2023 compared with April 2023, when adjusted for seasonal effects.”
There is an even better indicator of a recession - the purchase of Road User Charges. The ANZ Bank Truckometer states: “Traffic flows are a real-time and real-world proxy for economic activity ... The ANZ Heavy Traffic Index shows a strong contemporaneous relationship to GDP, while the ANZ Light Traffic Index has a six-month lead on activity as measured by GDP.”
TheLight Traffic Index fell 2.8 per cent month-on-month in April, while the Heavy Traffic Index fell 2.2 per cent.
That ANZ index shows we are in a recession, and it is deepening.
The year-on-year 16 per cent drop in job advertisements on the Seek website in April shows the labour market is rapidly weakening. The Government that reduced immigration when labour was in short supply has begun mass immigration. Earlier this year, it was predicted that net immigration could reach 100,000 in 2023. Mass immigration plus a weakening job market will ensure unemployment increases.
The Government is not responsible for the weather or the Ukraine war. But the Government is responsible for not fixing what only it can fix.
The World Bank has rated New Zealand as the easiest country in which to start a business. Eighteen years ago, I woke up one morning with a business idea. Without leaving my home, in 36 hours I registered a company, obtained a GST/tax number, opened a bank account and began trading.
But here is why I am feeling negative. Last week I tried to open a bank account for my 8-year-old grandson. Today you need an appointment to open an account. After two days of trying to ring the bank for an appointment, I went into the bank and queued for half an hour to see a teller. I now have an appointment for next month and a list of documents I must bring.
Despite having banked with the same bank for 50 years and being greeted by name, I must bring ID. If my grandson did not have a passport, I am not sure we could open an account. I have lost count of the number of times I have had to present my passport to establish my identity to tellers who already know who I am.
I have also tried to assist a beneficiary to get a bank account. We thought he could go contracting. He could not produce ID or a utility bill acceptable to the bank. He was living in a sleepout with no power. He was so discouraged that he gave up his plan to go contracting and decided to stay on the benefit.
Researchers from consultancy ThinkPlace say 16,000 beneficiaries have their benefit paid into others’ accounts. ThinkPlace says tens of thousands of people have become unbanked and forced into dangerous work-arounds. They are shut out of the economy.
The bank is not responsible. It is government red tape. Bureaucrats are concerned that the Russian mafia might open a bank account and register a business. The Russian mafia use Swiss bank accounts. The Swiss do not de-bank thousands of their citizens to stop a few Russians.
New Zealand must trade our way out of this recession, and ministers must not keep on spinning. Repealing the over-the-top red tape that has de-banked tens of thousands of people would be a good start.
- Richard Prebble is a former leader of the Act Party and a former member of the Labour Party
