Mike Hosking: This inept Government has put the brakes on the economy

COMMENT: We seem to be in two worlds at the moment.

I was asked by a car dealer last week, what's happening to the economy? I passed on what I was hearing. He said they weren't seeing it yet.

They were having to work harder for their money but the money was still coming in. That is your 'here and now' real world.

The one some are increasingly worried about is the world the polls are predicting. The confidence polls have been dropping across all sectors all this year.

The theory being, if it's not real, it will be. The counter-theory is that business doesn't like Labour governments so moan but get on with it anyway.

But the latest services sector numbers as put out by the BNZ show the two worlds are colliding. The services sector is what makes this country tick. It is us spending money, it accounts for two-thirds of the New Zealand economy.

And when you see that number in trouble, we all have trouble.

That number, as of this week, is a reason to worry.

It's 52.8 - what that means is the sector is still expanding. That's the good news, but not by much.

50 is treading water, below 50 and you're contracting. The 52.8 figure is 4.3 down on last month, that's your worry.

The expansion is stopping. We are putting the brakes on. And that's not sentiment, it's real.

It's real dollars, in real shops, that is no longer being spent. It's orders that aren't being placed. And in one of the sub-indices it's jobs that aren't being created or filled.

All five sub-indices are down, the employment index is down three points.

It has not been this slow since the middle of 2010. And in 2010 we were scrambling out of the global financial crisis. In 2010 we had an excuse to have numbers this slack.

So, given these numbers, can we at last start to harden up a bit, and have a real chat about this Government driving our country into a hole?

Can we start to acknowledge that the wage demands, the industrial action, the taxes, the spending and yet to be revealed workplace reform, is not good for the economy?

People don't like it and they're starting to react in a very tangible sort of way.

At some point the theory becomes reality, and it might be right here right now, and the reality is ugly.

We cannot blame the world, the world is okay. There is no GFC this time.

Returns for our exports are good, our trading partners are doing fine.
It's us, in isolation, that is taking a remarkable economic record and throwing it in the bin.

The services sector is driven at least in part, and often a large part, on sentiment. Spending is about feeling good, the moment you don't feel good you close your wallet.

52.8 is a lot of wallets closing. No it's not 50 or below, but then god forbid nor should it be.

52.8 is bad enough, certainly bad enough to start asking a few hard questions of a Government that only nine months in, has managed to find the economic brake pedal and slam its inept foot hard down on it.