December quarter GDP (+0.8%) was the third consecutive quarter of growth. Finance Minister Bill English says this suggests the recession, which began in early 2008, bottomed out in the first half of 2009, and since then the economy has grown again at a moderate rate. This is consistent with a range of other indicators, and broadly mirrors the pattern of NZ’s trading partners. The lift in the economy will create jobs, though it is likely to be some time before we see a sustained drop in unemployment. The recovery is threatened by a fragile global recovery, serious imbalances in the NZ economy, and an operating balance which remains in deficit. But English sees encouraging signs of rebalancing: the last two quarters of last year were the first since 2003 when our internationally tradable sectors grew faster than our domestic sectors, and for the first time since March 2000, Govt administration has not grown over a full year.

Some Worrying Signs. Activity in goods-producing industries increased 3% during the quarter, mainly driven by a welcome 4.5% lift in manufacturing activity after seven quarters of decline. Even so, manufacturing activity was 16.5% lower than in September 2005 when it last peaked. Not so cheering, gross fixed capital formation (measuring investment in fixed assets) decreased 0.9%, largely resulting from reduced investment (-25.8%) in intangible assets, such as software and exploration. The Govt hopes to boost this investment (largely from overseas) by opening up conservation land for mining exploration. Since March 2002 expenditure on GDP in current prices has increased 46%. But the summary statistics are instructive on what happens when we become increasingly dependent on overseas investment.

Getting Poorer. Real gross national disposal income, measuring the real purchasing power of national disposable income, in effect measures the volume of goods and services controlled by NZ residents – the chunk of the national cake left for us after the foreigners have taken their dues. It has increased by 22% in the past seven years. When population growth is taken into account, RGNDI per capita has increased just 10%. Moreover, while the recession might be over for the economy generally, in each of the past four quarters RGNDI per capita has been lower than a year earlier. Someone should tell Bill English we are getting poorer. It’s an inevitable consequence of borrowing to pay the bills. Bit by bit, a shrinking share of the cake is left for us Kiwis.

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