New Zealand’s economy actually grew during the pandemic, joining a small club of countries that are back in the dark. George Driver investigates whether it’s time to celebrate.
The country’s latest GDP figures appeared to be received with a collective shrug. New Zealand had “avoided a second pandemic recession“And the economy had been “kept afloat”. Even before the figures were released, the generally optimistic Mike Hosking falsely announced that they “expose our stagnant economy”. Spinoff’s own Alex Braae said they were “probably not the kind of numbers you skip champagne on.” Media coverage quickly turned to the perennial topicality of the housing market and how rising GDP could push up interest rates.
But don’t put the Lindauer back in the pantry just yet. Look at economies around the world and our economic performance is starting to look great.
New Zealand has now joined a small club of countries whose economies are now actually larger than they were before the global pandemic.
In early June, March quarter figures shown GDP – a measure of the size of the economy – grew 1.6% from the previous quarter, defying negative growth forecasts. After a turbulent 12-month period, when economic growth went from a record drop of 12.2% after confinement to a record 14% rebound In the September quarter, for the first time, the economy is now larger than it was before the pandemic. GDP is now 0.8% higher than in the three months to December 2019. It may not seem like much, but it’s the kind of number other countries can only dream of.
According to OECD figures, the European Union economy shrank 4.6% during this period, with the UK economy shrinking 8.7% from pre-pandemic levels. On average, the OECD economies shrank by 2.3%. North America is faring a little better, with the US economy shrinking 0.9% and Canada’s economy by 1.7%.
Only a handful of other countries have seen growth since December 2019. These include China (7.1%), Turkey (6.8%) and India (2.7%) , although these latest figures are accompanied by asterixis – inflation in Turkey was above 16% and the economy is said to have shrunk 40% in US dollars since 2013, while India has been affected by a crippling Covid-19 epidemic since March.
More comparable countries in the growth club include Korea (0.6%), whose GDP grew on the back of a export boom led by computer chips and vehicles, and Australia, which matched New Zealand’s 0.8% growth while also keeping Covid-19 at bay most of the time.
Comparing the GDP figures for the year through March 2021 – which takes into account the economic turmoil of 2020 – with the pre-pandemic year in December 2019, New Zealand’s economy is actually a nose ahead of that of Australia, defying Hosking’s repeated assertion that Australia is doing better than us at handling the economic fallout from the pandemic (see here, here and here). During this period, New Zealand’s economy shrank by 2.3%, while australia contracted by 2.4%.
Senior economist in computer science and boy ask me Brad Olsen says that all of this means New Zealand has a head start in post-pandemic recovery, while demonstrating the strength of our economy.
New Zealand’s economic performance since Covid-19 has been impressive and stronger than most economists expected, underscoring the resilience of New Zealand’s economy and supporting New Zealand’s immediate response to Covid-19, ”Olsen said.
“Having more people unemployed and then returning to work could limit the speed of recovery in certain regions, with retraining necessary for certain groups. While in New Zealand, job losses have been more moderate, which means less disruption and stoppages of jobs and works. “
Olsen says the government can take credit for the country’s relatively good economic performance, with the wage subsidy and foreclosure paying off in the long run.
He says the numbers are also helping settle one of the biggest local debates of 2020: whether New Zealand should have followed Sweden and avoided a lockdown to save the economy. According to OECD figures, the Swedish economy has shrunk by around 1% since December 2019, while recording 14,570 deaths.
“New Zealand’s path has meant a lot fewer deaths and a stronger economy,” Olsen said.
So, does that mean we can celebrate? Not so fast, says Murat Ungor, lecturer in economics at the University of Otago. Although the country has performed well during the pandemic, addressing the long-term structural problems in the economy will be crucial in the long term.
“What really matters is what happens in the long run,” Ungor says. “Quarterly data only shows us short-term fluctuations – in 10 years no one will remember the rate of growth in March 2021. Only by tackling the structural problems in the economy will we experience it. sustained growth. “
In particular, Ungor argues that New Zealand must contend with its deplorable productivity to ensure continued growth. A recent report of the Productivity Commission found New Zealand to be one of the least productive countries in the OECD.
“Without solving this problem, we will have serious economic problems over the next decade.”
So what’s the verdict on the GDP news? Perhaps not worthy of champagne, but arguably worth at least a bottle of New Zealand sparkling white at a reasonable price.
Subscribe to the Bulletin to get all of the day’s key news in five minutes – delivered every day of the week at 7:30 a.m.