Mike Hosking: When it comes to the economy, none of this ends well

Author
Mike Hosking,
Publish Date
Mon, 12 Apr 2021, 3:46PM
Finance Minister Grant Robertson and Prime Minister Jacinda Ardern. (Photo / NZ Herald)
Finance Minister Grant Robertson and Prime Minister Jacinda Ardern. (Photo / NZ Herald)

Mike Hosking: When it comes to the economy, none of this ends well

Author
Mike Hosking,
Publish Date
Mon, 12 Apr 2021, 3:46PM

The government is lucky, as it turns out, that Covid is still front-and-centre because if it wasn’t - and it won't always be - a great deal more time would be currently spent on the economy.

Kiwibank tell us the sugar-rush of spending is over. That mad dash we made post-lockdown last year to buy anything and everything is now finished. The household spending tracker was down nine percent in the March quarter - that is a massive fall.

The March quarter, by the way, is January, February and March. When the GDP numbers come out for that quarter next month, it will almost certainly show we went backwards, which then means we were officially in recession. A double-dip recession. They’ve done it not once, but twice.

The economy has tanked. The government keep saying the economy is doing better than thought - but that’s only because they thought it would be torched. It wasn’t torched - just burnt to a crisp.

So don’t fall for that. It is yet more of their spin and BS.

The thing to worry about here is we are in recession. And at a time when money is virtually free money, is being printed like no tomorrow, and the government are handing it out with alacrity and yet with all that stimulus we are still going backwards.

Now the upside, the agricultural and horticultural sectors are saving us and the bubble - if it's worth a billion - won't hurt either. But we can't escape the fact that the borders are closed for the year and it's only April.

And then we get that horrific housing figure. Four billion a year on the housing gap  - Grant's emergency housing - four billion.

And in that, is the key to our troubles. Firstly, it's money we don’t have. Secondly, and more importantly, it's money being handed out to the non-productive sector.

And that is where this government is blowing it. You put the money where there is a return, where it turns into something more than it started out as - and motels ain't it.

And this is the quintessential problem with socialist governments - they're about redistribution, not growth. They tax the landlord, the high earner and instead of doing something productive - they give it to people who need help. Nice gesture, nice in theory, just no good for the economy.

Welfare should be paid for out of growth - not debt, or robbing people's pockets. The real fear we have, and this will unfold for the rest of the year and into next, is we owe over $100 billion now.

What happens when interest rates rise? We are not growing as an economy, other economies are outperforming us, and we remain locked-off from the world. We are not growing our way out of trouble, we are printing our way out, and even that isn't working.

You don’t need to know much about economics to know none of this ends well.