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Andrew Dickens: Why we shouldn't fret over New Zealand's 'folk star' economy

Author
Andrew Dickens,
Publish Date
Sun, 11 Aug 2019, 9:58AM
Business confidence dropped as soon as the new Government came in, but we're doing better than most. (Photo / NZ Herald)

Andrew Dickens: Why we shouldn't fret over New Zealand's 'folk star' economy

Author
Andrew Dickens,
Publish Date
Sun, 11 Aug 2019, 9:58AM

So what's really happening to our economy? To be honest, I don't think anyone has a real grasp on it.

This week the Reserve Bank lowered our interest rates to record low levels. Now is that a good thing to stop us going down the road to hell or is this a bad thing because we’re already on that road to hell?

The editor of The Bulletin put it very well I thought: this is Adrian Orr saying Don’t Panic, but it’s very hard not to panic when someone is shouting don’t panic.

But for many, particularly in the media, it’s proof we're going to hell in a handcart. And when you've been detoured onto the road to hell you need someone to blame. And in the time honoured Kiwi tradition it's obviously the government's fault.

Labour has strangled the rock star economy, crowed many. Which I could go with except many of the same people have also said that this transformational government has, in fact, changed nothing at all.

They've stopped oil exploration, which is a thing, I don't deny. There's been some tinkering with the minimum wage and less people are subject to the 90 day trial but if that's all it takes to strangle our economy then you have to wonder what sort of economy we had in the first place.

Many called it a rock star economy but I never liked that. I think it's always been more of a folk singer economy. Steady sales, no trashing of hotel rooms, a sensible methodical economy not prone to excess. We are quite risk averse.  It's our strength but the mindset behind it is also our weakness.  All the time we’ve had cheap money experts have been saying there’s never been a better time for a bit of capital expenditure to update your kit so you could become more productive but many ignored that.

The real rock star economies are overseas and they’re running roughshod.

The US and China in the biggest trade war in generations, and it's starting to hurt. The UK taking the biggest punt of it's life, running away from guaranteed markets. Yesterday, it was revealed that the British economy has shrunk for the first time since the GFC. They're down 0.2 per cent and yet we have people moaning that we're only growing at two per cent. There are fears of a British recession and they haven't even left Europe yet. Europe is also wobbling as they realise the fifth biggest economy is leaving the village And in the middle of it our largest trading partner, Australia, is stumbling.

So sure. Surrounded by all these negative pressures, it's clear the government killed the economy.

One thing that every commentator noted was that our confidence fell as soon as the new government took over. So the thing is that it's not the government that strangled the economy. We strangled the economy because we were afraid of what the new government would do. But the year of delivery has failed so what are you afraid of?

What I took from Adrian Orr is this. We're better off than most, but their troubles will affect us. Ever since the GFC we have been careful. Folk stars, not rockstars. Not rushing into capital expenditure. You can do that for 10 years but eventually you end out doing business using clapped out equipment.

But it's time to think about the future. There's a small window. The Governor is saying have confidence. Invest in good ideas. Don't put all your money into a bank to stagnate because the interest rates worldwide are bad. It might as well work. Invest it in New Zealand. We have nothing to fear but fear itself.

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