The New Zealand economy surged 2.8% (quarter on quarter) in the second quarter of 2021 taking most forecasters by surprise. Market expectations were for a slowdown and a 1.1% growth after the relatively robust 1.4% q/q increase in the first quarter. GDPlive’s machine learning model was an outlier, showing a much more optimistic prediction on June 30th of 3% for the quarter — very close to the official figures.
The strong GDP figures reflect the positive momentum of the New Zealand economy following a recession in 2020. The country had been COVID-free until an outbreak of the highly infectious Delta…
The World Trade Organisation has warned that international trade will grow at a slower rate than before the pandemic hit. COVID-19 restrictions on mobility, disruptions to supply chains and the continued rise in protectionism have all severely tested global trade. Rebuilding trade and international connectedness will be key to a strong and inclusive economic recovery.
For New Zealand boosting trade flow is particularly important as even prior to the pandemic, our relative export performance had been in decline since 2000. Small countries tend to export — and import — more than bigger countries that have larger domestic markets. …
It is very difficult to sustainably grow GDP unless the workforce is also growing at a reasonable rate. Labour force growth in OECD countries contributed one-third of the total economic growth between 1960 and 2015. Since then, many countries have entered a labour-scarce environment, with some countries like Korea, Japan, Germany and Italy already shrinking.
Economic growth in the developed world grew strongly from the end of WWII to the 1980s, fuelled by an increasing working-age population. Since then, the working-age population has been declining in many advanced nations.
COVID-19 is only the latest of many epidemics and pandemics to have afflicted the world throughout history. Each pandemic is unique in terms of the nature of the disease, the human response and its historical context. However, there is a lot to be learned from past pandemics, which can provide insights into how the economy may change as a result of COVID-19. So, what are some of the themes that have emerged after past pandemics?
Prices are rising quickly across much of the developed world with inflation in OECD countries increasing at the highest rate since 2008. In the US, core consumer inflation has surged at a pace not seen since 1992. Central Banks have so far maintained the inflationary pressures are temporary and will abate on their own, although US Fed officials acknowledged on Wednesday that price rises may last longer than they expected.
The Economist called it “the West’s biggest economic-policy mistake” undermining economic growth and the public’s faith in fairness and capitalism. The mistake the Economist is referring to is the misguided policies promoting home ownership which created the developed world’s most serious economic failure. At the root of this failure is the application of planning rules that have restricted housing supply, particularly close to major cities. This has led to soaring rents and house prices in the cities, hindering workers from moving to areas where the most plentiful and productive jobs are located, and ultimately slowing GDP growth.
By Professor Christoph Schumacher
In a speech delivered just before yesterday’s budget, Finance Minister Grant Robertson acknowledged that the New Zealand economy had its problems, even before COVID-19 hit our shores. Housing affordability, climate change, child well-being and productivity issues were enormous issues the country needed to face up to.
The announcements in the 2021 budget won’t have given many business owners confidence that from their perspective things will be changing any time soon. In fact, they may well be in for more of the same, only with higher levels of debt and ongoing shortages of skilled staff.
While many advanced countries have suffered from falling productivity since the Global Financial Crisis, New Zealand’s productivity performance has been lacklustre since the mid-1990s. Our productivity growth since 1996 has been a paltry 1.4 percent and our output per hour worked is 40 percent below the top half of OECD countries.
The rapid development of COVID-19 vaccines has offered hope that we will one day soon see countries returning to a semblance of normality. However there is no doubt COVID-19 has been devastating for the global economy. Global GDP declined the most in 2020 since the Great Depression with the loss of 8.8 percent of global working hours equivalent to 255 million full-time jobs.
A faster vaccine rollout internationally is expected to boost world GDP by 2.8 percent according to the latest KPMG Economic Outlook. On the other hand, a global delay in the rollout of vaccinations until the end of…
In uncertain times, people tend to save more. In 2020, with the pandemic raging and people concerned about both their health and their jobs, it’s not surprising that people spent less and saved more.
In Australia, the household savings to income ratio increased to a whopping 19.8 percent in the June 2020 quarter — up from 6 percent over the previous quarter. Even by March 2020 that saving ratio was starting to increase (up 2.4 percent from December 2019):