{"id":342851,"date":"2026-03-22T23:18:09","date_gmt":"2026-03-22T23:18:09","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/342851\/"},"modified":"2026-03-22T23:18:09","modified_gmt":"2026-03-22T23:18:09","slug":"the-recovery-is-off-dear","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/342851\/","title":{"rendered":"The recovery is off, dear"},"content":{"rendered":"

This is a re-post of an article originally published on pundit.co.nz<\/a>. It is here with permission.<\/p>\n

Back in 1993 I was perhaps the first to announce that the economy seemed to be in recovery. The notion was seized upon; apparently, the long Rogernomics stagnation was over, and economic growth would soon be booming. That is not quite what I meant. \u2018Recovery\u2019 is a technical term used in trade-cycle theory for the phase when the economy has bottomed out and begins the upswing. It says nothing about how strong the upswing will be, nor whether the top of the cycle \u2013 the \u2018boom\u2019 \u2013 will be long.<\/p>\n

There was much disappointment from those who did not understand this when, a year later, the \u2018boom\u2019 indicated the growth trend was much like that the economy had been experiencing before the stagnation, except that the economy was growing at a lower level \u2013 it has never recovered the relative loss from the Rogernomes\u2019 shock policies. There was certainly no faster growth which followed \u2013 no catch-up. (I\u2019ve put a couple of wonkish notes at the end of the column \u2013 no need to read them if you are not a wonk.)<\/p>\n

The previous paragraphs were intended for a column I was about to write about the growing evidence that the New Zealand economy was in some kind of recovery. The point I wanted to underline was that \u2018recovery\u2019 did not mean that subsequent growth would be strong. I wanted to contemplate the case that the growth trend would be lower than it had been in the past. In two words, whether it was going to be a \u2018weak recovery\u2019.<\/p>\n

The economic consequences of the attack on Iran mean that any recovery has been delayed. Probably there will be higher inflation from higher oil prices (which means that people will spend less in real terms); there may be supply shortages from difficulties with offshore suppliers; there may be setbacks in confidence and further closing down of existing businesses or delays or even abandonment of promised investments. All a bit gloomy and unsettling. What is certain is that any recovery is delayed. *<\/p>\n

We cannot tell by how much or how long since we don\u2019t know when the Iran war will be over. But even if the conflict ends tomorrow, its consequences will take some time to unwind. I\u2019ll be addressing what seems likely at the time of the budget forecasts at the end of May. Conveniently, the Treasury\u2019s main forecasting effort is still a month off, when things will be less murky. Speculating before then is pointless, even if it can make good headlines for a media bereft of hard stories.<\/p>\n

However, it may be useful to background the sort of public economic debate which is likely to occur up to the election. The government, fronted by Christopher Luxon and Nicola Willis,\u00a0 has put a lot of emphasis on its claim that the economy measures it has taken were proving successful. Had there been no Iran war and the recovery had got under way, it would have promised strong growth, although evidence for that \u2013 if the government was right \u2013 would not really have been available until 2027.<\/p>\n

The government case now looks thin given the likely delay of the upturn. It will argue the delay is not the government\u2019s fault (without actually mentioning it is Trump\u2019s) and promise that there will be a recovery \u2013 eventually. I don\u2019t know how convincing that will sound to the public. Whatever, the May budget is going to be difficult; there can be no significant electoral \u2018bribes\u2019 \u2013 just promises. (Been there, done that.)<\/p>\n

There is the added complication that the three parts of the coalition are running almost independent economic policies, although there is some overlap among them. The above discussion is about the central policy. Meanwhile ACT has its own approach, although I have seen little real influence from the Ministry of Regulation either on policy or the economy \u2013 or, for that matter, when I get my hair cut. NZ First\u2019s Think Big is still largely a promise. It takes time for big projects to get under way. (Their construction phase needs to be distinguished from their production phase. Muldoon\u2019s construction phase certainly had an economic impact but there is little evidence that there was additional thrust to the economy from the production phase.) I mention the coalition party differences because they are likely to intensify in the runup to the election.<\/p>\n

The Labour Opposition will have the easy task of taking potshots. Whether it promises anything significant which will make it a credible alternative is a bigger challenge. It will offer some new policies \u2013 like a capital gains tax \u2013 but I am not sure whether that will mean much difference to the economy; they may enhance wellbeing although that seems hardly a frame which Labour is using. The Greens are likely to pay considerable attention to redistribution but they do not give as much attention as they did once to the environment. Te Pati M\u0101ori has not much of an economic policy except to enhance the wellbeing of M\u0101ori.<\/p>\n

In the end the economic issue may not be much about policy but about the credibility of each major party leadership to manage shocks \u2013 like the one the Iran attack is generating \u2013 using the existing paradigm.<\/p>\n

We have yet to reach the stage in the electoral cycle where serious economists withdraw and leave it to politicians and the commentariat to grumble, pontificate and promise. That does not mean that economists will give up thinking about economic issues \u2013 but what they have to say will be drowned out by the sizzle.<\/p>\n

* The Statistics NZ announcement that GDP growth in the December 2025 quarter was 0.2% \u2013 fractionally above zero in GDP per person terms \u2013 should be treated as that the economy is still near stagnation. It may be revised a litle \u2013 in either direction. Given the shock from the Iran war the statistic gives little indication of what may happen in 2026.<\/p>\n

Two Wonkish Appendices<\/p>\n

1. I expected that many of the Rogernomic changes would result in \u2018allocative efficiency\u2019 gains (better deployment of resources) that would boost the level of output but not necessarily accelerate the growth rate. I never found any significant improvement, although there was evidence of quality improvements (standard economic measures do not incorporate quality changes very well). Moreover, the economy is probably more resilient to economic shocks. (In contrast. the Rogernomes\u2019 redistributional impacts were very evident.) It may be a guide to the well-known economics question: \u2018how many Harberger triangles [the allocative effects] fill an Okun Gap [the macroeconomic effects]?\u2019. In the case of Rogernomics, macroeconomic management was dreadful. The answer answers sems to be \u2018a helluva a lot\u2019. (See my\u00a0In Stormy Seas.)<\/p>\n

2. I have long puzzled why the New Zealand economy has not benefited by the convergence effect \u2013 the well-established proposition that lower productivity economies tend to grow faster than the highest productivity economies and begin to catch up to them, once they have met certain organisational arrangements (which is why many of the poorest do not prosper). The convergence occurs because it is easier to borrow\/import existing technologies than to create new ones. My guess is that New Zealand\u2019s industrial configuration does not generally benefit from importing technologies in the way that other economies do; we are too small and insufficiently linked into the rest of the world because of our location.<\/p>\n

*Brian Easton, an independent scholar, is an economist, social statistician, public policy analyst and historian. He was the\u00a0Listener\u00a0economic columnist from 1978 to 2014. This is a re-post of an article originally published on pundit.co.nz<\/a>. It is here with permission.<\/p>\n","protected":false},"excerpt":{"rendered":"This is a re-post of an article originally published on pundit.co.nz. It is here with permission. Back in…\n","protected":false},"author":2,"featured_media":342852,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[138,219,111,139,69],"class_list":["post-342851","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-new-zealand","tag-newzealand","tag-nz"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/342851","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=342851"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/342851\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/342852"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=342851"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=342851"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=342851"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}