PREFU and the June quarter GDP numbers have been announced this week. Yes, we all knew the numbers were going to be bad. But how bad? Well, the answer is very bad, yet the media, on both occasions, has played it down, saying (quoting the politicians) that things are ‘not as bad as they expected’.
Really? How bad does it have to get?
PREFU revealed on Wednesday that the Government’s deficit for the year is $23 billion. But that’s OK because it is lower than the $28 billion revealed in May’s Budget. So don’t panic.
GDP fell by 12.2% in the June quarter or 12.6% per capita. These are eye-watering numbers.
Yes, COVID. We can blame everything on COVID, and indeed the government is doing exactly that. But wait a second. Why is it that Australia’s GDP decline is only 7%, and the decline in the USA – the country worst hit by COVID – is only 9.1%?
Didn’t we go ‘hard and early’ so as to minimise the effect on the economy? That is what Jacinda told us, on the eve of the first lockdown. And yet Australia and the USA have performed better and even in Europe, where the ravages of COVID were first apparent, the average GDP decline is only 12.4%. We should be doing a lot better than Europe. After all, we had the benefit of seeing what was happening there before we started recording cases here but in the end, our economic performance is no better than theirs, and we are one of the poorest performing countries in the OECD, where the average decline is 10.6%.
Don’t worry, the media and the politicians say. It could be worse, they say. Best to disregard the June quarter figures all together, they say, because after all, that was when we had the lockdown. Let’s look forward to the September quarter figures, which will show a significant bounceback.
Really?
Lockdown started in late March. By the end of May, we were in Level 2, then Level 1 soon after. Everyone was back at work. Life was mostly back to normal. People went on holiday, ordered new furniture and generally caused an element of economic stimulus that must have helped the GDP figures, at least to some extent. The month of June is about 33% of the second quarter. Only about 60% of the quarter was spent in lockdown. This shows how devastating lockdowns really are for the economy. Countries that didn’t lock down did better than we did. So much for Jacinda’s claim that, if we lock down and deal with COVID quickly, we will do less damage to the economy in the long run. Clearly, if we only compare ourselves to Australia for now, that is simply not true.
And for those who seem to think the September quarter results will be better, Auckland has been in Level 3 and Level 2.5 for about half of the third quarter. As Auckland is our biggest city, can we really claim that the September quarter is going to be much better? Our biggest city has been in lockdown for most of the last 6 months. Are the politicians and media just going to ignore that?
GDP is the most common indicator of the health of the economy. With a drop of 12.6% and no doubt more falls to come, it is fair to say that our economy is on life support.
The biggest concern is unemployment. With the announcement of the GDP figures, Treasury has revised its unemployment forecasts and now believes that unemployment will still be around 7% in 2023, and will not begin to fall significantly until 2027. That is 7 years of high unemployment, to go hand in hand with decades of deficits. When you remember all the pain and misery high unemployment will cause, these economic indicators are definitely nothing to celebrate.
One thing you can say about this government though; they are consistent. If they decide on a slogan, they stick with it, through thick and thin, even when the facts show that they have got it badly wrong.
Finance Minister Grant Robertson said the GDP drop was at the lower end of commentators’ expectations and reflected the Government’s decision go “hard and early” on Covid restrictions so the country could come back faster and stronger.
“While the economy slowed during lockdown, the benefits of moving into alert level 4 are not taken into account – including potentially saving thousands of lives, not overburdening the health system and getting on top of the virus,” he said.
Thousands of lives? Is Robertson still parroting the now-discredited Imperial College modelling? They didn’t save thousands of lives because we would never have had that number of deaths, even if we hadn’t gone into lockdown. All the Australian states, apart from Victoria, are proof of that.
Why is everyone, journalists, in particular, playing down our economic indicators, like they are actually good news? I don’t really know the answer, although I can think of $50 million reasons why. It is amazing what a bought media can do for your ratings. For Jacinda and her henchmen, it was money very well spent.
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