Steering clear of Armageddon

Good to hear a bunch of economists giving the same advice as Alf was dispensing earlier this year: New Zealand is at risk of talking itself into a “much deeper and longer downturn than is warranted”.

The warning, from the independent forecaster BERL, is recorded on Stuff today.

BERL says the gloom could be turned around with decisive leadership on infrastructure projects, and not cavalier spending cuts by government.

It also expects a modest economic pickup in the year ahead. But:

There is a risk that financial forecasters predicting the next Armageddon would become a “self-fulfilling prophecy”, Berl senior economist Ganesh Nana said.

Mr Nana disagreed that the past year had seen the biggest wealth destruction so far. There was a fall in wealth on paper, but little destruction of machinery, equipment, land and buildings.

The main challenge for New Zealanders and businesses was not to get overwhelmed by “the gloom from the financial media”.

And on employment:

Mr Nana said there was no evidence of a “black hole” in job numbers, which continued to grow into the December quarter. In the past couple of years, jobs have grown about 7000 in each quarter or almost 29,000 a year.

As to the negative sentiment about a deepening recession showing in industry confidence surveys, the reality was not that bad.

For example, two-thirds of the construction firms expect worse conditions in the next six months.

But more than 60 per cent had more than three months’ work on their books and 30 per cent had more than six months’ work ahead.

Here’s hoping the article was widely read.
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