Friday, January 11, 2013

Where is the stimulus New Zealand?

Economic and labour market commentators, including government departments and the Reserve Bank, have been forecasting for at least the last year and a half that employment would 'continue' to recover gradually. This hasn't happened. Employment is flatlining, and government efforts to stimulate a recovery are indiscernable.

The Canterbury rebuild will happen. Eventually that will increase employment in construction, at least in this region, with flow-on effects to employment in other industries, but again, mainly in Canterbury.

Agriculture produce will likely continue to enjoy historically high prices, providing Chinese growth continues, but much of the employment growth in this increasingly productive industry has been had. It should be possible to get greater leverage off of the premium that should be had from agriculture products 'made in New Zealand' - given China's unquenchable desire for these. But so far there's little evidence of this or of it contributing to greater employment.

So where is employment growth going to come from? The public sector isn't growing anymore - the government's seen to that (except for health, which always grows, but steady health growth doesn't result in the expansionary growth needed in other sectors).

That leaves us with the government's passive strategy of 'providing the conditions for business growth'. Unfortunately, this may not be enough.