Businesses are running scared. The firstmajor New Zealand economic news for 2009 has seen the NZIER’s measure ofbusiness confidence plummet to its lowest level since at least 1970. Confidence can be a nebulous beast, but measures of activity experienced in thelast three months have also fallen sharply. More specific questions also addsubstance to the pessimism. Profitability expectations are the worst since1982, and a wide range of other indicators from the survey are at their lowestsince the early 1990s recession.
Our work in the news
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Here is list of Infometrics’ latest mentions in the media.
Labour leader, Phil Goff, labelled the Treasury’s Briefing to the incoming Minister of Finance as an "ideological wishlist". However, far from being ideological, the briefing represents the rational consequences of sound analysis. Implementing the policies recommended in the briefing would make New Zealanders better off, encourage our best and brightest to remain in New Zealand and enhance the fairness of our society.
Since May this year, the Baltic Dry Index has collapsed (falling by 93%) – a movement that may be of concern for a small trading nation like New Zealand. The Baltic Dry Index (BDI) is effectively an index of shipping costs for 26 of the main "dry commodity" shipping routes. As a result, movements in the index give us some idea about how the cost of international shipping is changing. However, over recent years the index has also been used as an indicator of the outlook for commodity prices. This interpretation of the index is something we discussed in detail back in March
There is now little doubt in anyone’s mind that the New Zealand economy is in for another bumpy ride over the coming year. Given this realisation the burning question is: How can government policy save the day?
In a world increasingly wary of debt New Zealand is vulnerable, possibly very vulnerable. We are one of the most indebted nations in thedeveloped world with net foreign debt hovering around 100% of GDP. As a countrywe have been chalking up external account deficits for 35 years and now have anIOU bill to the rest of the world of around $160bn, or about $40,000 for everyNew Zealander. We are not the most indebted, but we are exceeded only by Iceland whose net foreign debt per head is a massive $100,000. But then Iceland is now virtually bankrupt.
Reports about the credit crunch, looming global recession and stock market volatility have dominated economic reports over the past few months. But for most New Zealanders the question will be what does it mean it for me? At its simplest: how safe is my job?
Trust is the prime victim of the current global financial meltdown. Much is made about greed as a motivator of market behaviour, a la Gordon Gekko’s "Greed is Good" speech in the film Wall Street. However, what makes modern market economies so successful is not that financial markets are a "free for all" but that they have to operate within clearly defined restrictions. Ultimately it is the rules and protections that promote economic performance in the world’s rich economies.
Economics is the study of changes at the margin. It is thus apt that the economic policies being proposed by the two main parties feature, at most, marginal changes. But endorsing the status quo sits awkwardly with their aspirational goals.
Most of us can recall what we were doing when major eventsoccurred like when the twin towers came down, when Princess Diana died orduring the stock market crash of 1987. The global financial crisis of 2007/08 isfast shaping up to be one of the defining periods in world history. But theenormity of what is happening on world markets can be hard for New Zealandersto comprehend. Twelve figure sums are being thrown around by governments and massivecompanies are going bankrupt. As we deal with our current economic challenges,the deteriorating world economy has New Zealanders wondering what else may bein store.
It’s official – New Zealand experienced its first recession in a decade over the first half of 2008. According tothe official statistics the quarterly level of economic activity is down 0.5%on its peak in December (adjusted for seasonal differences).