Economic growth, inflation, and interest rates around the globe remain significantly lower than they were prior to the 2008 Global Financial Crisis. The limited success of efforts to stimulate the economy over the last 12 years are reminiscent of the Japanese economy’s stagnation during the 1990s. Are other developed economies, including New Zealand, at risk of suffering the same malaise as Japan over the medium-term?
There’s a saying that it takes money to make money. There are, of course, exceptions to any rule, but this saying generally aligns with Thomas Piketty’s thesis (Capital in the Twenty-First Century) that if the rate of return on capital exceeds the economy’s growth rate, then wealth will gradually accumulate in the hands of fewer and fewer people. That is, if investment returns are growing faster than the economy, this wealth accumulates.
Infometrics Christmas Carol 2019 – sung to the tune of Santa Baby (written by Joan Javits and Philip Springer). Originally sung by Eartha Kitt, we used the version by Madonna
The latest Infometrics Quarterly Regional Economic Monitor points towards a slowing economy, even as growth remains broad-based across the country. Construction activity continues to grow at pace as New Zealand attempts to make up the shortfalls in housing, services, and infrastructure from rapid population growth over previous years.
African Swine Fever (ASF) is now firmly entrenched in every province of China and has recently been reported in several other South East Asian countries, causing an upheaval in the world’s meat market. The Fever, a highly contagious, incurable virus that is fatal to pigs but harmless to humans, has also been detected in parts of Eastern Europe since 2014.
New Zealand’s housing market isn’t functioning as well as it should be, with higher house prices, rising rents, falling home ownership, and a lack of housing options. But just how large is the housing shortage that we continually hear about?
The global economic slowdown will continue to be a drag on New Zealand’s economy over the next year, according to Infometrics’ latest forecasts. Escalating tariffs as a result of the trade war between the US and China have seen global growth expectations steadily downgraded. China, New Zealand’s largest export market and the major engine of the global economy over the last decade, is growing at its slowest rate in 30 years. All these factors mean that next year the world economy could record its slowest growth since 2012.
The latest Infometrics forecasts reinforce that New Zealand is expected to experience a period of softer growth over the next few years. With many businesses and boards currently reviewing their strategic plans and priorities for the coming years we thought it useful to briefly highlight some of the key current economic insights that decision makers need to be aware of.
Between September 1977 and March 1991, Japanese house prices rose 83% in real terms, or at an average real rate of 4.6%pa. Then things got ugly…
With local elections in full swing, there’s a greater focus on the direction that our councils are moving towards and how much is it going to cost. Wrapped up in these discussions is the the fact that right across New Zealand we need to address our infrastructure deficit after decades of neglect. Planning to address this deficit will not be easy, or cheap, but is critical to aiding growth and fixing our housing issues.