Thursday, January 2, 2014

The Aussies are jealous

Normally, Australians like to think that their poor relations on this side of the Tasman Sea are jealous of them. But as Michael Pascoe notes in the Sydney Morning Herald's BusinessDay, even the Ockers are getting green-eyed at New Zealand's economic success; Pascoe opines:

It’s bad enough losing the rugby, but in 2014 Australians will have to suffer Kiwis getting uppity about their economy as well.
While our economic growth is stuck around 2.5 per cent, there’s talk New Zealand could be doing double that by the middle of the year.
For so long the poor cousins across the ditch, it’s the Kiwis’ turn to ride the China resources roller coaster, with all the fun and fear that can engender. The commodity is different but the fundamental story is much the same as the China boom that lifted Australia over the past decade.
What iron ore and coking coal did for Oz, milk powder is doing for New Zealand. Forget the clich├ęs about New Zealanders and sheep – it’s cows that are making Kiwis feel good now, as well as the All Blacks having an undefeated year.
And they are feeling good. An ANZ bank survey this month found NZ businesses the most confident they’ve been since 1994. House prices and wages are rising and consumers are spending more – the government is expecting consumption growth of 2.8 per cent while Australia struggles to manage 2 per cent.
New Zealand’s terms of trade are at their highest since 1974, giving the average Kiwi sharply stronger buying power. It’s not so expensive for Kiwis to visit the relatives in Australia – but the land of the strangled dipthong is no longer a cheap holiday for Australians. The Kiwi dollar started the year above $1.26 to the Aussie. It’s finishing at $1.09.

Mr Pascoe is right; it's all about protein. He continues:

Milk powder prices are up by more than 50 per cent this year and China has overtaken Australia as New Zealand’s biggest trading partner. Fonterra, the world’s biggest dairy exporter, can’t keep up with the demand and finds itself caught by its cheese and butter operations holding back overall performance.
The impact of Chinese demand for milk solids is also behind the never-ending Warrnambool Cheese and Butter takeover saga. It must sadden those who saw productive Victorian dairy farms turned over to tax-driven blue gum plantations.

And after a cautionary word about being too reliant on one sector of the economy, even though it is booming, Pascoe closes with a warning to All Black coach Steve Hansen:
In the meantime, the $NZ40 billion rebuilding of Christchurch will provide its own increasing stimulus for the NZ economy. The Reserve Bank of New Zealand is expected to start increasing interest rates in 2014. It’s already attempting to cool the housing market through macro prudential means – a move the Reserve Bank of Australia admits it’s watching with interest. And rising rates should further support the Kiwi dollar.
While our Treasury forecasts Australia’s unemployment will nudge up to 6.25 per cent, New Zealand’s is 6.2 and falling from a high of 7.3 last year, twin factors that can be expected to reduce the usual migration flow. Australia has done well out of its Kiwi migrants. Given the direction of the New Zealand currency, we might have left it a wee bit late to stock up on five-eighths and sauvignon blanc.
Yet there’s always a silver lining. The last time Kiwis were this chipper was 1994 – when the Wallabies won the Bledisloe Cup with “that tackle” by George Gregan. Maybe a richer New Zealand also is a softer one.

When even Australians are singing our praises, is it any wonder that we're looking forward to 2014 with considerable anticipation? It's hard to be anything other than positive about the economy.
And whilst we seldom have good things to say about the Labour Party, Phil Goff's determination to drive through the FTA with China will be his legacy. Even though Helen Clark's Foreign Minister Winston Peters opposed the deal, it was just what the doctor ordered, and Phil Goff deserves plenty of praise. It's odd now that Labour has suddenly become so opposed to free trade, because Goff showed them what can be achieved when pragmatism is put ahead of ideology.


Lofty said...

An interesting observation from Australia KS.
The issue of all the eggs in one basket is valid, and of course it could all turn for the worst at some stage.
Hence the absolute requirement for NZ to ensure that a diverse range of "big money making" industries are allowed to prosper and deliver all those things that ensure the well being of the country and it's citizens.
I have enormous difficulty understanding why there is so much opposition to mining, oil exploration etc when the science of safe industry goes from strength to strength, and the gains that would lift the well being of the very constituents that they pretend to represent would be huge.
Of course I do understand that is pure politics at play, and the green Taliban assisted by some of their useful idiots in the Labour Party are actively sabotaging the economic gains of the present government.
Hopefully the thinking voters will see the gains and progress made can continue with the present stewardship of the country.

Edward the Confessor said...

All this gloating and boasting about how English somehow engineered the Canterbury earthquakes and overly high commodity and property prices. You're so terribly proud of the trougher for some reason. Tell me though, how's productivity growth going? How about those Pisa scores? You know, the things that actually matter...

Keeping Stock said...

You do realise Edward that the kids whose Pisa scores were released all had their primary education under LABOUR and BEFORE the introduction of National Standards?

Welcome back old bean, but you're going to have to try a whole lot harder :)

Kent Brockman said...

In other news, on Sunday Edward the Confessor will have been dead for 948 years.

Keeping Stock said...

Thanks for the history lesson Kent :)