Are we ready for growth?
Lian Dann writes in NZ Herald:
New Zealanders need to brace themselves for an economic boom.
It sounds crazy because good growth sure beats a recession, but after five years in the doldrums we may not be prepared for the strength of the rebound that economists are now tipping.
Next year the country will be “firing on all cylinders”, says Paul Bloxham, HSBC’s Sydney-based chief economist for Australia and New Zealand, in his latest report.
Bloxham is confident that we’ll be booming next year with GDP growth headed for 3 per cent and beyond.
His report, titled New Zealand’s boom, sets the tone for the way the rest of the world is starting to look at us.
Last week ANZ economist Cameron Bagrie noted that latest business and consumer confidence surveys were so strong they pointed to economic growth of around 4 per cent by early 2014.
Bagrie was sceptical about that happening and suggested the economy might “blow a gasket” if it were to accelerate so fast.
But he concluded that New Zealand could be on track for GDP growth above 3 per cent, putting us amongst the strongest performers in the OECD. “It’s been a long time since New Zealand can claim such rock star status,” he said.
Even the IMF expects the growth to pick up to 2.9 per cent next year – ahead of the our Western trading partners (including Australia) and not far behind Asian nations like South Korea and Singapore.
I have to say it would be a nice problem to have! I’d rather have too strong growth than too weak growth!
So why the predictions for strong growth?
The reasons we’re on the up are simple. Dairy prices have stayed at record high through a period of concern about Chinese growth which caused hard commodity prices to fall. Meanwhile, we are on track for record dairy production. That’s a huge boost to an economy that gets about 20 per cent of its income from cows.
Then there is the Christchurch rebuild, which should be kicking into top gear and boosting domestic activity.
I am not sure it is correct to say we get 20% of our income from cows. Dairy does represent around 20% of exports but that is only around 3% of GDP, and I think most people would regard a reference to national income as being GDP not exports.