Danger! The economic bubble is bursting

By   /   June 18, 2017  /   23 Comments

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Statistics NZ figures released this week have confirmed that New Zealand is in recession on a per capita basis as the economy has declined for two-quarters when measured on this basis.

Statistics NZ figures released this week have confirmed that New Zealand is in recession on a per capita basis as the economy has declined for two-quarters when measured on this basis.
Gross Domestic Product did grow by .4% in the December quarter 2016 and 0.5% in the March quarter 2017, but because New Zealand’s total population grew by a record 2.1% in the year to March.
Adjusting the GDP growth for population growth produces a negative growth number in both quarters.
The Treasury had predicted just three weeks ago in the budget a 1% economic rise for the March quarter and the number was half that.
The CTU estimates that GDP per hour worked – productivity in the economy – has also declined by 1.3% in the past year.
The economy is simply not working or performing as expected.
The economy has been propped up by property speculation, growing household debt, together with strong immigration and tourism numbers. This has produced economic froth rather than a growth in the real economy.
Workers incomes are also been squeezed. The New Zealand Herald reports today that “Wage growth – as we once knew it – has gone missing in action.” Economists are puzzled by the low wage rises of around 1.6% a year for the last two years when the labour market has been relatively “tight” from their viewpoint. The employment rate is at 76% of working age adults which is relatively high by international standards for an advanced capitalist country. Inflation is now above 2 percent so real wages are declining rather than rising.
The economic bubble is bursting.
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About the author

Mike Treen

National Director of Unite Union

23 Comments

  1. Pete says:

    While this doesn’t look like a good sign, it luckily isn’t as if the economy is recessing quickly. There is still time for growth and improvement. The true worrier is the lack of wage rising within the labour market. It needs to be addressed and soon.

  2. Steven says:

    The economy is set up for employers not employees. I don’t have a problem with that, provided any rewards are shared. It is obvious however, that there has never been any intention of sharing! The evidence lies in changed employment law to weaken Unions,dating back to employment contracts, to benefit Hollywood and the invidious zero hour contracts. It is true the latter was removed but only reluctantly when the TV cameras were aimed on the issue.

  3. Mike the Lefty says:

    Economists are puzzled by the low wage rises…?
    Not a puzzle at all.
    All part of the master plan of this plutocrat National government.
    The wealthy to get wealthier.
    The rest of us can go to hell.

  4. Nitrium Nitrium says:

    This was completely predictable given that Auckland house prices have stabilised, i.e. capital gains on houses have stalled which means people can’t spend said capital gains into the economy (via “refinancing”).

  5. David says:

    National would be better to lose this election so they can blame a new incoming government for the hard times ahead.To try to control the housing market there will be plenty of pain,mostly to the average home purchasers disparate to enter the property market.
    The property speculator would have cashed up by now and can wait for some cheaper pickings and on it goes, after all we are a farming economy, we just don’t realise that we are being farmed.

  6. CLEANGREEN says:

    Yes the bubble has burst alright and the best forecast is that it will happen in the last quarter of this year.

    http://www.businessinsider.com/sandy-jadeja-interview-technical-analysis-dow-jones-market-crash-forecasts-2016-6?IR=T

    The man who accurately predicted four market crashes to the exact date each time has told Business Insider about three more dates to worry about.
    Sandy Jadeja is a technical analyst and chief market strategist at Core Spreads.
    Technical analysts look at charts to pinpoint patterns in various markets and asset classes. From that, they forecast which direction prices are likely to move.
    They can’t tell you the reasons why there will be a big market movement, only that there is going to be one.
    He now warns that the following dates spell trouble for the Dow Jones in the US that could spread to other markets.
    1. Between August 26 and August 30, 2016.
    2. September 26, 2016.
    3. October 20, 2016.
    “We have interesting times ahead of us. We are dealing with issues on so many levels from economic uncertainty in the financial markets, including currencies and commodities as well as the rising house prices we have seen,” said Jadeja in an interview.

  7. darth smith says:

    we knew it was coming the shit is about to hit the fan 2008 was a warning to get your house in order. lets hope our fellow citizen took the warning on board and reduce there exposure to debt.

  8. Jack Ramaka says:

    NZ Economy is built oh finance, housing and immigration, if you interfere with any of these three variables you will have a different result.

    • darth smith says:

      those three variables lead to a dead end and we are at the end of the road.the left can say we told you so

    • Petercvs says:

      True. And an economy based on immigration and rising house prices is no better than a ponzi scene.

  9. frank says:

    and the dominoes are all lined up…..

  10. Mike in Auckland says:

    A similar concern exists even in the so much praised US economy:
    https://www.theatlantic.com/business/archive/2016/10/why-economic-growth-is-so-lackluster/504989/

    All this talk about growth in jobs and so forth, it seems that wages remain low for many if not most:
    https://www.weforum.org/agenda/2016/09/us-wage-growth-remains-low-why

    If immigration, a growing population and so are supposed to be so great for an economy, why is Bangla Desh not doing as well as perhaps Singapore or Switzerland or Norway, I wonder?

  11. Mike in Auckland says:

    Yes, according to this forecast, some slowing will occur, but not a bursting of a bubble, not for the whole economy, for sure:
    https://tradingeconomics.com/new-zealand/forecast

    Warnings here:
    http://www.focus-economics.com/countries/new-zealand

    “…Large net migration flows into the country are having positive spillovers on the economy. Nevertheless, the IMF warned recently that the housing market is becoming a concern for the economy’s health. These warnings were replicated by a Goldman Sachs report that suggested that high prices could cause the market to burst in the near future and severely impact economic activity.”

    Well, well, well, who will get it right?

  12. Afewknowthetruth says:

    Modern economics is a travesty of good housekeeping, and is founded on fraud and misrepresentation.

    Much-maligned Peak Oil advocates have been right all along, and the ‘headwinds’ will get worse as time goes on because it gets ever harder to extract oil from depleted oil fields and no large new oil fields have been discovered for decades. Indeed, a large number of countries are in dire straights because of falling oil extraction rates, and extraordinarily low oil prices -obviously manipulated, as is everything else- are going to bring the system down fairly soon.

    Superb analysis here:

    http://crudeoilpeak.info/brent-exit

    Needless to say, governments and so-called opposition parties remain firmly locked into denial of reality, as do most inhabitants of western nations.

    ‘My you live in interesting times’.

  13. Afewknowthetruth says:

    Infinite growth on a finite planet was never a good basis for economic policies……and the consequences of believing in such an absurd notion are now becoming all too apparent.

  14. Jono says:

    yep its been predicted by US commentators for a while now. they say the first market to crash will be the risky derivatives market bubble something like a 400 trillion dollar bubble everything else will fall from there. its scary. Just watch the Dow Jones thats the key. everything else is based on that indice…

  15. countryboy says:

    Ha ! you’ve all just been suckered by the Banks.
    What to do about it?
    Tell them to get fucked.

    • darth smith says:

      doesn’t work that way banks are secured creditors they win you loose everything.
      its better to get your debt down as low as possible and dont give them a chance to foreclose. you think it easy to tell them where to go it isn’t new Zealand loans are resource loans.

    • Quicksilver says:

      +100.
      Are there enough cops/army to enforce foreclosures on ALL mortgagers? Sure be interesting now, wouldn’t it?

  16. John W says:

    Growth is an obscene mantra.

    Reorganization of the economy is inevitable.

    Any long term solution means using less, smaller population globally and local resilience aimed at providing basic daily needs, not waste and luxury for the few.

    Full employment is very realistic but won’t happen if left to current structures relying on whims and profit making by investors and employers.

    We just don’t need waste, built in obsolescence, throw away packaging, fringe fashion changes to stimulate consumption and landfill to deal with criminal consumption of Non Renewable Natural Resourses.

    Reorganisation means a new shape of how we do things based on long term constraints and intelligent input from across society.

    Our best thinkers and researcher are presently ignored – the independent Scientists and their comprehensive encompassment of future prospects.

    Banks and financiers only feed themselves and power to do that has to be taken back to the state.

  17. Jack Ramaka says:

    The problem in NZ is, we are relying on immigration to keep fuelling the property market, once we reduce the demand we will have a price recorrection which is what happens in a Free Market, we have an artificial market at present driven by overseas buyers and low mortgage interest rates with the added incentive of tax free capital gains when you sell.

    In other words a Ponzi Scheme ?

    • Mike in Auckland says:

      No change, the government carries on as usual and ordinary Kiwis distract themselves with the latest click bait on “news” and social media websites, and we get this:
      http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11880489

      The house price slowing can only be temporary with this very high level of immigration. But perhaps we will adjust to overseas house occupancy, where homes will be filled with more persons or even families, I have seem homes where so many people shared, it is not funny.

      Nobody seems to care much, certainly does not do much.