Green shoots of recovery really dried snot of desperation – Why 2026 NZ Economy will continue to falter

I don’t think most people appreciate how bad the economy actually is right now. We have free market capitalism cheerleaders, we don’t have economic journalists. They always have to be upbeat and optimistic to channel the animal spirits of free market capitalism. Because the NZ Herald derives so much of its income from property speculation advertising, their never ending mantra is, ‘there’s never been a better time to buy’.

Pop the bubbly, the economic recovery is here (finally) – Liam Dann

The most recent GDP figures that showed a near standstill in the economy (it fell 1% GDP then gained 1.1%) is in contrast with the Half Yearly Fiscal Update which showed Debt has exploded and the pretend date of surplus is now 2030.

The Polar Ice Caps will melt before Nicola Willis gets us into surplus.

The Government have borrowed more than Labour have, (despite Labour’s excuse being a once in a century pandemic), but the extra borrowing hasn’t been for public services!

Nicola Willis is a wide eyed Free Market acolyte (which is why the pretend fight between her and Ruth Richardson is Right Wing Performance Art and the intellectual equivalence of the sound of one hand clapping). She believes with a religious fervour that if you cut back the State, the market will step in and do it cheaper.

This austerity has worked in the past because private debt was so low, it’s not working now because private debt is so high!

Bernard Hickey makes this very point…

The Luxon-Willis doctrine for the economy is to repeat the recipe adopted by both National and Labour Governments after recessions since 1990. They have constrained growth in Government spending to reduce public borrowing in the expectation that this will help interest rates fall even further. In turn, this was designed tempt households and businesses to step forward and replace debt-funded Government stimulus with private stimulus for the economy in the form of spending, investment, employment and wage growth funded with mortgages and business or farming loans.

It worked in the wake of the 1990/91, 1997/98, 2007/08 and 2020 recessions because firstly businesses (1991-2000 & 2002-08) and then households (especially from early 2000s onwards) were able to reinvest profits and/or borrow significantly more to pump extra money through the economy and fire up growth in consumer spending and house-buying and building.

That increase in household debt was possible and encouraged through the early 2000s as banks unshackled from lending and capital controls increased household debt from 60% of disposable income in 1990 to almost 180% by 2009. Since 2013, the Reserve Bank has restricted household borrowing through Loan to Value Ratio (LVR) and now Debt to Income (DTI) Ratio controls to reduce financial stability risks.

…State cut backs so the private sector can step up doesn’t work like it did in the past because private debt is so high now!

So while Willis has borrowed MORE than Labour, she’s borrowing it not for public services (which she has underfunded to their need), she’s borrowing it for tax cuts we can’t afford, landlord loopholes, Big Tobacco and the Oil and Gas industry!

National’s decision to smash Labour’s infrastructure pipeline last year has had a cascade impact on the whole of the Economy and they are scrambling to try and right the waka before we capsize.

New Zealand has always been 3 huge sparsely populated Islands that has always required the State to step in as the 40% foundation stone. National are trying to smash that up and hand over the funds to private interests, the way they are in Health.

The latest stats show Trucking, business investment and the delivery economy all slowing post the GDP numbers which alongside a weak retail season and more migration all spells for real trouble over a slowing first quarter of 2026.

Luxon promised us ‘growth, growth, growth’ last year, all we got was more people fleeing.

Those green shoots of recovery are going to quickly look like the dried snot of desperation.

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