Liam Dann starts quietly packing away the green shoots champagne

Well, well, well.

Now.

You will remember last year NZ Herald Economist Liam Dann was writing that the recovery was here, that National’s green shoots of recovery had worked and that free market Capitalism wins again…

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

NZ Herald

…yeah.

Well perhaps those green shoots of recovery were actually the green snot of desperation because barely 2 months after popping the champagne, Liam is walking it all back…

Gold rush, AI boom, inflation: What Trump turmoil means for Kiwi investors – Liam Dann

• Gold prices have soared 90% in the past year.
• Tech stocks and AI optimism drive the S&P 500 to record highs, despite geopolitical chaos.
• Inflation remains a concern, with New Zealand interest rates expected to rise in September.

NZ Herald 

 

…well, well, well.

So November last year the green shoots of recovery were here, come January and Liam is scrambling for excuses why it’s all failing.

Luxon promised growth, growth, growth and all we’ve had are culture war revenge fantasies masquerading as social policy.

Nicola Willis is such a wide eyed free market acolyte (she was previously on the NZ Initiative Board ffs), that she believes as a matter of faith that if you cut State expenditure, the market steps in and does it cheaper.

These free market economic dynamics work well when you have large population density to generate the competitiveness, but NZ is 3 enormous and sparsely populated Islands and we have always required the State to be the 40% foundation stone.

The decision early in 2024 to destroy the infrastructure pipeline with the construction industry has generated a cascade failure inside the economy as tens of thousands with skills have fled for Australia.

National have mutilated the economy with their ideological vandalism.

Bernard Hickey makes this 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.

The Kaka

 

…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!

Apparently this is all news to Liam Dann who seems genuinely surprised at how bad things are getting.

That is telling in of itself.