17 December 2014

We are in that slide towards the Festive Season where everyone suddenly becomes nice to each other, where the year’s problems no longer seem as grim or pressing, and where we start to think about our plans and hopes for next year. Christmas always seems to usher in a brief period of optimism, which is usually dashed once we return to work.

This year, there seems to be a sense that the woes of the Global Financial Crisis are now well and truly behind us and that there is more hope of some prosperity gains in the future. But how sustainable are those? Some of the international signs are not as encouraging as they might first appear, as a quick survey of a few other economies shows.

In Ireland, similar in size and type to New Zealand, but one more savagely ravaged by the GFC, growth is forecast to lift to about 3.5% this year. But that improvement has hardly led to dancing in the streets. The government is facing a bitter battle over its water pricing plan, and President Michael D. Higgins recently told a Chinese audience that Ireland’s modern economic history has been “poverty, illusory affluence, and poverty.”

In Britain, where growth is hovering around 3%, Prime Minister David Cameron, facing an uncertain election in May and the rise of myopic xenophobia in the form of UKIP, is arguably even more despondent, pointing to “red warning lights flashing on the dashboard of the global economy”. In the United States, despite his foreign policy failures and racial discord at home, President Obama appears more optimistic although still rather cautious, commenting that with growth at 3.9% the US is “primed for steady, more sustained economic growth.” In Australia, the Abbott government’s recovery hopes have been knocked by the Budget deficit blowing out to more than $40 billion. And in the “rockstar” (a term we do not hear any more) New Zealand economy the prospect of a Budget surplus seems to have receded, and Mr English restrains himself to saying our growth rate (similar to the US) means that we are “on track for solid growth.”

Sadly, all of this means we are not out of the economic woods yet and that prudent fiscal management and restraint will remain the order of the day for some time to come. Magic bullets will again be in short supply under the Christmas tree, but in comparative terms, the performance of the New Zealand economy does give cause for a little more optimism next year, as Mr English’s comments appear to imply. So, there is scope for some cheer over the Christmas barbies after all, even if economic Nirvana is still a little while off.

On that warily optimistic note, Dunne Speaks takes its leave for 2014. I will be back in 2015 after a few weeks break. In the meantime, my best wishes to all of you for a peaceful and happy Christmas with those that are nearest and dearest to you, and my hope that 2015 will enable you to achieve your hopes and dreams. Merry Christmas!