TODAY |

Corin Dann's analysis: Amid a month of political turmoil, NZ economy a big bright spot for the Government

It’s been a torrid, messy and exhausting few weeks for the coalition government with Prime Minister Jacinda Ardern battling to contain a series of Ministerial scandals and sagas.  

Not even Ms Ardern’s polished and impressive showing on the world stage at the UN was enough to shake the on-going questions at home surrounding the Meka Whaitiri and Derek Handley scandals.

The Opposition has been spoilt for choice in Question Time each day.  

While the day-to-day sagas are corrosive and are taxing on the Prime Minister and the coalition government’s political capital, it’s still not clear yet whether the damage is going to be deep and lasting - or forgotten as typical Beehive noise come the summer recess.  

This is especially so when you consider talk of the economy stalling this winter due to slumping business confidence has for now dropped right away.

GDP figures this month showed the economy surging at the fastest pace in 2 years in the June quarter. A full 1 percent of growth in the quarter.  That’s double Reserve Bank forecasts.

Annual growth is still within sight of the magic 3 percent mark.  

Now that doesn’t mean the slumping business confidence isn’t real. Or that their concerns about government policies on employment law and energy aren’t creating uncertainty.

They clearly are.

Some businesses as a result may choose to invest less or hire fewer people.  

That is a worry and could yet lead to growth being slightly weaker than it otherwise might have been later this year. It’s a downside risk both Treasury and the Reserve Bank have flagged.  

However what the GDP figures emphasise clearly and loudly to voters is that the poor sentiment in business isn’t actually derailing the underlying momentum and demand that’s built up in the economy over the last few years.

The former Prime Minister said there was a group “that just doesn’t like Labour being in Government. Source: Q+A

Exports are still healthy, the job market remains tight, construction remains robust, immigration whilst slowing is still historically strong, and tourism remains as buoyant as ever.

Worried businesses and consumers for that matter should be taking some confidence and reassurance from that.

In fact it's possible businesses were already starting to sense that doom and gloom talk was overblown. The latest ANZ business confidence survey this week did show a slight improvement, albeit from a 10-year low point.

For a government that’s been under attack daily over its ability to manage the economy, the GDP number come as a big morale boost. National will struggle now to get the same traction with claims of economic mismanagement.

And that’s important as the government was starting to feel the heat. It had already responded to talk of falling business confidence with a new business advisory group, while New Zealand First has been pushing to get late changes to the employment law legislation following concerns from regional businesses.

Where National might now find more traction however is around the rising cost of living.  

A combination of a weak dollar and rising international crude oil prices has pushed petrol to record highs.  It’s a trend that could get worse.

Add in some new looming government taxes and the price is getting staggeringly close to $2.50 a litre!

That will hurt many low income Kiwis in particular and may well start to dampen consumer spending going into Christmas.

Of course the impact from that on the economy won’t be known for a few months. That’s the thing about GDP data, it's always backward looking and slow in coming through.

That means the government can bask in the strong June quarter figures for a little longer yet.  It’s the one true bright spot, in what has been a very trying few weeks.

It comes after months of talk of low business confidence. Source: 1 NEWS