High growth for now - but who benefits?
"Will most people see money in their pockets as a result of the current high GDP growth rates?" asks Bill Rosenberg, CTU Economist. "Economic growth is forecast to peak this year, yet wage growth has been slow. There is a real question whether the current growth will come and go with few people seeing the benefit of it in their own standard of living."
There was no growth in household spending this quarter.
"Should wage and salary earners - by far the biggest group of earners in New Zealand - be the ones 'that don't enjoy the income growth that others do enjoy' as Reserve Bank Governor Graeme Wheeler is quoted as telling Parliament's Finance and Expenditure Select Committee last week?" Wage and salary earners bring in over three quarters of the average income to households with at least one person aged 18-64. The Reserve Bank has identified high net immigration, more people seeking jobs and still-high unemployment as factors holding down wages.
"There are many people trying to make ends meet after several years of stagnant incomes, out looking for jobs and only finding part-time ones with not enough hours to pay the bills. In addition to 154,000 unemployed in March there were 96,000 people wanting more hours, and another 100,000 classified as jobless. The number of young people not in education, training or employment rose in the March quarter after taking account of seasonal effects. For many people the 'growing economy' is meaningless." Rosenberg said.
"With two-thirds of the growth this quarter reliant on construction, the economic growth is still heavily based on the Christchurch reconstruction and building construction along with high commodity prices for our exports. Prices for dairy products and logs are now falling. The forecasts are for the growth in the economy to fall off after this year to below the levels of the 2000s before the Global Financial Crisis." Rosenberg said.
There was no growth in manufacturing this quarter, after six months of growth and six months of contraction. Three of the largest manufacturing sectors contracted: food processing, wood and paper products, and transport and other equipment. Textiles, clothing and footwear contracted for the fifth successive quarter.
"There is an increasingly urgent need for policies that bring down the exchange rate, help industries that create good, well-paying jobs to grow, and ensure that the income generated by the economy benefits wage and salary earners in rising wages." Rosenberg said
Or will the train go past with most people only able to stand on the platform watching it?