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Source: Reuters
If this week's Treasury forecasts are to be believed, then it looks like New Zealand will finish out 2009 with an economy that is growing confidently again, and all in all, in reasonable heart.
Forecasts for unemployment are continuing to be wound back while house prices and dairy prices are booming again.
You have to say that John Key's got a point when he says Kiwis have reason to be cheery going into Christmas.
Back in February, I like many of the people I talked to on the business programme, was genuinely terrified about New Zealand's prospects. It felt to me as a daily market observer that we were very much at risk of falling off a cliff.
Stock markets were still plummeting, commodity prices sliding, companies were running foul of nervous banks and employers were dumping staff. The central banks were still in crisis mode slashing interest rates aggressively, and in the US and UK they were printing more money than ever.
And, the already long recession in New Zealand was looking as though it could turn into something far worse.
The government recognised the threat and responded by having a job summit.
In the end, the summit itself didn't amount to much - the only concrete thing being a cycle way - however, it did at least focus minds and bring unions, business leaders and the government closer towards a single goal of getting New Zealand through.
Light in the gloom
But in March, things started to change in the very "forward looking" world of financial markets.
After bottoming out, markets surged forward from March on a belief that central banks had done enough to avert a full scale market meltdown.
In the early part of 2009 markets had been pricing in an Armageddon scenario. But, as savvy investors realised that the stimulus packages were working they came back to the market place with a keen eye for a bargain.
The rest is history. It's been a stellar rise since, with global markets up around 50% in many cases.
The story on Main Street has been different of course. With jobs being cut and mortgagee sales jumping, it has been tough. But as we close out the year there are signs that the optimism in markets is starting to translate into the real world.
It has been particularly evident in the economies of Australia and China. New Zealand should be thanking its lucky stars that it is. When all else was failing China did what everyone hoped they would do, they turned inward and started boosting domestic spending and consumption.
From this came a surge in commodities. This was first felt mostly in Australia, given its huge mineral resources, but also eventually in New Zealand.
I remember mid year getting a call from John Stulen at the Forestry Contractors Association.
He told me demand for logs out of China had spiked suddenly and they were struggling to move them through the ports. I'm pretty sure it was around then that Fonterra's auction prices for milk started jumping up after a big slump.
The mid-year rebound in the Kiwi dollar from its low of around 50 US cents all started to make sense.
The dollar's rise, of course, is a negative for many. While dairy prices may have boomed again demand for other manufacturing exports has not quite recovered to where it was.
Australia has had a remarkable run and that has helped us a lot this year, make no mistake. After its strong banking system shielded us from the initial credit crisis, Australia then proceeded to avoid a technical recession.
Their unemployment rate is now falling and well under 6%.
Given they are our main trading partner this was a massive boost for our exporters. A cross rate under 80 cents has also helped.
Outlook for Godzone
For New Zealand though there still remain some big picture worries. The growth we have had is not the kind many had hoped for. Its consumption- and borrowing-led rather than export-led.
We have huge private debt and the government is still borrowing $240 million a week to fund its deficits.
Our living standards still lag way behind Australia and if we are to catch them we must up our growth rate dramatically.
A lot of ground work was put in this year to try to address these concerns. The results have been mixed.
The Don Brash-led 2025 report was a disappointment as it came up with a neo-liberal prescription that was simply too radical and politically toxic.
On the other hand, the Tax Working Group looks like it will be providing the government with some well thought out and constructive suggestions for changing the tax system, while the Capital Markets Taskforce has come up with an excellent list of ways to improve the functioning of the capital markets. Although, I would note the partial sell-off of state assets as a political hot potato that may yet be too hot to handle.
2010 then will be a year of different challenges.
For a start, interest rates will have to rise next year as the economy starts to gather speed and that could be painful for those that have over extended&
For the government, it's shaping up as a year of change.
There's a mood building for reform, just how far they are willing to go and how unpopular they are willing to become will be interesting viewing to say the least&
Have a great Christmas and New Year.
This is Corin Dann's last blog for 2009. You can catch him back on air on Breakfast Business on January 25, TV ONE at 6am.
Look out for his next blog on January 29.
