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Corin Dann: English's luck looks like it may be changing

opinion Corin Dann

By Corin Dann ONE News Political Editor

Published: 2:55PM Friday March 22, 2013

  • Bill English (Source: ONE News)
    Bill English - Source: ONE News
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To date Bill English would have to be one of New Zealand's most unlucky Finance Ministers.

Over the course of his 4 years in the job he's had to deal with a devastating earthquake, a global financial crisis, a billion dollar finance company bailout, on-going Euro Zone crisis and the impact of two major droughts.

Throughout that time Mr English has kept his head down and focused on debt reduction, cost cutting in the public sector and fixing the bits of the economy that he believes are within the government's control. The basic idea being that by reducing the size of the state and its footprint on the economy, there will be more room for the private sector to flourish and create growth.

It's not a bold or flashy strategy and for much of the period there has been little tangible to show for it.

Unemployment has remained stubbornly high. Wage growth has been flat and the economy has lurched along with weak growth. The private sector hasn't been playing its part.

Perhaps the only thing Mr English could claim some credit for would be helping to keep interest rates low.

However Mr English's luck looks like it may be changing.

This week's the December quarter growth figure came in at a whopping 1.5 percent. This was hugely significant.

Not just because it beat market forecasts and surprised on the upside, but because it suggests a broad based recovery in the economy across virtually all sectors including retail.

What's at play here according to Westpac is the Christchurch Quake rebuild finally kicking in and starting to increase demand for good services right across the country.

The New Zealand domestic (as opposed to the export sector) economy is after a long flat spell finally showing signs of cranking into life again.

In fact so strong was the December GDP figure that economists believe it will easily counter any impact from the current Drought.

The missing piece of the puzzle in all this is of course jobs. Labour pointing out yesterday for example that in the same December quarter 23 thousand jobs were shed.

And it does remain a mystery as to why unemployment is lagging so baldly.

So much so that it's understood officials at the Statistics New Zealand are taking a close look at how they compile their figures.

Jobs remains a weak spot

For now though jobs remains a weak spot for the government and Labour with its claims this week about 1500 jobs going at Telecom is understandably hammering them on this.

But one suspects that if growth continues to expand at a rate similar to what it did in the December quarter then it won't be too long before the unemployment rate does start to come down towards 6 percent and under.

If it does, it will create a real problem for Labour.

As it will leave it stuck attacking National on the longer term structural issues in the economy that it argues it has failed to address.

Things like rebalancing the economy away from domestic consumption and more towards exports, bringing down the currency and preventing rapid house price inflation.

These are all worthy debates, the latest current account figures clearly show New Zealand as a whole continues to borrow massively to fund its lifestyle, while the high dollar remains a major headwind to growing our export sector. The IMF too also warned this week that Auckland house price inflation was a key risk to the economy.

Labour does offer alternative solutions to these issues such as a capital gains tax and a rewrite of monetary policy.

But will anyone be listening? If the economy starts doing well again ? And do Labour really have the salesman in David Parker who can articulate those concerns to the masses?

The fact is the signs are that come election year next year the New Zealand economy will be fizzing.

Growth is heading to an annual rate of 3 percent. That will start to flow through to wage increases and Kiwis should crucially start feeling better off.

That could be very hard to counter come the election.

Especially as National will be hell bent on convincing voters that going with a Labour/Greens government will put it all at risk.

One wonders then whether the left's strategists might have to have a rethink, perhaps Labour might have to start acknowledging that the government has got some of its economic management right? Convince voters that it won't all be put at risk?

Such a move could then free it up to concentrate on making sure the government at least allows the spoils of a rebuild boom to be fairly shared by Kiwis.