National says “the economy has grown in ten of the last eleven quarters.” That phrasing is pretty unusual. I wonder why.

For months, John Key and other National Ministers have been reminding the public that “the economy has grown in ten of the last eleven quarters.” Here is Key, Joyce, English, Key again, and English again all with the same magic phrase. For months before that, they said “the economy has grown in nine of the last ten quarters.” Their focus-grouping has clearly revealed that people think ten out of eleven ain’t bad.

The problem with National’s statistic is that it is self-serving bullshit. Here are four specific issues:

1. Start date

National’s growth report does not start in the first full quarter it was in office (Q1/2009, with negative growth). Instead, it starts one quarter later with the +0.10% growth in Q2/2009. How convenient. If you can make a cogent argument why the Q1 negative growth had nothing to do with National but the Q2 positive growth was all about National, then Steven Joyce probably has a job for you.

2. Counting “success”

Anytime the economy grows, no matter how little, National claims victory. Twice the economy grew by only 0.07% in a quarter (Q3/2009, Q2/2011), once more at 0.10% (Q2/2009). National claims these figures as evidence of its stewardship, despite the growth being nowhere near enough to cover population increases. In those quarters, New Zealanders got poorer on average, yet National patted itself on the back.

3. Wrong measure

“Did you grow at all?” is not a typical measure of economic success. By that yardstick, a $1 salary raise and a $1 million salary raise are the same thing. The measure is silly.

A more widespread, sensible measure of economic success is “how much did you grow?” On that measure, National has grown the New Zealand economy at only around 0.8% per year. That is well below New Zealand’s long-term average, and is barely enough to cover population growth. That is hardly a good reason to throw an Economic Stewardship Party.

4. Compared to who?

National says its ten-of-eleven (actually ten-of-twelve since National took office) record is pretty good compared to others. Really? Let’s see.

  • Australia grew is eleven of the same twelve quarters, and its economy grew almost three times as fast as New Zealand’s.
  • New Zealand did, however, grow better than most countries in the EuroZone. The EuroZone debt crisis may have had something to do with that. The fact that New Zealand is not in such a crisis, as Bill English explained shortly after becoming Finance Minister, is mainly due to good economic stewardship before National took the reins. So outgrowing the EuroZone is also a flimsy reason for National to congratulate itself.
  • Among non-EuroZone members of the OECD, a more appropriate comparison set, average growth was around 1.5% per year. New Zealand’s rate was barely half of that. See chart below.

In conclusion, the National government has been busy peddling an entirely misleading, selectively-generated statistic to mask its poor economic management. Faced with the same international conditions, Australia has outperformed National by almost three to one. Even the anemic US outperformed New Zealand by more than half.

It is time the commentators exposed National for trying to pull the wool over New Zealanders’ eyes.  

 

(All figures from stats.oecd.org – accessed 15 May, 2012)

Comments (8)

by BeShakey on May 16, 2012
BeShakey

The Nobel prize winning economist Paul Krugman recently said that the quality of economic debate in the US is now less informed than that of the '40's.  From what I've seen this also applies in NZ and Australia.  All thats needed is something that sounds vaguely plausible, a tiny bit of spin, and the economic debate ends.

by John Norman on May 16, 2012
John Norman
"poor economic management" saith you somewhere near the end of this blog. Methinks poor understanding is the true poverty. JK, I suspect, takes the positive growth word too far on occasion, but this coalition government's behavior is more about leveraging the private sector. Doing this via deficit spending. Or don't you get that type of hedge?
by Rob Salmond on May 16, 2012
Rob Salmond

@BeShakey: Sadly, you might be on to something there.

@John: Where in this post did I give you the impression that I do not understand deficit spending?

by Frank Macskasy on May 17, 2012
Frank Macskasy

@ Rob.

Got it in one.

Most of National's economic performance has been apalling. On top of that, they've had the cheek to smear Cullen's stewardship of the economy. A cursory look at stats proves the opposite.

Indeed, whenever the Nats are in power, things turn to custard; http://fmacskasy.wordpress.com/2012/05/16/that-was-then-this-is-now-12/

Their track record is definitely at variance  with their so-called "achievements"; http://fmacskasy.wordpress.com/2012/05/15/dear-leader-says/

What I can't wotrk out is why the public seem to think that National is a good ecopnomic manager - when they clearly are not. Their PR must be better than I'm giving them credit??

 

 

by BeShakey on May 17, 2012
BeShakey

I think the public (and perhaps more importantly the media and most commentators) are economically illiterate.  Present them with something vaguely plausible, and occassionally offer up a selected 'impartial' commentator, or a handful of quotes (perhaps out of context or misrepresented) and they will buy it.  Then when someone else says something different the most the media (or the public) can do is see there is a conflict and report that, but they don't have the skills (or the desire) to actually get to the bottom of the dispute and figure out who is right. 

In that situation there isn't any political advantage to presenting economically sensible policies, provided you don't go so far as to offer something that even the economically illiterate recognise as stupid.  Labour have been guilty of this as well (eg interest free loans).

by DeepRed on May 18, 2012
DeepRed

Key is confusing optimism with Stepford smiling, which is not the same thing.

"What I can't wotrk out is why the public seem to think that National is a good ecopnomic manager - when they clearly are not. Their PR must be better than I'm giving them credit??"

I think I know why, and it's not just slick PR. Severe downturns that ravage the "middle class" bring out a latent Social Darwinist inferiority complex - crank it up beyond 11 and it's called the Weimar Republic.

by Frank Macskasy on May 19, 2012
Frank Macskasy

@ Deepred - "I think I know why, and it's not just slick PR. Severe downturns that ravage the "middle class" bring out a latent Social Darwinist inferiority complex - crank it up beyond 11 and it's called the Weimar Republic."

That's as good as any other explanation I can come up with...

@ Bommy

Got anything in XL, dark brown, and in longcoat style?

Failing that, I'll have a couple of size 7 jandals (any colour) for next summer.

 [Mr Bommy - he dead. 

Ed.]

by Frank Macskasy on May 25, 2012
Frank Macskasy

@ Ed...

Ha ha ha...

 

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