The finance minister has identified his three big economic targets, and exports are on the list. So how are our seven largest trading partners handling the recession so far?
Bill English will deliver this year's budget on May 28. Rather him than me. In announcing the date he said, according to Vernon Small in the DominionPost, that the three main risks New Zealand faced were the stability of banks, trading partner growth and export prices, and the possibility of a "negative spiral" as job losses meant more people unable to keep up mortgage payments as house prices fell.
In other words, English has spelled out his Axis of Economic Evil. Bank stability, exports and job losses will be to him what Iran, North Korea and Iraq were to George W. Bush. Let's hope English is far, far more successful in his battles.
It's interesting that he's zeroed in on those three issues. Does anyone have any arguments? House prices aren't there, and talking to Bernard Hickey from interest.co.nz yesterday he was telling me that realtors who spurned him six months ago for predicting a 30 percent drop in house prices are now conceding he wasn't far off. Debt? Keeping people in work is probably the best way to counter both personal and national debt.
But English's comments got me wondering. What is the latest economic news from our largest trading partners? So here's a round up of what's happening to imports in the seven countries that bought 60% of our exports in 2007.
- Australia (buys 21% of our exports): Our neighbours have prided themselves on their relatively soft landing in this global recession. Government handouts have kept retail spending growing. Heck, officially they haven't even gone into recession yet. But in the past month the picture has morphed. A lot. Economic analysts have started issuing warnings, such as that from Access Economics, which, according to the New York Times, "warned that the mining-led economy 'will unwind scarily fast' in 2009, sending the Australian dollar and interest rates crashing". The bad news for New Zealand is that data out yesterday showed imports down in January, including most commodity imports, and predicted a slumping Aussie dollar. Australia has become too dependent on China and Japan buying its commodities, so now that they have stopped buying, Australia is in the gun.
- United States (12%): Anyone watching the news knows of America's financial woes. The Dow Jones, for example, is around 7500, which is getting horribly close to just half it's all time high, set back in late 2007. Its imports? Down for six months running. The last year has seen a record slide. If you're looking for good news, the import price fall in January was just 1.1%, the smallest drop since last July.
- Japan (10%): Japan? A mega-mess. We learnt on Tuesday that its GDP is down 12.7% in just the October-December quarter, more than three times worse than the US and its worst performance in more than three decades. It had become too dependent on the US buying its exports. The government is now at risk. Consumer spending is already down half a percent, much earlier than in previous recessions. So the Japanese aren't going to be buying our gear there.
- China (5.5%): Last week the Chinese government announced its imports were down 43% in January, compared with January 2008. I'm sorry, did you say 43 percent? Already 20m migrant workers have been laid off (you can be sure that's a very broad and ever-increasing number). You know that rapidly expanding Chinese middle class that was going to snap up our milk and beef? Hey, they're not expanding any more.
- Britain (5%): Last week British economists were welcoming a falling British trade deficit. Why? "A steep drop in imports as the recession eats into the national appetite for goods from overseas," was how the Times reported it. Imports were down 2.5% in December.
- South Korea (3.8%): If you've been reading Pundit's World News Brief, you'll have seen the parade of grim economic stories from South Korea in recent months. Last week the finance minister predicted its economy would shrink by 2%. And that's optimistic. The IMF reckons it'll be 4% and Credit Suisse is picking 7%. Even at 2%, Korea will lose 200,000 jobs. They too had become reliant on exporting to China, but their exports to their large neighbour could fall by 30% this year according to research out this week.
- Taiwan (2.3%): Like Japan and China, Taiwan has announced a record drop in exports, down 20% in the three months to December on an annualized basis. Of course if you can't sell, you can't buy. Imports are down 23% and they're rapidly heading towards basket-case territory.
As Fred Dagg once famously said of the global situation, "frankly Trev, it's a mess".