Why Australia’s economy will recover faster than ours
The New Zealand economy will be hit harder by this recession than the Australian economy. Let’s just concede that one and move on.
It should be plainly obvious to anyone with a passing knowledge of both economies, but it feels like something we need to get over before we get to debate about the different political approaches.
BNZ economists played into the transtasman rivalry last week with a comparative analysis of our relative recovery outlooks.
And of course the Aussies came out on top.
There’s also been commentary in the Aussie media talking down New Zealand’s chances.
But BNZ at least was careful to acknowledge the structural differences that make the outcome of any comparison a foregone conclusion.
In New Zealand, tourism accounts for around 20 per cent of total exports — that’s 6 per cent of our GDP.
In Australia, tourism receipts are just 9.5 per cent of total exports — less than 2 per cent of GDP.
So tourism is a much bigger, uglier hole in our economy.
We have no control over that. International tourism is likely to be “the last cab off the rank” in the global recovery, BNZ chief economist Stephen Toplis says.
We could complain about the lack of diversity in our economy and an over-reliance on tourism, but we’d have to direct those complaints at every government for the past 25 years or so.
Toplis also notes that New Zealand’s economy is broadly more reliant on exports than Australia.
In New Zealand, exports account for around 30 per cent of GDP.
In Australia, the weighting is around 22 per cent.
“So, by definition, all other things being equal, New Zealand is more leveraged to global growth than is Australia.”
It’s true that our lockdown was initially tougher than Australia’s.
That may have cost us in the short term, although it also ensures we can now make choices which should speed up our recovery.
Regardless, that safety-first approach has been embraced by the New Zealand public, who rewarded the Government with record approval ratings in the polls.
Certainly early attempts to critique the lockdown didn’t work out well for former National leader Simon Bridges.
In politics, as in comedy, timing is everything. Bridges may just have played his hand too early.
As focus shifts from the health crisis to the economic crisis and job losses mount, debate about the timing of the move to alert level 1, and the speed with which a transtasman bubble can open, will hit harder.
And these issues will all make a difference.
They might be marginal in the big macro-economic forecasts but they loom large in people’s lives.
At a macro-economic level we already have a pretty good idea of what is in store over the next few months.
A range of forecasts are expecting unemployment to peak this year at between 8 per cent and 10 per cent.
But the reality of the job losses we’re seeing played out in daily headlines will resonate far more