Congratulations, we made it to 2023... so, now what?
So you didn’t like 2022, perhaps the next 12 months will be more to your liking – or maybe not, Kevin Norquay learns.
Happier New Year, it’s 2023 Aotearoa. It will be happier than 2022, but not nearly blissful; with inflationary pain and job losses lying in wait, and the economic and social reset needed to make Godzone Great Again.
At least, that’s how economist Cameron Bagrie sees 2023 unfolding with 2024 likely to be the 12 months when a ‘‘sticky’’ recession fully arrives with its unwelcome baggage.
‘‘What we are going through is a reset, and resets involve some economic distress but resets offer wonderful opportunities that come out a lot stronger on the other side.’’
Both he and sociologist Paul Spoonley point to a socially divided country, at a time when a united vision is required. The health of both economy and society are linked.
Bagrie points to the current account deficit, declining educational attainment and achievement, crime and poor infrastructure – ‘‘the roads, the potholes’’ – as signs of trouble.
‘‘All these things are telling us that the trajectory we were on was not a sustainable one, we need to reconnect... both economically and socially.
‘‘That’s not gonna be easy because I’ve never seen New Zealand so divided. When you have got a divided society, it’s not just socially unhealthy, it’s economically unhealthy.
‘‘One of the big questions is, how do we heal as a nation? It’s going to have to involve give and take on a whole lot of areas and thinking about the common good.
‘‘That is not going to be easy. We sit in an environment where populism rules, and that makes it very difficult to chart a path to bring society back together. It takes real leadership as opposed to populism-driven leadership.
‘‘If you don’t have the social fabric right, that hits you economically. If you don’t have a well functioning health system, your workforce deteriorates.
‘‘If you don’t have a well functioning housing market, education system, it impacts the broader economy. We need a policy platform that realises those very strong feedback effects between the two.’’
Sociologist, Professor Emeritus Paul Spoonley says that, if anything, he senses that upset with the Government stayed on the boil, even after state-imposed Covid restrictions ended.
Any evaporation of 2022 grumpiness would need to take place against a backdrop of soaring grocery bills, inflation pushing up mortgage interest rates, affecting everyone.
A whole sector of society still feels dispossessed and diminished, in 2022 that led to a potpourri of protests – urban and rural – aimed at the establishment. And in 2023, an election is coming with its slogans and political biff.
Covid proved New Zealand was not doing as well socially as it thought it was, Spoonley argues.
‘‘Covid was a full stop to a period of stability and trust, and both have evaporated,’’ he says.
‘‘Covid generated a number of communities who have really dialled up the hostility towards government and significantly reduced levels of trust in experts, in institutions like the media and the government.
‘‘We’ve moved into this new and very divided society. And suddenly the things that we thought we’d done really well during Covid are now seen as being problems.
‘‘One of the paradoxes at the current moment is that when you look at the economic indicators, many of them indicating that New Zealand has done really well, but we’ve got the focus on the negatives.’’
‘‘One of the big questions is, how do we heal as a nation? It’s going to have to involve give and take on a whole lot of areas and thinking about the common good. That is not going to be easy.’’
Cameron Bagrie
High income countries – New Zealand is one – were experiencing a demographic transition in which the number of prime workers as a proportion of the population had fallen.
Those countries relied on immigration to fill the job shortages and grow the population, but Covid put a vice on international travel. Now, New Zealand is in a struggle with the likes of Germany and the UK for workers.
‘‘It’s not generally recognised, but New Zealand is seen as one of the countries that is adjusting fastest to the new world of migration,’’ Spoonley says.
‘‘Germany has estimated that it needs a net gain of 400,000 from migration each year to keep its labour market working, and the UK has said that it will recruit or train 50,000 new nurses in the next two years.’’
New Zealand too, needs nurses. And a better spread of personal wealth.
‘‘We’ve got a generation – the baby boomers – who are owning houses, which have got too many bedrooms for the people that are living in them,’’ he says.
‘‘We’ve got this generation that has done very well and owns assets and the household wealth of that generation is considerably higher than any other generation.
‘‘But we don’t have a way of redistributing the housing stock for millennials or Generation Z, or increasingly generation Alpha.’’
As well as social division, a recession Bagrie rates the worst in 30 years can be added to the mix.
‘‘That’s the second half of the 2023 story before we really start to see a sharp drop-off in work, and that will roll on to 2024,’’ he says.
‘‘If you look at the past 30 years, we’ve had a couple of recessions.
‘‘They’ve been a mixture of domestic and global-led. But they’ve been pretty short, sharp affairs, and one of the reasons they’ve been pretty short, sharp affairs is that monetary policy has reflated everything pretty quickly. Interest rate hikes are
followed by interest rate cuts.
‘‘The difference this time around is
… it looks like it’s got a lot more stickiness about it.
‘‘If inflation has a bit more stickiness about it, then the economic adjustment on the other side to get the inflation thief back in jail is a bit harder and it’s going to be a bit more elongated.
‘‘Most of the workforce have not seen an elongated economic adjustment or what it takes to get the inflationary thief back in jail. You’ve got to get back to the late 1980s, early 1990s, and it was pretty brutal.’’
Real leadership means dropping ideology and short-termism, rather than flicking from side to side.
‘‘Real leadership is not just dishing out lollies, it’s articulating a plan: ‘This is where we are going’, and being prepared to make some big bold decisions,’’ Bagrie says.
‘‘There should be some things we should be able to agree on across the nation – wellbeing needs an economics base.
‘‘At the moment, if you look at what we’re seeing across the farming community, the current accounts for trade, that economic base is hurting
‘‘We shall be able to agree that the most important thing in life is time, time to spend with loved ones and your kids. If you don’t have your health, then time’s worth nothing.’’
Even if the Government has lost its sheen, political specialist Mike Munro says it is too early to call the election result.
‘‘After all the stresses of 2022, prophesying about 2023 is fraught with danger. All we can expect is the unexpected,’’ Munro says.
‘‘As for the election, there could be some event on which the whole thing turns.
‘‘Whether that event is global, economic, climatic, a monumental political blunder, a scandal... nobody really knows.
‘‘I have a feeling that what the Government does, or doesn’t do, about its unpopular or controversial policies, will make little difference.
‘‘It will need to do something that plays on the emotions of soft voters, like interest-free student loans did in 2005.
‘‘That’s where the 2023 Budget will be really important. Winning the political centre is essential, and Labour has time to do that.’’
Yet there is some happy news for 2023. The Fifa Women’s World Cup is headed this way in July and August, a spectacular sporting event that should cheer up sports fans and hospitality owners as it injects money into the domestic economy.
The world’s largest women’s sporting event, it is expected to haul in a worldwide audience of more than a billion, says Kylie Hawker-Green, the Ministry of Business, Innovation & Employment’s major events manager.
‘‘It puts New Zealand front and centre on the world stage and will generate significant social and economic benefits for New Zealand, leaving a lasting legacy for football and women’s sport in this country, and our communities, through things like upgraded sporting facilities.
‘‘We expect tens of thousands of international visitors to travel to New Zealand for the tournament, which will provide a much-needed boost for our tourism and hospitality sectors as they recover from the impacts of Covid-19.’’
It all helps. Now back to Bagrie, for more solutions.
New Zealand needs to get children re-engaged with school, as the most important economic indicator is education. ‘‘We need a call-to-arms on this thing.’’
And housing: ‘‘You don’t get wealthier selling more expensive houses to each other. We’ve got to be looking at what we can do to unlock capital formation into the really productive part of New Zealand. Can we make New Zealanders a lot more aspirational?’’
Climate change is not just a matter for farmers and ‘‘we’re not having those urgent discussions’’.
2023 is time for some tough conversations and hard work, Bagrie says. ‘‘I call the next few years the three Rs: reset, reality and some real hard mahi. There’s going to be some darkness, but it also offers a lot of opportunities to sort out a whole lot of problems but also opportunities down the track.’’