Wellington, January 25, 2020
The economy is doing well!
That is the take-home message from all the detailed economic indicators.
The most recent growth rate comes in at 2.4%, unemployment continues to hover down around 4%, and inflation is sitting at 1.5%.
We are growing faster than Australia, the UK, Canada, the EU, Japan and the OECD average.
This is an excellent result.
There is more good news in the government’s financial statements.
The latest results for the five months ended November 30, 2019 show that the accounts are in surplus, and government expenses are tracking along close to the forecast.
Debt remains low at 20.1% of GDP and investment gains are higher than forecast.
Positive result
The Crown financial statements do tend to fluctuate from month to month due to tax timing changes, but nevertheless, as Finance Minister Grant Robertson said, this is a positive result.
Business confidence is beginning to improve.
Traditionally, it tends to be higher than they are under National governments.
This is because some business people assume that they would not do as well under Labour, even when the evidence does not correlate with the actual state of the economy.
Fortunately, the latest business confidence survey shows that many business sectors are more upbeat about the future and many people recognise the importance of social and environmental factors on business.
What do these positive results mean for small business owners who play such a pivotal part in our communities and our economy?
Small business complexity
It means small businesses will continue to do well, with more people in employment there are more customers spending more money.
When there is more money circulating in the economy, it increases prosperity for everyone.
The government does acknowledge that the complexity of running a small business is often underestimated. Managing cash flow and tax payments, as well as actually running the business can be challenging. Also, when we have low unemployment it can be difficult to attract and retain qualified staff.
The newly launched Business Boost initiative will help with many of these challenges.
It provides mentoring and advice for small businesses across a range of topics, such as staff management, cash flow planning, and interacting with government.
The website for Business Boost can be found here: https://www.tools.business.govt.nz/boost/
Even though the economy is ticking along nicely, it needs to be looked after and supported, particularly in the face of the global headwinds we are facing from issues like the US-China trade war and Brexit uncertainty – which are having an impact on businesses here. We know we’re not immune to the global situation. The budget surplus and low debt give us the opportunity for further investments to strengthen the economy.
Infrastructure investment
That is why the government has recently announced a $12 billion investment in infrastructure.
This investment will have a dual benefit: we get the public transport and hospitals and schools that we need to support our population, and at the same time, our businesses get more guaranteed work on big projects, which enables them to keep employing more people and spreading the wealth throughout the different sectors of the economy.
The government recognises that not all businesses can participate in building a new road or big new hospital. The extra funding for school maintenance announced late last year is intended to benefit local businesses and communities by creating smaller scale projects that give work to local tradies.
Spreading the wealth in this way supports the economy and helps future-proof it against economic shocks. Of course, it also means that our children, and the people who work in schools, have good conditions to learn and teach in.
That a win for all of us.
Getting the economy running right is a complex and difficult task.
So far, the government is doing well, as all the positive economic indicators show.
That’s a great outcome for the country.
Deborah Russell is elected Labour Member of Parliament from New Lynn (West Auckland) and Chairperson of the Parliamentary Select Committee on Finance & Expenditure.
