Thursday 28 January 2016

The (Actual) State of the Nation, 2016 Edition

Back in 2014 I was bored enough to fact-check John Key’s speechwriter’s soundbites in his State of the Nation speech. Yesterday he gave his speech for 2016 in central Auckland to the local Chamber of Commerce, complete with police armed with rifles. In his speech, he mentioned Auckland 34 times, Taranaki four times, Gisborne and Blenheim and Canterbury and Wellington once each, and Antarctica as the place where Simon Bridges has currently been banished while John Key takes the credit for announcing good news about the city rail link. He also talked about the flag zero times, because it’s totally not relevant to the state of the nation at the moment. Anyway, rather than continue working on a literature review, I’ve decided to quickly look at the claims made by Key, instead of just taking his word for it.

“Global dairy prices remain low. But over time, they will recover and the New Zealand dairy sector is well-placed to attract growing numbers of middle-class customers in key markets.”
The Fonterra GlobalDairyTrade Price Index dropped to an all-time low of 514 in August 2015, and remains lower than the historical average since 2006 (in the bottom quartile). When the index was at its lowest in 2015, the price of milk solids was half the cost of production. The index did recover slightly, but has since levelled off again. In the supply and demand market, the banks forecasted that production will drop around 5 percent and thus drive prices up. The NZX Dairy Futures has prices trending up for the rest of the year. Is that a good thing for New Zealand farmers? Well it depends on why production is dropping... Price is not everything! At least that’s the optimistic view – Westland Milk Products believes that the global dairy prices will stay weak for at least another six months, blaming high production in Europe. China has been increasing their production as well, and considering they are one of the largest buyers, taking themselves off the global market certainly doesn’t help NZ. Fonterra CEO Theo Spierings last week: “There's definitely going to be pain, more pain”.

 “We remain one of the best places to do business.”
In the 2015 best countries for doing business rankings, New Zealand ranked 2nd (no change) in the World Bank’s rankings, and 2nd (up one) in Forbes’ rankings. Apparently we’re very good at allowing people to start businesses, register property, get credit, and enforce contracts, but not so good at trading across borders, resolving insolvency, and, for some reason, we’re ranked 31st for getting electricity. We were ranked 25th by Bloomberg in 2014, largely due to low scores for labour and material costs and readiness of local consumer base. We also ranked 16th in the World Economic Forum’s global competitiveness rankings.

“Consumer and business confidence is picking up and I sense a feeling of optimism among New Zealanders.”
Both consumer (based on Westpac research) and business (based on ANZ research) confidence had massive drops in the third quarter of 2015, but they both recovered in the lead-up to Christmas. Here are some quotes from the most recent reports: “the proportion of households expecting to be better off financially in a year’s time has fallen to its lowest level in four years“, “The service sector continued to be the most optimistic (32), and agriculture the least (7.5)”, “more households think that economic conditions will soften over the next five years”. Confidence has been increasing recently, but it’s still significantly lower than it was in early 2014.

 “While we've been the Government, the average wage has increased by more than double the rate of inflation.”
Does it feel like your ability to buy things has increased? Wages rising at more than double the rate of inflation should be a boon to consumption. According to Statistics NZ, between 2009 and 2015, average weekly earnings rose from $870 to $1,031 – an 18.5% increase. In the same time period, the cumulative inflation has been about 10.7% according to the Reserve Bank and about 11% according to Statistics NZ. So maybe not “more than double” but more nonetheless. As an aside, the housing part of the Consumer Price Index has risen by 19% in the same time period, and education has risen by a whopping 29.4%, so certain groups of society are being hit harder than others. In the interests of balance, communications reduced by 24% and clothing and footwear, recreation and culture, and household contents and services dropped by 3-5%.

“And New Zealand has the third highest employment rate in the developed world. That's right: Our businesses employ a higher proportion of the working age population than almost any other developed country.”
The OECD says we have the 15th lowest unemployment rate and 7th highest employment rate (out of 36). Not that there’s a huge difference, and comparative rankings probably don’t mean very much when the difference between one position and the next is 0.1%. You could have the lowest unemployment rate in the world but if that rate is 15% then your constituents aren’t going to have a very good time. Being better than “almost any other developed country” sounds great though!

“In terms of the Government's finances, under Bill English's careful management, we achieved our surplus target last year.”
True, although we should all consider where the money magically appeared from, given that only a few months prior Bill English and Treasury were preparing the public for bad news. Also, Treasury predicts a deficit for the next financial year. Apparently the Future Investment Fund (remember the asset sales?) has run out.

“The Government is also investing billions of dollars in upgrading New Zealand's infrastructure, to get the country moving - literally. Since we took office, we've invested [billions of dollars on roads, roads, roads, rail, broadband, Canterbury, schools, hospitals, housing, and other public infrastructure].”
In the interest of not just focusing on the negatives, I’m including this passage where the PM lists about $35.6 billion in spending on infrastructure since National took office and $11.5 billion over the next two years. The numbers are in the budget(s).

My Government is motivated to continue working hard for all New Zealanders.”
This claim could not be verified. Depends on your definition of “all” I guess.

Looking back at my 2014 post, I guess maybe my position on the National government has softened over the last two years. Or maybe I’m more cynical about everything. There were a lot of half-truths in this speech, but that's not really all that surprising is it? This all makes me sound quite anti-National, but honestly I think I'm just anti-everyone at the moment.

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