Andrew Dickens: My take on GDP

While I was away tramping all over the top of the Coromandel Peninsula, we had some good and bad news. 

GDP came out better than we expected with a rise of 0.7% in the fourth quarter, which should signal the start of green shoots and recovery and confidence.  

But at the same time, the consumer confidence figure came out and it was the worst we’ve seen since the 90s.  

And then Paul Bloxham, the Australian economist who invented the rock star economy name, came out and said our recession has been the worst in the OECD.  

So why aren’t we confident? And why was our recession so hard?

Here’s my take: the Reserve Bank and the Government need to start working together.  

During the pandemic the bank slashed interest rates while the Government turbo charged spending, leading to a hangover that needed medicine.  

The previous Government was rightly blamed for the mess it was responsible for but we had been double hit by the bank and the Government. All levers pulled.  

The new Government came in and promptly slashed spending to reduce borrowing and reduced revenue through tax cuts, but the Reserve Bank had already started attacking inflation a year before hand with interest rates.  

So once again we were doubly hit. And the tax cuts, which Fran O’Sullivan six weeks ago described as badly timed, meant we weren’t paying back debt. We’re struggling to pay interest. 

So as Paul Bloxham has now described, we had an excessive pandemic reaction followed by an excessive inflation reaction.  

Now all the stuff we’ve done is technically correct, and this is easy to criticise with 20/20 hindsight.  

But it’s been as if the left hand and the right hand doesn’t know what each other are doing, which means our recovery will be slow. 

All parties claim they are the prudent fiscal managers and all Reserve Bank Governors claim the same. But on the evidence of the past five years, that’s not true. 

We need to learn from this unless we want to keep reeling from boom the bust over and over again. 

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Episode Transcript

Speaker 1 (00:00):
Now, look, while I was tramping all over the top
of the Commandual peninsula, we had some good and bad
news about our economy. GDP came out better than we expected,
a rise of point seven percent in the fourth quarter,
which should signal the start of green shoots and recovery
and confidence. But at the same time, the consumer confidence
figure came out and it was the worst we've seen
since the nineties. And then Paul Bloxham, the Australian economists

(00:22):
who invented the rock Star economy name, came out and said,
our recession has been the worst in the CECD So
what happened there and why aren't we confident? And why
was our recession so hard? And here is my take.
The Reserve Bank and the government need to start working together.
During the pandemic, the bank slashed the interest rates while

(00:43):
the government turbocharged spending, leading of course to what we
know the hangover that needed medicine. The previous government rightly
blamed for the mess it was responsible for. But we've
been double hit by the bank and the government. They
pulled all the leavers. So then the new government came
in to fix things, slash spending to reduce boring good
move and also reduce revenue through tax cuts. But the

(01:05):
Reserve Bank had already started attacking inflation a year beforehand
with interest rates, so once again we were doubly hit
and we got some tax cuts, which was that the
right thing to do at the right time. Fran O'Sullivan
six weeks ago described the tax cuts as badly timed.
It meant we weren't paying back debt. We're still struggling

(01:28):
just to pay the interests. So, as Paul Bloxham has
now described, we had an excessive pandemic reaction followed by
an excessive inflation reaction. Now, all the stuff that all
the parties did is technically correct in macroeconomics, and this
is easy to criticize the twenty twenty hindsight, but it
has been as though the left hand and the right

(01:50):
hand doesn't know what each other are doing, which means
it was tough, which means now our recovery will be slow.
All the parties claim they are the prude fiscal managers,
and all Reserve Bank governors claim the same, but if
you look back over the past five years, that's simply
not been true. They've been working against each other, and

(02:10):
we did it hard. And the reason I mentioned all
of this is because we need to learn from this
unless we want to keep on reeling from boom to bust,
over and over again. For more from Early Edition with
Ryan Bridge, listen live to News Talk set Be from
five am weekdays, or follow the podcast on iHeartRadio.