Economic outlook, government finances and the labour market · Economic outlook, government...
Transcript of Economic outlook, government finances and the labour market · Economic outlook, government...
Economic outlook, government finances and
the labour market
In the thick of it seminar26 June 2015
Bill RosenbergPolicy Director/EconomistN Z Council of Trade Unions
Outline
The economy Government financesWages and salaries
2
The New Zealand economyGDP growth has probably peaked
– International outlook has many risks: Eurozone and Greece China and Australia growth rates have fallen (but not so bad) US still not fully recovered
– Commodity prices especially dairy have fallen– Along with fall in interest rates, dollar down (mainly vs US$)– Christchurch reconstruction has probably peaked – will flat line– Construction in Auckland still strong, but mixed in regions– Very low 0.2% growth in March 2015 quarter– Treasury forecast is for annual growth to peak this year, but
was surprised by lower March growth– Growth lower than before the Global Financial Crisis hit – per
capita growth even more so 3
4Source: Statistics New Zealand National Accounts; Treasury Budget 2015 forecasts
Treasury Forecast
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Economic growth:Increase in Gross Domestic Product
Quarterly increase
5Source: Statistics New Zealand National Accounts; Treasury Budget 2015 forecasts
Treasury Forecast
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Economic growth:Increase in Gross Domestic Product
Annual increase
Quarterly increase
6Source: Statistics New Zealand National Accounts; Treasury Budget 2015 forecasts
Treasury Forecast
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Economic growth:Increase in Gross Domestic Product
Annual increase
Quarterly increase
Average 2000-2007,2012-2019
7Source: Statistics New Zealand National Accounts; Treasury Budget 2015 forecasts
Treasury Forecast
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Economic growth:Increase in Gross Domestic Product
Annual increase
Annual increase percapita
Quarterly increase
Average 2000-2007,2012-2019
8Source: Statistics New Zealand National Accounts; Treasury Budget 2015 forecasts
Treasury Forecast
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Economic growth:Increase in Gross Domestic Product
Annual increase
Annual increase percapita
Average 2000-2007,2012-2019
The New Zealand economy Inflation low, but likely to rise with falling dollar and interest rates
House prices rising rapidly in Auckland
Household debt rising again; continuing concerns regarding farming debt, especially with dairy and log prices falling
Unemployment still high at 5.8% (146,000 people) given number of years past the recession
– Higher in most of the North Island, lower in the South Island
– Strong employment growth, but also strong increase in labour supply
Net immigration 57,800 in year to May; Beneficiaries being forced into work
So low productivity growth (Treasury est. negative 0.3% in year to June 2014, only 0.7% this year)
Low pay rises
9
10Source: Statistics New Zealand; Treasury Budget 2015 and RBNZ MPS March 2015 forecasts
1.6%
0.3%1.3%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%M
ar-0
8
Mar
-09
Mar
-10
Mar
-11
Mar
-12
Mar
-13
Mar
-14
Mar
-15
Mar
-16
Mar
-17
Mar
-18
Mar
-19
CPI Trend and forecasts
CPI % Forecast (Treasury) Forecast (RBNZ)
11
3.8%
6.9%
6.2%
6.6%
6.3%
7.2%
6.4%
5.5%
5.8%
2%
3%
4%
5%
6%
7%
8%
Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
Perc
enta
ge u
nem
ploy
ed
Actual and Forecast unemployment
Actual unemployment rate (LHS) Treasury Forecast Unemployment Rate (LHS)
NZIER consensus forecast
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60,000
80,000
100,000
120,000
140,000
160,000
180,000
2%
3%
4%
5%
6%
7%
8%
Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
Perc
enta
ge u
nem
ploy
ed
Actual and Forecast unemployment
Actual unemployment rate (LHS) Treasury Forecast Unemployment Rate (LHS)NZIER consensus forecast Actual people unemployed (RHS)Treasury Forecast People Unemployed (RHS)
Government finances May or may not be a surplus this financial year (to June
2015)– But any deficit (or cash deficit) is now so small that it is well
below the increase in nominal GDP– So borrowing needs would rise more slowly than GDP from the
new financial year even without going into surplus – net debt would fall as proportion of GDP
Could afford more government debt(not that I’m advocating it!)– Government debt low by international standards
13
14
Low government debt, plenty of room to move. Better to not to try to reduce it: IMF research
Source: “When Should Public Debt Be Reduced?”, Ostry et al, IMF 2015
Government finances Negative effect on economy of fiscal policy on GDP
2017-19
15
Conclusion: current fiscal
position too tight cutting
expenditure for other reasons
26%
27%
28%
29%
30%
31%
32%
33%
34%
35%
Government expenses as percent of GDP
Forecast
Wages and Salaries
Generally low wage increases since GFC State sector worse
16
17
900
950
1000
1050
1100
1150
2009 2010 2011 2012 2013 2014
Wages and Productivity, market/measured sector
Producer real Compensation of Employees/hour Consumer real Compensation of Employees/hourProducer real average wage Consumer real average wageLabour Productivity
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35%
40%
45%
50%
55%
60%
65%
The nation's income: how it is sharedSource: GDP (Income), National Accounts, SNZ
Capital share Labour share
19
940
950
960
970
980
990
1000
1010
1020
2009 2010 2011 2012 2013 2014
Labour Cost Index for State Sector groups adjusted for inflation compared to the private sector
(June 2009=1000)
Private Sector
Education and Training
Health Care and SocialAssistance
Public Administration andSafety
Central GovernmentAdministration, Defenceand Public Safety
20
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
Real increases in Labour Cost Index in Public Sector compared to rest of economy since June 2009
21
0%
1%
2%
3%
4%
5%
6%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Annual increase in Labour Cost Index – health vs all
Health
All industries
22
24.00
26.00
28.00
30.00
32.00
34.00
36.00
Real total average hourly earnings(March 2015 $)
Public Sector
Public Administration and Safety
Education and Training
Health Care and Social Assistance
Private Sector
23
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
PublicAdministration and
Safety
Education andTraining
Health Care andSocial Assistance
Public Sector Private Sector
Increases in real total average hourly earningsMarch 2009 to March 2015 (March 2015 $)
24
0%
1%
2%
3%
4%
5%
6%
7%
8%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Annual increase in average hourly wage – health vs allAverage increase for year to quarter
Health Care and SocialAssistance
All industries
25
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14
How many times more likely a job on a CEA is to get a pay increase than a job not on a CEA
Calculated from LCI distribution of increases statistics and VUW Centre for Labour, Employment and Work CEA bargaining statistics
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0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
How many times more likely a job on a CEA is to get a pay increase than a job not on a CEA
Increase less than 2%
2-3%
3-5%
5%+
Any increase
Calculated from LCI distribution of increases statistics and VUW Centre for Labour, Employment and Work CEA bargaining statistics