Recession Ends and Growth Follows – The New Zealand Experience

In the previous post “Societal Myths and the Impact on Infrastructure“, Ross talked about how outdated fact are amplified on news and media and how these influence public and political decision making.

In this post, Ross presents the New Zealand experience to illustrate that recession ends contrary to common perception that recession feels like never-ending.

In North America, in Europe, and the UK, there’s been a pretty nasty recession over the last eight years or so.

And in New Zealand, we had our equivalent of that, back in 1987 to 1995 over a period of 8 years and it was pretty much called the “Last one out turn off the lights” recession.

Unemployment was at 12%, true. So everybody knew somebody that was out of work, that included highly qualified professionals, engineers, accountants, lawyers, right across all the professional spectrum, tradesman, laborers, a whole lot. There were people unemployed.

Secondly, house interest first mortgage rate for 20.5%, which in today’s context just seems astronomical.

The New Zealand government did ride up to 50% of GDP because our interest rate was so high, the percentage of debt servicing is a very high percentage of overall GDP and had a real impact on the social programs in New Zealand as a result of that.

And during this period, people absolutely with their feet and move to Australia and the peak of that it was running at about 2% of the population per annum was moving to Australia.

We have our free labor market between Australia and New Zealand so New Zealand citizens can move and work in Australia as they want to and that was certainly happening.

No training was undertaken during that period, probably a little longer than that. And so there’s a gap in our society now of, that lagged on from that, of skills gap right across for that lack of training.

And there’s absolutely minimal infrastructure investment, I remember because I was working during that period. We were just doing the bare minimum operations and maintenance, there was no capital.

And the bottom graph on the slide here, which we’ll come back to later in the presentation shows that during that period we were actually consuming more infrastructure or more capital infrastructure than we were developing.

So we were actually running our infrastructure down during that period. And it took us a decade plus to recover from that.

But these things never stay still. And one of the things that have happened over the last 30 years.

So New Zealand now, 30 years later from that recession is one of the top 10 countries in the world across a range of indicators and we generally have a very good lifestyle here in New Zealand.

The country is prosperous and safe. It is well governed. And the infrastructure is getting better, remembering that we’re still a very young country in terms of building out western infrastructure.

But that deficit that we have has been overcome and we’ve moved on from there. And I think that’s one of the things, so I want to point out, in terms of recessions feel like they never end, but they do.

And then there’s a catch-up period and investment period following them. And life carries on and goes ahead again. So that’s the good news story from New Zealand.

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Societal Myths and the Impact on Infrastructure