It's time for rest of economy to shine

Manufacturing, technology and other benefactors like tourism and education are sectors that will provide urban jobs.

The rock star has left the building.

The tide has turned on the economic boom. The slump in dairy prices has once again laid bare the vulnerabilities of a commodity-dominated economy.

Now interest rates and the dollar are both on their way down - back to levels not seen since the global financial crisis.

Reporting that change in tide has lifted the gloom to the front pages. It's winter. Life sucks.

But does it? For markets and economic forecasters the trend is the thing. That's one of the reasons that a change in sentiment is so powerful in grabbing hold of the prevailing narrative.

Real life isn't quite like that though. There is no single narrative to which we must adhere.

We need to be realistic and aware of risks but, particularly in the business world, we can't afford to give in to pessimism.

Reality right now is 2.5 per cent GDP growth in an environment with almost no inflation and low interest rates.

Looking back over the past 30 years of New Zealand's economic history there aren't many periods when these conditions wouldn't have been viewed as a sweet spot.

The trend is the problem. The dairy slump will bite and economic growth will likely soften.

But there are reasons to be hopeful. Reserve Bank rate cuts will help.

Reality right now is 2.5 per cent GDP growth in an environment with almost no inflation and low interest rates. Looking back over the past 30 years of New Zealand's economic history there aren't many periods when these conditions wouldn't have been viewed as a sweet spot.

Though the shift in direction from the central bank has added to the negative sentiment, the cuts will translate to dollars in the pocket for many middle-class mortgage-holding New Zealanders.

Then there is the dollar, which is finally back at levels that allow exporters to breathe.

The floating currency is meant to be the mechanism around which the economy corrects itself. It has not been working properly since the GFC because the US dollar has been moored at artificially low levels.

But that is changing. It has already changed.

The ANZ Commodity Price index for June showed export prices had slumped 20 per cent in 12 months overall but just 4.3 per cent on a currency adjusted basis.

For the month they were down 3.1 per cent but had actually risen 2.9 per cent on a currency adjusted basis.

Those selling in US dollars are able to convert those earnings back into more local money.

It gets even better when you look at returns for our exporting manufacturers and tech companies.

These are firms with more stable pricing. The fact that they haven't had a commodity boom to lean on has made the high dollar very tough. But now as it falls they cash in.

Just look at NZ's leading high-tech manufacturer F&P Healthcare, you can see it in the share price - up more than 50 per cent in a year.

For some companies, particularly those that hedge their currency needs, the benefits may take a while to flow but when they do they will offer a fuel injection to a sector which had to learn to run lean and mean in the past decade.

Manufacturing, technology and other benefactors like tourism and education are sectors that will provide urban jobs. They are the key sectors when we talk about diversifying New Zealand's economy and getting away from the trap of commodity cycles.

So for all the gloom - and there will be more of it as the commodity slump starts to weigh on the big economic data - this part of the economy needs to be viewed as an opportunity.

It is time for the rest of the economy to shine.