Growth versus growth - the problems with arguments about statistics

Jacinda Ardern and Simon Bridges have made very different claims about New Zealand's economic growth, although neither is wrong. Photo / Mark Mitchell

ANALYSIS:

Amid calls for a factual election campaign, the facts around New Zealand's economy are already in dispute.

After delivering her opening statement to Parliament on Wednesday, Prime Minister Jacinda Ardern slapped down a critic on Instagram who had suggested she was ruining New Zealand's economy.

"Is that a reference to the low unemployment levels we've achieved, high wage growth, the decrease in debt or the solid GDP growth at 2.7 per cent?" Ardern wrote.

The statement included a number of claims, but National leader Simon Bridges focused on only one.

Promoting a link to a New Zealand Herald article, Bridges said on Twitter: "Except she's entirely wrong. Today the Reserve Bank has estimated growth was an anaemic 1.6 per cent in 2019."

Except she’s entirely wrong. Today the Reserve Bank has estimated growth was an anaemic 1.6% in 2019. https://t.co/0RIaiW3AG2

— Simon Bridges (@simonjbridges) February 12, 2020

So who is right? Well, both of them (and despite what Bridges claims, Ardern is not wrong). They are talking about subtly different things.

Ardern's claim about 2.7 per cent growth can be found on the Statistics New Zealand website, which reports that "annual growth" in the year to September 30, 2019, was 2.7 per cent.

Bridges, meanwhile, used figures released by the Reserve Bank on Wednesday, which forecast in its latest monetary policy statement that in the final three months of the year, the economy expanded by 0.4 per cent.

This, he argued, meant the economy would have grown at 1.6 per cent (according to calculations, if the Reserve Bank is right in its estimation, growth would be about 1.61 per cent).

But they are talking at cross purposes for two reasons, hence the very different answers.

The first is the period - Ardern is talking about the year to September 30, while Bridges is talking about the year to December 31 (and for the end of that, basing his assumption on an estimate of the Reserve Bank, which could easily be wrong).

The two political figures are also using different calculations for growth.

Ardern is using an annual figure (12 months to September 2019 vs the 12 months to September 2018) whereas Bridges calculation appears to use the difference between one quarterly figure and the same quarter the previous year.

Using Bridges' method, but the period Ardern was referring to, the growth rate for the year to September 30 was 2.3 per cent.

On its website, Statistics NZ said the annual measure - used by Ardern - is its "preferred measure … because it is a better indicator of trends in annual growth".

Be that as it may, bank economists usually publish both figures in their research, but tend to focus on the change from the same quarter a year ago when referring to annual growth.

When Statistics New Zealand publishes tables of how New Zealand's growth compares to other countries (and remember, the Government has been at pains to point out New Zealand is growing faster than many of its similar rivals) it uses the change from same quarter in the previous year calculation.

So both claims are valid, highlighting exactly how difficult it could be to enforce any kind of rules for a factual campaign.