So how is the NZ economy looking as we move on from the election? Well, in this column, you can take your pick.

Five reasons we're in economic trouble


The fall from record dairy commodity price highs has come harder and faster than anyone could have expected. Suddenly we're seeing farmers having to shift their mind set from a record-beating payout of $8.40 to a $5.30 at best - and we don't yet know if we've hit bottom.

The dollar
It's still too high and leaves the Reserve Bank snookered. The bank needs to keep lifting interest rates to head off a housing boom and keep a lid on consumer spending and the domestic economy.

But efforts to do so attract currency investors and push our dollar higher, making life tough for exporters. Dairy price falls may prompt a pause but Reserve Bank Governor Graeme Wheeler seems full of resolve to stay on top of inflation.


As New Zealand's largest trading partner, the continued slowdown in China's growth rate has to be of some concern. But while that may be measured the biggest risk is a property or stock market crash in China. Any kind of uncontrolled financial turmoil in China would send shockwaves around the world with the biggest impact felt through Asia and Australia. How likely this is depends who you talk to. Certainly there has been evidence of a property bubble in big cities like Shanghai for some time.

US markets
They're over-valued and due for a fall. The real US economic recovery has failed to keep pace with stock prices which have been inflated by an influx of investors who can't expect any kind of serious interest rate returns from the banks. With the Federal Reserve keeping the official cash rate near zero, markets are still benefiting from artificial stimulus. As markets hit record high after record high some are getting nervous - particularly as we head in to October, a month most strongly associated with big market falls.

The strategy
Where is it? What is New Zealand actually doing to create jobs and push wages up. As export earnings fall we are once again relying on the wrong end of the economy - property and consumer spending - to prop up GDP and see us through. If that's the case we have only limited time before a drought or another global financial crisis stops in our tracks.

Five reasons the economy is in good shape

Crowds on Nanjing Road, Shanghai, China. (BNZ China series) 23 June 2014. New Zealand Herald photograph by Mark Mitchell
Crowds on Nanjing Road, Shanghai, China. (BNZ China series) 23 June 2014. New Zealand Herald photograph by Mark Mitchell


The idea that China growing at 7.5 per cent is bad news for the world is ridiculous. China's slowdown has been well signalled and is part of a targeted Government campaign to shift the focus from manufacturing and exporting to the domestic economy.

It's good news for New Zealand as a preferred trading partner as it means more demand for dairy and higher value consumer food products.

The markets
New Zealand's capital markets have never been in better shape. There is plenty of money looking for an investment home and a steady pipeline of new companies coming to the market.

This is a scenario that those in the industry could only dream about five years ago.

With the markets functioning well we should see companies raising money and expanding to take advantage of the improved economic conditions.


Like John Wayne riding to the rescue, the US recovery looks set to be perfectly timed to head a New Zealand slowdown off at the pass.

As America gets back into top gear its currency will rise, ours will fall and we'll see our manufacturers finally get a break. Beyond the currency we shouldn't forget the US remains our third largest trading partner, and if it starts to boom our exporters and our tourist industry should start to benefit.

Xero chief executive Rod Drury. Photo / Dean Purcell
The tech sector
The slump in dairy commodity prices will be good for us. New Zealand is overly reliant on dairy for its export earnings and we should put more focus on the tech sector.

Okay, at $5.3 billion in export earnings it is dwarfed by dairy. But it is growing fast and, as of last year, accounted for 15 per cent of total export earnings.

Companies like Xero and F&P Healthcare are leading the charge but the smart start-ups keep coming. Tech has to be part of the future for all modern economies that want to create well-paid jobs for their people. New Zealand is in good shape.

New Zealanders
Innovative, adaptive and always up for a challenge. Since we opened this country up to the free-market in 1984 Kiwis have been coping with the volatility of a floating dollar, exposure to global markets and new financial trends. Being a small nation is a big advantage and enables us to adapt quickly to a new economic climate. Whatever comes our way we should back ourselves to rise to the challenge and meet it.

So there we are

An economic analysis with something for everyone. How you see it no doubt depends on your everyday experience of this economy and perhaps your political leanings.

In my view all of the above propositions are valid, although which ones ultimately have most influence on our future remains to be seen. Economics isn't about predictions, it is about being aware of all the variables which can shape the economy and being prepared to deal with them.