Thanks to ANZ economist Cameron Bagrie, interviewed on
Morning Report the other day, we now know what needs to
be done to make New Zealand productive and prosperous.
Asked by Geoff Robinson for an ‘idiot’s guide to the
economy,’ the redoubtable Bagrie tore into the subject like
a shark leaping for bait. In essence, this is what he said
(edited, but all his own words):
We need to step back and look at the big picture, because
there’s an underlying weakness in the tax base and not a
lot of money left in the kitty. According to fiscal
projections we need to get used to a new normal as we
come to the long end of the curve. There is no free lunch
here. There has to be a process of fiscal consolidation. The
economy is a soup-bowl, a saucer or a bathtub with a few
waves sloshing along the bottom. If we look like going
back to the old normal, the stick’s going to have to come
out and the Reserve Bank’s got to knock that on the head.
Yes, there is positive momentum but going forward it’s
not a robust recovery as we turn the corner. The ball’s not
going to go over the fence every time. There’s a behavioural
aspect to the economy that’s going to be the big driver.
Good to get that clear.