Political & Economic week that was: ACT not supporting RMA reform but Labour will

Click the NBR Radio box for on-demand special feature audio: Rob Hosking breaks down the political and economic week that was

A strange shift is under way in politics, when Labour supports a major government measure but two of National’s support partners do not.

This is over the long-awaited Resource Management Act reforms, which were announced last week and finally introduced to Parliament this week.

Last week the Maori Party said it would support at least the first reading of the amendment legislation and Peter Dunne said he would not.

This week we learned the somewhat more surprising news that Labour will support it, and the ACT Party will not.

All are doing so for different reasons but it puts National in an interesting position.

Meanwhile, the opposition has been baiting National about the economy, in the build-up to next week’s Reserve Bank monetary policy statement and the government’s own half-yearly economic and fiscal update the week after that.

Both the Reserve Bank and the Treasury can be expected to revise their unemployment outlook up and, in the buildup to that, Labour is beating the job drum.

It has led to some dubious jiggery-pokery with statistics – a press released yesterday saying unemployment is now 32% higher in the South Island was highly misleading as it somehow left out the fact unemployment is still at 4.4% of the workforce overall – well below the National average and the long-term trend – and the employment rate is at a record high.

A lot of this is migration driven: net migration data, which was also out this week, shows a continuation of the previous trend. Fewer people are leaving, and more skilled people – both expatriate New Zealanders and new migrants – are coming through the turnstiles at the airports.

At the same time, the low and no-skills jobs are drying up.

The other economic data this week points to some inflationary pressures – the prices in the terms of trade data show an import price spike.

Also: debt data from the Reserve Bank show borrowing, while still historically low, is at its highest since the GFC.

Borrowing for housing has risen by above 7% for the most recent 12 months and is at its highest level since mid-2008.

Borrowing for farming is up more than 9% for the first time since mid-2009. There has, for a number of reasons, been a loosening of the credit corsets worn by households and businesses in recent years.

Overall, private sector borrowing is up 6.7% for the year: a year ago it was 4.5%.

The rise is even bigger considering that 4.5% was not wildly out of line with nominal GDP – that is, in real terms, it was minimal.

Nominal GDP has tumbled due to negligible inflation, meaning that rise in borrowing is much more than it first appears.

That means, in turn, the Reserve Bank is less likely to want to fuel this by cutting interest rates further.

However, the mix in the terms of trade is not as bad as it looks – much of the fall in the balance between what New Zealand earns and spends overseas was driven by the fall in the exchange rate over the winter. 

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