Westpac economist Brendan 'O'Donovan , you may recall, was predicting a remarkable economic recovery in December.

He told the New Zealand Herald on 30 December: 'Personally I think New Zealand could have a ripsnorter of a year and I think we could be on the cusp of a golden decade in terms of economic prosperity.'

As I said in a recent post o'Donovan has made these kind of glowing predictions before and has been proved wrong . He will be wrong this time round as well.

O'Donovan though thinks you can talk the economy up and believes that the nebulous 'business confidence ' factor will spark an economic recovery.

O'Donovan has been speculating about the economy again although he appears to have sobered up since his feverish December pronouncement. Perhaps he just had too much to drink at the office Xmas party.

Now he says that a 'rise' in business confidence implies 'a modest pace of expansion'. No mention of 'ripsnorters and 'golden eras' you will notice.

O'Donovan was quoting from The Institute of Economic Research's December Quarterly Survey of Business Opinion.

But that survey shows that just 8 per cent of companies surveyed expect the economy will improve over the next six months - up from 6 per cent in the third quarter.

On this less than impressive figure lies O'Donovan's claim of 'a modest pace of expansion'. But it's all just hopeless anyway because 'business confidence' does not lead to 'economic growth'. In fact, it's the other way round - an improvement in economic conditions leads to a rise in 'confidence'.

'Business confidence' surveys, frankly, aren't worth the money they are printed on.

Only 4 per cent of 814 companies surveyed last month said trading improved in the three months ended December 31.

The economy apparently grew by '0.6 percent'. Given the seriousness of New Zealand's economic crisis this figure is risible.

At least Shamubeel Eaqub, principal economist at the institute of Economic Research, was a bit more rational when he observed that 'at least' the New Zealand economy 'didn't appear to be going backwards'.

But this observation is blinkered by a failure to look out at the train wreck that has occurred out on the street.

Ordinary people are suffering staggeringly high unemployment and underemployment. The government's only 'solution' is to make more spending cuts, give tax cuts to the rich while at the same time bashing beneficiaries for not getting jobs - jobs that don't exist in anywhere near sufficient numbers.

People who do find jobs are, more often than not, faced with lower salaries. Many laid-off workers who have found new jobs are taking pay cuts or settling for part-time work when they get new ones, sometimes taking jobs far below their skill levels.

Food banks are reporting increasing demands for their services and more people are falling off the edge.

This is happening against the backdrop against a global economy that threatens to fall over again.

Just a week ago The Financial Times - hardly a radical publication - pointed to the likelihood that the European financial crisis will spread in the next few months: “Last year brought the eurozone debt crisis. Greece and Ireland had to be bailed out and big question marks still hang over Portugal and Spain. But the focus is now likely to widen. The question for 2011 is how much of the western world will be caught up,”

Pointing to the deepening divisions in the world economy, Nobel laureate economist Joseph Stiglitz is now warning of another great economic collapse.

So we limp on and in New Zealand we wait for something that will break the failed neoliberal consensus that exists among the business establishment, the political parties and the corporate media. How long before we say 'enough is enough'?


  1. It is astonishing that these people still have any credibility.


    Despite their predictions being as historically accurate as those of astrologers, we are still expected to believe them.


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