Thursday, 11 March 2021

What's next?

The OECD came out this week with an update to its economic outlook and a set of policy recommendations. If you've wondered how New Zealand has been faring through the Covid outbreak, relative to my selection of the usual suspects, here's how we went in 2020 (we're red, and there are a couple of comparators in green, the OECD, and the world as a whole) ...

and here's how the OECD sees 2021 going ...

... and here's their best guess at 2022.

We scrub up pretty well when you look back at 2020: we had a typical-sized downturn (a tad worse than the world as a whole, a tad better than the typical higher-income OECD country), but for a much better Covid outcome than in most places, so as a package it's pretty impressive. Longer run, it looks, unfortunately, like back to the pre-Covid status quo: the OECD says we should expect relatively slow growth by either world standards or by comparison with our better-off peers.

On policy, beyond the obvious big macro settings (" A premature tightening of fiscal policy must be avoided.  The current very accommodative monetary policy stance should be maintained"), the OECD's recommendations are
  • "vaccinate fast" (Co-ordinate and accelerate vaccination of adults across the world, ensure poor countries receive their fair share of doses, and improve funding for the COVAX initiative, ensure effective test, track and trace programmes)
  • "invest fast" (Speed up implementation of new spending boost growth and jobs, help businesses adapt to a digital future, privilege grants and equity-type support over debt to give viable small and medium-sized companies the space to develop, invest in cleaner infrastructure and digital technology to foster a transition to a more resilient and sustainable economy) and
  • "support people" (Protect the incomes of people hit hardest by the crisis, help the low skilled and the vulnerable, improve training schemes and access to the labour market, focus on youth – young people need particular support now and to help them prepare for a changing world of work)

and who's going to argue with any of that, though you have to feel that "invest" and "fast" do not come easy to New Zealand policymakers, and I'll be pleasantly surprised if it happens. It would be nice if, for once, we just took the OECD's ideas and ran with them quickly and comprehensively: unfortunately, our track record is not crash hot ('Are we serious?', 'Take advice? Moi?').  Among other things, we wouldn't have today's housing market problems if we'd listened to the OECD's suggestions, going back to 2017, on how to address them. 

1 comment:

  1. John Gibson at the economics forum last week made a rather important point about NZ's overall structure and that small proportions of services in GDP should mean our counterfactual economic performance would have had a smaller hit from Covid than other places because Covid hits services worse than other sectors. Which of those OECD comparitors had comparable ex-ante industrial shares of GDP?


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