All Economies Lead South; or Do They?

If you peruse any major newspaper of late, you’re almost guaranteed to find an article on the four tenets of the zeitgeist: Boris versus Brexit, the next chapter in the Trump saga, the war on protesters and the storm warnings for a global recession. In fact, there hasn’t been a single day over the last couple of months that I haven’t read a piece about the latter on the New Zealand Herald website: prophecies of upcoming economic downturn being penned at every convenience by journalistic augurs. What intrigues me most about all this speak of doom and gloom, however, is that it seems entirely nonsensical for those of us here in New Zealand.

That’s not to say that I have some supposed infallible foresight: I certainly can’t say whether or not there will be a recession of any kind in any part of the world. What I can say is that I’ve spoken to a lot of top Kiwi leaders that have seem panicked by sensationalist soundbites and those persons might need a new perspective. It might seem hard to shake off the constant drone that ‘The global economy is heading into recession’[1] (The Guardian, 2019), there is a ‘Slowdown in the global economy’[2] (, 2019) or ‘Stockmarkets [have] tumbled across the globe’[3] (The Economist, 2018), but, in a world of untruth and out of context opinionism, why do some people seem so intent on taking as gospel truth the first thing they read or hear without considering its factual basis or relevance? Yes, the world is watching with bated breath to see who will trip over the fiscal cliff edge first, but what does that have to do with the New Zealand economy? The Kiwi growth rate might be down from a ten-year high of 4%[4] in the middle quarters of 2015, having slowed to 2.7%[5] as of the first quarter of 2019, but influential individuals such as ASB’s chief economist Nick Tuffley still predict the country is ‘Going to be comfortably holding its head above water’[6] even if countries like China, the UK or America do take the plunge.

What’s my issue with this sort of economic chatter though? Surely it’s harmless fake news – I shudder at the term – swirling around break time coffee and overzealous LinkedIn posts? You would think such bloated statements would be in one ear and out of the other, but it seems to be taking some effect. As Cameron Bagrie (Managing Director and Chief Economist of Bagrie Economics) puts it: ‘The New Zealand economy should be hooning along the motorway, but has the handbrake on instead’[7]. This means all this chatter might be causing the downturn because people are deciding the downturn is happening. As The Washington Post explains:

The strength and weakness of the economy: It depends on people. Their spending makes up about 70 percent of economic activity, and they rely on their gut feeling about the economy when they decide whether to make big purchases such as cars, refrigerators or fancy birthday dinners.[8]

What this alludes to is the idea that idle chatter could influence public opinion on the health of the economy and could mean New Zealand talks itself into an unnecessary recession; or at least into a lower sense of economic growth than it deserves. Even Matt Whineray (CEO of the New Zealand Super Fund) states in interview that the risk involved in being a long term investor can be not having ‘The support from our stakeholders’[9] whereby ‘In a broader sense stakeholders are government, media, public’[10].

What do I think should be the take away from all this economic discussion then? Am I suggesting that we should all throw off the gloomy veil and start emulating the British Prime Minister’s indomitable sense of optimism? Am I saying it’s time to remortgage the house in order to build that moat in the garden you’ve always wanted? As much as I’d love to see that potential landscaping dream, my only feelings are that I’m on the fence when it comes to recession guessing. It’s a boring answer, but I think it’s the right answer for somebody like me; and I think everybody should apply the same healthy level of scepticism I do to such uncertainties because that’s what they are: an uncertainty. In that sense, I think it’s time to stop listening to non New Zealand hearsay if that’s not where your investments lie because there’s enough fearmongering on the economy from inside the country without piling irrelevant outside news on top.


[1] Phillip Inman, Is a Global Recession Coming? Here are Seven Warning Signs,, (London: Guardian Media Group, 2019). [2] Shannon Molloy, Growing Fears of a US Recession Spark Global Panic,, (Adelaide: News Corp Australia, 2019). [3] No author, The Next Recession,, (London: The Economist Group, 2018). [4] No author, Key Graph Data: Real GDP,, (Wellington: Reserve Bank of New Zealand, 2019). [5] Ibid. [6] No author, NZ Will Keep 'Head Above Water' Amid Recession Fears,, (Wellington: Radio New Zealand, 2019). [7] Dan Satherley, Economist Warns We're Driving Towards a Recession,, (Auckland: MediaWorks, 2019). [8]Heather Long, This is the Factor that’s Likely to Determine Whether There’s a U.S. Recession,, (Washington DC: The Washington Post, 2019). [9] Gareth Vaughan, The NZ Super Fund's Matt Whineray on Explaining the Difference Between Volatility and Risk, the Fund's Focus on Equities & Not Being Forced to Sell,, (Auckland:, 2018). [10]Ibid.