As goes New Zealand, so goes the world?

by on June 17, 2008 at 6:50 am in Economics | Permalink

The land of the long white cloud has enjoyed a 10-year economic boom
driven by exports of milk, butter and cheese, a population riding a
housing market boom and tourists eager to sample the landscapes
depicted in Hollywood films such as The Lord of the Rings.

But
New Zealand is on the cusp of a downturn and risks seizing the dubious
honour from the US of becoming the world’s first developed nation to
sink into recession, as measured by two consecutive quarters of
negative gross domestic product growth.

GDP numbers for the January-March quarter due this month are forecast
to show a contraction of at least 0.3 per cent. TD Securities and other
economic forecasters are predicting a 0.2 per cent decline for the
April-June quarter.

Here is more information.  Elsewhere in the Commonwealth, one UK supplier is now charging $14-15 a gallon ($18 for a UK gallon) for gas, he wants to make sure his customers can always get the product.

sethstorm June 17, 2008 at 1:35 pm

Elsewhere in the Commonwealth, one UK supplier is now charging $14-15 a gallon ($18 for a UK gallon) for gas…
…and simultaneously becomes a huge target. That’s not how you make sure product is retained. You work with the strikers to address their concerns. Also, you make sure gouging is off the table.

Otherwise, he may end up angering law enforcement as well.

spencer June 17, 2008 at 3:29 pm

Can’t we get away from using the meaningless definition of a recession being two quarters of negative growth in real gdp. The standard definition of a widespread decline in economic activity provides a much better understanding of what a recession implies. A recession is suppose to be a period of hard times for a wide swath of the economy and population and this two quarter definition does not convey that implication.

meter June 17, 2008 at 4:04 pm

Quanticle doesn’t understand the chagrin against high prices, but then states a bromide that I find the most puzzling of all.

Has demand for oil from the developing world *really* shot up 100% in the past year alone? Does anyone find that explanation the least bit plausible?

Matt Nolan June 17, 2008 at 5:42 pm

What can I say, in New Zealand we always try to be global leaders in whatever we do :P

It is also important to remember that one of the primary reasons we are falling into recession is because we have just experienced a significant drought – not because of the slowdown in global economic activity.

In fact our terms of trade keeps rising even with higher fuel prices – indicating that the global economy is currently holding us up, instead of driving the current slowdown.

tom June 18, 2008 at 9:56 am

“So how, precisely, do you intend to measure this widespread decline in economic activity?”

I bet it’s about ‘feelings’. ;)

Really though, without a definition it is meaningless.

happyjuggler0 June 18, 2008 at 3:55 pm

Has demand for oil from the developing world *really* shot up 100% in the past year alone?

Sigh. Demand can’t exceed supply. What happens when demand outstrips supply at what is the current price?

The answer is that the price keeps rising until enough demand destruction occurs for the market to achieve a new equilibrium.

There is a monstrously huge shortage of oil at $20 per barrel. There is no shortage at current market prices which are about $135 (give or take) per barrel.

When prices soar it simply means that new demand is growing faster than new supply at the previous price(s). More and more people who are escaping poverty in the world, and that isn’t going to stop for perhaps a couple of generations.

This means there are only two possible ways we’ll ever see cheap oil again, assuming no WWIII. First, we can continue finding and bringing to market new oil to market to more than meet demand at current prices.

The second possibility is either a cost effective oil substitute comes online in volume, or a cost effective substitute (or significant improvement) to the internal combustion engine comes along.

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