THE COMING INFLATION

Inflation is now with global warming, the big international news story to worry about post Covid. Most commentators see it as a one-off burst which I believe will be the situation in America, Asia and Western Europe. But in the developed world no country will cop it as bad as New Zealand in the next few years. Here’s why.

First however, let’s clear one thing up. The approach taken to fighting inflation by the Reserve Bank in the 1990s was spectacularly stupid and caused immense harm. Then Governor Don Brash bought into the nonsense it had a monetary source. It didn’t but certainly has had in countries like Zimbabwe, Venezuela and others running amok with the printing press without any matching productivity of goods and services.

Inflation is no more or less than demand exceeding supply for goods and services. Demand existing logically assumes the ability to pay.

Don’s approach was to crush demand, rather than to promote supply. Before him in the early 1980s, Muldoon’s strategy was equally idiotic, namely price controls which compounded the problem by thwarting increased supply.

The world has changed dramatically this century. It has to various degrees embraced the market economy system and thus boomed. However, trouble looms.

First, all western nations and many others such as China, Korea and Japan are no longer reproducing themselves. To date they have compensated with migration from poorer Asian countries and in Western Europe, mainly from former Soviet east European nations and the Arab world. That will continue post Covid.

The failure to reproduce their populations in the advanced economies is singularly attributable to female education. When I was young most girls were married by the age of 20 and commenced baby production. Today, they understandably don’t want a bar of that, instead footing it with males in careers. Some opt for a single child in their late 30s, many others for none. Who can blame them?

Add to that, health advancements now have people living longer than any time in history. Supporting this burgeoning retirement sector will be an ever diminishing ageing work force.

So emerging from the Covid hiatus will be a huge work force shortage. It’s already here in New Zealand. Talk to any builder about the difficulties in obtaining skilled labour and materials. As a result construction costs are soaring. The same situation applies in numerous other activities.

Here’s why New Zealand will cop it worst than other developed nations.

Because our nearest neighbour Australia is much richer than New Zealand and is facing the same shortage crisis it will drain New Zealand’s professions, trades and even semi-skilled activities such as shearing and such-like, with wages and salary that will seem like a pipe-dream to Kiwis. Add to that Australia’s lower cost of living and let’s face it, more exciting life-styles appealing specially to the young and frankly, we’re in big trouble in the years ahead with a large-scale exodus across the Tasman.

The Productivity Commission has come out with a vision-less proposal to limit future immigration. In fact, opening our doors to Asian migration while the going is good before they’re lured elsewhere, is critical. But the “going is good” period won’t last as the current Australian government has openly said it intends targeting them and the Middle East and eastern European states, all huge sources of migrants across the Tasman for the past two decades, in its open ambition to build a much bigger population. We can never compete.

It’s conceivable that by the end of the decade our population could dwindle to four million with a relatively small workforce struggling to support a huge retired sector plus the parasitical welfare careerists now seemingly a permanent part of our landscape. If so it will certainly solve the housing supply problem, but otherwise it’s not a happy outlook.

9 Comments

In total agreement here.

There’s no doubt New Zealand is heading towards bankruptcy, as successive politicians have sold off the balance sheet to overseas interests. Now we are bearing the high costs of leasing everything, and need increased population to support it. The past and present politicians lust for power knows no boundaries, and it will be a fact their children and grand children will pay the price of their short term lust.

However, isn’t the main problem those in power (and this extends beyond government) want continuous growth?

The next question one has to ask oneself, who is benefiting from all this?

As far as I can see, the only winners are the interest seekers; at the expense of everything else including the planet.

The charging of interest wrongly assumes there are infinite resources. Maybe there is, but not on the planet we live. This explains the lower interest rates of today, and probably negative ones of tomorrow.

The solution for New Zealand is companies overseas owned should be subject to a higher tax rate than locally owned, to encourage them to spend (or live) locally; not just be parasites and ignore the consequences of abuse of power.

One of Bobs best…accurate and disturbingly reasoned. Kiwiland has little to offer ITSELF.

Yep, history about to repeat itself as it always does.

… last year I read a book called ” Empty Planet ” ( Bricker & Ibbotson ) in which the authors attested that the current population worldwide was rising based on increasing longevity not because of births … they believe the population of China will almost halve by the end of this century , and that only India is likely to have significant population growth … New Zealand should , as Bob suggests , open the immigration doors to young & bright people from anywhere , just welcome anyone who wishes to come here …

Most timely comment coincidental with today’s New York Times morning briefing on the very same subject of the new global contest for skilled migrants thus:

Our “leaders” are so way out of their depth they can barely wade through.

Is there one good person within any party, not part of the crime syndicate, we can vote for in the future? One person of genuine, good, strong intent to lead NZ in the right direction? It only takes one good Prime Minister to stand up for the people and put all this shit and corruption to bed. Does that person exist in New Zealand, Bob?

Happy Birthday!

I continue to wonder why the general view as to how to solve a skill shortage is to import thsse skills. Why is it believed to be impossible to use the NZ poulation to fill this need with beter education targeted to skills required, aptitudes of all in their diversity ? There must be space in the economy if immigration is rediuced for increased productivity in the NZ workforce with the associated improvement in income and wealth creation.

You can add to that the number of broken marriages causing a need for two houses not one, unsurprising we have a housing shortage…I agree and have predicted an exodus to Australia, in fact it has already started for Nurses…

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