Widely touted as a role model for responsible government, the New Zealand brand of dry economic management appears to have been oversold. After two years in which the economy was dragged spectacularly from a long period of negative growth to race ahead at more than 6%, there was an equally headline-grabbing plunge over the next two years that only now appears to have hit bottom. What the policy clearly has failed to provide is the predicted stable platform.
Over the past 10 years the economy has been on a switchback: down, up, then down again, as measured by percentage changes in annual GDP. Five consecutive years of negative growth were turned into modest growth of 1.2% in fiscal 1993, a tremendous surge to 6.2% in 1994 and another impressive rise of 5.3% in 1995. But for 1996 growth dropped back to 3.6% and in the 12 months to March 31 1997, it became clear that the economy again had run out of steam: growth was 1.4%.
At this level, the economy probably is near the bottom of the cycle, according to ASB Bank economist Rozanna Wozniak in Auckland. She expects signs of renewed growth to emerge by the end of this calendar year.