and that’s roof valleys (in his previous life as television building presenter), because seemingly Cr Cull’s economic analysis is excessively pessimistic. His assessment of the peaks and valleys of economic modelling seem somewhat less accurate than his building acumen.
Writing in his opinion piece in the ODT today (4.12.08), Cr Cull was unsurprisingly pushing the ‘current economic conditions’ line as the reason for halting the stadium development. Making reference to unnamed “Eminent economists”, Cr Cull claims that we are in the “worst global recession in a century, predicting a longer and deeper slump than first anticipated.”
Further he claimed “business outlook for the medium term is negative” and that “Unfortunately, much worse is on its way.” Very gloomy indeed. However it is a shame that those unnamed economists seem to be at odds with both the very conservative economic think tank the New Zealand Institute of Economic Research’s (NZIER) own forecast released 1 Dec, and that of the Governor of the Reserve Bank, Dr Bollard.
The NZIER states “New Zealand’s first recession in nearly a decade should be a shallow one”, with Dr Bollard reinforcing that “If you want to be technical about it we believe the recession has ended and we have positive but very low growth for the next four quarters”. Indeed during the unprecedented announced cut in the Official Cash Rate (OCR) today by 150 basis points (or 1.5% to you and me) to 5% today, Dr Bollard predicted a somewhat rosy and positive 4.1% growth for 2011, which just happens to be when the projected opening of the stadium will be.
I would be more than willing to listen to conservative and cautious predictions, including the likes of those from Cr Cull, if those were based on named “Eminent economists”, and we could verify their data. In the mean time the likes of the Reserve Bank and the NZIER are credible sources, who while acknowledging the severity of the economic downturn, are relying on the facts and figures of economic forecasting to paint a picture that is at odds with that Cr Cull.
Below is the graphical predictions for the economy as laid out by the NZEIR, which as we can all see, are again at odds with the picture painted by Cr Cull in the ODT. I feel very uneasy with Councillors being so pessimistic (as I am with ones frivolously over the top), seemingly it isn’t the role of a councillor to to use somewhat erroneous predictions of doom and gloom to halt major public spending programs.
Indeed in the very same newspaper, the Otago Chamber of Commerce, while painting a gloomy picture for the region stated that it was their wish to see “Practical solutions were needed, including reconsidering rates relief packages, supporting local companies and their products, and bringing forward the council’s budgeted expenditure – for projects big and small – where possible to stimulate the economy, he said.”. Further, chief executive of the Otago Chamber of Commerce John Christie added “I definitely think this is not the time to retrench”. This would be at odds with both Cr Cull and the actions of the errant Mayor of Auckland, the radical John Banks, who’s economic plan for the city involves massive cuts in spending, resembles that of the 1930s governments who only worsened the economic collapse bought about by the stock market crash of 1929. Governments and economists have learnt the lessons of 1929, and adopted a Keynesian approach to fiscal stimulation, that of spending and intervention, rather than wishing the market will sort itself out.
Finally, it is predicted that the OCR (the rate at which Banks borrow money from the Government to lend to us and councils) will continue to fall, with the next fall predicted late Jan, and the OCR expected to level out at 3.5%, rates which haven’t been seen in NZ in recent times. Of course this isn’t the rate which the DCC will be borrowing the money to fund the building of the stadium, however it is considerably less than what it would have been if the money was borrowed only 2 months ago. Over the next 6 months to a year, with oil prices at 3 year lows, the tumbling commodity market (steel and other materials) and low interest rates, the affordability of the stadium has never been so attractive, even more so than when the stadium costs were first factored.
Echoing the Otago Chamber of Commerce, this is not the time to hunker down, and as stated, building a stadium at this time has never been so affordable for the city.
Recession over, technically: Bollard
DCC urged to take lead on economy
Quarterly Prediction, NZEIR 1 Dec 2008
Recession ‘relatively shallow,’ recovery will speed up from 2010
No economic environment for new stadium