Snapshot on New Zealand's economy: broke, vanveldenish
Neoliberalism is terminally sick, on ventilation and waiting for euthanasia
On 19 June, Statistics New Zealand published the GDP figures for the March 2025 quarter. This quarter was the first when it was possible to analyse a full year of this government’s economic policy because this quarter ended the year since the coalition government first increased the minimum wage on 1 April 2024. With that increase, the main building blocks of the government’s economic policy settings got into place following the repeal of the Fair Pay Agreement Act and the reinstatement of the 90-day trials. So, how is the economy doing?
Full stop!
It is sufficient to note that among New Zealand's main trading partners, only New Zealand had a declining GDP figure for the first quarter of 2025 compared to the same period in 2024. New Zealand’s economy was 0.7% lower than a year ago. All the other countries were in positive domain: Australia up by 1.3%, China up by 5.4%, Japan up by 1.7%, the United States up by 2.1% and the UK up by 1.3%. So, the coalition government cannot blame the uncertainties of the international environment for the economy’s poor performance.
As implied in the introduction, the year-on-year comparison will be the main topic of discussion in this piece. The main point is that this was the first full economic year when the government’s core economic policy framework was in operation. On 1 April 2024, the minimum wage increased to $23.15 per hour as the final component of the allegedly growth-oriented economic policy that made it much easier for businesses to hire and fire employees. The results? In the year ending in the March 2025 quarter, the economy was 1.1% lower than during the year between the June 2023 and the March 2024 quarters.
This “stunning” performance occurred even though the minimum wage was increasing only by 2% from 1 April 2024. Workplace relations and safety minister, Brooke Van Velden, announced the increase of the minimum wage in February 2024. At the time of her decision, the most recent inflation data was known for the December 2023 quarter. The CPI figure that was known then was 4.7% annual inflation, so the increase in the minimum wage did not even cover the rate of inflation. Minister Brooke Van Velden argued that during the former Labour-led government, the minimum wage increased more than inflation, and the correction had become necessary.
This argument is critically problematic for at least two reasons. First, between 2008 and 2017, the National-led government increased the minimum wage at a rate higher than the inflation, so the minister’s claim is at least inaccurate. Second, probably more importantly, the increase in the minimum wage can follow the increase in the economic productivity, which is a different figure (e.g. nominal GDP growth per worker). The minister does not know this, even though she has an economics degree.
When the employment conditions become increasingly precarious for workers owing to, for example, the uncertainties of the 90-day trials, and their wages do not increase at the pace of inflation, what happens is that their spending preferences change, and they will try to save money on some of their former spending. Are we surprised that it is exactly the ‘arts, recreation, and other services’ category that fell the most during the last quarter? These services can be regarded as non-essential. Besides, it is also telling that on the year-on-year comparison, goods-producing industries fell the most (4.7%), among which construction declined the quickest with a 9.3% fall. People simply cannot afford to buy homes or pay as much rent as they could previously, so investors do not buy as many rental properties either.
The real catastrophe, though, is the state of the labour market. Despite all the business-friendly measures, in the March 2025 quarter, there were 2.9% fewer hours worked per week (96.3 million). Consequently, we cannot be surprised by the negative trends of the other labour market indicators: unemployment rose from 4.4% to 5.1% by March 2025, and underutilisation also grew from 11.2% to 12.3%. The number of weekly paid hours decreased by 2%. This figure is relevant because this shows that the number of full-time and permanent employees decreased to 1,908,318 from 1,927,791. This is the reason why HR experts have the sentiment that more and more people are engaging in part-time employment (they are forced to do so).
The outlook for the coming year is not rosy either. Recent monthly surveys of manufacturing and services show a further decline.
Martin Van Buren was the 8th president of the United States, serving between 1837 and 1841. He had a very strange decline in his sight. For one of his eyes, he was short-sighted, while he was long-sighted for the other. To compensate for this, he developed a strange smirk. However, it was not his look that triggered the creation of an adjective. It was his non-decisive and equivocal rhetoric and his evasive behaviour which is captured by the term ‘vanburenish.’ Allegedly, once he was asked whether the Sun would rise in the East. He responded that he had heard that it was the general belief that the Sun rose in the East; however, he never woke up early enough to check, so he could neither confirm nor deny it.
The adjective vanburenish is inspiring enough to create another adjective to describe the current state of the broke New Zealand economy: vanveldenish. This state reflects the tendency that neoliberal economic policies prefer business interests and, instead of the Marxian natural state of capitalism, where the phenomenon of expanded reproduction characterises the economy, in neoliberalism, we can see shrinking reproduction. It is fair to say that no one is attracted to this. Therefore, it is time to focus on creating a new economic regime, one that brings about fairer employment conditions and more care services provided by the state.
It appears that Brooke Van Velden is destined to promote euthanasia. It was her major role between 2017 and 2020 to garner support for the euthanasia referendum. In her new role as minister, she is inadvertently working on a similar agenda: generating support for the euthanasia of neoliberalism.
Unfortunately, we can “thank her” some years later only!