By Duncan Garner
The economy is dead flat - and there are few signs a bounce is on the way. Do the weak economic indicators point to a second recession? Perhaps.
Sure there are the upsides - commodity prices are high, the South Canterbury payout is now in people's pockets and the tax cuts are flowing through to households - but how much of this will be spent? More on that shortly.
But first the Government's books. The economy can bounce back at short notice but the Government's books take years to recover from a recession like we have just had.
And for the Crown's balance sheet, it's a dire and dark situation. Finance Minister Bill English confirmed that accounts for June and July this year show $750m less gathered in revenue than predicted. Why? It's simple. There is not the economic activity that officials predicted. There is no economic recovery at this stage. People are not spending. Company tax is down. PAYE is down because fewer people are in work. GST is down because people aren't spending. Householders are paying off debt, paying off their credit cards, paying off their mortgages.
Behaviour has significantly changed.
$12 billion that would normally have been spent over the past 18 months in shopping malls and on renovators and builders has been spent on reducing debt.
It's the right thing to do long term as we correct our love of debt and our love of spending on housing - but paying off debt is doing nothing for retailers and it's doing nothing to boost the economy in the short term.
Bill English made it clear today that there is no aggressive recovery like John Key predicted. And English has been right on this from the start.
Here's what John Key said early last year;
"We will be coming out of it and be coming out of it reasonably aggressively."
And this is what English said; "This is not the typical recession where we come out of it aggressively. This is a recession where there is a lack of capital. People won't lend and so we are going to grind slowly out of it."
And he has been proved right. Today in a select committee English has once again said the recovery is weak and he even said "recession type factors are still at play."
It's a grim warning. We will have $35b worth of cash deficits over three years. We are still borrowing $250m a week to survive. Labour's David Cunliffe has called it "borrow and hope." It's a smart arse comment but he might be right. National's economic plan, if there is one, doesn't appear to be working.
Sure commodity prices are at record highs, but will the farmers buy new cars and spend or will they pay off debt? Paying off debt won't in the short term save the provinces. It won't help the cities either. And sure South Canterbury investors have got their money back but how many of them are going on a shopping spree? Not many, the figures would suggest.
So this is the economic reality right now. Kiwis are paying off debt. Retailers are going to the wall. Tax revenue is down. Growth is barely visible. Tax cuts are being saved. Alan Bollard says the economy is fragile. English can't rule out the cash deficit blowing out even further. He says "recessionary factors" are still at play. There are no signs of new jobs.
So in light of all this - does National need to change course? Perhaps. But it won't. It cant. It has no options. It's made its economic bed - no matter how cold it feels.
The economy is stagnant. If it tanks - that's a recession.
National's economic plan seems to be to cross its collective fingers and dare I say it -"borrow and hope."