Oram on pessimism and optimism

Economic and business journalist, Rod Oram, muses (Sunday Star Times) on whether Kiwis - individuals and business - are justified in being so negative about New Zealand's prospects in their responses to surveys of the public mood.

To some extent, the difficulties some are experiencing are the product of their own choices.

"Why many households over-borrowed and over-spent is a very difficult question to answer. Each individual and family would have its own reasons. But catch-up was perhaps a theme for many. After more than a decade of anxious slog through economic reforms, people felt it was time to reap more material rewards.

But it has left them poorly prepared to deal with rising interest rates, food, fuel and other costs over the past two years. And those factors will get only worse before they get better."

Oram notes that business is pessimistic despite things going well.

"Since this period of uninterrupted growth started in late 1998, they have been net negative 38% of the time. Yet, their profits have increased two-and-a-half fold over that period, as measured by corporate tax payments.

They have soared from $4.5 billion in 1998 to $11b last year."

The UMR survey asks: "Generally speaking are things in New Zealand heading in the right direction or are they off on the wrong track?"

You could fill that bucket with any angst or joy you happened to have on hand derived from any source. Marriage going wrong? Can't make the minimum on your credit card? Everything is off track.

I know it is just measuring sentiment, but to be any sort of realistic public assessment of anything, the question presumes the person being asked is sufficiently well informed to make an accurate response reflecting the real world. Measuring the anxiety levels of someone who hasn't got a blind clue what's going on won't inform public policy in any way unless you also determine the competence of the respondent.

The questions also presume everyone will give an honest answer. Hmmm.

Over the years, I've more or less come the conclusion that businesses don't much like Labour-lead governments and will respond very negatively to the general questions while being muc more accurate and realistic about their own company's prospects. I particularly remember how business talked down the NZ economy after Labour won in 1999. Almost to the point where their negativity became sfl-fulfilling. Only then did they pull back. They were cutting off their own noses to spite Labour's face.

Business has been particularly negative for the past four months. Sure, the rising price of oil may have a role there, but I hope no dairy farmers dared to express pessimism. It's just as likely that some business people use these surveys to dump on a government they don't like whether or not the country is on the wrong track or not.

Finally, most people have no idea how the world works or what lies ahead. If they did, they wouldn't be having debt problems or be caught out by the property market tanking. Their responses are useless.

Rod Oram may not feel he can declare these surveys of the public mood to be rubbish, but I'll go there. I think these surveys are worthless. They tell us some people are always wringing their hands for unknown reasons. The survey reports get some free earned media for the bank or whoever conducting / sponsoring it, and have some propaganda value for people who want to cast them one way or the other.