Very true 😛

“Recession/no recession is too discrete. I don’t think we should encourage anyone to exaggerate the importance of any particular definition for policy purposes or otherwise”

Indeed – after all if we have negative GDP growth because of a permanent supply shock the policy prescription should be different to a temporary demand shock.

“I will be very surprised if Dr Bollard is right. In fact, unfortunately i think that the recession is really only beginning to get going.”

Potentially, like you have been saying the key appears to be the world outlook.

However, I would like to see what has happened to domestic savings this year before trying to argue with him – if domestic savings has improved markedly, and if commodity prices don’t fall through the floor (which even now they have not – they have just fallen a long way 😛 ), then the idea of a long period of stagnant growth and a robust recovery is not unconscionable

Do you think we need a similar body of private sectors economists in New Zealand that call recessions? Given our small size it would be best to associate it with one of the universities methinks

The arbiter of economic cycles in the US is the National Bureau of Economic Research, which despite its official sounding name is simply a private group of economic researchers, albeit very good ones.

The NBER has kept records of economic cycles in the US for many years (http://wwwdev.nber.org/cycles/cyclesmain.html)
and its high-powered Business Cycle Dating Committee makes pronouncements of the timing of the start and end of each cycle. They do this by announcing a peak (the end of an expansion) and a trough (the end of a period of decline). They do not use GDP as their sole indicator, but uses a range of indicators.

They have most recently declared December 2007 as a peak time of economic activity, meaning that the expansion ended at that point.

My thought is that with an expectation for a lower yield that the demand would stay current and drive up the price.”

It depends how much of the supply little old New Zealand makes up. We are constantly told that we supply 50% of global lamb exports – but even so exported lamb only makes up a tiny proportion of a countries meat production (especially since intra-EU trade is counted as internal).

As a result the price effect would be small.

Also, even if a drought here did drive up commodity prices this will not compensate for the drought.

GDP is based on the “volume” of production – not the change in prices. A lift in commodity prices does not increase GDP from agriculture – it has to come in through consumption. As a result, a lift in commodity prices would dampen the hit to consumption from the drought – it wouldn’t prevent the knock to agricultural volumes that we saw in the March 2007 numbers.

My thought is that with an expectation for a lower yield that the demand would stay current and drive up the price.

Ahhh very interesting – I don’t think I’ve seen that before. If that is the case we expect a recession until about September next year don’t we 😛

Indeed it does … the Reserve Bank has assumed that the first doesn’t happen, and that the second happens to a degree. Given their assumptions we wouldn’t see a “technical recession” next year.

I am concerned about a second drought as well – it definitely isn’t looking good. Another drought would mean that we face a very, very, bad March quarter 🙁

On the commodity price side though, it is important to note that New Zealand dollar commodity prices are actually still at record highs – and even world dairy prices have only come back to their 2006 levels. Hopefully there is a bit more support for our commodity prices in the short term 🙂