Why Are We Happy With 3-4% Economic Growth?

Canterbury is on track for growth of about 6% in 2013, down from over7% in 2012, but New Zealand as a whole is on track for almost 4% growth in 2013.

The two-speed economy is in full swing, but the recovery hasn’t started for a lot of people. Larry Summers was onto something when he suggested that very high economic growth – possibly bubble territory – is necessary to enable high levels of employment and economic achievement in an age where average is over.

Why are we happy with 3-4% economic growth? There are so many projects in this country that should be going ahead – but are not because of red tape and risk aversion on the part of potential backers – that could easily see economic growth look like Canterbury for the whole of the economy including the regions in 2014.

It is an unsurprising indictment of central planning we are witnessing in Christchurch. It should be considered a national embarrassment that it has taken a few years to get to the point of recovery where things are finally looking like Christchurch can be rebuilt before I’m retired.

But the real tragedy of all of this is that no one is talking about the opportunity cost. Everyone from John Key down has fallen for the broken window fallacy – all of the resources expended in rebuilding Christchurch are simply getting Christchurch back to where it was before the earthquakes. If only “net new” investment and activity was as bold as it should be, and silly buggers had thought about supply and demand before calling loans in on needed housing developments, a lot of our problems as a society over the next few years would be a walk in the park to solve with the amount of money flowing around now.

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