If forecasts from the Treasury are to be believed, and they can be notoriously inaccurate, New Zealand is set to continue on a path of growth. Bank economists are equally optimistic about the future, although with the usual caveats.
New Zealand is set to have economic growth in the 3.5% to 3.7% range into the foreseeable future before falling back to the high 2% range. These growth rates are unheard elsewhere in the Organisation for Economic Cooperation and Development (OECD) where countries still face buying up assets and issuing government bonds to drive growth.
Only recently did the United States Federal Reserve lift its interest rates after nearly a decade, and then only to a range of between 0.5% and 0.75%. In New Zealand, official lending rates are expected to stay at 1.75% while across the Tasman the Australian central bank may yet cut further from the current 1.5%.
However, while there is general agreement the economy will continue to grow, inflation remains low at just 0.4% - a statistic the Reserve Bank has so far been unable to change.
The bank lowered the official cash rate to help drive economic growth. The offshoot was New Zealanders going on a house-buying spree, racking up debt in the process. Since 1995, there have been seven corrections in house prices, a fact easily forgotten.
Private debt in New Zealand is at dangerous levels just a few short years after finance companies in New Zealand collapsed, taking with them the savings or assets of so many people. If interest rates do rise in New Zealand, the ability of people to repay will be sorely tested.
In turn, that places pressure on employers to lift wages, something which has happened very slowly in the past few years.
In an ideal world, economic growth means New Zealand businesses doing well, growing their order and sales book, growing their staff and rewarding skilled people with better wages and salaries. What has happened is that some skills are in short supply and the people with them can command higher hourly rates. Others, stuck in the middle of needing to retrain or move, have been left with wages barely moving, leaving them unable to move up the ladder.
It is a truism that if each small to medium-sized business could take on one more person, New Zealand would have negligible unemployment. But given the need for qualified construction staff in New Zealand to deal with the booms of Auckland and Christchurch, the country's monthly net migration figures continue to reach new heights.
We do not have enough skilled people to fill the jobs. The construction industry is warning the country is not doing enough to ensure New Zealanders are properly trained to deal with future booms.
The November 7.8-magnitude Kaikoura earthquake will be a choke point on skills, but the spending of nearly $2 billion to rebuild the road and rail line between Kaikoura and Blenheim will continue to boost the economy and keep people employed on reasonable money.
The New Zealand economy is vulnerable to overseas events, something which is often overlooked in the good times. The NZX 50 had recently been testing new highs daily, but has dropped in value as the US lifted interest rates and global terror events meant overseas investors felt happier taking the profits and repatriating their money. Without overseas money, transtasman companies start to look ordinary.
The message for the new year must be for New Zealand households and businesses to reduce their debt however they can and as soon as they can. That may sound unrealistic given soaring house prices in Queenstown and Central Otago, but to believe a financial shock will not come is naive at best.
