For a decade, economic conditions have been benign, if not somewhat stagnant, with economic growth slow, wages growth slower and inflation below target even at super low interest rates.
Yet we’ve now seen inflation come roaring back, bring rapidly rising interest rates and serious cost of living pressures. Unemployment went below 4% for the first time in 40 years. The budget is massively in deficit and debt is climbing rapidly.
What happens next? Are we going to see the share of income shift back in favour of labour over capital? What are the implications for inter-generational equity? What’s a realistic path forward?
Both sides of politics have talked up economic growth as the solution, but neither offers a compelling agenda. What are the political and economic constraints on the government fixing the Budget and pursuing a more productivity focused agenda? Why is economic reform so hard?