Real GDP in New Zealand - a decade of slow growth ahead

Following the post on the German real GDP per capita, we present a model for New Zealand. It was also obtained by the trial-and-error method [1]. Empirical constant A and the specific age, Ns, in the defining equation:

g(t) = dlnG(t)/dt = A/G(t) + 0.5dlnNs(t)/dt (1)

have been varied in order to fit amplitude and major features of the observed curve. The best fit annual increment value is A=$220 (1990 US$), i.e. less than in France and Germany. Surprisingly, the specific age population in New Zealand is 14 years, which is different from that in the US, Japan, France, and Germany. The age pyramid enumerated by the 2006 census was extrapolated in the past and in the future in order to estimate the number of 14-year-olds in (1).

Figure 1 presents the observed and predicted GDP growth rates for New Zealand. As for the other countries, all original readings of GDP were obtained from the Conference Board database. Both curves in the upper panel are characterized by high-amplitude oscillations likely associated with measurement errors. Therefore, in the lower panel of Figure 1, the annual curves are smoothed with MA(5) and MA(3), respectively.

Without prejudice, we have failed to find such a good prediction of real GDP elsewhere and would appreciate any information on a better model. The shape, amplitude and timing of the curves are in an excellent agreement after 1980.

Overall, there is no danger of a deep recession in New Zealand, but the rate of real economic growth will be very low (on average ~0.5% per year) in the years to come. Before 1980, data are likely not reliable due to significant revisions to relevant definitions.

Figure 1. Upper panel: Observed and predicted growth rate of real GDP per capita in New Zealand. Lower panel: The observed curve is smoothed with a 5-year moving average. The predicted rate is smoothed with MA(3). One can observe an outstanding agreement between the smoothed curves.