Yesterday, Statistics New Zealand released numbers showing the economy grew by 0.2 per cent in the three months ended December 31, having contracted by 0.2 per cent in the third quarter last year.  So we’ve avoided recession, but only by our fingertips.

Or have we?  Yesterday evening Radio New Zealand reported:

…damage to Statistics New Zealand’s building in Christchurch following an earthquake in February meant some information usually used to compile the figures has not been included.

BNZ economist Stephen Toplis said the information unable to be retrieved relates to 20% of the economy and any revisions could be substantial.

And that 20% will relate largely to Canterbury, where the economy would have already been feeling the impact of the September 4 earthquake.

Perhaps Bill English shouldn’t be so optimistic about the economy after all.

There will be a continued increase in demand for tertiary education – much of it at polytech level as older people seek to reskill or upskill. But also as school leavers find it more difficult to get work tertiary education becomes the only viable option. If there aren’t enough jobs what else are people expected to do? Doing nothing only invites derision, so further education is the only option. The student loan scheme will come under increasing pressure as well as increasing numbers of unemployed people look for some way of riding out the recession that gives them a chance at getting a job. There is already a demand for early childhood teachers because more parents are going out to work. That same need will grow as people go to polytech or university as well.

Unless the government considers the issue of tertiary and adult education as a key plank of the recession package, the impacts of the recession will significantly greater than expected. Not just in that fewer people will be retraining in areas that are needed by the NZ businesses as they adjust to the changing economic environment but also in the costs of having many young people with nowhere to go once they finish school.

Education International are building a campaign on how an investment in education will assist in the relieving the pressures of the recession. They say:

UNESCO says the world needs 18 million qualified teachers just to meet demographic challenges in the industrialized countries and to achieve one of the key Millennium Development Goals – primary education for all children by the year 2015, in the developing countries. Many more teachers and instructors are needed for secondary and vocational education.

We can be part of this if the Government lifts its gaze.

It’s a long video, (55 min), but well worth the trouble if the topic interests you. A copy of his presentation, entitled The Global Recession: an opportunity to create a sustainable and desirable future is behind the link. (.ppt 27 Mb)

The extraordinary rise in oil prices since 2003 has sucked hundreds of billions of dollars out of the US economy (and the Cascadian economy). High oil prices have been a contributing cause of most recessions: Since 1948, “all large oil price increases but two have been followed by recessions,” as Andrew Hoerner and Nia Robinson of Redefining Progress (RP) write (pdf). “Four of the five recessions since 1970 . . . were preceded by big jumps in oil prices.”

The worrying thing is that, with peak oil now here, we can expect not just regular increases in the price of oil, but also more random, and larger jumps up in down in its price. It won’t track up slowly but jolt up and plummet down erratically as supply gets harder to extract and oil dependant corners of the economy try to react. And the people who will be hurt the most are those already in poverty.

In short, if we weren’t so addicted to oil, we would not be so vulnerable to price shocks. This fact underlines the importance of seizing the opportunity of the financial meltdown and its resulting economic downturn to break the addiction.

All of which is why investing in accessible public transport, clean renewable energy and energy efficiency measures such as the $1 billion home insulation fund are the type of fiscally prudent measures that we need to take now while we have the chance.

Despite global financial turmoil, National’s finance spokesman, Bill English, has indicated the party is still considering tax cuts of $50 a week.

Asked on Radio New Zealand whether cuts of that magnitude were still on the table, Mr English replied: “It will be around those expectations.”

His comment comes just before the next Treasury quarterly report is expected to show a recession, and follows ongoing ructions in the United States with the bankruptcy announcement of investment bank Lehman Brothers and forced sale of Merrill Lynch to the Bank of America.

Of course Cullen has not helped this by by emptying the state piggy bank with his own tax cuts before English can get his hands on it:

Finance Minister Michael Cullen yesterday sent the country a further warning that the Government’s cupboard was bare, saying the pre-election fiscal update was expected to show “significantly worse” deficits than the $3.5 billion forecast in the Budget.

It seems bizarre that, as our economy, and indeed the world economy, enters this recession we are going to replay last election’s bribe-orama game again.  We need to be investing in sustainable infrastructure, local jobs and businesses and protecting those who will be hurt most in a downturn.  Tax cuts achieve none of those things. As we have seen before they come at the expense of borrowing or cuts to services that New Zealanders value; services like universal free health and education.

Personally I think Tradestaff may have a different, old-style recession in mind to the current peak oil fuelled one.  I think this new recession might have more vacancies for bus and train builders than roading engineers and more space for horticultural farmers than industrial dairy farmers.

Tradestaff reckons that an economic downturn and technology are the threats that could make many other workers redundant.  However, as we have seen from the numerous redundancies and closures this year before the recession has begun it’s just as likely to be political choices we make that cause jobs to evaporate.  The 500 ANZ National jobs that are now in Bangalore rather than New Zealand undercut the myth that workers should embrace IT and service work rather than manufacturing and farming. Likewise many skilled manufacturing jobs have headed offshore because we forgot to support our diverse local economies in exchange for cheap imported and replaceable goods. Political choices that favour low carbon self sufficiency might be a good way to start recession-proofing more jobs.

Will this price rise lead to a recession? Our western economies are more dependant on oil than ever, but not for heavy industry. We have exported that to Asia and have decoupled a little from a direct oil to GDP linkage. It’s more indirect now. I suspect that the financial markets, the paper mirror of the real material economy, will cop the blame for any downturn that may be looming.

It’s a chicken and egg debate as to whether the failing US dollar is to blame for high oil prices or whether high oil prices, reflecting the plateau in production for the last three years, are the root cause of the decline in the dollar. My money is that oil’s contraction in relation to demand is controlling the dollar, not the other way around. Oil is real. The production plateau is real. Demand is real. The dollar is subject to the fiat of the market and as such is not real at all.

Michael Cullen, during the prosperous times, has shown glimpses of both traditional conservative and Keynesian approaches to managing the economy.  So it’s hard to pick exactly what he would do if the economy did turn.  Most commentators seem to view Bill English as a traditional conservative and John Key as a neo-conservative.  But other than National’s strong belief that tax cuts will win them votes again it is hard to pick what their approach to economic policy in a recession might be.

Without having seen the Green’s economic package for the election (it’s being worked on) I imagine one key principle that the Greens would apply when dealing with recession would be that those who are most vulnerable to unemployment or poverty should be protected. The second principle would be to take the opportunity to restructure our economy –growing our way out of recession is no value if the growth is unsustainable or harms our communities and environment.  The Greens would protect our economy from global instability by rebuilding the ability to do things for ourselves. That would mean a much stronger focus on small scale local food production and manufacturing.  A Green solution to recession would be about creating jobs and industries that were less reliant on oil.