The ANZ Truckometer is a set of two economic indicators derived using traffic volume data from around the country. Traffic flows are a real-time and real-world proxy for economic activity –particularly for the New Zealand economy, where a large proportion of freight is moved by road. It represents an extremely timely barometer of economic momentum. The ANZ Heavy Traffic Index shows a strong contemporaneous relationship to GDP, while the ANZ Light Traffic Index has a six month lead on activity as measured by GDP. Notice the change around 2007/08 with the GFC. The index below does show some encouraging signs after the lockdown with heavy traffic bouncing back as restocking takes place. Although as stated by Sharon Zollner of ANZ it is early days.
Although GDP has lifted millions of people out of poverty there have been numerous articles/books written on how economic growth alone is not enough to indicate how economies are developing – see previous posts on this topic. An economy that doesn’t account for basic human needs, address educational opportunity, protect the environment, personal freedom etc isn’t achieving success. Therefore understanding the success of countries beyond GDP means inclusion of social progress.
The Social Progress Index aims to meet this pressing need and incorporates four key design principles:
- Exclusively social and environmental indicators: The aim is to measure social progress directly, rather than relying on economic indicators.
- Outcomes not inputs: Measuring a country’s health and wellness achieved, not how much effort is expended nor how much the country spends on healthcare.
- Holistic and relevant to all countries: Creating a holistic measure of social progress that encompasses the many aspects of the health of societies. Knowing what constitutes a successful society for any country, including higher-income countries, is imperative
- Actionable: The Index aims to be a practical tool that will help leaders and practitioners in government, business, and civil society to implement policies and programs that will drive faster social progress.
Each of the twelve components of the framework (see above) comprises between three and five specific outcome indicators. Indicators are selected because they are measured appropriately with a consistent methodology by the same organisation across all of the countries.
The 2016 Social Progress Index includes 133 countries covering 94 percent of the world’s population. An additional 27 countries are included with results for 9 to 11 of the total 12 components. This brings total coverage to 99 percent of the world’s population.
SPI v GDP per capita
Despite the overall correlation between economic progress and social progress, the variability of performance among countries for comparable levels of GDP per capita is considerable – see graph below. Hence, economic performance alone does not fully explain social progress. The Social Progress Index findings reveal that countries achieve widely divergent levels of social progress at similar levels of GDP per capita. You will notice that Kuwait and the United Arab Emirates have relatively high levels of GDP per capita but don’t rate as well on the SPI. By contrast although Costa Rica’s GDP per capita is below $20,000 the country does rate highly on the SPI.
The top 12 countries have tightly clustered overall scores between 90.09 and 87.94. Five of the 12 countries in this group are from the Nordic region, confirming that this model of development delivers social progress. More striking is the finding that the majority of countries in this group do not correspond to the Nordic model. The top performers show that there is more than one path to world-class social progress. New Zealand and Australia are the top two performers, respectively, on Personal Rights. New Zealand achieves strong relative social progress, despite its high GDP per capita. This is a significant achievement given that it is harder for countries with higher GDP per capita to over-perform.
Social progress is about meeting everyone’s basic needs for food, clean water, shelter, and security. It is about living healthy, long lives and protecting the environment. It means education, freedom, and opportunity. Social progress goes far beyond crossing a dollar-denominated threshold. We need a much more holistic view of development.
It is important that you are aware of current issues to do with the New Zealand and the World Economy. Examiners always like students to relate current issues to the economic theory as it gives a good impression of being well read in the subject. Only use these indicators if it is applicable to the question.
Indicators that you might want to mention are below. Notice how low global interest rates are as economic conditions have warranted greater borrowing and spending in the world economy.
The New Zealand economy expanded by 2.8 percent over the year ended in the June quarter driven mainly by an increase in household consumption of 1.9 percent over the quarter, while exports of goods and services rose by four percent. The construction industry expanded by a further five percent in the quarter, while the retail, hiring, and real estate services industry expanded by 1.3 percent. The annual current account deficit totalled $7,383 million in the year ended June 2016, equivalent to 2.9 percent of gross domestic product (GDP).
The OECD in its September Interim Economic Outlook commented that the world economy remained “in a low-growth trap”, with GDP growth of 2.9 percent predicted for 2016, before rising slightly to 3.2 percent in 2017. Subdued economic growth is forecast for the major advanced economies, with growth for the United Kingdom expected to drop from 1.8 percent in 2016 to one percent in 2017. The Chinese economy is expected to grow by 6.5 percent in 2016, easing to 6.2 percent in 2017 as it moves from an investment-led to a consumption-led growth model. In mid-2009, the unemployment rate for both the Euro area and the United States was approximately ten percent. Since then the unemployment rate for the United States has fallen to 4.9 percent, while the unemployment rate for the Euro area peaked at over 12 percent in 2013, and currently sits just above 10 percent.
Low interest rates internationally have resulted in asset price inflation, particularly in share and house prices. Monetary policy can only do so much but with global interest rates at approximately zero there needs to be the support of the politicians to enlist a much more stimulatory fiscal policy.
Source: Monthly Economic Review: New Zealand Parliamentary Library
Recently The Economist wrote a piece on the port of Rotterdam as a global indicator. The port has been heralded as the instant indicator of the state of the global economy. In 2014 it handled 446m tonnes of cargo which was double the amount in Antwerp Europe’s second largest port. So why is Rotterdam such a prevalent indicator? Well the trends that are transforming the port include those that are rapidly growing in the global economy – e.g. automation and the reduction of fossil fuels.
The port has evolved and kept up with new ideas and before the post-war boom Rotterdam built new storage facilities for oil and chemicals. Furthermore, with the onset of globalisation the port started to accepts mega-ships bringing sneakers and flat screen TVs from Asia to Europe. Activity in the port bears witness to four trends in the world economy:
- The low price of oil
- Slow growth in China and Emerging markets
- The sluggish euro-area recovery
- The global slowdown in manufacturing and trade.
Rotterdam’s vast storage tanks (see photo below) quickly filled, as traders bought cheap crude on the spot market and sold futures at a higher price, locking in a profit. The slow down in China has led to the appearance of Chinese ships offloading surplus steel as demand for German cars in China has dropped which means less demand for steel. Therefore the drop in shipments of bulk goods arriving in Rotterdam is a result of this threatening cycle.
Global trade has been falling for the last few years (down by approximately 14% in 2015) and has been less than global growth (usually the other way around). The port of Rotterdam has been felt this pinch as one in four containers originates form China. Although the volume of goods in the port has increased by 4.9% in 2015 it was almost entirely due to the increased trade in oil and oil products as container volumes dropped by 1.1% and agricultural bulk by 3.8%. As the production of oil becomes concentrated in fewer countries there will be the requirement of shipping oil as well as storing it which will add to the activity of Rotterdam.
Another indicator that is prevalent in Rotterdam is automation. A lot of the work usually carried out by labour has been replaced by automated guided vehicles (AGV’s). The cranes lift the containers onto these vehicles who then deliver them to stacks to be distributed by truck train or barge. Furthermore these new technologies are powered by electricity as solar panels and an increasing number of windmills provide much of the power the port consumes.
I got this very informative image from a colleague. Put together by the ANZ Bank it shows how New Zealand, Australia, USA, Euro area and the UK rank over a range of variables. How it works is that 1st place in each category shaded dark blue, 2nd place shaded light blue, and last place shaded red.
When they are combined the overall rank has: 1st New Zealand – 2nd Australia. However in the major indicators of Growth, Inflation and unemployment has Australia ranked one in each. As for the Euro area it is ranked last in three categories and ultimately last overall. A useful exercise for students would be to research these categories in major economies and get them to rank them as below.
Barclays Capital have produced an interesting indicator in that its Skyscraper Index shows the relationship between construction of the next world’s tallest building and an imminent financial crisis.
Over the past 140 years it is interesting to see the economic environment post skyscraper completion. The Great Depression was matched by 3 record breaking New York skyscrapers. With the completion of the World Trade Center skyscrappers in 1973/4 saw the looming spectre of stagflation (high unemployment and high inflation) in both the US and UK economies. This condition was further compounded by the breakdown of the Bretton Woods Agreement.
The Petronas building in KL was followed by the Asian currency crisis and the Taipei 101 coincided with the early 2000’s recession and the end of the technology bubble. The Burj Khalifa was completed in 2010 which was amidst the current financial crisis. Its increase in height over the previous highest skyscraper is indicative of the extent of the current economic crisis.
Here is an image from the Barclays Capital publication which might be useful for the classroom environment. Just click on the image.