That’s what the following graph tells us, courtesy of Robert MacCulloch’s blog, Down To Earth Kiwi, where he explains the graph and then runs the numbers.

The red-line is the pre-pandemic long-run trend in Real GDP. Meanwhile the light blue line is actual Real GDP, and the black line is actual Real GDP per capita.

On both Real GDP and GDP per capita bases, our actual performance is now 7% lower than where NZ was expected to be, before the pandemic. Treasury predict we will keep underperforming at that level for the foreseeable future. To put numbers on these amounts, we’re talking $28 billion per year in lost output.

Seven percent is a huge number in terms of GDP, where you’re typically talking about GDP growth rates of 3-4% at best for a developed economy, and NZ hasn’t even done that well for decades, especially on GDP per capita where our massive immigration has grown GDP by sheer consumer numbers.

A 7% contraction would be a massive recession, but this is not a business cycle, since this gap is only a theoretical one from where GDP should be now. But given how stable that pre-covid-19 GDP growth rate had been up to 2020 it’s not really theoretical to say that there is now this relatively massive gap – and we’re not closing it, which means it’s a permanent loss of $28 billion per year, and the total loss over time will compound.

Should it go on indefinitely, it will add up to a $560 billion total loss (=28/0.05, with a 5% discount rate used). In terms of personal incomes, we’re losing $4,000 per year, compared to where we should be tracking. The bottom has fallen out of NZ’s economy.

This is not something that you can incrementally dig yourself out of, even over a decade, and the people who did this, or at least their ideology, will be back in power in less than a decade.

As to getting out of the mess they made, MacCulloch has more bad news, based on the government’s forecast about future deficits: in 2025 it will be -4.1% and in 2026, -3.1% for an average of -3.4% and he compares that to the Ardern-Robertson fustercluck of 2018-2023:

The average is -1.6%. So National, ACT & NZ First are on course to more than double the size of fiscal deficits that were run during the Ardern-Robertson years.

MacCulloch is being a little unfair, as that average includes two years of surpluses that Ardern-Robertson inherited from National – 1.9% in 2018 of 1.9% and 2.4% in 2019. National inherited deficits, the last in 2023 being -2.4%.

Still, it’s not a good look and raises more fears about National’s incremental approach to improving things. You need to be in power for a minimum of two terms for that to work, preferably three. They should get two and perhaps even three if they’re lucky with centrist voters fleeing from a government that includes Te Pati Maori and the Greens.

Will be three terms be enough to fix this and put us back on a growth rate that might close that gap that opened up in 2022?

I have my doubts and increasingly my best hope is that we hit bottom enough that we elect a Milei, but that’s a hell of way to get to the right policies.