The Implications of a Recession for the Māori Economy

Executive Summary

This paper highlights possible risks for the Māori economy from the current global economic recession as well as future economic trends and how some Māori businesses may be well placed to leverage off these trends.

Given recent developments, the Treasury’s ‘downside’ scenario forecast is now considered likely to be a more accurate estimate of the New Zealand economy going forward. The short term forecast for 2009 includes:

  • a decline in real GDP of 0.2%;
  • a decline in residential investment of 22%;
  • a decline in exports of goods and services of 1.0%; and
  • an increase in the unemployment rate of 5%.

Furthermore, the latest New Zealand Institute of Economic Research Quarterly Survey of Business indicated that:

  • 43% of businesses expect less activity over the next three months; and
  • 32% of businesses expect to cut staff over the next three months.

Historically, recessions have had a disproportionately negative impact on Māori compared to non-Māori largely because of where Maori have been concentrated in the labour market and industry sectors. In recent years Māori have made significant gains in terms of skills and education. More Māori are in skilled and highly skilled jobs across a range of sectors.

Nonetheless a relatively high proportion are still employed in lower-skilled, lesser paid occupations. Significant numbers of Māori are in sectors particularly vulnerable to current international economic developments, including the construction and manufacturing industries.

These characteristics present risks for Māori incomes and, consequently, Māori housing. Māori are currently under-represented in home ownership statistics and there is a risk that the recession will further entrench this difference, reducing the intergenerational benefits of Māori home ownership.

Increasing Māori unemployment may encourage entry into further education or training. However there is also the risk that if incomes decline significantly higher levels of education and training may be considered too costly.

Māori assets are concentrated in the primary and secondary sectors and thus exposed to global fluctuations. The value of Māori assets is therefore expected to decline over the short term. Most Māori businesses are concentrated in export industries such as fishing, forestry, agriculture and tourism sectors which are also exposed to global economic conditions. The current recession therefore represents significant risks for Māori which need to be considered in terms of policy responses. These responses also need to take into account the longer term trends influencing the global economy and the shape of both the New Zealand economy and the Māori economy. Key trends are anticipated to include moves from traditionally dominant sectors to those based on knowledge, information and technology; changes to the balance of world economic power away from Europe to Asia and other emerging economies; and the increasing impact of climate change. The strengths of some Māori business; including low debt-equity ratios, the separation of commercial activities from non-commercial, the movement to diversify assets, the strong focus on the quadruple bottom line, the value associated with being Māori and recruitment of the best skilled people; may mean that these businesses is well placed to take advantage of these trends.

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