The first three months of 2011 began with uncertainty as the global economy continued its tentative steps towards recovering from the consequences of financial and sovereign debt crises. Increasing uncertainty took hold with the appearance of political turmoil in North Africa and the Arabian peninsula. Then there was the destructive Christchurch earthquake in February. And then there was a devastating earthquake and tsunami in Japan, with nuclear concerns yet to abate. In this context it doesn’t seem too much of an exaggeration to say that our world has indeed changed.

Remarkably, many New Zealand headline writers, commentators and officials seem intent on commenting on whether GDP figures would confirm a double-dip recession. To me, in the above context, data relating to something that happened three months ago just seems irrelevant. Needless to say I have been asked on numerous occasions over the past few months about the possibility of a double-dip recession. My response was, as it always has been, “does it really matter when the core challenges facing the NZ economy remain significantly unchanged?” Yet, somehow it was supposedly newsworthy that there wasn’t a double-dip recession.

On reflection, I believe that what many people are really asking is, “when will things get back to normal?” The honest answer to this is “I don’t know, because I don’t know what normal looks like anymore, let alone when we are going to get there”.

Of course, this uncertainty is much starker in the aftermath of the Christchurch earthquake. And those seemingly impatient for a number on the economic impact of this tragedy are again, I believe, really asking “when will things get back to normal?” And we must admit, again, that the answer is the same – “we don’t know, because we haven’t got a clear idea of what the new ‘normal’ might look like”.

Despite the clear signals that our world has changed and things won’t be ‘back to normal’ for several years, at best, it is equally clear that our headline writers, commentators, officials and policy advisors seem intent on retaining our old policy framework. We had the laughable (well it would have been funny if it wasn’t serious) episode where the Governor of the Reserve Bank had to explain why, in the aftermath of a fairly unprecedented event, he discussed options with the Minister. Subsequently, the Governor had to reiterate that this discussion did not change his (the Governor’s) decisions.

I’ve never quite understood why the Governor is allowed to talk to all and sundry, while the myriad of market players and headline writers are allowed to influence the Governor’s decisions with their commentaries, yet our own elected leaders are not allowed to exert any influence. But that has been the accepted protocol for the past 20 years. Now, with the country needing leadership (in all meanings of that word), it is surely appropriate for our leaders to converse and, indeed, have an opinion on, an important aspect of economic policy.

Nevertheless, New Zealand’s economic commentary seems destined to continue with the language of recessions, inflation and government debt. Already we are being warned that inflationary pressures will accompany a Christchurch construction boom and that the Reserve Bank must stand ready to fight. And the self-imposed imperative to rapidly ‘re-balance’ the government accounts has been reiterated by comments from the IMF.

Curiously, authors of any conventional anti-inflation textbook would have winced at the use of demand-management monetary policy to avert a supply-induced construction capacity shortage relative price change – but perhaps that’s getting too technical. And the call to quickly rectify New Zealand’s government imbalance, when the crown’s debt situation is far from desperate by international standards, is equally curious.

Faced with the prospect of a new ‘normal’, one of the worst things we could do is to bury our heads and continue to operate as if the old world rules still hold. One thing is clear, inflation is not the number one problem facing the New Zealand economy – it is not even close to number two, so why do we treat it as such? And government debt is not the number one challenge, and recessions are really only of concern to those who believe short-term economic cycles are more important than long-term sustainable improvements in well-being and livelihoods.

Further, the received wisdom that New Zealand spends too much and doesn’t save enough also needs to be relegated as key policy planks. New Zealand’s number one challenge is not to spend less. It is not to save more. New Zealand’s number one challenge is to earn more. Synonymous with earnings is exports.

Growing income and export earnings must be put top of the economic agenda. If we do not, and continue with the policy prescriptions of yesterday and yesteryear then not only will the task of re-building Christchurch seem overwhelming, it will be truly overwhelming.