Things may be grim, but for a brief, double-take moment during John Key’s speech on the economy this week, it looked as if the Prime Minister might see things as even more apocalyptic than the rest of us.

Having just labelled New Zealand a “third-division economy” in the OECD, he went on to put us in the same league as “Greece, Korea and the Czech Republic”.

Greece, yeah, not flattering.  Czech Republic?  Not sure, but plausible.  But Korea?  Huh? Which one?  Surely he doesn’t mean North Korea, the collapsing, nuclear-capable kleptocracy that starves its people and posts border guards to stop its citizens from mass exodus.

But if he meant South Korea, then a few in the audience were left thinking: “we should be so lucky”.

South Korea’s GDP per head is still a little lower at US$24,550 than New Zealand’s at US$26,796, according to the Economist Intelligence Unit.

However, there’s no escaping that those two basic measures of wealth have been converging for years as New Zealand slips down the ranks and South Korea moves up.

An economy increasingly based on the manufacture of high value, technologically advanced goods, South Korea has a current account surplus of 2.2% of GDP, and is undertaking a big fiscal stimulus package in response to the credit crisis with little risk to the national balance sheet thanks to that.

The last 10 to 15 years of South Korea’s economic history show the country growing much faster than its domestic demand growth, indicating high productivity and growing returns from exports.

New Zealand, on the other hand, has a whopper of a current account deficit that has improved a little thanks to the depth of the recession here, but which is still stuck stubbornly high at around 8% of GDP and is getting not much better at selling agricultural products except as commodities.

Our export performance is poor compared to the hoop-la, and to the record of similarly sized OECD economies.

A persistently high Kiwi dollar post-Budget worsens the short to medium term outlook, and that was one of the reasons Fitch Ratings put us on negative outlook this week.

The kiwi took an immediate hit, but by start of play Friday had bounced back up through overnight trading to pretty much where it had been before.  Who knows what it’s really up to?  People elsewhere seem to think we’re still good for our debts.  Whew.

Other signs are not so good.  For annual inflation still to be clocking at 1.9% for the year to June 30 goes to show what an overheated time the New Zealand economy was having before the bust.

To be at the middle of the Reserve Bank’s inflation target range at what looks like the bottom of a very nasty recession should be cause for caution, especially when this period reflected a very large drop in petrol prices, which only turned back up in the last quarter.

All of this is why Key and his deputy, Finance Minister Bill English so consistently downplay the alleged New Zealand recovery.

“Any optimism is welcome,” said English this week.

Or as Key said of the expected upturn: “I hope that’s the case because I want New Zealand to be back on track and growing and employing people.”

This, after pretty much trashing the economy’s readiness for anything approaching sustainable economic growth where we actually pay our way in the world.

By cobbling together some publicly available numbers that no one had much looked at that way before, Key pointed out that the tradeables sector of the economy, the bit that earns actual new wealth, had effectively been in recession for five years, shrinking by 10%.

“During that period, the non-tradeable sector – which has lower productivity – has grown by 15%,” he said.  “That constitutes highly unbalanced growth.”

New Zealand can’t avoid this gear-graunching end to the 15 year debt binge, so the mood at home is, at best, cautious, according to the ING pan-Asian investor sentiment dashboard score for New Zealand of 84, compared with 132 for the region as a whole.

That made New Zealand investors the most pessimistic of the 13 countries surveyed.  Even Japanese investors – so bearish that ING excludes them from the regional index to fend off the impact of their overwhelming gloom – were more optimistic than New Zealanders in the second quarter of this year.

So, what about our new foe and comparator, South Korea?

Sixth on the league table of 13, leaping from seriously pessimistic in Q1 with a score of 73, to 122 in Q2, not far off the regional index score of 132.

That looks a lot more like green shoots than anything going on here, although as ING’s New Zealand investment strategist Stuart Millar pointed out: “The risk is that Asian investors become too optimistic too early.  It will be difficult for global equity markets to advance strongly while economic growth in the developed world is continuing to contract.”

Spoken like a true Kiwi, in other words.

It still feels as if South Korea will keep getting wealthier, while we keep slipping.  Catching Australia, whose continuing good fortunes are also New Zealand’s, is becoming more of a pipedream by the day.

And that was the problem with John Key’s speech outlining the Government’s economic agenda, it was impressive in its frankly worded analysis – the New Zealand economy had “flattered to deceive,” he said at one point.

But it was weak on where the productivity lift is coming from.

The six identified areas of focus – regulatory reform; infrastructure investment; better public services; education; innovation and business assistance; and a world-class tax system – are all very well.

But for the first four, Key outlined only what we know already – regulatory reform is glacial and possibly suicidal in Auckland local government; infrastructure is getting a decent lump of money hurled at it; and public services may get better, but there’s no immediate reason to think they’re doing anything other than getting smaller at the moment.

In education, there is a lot of action in the primary and secondary areas, but policy action on getting more out of our universities and CRI’s appears slow in coming despite their vital role in finding the “high quality, efficiently farmed” products that Key identified as our gravy.

On the business innovation and exporting front, there is clearly something big coming for MFAT, with the new chief executive, John Allen, now in place.  Heavy-hitting Ministers like Gerry Brownlee see the foreign service as spending too much time on “the niceties” and not enough time getting their hands dirty to make the country some money.

In tax reform, too, there are the seeds of big change.  Key’s comments this week effectively endorsed the thrust of Treasury Secretary John Whitehead’s controversial tax speech several weeks ago.

The trouble with chasing improvements in productivity is that they come from hundreds of places, all at once, piling up on one another to push the national economic flywheel that little bit harder.

But when the wheel is turning slowly, and the pushing is weak, it can be hard to know if you’re achieving anything.  That, more than anything, is how the New Zealand economy feels today.