There is a constant theme from the economic commentariat that New Zealand needs to lift its economic growth rate, coupled with policies which they are certain will attain that objective. Their prescriptions are usually characterised by two features. First, they tend to be in their advocate’s self-interest. Second, they are unbacked by any systematic empirical evidence using, instead selective anecdote. Well, yes; there is always an example to confirm one’s prejudice. But rarely will it stand up in a court of science. (The conversation is not helped by those who cannot discriminate between prod ..read more

Do we treat the government finances with the common sense that household’s manage theirs? It is a commonly held view that we should treat the government as if it is a prudent household. We don’t when it comes to its debt. Currently the government says it wants to constrain its net debt to between 20 and 40 percent of annual GDP; that is, between about 67 and 133 percent of its annual revenue. But households borrow up to 450 percent of their annual before-tax income. Households borrow at that rate to purchase houses. They look at the whole of their balance sheet including their assets as well a ..read more

Budget tensions are becoming evident within the Coalition Government. Winston Peters made numerous political points in his speech to the NZF annual conference. But the attack on his own government’s fiscal policies raised issues of substance.      ‘Today in the Sunday Star Times, journalist and former advisor to the Labour Government, Vernon Small, refers to the ‘present government facing a fiscal hole’ of $5.6 billion. He’s right of course, but he’s wrong when he said that last year politicians were warned of that. Only one political party in the 2023 [election] campaigned to a ..read more

Is she hinting that the Coalition Government will have to back down on key promises it made in Opposition? The Minister of Finance, Nicola Willis, is telling an evolving story about her fiscal challenges. In Opposition she was confident that she could deliver her promised income tax cuts. Appointed minister, she reported the (Treasury) ‘books’ were in a worse state than she expected, although this seems to be more from her advisers not reading the Treasury’s Pre-election Forecast and Update carefully enough. It’s a good trope because it blames the outgoing government, but it’s hardly the analy ..read more

What seemed a booming success a couple of years ago has collapsed into fraud convictions. I looked at the crash of FTX (short for ‘Futures Exchange’) in November 2022 to see whether it would impact on the financial system as a whole. Fortunately there was barely a ripple, probably because it was too small and most investors were not sufficiently integrated into the rest of the financial system to be borrowing from it to speculate on cryptocurrencies, Subsequently its founder, Sam Bankman-Fried, was found guilty on seven charges of financial fraud. He comes up for sentencing later this month. M ..read more

The Government says it will give localities more control over healthcare decisions. But how? New Zealand’s political reflex is that any problem can be resolved by further centralisation. Students will be officially banned from having cell phones at school from Term 2. The decision could have been left to individual schools. Each knows a lot more about local circumstances than the Minister of Education does (or I do). But the New Zealand way is a central directive. On the other hand, sometimes centralisation is needed. Historically, there has been an ongoing process of consolidation of secondar ..read more

Not so much from a lack of nominal income but from rising mortgage interest rates The just released Statistics New Zealand (SNZ) estimates child poverty for the year ending June 2023 show the proportions of children on nine different poverty measures are higher than they were in the June 2022 ending year. SNZ warns that the increases are not large enough to outweigh the sampling error but here I accept the conclusion as meaningful and discuss why. (Each indicator in 2023 is below the 2018 measure, when the SNZ first began measuring. Even so, the data is not on track to hit the child poverty re ..read more

The Sorry Story of Earthquake-Prone Buildings. The Treasury requires that when new or amended legislation is proposed, a Regulatory Impact Statement (RIS) be provided – ‘a high-level summary of the problem being addressed, the options and their associated costs and benefits, the consultation undertaken, and the proposed arrangements for implementation and review’. In its hurry to get back to the 2017 policy framework within 100 days, the new Luxon-led government announced it would not require RISs for its legislation. Perhaps the flouting of requirements could be justified if they were repeali ..read more

Public policy towards tobacco consumption remains politically sensitive. In 1983, a young researcher was told by a medium-level Treasury official that Treasury policy was to abandon excise duties on tobacco. The senior Treasury economist that I consulted, famed for his commonsense, snorted ‘we need the money’. He explained that no-excise-duty was the ambition of a couple of very ideological Treasury officials – later we would call them ‘Rogernomes’ or ‘neoliberals’ – who objected to state intervention. I recount this incident to remind you that tobacco policy has an ideological dimension as we ..read more

Interpreting the agreement made at Waitangi as a social contract is a way to move forward on treaty issues. (This column follows ‘Our Understandings Of Te Tiriti Has Evolved Organically’.) Te Tiriti is in the form of a social contract of the sort that political theorists have discussed since the seventeenth century to explain how countries should be governed. Philosopher David Hume pointed out that no country had a tangible one on which it was founded. Sixty-four years after his death, New Zealand upended his objection. Te Tiriti looks like a social contract. It has a prologue, three articles ..read more