Once were a trading nation
Croaking Cassandra
by Michael Reddell
2w ago
I’ve used here before the snippet from older books that in the decades before the Second World War it was generally accepted that New Zealand had the highest value of foreign trade per capita of any country.  Estimates of historical GDP per capita suggest we also had among the very highest levels of real GDP per capita. That was then. Yesterday I noticed this tweet from a Herald journalist. I presume the chart was taken from The Treasury’s Briefing to the Incoming Minister. 2021 wasn’t a great year for comparisons, since our border had been largely closed, directly affecting exports and impor ..read more
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The Conway speech
Croaking Cassandra
by Michael Reddell
2w ago
I’ve been rather tied up with other stuff for the last few weeks (including here) which is why I’ve not previously gotten round to writing about the first piece of monetary policy communications from our Reserve Bank this year.  That was the “speech” by the Bank’s chief economist (and MPC) member Paul Conway given to anyone and no one in particular over the internet last Tuesday. It had been a couple of months since anything had been heard from any MPC members, in what are not exactly settled or uninteresting times, and it is still several weeks until we get the first formal monetary policy re ..read more
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Conflicts of interest
Croaking Cassandra
by Michael Reddell
3w ago
A while ago I stumbled on the report of Kristy McDonald QC, dated 22 February 2022, which had been commissioned by Hon David Clark, then Minister of Commerce, into aspects of the appointment of the default Kiwisaver providers, and specifically around the handling of conflicts of interest involving the then chief executive of the Financial Markets Authority (FMA) whose brother-in-law was the chief executive of one of the providers. The FMA provided a strictly limited bit of advice to the Minister. I was less interested in the specifics of the case - which didn’t reflect very well on the FMA or ..read more
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Avoiding scrutiny
Croaking Cassandra
by Michael Reddell
1M ago
Regular readers will recall that I have, intermittently, been on the trail of the approach taken to the selection (and rejection) of external MPC members when the current crop were first appointed in 2019. I have been pursuing the matter since a highly credible person who was interested in being considered for appointment told me that (a) the Bank’s search company had informed my interlocutor that they would not be considered because they had active research expertise in areas around macroeconomics, and (b) having been somewhat puzzled by this response they had personally checked this understa ..read more
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Productivity woes….continued
Croaking Cassandra
by Michael Reddell
1M ago
In my post on Monday I drew attention (again) to the fact that New Zealand has made no progress at all in reversing the decline in relative economywide productivity (relative to other advanced countries) since what was hoped to be a turning point, with the inauguration of widespread economic reforms after the 1984 election. If anything, the gaps have widened a bit further, and more countries (most former Communist ones) have entered the advanced country grouping, first matching and now overtaking us. Despite being so far behind the OECD leaders there are also clear signs that labour productivi ..read more
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Unconvincing
Croaking Cassandra
by Michael Reddell
2M ago
The Herald ran an op-ed yesterday under the heading “Why the Government’s new Reserve Bank mandate may lead to worse outcomes”. It was written by Toby Moore who served as an economic adviser in Grant Robertson’s office while he was Minister of Finance (a fact the Herald chose not to disclose to its readers). I’m more interested in the substance of his argument. Moore is a serious guy, and I suspect he’d run his arguments whether or not he’d ever taken up a role with Robertson. But I think his core argument ends up not very persuasive. Moore opens his article pointing out that there isn’t an ov ..read more
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Deep falls in real per capita GDP
Croaking Cassandra
by Michael Reddell
2M ago
I ran this chart in a post the other day The fall in New Zealand’s per capita real GDP (averaging production and expenditure measures) over the last year has been quite striking set against other advanced (OECD) countries for the same period. We are equal second-worst, and quite a bit worse than the next country with its own monetary policy (Sweden) - I’m mainly interested in the inflation situation.  The fall in real per capita GDP in New Zealand thus far isn’t much short of the fall experienced in the 2008/09 recession. With recent data it is certain there will be revisions and thus it isn ..read more
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Economic underperformance
Croaking Cassandra
by Michael Reddell
2M ago
With both the annual and quarterly national accounts data having come out recently it is time for a quick update of some old charts. First, labour productivity (real GDP per hour worked). This chart is from the period since just prior to Covid, and for both New Zealand and Australia If you want some slight consolation, at least we haven’t lost any ground relative to Australia over this period, but for both countries it is (on current readings) almost four wasted years, with no economywide productivity growth at all. And whereas Australia’s terms of trade have risen by 11 per cent over that pe ..read more
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Monetary policy turning points
Croaking Cassandra
by Michael Reddell
2M ago
When the Reserve Bank MPC came out late last month with its last words on monetary policy before its extended summer break, my post then was headed “Really?“. It was a commentary on the disjunction between the Reserve Bank’s inflation forecasts on the one hand, that showed quarterly inflation collapsing (not really too strong a word for it) over the next few quarters, and on the other hand the Bank’s OCR projections that showed a better than even chance of a further OCR increase early next year and an OCR at or above current levels well into 2025. It wasn’t as if the Reserve Bank even gave us ..read more
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GDP per capita growth
Croaking Cassandra
by Michael Reddell
2M ago
The quarterly GDP data were out on Thursday. Quite how one reads them probably depends on bit on where your focus lies. To the extent that the focus is on squeezing out inflation then any data that points to excess demand dissipating a bit faster is mostly a good and welcome thing. The sooner inflation is back to around 2 per cent, after three years away, the better. On the other hand, real GDP per capita is the average real incomes of New Zealanders. And since not only did real per capita GDP fall in the September quarter but some other recent quarters were revised down there is the gloomy si ..read more
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