There have been claims by the Labour party that rising departures from NZ are the fault of the National party, and that the increase during their tenure was due to the global financial crisis (GFC). Now this is a little bit untrue in terms of the way it is framed, I’ll just quickly point that out and then have a little chat regarding why we might be seeing departures rise, and whether it is really a policy relevant issue in of itself.
Now, I know we make a big deal of how Australians make more than we do. However, it doesn’t matter how well or how poorly a country is doing – when policy is made it should be on the basis of evidence and costing, not ideology per see. Redistribution and social goals are essential – but we should ask why we are going for them, and what is the best way to achieve them, rather than throwing ourselves around at selling points.
On that note Agnitio sent me this article. The TVHE team is discussing it at the moment. In the interest of having a post up today, I will put up my first response to the article.
Not fact checking properly was a pretty big fail on the part of the Economist to be honest – but I noticed that the Labour guy did not rebut, or explain why, the cost of the Australian project was 10x higher … especially given that he said the speed of the system would be the same.
And the justification may be that Aussie is much much larger – but in that case the marginal benefit associated with providing the service to low density areas would be pretty low. It is useful to use a market mechanism in help figure out what the underlying value really is.
And that is where the Economist article was probably right with its “right-wing dogma”, and where the Australian government keeps messing up – along with setting maximum calorie counts on meals, and forcing power companies to pay above the price they can charge to households selling back to the grid 😉
If the Australian government is determined to keep implementing poor policies that directly lower the welfare of their citizens, then we probably won’t have to worry about New Zealanders continuing to flood over there will we.
Note: I believe that a number of the reasons why Aussie is more affluent than Australia stem from their sheer advantage in terms of scale, their earlier TOT increase, the fact they are closer to their markets, and the fact that average tax rates are in fact lower over the ditch. Given all this, I don’t see why catching Australia should be a goal for policy – simply making the best society we can, given what the members of society value, appears to be the only sensible target for policy right?
I suppose I should make some falsifiable predictions for the year ahead – so I can explain at the end of the year why I was so wrong 😉
Lets go (note, these are my rough picks – they aren’t associated with anyone else, and they definitely don’t exist in a professional capacity) :
To start off with I have to admit I like Bernard Hickey. I like the fact he has got out there, written about New Zealand economic issues, and pushed to add an open debate type platform to the discussion regarding the New Zealand economy. As a result, I may have not been critical enough when I read his posts in the past – as I did not see this coming. In truth, the calls for exchange rate, trade, and capital controls is a massive step too far in what could well be the wrong direction. Let me talk about the points Hickey has raised:
Anti-Dismal points out the fact that Colin James seems to have run into a little confusion around the GDP statistics. Now, I can understand this confusion AND I agree that we need to think more sensibly about what income is before we run around making comparisons. In this sense, all I want to point out is how the confusion came about.
Now it is true, Australia releases production, expenditure, and income measures of GDP. However, I would note that they set the chain volume measure of these indicators equal with a “statistical discrepancy” figure.
In New Zealand, our statistics department releases production and expenditure GDP, but does not force them to be equal. They state that they believe the production figure is more reliable overall – and that is why people discuss this figure.
Of course, GDP misses many “non-market” forms of value-added, it is a measure of “production” so misses the fact that a higher terms of trade increases NZ’s implicit income, furtermore it misses “international transfers” which are highly negative for an indebted nation like NZ.
Furthermore, we have to ask why we are looking at the figures. Is our concern that someone in the same role gets more $$$ in Aussie and so has the incentive to move over there? If that is the case, why not just compare the PPP adjusted wages for those professions? Simply looking at GDP misses the fact that our two economies produce different things, and hire different types of labour.
I am not a fan of cross-country comparisons at this type of aggregate level, and I think we should be thinking carefully a little more carefully about what our concerns are regarding the NZ economy directly – rather than focusing on the arbitrary target of our relative living standards compared to other nations. I realise these relative standards might give us some information on “what we could do” – but unless we are careful when looking at the NZ economy they will lead us towards policy mistakes.
There has been an interesting discussion comparing the recession in three open economies, Australia, Canada, and New Zealand. It started with the Canadians, but a couple of New Zealanders then became involved.
The facts are that:
This list of facts suggests one of two things to me:
Now, I’m willing to rule out the first one – as we did keep inflation near the target band, and to be honest inflation expectations have held up a little too well …
So this implies that NZ had a larger supply shock. Here are some reasons I think was the case:
Now while these factors explain why NZ declined more sharply than other countries, I don’t think they explain why we are still lagging behind. Our TOT is recovering fast – it will be back at its peaks mid year. The drought is over and restocking has been completed. And our debt position is less of a hazard than it was 12 months ago. Interesting.
If NZ doesn’t recover to trend (which is very much the consensus forecast out here), it is because New Zealand faced a permanent supply side shock BEFORE the global crisis – we were struggling before things hit the fan overseas, with only a strong lift in the TOT saying us. When that flooded out at the closing stages of 2008 New Zealand dropped like a stone.
So for Australians and Canadians looking for a point of comparison with New Zealand, just remember that NZ faced a few other issues 😉