Matt Nolan

Unions: More xenophobia

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The Union’s want non-New Zealanders fired before New Zealanders.  We’ve seen this type of nationalistic sentiment before, about outsourcing and through Buy Kiwi made.  This is all pure xenophobia – and I hope that our grandchildren will look back on this and be embarrased.

I have three issues with the idea that we should arbitrarily favour “New Zealand” workers:

  1. It presumes there is a limited pool of work – in actuality, having more workers also “creates more jobs.
  2. It presumes that the goal is “jobs” – the actual goal should be to create happiness.  A closer proxy to happiness would be efficient production – not “job creation” (which is just a wild catchphrase).  I realise that creating an environment of gainful employment is important – but the trade-offs have to be kept in mind.
  3. It presumes that we value New Zealanders more than non-New Zealanders.  Surely we are not that racist.

If a business chooses to keep on a non-New Zealander instead of a “New Zealander” it is because they are a better worker, or they offer greater flexibility to the firm.  Why should we impede the liberty of the firm and worker to trade freely just because we want to get an inefficient, inflexible, New Zealander in the job?

And trust me, the argument that Australia is doing it so we should is rubbish – do we really want to say that we have the same attitude to other races that Australia does!

Will Taylor

Commerce Commision: Times are a changing

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Paula Rebstock has resigned

Update: It isn’t on the Commission’s website yet but Mark Berry has been named the new chair. (I subscribe to the Commission’s news releases, loser I know!)

Matt Nolan

More bad tax policy …

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There is a good reason why I want tax policy to be set independently – so that the true cost associated with the dumping of the regional fuel tax can be realised.

Lets ignore the conjectures and hyperbole about how we are raising funds to “electrify the railway”.  If government is going to spend a certain amount of money (which it is whether it is a regional body or a national body paying for the electrification) we should be interested in raising funds for this spending in the most efficient way possible.  Furthermore, we would prefer to tax in such a way that we actually get people who benefit from the spending to pay for it.

There are two ways that I see the fuel tax as more efficient than what the government is suggesting – which is effectively higher income taxes in the future.  Firstly, the fuel tax was an externality tax.  Because the social cost of fuel consumption is greater than the private cost the government can place a tax and (potentially) improve outcomes!  Even once this justification is used up, we have another one – Ramsey Pricing.  Demand for petrol is inelastic, so we can raise a set amount of revenue with a lower “dead-weight loss” (loss of happiness from the tax) than if we taxed goods with more elastic demand.

Secondly the fuel tax was at least partially targeted – as it raised the revenue for the public good work from the region where the work was going to happen.

Dumping the this tax implies that national income taxes will have to be higher than they would have otherwise been.  This implies that we are using a less efficient, and less targeted, means of taxation to achieve a level of government spending in Auckland and Wellington (which in this case just happens to be on a railway – something that needs to have its merits debated separately).  Bad policy.

Matt Nolan

The post March 09 MPS $NZ bounce

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Realising that I am probably low on content Bill Bennet (his blog) gave me a question to write a post on:

Why did the NZ$ shoot up against the A$ when the official NZ interest rate dropped below Australia’s? The declared rate was pretty much the one anticipated and the $’s climb was dramatic.

There are two primary reasons:

  1. The recovery in the US market which was “increasing risk aversion” (yuck) at a similar time (and we are a “riskier dollar”),
  2. The distribution of expectations surrounding the rate cut.

Here is a picture with the bounce:

nzdtwi_2_3weekgif

Source (NBNZ)

And below is the email I sent discussing the expectations issue.

Read more

Matt Nolan

Crampton, Walker on policy

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Over at Eric Crampton’s excellent blog he did a round up of NZ economic issues.  In this round up he stated:

On the whole, Key’s National government has so far done a lot less harm than have others

I agree.

Paul Walker takes issue with this stating:

This government can, in my view, do a lot better than it is

I agree.

These guys are both completely right.  The government has been relatively constrained in the face of the crisis, which given our priors is a good thing.  However, the policies that they have put through just aren’t good policies as we have suggested here (as even if what they are aiming to do is the right thing to do – there are far better ways of doing it).

If I had to pick a position then I would say I’m currently with Paul – I would rather try to push the government towards optimal policies than accept that what they are doing is “relatively better”.  If everyone was jumping off a cliff would I think it was a better policy for my friend to jump off into a relatively soft area or not to jump at all …

Matt Nolan

A medium term divergence: RBNZ and Treasury

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The Rates Blog is reporting that new Treasury figures will indicate that New Zealand’s expected economic situation will be revised downward in the medium term.  However, the RBNZ’s latest MPS (effectively a forecast) states that we will get back to “potential” – with 4.8% growth in March 2011 and 3.8% growth in March 2012.

Treasury appears to think that NZ is facing permanent shocks to economic activity – while the RBNZ believes we are currently facing a transitory negative shock.  These debates are erupting around the world for all sorts of economies – but it is surprising to see the monetary body seemingly taking a different stance to the fiscal body.

Tell you what – when Treasury forecasts are actually released we will have a closer look, and we will try to figure out exactly what the difference is.  Is it just the rhetorical representation of the forecasts that differs, or do the two different organisations have different beliefs regarding the persistence of the negative shock hitting New Zealand for overseas?