Matt Nolan

August 08 NBNZ Business outlook

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July discussion here.

I don’t usually talk about the Business outlook stats – but I did last month, and I should this month (*).

Own activity expectations moved back into positive territory, business confidence is at its highest rate since November, and inflation expectations are at record levels (3.79% – even higher than the expectation numbers reported by the RBNZ for the September quarter).

This is a surprising result for the market, and makes our blogs pick of an economic recovery from September and annual consumer price index growth of 5% in September both seem a little more likely 😉

Lets ask if these numbers describe any of the issues we mentioned in July:

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Matt Nolan

Did the July FPI tell us food price growth was starting to cool?

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According to this Herald article the fact that annual food price growth fell from 8.2% to 7.6%, and the fact that increases stemmed from a lift in fresh vege prices implies that food price inflation is now cooling. Lets investigate this claim a little bit. (Note: I am ignoring the title “Relief on way for families as record food costs set to ease” as it is just silly – the economist they interview says food price growth will ease to 4%, not that the actual cost is going to ease.)

First the fresh vege claim. Lets try to remember here the the food price index is not seasonally adjusted. As a result there is an increase in these vege prices every July. To account for the seasonal pattern we can compare how much vege prices were up on a year earlier – in June they rose 8.7%, in July 5.4% (source). As a result, blaming vege’s for the increase in the food price index seems a little dishonest.

Now that we know this, we can just discuss the deceleration in annual food price growth.

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Matt Nolan

Think Big and the balance of payments

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When I was listening to Radio NZ on Sunday I heard some people discussing why they thought “Think Big” was a good idea.

Although I agree with some of the points they raised, if those points are actually true (namely that they felt, given forecasts at the time, these projects would have been viable – and that there were substantial barriers to private entry) I also disagreed with large amounts of it.

One of the main things I disagreed with was the call that increased “self-sufficiency” in terms of steel and fuel improved our “balance of payments”. Now this is a claim I’ve heard from a number of “Think Big” supporters – and as a result it is a claim I plan to discuss here.

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Matt Nolan

No turning point in housing

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It is interesting to see the real estate blog calling a “turning point” in the housing market. For the sake of completeness, I’m going to attempt to call the opposite – namely I am going to put down the case for why the housing market will continue to remain slow.

Note that I am stating that it continues to remain slow – rather than making the even more specific argument that it will slow further. In order to defeat the idea that we have an upswing in the property market coming, I merely have to show there will be no upswing – after all it would be harder to record lower house sales volumes then we currently are 😉 . First, I will face up the facts that the real estate blog has put forward for an upswing, and then I will add a few more issues that I think will keep the real estate market depressed.

Also ultimately, the “heating up in the property market” appears to imply two things on the real estate blog, namely:

  1. Sales rising to normal levels,
  2. Steady house prices.

I will attempt to look at these issues separate – and I will discuss how these may trade-off.

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Matt Nolan

Boobs on bikes and violent male crime

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Source: Stuff

There has been a lot of discussion surround the recent Boobs on Bikes parade in Auckland. Specifically, there is a belief that pornography, which is promoted by this parade, causes violent male crime.

This is a bold claim – a claim I know practically nothing about. However, I’m going to try and describe the way I would frame the issue for analysis, so that we can have a structured discussion on the issue.

Before doing so I would like to note that other New Zealand blogs are discussing the parade – they are linked to here: (Tumeke) (The Hand Mirror *) (No Right Turn *) (Liberty Scott) (No Minister) (Public Address). Now for the discussion:

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Matt Nolan

The debt binge – who to “blame”?

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Has anyone else noticed the large swath of BNZ articles turning up around the internet, both on the Rates Blog and on Business Day (they also do more writing on their homepage). It is good – I like seeing economists getting out there and writing things.

Anyway, while I was looking through all these articles I noticed one by Tony Alexander on our “borrowing binge“. Now he is exactly right that households will, at some point, have to pay off debt. However, he does not cover the fact that households can also take on debt – as long as incomes are rising, households will be able to sustain larger and larger amounts of debt. This is an important point, and as a result I feel that his article appears to create more panic around debt levels then is really necessary.

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