Matt Nolan

Outsourcing jobs – whats the issue?

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Yesterday we had the dual announcements of both Fisher and Paykel and ANZ moving work overseas.

The Standard has taken issue with this activity. Particularly, two posts at the Standard lamented the “exploitation” of foreign workers and stated that consumers should stand up to protect domestic jobs.

On a separate note we have seen the closure of a Dunedin knitwear company at the same time, while the D&B payment survey shows that manufacturers are taking a long time to pay their bills, taking 53.6 days on average (can only find old one 😛 ):

What do these stories have in common other than the sad fact of job losses? What do these stories tell us about the New Zealand economy?

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Matt Nolan

Biofuels and food prices

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Why is everyone acting so surprised about the fact that biofuel regulation will (and has) led to higher food prices? We said it would in August (well to be fair, Keith Woodford from Lincoln University said it before us, and other people were saying it before that 😉 ).

However, unlike some commentators, we do not believe that the fact that world food prices are rising should impact our decision on whether to make biofuels mandatory (something I don’t agree with), as NZ’s demand for biofuels will be so small that it won’t have an impact on the world price for food.

Also there are some unintended benefits for NZ from the mandatory regulations in the US and Europe. Corn etc has become more expensive, making it more costly for foreign dairy farmers to produce milk. This is part of the reason that milk spot prices have doubled over the last year – injecting a lot of money into the NZ economy.

On that note, I want to complain about this: (h.t. Kiwiblog)

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Will Taylor

Bringing people into the country is strategic but having electricity isn’t??

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So we have been talking about asset sales (or the blocking of) in relation to Auckland airport a fair amount lately. As you may or may not have picked up I don’t really have a problem with the idea as the assets in question were already owned by investors and nothing bad had happened. We are talking about two profit maximizing investors exchanging ownership of an asset; they have the same incentives to make money regardless of whether they live here or overseas. We aren’t talking about privatization where the government is selling something to private investors where the incentives between the two parties could arguably be quite different (profit maximization vs. welfare maximization) although they often coincide. That however is a different issue.

I was a bit astounded to read this morning that aparantly the government is unlikely to block the sale of part of our electricity distribution network but not an airport. Not because I have a problem with the sale (I’m perfectly comfortable with it) , more that I think if you apply the same incorrect logic that blocked the AIAL sale, you should be more worried about electricity lines.

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Matt Nolan

Why does the target rate matter?

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WIth inflation heading far outside the Reserve Bank’s target band both Kiwiblog and Kiwiblogblog have had a little to say about inflation targeting.

David Farrar at Kiwiblog states that inflation outside the range is bad, and in fact our relevant target band should be 0-2%. He also states that we can act like the target is truly the point at the middle of the band – ergo we currently have a target of 2% (in the 1%-3% band). David then finishes by saying that current interest rates will have to stay high – something that will be a concern to people.

Wat Tyler (a good historical reference of a left wing blog may I add) disagrees with this way of looking at the target, states that interest rates were higher in the 90’s and so should not be such a concern, and says that a little breakout from the inflation target doesn’t matter – as long as we keep inflation in single digits.

Both sides have points – lets try to dig a little deeper and figure out what my opinion is 😉

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Will Taylor

AIAL: Access Denied!

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The government has blocked the sale of 40% of Auckland International Airport (AIAL) to the Canada Pension plan as it does not pass the test of “benefiting New Zealand”.

it’s a good thing those money hungry Canadians aren’t going to bleed the economy dry by taking control of a “strategic” asset.

On a serious note, I still don’t see what the issue is. We’ve discussed this previously here and I don’t feel the need to repeat the arguments we made. It’s not like they can take they airport and move it somewhere else. If they run the airport down like everyone is worried about then travelers can bypass New Zealand and go to Australia. If this happens the airport loses money so why would they do it?  People will point to the railways and the our phone infrastructure as examples of strategic assets that were run down and use this as an argument that the same thing will happen to AIAL. They key thing that people ignore here is that back in the day there weren’t many close substitutes for the railway and phone communications. Therefore a firm could profitably cut expenditure and reduce quality since there weren’t many credible substitutes (i.e they wouldn’t lose customers).

Ultimately I can’t help but feel this is the political decision of a government that is scared of being associated with “asset sales” coming into an election year, rather than a decision that has been based on any sound economic reasoning.

It’s been a while since I’ve posted,have you missed my sarcasm?

Agnitio

jamesz

Beer prices rise with the tides

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In the spirit of talking about big issues that affect the little people, NIWA says ordinary NZers should be very worried about climate change:

Jim Salinger, a climate scientist at New Zealand’s National Institute of Water and Atmospheric Research, said climate change likely will cause a decline in the production of malting barley in parts of New Zealand and Australia. Malting barley is a key ingredient of beer.

“It will mean either there will be pubs without beer or the cost of beer will go up,” Mr. Salinger told the Institute of Brewing and Distilling convention.

I don’t know whether to believe the doom merchants, but it certainly has me worried! Maybe this is the incentive people need to actually do something. Having to trade off between big cars and beer might spur ‘mum and dad New Zealanders’ into action! Or we could just have a carbon tax…

(HT:Slashdot)