Matt Nolan

Housing and the value of individuality

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The government is introducing ways to reduce the compliance costs associated with building homes. By doing this, the government can increase the amount of house and land packages in perth or increase the supply of properties, lowering the price of houses, and thereby increasing housing affordability.

No doubt this will be an interesting policy to look over, however this is not what I am going to do right now. Instead I am interested in Professor Roy Fleetwood’s (of Victoria University’s Architecture and Design Faculty) dual claims that”the plan risked creating cardboard cut-out houses” and that “the Kiwi dream was to build your own home, but individuality was highly prized”.

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Matt Nolan

Economic uncertainty – time to get scared?

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Today I noticed two very different stories about the outlook for the New Zealand economy. From Bernard Hickey (h.t. Kiwiblog) we have a dramatised version of what ANZ and BNZ are saying about economic conditions. From Berl we have a more moderate story which is closer in form to all the other analysts (such as RBNZ, Westpac, and Infometrics 😉 ).

Now don’t get me wrong – everyone is expecting a slowdown in economic growth. However, the question currently is, are we going to have a technical recession or not?

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Matt Nolan

Technical recession – them be strong words!

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I’m suspicious about Dr Cullen’s claim that we are heading for a “technical recession“. I agree that we are heading towards a period of sub-trend growth. We might be heading towards a period where we have a consumption based recession (slow growth, consumption stalls, unemployment rises), which would be a big deal.

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jamesz

An expensive habit

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We’ve talked in the past about how smokers would be better off if they could precommit to not smoking in the future. It seems that someone is trying to do just that by auctioning a contract on Trademe:

I’ve smoked cigarettes for twelve years and I’ve tried all the usual ways to quit smoking. Now that my wife Annabel and I are pregnant with our first child, it’s time to give up once and for all.

I’ve created a listing on the New Zealand online auction site trademe.co.nz, and on Monday 31 March, 2008, the highest bidder will receive a contract written by my lawyer, Chris Hoquard at Dominion Law, in which I hand over my right to smoke to them, and agree to pay them a forfeit of NZ$1000.00 per cigarette that I smoke at any time following the auction’s closure.

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Matt Nolan

Housing and the economy: How does it work?

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Skimming Stuff this morning I noticed the headline: House price slump ‘drag on economy’.  I thought that it might be useful, or possibly even interesting to discuss how a cooling in the New Zealand housing market could weaken economic activity.

When thinking about this issue we gave to ask the following question – how does house price growth influence household/consumer behaviour? For people that own houses, higher house prices act as an increase in their level of wealth, and houses are an asset. If a households wealth level is higher then they are both willing, and more able, to borrow money now to fund consumption – given peoples incentive to smooth consumption over time.

In this sense a fall in house prices would have a ‘negative wealth effect‘ (and a liquidity effect) on households, which would lead to households tightening their belts and saving more. This (along with strong wage growth) is part of the reason that so many New Zealand forecasters expect private savings to increase (along with the impact of tax cuts).

However, something is missing here. Read more

Matt Nolan

February 2008 Treasury economic indicators

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I normally don’t have much to say on the economic update provided by Treasury each month, as it is mainly just a look back at historical data. However, this time around they seem to have infused their release with negative undertones – suggesting that Treasury may be looking at providing a weaker set of forecasts than we have seen from the Reserve Bank.

This pessimism about the economic outlook was extended to some type of special report according to the link (if anyone knows the report he is talking about can they send me the link, please). Most interestingly they suggested that the recent growth in employment was the result of rising labour supply as people struggled to pay their bills. I found this statement of particular interest, as it feeds into the Treasury belief that non-tradeable inflation pressures are going to ease over the year (a belief I do not share). As a result, I wish to discuss it below the flap.

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