jamesz

Why I’m not worried about struggling students

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The recent budget reduced the number of students who are eligible for the student allowance, particularly for postgraduate students. There have since been almost daily articles in the newspapers lamenting the students’ plight. Today there is an article in which a student describes how she will have to take on extra debt to finance her postgraduate education. Similarly, my Facebook is full of people wondering why the government refuses to ‘invest in our future’. The reason is fairly straightforward: when the government pays for tertiary education it transfers money from poor people to wealthy people. Tertiary students, particularly those in postgraduate education, are some of the wealthiest people in our society and don’t deserve to get a free lunch on top of it.

You might wonder how I can justify that statement when most students have very low incomes. Well, they are not rich because of their present income, but because of the income they will earn in future. Three years after completing their degree, a bachelor’s graduate will earn 51% more than someone with only secondary qualifications. Someone with a master’s degree will earn 74% more and a doctoral graduate 120% more. Yet it was the secondary graduate, working full time while the student was studying, that helped fund about 75% of their education. How can that possibly be fair?
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Matt Nolan

Points for the Budget

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Over at Dim Post, there is the general question of whether a “zero-budget” makes sense.

Commenting on the post, I remembered some of the key points to keep in mind when looking at actual policy – rather than the tiresome and incoherent ramblings we will get from politicians of all stripes and colours when the Budget is released.

What you are saying is valid – but when we view the budget in economics terms, instead of the political terms it is being sold in, there are a few things to keep in mind:

  1. The goal should be to have a balanced budget, once the economy is back at “potential”. So the surplus in 14/15 has to come with a forecast that has unemployment at or below 5%. If unemployment ends up higher than this, the government will continue to run a deficit by default – and so even when the forecasts are wrong this aim squares out.
  2. Government has been borrowing heavily, at low interest rates, to fund infrastructure. If it wasn’t for government building there would have been virtually no non-residential building in recent years. Infrastructure spending (in real terms) is at record highs. The government is actually being very Keynesian – they just don’t want to say it because their supporters might get grumpy.
  3. If the government keeps to the idea of getting the budget back in balance by the time the economy is back at potential, and makes that clear, it makes it easier for the RBNZ to cut the OCR or at least keep it at its current level, which will also help to boost activity/cut unemployment.

You are right it is an incredible period of uncertainty – but the government can’t do too much about that directly except limit uncertainty from them by ensuring their plans are clear. We can debate what the appropriate long term “size” of government should be – but I think both parties are being responsible by making sure that we have the budget back in balance by the time the economy is back at potential.

The key way to judge the Budget in “macro” terms will be the consistency of the UR forecast to the surplus.  In “micro” terms there will also be a lot of marginal issues we can address – hopefully there will be more talk about superannuation.

Either way, I’m not forward to listening to all the blah blah blah about politics, but I will be sifting through the Budget to get an understanding of ways government policy will influence the outlook for the general economy during the coming years.

Matt Nolan

Bleg: BERL’s report on asset sales

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From this news release I can’t make heads or tails of what was really going on in the BERL report on partial asset sales, which is a pity because I would like to read what they put down – and hopefully learn a bit more about what is going on.

Does anyone have any idea where this report is?

Update:  Report on the Green’s site.  Eric Crampton, along with links from all over Offsetting Behaviour.

Matt Nolan

A question about media7

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I’ll be honest here, I don’t watch TV at all – I follow written news feeds while I’m writing and working, and I find that just works more efficiently for me than sitting down and enjoying the spoken prose of someone.

However, I’ve noticed in the TVHE twitter feed that people are very upset about the loss of Media7.

Now the question I have is this, if the resource is so valuable why aren’t people willing to pay enough for it to be on pay-per-view?  Surely, if it is adding such an important view to peoples lives they will be willing to put funds towards it.

The common argument against this is that it has other social benefits, such as educating the public.  But I was under the impression that the viewing numbers were very low – how can it be educating the public if only people who have either already set their opinions or would get the information from other sources are the ones viewing it?

Now I’m sure its very good, and that the information it provides is superb.  But unless people are willing to put their money where there mouth is, the point of view I’ve expressed here makes it understandable that the government is keen to scrap it.  Now, I would be more than happy to be convinced otherwise – and to be shown significant and important social benefits.  However, if anyone mentions the GC their comment is not going to be treated seriously 😉

Matt Nolan

Changing the past: New GDP numbers

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Yesterday, Statistics New Zealand released fancy new GDP figures for the New Zealand economy.  The new industry classification it uses (ANZSIC06) provides a more consistent, and modern, treatment of different industries in terms of production GDP – and in this sense, it is going to be exciting going through and seeing what this data series says about the evolution of the New Zealand economy.

However that is not what I’m going to do here 😉

Instead, I’d like to point out a couple of things from the release that Stat’s NZ nicely provided:

  1. A mixture of new annual benchmarks and significant revisions (based on other changes in methodology) has led to a significant downward reduction in estimated expenditure GDP over the past two years.  If we felt this series best represented the evolution of production in NZ (which is likely doesn’t), then we could very much make the case that we experienced a “double-dip” in late-2010.
  2. If we look at primary, goods producing, and service industries under the current classification and with new annual benchmarks, the ratio of real goods producing GDP to total real GDP is higher than it was.  Talking about how low this ratio was for a time informing policy.   To me this change in the data simply indicates that people have to be careful looking at ratios of real variables – a concern should rely on an observable market or government failure, rather than be built solely off a nice looking graph.

I will be spending a lot of the next month rolling around in these figures, and occasionally I might pop on here and say something who knows 😉

jamesz

Cost of legislation

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A paper out of Otago university finds:

Every time Parliament passes a new act it costs the country an average of $3.5 million, according to a new study. And… even just a piece of regulation costs around $530,000…
Researchers in Wellington and Otago came up with the figure by analysing the number of acts and regulations passed between 1999 and 2010, and looking at the costs of running Parliament and getting policy advice.
…
The price range for a new act was from $2 million at the low end, up to $6.2 million.
“This is because the size of new legislation varies greatly, from just a few pages to hundreds. So when considering both acts and regulations, we calculated the average cost per page of legislation at $45,000.”

They included the cost of Parliamentary time and the cost of the policy analysts’ time.