Listener 1 December, 2001.
Keywords: Macroeconomics & Money
As the chief economist of the OECD recently explained ‘even without further adverse developments, [I expect] an immediate slump and then global stagnation probably until late next year’. He went on to say he ‘is probably optimistic’. The pessimism arises from the splutterings of the three great motors of the postwar economy.
Listener20 October, 2001
Keywords: Macroeconomics & Money
There were two views on the world economy on September 10th. The optimistic conventional wisdom thought the world economy was about to enter a recession, and would be out of it by the end of this year. A smaller group, although in my view better informed and with a better recent track record of forecasting, thought the world economy was already in recession (although this is partly a matter of definition) and expected the slowdown to continue well into next year.
Listener 15 September, 2002.
Keywords: Globalisation & Trade; Macroeconomics & Money
A hundred years ago, New Zealand turned down the chance to federate with Australia – to become one of its states, rather remain than an independent nation. Ten years earlier there was a groundswell in favour, but the prosperity and the social consolidation of the 1890s gave us the confidence to go it alone. How different it is today. A survey of the New Zealand elite, by Bob Cately, professor of political studies at the University of Otago, found 88 percent believing that New Zealand would benefit from a single economic union with Australia, and 55 percent that economic amalgamation would lead to political union. (His book Waltzing with Matilda describes the elite as parliamentarians, ‘businesses, business organizations, trade unions and some media outlets.’ He does not mention senior public servants but my impression is that they would have responded similarly.)
Listener 23 June 2001.
Keywords Macroeconomics & Money
Most of the public comment on the government’s May budget was on the lack of growth of social spending. This overlooked that in a typical year the government has a little less than a billion dollars extra to spend from economic growth, after allowing for price and population increases. After some has been spent on really urgent items (like increasing bio-security) and necessary repairs to failed past policies (the cervical smear program) there is perhaps $750m left. That total is less, say, than the spending that advocates for Education or Heath or Social Welfare are each demanding for their sectors alone. Inevitably many (quite reasonable) demands are not met. Their advocates are irate, but rarely suggest cutting back on other government expenditures or raising taxes. Last year was unusual because the incoming government raised income taxes and so had more than normal to spend. This year (and in most years) it did not, so there is not the same expansion on government spending.
Listener 9 June 2001
Keywords History of Ideas, Methodology & Philosophy; Macroeconomics & Money
Every country has its own deeply held and specific cultures, arising from the particularities of its history and geography. Economics is prone to overlook this proposition because it aims to provide a ‘scientific’ theory of economic behaviour which is culture independent. A nice example of the resulting difficulties will be found in US economist Todd Buchholz’s New Ideas from Dead Economists. One chapter is devoted to ‘The Public Choice School: Politics as Business’, centred on the work of Nobel economic prize-winner James Buchanan, who like Buchholz lives in the Washington conurbation near the centre of the US government. The theory was very influential in New Zealand’s public sector reforms from the late 1980s.
Revised paper for The Stout Centre Research Centre conference on ‘Holyoake’s Lieutenants: 1960-1972′, 27-28 April, 2001. Parliament Buildings, published in Holyoake’s Lieutenants ed M. Clarke (Dunmore Press 2003)
Keywords: Macroeconomics & Money; Political Economy & History;
The term of the second National Government, from 1960 to 1972, can be split into almost exactly equal economic phases, changing at the end of 1966, when almost coincidentally the Minister of Finance also changed. The second from March 1967, was Rob Muldoon, well enough known and important enough to have a conference of his own in due course. From December 1960 to February 1967 the finance and economics lieutenant had been Harry Lake, an almost shadowy figure in the politically histories of New Zealand.
Listener 31 March, 2001.
Keywords Business & Finance; Macroeconomics & Money
As I write, there is vigorous debate about the current US economy downturn. In the jargon the question is whether it will be a V, U or L – the second half of each letter indicating a quick rebound a slow rebound, or a drawn out depression. It is noticeable that informed opinion is moving towards the more pessimistic end of the possibilities, although most commentators currently reckon on the U rather than the L.
Listener 20 January 2001.
Keywords: Statistics;
Statistics New Zealand (SNZ) releases its December quarter 2000 estimate of the Consumers Price Index (CPI) this week. The increase is expected to be a high and, if it is a dull news day, there will be much angst. In fact we have known for some time that consumer prices are increasing more quickly than usual, mainly because the fall in the New Zealand exchange rate will push up the domestic prices of imports which flow on into consumer prices. There is the puzzle of how quickly they will flow through, and the degree to which the New Zealand sellers can and will absorb the import price hikes. There is also an argument about whether the exchange rate will stay down. Everyone expects some recovery – providing the world financial markets remain stable – but some of the predicted New Zealand exchange rate levels, seem fantastical. They would take the pressure of domestic inflation, but the export sector would suffer grievously again.
A response to an Economist article of 30 November 2000.
Keywords: Growth & Innovation; Macroeconomics & Money; Political Economy & History;
A summary of The Economist’s position of the New Zealand economic reforms might be:
New Zealand had to change its economic policies from at least the early 1980s. The path of the reforms was riddled with ‘blunders’ and ‘hubris’. The Economist enthusiastically supported them at the time, despite warnings of the weaknesses that the microeconomic reforms were extremist and the macroeconomic reforms faulty. The outcome has been a much poorer performance than other countries – such as Australia – which tackled the same problems with a more thoughtful, incremental and technically competent approach. This conclusion applies even ignoring the rising inequality and the social distress. Nevertheless, The Economist thinks New Zealand should continue to pursue the policies which have failed in the past. Victory is about implementing ‘right’ policies, not getting better outcomes.
The Story of Our Economy has been one of Secret – and Occasionally not so Secret – Debt Crises.
Listener 11 November, 2000
Keywords: Macroeconomics & Money; Political Economy & History;
In 1939 New Zealand faced a debt crisis. The government had to roll over £17m of debt and borrow a bit more to pay for imports in excess to export revenue. The Minister of Finance, Walter Nash went to London to obtain the money. The terms initially offered were so harsh that expressions like ‘bankruptcy’ were used. Privately, of course, for the public had no idea how close a run thing it was. Writing up this story recently led me to think just how much the story of the New Zealand economy has been one of secret – and very occasionally not so secret – debt crises. Listing all of them would take more than this column, but many readers will recall the currency crisis of 1984.
Listener 28 October 2002.
Keywords: Macroeconomics & Money;
Wanting to avoid the Great Depreciation of the 1930s, the leaders of the world established the International Monetary Fund in 1945. It has a number of purposes but a major one is to provide enough international liquidity should a 1930 type crisis ever occur again. Think of the IMF as the international equivalent of a reserve bank, and don’t confuse it with the International Bank for Reconstruction and Development (a.k.a. ‘World Bank’) whose purpose is to provide international capital for development investment, not short-term liquidity.
Should the Economic Reforms be Intensified or are New Policies in Order?
Listener 14 October, 2000
Keywords: Growth & Innovation; Macroeconomics & Money;
There is a debate going on about what to do about the economy. The loudest view is that it is the fault of the new government, and that we only have to return to the policies of the last fifteen years and everything will come right. There are three reasons why this is not very compelling. First, the Labour-Alliance government does not seem to have changed policy that much. Second, the ‘collapse’ began in early 1999 or even 1998, well before the new government took power. And third, over the fifteen years the performance of the New Zealand economy has been the worse in the rich OECD, inflation excepted. So the past policies have failed, and are unlikely to succeed in the future.
Listener 30 September, 2000.
Keywords: Macroeconomics & Money;
It is extraordinary how much economic debate in New Zealand is oblivious to any evidence. Recent advocates of the New Zealand economy going into monetary union with Australia or the US seem quite unaware that it has spent over half of the time since 1840 in one, and is currently in one. We can learn from both experiences, but the lesson is not what the advocates want us to hear.
Listener 19 August, 2000
Keywords: History of Ideas, Methodology & Philosophy; Macroeconomics & Money;
Just before he was struck down by his final illness, 79-year-old Bryan Philpott completed the last of his many research papers. It reviewed the work he done at the Research Project on Economic Planning (RPEP) over its thirty years, first as McCarthy Professor of Economics at Victoria University of Wellington, and then in retirement. The paper reflects an impressive research achievement, but also includes and was intended to include, so he told me a powerful rebuke to the economic policy of the last 15 years. To explain how, requires some preliminaries.
Listener
22 July, 2000
Keywords Macroeconomics & Money; Statistics
The premier survey of business opinion has been produced by the NZIER since 1961. When I looked at in the 1980s, I was struck by how unhelpful the business opinion question was in comparison to the questions of what the business respondents had actually done, and what they planned to do in future. These matters were not their opinions, which may or may not be well informed. They are the actions the respondents have taken and are going to take in their business lives, on such things as investment, employment, output, and inventories.
Listener 8 July, 2000.
Keywords: Macroeconomics & Money;
Just as nostalgia aint what it use to be, neither are government budget presentations. Once they were given in the evening when financial markets were closed, and were filled with surprises such as excise tax increases. Today, the budget is presented in the afternoon, there are few surprises (tax increases are announced at other times). The reduction in significance may be no bad thing. But the media still treats the budget as one of the great political events of the year. A few days later the news returns to normal, and the dispassionate observer wonders what it was all about.
Listener: 27 May, 2000
Keywords: Macroeconomics & Money;
New Zealand’s economic debate can be bizarre. Take the recent rises in the Reserve Bank base interest rate. Hardly anybody made the point that world interest rates are rising. The American Fed(eral Reserve Bank) is putting up its base rate, the European Central Bank is too, so is Australia’s Reserve Bank (RBA), and so on. Can we ignore a rising tide? The rest of the world could then borrow unlimited quantities from the Reserve Bank of New Zealand (RBNZ), a scenario too absurd to contemplate. Something horrible would happen to our monetary system and economy if we ignore what happens overseas.
Listener 13 May, 2000.
Keywords: Macroeconomics & Money;
To understand the consequences of dramatic change in share prices, think instead about housing. Suppose you are told the value of your house has doubled. Suppose it makes no difference to your behaviour (except a bit of skiting, disguised as grumbling about higher local authority rates). When sometime later you are told your house price has halved, it wont matter much either (except you have another excuse for grumbling).
New Zealand Herald February 2000.
Keywords: Macroeconomics & Money; Political Economy & History;
I wanted this to be a good book. It was a super idea to have a “biography” of the British pound which has been around for a thousand years and was once the world’s most important currency. There is so much mystery about money, that a good book would improve public understanding and reduce the mysticism.
Listener 12 Feb 2000
Keywords Growth & Innovation; Macroeconomics & Money; Social Policy
Once upon a time Treasury’s briefing to the incoming government was notorious for thick volumes which set down economic prescriptions for the government with an arrogance offset by errors. However its 1999 briefing, Towards Higher Standards for New Zealanders, is more modest. Early on it states that economists’ “understanding of what generates (economic) growth is far from complete.”