Is the economy in another long stagnation? If so, why? This is about the time that the Treasury will be locking up its economic forecasts to be published in the 2024 Budget Economic and Fiscal Update (BEFU) on budget day, 30 May. I am not privy to what they will be (I will report on them in…
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Do we treat the government finances with the common sense that household’s manage theirs? It is a commonly held view that we should treat the government as if it is a prudent household. We don’t when it comes to its debt. Currently the government says it wants to constrain its net debt to between 20…
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Budget tensions are becoming evident within the Coalition Government. Winston Peters made numerous political points in his speech to the NZF annual conference. But the attack on his own government’s fiscal policies raised issues of substance. ‘Today in the Sunday Star Times, journalist and former advisor to the Labour Government, Vernon Small, refers to the…
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Note written for circulation in March 2024 There’s almost no issue on which outgoing Labour MP and former Finance Minister Grant Robertson would find agreement with former National and Act leader Don Brash. But when Robertson was asked during his exit interview with the Herald whether he thought it was worth considering Brash’s idea of…
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Is she hinting that the Coalition Government will have to back down on key promises it made in Opposition? The Minister of Finance, Nicola Willis, is telling an evolving story about her fiscal challenges. In Opposition she was confident that she could deliver her promised income tax cuts. Appointed minister, she reported the (Treasury) ‘books’…
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This note was to try to clarify my thinking about what was going on in WP’s speech to the party on Sunday 17 March. It was, of course, a speech to the NZF annual conference which makes numerous political points – some valid. But the attack on his government’s tax policies is something in addition….
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The New Zealand economy is struggling; the new government will struggle to implement its economic promises. There is not a great deal of difference in Treasury’s projected GDP growth patterns between the May 2023 Budget Economic and Fiscal Update (BEFU) and the December 2023 Half Yearly Economic and Fiscal Update (HYEFU). But there are some…
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The new Minister of Finance implied that Treasury’s ‘books’ were deceptive. Can’t see it myself. I was disturbed by media reports that the new Minister of Finance, Nicola Willis, had criticised the previous Labour Government ‘for leaving the books with “nasty financial surprises” that National will have to clean up’ and that ‘after looking at…
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I have not weighed in on the vigorous and welcome discussion on the dual mandate of the Reserve Bank to both target inflation and maintain maximum sustainable employment. This note is about why the new government gave so much priority to abolishing it. One reason for not joining in is that I am unsympathetic to…
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There is a view that the world economy is entering a period of higher inflation and higher nominal interest rates, but who knows? Presumably New Zealand has to follow. If you know everything about the inflation process, and are totally committed to central banks targeting inflation at 2 percent p.a., then there is no need…
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The more informed an economist is, the more they keep their head down during elections. Elections are not a time to talk about economics in a serious way. Sure, politicians talk about the economy and what they will do to it, with promises soon forgotten when they take power. Elections are timely reminders of how…
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A close analysis of the Treasury assessment of the Medium Term in its PREFU 2023 suggests the economy may be entering a new phase. Last week I explained that the forecasts in the just published Treasury Pre-election Economic and Fiscal Update (PREFU 2023) was similar to the May Budget BEFU, except that it showed weakening…
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While the economy is not doing too badly in output terms, external circumstances are not favourable, and there is probably a sizeable group of households struggling because of rising interest rates. Last week’s announcement of a 0.9 percent increase in volume GDP for the June quarter had the commentariat backing down from their confident predictions…
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What is PREFU 2023 really telling us? Despite the headlines, things are not much worse than at the time of the 2023 budget, but fiscal management is always difficult. The Treasury is required by law to publish a Pre-election Economic and Fiscal Update (PREFU) a few weeks before a general election, just as it is…
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Evergrande and Country Garden – two giant Chinese property development companies – are a portent of the turbulence before us. The recent financial failures of two ginormous Chinese property companies, Evergrande and Country Garden, at various times ranked the second largest and sixth largest in China have implications for the New Zealand economy. The Evergrande…
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The recent reduction in the US credit rating signals that market lenders are not happy with the US fiscal arrangements. New Zealand’s lower rating is a warning that we could do better too. Fitch recently lowered its long-term credit ratings rating of US government debt from the top grade of AAA to AA+. Financial markets…
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Do I detect increasing uncertainty as to the effectiveness of monetary policy to deal with inflation? It may be helpful for an understanding what is going, to recount the conventional wisdom before ‘monetarism’; that term was coined in 1968 so I was there before it and recall some of the debate leading up to it….
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Are we evaluating the economy on the right criteria? Perhaps we should be paying more attention to rising overseas debt. The commentariat’s announcement last week that the New Zealand economy was in an ‘official recession’ by March 2023 – two quarters of output/GDP decline – was greeted with white faces by officials in the Reserve…
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Circulated 13 April 2023 There is a fetish for setting performance targets in, among other places, the education and health system. This note draws on economists’ experiences to caution about their use, and illustrates how this has mattered in the health system. The foundation principle is Gilling’s Law which states ‘how the game is scored…
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Working Paper for New Zealand Productivity Commission Introduction Unexpected shocks to the New Zealand economy are endemic. The numerous small ones have been dealt with by the local initiatives inherent in the market economy and by common sense. However, there are a few big shocks where national action has been necessary. Sometimes those actions have…
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