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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Jasfest, 7 December 2021 I apologise for not presenting this short tribute to Jas. I have had a tumour removed from my larynx. The prognosis is good, but it will take some time for my voice to recover sufficiently to be able to make presentations. I want to talk about Jas as a macroeconomist, but…
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Now is about the time that the Government is getting its Budget Strategy together In the week before the budget – the 2021 one is to be delivered on Thursday 20 May – there is a strange ritual in which all the commentariat and lobbyists (who are not necessarily distinct from one another) tell us…
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Introduction: The focus of this paper is on macroeconomic management and not on the entirety of economic policy. There are many issues which macroeconomic interventions cannot address. To use macroeconomic instruments, rather than the relevant targeted instrument, will blunt the effectiveness of macropolicy interventions. Reflecting, this paper is really a critique of the current primary…
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The Treasury forecasts suggest the economy is doing better than expected after the Covid Shock. John Kenneth Galbraith was wont to say that economic forecasting was designed to make astrology look good. Unfair, but it raises the question of the purpose of economic forecasts. Certainly the public may treat them as horoscopes which is usually…
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I was writing almost weekly about the Covid Crisis during its peak of between March and June 2020. Not that I had any technical expertise in the area (in the following please allow for that) but its impact on economics areas where I had some expertise was great. Here is a list of the Pundit…
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I prepared this note on the contribution of Joseph Stiglitz of the same title to an important symposium in Oxford Review of Economic Policy, Volume 34, Numbers 1–2, 2018 (pp. 70–106). It is for economists. A shorter version is published in the AUT Briefing Papers series. Stiglitz’s text is in italics: I believe…
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