PREFU26 enables us to compare the economic management of the 2023 Labour Government with the 2026 Coalition Government. Some argue that the forecasts in the Treasury Economic and Fiscal Updates are biased in favour of the government of the day. That cannot be right. The forecasts underpin the Crown’s borrowing program, and the forecasters would…
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The government simply setting a debt target for its fiscal management makes no sense. Better to set a Crown Net Worth target which reflects the entirety of the Crown balance sheet. The National Party promises to bring net core Crown debt down below 40 percent of annual GDP. Labour promises to reduce net debt to…
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Short notes on economic matters which do not make a full column. Wellbeing It is true that wellbeing is a fuzzier concept than, say, GDP. We can make it less fuzzy by discussing and researching the notion but because it is multidimensional and about actual people, I expect it to always be a bit problematic….
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Presentation to Auckland U3A Meadowbank, 21 August I have been asked to talk about New Zealand’s economic history and what we might learn from it which sheds light on the future of the economy. I shall have to be selective. Not in Narrow Seas: The Economic History of Aotearoa New Zealand is 250,000 words. In…
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At the 2026 election, unemployment is likely to be higher and inflation lower than it was in 2023. It was headline news that the unemployment rate, at 5.6 percent of the labour force, rose in the June Quarter to its highest level since March 2015. In fact it has been creeping up over the last…
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Productivity increases do not always generate increases in profits. We do not know when the economic boom generated by AI will be over, but the overstretched industry is increasingly looking shaky. When I last wrote about financial booms and busts, I equivocated over whether the next financial bust – there will be one, we just…
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Apply the golden fiscal rule and invest prudently. A lender is greatly disadvantaged compared to a borrower. The borrower gets the cash immediately. In exchange, the lender gets a promise that the borrower will repay the loan (plus interest) at some time in the future. No matter how honourable the borrower is, the lender knows…
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If there is a major shock, New Zealand has not got a lot of fiscal room to move. In late 2008, there was the Global Financial Crisis. New Zealand’s orthodox response was a fiscal expansion with a deficit (OBEGAL) of $3.9b in the June 2009 year compared to a fiscal surplus of $5.6b in June…
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The proposal to reduce the number of public servants is not well worked out. Announcing the reduction of 8700 jobs for public servants during the runup to the 2026 election suggests the economy is in a fragile state. The Iran War is generating global stagnation and inflation; even worse – if oil and related products…
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The outlook is gloomy. The Treasury economic forecasts for May budgets are usually settled in April to feed into the fiscal forecasts and, critically, the borrowing program. They can be changed in the interim six weeks if anything happens. (Not too difficult with a fully balanced forecast; I was once involved in a morning rejig…
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We are facing difficult challenges from the likely rise in import prices. Many readers may find this week’s column difficult compared to the discussions they are familiar with. That is because it tries to get the analysis right rather than skipping over the difficult bits and leaving the reader with misunderstandings. So apologies for the…
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We may regret we have not put enough effort into building resilience. I was wrong when I argued that the Muldoon Government should have hiked petrol tax to ration petrol when it ran short following the Second Oil Shock in 1979. The Iran revolution’s reduction of oil output amounted to about 4 percent of world…
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Andrew Sorkin’s new book, 1929: The Greatest Crash in Wall Street History sheds light on how financial markets work. Economists argue over how exactly the Great Depression of the early 1930s occurred. We are pretty much agreed on what happened in New Zealand – our ability to borrow internationally became very limited while the terms…
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Why we want the Reserve Bank to operate independently. Minister of Foreign Affairs Winston Peters was wrong to criticise Governor of the Reserve Bank of New Zealand, Anna Breman, for cosigning a statement with 14 other heads of other central banks (plus two from the Bank of International Settlement). The statement expressed support for the…
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The government is still borrowing for consumption. I do not think anyone understands the politics of the spat between Ruth Richardson, who chairs the Taxpayers Union, and Nicola Willis – including those two. The underlying economic issue is analytically clearer. The technical term for it is ‘fiscal consolidation’. It is easiest to understand it by…
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We should follow the Golden Rule of Fiscal Management and not borrow for consumption in the medium run. Asymmetry is a crucial, but often ignored, feature of credit transactions. You would normally be surprised if a shopkeeper said they would sell you 1kg of apples but not 2kg, even if you offered to pay a…
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Presentation to Wellington Macrogroup Seminar on Debt policy. 7 November 2025; there is a PowerPoint that goes with this presentation. Available on request. This paper argues that we should focus fiscal policy on net worth more than we do. The current obsession with debt ignores the difference between borrowing for investment purposes and borrowing for…
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Queen Elizabeth II famously asked about the 2008 Global Financial Crisis, ‘Why did no one see it coming?’ In fact, many economists (including yours truly) had pointed out that the financial system probably would crash. But we failed to predict what would precipitate the collapse, how severe it would be and when it would happen….
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Our current fiscal settings promise that we will eventually face a public debt explosion. A major cause would arise from the aging population. Is there anything we can do? It has long been known that the ageing population would create future fiscal pressure. It was quantified in the first (2006) Treasury long-term fiscal projection and…
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What the latest Statistics New Zealand GDP figures might be telling us. Statistics New Zealand’s publication of GDP for the June Quarter got a lot of media coverage, some of which bordered on the hysterical. To say the figures demonstrated the country was ‘bankrupt’ is a nonsense. Bankruptcy is about debt. Not a single one…
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