What are the economic and political implications if the New Zealand economy stagnates for five and more years? Prime Minister Christopher Luxon told Morning Report that ‘We’ve got the worst recession* we have had in 30 years’. (Observe, he could have said ‘since the Rogernomics Stagnation which finished 30 years ago’, but some things may…
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Why is the British Labour Government penalising its poor? We have the spectacle of the Starmer-led British Labour Government taking measures which are making some of the most struggling Brits worse off. It has got to the point where Labour’s parliamentary backbench is revolting and the government has had to make partial concessions – the…
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What can you do when you have hit your borrowing limit and still want to spend? One option is to cut back on maintenance of your capital – say, to delay repainting the house or keeping the car in tip-top condition. The government does the same. Hence our three water systems leaking, polluting and flooding;…
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Why Government borrowing is limited This column started out to explain how the proposed structural outsourcing of public surgery was partly a consequence of the peculiarities of our fiscal borrowing practices. In summary, the restriction on the government’s debt level means seeking indirect ways to provide the required capital. One way of doing this is…
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Circulated to colleagues The Minister of Health has announced that he expects Health New Zealand to take out ten-year contracts with private health providers to deliver surgery. This is structural outsourcing; it is a form of privatisation (although, no doubt the minister would deny this claim). Whether such long-term outsourcing is efficient is a complicated…
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Monopsonies – dominant purchasers – need to be restrained as much as monopolies – dominant sellers. That is what pay equity is about. This column is not about you-know-who. There are many other political bullies offshore; sometimes there are local ones, as when a politician attacks a group which cannot defend itself or a cabinet…
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Perhaps the state of the economy is not as sound as we are being told. There was an odd little story over the 2025 Budget, hardly worth relating except that it tells something about budget politics. The original invitations to the lockdown, the meeting which gives a preview of the budget to the media so…
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A note prepared for some colleagues As its subtitle says, the Treasury’s 2025 Long-term Insights Briefing: Sustainable and resilient fiscal policy through economic shocks and cycles focuses on economic shocks and cycles. This commentary takes a slightly different point of view because it includes all shocks to the economy, not just economic ones. Among the…
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Should we pursue a ‘Golden Rule’ where any public borrowing for consumption is temporary? This columnist is a fiscal conservative who is cautious about government borrowing for public consumption. I was not originally. The Keynesian model I first studied said borrow as much as is necessary to sustain demand. But the model was of a…
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The budget runup is far from easy. Budget 2025 day is Thursday 22 May. About a month earlier in a normal year, the macroeconomic forecasts would be completed (the fiscal ones would still be tidying up) and the main policy decisions would have been made (but there would still be a lot of policy detail…
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It is said that economists know the price of everything and the value of nothing. That may be an exaggeration, but an even better response is to point out economists do know the difference. They did not at first. Classical economics thought that the price of something reflected the objective cost of producing it –…
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Severe geological and financial earthquakes are inevitable. We just don’t know how soon and how they will play out. Are we putting enough effort into preparing for them? Every decade or so the international economy has a major financial crisis. We cannot predict exactly when or exactly how it will happen. (For what its worth,…
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The state of the current economy may be similar to when National left office in 2017. In December, a couple of days after the Treasury released its 2024 Half Year Economic and Fiscal Update (HEYFU24), Statistics New Zealand reported its estimate for volume GDP for the previous September 24 quarter. Instead of the expected trivial…
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A note written for some younger economics colleagues. I was lucky when I was on the Treasury Forecasting Panel (from about 1998 to 2008) that Jas McKenzie was on it too and we could discuss our experiences. Generally, our approach was that they were the Treasury forecasts and that our task was to help them…
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By way of prologue, the closest parallel to the current economic situation may be when Ruth Richardson became Minister of Finance in late 1990. The economy had been contracting, although there were signs of a fragile recovery. She was an Austerian and cut public spending savagely. The economy plunged a further 5% in GDP per…
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Does the Autumn 2024 British budget point to a change in fiscal strategies? Many countries found their fiscal position was unsustainable, following the 2008 Global Financial Crash. Their public spending was well in excess of their public revenue and they had to borrow more heavily than lenders thought prudent. Almost unanimously, such countries tried to…
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A note written for some younger economics colleagues. I was lucky when I was on the Treasury Forecasting Panel (from about 1998 to 2008) that Jas McKenzie was on it too and we could discuss our experiences. Generally, our approach was that they were the Treasury forecasts and that our task was to help them…
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Stagnation and Contraction In this column I use the less familiar measure of GDP per capita instead of the GDP measure favoured by the commentariat. I became familiar with it when I began doing international comparisons because of the population differences between countries, while I depended upon the measure while working on New Zealand’s economic…
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What does Budget 2024 tell us about the current government? Muddle on? Coalition governments are not new. About 50 percent of the time since the first MMP election, there has been a minority government, usually with allied parties holding ministerial portfolios outside cabinets. For 10 percent of the time there was a majority government and…
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There was no less razzamatazz about the 2024 Budget than about earlier ones. Once again the underlying economic analysis got lost. It deserves more attention. Just to remind you, the Budget Economic and Fiscal Update (BEFU), is the Treasury’s independent assessment and so can be analysed by other competent economists (although they may disagree with…
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