NZ GDP at record highs?

It has been a long time since I’ve closely followed New Zealand macroeconomic statistics – but I was a bit surprised seeing the headline “GDP jump of 14 per cent completes NZ’s ‘V’-shaped recovery“.

Cliffs notes to this post – it was a strong result, but September likely wasn’t the strongest quarter on record, and real economic activity is still probably down a little bit. You gotta be careful with seasonal adjustment during “shock and turning points” – and Stats NZ did actually even tell us this in their release!

Update: As Economissive notes I can’t read and this was up on a year ago – good shout this was a dumb thing to miss. Dang that is a strong GDP result!

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COVID-19 is a watershed moment for government involvement in the economy

The RBNZ released a report estimating the economic impact of COVID-19 containment measures back in May. They estimate that one week of alert level four (L4) costs the economy about $2.2 billion in GDP. Stats NZ recently registered a 12.2% fall in GDP for the June quarter. Sobering stuff.  These are big, scary numbers. Scarier still for those in tourism or hospitality who are wearing a disproportionate amount of that cost. Clearly there is substantial economic suffering, but how can we think about government responses?

About the author: Byte Size Story connects everyday economic issues with the big picture. The views expressed here are the authors. If you have any questions about the post please email bytesizestory@gmail.com

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The game of mask wearing

Now that we are back to level 2 lockdown in New Zealand (apart from Auckland where it is level 3) the issue of “should we wear a mask” has cropped up.

A lot of “words” have been spread across the internet on the issue, with people arguing about their effectiveness, complaining about how it hurts their “liberty and freedom”, and people saying they don’t like how it makes it harder to breath – hence why random idiots on the street feel empowered to yell at people who wear a mask, without realising that their willingness to lash out at other people makes them sound simultaneously stupid and scared.

But I digress before I’ve even gotten started – when it comes to wearing masks this tweet raises a great point:

I made a similar point when I was teaching on Thursday (having come in with a mask) – so I thought it could be fun to think about it a bit more here.

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ECON141: When cash rates go negative

Last time I discussed how the cash rate influenced the interest rate.  But what happens when the cash rate goes negative?  This is the focus of today’s post.

After recent discussions about “negative interest rates” across Australasia I thought it would be useful to talk about how these rates appear mechanically at a high level (in terms of financial system operations).

In class (and Gulnara’s posts here) the motivation of why negative interest rates might be appropriate in a policy sense was raised.  Furthermore, she did a great job of noting that it is unlikely that negative rates will cause additional savings (as some have claimed) and so theoretically we can continue to think about our investment model with negative interest rates.

For this post we will assume that the central bank is trying to influence interest rates towards a level that will “close the output gap” or “push Y to its sustainable level” and achieve their inflation target, and it just happens that this interest rate is negative.

The wrinkle is that we achieve this negative interest rate through a settlement cash mechanism – so we need to ask, how do negative rates in settlement cash accounts translate into lending and actual interest rates?

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ECON140 teaching under level 2 preference vote

As noted on blackboard we will need to decide if we continue with these lectures, or move to prerecorded lectures and no in person component . As a result I have popped a vote for this below – we will move to the type of lecture the majority of the class wants.

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The Parasite law of the Soviet Union and MMT theory

I have just bumped into an interesting twitter thread where an MMT theorist justifies their job guarantee by pointing to the Soveit Union’s Parasite law. 

Being born in the old Soviet Union, and having talked to my parents about their experience with it, I thought it might be useful to share my views on the topic. 

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