Will Taylor

Aligning tax rates

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I just read an article on stuff where Peter Dunne has said the government is committed to aligning personal, company and tax rates in the medium term. I think this is great news, this quote sums it up for me:

The differences “provides scope for people to use various entities to structure their tax affairs so as to reduce their tax liabilities”

Having differences in the top tax rates gives people the incentive and ability to restructure their affairs to avoid paying taxes. This is just a waste of resources.

Now the article says that all rates are going to 30%, I’m not particularily concerned with what that number is. I’m not arguing we should have lower tax rates, I’m arguing that we shouldn’t have a large differential in the top rates.

Matt Nolan

Why a 50bp cut in April is looking increasingly likely

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nzdtwi_2_3weekgif1Source NBNZ

The RBNZ felt that the dollar would fall toward a TWI of 47 – not lift to 55. As the Bank is currently focused on short-term economic activity, rather than inflation, the sudden lift in the TWI will actually give them more reason to cut harder in April.

Given this increasing risk of a larger cut I think iPredict has a good set of prices at the moment. 25 is still the most likely, but 50 has a good chance – although to be fair I did buy a small number of 50’s when I saw the relative price 🙂 .

On the no change side I think the market is highly over-pricing it – given that the Bank said it would only stop cutting when it is positive that they have hit the bottom of the cycle – as a result having a 22% chance of no change is not consistent with the 96% chance the market currently has on an OCR under 3% 😛 (as a result, I shorted a slightly larger bundle of these).

jamesz

Confusing price discrimination

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Wholly Bagels in Wellington has this great student special which I often take advantage of: in the last hour before closing they charge 30% less to students. Much as I love the special, I can’t figure out why they run it that way. I can think of three reasons they might price discriminate in this fashion: Read more

Matt Nolan

Quote 20: Nigel Pinkerton on the derivation of economic models

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I heard the following gem round the water cooler at work:

Beer makes economics happen

I felt that given it is a Friday, and given that there is a lot of economics going on, this quote was felt especially poignant.

Personally I think Jagermeister is a better economic stimulant – but I understand that I’m in the minority.

Matt Nolan

People have decided to stop going to Aussie – go the collapsing labour market

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Fewer people are departing to Aussie this February than in Feb 08 (down 22%). The economics tea leaves never leave me wanting – maybe I need to incorporate them into my forecasting routine.

This is a drastic slowdown – and is consistent with the sharp increase in unemployment over in Aussie. Now I’m just waiting for someone to say:

1) Aussie departures near record high or,

2) John Key stems tide to Aussie.

Both will give me a little giggle 🙂

Update:  Go here, read the comments 😀

Matt Nolan

The US economy is still very mighty

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I was sent a book called “When Giants Fall” – which I am part of the way through.  It is very well written, although I have some issues about the economics type ideas in it.  Once I have finished it I will be sure to pop a review up.

One of the implicit claims in the book and among many people I’ve heard from is that the US is only ahead of everyone else because they are borrowing – once the game of musical chairs between developing nations and the US stops the US will not be the primary superpower, or even a superpower, anymore.

Now I don’t really buy this.  Lets think about the GDP of the US.  Now if the US is borrowing to buy things this wouldn’t increase GDP – as any increase in consumption or investment would be netted out by a similar increase in imports.  US GDP is currently $13.8 trillion pa (US definition of trillion 😉 also all figures are in US$ as of 2007).  The other big boys have:  Japan, $4.3 trillion pa, Germany $3.3 trillion pa, and China $3.3 trillion pa – these three produce less per year COMBINED than the US produces.  World GDP is $54.3 trillion pa – so the US accounts for about a QUARTER of world production.

Sure the US has borrowed a lot, and sure the US economy is in big big trouble at the moment, but lets keep some perspective here – the ability for the US to produce is far beyond anything that any of the rest of the world has.  Could this change over time – sure.  But I wouldn’t say that the US has solely relied on borrowing – it also makes a hell of a lot of stuff.