Matt Nolan

More commentators on the NZ dollar

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As mentioned here earlier, the high NZ dollar is a symptom of domestic imbalances not a cause – so instead of looking at intervening in the dollar we should be trying to understand exactly what is driving structural issues in the economy.

A couple of articles that follow on in this view are:

  1. Brian Gaynor in the Herald, discussing the incentives towards property investment.
  2. Westpac on the indirectness of any link between the OCR and our structural issues.

With the Westpac piece everyone jumped on the idea that “a lower OCR doesn’t necessarily imply a lower currency”, which is true.  However, I felt the main point was more to do with the inability of monetary policy to solve structural problems in the economy – a point I agree with completely.

Matt Nolan

Fixed and floating, monetary policy, and structural imbalances

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Over at the Rates Blog Andrew Coleman has written a piece on fixed mortgage rates and the monetary policy transition mechanism.

His initial point is that the ability of the Reserve Bank to smooth economic activity has been constrained by the fact that so many New Zealander’s hand fixed rate mortgages, compared to Australia where the majority of mortgage holders were on floating rates.

While his point holds weight, given that New Zealand is a net debtor country and higher average interest rates imply that the “increase in income” associated with a fall in the OCR was smaller.

However, there are three comments I would need clarification on before deriding the effectiveness of NZ monetary easing.

Read more

Matt Nolan

Cartoon: Night classes

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An excellent cartoon from Mike Moreu:

The main thing for me is the question of “what is the social benefit”.  In part education increases the human capital of the individual, which is something that the individual should pay for, in another part education can be consumption (which the individual should pay for) and in a final part some types of education also benefit other people – which is where government subsidies come in.

I think there are many night courses we can identify as not having this social benefit – and so the government shouldn’t pay for them.  I don’t know if this is the test the government is applying, but it is the one they should be applying.

Hence, I think Mike’s comic here is spot on – when a course only has private consumption and investment value it should be the individuals choice to do it and responsibility to pay for it.

Matt Nolan

June 09 unemployment rate: 6%

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6% aye.  Higher than market expectations.  Pretty inline with what we suspected here.

After 18 months of recession the unemployment rate had to be higher, it just wasn’t making sense.  Now it is.

More details to come methinks.

Matt Nolan

June 09 unemployment pick

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I haven’t picked a number yet.  I’m going 6.1% (seasonally adjusted).  I know, that is a huge increase on 5% in March, and it would take us past Australia’s 5.8% rate.  But unless I see the unemployment rate really moving then I don’t see this recession as (relatively) all that serious.

Lots of people are picking 5.5%, median pick is 5.7% (I think), RBNZ has 5.8% 5.9%.  If it is under 5.5% then it is one hell of a strong result.  If it is over 5.8% the market won’t be very happy.  If it is over 6.1% I will be extremely confused.

Let’s see what happens.

Matt Nolan

Cartoon: Retirement planning

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Given concerns about future retirement funding, I thought that this cartoon from the excellent Basic Instructions site hit on some important issues: