Matt Nolan

Query (or Bleg): Singapore refined petrol data

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So, where do I get figures on Singapore refined petrol prices?

Crude oil has been falling, the exchange rate has stayed stable, but rising refining costs have driven up the retail price of petrol.  If anyone knows where I can find the figures it would be much appreciated 😉

Matt Nolan

The issue of data

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I will give people a little more time to write comments on this post on economists and predictions before I discuss it – let me say that I’m very happy with the two comments (from HH and Kimble) so far.

There is a related issue that I think needs a bit of attention before we start discussing these things – data. Statistics New Zealand does an excellent job getting together data and putting together clear, transparent, and useful, data series. However, even with all the hard work they put into the process there will always be some issues with the data, namely:

  • Not all the survey responses arrive, or arrive at the same time – implying that there is constant revisions to the data,
  • Changes in methods mean that there is constant revisions to the data
  • Changes in methods implies that some data series for the same thing (eg private consumption over time) are incompatible,
  • Seasonal adjustment and trend estimates can be subject to an “end point bias” – which implies that the figure we have at the time is different to the “true” figure that will be available in the future,
  • Quality adjustment is a subjective process – but the adjustments are not always transparent,
  • In a country like NZ sufficiently disaggregated data cannot be released,
  • In a small country the “timeliness” of surveys can be poor (GDP is out three months after the event for example),
  • The length of data series – for many types of statistics there just isn’t much data!
  • Even if the definitions of what the data does is transparent – the data will often be misused by people interpreting it.

What does all this mean – well, even though Statistics NZ does the best job in getting data that is possible, and even though economists might make the best use of the data that they can, it takes a long time (several years) until it is clear (in a quantifiable sense) what has actually happened.

Matt Nolan

Question: Have economists been over-confident regarding their ability to predict things?

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My unequivocal answer here would be yes – but I’m not asking me, I’m asking you.

Do you guys think that economists have been over-confident about their ability to predict things?

We have repeatedly said on this blog that economic science “frames issues” – but predictions only stem from virtually untestable value judgments (although we can inform these, and narrow the band of judgments, by using data).

However, it appears that many economists have tried to sell their ability to predict – something that has caused issues.

This blog post really sums up how I think people think about economists right now (ht Market Movers).  I think the issue is that economists have sold this story to the public about their ability to predict – an ability that doesn’t exist.  The risk from this is that the value that economists can add (framing issues, even describing what has happened) may get ignored as a result of this perceived failure.

Matt Nolan

Japan’s economy in free fall: What does this mean for NZ?

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Japan’s economy contracted by 3.3% over the December quarter – a massive fall. To put this in context, the New Zealand economy has shrunk by 1% over the past nine months (to September) on the back of a drought induced recession.

On the face of it this seems scary – Japan’s economy is falling because exports are falling, implying that “world demand” is falling.

However, then I stop and think about it. Japan produces manufactured goods – these are the things that we import. A collapse in world demand for manufactured goods will lead to lower manufactured good prices – which is an effective income boost for NZ.

Furthermore, a weak Japanese economy makes NZ seem “relatively” less risky – something that could help prevent our ability to borrow from overseas from deteriorating.

This isn’t all bad news for NZ – it is possible that global “rebalancing” could work in our favour yet …

Update:  Paul Walker rightly points out that Japan is a major purchaser of NZ products – implying that a slowdown in Japanese growth will hurt us.  This is true.  However, my view is that what matters is the “relative price” for what we sell vs what we buy.  We are a small country, so what we produce can be sold anywhere – what matters is the return.  With global demand slowing it could be the case that the price of manufactured goods falls further than the price of soft commodities – something that would actually provide an income boost for little old NZ.

Matt Nolan

New Zealand’s sovereign debt rating is tops?

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Well according to Moody’s we are in the top tier of AAA rated sovereign debt (ht Market Movers).

New Zealand is “Resistant” while the USA and UK are only “Resilient” and poor old Spain and Ireland are “Vulnerable”.

Go us aye 😉

Matt Nolan

Don’t bail out F&P

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Almost unsurprisingly F&P is struggling in the current environment. Given that we are experiencing a global recession there was always going to be a huge fall off in demand for appliance products (something that hasn’t really happened in New Zealand yet interestingly).

Stuff has already put up a few articles on the event (* and *) and Bruce Sheppard has suggested a bail out. Let me just say that I am completely against a bail out.

Now, if F&P is still in a position where it will be profitable in the medium term, but drastic conditions in the credit market prevent F&P gaining any finance, I could accept the government loaning money to F&P temporarily at a high rate of interest. Bailing out F&P should not be an option – after all, what is growth promoting about forcing all of society to cover businesses mistakes?

As far as I can tell they are in trouble as their debt was denominated in foreign currency and the value of the NZ dollar collapsed. Now excuse me if I’m wrong – but isn’t this just hedging on their part. A few months ago they were complaining that the dollar was too strong and was reducing the profitability of their manufacturing. Now that the dollar is weak (improving the return on what they make) they have lost out on their debt. By denominating their debt in foreign currency they were hedging their losses stemming from a high dollar – why should we be bailing them out when the tide turns?

Update:  Kiwiblog and Anti-Dismal more explicitly discuss the moral hazard problem.