Chris B :So i’d be interested (time permitting, of course) to hear an economist’s view of how much flow on there is from agricultural exports (as opposed to, say, tourism “exports”) on to the economy as a whole, and how this flow on influences urban workers.

That’s kind of the problem – in the last decade at least, most of the direct influence on urban workers has not come from farmers at all, but from international capital markets. No wonder us townies are so ungrateful. :p

@Dismal Soyanz

Good points guys.

@Dismal Soyanz

Very much, I swear I’m going to have a headache for the rest of the year.

@Chris B

Hi Chris,

I am very much in your camp insofar as I don’t agree with just stating “what is good for farmers is good for us”. In the short term there are undeniable distributional consequences from such a lift in food prices – after all, people who aren’t making the food are food importers 😉

However, the change in the exchange rate does help to ease the burden on households in New Zealand – and that is a useful thing. Furthermore, in the long-run resources move about based on the changes in “relative prices” in the economy … as a result, it is likely that the majority of households in New Zealand will end up better off.

Facing such a shock, I am also of the view that we don’t want people to fall into the cracks – rising food prices do crimp household income and will have an impact on the poorest households. However, my impression was that part of the role of a security net from government was to ensure that the worst off citizen did enjoy a certain standard of living – as long as such a net exists, then we don’t have to worry about this impact.

Given the uncertainty around the net distributional consequences around the economy – allowing the exchange rate to do the heavy lifting for distributing income from the boost in export prices is the safest way to go.

As a result, it makes me grumpy.

What with this being an election year, you must be one cheery bugger 🙂

Certainly the media trumpet things as if it were the end of the world but the pollies display an invective-hurl-at-the-radio-inducing disingenuity when asked to comment.

On reflection, it’s something that will likely be with us until such time as we have a media that either has the smarts in-house or has sufficient smarts to go ask a half-decent economist to explain it all first. Unfortunately pulling in the punters often translates into a race to the bottom.

I agree that I have no problem with agents acting rationally. However, economists, the media, and politicians are all groups with specific institutional power – and I hold them to a higher standard with regards to information due to this.

As a result, it makes me grumpy.

1) Agreed regarding it being a politically sensible move from Labour. This doesn’t change the fact I hate politics and the associated misinformation.

2) The whole media narrative thing makes it sounds too sensible – I prefer to say it fits into “media laziness”. They want to sell an idea that is really easy to write down – so they do this. Doing a bit more work and actually describing what is going on would be honest, but both involves effort and risks reducing the shock value of the story if it isn’t written properly. So they just role with the lazy line.

3) I agree. I’m also pretty pissy with the media here as well though.

2. It fits into the preferred media narrative about GST being regressive.

3. The ones who really should be pilloried are the “economists” quoted in press taking this line who do know better but who want to make political points for Labour. Rosenberg from the CTU is prime offender here.