Andrew Coleman

Retirement income and the choices of youth

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When you get to a certain age, anyone under 35 seems young.

People born after 1984 have different preferences and a different life experience than people born earlier. Their phones are better, their clothes use less cloth, their cars are more fuel efficient, and they probably left home at a later age. They may eat less meat, be more concerned about global warming, and have a longer life expectancy.

Firms design products for these cohorts that are very different to the products they designed for young people a generation or two ago.

Strangely, however, the government obliges these cohorts to use a similar retirement income policy as their parents. Sure, they occasionally argue over small details such as whether the age of entitlement (on young cohorts) will be raised from 65 to 67, but they never ask: is the current system fit for purpose for a new generation?

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Benje Patterson

Tiwai Point and the government’s role in “transition”

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Once again, Rio Tinto is threatening to shut down Tiwai Point in order to gain concessions. Ultimately, government isn’t supporting the smelter because we care about Rio Tinto – but because we care about the workers and their opportunities in life.

This reminds me of a post from 2013 which I would like to repeat here – it was originally posted on interest.co.nz here.

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Gulnara Nolan

Technological change and the monetary policy effectiveness

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Last week I discussed GDP-B and its potential impact on monetary policy. The main takeaway was that, if GDP-B led to a higher production figure it didn’t necessarily mean that monetary policy needed to be tighter or looser – instead it is changes in prices and inflation expectations that remain key.

However, there is a key way that the technological change embedded in GDP-B could well matter for monetary policy – the way it influences how expenditures take place and how they are shifted through time.

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Andrew Coleman

Taxing capital incomes – are we doing it the right way?

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About fifteen years ago, the new Secretary of the Treasury, Dr Caralee McLeish, was part of a World Bank team that put together a dataset measuring the regulations and taxes that small businesses face in different countries. In conjunction with Price Waterhouse, this group (including an extremely famous Harvard economist) worked out the taxes paid by a standardised 20-person business in its first two years of operation, as well as the taxes its employees pay. 

The authors then used this data to ascertain if there was a consistent relationship between the taxes and regulations that businesses in each country face and the amount of investment taking place in each country. There was: the countries with lower tax rates and less onerous regulations tended to have more investment and more foreign investment. The data were considered so useful that the exercise is now repeated annually. One of the original papers by this group of authors, “The effect of corporate taxes on investment and entrepreneurship” (published in 2010) has been cited more than 750 times. 

New Zealand has low levels of capital for a country of its income level and quite high corporate taxes. 

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Gulnara Nolan

Does a new GDP measure change optimal monetary policy?

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At the 61st Annual Meeting of the National Association for Business Economics, The Fed’s chair Jerome Powell gave an insightful speech. The key takeaway from the speech was that in an evolving economy, monetary policy is very data driven.

Powell touched on three aspects of evolving economy: the consequences of an oil price spike, the measurement of output and productivity, and the role of tightness in the labour market.

In this post I will talk about the measurement of output and productivity aspect of the speech and some elements of that which will matter for monetary policy.

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Andrew Coleman

Cook, Elcano, and Circumnavigation

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New Zealand is in the process of commemorating, commiserating and/or celebrating James Cook’s first voyage to New Zealand in 1769. New Zealand was merely one stop on his trip, albeit a lengthy one, which proceeded onwards to Australia, Java (where nearly a third of the crew died from dysentery), Cape Town and back to England.  It was the 25th circumnavigation of the world.

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