jamesz

People don’t understand government support

/5 Comments/in /by

It’s very fashionable in some circles to call for reductions in government intervention these days. Let people stand on their own two feet, we are told. An interesting article in the NYT suggests that people don’t fully understand the role of the government in providing benefits. Krugman cites US research showing that:

…44 percent of Social Security recipients, 43 percent of those receiving unemployment benefits, and 40 percent of those on Medicare say that they “have not used a government program.”

I don’t know if the results would be similar for NZ: perhaps it depends on how the benefits are delivered and whether a private firm provides them. However, it seems pertinent at a time when the government is focused on reducing the costs of long-term unemployment, even as our healthcare and superannuation expenses are the major fiscal risks for the government. Do voters really understand the fiscal transfers that are occurring and where the government puts the money?

If you’re interested in who receives what benefit from the government then it’s worth having a look at the latest Treasury work on fiscal incidence.

Matt Nolan

Careful with regulation

/17 Comments/in , , /by

Here is an article I wrote for the fine people over at Idealog on regulation.  The primer is:

Tobacco prices must be higher, alcohol availability is going to be limited, and even Coca-Cola has come in for a lashing for being an addictive substance. But this obsession comes with a cost that policymakers need to face before they impart harm on innocent Kiwis.

Feel free to go over to the site to see what I said and comment 😉

jamesz

No free lunches in economic reform

/in , /by

A recently released report from the Grattan Institute in Australia surveys ‘game-changing’ ways to increase GDP. Its conclusions on the priorities for economic reform are summarised in a diagram:

Notably, two of the three most urgent changes that they identify relate to lifting workforce participation. That’s a tricky topic because, while more labour might increase GDP, it also decreases leisure time. Read more

Matt Nolan

Points for the Budget

/in , , , /by

Over at Dim Post, there is the general question of whether a “zero-budget” makes sense.

Commenting on the post, I remembered some of the key points to keep in mind when looking at actual policy – rather than the tiresome and incoherent ramblings we will get from politicians of all stripes and colours when the Budget is released.

What you are saying is valid – but when we view the budget in economics terms, instead of the political terms it is being sold in, there are a few things to keep in mind:

  1. The goal should be to have a balanced budget, once the economy is back at “potential”. So the surplus in 14/15 has to come with a forecast that has unemployment at or below 5%. If unemployment ends up higher than this, the government will continue to run a deficit by default – and so even when the forecasts are wrong this aim squares out.
  2. Government has been borrowing heavily, at low interest rates, to fund infrastructure. If it wasn’t for government building there would have been virtually no non-residential building in recent years. Infrastructure spending (in real terms) is at record highs. The government is actually being very Keynesian – they just don’t want to say it because their supporters might get grumpy.
  3. If the government keeps to the idea of getting the budget back in balance by the time the economy is back at potential, and makes that clear, it makes it easier for the RBNZ to cut the OCR or at least keep it at its current level, which will also help to boost activity/cut unemployment.

You are right it is an incredible period of uncertainty – but the government can’t do too much about that directly except limit uncertainty from them by ensuring their plans are clear. We can debate what the appropriate long term “size” of government should be – but I think both parties are being responsible by making sure that we have the budget back in balance by the time the economy is back at potential.

The key way to judge the Budget in “macro” terms will be the consistency of the UR forecast to the surplus.  In “micro” terms there will also be a lot of marginal issues we can address – hopefully there will be more talk about superannuation.

Either way, I’m not forward to listening to all the blah blah blah about politics, but I will be sifting through the Budget to get an understanding of ways government policy will influence the outlook for the general economy during the coming years.

Matt Nolan

A question about media7

/16 Comments/in , /by

I’ll be honest here, I don’t watch TV at all – I follow written news feeds while I’m writing and working, and I find that just works more efficiently for me than sitting down and enjoying the spoken prose of someone.

However, I’ve noticed in the TVHE twitter feed that people are very upset about the loss of Media7.

Now the question I have is this, if the resource is so valuable why aren’t people willing to pay enough for it to be on pay-per-view?  Surely, if it is adding such an important view to peoples lives they will be willing to put funds towards it.

The common argument against this is that it has other social benefits, such as educating the public.  But I was under the impression that the viewing numbers were very low – how can it be educating the public if only people who have either already set their opinions or would get the information from other sources are the ones viewing it?

Now I’m sure its very good, and that the information it provides is superb.  But unless people are willing to put their money where there mouth is, the point of view I’ve expressed here makes it understandable that the government is keen to scrap it.  Now, I would be more than happy to be convinced otherwise – and to be shown significant and important social benefits.  However, if anyone mentions the GC their comment is not going to be treated seriously 😉

Matt Nolan

April 12 Aussie unemployment rate drops: What about NZ migration?

/1 Comment/in , , /by

There seem to be concerns about the number of New Zealanders permanently heading over to Australia.  In the year to March 53,237 people permanently left NZ for Aussie, up 12,331 from March 2011.  To put this in perspective Australia accounted for 61% of all permanent departures – and annual departures to other countries were actually down 1,106 from a year earlier.  This is all via good old Stats NZ.

To me this is all much of a muchness – however one thing I do know is that the level of the Australian unemployment rate, and the gap between their UR and NZ’s has a strong impact on the level of permanent departures over there … unsuprisingly.

As a result, the drop in the Australian unemployment rate to 4.9% in April should be seen as a signal that we will see departures stay high for a while yet.  We can easily see this by just comparing the unemployment rate figures (which you can grab simultaneously off the OECD site):

In this environment, people are moving overseas to find work.  It’s not surprising, and in of itself doesn’t lead to any policy conclusions – we need to add a few more pieces before we can really start to say anything.  So this is just a little thing to keep in mind.