On Friday I gave interest.co.nz a Top 10 which, in a sense, considered trade, immigration, and social policy – at least in terms of some of the principles we used to discuss trade-offs. Go over and give it a crack 😉
While I have been buried in literature regarding New Zealand’s policy past I have not been paying too much attention to what politicians within New Zealand have been saying. This has led me to miss the growth in xenophobia in New Zealand – with the suggestion of putting a levy on “foreign workers” now being seen as sensible policy by the Labour party. This disappoints me greatly, and I am genuinely hurt that society is moving this way over here.
Although growing xenophobia in New Zealand and around the world disappoints me, I struggle to believe it is the result of a truly racist preference. Instead the growth of, or at very least the perception of, economic insecurity is undermining principles of tolerance. In that way there is a role for government to improve outcomes – not by attacking other groups – but through its role as the provider of social insurance.
It is in this way that the Labour party’s willingness to discuss the Future of Work is encouraging. A lack of economic security, both in terms of income and perceptions of status, is one of the key reasons why society coordinates insurance policy through a central government – the scope and nature of this needs to be discussed and evaluated as the world changes.
And in this way the recent NBR piece by Rodney Hide that was approving linked to by David Farrar makes no sense to me. I don’t disagree that politicians use empty rhetoric – Hide as a former politician has plenty of experience doing that himself. In fact the article is filled with its own meaningless slogans about wealth generators and needing to be an experienced businessman to discuss industry.
There is a meaningful debate to be had about the nature of social insurance in New Zealand, and the way we help people transition between jobs in the face of technological changes and other changes in the global economic environment. This is a debate that we ignored in the 1980s and early 1990s which has undeniably hurt certain groups in society. This is a debate that has been ignored in the UK and US and has led to the election of increasingly authoritarian governments pushing increasingly intolerant policies that the majority feels will give them the security they lack in the labour market.
Morally I have long felt that the Western middle class (myself included) should accept the idea of slower growth in living standards to reduce global poverty – although premised on the idea that there should be more domestic support to helping those who lose from any change to transiton. But recent elections around the world show they haven’t, and the status costs associated with these changes (and growth in income to the wealthiest in these countries) has led to a backlash. Not just that, but the changes have occurred in a way that has – for many – undermined economic security.
This is a relevant issue for policy makers and the public to discuss, and making sure we talk about these so that the trade-offs involved are transparent and the value-judgments we are making as a society are clear is essential. Attacking policy suggestions on the basis that the report is too big and you don’t know what the programs are – like Hide does – doesn’t help.
The Independent Hearings Panel (IHP) has released its recommendations on the Auckland Unitary Plan. One of the ways the IHP is proposing to increase density is to reduce the Single House Zone (SHZ) by 22%. The SHZ is areas with relatively large sections that you are only allowed one house on. So these areas are effectively frozen in time, no growth will can happen and they will remain villages of sorts.
To get a feel for how the SHZ effects Auckland, and therefore what reducing it might do, I’ve pulled together a map of the SHZ, as proposed by Auckland Council back in September 2013 (what is known as the “Proposed Auckland Unitary Plan” or PUAP). I.e. the IHP is proposing to reduce what is shown in this map substantially. But the data that would allow me to draw that map hasn’t been released yet. (You can view the maps with all the zones online here.)
Looking at this, it’s striking that the CBD is encircled by the SHZ. So the land it is closest to where people work, and therefore would benefit the most from increased density, is precisely the land that can’t be unlocked for increased density.
While the map that everyone will be interested in today is the new Auckland Unitary Plan (AUP)….I have been playing around with drawing maps in R. The maps below use the 2013 census meshblock data set.
Given all the discussion around NIMBYism that has surrounded the AUP process, I thought it would be interesting to look at where people actually own the homes they live in. The first map below shows the proportion of households within a meshblock that either own/partially own the house or it is held in a family trust. Including the latter category in my measure of home-ownership may cause some anomalies, such as with the leasehold land around Cornwall park.
It will be interesting to compare this the AUP when comes out and see whether the are any patterns in zoning in areas where there is a high % of owner-occupied dwellings vs those where people rent (i.e. investors own the homes).
The other map I pulled together uses household income data. For this map I looked at the proportion of households with an income over > $100,000. I.e. I was interested in “which areas had the highest concentration of wealthy households”.
Again, pretty much shows what you would expect, higher concentrations of wealthy households in the inner suburbs and waterfront eastern suburbs. South and West Auckland on the other hand have lower concentrations of wealthy households.
I was sitting around eating a date scone the other day when I ran into this article by Shamubeel Eaqub. The topic was central bank communication and whether the RBNZ (New Zealand’s central bank) was doing things well. Within a number of hours I’d been sent the link numerous times and had received a pile of feedback – with people on all sides fairly angry. This is an important issue though, so I thought I would note down my own thoughts while they are in my head.
I am not blogging at the moment – and I’m incredibly sorry about that. I won’t really be back until I can commit to being back properly – which won’t be until I’ve completed a lot of modeling work related to income inequality in New Zealand. I am not back today to talk about any literature on inequality though – I realise there are a lot of things I can post about here, and I have views, and those views will come in due course. But not today.
However, there have been a multitude of developments I should post on regarding an issue I angrily stopped writing on nearly two years ago – the area of financial stability.
Firstly, there is Michael Reddell’s blog. He is a very good New Zealand economist who would be among the top of my reading list if I was still involved in these sorts of issues. He recently stated:
The Reserve Bank appears to have taken on itself some responsibility for trying to manage house price fluctuations. However, the Bank’s involvement appears to be based on a misconception of what is going on, and a misapplication of insights from financial crises abroad, notably that in the United States last decade. There is little or no evidence that financial stability in New Zealand is in any way threatened. The LVR restrictions – and others the Bank appears to be contemplating – undermine the efficiency of the financial system.
Eric Crampton has also added the important view about how increased direct regulation threatens actual independence.
However, the big move has been Treasury turning around and criticising the Bank with this gem:
However, Treasury has been engaging with the RBNZ to suggest that although we accept that house price changes can have macroeconomic implications, the RBNZ’s mandate is focused on promoting financial stability, and therefore the policy proposals should be reframed to focus more clearly on reducing systemic risk rather than asset prices.
There are three extreme ways to take this:
- The Bank’s communication has been unclear, and this is a push to try to improve the way policy is justified and evaluated
- The Bank has been implementing unjustifiable policy due to its own misunderstanding of the issues
- Treasury is acting in a politically motivated way, and this illustrates the gradual loss of central bank independence.
I would never come down on any of these explanations as an extreme – but they are useful to consider when we think about how recent events will be interpreted and considered.
And my view on the policies involved – it hasn’t changed since prior to the implementation of LVRs, I’d instead note that views may have changed across organisations relative to 2013.
Sidenote: There was also this well written bulletin piece by the Bank. It is well written, but I feel that it missed the critique people actually have – namely the dual concerns of “does risk weighting make any sense when we are talking about systemic risk and externalities stemming from the lender of last resort function” and “is the implied equity ratios for banks really high enough, given how low it is relative to other firms due to the belief by banks and depositors that banks will be bailed out”. In this case, as in the above case, the RBNZ keeps answering questions people aren’t asking, and missing the questions people are justifiably asking.
Sidenote 2: This is also not at all related to monetary policy and any perceived failure due to the long period of elevated unemployment NZ has had – this is a relevant issue to discuss, but it is separate and involves a discussion about how we view potential output. Eg here and here. If the Bank’s decrease in its view of potential in June 2012 was justifiable and the increase in June 2015 was justifiable then their actions were justifiable – you can use that to defend or to attack the Bank, it is simply a framework.