Truth is a strong word when discussing inequality …

Over at Polity Rob Salmond has promised us the truth about the gap between NZ’s rich and the rest (via Toby Manhire)!  This would be encouraging, given the complexity of the data.

I just want to say at the start I have full respect for people who want to discuss these important issues, including the use of data.  However, after reading his post I think he may have oversold his claim.  Don’t get me wrong, what he posted was interesting – if you go over to his post you will see a graph that shows aggregate taxable income for three groups – those being taxed on $150k a year, those being taxed on $100-$150k a year, and those being taxed on less than $100k.

I do not have the data sadly, but I have some reservations stemming from what I see in the post.  For some reason he is only quoted gains since 2010/11 – ignoring the whitewash for high income earners that occurred in 2009/10 due to the global financial crisis.  Furthermore, the income changes he quotes are biased (to the point that they aren’t representative of household income at all) in two ways:

Update:  Rob has re-evaluated the data and changed his interpretation of what it is saying, he has also blogged saying so – full respect for that.  His intent, of going through the data to try and figure out what is going on with policy relevant issues is admirable – and it is good that there is this blogging format where we can work through data and interpretation online.  With income inequality getting a bigger focus, there is going to be a lot more writing across New Zealand sites on this issues in the coming year.  For those who aren’t interested, the internet is a big place :)

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Quick note on Labour tax annoucement

I have very little time to write anything substantive – and an internet connection that is awful at best.  But I just wanted to say I agree with David Cunliffe’s comments here when it comes to dumping the tax free threshold and tax-free fruit and vege policies:

We believe there are better ways to help struggling Kiwi families

Indeed, both these policies seemed poorly targeted – although I always leave the option open for analysis to prove otherwise :)

We will see what they announce this year I guess!

Is current spending unsustainable?

Recent statistics indicate that households are ramping up the number of goods and services they are buying.  With debt levels still elevated and the spectre of the Global Financial Crisis still fresh in our minds is this a cause for concern?  Gareth Kiernan indicates that perhaps current spending behaviour is more ‘sustainable’ than meets the eye for two reasons (Infometrics link):  Price growth has been weak (holding down the increase in the value of spending) and ‘quality adjustment’ has been substantial.

So although growth in the total value of household spending has picked up over the last year, it is not out of line with historical norms – unlike growth in the volume of spending.  In simple terms, consumers have been able to purchase more goods and services without having to stump up more cash.

A view on debt in the dairy industry

After the most recent Financial Stability Review in New Zealand, Benje Patterson has decided to have a look into whether dairy farm debt really is a significant financial stability risk – and what this means for macroprudential policy (Infometrics link).  His conclusion:

On balance, it seems that a sharp correction to both dairy and farm prices is an unlikely scenario at present.  This conclusion implies that risks to financial stability are contained for now, but the Reserve Bank’s warnings regarding dairy sector debt still provide a prudent and balanced starting point for a discussion of risk.  Even so, this does not mean the Bank’s comments should in any way be interpreted as a prelude to LVR restrictions in the dairy industry.  The Reserve Bank knows full well that such restrictions could lead to inappropriate distortions to investment incentives and the ownership structures of farms would make dairy LVR restrictions unworkable in practice.

It is a risk that we must be mindful of, but there seems to be no sensible reason for loan-to-value restrictions for farmers (in any way of defining such restrictions).  Do you agree?

What are we asking with productivity in NZ?

Danyl posted about the recent Productivity Commission paper on Australia vs NZ productivity differences recently.  If you ignore the politics and conspiracy (the timing of the paper was well known and they were asking people to write about it, hence why I wrote this at the time) he asks a good questions, why have we seen relative productivity drop up?

I gave a fairly casual response in the comments – which was ignored as other people busily made things up ;) :

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