Confidence plummets

July 31, 2018

Labour, NZ First and the Green Party haven’t even been in government for a year and already business confidence has droppedto the second lowest in the OECD.

New Zealand has tumbled from top to bottom of the OECD business confidence rankings with the most recent data revealing New Zealand has the second lowest level of business confidence in the developed world, National’s Finance Spokesperson Amy Adams says.

“Given the high level of political uncertainty around the world it is a shocking revelation that New Zealand – typically a haven of political and economic stability – has the second lowest level of business confidence in the OECD.

“In 2016 New Zealand was the second highest in the OECD with 33 of the 35 countries beneath us. Now everyone except South Korea is ahead of us. To have fallen so far in such a short space of time is a damning reflection of this Government’s economic management.

“It is clear the Government’s low-growth policies are having a major impact, and are driving New Zealand’s appallingly low business confidence – though the Government is still refusing to acknowledge that.

“Policies such as industrial relations reforms, increased costs on small businesses via minimum wage increases and higher fuel taxes as well as the banning of oil and gas exploration, have all been bad for business sentiment and the economy.

“We want businesses confident so they can invest for growth, hire more people, and increase wages. That is how Kiwi families get ahead.

“With this Government’s dismissive and reckless approach to the economy, it’s no wonder we are again beginning to see more Kiwis heading overseas to greener pastures as opportunities here in New Zealand dry up.”

 

Businesses are generally still reasonably confident about their own outlook, but how long will it be before lack of confidence in the wider economy impacts on their decisions?

Increases in fuel taxes and the minimum wage, the prospect of a return to 1970s industrial relations and the strife that will accompany that, and the unilateral decision to end oil and gas exploration are all taking their toll on confidence.

Deteriorating  relations with Australia, our second business trading partner, add to causes for concern on the domestic front.

Sir John Key warns of clouds on the international horizon too:

. . .”We’re at the end of what I’d say is the economic cycle at the moment. There’s no question that when I look around the world and the things I’m now involved in internationally, you can start to see the pressure in the system,” Key said. 

“I was in China a week ago, it’s clear their economy is really starting to splutter a little bit. While the United States economy is doing well, they’re running massive, massive deficits – 7 per cent of GDP. Europe’s obviously much weaker than it was.

“So I think you are starting to see a slowdown in the economy and I think that, in part, reflects the business confidence numbers in New Zealand, and I think in part New Zealand businesses are looking at what the Government’s doing and they’re uncertain about that.” 

Low business confidence numbers could not be ignored, but Key said he hoped the economy remained strong “because every day, New Zealanders rely on it”.

“If doesn’t, then I think the right political party to lead the country wouldn’t be the one that’s currently there,” Key said. . .

A sluggish economy isn’t just a problem for business it’s a problem for everyone and should it get worse, businesses need confidence that the government will handle it well.

The current one has given plenty of grounds for concern that it won’t.

Running a business is full of risks and uncertainties and business people need confidence in their own outlook and the wider environment if they are to take the risks necessary to grow rather than stand still or retrench.

Business confidence doesn’t matter only for individual operations. It’s important for security of employment and a vibrant and growing economy.

That in turn is necessary to fund the infrastructure and services we don’t just want but need.


NZ 3rd for growth but . . .

September 16, 2016

Good news on the economic front:

The third highest growth rate in the OECD shows the Government’s management of the economy is delivering more jobs and opportunities for New Zealanders, Finance Minister Bill English says.

Statistics New Zealand reported Gross Domestic Product grew by 0.9 per cent in the three months to 30 June 2016. This took annual growth to 3.6 per cent – putting New Zealand’s growth rate in the top three among developed economies.

“Despite the tough period the dairy industry has been through, we are in the unusual position of enjoying solid growth, rising employment and real wages at the same time as very low inflation.

New Zealand’s annual growth rate of 3.6 per cent is more than double the OECD rate of 1.6 per cent and compares with 3.3 per cent in Australia, 2.2 per cent in the United Kingdom, 1.2 per cent in the United States and 0.8 per cent in Japan.

The result means the New Zealand economy is now worth more than $250 billion for the first time.

Growth in the June quarter was led by construction which grew by 5.1 per cent over the quarter. Residential construction was up 10 per cent over the last year – reinforcing the fact that New Zealand is in the middle of a significant building boom.

Exports of goods increased 7.6 per cent for the quarter, the highest increase in 18 years. 

But there is a but:

“While this result is solid and the outlook is relatively positive, there are many risks around and we cannot afford to take our current economic performance for granted. That is why the Government is continuing to focus on building a stronger, more resilient economy.

The Opposition and the other wailers have plenty of other buts including too many people not benefitting from the growth.

You could look at it that way but a growing economy is not a magic bullet.

New Zealand has entrenched problems of dependency which leads to and/or exacerbates poverty with all its attendant problems.

There are myriad causes for that none of which have easy or fast solutions.

But the opportunities to address not just the problems but the root causes of them are greater with a growing economy.

That New Zealand not only has one but has the third fastest in the OECD in spite of the dairy prices in the doldrums, is very good news.

 

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Trust in government

December 22, 2015


Really working for NZ

June 22, 2015

National’s campaign slogan was working for New Zealand and its policies really are:

New Zealand recorded another quarter of continued economic growth, confirming that the Government’s sensible economic programme is taking New Zealand in the right direction, Finance Minister Bill English says.

“A reduction in dairy production contributed to quarterly growth of 0.2 per cent coming in at the lower end of market expectations, but still resulted in annual growth of 2.6 per cent,” he said. “A strong economy provides Kiwi families with new jobs, higher incomes and opportunities to get ahead.

“We are seeing solid, sustainable economic growth that is giving businesses around the country the confidence to invest another dollar and hire another person.”

74,000 jobs have been created in the past year, and average annual wages have increased by $5,700 in the last four years. Treasury forecasts they will rise by a further $7,000 to around $63,000 by mid-2019, considerably faster than inflation.

“Sustained economic growth is translating into real benefits for New Zealand households. But we need to stay on course to really lift our long-term economic performance.”

The latest quarter was driven in part by the expected reduction in dairy production as a result of drought conditions, with agriculture down 2.3 per cent. Mining activity was down 7.8 per cent, whereas retail trade and accommodation increased 2.4 per cent and construction was up 2.5 per cent.

Average annual economic growth was 3.2 per cent.

“The lower dairy output was in line with Treasury’s forecasts, which see the economy continuing to grow at around 2.8 per cent on average over the next four years.

“This results highlights that New Zealand is closely tied to international markets, and risks are ever-present.”

New Zealand’s 2.6 per cent GDP growth in the year to March compares with 2.3 per cent in Australia, 2.4 per cent in the United Kingdom, 2.7 per cent in the United States, 2.1 per cent in Canada, negative 1 per cent in Japan and 1 per cent in Germany. Average growth across the OECD was 1.9 per cent.

Whether you’re an individual, family, business, other organisation or government, careful management of your finances matter not as an end in itself but as the means for doing what you need and want to do.
New Zealand National Party's photo.


Education the key

December 11, 2014

A new OECD report appears to show inequality is growing in New Zealand.

But NBR editor Nevil Gibson discusses what it really shows:

. . . The four-page summary report based on a working paper, Trends in income inequality and its impact on economic growth (See report here), and statistical tables, has been seized on by the media the opposition as a “failure of trickle down economics” and a case for higher taxes on the rich and more redistribution to the poor.

In fact, this is not the case. The main reason is the dated nature of statistical material, while the policy suggestions carry a heavy caveat that “Redistribution policies that are poorly targeted and do not focus on the most effective tools can lead to a waste of resources and generate inefficiencies.”

The figures that show New Zealand’s growth was inhibited by increased income inequality are based on the period 1990-2010. The figures show “real disposable household income” in New Zealand from 1985 to the GFC (2008) was around the OECD average and well below countries such as Australia.

In the five years post the GFC, New Zealand disposable incomes among the top 10% fell 2.2% (OECD average 0.7%) while those in the bottom 10% fell the least, 0.5% (also the OECD average). Average New Zealand incomes fell  0.9% compared with the OECD average of 1.8%. . .

The GFC hit the richest but National’s policies to look after the most vulnerable during the GFC gave them some protection.

. . . But the main interest in the paper is the evidence it offers on the main mechanism through which inequality affects growth.

This is that the wider income gap between the lower middle class and poor households compared to the rest of society undermines education opportunities for children from poor socio-economic backgrounds, lowering social mobility and hampering skills development.

In other words, it is education rather than taxation that is the key: “a lack of investment in education by the poor is the main factor behind inequality hurting growth,” the report says.

“This compelling evidence proves that addressing high and growing inequality is critical to promote strong and sustained growth and needs to be at the centre of the policy debate,” says OECD Secretary-General Angel Gurría:

“Countries that promote equal opportunity for all from an early age are those that will grow and prosper.”

Few would argue that successive governments in New Zealand are seriously deficient in this area and the biggest deniers would be the Labour government of 1999-2008.

The OECD handout summarising the report observes:

“People whose parents have low levels of education see their educational outcomes deteriorate as income inequality rises. By contrast, there is little or no effect on people with middle or high levels of parental educational background.

“The impact of inequality on growth stems from the gap between the bottom 40% with the rest of society, not just the poorest 10%. Anti-poverty programmes will not be enough, says the OECD.

“Cash transfers and increasing access to public services, such as high-quality education, training and healthcare, are an essential social investment to create greater equality of opportunities in the long run.”

As mentioned, the paper also finds no evidence that redistributive policies, such as taxes and social benefits, harm economic growth, provided these policies are well designed, targeted and implemented.

Well-off New Zealanders already carry a high tax burden – more than half of the population pays no tax except GST – so I don’t think any party can justify higher taxes on the basis of this report.

As the report itself warns,” not all redistributive measures are equally good for growth.”

Inequality increased under Labour’s high tax, high spending policies of the noughties.

It has improved under National which has reduced taxes and taken a much more careful approach to targeting spending where it is needed most needed.

One of those areas is education:

The key message of the OECD’s report on inequality, released today, is investment in education and is not a prescription for higher taxes, says the Taxpayers’ Union.

The Union’s Executive Director, Jordan Williams, reacting to the OECD report and interviews with Grant Robertson and Russel Norman on this morning’s Morning Report says:

“Grant Robertson and Russel Norman want to use the report as justification to tax high incomes more, even though the top 6% of income earners already pay 37% of everyone’s income tax. They are trying to use the OECD report to frame small efficient government and incentives to work as a bad thing.”

“We’re disappointed that Mr Robertson continues to refer to the made up economic theory of ‘trickle down economics’. Mr Robertson must know that no such economic theory exists. No economist has ever argued that in order to make a poor person richer you should make a rich person richer first. Economists have, however, argued that economic growth and freedom makes us all, rich or poor, better off.”

“The biggest cost of living is people’s tax bills. Instead of wanting to solve inequality by cutting government waste and taxes at the low end, politicians immediately want to tax more so they can distribute it to constituencies.”

The background to the oxymoronic ‘trickle-down economics’ argument Messrs Robertson and Norman referred to on radio this morning to is available in a piece by New Zealand Initiative Researcher Jenesa Jeram republished with permission.

“Mr Robertson is now shadow Minister of Finance. He should be focused on arguing real economic data, not taking on his own straw men arguments,” concludes Mr Williams.

The poor won’t get richer by making the rich richer first. But nor will taking more than is fair and reasonable from anyone help those most in need.

Higher taxes and poor spending don’t help the poor and harm the wider economy.

Education is the key to helping the poor, along with carefully targeted investments in health and other services needed to provide equality of opportunity for them.


NZ one of better for inequality

June 25, 2014

The left have done their best to make inequality the problem of the moment.

Fortunately for New Zealand, though not the left’s campaign, the OECD facts contradict their story:

New Zealand was one of only six developed economies in which both income inequality and disposable income inequality was flat or slightly better between 2007 and 2011, according to the Organisation for Economic Cooperation and Development.

In its latest report, which looks at the impact of the global financial crisis on inequality across 33 developed economies, the OECD confirms New Zealand performed relatively well through the GFC and its aftermath, Finance Minister Bill English says.

“The domestic recession in New Zealand under the previous government in early 2008 and the global financial crisis that followed were tough on many New Zealanders and their families,” he says.

“However, this Government ran large deficits and borrowed through that period to continue its significant support programmes. At the same time, we also set a track back to surplus and supported an economic recovery that is now delivering more jobs and higher incomes.

The opposition criticise the increase in debt but give the government no credit at all for using it to protect the most vulnerable from the worst impact of the GFC.

“This latest OECD research confirms that while inequality increased in many OECD countries during the global financial crisis, this was not the case in New Zealand.”

Using data compiled for the Ministry of Social Development’s household incomes report, the OECD’s latest Income Inequality Update confirms that both income inequality and disposable income inequality were flat or slightly better in New Zealand between 2007 and 2011.

It also finds that the disposable incomes of the top 10 per cent of New Zealand’s income earners were hit harder than the bottom 10 per cent of income earners through this period.

“Across the OECD as a whole, the opposite was true,” Mr English says. “The bottom 10 per cent of disposable incomes fell by twice as much through the GFC and the top 10 per cent.

Mr English says that the Government remains focused on supporting the most vulnerable New Zealanders by improving public services, lifting education standards and supporting more New Zealanders off welfare and into work.

“It’s in these areas that we can make a real difference to the lives of New Zealanders most in need.”

The easiest way to solve inequality is to make the rich poorer – as the left want to do by taxing them more.

That might close the gap between the top and bottom but will do nothing to improve the lot of those in most need.

Addressing their problems, as the government is doing through better public services, higher achievement in education and helping those who can work to do so is the only way to get sustainable improvement in living standards for the vulnerable.

The OECD report is here.


NZ 1st in OECD, 3rd in world for business ease

October 30, 2013

The World Bank’s Doing Business report ranks New Zealand third, and it is the highest-ranked OECD economy .

The annual report measures government regulations and their effect on business across 189 countries.

A media release says:

A new World Bank Group report finds that high-income economies in the Organization for Economic Co-operation and Development (OECD) continue to lead the world in providing business-friendly environments for local entrepreneurs.

Doing Business 2014: Understanding Regulations for Small and Medium-Size Enterprises ranks 189 economies on the ease of doing business. Six of the top 10 are OECD economies: New Zealand, the United States, Denmark, the Republic of Korea, Norway, and the United Kingdom. OECD economies also continue to take steps to improve business regulations, with more than half implementing at least one regulatory reform in the past year.

New Zealand, the highest-ranked OECD economy, has made sustained efforts to improve its business climate. The report finds that in the past year New Zealand made it easier to enforce contracts by implementing an electronic case management system—improving the recording of court cases, lowering costs, and shortening resolution times.

“OECD economies on average have managed to create a regulatory system that facilitates interactions in the marketplace and protects important public interests without unnecessarily hindering the development of the private sector,” said Augusto Lopez-Claros, Director, Global Indicators and Analysis, World Bank Group. “Their stronger institutions and lower transactions costs provide an appropriate point of reference for other economies. In fact, we see countries increasingly seeking to narrow the gap with OECD practices, notably in Europe and Central Asia.”

The breakdown on New Zealand is here.

Economic Development and Small Business Minister Steven Joyce today welcomed the report:

“This is excellent news. Only Singapore and Hong Kong are higher than us overall and we still rank first in the world for starting a business and investor protection,” Mr Joyce says.

“This World Bank report is highly regarded and is used by businesses internationally when they consider setting up operations. The fact that New Zealand continues to rank so high sends a clear message that we are an ideal country for business investment.”

While New Zealand is in third place for the second year running, improvements to the business regulations were evident in a number of areas.

The cost to a business of construction permits and getting an electricity supply, as a percentage of income per capita, have dropped every year since 2010. Improvements to New Zealand’s court system were also cited by the World Bank as making contract enforcement speedier and less costly to business.    

The World Bank’s Doing Business report provides objective measures of the time, cost and number of procedures involved in all major aspects of running a business. . .

Ease of doing business is important.

Less time and money wasted on difficulties in doing business leaves more to spend in and on the business.

There is no room for complacency, though. We’re good and with the right policies we can be better.


Still growing despite drought

September 20, 2013

The impact of last summer’s drought wasn’t confined to farmers and those who service and supply them.

It hit the wider economy but in spite of that annual growth still compares well with that in other OECD countries.

New Zealand’s economy continues to grow steadily, maintaining one of the higher annual growth rates in the OECD, Finance Minister Bill English says.

As expected, the severe drought earlier this year slowed economic growth in the June quarter, with statistics out today showing gross domestic product grew 0.2 per cent in the three months to June 30.

However, annual growth – from the June quarter 2012 to the June quarter 2013 – remained relatively strong at 2.5 per cent. This compares with growth over the same period of 2.6 per cent in Australia, 1.6 per cent in the US, 1.4 per cent in Canada, 1.3 per cent in Japan, 1.5 per cent in the UK and -0.5 per cent in the Euro area.

“It’s pleasing that despite the worst drought in 70 years, New Zealand still achieved one of the higher annual growth rates in the OECD,” Mr English says.

“While the June quarter was affected by a fall in agricultural production – down 6.4 per cent – growing conditions since then have been good, business and consumer confidence have been high and the Canterbury rebuild continues apace.

“All these factors mean that we can anticipate relatively strong growth resuming in the September quarter. As the Reserve Bank Governor has noted, New Zealand is one of the fastest growing economies in the developed world and that growth is expected to be maintained, and become more broadly based over the next couple of years.

“However, real risks and challenges remain in the global economy, especially for our most important trading partners. Today’s GDP result demonstrates the importance of the Government sticking with its proven policies aimed at keeping tight control of its spending, reducing the need for borrowing, and encouraging the job growth that in turn supports New Zealand families.”

Growth depends on both luck and management.

The drought was bad luck, that its impact wasn’t even worse was due to good management, including irrigation development.

The continuing uncertainty on the global financial scene is beyond our control, but good management by the government is having a positive impact on things it can control.

Much of the credit for that goes to the Finance Minister who is getting recognition for what he’s achieving.

. . . widespread respect for English, following his steady, careful performance as minister of finance through the worst financial crisis of the past 80 years, has been growing.

A complimentary remark by a respected American economist on English’s performance at a conference in Sydney recently, was not untypical and it prompted a highly regarded New Zealand economist, Matt Nolan, to comment: “This is not the first time I’ve heard people overseas sing Bill English’s praises [it is probably in double-digits now] . . . we have a finance minister who understands the issues and tries to communicate them clearly.”

English came to office with an economy that had already been in recession for almost a year, when the global financial crisis hit. He had a measure of luck – there was no housing bust and although there were nervous moments, the New Zealand banking system did not buckle.

But English responded to the crisis pragmatically and skilfully, avoiding severe retrenchment but focusing determinedly on reducing government debt and balancing the budget. Contrary to opposition propaganda, the government did not bring with it any dogma or hidden agenda.

A shock could, of course, upset things. The balance of payments deficit and overseas debt continue to be relatively high and to cause concern. But English’s overarching goal of getting the Government’s books in order, which looked hopelessly remote five years ago, now seems achievable, if only by a whisker, next year.

He has also made it a habit to lucidly explain not just the benefits, but also the trade-offs his policies involve. There may be much in the economy to criticise, but it has not been possible to persuasively do so with cheap populism and glib sound-bites. . .

In spite of criticism from the left, the government’s policies haven’t been slash-and-burn ones.

They’ve been a careful mix designed to reduce the burden of government, maintain public services and encourage export-led growth.

Some policies have required an increase in funding but that’s been done with the knowledge that more spent now in some areas will pay-off with reduced costs in the future. Helping people from welfare to work is an example of this.

National is on track to surplus next year in spite of the financial and natural disasters it’s faced.

Labour was forecasting a decade of deficits before the global financial crisis struck and promises made by its new leader David Cunliffe during his campaign show growth we’d be going backwards again if they were in power.


OECD doesn’t back LabourGreen CGT

June 7, 2013

New Zealand’s economic policies have been endorsed by the OECD.

The Organisation for Economic Co-operation and Development has confirmed New Zealand’s macroeconomic policies strike the right balance between supporting the recovery and ensuring sustainable medium-term growth, Finance Minister Bill English says.

In its Economic Survey of New Zealand for 2013, the OECD also notes the economy is gaining momentum, with post-earthquake reconstruction in Canterbury, and business investment and household spending gathering pace.

“The OECD confirms the Government’s economic plan is on the right track,” Mr English says. “In particular, it notes our work in improving productivity to support long-term growth, it confirms the banking system is in good shape and well supervised, and it supports our focus on getting back to surplus and reducing debt.

“It concludes that reducing government debt will establish a favourable starting position for confronting longer-term cost pressures from an ageing population. It will also tend to raise national saving rates and reduce New Zealand’s external vulnerabilities.

“This is a welcome endorsement of the Government’s economic programme from the OECD, coming just a few weeks after the International Monetary Fund also confirmed we have struck an appropriate balance with our programme.”

Mr English agrees with the OECD’s assessment that New Zealand’s high private debt levels, large external imbalances and an over-valued exchange rate are among the main risks to growth.

“That’s why the Government is taking a number of steps, such as through the Business Growth Agenda and the internationally-focused growth package in the Budget, to help businesses and exporters become more competitive and to sell more to the world.

“While the OECD’s modelling predicts relatively small growth impacts from achieving some of the specific Business Growth targets, taken as a package evidence suggests they could make a material difference to productivity and incomes,” Mr English says.

The OECD notes that New Zealand policymakers are increasingly attuned to social equity and welfare issues.

It says welfare reforms are attempting to reduce long-run benefit dependency by emphasising education and training for at-risk youth, placing more conditions on beneficiaries and requiring stronger accountability from public and private providers.

“I’m pleased with the OECD’s positive assessment of the main elements of the youth package within our welfare reforms, and other recent changes to increase educational achievement and reduce youth unemployment.

“We will carefully monitor progress to ensure we further improve the participation of young people in education and training.”

One area the OECD report differs from the government’s policies is a Capital Gains Tax.

Mr English says the Government does not agree with the OECD about the need for a comprehensive capital gains tax applying to all assets, including the family home.

“Two comprehensive, expert reviews of New Zealand’s tax system – the 2001 Tax Review and the 2009 Tax Working Group – did not recommend a widespread capital gains tax of the sort the OECD recommends.

“The Government significantly tightened the tax rules around property investment in Budget 2010, which is expected to raise an additional $3 billion in tax revenue over four years.

Labour and the Green Party policy is for a CPT and they’ve seized on the OECD report as vindication of their stance.

However, that conveniently overlooks the report’s recommendation that a CTG covers the family home and replaces other taxes.

The LabourGreen version would exclude the family home and those parties wouldn’t reduce other taxes.

Labour lost the argument over this in parliament on Wednesday:

Hon David Parker: Why does he continue to refuse to adopt a capital gains tax excluding the family home when it is clear it would reduce inequality, it is clear it would take the pressure off house prices, and it is clear some people would pay their fair share of tax, and, at the same time, it would improve the economy?

Hon BILL ENGLISH: If a capital gains tax had all those magical powers, then you would not see a whole lot of developed country economies on their knees because of excessive housing markets. We have not implemented it, for a couple of reasons. One is that we believe the other tax measures we have taken, which are collecting $3 billion in tax revenue over 4 years, are more effective, and, secondly, we believe that changing the planning laws to allow more supply of houses will have a much bigger impact on fixing wealth inequality than a capital gains tax.

Rt Hon John Key: Has he seen any reports about a period of time between 1999 and 2008 when there was a substantial increase in the housing market in New Zealand and when there was a major amount of work done, to extent that half of the work of the Department of the Prime Minister and Cabinet was about the housing market, and, by the way, was there a recommendation for a capital gains tax that was adopted in that period of time?

Hon BILL ENGLISH: It is funny you should mention that. Some of the things the last Labour Government did were sensible. In 2001 it commissioned a tax review—a comprehensive review of New Zealand’s tax system. That review concluded that a capital gains tax that exempted the family home would not be effective. Faced with the fastest-rising housing market in New Zealand’s history through the mid-2000s, the previous Labour Government, in which most of the Opposition’s current front bench served, did not implement a capital gains tax. . . 

Hon David Parker: Is the truth of the matter not that Mr English and his colleagues stopped the Savings Working Group and others looking at a capital gains tax by putting it out of their ambit, and is it not the reality that National’s refusal to introduce a capital gains tax is because it does not suit the vested interests of its backers?

Hon BILL ENGLISH: Well, with, I think, 47 percent of New Zealanders voting for the National Government in the last election, we are very pleased to represent a very broad range of backers—in fact, a much broader range of New Zealanders than the Opposition Labour Party, which claims to represent everybody. No, the reason we have not implemented a capital gains tax is that when you exempt most of the housing market, it becomes a tax purely on successful, profitable businesses, and that would be bad for growth. We are addressing the problem of rising house prices by addressing the real issue of the lack of supply, particularly in Auckland.

How typical – LabourGreen have a policy which wouldn’t address Auckland’s housing affordability and would be a tax on successful, profitable businesses which would be bad for growth.

Offsetting Behaviour also argues against a CGT:

 

 

 

 

 


NZ scores well on Better Life Index

May 29, 2013

New Zealand scores well on the OCED’s Better Life Index which ranks countries on quality of life factors including education, health, housing and income.

The commentary for New Zealand says:

New Zealand performs exceptionally well in overall well-being, as shown by the fact that it ranks among the top countries in a large number of topics in the Better Life Index.

Money, while it cannot buy happiness, is an important means to achieving higher living standards. In New-Zealand, the average household net-adjusted disposable income is 21 892 USD a year, less than the OECD average of 23 047 USD a year. But there is a considerable gap between the richest and poorest – the top 20% of the population earn five times as much as the bottom 20%.

In terms of employment, 73% of people aged 15 to 64 in New-Zealand have a paid job, above the OECD employment average of 66%. Some 78% of men are in paid work, compared with 67% of women. People in New-Zealand work 1 762 hours a year, slightly less than the OECD average of 1 776 hours. Around 13% of employees work very long hours, more than the OECD average of 9%, with 20% of men working very long hours compared with 6% for women.

Having a good education is an important requisite for finding a job. In New-Zealand, 73% of adults aged 25-64 have earned the equivalent of a high-school degree, close to the OECD average of 74%. This is slightly truer of men than women, as 74% of men have successfully completed high-school compared with 72% of women. New-Zealand is a top-performing country in terms of the quality of its educational system. The average student scored 524 in reading literacy, maths and science in the OECD’s Programme for International Student Assessment (PISA). This score is higher than the OECD average of 497, making New-Zealand one of the strongest OECD countries in students’ skills. On average in New-Zealand, girls outperformed boys by 15 points, higher than the average OECD gap of 9 points. 

In terms of health, life expectancy at birth in New-Zealand is 81 years, one year higher than the OECD average of 80 years. Life expectancy for women is 83 years, compared with 79 for men. The level of atmospheric PM10 – tiny air pollutant particles small enough to enter and cause damage to the lungs –is 12 micrograms per cubic meter, considerably lower than the OECD average of 21 micrograms per cubic meter. New-Zealand also does well in terms of water quality, as 88% of people say they are satisfied with the quality of their water, higher than the 84% OECD average.

Concerning the public sphere, there is a strong sense of community and high levels of civic participation in New-Zealand, where 93% of people believe that they know someone they could rely on in time of need, higher than the OECD average of 90%. Voter turnout, a measure of public trust in government and of citizens’ participation in the political process, was 74% during recent elections, higher than the OECD average of 72%. Voter turnout for the top 20% of the population is an estimated 81%, whereas the participation rate of the bottom 20% is an estimated 75%. This 6 percentage point difference is lower than the OECD average difference of 12 percentage points, and suggests there is broad social inclusion in New Zealand’s democratic institutions.

In general, 83% of people in New-Zealand say they have more positive experiences in an average day (feelings of rest, pride in accomplishment, enjoyment, etc) than negative ones (pain, worry, sadness, boredom, etc), more than OECD average of 80%.


Rural round-up

January 18, 2013

Groser welcomes new OECD-WTO report on international trade:

Trade Minister Tim Groser has welcomed the OECD-WTO’s estimates of “Trade in Value-Added” at the launch of the new database in Paris.

“This new data estimates trade in value-added terms, which helps convey the interdependencies of global value chains and reveal who ultimately benefits from trade,” Mr Groser says.

“Engaging internationally is crucial to all countries’ future prosperity. New Zealand is especially well connected to global value chains in the agriculture and food sectors.”

According to OECD estimates, 81 percent of New Zealand exports’ value is created domestically. This is higher than the OECD average of 72 percent, reflecting both our geographic distance and the importance of agricultural products to our exports. . .

Fonterra trading scheme adds new dynamic for farms

The introduction of Fonterra’s Trading Among Farmers (TAF) share trading scheme has added a new dynamic to the market for dairy farms, and has potential to put downward pressure on farm values, Real Estate Institute of NZ rural market spokesman Brian Peacocke said.

The introduction TAF last November has been a spectacular success and probably far greater than Fonterra could ever have have anticipated, according to market participants.

The units, which do not carry voting rights and which can be owned by the public, last traded at $7.45 – a 35.5 per cent premium their $5.50 issue price. The success of the units has rubbed off on the value of Fonterra shares, which can only be traded by farmers. The shares last traded at $7.42 compared with a pre-TAF “fair value” share price – set by Fonterra – of $4.52. . .

Depression in rural communities a concern:

With a disproportionate number of suicides in the rural sector, Federated Farmers is calling for a proactive approach to solve the problem.

Hawke’s Bay farmer and the province’s Dairy Chairperson, David Hunt, has experienced depression first hand. He knows just how frightening and lonely it can be. Here is his story:

“A farmer suicide recently compelled me to come forward, as I have great respect for what John Kirwan has done for mental health and I wanted to share my experience to help farmers. What helped me accept my depression were the people opening up to me about theirs. There is no shame in it, depression is a hereditary illness that causes a chemical imbalance in your brain, there’s no choosing what illness you get,” he says. . .

Education will help quad bike safety – Jeanette Maxwell:

Quad bikes have been in the news following two deaths and several injuries over the Christmas and New Year period.

Most incomprehensible was the incident in which 6-year-old Ashlee Shorrock suffered serious injuries after being flung from a quad bike that veered off a Hawke’s Bay road late at night. What were she and the four adults also injured in the crash doing on the bike in the first place?

However, while it may not seem like it from the intense media coverage, quad bike deaths and serious injuries remain relatively rare despite the 100,000 machines in New Zealand.

While quad bikes are dangerous if mishandled and the farm toll is serious and must come down, we fear that politicians will respond to the media coverage by jumping at ”solutions’ . . .

Chance to win a free paddock and boost productivity:

Federated Farmers hopes all farmers will enter the Pasture Renewal Charitable Trust’s (PRCT) ‘Win a Free Paddock’ competition which begins on 20 January and runs through to 28 February.

All farmers are eligible to enter for three chances to win $8000 worth of products and technical advice used in the pasture renewal process.

“Federated Farmers is proud to support PRCT’s work in this area because pasture renewal is a core farming activity improve pasture quality, which in turn brings greater productivity, increased returns, improved animal health and more farm management options,” Federated Farmers board member and New Zealand Grassland Association executive member Anders Crofoot says. . .

Seafood New Zealand Chief Executive announced:

The chair of Seafood New Zealand, Eric Barratt, today announced that Tim Pankhurst has been appointed chief executive of Seafood New Zealand effective from April 2013.

Mr Pankhurst is currently the general manager of the Communications and Media Industry Training Organisation (CMITO) and Print NZ, as well as having an advisory editorial role with the Newspaper Publishers’ Association (NPA). He was previously chief executive of NPA and is a former daily newspaper editor of The Dominion Post, The Evening Post, Waikato Times and The Press. . .

Husqvarna joins the Sponsor Family of the ANZ Young Farmer Contest:

New Zealand Young Farmers are proud to announce Husqvarna NZ have partnered with the ANZ Young Farmer Contest as prize sponsors of New Zealand’s Ultimate Rural Challenge.

Husqvarna is a leading manufacturer of outdoor power equipment, designed to work in the toughest of conditions. One of the oldest industrial companies in the world with more than 300 years of history and experience, the Husqvarna Group today is the global leader in outdoor power products for forestry, lawn and garden care. . .


NZ tops OECD for public education spending

September 18, 2012

Next time someone tells you New Zealand doesn’t spend enough on education show them this:

The amount spent isn’t necessarily a measure of success.

The quality of spending is at least as important as the quantity and it’s not just what is spent, but  how and where it’s spent.

There is debate about the quality, how and where of spending. It is possible to find arguments in favour of increasing the amount that’s spent too.

But they lose some of their strength when we top the OECD for spending on public education as a percentage of public expenditure.


How well matters more than how much

February 21, 2012

The quality of spending in education is more important than the quantity spent according to the OECD programme for International Student Assessment (PISA).

Education Minister Hekia Parata said:

New Zealand was singled out as a top performer achieving better-than-average results despite its comparatively low gross domestic product.

Ms Parata says the report shows expenditure levels should not be a barrier to achievement.

“It’s great to see that New Zealand has once again performed well in this international survey.

“However, with one in five students currently leaving school without a qualification, we have still got work to do,” says Ms Parata.

“Our Government’s key objective is to ensure every child has the opportunity to succeed. Over the next three years we want to significantly raise achievement for all students, especially those groups of students who have historically under performed.’’

Several factors influence achievement but how well money was spent was more important than how much.

The report showed:

  • Greater national wealth or higher expenditure on education does not guarantee better student performance. Among high income economies, the amount spent on education is less important than how resources are used.
  • Successful systems in high income economies tend to prioritise the quality of teachers over the size of classes.
  • School systems that perform well in PISA believe that all students can achieve and give them the opportunity to do so.

The full report is here.


All better without subsidies

December 12, 2011

A visiting dairy farmer from the United States said they have very few subsidies now and that’s the way most farmers there like it.

The prefer to prosper, or not, through their own efforts rather than at the whim of the government.

That sentiment is shared by farmers here and the OECD:

Countries should focus on improving farm productivity, sustainability and long-term competitiveness, rather than policies that distort markets.

NZ has the lowest agricultural  subsidies in the OECD:

New Zealand has the lowest level of government support to agriculture in the OECD, at just 1% of farm income. Australia (3%), Chile (4%) and the United States (9%) are also well below the OECD average.
  • The European Union has reduced its level of support to 22% of farm income, but remains above the OECD average.
  • Support to farmers remains relatively high in Korea (47%), Iceland (48%), Japan (49%), Switzerland (56%) and Norway (60%).
  • Brazil, South Africa and Ukraine generally support agriculture at levels well below the OECD average, while support in China is approaching the OECD average. In Russia, farm support now exceeds the OECD average.

I didn’t think we had any support at all. If I’m reading the report correctly that 1% is sector-wide policy measures  representing general services to agriculture.

New Zealand farmer were dragged unwillingly into the real world in the 1980s but I haven’t met a single farmer in the last 20 years that would want to go back.

Farmers and the country are better off without subsidies.


It’s floor not gap or ceiling that matters

December 7, 2011

The news that the gap between the rich and poor in New Zealand has widened again has led to inevitable calls for  action.

That action usually means taking more from the wealthy.

Dragging the top down would certainly narrow the gap but it wouldn’t necessarily help the poor.

The problem isn’t the ceiling or the gap between it and the floor, it’s the health and wellbeing of people on the floor.

A compassionate society has a role in looking after the vulnerable. That includes providing or assisting with necessities such as shelter, food, education and healthcare.

It means helping people get to a position where they can help themselves.

The question a compassionate society should be asking is not, how much do the poor have in relation to the rich, but do the poor have enough?

Enough, if someone else is paying, is sufficient for necessities , not luxuries.

The best assistance for the poor is a growing economy which provides more, better paid jobs, not higher taxes and more redistribution.

 


Freedom is path to happiness

June 19, 2011

What makes us happy?

Tim Worstall looked at an OECD report Your Better Life  which showed 16 countries ranked better than the USA and found:

The most obvious point is that higher taxes and a larger welfare state don’t provide the answer.

He looked further and found that, with the exception of France, all the countries which were higher up the better life index than the USA also had more economic freedom.

So, now we have it, now we know what it is that makes countries happy, happier than the United States. Free trade, property rights and the rule of law.

When it’s as simple as that, why would anyone try to block free trade, weaken property rights or undermine the rule of law?

P.S. The Better Life Index for New Zealand is here.


Living standard about more than money but not high without money

May 27, 2011

Treasury has decided there’s more to higher standards of living than material wealth:

Treasury’s understanding of the term living standards goes beyond the narrow material definition – often proxied by GDP – to incorporate a broad range of material and non-material factors such as trust, education, health and environmental quality. In taking a broad approach to understanding living standards, Treasury is in line with other economic institutions internationally. For example, the Australian Treasury acknowledges that “analyses of economic development or progress that only take income into account neglect other important determinants of wellbeing”  . . .

I can’t argue with that. Anyone who thinks the standard of living is all about material wealth knows more about price than value.

The OECD certainly thinks so in its better life initiative:

The Index allows citizens to compare well-being across 34 countries, based on 11 dimensions the OECD has identified as essential, in the areas of material living conditions and quality of life: housing, income, jobs, community, education, environment, governance, health, life satisfaction, safety, work-life balance..

New Zealand performs well on the index which rated factors including  income, employment, education, health, civic participation and satisfaction.

New Zealand performs exceptionally well in overall well-being, as shown by the fact that it ranks among the top countries in a large number of topics in the Better Life Index.. .

. . . When asked, 77% of people in New Zealand said they were satisfied with their life, above the OECD average of 59%.

Our average incomes are lower than those for the OECD but we’re above average for most other factors. However, the report acknowledges that while money can’t buy happiness it contributes to higher living standards.

That reminds me of a quote attributed to Margaret Thatcher:

“No one would remember the Good Samaritan if he’d only had good intentions – he had money too.”

A high standard of living must take into account more than material possessions, but it still requires material goods and services and the money to buy them unless you remove yourself from society and become wholly self-sufficient.

You don’t need a lot of money to have a good life but you’ll have a better life if you, and your country, have more than enough.


Taxes not low when Tax Freedom Day’s in May

May 18, 2010

Last Tuesday was Tax Freedom Day.

That’s the notional day when the Business Round Table calculates that the  average New Zealander stops working for the government.

Executive director Roger Kerr said:

 . . .   the calculation of 11 May was based on central government core expenditure, which is forecast to be 35.5 percent of gross domestic product (GDP) in the government’s December 2009 Half Year Economic and Fiscal Update.

 “Tax Freedom Day in 2008 and 2009 fell on 10 and 11 May respectively, according to revised data. However, it arrived two weeks earlier in 2007 (27 April). The big delay in the arrival of Tax Freedom Day since then reflects the rapid growth of spending during the last term of the previous government. The present government’s forecasts indicate little relief for taxpayers in the next three years. Mr Kerr said that the Business Roundtable regarded government spending as the best measure of the overall tax burden because almost all government spending ultimately has to be financed from present or deferred taxation (borrowing). It ‘looks through’ periods when the budget is in deficit or surplus.

The growth in spending in the previous government’s last term shows how expensive the 2005 election was and how much of our money was used to win it.

The dead rats National had to swallow before the 2008 election and the response to the world recession has kept state spending higher than it ought to be.

There’s little comfort in the finding that Tax Freedom Day here is earlier than the OECD average of June 14.

This reflects the sharp expansion in spending by many OECD countries, partly in response to the global financial crisis. It highlights the need for “large scale fiscal adjustment” as countries recover from the economic downturn which is recommended by the International Monetary Fund.

A comparison with those countries  came up again last week with a report showing that our tax wedge – individual tax as a percentage of labour costs – is amongst the lowest in the OECD.

However Kiwiblog  points out this report isn’t comparing apples with apples:

This is not a measure of the overall level of taxation in the economy. It is a measure of the difference between gross pay and net pay. There is a huge difference.

 Macdoctor also noticed that report  didn’t take account of consumption taxes, compulsory superannuation and employers’ contributions to social security.

Back to the Business Round Table report which noted:

 A number of fast-growing Asian and other countries have levels of government spending, and hence tax burdens, that are well below the OECD average. Their advantage has increased as they have not generally increased spending to the same extent as developed countries.

 If the tax burden is measured as a ratio of taxation to GDP instead of spending, the picture of New Zealand as a highly taxed country is accentuated. The latest OECD figures show that the ratio of ‘general government total tax and non-tax receipts’ to GDP for New Zealand is 40 percent for 2010, well above the average OECD ratio of 36.6 percent and much higher than Australia’s ratio of 33.1 percent.

Kerr isn’t suggesting there should be no tax:

“While soundly based government spending on public goods and a safety net is justified, economic research suggests that beyond a certain point government

spending and taxation are harmful to economic growth.”

Finance Minister Bill English has given pretty strong signals we’ll get tax cuts in Thursday’s Budget.

That in tandem with measures to improve public service efficiency and economic growth gives some hope that Tax Freedom Day will be earlier in future.

That will provide security for essential public services while allowing us to retain a bit more of our own money.


OECD prescribes less debt, more productivity for NZ

April 16, 2009

The OECD’s latest report on New Zealand  forecasts a shrinking economy for the rest of this year with hesitant growth in 2010.

It recommends that the Reserve Bank cuts interest rates again and keeps them low and says the government must take control of deficits and debt.

Given the risks to the government’s credit rating and to market confidence and the heavy dependence on foreign debt funding, there is little room for more fiscal expansion. It is crucial that the new government’s first budget this May delivers a credible consolidation plan.

It says the gap between New Zealand’s productivity and the rest of the OECD must be addressed.

Although the quality of New Zealand’s regulatory regime is generally high, it has fallen relative to other OECD countries. Even if a cyclical improvement is likely following the downturn, a durable pick-up in productivity growth with high employment will require structural policy changes

The graph in the previous post shows how bad the gap is and the report says that is partially explained by our geographical isolation but:

The country appeared to be on the right policy track with its earlier market-oriented reforms. But the policy focus on productivity and growth eroded during the years of economic buoyancy, while other countries advanced. Notably, a large amount of new regulation, at times poorly designed, coordinated and focused, was introduced. Such measures have increased the costs of doing business and sent bad signals to foreign investors.

The report’s prescription for economic recovery includes increasing public sector productivity, shifting the tax base from income to consumption and selling assets.

The authors commend the basic principles of the RMA but recommends improvements to  its management and implementation including streamlining the consenting process and establishing local provisions for water trading and the measurement and consent of nutrient flows.

They also suggest our greenhouse gas targets are dependent on other countries having similar policies and targets.

The report says that rising health care costs threaten long term fiscal sustainability and suggests an increase in private insurance and provision.

Its prescription also includes increasing medical student numbers and accepting more foreign students.

To the extent that New Zealand cannot offer international-level specialist wages, it should work harder to create a satisfying and innovative clinical environment, giving doctors a high degree of autonomy and interaction with other professionals in the new collaborative-care settings.

How easy would that be and would it be enough?

The report is recommending strong medicine and memories of the fallout from the last time that was administered in the 1980s and early 90s will foster resistance.

But tough times require tough measures and the challenge for the government is to deliver the medicine the economy needs without turning it into political poison.


What went wrong?

April 16, 2009

Remember Labour’s pledge to get New Zealand into the top half of the OECD?

This graph from the OECD’s latest economic survey shows that progress didn’t match the rhetoric:

dairy-100011

What went wrong?


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