Petrol not fast to rise and slow to fall

07/08/2008

A government study found that, contrary to popular belief, petrol prices don’t rise quickly and fall slowly.

The key findings of the review were:

* The New Zealand petrol market is fundamentally competitive;

* Price rises are mainly due to increases in crude oil price overseas;

* Retail petrol prices are not fast to rise and slow to fall;

* A Fuelwatch scheme like that in Australia (where petrol prices are published and fixed for a certain time) would not work in New Zealand as the market is different; and

* There was a need for more transparency on importer margins and reporting them would be useful for consumers.

The report, which was commissioned by the Ministry of Economic Development, found we’ve got the fifth lowest petrol prices inclusive of taxes in the OECD.

I’m pleased we’re not going to waste money on a Fuelwatch scheme. But I’m not sure that there is much comfort in having the fifth lowest prices in the world when that price is so high and impacts on almost everything we do or buy.


Progressive move to universal student allowance – Hodgson

17/07/2008

Tertiary Education Minister Pete Hodgson says that Labour’s Policy  is for a progressive move to a universal student allowance rather than a direct move.

His comments follow speculation Labour will offer a universal student allowance as an election bribe, a policy which appeals to the Greens.

Green MP tertiary education spokeswoman Metiria Turei said the Government should provide a timetable for moving to universal allowances.

“Maybe toying with student livelihoods is just political game playing, but student debt is no fun at all for the generation which has grown up struggling with debt repayments, let alone trying to buy houses or start families,” Mrs Turei said.

Paying higher taxes for election bribes isn’t much fun either and money spent on direct student support is money that’s not available for other areas of education.

The New Zealand Vice-Chancellors’ Committee said speculation about the universal allowance was unhelpful and the country was spending well over the OECD average on student financial support.

The organisation said funding for tertiary students was more than twice the rate it was for tertiary education institutions. Forty-two percent of tertiary education spending went to student financial support, compared with an OECD average of 18 percent.

Students should put their efforts into strategies to improve the quality of education rather than the quantity of allowances.

Education lobby group, Education Forum, policy advisor Norman LaRocque agreed with the university vice-chancellors.

“Putting money into student support, rather than into funding for TEIs (tertiary education institutions), would do nothing to improve the performance of the tertiary education sector in New Zealand,” he said.

Over generous subsidies send all the wrong signals, encouraging participation rather than rewarding effort.

Students and the country would be better off if more went into teaching and teaching reources; or encouraging graduates in areas of skills shortages, as National has suggested doing by writing off a portion of student loans for each year medical graduates work as rural GPs.


Quango Hunting Season Opens

10/07/2008

Those of us out in the real world will not be surrprised by ANZ Chief economist Cameron Bagrie’s  conclusion that Government spending is being directed into non productive areas.

His study, prompted by a rise in government spending in relation to the economy, found it impossible to assess whether spending was productive, “because no one really knows the counterfactual”.

So instead, Mr Bagrie examined the spending mix — how much was spent on front-line activities, such as welfare benefits, health and education services and police rather than on “back office” (departmental outputs).

`What we find is that back-office (departmental) expenses have exceeded our definition of front-line spending, resulting in an upward trend.”

Growth in departmental outputs has averaged close to 7 percent a year since 1997 while front-line spending increased by 5 percent.

Nominal GDP growth within the economy averaged 5.5 percent. Government spending as a proportion of GDP has fallen from 42 percent in 1995 to 39 percent in 2001 and risen back to the OECD average of 40 percent in 1997.

Mr Bagrie said if the back-office ratio had remained in line with front-line spending then there would have been an extra $1 billion free for other activities and a cumulative saving since 1997 of $3 billion.

It would not have been difficult for people at the front line of public services to find a good use for that money, or some could have been better spent on tax cuts. 

In education, back-office spending had grown annually at 12 percent since 1997, massively outstripping front-line purchases.

Similarly, benefit spending increases had averaged 3 percent while back-office spending had been 7.5 percent a year.

Meanwhile unemployment is at record lows so there are more people in a department helping fewer beneficiaries.

However, in health, the trend was the opposite.

While it was encouraging spending for tomorrow in activities such as education and infrastructure was increasing, it was puzzling relatively more money was going into departmental spending, Mr Bagrie said.

The study found spending in productive government activities (education, law and order, science, housing, defence, employment initiatives, and transport) grew at 5.2 percent compared with those in non productive (departmental outputs, heritage, culture, recreation and economic and industrial services) at 8.4 percent.

That’s a damning indictment on Labour’s priorities.

In another gauge of the spending mix, Mr Bagrie said it appeared growth in spending in “hand-up” activities (front-line education excluding student loans and employment initiatives) was outpacing “hand-out” (benefits) by 4.4 percent to 3.3
percent.

At least that is encouraging.

Mr Bagrie acknowledged shortcomings in his definitions and noted the Government may have been playing “catch-up” in departmental spending due to previous under-spending.

He said there were no benchmarks and the mix of spending was not necessarily wrong, particularly as spending priorities were the result of living in a democratic society.

“Nonetheless, we believe the trend across our gauges is sufficiently clear: more government spending is being directed at areas that are not going to the front-line and for consumption today relatively to tomorrow.”

Mr Bagrie said there needed to be measurable benchmarks introduced into the Government’s stated objectives such as the Fiscal Strategy Report.

However, he said the requirement for transparency and rigorous analysis of spending could be overdone and may be part of the problem. Many resources in education and elsewhere were tied up in approval and monitoring rather than simply getting the job done.

In other words too much time, energy and money is wasted on form filling and box ticking.

With 41 government departments, 65 crown entities, 21 District Health Boards and 9 Crown Research Institutes, Mr Bagrie said it may be time for a repeat of the 1980s “quango hunt” to slim government down.

A quango hunt what fun! Let’s start by reducing the number of DHBs.

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