Celebrating humanity's flourishing through the spread of capitalism and the rule of law
05 Apr 2015 1 Comment
in applied price theory, economics of regulation, politics - New Zealand, urban economics Tags: housing affordability, RMA, supply of land, zoning
If homebuyers access additional lines of funding because they can tap into their KiwiSaver retirement savings, they will use this to bid up the price of housing and land.
If the supply of land is fixed or otherwise constrained from expanding much, such as by the Resource Management Act and the metropolitan urban limit in Auckland, the only thing that will happen is that the price will go up with more money chasing the same amount of land and housing.
The price of land and housing must go up in the absence of some reforms that increase the supply of land. Rather than increase access to housing among those with don’t own a house, allowing homebuyers to access their KiwiSaver retirement savings entrenches the prospects of Generation Rent.
04 Apr 2015 Leave a comment
in business cycles, economic growth, global financial crisis (GFC), macroeconomics, politics - Australia, politics - New Zealand Tags: GFC, Rogernomics, Trans-Tasman income gap
@JimRose69872629 @JohnQuiggin @pagdavidson Largest fall in real mean incomes in NZ was in the early 1990s http://t.co/DDVgeMIGsj—
Peter Whiteford (@WhitefordPeter) April 04, 2015
Real household mean incomes rose during Rogernomics; fell during the deep recession at the beginning of the early 1990s; then rose strongly until 2009 and the onset of the Global Financial Crisis.
03 Apr 2015 Leave a comment
in economic history, politics - Australia, politics - New Zealand, population economics
02 Apr 2015 1 Comment
in income redistribution, labour economics, politics - Australia, politics - New Zealand, politics - USA, welfare reform Tags: social insurance, social safety nets, welfare reform, welfare state
I have reanalysed data published by the Peterson Institute on the true levels of social expenditure across the industrialised countries for the Anglo-Saxon countries.
Figure 1: gross public social expenditures in OECD countries, 2011
Source: POLICY BRIEF 15-4: The True Levels of Government and Social Expenditures in Advanced Economies.
When you just look at gross public social expenditure, New Zealand is in the middle of the pack with the United Kingdom having the largest spending. There are not particularly large differences across social spending in the Anglo-Saxon welfare states.
Figure 2: Gross public social expenditure and the effects of taxation in OECD countries, 2011
Source: POLICY BRIEF 15-4: The True Levels of Government and Social Expenditures in Advanced Economies.
There is not much change when you include the effects of taxation on consumption by benefit recipients.
Figure 3: Net after-tax public and private social expenditure in OECD countries, 2011
Source: POLICY BRIEF 15-4: The True Levels of Government and Social Expenditures in Advanced Economies.
When private mandatory social spending is included, such as employer sponsored health cover, there is considerable change with United States leaping to the front and New Zealand dropping to the bottom. The USA has the largest and most expensive is health sector in the world so they are leaping of the front, either because healthcare is expensive in United States or people in the United States are not constrained by government rationing to spend less than they would prefer on their own healthcare. Let’s leave that war of ideas for another day.
Figure 4: Net after-tax total social expenditures in OECD countries, 2011
Source: POLICY BRIEF 15-4: The True Levels of Government and Social Expenditures in Advanced Economies.
On the face of it, New Zealand has the smallest Anglo-Saxon welfare state while the United States has the largest. A more accurate measure of the relative sizes of these Anglo-Saxon welfare states would require the wisdom of Solomon in measuring waste and underfunding in the respective systems and more trust than you should have in services sector in purchasing power parity adjustments.
For those that are interested, the OECD-wide gross social spending and net after-tax total social spending are reproduced below in figures 5 and 6.
Figure 5: Net after-tax total social expenditures in OECD countries, 2011
Source: POLICY BRIEF 15-4: The True Levels of Government and Social Expenditures in Advanced Economies.
The Figure 5 data on the OECD wide welfare state sizes shows that when you add private spending, including social spending mandated by law, the US has the second largest OECD social safety net as Kirkegaard said in his Peterson Institute paper:
Taking the full effects of tax systems and social spending from both private and public sources into account, the United States is seen to be devoting more resources toward social purposes than is generally acknowledged. In fact, only the French spend more than Americans, while the alleged welfare-addicted Scandinavians and Europeans spend less on average.
Figure 6: Gross public social expenditures in OECD countries, 2011
Source: POLICY BRIEF 15-4: The True Levels of Government and Social Expenditures in Advanced Economies.
Via The US welfare state and safety net are bigger than you think. But who are they helping? – AEI | Pethokoukis Blog » AEIdeas and POLICY BRIEF 15-4: The True Levels of Government and Social Expenditures in Advanced Economies
01 Apr 2015 Leave a comment
in labour economics, minimum wage, politics - New Zealand, unemployment
Source: Short-Term Labour Market Statistics : Harmonised Unemployment Rates (HURs).
In New Zealand during June 1987–2014, unemployment rates were consistently higher for younger people aged 15–19 years than other age groups. Rates were lower for each age group, with those aged 45–49 years having the lowest). In the year ending June 2014, annual unemployment rates were 22.5% for those aged 15–19 years and to 11.7% for those aged 20–24 years – Child Poverty Monitor: Technical Report.
The time is not right, as they say, for New Zealand to increase its minimum wage rates after a sharp spike in the unemployment rates of youth and in particular of teenagers after the Global Financial Crisis.
01 Apr 2015 Leave a comment
in politics - New Zealand, politics - USA, urban economics Tags: Don Brash, land supply, Resource Management Act, zoning
01 Apr 2015 Leave a comment
in environmental economics, global warming, politics - Australia, politics - New Zealand, politics - USA Tags: 2014 congressional elections, climate alarmism, global warming, opinion polls, voter demographics
31 Mar 2015 Leave a comment
in politics - New Zealand, politics - USA, public economics Tags: neoliberalism, Rogernomics, tax reform
If our friends on the Left are to be believed, governments fell under the spell of a flying visit by Milton Friedman and his local neoliberal cronies and slashed taxes to the bone from about the mid-1980s in Australia and New Zealand.
Source: Revenue Statistics – Comparative tables.
In Australia’s case, the only time tax revenue as a percentage of GDP fell prior to the election of a Labour government in 2007 was during a deep recession in 1991. This was a recession bought on by irresponsible monetary policy by Paul Keating– the Keating recession.
As for New Zealand, the tax take increase quite considerably under tax reforms of the Labour Government of the 1980s. Roger Douglas, far from being a neoliberal plant, seemed to be a double secret agent of a tax maximising Leviathan. Little wonder the New Zealand economy was sluggish in the late 1980s because of this large increases in the tax take.
Osborne won't rule out tax cut for top earners ind.pn/1JaeId4 http://t.co/LvO7vgmmX0 http://t.co/YU3600Sk5s—
Marcus Chown (@marcuschown) April 05, 2015
31 Mar 2015 Leave a comment
in constitutional political economy, politics - Australia, politics - New Zealand, Public Choice, public economics, taxation Tags: Geoffrey Brennan, James Buchanan, tax reform
The GST increased from 10 to 15% in New Zealand; more than doubled in the UK; but GST rates were stable or went up and down in the remaining Anglo-Saxon countries.
As for a selection of other non-Anglo-Saxon countries , Brennan and Buchanan were right. Tax reforms such as a broad-based consumption tax leads to higher taxes through time.
ICYMI: How does Australia's GST compare with other nations? ab.co/1eBsdrS #factcheck http://t.co/QFP05xonEB—
ABC Fact Check (@ABCFactCheck) July 31, 2015
The GST (goods and services tax) in Europe is known as the value added tax (VAT).
Source: OECD Tax Database – OECD.
31 Mar 2015 Leave a comment
in health economics, politics - Australia, politics - New Zealand
Seems like imposing a tax on those did not have a private cover induced high income people to take out private cover stop
Via http://www.healthfunds.org.nz/pdf/dec2013%20Quarterly%20statistical%20summary.pdf
Via INFOGRAPHIC: A snapshot of private health insurance in Australia.
31 Mar 2015 Leave a comment
in economic growth, macroeconomics, politics - Australia, politics - New Zealand, politics - USA
31 Mar 2015 Leave a comment
in business cycles, economic growth, macroeconomics, politics - New Zealand Tags: 1998 recession, drought, real business cycles
Reserve Bank of New Zealand has these conclusions about the contribution of drought to the business cycle in the late 1990s in New Zealand and in particular the mild 1998 recession:
a back-of-the-envelope estimate of the impact of the drought-induced fall in supply would suggest a contribution from the agricultural sector to production GDP for the March quarter of 1998 of around -0.4 percentage points out of the total 1 per cent fall in production GDP. In the June quarter of 1998, the contribution from these sectors was close to zero.
Figure 27:
In 1998, agricultural and hunting industry contributed per cent of real GDP. . That included the production of livestock, wool, dairy, horticulture, and crops, as well as the provision of agricultural contracting services and hunting. In the same year, the primary food manufacturing industry contributed 3 per cent of GDP. This category covers the processing of meat and dairy products for export and local markets.
28 Mar 2015 Leave a comment
in economic growth, economic history, macroeconomics, politics - New Zealand
While feuding on another blog about the ups and downs of the New Zealand economy since the 1970s, I pointed out that a long economic boom followed the Ruth Richardson “Mother of all Budgets” in 1991:
My interlocutor quickly replied to blame Rogernomics, in particular, inflation targeting and its administration by Don Brash for a severe recession in New Zealand in 1998:
The mild recession in New Zealand in 1998 was a result of the combination of two severe droughts and the effects of the Asian financial crisis.
Drought is a major factor in the New Zealand business cycle because of the large size of the farming sector. Indeed, the ups and downs of a monopoly dairy exporter that accounts for 7% of GDP, Fonterra, are so central that a single dirty pipe at a milk factory that put the quality of its milk exports in question lead the Treasury to revise its economic forecasts for that year.
There is growing evidence that a substantial part of business cycle volatility can be explained by real business cycle theory (RBC). RBC claims that a good majority of economic volatility is caused by changes on the supply side: tax and regulatory changes, bad weather in farm economies, spikes in oil prices and technology shocks. Real business cycle models have enjoyed success in replicating most of the observed characteristics of, for example, U.S. aggregate economic activity.
Over the last 15 years, a number of papers at the Treasury and Reserve Bank of New Zealand have explored the role of droughts in the New Zealand business cycle, such as the drought in 1997.
The 1998 recession was preceded by a severe drought that may have knocked a half percentage point off GDP or more. As the Treasury explained in 2008:
Given the importance of the primary sector in New Zealand, climatic conditions have always been a significant driver of GDP volatility in New Zealand. There is strong evidence that the 1998 drought triggered or precipitated the onset of the last recession in the late-90s.
In 2008, the dry conditions in New Zealand led the Treasury to revise its forecasts as follows:
current dry conditions are likely to trim GDP growth by around 0.5% for the 2008 calendar year.
In 2013, the Reserve Bank made similar pessimistic forecasts about the implications of drought for economic prospects. New Zealand was suffering its worst drought in decades:
It was simply mistaken to blame the 1998 recession in New Zealand as the spawn of Rogernomics. There was a drought, a big one, big enough drought to shake the New Zealand business cycle in a country with a large farming sector.
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