Donal Curtin

Donal Curtin is a macroeconomist (former chief economist for a big bank), writer (six years as a financial journalist with Euromoney, award-winning economics columnist, blogger), economic regulator (12 years on the Commerce Commission). He has an economics consultancy based in Auckland and blogs for The Dismal Science. Donal is on Twitter @donal_curtin

Let’s take in more talent from overseas – and quickly - The Dismal Science

Nov 26, 2014

The latest net migration figures got a fair amount of media airtime, and even though a fair slab of it was on the invidious "aren't we doing better than Australia" track, the numbers were still pretty impressive - we had the biggest ever annual level of net immigration in the October '14 year (+47,700), beating the previous records set in the August '14 year (+43,500) and the May '03 year (+42,500). Net immigration is running at over four times its annual average over the past 20 years (+11,700). If you're interested in the details, the big pdf release from Stats is here and the actual data here.

It's interesting to see how sensitive these migration flows are to economic conditions at both ends of the migration journey: a lot of the media commentary, for example, picked up on the big impact on trans-Tasman flows of the strong New Zealand business cycle, compared with the currently sub-par Aussie one. But the same mechanism also works on migrant flows from other places, and it's left me wondering whether we're missing a good opportunity to attract European talent in particular.

We know, for example, that employment conditions in France are pretty grim, particularly for younger people, mostly down to the weak French economy, but aggravated by an inflexible labour market. So it's not surprising to see that the number of French people coming here on work visas has been rising strongly, from 1,187 in the October '12 year to 2,642 in the October '14 year. Unemployment isn't anywhere near as bad in Germany, but again the local slow economy is encouraging more Germans to look for jobs here, and the numbers coming on work visas have risen from 1,703 to 2,723 over the past two years.

But these opportunities to get talented people to come here from overseas don't last forever: the flows are very sensitive to relative changes in the business cycle at both origin and destination. Ireland's the classic example: business conditions were dire in Ireland until this year, when there has been a reasonably robust recovery. And the link to the net work migration flows from Ireland has been immediate: we had 1,298 Irish people coming here on work visas in the October '12 year, and 1,378 in the October '13 year, but it's already started to ebb, with a drop to 1,032 in the October '14 year.

I'd say we have a short but highly promising opportunity to get more skilled people to come here from the recessionary Eurozone. Jobs fairs in Australia are all well and good: but what about also doing a one-off liberal offer of work visas around Europe?

And by liberal, I mean one that doesn't pay too much mind to MBIE's 'Long Term Skill Shortage List', the thing that prioritises the kinds of skills we're normally looking for, partly because the list looks to me rather odd in places - I can believe we're short of engineers of all kinds, a fair array of medical specialists, and anything to do with ICT, but social workers? chefs? education lecturers? statisticians? external auditors? quantity surveyors? - and partly because we can't actually achieve that degree of precision in knowing what we'll need or in linking credentials to innovation or entrepreneurship. For all we know the next big app could be written by a self-taught enthusiast who left school with no qualification.

So I'd be inclined to hoover up as many of Europe's skilled and talented people as we can, while we can, and I'd relax the current immigration criteria to do it. Paper Marseilles and Düsseldorf with easy to complete work visa forms, and see what happens.

It can only be good for us. And if you're not too sure that immigration is good for a country, then read this opinion piece from the Brookings Institution, "Even Piecemeal Immigration Reform Could Boost the U.S. Economy", which says

High-skilled immigrants are good for America, and we should encourage more of them to come here given recent trends in entrepreneurship, where more firms are dying than being created every year. But high-skilled immigrants could help turn that trend around — they are twice as likely to start businesses as native-born Americans. This is especially true in high-tech sectors, where immigrants are not only more likely to start firms, but also to patent new technological discoveries
A bit of piecemeal immigration liberalisation would work for us, too.

The ref shouldn’t reach for his pocket - The Dismal Science

Nov 21, 2014

You've got a valuable piece of intellectual or physical property. What, from a competition law perspective, can you do with it?That might seem a daftly broad (or broadly daft) question to ask, but it keeps coming up, and it rather bothers me, since if ...

Decile funding – pros and cons - The Dismal Science

Nov 13, 2014

There's been quite a bit of reaction in the social media to the news that 'Poorly targeted' school decile funding may be dropped. It's not easy to make much of a case for anything in 140 character bursts, so I thought I'd take a bit more space to wonde...

Too many rules, not enough houses - The Dismal Science

Nov 10, 2014

Last month I wrote about some residual absurdities in Australia, where there were still bizarre examples of nutbar regulation of the retail trade, and this despite decades of economic reform that one might have expected would have swept away the last of the most egregious nonsense.
It left me feeling that "there are still thickets of regulation that are absolutely bonkers". At the end of the post I said that "the good news is that both Australia and New Zealand now have Productivity Commissions that are able to turn over the flat stones and tell us what they're finding underneath", and wondered "what we'd find if, for example, we turned over some flat stones of our own".
I didn't have long to wonder.
Along came the Issues Paper (pdf) for the Productivity Commission's latest project, on the availability of land for housing. And even at this early stage it has found multiple examples of over-prescriptive, inconsistent, complex, inefficient, expensive and (I would say) largely rationale-free regulation.
Here are some examples, direct quotes from the paper.

(1) A Ministry for the Environment review of Christchurch City Council planning and resource consent processes described the two Christchurch District Plans as:
…large, cumbersome and difficult to navigate. The City plan is effects-based, while the
Banks Peninsula plan is activities-based. There are a total of 109 different planning zones,each with varying provisions (p28)
(2) Auckland Council is currently in the process of developing its first Plan as a unitary council. The Proposed Auckland Unitary Plan (PAUP) will replace the existing Regional Policy Statement and 13 district and regional plans. Given the breadth of the material covered in the PAUP it is not surprising that the document is lengthy, but at 6 961 pages (at the time of writing) the PAUP is very unwieldy. Supplementary documentation acknowledges that the Plan is complex, but also suggests that users must read the full document:
       The Unitary Plan is a complex document that consists of many interlinked parts. One        must not look at any provision in isolation, but read it as a whole (p29)
 (3) the Ministry for the Environment notes that plans prepared by “the eight largest
territorial authorities showed 123 different terms were defined, with more than 450 variations of those definitions”...
A comparison of two Plans’ rules around car parking demonstrates the variation. The Käpiti Coast District Council’s Rules and Standards states that "All buildings shall be designed so that wherever practicable sufficient manoeuvring space on site will ensure no reversing onto the road is necessary." In contrast, Nelson City Council’s Residential Zone Rules state that "Reverse manoeuvring is encouraged on unclassified roads and is part of ensuring a low speed environment and people orientated streetscape." (p37)
(4) One way of enabling new types of land use is to change a Regional or District Plan. Changes to Plans can be sought by a local authority or a private party...
The average timeframe taken to complete a Plan change in 2012/13 was 24 months. This was an increase from 2010/11, where council-initiated Plan changes took 17 months to complete and privately initiated Plan changes took 16 months (p47)
No doubt some processes are working well, but in spots we've got regulations of a complexity that would tax a Talmudic scholar, a glacial pace of administration, and an absence of compelling logic, with things forbidden in one jurisdiction being encouraged in the next. And all this against a background of a bloated local administration superstructure. We're a small country, but even after a programme of local authority consolidation, we're still left with this (p16):

No wonder we get this outcome (p7).

The Issues Paper isn't all about the dead hand of local authority micromanagement - I've focussed on those aspects as I've got an interest in good regulation - and it canvasses a wide range of other factors affecting the availability of housing land. The Productivity Commission is looking for people to tell it whether it's on the right track with its initial ideas, and whether it's missed anything: in particular it has a list of 74 specific questions where it is looking to get feedback and information, though people are also welcome to submit their views outside the 74-question format (contact details are in the paper and here).
The state of the housing market is one of the bigger economic issues right now: take the opportunity to have your say on what's going on and what should be done about it.

Report from the GEN conference - The Dismal Science

Nov 07, 2014

Wednesday was the Government Economics Network's annual conference at Te Papa in Wellington. This year the theme was "The relevance of economics in a changing world".The keynote presentation was from Stanford's Paul Oyer, "The more things change, the m...

Are we asleep? - The Dismal Science

Nov 04, 2014

On Wednesday I was passing through Dublin Airport on my way back to New Zealand, when I saw poster ads promising people up to 150,000 euros as a reward, if they've been responsible for introducing a new foreign company as a direct investor in Ireland. You can see how the scheme works here.
It's a clever idea, and it comes on top of an already impressive track record in attracting foreign direct investment (FDI) into Ireland. The agency involved, IDA Ireland, is widely regarded as one of the best of its kind: as one example, in the 'Achievements' bit of its website, it says that "2013 was a record year for FDI in Ireland as IDA client employment reached its highest ever level at 166,184. FDI alone created 25,000 jobs in 2012 and 2013".
And it is quality investment. As a recent report from an IBM unit says:

For most countries it is not just the number of jobs created that is of interest, but also the type of investment projects and their value to the economy. Comparing countries on what
projects are attracted, and not just the number of jobs, is therefore an increasingly important metric for gauging inward investment performance. To this end, IBM-Plant Location International has developed an FDI value indicator that assigns a value to each investment project, depending on the sector and the type of business activity. This value indicator assesses the added value and knowledge intensity of the jobs created by the investment project. Using this measure, Ireland continues to be the top performer in the world, resulting from the country’s success in attracting research and development (R&D) activities in life sciences and ICT coupled with high-value investment in financial services. 
It's left me wondering whether we are doing anything at all in New Zealand to attract inward FDI, let alone anything comparably slick or substantial or successful. Quite the contrary: I can recall people arguing against the desirability of FDI in the first place (repatriated profits would supposedly weaken the balance of payments) and some crassly populist criticism of the cost of wining and dining potential investors.
While Ireland's got some unique advantages - it's a low tax, business friendly, English speaking base within the EU -  we have our own selling points. But when's the last time you saw any recent government making a serious attempt to capitalise on them? And why aren't we getting our share of the FDI that's creating those high value added and knowledge intensive jobs?

The way we live now - The Dismal Science

Oct 26, 2014

Today's release of the September quarter Consumer Price Index incorporated the latest three-year review (pdf) of spending patterns, and some other changes, notably using technology to capture the prices of many consumer electronic goods. Instead o...