Michael Reddell

Regressivity, petrol taxes, and ministerial PR - The Dismal Science

Jun 28, 2018

Someone around home mentioned this morning that there was a confused article on the Herald website about the progressivity (or otherwise) of the fuel tax increase. I didn’t pay much attention until I read the paper over lunch, when I was a bit staggered by what I found. This was the centrepiece chart The line of argument from opponents has been that the fuel tax increase will fall more heavily on low-income people. But according to the Herald’s journalist, channelling Phil Twyford.  in a startling revelation, the ministers claim that the wealthier a household is, the more it is likely to pay for petrol. They say the wealthiest 10 per cent of households will pay $7.71 per week more for petrol. Those with the lowest incomes will pay $3.64 a week more. I still don’t understand what the journalist finds startling. It … Read More

Why are we gifting so much to farmers? - The Dismal Science

May 29, 2018

Despite announcing yesterday a plan that aims to eradicate Mycoplasma bovis from New Zealand, there was no sign of the pro-active release of any background papers or analysis. We don’t have copies of the relevant Cabinet papers, or the relevant advice from The Treasury or MPI. Not that long ago, the incoming government talked of its commitment to open government, and now it plans to spend hundreds of millions of dollars of taxpayers’ money –  without, it appears, any additional legislation – without giving us, up front, any of the relevant papers. Here is the extract from the Minister’s statement yesterday The full cost of phased eradication over 10 years is projected at $886 million. Of this, $16 million is loss of production and is borne by farmers and $870 million is the cost of the response (including compensation … Read More

A generous subsidy that pays off? - The Dismal Science

May 10, 2018

Reading the Herald over lunch, I chanced upon a story under the headline $50m PhD subsidy pays off.   That is the $50 million per annum subsidy put in place more than a decade ago that allows foreign PhD students to study at domestic fees (apparently a saving for them for more than $30,000 per annum each), allows full domestic work rights for them and their partner, and free access for their children to New Zealand public schools. The story says it is based on a new report from Education New Zealand.  Education New Zealand, of course, is not exactly a disinterested party.  It is the government agency that champions the export education industry.  In their own words: ENZ is New Zealand’s government agency for building international education. We promote New Zealand as a study destination and support the … Read More

World War One and the New Zealand economy - The Dismal Science

Apr 25, 2018

Earlier this week, in the lead up to ANZAC Day today, The Treasury drew attention to an interesting conference paper written a few years ago by Brian Easton on “The impact of the Great War on the New Zealand economy”.   From the opposite end of the political spectrum, Eric Crampton described it as “really great”.  I’m not sure I’d go that far, but for anyone interested in aspects of New Zealand’s economic history –  especially bits on which there are few systematic treatments (and often only patchy data) – it is certainly worth reading. Easton’s focus is less on the details of how the economy did during the war as in supporting my contention that the war experience fundamentally affected the way we governed New Zealand.  I shan’t be surprised if economic historians from other countries come … Read More

Opinion: Economic growth within Environmental limits - The Dismal Science

Apr 20, 2018

That was the title of a speech David Parker gave a couple of weeks ago.  Parker is, as you will recall, a man wearing many hats: Minister for the Environment, Associate Minister of Finance, Minister for Trade and Export Growth, and Attorney-General.  Since he was speaking to a seminar organised by the Resource Management Law Association, this speech looked like it might touch on all his areas of portfolio responsibility. In passing, I’ll note that he clearly doesn’t live in Wellington.  He introduces his speech lamenting that New Zealand had just had its hottest summer on record.  Most Wellingtonians –  no matter how liberal (indeed, I recently heard an academic working on climate issues make exactly this point) – revelled in a summer that for once felt almost like those the rest of New Zealand normally enjoys.   … Read More

Visiting economists opine on NZ - The Dismal Science

Apr 19, 2018

Lots of people, even abroad, look at New Zealand’s economy.   For example, there are ratings agencies selling a commercial product to clients, and there are investment funds putting their own and clients’ money at risk.   And then there are the government agencies; notably the IMF and the OECD. Every year or so, a small team of IMF economists come to visit for their Article IV assessment.  New Zealand isn’t very important to the Fund: we aren’t systemically important, we don’t borrow money from the Fund, and we aren’t even part of any of the country groupings with traditional clout at the Fund (eg the EU or euro-area). And the New Zealand story is complicated –  there aren’t other countries much like New Zealand to compare us against and learn from, and especially not in the Asia-Pacific region … Read More

Population size and GDP per capita: US states - The Dismal Science

Apr 16, 2018

There have been a few posts here (here, here, and here) in the last week or so around the issue of population size and GDP per capita –  not because my prior is that there is any such relationship but (a) because I think there isn’t, and it is worth occasionally illustrating that across countries, and (b) because even some officials in the New Zealand government still appear to believe that our (small) size is a material element in the story of what holds New Zealand back. There are arguments why, in theory, a larger population might result in better long-term economic performance (higher productivity), but whatever the merits of those arguments they seem to have been outweighed by other factors.  In the world we currently live in, the average big country is no more economically successful … Read More

Small size simply isn’t the issue … - The Dismal Science

Apr 12, 2018

Just yesterday I wrote, in response to a comment that My point simply was that there is no obvious correlation, in the cross section, between population size and GDP per capita (or productivity). I’m not aware of any serious observer arguing otherwise At the level of very simple correlations, I’d illustrated this lack of relationship –  whether for all countries, just advanced countries, excluding the handful of extremely large countries, or whatever.  Bigger countries (by population) don’t, on average, have higher per capita incomes than smaller countries. But then I went to a seminar at the Productivity Commission yesterday afternoon, attended by various private and public sector people.  The substance of the seminar –  a new MBIE report on the manufacturing sector, and the discussion of it and of possible policy responses –  is embargoed until David … Read More

More on population and per capita GDP - The Dismal Science

Apr 10, 2018

My quick post on Saturday, in response to someone’s comment, was designed simply to illustrate what should have been quite an obvious point: looking across countries in any particular year, countries with large populations don’t tend to be richer (per capita GDP) than countries with small populations.  Just among the very big countries, the United States is towards the top of the GDP per capita rankings (beaten by a bunch of small countries), and China, India, Indonesia, Pakistan, and Brazil are not.   Since both the physical sizes of countries, and their populations, are the outcomes of all sorts of historical factors, it wasn’t an observation about immigration policy or (wince) “population policy”. And, of course, GDP per capita isn’t everything: moderately well-off large countries are typically more powerful (defence or offence) than small rich ones. But, continuing … Read More

Population and real GDP per capita - The Dismal Science

Apr 09, 2018

I noticed a few comments to another of my posts about possible links between population size and economic performance. My working assumption is that, on average, across all countries, there isn’t any such relationship. Apart from anything else, if there were a positive relationship –  that was more than chance –  it would suggest that two countries merging would increase their respective real incomes. And yet for at least the last 70 years, we’ve had steadily more countries emerging.  No doubt economics isn’t the only thing at work in those choices –  people might be willing to pay a price to be “free” and self-governing –  but it isn’t likely to be an irrelevant consideration either. But what do the data show?   Here I’ve just used the IMF World Economic Outlook database data for 2016. The … Read More