Michael Reddell

Thinking about housing again - The Dismal Science

Oct 28, 2015

I gave a talk in Nelson last night on housing issues.  It was largely a rework of material I’ve used before (posted here and here) so I won’t post the text here.   I’m not sure the speech quite hit the mark for the audience, but as always when I put together a presentation I find that I learn something in the process, or  some things come together more clearly in my own mind. By Auckland standards, Nelson-Tasman house prices aren’t that high.  In real terms, house prices are still lower than they were in 2007.   But a median house price of around $400000 against a median household income of not much over $60000 reminds us just how high price to income ratios are across most of New Zealand (my old home town of Kawerau remains an unattractive … Read More

1876 revisited? - The Dismal Science

Oct 22, 2015

The New Zealand Initiative was out this week with a new report, In the Zone: Creating a Toolbox for Regional Prosperity. If I’ve understood correctly their proposal, local authorities would be able to seek approval from central government to run policy experiments in their own areas (freeing up the Overseas Investment Act, legalising drugs, prohibiting prostitution, banning private schools, introducing capital punishment, banning immigration –  or the reverse of each of these). Frankly, it seemed to be a solution in search of a problem.  I’m all in favour of a bit of localised regulatory competition –  the sort of thing that was, for example, possible in respect of building and land supply in Auckland before the ACT Party leader legislated to merge all the councils in the Auckland region into a single body.    The authors rightly cite the advantages … Read More

An official target for house prices to disposable incomes - The Dismal Science

Oct 19, 2015

Getting back to thinking about housing issues, in preparation for a speech next week, I noticed that the Auckland Council’s Development Committee had adopted a target of reducing the Auckland ratio of median house prices to median disposable income to five (from around ten at present) by 2030. The target appears to have been adopted following the recent report on housing affordability issues by the Council’s Chief Economist. That report,  if rather patchy, has some interesting material I’d not seen previously, such as the estimated range of costs of some of the view shaft restrictions on building that Auckland currently has in place. I wasn’t that impressed by the new target.  The report notes that house price to income ratios probably “should” be around three, and then adopts a target which, even if taken seriously, would still leave price … Read More

Economic performance since 1952 for Her Majesty’s realms and territories - The Dismal Science

Sep 09, 2015

Today Queen Elizabeth becomes the longest-reigning British monarch (as others have noted, she became New Zealand’s longest-reigning monarch a couple of years ago). By 1952 a few places that had been British possessions or protectorates had already become independent (eg India, Pakistan, Israel, Ireland) but the extent of Her Majesty’s territories was still quite astonishingly large.  The Conference Board has GDP per capita numbers back to 1950 for a fairly large number of countries.  I found useable data for 24 countries (probably fewer than half the total) that in 1952 were either British possessions or (New Zealand, Australia, South Africa, and Canada) were independent but shared the Queen as head of state. Here is how those countries have grown since 1952.  The green bars represent those countries in this sample which have the Queen as head of state today. In 1952, on this … Read More

Closing the gap with Australia: only the OECD seems to think so - The Dismal Science

Sep 08, 2015

A friend asked me yesterday for the latest GDP per capita numbers for New Zealand and Australia.  His interest was a point estimate, to compare current levels in the two countries.  I went back to him with the series I would normally consider best for that purpose: the OECD’s measure of current price GDP per capita, converted to a common currency (usually USD) using the estimated purchasing power parity (PPP) exchange rates.  Unlike constant price measures, current price measures take full account of changes in the terms of trade –  which aren’t things governments can do much about, but which can materially affect living standards in countries like ours (in which the terms of trade are quite variable). To my surprise, Australian per capita GDP on that measure was only about 22 per cent higher last year than New … Read More

“Financial literacy”, schools, and governments - The Dismal Science

Sep 02, 2015

According to a new poll out this week, 93 per cent of New Zealanders want “financial literacy” to be a compulsory subject taught in all schools.  The details of the poll don’t seem to be available, but we can probably assume that the questions were phrased in such a way as to encourage a positive answer.  No doubt even a more balanced question might have drawn a positive response.  To many it sounds like a “good thing”.  I’m sceptical. I’m sceptical at a variety of levels.  First, and perhaps most practically, these surveys (and the reported views of advocates) never ask what people would prefer schools to stop teaching.  There are only so many hours in the day/year.  I’d face the same question as what should the schools stop teaching, but given a choice, personally I’d rather that schools … Read More

Birthplaces of our net PLT migrants - The Dismal Science

Aug 24, 2015

The chart below shows the birth countries for the net permanent and long-term (self-identified) migrants for the 14 years ending March 2002 to 2015 (Statistics New Zealand has a break in the series prior to that).  SNZ don’t break out all the countries, but these are the ones they separately identify.  “Net” is emphasised by the large negative number for the New Zealand-born. I don’t have a point to make.  I hadn’t had a look at the birthplace data for a while, and I’m always conscious that two of my children are net PLT immigrants, so I was a little curious. A few things surprised me a little, in the second tier of countries.  I was a little surprised at how many people had come from the United States, Japan, Germany and France –  all countries with higher per capita incomes than New … Read More

TVNZ’s Q&A on immigration - The Dismal Science

Aug 24, 2015

As most New Zealand readers will now know, TVNZ’s Q&A programme yesterday featured a debate around the economics of immigration. Unfortunately, the programme got prominence not for anything of substance that was said by the participants, but for a vulgar outburst by Shamubeel Eaqub. It was pretty unfortunate, but then this was the guy who only a few weeks ago was dismissing my analytical arguments as “that’s racist” , and then turned his attention to Fonterra, suggesting they were treating their investors as ‘scum’. TVNZ got together Don Brash, Shamubeel Eaqub, and Massey University population/immigration professor, Paul Spoonley. They had asked me to go on the programme, but I don’t do work-like things on Sundays. Don Brash articulated some of my macroeconomic arguments about the impact of our large-scale programme of targeting non-citizen migrants. Read More

TPP: Surely we deserve better than this? - The Dismal Science

Aug 21, 2015

No, that was not a reference to the latest release from the Reserve Bank on investor finance restrictions.  We do deserve better from them, but I’ll elaborate on that later. Somewhere along the line I must have signed up for releases from the Minister of Trade, Tim Groser.  I don’t recall doing so, but this release turned up earlier this afternoon Good afternoon Michael There’s been a lot of debate recently about the proposed Trans Pacific Partnership (TPP). The TPP aims to create a regional free trade agreement involving 12 Asia Pacific countries, including Australia, Japan, the United States, Canada, and New Zealand. These 12 countries have combined a GDP of US$27 trillion (NZ$40 trillion). If we are able to secure a deal, this would deliver massive benefits to the New Zealand economy. It will help to create more jobs for … Read More

Big countries don’t seem to have got richer faster - The Dismal Science

Aug 21, 2015

Implicit in much of the discussion around an appropriate immigration policy for New Zealand is a sense that our prospects would be better if only New Zealand had more people. Some have come out and actively argued the case – see, for example, this brief note from the NZIER last year. I’ve long been fairly sceptical of that proposition. A casual glance around the world suggests no very obvious relationship. The United States and Iceland co-exist, and Japan and Singapore. At the other ends of the income spectrum, India and Bhutan, and Brazil and Costa Rica. There are all sorts of arguments advanced around the economics of agglomeration, and that analysis seems to work quite well in describing what happens within countries. But it does much less well in describing economic performance across countries. And as I’ve pointed out … Read More