The PM – it is fair to suppose – did not have the latest stats by his side when he was questioned by Chris Hipkins in Parliament the other day.
On the other hand, he should have had a rough idea of what has been going on in the labour market but he was not of a mind to admit it.
And so he ducked the question.
“Rt Hon Chris Hipkins: Has unemployment increased or decreased since he became Prime Minister?
As Hipkins would have known, after checking the data in the table below, it has increased.
As Hipkins would have known, after checking the data in the table below, it has increased.
Click to view
But Christopher Luxon demonstrated his flair for obfuscation when a straight answer is bound to be politically awkward.
Rt Hon CHRISTOPHER LUXON: Well, as I’ve said to the member before to explain the five immutable laws of economics, when spending goes through the roof—up by 84 percent—when inflation hits 7.3 percent, and when there are 12 interest rate rises, an economy slows down and people lose their jobs, and that’s why this Government cares about low and middle income working New Zealanders. The Labour Party used to, but I don’t know what they do now.
Luxon might have tried to comfort his audience by saying the peak is nigh and mentioning the latest forecasts from the Treasury, although – on second thoughts – maybe they are not nigh enough.
In the labour market, sluggish demand has led to higher unemployment and slower wage growth. The unemployment rate is expected to peak at 5.5% in the December 2025 and March 2026 quarters.
But mention of those forecasts might have been apt to prompt a reference from Hipkins to other disagreeable aspects of the forecasts, such as the bottom line of the government’s books:
A widening fiscal deficit is expected in 2025/26, driven in part by the weak economy…
The Financial Statements of the Government for 2024/25 came in stronger than forecast at the Budget Economic and Fiscal Update 2025 (Budget Update). However, most of the drivers of the improvement were temporary.
The operating balance before gains and losses excluding ACC (OBEGALx) is forecast to deteriorate to a deficit of $13.9 billion in 2025/26. As a share of GDP, it falls from -2.1% in 2024/25 to -3.0% in 2025/26. This will be the largest OBEGALx deficit as a share of GDP since the 2019/20 year.
Having noted what Luxon preferred not to mention, let’s look at what he did say.
He huffed and puffed about the five immutable laws of economics.
But he identified just one: when spending goes through the roof, an economy slows down and people lose their jobs.
The other four?
Who knows?
PoO wonders when Luxon was first alerted to the immutable laws of economics and their utility for policy-making.
He mentioned them (but had not reduced their number to five) when he was questioned by Jack Tame a year ago.
The Spinoff reported:
Tame states that New Zealand is now ranked 179 out of 190 countries on the international monetary fund record of GDP growth data, and this year has had lower growth than countries like Guinea Bissau, Chad and Iraq. “Why is that?” he asks the PM.
“Again, what I would just say to you is,” Luxon begins with a grin, “is that we have forgotten the immutable laws of economics.”
PoO hasn’t searched every prime ministerial mention of the immutable laws.
But late in July this year, he was talking about them.
Bernard Hickey recorded this exchange on his Substack after a post-cabinet press conference (the bolding is Hickey’s):
Thomas Coughlan: So you’re opening remarks for about 10 minutes on the cost of living. Are you feeling defensive on that issue?
Christopher Luxon: No, not at all. No. More just acknowledging for New Zealanders that we have just gone through three years of a recession that’s probably been nothing like we’ve seen since the early 1990s. How did we get here? As I keep saying – we’ve had to come back to the immutable laws of economics. If you lose control of spending, you lose control of inflation, you lose control on interest rates, put an economy into recession and people start losing their jobs.
It’s a known economic prescription that we know how that works and the previous government stuffed that, they crashed that and as a result people are feeling that pain and suffering now.
A few weeks ago, at Question Time in Parliament, Luxon more specifically was talking about five such laws.
Chlöe Swarbrick: Why are there 10,000 more unemployed young people and 36,000 fewer jobs in this country since he took office, if not because of his Government’s billions of dollars of cuts to investment?
Rt Hon CHRISTOPHER LUXON: There are five immutable laws of economics. The first is about spending; that drives into creating inflation. When you have high inflation because spending went up 84 percent, you end up with 12 to 13 interest rate rises. That then, because of high interest rates and high inflation, means that, actually, businesses get squeezed because the economy’s in a recession, and, as a result, people, unfortunately, lose their jobs. That’s why if you care about low and middle income, working New Zealanders, like this Government does, you actually make sure you run the economy well and you’re a fiscal conservative.
As happened when he more recently referred reverentially to the five immutable laws, he did not apprise Parliament – or the listening public – of the other four.
That’s a shame, because PoO can find no universally agreed-upon, official list of “five immutable laws of economics” in the same way there are laws in physical sciences like gravity.
We do know that economists refer to several foundational principles or concepts that describe human behaviour and resource allocation. Mind you, our search was far from exhaustive.
We were reminded that the principles and/or concepts include:
- Supply and Demand: This fundamental concept explains how the interaction between the quantity of a resource available (supply) and the desire for it (demand) determines prices in a market economy.
- Scarcity and Trade-offs: Resources are limited, so individuals and societies must make choices, meaning they face trade-offs
- Opportunity Cost: The cost of something is what you give up to get it, or the value of the next-best alternative that was foregone.
- Marginal Thinking: Rational people make decisions by evaluating the costs and benefits of a one-unit change (the “margin”) in an activity and increasing the activity if the marginal benefit exceeds the marginal cost.
- Incentives: People respond to incentives (rewards and punishments), which is a key component in understanding consumer and producer behaviour.
And we reckon Luxon should get hold of this for holiday reading: it’s The 10 Immutable Laws of Nanoeconomics, the subject of an article by Venkatesh Rao.
If the PM talked about principles rather than “immutable laws”, then – fair to say – he may have been referring to The five fundamental principles of economics, basic terms we need to know in order to move on.
This says there are five fundamental principles of economics that every introductory economics course begins with at the start of the semester: rationality, costs, benefits, incentives, and marginal analysis.
But we also found:
And
Take your pick.
You might also care to write to ask Luxon about the other four on his list of immutable laws.
Bob Edlin is a veteran journalist and editor for the Point of Order blog HERE. - where this article was sourced.
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