This kind of conference never tends to have an organising theme. Sessions run in parallel; people attend the ones that strike their fancy. If I had to draw a theme from the set I attended, I’d start with one of the last talks I saw.
Victoria University of Wellington and Motu’s Arthur Grimes provided the keynote address on the conference’s third day. His excellent plenary built around an old John Clarke song: we don’t know how lucky we are. On a broad range of measures, New Zealand is doing far better than you might have thought.
Grimes noted the importance of a culture that celebrates growth, rather than denigrating and problematising it. Adjusted net national income grew strongly from 1994 to 2018. And when that growth stopped, happiness measures flagged. And this is the first half-century since humans arrived in New Zealand that hasn’t seen another bird species fall extinct.
One of our main disadvantages, beyond still-broken rules around housing supply, is sitting next door to Australia and feeling bad by comparison.
I drew similar lessons from some of the other presentations – though that might not always have been the speaker’s intention.
Massey University’s Nazila Alinaghi has been in the data mines, tunnelling through administrative data held in the Integrated Data Infrastructure, to check persistence in top incomes.
New Zealand’s income inequality statistics have been roughly flat for the past 25 years. The top one percent of workers earned about the same fraction of overall income in 2000 as they did in 2024 – or at least there is no trend over that period.
Even if the proportion of income earned by the top 1 percent has not changed much, the composition of the group might matter. A country where the top 1 percent were always the same people would be different from one where different people rose into and fell out of the category.
Alinaghi found that persistence in the top 10 percent is stronger than persistence in the top 1 percent, and persistence in the top 1 percent is stronger than persistence in the top 0.1 percent. Or, in other words, if you were in the top 10 percent over the past few years, you’ve got better odds of staying in that group than if you were in the top 1 percent.
Across a lot of different ways of measuring the concept, persistence rose over the period before falling back again. The top 1 percent is getting older, but so is the population overall. And further work will look more closely at the effects of migration in that data. It’s neat work, and I’ll look forward to seeing the completed version.
Everyone thinks that inequality has been ever-increasing. The data just doesn’t show it.
Auckland University of Technology’s Leon Iusitini asked a different question, but a related one. Are children more or less likely to follow their parents’ chosen professions? Iusitini’s own delvings into the data mines compared the occupations of people who had kids aged 3-14 in 1991 with their kids’ later occupations.
Perhaps unsurprisingly, occupational persistence is relatively strong in farming. The same is also true in physical sciences, maths, and engineering professions. And both daughters and sons were more likely to follow their fathers into blue-collar work.
I would love to see continued work in the area testing whether areas with a strong apprenticeship character, like farming but also like construction, tend to see greater persistence.
There was a superb presentation on problems in cost-benefit assessment, or rather in not using it, when deciding on major projects. Here we can consider ourselves lucky not at the outcome, but that someone is checking.
Economists prefer to rely on cost-benefit analysis when assessing projects – CBA. Some others like to use what’s called Multi-Criteria Analysis – MCA. On that latter kind of assessments, projects get scored across a variety of categories.
Cost-benefit assessment tries to put a monetary value on all kinds of different costs and benefits – some of which are harder than others to turn into dollars and cents. But Treasury maintains a comprehensive spreadsheet (called CBAx) listing the costs and benefits of many things, all of which then provide a standardised basis for assessment.
Multi-Criteria Analysis does not try to do that at all. Instead, a project gets a score within each category, the categories are weighted by their perceived importance, and the project gets an overall grade.
Suppose that you wanted the government to adopt your project proposal, and you knew it didn’t do well on a value-for-money basis. It would have a tough time under CBA. But under MCA, there’s a neat trick. If you add more categories for assessment, the weighting on cost declines automatically. If cost is one of two categories, each category gets 50 percent weighting. If cost is one of 10 categories, then the project’s poor ranking on cost can be outweighed by whatever other categories are added in.
Of course it is possible to require cost to have a high weighting. But it’s rarely done. And then we wind up being surprised by all of the expensive projects that get approved. Cost-benefit assessment is underrated – or, at least, MCA should require that rankings on cost carry a lot of weight. In the assessment exercise described, fewer than 5 percent of evaluated project proposals had a robust cost-benefit assessment.
I am very glad this work is being done, and I expect to provide a more detailed column when the authors are ready to release it into the wild.
The London School of Economics’ Andrew Summers’ plenary explained the UK’s capital gains tax, how it should be modified, and some lessons New Zealand might draw from it. The lesson I drew is that our tax system isn’t all that bad, when real-world alternatives are considered carefully.
The UK’s capital gains tax was designed as a way of catching and taxing income that was otherwise hard to pin down. The UK defines income narrowly for tax purposes. Income that does not meet that definition is classed as a capital gain and attracts a lower tax rate than income. By contrast, New Zealand defines income very broadly for tax purposes. So some income is taxed more heavily here than in the UK, where it would count as a capital gain. But other income caught in the UK as a capital gain is not taxed at all in NZ.
Summers noted that the UK tax system’s definition of the base for capital gains taxes, and the rate at which they’re taxed, changes frequently. It is hard for businesses and others to plan around it. Income that would not have been treated as a capital gain for years can suddenly become taxable when a definition changes – with application to the accumulated appreciation over the prior period. It should rightly be seen as a form of retrospective taxation.
While the UK’s regime catches a lot of taxpayers over a long enough time horizon, most of the gains, when weighed by value, are increases in the value of unlisted shares. If you’ve started and built a business, the capital gain when you sell that business can be substantial. Residential property accounted for almost a third of capital gains taxpayers by number, but for less than a fifth when assessed by value. Summers warned against focusing on residential property when thinking about capital gains taxes.
I liked the package of reforms that Summers proposed for the UK. But the gap to be filled by a capital gains tax in New Zealand is much smaller where the definition of income is so much broader. And the risks of politicised redefinitions of the tax base for a capital gains tax seem substantial.
Canterbury University sociologist Mike Grimshaw presented work looking back on old issues of the National Business Review during the period leading up to and through Sir Roger Douglas’ reforms. It was fascinating, and I hope he will find a publisher for it. It is book-worthy. The country got very lucky in finding its way out of Muldoonomics and Muldoonism.
Margaret Galt of the Stout Research Centre compared outcomes for men who moved to New Zealand from the UK in the 1800s with their brothers who stayed in the old country. Incredible archival work trawling through ancient census data from two countries, identifying 927 pairs of brothers, and tracking them over time. The brothers who moved here lived almost five years longer than those who stayed home – though that result did not hold for Irish migrants who went to the mines. Migrants also generally experienced greater wealth accumulation and more social mobility.
Kevin Counsell at the Ministry for Regulation put up some indicative work on recognising overseas labelling requirements. Currently, food sold in New Zealand has to meet local food labelling requirements. Easing those requirements, by deeming labelling that meets comparable countries’ standards to be good enough for New Zealand as well, would make it easier for new grocers to set up shop here.
Their first-pass at estimating the benefits suggested perhaps $166 million in net present value over 10 years. I think it could be larger – their modelling restricted the benefits to new entrants, but I expect incumbents could see substantial cost reductions too.
I enjoyed Arthur Grimes’s Friday morning plenary but suggested adding another album to his musical theme: Franz Ferdinand’s “You could have it so much better”.
New Zealand does well. But if we could fix housing, and learn to rely on regulatory authorisations from overseas, things could be a lot better. I think I’m more optimistic than Arthur is about our prospects of fixing housing. I hope I’m not setting myself up for disappointment. We’ll both have the revised Resource Management legislation to look forward to, later this month.
Dr Eric Crampton is Chief Economist at the New Zealand Initiative. This article was first published HERE
Grimes noted the importance of a culture that celebrates growth, rather than denigrating and problematising it. Adjusted net national income grew strongly from 1994 to 2018. And when that growth stopped, happiness measures flagged. And this is the first half-century since humans arrived in New Zealand that hasn’t seen another bird species fall extinct.
One of our main disadvantages, beyond still-broken rules around housing supply, is sitting next door to Australia and feeling bad by comparison.
I drew similar lessons from some of the other presentations – though that might not always have been the speaker’s intention.
Massey University’s Nazila Alinaghi has been in the data mines, tunnelling through administrative data held in the Integrated Data Infrastructure, to check persistence in top incomes.
New Zealand’s income inequality statistics have been roughly flat for the past 25 years. The top one percent of workers earned about the same fraction of overall income in 2000 as they did in 2024 – or at least there is no trend over that period.
Even if the proportion of income earned by the top 1 percent has not changed much, the composition of the group might matter. A country where the top 1 percent were always the same people would be different from one where different people rose into and fell out of the category.
Alinaghi found that persistence in the top 10 percent is stronger than persistence in the top 1 percent, and persistence in the top 1 percent is stronger than persistence in the top 0.1 percent. Or, in other words, if you were in the top 10 percent over the past few years, you’ve got better odds of staying in that group than if you were in the top 1 percent.
Across a lot of different ways of measuring the concept, persistence rose over the period before falling back again. The top 1 percent is getting older, but so is the population overall. And further work will look more closely at the effects of migration in that data. It’s neat work, and I’ll look forward to seeing the completed version.
Everyone thinks that inequality has been ever-increasing. The data just doesn’t show it.
Auckland University of Technology’s Leon Iusitini asked a different question, but a related one. Are children more or less likely to follow their parents’ chosen professions? Iusitini’s own delvings into the data mines compared the occupations of people who had kids aged 3-14 in 1991 with their kids’ later occupations.
Perhaps unsurprisingly, occupational persistence is relatively strong in farming. The same is also true in physical sciences, maths, and engineering professions. And both daughters and sons were more likely to follow their fathers into blue-collar work.
I would love to see continued work in the area testing whether areas with a strong apprenticeship character, like farming but also like construction, tend to see greater persistence.
There was a superb presentation on problems in cost-benefit assessment, or rather in not using it, when deciding on major projects. Here we can consider ourselves lucky not at the outcome, but that someone is checking.
Economists prefer to rely on cost-benefit analysis when assessing projects – CBA. Some others like to use what’s called Multi-Criteria Analysis – MCA. On that latter kind of assessments, projects get scored across a variety of categories.
Cost-benefit assessment tries to put a monetary value on all kinds of different costs and benefits – some of which are harder than others to turn into dollars and cents. But Treasury maintains a comprehensive spreadsheet (called CBAx) listing the costs and benefits of many things, all of which then provide a standardised basis for assessment.
Multi-Criteria Analysis does not try to do that at all. Instead, a project gets a score within each category, the categories are weighted by their perceived importance, and the project gets an overall grade.
Suppose that you wanted the government to adopt your project proposal, and you knew it didn’t do well on a value-for-money basis. It would have a tough time under CBA. But under MCA, there’s a neat trick. If you add more categories for assessment, the weighting on cost declines automatically. If cost is one of two categories, each category gets 50 percent weighting. If cost is one of 10 categories, then the project’s poor ranking on cost can be outweighed by whatever other categories are added in.
Of course it is possible to require cost to have a high weighting. But it’s rarely done. And then we wind up being surprised by all of the expensive projects that get approved. Cost-benefit assessment is underrated – or, at least, MCA should require that rankings on cost carry a lot of weight. In the assessment exercise described, fewer than 5 percent of evaluated project proposals had a robust cost-benefit assessment.
I am very glad this work is being done, and I expect to provide a more detailed column when the authors are ready to release it into the wild.
The London School of Economics’ Andrew Summers’ plenary explained the UK’s capital gains tax, how it should be modified, and some lessons New Zealand might draw from it. The lesson I drew is that our tax system isn’t all that bad, when real-world alternatives are considered carefully.
The UK’s capital gains tax was designed as a way of catching and taxing income that was otherwise hard to pin down. The UK defines income narrowly for tax purposes. Income that does not meet that definition is classed as a capital gain and attracts a lower tax rate than income. By contrast, New Zealand defines income very broadly for tax purposes. So some income is taxed more heavily here than in the UK, where it would count as a capital gain. But other income caught in the UK as a capital gain is not taxed at all in NZ.
Summers noted that the UK tax system’s definition of the base for capital gains taxes, and the rate at which they’re taxed, changes frequently. It is hard for businesses and others to plan around it. Income that would not have been treated as a capital gain for years can suddenly become taxable when a definition changes – with application to the accumulated appreciation over the prior period. It should rightly be seen as a form of retrospective taxation.
While the UK’s regime catches a lot of taxpayers over a long enough time horizon, most of the gains, when weighed by value, are increases in the value of unlisted shares. If you’ve started and built a business, the capital gain when you sell that business can be substantial. Residential property accounted for almost a third of capital gains taxpayers by number, but for less than a fifth when assessed by value. Summers warned against focusing on residential property when thinking about capital gains taxes.
I liked the package of reforms that Summers proposed for the UK. But the gap to be filled by a capital gains tax in New Zealand is much smaller where the definition of income is so much broader. And the risks of politicised redefinitions of the tax base for a capital gains tax seem substantial.
Canterbury University sociologist Mike Grimshaw presented work looking back on old issues of the National Business Review during the period leading up to and through Sir Roger Douglas’ reforms. It was fascinating, and I hope he will find a publisher for it. It is book-worthy. The country got very lucky in finding its way out of Muldoonomics and Muldoonism.
Margaret Galt of the Stout Research Centre compared outcomes for men who moved to New Zealand from the UK in the 1800s with their brothers who stayed in the old country. Incredible archival work trawling through ancient census data from two countries, identifying 927 pairs of brothers, and tracking them over time. The brothers who moved here lived almost five years longer than those who stayed home – though that result did not hold for Irish migrants who went to the mines. Migrants also generally experienced greater wealth accumulation and more social mobility.
Kevin Counsell at the Ministry for Regulation put up some indicative work on recognising overseas labelling requirements. Currently, food sold in New Zealand has to meet local food labelling requirements. Easing those requirements, by deeming labelling that meets comparable countries’ standards to be good enough for New Zealand as well, would make it easier for new grocers to set up shop here.
Their first-pass at estimating the benefits suggested perhaps $166 million in net present value over 10 years. I think it could be larger – their modelling restricted the benefits to new entrants, but I expect incumbents could see substantial cost reductions too.
I enjoyed Arthur Grimes’s Friday morning plenary but suggested adding another album to his musical theme: Franz Ferdinand’s “You could have it so much better”.
New Zealand does well. But if we could fix housing, and learn to rely on regulatory authorisations from overseas, things could be a lot better. I think I’m more optimistic than Arthur is about our prospects of fixing housing. I hope I’m not setting myself up for disappointment. We’ll both have the revised Resource Management legislation to look forward to, later this month.
Dr Eric Crampton is Chief Economist at the New Zealand Initiative. This article was first published HERE
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