Damien Grant: New Zealand deserves better than Nicola Willis’ plan

It is four sleeps to Christmas. A time of make believe where we embrace the wonder of Santa Claus to delight children and ourselves.

Make believe is a powerful element of the human condition. The willingness to embrace an illusion is a pre-requisite to enjoy a movie, magic show or a marriage.

Richard Prebble: “Twenty Economists” Letter Not Worth the Paper It’s Written On

“Group of 20 economists urge PM and Minister of Finance to urgently change course,” screamed the headlines.

When I was a finance minister, I remember similar letters — economists demanding a return to central planning and subsidies. Treasury used to roll its eyes. They knew that anyone can call themselves an economist. One prominent media “economist”, not among the latest signatories, never even earned an undergraduate degree in economics.

David Farrar: Treasury vs Reserve Bank

The Herald reports:

It has been revealed just how unimpressed Treasury was with the Reserve Bank for pitching for a 50% funding increase shortly before Adrian Orr resigned as governor.

As they should be.

Michael Reddell: One more Treasury OIA about RB spending

All the interest in the Orr-departure story – the background, and the subsequent and ongoing efforts to mislead the public by the Board and the temporary Governor – seems to now centre on the Ombudsman. Various people, including me, have appealed the Bank’s OIA obstructionism on specific requests and the Ombudsman seems to be pursuing the issue reasonably expeditiously.

Dr Oliver Hartwich: Treasury returns to economic rigour

“First and foremost, there is the need to maintain fiscal space for fiscal policy to play a shock-absorber role. That means paying our debt down during normal economic times.”

With these words, Treasury Secretary Iain Rennie signalled a welcome return to sound economic principles in his speech launching the draft Te Ara Mokopuna 2025, the Treasury’s Long-term Insights Briefing on how to manage government finances sustainably.

Ele Ludemann: Reserve Bank loses $$s

The Reserve Bank is losing millions of dollars in funding:

The Reserve Bank will have its funding dramatically reduced over the next five years after reaching a new funding deal with the Government.

In a statement, Finance Minister Nicola Willis said the deal worked out at about $150 million in annual operating spending – 25% less than the $200m budgeted for this year.

Michael Reddell: Really?

A few weeks ago an invitation dropped into my email inbox to attend a joint Treasury/Motu seminar on recent, rather major, changes that had apparently been made to the discount rates used by The Treasury to evaluate proposals from government agencies.

Michael Reddell: Willis and Rennie speaking

Last week various of the great and good of New Zealand economics and public policy trooped off to Hamilton (of all places) for the annual Waikato Economics Forum, one of the successful marketing drives of university’s Vice-Chancellor.

My interest was in the speeches delivered by the Minister of Finance and by Iain Rennie, the newly appointed (by this government) Secretary to the Treasury. The Minister also used her speech to announce the launch of a Going for Growth website complete with a 44 page document (15 of which are photos and covers, and another 9 are lists of things (being) done) titled “Going for Growth: Unlocking New Zealand’s Potential” – in the Minister’s words, “Going For Growth outlines the approach the Government is taking to turbo-charge our economy”.

Michael Reddell: Where were the central agencies?

Back in early October I wrote a post “Public policy just keeps on worsening”, on the then newly-announced Residential Development Underwrite scheme, under which the government will provide free downside price/liquidity insurance to big residential property developers, for a period that was said not to be forever but with no specific time limit, and instead with confident assurances from the minister (Bishop) that the government (Cabinet) would judge when to turn this subsidy off and on. It seemed like a classic example of bad policy, playing favourites at the big end of town, offering subsidies with no rigorous analysis of any sort of market failure, handing unconstrained discretion to ministers, and so on.

Michael Reddell: Fiscal and monetary policy

Over the last few years, The Treasury seems to have been toying with bidding for a more significant role for fiscal policy as a countercyclical stabilisation tool It seemed to start when Covid hubris still held sway – didn’t we do well? – and the first we saw of it in public was at a Treasury/Reserve Bank conference in mid 2021, at which both the Secretary and some of her staff were advancing thoughts of that sort (I wrote about it here). More recently, this mentality has shown up in the commissioned report from US economist Claudia Sahm (post here) and in the consultation for The Treasury’s forthcoming long-term insights briefing (post here).

Michael Reddell: Treasury says one thing in a speech but quite another in the BEFU

I picked up The Post this morning to find the lead story headlined “Recession hits homes harder than businesses”, reporting a speech given earlier this week by Treasury’s deputy secretary and chief economic adviser Dominick Stephens. There was an account of the same speech, but with some different material, on BusinessDesk a couple of days ago. Astonishingly, despite being an on-the-record address, on what are clearly high profile macroeconomic issues, including touching on monetary policy, The Treasury has not issued the text of the address, so the rest of us – not the Auckland “business crowd” who heard it live – are entirely reliant on journalists’ reporting of what the chief economic adviser to the government’s principal economic adviser (which is how Treasury likes to style itself) actually said, let alone the context within which he said it. That seems less than ideal (to say the least).

Michael Reddell: A Sahm-type rule for NZ? I think not.

The Treasury yesterday hosted the first in their new series of guest lectures, under the broad heading “Fiscal Policy for the Future”. In introducing the series Dominick Stephens, Treasury’s chief economist, told us that the focus would be on three sub-headings: policy dimensions around fiscal sustainability, the potential stabilising role of fiscal policy, and ideas around value for money. Which sounds fine I suppose, but it perhaps wasn’t a great example of reading the times that the first lecture was about an idea that would, when it was used, involve the Crown simply giving away a lot more money (automatically).

Michael Reddell: Comparing Treasury and Reserve Bank forecasts

I put a range of charts on Twitter late last week illustrating why, from a macroeconomic perspective, I found the government’s Budget deeply underwhelming. I won’t repeat them but will just show two here.

The first is the Treasury’s estimate of how the bit of the operating deficit not explained just by swings in the economic cycle change from 2023/24 (which was largely determined by last year’s Labour Budget) to 2024/25 (influenced by this year’s Budget choices)

Dr Bryce Wilkinson: What? Does Treasury really favour a comprehensive capital gains tax?

Last Friday, Treasury “pro-actively” published its November 2023 Briefings for the Incoming Government. One was on the economic and fiscal context. It was for the new Minister of Finance.

Its headline message was that macroeconomic and fiscal restraint is needed. Treasury recommends a return to fiscal surpluses by 2026/27. It considers that both spending cuts and higher tax revenues will be needed.

Eric Crampton: Why NZ needs an independent parliamentary budget office

The true state of public finances is not meant to surprise any incoming government.

The Public Finance Act 1989 aimed to prevent any outgoing government from handing an incoming government the kind of horrors David Lange and Roger Douglas found in the books in 1984.

Mike Hosking: The fiscal hole is the last economic straw

It doesn’t really matter whether it's a $20 billion hole or not.

It might be $19.6 billion. The fact is, the Government has a hole, a massive fiscal hole that will, before the election, be fully exposed in what they call the PREFU.

The scandal here is several-fold.

Brian Easton: The Economic Runup To The Election.

The Treasury released its budget economic forecasts. What do they say about the economy over the next four months?

Let me begin me with an irritation. One post-budget headline was ‘Treasury optimistic over recession risk in Budget 2023'. Treasury being optimistic is almost an oxymoron. They fire down the centre.

It is true that Treasury has lifted its forecast of economic activity (GDP) a little since its December 2022 exercise, reflecting stronger migration and tourism and the rebuild from the cyclones. Even so, it expects GDP per capita to fall fractionally between the June 2023 and June 2024 years. The next year is going to be tough, with some quickening of economic activity in the middle of 2024.

Cam Slater: You Might Have Missed It, but This Story Is Important

An important story dropped on Friday, just as Kiwis were waking up to the sad news that Queen Elizabeth II had passed away. The author of the story must have been gutted, but this story is important and must be addressed, rather than swept under the rather lumpy carpet that hides all the screw-ups of the worst government in living memory.

Dr Eric Crampton: Finally our unemployment figures make sense

The economists descended on Wellington last week. Or, at least, many shuffled their way from the Ministries over to Victoria University to meet with academics from across the country for the annual three-day conference of the New Zealand Association of Economists.

The NZAE annual meetings are a strange and wonderful thing, whether by accident or by design. In larger countries, economists’ conferences tend to be more specialised. Academics attend some conferences, including academic researchers based in places like the Federal Reserve, but few practitioners attend. Other conferences cater to policy practitioners in the bureaus – with fewer academics in attendance. The NZAE meetings mix things up, so policymakers get to hear from academics and vice versa.

Bryce Edwards: Grant Robertson’s “sweet moderation”

Grant Robertson is a big fan of British socialist folk-punk singer Billy Bragg. The finance minister even wrote an opinion column last year that started and ended with lyrics from Bragg’s iconic song “Between the Wars”, with its key line “Sweet moderation; Heart of this nation”. Robertson titled his column, “We can be a nation of sweet moderation – but only if we keep working at it”.

The Finance Minister and Deputy Prime Minister appropriated Bragg’s “sweet moderation” line as a justification in the face of criticisms that his government had become moderate rather than “transformational”. In fact, his column sought to paint rising political discontent and anger as being dangerous and something for all to condemn. In contrast to radicalism, he claimed that his type of “sweet moderation” was all about “giving everyone a fair suck of the sav” – i.e. a very down-to-earth way of signalling a vague sense of egalitarianism.

What Robertson misses about Bragg’s song is that it’s actually a critique of politicians like Robertson, who fail to side with the poor. Bragg’s song calls for a proper welfare state “from the cradle to the grave”, and it criticises governments who deny workers “a living wage”. The character in the song recalls: “As times got harder; I looked to the government to help the working man”, but the Government failed to help the poor and instead helped the wealthy.