Part 2: The economics and politics of coronavirus are hard to discern but may surprise

So to be clear, at this stage not much is clear.  But it’s surely possible to draw out a few facts and try to isolate what might emerge as significant.

Point one: We can be reasonably sure that there will be a large fall in measured economic output.

This will capture the changes in our collective economic behaviour, both voluntary changes in response to events, and those mandated by governments. Think restaurant meals uneaten, movies not watched, flights not taken, bungees not jumped, houses not painted, and so forth. Some things postponed, some gone for ever. Continue reading “Part 2: The economics and politics of coronavirus are hard to discern but may surprise”

Part 1: It really did feel like the last plane to London

Auckland airport on Sunday evening airport bathed in bright sunshine. Passengers only in a near-deserted terminal, the formalities brief and at arms length, boarding quick.

The protocols were reassuring. A temperature check and face masks where possible. One nervous passenger per row.

It filled up in Brisbane with repatriating Taiwanese. Surgical scrubs and face masks suggested that some were more prepared than others; an unwillingness to use touchscreens or accept refreshment indicated highly focused concerns. Continue reading “Part 1: It really did feel like the last plane to London”

Leftie writer champions an idea which found favour with Milton Friedman for getting the state out of our lives

A contributor to the left-wing The Standard is heartened by cross-party support for the idea of a temporary universal basic income (or UBI).  Finance Minister Grant Robertson has confirmed on Radio NZ that the idea is being considered (*5 mins in) and Simon Bridges has not ruled out supporting it.

The UBI is a wage paid to all working age adults by the Government, no matter what they earn.

Bridges’ one reservation – apparently – is that once in place, a UBI could not be reversed.

Would that be a bad thing?

Readers keen to consider both sides could check out the pros and cons here.

The New Zealand Herald affirmed Robertson’s readiness to consider a UBI.  After one of the many emergency announcements made in recent days, it reported, the Minister said:

“Now that many New Zealanders will not be able to go to work over the next few weeks our priority is ensuring they continue to receive some form of income through this period.”  Continue reading “Leftie writer champions an idea which found favour with Milton Friedman for getting the state out of our lives”

The PM disapproves of politicking when it questions Covid-19 policies – but not (it seems) if it supports them

Kiwiblog drew our attention to Labour’s politicking to exploit its response to the Covid-19 virus.

National – on the other hand – has announced it supports the government’s decision to move the country towards Level 4 of the Covid-19 alert system over the next 48 hours and to extend the economic package for all businesses.

Opposition leader Simon Bridges said:

“This is an unprecedented situation and we support any measures that will protect the health and safety of New Zealanders.

“I understand that this will be a worrying and stressful time for New Zealanders. I encourage everyone to stay calm and follow the rules that are now in place.

“We will work in a supportive and constructive way with the Government in the interests of bringing New Zealand through this crisis together.

“I have offered the Government the services of our MPs and staff to assist where we can.”

More significantly, Bridges said in a separate statement he has asked all MPs and candidates to put campaigning on hold. Continue reading “The PM disapproves of politicking when it questions Covid-19 policies – but not (it seems) if it supports them”

Social welfare has shrunk as a portion of total govt spending – but that’s before Covid-19 upset the figures

We were checking out the cost of our social welfare system, when  government responses to the Covid-19 pandemic made nonsense of all our old concepts of government assistance.

The virus has turned everybody – by the looks of it – into state beneficiaries and has  significantly raised government spending projections.

Never mind.  We will go ahead anyway and show what we found when we compared social welfare spending in the six months ended December 31 2019 with social spending 20 years previously.

The comparisons were made using data dredged from the Financial Statements of the Government of New Zealand.

Among our findings, corporate welfare beneficiaries were doing much better than 20 years ago – in terms of their slice of government spending – before the virus triggered much greater injections of government assistance.

The other big change from 20 years is the proliferation of social welfare programmes recorded as transfer payments in the financial statements (see table below). Continue reading “Social welfare has shrunk as a portion of total govt spending – but that’s before Covid-19 upset the figures”

After billions are committed to dealing with the ravages of Covid-19, money can still be found for PGF projects

The Point of Order Trough Monitor has been severely tested in recent days, alerting us to spending decisions in the billions rather than the millions.

Much of this mix of spending, lending and granting has been a policy response to Covid-19 but we were not surprised to find New Zealand First Ministers have been unimpeded from spreading Provincial Growth Fund goodies around the regions.

Nor were we surprised to find Andrew Little, who has been given the extraordinary Pike River Recovery portfolio, is pumping more money down an abandoned mine to keep an election promise to families of the Pike Mine disaster.

The $12 billion programme to cushion the impact of Covid-19 was described as the most significant peace-time economic plan in modern New Zealand history.

Here’s what has triggered the monitor – Continue reading “After billions are committed to dealing with the ravages of Covid-19, money can still be found for PGF projects”

It’s not too long ago that mention of QE was derided as “nuttynomics” and “wacky”

Quantitative easing has slipped comfortably into the vocabularies of commentators discussing the policy response to the Covid-19 crisis.

A post at Investopedia describes quantitative easing (QE) as a form of unconventional monetary policy in which a central bank purchases longer-term government securities or other types of securities from the open market to increase the money supply and encourage lending and investment.

Buying these securities adds new money to the economy and serves to lower interest rates by bidding up fixed-income securities. At the same time, it greatly expands the central bank’s balance sheet.

When short-term interest rates are at or approaching zero, normal open market operations, which target interest rates, are no longer effective, so instead a central bank can target specified amounts of assets to purchase. Quantitative easing increases the money supply by purchasing assets with newly created bank reserves in order to provide banks with more liquidity. Continue reading “It’s not too long ago that mention of QE was derided as “nuttynomics” and “wacky””

A united front against Covid-19 is all very well, but it shouldn’t isolate the Ardern govt from hard questioning

As  the  Covid-19 crisis  deepens, the  country  needs  unity, not politics as  usual:  so  says  the  PM  Jacinda  Ardern.

Repeating  a  theme  she had expressed  in a speech the previous   day, she told  Parliament  on  Wednesday:

There are moments in our history where it’s not business as usual, where New Zealanders expect us to come together”, 

 “We are a nation that has been shaped because of our experiences, and they often have been tough, harsh, and unpredictable. That is when New Zealanders are at their best. That is when we rally: when we look after one another, when we care for the most vulnerable. So my final message is this to New Zealanders: be strong but be kind—we will be okay”. Continue reading “A united front against Covid-19 is all very well, but it shouldn’t isolate the Ardern govt from hard questioning”

Dairy industry profits are a bright spot in an economy headed for recession

NZ’s  dairy  industry, under constant  fire from critics for its methane emissions,  pollution of  waterways  and  intensive farming practices in recent years, almost  overnight  is shaping up   to be one of the  country’s  saviours  as the economy dives into  recession.

While  other   key export sectors — tourism, forestry, education — are jack-knifed by the  coronavirus  pandemic,  the dairy industry’s earnings  more than ever before are proving it to be  what the  critics  have scorned:  “ the backbone of the economy”.

The  much  maligned Fonterra Co-op  this week  reported total group sales revenue in  the  six months to  January 31 increased by 7% or $678m to $10.4bn, mainly due to improved pricing and the product mix  sold.  That  compared with  $9,745bn  in the  January  2019  half.

And  Fonterra  is  keeping its  farmgate  milkprice  forecast   in the $7-$7.60 /kg  range.  That  means  more than $11bn  being paid to  its suppliers. Continue reading “Dairy industry profits are a bright spot in an economy headed for recession”

It’s a matter of hope rather than certainty – Westpac says the recession will be deep but brief

Bank economists must wonder about the prudence of injecting firm figures into their forecasts at the best of times.  It’s much more challenging when a virus is rampaging around the globe.

But regardless of any misgivings, the economists are not only portending a significant GDP shrinkage  in the foreseeable future – they are talking (for example) of GDP falling 3-4% this year (the ANZ) or by 3.1% over the first three quarters of this year (Westpac).

The percentage point has to be admired.

But the most important information these economists have emailed to their customers and the news media today is that the outlook is highly uncertain.

In other words, they don’t really know how much GDP will shrink or for how long it will keep shrinking, but here’s their best shot at it for a public desperate to know how bad things will get during the virus-driven downturn.

The ANZ team is not trying to pretend otherwise.  They say:

“Forecasting has become an almost-impossible task.”

And this being so, Westpac was right to include the word “hope” in the headline atop its latest analysis.  It summed up things succinctly:

“The coming recession: deep, but hopefully brief.”     Continue reading “It’s a matter of hope rather than certainty – Westpac says the recession will be deep but brief”