Setting a suicide-reduction target might have been detrimental to the govt’s wellbeing

The headline on a statement released from the PM’s Office on the eve of the official release of the Wellbeing Budget tells us the government is Taking mental health and addiction seriously.

To demonstrate this, the government has accepted, accepted in principle, or agreed to further consideration of 38 of the 40 recommendations in the report of the Inquiry into Mental Health and Addiction.

This raises an obvious question:  which two recommendations have been rejected?

The press statement gives the answer:

  • The Directing the State Services Commission to report on options for creating a ‘locus of responsibility’ for social wellbeing within Government; and
  • Set a target of 20% reduction in suicide rates by 2030.

Continue reading “Setting a suicide-reduction target might have been detrimental to the govt’s wellbeing”

Robertson talks about the Well-being Budget – and hints we should brace for the long haul

Finance  Minister   Grant  Robertson  exuded  confidence  in  Parliament on Tuesday  that  his budget  this week  will  tackle “NZ’s  long-term challenges”.

He emphasised “long-term” in  answering  a  patsy question  from  a   Labour back-bencher.  He mentioned “ big difference in this year’s Budget“, which is is that “we have integrated evidence and a range of indicators of well-being at every stage of the budget process”.

Hence the Well-being Budget will enable the government “to track New Zealanders’ success on all of the things that they value”. Continue reading “Robertson talks about the Well-being Budget – and hints we should brace for the long haul”

What Bridges can learn from Australia: forget about the polls and apply policy lessons

Just  as  Australians  are  absorbing the   lessons  of  Scott Morrison’s  “miraculous” return from the electoral dead, New  Zealanders  are  being told by  a prominent   Wellington  economist  Ganesh Nana  he  fears  the   Ardern government  is  about  to  back down  from “meaningful economic  reform”.

 Yet across  the Tasman   it  was  the  “ambitious”   economic reforms proposed   by   Federal  Labor  leader  Bill  Shorten   which delivered the crushing  blow   of   losing  what the pundits   called the  “unloseable” election.

Labour  in   NZ   is  probably   congratulating  itself  that  it  has   dropped  a  broad  capital   gains tax   not  just  from  its current  programme  but  for the future.For it  is clear  many  Australian  voters  rejected   Shorten’s  plan for  a   giant  tax grab across  the   economic spectrum   and  allowed   Scott Morrison to  play  mercilessly  the  line  “the  Bill  you  can’t  afford”.

Labor underestimated,    as  one  Australian pundit   put it,  the downside of

” … mucking around with the aspirations of middle Australia [through negative gearing and capital gains tax changes that stirred anxiety about falling house prices]. I think this would be the last time that the Labor Party goes anywhere near people’s homes.” Continue reading “What Bridges can learn from Australia: forget about the polls and apply policy lessons”

The Trough Monitor is stretched as Ministers dispense (or squander) more millions of our money

Wow – the Point of Order Trough Monitor struggled to keep count of the money being thrown around today and the goodies being dispensed to the government’s chosen industry groups in a flurry of Beehive announcements.

Not all the announcements related to money being dished out.  To the contrary, Deputy PM Winston Peters brought news of revenue being foregone:  the betting levy is being repealed.

The racing industry will benefit from having more money to invest in its revitalisaion.

Peters’ colleague, Shane Jones, meanwhile was dipping into the Provincial Growth Fund to find goodies for a few lucky beneficiaries.

Here’s what we learned from the Trough Monitor, which does not distinguish between good and bad investments of our tax monies. It’s your money they are spending (or squandering).  You decide the merits… Continue reading “The Trough Monitor is stretched as Ministers dispense (or squander) more millions of our money”

Ardern took aim at American gun laws – but the US Constitution explains why she misfired

So PM Jacinda Ardern doesn’t understand  why the United States can’t change its gun laws.  Homework, someone?  The right to carry weapons is enshrined in the US Constitution.

The Second Amendment to the constitution states:

“A well-regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.”

This has been fought over for more than a century, up to the Supreme Court and within the 50 states which make up the US.   Individual states have similar provisions. Continue reading “Ardern took aim at American gun laws – but the US Constitution explains why she misfired”

Comforting news for Oceana Gold – the Minister who scuttled its land purchase plan is doing her best

We learned a bit more yesterday about why Eugenie Sage flexed her ministerial muscle and scuttled part of Oceana Gold’s development plans at Waihi.

Perhaps most notably, during Question Time in Parliament, we learned she is doing her job as Minister of Land Information to the best of her ability.

But she did provide guidance to investors by acknowledging that the contribution to carbon emissions and New Zealand’s net zero target could be considered when she determines whether a proposal will provide substantial and identifiable benefit to New Zealand.

She also provided ammunition for National’s David Bennett to demand she prioritise the economy over her ideology.   Continue reading “Comforting news for Oceana Gold – the Minister who scuttled its land purchase plan is doing her best”

Is Modern Monetary Theory voodoo economics?

Difficult times make for questionable thinking.  So soon you might be hearing a little more about Modern Monetary Theory (MMT) – a slippery body of theory which has emerged from the low interest rate environment which followed the 2008 global financial crisis.  It’s hard to pin down but at its heart is the belief that modern governments which can print their own money have fewer constraints on increasing spending and raising public debt levels than suggested by conventional economists and central bankers. MMT is finding popularity on the left wing of America’s Democratic Party as a painless way to pay for renewable energy and state-run healthcare.

The latest person to say we should take this seriously is Mr Ray Dalio, an American billionaire who opines on public policy (his full argument is here and a Bloomberg summary is here).  Mr Dalio thinks that interest rates and inflation will remain low; central banks, unable to cut interest rates below zero, will run out of ways to stimulate the economy with monetary policy; and fiscal policy will step into the gap in imaginative ways (for example, printing money to finance state spending, buying assets, writing off debts or even cash handouts).

As is often the case with this sort of thinking, there is a body of truth providing the seedbed from which the theory grows.  This can make it more tricky to distinguish sound conclusions from flawed. So it’s noteworthy that MMT has caught heavy duty flak from both ends of the political spectrum. Take the following analyses from economists Paul Krugman and Scott Sumner – who have clashed ferociously on almost every aspect of economic policy over the last ten years.

A Nobel prize winner of the centre-left, Mr Krugman is just the man MMTers would like on their side. He was a strong proponent of the inadequacy of monetary policy both during and after the 2008 global downturn, and a leading advocate of fiscal expansion. But he is very clear on the parameters of this policy and in this column he makes equally clear that he thinks many of the claims for MMT are based on defective reasoning.  An example of his customary trenchancy: “So let’s be clear here: Are MMTers claiming … that there is only one deficit level consistent with full employment, that there is no ability to substitute monetary for fiscal policy? Are they claiming that expansionary fiscal policy actually reduces interest rates? Yes or no answers, please, with explanations of how you got these answers …”.

On the other side of the fence, Mr Sumner is a market monetarist theorist (note – different sort of MMT).  His thinking runs in a line from Milton Friedman and Anna Schwartz’s pioneering work in the 1960s on the monetary history of the United States. He believes monetary policy should be more market and less model based in order to keep inflation low and better manage unusual demand shocks like the 2008 slump. The key variable is using interest rates to keep nominal GDP growing at a stable rate.

In his assessment of MMT, he says that mainstream economists (read Mr Krugman) are sometimes a little sympathetic towards its claims when the economy is depressed and interest rates are zero, because they think monetary policy may not work and fiscal policy is more powerful. Mr Sumner has no truck even with this carefully-circumscribed sympathy.  His view: “In 2013, we saw how even at the zero bound for interest rates, monetary policy is still more powerful than fiscal policy. A dramatic $500 billion reduction in the budget deficit did not lead to the growth slowdown predicted by many Keynesian economists. It was fully offset by expansionary Fed actions and much more aggressive forward guidance.”

Lacking Mr Krugman’s or Mr Sumner’s qualifications, a lay observer with a moderate historical knowledge might ask if Mr Dalio is really wise to assume that the world is stuck in a permanent cycle of low inflation and interest rates.  It’s true, as Mr Dalio points out, that Japan has been there for several decades now and has successfully run up a huge government debt of 250% of GDP.  But this has been possible because Japan’s numerous old people like cash savings and are happy to lend to their government at screamingly low nominal (and real) interest rates.  The government has recycled those savings into spending on schools, police and, with some irony perhaps, pensions.  All very neat so far.  But bear in mind that there is a commitment – eventually – to repay those resources – say if a grandparent wanted to help a son buy a house or help a granddaughter pay for her education.  If this were to happen on any scale, the government will have to divert real spending to do this.  Or find a creative way of writing down its obligations.

Nor is Japan’s approach to the current economic climate the only option. Switzerland faced roughly similar circumstances but its government reduced debt to less than 30% of GDP.  New Zealand also lowered its government debt to GDP ratio, but its businesses and consumers borrowed heavily at low real interest rates to invest in highly productive assets like dairy farms or rental housing.  This has been a great trade – so far.  But if there is a change – as yet unforeseen – in global savings, consumption and investment patterns, we could see higher global real interest rates (remember how high rates were needed to defeat inflation in the 1980s and 1990s?). Some NZ investment decisions might then look a bit silly with hindsight. And MMT will certainly be much less appealing (no doubt its supporters will transition smoothly to making the case for capital and interest rate controls).