A budget to keep the Jacinda bubble from bursting might blunt NZ’s productivity and spur Kiwis to better themselves in Oz

Finance  Minister  Grant  Robertson  won’t  want to do anything  to disturb  the  waves  of  euphoria  washing  over  New  Zealanders when  he  presents  the  budget  this  week.  The  country is  still basking    in  the  recognition accorded  the Prime  Minister  with  the  top spot in Fortune magazine’s list of the world’s greatest leaders.

The annual list, which was published on Friday,  praised Ardern’s leadership during the Covid-19 pandemic as well as her “world-leading climate and gender-equity policies”.

Fortune magazine has been ranking and publishing top 50 world leader lists since 2014. Although Ardern has featured on it in the past, this is the first time she has been ranked  number  one.

Even  one-time National   supporters  line  up  in  the  queue   of  Ardern  worshippers.

So  Robertson   will  strive to  avoid  any  discordant  notes in  the  budget.  Yet  the  fact  is  that  the  NZ  economy,  though  it   has  survived the  Covid   pandemic  with  a  surprising  degree  of  success,  is  facing  many  challenges,  some  of  them  with  very  sharp  edges, as  it  moves  into  the  next  cycle.

Critiques of Govt’s contentious housing package raise questions about whose advice was sought

So  what happened  to  “go hard, go  early”?  Does  anyone  expect house  prices  (which have risen   more than $100,000  since  early 2020) to  start falling?

The  Ardern government’s   housing  package aroused  curiously mixed  reactions, hardly  any  of them  providing  a  glimmer of  light  to  would-be first-home buyers that house prices will  be  falling  any time  soon.

From one side, the warning came that rent controls could not be far behind. From the other,  “market forces” and the evils of neo-liberalism had  at  last been corralled.

Over  on the  Left, Chris Trotter  sees a housing crisis ripping apart the country’s weakest and most vulnerable communities.

“While the detail of the Labour government’s housing package has been sufficient to unleash the very worst impulses of NZ’s landlord class – whose screams of rage and wild threats of social vengeance have pretty much confirmed the rest of NZ society’s worst fears concerning‘property investors’ – it is the rank insubordination of the nation’s elected leaders which most rankles neo-liberalism’s true believers”.

Govt will help us find forgotten money – it will also enable the RBNZ to hire more staff to (hopefully) protect our finances

Latest from the Beehive –

Our immediate reaction was to be grateful on learning from a Beehive press statement headline that  the government is Protecting Kiwis with stronger financial supervision

Our second reaction was to wonder exactly how it intends strengthening this supervision.

The answer is that a new five-year funding agreement with the Reserve Bank will provide it with an annual average budget of $115 million, up $35 million from this financial year.

The bank expects staff levels to rise 58% to 468 during that period.  To do what?

Not only does the government intend protecting our financial wellbeing, however.  It also aims to boost the finances of some people by introducing a law change to make it easier for forgotten funds in institutional accounts to be returned to their rightful owners.

Revenue Minister Stuart Nash has introduced an amendment to the Unclaimed Money Act 1971. It will update the rules controlling forgotten sums of money held by banks or other financial institutions and professional bodies.

The long list of institutions which hold money on behalf of clients includes banks and building societies, lawyers’ trust accounts, sharebrokers, real estate agents, auctioneers, insurance companies, motor vehicle dealers and company liquidators.

Covid-19 has given Robertson the chance to break records with his Budget (but he will wonder where the surpluses went)

Grant  Robertson,   when he  took on the Finance  portfolio, almost certainly   did not envisage the  kind of  records  he would be setting  in  next week’s  budget.    Surpluses have  evaporated:  instead he   will be setting  records   in deficits  and borrowing.

For long  enough he has  cited  international   agency  reports to underline how  orthodox he has been  in handling the  nation’s finances.  Now the challenge is to  sustain that  faith,  as he  embarks  on saving the  NZ economy  from  a  disaster  worse than the  Great  Depression.

ANZ  Bank  economists  are saying Treasury’s Budget Economic and Fiscal Update (BEFU) will show rapidly widening fiscal deficits in the near term that will send debt spiking higher.

“For our part, we expect net core Crown debt will lift to 40-50% of GDP, with the total Crown OBEGAL recording a near-term deficit close to 10% of GDP. This could see bond issuance lift to around $145bn over the next few years, $100bn higher than December’s Half-Year Update”.

 Those  are   breathtaking  numbers.

Now let’s see how Robertson harnesses the powers of the state to revive the economy

Finance Minister  Grant  Robertson,  who only four  months ago  would have  been quietly rejoicing at the prospect of presenting an election-winning  budget,  now has the challenge of framing a  programme to  salvage  the  economy.  It will be a  formidable  task,  even  if at the time of presentation the country is  in sight of  freeing itself  from  the  blight of  Covid-19.

He says  he  has  a strong personal  belief  in  the  power of  the state  to  do  good.   And   certainly  the  Ardern   coalition   has  deployed  the   power of  the state  effectively  in the campaign  against the  Covid-19  pandemic.

If  Robertson  can  do the  same  with the  economy,  he  will win a  place   in  history.  But   with  economists  predicting  unemployment will soar  above 10% of the workforce,  and consequently  inequality  set to deepen,  many New Zealanders could be  disadvantaged for  life.

Already Robertson is getting  plenty of advice   on what   his priorities  should be.  Labour’s  coalition supporter, the Green Party, is calling is calling for an “ economic stimulus package fit for the 21st century that puts people, climate, and nature first with significant investment in nature based jobs”.  

RBNZ board is pressed to put many hard questions about surprise slashing of the OCR

Michael Reddell, on his Croaking Cassandra blog, has scolded the Reserve Bank Monetary Policy Committee about its prowess – or lack of it – in the communications department.

His concerns were raised by the committee’s decision – announced yesterday along with the latest Monetary Policy Statement – to lop the Official Cash Rate by 50 basis points to 1 per cent.

As Westpac commentators noted:

“This was a stunning decision – in the history of the OCR, the only times the OCR has been cut by 50bps or more have been after the 9/11 terrorist attack, during the GFC, and after the Christchurch earthquake. We are very surprised that the RBNZ decided to cut 50bps in today’s environment.”

Reddell was surprised, too, and is urging the RBNZ’s board to ask hard questions about just what went on before the announcement.

Makhlouf gets credit for his promotion of well-being – but what has happened to Treasury’s well-being?

Ireland has appointed the head of New Zealand’s Treasury department, Gabriel Makhlouf, as the next governor of its central bank.  He succeeds Philip Lane, who is moving to Frankfurt to join the executive board of the European Central Bank as its chief economist.

Confirming Makhlouf’s appointment to the Central Bank of Ireland, Irish finance minister Paschal Donohoe said:

“Gabriel has demonstrated his broad and detailed knowledge of economics, financial markets, monetary policy and fiscal policy, and has the experience of leading a large and complex public service organisation of 10,000 people.”

Before heading New Zealand’s treasury, Makhlouf was chair of the OECD committee on fiscal affairs, the world’s leading tax rule-making body.

According to the Financial Times, this is a priority area for Ireland in light of moves to overhaul global corporate tax rules.

In this country, in its report on the appointment, Stuff said Makhlouf is credited with introducing well-being measures into government Budgets.

Stats NZ – struggling with its census data – is aiming higher and will measure our spiritual well-being

The public service has gone all touchy-feely as it gets to grips with the well-being message from the PM and her government.  Or maybe it simply wants us to think it has gone all touchy-feely.

This includes the number-crunching Government Statistician, whose agency is struggling to crunch the latest census data, and – good grief! – the bosses of The Treasury, an outfit we thought was hard-nosed about things like government spending and fiscal rigour.

What’s more, as we were drafting this post, ACC Minister Iain Lees-Galloway announced the Government was able to improve the well-being of older working New Zealanders and those working overseas with the passing of the Accident Compensation Amendment Bill.

“The legislation passed last night helps ensure we improve the well-being of New Zealanders by addressing a number of gaps and technical issues in the ACC scheme to help keep the system fair, transparent and accessible for all claimants,” says Iain Lees-Galloway.

The changes are outlined in his press statement,

Meanwhile Stats NZ – still struggling to publish hard census data – has set about trying to measure things such as our spiritual health (which, in the case of the writer of this post, is strongly linked to gin-and-tonic consumption).

We suspect the statisticians have other forms of spiritual health in mind as they pump resources into their well-being measures, presumably diverting them from the less consequential task of producing census results.

Michael Reddell, at Croaking Cassandra, is appropriately scornful: 

The Government Statistician can’t manage a census competently, and won’t tell us (let alone MPs) just how bad the situation is (about a census taken more than a year ago), but today – aiding and abetting the government’s Wellbeing Budget branding – she was out with the final list of indicators to be published in this brave new world.   It goes under the label “Indicators Aotearoa”, and in addition to not being able to run a census, she seems –  in common with many public servants –  to have forgotten the name of the country: New Zealand.

Among the list of indicators –  many of which are already published (and thus you wonder what value there is in one set of bureaucrats prioritising them and putting them in one place) –  was this snippet.

I don’t have too much problem with suicide rates.  They are reasonably hard and somewhat meaningful data (but comparisons across time and across countries are hard).

But the other three made almost no sense.

Take that “spiritual health” indicator –  well, there is no indicator yet, but an aspiration to have one.  Real resources are being wasted on this stuff.    Who knows what business it is of the government to be measuring “spiritual health”, whatever it means?  And, strangely, it appears that the Government Statistician believes that only the “spiritual health” of Maori people (or was that “Maori society”?) matters.  Are we back in taniwha territory again…?

Reddell sent us to look at the Stats website which explains:

Indicators Aotearoa New Zealand is being developed by Stats NZ as a source of measures for New Zealand’s well-being. The set of indicators will go beyond economic measures, such as gross domestic product (GDP), to include well-being and sustainable development.

The well-being indicators will build on international best practice, and will be tailored to New Zealand.

This work supports many cross-government initiatives and international reporting requirements, including the Treasury’s Living Standards Framework and the United Nations’ Sustainable Development Goals (SDGs).

Indicators Aotearoa New Zealand will be delivered by Stats NZ and will support the government’s ambition to use a well-being approach to strategic decision-making.

Indicators for which we have information will be populated with data when we release our website in late June 2019. 

The selection of indicators to be reported on from June this year (in an attempt “to understand the most important aspects of well-being for New Zealanders”) significantly was not driven by the availability of data.

The initial set of indicators includes gaps in data, ranging from a complete absence of data to limitations on the ability to break information down to useful and meaningful levels for different communities.

Stats NZ is working with stakeholders to prioritise understanding data gaps and how they can be addressed. We’re feeding this information back to Government for their consideration.

The indicators signed off by the Government Statistician include:

Culture
Engagement in cultural activities; inter-generational transfer of knowledge; te reo Māori speakers

Health
Health equity; health expectancy; mental health status (psychological distress); amendable mortality; self-reported health status; spiritual health; suicide

Identity
Language development and retention; sense of belonging

Knowledge and skills
Core competencies (non-cognitive skills); early childhood education (ECE) participation; educational attainment; inequality of educational outcomes; literacy, numeracy, and science skills of 15-year-olds

Land
Active stewardship of land

Leisure
Leisure and personal time; satisfaction with leisure time

Safety
Domestic violence; experience of discrimination; harm against children; injury prevalence; perceptions of safety/feelings of safety; victimisation

Social connections
Contact with family and friends; loneliness; social support

Subjective well-being
Ability to be yourself; experienced well-being; hope for the future; life satisfaction; locus of control; sense of purpose, whānau well-being

Human capital
Health expectancy; literacy, numeracy and science skills of 15-year-olds; te reo Māori speakers

Social capital
Generalised trust; institutional trust; volunteering

The Treasury’s contribution to the push for compassion comes from the development of its Living Standards Framework (LSF) to help it advise governments about how the policy trade-offs they make are likely to affect everyone’s living standards.

The LSF looks across the human, social, natural and financial/physical aspects of those things that affect our well-being – the ‘four capitals’. It is a tool that emphasises the diversity of outcomes meaningful for New Zealanders, and helps the Treasury to analyse, measure and compare those outcomes through a wide and evolving set of indicators.

Read more about the Treasury’s approach to living standards here: The Treasury Approach to the Living Standards Framework

But hey – Eric Crampton, on the Offsetting Behaviour blog, tells us what else they are up to.

He draws attention to an invitation to pay a $35 registration fee for an event at Treasury,  which is helping to promote a small business involving a former Treasury staffer by hosting the event and encouraging folks to buy its products.

We are teased to attending by a flyer which is headed:

Imagine surprising Aotearoa with a strain of compassion so delightful that it re-wires our collective consciousness!  

Come and join us in our social lab

The Treasury promoters are Fiona Ross, The Treasury Chief Operating Officer, David Dougherty, The Treasury Manager Strategy and Performance, and “24 curious and creative people at The Treasury” who have been “experimenting the social lab”.

They have

 … created a “compassion starter culture” – a network of people who want to create a more compassionate culture in Aotearoa, starting where we are – in our workplaces.

We’ve been playing and rapidly prototyping with the Heartwork Wellbeing Card Game* – now available publicly.

We know that the intention for what we want to create has a huge power.

We don’t have all the answers. And we can’t do this mahi alone.

So we’d like to invite you into this social lab.

So we can grow an even more beautiful, and more resilient strain together.
We’ll share what we’re learning while we’re still metabolising.

Fiona Ross will tell attendees about what she’s been learning from her experiments with the Heartwork cards in her work as Chief Operating Officer of the Treasury.

We don’t know much about Heartwork cards.

We do know a full house (three of a kind with a pair) beats a flush in a poker game.

And we are sure too many New Zealanders are not as flush as they would like to  be.

We must wait to see how their lot will be improved by Treasury’s fascination with compassion and Heartwork cards.

Acculturation at our central bank – Orr branches into spiritualism (maybe to give more mana to money)

Our financial ecosystem seems well and truly rooted.

Point of Order doffs its cap to Michael Reddell for alerting the public to the Reserve Bank of New Zealand’s plunge into political correctness.

Reddell draws attention, too, to the awful reality that a great deal of government improvidence goes undetected by the Point of Order Trough Monitor, which limits its surveillance to the profligacy of the inhabitants of the Beehive.

In particular, he has highlighted the Reserve Bank’s recruiting a “cultural capability advisor Maori” and wonders what this bureaucrat will do in an agency with three main jobs, none of them involving direct dealing with the general public – Maori, European, Chinese, Mexican or whatever:

• the Bank issues bank notes and coins.  That involves purchasing them from overseas producers, and selling them to (repurchasing them from) the head offices of retail banks;
• it sets monetary policy.  There is one policy interest rate, one New Zealand dollar, affecting economic activiity (in the short-term) and prices without distinction by race or culture.  Making monetary policy happen, at a technical level, involves setting an interest rate on accounts banks hold with the Reserve Bank, and a rate at which the Reserve Bank will lend (secured) to much the same group.  The target – the inflation target, conditioned on employment (a single target for all New Zealand) – is set for them by the Minister of Finance.
• and it regulates/supervises banks, non-bank deposit-takers, and insurance companies, under various bits of legislation that don’t differentiate by race or culture.

Wake-up call in banking should be heeded by the regulatory agencies, too

“PM:  If  banks won’t  act lift game, we’ll  act”.  So read the headline in  Tuesday’s  NZ  Herald.

Sounds  as  if the government is  on the job, although the   underline was a  bit  more cautious:  “Ardern’s  stern  words stop short of saying customers  ripped  off”.

So  what  was  the headmistress  on  about?   Surely she wasn’t   saying the  Reserve  Bank   (a  key regulatory agent in the banking sector)  needs a rev  up?

Or is it that KiwiBank  needs to  lift its game?

Possibly.  KiwiBank hasn’t been the  raging success  its founder, the  late Jim Anderton,    thought or hoped it would be.