Previous Posts

  • Robert MacCulloch

Amusingly (if that's the right word?) the Reserve Bank of NZ's Monetary Policy Committee seems to be the only group in the country which doesn't think prices are on the rise.

The latest ANZ Business Outlook survey showed measures of inflationary pressures have soared. "Reported costs are through the roof ..." says ANZ chief economist Sharon Zollner.

Meanwhile, down in Wellington, the RBNZ's Monetary Policy Committee, which sets the Official Cash Rate, stated a few weeks ago, on 14th April, that:

"Some temporary factors are leading to specific near-term price pressures ... However, the Committee agreed that medium-term inflation ... would likely remain below its remit target in the absence of prolonged monetary stimulus ... The Committee agreed to maintain its current stimulatory monetary settings until it is confident that consumer price inflation will be sustained at the 2 percent per annum target midpoint".

Take your bets: the RBNZ versus Sharon Zollner. My money's on Sharon (!).

My reading is that the RBNZ has made a mistake ploughing ahead with its $100 billion Quantitative Easing Program in the face of sky-rocketing house prices and growing evidence that consumer prices are on the rise, but doesn't want to admit the mistake and isn't sure how to extricate itself so is sticking with the old plan and digging deeper.

  • Robert MacCulloch

A conference called "Auckland's Future, Now" has just been held which received national media coverage. It was "hosted by Auckland Unlimited - the region's economic & cultural agency & an Auckland Council-controlled organization". It was attended by the PM, former PM's John Key & Helen Clark, as well as Mayor Goff, who all spoke.

For the record, we brought out the world's leading urban economist, Ed Glaeser, for a visit to NZ eight years ago (back in 2013) and organized for him to talk direct with Auckland Council at an event attended by the Mayor, as well as with a host of top politicians, from both the left and right, in Auckland & Wellington. I attended most of those meetings.

It turns out that every piece of advice that Glaeser gave to avoid the current housing affordability crisis, solve our transport problems and prepare Auckland to be a "city of the future" was ignored. Glaeser emphasized how essential is top notch education to help ensure urban success. High local education levels create a base from which more skilled workers can be attracted. They allow cities to bounce back more quickly from adverse shocks:

Interviewer: "So Singapore's number one ranking in education is not a coincidence".

Edward Glaeser: "It's not a coincidence. Right. Good cities invest hard in their education as well. Obviously, the economic miracle of Singapore is pretty great. And that's part of it, right? I mean, part of effective cities and part of thinking that we want cities to enable children to make better lives for themselves is making sure that they have the right educational institutions .."

However, I couldn't find a single reference to the quality of school education in Auckland and how it can be improved in the entire "Auckland's Future, Now" programme. Since Glaeser's visit, NZ has plummeted further to become 2nd to bottom of the OECD league tables in terms of maths & science test scores at schools. Most top economists I talk to these days are saying that since so little was done back at the time of Glaeser's visit to start addressing Auckland's problems, the scale & complexity of the issues have now become so immense, they are increasingly verging on becoming intractable.




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Robert MacCulloch