Down to Earth Kiwi

down to earth thinking from down under

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Aug 29, 2021
2 min

First Home Buyers Beware: Your own bank may start bidding against you at the auction

The Times in the UK, as well as media outlets in the US, have documented a growing phenomena. Big financial institutions are snapping up residential property, no doubt attracted by the huge capital gains available. Bearing in mind also how working from home may become more desirable as culture adapts to worries about the virus. These financial institutions are then simply renting out the properties. They are doing so in preference to granting mortgages. When you think about i

Aug 27, 2021
2 min

My "toy model" is better than your "toy model"

You may have heard the jokes. One of the founders of modern economics, Paul Samuelson, once observed how "the stock market has predicted nine out of the last five recessions". To which the New York Times, plus a hoard of others, have added, "And economists have an even worse record". Yes, thanks for making fun of my profession, often referred to as the "dismal science". And on that note, let's reference the government's Covid-19 modelers who're trying to predict virus numbers

Aug 25, 2021
4 min

Can we solve the problem of Kiwi Media Bias for $1?

I wrote an "opinion column" with the above title for the National Business Review which they published yesterday. It is reproduced below, if you aren't an NBR subscriber: There once was a time when the owners of big newspapers were amongst the wealthiest, most powerful, folks in town. They could swing elections. Give you a good name. Or a bad name. Australia had the Packers, Fairfaxes and Murdochs. In Auckland we had the Hortons at the Herald. A swathe of politicians went out

Aug 25, 2021
2 min

An Economist's Viewpoint: Our government should have vaccinated Auckland FIRST

As I've discovered the hard way, the last thing our government likes doing is involving folks, especially economists, in decision-making who it considers at odds with its own ideological viewpoint. It's also evident in many recent high-level appointments which have been made. And it is why the most senior members of this government, including the Finance Minister, still make jibes at "right-wing" folks who they consider proponents of "free market reforms". But those of us who

Aug 24, 2021
2 min

What's going to happen to the Kiwi economy now?

In light of the latest lock-down, politicians, media pundits and "experts" are out in force with fancy forecasts as to how our economy is going to get through this. The Finance Minister has characterized the new state of affairs as most likely to be a temporary shock, a blip, which the government can get people through, courtesy of re-activating the wage subsidy scheme and more borrowing. He says the economy is in great shape. If only things were that simple. What's the worst

Aug 22, 2021
2 min

The End of Kiwi Exceptionalism?

Oh dear, it's now looking like our virus elimination strategy, of which we were so proud, may be coming to an end. I'm no medic, so just have to interpret the virus news as a layperson. And the focus of this blog is trying to figure out the economic impact. But in light of the Sydney Morning Herald's headline today, namely that "PM Scott Morrison has reassured NSW the state can reopen based on current vaccination targets regardless of its daily COVID-19 case numbers", it's lo

Aug 22, 2021
2 min

Are the Kiwi virus modelling "experts" trying to predict the unpredictable?

The whole nation is hanging on its seats trying to predict what will happen the next few weeks in terms of virus numbers. The country has ground to virtually a complete halt. The pronouncements of the Finance Minister that this is just a temporary economic shock, the fall-out of which can be quite easily handled by the wage subsidy scheme and more borrowing, don't wash at all. Just like you and me, he has little to no idea about how big will be the scale of the fall-out this

Aug 20, 2021
1 min

Sir Michael Cullen: A Tribute to his Greatness

Sad news today about former Finance Minister, Sir Michael Cullen. Unlike most politicians from both the left and right, he leaves huge legacies. He was a founder of the NZ Super Fund and also the hugely popular Kiwi Saver scheme. This blog supports saving schemes to help fund not only retirement, but also the health needs, of individuals. Sir Michael, right up to the end, wrote extraordinarily perceptive articles in the media on matters related to economics and finance. He wa

Aug 20, 2021
1 min

Parliament's Finance & Expenditure Committee and the RBNZ: A Fact Check

Stuff News has reported on the Reserve Bank Governor addressing Parliament’s Finance and Expenditure select committee. It quotes him as telling MP's that in NZ, “We have had the strongest operating economy in the globe". That's news to me. The primary metric used in economics to measure the strength of the economy is GDP. We are very far from having the highest GDP in the world on a per capita basis, let alone, of course, in terms of total GDP. The World Bank publish a list

Aug 18, 2021
1 min

Who do you believe? Minister Nash or Bloomberg News?

Minister of Economic Development, Stuart Nash, was asked why Amazon is pulling its Lord of the Rings TV series out of this country. He stated that "Amazon has raised no complaints about its experience with this production in NZ or problems encountered along the way .. In fact, it has praised every Government agency it dealt with for their great collaboration, and for the way it was treated by Kiwis who hosted the cast and crew .. Amazon's decision is not a reflection against

Aug 17, 2021
2 min

A Win for Humanity? Lets do the math.

In the interests of non-partisanship, one should call out Kiwiblog for running the headline, "A win for humanity" which was the topic of a Tweet the website is highlighting (see below). The Tweet says "Incredible beyond words. A US Globemaster C17, carrying more than 5 times its passenger limit. 640 Afghans saved from The Taliban. The crew made the decision to go. American heroes". Kiwiblog added commentary that it is "heart warming to see the common humanity as the crew of t

Aug 17, 2021
2 min

The short versus long-run economic forecast for NZ

The NZ Herald's Business Editor, Liam Dann, has gone into overdrive defending the government's handling of our economy the past 18 months. He laments "the Covid complainers - whingers stuck in a feedback loop of false expectation about plans and timing that simply can't be realistically met". He says "the worst thing about living in NZ right now is the relentless negativity". Hang on a second. For many business owners there's a desperate issue, right now, about hiring skilled

Aug 16, 2021
1 min

The Trackless Trams / Electric Buses versus Light Rail Debate Revisited

Dominion Rd Business Association manager, Gary Holmes, has got it right when he argues in favor of trackless trams to run along the iconic route and when he says that they are far cheaper and less disruptive than light rail. "Light rail in Sydney is costing about $120 million per kilometre, whereas trackless trams cost about $6m to $8m per kilometre. They can go in on existing road services and be installed in weeks or months, not years," said Holmes. He is giving the same ar

Aug 16, 2021
2 min

A Wellington-based former RBNZ Chair's suggestion about how to cut Auckland house prices is wrong

Former Reserve Bank Chair, Arthur Grimes, has made a suggestion about how to solve Auckland's housing affordability crisis. The NZ Herald has reported his call for the Government and Auckland Council to enact policies to deliberately 'collapse' the city's house prices by at least 40 per cent and intensify building along Tamaki Drive with Gold Coast-style towers. "I can't understand why that whole [area] from Orakei to St Heliers is not like the Gold Coast", Grimes says. "Basi

Aug 11, 2021
1 min

The Nats and their lack of economic policy: a reason

This is primarily an economics blog, not a politics one. However to the extent the two overlap, we do some political commentary. Since perhaps the biggest single barrier to the development of exciting, innovative economic policies in this country has come from our Members of Parliament being too scared to take risks and promote new ideas. This issue is at the heart of the current dysfunction that exists within the National Party. And the past few days have put this problem, w

Aug 10, 2021
2 min

"Demand the Debate", Judith? But there's hardly any in your own party.

The leader of the National Party, Judith Collins, gave her annual conference speech on the theme of "demanding the debate". It's a topic on which I have some experience, having tried to promote debates on public policy issues, in conjunction with the University of Auckland Debating Society. One debate we organized was on freedom of speech. It was filmed live to a national audience. Former Governor General Sir Anand Satyanand gave an extremely eloquent summing up. The star deb

Aug 9, 2021
1 min

Cullen's critique of Auckland light rail is just copying what the government was told 7 years ago

Seven years ago we invited Ed Glaeser, the world's leading urban economist, who is based at Harvard University, out to NZ. He was our Sir Douglas Myers Visiting Professor. Every piece of advice he gave Auckland City Council and the government in Wellington has been ignored. How do I know? I sat in on the meetings. Toll roads, land-use regulation. You name it, they ignored it. He urged stringent cost-benefit analysis to ensure infrastructure projects were justified. Again it w

Aug 9, 2021
2 min

Welcome to Aotearoa, Mr Page: he's barely off the plane before the Tall Poppy is put in his place

Stuff news did some investigative reporting, seemingly designed to stir up the politics of envy. In an article called "Billionarie's entourage requested Managed Isolation & Quarantine (MIQ) hotel upgrade" they report, "New details can now be revealed about [Google Founder] Page’s previously unpublicized visit [to this country from Fiji] ... sources told Stuff that during Page’s MIQ stay, there was pressure on officials for the billionaire to receive preferential treatment. St

Aug 5, 2021
1 min

The Happiness of Olympic Athletes

As we know, well-being economics has been having a big influence on policy-making in this country and subjective surveys are being increasingly used by our government to guide its decisions. Yesterday, America's cup winner Peter Burling missed the Gold. His co-sailor, Blair Tuke, said "On the Olympic podium in London, we saw people not enjoying the silver medals or being disappointed ... we said 'let's not be those people, if that ever happens', so we'll hold our heads high a

Aug 4, 2021
1 min

Time for the (Underqualified) Managers at the Reserve Bank of NZ to Resign

According to data released just a few months ago in May, the RBNZ was predicting the unemployment rate would stay the same throughout 2021/22 at 4.7%. (See Table 6.5 on page 46 of their Monetary Policy Statement below). As a result of this forecast, the Monetary Policy Committee observed how "unemployment remains above its pre-COVID-19 levels" and decided to maintain "the current stimulatory level of monetary settings in order to meet its consumer price inflation and employme

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Robert MacCulloch

rmacculloch1@gmail.com