Dawn Chorus with 6 things at 6:26am, including: GDP/hour slumps back to 2012 levels; Council loses big High Court case on irrigation; Alternative review of Kāinga Ora;
GDP .. So much work ( eg voluntary , parenting ) is not taken into account . I am no economist ..but thought Marilyn Warings TED talk on GDP some years ago an interesting angle to how work is valued ( or not ) .
The cicadas and dawn sounds this morning a magical start to the day ! thanks
No doubt one factor. But out fall is worse than others and has been going on since early 2010s. Also, our Covid experience wasn't as bad as others in terms of deaths and sickness.
Thanks Bernard. Pertinent comment on long covid from the Public Health Communication Centre this morning - expect long covid to have an increasing effect in labour markets.
Another area I see holding productivity down (in a technical sense) is all the effort to meet regulations, especially in finance and local government. Those activities don’t generally show up as productivity because the only GDP created is the salary of the employee. For everyone else it’s just more cost (inflation) which then eats away at real growth. This is the bureaucratic cost that drags productivity down.
You also understate the vicious circle problem that arises with the inability to change things - starting a business is hard and risky, AND tax disadvantaged, so of course no one bothers. This contributes to less competition as well as low productivity, and therefore higher inflation (which seems stickier here than abroad, notwithstanding aggressive interest rate moves.)
One thing you didn’t mention on councils yesterday was their dependence on building permits to generate revenue. If building/permits continue to plunge, it’s additional stress on council budgets.
How do other countries exceed our productivity if they carry a higher regulatory burden? Should we maybe increase regulations to increase productivity?
Certainly agree on the tax disadvantage front which results in the NZ economy being a housing market with bits tacked on.
Council income dropping from reducing building permits is a very good point in this recession.
Starting a business in beurocratic terms is dead easy in NZ compared to other places.
The hard parts are - funding and selling whatever it is you are offering.
Banks will not give you money unless you have equity in your house. Business loans are expansive, even more so now with interest rates so high. But same banks will be happy to mortgage you above your eyeballs to buy residential property.
And because we are a low wage economy, there are many people who participate in the economy only fir the basics, and even that is limited after so much of their income is sucked into paying rent.
Happy birthday 🎂 old man! (I turned 59 9 days ago! )
Where is the joy in anything the govt are doing? It feels like white men (and Winston) in suits bashing away at how awful things are. And they are awful for some but do we need a privatisation agenda that feels like it’s coming?? Secondary School here built with PPP but can community use its facilities out of hrs?? NO, not without paying $$$$. So hardly gets used at all.
The doom and gloom about the economy that the coalition of chaos is pushing, is to set us up to accept the changes. They are bringing in no matter how bad they are.
Their agenda is to transfer wealth and income from the poor to the richest.
Hi Bernard, great post and pretty much agree with every point. However I've just come back from a trip to Silicon Valley and in has been interesting to see the ecosystem they have setup between early stage VCs and academia to spin out promising IP, and just have not seen much equivalent here in NZ. Is that not also an issue here in NZ that even if we realigned the economic incentives towards R&D investment, that there is necessarily a lot of (at least obvious) places to put that capital? And also is there any political party that has formed any kind of policy of setting up some basic R&D infrastructure for private funding to funnel into in NZ?
Maybe not basic or blue sky academic research, but they will certainly invest in IP spun out of that research. Talked to a company that had just raised over $100million NZD in that exact scenario. Obviously they have a tonne more capital floating around there so not really fair to compare, but what would an academic spin out get here in NZ for its first funding round?
The problem is that the fundamental basic research that generates the commercial opportunities that industry and vc’s look for usually comes from government funding - either to the university or specific areas - usually defence in the US where DARPA responsible for most of the R&D which made Silicon Valley possible. Not holding my breath for that sort of forward looking seed funding in NZ at present, indeed the government seems to be shrinking NZ’s research base eg Callaghan.
Universities in NZ are structured to ensure that the ship (a grand, old clipper) stays afloat. Most of the money attracted by innovative, enterprise academic researchers is spent repairing the main sail and polishing the brass.
I think changing the incentives and housing affordability changes an awful lot. Young people want to stay here more. They don’t spend all their 30s and 40s saving deposits.
The university of Otago built a “Centre for Innovation” just to make it clear that new, disruptive ideas have a place on campus. It’s in the angular, glass upstart across the Leith, a safe distance from the clock tower. There, any ideas threatening to the out-of-date, not-fit-for-purpose business model can be efficiently and effectively quashed. The first lecture in every course should be a critique of the lecture theatre, the lecture format, and the limitations of outdated organisational structures.
Happy Birthday Bernard, this morning’s Kaka was accompanied by the loudest serenade from your local wildlife yet, so we can assume they are celebrating you as well.
Numbers 4 and 5 do not make any sense to me to be honest... How is giving money to families with kids to help them with childcare costs end up being portrayed as a benefit for property investors??? This is some serious mental gymnastics..... One day the readers here shout that this government hates children. The next day when the government helps working families with childcare costs it is being vilified for doing it.
ECE are largely capitalist enterprises using our children as economic units. The concern is that with a significant number of their customers being eligible for the rebate they will be able to lift the charge in order to capture some of that for themselves.
The Wright family who have a significant presence in the ECE farms are also funders of National and ACT. They have structured their business well to take advantage and National certainly will have written this policy so as not to do them any harm, at the very least.
Kurt we live in a capitalist society so all private enterprises are capitalist enterprises. What is the alternative? Communism? Government provided ECE services?
No disrespect Alister and I enjoy the discourse but I have a full-time job and a young child. It is not the best use of my productivity to do your research in order to educate yourself on what other OECD nations do, what works and what doesn't. But it's out there
Same here Kurt. Full time job and kids! The discussion is interesting and productive I think. Let's keep it going. I'll do my research and see what I can find out. Send me a link or two if you get a chance to help me out!
There is nothing stopping those alternatives being implemented now. Why aren't they implemented on a sufficiently large scale to saffocate the capitalist offer by taking all the demand away? So Kurt us wrong. It is not a capitalist enterprise, right? There are non capitalist options. So where is the problem? Why are these alternatives not thriving? Why is the country still dependent on orivate, for profit, providers?
The concept of productivity is a difficult one for the layman- a lot of people think falling productivity literally means lazy workers spending too much time on their phones instead of working! This misunderstanding is very conducive to political worker-bashing I'm sure.
In reality, labour productivity is actually capital productivity expressed in terms of the labour applied to the capital= Technological change = new investment. (Bernard says this).
The blip after covid is people spending money they couldn't spend during covid- but much of the money came from Covid support payments. The big down-slide since mid '22 in graph 2 is 'reverse LSAP' where the RB is selling bonds to NZDMO i.e. the Treasury- more than $8 billion srarting in June '22 (data files here: https://www.rbnz.govt.nz/statistics/series/reserve-bank/open-market-operations ). This is money that Treasury can't spend on goods and services, sucking money out of the economy, thus the recession.
This is part of a rule that treasury shouldn't run a permanent deficit at the reserve bank- I believe it's an IMF rule that has its origin in the ancient days of 'gold standard' where countries would periodically leave the standard during a crisis (usually war) then have to cut the money supply drastically afterwards (creating recession in the process) in order to return to parity with gold reserves , but there's no good reason for it in accountancy terms or in a fiat/credit based economy. IMO it's a sop to the commercial bank sector where the government is thus forced to borrow. It's also a good demonstration of how reductions in government spending creates recession, not the other way round.
Yo Bernard, I trust you have a Birthday celebration that includes lots of awareness that your productivity and abilities result in much appreciation from me and many.
Bernard, I’m listening to a great podcast from the guardian Australia about ‘who screwed millennials ‘ out of a house in Australia.
I’ll be sending it to the boomers in my life for the arguments to understand what changed compared to their lives. So many people don’t understand the economics and would be great to see a NZ commentary on similarités and differences - as I think it’s even worse in NZ than Aussie. As you highlight here, we don’t have even the tax system or productivity of Australia.
Happy birthday, Bernard!
Thanks Matthew.
Ditto for a happy day Bernard . 🎉
GDP .. So much work ( eg voluntary , parenting ) is not taken into account . I am no economist ..but thought Marilyn Warings TED talk on GDP some years ago an interesting angle to how work is valued ( or not ) .
The cicadas and dawn sounds this morning a magical start to the day ! thanks
Thanks Eleanor. That's lovely to hear. And I agree. Marilyn Waring has many interesting things to say on this.
Ditto for all Eleanor's points
Is long covid another factor in the reduced labour productivity since 2020?
https://billmitchell.org/blog/?p=61652
No doubt one factor. But out fall is worse than others and has been going on since early 2010s. Also, our Covid experience wasn't as bad as others in terms of deaths and sickness.
Thanks Bernard. Pertinent comment on long covid from the Public Health Communication Centre this morning - expect long covid to have an increasing effect in labour markets.
https://www.phcc.org.nz/briefing/long-covid-aotearoa-nz-risk-assessment-and-preventive-action-urgently-needed
Yep. That’s important. I’ve made it my must—read over at the 10 things.
Hari huritau e te rangatira!
Happy Birthday, hope it’s a good one!
Another area I see holding productivity down (in a technical sense) is all the effort to meet regulations, especially in finance and local government. Those activities don’t generally show up as productivity because the only GDP created is the salary of the employee. For everyone else it’s just more cost (inflation) which then eats away at real growth. This is the bureaucratic cost that drags productivity down.
You also understate the vicious circle problem that arises with the inability to change things - starting a business is hard and risky, AND tax disadvantaged, so of course no one bothers. This contributes to less competition as well as low productivity, and therefore higher inflation (which seems stickier here than abroad, notwithstanding aggressive interest rate moves.)
One thing you didn’t mention on councils yesterday was their dependence on building permits to generate revenue. If building/permits continue to plunge, it’s additional stress on council budgets.
Doesn't the World Bank call out NZ as being one of the most business friendly countries in the OECD? In 2019 we were ranked 1st
https://data.worldbank.org/indicator/IC.BUS.EASE.XQ?locations=OE
How do other countries exceed our productivity if they carry a higher regulatory burden? Should we maybe increase regulations to increase productivity?
Certainly agree on the tax disadvantage front which results in the NZ economy being a housing market with bits tacked on.
Council income dropping from reducing building permits is a very good point in this recession.
I believe iNZ is considered to be an 'easy' place to do business, not necessarily a 'good' place. (except if you're a bank, of course)
Easy to start a business, especially a small one. But not many real growth stories at scale.
Those are excellent points I hadn’t thought of. Councils are buggered from various directions right now.
Starting a business in beurocratic terms is dead easy in NZ compared to other places.
The hard parts are - funding and selling whatever it is you are offering.
Banks will not give you money unless you have equity in your house. Business loans are expansive, even more so now with interest rates so high. But same banks will be happy to mortgage you above your eyeballs to buy residential property.
And because we are a low wage economy, there are many people who participate in the economy only fir the basics, and even that is limited after so much of their income is sucked into paying rent.
Wishing you a very happy day, Bernard, filled with aroha and whānau.
🎶 Hari huritau ki a koe 🎶 🥳 🍻
Be blest with health, and peace, and sweet content.
- Robert Burns
🌊 🌬 🌱
Happy birthday 🎂 old man! (I turned 59 9 days ago! )
Where is the joy in anything the govt are doing? It feels like white men (and Winston) in suits bashing away at how awful things are. And they are awful for some but do we need a privatisation agenda that feels like it’s coming?? Secondary School here built with PPP but can community use its facilities out of hrs?? NO, not without paying $$$$. So hardly gets used at all.
The doom and gloom about the economy that the coalition of chaos is pushing, is to set us up to accept the changes. They are bringing in no matter how bad they are.
Their agenda is to transfer wealth and income from the poor to the richest.
57 isn't old
That is factually correct. A recent survey shows that early middle age kicks in at about 65.
Happy Birthday Bernard have a great one. It looks like a beautiful day weather wise. Enjoy! Thanks for another insightful dawn chorus.
Hi Bernard, great post and pretty much agree with every point. However I've just come back from a trip to Silicon Valley and in has been interesting to see the ecosystem they have setup between early stage VCs and academia to spin out promising IP, and just have not seen much equivalent here in NZ. Is that not also an issue here in NZ that even if we realigned the economic incentives towards R&D investment, that there is necessarily a lot of (at least obvious) places to put that capital? And also is there any political party that has formed any kind of policy of setting up some basic R&D infrastructure for private funding to funnel into in NZ?
Not sure early stage VC’s look to be involved in basic R&D the risk is too high they prefer projects about to be commercialised
Maybe not basic or blue sky academic research, but they will certainly invest in IP spun out of that research. Talked to a company that had just raised over $100million NZD in that exact scenario. Obviously they have a tonne more capital floating around there so not really fair to compare, but what would an academic spin out get here in NZ for its first funding round?
The problem is that the fundamental basic research that generates the commercial opportunities that industry and vc’s look for usually comes from government funding - either to the university or specific areas - usually defence in the US where DARPA responsible for most of the R&D which made Silicon Valley possible. Not holding my breath for that sort of forward looking seed funding in NZ at present, indeed the government seems to be shrinking NZ’s research base eg Callaghan.
Universities in NZ are structured to ensure that the ship (a grand, old clipper) stays afloat. Most of the money attracted by innovative, enterprise academic researchers is spent repairing the main sail and polishing the brass.
I think changing the incentives and housing affordability changes an awful lot. Young people want to stay here more. They don’t spend all their 30s and 40s saving deposits.
The university of Otago built a “Centre for Innovation” just to make it clear that new, disruptive ideas have a place on campus. It’s in the angular, glass upstart across the Leith, a safe distance from the clock tower. There, any ideas threatening to the out-of-date, not-fit-for-purpose business model can be efficiently and effectively quashed. The first lecture in every course should be a critique of the lecture theatre, the lecture format, and the limitations of outdated organisational structures.
Happy Birthday Bernard, this morning’s Kaka was accompanied by the loudest serenade from your local wildlife yet, so we can assume they are celebrating you as well.
In huge appreciation for what you do. Hugs!
Thanks Deborah. I’m very lucky.
Numbers 4 and 5 do not make any sense to me to be honest... How is giving money to families with kids to help them with childcare costs end up being portrayed as a benefit for property investors??? This is some serious mental gymnastics..... One day the readers here shout that this government hates children. The next day when the government helps working families with childcare costs it is being vilified for doing it.
ECE are largely capitalist enterprises using our children as economic units. The concern is that with a significant number of their customers being eligible for the rebate they will be able to lift the charge in order to capture some of that for themselves.
The Wright family who have a significant presence in the ECE farms are also funders of National and ACT. They have structured their business well to take advantage and National certainly will have written this policy so as not to do them any harm, at the very least.
Kurt we live in a capitalist society so all private enterprises are capitalist enterprises. What is the alternative? Communism? Government provided ECE services?
Nah there's plenty of other options that would help increase our national productivity and are used by, wait for it, not communist nations!
Such as?
No disrespect Alister and I enjoy the discourse but I have a full-time job and a young child. It is not the best use of my productivity to do your research in order to educate yourself on what other OECD nations do, what works and what doesn't. But it's out there
Same here Kurt. Full time job and kids! The discussion is interesting and productive I think. Let's keep it going. I'll do my research and see what I can find out. Send me a link or two if you get a chance to help me out!
Not for profits? Social enterprises? Employee ownership? Lots of alternatives
There is nothing stopping those alternatives being implemented now. Why aren't they implemented on a sufficiently large scale to saffocate the capitalist offer by taking all the demand away? So Kurt us wrong. It is not a capitalist enterprise, right? There are non capitalist options. So where is the problem? Why are these alternatives not thriving? Why is the country still dependent on orivate, for profit, providers?
Happy birthday Bernard. Keep doing what you're doing its so important! Have a great day
The concept of productivity is a difficult one for the layman- a lot of people think falling productivity literally means lazy workers spending too much time on their phones instead of working! This misunderstanding is very conducive to political worker-bashing I'm sure.
In reality, labour productivity is actually capital productivity expressed in terms of the labour applied to the capital= Technological change = new investment. (Bernard says this).
The blip after covid is people spending money they couldn't spend during covid- but much of the money came from Covid support payments. The big down-slide since mid '22 in graph 2 is 'reverse LSAP' where the RB is selling bonds to NZDMO i.e. the Treasury- more than $8 billion srarting in June '22 (data files here: https://www.rbnz.govt.nz/statistics/series/reserve-bank/open-market-operations ). This is money that Treasury can't spend on goods and services, sucking money out of the economy, thus the recession.
This is part of a rule that treasury shouldn't run a permanent deficit at the reserve bank- I believe it's an IMF rule that has its origin in the ancient days of 'gold standard' where countries would periodically leave the standard during a crisis (usually war) then have to cut the money supply drastically afterwards (creating recession in the process) in order to return to parity with gold reserves , but there's no good reason for it in accountancy terms or in a fiat/credit based economy. IMO it's a sop to the commercial bank sector where the government is thus forced to borrow. It's also a good demonstration of how reductions in government spending creates recession, not the other way round.
Yo Bernard, I trust you have a Birthday celebration that includes lots of awareness that your productivity and abilities result in much appreciation from me and many.
Thanks Dave C. Productivity is my thing.
Bernard, I’m listening to a great podcast from the guardian Australia about ‘who screwed millennials ‘ out of a house in Australia.
I’ll be sending it to the boomers in my life for the arguments to understand what changed compared to their lives. So many people don’t understand the economics and would be great to see a NZ commentary on similarités and differences - as I think it’s even worse in NZ than Aussie. As you highlight here, we don’t have even the tax system or productivity of Australia.
https://podcasts.apple.com/nz/podcast/full-story/id1482061243?i=1000650261496
Happy Birthday Bernard and congratulations on your spritely mind pondering GDP in relation to happiness. Waiheke working its magic.