Welcome to the June 2017 newsletter from The Policy Observatory.
Staff changes: Economist Simon Chapple has joined The Policy Observatory staff on a half time basis, replacing Michael Fletcher who left last year. Simon has experience working in the New Zealand public sector and at the OECD. An interview with him about ‘the social investment approach’ was run in The Spinoff in the lead up to Budget 2017, with a longer interview on our website.
In July and August The Policy Observatory will host a series of conversations about the future of the New Zealand economy. Chaired by Rod Oram, each event covers a different topic: the future of trade in a world of re-emergent national populism and voter scepticism of big trade deals; the balance between the ‘seed’ economy and the ‘bubble’ economy in New Zealand and how to productively shift that balance; and the opportunities and threats posed by big data for public policy making. Details are on our website; click on the event links below.
We have a new report by Brian Easton on the relationship between price increases in the housing market, and price increases generally. Since 2002, excluding the period when the Global Financial Crisis impacted (2007-2012), house price rises in New Zealand have averaged 12.4% more than the Consumer Price Index (CPI). This differential is almost ten times the pre-2002 rate. Using Reserve Bank of New Zealand data, Brian Easton compares house price changes to the Consumer Price Index (CPI), a measure of general inflation that excludes house sales. His report reveals the extent of the gap between CPI rises and house price rises and concludes houses today are overpriced.
Brian’s report is here:
We have also uploaded some of the reports prepared for the visit of UK economist Ann Pettifor last year. These can be viewed on the Reports & Projects page.
Professor John Tookey’s report on the housing crisis from a construction sector perspective, profiled in last month’s newsletter, was picked up for interviews on the RNZ Nine to Noon Show and the National Business Review (paywalled).
Brian Easton’s report on house price rises was covered on Radio New Zealand and 1ZB news over Queen’s Birthday weekend.
The Briefing Papers website sits under The Policy Observatory umbrella. Two papers were published analysing aspects of Budget 2017.
Public Debt: How Low Should It Go? By Brian Easton
Brian Easton discusses the government’s aim to lower its debt targets and points out the elephant in the room: high private debt.
“For the government may be taking a stern position on the public debt track but it is shying away from dealing with the private debt track. By doing so, it is once more exposing New Zealand to another foreign debt crisis.”
Budget 2017: What Tax Cuts? By Terry Baucher
Tax specialist Terry Baucher discusses this year’s budget tax threshold adjustments in the context of rising government revenues. Fiscal drag, changes to Kiwisaver and Student Loan repayments rates have garnered the government more income; meanwhile abatement rates on Working For Families and the Accommodation Supplement, and Student Loan repayments means some workers are paying an eye-watering 84 percent marginal tax rate.
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