Browse by publication topic: Public Good publications

The Canterbury earthquakes have disrupted lives and the economy. This Insight brings together key economic indicators to provide a second snapshot of the economic disruption.   We find encouraging signs of stabilisation.

Proust’s À la recherche du temps perdu (In search of lost time) inspired the Proust index in The Economist newspaper of 25 February 2012. The Economist looked across a number of economic measures to see how far back countries have slipped since the global economic crisis. We replicated the Proust index for New Zealand. The recession has cost us dear. In economic terms, New Zealand is now back in 2005.

The recovery will slower than previously thought, according to the NZIER Consensus Forecasts. But the economy will still grow: 2.2% in the year ending March 2012 and then accelerate to 3.0% in 2013 and 2014. The Canterbury reconstruction will be a key driver, with the rest of the economy growing more modestly, averaging 2.2% over the next three years.

This Insight discusses the common pitfalls with undertaking policy development and ultimately writing a snappy, easy to follow RIS.

Performance indices are used worldwide as indicators of activity in key sectors to assist analysts and decision-makers. An advantage of these indices is that, by pooling information from the series that make up the indices, idiosyncratic variation is smoothed out, and a stable and potentially more robust indicator of direction is constructed. Our study shows that individual sector diffusion indices from the QSBO are both good coincidental and leading indicators of economic activity.

Assumptions on export elasticities can have a big impact on CGE model results, especially at the industry level. Export elasticities measure the responsiveness of demand for a country’s exports to a change in the world price. The greater the elasticity, the greater the change in export demand following a price shift.  We find that the size of the export elasticities has an important impact on the magnitude of Computable General Equilibrium (CGE) modelling results.

The main reason for the growing income gap between New Zealand and Australia are differences in the quality of management, process innovation and the quality of labour and capital, finds new research released by NZIER. This finding contrasts with the more conventional belief that a lack of capital intensity or differences in mining wealth is the issue.  “When we adjust for differences in the structure of our economy, we find that the income gap with Australia is not so much because it does different things, but because, in the things we do too, Australia does it better”, said Jean-Pierre de Raad, NZIER’s chief executive.
“Only 30% of the productivity gap is due to the structure of the economy. Mining is not the secret to Australia’s success.”
“We also find that capital intensity is not the main thing we should be concerned about, as differences primarily reflect economic structures. Instead, New Zealand’s main problem is the underperformance of industries.”

Economists expect resilience despite global risks. New Zealand economists on average believe the economy is set to recover, in part due to reconstruction of Canterbury. Global fears do not appear to have impacted on New Zealand economists’ expectations much as yet. Economic growth forecasts have been revised up a touch for the next two years, according to the latest NZIER Consensus Forecasts Survey. Economic growth will accelerate from 1.5% in the year ending March 2011 to 2.6% in 2012 and 3.7% in 2013. The Canterbury reconstruction will be the major driver, with a more modest recovery elsewhere.

The National Policy Statement (NPS) on Freshwater Management is a good first step, but it may leave local authorities in the dark about how to meet its intent.

Working for Families (WFF) was introduced between 2004 and 2007 to “make work pay” and ensure income adequacy for families with children. The policy has reduced child poverty, drawn an extra 8,100 sole parents into some paid work, encouraged more of them to work 20 hours or more, and reduced the time they receive a benefit. But it also resulted in 9,300 fewer second earners in paid work, and over half of non-beneficiary families with worse incentives to earn more, at an additional cost of $1.5 billion per year.  The objectives are laudable, but we worry about the cost-effectiveness and poor incentives of WFF. To ensure value for money of government spending, it is time to reconsider WFF.

NZIER contributed the trade and investment chapter of the book Pacific Partners – The future of U.S.-New Zealand Relations. The case studies that lay behind this chapter have now been published as NZIER working paper 2011/1. These case studies were developed to inform and illustrate the conceptual ideas presented in the chapter, and to provide real world examples of how New Zealand and U.S. firms are working together for mutual benefit.

The Government has recently announced that it will be extending the policy regarding 90-day trial periods for new workers to all employers, not just those with fewer than 20 employees. NZIER’s preliminary analysis suggests that this extension is likely have a positive impact on employment.