NZIER on fiscal stimulus

May 15th, 2009 at 12:46 pm by David Farrar

NZIER have done a very interesting report on the balancing act between and debt.

The of almost $10b over four years will result in an extra 10,000 jobs in the short run, but it will reduce future consumption by $160 per person per year. We can spend now, but we have to pay for it eventually.

And that is the key thing to remember – that debt has a cost.

We find that a policy that reduces the cost of employing people could boost employment more at a similar cost to long-run consumption. Better still would be well-targeted spending on infrastructure to deliver longrun productivity improvements. Given New Zealand’s longer term growth challenge, any fiscal efforts to stabilise the and avoid a more severe recession should have productivity at the centre of the policy radar screen.

Productivity growth is all important.

we find that the current package is likely to:
• generate an extra 10,000 jobs in the short run
• raise GDP in the short term by 0.6 percentage points
• lead to lower employment after 2012 and a 0.8 percentage point fall in long-run real consumption per annum than without the stimulus.

Again debt has consequences. And just think about how much more debt there would be with Labour – not just $1b+ for their pet tunnel, but they have oppossed every cost saving in the public service.

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34 Responses to “NZIER on fiscal stimulus”

  1. sonic (2,818 comments) says:

    “We find that a policy that reduces the cost of employing people”

    Translated. we want you to work longer and harder for less pay.

    [DPF: You’ve never heard of productivity gains through technology?]

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  2. dime (10,102 comments) says:

    “but they have oppossed every cost saving in the public service.”

    LOSS OF JOBS LOSS OF JOBS!!!

    Thats Dimes memory from the debates between the Don and Helen. her just screaming that out as the great man talked economic sense.

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  3. goonix (140 comments) says:

    Discussion on this: http://www.tvhe.co.nz/2009/05/13/nzier-comes-out-in-favour-of-wage-subsidies/

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  4. garethw (205 comments) says:

    What happened to the Productivity Commission idea? A la Australia’s?

    Also, from that report: “We have assumed in this paper that the Government will need to raise taxes after the economy recovers to deal with the projected budget deficits and worsening net Crown debt”
    So taxes are going back up huh?

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  5. jarbury (464 comments) says:

    This is an interesting read:
    http://img.scoop.co.nz/media/pdfs/0905/GreenNewDeal.pdf

    28,000 jobs created by spending $2 billion on building 6000 state houses. Wow that would go a LONG way towards mitigating the worst effects of the recession. And create something with lasting value, housing.

    Just goes to show what is important is how you spend stimulus money. Motorways are not so great as they’re capital intensive, housing is great as it’s very labour intensive.

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  6. MyNameIsJack (2,415 comments) says:

    [DPF: You’ve never heard of productivity gains through technology?]

    I have, but most NZ employers don’t seem to have. NZ has one of the lowest investments in new tech.

    Also, what new technology is there to increase productivity in areas such as hair cutting and latte making, about the only jobs that cannot be sent to india!

    And just think about how much more debt there would be with Labour

    Why? They are no longer in government, the National Socialists are and as they piss around with job summits and cycelways to nowhere, jobs are being trashed all over the nation. Time to move on DPF, accept that your lot won and they are floundering!

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  7. sonic (2,818 comments) says:

    “DPF: You’ve never heard of productivity gains through technology?]”

    I certainly have, but how does that “reduce the cost of employing people”

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  8. toad (3,674 comments) says:

    What do you think of the Green New Deal economic stimulus package the Greens released today DPF?

    Good stuff from where I’m sitting.

    [DPF: I think there are some good aspects to it, which I will blog. Just been hectic day so doubt will be until tomorrow to give me time to go through thoroughly]

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  9. MyNameIsJack (2,415 comments) says:

    sonic (2132) Vote: 2 1 Says:

    May 15th, 2009 at 2:28 pm
    “DPF: You’ve never heard of productivity gains through technology?]”

    I certainly have, but how does that “reduce the cost of employing people”

    Easy – the technology is the internet, the reduced cost of employing people is sending the jobs to bangalore a la ANZ National Bank.

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  10. dime (10,102 comments) says:

    hey Toad – wasnt the “new deal” a disaster? prolonged the depression and all that…

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  11. dime (10,102 comments) says:

    Ok, had a quick look at the greens new deal…

    highlights :

    Home Inulation – 164 mil
    Transport efficiancy – 1 billion
    Protecting waterways 600mil
    6,000 state homes – 2 billion
    community economic development 439 mil

    for those that missed it… 6000 new state homes. FFS

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  12. MyNameIsJack (2,415 comments) says:

    And another example of “productivity gains through technology”, except the gain isn’t in NZ.

    http://www.stuff.co.nz/business/industries/economy/2413882/Black-day-for-Kiwi-workers

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  13. jarbury (464 comments) says:

    Dime, building those state houses is expected to create 28,000 jobs. The houses dont’ need to stay as state subsidised housing, some could be sold to ensure you don’t end up with over-concentration in areas. There has been hardly any housing development in Auckland in the last year or so, due to finance company failures & falling prices & the recession. As the population continues to grow unless we expand housing supply soon and fast we will have skyrocketing rents and prices in the next few years.

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  14. Bevan (3,924 comments) says:

    for those that missed it… 6000 new state homes. FFS

    So the Greens want to build low income ghettoes? Now that will go down a treat!

    Wonder how the resource consent will go

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  15. dime (10,102 comments) says:

    bevan – the 6000 homes would be built amongst normal people. so everyone has a piece of trash in their street!

    jarbury – how about make it easier to get resource consent, lower taxes and let the market build the houses it needs. supply and demand always works it out!

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  16. jarbury (464 comments) says:

    If supply and demand always worked it out we’d be building houses like crazy in Auckland at the moment.

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  17. Banana Llama (1,043 comments) says:

    Instead of paying people to dig holes and fill them how about we just work out ways to produce more than we consume, with the excess production we can have this thing called savings, with this thing called savings we can invest in more productive capacity which would give us more to consume, what we don’t consume we can save.

    Zomg an infinite loop.

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  18. getstaffed (9,186 comments) says:

    And another example of “productivity gains through technology”, except the gain isn’t in NZ.

    Yeah, I wish I was still digging in coal mines like my grandfather. Damn that new fangled drilling technology. Damn those efficiency gains.

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  19. goonix (140 comments) says:

    “If supply and demand always worked it out we’d be building houses like crazy in Auckland at the moment.”

    When house prices are falling or stagnant you’d suggest more should be built? lol. Plus you have to take into account interventions preventing the market from clearing, such as the RMA and local body zoning laws.

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  20. emmess (1,432 comments) says:

    >>If supply and demand always worked it out we’d be building houses like crazy in Auckland at the moment.

    We would have in the time before and during the boom if it wasn’t for the small g green ideology and we wouldn’t be in the mess we are in now

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  21. jarbury (464 comments) says:

    goonix, considering that most people agree that Auckland’s house prices are hugely over-valued I would say there’s a good argument that we should keep building houses to make them drop even lower.

    I agree on the zoning laws – which are usually stupidly restrictive. Why is it a million times easier to build bollocks Dannemora/Flat Bush McMansions than it is to build townhouses or apartments in a place like Avondale or Onehunga? Our current planning rules make it easy to build unsustainable sprawl and difficult to build efficient intensification – that’s just stupid.

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  22. Kimble (4,443 comments) says:

    “here’s a good argument that we should keep building houses to make them drop even lower”

    MAKE them drop lower?

    Why would anyone build a house that they KNOW is going to be worth less in the near future?

    Desire to control the market to get the “right” outcome
    +
    A fundamental misunderstanding of markets and prices

    Almost the perfect storm

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  23. Banana Llama (1,043 comments) says:

    If house prices dropped lower people might just build a house to live in, strange concept i know.

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  24. bwakile (757 comments) says:

    Hard to take the new green deal seriously when it only takes about 6 pages of preamble to get to the bit where they kneel down and worship the UN, global warming, peak oil and every other fear they can muster on a single page.

    Sounds like the old green deal in a new box.

    Plus toad et al seem to positively relish the prospect of spending other people’s money to create their perfect world.

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  25. toad (3,674 comments) says:

    Bevan said: The Greens are not talking about ghettoes. Poor people have to live somewhere, you know. Greens policy is that state housing was interspersed throught communities. If you are uspet by having a cleaner or fast food worker or sole parent living nearby, then too bad. Or should they all live in South Auckland and have to travel to Mount Albert to subsidise their incomes with a bit of criminal activity?

    The state housing part of the package makes great sense. It creates 28,000 jobs, and these are jobs that can be taken up by those who have been or will be laid off owing to serious downturn in the housing construction industry and have few skills that can be utitlised elsewhere. It also helps to make the state rental market a more significant proportion of the rental housing market, which will but a brake on private rents and make rental housign more affordable to people on low incomes.

    And, because the state houses will be energy-efficient, there will be less cost to the state through Work and Income supplementary benefits and allowances.

    And, above all, it would help move investment decisions from property speculation to productive enterprise – a capital gains tax would be even more effective re that, but I guess that won’t ever be on the agenda until the Greens are actually in the position to lead a Government.

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  26. Bevan (3,924 comments) says:

    Bevan said: The Greens are not talking about ghettoes. Poor people have to live somewhere, you know.

    Actually I did not say that. Maybe you should learn how to use html tags properly….

    Greens policy is that state housing was interspersed throught communities.

    Do these communities get a say in this, or will it be forced upon them without consultation?

    If you are uspet by having a cleaner or fast food worker or sole parent living nearby, then too bad. Or should they all live in South Auckland and have to travel to Mount Albert to subsidise their incomes with a bit of criminal activity?

    I wasnt aware that all fast food workers, cleaners and solo parents were criminals – you shouldnt stereotype like that, Im sure a majority of them are good hardworking people who are just trying to get by. Mind you if they are as you say criminals, then no I wouldnt want them living anywhere near me.

    but I guess that won’t ever be on the agenda until the Greens are actually in the position to lead a Government.

    Its more likely that I’m going to go home and find Jessica Alba and Scarlett Johanson waiting for me to join them in a threesome! I guess dreams are free.

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  27. infused (660 comments) says:

    The 018 and Yellow jobs were going to go over seas regardless. This was announced not long after Yellow was bought.

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  28. peterquixote (231 comments) says:

    I think that PM NZ Key has recognised that we can raise tourism from ten to fifteen per cent gross income.
    Its good dudes. Pick a good place to live in New Zealand.

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  29. WraithX (283 comments) says:

    MyNameIsJack: “Easy – the technology is the internet, the reduced cost of employing people is sending the jobs to bangalore a la ANZ National Bank.”

    Well that is easily resolved – dump the minimum wage which has an unintended consequence of outpricing labour and companies will employ kiwis to do the job. Perhaps if the greens and labour stopped to think for a minute they would realise that minimum wage destroys jobs. Surely it is better to be paid at $10 an hour (as defined by the market let’s say) than unemployed because no one will pay you $13. This is very basic economics and the lack of a grasp of it in the Green and Labour party shocks me. Especially when the very consequences of ignoring it are playing out around them.

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  30. WraithX (283 comments) says:

    jarbury: “There has been hardly any housing development in Auckland in the last year or so, due to finance company failures & falling prices & the recession. ”

    And perhaps the fact that the environmental courts and taniwhas and a lame resource management act are preventing building. Oh but wait – don’t the greens support those things? We have to respect Maori superstitions, and we have to save the environment.

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  31. WraithX (283 comments) says:

    oh – in my last comment when I said lame I meant it in the old fashioned way – as in crippled – not in the more modern Internet sense of “sucky”. Though it is that too :)

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  32. jarbury (464 comments) says:

    WraithX, barely anything’s been proposed in the last year or so to be turned down. Last major thing might have been the SoHo development in Ponsonby, but that was only turned down on specific grounds of its effects on one neighbouring building that could have been easily fixed by a small design change.

    However, then the developer went bust.

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  33. reid (16,632 comments) says:

    Speaking about productivity gains through technology, I really hope it’s occurred to someone in the Cabinet to talk to professional groups like accountants and lawyers re: the difficulties, delays and sheer daily frustration they face when dealing with their respective govt depts on behalf of their clients.

    If that could be streamlined there would be significant productivity gains within those professions.

    For example, by allowing a database approach to their myriad forms so that when a tax return or immigration application needs to be completed, there is a database sitting behind the form that will pre-populate the various fields after you enter say the client’s IRD number. At the moment, an accountant who say files a monthly online GST return has to manually populate every field. FFS. Immigration is even worse. They have pdf forms on their website and there are multiple forms so if you’ve got a family to process you’re forced to manually complete the same information multiple times.

    I used to work in technology and know what it would take to implement such an approach. It could be done quite simply. But getting the respective depts to implement it will take political direction because they’re so obdurate in respect of their justification for not doing so.

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