June 10th, 2015 at 9:00 am by David Farrar

The latest OECD report on NZ is here.

The New Zealand economy has performed well in recent years, but bottlenecks in housing and urban infrastructure, inequalities in living standards and rising environmental pressures all pose challenges for sustaining robust growth and high levels of well-being over the long term, according to the OECD’s latest Economic Survey of New Zealand.

The Survey says that New Zealand can expect its strong, broad-based expansion to continue in the near term, with economic growth projected at 3.4% in 2015 and 3% in 2016. The budget deficit has been almost eliminated, general government debt is falling as a share of GDP, and monetary policy remains accommodative, pushing inflation back up to the midpoint of the official 1-3% target range.

However, the OECD points out a number of barriers to sustaining strong growth. House prices in Auckland, New Zealand’s economic hub, are high, reducing its attractiveness as a business location and posing financial stability risks. Strong population growth and constrained housing supply have resulted in rapid house price increases, eroding affordability. To address this, New Zealand should reduce the economic costs of environmental and planning regulations and the scope for vested interests to limit development that would otherwise be in the wider public interest.

The burden of housing costs has risen substantially for low-income households. Moves to bring the social housing stock more in line with demographic and geographic demand, as well as to reallocate it to those most in need, will help the hardest hit households. The government’s commitment to expanding the social housing stock is welcome, although the Survey recommends providing additional resources, to achieve a more significant increase.  

They also look at local government:

One of the most problematic factors cited for doing business in New Zealand remains an inadequate supply of infrastructure. The Survey recommends that New Zealand facilitate greater urban infrastructure provision by diversifying revenue streams available to local governments. Better management of the demand for and use of urban infrastructure, including congestion charging to reduce urban traffic, should be considered.

I’m in favour of congestion charging.

NZ has lowest gender wage gap in the OECD

April 16th, 2015 at 1:00 pm by David Farrar

Once again, NZ is one of the better places in the world for women, or men, to live.

OECD Watch is not an international human rights body

April 2nd, 2015 at 10:00 am by David Farrar

The Press reports:

Quake-hit Christchurch homeowners are taking insurer IAG and Fletcher EQR to an international human rights body. …

International lawyer Steve Patterson, of WeCan, said he lodged an appeal against this decision with OECD Watch in the Hague (Netherlands).

MBIE accepted a first quake claim alleging an insurance company breached human rights earlier this year.

The OECD guidelines promote responsible business conduct and observance is not legally enforceable. They do not override New Zealand law or regulations. 

This is a poorly explained story. There is no “appeal” to OECD Watch. It is not an international body that is part of the OECD or any multi-national governmental organisation.

OECD Watch is a self-appointed group of civil society NGOs. It can’t hear an appeal from anyone. It can offer an opinion on any issue it wants. But that opinion has no more standing than an opinion from any other group of NGOs.

OECD says you can’t do special tax rules for digital companies

February 3rd, 2014 at 10:00 am by David Farrar

The FT report:

Proposals for a tax crackdown on digital companies such as Google and Amazon are to be dropped, as governments push ahead with measures affecting the global economy.

Designing special tax rules for internet companies would not be viable, given the growing digital presence in large parts of the economy, an international task force has concluded.

So I’m really looking forward to details of the magic wand that Labour claim they have, that will mean those companies will pay tax in New Zealand based on their turnover instead of their profit.

No room for complacency

December 4th, 2013 at 2:00 pm by David Farrar

Stuff reports:

Kiwi students are falling behind the rest of the world in reading, maths and science, a global education report has revealed.

New Zealand’s education ranking has fallen from seventh to 18th in science, from 12th to 23rd in maths, and from seventh to 13th in reading, according to a report released by the Organisation for Economic Co-operation and Development (OECD) last night.

Just over 4000 15-year-old Kiwi students took part in the assessment, which is done every three years.

Opposition MPs say students are falling behind because teachers are too busy filling in government forms to concentrate on teaching.

But Education Minister Hekia Parata pointed the finger at issues to which the study group has been exposed, including the bedding-in of a new curriculum, under-investment in teachers, and a poor culture of behaviour in some schools.

“This Government is addressing all of these long-standing issues,” she said.

The students measured by the report were in the education system from 2001 to 2012, which meant they had never been caught by the national standards system, Parata said.

This should be a wake up call for those who resist change in the education system. Stagnation and decline is not acceptable. If you talk to secondary teachers, you’ll know that it is too late for them to do much with a student if they get to secondary school with inadequate literacy and numeracy schools.

We’ve had the bigotry of low expectations for too long, where the 15% tail are allowed to fail. Not everyone will be able to get good qualifications, but everyone must leave school with functional literacy and numeracy.

OECD scores NZ Government highly

November 16th, 2013 at 12:00 pm by David Farrar

The OECD has published ratings for its members governments. The overall data is pretty good for New Zealand. Some highlights:

  • Citizens rate government satisfaction 10% higher than OECD average
  • ICT expenditure by Govt is highest in OECD at 2%
  • Trust in Government up 2% since 2007 (down 5% for overall OECD)
  • Income inequality (Gini coefficient) reduces from 0.45 to 0.32 after tax and welfare transfers.
  • Education performance on PISA is 521 compared to OECD average of 495 despite average expenditure per student of US$70,100 compared to OECD of $83,500.
  • Govt employees make up 9.7% of labour force compared to OECD of 15.5%
  • Women are 29% of Ministers compared to 25% for OECD
  • Confidence in government is 61% (OECD 40%), Police 83% (72%), Education 71% (66%), Health care system 83% (71%) and Justice system 58% (51%)

On the not so good side:

  • Deficit at 7.5% of GDP is higher than OECD average of 3.5%. But this is 2010 data which includes earthquake. Still shows how important it is to reduce and eliminate the deficit.
  • Government senior managers paid $397,000 on average compared to $232,00 OECD average (in US$ PPP)!


Hard data for education

July 14th, 2013 at 7:00 am by David Farrar

The Herald reported:

New Zealand’s education system has been treading water and its students will lose out in the global race for the best jobs unless change is embraced, a visiting expert warns.

Andreas Schleicher has been dubbed “the world’s schoolmaster” by international media – and he advises a shake-up of New Zealand’s system.

The German scientist and statistician is a pioneer of using hard data to analyse what was traditionally thought of as a “soft” subject, previously dominated by tradition, theories and ideology.

The change in approach helped him become one of the world’s most influential education experts.

It’s depressing that some parties and unions spend so much energy fighting against the Government and parents having some standard data. There is huge power in data. Even more depressing that they are now boycotting a tool that will help improve moderation and consistency.

A parent questionnaire which ran with the PISA test was used to see what factors were most important in terms of test results.

It found that parents showing a consistent interest in a child’s education is the most important factor in raising his or her achievement.

“It is not the hours of homework that you spend with your children, it is not about the degree that you have,” Mr Schleicher says. “It is simple things – when parents ask them every day at the dinner table, ‘How was school? What went well? Did you have any difficulties?”‘

Good advice.

New Zealand must deploy its best teachers to the most challenging classrooms, Mr Schleicher says. Data clearly show the highest performing countries prioritise and target the quality of teaching.

Overseas examples include Shanghai, which topped the 2009 results, where vice-principals at successful schools can only become principals if they show they can turn around one of the lowest-performing schools.

What a great idea.

Mr Schleicher supports National Standards data as a way for educators to identify success and failure.

The standards are descriptions of what students should be able to do in reading, writing and mathematics as they progress through levels 1 to 8, the primary and intermediate years.

Their introduction has been controversial, with opponents saying they will lead to “league tables” of schools, and give parents the false impression that a school can be judged by its results alone. “I can see the challenges,” Mr Schleicher says.

“But in the dark all schools look the same, and all students look the same.

“Unless you have some light to illuminate the differences, there is very little you can do about it.”

Absolutely. Some data is better than no data.

Education at a glance

June 26th, 2013 at 11:00 am by David Farrar

The OECD has published its 2013 Education at a glance book of OECD educational statistics. The report has around 400 tables in it.

Ministers Parata and Joyce highlight NZ is :

  • Investing 7.3 per cent of its GDP in education – the seventh highest in the OECD
  • Investing 20 per cent of all public expenditure in education, which is the second highest percentage in the OECD
  • In the top third of countries for participation in early childhood education  – 95 per cent of four year olds enrolled in 2011
  • In the top seven countries for the percentage of public expenditure allocated to early childhood education
  • In the top 10 of the OECD for the highest proportion of tertiary qualified adults, with 39 per cent of 25 to 64 year-olds and 47 per cent of 25 to 34 year-olds in New Zealand having a diploma or higher qualification
  • Increasing significantly the number of 15 to 19 year olds enrolled in study –81.5 per cent in 2011, up from 74 per cent in 2008

So let no one say the issue for education is not enough money being spent by taxpayers.


Are degrees worth it?

September 30th, 2012 at 10:14 am by David Farrar

The HoS reports:

New Zealand university degrees are the most worthless in the developed world, an international report reveals.

The value of spending years at university has been severely dented by an OECD report that reveals tertiary study adds little to our earning power – less than $1000 a year for women, not much more for men.

New Zealand is at the bottom of the global league tables. The net value of a man’s tertiary education is just $63,000 over his working life, compared with $395,000 in the US. For a Kiwi woman, it’s $38,000 over her working life – that’s less than $1000 a year.

When I read this story, I was suspicious. I recall in the late 1990s looking at income data for graduates and calculating the average boost in income over a working life is around $500,000 (gross, not NPV), and having Ministers use this in 1999 to say that this was a good return on an average $10,000 student loan etc.

Danyl has beaten me to it, and blogged:

 The actual report is here. And the thing that they make really clear is that they distinguish between two categories of tertiary education. Type A – university degrees – and type B: (mostly polytechnics). Taken together New Zealand is at the bottom of the table. But if you look at degrees and advanced tertiary study then New Zealand isn’t doing that badly – and the countries that are doing extremely well on that metric are mostly countries with low rates of type A tertiary education. Their degrees are highly valuable because of their scarcity. Almost every statistic in the Herald story refers to non-university level education, but the entire story is about the alleged worthlessness of degree qualifications!

Yes, quite misleading to say degrees are worthless. We have a huge number of students at wananaga, with PTEs and the like who give non degree qualifications.

Tertiary education minister Steven Joyce, who has a zoology degree, said Government figures showing how much people earned four years after study were more positive. But even by that measure, those with a bachelor’s degree earned just 46 per cent more than those with a level-three school qualification.

Just 46%? That’s a huge difference.

Joyce said the Government kept an eye on under-performance at the lower levels of tertiary study. There was no improvement in pay for people who had done NZQA level-three and level-four certificates and diplomas. It was not until they reached a level five or six, or a level-seven degree, that earnings increased.

The point Danyl made.

The story generally had the right data, but it conflated tertiary study and getting a degree in an (unintentionally I am sure) misleading way.

The statement that university degrees are the most worthless is simply wrong. The 40% gain in earnings for a degree amongst 25 to 64 year olds is higher than Denmark, Norway and Sweden.

Not comparing apples with apples

May 13th, 2010 at 9:46 am by David Farrar

The Herald reports:

The average New Zealand earner’s total tax burden is second-lowest in the OECD when superannuation and other compulsory taxes are counted, according to a new report.

This is not a measure of the overall level of taxation in the economy. It is a measure of the difference between gross pay and net pay. There is a huge difference.

The report also said that New Zealand had the smallest tax wedge for  one-earner married couples with two children earning the average wage, at 0.6 per cent.

The OECD report includes welfare payments made through the IRD (working for families) as negative tax.

This does not mean NZ has low levels of tax. It means we have high levels of welfare delivered to families with children.

Many countries had lower tax rates than New Zealand, but had compulsory superannuation and social security payments that increased their tax wedges.

Indeed, so again not apples and apples. KiwiSaver is near de facto compulsory but not included. The Australian compulsory super is included as part of the “tax wedge” even though the amount deducted goes to you personally, not the Government.

The other aspect not included in the tax wedge is indirect taxes such as GST are not included in the tax wedge:

Green Party co-leader Dr Russel Norman said the report showed the Government was misleading people that New Zealand had high taxes, to justify tax cuts for the highest-earners.

This just shows Russel is trying to misled people, or does not understand what a tax wedge is. It is purely a measure of how much the Govt takes out of your pay. It is NOT a measure of the overall level of taxation in the economy.

Again for those who are really really stupid, the tax wedge:

  1. does not include indirect taxes (those with GST are shown to be lower)
  2. includes deductions made by the Govt, even though they are going to your own personal super account (ie those without compulsory super are shown to be lower)
  3. includes welfare payments made through tax system (tax wedge would be much higher if they were done through WINZ)

So if anyone carries on claiming that a low tax wedge means a low level of overall taxation, they are lying.

The better measure to use is the OECD study of the ratio of overall tax revenue to GDP. Now this does have us (thankfully) in the lower half of the OECD, but not second to bottom.  In 2007 tax was 35.7% of GDP and the OECD average was 35.8%.  Note however that amongst OECD pacific countries the average is 30.4%. Australia is 30.8%.

Again comparisons can be difficult as state government revenue should be featured also.

OECD on international roaming rates

April 12th, 2010 at 9:00 am by David Farrar

The Dom Post reports:

“Unreasonably” high charges for using mobile phones and mobile broadband overseas could face the regulators’ axe under an OECD proposal.

Mobile network owners pay hefty rates so their customers can use the networks of overseas carriers while travelling, and these fees are usually passed on to the customer.

A report by the Organisation for Economic Co-operation and Development proposes several ways to reduce global roaming charges – including regulation of wholesale access charges by governments around the world.

The report urges telcos to better educate customers about roaming charges so as to avoid “bill-shock”.

Wellington businesswoman Liz Price says she was horrified to discover she had been charged $3500 for two hours of internet use while on holiday in Australia.

The charges of $30 a MB are highway robbery, and represent massive profit margins.

Let’s say the cost of international bandwidth is US$1,500 a month for 1 Mb/second. That means it takes 8 seconds to get 1 MB of data, which is then charged to the customer at NZ$30.

US$1,500 a month is US$50 a day. That is a cost of US$2 an hour or NZ$3 an hour.

The cost per minute is 5c so the cost for that 8 seconds of bandwidth is basically NZ1c and you pay NZ$30 for it.

Now of course a pipe is not perfectly used at 100% capacity the entire time, but you get some idea of the massive over-charging in place for international roaming.

Size of Fiscal Stimulus

May 6th, 2009 at 1:26 pm by David Farrar


This OECD chart shows that NZ’s fiscal stimulus is in fact the 6th largest in the developed world, as a percentage of GDP.

Hat Tip: The Visible Hand in Economics

OECD 2009 Report on NZ

April 17th, 2009 at 1:00 pm by David Farrar

The full OECD report is here. One key aspect:

The country appeared to be on the right policy track with its earlier market-oriented reforms. But the policy focus on productivity and growth eroded during the years of economic buoyancy, while other countries advanced.

The 2000s were the wasted years. Complacency ruled, and the rest of the world left us behind.

NZ pensioners relatively best off in OECD

April 7th, 2009 at 10:00 am by David Farrar

Auckland University’s Retirement Policy and Research Centre has done a report based on a 2008 OECD survey of income distribution.

They first note that the Tier 1 pension (NZ Super) for a single person living alone is 46% of the median GDP per capita. By comparison, the UK is 13% and US 17%.

The OECD studied how many people of retirement age (0ver 65 in NZ) were below the relative poverty line of 50% of the median equivalised household disposable income. So this is not a study of absolute comfort, but how those of retirement age in a country fare compared to the overall country.

NZ has the lowest level of elderly people in relative poverty. Only 1.5% of those aged over 65 have an income below 50% of the median income. Also at around 2% are the Czech republic and Netherlands.

I’ve often said we have the most generous schemes in the world. The average poverty rate in the OECD was 13%.

Incidentally our poverty rate for elderly has got slightly worse under Labour – it was 1.3% in the mid 90s and is now 1.5%. But not a big change and still way less than almost everywhere else.

Australia has an elderly relative poverty rate of 27%. So wages may be higher there, but the pension is not as generous relative to wages.

Interesting we spend around the same amount as Australia on social spending for the elderly, as a percentage of GDP.

I recommend people read the full report. Good food for thought.

Paul Walker on food prices

July 25th, 2008 at 2:00 pm by David Farrar

Paul Walker takes a long hard look at the causes of global food inflation. He looks at the three theories:

  1. Newspapers have cited an internal World Bank document as having found that 75% of the price increase was due to biofuels
  2. Several governments and commentators see speculation as a major driving force.
  3. Widely held view has it that rapidly growing food demand in the emerging economies is pushing up global food prices.

So how does theory 2 hold up:

Yet, there is no hard evidence that “speculation” has added much to the price increase on spot markets. After all, it is only when “speculators” actually buy produce on the spot market that they can drive up the price, and this would have to be reflected in growing stock levels – but stocks appear to have declined throughout the period of rising prices

So how about theory 3 – blame China and India:

Food demand in China, India, and other emerging economies is rising as their incomes grow. However, domestic food production in most of these countries is growing in parallel. China, for example, has been a consistent and growing net exporter of cereals (including rice). The Agricultural Outlook expects China’s net cereals exports to decline only very gradually in the coming decade. For India, the picture is similar, though there was significant variability in its net trade position in the past. In short, growing food demand in the major emerging countries cannot be held responsible for the rise in world market prices for cereals.

So that leaves theory 1 – biofuels:

The use of agricultural products, in particular maize, wheat, and vegetable oil, as feedstock for biofuel production has expanded dramatically in recent years. Between 2005 and 2007, i.e. in the period when food prices began to explode, nearly 60% of the growth in global consumption of cereals and vegetable oils was due to biofuels. Global output of cereals and vegetable oil did not decline during that period, but just grew slower than the rapid expansion of use.

In a situation of depleted stocks and very low demand and supply elasticities, this gap between use and output growth has pushed prices up very strongly.

And the conclusion:

Thus we find that there cannot be much in the way of doubt that biofuels are a significant factor in the rise of worldwide food prices. Add to this the fact that other research suggests that biofuel support policies are disappointingly ineffective on environmental grounds, then it should be clear that governments need to reconsider their support for biofuels. But many governments, including New Zealand’s, seem to want to push ahead with such policies despite the kind of evidence Tangermann brings to bear on the issue.

Stefan Tangermann, quoted by Walker, is Director of Trade and Agriculture for the OECD.