Economics

For an industry in crisis they sure are doing well

Labour and the other opposition parties haughtily declared that manufacturing was in crisis. Almost the second after they declared the crisis manufacturing started posting results for the sector that showed that not only was it not in crisis but rather healthily growing.

Manufacturing continues to grow, making a mockery of the opposition inquiry into the “crisis”.

Activity in New Zealand’s manufacturing sector continued to march onwards, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for March was 58.4 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was 1.9 points higher than February and the highest level of activity since July 2013. The sector has now been in expansion for 19 consecutive months, with the first quarter of 2014 averaging 57.1.

BusinessNZ’s executive director for manufacturing Catherine Beard said that there were a number of pleasing aspects to the March result.  Read more »

And still more good news, business confidence hits 20 year high

Labour can’t catch a trick right now as the economy booms.

Now the latest NZIER Quarterly Survey of Business Opinion show business confidence is the highest since 1994.

The economy is running at the best pace in more than a decade and business confidence is the highest since 1994 according to a new survey.

The latest NZIER Quarterly Survey of Business Opinion released today shows optimism and activity were being translated into hiring, investment and better profits.

“The underlying trend is very, very strong – stonking,” NZIER principal economist Shamubeel Eaqub said.

Retail spending surged to its highest level since 1994 and building was at its best since December 2003.

The survey shows confidence about the general business situation remained at net 52 per cent of firms positive, seasonally adjusted, the highest since June 1994.

The survey showed economic activity got stronger this year.  Read more »

Hooton on Labour’s version of crony capitalism

Corporate shill Matthew Hooton calls out David Cunliffe for his own version of crony capitalism.

The most disappointing aspect of John Key’s government is its tendency toward crony capitalism and corporate welfare.

Most passionately debated were the tax breaks and employment law changes for the movie industry after lobbying from Sir Peter Jackson andWarner Bros.

The SkyCity deal involved the government foregoing future revenues from casino relicensing to get a Convention Centre at no immediate cost.

The Tiwai Point aluminium smelter, with annual revenues of over $1 billion, was given a one-off handout of $30 million, an amount which cannot materially improve its viability.

The government tried to keep prices for broadband and landlines artificially high to subsidise Chorus.

These are the best-known examples but seldom does a week go by without Steven Joyce announcing a new handout to some chosen sector or firm.

I don’t subscribe to subsidies, but politicians love the pork.

In his first party conference speech as leader, Mr Cunliffe launched a fearsome assault on National for “tilt[ing] the playing field even further” towards its “mates.”

“[National]’s Hall of Shame,” Mr Cunliffe boomed, “involves those shabby deals with Warner Brothers, Sky City, Rio Tinto and Chorus.”

Quite accurately, Mr Cunliffe reported businesspeople telling him they wanted no part of it. “They want a level playing field that’s fair and transparent, not one set of rules for National’s mates and another for everyone else,” he said.

It was a superb issue for Labour because it unifies everyone from the anti-business far left to the New Zealand Initiative, the resurrected Business Roundtable.

Now Labour has gone and blown it.  Read more »

Cunliffe vs the truth…again

David Cunliffe’s truthiness issue seems to be getting worse. Today he tweets about the regions:

However the facts are quite different

Provincial regions across the country have led New Zealand’s economic recovery from the Global Financial Crisis according to new Statistics New Zealand numbers released today, Economic Development Minister Steven Joyce says.

Bay Of Plenty, Gisborne and Hawke’s Bay in the North Island, and Nelson/Tasman, Canterbury, Otago, and Southland, have experienced growth above the national average of the five year period from 2008 to 2013, while Auckland, the West Coast, and Waikato have been just under the average. Meanwhile Taranaki continues to generate the highest GDP per capita by some margin.  Read more »

Don’t blame Chinese for house price increases, blame Labour and people like Selwyn Pellett

Our politicians, particularly the more xenophobic of them, like to blame Johnny Foreigner for the rise in house prices.

The same is happening in Australia, with all manner of things like Chinese investors being blamed. The real reason though is somewhat different.

Labour and the Greens claim that restricting foreign investment and applying capital gains taxes will lower prices…and yet the opposite is true in Australia.

Foreign investors are not to blame for rising house prices. The real culprits are the taxing and regulating activities of Australian governments that raise the supply price of new housing.

Despite this, the House of Representatives economics committee is set to inquire into the impact of foreign investment on the Australian housing market at the instigation of Treasurer Joe Hockey.

According to committee chair Kelly O’Dwyer, the inquiry will consider whether the current restrictions on foreign investment in residential real estate serve to increase supply, as is their stated intention, or raise prices.

This is rather like asking whether foreign tourists increase the production of goods and services or raise consumer prices. The answer depends on how flexibly Australian producers can accommodate changes in foreign as well as local demand through increased output.

Minimum wages don’t work in alleviating poverty

Hat tip Lindsay Mitchell

A new study shows that the minimum wage as a means to alleviating poverty is a fallacy.

Minimum wages are poorly targeted to those actually in need, says Joseph Sabia, an associate professor of economics at San Diego State University.

  • Sabia’s own research has found no evidence that increasing the minimum wage reduces poverty, even among less-educated single mothers, who are specifically targeted by these policies.
  • Research by David Neumark and William Wascher found that while some poor workers that kept their jobs after the wage increase were lifted from poverty, others lost their jobs and fell into poverty. The Neumark and Wascher findings indicate that wage increases only redistribute income between poor and near-poor households.
  • Some in favor of wage increases have said that the poor record of wage increases on alleviating poverty is simply because poverty is an imperfect way of measuring the economic well-being of low-income households. As such, Sabia and Robert Nielson of the University of Georgia studied whether wages were effective in reducing alternate measures of well-being, finding no evidence that higher minimum wages helped people pay rent, pay utility bills on time, avoid financial or health insecurity, or make ends meet in other ways.  Read more »

More on Labour’s power lies

Yesterday we blogged about how out of whack David Cunliffe’s power graph was. We presented a nother view from the same data.

Another reader has emailed with his thoughts.

Cam

Haven’t really followed the arguments around power prices. But what really grinds my gears is bad data analysis. I have done quite a bit of normalizing of data in my time and although it is a powerful tool, it has to be used with caution because it can really skew the data. As soon as I saw Labours press release I was suspicious about why they chose to normalize to the date they did.

Thanks to previous correspondent who made the raw data easily available, I normalized the data to 1990, as this was the closest data point to the reforms that people complain about. Also have blocked out via color who was in power. Because of the data, I have “logged” the y-axis, so the changes are non-linear wrt this axis.

NZ is in black / bold. Shows that the price rise was not due to the early 90′s reforms. As there was almost no price increase from 1990 to year 2000. Furthermore the price was increasing before the reforms, then had reduced increases post reforms. So it is impossible to blame the reforms for the price increases.  Read more »

Driverless cars will cause insurance companies headaches

Driverless cars are going to cause insurance companies massive headaches…not from accidents, but from drying up their cashflow.

The advent of driverless cars will mean much fewer accidents.

Driverless cars are coming, sometime. They’re going to be safer and more reliable than traditional cars and they’re going to make Google and several other manufacturers very, very rich. The only wreckage they’re going to leave behind is going to be the corpses of the scores of companies who make a killing on car accidents.

It’s no secret that computers are already much better drivers than humans. They don’t drive drunk, they don’t text, they don’t forget where they’re going or daydream. They might not reduce accidents by as much as 90 percent, as Google has suggested, but once driverless cars get any sort of real market share, the roads are definitely going to be safer.

“The immediate losers are the people who depend on accidents for their businesses,” Chunka Mui, a business consultant and author said at a Council on Foreign Relations discussion on the economic future of driverless cars Wednesday.

It’s not just insurance companies. In his book, The New Killer Apps, Mui imagines the economic implications of a world where driverless cars are common:   Read more »

Guest post: Are thousands of people being denied benefits?

by Lindsay Mitchell

The Daily Blog recently ran the graph below along with the headline, “Billions of dollars stolen from the unemployed”. Mike Treen wrote,

The combined efforts of both National and Labour governments’ punitive policies towards the unemployed seems to have removed over 100,000 people from rightful access to an unemployment benefit.

Source/ The Daily Blog

Source/ The Daily Blog

In today’s Herald Brian Gaynor has been exploring statistics, their variability and utility. He produced the following graph which tracks the quarterly difference between those officially unemployed (using the same Household Labour Force Survey data Treen used) and the new Jobseeker Benefit (projected back to 2008 by MSD):  Read more »

More good news, unemployment hits 3 year low

The opposition just can’t catch a trick at the moment…the government says economic growth is the way to to prosperity and out of unemployment, the oppositions says where are the jobs.

Then the economy grows and the jobs come on line and unemployment drops. Pretty soon we will hear from someone like Darien Fenton moaning that the jobs people are getting aren’t “quality” jobs.

Paul McBeth at BusinessDesk reports:

New Zealand’s unemployment rate fell to a three-year low in the fourth quarter of 2013 as jobs growth beat expectations, led by gains in the retail, accommodation and hospitality sectors.

The unemployment rate fell to 6 percent in the three months ended Dec. 31, in line with the forecast by a Reuters survey of economists, and down from 6.2 percent in the September quarter, according to Statistics New Zealand’s household labour force survey. That’s the lowest jobless rate since June 2009.

Employment rose 1.1 percent in the quarter, beating the 0.5 percent pace of growth forecast, led by gains in retail, accommodation and food services, construction, and professional scientific, technical, administration and support services. Employment grew 3 percent on an annual basis.   Read more »