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Insights 40: 27 October 2023
NZ Herald: Oliver Hartwich on how localism might be the key to coalition unity
 
The Australian: Oliver Hartwich on New Zealand's Election Aftermath: Changes Ahead!
 
Newsroom: Eric Crampton on the anticpitated water reform and the need for it to happen quickly
Education under the coming coalition
Dr Michael Johnston | Senior Fellow | michael.johnston@nzinitiative.org.nz
In a week from now, when the special votes have finally been counted, coalition negotiations will begin in earnest. National, ACT and, probably, New Zealand First will get into horse-trading over policy and Ministerial posts. Some policy areas will be difficult. One that should not pose too many obstacles, though, is education.  

All three potential coalition partners agree that our school system is in a parlous state. While they differ in emphasis, many of their positions are complementary rather than in conflict. 

National’s policy is focussed mainly on what happens in our classrooms. Reform of the two great pillars of education – curriculum and teaching – is the mainstay of their platform.  

They have promised to rewrite the curriculum to make it more detailed and include annual progress expectations. There is a strong focus on improving literacy and numeracy.  

New teachers will have to demonstrate expertise in literacy, mathematics and science instruction. Existing teachers will be provided with professional development to get them up to speed with the most effective methods of teaching children to read, write and become numerate. 

ACT’s policy is more concerned with systems level reform. They want to give parents more choice in how their children are educated. All public schools could opt to become partnership schools, with much more budgetary flexibility and accountability for children’s learning. 

Ultimately, ACT aims to revolutionise the way education is funded. The plan is to provide a Student Education Account to parents for each of their children. Parents could spend that money on the early childhood and school education of their choice. When they leave school, students could spend the balance on tertiary study.

ACT also has its sights set on the Ministry of Education. They would like to “strip it back to basics” and devolve many of its current functions to the local level.

New Zealand First’s education policies are more piecemeal. Their most substantial positions are to make Learning Support Coordinators available to all schools and provide extra resources to identify and assist children with learning challenges. It’s probably fair to say that their main policy priorities lie elsewhere.

The parties’ education policies are broadly compatible. ACT’s emphasises systems level change, while National’s is aimed at the mechanics of teaching and learning. New Zealand First’s items can be incorporated straightforwardly. 

In education, at least, the three parties could all deliver almost everything they’ve promised. 
Learning about inflation
Dr Dennis Wesselbaum | Adjunct Fellow | dennis.wesselbaum@otago.ac.nz
Common advice to public speakers is to start with a joke. So perhaps outgoing Prime Minister Chris Hipkins was only joking when he kept saying, “We are winning the battle against inflation”. Cost of living crisis – what crisis? 

Labour defended high inflation rates by referencing other countries’ poor records – the “global inflation shock”. Meanwhile, countries like Switzerland, Indonesia, South Korea and Japan maintained lower inflation rates than New Zealand. 

In any case, that argument is certainly not true now. GDPLive currently puts inflation in New Zealand at 6% and the September CPI was 5.6% - though half a point will be petrol excise returning. Inflation in the US and Japan has fallen to about 3% and in the Eurozone it is about 4%. 

Why was America’s inflation peak almost one percentage point higher than New Zealand’s, but is now lower? Both countries have had massive fiscal expansion, suffered from supply chain issues, faced lower growth from China, and been affected by the Ukrainian war.  

There are two key reasons. First, in the US, both expenditure and debt-to-GDP ratio are stable, while in New Zealand, both are increasing. Labour in 2023 was still debt-financing fiscal stimulus and yet, somehow, expected inflation to fall. 

Second, in the US, monetary policy was more aggressive in hiking interest rates than in New Zealand. While I have defended the RBNZ’s policy in the past, it missed an important insight from behavioural macroeconomics. 

In standard macroeconomic models, agents form rational expectations (they use all available information and understand the state of the economy).  

But people learn over time. 

Models incorporating learning behaviour have been developed in which agents form and update beliefs about the state of the economy as new data becomes available. 

In these models, agents who learn about the state of the economy when experiencing fiscal spending shocks react more strongly than agents who do not learn. This is especially important when inflation is very high. 

This insight is crucial for monetary policymakers because it requires a stronger reaction of interest rate hikes to achieve price stability. This happened in the US, where interest rates hit highs not seen for more than two decades, but not in New Zealand. 

Voters expressed no confidence in those responsible for fiscal policy: the Labour Party and Finance Minister Grant Robertson.  

There should be similar accountability for those who have made severe mistakes in monetary policy: the RBNZ’s Monetary Policy Committee and the Governor. 
Census trouble
Ben Macintyre | Research Assistant | ben.macintyre@nzinitiative.org.nz
Hey, you. Yeah, you. Did you fill out your census form? I expect you did.

Everyone fills out their census form. It is our sacred duty as proud New Zealanders to inform the government of our address, occupation, and favourite colour.

I expect you did your duty? Of course you did.

What was that sorry? You… didn’t? WHAT?

How could you? We sent you so many letters!

We gave you a hard deadline to fill out the census form. Then we gave you another hard deadline. Then another one.

When that didn’t work, we thought we might sweeten the deal. We knocked on your door asking you to kindly fill out your form. After all, if you’re unwilling to engage with the government, surely the government rocking up to your house unannounced will change your mind.

But some people still didn’t fill out their form. So, we had to get nasty.

If you weren’t affected by Cyclone Gabrielle (an inventive way to get out of census duty, we must admit) then we told you you’d be fined $2000 by the end of June.

Well, guess what? June has been and gone (as has July, August, September and most of October) and some of you still haven’t returned your forms! This is unacceptable!

You leave us no choice. We’re going to prosecute you now for everything you have, assuming everything you have adds up to exactly $2000.

Well, we were going to. But now we can’t.

It turns out that when we sent you all those letters you didn’t read, we accidentally didn’t tell you all the legal jargon we were supposed to tell you. As a result, we’re not allowed to prosecute you.

You might say that such a basic and obvious error is a damning indictment of the entire census-taking process.

To this we say, “please fill out your census form.”

So, you got away with not filling out your census. Enjoy it while it lasts.

But we’ll regroup, figure out what went wrong, and catch you next time.

Eventually, the census will get you. You cannot escape.

Because remember, at the end of the day, we don’t know where you live.
 
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