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| Dr Oliver Hartwich | Executive Director | oliver.hartwich@nzinitiative.org.nz | ||||||||||||
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Treasury is seeking a Senior Analyst for its Economic Strategy unit. Advertised as a ‘unique opportunity’, Treasury explained they were looking for “a well-rounded candidate”. Fair enough. But then the Government’s economic advisory department added that “an economics background is not essential.” Former Treasury employees and academic economists were outraged. How could you have a senior position in economic strategy without knowing economics, they asked. Quite. Still, there is another and equally concerning problem about Treasury’s job advertisement: it totally lacks specificity. This is everything the job ad tells us about the candidate’s required characteristics:
Keeping public sector job ads so vague is problematic. It opens the door to arbitrariness and stands against best international practices. New Zealand regularly leads Transparency International’s ‘Corruption Perception Index’. So it might be worth also taking their recruitment advice onboard. Transparency International’s Anti-Corruption Resource Centre warns that “in many developing countries, weak HR management processes have resulted in oversized and under-qualified civil services, with distorted incentive structures and poor work ethics that ultimately undermine the goal of building a strong, efficient and accountable public sector.” Now, New Zealand is not a developing country. But we do not want to become one, either. Transparency International strongly recommends precise definitions of skills in public sector recruitment: “If merit is vaguely defined in broad terms, such as ‘able to do the job’, many candidates may be adequate, and the ambiguity may be misused to favour relatives or political supporters to the detriment of other outstanding candidates.” This is not corruption of the bribery kind. But it allows an intellectual corruption in which a candidate’s actual qualification can be trumped by irrelevant considerations. Next time Treasury advertises a position, it should be more specific. If it wants a lawyer or an accountant instead of an economist, fine, but then it should say so. Ideally, it should identify the qualifications and experience of the candidate. What is good advice for other countries is good advice for New Zealand. |
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| Dr Bryce Wilkinson | Senior Fellow | bryce.wilkinson@nzinitiative.org.nz | ||||||||||||
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Public debt ratios in many major economies are alarming. “Never before has the world economy been so indebted”, The Economist, a UK magazine, wrote last week. Unprecedented loose money has artificially reduced interest rates. (See this week’s chart of the week on the relative decline in the public interest bill). The situation is unsustainable and looks dangerously unstable. Developments this year reinforce these concerns. Resurgent consumer price inflation bolsters our stagflation scenario. Central banks are now in a bind. They cannot keep interest rates low and meet their inflation targets. "The era of super-cheap money is over", wrote The Economist. Increased inflation expectations reduce bond prices. That increases bond yields. Tighter monetary policy increases them further in the short term. That adds to bond investors' losses. Omicron and the potential conflict over Ukraine threaten income growth expectations. Higher borrowing costs and weaker economic growth threaten asset prices generally. Since the beginning of the year, the S&P 500 has fallen almost 7.3%. Widespread pain lies ahead for lenders and borrowers. The risk our report identified - of another Great Depression - continues. The Reserve Bank of New Zealand seems oblivious to these pressing risks. Its November 2021 Financial Stability Report ignored them. Instead, it devoted an entire section to speculating about distant climate change risks. Other central banks are also contriving to make this case. Their drive to regulate in advance of convincing evidence is a bad look. What are their real motives? Regardless, the issue is a distraction from the 'here and now' problem described above. There are some positives, though. First, asset prices have not collapsed. Second, higher interest rates are good for lenders to the degree that they are bad for borrowers. The combined purchasing power remains unchanged. Third, real interest rates on government bonds remain low, promoting real investment. Lower expected future capital gains should also help lower house prices. However, the inflation breakout is only the first puff of a storm to come. Read Bryce's report Walking the Path to the Next Global Financial Crisis. |
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| Matt Burgess | Senior Economist | matt.burgess@nzinitiative.org.nz | ||||||||||||
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The system is very advanced. It works by putting each part of the economy into one of two categories, “Good” or “Bad”. Everything that is Good is encouraged. Everything that is Bad is not. The system made headlines recently when, thanks to some good old-fashioned log rolling between Germany and France, the European Union declared nuclear and natural gas are green technologies. As a result, Eurocrats who until a few weeks ago were doing everything they could to stop investment in nuclear and gas will now do everything they can to drive investment into those technologies. Such is the power of the taxonomy. Now this marvel of bureaucratic machinery is to be pointed at the rest of society. A new social taxonomy will decide whether companies are “Good” or “Bad”. Officials will use their powers to shift investment towards Good companies and away from Bad companies. Many factors will decide whether a company is Good. Companies will need to pay fair wages, and provide training and childcare for employees. Companies will have to prove they benefit customers and society as a whole. Companies which import goods will need to prove they pay fair wages to overseas workers. Housing companies must show they have built enough social houses. Companies will also need to pay their taxes and protect their customers’ data. This list is real. Companies that sell tobacco or make landmines will automatically be listed as Bad. Not everyone is happy about the new system. One politician sensibly pointed out financial regulation should not control how we live our everyday lives. Social policy should. "In Europe we have the highest social standards in the world,” said German MEP Markus Ferber. “Socio-political questions should be solved through social policy and not through financial market regulation.” This is all excellent news for the economy. The new social taxonomy will create thousands of jobs, millions probably, in the services sector. Specifically, the lobbying-for-political-favours part of services. The new system will benefit everyone – regulators, politicians, lawyers, lobbyists, liquidators. The list goes on and on. The new taxonomy was badly needed. Without any way to force companies to work in the public interest (besides competition and free enterprise), officials must have been getting desperate. There really is nothing officials cannot do. Finally, Europe can look forward to some growth. |
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