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| Dr Oliver Hartwich | Executive Director | oliver.hartwich@nzinitiative.org.nz | ||||||||||||
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However, I wish Stuff had covered New Zealand’s deteriorating education standards instead of running a series of long articles on a British TV trivia show this week. The paper we released on Tuesday should have been front-page news. We now have hard evidence – from the Education Ministry! – that our education system fails to teach our children how to read, write, and calculate. New Zealand’s education establishment has pretended for years that rising NCEA pass rates meant improving education results. Since NCEA includes literacy and numeracy requirements, that seemed encouraging. However, there is a problem: Most of NCEA’s required literacy and numeracy credits can be achieved without much literacy or numeracy. A minor bit of reading in a history class, or a few numbers in a science class, could get the job done. Students can gain literacy and numeracy credits without being properly tested for either. Laudably, the Ministry created new, more rigorous reading, writing, and numeracy standards that are directly assessed. We found out about a large trial of these tests via a request under the Official Information Act. A third of students failed the numeracy test. A third failed the reading test. And two-thirds failed the writing test. The tests only checked a basic level of literacy and numeracy – not the level that would allow one to study for a university degree. Just enough to get by in modern life. Think of reading a newspaper, writing to a company, and calculating interest payments on a mortgage. That so many of our students have not mastered the basics after ten years of education is a scandal. In an ideal world, our education system would make students proficient in geography, physics, chemistry, history, biology, music, art and many more subjects. But at the very least, schools should teach students how to read, write and calculate. Our children are wasting their potential if we do not equip them with these skills. Is the problem a lack of spending? Over their entire school career, teaching each student costs about $100,000. Is it unreasonable to expect them to master some basic skills at that level of spending? So, yes, learning about the best Chaser is interesting. The information Stuff provided about preparing for TV trivia is certainly helpful. However, perhaps we should ask how our education system can better prepare our children for their future. Read our Policy Point: A way ahead for NCEA literacy and numeracy |
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| Dr Dennis Wesselbaum | Adjunct Fellow | insights@nzinitiative.org.nz | ||||||||||||
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Supply chain issues do add to inflationary pressures. But these have been easing: the Freightos Global Container Index (FBX) has decreased since its peak in September 2021 by about 42 percent. The Ukraine war plays some role. But the HWWI commodity price index has decreased by 19 percent since February. Notice that inflation started to increase well before the Ukraine War. The combination of monetary and fiscal policy is the more obvious cause. The average annual growth rate of government consumption expenditures between 2020 and 2021 was 11.5 percent (average 2010 to 2019: 4.6 percent). How was this financed? The RBNZ’s balance sheet roughly tripled since 2019, with broad money increasing by 21 percent since January 2020. This was mainly done by using the Large-Scale Asset Purchase (LSAP) programme, which bought New Zealand Government bonds. It started in March 2020 and currently stands at about $53 billion. What does research tell us about the effects of fiscal policy? Lessons are that fiscal policy has larger effects in a recession, that it has larger effects when interest rates are close to zero, and it creates inflation with a delay of about one year. The government started spending during the June 2020 quarter, when the OCR was 0.25 percent, and GDP fell temporarily by about ten percent. Inflation started to increase substantially during the June 2021 quarter. Coincidence? I don’t think so. Some of this spending was an appropriate response to the pandemic, but much should have been pared back later. Central bankers say that the next two quarters will tell us whether the inflation increase is temporary or persistent. Macroeconomists know that the Producer Price Index (PPI) leads the Consumer Price Index (CPI). PPI inflation has been even larger than CPI inflation and shows no signs of slowing (currently around 9 percent). This implies that inflation will be high in the next quarter and might increase further. What worries me are that inflation expectations among consumers and firms are increasing and appear to be becoming unanchored. Managing expectations is critical for effective monetary policy, and that requires credibility, which the bank is starting to loose (see Arthur Grimes’ comments from Tuesday here). |
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| Dr Eric Crampton | Chief Economist | eric.crampton@nzinitiative.org.nz | ||||||||||||
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Each has a coin purse slung over a shoulder. Each has a pocketknife, slitting the purse of the person ahead of them to steal some coins. That many coins fall to the ground is tragic, but unavoidable. Everyone could do better if they all put away their knives, but none will want to be first to try it. Solving the social dilemma of the rent-seeking society requires everyone to throw their knives away at the same time. Everyone must trust that the person behind them is keeping their part of the bargain. It has been done before. It is the simplest explanation of the reforms of the 1980s. Manufacturers had been stealing from everyone with import licences and tariffs that inflated the cost of everything; farmers had been covering inflated machinery costs with hefty agricultural subsidies, stolen from taxpayers. Over a short period of time, the knives all went away. They’re coming back. And each new knife begets more. New Zealand’s film subsidy regime tries to keep up with foreign film subsidies. Trying to keep up with European agricultural subsidies was a mistake that almost bankrupted the country. Film subsidies are less wasteful only because the film sector is smaller. A billion dollars or so over five years will not bankrupt us but does cause further problems. Dean Hall, CEO of Dunedin-based videogame company Rocketwerkz, pointed out one problem two years ago. The government had recognised talent shortages in the videogame sector but was causing the problem by subsidising film companies like Weta to bid workers away. It is hard to compete for talented computer graphics designers when your competition gets money back from the government for every dollar they spend. Ending film subsidies would have been the sensible response. The government instead is now considering subsidising videogame makers. New Australian videogame subsidies haven’t helped. So instead of having one industry whose continued existence, at current scale, depends heavily on subsidies, we will have two. But it will not end there. When other software companies complain that they cannot compete with subsidised videogame companies for programming talent, will the government subsidise software more generally? What about other companies that also need programmers? We are again forming the circular queue, with knives at each other’s coin purses. The disarmament lessons of the 1980s will need to be learned anew. |
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