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Insights 13: 13 April 2017
Manifesto 2017: What the next New Zealand government should do
Dr Oliver Hartwich: Crossroads and roundabouts - National Business Review
Liam Dann: Young house hunters should just give up - NZ Herald

Tribute to Sir Douglas Myers (1939 - 2017)
Dr Randall Bess | Research Fellow |
Sir Douglas Myers, well known and respected for his business and philanthropic interests and recognised as such, died this last week at the age of 78 after a long battle with cancer.

Sir Douglas was also known for his lifelong passion for fishing. With considerable enthusiasm, he would talk about having fished for more than 70 years from Whitianga to North Cape.

His keen interest in fishing was the impetus for The New Zealand Initiative’s fisheries project. As the Research Fellow for this project, I was fortunate to hear first-hand what fishing was like during Sir Douglas’ earlier years and what he considered was needed to improve fisheries. 

He once said “The fish numbers and sizes today in comparison to 60 or 70 years ago are pathetic; there has been a very substantial decline – unless the fish have got cunning and our skills have not progressed!”

Sir Douglas considered the decline in fisheries cast a sombre light on New Zealand’s ability to keep public policy relevant. “But, for me it’s about the most interesting issue I see in New Zealand.”

He stated clearly “I’m sure the fish stocks are overfished, and there is much wastage when maximising catches during spawning, and very poor regulations that lead to destructive behaviours, not just by commercial interests, but Maori and recreational too.”

Sir Douglas considered the solution for the snapper fishery was to seriously reduce catch levels during peak spawning. He would often say, “For a farming nation, it doesn’t make sense to kill stock just as they procreate, or to target the bigger ones that procreate the most.”

He did not have much confidence in the big fishing companies, nor the officials and politicians placed to safeguard the public’s interest. He considered “Ours is not a government driven to bold policy leadership.”

Instead, he held out hope that New Zealanders would realise what they can do to improve the situation. “I only hope there will be enough who are prepared to push for change, and that the new government will respond by showing some courage and leadership to get the job done.”

The New Zealand Initiative is grateful for Sir Douglas’ longstanding service, support and his foresight in establishing the fisheries project.

Please support this project in his honour by joining in upcoming debates about what is possible and what solutions will work best.

Nicholas Kerr has written a tribute to Sir Douglas, detailing his passion for public policy and involvement with the New Zealand Business Roundtable, on The New Zealand Initiative blog.

Stay on target
Dr Eric Crampton | Head of Research |
You may be in a spot of trouble if you ever really wind up having to kill two birds with the throw of one stone. It is a tricky shot to pull off. We shouldn’t put the Reserve Bank into that situation.

Labour’s Grant Robertson proposes expanding the Reserve Bank’s mandate to include unemployment. Last year, Robertson speculated about widening the Bank’s mandate even further, to consider the exchange rate, employment, wages and ‘the overall health of the economy’.

Monetary policy can only reduce unemployment in the short term. In the longer term, unemployment comes back and the country is stuck with a higher inflation rate. A central bank facing a dual mandate can be tempted into running too hot during asset price booms, and investors will know it.

As Oliver Hartwich reminds me, Germany’s Helmut Schmidt preferred five percent inflation to five percent unemployment - and eventually got both. Chasing a dual mandate can do harm to both objectives.

Similarly, central banks can get in trouble when trying to chase two targets with one instrument. The Reserve Bank can use the OCR to target inflation rates. Trying to use the OCR to target both inflation and unemployment requires that all stones hit two birds. It’s a heroic ask – especially when hitting even a single bird has proved a bit tough over the past decade.

If your hope is that the Bank would sensibly prioritise inflation under a dual mandate, think again. Full employment does follow naturally under stable inflation. But if that is what a government proposing a dual mandate wanted, no change to the Policy Targets Agreement is needed. The Bank already aims to avoid unnecessary instability in output (unemployment) while pursuing stable inflation. A dual mandate would tell the Bank that the government wants it to lean more heavily on short term unemployment.

Robertson’s attack on inflation targeting is especially odd in the current environment. Today’s 5% unemployment rates reflect strong growth in the labour market. Workers are being drawn into the labour force rather than abandoning job searches and leaving the labour market. And New Zealand’s employment rate is the fourth highest in the OECD.

The Reserve Bank has plenty to worry about in dealing with the consequences of a broken housing market. Trying to make trick shots firing its OCR stone at two birds at the same time seems ill-advised.

Boy, do I have a deal for WCC!
Jason Krupp | Research Fellow |
George W Bush’s most famous quote is the one he got so fantastically wrong. Repeating an old Tennessee saying, he meant to say “fool me once, shame on you. Fool me twice, shame on me”. Instead it came out a garbled mess that made the then US President look a fool.

It was the Tennessee version that recently sprung to mind when I read that Wellington City Council (WCC) had bought a block of land in the dormitory suburb of Tawa for $1.1 million. The deal was unusual because of the motivations behind the transaction.

The land is currently being used for forestry, and the owner is looking to divest.

WCC, in a majority decision where only one councilor dissented, decided to buy the land, against advice from officials. The thinking was that since the land is zoned for rural use it cannot be used for housing (a half-truth given that WCC can change zoning, and developers apply for zoning changes all the time). It will instead be used for bush walks, although calling a forest plantation “bush” is a bit of a stretch.

But the costs don’t end there. The council will still have to fell the trees because untended pine plantations are prone to tree fall and fires. So in effect WCC has purchased a parcel of land that will never have housing built on it, has minimal ecological value, and needs further public funding before it can be safely used. Press reports claimed the reason the original owner didn’t mill the trees himself was because it was uneconomical.

Even more remarkable is that the city is trying to keep rates increases under 3.3 percent, down from a forecast of 5.1%. That will require a lot of belt tightening, and clamping down on unnecessary spending is a very good place to start. And yet here we are.

Going back to the Tennessee adage, shame on WCC for pulling this on ratepayers.

Then again, if councillors are unwilling to turn down foolish deals, as an owner of a piece of land at the bottom of a quarry, at risk of rock fall, slippage and storm surge, boy, do I have a $1.1 million deal for them. But if this deal goes ahead, and others like it in Aro and Karori, shame on ratepayers for blindly buying yet another pup.
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