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Insights 36: 25 September 2020
NZ Herald: Bryce Wilkinson says our politicians have few answers for NZ's economic woes
 
Podcast: Briar Lipson on whatís going wrong in our schools
 
Event: The Helen Clark Foundation and The New Zealand Initiative - Impact of cannabis legalisation in the US

New Zealandís top job
Dr Oliver Hartwich | Executive Director | oliver.hartwich@nzinitiative.org.nz
Too much money is spent on education. New Zealand invests billions into schooling its children. If they then also go to university, that only makes it worse.

It is all a colossal waste of money to train young Kiwis to become nurses, teachers or office administrators.

Instead, we should be teaching our young people how to become a house.

No, really. Being a house is the most attractive job in New Zealand today. If you do not believe me, let me tell you the story of our family home.

When we arrived eight years ago, we bought a modern, 4-bedroom family home in one of Wellington’s Northern suburbs.

This week, real estate website homes.co.nz sent me an email to inform us our home might fetch $700,000 more than what we paid for it in June 2012.

Just to do the maths. That equals an average annual price increase of $87,500. This is a little more than the base salary for the most highly qualified teachers. It is $15,000 more than the average salary of a policeman. Our house is earning $35,000 more than the median full-time income.

If our abode was in the labour force, it would be in the top income tax bracket and among the top 11% of income earners.

Of course, all of this is nonsense. Houses are not employees. Owner-occupied houses do not generate an income, let alone a taxable one. And I am not suggesting the Government tax imputed rents or introduce capital gains taxes.

But our house’s story does show how grotesquely absurd the property market has become.

Had we arrived in New Zealand this year instead of in 2012, we could not afford our home.

Worse: Anyone younger than us, or on entry-level salaries, cannot afford any decent family home in Wellington these days. Those on the median income (about $52,000) would struggle to purchase even an apartment.

In this election campaign, all parties talk about housing affordability. But they offer few concrete solutions, and none have a credible record on housing policy.

It is a sad indictment on New Zealand that most young people will not earn more money than their parents’ houses accrue each year. And they will struggle to buy a home themselves.

There is only one way out of this mess. We must unclog the housing market, abolish the RMA, incentivise councils to build the necessary infrastructure to support more housing – and build.

Casting a better referendum ballot
Dr Eric Crampton | Chief Economist | eric.crampton@nzinitiative.org.nz
Voting is not a duty. But if you do vote, you should vote well. Casting an informed ballot matters.

This year’s election will not just have voters choosing among parties to represent them in Parliament. Voters are also asked to decide two referendum questions: should euthanasia become legal under the End of Life Choice Act 2019 and cannabis under the proposed Cannabis Legalisation and Control Bill?

Both questions have attracted a bit of mischief. Opponents of the cannabis legislation, for example, bought newspaper ads suggesting that the drug might be sold at the local dairy. That would be illegal under the legislation as written. And discussions about US experiences with similar legalisation have not always been fairly represented.

Next week, The Helen Clark Foundation and The New Zealand Initiative will jointly host a Zoom webinar with The Brookings Institution’s John Hudak. Hudak is deputy director of the Center for Effective Public Management and a senior fellow in Governance Studies. And he is also the author of Marijuana: A Short History.

In 1965, American President Lyndon Johnson told his country that its “continued insistence on treating drug addicts, once apprehended, as criminals, is neither humane nor effective. It has neither curtailed addiction nor prevented crime.”

The US war on drugs scaled up over the following three decades, to little benefit and much cost. Now, fifty-five years after Johnson’s warning, medicinal cannabis is legal in 33 states, with recreational cannabis legal in 11 and small amounts decriminalised in 16 states.

Because every state followed its own path in setting alternatives to prohibition, US policies are instructive for New Zealand. The states learned from each other and from their own experiences, adjusting legislation to deal with emerging problems.

Hudak’s book also details how public opinion in the US shifted over time. As legalisation progressed from state to state and voters saw the effects, public opinion bent in legalisation’s favour. In 2013, 35% of Republicans and 65% of Democrats supported legalisation. By 2019, 51% of Republicans and 76% of Democrats supported it.

Hudak will tell the webinar about the American experience in shifting from prohibition to regulated markets, the outcomes in different places and the lessons New Zealand might draw from those experiences to better inform our own debate.

To find out more about the US experience and cast a wise ballot, register for the October 1 webinar here.

Half-baked
Nathan Smith | Chief Editor | nathan.smith@nzinitiative.org.nz
Times are tough; I get it. All this talk of a “new normal”, but only Coco’s Cantina in Auckland seems serious about getting us there.

Everyone is entitled to their own opinion, but not all opinions are equal. Thankfully, Coco’s opinion about how to reinvigorate New Zealand’s anaemic restaurant sector after Covid-19 is an enormously good idea.

Owner Renee Coulter says the solution to her woes isn’t to cook a better ricotta (which I’m sure is still as wonderful today as the last time I tried it), but to put a cap on the number of restaurants.

Her back-of-the-napkin logic suggests lower competition will boost the revenue of the chosen few outlets that remain – which presumably includes her K Road eatery, of course.
But her maths is backwards.

Restaurants aren’t competing against each other. That’s 20th-century thinking. The main competition for Coco’s Cantina is all the other ways Aucklanders fill their stomachs.

See, if she thought her position through, the correct move would be to advocate all locations serving food must have a licence. That would kill two roast chickens with one stone.

After all, it’s dangerous to cook at home. All the scalding, burns, cuts, and heavy objects dropped on unsuspecting feet. Much better to let the experts whip up a stir-fry.

Hundreds of people could be hired as inquisitors, knocking on front doors at mealtimes to check if the family stove has the proper grade.

Don’t assume the vegans are safe from this new licensing regime. It might look easy to toss a salad, but have you ever seen two that look the same? Where’s the consistency? How can anyone be sure the product is prepared hygienically with such glaring disparities? Disgraceful.

Hopefully, movie theatres bounce back after Covid, but they can’t wriggle out of the new rules. I see pimply-faced teenagers chucking popcorn into giant, hot machines all the time. There’s no way they have the proper training for that. They can barely process my online bookings.

Why stop there?

Nervousness is an entirely unfair competition, too. Some people chew their fingernails habitually but that is ring-fencing the enormous market opportunity for Coco’s Cantina to expand into drive-through nail-biting. An entirely new industry like this might be exactly the productivity boost New Zealand needs.

If we can’t copy Coulter and think out of the box, our economy is cooked.

Well, not without a licence anyway.
 
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