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Insights 22: 23 June 2022
Newsroom: Eric Crampton comments on the govt policy that gave officials a day to cost it
Podcast: Professor James Allan on his review of the He Puapua Report
The Australian: Oliver Hartwich says the Reserve bank's virtue signalling rings hollow

New Zealand’s economy a shadow of its former self
Dr Bryce Wilkinson | Senior Fellow |
Paul Bloxham, HSBC’s chief economist, once described New Zealand as a “rockstar economy”.

That was back in January 2014.

Today, there is nothing “rockstar” left about the New Zealand economy, unless you have Ozzy Osbourne in mind.

For more than three decades, the Swiss Institute for Management and Development (IMD) has compiled annual rankings of competitiveness for 63 of the world’s most important countries. It makes for sobering reading for New Zealanders.

Back in 2017, New Zealand ranked #16 - ahead of Australia at #21.

Five years on, New Zealand has fallen to #31, while Australia is now ranked #19.

A closer look reveals the factors behind New Zealand’s plummeting ranking.

Over the past few years, we have plunged in economic performance, falling from 22nd to 47th place. Government efficiency has also deteriorated markedly from 7th to 17th place.

That’s not a record for this government to feel proud of. And it gets worse.

Altogether, the IMD’s ranking comprises 25 subcategories. In eight of them, New Zealand finds itself in the bottom half of all countries. And these are the categories that really matter: domestic economy, international trade and investment, inflation, productivity and efficiency, attitudes and values, and technological infrastructure.

The IMD noted New Zealand going in the wrong direction on subsidies, inflation, tourism, brain drain, public finances, skilled labour, competent senior managers, and central bank policy.

As shocking as it is to see the IMD’s assessment, if we are honest, none of this should surprise us.

We know that our public finances are not in good shape.

We have observed the erratic behaviour of the Reserve Bank.

We are watching the onset of a new brain drain to Australia and the rest of the world.

We have seen how Covid has decimated our once thriving tourism industry.

And we feel the effect of inflation every time we fill our cars or do the weekly shopping.

Where the IMD’s competitiveness ranking holds up an external mirror to us, Westpac’s Consumer Confidence Survey, released this week, shows that Kiwis also understand how dire our economic situation has become.

Consumer confidence in New Zealand now stands at the lowest level since that survey began in 1988. And, perhaps most damningly, for the first time, a majority has a negative 5-year outlook on the economy.

These are not just signs of a small downturn. These are signs of a former rockstar in a policy-induced coma.

Expecting better
Dr Eric Crampton | Chief Economist |
In February, New Zealand’s PCR Covid testing system fell apart.

The Ministry of Health, the Director-General of Health, and the Ministers should have known it would happen. They repeatedly asserted it would not.

Last week, the government released Allen + Clarke’s rapid review of the failure.
The Report had a few conclusions. The most troubling is this:
“The reporting style of the COVID-19 Testing and Supply Group appears to assume its audience had the requisite background knowledge and understanding to interpret the reports and recognise the significance of what was being reported. It also doesn’t recognise the significant non-COVID workload of some of the audience, such as the Director-General or Ministers who have significant other portfolios to attend to. This is perhaps reflective of the capacity limitations of the group in such a demanding environment.”

To put it more bluntly, neither the Director-General of Health, nor the Ministers, understood the briefings they were provided on a matter of core responsibility.

It takes only very basic numeracy and a very basic understanding of how pooled testing works to immediately see the problem. And if you fail at either of those, simply looking across to Australia’s collapse in December should have been enough.

Here’s the obvious problem – as I explained on 24 January.
The country’s Covid testing system is likely to fall apart, quickly, when case numbers rise.
Testing labs can bundle five to ten samples together for testing. If none are positive, all is fine.
If the pooled sample is positive, individual samples need separate re-testing. When positivity rates are low, the system works well. But when positivity rates are high, pooled sampling stops working. Testing capacity drops to a small fraction of what it had been, just when it is most needed.
Headline figures on testing capacity may be more than a little optimistic. Contracting now for greater capacity, focusing on the saliva-based PCR testing (which identifies genetic material from the virus) that catches Omicron cases earlier, matters.

It does not take expert detailed attention to see the problem. I could see it. And I am just an economist - not a public health specialist.

If the Director-General of Health could not be made to understand the problem, he is not fit for the job.

We all deserve and should expect better.

Read Eric's Dominion Post article NZ's failure to prepare for Omicron means there's shambles to come here

The jury is out
Dr Oliver Hartwich | Executive Director |
I always believed that Magna Carta left us with a most valuable inheritance: the right to trial by jury. Even after learning that legal historians now regard this assertion as fiction, I did so.

But my unbridled enthusiasm for jury trials is struggling to survive a personal encounter with the jury system.

Last week, I was summoned to serve as a juror in the Wellington High Court. I was excited. Finally, I could fulfil my civic duty, make use of my legal training, and help justice prevail.

Well, if only.

Arriving early was my first mistake. Having been summoned to report for duty service at 9am, I expected registration and security procedures to take time. However, the Court was still closed to the public and to jurors at 8.45am. Fortunately, it wasn’t raining.

When I eventually made it into the building, no one wanted to check my ID. Did the Court not want to make sure it was really me?

From there, it only got worse.

Two smaller courtrooms were crowded with approximately sixty potential jurors, all wearing masks and socially distanced. For about half an hour, we waited in solemn silence for further instructions.

A court officer attempted to show us a video containing information for jurors. It took three attempts to get it going, and for unexplained reasons, the video stopped a few minutes before it was over.

Our names were then placed in a raffle drum for the ballot. On turning it, a few papers flew out, so the officer had to start over. Silly me, I thought he had done all this before.

The officer drew thirty names and pronounced most of them correctly. Still, mine was not among them.

Not even an hour into the job, I thought my legal career was already over. How wrong I was.

While the Court went through the process of selecting a jury of 12 out of 30 drawn jurors, the undrawn half remained waiting. In two courtrooms. Without water. Without further information. In silence. For almost two hours.

A fellow unchosen juror behind me fell asleep and started to snore loudly. It was not precisely exciting.

At 11.30am, we had to vacate the room. Not because our job was done but because the room was needed.

Spreading all over in the foyer, we waited further. Another juror put herself on the floor, using her backpack as a pillow. Another one complained enough until they brought us some hot water, tea and instant coffee.

Just after midday, they sent us home for the day. But they told us to keep checking the Court’s website every night just in case they needed us later in the week. The page only got updated on Thursday to tell us they did not.

I still believe in trial by jury.  But not in the efficiency of our justice system.

On The Record

Initiative Activities:   
  • Podcast: Oliver Hartwich talks with Eric Crampton about the Government's rushed policy making
  • Podcast: Eric Crampton talks with Len Cook about changes to the Statistics Act
  • Podcast: Professor James Allan on his academic review of the He Puapua Report
All Things Considered
  • Video of the week: Peter Williams on the proposed Three Waters reform. What it will mean to everyday Kiwi's
  • Latest (June 2022) OECD forecasts for General Government Fiscal Aggregates in 2022 for Australia and New Zealand show Australia in a stronger position  
  • Consumer confidence plummets to lowest level on record
  • The best places to stargaze to see Matariki rising
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