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Insights 28: 6 August 2021
NZ Herald: The government is the real obstacle to supermarket competition says Oliver Hartwich
Podcast: Matt Burgess on Catherine Leining’s article ‘Why the ETS is not enough’
Submission: Natural and Built Environments Act exposure draft by Matt Burgess

Government by numbers
Dr Oliver Hartwich | Executive Director |
Reports about the Government reconsidering the controversial Auckland cycling bridge are welcome. At projected costs of $785 million, the bridge always looked excessively expensive. Its benefits, by comparison, were minuscule.

The Government’s U-turn was likely triggered by public opinion. A Newshub poll revealed 81.7 percent of respondents were against it, with only 11.9 percent in support and the rest undecided.

It is rare for this government to misread the electorate’s mood like that. It regularly tests its policies and messaging with polls and focus groups.

There is nothing wrong, in principle, with asking people which big projects they want – and whether they are willing to pay for them.

The real question is, why should this only happen behind closed doors in the Beehive?

For projects where both the costs and benefits are concentrated in one area, it would make sense to ask the local population in a referendum. Especially where costs cannot easily be recovered by user-pays schemes.

Politicians often wish to create legacies for themselves. A new bridge, stadium or library can be a physical testament to one’s time spent in office. If the politicians are lucky, these constructions may even be named after them eventually.

To the community, meanwhile, such vanity projects are just white elephants: expensive to build, troublesome to maintain, impossible to get rid of. In hindsight, it would have been better had these projects never been built.

So why have such regrets in hindsight when it is possible to prevent them in the first place?

A referendum should not just ask about whether the electorate wants the bridge, the stadium or the library. It should also spell out clearly how they will be paid for.

For example, a project like the cycling bridge (if funded locally) would cost the average Auckland ratepayer about $1,324. Building the bridge would thus mean a one-time 38 percent surcharge on the annual council rates.

Other countries are routinely deciding on their big projects via referendum. In Switzerland, the people have their say on stadia, school extensions and bicycle paths. Sometimes they approve them; other times they do not.

By engaging the electorate directly, the public is more likely to get what it wants and will pay for. And it limits politicians’ ability to use projects for their personal vanity or political gain.

Referenda are a much more transparent way of government by numbers than the poll-driven roll-out and roll-back of initiatives we have become used to.

Unemployment Insurance Schemes Internationally
Dr David Law | Senior Fellow |
In late May, Budget 2021 revealed that work was underway to develop an unemployment insurance scheme. This would see benefits tied to past employment and wages in some way. Details, however, are limited.

It is not immediately clear there is a problem that unemployment insurance would solve.

New Zealand has low levels of unemployment, only a small share of which is long-term. We have high labour market participation rates compared to other OECD countries. Our welfare system is well targeted by international standards.

For New Zealand, unemployment insurance is an answer to a problem that may not exist.

That aside, a look at the characteristics of unemployment insurance schemes worldwide provides context for whatever proposal is eventually served up.

The International Labour Organisation (ILO) recently compared unemployment insurance schemes in over thirty countries. The ILO looked at eligibility criteria, income replacement rates, maximum benefit duration and, of course, cost.

Over half of the countries in their sample required a minimum of twelve months of employment to be eligible. However, the requirement ranged from as high as three years of employment to as little as four months.

Average initial unemployment insurance benefits range from 30% to around 90% of previous income. The average for advanced economies was 61% and the level of benefits typically fall with unemployment duration.

The maximum duration individual recipients can claim unemployment insurance benefits was, on average, a little less than seven months in advanced economies.

All these features affect the cost of unemployment insurance, which differs widely between countries. The range is from as low as 1% of wages, to as high as 8%. The average for advanced economies is 2.6%.

Last year the Ministry of Business Innovation and Employment (MBIE) provided some initial estimates of what various unemployment insurance schemes might cost in New Zealand. Some of those estimates were for a scheme that would replace 80% of lost wages for a maximum of 12 months – very generous by international standards.

MBIE put the annual cost at a mere $0.8 to $1.3 billion with flows into unemployment of 3.3% of the workforce, which is similar to the number of new Jobseeker recipients each year. That is a cost of well below 1% of wages.

Even with higher unemployment flows of 5%, costs are only estimated to be a modest $1.3 to $2.0 billion. As a share of wages that’s only around half the international average.

If eventually we are sold one of the most generous schemes internationally, that supposedly costs relatively little, I for one, will be highly sceptical.

Kiwi Olympics
Matt Burgess | Senior Economist |
Dear International Olympic Committee,

Please find attached our bid to host the 2036 Olympics Games in Wellington.
We noticed that at US$25 billion, Tokyo Olympics are the most expensive Games ever. That is a lot of sheep meat, as they say.

So forget unity and aspiration. The theme of the 2036 Olympic Games in Wellington will be fiscal responsibility.

Needless to say, our economic advisers are very excited about this theme. They have calculated that a fiscally responsible Games in 2036 will be “extremely efficient,” which means “wildly popular.”

Here is how we will cut costs.

First, we will run the 100 metres dash over 80 metres. To compensate, we will either make the track uphill or athletes will do the last bit twice. They won’t mind.

Instead of gold, silver and bronze medals, the medals will be tin, aluminium and tin with manure. We will make the ribbon out of number 8 wire because cliches are very cheap.

We think Tokyo was onto something by not letting anybody apart from athletes into the venues. We will save even more money by not having venues. We will broadcast everything via web cams. Spectators can watch on YouTube. Think of the emissions!

We also propose to remove two rings from the Olympics logo to save money on signage.

And no Games village. The athletes will be billeted.

As for mottos for the 2036 Games, we have some ideas. They include “Cheap as chips” and “Sweet as.” But we are leaning towards “Chur!” mainly because it has the fewest letters.

We are not going to lie to you. Hosting the Olympics in Wellington has risks.

For example, we cannot be sure the pool will have water or that you will be able to see the bottom. And let’s just say the water might have… obstacles. Does the term “Code Brown” mean anything to you?

The boat races will start in Wellington harbour. We just don’t know where they will finish. Depending on the wind, it could be Auckland, Christchurch or Chile.

Martial arts and shooting competitors will have dedicated facility thanks to a generous offer from the friendly team at the Mongrel Mob.

To commemorate the Wellington Olympics, the entire city will be declared heritage after the Games. Whichever parts were not already heritage, that is.

Finally, we promise to start the 2036 Games on time. Unless MIQ is still a thing in 2036 in which case all bets are off.

Yours etc.

On The Record

Initiative Activities:
  • Podcast: Matt Burgess and Oliver Hartwich discuss competition in the supermarket industry
  • Podcast: Matt Burgess on Catherine Leining’s article ‘Why the ETS is not enough
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