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Insights 03: 5 February 2016
The Local Formula: Myths, Facts & Challenges
Event sold out - waitlist only
Dr Oliver Hartwich talks about the great 'cash wall' of China

The costs of free
Dr Eric Crampton | Head of Research |
Labour’s proposed free tuition policy surprised me, but not as much as the rapid hot-takes it generated. It is a bit cheap to say that the devil will be in the details, but with so little detail on the policy yet released, it would be tough to have particularly strong views on it.

Instead of views, I have many questions.

So, first: what precisely is this policy trying to solve that is not already solved by student loans? If technological changes mean more workers will need retraining, student loans facilitate that. If the loan would be too hard to pay back, even at zero percent interest rates, was the retraining course really such a great idea?

Leaving that aside, there are a host of problems in implementation.

Universities cannot increase their fees by more than 3% per year under the current government tuition cap, presumably to help mitigate the costs to the government of the zero-percent loans policy. Would the policy just give universities a per-student amount equal to their current tuition fees, plus a 3% ratchet per year?

If so, they may have a few problems.

Auckland University already chafes under the fee maxima, wishing to hike fees and differentiate itself as a higher cost, higher quality institution. Other universities complain that costs have been increasing far more quickly than have tuition fees and government funding. And at least some of those cost increases will be due to administrative bloat that has been due to increased reporting requirements tied to central government funding.

How would the government decide how many places it would fund at which institutions and for which qualifications? Will the government decide how many students should go to university – already subject to negotiation between universities and the government in the universities’ investment plans – and how many should go into apprenticeships? Or will that choice be left to student demand?

The rhetoric around the policy ties into Labour’s Future of Work initiative. So, how would the government decide which courses are real job retraining and upskilling, and which are fun evening pastimes for retirees where there is no age limit? Are both funded, or only the former?

Labour will need some fine balancing between academic independence, respect for student preferences, and avoiding rorts.

I wish them luck.

Housing news about as thrilling as cricket
Jenesa Jeram | Research Assistant |
Is there anything in the world duller than cricket?* Cricket is one of those sports that is so painfully slow, that commentators have nothing to do but talk about the crowd. Or the weather.
Almost daily reporting on the Auckland housing crisis has a similar appeal. Now, that is not to say unaffordable housing is not important. It is, and The New Zealand Initiative has said time and time again that this is a supply-side problem, requiring an easing of red tape, and greater incentives for local government. Our most loyal readers may be sick of hearing it, but we stand by it.
So by no means is housing an insignificant issue. But is it really necessary for the Herald to include nearly daily updates on what is happening in Auckland housing? Over the past week we have heard ‘Property market about to 'go bananas'’, that ‘Survey exposes Aucklanders' property obsession’, but ‘Fewer expect NZ house prices to rise’.
That’s right, housing went from sunny skies to storms ahead (or the other way around, depending on whether you are a buyer or a seller) in a week. This running commentary is not only confusing, it is also incredibly inconsequential for a majority of New Zealanders.
In the absence of any real action or change, the Herald’s attention inevitably drifts to the crowd of innocent bystanders.
In case you haven’t heard, Lorde bought a house. In Auckland. It cost a lot of money. There is also a young millionaire in our midst, who owns 11 rental properties, also in Auckland. He’s from China (as the Herald so helpfully informs). The Auckland market is so overheated some tenants are even compelled to pay their rent with other forms of currency (I’m talking about sex).
I’m sure there are a lot of observers who aren’t interested in the play-by-play commentary. Most are just waiting for policymakers to lift the artificial constraints to supply so people can go back to their normal lives.
But like cricket, celebrity gossip, and stories on health trends, perhaps the distracted housing commentary has an appeal to Herald readers I don’t understand. In the meantime, how about we relegate these daily updates on the Auckland property market to where they belong: the sports or weather section.
*Views on cricket do not necessarily reflect the opinions of all Initiative staff.

Empty seats don't lie
Martine Udahemuka | Research Fellow |
There are many things that are great about our cool little capital: Wellington’s wind, its regular earthquakes, and of course the Sevens.
Though we can’t do much about the former two, at least we can destroy the latter. That’s what event planners probably thought when they changed the tried-and-tested Sevens formula.
In sports they say, “Never change a winning team”. In sports management, they must think “If it ain’t broken, fix it anyway.”
Let’s face it, the Sevens weekend has always been less about the rugby than it has been about the festivities surrounding it.
Before its fall, the spectacle was a great fit for quirky Wellington. It always kicked off with the parade down Lambton Quay. Later the crowds, dressed in tasteful and not-so-tasteful costumes, would descend on the city. Some of them eventually even found their way to the stadium.
And of course there was beer. Lots of beer. Granted this meant the streets were full of boisterous adults behaving in child-like ways. But the party was generally peaceful – and fun.
And it sold. There were millions of reasons why the Sevens did not need to change. Roughly the amount of dollars they injected into Wellington.
Unfortunately some planners, supported by the men-in-blue, decided they knew what people wanted better than they knew themselves.
They were puzzled why folk would spend their hard-earned cash on a game of rugby without properly watching it.
So to bring the focus back to the game and lure in ‘real’ rugby fans, they scrapped the parade this year and slashed ticket prices. The biggest change though was to turn the Sevens from an event for childishly behaving adults into an event for actual children.
The result? The adults keen to party hard were no longer interested in coming for a bigger children’s birthday. And the most colourful thing about the Sevens 2016 were the almost 20,000 bright yellow seats screaming to be occupied.
Sometimes change is warranted. Other times, it is just messing with a classic.

On The Record
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