Thursday 13 June 2024

Morning roundup

A selection as I read through the morning papers.

  • Twenty-three MPs claim an accommodation allowance to stay in their own Wellington properties.  Well, consider the alternatives, which the story doesn't.
    • You could pay all MPs much higher salaries and tell them to sort their own accommodation, which would mean higher effective pay for Wellington-area MPs who wouldn't need to pay for a second residence.
    • You could means-test access to accommodation support which would basically scale MP pay by prior wealth. It would also tilt things to discourage candidacy of middle-to-higher wealth MPs from outside of Wellington.
    • You could raze Premier House and put up halls of residence for MPs and the Prime Minister (and maybe have a reality show based there).
    • Or you could provide non-Wellington MPs who have a Wellington property with a strong incentive to sell off any Wellington properties by not providing the payment to MPs who don't live in Wellington but who have a house here.
    What do you think sucks least? Because I'm not sure there are other options.

  • The Government is to run a Parliamentary inquiry into rural banking.
    The Federated Farmers’ campaign for an inquiry was led by farmer Richard McIntyre.
    “I have been inundated with phone calls and emails from farmers, and even some former bankers, wanting to tell their stories,” he said.
    “And there’s been some pretty harrowing stories.”
    The worst of those involved farmers losing farms that their families had owned for generations, he said.
    Parliament might consider whether difficulty in foreclosing on failing farms, because of this kind of response, provides a strong disincentive to lending on rural properties.

  • I love that Xero is now putting out productivity data. The data is depressing. But great that Xero's doing it!

  • My gawd people. We have a competitive electricity market. New supply can come in if demand increases - though we need to make consenting for it easier. Emissions from mining and from electricity are in the Emissions Trading Scheme. If you want fewer emissions, reduce the number of unbacked units the government will issue or allocated between now and 2050. But wanting to block a gold mine because it will use energy and might have CO2 emissions is nuts.

Tuesday 11 June 2024

Expert advice

There are a few things you'd hope would be common knowledge about the Emissions Trading Scheme.

For example, the scheme caps net emissions. If emissions go down in one sector, another sector's emitters can buy the slightly-cheaper NZUs and use them. The only thing that reduces net emissions in the covered sector is government auctioning or allocating fewer units. 

And that the scheme wasn't designed by idiots. You can get credits for growing trees. But if you cut down the trees, or if the forest burns down, there are obligations: surrender the carbon credits or replant to sequester an equivalent amount of carbon. 

If the scheme didn't require surrendering credits if the forest burned down, it would be a pretty stupid design. 

MPI explains it in really simple language.

Natural disasters and other accidental events can damage forest land. Where this damage fells, burns, kills, uproots, or destroys the forest, the forest is treated as cleared in the ETS. This can result in a need to pay (surrender) New Zealand Units (NZUs or units) for the decrease in stored carbon.

From 2023, you can apply to pause carbon accounting if such an event damages your forest. This is called a "temporary adverse event suspension". If your application is approved, you won’t need to pay units for the decrease in stored carbon.

This pause will last until your forest:
  • is re-established (replanted or regenerated), and
  • achieves the same level of carbon storage as it had before the event.
So it's fun to read today's Carbon News:
The former chief science advisor for the Ministry of Transport says the current government isn’t even pretending to try to reduce carbon emissions from transport.

For the past six and a half years Simon Kingham, professor of Human Geography at Canterbury University’s School of Earth and Environment, was seconded two days a week to the Ministry of Transport as chief science advisor, to advise on the evidence base of government policy.

Kingham says the coalition government is taking a completely different approach to the former Labour-led government. “The previous government was working to reduce transport emissions. The current government is not even pretending to try.”

There is a long list of transport emissions reduction policies that the coalition government has binned. “They’ve cut back the Clean Car Discount, reduced the Road User Charges exemption for EVs, they’re winding back the Clean Car Standard, reducing funding for public transport, reducing incentives for walking and cycling, they’re building more roads which increases emissions, they’re encouraging density but also encouraging sprawl, which induces demand."
He continues:
The government seems to be focussing more on net emissions and offsetting, Kingham says. But that’s not a straightforward solution. “If the emissions reductions are not coming from transport or agriculture that puts a lot of pressure on tree planting.”

While the government issues carbon credits for tree planting, we don’t know if that sequestration is necessarily durable, Kingham says. “Do they get to keep the carbon credits if the forests burn down? As well as tree planting there’s talk of biofuels. That all adds up to a lot of land that’s going to be used and I don’t know if anyone has thought through the implications of that.”

While relying on the Emissions Trading Scheme might work to decarbonise other sectors, Kingham says it won’t work for transport. “The ETS is not going to deliver reductions in transport because the price it would have to go to is politically unpalatable. You’d have to add a dollar to the price of petrol and no-one is going to want to do that.”
One nice feature of the carbon price is that it tells us where emission reductions are most cost-effective. If one sector won't decarbonise much at a carbon price of less than $100, that tells us that there are lots of other ways of reducing net emissions for less than $100/tonne.

But it could be a fair critique to want transport planning to be making its best guesses as to what people will want as transport options when the carbon price rises to $100 or $150/tonne.

Anyway, it's always fun to gauge understanding of the ETS.

I'd always counted things like the clean car discount as pretending to try to reduce emissions. 

Wednesday 29 May 2024

Baseline 2019

I'll be in tomorrow's budget lock-up and on TVNZ's ridiculously early Breakfast panel pre-budget roundup ahead of it. 

For rather some time I've been making the case that government needs to retrench Core Crown Expenditure to pre-Covid levels. 

The Great Wellbeing Budget of 2019 was not austere. It was a substantial increase in spending, as a fraction of GDP, as compared to the prior National government's last budget. 

So. 

Take every Vote from Budget 2019 as a percent of GDP.

Make that the baseline for a future budget. Maybe 2025 if they're somewhat ambitious, 2026 if less ambitious. 

Some programmes or structural changes since Budget 2019 might be considered worth keeping. Government would have to trim other spending so there'd be room for it. 

I'm less interested in overs and unders around automatic stabilisers. Benefit spending will be higher in 2025 than 2019 because unemployment is likely to be higher; note too though that jobseeker numbers remained very high relative to unemployment over the period after lockdowns. 

If Budget 2025 were "Hey, this is the same as Budget 2019 would have been, as a fraction of GDP, if unemployment had been at 2025 levels", all good. There would be no structural deficit. 

Let's compare a few numbers here. 

At Budget 2019, Treasury put up forecasts of Core Crown expenditure for the year to June 2023. The bulk of Covid spending should have been 2020 and 2021. The traffic light system ended in September 2022. 

Budget 2019 forecast a 4.3% 2023 unemployment rate. The 2023 half-year fiscal update had a 3.6% unemployment rate for year to June 2023. So higher unemployment isn't responsible for any differences in spend between 2019's forecast 2023 and the actual 2023. 

Let's compare Budget 2019's forecast for core crown expenses by functional classification for 2023 with actual expenditure by those classifications for the year ended June 2023, inflated by the extent to which nominal GDP for 2023 exceeded 2019's forecast GDP for 2023. Nominal GDP in 2023, divided by the forecast of 2023 GDP from Budget 2019, then multiplied by each functional classification line. 

Overall, Core Crown spend is $13.4b higher than had been expected in 2019, after inflating for nominal GDP increase over the period, and accounting for Budget 2019's expectation of about $10 billion in new operating spending by 2023 that couldn't be classified in 2019.

Or put it this way. Budget 2019 expected Core Crown spending in 2023 would be about $104 billion across those functional areas, plus $10 billion in new operating spending, for $114b all up, after adjusting for nominal GDP growth to catch population increase and inflation.

Actual 2023 was almost $127 billion. So $13.4 billion more than would reasonably have been expected.

Despite unemployment being a lot lower in 2023 than had been forecast in 2019 for 2023, social security and welfare spending were $3.8 billion higher than had been forecast for 2023 at Budget 2019.

Health spending was $7.7 billion higher. 

Finance costs are substantially up, and there won't be much government can do about that now other than avoiding making things worse.

Transport is $1.8b higher. Core government services $1.6b higher. Education $1.5b higher. 

Spending has blown out across the board. If you take the excess spend as a proportion of the had-been-forecast spend, the blowout is of course biggest in finance costs, with with housing and community development (60.3%), heritage, culture and recreation (57.8%), environmental protection (52.2%), primary services (48.9%), and transport and communications (47.1%) following - health only blew out by 36.8% as compared to forecast and social security and welfare by only 9.9%. But those two line items are so very very big. 

Getting back to Core Crown expenditure comparable to 2019's when measured against current GDP isn't a small job.

The Taxpayers Union commissioned a poll from Curia. Sample of 1000 respondents. 

They wanted to know whether people viewed Robertson's Wellbeing Budget, with Core Crown spending of 29% of GDP, as being too low, about right, or too high. 

Only Green Party supporters reported that it was too low, or at least in any substantial numbers. Among Green supporters expressing an opinion, about half of Green supporters thought it was too low, and half thought it was about right. 

Among the population at large, 9% thought it was too low, 34% about right, 29% too high, and 29% were unsure. 

Among those expressing an opinion, those thinking spending in 2019 was too high outnumbered those saying it was too low by more than 3 to 1, with most saying it was about right.

It isn't crazy to view the pre-Covid spending proportions as a decent baseline. And most people didn't think Budget 2019 was austerity - far more people said that it spent too much, as a fraction of GDP. 

Budget 2019 reckoned on Core Crown spend of 28.8% of GDP over the medium term.

December's Half-Year fiscal update had 2023 Core Crown spend at 32.2% - the mess I pointed to above. And forecast it would be worse for 2024 at 33.4% of GDP. 

People rightly recognise Budget 2019 as not being austere. 

Getting back to spending consistent with government's share of the economy in 2019 is still going to be a big job. 

I'm hoping tomorrow to see reasonable work in that direction at least. Especially if they also want to deliver tax reductions, given the size of the deficit. 

National will be damned as austerity merchants for any spending reductions, regardless of how many people viewed 2019's budget as too generous. 

If you're going to be hanged anyway, better to be hanged for a sheep than for a lamb. I don't expect any sheep here. But they could at least aim for hogget. 

Campus speech

Victoria University's panel on free speech at universities seemed designed to be tedious, providing the smallest target for criticisms of the university. 

Rather than any discussion among panelists, we heard a series of statements in response to less-than-useful questions from Corin Dann. 

Because of Dann's framing, a pile of discussion was around who should be allowed to speak on campus.

Dann could not be expected to know that there has been a standard solution to this. Or at least there was for the period I was on campus at Canterbury. It worked well. Michael Johnston briefly alluded to that standard solution, but that didn't stop the 'but who should be allowed to speak on campus' bit. Or "Should someone be allowed on campus to debate cutting off Corin Dann's head" - as one of the panelists put it. 

Someone can speak on campus if they have been invited to do so by a member of the academic community

An academic can invite guest speakers to present to their class. 

Departments invite guest speakers to present working papers in regular workshops. Ours were on Friday afternoons, followed by excellent beer at the Staff Club. 

If an academic wants to host a guest speaker for a more public event, they need to get a room booking. At one point that was done through the Department because we controlled a couple of our own lecture theatres; later, that required centralised room booking. But the academic's name was on the booking; the academic had thought the speaker worth hearing out.

If a student group wanted to host a guest speaker, they could do it at the student union, or they could ask a member of faculty to book one of the lecture theatres. I think the student union restricted that to recognised student groups - but there was a broad set of recognised student groups, from ACT On Campus to Maoists. 

In any case, the guest was there because a member of the academic community thought they were worth hearing. 

For plenary speakers where there might be resourcing issues, or if it were part of a University named lecture series, that would need sign-off from whoever ran that series. Not getting signoff didn't mean the person couldn't speak on campus. It just meant they wouldn't speak in that slot. If other ways of financing a visit could be worked out, the academic could just book a room. 

The test shouldn't be some big public discourse about who is or isn't worth hearing, or who is or isn't presenting misinformation. 

There was useless, tedious discussion of whether Julian Bachelor (an activist favouring one reading of the implications of the Treaty of Waitangi) should be allowed to talk on campus. 

The only test should be whether a member of the academic community thinks he is worth hearing. Not whether his views are respected in, say, the Faculty of Law. I expect they think he's nuts, and they could well be right. It isn't my field. 

But I know that the Accounting Department regularly hosted speakers that folks in econ/finance thought were barking mad. And one fine Accounting colleague would often send all-college emails about how all of economics is wrong, as proven by their guest speaker who didn't have a clue about the content of intermediate micro, just that it was 'neoliberal'. 

The test wasn't whether we thought the speaker was an idiot, or wrong, or providing misinformation. Some of the Accounting guests were all three - at least in the view of the econ tea room. 

The test was whether the people in Accounting thought that the speaker was worth hearing. 

An equilibrium where we would have gotten to veto speakers that we thought were idiots and they got to veto speakers that they thought were idiots would have been terrible. 

So there's a simple answer on the Bachelor, or anyone else, question. They should be allowed to speak on campus if a member of the academic community has asked them to do so. 

That raises a separate question: would faculty still feel safe in inviting speakers that they think are very much worth hearing, but that might draw complaint?

Update:

After the session, I walked back toward the train station with a couple of Vic academics that I ran into outside the event. 

They noted that they’d been approached by a journo for their views.

They said they’d politely declined.

They also said that they hadn’t told the journo the reason for declining. Namely, that Vic is not a safe place for freely airing one’s views on such matters. They did not expect the Uni to have their backs if there were pushback, and they were surprised how many of their colleagues in the audience appeared supportive of restricting speech on campus. 

Wednesday 22 May 2024

Free trade for free countries

Matthew Yglesias at Slow Boring reiterates the case for American free trade with likeminded countries

What we ought to be doing is trying to minimize the total amount of trade barriers, and thus the economic cost of pursuing competition with China, by reducing as many trade barriers as we can. We should stop complaining about cheap Canadian lumber. We should stop blocking imports of Latin American sugar. We should let Toyota sell cheap small trucks to Americans who want them. We should, frankly, probably start buying (or leasing2) warships from Japan and Korea, where they actually know how to build ships. America is toast in a conflict with China if we can’t count on cooperation with our friends, so we may as well optimize on maximum economic efficiency and the freest possible trade within the free world. This also applies to quasi-trade in professional services — we should make it easier for foreign doctors to practice here, and have the FDA and European drug regulators work together so approval by one agency will let you sell on either side of the Atlantic. There’s a lot we can do to work together internationally and increase prosperity.

It seems obviously crazy that the US wants countries to reduce trade links with China while setting tariffs on countries that it calls friends and allies that encourage them to trade with China instead. 

That was my column over in the Post on Monday. 


I think it's a bit crazy that New Zealand has been talking about tighter defence arrangements with the US without having a secure trade deal with the US already in hand. China is our largest trading partner. We have a free trade agreement with them. And while there have been occasional bits of weirdness facing goods entering, they don't stick giant tariffs on our exports. 

Easy to check this for yourself, even though MFAT in general seems to prefer not making a big deal about how protectionist America is (contrast MFAT's correct and explicit views on the evils of Canadian trade practices, with softpeddling on America's). 

MFAT has a Tariff FinderMFAT has a Tariff Finder. Click the Exporting button; you're pretending to be a NZ-based exporter. Then compare tariffs on your exports if you're exporting to China, and if you're exporting to America. You can find China among the FTA partner countries on the drop-down list; the United States is on the non-FTA partner list. 

When NZ got its FTA with the UK, people made a big deal about onions now getting tariff-free access to the UK. So let's check onions. The US charges 0.83 cents/kg; no tariffs for entry into China. 

Is the Chinese ambassador wrong when he says that China has been a more reliable trade partner for New Zealand than the US has been? 

NZ trade with China can be subject to holdups at the ports if the Chinese government is mad at us - and what happened with Australian wine is concerning. 

But NZ trade with the US depends on madness in American farm states and whatever populism Congress wishes to appease [and trade with Canada is even worse - America at least tries to do its protectionism within the rules; Canada signs agreements it knows full well it will immediately break]. 

Anyway. 

If US trade policy really were about global geostrategic stuff, rather than mainly being protectionism, they would be opening trade as Yglesias suggests. 

And while neither the Republicans nor the Democrats show much interest in being reliable trade partners for anyone, I'd be a bit nervous about AUKUS. 

Contestable advice

Danyl McLauchlan over at The Listener on the recent shift toward more contestability in public policy advice in education:
Education Minister Erica Stanford, one of National’s highest-ranked MPs, is trying to circumvent the establishment, taking advice from a smaller pool of experts – some linked to right-wing think tank the New Zealand Initiative – instead of the traditional so-called experts. The Education Ministry itself is facing heavy job losses – 755 staff. Many of its core functions will be contracted out to consulting firms, especially in areas linked to Stanford’s reform programme: rebuilding the curriculum; an emphasis on reading, writing and numeracy; consistent assessment and reporting; better use of data and analysis.

There’s also a focus on improved teacher training. A recent Education Review Office report said 60% of principals believed their new teachers were unprepared to enter a classroom. It urged the sector to adopt stricter entry criteria for training programmes and to conduct exit exams.

The universities rejected the criticism, and the government is now considering expanding private-sector training.

If one cluster of advisors centered around MinEd has been providing advice that leads to terrible outcomes, good idea to seek advice elsewhere.

Tuesday 21 May 2024

Afternoon roundup

A closing of the browser tabs: