Monday 12 August 2013

Monday roundup

I love that the NZ economics blogosphere is now large enough that I can now simply outsource parts of my thinking to others. Today's worthies:

Donal explains the changes to broadband pricing regulation over at Economics NZ. First some background: mobile call pricing has come down substantially consequent to a new competitor's entry. Next, some background on the current broadband regulatory structure and how prices are set for regulated access to Chorus's infrastructure. Donal promises more to come.

James Zucollo notes that Netflix doesn't believe your star ratings. Instead it recommends films based on what you actually watch. Expressive preferences differ from revealed preference. That's why economists trust the latter over the former whenever available, and are skeptical about surveys even when revealed preference measures aren't available.

Finally, Shamubeel Eaqub blogs at TVHE on National's policy in support of first-home buyers. Recall that RBNZ is initiating LVR regulations to prevent banks from taking on too many highly leveraged mortgages; they think that banks' asset sheets take on too much housing price risk. This will necessarily fall hardest on first-home buyers who cannot use the proceeds of the sale of their first home as deposit towards their next home. The National Party's proposed plan lets Kiwisaver participants use more of their dedicated retirement savings towards their first home. While this will push up housing prices where housing supply is pretty inelastic, it shouldn't heighten any of the risks that RBNZ is worried about under LVR: it's still a real deposit, and so it's less likely that banks wind up in the negative on foreclosing. The part that's a problem is instead the expansion of the Welcome home Loans Scheme, under which the government apparently underwrites loans for home buyers, who have to come up with only a 10% deposit. I can't see how this part doesn't cut against RBNZ's LVR policy except inasmuch as it's somewhat limited in total coverage: the Fairfax story says they're expanding from 850 loans per year to 2500. 

1 comment:

  1. Excellent comment on housing. I'm glad that you made this distinction between underwriting and deposit subsidies, which is crucial from moral hazard and financial stability perspectives. I was just about to comment at TVHE before I saw this!