Our unemployment release valve blows

The prospects for keeping down the growth of our unemployment queues have taken a turn for the worse. Late last year we were hoping that unemployment would only reach 6% at the depth of the current recession. A key factor in keeping the unemployment rate from blowing out was the assumption that Australia’s economy would keep chugging along and absorb much of our surplus labour. But with Australia’s prospects suddenly looking a lot less rosy we can no longer look to our biggest neighbour to alleviate our problem.

Sharing the fruits of growth

Real disposable incomes of Kiwi households have been rising on average for a considerable length of time even after taking into account increasing costs of food, fuel and mortgages. This was very clearly demonstrated by a colleague of mine – Chris Worthington – in this column some weeks back. But averages sometimes disguise differences across social strata. Have we all being been enjoying the fruits of growth?

More tax cuts please

Tax cuts have finally been granted, albeit modest ones. From October full time earners will pay between $12 and $28 dollars per week less in tax. Welcome, but hardly cause for wild celebration.

Looking South

There are parallels between the struggles of the Southland economy and New Zealand’s struggles in an international context. Southland is isolated, its climate is challenging, its population and market is small, and agriculture is a big part of its economy. But through wise use of their resources and some smart choices, Southland has been able to turn itself around. As a nation we can learn from that.

Rugby, poverty, Apartheid, and Minto

John Minto’s decision to reject an award nomination from the South African government is hardly surprising. He is a doctrinaire socialist and is fundamentally at odds with the market-friendly policies pursued by the ruling African National Congress. Minto has sought to portray South Africa as an example of the failure of market-based policies to address poverty. To support his stance he has made some extraordinary claims about economic and social conditions in South Africa, some of which are quite simply wrong.

Not as equal as we think

We are Australia’s poor cousins, that we all know. Even Tasmanians, the poorest Australians, earn on average more than 10% per week than we do. While we know we are poorer we like to think that sometimes we have other worthy attributes. We are less inclined to invade foreign countries alongside our traditional allies. We think we are greener – our per capita carbon dioxide emissions are less than half that of Australia’s. We also like to think that we have a more equal society. Greater equality is a popular perception but is incorrect if income distribution is our measure of equality.

A blessing in our low productivity past

New Zealand’s low labour productivity growth in the recent past is often identified as a problem. But if we had enjoyed stronger productivity growth our society may look quite different today, and not necessarily better. Labour productivity measures the value of final goods and services (or gross domestic product) produced in the economy for each hour worked. Low labour productivity growth means that we are producing little more for each hour’s work today than ten or fifteen years ago.

A silver lining to jobs lost to Asia

The rampant Kiwi dollar is likely to encourage more manufacturers to relocate production to low cost Asian countries. In fact, several manufacturers had already announced plans to move production before the latest Kiwi dollar rally. This will mean more job losses in an industry that has been shedding jobs over the past few years. In April our iconic whiteware producer Fisher and Paykel signalled their intention to relocate 350 jobs to Thailand. Next was Sleepyhead with a possible 250 jobs, followed by Dynamic Controls with another 200 jobs, both to China.