Making something of Labour’s free student fees proposal

The Labour Party’s proposal for the government to pay for the first three years of tertiary education is overly generous, but it does have some merit…… though for different reasons than I imagine was the basis for Labour’s thinking.
Some have labelled Labour’s proposal as an electoral bribe but there are some sound economic arguments for government assistance in the provision of tertiary education and indeed these arguments might justify some movement in education policy in the direction suggested by Labour.

Review of GST misses the point

Trying to plug the holes in the current goods and service tax system is likely to be an expensive failure that will have the perverse impact of encouraging a culture of tax avoidance. As I have noted previously, there is a fundamental flaw in the design of New Zealand’s GST, which the current review of cross-border transactions ignores. While the current review is aimed at plugging revenue gaps that are developing because of technology and social changes to retail patterns, it ignores the more important economic efficiency consequences of shortcomings in the design of GST.

Welcome focus of the government on investing in children

The government should be commended for "pressing ahead withits social investment approach, which is about targeted, evidence-basedinvestment to secure better long-term results for the most vulnerable NewZealanders" (2015 Budget Speech, p8).  In particular, a focus on alleviatingchild poverty will potentially be of great benefit, not just for today’svictims, but for New Zealand in general.  Economic deprivation as a child is acause of poor adult outcomes when it denies them access to critical needs fortheir full development.

Changing sources of local government revenue

There are some legitimate reasons for exploring alternative methods for raising local government revenue, but it is important that the analysis does not confound two separate issues: how much funding should be raised and what methods should be used for raising these funds. Ultimately the issue about funding levels is really about spending levels; the alternative to taxing more is always to spend less.

Rating the education policies

National and Labour are offering quite different views onwhat new policies will improve the performance of the school system.  Labourbelieves that the current standard of teachers is fine, but what is needed ismore of them.  National believes that improving school outcomes will come fromimproving the average standard of teaching.  Their proposal is to reward betterteachers and, in particular, reward them for assisting other teachers to improveeducation outcomes. 

Can we improve the election process to get better policy?

Despite this general level of comfort with New Zealand’s political system there is always room for improvement. My general concern is that the quality of policies should be as high as possible. By this I mean that policies introduced are most effective in delivering the intended outcomes and that unintended side-effects are minimised. I think it is totally appropriate that policies reflect the philosophy of the elected government and the interests of the electorate, but it annoys me when policy does not look like it will be as effective as it could be, or delivers outcomes in a costly way.

Explaining the gender pay gap

In recent decades , a narrowing has occurred between men’sand women’s labour force participation, paid hours of work, hours of work athome, life-time labour force experience, occupations, and education.  Indeed,young women are now obtaining qualifications at a higher rate than men.  Yetdespite an observed convergence in earnings, a gap between the wages earned bymen and women still persists. 

Giving credit control to the government

Economic downturns are never pleasant events, yet it is thebooms that often generate the destructive power of the downturns.  Thecombination of sales growth and easy credit promotes an investment boom thatfurther fuels economic growth.  The problem with easy money is that too manyinvestment ideas get financial backing.  Everything looks like a winner, andthe more cautious investors look like mugs.  Although fewer frivolousinvestment mistakes are made during the downturns, excessive caution causes thedamage of missed opportunities.  Part of the solution to avoiding the worst problemsassociated with economic downturns is maintaining the discipline and so containingexcesses during the good times. 

Time for a pre-emptive strike on inflation

The Reserve Bank should pre-empt a build-up in inflation by raisinginterest rates next week.  Although demand pressures are on the rise, the realproblem is that New Zealand has entrenched high inflation expectations and awide-spread cost-plus mentality that threatens to undermine the effectiveimplementation of monetary policy if the Bank is too slow in reacting to thecurrent build-up in inflation pressures.