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.

What price peak oil?

Long-time readers of our forecasts willprobably be aware that, over the last seven years, we have typically expectedworld oil prices to settle back down over the medium-term, usually US$10-15below the prevailing level when we’ve been preparing the forecasts. Such aview has not been out of line with the received wisdom. Consensus forecastsfor oil prices over the same period have generally tracked the current oilprice with some downward adjustment expected over the coming year to bring oilprices back to more "normal" levels. The futures market has generally been alittle less sure of any reversal in prices, but even so, an oil price ofUS$120/bl was never on anyone’s radar even 12 months ago.

Where house sales go, prices don’t necessarily follow

Back in January 2004, Infometrics put outa press release concluding that "property values will begin to fall before theend of this year … some areas that have experienced large price increases (suchas Nelson) could undergo a nasty correction."  After four years of resolutelypredicting an impending slowdown in the housing market, it seems we’ve finallygot it right!

Congested Thinking about Congestion Charging

The Dominion Post of Friday 18 April had a front page article on congestion charging for the Wellington region at peak commuting times. Congestion charges have much theoretical merit, but the conditions under which they deliver are beneficial are not that easy to assess. As I read through the article I became progressively more concerned about the proposed scheme. Let’s start by looking at those aspects of the proposed scheme that really are complete rubbish.

GST cuts and Dr Cullen’s conditions

The government is looking for a way to cuttaxes within the confines of its "four conditions". Given the difficultyassociated with achieving these conditions through personal income taxes, it ispossible that the government may look at other forms of tax cuts, such asreducing the GST rate. However, any belief that a reduction to the rate ofgoods and services tax will be more likely to satisfy these conditions ismisguided.

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.

Off track with rail

The cost of propping up rail over the past fifty years can probably be totted up but it would be a disheartening job. Whatever the result the message is likely to be that rail, in its present form, is not a viable business in New Zealand. There may well be a case for subsidising urban passenger rail services and it’s not the focus of this article. But it’s well past time to take a hard-nosed look at the rail freight business in this country.

No “right” response to global warming

The mainstream acceptance of both the scientific consensus on global warming and the need for a globally binding cap on carbon emissions does not by itself indicate that we are close to reaching a satisfactory solution to climate change. The optimal policy response is still subject to massive uncertainty from three sources: risk around our central forecast of climate change costs, uncertainty about the cost of reducing emissions, and uncertainty about how we should share the cost burden.

Measures of allocative efficiency

In the last few weeks my colleagues, Gareth Kiernan and Adolf Stroombergen, have discussed the importance of what economists call allocative efficiency – ensuring that the nation’s resources flow into those activities where they are most valued. I continue with that theme. My aim is to present a measure of how big a deal allocative efficiency is for the New Zealand economy.

An array of carbon prices

Last week my colleague Gareth Kiernan discussed the importance of what economists call allocative efficiency – ensuring that the nation’s resources can flow into those activities where they are most valued. A pre-requisite to achieving such an outcome is clear and consistent price signals. An area where pricing is rapidly becoming neither clear nor consistent is carbon pricing.