News and Opinion, sponsored by RaboPlus

By Matt Nolan from Infometrics

Following the global financial crisis people all around the world were angry and they wanted someone to blame. Given that the crisis seemed to originate from credit markets, it became natural for everyone to blame bankers.

In Britain there have been calls to make bankers pay through the introduction of a tax on speculative banking transactions called a “Robin Hood tax”. It even has the all important celebrity backing of Bill Nighy, and 131,919 fans on Facebook. Economists have seen this tax before in a different guise – we call it a financial transaction tax. Instead of attacking bankers, lowering financial market volatility, and raising money for the needy the burden of such a tax would fall mainly on ordinary people while having few of the claimed effects.

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By Adolf Stroombergen from Infometrics

Many people do not support an increase in GST, or so the polls tell us. I recall the same popular sentiment in 1986 when GST was first introduced. At that time there was a natural fear about a type of tax that was unfamiliar to most New Zealanders. Would it work? Would politicians deliver the accompanying income tax cuts? Who would gain and who would lose? Would government be bigger or smaller? Perhaps these fears still exist even though the change being talked about this time is much less dramatic.

The policy options currently on the table involve a change in the tax mix that deliver the same amount of revenue to the government. Whether the total tax take is too high or too low – whether government is too big or too small – is a different issue. The aim of the current proposals for tax reform is to find a better way to collect the same amount of tax revenue. What is meant by a better way? One that is more conducive to economic growth, fairer to those who can least afford to pay, easier to understand, more difficult to avoid and cheaper to comply with and administer.

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By Infometrics economist Chris Worthington

One of the grimmer aspects of the holiday season is the prominent focus given to the holiday road toll. Although it will be small comfort to the friends and relatives of those who died on the roads this summer, 2009’s holiday road toll of 13 was a substantial improvement on the 25 who died in 2008. After adjusting for the number of vehicles on the road, 2009 would be the third lowest holiday road-toll since records began in 1958.

There is often a temptation to divine an explanation for the year-to-year swings in the holiday road toll (or the yearly road toll). The reality is that over such a small sample period (the holiday period is normally 11.6 days), the normal variation inherent in such figures swamps any ability to attribute changes to causes like public safety campaigns or changes in police visibility. We just can’t say that the drop from 25 to 13 reflects any underlying change in behavior.

The good news is that over a longer time period, there is a remarkably clear and significant downward trend in the overall road toll. The raw road toll statistics need to be adjusted for the increasing number of drivers on the road. Ideally this adjustment would take into account the actual number of kilometers driven, or time spent in cars, but lacking that data the common adjustment is to compare road accidents to the number of vehicles in New Zealand.

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By Infometrics economist Gareth Kiernan

Recently released figures showed the unemployment rate surging to 7.3% in the December 2009 quarter, the highest level in over ten years. The number of unemployed people has risen by 88,000 since December 2007, more than doubling over that two-year period.

Three years ago the number of applicants for vacancies was low and the average quality of those applicants was even lower. The balance of power in the labour market has now definitely shifted in the employer’s favour, so for those people who’ve been made redundant over the last 24 months, finding a new job is currently a tough slog.

Some people see enrolling with an employment agency as a good way of boosting their chances of getting back into work. And in a developed society, experts and intermediaries play an important role in many facets of everyday life. Real estate agents have wider networks and greater marketing skills to help sell your house.

Mortgage brokers know the ins and outs of the banking sector and can potentially get you discounted interest rates. And given that it’s the job of investment advisers and money managers to monitor financial markets, they should have the expertise to provide good financial advice – at least, that’s the theory!

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By Infometrics economist Geoff Simmons

The festive season is a time for family and reflection. After a few drinks on Christmas Day, this combination got some of my family musing about future generations. First we started talking about New Zealand’s flaccid emissions trading scheme, the lack of progress at Copenhagen, and finally about living in a world of more than 2 degree temperature rises.

The impacts on New Zealand may be manageable, but how might we deal with the global fallout, possibly including refugees from a drought stricken Australia?

At the next gap in the conversation my niece Sufia (aged eight), piped up. “I don’t want to die,” she said. Sufia is precocious and bright, but usually tends to err in the direction of surreal comedy rather than dead-pan heartfelt pleas.

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By Infometrics economist John Carran

There has been a renewed focus on public asset sales in some western countries as governments reassess the value they get from owning commercial assets when faced with spiraling public debt. The British Government, for example, has announced it will sell £16bn ($35.8bn) in public assets over the next two years. Several other European countries such as France and Germany are also undergoing or seriously pondering public asset sales.

The New Zealand Government has a considerable amount of capital tied up in commercial assets on its balance sheet – around $15bn as at 30 June 2009. Examples of State Owned Enterprises include New Zealand Post, TVNZ, KiwiRail, and the government-owned electricity generators.

Consider what could be achieved for taxpayers if a proportion of that capital was freed for use elsewhere. For instance, it could be invested in much needed infrastructure such as roads, or it could be invested in schools, hospitals, and other public amenities.

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