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Oz and the Anglosphere

November 11th, 2015

Here’s a piece for Inside Story, pointing out the rest of the English speaking world is doing worse than Australia, and that New Zealand, in particular, should never be used as a model in anything to do with economic policy.

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  1. GrueBleen
    November 11th, 2015 at 13:58 | #1

    What did I say elsewhere about any member of this species who has a brain is prevented from using it ?

    We’ve had this NZ hero worship thing a long time now (except for when Labour are in power across the pond), and NZ keeps on enthusiastically showing us why this is really stupid.

    And we keep on doing it. So it goes.

  2. Troy Prideaux
    November 11th, 2015 at 14:34 | #2

    I disagree with the argument that NZ’s recent performance was primarily due them coming from a greater level of “backwardness” allowing them to grow their GDP at a faster rate. I personally believe it’s primarily due to their capitalisation of Chinese (and global) dairy demand which they timed perfectly.
    Saying that, whenever I disagree with John on a claim, I’m nearly always wrong ๐Ÿ˜›

  3. Uncle Milton
    November 11th, 2015 at 14:54 | #3

    But they are good at rugby.

  4. Happy Heyoka
    November 11th, 2015 at 16:50 | #4

    Over the last decade (or at least, since ~2008 when the melamine scandal hit) you might be right. Certainly in my neck of the woods the only major new factories are for milk processing and the dairy farmers are almost happy.

    However, it’s El Niรฑo time again, and that’s not good for dairy if you don’t have irrigation and if you are forced to pay for imported feed. More likely than not it will force culling of the dairy herd (for starters) and New Zealand is not likely to fair any better than Australia in that regard.

  5. paul walter
    November 12th, 2015 at 12:45 | #5

    The econonomics thingie only illustrates the point:

    What sort of people would willingly live on top of a humungus great supervolcano that could end life as we know it on the planet, any old tickedy-boo of the clock?

  6. Troy Prideaux
    November 12th, 2015 at 12:57 | #6

    @Happy Heyoka
    Indeed. My understanding is NZ dairy farmers have been doing it hard(ish) for the past 12 or so months anyway. Not sure exactly what the primary cause of that is? climate, low milk commodity pricing, stronger dollar in comparison to providers like Australia?
    However, they certainly did experience some boom years after that melamine scandal.

  7. Tim Macknay
    November 12th, 2015 at 13:24 | #7

    @paul walter
    Presumably a different sort of people than the sort who would live on a dry as dust, worn out desert rock, where all the fertility leached out of the soil millions of years ago? ๐Ÿ˜‰

  8. paul walter
    November 12th, 2015 at 14:01 | #8

    Well, Tim, it was the poms. They tricked our ancestors into coming here on the basis that rehabilitation would be good for their souls. When they realised they were lying, it was too late, so, like true members of the master race, they just put together oh such a clever little country just for us, until the yanks turned up and privatised it.

    But it wasn’t our fault our ancestors were troublemakers, rumdots, tarts and handkerchief thieves. We just had to make do with what they left us.

    No instant running hot water for a tub or brew of tea, like those fortunates on the North Island of Enzed, or instant fridge like the South Island. No, our ancestors had to do it all by themselves and what’s more whilst under the scrutiny of crude, oafish squatter’s thugs.

  9. Happy Heyoka
    November 12th, 2015 at 14:12 | #9

    @Troy Prideaux

    on NZ Dairy meta topic, interesting speech, if you have half an hour to digest it:

    “The significance of dairy to the New Zealand economy”
    A speech delivered to DairyNZ in Hamilton on 7 May 2014 by Graeme Wheeler, Governor

    It does make me think about having an economy strongly linked to primary production and commodity prices – not that we’d be dumb enough to (continue to) do that here… no sireee…
    (waiting for Malcolm’s “innovation” speech, expecting they’ll just forget about it again – as usual historically – next time the primary industry stuff picks up again)

  10. Tim Macknay
    November 12th, 2015 at 16:50 | #10


  11. Jim
    November 13th, 2015 at 08:42 | #11

    The New Zealand economic miracle is a consequence of a few things. 1) starting from a lower base (as JQ has pointed out); 2) the rapid growth of the diary industry (now flattening out – wait for the crash); 3) the rebuilding of Christchurch after the earthquakes (massive economic stimulus in the construction sector), and; 4) population growth (particularly immigration into Auckland).

    But in terms of a standard of living, NZ is way behind Australia (housing affordability, health, education), and the nutrient runoff from the diary sector has pretty much buggered every waterway in those regions (a massive cost that has largely been ignored).

  12. Troy Prideaux
    November 13th, 2015 at 09:36 | #12

    Agree with all that, except I’m not expecting any dairy “crash” compared to today’s circumstances. There’s already been a big drop off in dairy commodity prices and whilst it’s probably a bit early say it’s bottomed out, we can see by the current baby formula shortages that china still has demand for certain dairy products.


  13. November 13th, 2015 at 16:30 | #13

    Hi John,
    I found your comments on Armistice Day refreshing.Surely every aspective of WW1 has been
    covered by now. May I suggest that we examine History and see if there are circumstances
    arising that may lead to a further catastrophic confrontation_the Final Solution.
    An article in a recent copy of The Atlantic “The Thucydides Trap:Are the U.S.and China Headed for War?”

  14. Jim
    November 14th, 2015 at 09:47 | #14


    The issue with the more recent diary conversions is that many of them have a variable production cost up around $5 which is well above the current market price (NZD $3.85/kg). Also, the more recent conversions (particularly in Canterbury in the South Island) have significantly higher fixed costs (particularly debt).

    @Troy Prideaux

  15. Ikonoclast
    November 14th, 2015 at 11:03 | #15


    Thinking along the lines of the The Thucydides Trap (and the study which examines same) conforms to my statement in the Armistice Day thread. Namely that we should be looking for laws and tendencies (via correlations) rather than searching for “causation”. I could write a lot about the Atlantic article on The Thucydides Trap but this is not the right thread for it. I would have to take it to weekend reflections or a new sandpit.

  16. Jim Rose
    November 15th, 2015 at 13:25 | #16

    John, your source chart as with most Reserve Bank of New Zealand data goes back to 1990.

    If you take on that chart back to the 1970s and earlier using Conference Board Total Database PPP data, you would find that New Zealand economy diverged from Australia in the 1970s quite rapidly (a 34% drop in TFP against trend) when that economy was a heavily regulated, highly taxed economy.

    What followed from 1974 to 1992 with the lost decades: two decades of negligible growth and no real wages growth.

    With the election of a National party government in 1990 and a fiscal consolidation, New Zealand growth reserved at the trend rate of 2% in 1992.

    As shown in the chart conveniently compiled by the New Zealand Council of Trade Union, there was 20 years of real wage stagnation until the passage of the Employment Contracts Act in 1991. What followed the passage of that Act was sustained real wages gross for the first time in two decades.

    There are two puzzles in your data. The first is New Zealand’s resumption of growth but no rebound from the earlier depression of 1974 to 1992. The second puzzle is the failure of Australia to converge in the USA in the postwar period. Australia has been at about 80% or so of the USA in GDP per capita oral other similar measures for the entire postwar period โ€“ neither catching up nor falling behind.

    You can’t blame distance because Canada up until the 70s was neither catchy and up nor falling behind the USA then suffered a sustained productivity drop in the 1980s and early 1990s. A massive fiscal consolidation in the mid-1990s prevented further divergence from the USA. The gap with the USA stopped growing but there was no rebound to recover previous lost ground.

    I will not link to those charts I have mentioned, for as you recall from emails some year or so ago, your spam filter absolutely hates any links I might submit in my posts and utterly destroys the post and doesn’t even leave it in the spam filter.

  17. derrida derider
    November 16th, 2015 at 14:48 | #17

    “With the election of a National party government in 1990 and a fiscal consolidation, New Zealand growth reserved at the trend rate of 2% in 1992.”

    Compared with a trend growth of well over 3% for Australia. You’ve correctly made the point, Jim, that NZ’s worst ABSOLUTE economic performance for NZ was before 1990. The last part of this was the Rogernomics period so you’re actually, in asserting that fiscal austerity was what finally boosted growth, agreeing with John and I that poor macroeconomic, not microeconomic, management is a big part of NZ’s story.

    But then NZ has signally failed to improve RELATIVE performance since 1990 – as you yourself admit in talking of the “puzzling” lack of a rebound. Have you not then reinforced rather than undermined John’s argument?

    I think it’s all part of a more general point – and one that Keynes made, BTW – that keeping an economy running near it’s capacity is far more effective for growth and prosperity than trying to raise that capacity through distributionally problematic microeconomic reforms. As they say, you can fit an awful lot of Harberger triangles into an Okun gap.

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