Having seen the abilities of the team of crack fact(oid)checkers here, I can’t resist the temptation to ask for more help. I’m planning on writing something on higher education. My starting point is the belief that the squeeze on universities, driven in part by the desire to force them to rely more on full-fee paying domestic students, has resulted in very little growth in domestic undergraduate numbers over the decade since the government was elected. But I’m having trouble getting consistent time-series on this. This report called Selected Higher Education Research Expenditure Statistics: 2000 supports my view for the period up to 2000, but after that, looking at the DEST site, I can only find annual cross-sections that don’t seem to be collected on a consistent basis. Can anyone give me consistent time series on domestic undergraduate numbers, and commencements. Better still is there a breakdown giving the number of HECS places and the number of full-fee places supported by FEE-HELP, on a basis comparable to the statistics up to 2000?

Update I found what I was looking for on the National Union of Students website. It’s over the page and needs some formatting. Money quote:

The number of subsidised places in 2007 will be roughly the same as they were in 1997. In terms of student access to HECS places a decade of Howard Government education reforms has amounted to standing still.

This is consistent with the partial data I already had.
The most recent data on full-fee places I could find was for 2002, when there about 6000 full-fee undergraduate places. Presumably that’s increased, but it seems clear that, as far as expanding access to higher education goes, the last decade has been almost completely wasted while the government chased a range of (mutually inconsistent) ideological hobby horses.
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Like a lot of people, I suspect, I’ve been putting off the task of working out my situation in relation to superannuation. The rules are so complex, and have been changed so often, that it seems easier to just keep making the automatic payments, pick a reasonable looking investment strategy from the four or five on offer and hope that something comes along to clarify the issues.

In one sense at least, that strategy has paid off. Costello’s Budget speech announced what are claimed to be the most radical reforms ever to superannuation policy. At the very least, they are big changes, and render most previous calculations obsolete, so I’m glad I didn’t make any. Moreover, Costello’s claim to have simplified the tax treatment of super appears to be correct, although we’ll have to wait for the devilish details of cliche to be sure. Given that complexity entails a wide range of social costs, simplification is good in itself.

The bad is that the simplification has been achieved by greatly reducing the tax paid by those with large amounts of super, while doing nothing much for the rest. The likely outcome, I suspect is an increase in import-intensive luxury consumption.

The cosmetic part of the story is the claim that this will encourage people to stay in the workforce longer. Like a lot of other commentators, I doubt this. The income effect (more money makes retirement more affordable) seems likely to outweigh any substitution effect from higher expected net returns.

In her Budget column today, Janet Albrechtsen makes the following claim:

NSW has about 380,000 state and local public servants servicing a population of 6.7 million people. And that’s not counting more than 40,000 public servants working in government-owned businesses. With a population of about four million, that should mean that New Zealand should have about 225,000 public servants. Right?

Wrong. According to Statistics New Zealand, our cousins across the Tasman have fewer than 69,000 public servants. That’s one public servant for every 58 New Zealanders, compared with one NSW public servant for every 17.5 NSW residents. The comparison only gets worse when you realise the NZ figure includes almost 12,000 defence force personnel and other public servants who, in Australia, would be working for the federal Government.

I’m too busy to check myself, but this seems highly implausible to me. NZ seems to have much the same mix of public and private schools and hospitals as Australia, and presumably local councils perform much the same range of tasks (maybe with a bit more contracting out). Can anyone do a factoid check here?

Update 2:31 pm An amazing team of unpaid factoid checkers has solved the puzzle almost immediately and the answer is “The number you first thought of”. According to the NZ government,

The public service makes up a small proportion of total state sector employment, as measured by Statistics NZ. In 2004 the Public Service made up only 14 per cent of the 275,000 state sector jobs

suggesting that, after netting out people doing federal government jobs, the NZ and NSW public sectors are almost identical in size, relative to the population. Albrechtsen’s entire piece is based on a difference in statistical classifications. Thanks to everyone who helped dig out the facts.

The obvious question is, if readers of this blog can find this kind of thing out for free, and in a matter of minutes, why is Albrechtsen getting paid for not bothering to make such obvious checks?

A couple of commenters have suggested emailing and asking for a retraction, and anyone who wants to do so is welcome to. My past experience with such things is that any correction is so grudging and qualified as to be worthless, but maybe Albrechtsen will surprise us.

Every time the budget comes out, we get little spreadsheets showing how much different kinds of households get in tax cuts. Something that struck me about last night’s budget was the fact that people on $30 000 got a smaller cut than people on $25 000. As far as I can see, no one has commented on this (feel free to point out exceptions) but on the face of it, there’s a puzzle here. As Costello said last night, if you cut the marginal rate on low incomes, (or raise the threshold), everybody gets the cut. So unless a rate is raised somewhere, people on higher incomes always get at least as big a cut as those on lower incomes.

The answer turns out to be something called the low income tax offset, which has been around for a while, as this factsheet from 2003 shows. As the name implies, low income earners* get an offset against their tax, but this is phased out as incomes rise from $20 000 a year to $30 000 (with this budget the phaseout starts at $25000 and runs to $40000).

Effectively, this is much the same as raising the threshold at which tax is paid (to around $9000, compared to the officially published $6000) and increasing the marginal rate on incomes between $25 000 and $40 000. I haven’t checked out how much, but I estimate it’s equivalent to around 2.5 percentage points, raising the effective marginal tax rate from 30 per cent to 32.5 per cent.

So, where the official tax scale suggest that low and middle income earners face the same threshold and lower marginal rates, the truth appears to be pretty much the opposite. It’s an open question as to which is better, but it would certainly be good for the tax scales to reflect reality instead of obscuring it.

*Another group of beneficiaries, far from low-income, are the children of those (probably including quite a few Cabinet ministers) who dodge tax through family trusts. The offset raises the threshold at which the income nominally assigned to them becomes taxable.

Budgets used to be big news once, both in the leadup and in the aftermath. Now, they’re front page news for a day, and even that’s not secure. If the Beaconsfield mine rescue had been a day later, I suspect at least some editors would have pushed the Budget to the inside pages. Why the decline in interest?
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I got the conference volume from the Reserve Bank of Australia 2005 Conference quite a while ago, but I’ve only just read them. The main focus is on the decline in the volatility of the business cycle observed in the English-speaking countries since the mid-80s (or in Australia’s case since the end of the last recession).

There’s a lot of discussion of monetary policy, micro reform and so on, but no mention of what I would see as the single most important factor – the abandonment of the external balance objective. For most of the postwar period, economic policy makers juggled the desire to keep the domestic economy stable with the constraint imposed by the balance of payments. Not surprisingly, this was a difficult job and promising economic expansions were regularly choked off because of emerging current account deficits.

Now we have a deficit of 7 per cent of GDP (as do most other English-speaking countries) and no one worries. The assumption is that borrowers and lenders are consenting adults who can make their own decisions. Right or wrong, this assumption makes macroeconomic management an awful lot easier.

We may well be about to find out whether policymakers have been right to view trade deficits with benign neglect. The US dollar seems to be beginning its long-awaited depreciation against the euro and other trading partners (even against the $A) and long-term interest rates are rising. Some combination of the two should sooner or later bring the US back into trade balance. The question is whether this adjustment will be smooth or painful.

As reader Jonno points out in comments to the previous post on this, the problems with Public Private Partnerships are beginning to become apparent even in the UK where, under the name of the Private Finance Initiative, the idea has been pushed strongly by both Conservative and Labour governments.

This report in the Guardian indicates that the UK Treasury is pulling back from an aspect of the PPP model I’ve long criticised, the bundling of “soft services” like cleaning and catering into contracts for the construction and maintenance of hospitals and schools. The British government is still pushing ahead, under intense pressure from the business interests who benefit from these schemes, but the Treasury Report while unsurprisingly positive in tone, stresses the subsidiary role of the PFI, which is expected to account for between 10 and 15 per cent of total investment in public services.

The NZ Treasury has a paper looking at the advantages and disadvantages of Public-Private Partnerships (PPPs)*. The conclusions are almost exactly what I would have written myself.

This paper argues that:

* there are other ways of obtaining private sector finance without having to enter into a PPP
* most of the advantages of private sector construction and management can also be obtained from conventional procurement methods (under which the project is financed by the government, and construction and operation are contracted out separately), and
* the advantages of PPPs must be weighed against the contractual complexities and rigidities they entail. These are avoided by the periodic competitive re-tendering that is possible under conventional procurement.
The paper concludes that PPPs are worthwhile only if all three of the following conditions are met:

1. The public agency is able to specify outcomes in service level terms, thereby leaving scope for the PPP consortium to innovate and optimize.
2. The public agency is able to specify outcomes in a way that performance can be measured objectively and rewards and sanctions applied.
3. The public agency’s desired outcomes are likely to be durable, given the length of the contract.

The only thing missing is a discussion of the cost of capital. I’ve discussed this issue with NZ Treasury in other contexts, but I’m not sure where they would come out in relation to PPPs

* Acronyms are tricky things. In the post below, PPP means Purchasing Power Parity. And once upon a time, it meant Point-to-Point Protocol, which was used by modems.