Publication by type: Insights

The Canterbury earthquakes have disrupted lives and the economy. This Insight brings together key economic indicators to provide a snapshot of the economic disruption. The true cost of the disaster will not be known for some time. The immediate clean-up and reconstruction is boosting demand in certain sectors like utilities, construction, safety, healthcare and social assistance. These have not fully offset reduced activity in other sectors.

The National Policy Statement (NPS) on Freshwater Management is a good first step, but it may leave local authorities in the dark about how to meet its intent.

The Government's infrastructure priorities now need to be reviewed in light of the cost of Christchurch's devastating earthquakes. However, the cost-benefit appraisals of major transport schemes that are likely to form part of the reprioritisation tend to understate the benefits. Thus there is a risk the wrong projects get weeded out or delayed when it would be better to look elsewhere to find the money needed to support Christchurch. We describe the reasons why, and provide some considerations that will help reduce this risk. In the long term we would argue for improvements to methodologies.

Labour’s proposed tax-free threshold for the first $5,000 of wages and removing GST from fresh fruit and vegetables will cost around $1.7 billion in the first year. This is to be funded by raising the top tax rate for high income earners. From an economic perspective, these proposals would be a big step backward.

What do New Zealand’s musical preferences suggest about the economic outlook for 2011? Using a highly scientific method, our in-depth analysis of the current New Zealand Top 10 songs aligns well with our take on the economy. The outlook is mixed and messy, much like the tunes played by a drunken DJ.

Kiwis fly to Australia in search of a better nest

The continuous flow of Kiwis to Australia is closely linked to Australia’s economic performance. The big difference in income between Australia and New Zealand is likely to be a major factor. Life style factors and incomes in New Zealand are still appealing enough to attract a healthy flow of immigrants that more than compensates for the flow across the ditch – which is why the Treasury has previously termed this a brain exchange rather than a brain drain. But the combined effect of a growing income gap and larger population is predicted to lead to a net outflow of 26,000 people per year.

Personal tax cuts from 1 October 2010 will boost take home pay for New Zealand workers. NZIER has updated its personal tax calculators to allow comparison with Australia.
New Zealand’s new personal tax regime is less onerous for high income earners than Australia’s. But as Australia’s average weekly wage is about 40% higher in Australia, a typical family is much better off in Australia if disposable income is the measure. Our model family’s after tax income is 33% higher in Australia.

When taxpayers’ money is spent on health and safety measures in transport and healthcare services, the decisions made implicitly or explicitly place values on saving lives and casualties. In recent years there has been a move towards using standard measures of these values so that there is some consistency in decisions. This is to be welcomed, but if the measures are flawed then decision-makers can unwittingly pick the wrong projects that do not deliver maximum value for money.