30 September 2013

Paula Bennett's voodoo economics

You can be forgiven if you are scratching your head over a report from the Ministry of Social Development that claims a liability that is estimated to have risen by $9 billion actually means that the government has saved $3 billion. Is this some new kind of accountancy double-speak?
The figures arise from an actuarial valuation of the projected lifetime liability of benefits for those who were on welfare in the 12 months prior to the date of valuation. Last year an estimate of $78 billion was issued, but this year it is estimated at $87 billion. So that's about $9 billion increase.
But the Minister is arguing that a change in the estimate of future interest rates – and hence a shift in the valuation's discount rate – has added $13.4 billion to the valuers' calculations, and that increase is counterbalanced by the government's policies to reduce the numbers on benefits producing a $3 billion 'reduction' in the estimated forward liability.
Well, this just goes to show you the hazards of actuarial estimates of long-tail risk. If changing predictions of future interest rates mean that your valuation can flap around in the wind to the extent of (on paper) $13 billion, then how can you be sure that the lesser sum of $3 billion is not equally subject to grand fluctuations? The answer is: you can't – it's all just based on projections, estimates and sophisticated mathematics. Another recession or a drought and your estimates are up the proverbial creek.
But that's not the end of the story. The Minister's actuarial valuation of the welfare budget does not necessarily represent long-term value for the taxpayer or for the Treasury. This is because it's a single-budget estimate, and not a whole-of-government cost-benefit analysis. In short, the Minister's theoretical reduction in future liability of $3 billion takes no account of the potential for extra costs to be borne by, say, the justice or public health budgets that may arise from abandoning the poor and dumping them off welfare with no jobs to go to.
What (in theory) may have saved her budget some money in the long term may lead to rising costs elsewhere in the long term.
MSD and its Minister should do less voodoo economics and creative accounting and do more to care for the sick and vulnerable. Above all, we need more training and job schemes, especially for the young.

(For closer supporting analysis, see the article by Simon Chapple.)

26 September 2013

What are the political implications of Team NZ's loss?

Major sporting events these days inevitably bring out speculation about whether or not they are likely to affect election results. And there is indeed some research evidence to support the view that a big win can boost support for incumbent candidates.
However, if I were Len Brown, I would not be worrying that the loss to Oracle means his hold on the mayoralty is in jeopardy. Sure, he would have loved to be basking in the reflected glory of a Team NZ win and talking about the huge benefits for Auckland and New Zealand. This would be especially welcome for him given that ballot papers were only recently posted out to us.
But the evidence suggests that the effects of sporting wins (and hence presumably losses too) are only marginal. They affect people's mood, and those who do not think very deeply about their reasons for voting may be influenced one way or the other.
Len Brown's command over Auckland is simply too great to be significantly affected by Team NZ's failure. It may mean that a few people get depressed and fail to complete their ballots. Perhaps those local board candidates whose fortunes sit on a knife-edge and for whom every vote counts could be a little worried that Team NZ's fate has sunk them as well.
As for John Key, I am sure that he too would have loved to be basking in the reflected glory of sporting success. It's unfortunate for him that this bad result follows news of a rise for Labour in a recent opinion poll. Oh well, he might think, the next election is more than a year away and people will have forgotten the America's Cup by then.

19 September 2013

Albo and Shorten should look to New Zealand for primary guidance

See my article on The Conversation.

15 September 2013

Cunliffe: the predictable option

At 11.30am Sunday, iPredict was pricing 'David Cunliffe to be the next Labour Party leader' at 84 cents.
And, guess what! At 2.45 pm, the Labour leadership contest was announced in favour of... DC!
The Labour Party has enjoyed the limelight in the media for the duration of the election, and this has done them no harm at all. It has even brought in many new (or renewed) memberships.
Party management have been at pains to emphasise the need for unity, however, given past disruptions and the risk that, without plenty of self-discipline, the election campaign could have descended into acrimony. Fortunately for them, it didn't, but this has not prevented commentators from speculating about the potential for revenge and recrimination once the new leader gets to work. This primary-style leader election process lends DC a genuine mandate, however. And so those who have been skeptical about him, if not openly hostile towards him, will have difficulty ignoring that democratic voice.
Reporters and bloggers will be on the look-out for the slightest hint of disunity, and some are even capable of drumming it up out of nowhere. Any demotion on Labour's front bench is now going to be interpreted by reporters in the worst possible light. No other political party on the local landscape at present is undergoing the same level of minute scrutiny. That's the downside of Labour's drawing attention to itself in this way.
Nevertheless, think back to the much bigger drama in the primary Democratic contest between Obama and Hilary Clinton. It was forgotten well before the election. Further to that, it's interesting how no-one seems to make a big deal any longer about the identity politics issue of 'the first black president'. Going on that example, we would soon enough have gotten over 'the first gay PM.' Every time someone said in the press that 'Robertson's sexuality isn't relevant,' they proved the opposite: by having to argue the point, they proved that it was relevant. But we would soon have forgotten about it all the same.
In the meantime, hardly anyone is examining disunity and pork-barrell politics in the National Party – and it's not because National lacks that kind of thing. Indeed, Labour's dominance in the politics headlines lately has limited the attention that otherwise would have been paid to Key's overriding of Treasury advice against the $30 million 'sweetener' he's paid out to Pacific Aluminium, and hence to Rio Tinto shareholders. See NZ Herald.

13 September 2013

But what are Labour members voting for?

Labour members and affiliates have cast their preference votes for the party leadership. There was plenty of speculation about who's most fit for the job and why.
My present question, though, is: On what grounds did the voters make their choices?
It would be great if someone would do a survey to find out. The multi-choice options could include:

The candidate who is:

The most able to challenge John Key.
The best leader of the Opposition.
The most able to communicate Labour's values to the public.
The best election campaigner.
The most likely to be a great PM.
The one you happen to 'like' the most.
The one you think most other Kiwis 'like' the most.
The one you 'like' the least.*
The one who'd look the least ridiculous to the international media.
The one who is least likely to fluff his lines.
The one most likely to offer you a plum job.
The one most likely to shaft your party enemies.
The one most likely to beat DC.
The one with the nicest spouse.

Respondents could tick more than one.

*assuming that he'll lose the election and be eviscerated afterwards so you can enjoy some schadenfreude.

10 September 2013

Is the Labour leadership election decided by the media?

In a word: No.
Now for the long answer...
Recent commentary has asked whether the Australian federal election and the present Labour leadership election may support the allegation that big media and their hired journalists are essentially picking and grooming the winners. But real life is never that simple.
Candidates for public office actively use exposure in the media, especially TV, to get their messages and personal imagery across, just as much as the journalists use the political 'theatre' to boost their careers and their employers' channel ratings. There is an 'unholy alliance' between reporters and politicians, as the former seek to raise their reputations as 'ballsy' makers and breakers of news stories, and the latter seek to raise their reputations as power-brokers who never put a foot wrong. It's a high-stakes game for both parties.
Pity the poor voter, then, who has to interpret the posturing, the half-truths and the (often cheesy or trite) narratives that emerge from this scrum, and to make a supposedly 'informed' decision based on that. To add to the complexity, the voter is provided with polling data that can influence choices by indicating who has – and who hasn't – got a chance of winning. Is there not a risk that, because the media-pack have their knives sharpened to gut one candidate, while preparing a love-fest with another, that public (or party membership) opinion will be easily swayed accordingly?
What this doesn't account for are two important ingredients: human disorganisation and competitiveness. That is, while reporters may be better informed about the candidates than the average member of the public, they are scurrying around in a relatively chaotic way, trying desperately to manage their own lives and meet deadlines, so that they really have little time to think intelligently, let alone to organise a conspiracy. And, just as one news agency and its star reporter may be doing a hagiographical job on one candidate, they then provide a competing agency and its hired hands with a golden opportunity to burst that bubble by 'digging up the real dirt' that others had overlooked.
So, the so-called 'news' that emerges is just story-telling and fabrication, but it kind of works provided that the democratic system more or less requires the candidates to be accountable for at least a few of the rash promises that they made – and there can be no doubt that rash promises abound in the Labour leadership contest!
My advice is to throw out your TV.

08 September 2013

Kiwi ex-pats gain nothing from Aussie election

It's estimated there may be about 600,000 NZ citizens living in Australia. Most of them will be living and working there on the discriminatory marginal status of ‘indefinite temporary resident’ (on a ‘special category visa’), entitled to work in Australia but not eligible for welfare benefits, and not eligible to vote.
Neither Labor nor the Coalition made any election promise to rectify the status of New Zealanders who are working there, and paying taxes to the Australian government, but who are denied normal rights of citizenship. Well, why would either party promote such a policy, as New Zealanders can't vote? Promising to rectify the discriminatory status of New Zealanders in Australia would win no votes from Australians – indeed, it would have cost them votes. 
In effect, since 2001 when this policy began, New Zealanders are being treated in Australia as ‘guest workers’. On entry to Australia, they have a right to work and must pay taxes, but they have few rights to social protection, higher education subsidies and loans, and they are subject to the same tough conditions as any other nationality if they wish to apply for permanent residence or citizenship. The same restrictions apply to their children, even if they were born in Australia. One of the social problems arising from this set of policies is that Australia-born New Zealanders are growing up there, getting their compulsory education and seeking employment, but without social protections. The lack of tertiary education support means that higher qualifications are often out of the reach of families, and the lack of qualifications then counts against them if they apply for permanent residence or citizenship. It has been alleged in the media that these restrictions on social supports and opportunities are now leading to problems of poverty, youth violence and crime in some parts of Australia. Some states have even amended human-rights laws to prevent New Zealanders from taking discrimination claims.
New Zealanders in Australia are contributing to their host country's economy and to the Australian Treasury, but they are systematically locked out of the entitlements that normally go with such contributions. And the recent election shows that their plight counts for nothing politically.

Some facts, from Australia's Department of Immigration and Citizenship: The Special Category Visa is a temporary visa that allows a New Zealand citizen to remain indefinitely and live, work or study in Australia lawfully as long as that person remains a New Zealand citizen. The SCV is not a permanent visa and visa holders do not have the same rights and benefits as an Australian citizen or permanent resident. In addition to the limitation introduced in the 2001 changes for SCV holders, both Australian permanent residents and SCV holders are generally not able to: vote in Australian government elections, access student loans, join the Australian Defence Force, or obtain ongoing work for the Australian Government.
(PS: I have dual Australian/NZ citizenship, so I have no personal interests at stake here.)

04 September 2013

Should NZ support a military strike on Syria?

We all want to see an end to the Syrian civil war. There are more than 100,000 dead, and about one third of the population either in refugee camps or internally displaced. And the Syrian government is now accused of resorting to chemical weapons.
No-one wants to stand by and watch, but the fact is that we have been standing by and watching for a long time now, and the western powers are still being indecisive. The English parliament has voted against Mr Cameron's proposal to act against the Syrian government, and Obama is referring the matter to the US Congress. The UN Security Council won't back any joint military actions, due to support for Syria from Russia and China. And NATO won't act either.
Mr Key has confirmed that there was an approach from US Secretary of State John Kerry seeking 'moral support' for a military strike now that Syria has deployed chemical weapons. But what would the military objective be? If it is to retaliate or to punish the Assad regime for the use of chemical weapons, which are banned in international law, then that will not be enough to end the civil war. It will presumably target some chemical facilities and military bases, using cruise missiles perhaps, thus degrading Assad's military capabilities. But the war will go on and Assad will hardly be persuaded to step down by such an intervention.
If the objective is more ambitious – say, regime change – then the extent of the bombardment would need to be much greater, there'd be much greater risk to innocent people, and neighbours, notably Iran, threaten to get involved. Why would the US give Iran another free pass to increase its influence in the region, as it did with Iraq?
If the objective is to give the rebels a better chance of advancing their goals, then presumably a no-fly zone would need to be enforced, using US air power, as in Libya. But there are literally hundreds of rebel militias, some of whom are fighting among themselves. Many are allied with Iran and far from western-friendly. 'Victory' for the rebels would lead we know not where. It may just lead to more civil war.
The US is looking impotent because it is impotent. 
Any moral persuasion from New Zealand should be targetted at China and Russia, urging them to reconsider the support they are giving to the Syrian government. American bombs are not going to help. There is no sensible case at all for New Zealand to morally support an American military intervention in Syria.