CINXE.COM

<!DOCTYPE html> <html lang="en"> <head> <meta charset="UTF-8"> <meta name="viewport" content="width=device-width, initial-scale=1"> <title>Fiscal policy | croaking cassandra</title> <link rel="profile" href="http://gmpg.org/xfn/11"> <link rel="pingback" href="https://croakingcassandra.com/xmlrpc.php"> <meta name='robots' content='max-image-preview:large' />  <script id="wpcom_remote_login_js"> var wpcom_remote_login_extra_auth = ''; function wpcom_remote_login_remove_dom_node_id( element_id ) { var dom_node = document.getElementById( element_id ); if ( dom_node ) { dom_node.parentNode.removeChild( dom_node ); } } function wpcom_remote_login_remove_dom_node_classes( class_name ) { var dom_nodes = document.querySelectorAll( '.' + class_name ); for ( var i = 0; i < dom_nodes.length; i++ ) { dom_nodes[ i ].parentNode.removeChild( dom_nodes[ i ] ); } } function wpcom_remote_login_final_cleanup() { wpcom_remote_login_remove_dom_node_classes( "wpcom_remote_login_msg" ); wpcom_remote_login_remove_dom_node_id( "wpcom_remote_login_key" ); wpcom_remote_login_remove_dom_node_id( "wpcom_remote_login_validate" ); wpcom_remote_login_remove_dom_node_id( "wpcom_remote_login_js" ); wpcom_remote_login_remove_dom_node_id( "wpcom_request_access_iframe" ); wpcom_remote_login_remove_dom_node_id( "wpcom_request_access_styles" ); } // Watch for messages back from the remote login window.addEventListener( "message", function( e ) { if ( e.origin === "https://r-login.wordpress.com" ) { var data = {}; try { data = JSON.parse( e.data ); } catch( e ) { wpcom_remote_login_final_cleanup(); return; } if ( data.msg === 'LOGIN' ) { // Clean up the login check iframe wpcom_remote_login_remove_dom_node_id( "wpcom_remote_login_key" ); var id_regex = new RegExp( /^[0-9]+$/ ); var token_regex = new RegExp( /^.*|.*|.*$/ ); if ( token_regex.test( data.token ) && id_regex.test( data.wpcomid ) ) { // We have everything we need to ask for a login var script = document.createElement( "script" ); script.setAttribute( "id", "wpcom_remote_login_validate" ); script.src = '/remote-login.php?wpcom_remote_login=validate' + '&wpcomid=' + data.wpcomid + '&token=' + encodeURIComponent( data.token ) + '&host=' + window.location.protocol + '//' + window.location.hostname + '&postid=72492' + '&is_singular='; document.body.appendChild( script ); } return; } // Safari ITP, not logged in, so redirect if ( data.msg === 'LOGIN-REDIRECT' ) { window.location = 'https://wordpress.com/log-in?redirect_to=' + window.location.href; return; } // Safari ITP, storage access failed, remove the request if ( data.msg === 'LOGIN-REMOVE' ) { var css_zap = 'html { -webkit-transition: margin-top 1s; transition: margin-top 1s; } /* 9001 */ html { margin-top: 0 !important; } * html body { margin-top: 0 !important; } @media screen and ( max-width: 782px ) { html { margin-top: 0 !important; } * html body { margin-top: 0 !important; } }'; var style_zap = document.createElement( 'style' ); style_zap.type = 'text/css'; style_zap.appendChild( document.createTextNode( css_zap ) ); document.body.appendChild( style_zap ); var e = document.getElementById( 'wpcom_request_access_iframe' ); e.parentNode.removeChild( e ); document.cookie = 'wordpress_com_login_access=denied; path=/; max-age=31536000'; return; } // Safari ITP if ( data.msg === 'REQUEST_ACCESS' ) { console.log( 'request access: safari' ); // Check ITP iframe enable/disable knob if ( wpcom_remote_login_extra_auth !== 'safari_itp_iframe' ) { return; } // If we are in a "private window" there is no ITP. var private_window = false; try { var opendb = window.openDatabase( null, null, null, null ); } catch( e ) { private_window = true; } if ( private_window ) { console.log( 'private window' ); return; } var iframe = document.createElement( 'iframe' ); iframe.id = 'wpcom_request_access_iframe'; iframe.setAttribute( 'scrolling', 'no' ); iframe.setAttribute( 'sandbox', 'allow-storage-access-by-user-activation allow-scripts allow-same-origin allow-top-navigation-by-user-activation' ); iframe.src = 'https://r-login.wordpress.com/remote-login.php?wpcom_remote_login=request_access&origin=' + encodeURIComponent( data.origin ) + '&wpcomid=' + encodeURIComponent( data.wpcomid ); var css = 'html { -webkit-transition: margin-top 1s; transition: margin-top 1s; } /* 9001 */ html { margin-top: 46px !important; } * html body { margin-top: 46px !important; } @media screen and ( max-width: 660px ) { html { margin-top: 71px !important; } * html body { margin-top: 71px !important; } #wpcom_request_access_iframe { display: block; height: 71px !important; } } #wpcom_request_access_iframe { border: 0px; height: 46px; position: fixed; top: 0; left: 0; width: 100%; min-width: 100%; z-index: 99999; background: #23282d; } '; var style = document.createElement( 'style' ); style.type = 'text/css'; style.id = 'wpcom_request_access_styles'; style.appendChild( document.createTextNode( css ) ); document.body.appendChild( style ); document.body.appendChild( iframe ); } if ( data.msg === 'DONE' ) { wpcom_remote_login_final_cleanup(); } } }, false ); // Inject the remote login iframe after the page has had a chance to load // more critical resources window.addEventListener( "DOMContentLoaded", function( e ) { var iframe = document.createElement( "iframe" ); iframe.style.display = "none"; iframe.setAttribute( "scrolling", "no" ); iframe.setAttribute( "id", "wpcom_remote_login_key" ); iframe.src = "https://r-login.wordpress.com/remote-login.php" + "?wpcom_remote_login=key" + "&origin=aHR0cHM6Ly9jcm9ha2luZ2Nhc3NhbmRyYS5jb20%3D" + "&wpcomid=85004741" + "&time=1743522818"; document.body.appendChild( iframe ); }, false ); </script> <link rel='dns-prefetch' href='//s1.wp.com' /> <link rel='dns-prefetch' href='//s2.wp.com' /> <link rel='dns-prefetch' href='//s0.wp.com' /> <link rel='dns-prefetch' href='//fonts-api.wp.com' /> <link rel="alternate" type="application/rss+xml" title="croaking cassandra » Feed" href="https://croakingcassandra.com/feed/" /> <link rel="alternate" type="application/rss+xml" title="croaking cassandra » Comments Feed" href="https://croakingcassandra.com/comments/feed/" /> <link rel="alternate" type="application/rss+xml" title="croaking cassandra » Fiscal policy Category Feed" href="https://croakingcassandra.com/category/fiscal-policy/feed/" /> <script type="text/javascript"> /* <![CDATA[ */ function addLoadEvent(func) { var oldonload = window.onload; if (typeof window.onload != 'function') { window.onload = func; } else { window.onload = function () { oldonload(); func(); } } } /* ]]> */ </script> <script type="text/javascript"> /* <![CDATA[ */ window._wpemojiSettings = {"baseUrl":"https:\/\/s0.wp.com\/wp-content\/mu-plugins\/wpcom-smileys\/twemoji\/2\/72x72\/","ext":".png","svgUrl":"https:\/\/s0.wp.com\/wp-content\/mu-plugins\/wpcom-smileys\/twemoji\/2\/svg\/","svgExt":".svg","source":{"concatemoji":"https:\/\/s2.wp.com\/wp-includes\/js\/wp-emoji-release.min.js?m=1743165756i&ver=6.8-beta3-60087"}}; /*! This file is auto-generated */ !function(i,n){var o,s,e;function c(e){try{var t={supportTests:e,timestamp:(new Date).valueOf()};sessionStorage.setItem(o,JSON.stringify(t))}catch(e){}}function p(e,t,n){e.clearRect(0,0,e.canvas.width,e.canvas.height),e.fillText(t,0,0);var t=new Uint32Array(e.getImageData(0,0,e.canvas.width,e.canvas.height).data),r=(e.clearRect(0,0,e.canvas.width,e.canvas.height),e.fillText(n,0,0),new Uint32Array(e.getImageData(0,0,e.canvas.width,e.canvas.height).data));return t.every(function(e,t){return e===r[t]})}function u(e,t,n){switch(t){case"flag":return n(e,"\ud83c\udff3\ufe0f\u200d\u26a7\ufe0f","\ud83c\udff3\ufe0f\u200b\u26a7\ufe0f")?!1:!n(e,"\ud83c\uddfa\ud83c\uddf3","\ud83c\uddfa\u200b\ud83c\uddf3")&&!n(e,"\ud83c\udff4\udb40\udc67\udb40\udc62\udb40\udc65\udb40\udc6e\udb40\udc67\udb40\udc7f","\ud83c\udff4\u200b\udb40\udc67\u200b\udb40\udc62\u200b\udb40\udc65\u200b\udb40\udc6e\u200b\udb40\udc67\u200b\udb40\udc7f");case"emoji":return!n(e,"\ud83d\udc26\u200d\u2b1b","\ud83d\udc26\u200b\u2b1b")}return!1}function f(e,t,n){var r="undefined"!=typeof WorkerGlobalScope&&self instanceof WorkerGlobalScope?new OffscreenCanvas(300,150):i.createElement("canvas"),a=r.getContext("2d",{willReadFrequently:!0}),o=(a.textBaseline="top",a.font="600 32px Arial",{});return e.forEach(function(e){o[e]=t(a,e,n)}),o}function t(e){var t=i.createElement("script");t.src=e,t.defer=!0,i.head.appendChild(t)}"undefined"!=typeof Promise&&(o="wpEmojiSettingsSupports",s=["flag","emoji"],n.supports={everything:!0,everythingExceptFlag:!0},e=new Promise(function(e){i.addEventListener("DOMContentLoaded",e,{once:!0})}),new Promise(function(t){var n=function(){try{var e=JSON.parse(sessionStorage.getItem(o));if("object"==typeof e&&"number"==typeof e.timestamp&&(new Date).valueOf()<e.timestamp+604800&&"object"==typeof e.supportTests)return e.supportTests}catch(e){}return null}();if(!n){if("undefined"!=typeof Worker&&"undefined"!=typeof OffscreenCanvas&&"undefined"!=typeof URL&&URL.createObjectURL&&"undefined"!=typeof Blob)try{var e="postMessage("+f.toString()+"("+[JSON.stringify(s),u.toString(),p.toString()].join(",")+"));",r=new Blob([e],{type:"text/javascript"}),a=new Worker(URL.createObjectURL(r),{name:"wpTestEmojiSupports"});return void(a.onmessage=function(e){c(n=e.data),a.terminate(),t(n)})}catch(e){}c(n=f(s,u,p))}t(n)}).then(function(e){for(var t in e)n.supports[t]=e[t],n.supports.everything=n.supports.everything&&n.supports[t],"flag"!==t&&(n.supports.everythingExceptFlag=n.supports.everythingExceptFlag&&n.supports[t]);n.supports.everythingExceptFlag=n.supports.everythingExceptFlag&&!n.supports.flag,n.DOMReady=!1,n.readyCallback=function(){n.DOMReady=!0}}).then(function(){return e}).then(function(){var e;n.supports.everything||(n.readyCallback(),(e=n.source||{}).concatemoji?t(e.concatemoji):e.wpemoji&&e.twemoji&&(t(e.twemoji),t(e.wpemoji)))}))}((window,document),window._wpemojiSettings); /* ]]> */ </script> <link crossorigin='anonymous' rel='stylesheet' id='all-css-0-1' href='https://s2.wp.com/wp-content/mu-plugins/jetpack-plugin/moon/modules/infinite-scroll/infinity.css?m=1685131895i&cssminify=yes' type='text/css' media='all' /> <style id='wp-emoji-styles-inline-css'> img.wp-smiley, img.emoji { display: inline !important; border: none !important; box-shadow: none !important; height: 1em !important; width: 1em !important; margin: 0 0.07em !important; vertical-align: -0.1em !important; background: none !important; padding: 0 !important; } </style> <link crossorigin='anonymous' rel='stylesheet' id='all-css-2-1' href='https://s2.wp.com/_static/??-eJydzEEOwiAQheELCdMSEtOF8SxAyYSKQGYGDbe37cadC5cvL98P76ZCLRKLQMsdU2HAvk8fCfeHIrzMpCdtwfeUV/C5hofKyZOjASwjRx2YL/AzdCqGLUpzB3ejdlFIaf03QU5SQf7y+/M2X+1slsUYu30AMZRP0A==&cssminify=yes' type='text/css' media='all' /> <style id='wp-block-library-inline-css'> .has-text-align-justify { text-align:justify; } .has-text-align-justify{text-align:justify;} </style> <link crossorigin='anonymous' rel='stylesheet' id='all-css-4-1' href='https://s2.wp.com/_static/??-eJzTLy/QzcxLzilNSS3WzyrWz01NyUxMzUnNTc0rQeEU5CRWphbp5qSmJyZX6uVm5uklFxfr6OPTDpRD5sM02efaGpoZmFkYGRuZGmQBAHPvL0Y=&cssminify=yes' type='text/css' media='all' /> <style id='jetpack-sharing-buttons-style-inline-css'> .jetpack-sharing-buttons__services-list{display:flex;flex-direction:row;flex-wrap:wrap;gap:0;list-style-type:none;margin:5px;padding:0}.jetpack-sharing-buttons__services-list.has-small-icon-size{font-size:12px}.jetpack-sharing-buttons__services-list.has-normal-icon-size{font-size:16px}.jetpack-sharing-buttons__services-list.has-large-icon-size{font-size:24px}.jetpack-sharing-buttons__services-list.has-huge-icon-size{font-size:36px}@media print{.jetpack-sharing-buttons__services-list{display:none!important}}.editor-styles-wrapper .wp-block-jetpack-sharing-buttons{gap:0;padding-inline-start:0}ul.jetpack-sharing-buttons__services-list.has-background{padding:1.25em 2.375em} </style> <link crossorigin='anonymous' rel='stylesheet' id='all-css-6-1' href='https://s2.wp.com/wp-content/plugins/coblocks/2.18.1-simple-rev.4/dist/coblocks-style.css?m=1681832297i&cssminify=yes' type='text/css' media='all' /> <style id='classic-theme-styles-inline-css'> /*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} </style> <link crossorigin='anonymous' rel='stylesheet' id='all-css-8-1' href='https://s1.wp.com/_static/??/wp-content/mu-plugins/core-compat/wp-mediaelement.css,/wp-content/mu-plugins/wpcom-bbpress-premium-themes.css?m=1432920480j&cssminify=yes' type='text/css' media='all' /> <style id='global-styles-inline-css'> :root{--wp--preset--aspect-ratio--square: 1;--wp--preset--aspect-ratio--4-3: 4/3;--wp--preset--aspect-ratio--3-4: 3/4;--wp--preset--aspect-ratio--3-2: 3/2;--wp--preset--aspect-ratio--2-3: 2/3;--wp--preset--aspect-ratio--16-9: 16/9;--wp--preset--aspect-ratio--9-16: 9/16;--wp--preset--color--black: #000000;--wp--preset--color--cyan-bluish-gray: #abb8c3;--wp--preset--color--white: #ffffff;--wp--preset--color--pale-pink: #f78da7;--wp--preset--color--vivid-red: #cf2e2e;--wp--preset--color--luminous-vivid-orange: #ff6900;--wp--preset--color--luminous-vivid-amber: #fcb900;--wp--preset--color--light-green-cyan: #7bdcb5;--wp--preset--color--vivid-green-cyan: #00d084;--wp--preset--color--pale-cyan-blue: #8ed1fc;--wp--preset--color--vivid-cyan-blue: #0693e3;--wp--preset--color--vivid-purple: #9b51e0;--wp--preset--gradient--vivid-cyan-blue-to-vivid-purple: linear-gradient(135deg,rgba(6,147,227,1) 0%,rgb(155,81,224) 100%);--wp--preset--gradient--light-green-cyan-to-vivid-green-cyan: linear-gradient(135deg,rgb(122,220,180) 0%,rgb(0,208,130) 100%);--wp--preset--gradient--luminous-vivid-amber-to-luminous-vivid-orange: linear-gradient(135deg,rgba(252,185,0,1) 0%,rgba(255,105,0,1) 100%);--wp--preset--gradient--luminous-vivid-orange-to-vivid-red: linear-gradient(135deg,rgba(255,105,0,1) 0%,rgb(207,46,46) 100%);--wp--preset--gradient--very-light-gray-to-cyan-bluish-gray: linear-gradient(135deg,rgb(238,238,238) 0%,rgb(169,184,195) 100%);--wp--preset--gradient--cool-to-warm-spectrum: linear-gradient(135deg,rgb(74,234,220) 0%,rgb(151,120,209) 20%,rgb(207,42,186) 40%,rgb(238,44,130) 60%,rgb(251,105,98) 80%,rgb(254,248,76) 100%);--wp--preset--gradient--blush-light-purple: linear-gradient(135deg,rgb(255,206,236) 0%,rgb(152,150,240) 100%);--wp--preset--gradient--blush-bordeaux: linear-gradient(135deg,rgb(254,205,165) 0%,rgb(254,45,45) 50%,rgb(107,0,62) 100%);--wp--preset--gradient--luminous-dusk: linear-gradient(135deg,rgb(255,203,112) 0%,rgb(199,81,192) 50%,rgb(65,88,208) 100%);--wp--preset--gradient--pale-ocean: linear-gradient(135deg,rgb(255,245,203) 0%,rgb(182,227,212) 50%,rgb(51,167,181) 100%);--wp--preset--gradient--electric-grass: linear-gradient(135deg,rgb(202,248,128) 0%,rgb(113,206,126) 100%);--wp--preset--gradient--midnight: linear-gradient(135deg,rgb(2,3,129) 0%,rgb(40,116,252) 100%);--wp--preset--font-size--small: 13px;--wp--preset--font-size--medium: 20px;--wp--preset--font-size--large: 36px;--wp--preset--font-size--x-large: 42px;--wp--preset--font-family--albert-sans: 'Albert Sans', sans-serif;--wp--preset--font-family--alegreya: Alegreya, serif;--wp--preset--font-family--arvo: Arvo, serif;--wp--preset--font-family--bodoni-moda: 'Bodoni Moda', serif;--wp--preset--font-family--bricolage-grotesque: 'Bricolage Grotesque', sans-serif;--wp--preset--font-family--cabin: Cabin, sans-serif;--wp--preset--font-family--chivo: Chivo, sans-serif;--wp--preset--font-family--commissioner: Commissioner, sans-serif;--wp--preset--font-family--cormorant: Cormorant, serif;--wp--preset--font-family--courier-prime: 'Courier Prime', monospace;--wp--preset--font-family--crimson-pro: 'Crimson Pro', serif;--wp--preset--font-family--dm-mono: 'DM Mono', monospace;--wp--preset--font-family--dm-sans: 'DM Sans', sans-serif;--wp--preset--font-family--dm-serif-display: 'DM Serif Display', serif;--wp--preset--font-family--domine: Domine, serif;--wp--preset--font-family--eb-garamond: 'EB Garamond', serif;--wp--preset--font-family--epilogue: Epilogue, sans-serif;--wp--preset--font-family--fahkwang: Fahkwang, sans-serif;--wp--preset--font-family--figtree: Figtree, sans-serif;--wp--preset--font-family--fira-sans: 'Fira Sans', sans-serif;--wp--preset--font-family--fjalla-one: 'Fjalla One', sans-serif;--wp--preset--font-family--fraunces: Fraunces, serif;--wp--preset--font-family--gabarito: Gabarito, system-ui;--wp--preset--font-family--ibm-plex-mono: 'IBM Plex Mono', monospace;--wp--preset--font-family--ibm-plex-sans: 'IBM Plex Sans', sans-serif;--wp--preset--font-family--ibarra-real-nova: 'Ibarra Real Nova', serif;--wp--preset--font-family--instrument-serif: 'Instrument Serif', serif;--wp--preset--font-family--inter: Inter, sans-serif;--wp--preset--font-family--josefin-sans: 'Josefin Sans', sans-serif;--wp--preset--font-family--jost: Jost, sans-serif;--wp--preset--font-family--libre-baskerville: 'Libre Baskerville', serif;--wp--preset--font-family--libre-franklin: 'Libre Franklin', sans-serif;--wp--preset--font-family--literata: Literata, serif;--wp--preset--font-family--lora: Lora, serif;--wp--preset--font-family--merriweather: Merriweather, serif;--wp--preset--font-family--montserrat: Montserrat, sans-serif;--wp--preset--font-family--newsreader: Newsreader, serif;--wp--preset--font-family--noto-sans-mono: 'Noto Sans Mono', sans-serif;--wp--preset--font-family--nunito: Nunito, sans-serif;--wp--preset--font-family--open-sans: 'Open Sans', sans-serif;--wp--preset--font-family--overpass: Overpass, sans-serif;--wp--preset--font-family--pt-serif: 'PT Serif', serif;--wp--preset--font-family--petrona: Petrona, serif;--wp--preset--font-family--piazzolla: Piazzolla, serif;--wp--preset--font-family--playfair-display: 'Playfair Display', serif;--wp--preset--font-family--plus-jakarta-sans: 'Plus Jakarta Sans', sans-serif;--wp--preset--font-family--poppins: Poppins, sans-serif;--wp--preset--font-family--raleway: Raleway, sans-serif;--wp--preset--font-family--roboto: Roboto, sans-serif;--wp--preset--font-family--roboto-slab: 'Roboto Slab', serif;--wp--preset--font-family--rubik: Rubik, sans-serif;--wp--preset--font-family--rufina: Rufina, serif;--wp--preset--font-family--sora: Sora, sans-serif;--wp--preset--font-family--source-sans-3: 'Source Sans 3', sans-serif;--wp--preset--font-family--source-serif-4: 'Source Serif 4', serif;--wp--preset--font-family--space-mono: 'Space Mono', monospace;--wp--preset--font-family--syne: Syne, sans-serif;--wp--preset--font-family--texturina: Texturina, serif;--wp--preset--font-family--urbanist: Urbanist, sans-serif;--wp--preset--font-family--work-sans: 'Work Sans', sans-serif;--wp--preset--spacing--20: 0.44rem;--wp--preset--spacing--30: 0.67rem;--wp--preset--spacing--40: 1rem;--wp--preset--spacing--50: 1.5rem;--wp--preset--spacing--60: 2.25rem;--wp--preset--spacing--70: 3.38rem;--wp--preset--spacing--80: 5.06rem;--wp--preset--shadow--natural: 6px 6px 9px rgba(0, 0, 0, 0.2);--wp--preset--shadow--deep: 12px 12px 50px rgba(0, 0, 0, 0.4);--wp--preset--shadow--sharp: 6px 6px 0px rgba(0, 0, 0, 0.2);--wp--preset--shadow--outlined: 6px 6px 0px -3px rgba(255, 255, 255, 1), 6px 6px rgba(0, 0, 0, 1);--wp--preset--shadow--crisp: 6px 6px 0px rgba(0, 0, 0, 1);}:where(.is-layout-flex){gap: 0.5em;}:where(.is-layout-grid){gap: 0.5em;}body .is-layout-flex{display: flex;}.is-layout-flex{flex-wrap: wrap;align-items: center;}.is-layout-flex > :is(*, div){margin: 0;}body .is-layout-grid{display: grid;}.is-layout-grid > :is(*, div){margin: 0;}:where(.wp-block-columns.is-layout-flex){gap: 2em;}:where(.wp-block-columns.is-layout-grid){gap: 2em;}:where(.wp-block-post-template.is-layout-flex){gap: 1.25em;}:where(.wp-block-post-template.is-layout-grid){gap: 1.25em;}.has-black-color{color: var(--wp--preset--color--black) !important;}.has-cyan-bluish-gray-color{color: var(--wp--preset--color--cyan-bluish-gray) !important;}.has-white-color{color: var(--wp--preset--color--white) !important;}.has-pale-pink-color{color: var(--wp--preset--color--pale-pink) !important;}.has-vivid-red-color{color: var(--wp--preset--color--vivid-red) !important;}.has-luminous-vivid-orange-color{color: var(--wp--preset--color--luminous-vivid-orange) !important;}.has-luminous-vivid-amber-color{color: var(--wp--preset--color--luminous-vivid-amber) !important;}.has-light-green-cyan-color{color: var(--wp--preset--color--light-green-cyan) !important;}.has-vivid-green-cyan-color{color: var(--wp--preset--color--vivid-green-cyan) !important;}.has-pale-cyan-blue-color{color: var(--wp--preset--color--pale-cyan-blue) !important;}.has-vivid-cyan-blue-color{color: var(--wp--preset--color--vivid-cyan-blue) !important;}.has-vivid-purple-color{color: var(--wp--preset--color--vivid-purple) !important;}.has-black-background-color{background-color: var(--wp--preset--color--black) !important;}.has-cyan-bluish-gray-background-color{background-color: var(--wp--preset--color--cyan-bluish-gray) !important;}.has-white-background-color{background-color: var(--wp--preset--color--white) !important;}.has-pale-pink-background-color{background-color: var(--wp--preset--color--pale-pink) !important;}.has-vivid-red-background-color{background-color: var(--wp--preset--color--vivid-red) !important;}.has-luminous-vivid-orange-background-color{background-color: var(--wp--preset--color--luminous-vivid-orange) !important;}.has-luminous-vivid-amber-background-color{background-color: var(--wp--preset--color--luminous-vivid-amber) !important;}.has-light-green-cyan-background-color{background-color: var(--wp--preset--color--light-green-cyan) !important;}.has-vivid-green-cyan-background-color{background-color: var(--wp--preset--color--vivid-green-cyan) !important;}.has-pale-cyan-blue-background-color{background-color: var(--wp--preset--color--pale-cyan-blue) !important;}.has-vivid-cyan-blue-background-color{background-color: var(--wp--preset--color--vivid-cyan-blue) !important;}.has-vivid-purple-background-color{background-color: var(--wp--preset--color--vivid-purple) !important;}.has-black-border-color{border-color: var(--wp--preset--color--black) !important;}.has-cyan-bluish-gray-border-color{border-color: var(--wp--preset--color--cyan-bluish-gray) !important;}.has-white-border-color{border-color: var(--wp--preset--color--white) !important;}.has-pale-pink-border-color{border-color: var(--wp--preset--color--pale-pink) !important;}.has-vivid-red-border-color{border-color: var(--wp--preset--color--vivid-red) !important;}.has-luminous-vivid-orange-border-color{border-color: var(--wp--preset--color--luminous-vivid-orange) !important;}.has-luminous-vivid-amber-border-color{border-color: var(--wp--preset--color--luminous-vivid-amber) !important;}.has-light-green-cyan-border-color{border-color: var(--wp--preset--color--light-green-cyan) !important;}.has-vivid-green-cyan-border-color{border-color: var(--wp--preset--color--vivid-green-cyan) !important;}.has-pale-cyan-blue-border-color{border-color: var(--wp--preset--color--pale-cyan-blue) !important;}.has-vivid-cyan-blue-border-color{border-color: var(--wp--preset--color--vivid-cyan-blue) !important;}.has-vivid-purple-border-color{border-color: var(--wp--preset--color--vivid-purple) !important;}.has-vivid-cyan-blue-to-vivid-purple-gradient-background{background: var(--wp--preset--gradient--vivid-cyan-blue-to-vivid-purple) !important;}.has-light-green-cyan-to-vivid-green-cyan-gradient-background{background: var(--wp--preset--gradient--light-green-cyan-to-vivid-green-cyan) !important;}.has-luminous-vivid-amber-to-luminous-vivid-orange-gradient-background{background: var(--wp--preset--gradient--luminous-vivid-amber-to-luminous-vivid-orange) !important;}.has-luminous-vivid-orange-to-vivid-red-gradient-background{background: var(--wp--preset--gradient--luminous-vivid-orange-to-vivid-red) !important;}.has-very-light-gray-to-cyan-bluish-gray-gradient-background{background: var(--wp--preset--gradient--very-light-gray-to-cyan-bluish-gray) !important;}.has-cool-to-warm-spectrum-gradient-background{background: var(--wp--preset--gradient--cool-to-warm-spectrum) !important;}.has-blush-light-purple-gradient-background{background: var(--wp--preset--gradient--blush-light-purple) !important;}.has-blush-bordeaux-gradient-background{background: var(--wp--preset--gradient--blush-bordeaux) !important;}.has-luminous-dusk-gradient-background{background: var(--wp--preset--gradient--luminous-dusk) !important;}.has-pale-ocean-gradient-background{background: var(--wp--preset--gradient--pale-ocean) !important;}.has-electric-grass-gradient-background{background: var(--wp--preset--gradient--electric-grass) !important;}.has-midnight-gradient-background{background: var(--wp--preset--gradient--midnight) !important;}.has-small-font-size{font-size: var(--wp--preset--font-size--small) !important;}.has-medium-font-size{font-size: var(--wp--preset--font-size--medium) !important;}.has-large-font-size{font-size: var(--wp--preset--font-size--large) !important;}.has-x-large-font-size{font-size: var(--wp--preset--font-size--x-large) !important;}.has-albert-sans-font-family{font-family: var(--wp--preset--font-family--albert-sans) !important;}.has-alegreya-font-family{font-family: var(--wp--preset--font-family--alegreya) !important;}.has-arvo-font-family{font-family: var(--wp--preset--font-family--arvo) !important;}.has-bodoni-moda-font-family{font-family: var(--wp--preset--font-family--bodoni-moda) !important;}.has-bricolage-grotesque-font-family{font-family: var(--wp--preset--font-family--bricolage-grotesque) !important;}.has-cabin-font-family{font-family: var(--wp--preset--font-family--cabin) !important;}.has-chivo-font-family{font-family: var(--wp--preset--font-family--chivo) !important;}.has-commissioner-font-family{font-family: var(--wp--preset--font-family--commissioner) !important;}.has-cormorant-font-family{font-family: var(--wp--preset--font-family--cormorant) !important;}.has-courier-prime-font-family{font-family: var(--wp--preset--font-family--courier-prime) !important;}.has-crimson-pro-font-family{font-family: var(--wp--preset--font-family--crimson-pro) !important;}.has-dm-mono-font-family{font-family: var(--wp--preset--font-family--dm-mono) !important;}.has-dm-sans-font-family{font-family: var(--wp--preset--font-family--dm-sans) !important;}.has-dm-serif-display-font-family{font-family: var(--wp--preset--font-family--dm-serif-display) !important;}.has-domine-font-family{font-family: var(--wp--preset--font-family--domine) !important;}.has-eb-garamond-font-family{font-family: var(--wp--preset--font-family--eb-garamond) !important;}.has-epilogue-font-family{font-family: var(--wp--preset--font-family--epilogue) !important;}.has-fahkwang-font-family{font-family: var(--wp--preset--font-family--fahkwang) !important;}.has-figtree-font-family{font-family: var(--wp--preset--font-family--figtree) !important;}.has-fira-sans-font-family{font-family: var(--wp--preset--font-family--fira-sans) !important;}.has-fjalla-one-font-family{font-family: var(--wp--preset--font-family--fjalla-one) !important;}.has-fraunces-font-family{font-family: var(--wp--preset--font-family--fraunces) !important;}.has-gabarito-font-family{font-family: var(--wp--preset--font-family--gabarito) !important;}.has-ibm-plex-mono-font-family{font-family: var(--wp--preset--font-family--ibm-plex-mono) !important;}.has-ibm-plex-sans-font-family{font-family: var(--wp--preset--font-family--ibm-plex-sans) !important;}.has-ibarra-real-nova-font-family{font-family: var(--wp--preset--font-family--ibarra-real-nova) !important;}.has-instrument-serif-font-family{font-family: var(--wp--preset--font-family--instrument-serif) !important;}.has-inter-font-family{font-family: var(--wp--preset--font-family--inter) !important;}.has-josefin-sans-font-family{font-family: var(--wp--preset--font-family--josefin-sans) !important;}.has-jost-font-family{font-family: var(--wp--preset--font-family--jost) !important;}.has-libre-baskerville-font-family{font-family: var(--wp--preset--font-family--libre-baskerville) !important;}.has-libre-franklin-font-family{font-family: var(--wp--preset--font-family--libre-franklin) !important;}.has-literata-font-family{font-family: var(--wp--preset--font-family--literata) !important;}.has-lora-font-family{font-family: var(--wp--preset--font-family--lora) !important;}.has-merriweather-font-family{font-family: var(--wp--preset--font-family--merriweather) !important;}.has-montserrat-font-family{font-family: var(--wp--preset--font-family--montserrat) !important;}.has-newsreader-font-family{font-family: var(--wp--preset--font-family--newsreader) !important;}.has-noto-sans-mono-font-family{font-family: var(--wp--preset--font-family--noto-sans-mono) !important;}.has-nunito-font-family{font-family: var(--wp--preset--font-family--nunito) !important;}.has-open-sans-font-family{font-family: var(--wp--preset--font-family--open-sans) !important;}.has-overpass-font-family{font-family: var(--wp--preset--font-family--overpass) !important;}.has-pt-serif-font-family{font-family: var(--wp--preset--font-family--pt-serif) !important;}.has-petrona-font-family{font-family: var(--wp--preset--font-family--petrona) !important;}.has-piazzolla-font-family{font-family: var(--wp--preset--font-family--piazzolla) !important;}.has-playfair-display-font-family{font-family: var(--wp--preset--font-family--playfair-display) !important;}.has-plus-jakarta-sans-font-family{font-family: var(--wp--preset--font-family--plus-jakarta-sans) !important;}.has-poppins-font-family{font-family: var(--wp--preset--font-family--poppins) !important;}.has-raleway-font-family{font-family: var(--wp--preset--font-family--raleway) !important;}.has-roboto-font-family{font-family: var(--wp--preset--font-family--roboto) !important;}.has-roboto-slab-font-family{font-family: var(--wp--preset--font-family--roboto-slab) !important;}.has-rubik-font-family{font-family: var(--wp--preset--font-family--rubik) !important;}.has-rufina-font-family{font-family: var(--wp--preset--font-family--rufina) !important;}.has-sora-font-family{font-family: var(--wp--preset--font-family--sora) !important;}.has-source-sans-3-font-family{font-family: var(--wp--preset--font-family--source-sans-3) !important;}.has-source-serif-4-font-family{font-family: var(--wp--preset--font-family--source-serif-4) !important;}.has-space-mono-font-family{font-family: var(--wp--preset--font-family--space-mono) !important;}.has-syne-font-family{font-family: var(--wp--preset--font-family--syne) !important;}.has-texturina-font-family{font-family: var(--wp--preset--font-family--texturina) !important;}.has-urbanist-font-family{font-family: var(--wp--preset--font-family--urbanist) !important;}.has-work-sans-font-family{font-family: var(--wp--preset--font-family--work-sans) !important;} :where(.wp-block-columns.is-layout-flex){gap: 2em;}:where(.wp-block-columns.is-layout-grid){gap: 2em;} :root :where(.wp-block-pullquote){font-size: 1.5em;line-height: 1.6;} :where(.wp-block-post-template.is-layout-flex){gap: 1.25em;}:where(.wp-block-post-template.is-layout-grid){gap: 1.25em;} </style> <link crossorigin='anonymous' rel='stylesheet' id='all-css-10-1' href='https://s0.wp.com/wp-content/themes/pub/big-brother/style.css?m=1513292499i&cssminify=yes' type='text/css' media='all' /> <link rel='stylesheet' id='big-brother-gentium-css' href='https://fonts-api.wp.com/css?family=Gentium+Basic%3A400%2C700%2C400italic%2C700italic&subset=latin%2Clatin-ext&ver=6.8-beta3-60087' media='all' /> <link rel='stylesheet' id='big-brother-open-sans-css' href='https://fonts-api.wp.com/css?family=Open+Sans%3A400%2C800&subset=latin%2Clatin-ext&ver=6.8-beta3-60087' media='all' /> <link crossorigin='anonymous' rel='stylesheet' id='all-css-14-1' href='https://s2.wp.com/_static/??/wp-content/mu-plugins/jetpack-plugin/moon/_inc/genericons/genericons/genericons.css,/wp-content/themes/pub/big-brother/inc/style-wpcom.css?m=1685129444j&cssminify=yes' type='text/css' media='all' /> <style id='akismet-widget-style-inline-css'> .a-stats { --akismet-color-mid-green: #357b49; --akismet-color-white: #fff; --akismet-color-light-grey: #f6f7f7; max-width: 350px; width: auto; } .a-stats * { all: unset; box-sizing: border-box; } .a-stats strong { font-weight: 600; } .a-stats a.a-stats__link, .a-stats a.a-stats__link:visited, .a-stats a.a-stats__link:active { background: var(--akismet-color-mid-green); border: none; box-shadow: none; border-radius: 8px; color: var(--akismet-color-white); cursor: pointer; display: block; font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', 'Roboto', 'Oxygen-Sans', 'Ubuntu', 'Cantarell', 'Helvetica Neue', sans-serif; font-weight: 500; padding: 12px; text-align: center; text-decoration: none; transition: all 0.2s ease; } /* Extra specificity to deal with TwentyTwentyOne focus style */ .widget .a-stats a.a-stats__link:focus { background: var(--akismet-color-mid-green); color: var(--akismet-color-white); text-decoration: none; } .a-stats a.a-stats__link:hover { filter: brightness(110%); box-shadow: 0 4px 12px rgba(0, 0, 0, 0.06), 0 0 2px rgba(0, 0, 0, 0.16); } .a-stats .count { color: var(--akismet-color-white); display: block; font-size: 1.5em; line-height: 1.4; padding: 0 13px; white-space: nowrap; } </style> <link crossorigin='anonymous' rel='stylesheet' id='all-css-16-1' href='https://s1.wp.com/_static/??-eJzTLy/QTc7PK0nNK9HPLdUtyClNz8wr1i9KTcrJTwcy0/WTi5G5ekCujj52Temp+bo5+cmJJZn5eSgc3bScxMwikFb7XFtDE1NLExMLc0OTLACohS2q&cssminify=yes' type='text/css' media='all' /> <link crossorigin='anonymous' rel='stylesheet' id='print-css-17-1' href='https://s1.wp.com/wp-content/mu-plugins/global-print/global-print.css?m=1465851035i&cssminify=yes' type='text/css' media='print' /> <style id='jetpack-global-styles-frontend-style-inline-css'> :root { --font-headings: unset; --font-base: unset; --font-headings-default: -apple-system,BlinkMacSystemFont,"Segoe UI",Roboto,Oxygen-Sans,Ubuntu,Cantarell,"Helvetica Neue",sans-serif; --font-base-default: -apple-system,BlinkMacSystemFont,"Segoe UI",Roboto,Oxygen-Sans,Ubuntu,Cantarell,"Helvetica Neue",sans-serif;} </style> <link crossorigin='anonymous' rel='stylesheet' id='all-css-20-1' href='https://s2.wp.com/wp-content/themes/h4/global.css?m=1420737423i&cssminify=yes' type='text/css' media='all' /> <script type="text/javascript" id="wpcom-actionbar-placeholder-js-extra"> /* <![CDATA[ */ var actionbardata = {"siteID":"85004741","postID":"0","siteURL":"https:\/\/croakingcassandra.com","xhrURL":"https:\/\/croakingcassandra.com\/wp-admin\/admin-ajax.php","nonce":"95491f6cac","isLoggedIn":"","statusMessage":"","subsEmailDefault":"instantly","proxyScriptUrl":"https:\/\/s0.wp.com\/wp-content\/js\/wpcom-proxy-request.js?ver=20211021","i18n":{"followedText":"New posts from this site will now appear in your <a href=\"https:\/\/wordpress.com\/reader\">Reader<\/a>","foldBar":"Collapse this bar","unfoldBar":"Expand this bar","shortLinkCopied":"Shortlink copied to clipboard."}}; /* ]]> */ </script> <script type="text/javascript" id="jetpack-mu-wpcom-settings-js-before"> /* <![CDATA[ */ var JETPACK_MU_WPCOM_SETTINGS = {"assetsUrl":"https:\/\/s1.wp.com\/wp-content\/mu-plugins\/jetpack-mu-wpcom-plugin\/moon\/jetpack_vendor\/automattic\/jetpack-mu-wpcom\/src\/build\/"}; /* ]]> */ </script> <script crossorigin='anonymous' type='text/javascript' src='https://s1.wp.com/wp-content/js/rlt-proxy.js?m=1720530689i'></script> <script type="text/javascript" id="rlt-proxy-js-after"> /* <![CDATA[ */ rltInitialize( {"token":null,"iframeOrigins":["https:\/\/widgets.wp.com"]} ); /* ]]> */ </script> <link rel="EditURI" type="application/rsd+xml" title="RSD" href="https://croakingcassandra.wordpress.com/xmlrpc.php?rsd" /> <meta name="generator" content="WordPress.com" />  <meta property="og:type" content="website" /> <meta property="og:title" content="Fiscal policy – croaking cassandra" /> <meta property="og:url" content="https://croakingcassandra.com/category/fiscal-policy/" /> <meta property="og:site_name" content="croaking cassandra" /> <meta property="og:image" content="https://s0.wp.com/i/blank.jpg" /> <meta property="og:image:alt" content="" /> <meta property="og:locale" content="en_US" />  <link rel="shortcut icon" type="image/x-icon" href="https://s1.wp.com/i/favicon.ico" sizes="16x16 24x24 32x32 48x48" /> <link rel="icon" type="image/x-icon" href="https://s1.wp.com/i/favicon.ico" sizes="16x16 24x24 32x32 48x48" /> <link rel="apple-touch-icon" href="https://s2.wp.com/i/webclip.png" /> <link rel='openid.server' href='https://croakingcassandra.com/?openidserver=1' /> <link rel='openid.delegate' href='https://croakingcassandra.com/' /> <link rel="search" type="application/opensearchdescription+xml" href="https://croakingcassandra.com/osd.xml" title="croaking cassandra" /> <link rel="search" type="application/opensearchdescription+xml" href="https://s1.wp.com/opensearch.xml" title="WordPress.com" /> <meta name="theme-color" content="#f5f6f7" /> <style type="text/css"> .recentcomments a { display: inline !important; padding: 0 !important; margin: 0 !important; } table.recentcommentsavatartop img.avatar, table.recentcommentsavatarend img.avatar { border: 0px; margin: 0; } table.recentcommentsavatartop a, table.recentcommentsavatarend a { border: 0px !important; background-color: transparent !important; } td.recentcommentsavatarend, td.recentcommentsavatartop { padding: 0px 0px 1px 0px; margin: 0px; } td.recentcommentstextend { border: none !important; padding: 0px 0px 2px 10px; } .rtl td.recentcommentstextend { padding: 0px 10px 2px 0px; } td.recentcommentstexttop { border: none; padding: 0px 0px 0px 10px; } .rtl td.recentcommentstexttop { padding: 0px 10px 0px 0px; } </style> <meta name="description" content="Posts about Fiscal policy written by Michael Reddell" /> </head> <body class="archive category category-fiscal-policy category-40680 wp-theme-pubbig-brother customizer-styles-applied jetpack-reblog-enabled custom-colors"> <div id="page" class="hfeed site"> <a class="skip-link screen-reader-text" href="#content">Skip to content</a> <header id="masthead" class="site-header clearfix" role="banner"> <div class="site-branding"> <a href="https://croakingcassandra.com/" class="site-logo-link" rel="home" itemprop="url"></a> <h1 class="site-title"><a href="https://croakingcassandra.com/" rel="home">croaking cassandra</a></h1> <h2 class="site-description">Economics, public policy, monetary policy, financial regulation, with a New Zealand perspective</h2> </div> <nav id="site-navigation" class="main-navigation nav-horizontal" role="navigation"> <button class="menu-toggle" aria-controls="primary-menu" aria-expanded="false">Menu</button> <div id="primary-menu" class="menu"><ul> <li ><a href="https://croakingcassandra.com/">Home</a></li><li class="page_item page-item-1"><a href="https://croakingcassandra.com/about/">About Michael Reddell’s blog</a></li> <li class="page_item page-item-66509"><a href="https://croakingcassandra.com/book-reviews/">Book reviews</a></li> <li class="page_item page-item-58338"><a href="https://croakingcassandra.com/china-prc/">China (PRC)</a></li> <li class="page_item page-item-71258"><a href="https://croakingcassandra.com/early-mpss-and-economic-projections/">MPSs & Economic Forecasts from early-mid 90s</a></li> <li class="page_item page-item-8395"><a href="https://croakingcassandra.com/papers-and-speeches/">Papers and speeches</a></li> <li class="page_item page-item-70350"><a href="https://croakingcassandra.com/reserve-bank-of-new-zealand-superannuation-scheme/">Reserve Bank of New Zealand Superannuation Scheme</a></li> </ul></div> </nav> </header> <div id="content" class="site-content clearfix"> <div class="breadcrumbs"> <a class="breadcrumbs-root" href="https://croakingcassandra.com/">Home</a><span class="breadcrumbs-current">Fiscal policy</span> </div> <section class="primary content-area"> <main id="main" class="site-main" role="main"> <header class="page-header"> <h1 class="page-title"> Fiscal policy </h1> </header> <div class="article-wrapper"> <article id="post-72492" class="post-72492 post type-post status-publish format-standard hentry category-fiscal-policy category-treasury"> <header class="entry-header"> <h1 class="entry-title"><a href="https://croakingcassandra.com/2025/02/19/really-3/" rel="bookmark">Really?</a></h1> <div class="entry-meta"> <span class="posted-on"><a href="https://croakingcassandra.com/2025/02/19/really-3/" rel="bookmark"><time class="entry-date published" datetime="2025-02-19T10:50:01+13:00">February 19, 2025</time><time class="updated" datetime="2025-02-19T11:12:59+13:00">February 19, 2025</time></a></span> <span class="byline"><span class="author vcard"><a class="url fn n" href="https://croakingcassandra.com/author/mhreddell/">Michael Reddell</a></span></span> <span class="entry-categories"><a href="https://croakingcassandra.com/category/fiscal-policy/" rel="category tag">Fiscal policy</a>, <a href="https://croakingcassandra.com/category/treasury/" rel="category tag">Treasury</a></span> </div> </header> <div class="entry-content"> <p>A few weeks ago an invitation dropped into my email inbox to attend a joint Treasury/Motu seminar on recent, rather major, changes that had apparently been made to the discount rates used by The Treasury to evaluate proposals from government agencies.</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2025/02/image-5.png"><img data-attachment-id="72494" data-permalink="https://croakingcassandra.com/2025/02/19/really-3/image-329/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2025/02/image-5.png" data-orig-size="687,453" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2025/02/image-5.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2025/02/image-5.png?w=687" width="687" height="453" src="https://croakingcassandra.com/wp-content/uploads/2025/02/image-5.png?w=687" alt="" class="wp-image-72494" /></a></figure> <p>It was all news to me, but when I went over to The Treasury’s website I found that the new policy had come into effect on 1 October last year (relevant Treasury circular <a href="https://www.treasury.govt.nz/publications/circulars/treasury-circular-2024-15-updated-public-sector-discount-rates-cost-benefit-analysis">here</a>) and that the work on this major policy change had apparently going on for a long time, dating back to the days of the previous government (the two consultant reports are both dated June 2023). All the papers Treasury has released are <a href="https://www.treasury.govt.nz/information-and-services/public-sector-leadership/guidance/reporting-financial/discount-rates">here</a> (I have also now lodged an OIA request for other relevant papers, including advice etc to current or former Ministers of Finance).</p> <p>The new discount rates are shown here</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2025/02/image-6.png"><img data-attachment-id="72496" data-permalink="https://croakingcassandra.com/2025/02/19/really-3/image-330/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2025/02/image-6.png" data-orig-size="926,271" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2025/02/image-6.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2025/02/image-6.png?w=700" width="926" height="271" src="https://croakingcassandra.com/wp-content/uploads/2025/02/image-6.png?w=926" alt="" class="wp-image-72496" /></a></figure> <p>This is a dramatically different model than what had been used until now, when all projects were required, as a starting point, to be evaluated using a 5 per cent real discount rate.</p> <p>I have read all the papers The Treasury released and went along to the seminar on Monday, and came away even more troubled – about both the public policy and analytical dimensions – than I had been initially. Why, you might ask, should commercial projects be evaluated at dramatically different rates than non-commercial projects? Who is going to decide what counts as “commercial” and what as “non-commercial” (and should so much hang on what must, at the margin at least, be something of a line call)? And why would a change of this magnitude, which will materially affect advice going to ministers across the whole of government have been done with no public consultation whatever (and Treasury confirmed to me that this had indeed been the case, and that such consultation as there had been had only been with other government entities)?</p> <p>But, first, those acronyms: SOC (social opportunity cost) and SRTP (social rate of time preference). Under certain restrictive conditions these two things should be the same, but estimates of them are rarely even close. There is a vast literature on this stuff, going back many decades.</p> <p>Here is how The Treasury describes the two approaches</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2025/02/image-8.png"><img data-attachment-id="72499" data-permalink="https://croakingcassandra.com/2025/02/19/really-3/image-332/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2025/02/image-8.png" data-orig-size="877,447" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2025/02/image-8.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2025/02/image-8.png?w=700" width="877" height="447" src="https://croakingcassandra.com/wp-content/uploads/2025/02/image-8.png?w=877" alt="" class="wp-image-72499" /></a></figure> <p>There is quite a bit of (questionable) editorial in these descriptions, but the gist is fine: SOC is designed to capture the cost to “society” of funding some public sector proposal (funds could be used for other purposes and projects by firms or individuals), while SRTP attempts to capture how much current consumption “society” (however represented) is willing to give up in exchange for more future consumption.</p> <p>For decades, Treasury has used a SOC-based approach here, and in my view were right to do so. Of the other countries shown in the various reports, it seems that a majority also use the SOC approach while a small group of European countries used a SRTP approach.</p> <p>Treasury and their consultants all seem to agree that on straightforward commercial projects, the SOC approach is the only sensible one to take. To do anything else – to use a materially lower discount rate – would be to skew the playing field in favour of the government investing in commercial projects that the private sector could do just as well. In that sense, moving to an 8 per cent real discount rate for unquestionably commercial projects is a step in the right direction (although I suspect that even at 8 per cent, the discount rate is likely to be lower than the hurdle rates of return required by many/most private sector companies in deciding on investment proposals). </p> <p>A common argument that claims this is okay is based on the fact that government bond yields are typically lower than those for corporate bonds. I’ve long thought (and written about here) that that is a deeply flawed argument, because a key reason government bond yields are lower than those of private sector securities (no matter how large the corporate) is that government’s ability to pay is secured on the coercive power to tax, and that risk (to us, as taxpayers) needs to be priced in evaluating proposals to spend public money. All the more so when one realises that the likelihood of draconian tax increases to meet government obligations is probably pretty strongly correlated with adverse economic circumstances in the wider economy (and thus for the ability of taxpayers to comfortably pay). I’ve also long been uneasy about the idea that public sector proposals should be evaluated at rates that are probably below private sector hurdle rates because of the utter absence of market disciplines government agencies and politicians as decisionmakers face. When people who face no market disciplines want to take our money – tax now, or via debt – and use it on long-term projects, it seems not unreasonable that their schemes should be evaluated on at least as demanding a basis (but ideally more demanding) as private commercial entities do. After all, it is a pretty widely-accepted stylised fact that cost over-runs and execution failures are more the norm than the exception in major public projects in New Zealand (not only New Zealand of course). Remarkably, in none of the Treasury papers nor in the seminar on Monday was there any mention of incentives and disciplines: government failure was all but unknown in a land of benevolent and wise social planners.</p> <p>But commercial projects (ones that are clearly so) are the easy bit of all this. The latest change was at least a step in the right direction. And the Treasury circular is clear that </p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2025/02/image-9.png"><img data-attachment-id="72502" data-permalink="https://croakingcassandra.com/2025/02/19/really-3/image-333/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2025/02/image-9.png" data-orig-size="798,118" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2025/02/image-9.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2025/02/image-9.png?w=700" loading="lazy" width="798" height="118" src="https://croakingcassandra.com/wp-content/uploads/2025/02/image-9.png?w=798" alt="" class="wp-image-72502" /></a></figure> <p>The real problem arises in respect of the “non-commercial proposals”. You will look in vain in the Treasury Circular for any official justification for using such wildly different discount rates for the two types of proposals, with the far lower discount rates for those proposals that – almost by assumption – are subject to fewer market-type tests and greater uncertainty (including about specifying benefits and objectives). It will be interesting to see how The Treasury framed advice on this issue to the Minister of Finance. One hopes they mentioned that even so-called non-commercial projects have an opportunity cost – a real burden on taxpayers whose money could be used for other things.</p> <p>Now, in fairness, the background papers briefly mentioned some arguments (including suggestions that future generations are not represented in today’s market prices, but may be represented by a benevolent government decisionmaker – although it is never clear why (eg) families are less likely to internalise interests of future generations than governments, the latter being individuals facing re-election every three years, and no effort is made to evaluate the actual demonstrated interest in or ability of past or present governments to effectively represent those interests). However, the main paper Treasury cites, that by academic economist Arthur Grimes, has just three recommendations at the end, and not one of them is for anything like this stark (although he notes that “long-term payoffs to projects for which the populace is likely to have a lower rate of pure time discount compared to that for generalised consumption could have a lower [social discount rate] than the default rate….This proposal…is one which warrants further investigation). Grimes was a little sharper in his slides on Monday, but even then his proposal was only for lower discount rates for “some non-market activities” (and quite whose preferences were to guide the choice of “some” wasn’t clear).</p> <p>What that 2 per cent discount rate for non-commercial proposal does is to ignore the actual opportunity cost of funds (that 8 per cent, or more) and preference – in ranking possible proposals for using scarce societal resources – non-commercial proposals (that generally won’t cover the social cost of capital) over commercial ones. And that is quite regardless of the character of the individual non-commercial proposal, a category that even in concept covers a vast array of possibilities. It is really quite extraordinary, and perhaps all the more so to see it adopted by this government, which came into office focused (at least rhetorically) on low quality government spending, the rapid run-up in debt under the previous government. (I had been unsure until Monday whether these policies had simply been adopted by Treasury, but I was assured by Treasury officials that they had in fact been signed off by the current Minister of Finance).</p> <p>Now, to be clear, there are some caveats. First, discount rates aren’t everything. All too often cost-benefit analyses have simply been ignored, even when done. And if one looked at the table of discount rates used in other countries that was presented on Monday, the only country using a lower discount rate than the New Zealand 2 per cent is Germany – a country that many of the great and good think does far too little government capital spending (their debt brake – a very sensible initiative in my view – acts as a constraint presumably). In a New Zealand context, simply changing discount rates won’t of itself get more projects off the ground. </p> <p>But both operating and capital allowances are fluid over time – they are no sort of anchor – and there is no real debt constraint at all. What the change to discount rates will do is make many more non-commercial projects look to pass a cost-benefit assessment, creating pressure from interested parties on governments to raise taxes or take on more debt “because, you can see, so many good projects just aren’t being funded”. And going by the mood of the room on Monday – most attendees seemed to be public service affiliated – many officials will think that just a fine thing indeed (there were people getting up and thanking Treasury for making this change, which would make such a difference to their preferred types of schemes). What was the Minister of Finance thinking when she signed this off?</p> <p>Especially as the entire thing seems like an indeterminate muddle. </p> <p>First, there is this table from the Treasury circular, designed to assist agency CEs and CFOs in doing their cost-benefit analyses.</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2025/02/image-10.png"><img data-attachment-id="72506" data-permalink="https://croakingcassandra.com/2025/02/19/really-3/image-334/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2025/02/image-10.png" data-orig-size="969,681" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2025/02/image-10.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2025/02/image-10.png?w=700" loading="lazy" width="969" height="681" src="https://croakingcassandra.com/wp-content/uploads/2025/02/image-10.png?w=969" alt="" class="wp-image-72506" /></a></figure> <p>So things that politicians or officials happen to think are good for people (“merit goods”) – whether we value them or not – get evaluated at a much more favourable (lower) discount rate than other stuff. But even setting points like that aside, one is left with more questions than answers. Take schools for instance. Most are provided directly by the state with no charge at point of use, but not all are, and there is no technical reason why a quite different operating model couldn’t be chosen. Same goes for health and hospitals. Are they “commercial” or “non-commercial”? How will Dunedin hospital – a long-lived capital project – be evaluated (if at all)? Does a different discount rate get used if a PPP is involved (see final item in the “commercial” column), than if the government provides the finance directly? And if so, why? And “social housing” is in the right hand column, even though housebuilding and rental operations are directly amenable to commercial models (perhaps with income subsidies to poor users). One could go on.</p> <p>I asked about some of these specifics at the seminar on Monday, and got no better than handwaving answers, along the lines of “well, we don’t really know, but time and experience will tell”. It was pretty breathtaking really, but then I came home and reread the official circular and that was more or less exactly what they’d told agencies too. It was there in the text above that table, and also in this “The Treasury may publish further guidance as we gain experience with the new PSDRs.”. May…..how helpful.</p> <p>Now again, to be fair, the circular notes that agencies will be required to stress test proposals by presenting evaluations done at both high and low discount rates. And there will be plenty of public sector proposals where it may not make much difference (where the costs and benefits are both substantially spread through time), but for anything with a major long-lasting capital commitment (think infrastructure) the difference will be enormous. And there is just no guidance, either to agencies, or to enable the public to have a sense of how proposals are likely to be evaluated by officials.</p> <p>But in case you were thinking that surely not too much would be done at 2 per cent, there was this final guidance to agencies</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2025/02/image-12.png"><img data-attachment-id="72512" data-permalink="https://croakingcassandra.com/2025/02/19/really-3/image-336/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2025/02/image-12.png" data-orig-size="812,100" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2025/02/image-12.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2025/02/image-12.png?w=700" loading="lazy" width="812" height="100" src="https://croakingcassandra.com/wp-content/uploads/2025/02/image-12.png?w=812" alt="" class="wp-image-72512" /></a></figure> <p>That is pretty much everything central government actually does.</p> <p>The whole thing is rendered even more unsatisfactory by this note at the end of the Treasury Circular </p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2025/02/image-11.png"><img data-attachment-id="72510" data-permalink="https://croakingcassandra.com/2025/02/19/really-3/image-335/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2025/02/image-11.png" data-orig-size="879,143" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2025/02/image-11.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2025/02/image-11.png?w=700" loading="lazy" width="879" height="143" src="https://croakingcassandra.com/wp-content/uploads/2025/02/image-11.png?w=879" alt="" class="wp-image-72510" /></a></figure> <p>If the social cost of capital estimate is 8 per cent real – per this new guidance – it is hard to see any decent basis for keeping the capital charge rate, which incentivises agencies to use scarce capital prudently, at 5 per cent. And whatever the capital charge rate is set at – 5 or 8 per cent, or something higher still – our Minister of Finance and Treasury are happy to evaluate almost all central government department proposals at a discount rate of 2 per cent, far below our cost of capital to enable and fund such activities. I’m happy to agree that there are probably a handful of things that might appropriately be evaluated at below the cost of capital, but….they are few indeed (and probably contentious across different groups in society). And the approach Treasury and the Minister have taken just increases the risk of more uneconomic proposals being adopted over time, with more of a bias towards proposals where there are fewer solid external benchmarks. That seems less than ideal, especially in a government that touts its commitment to “turbocharging” economic growth and productivity.</p> <p>(I’m also not really persuaded by the case for generally declining discount rates on all non-commercial projects, especially beginning at such a short horizon (30 years, which seems to be shorter than those other countries that adopt this approach), but it would be largely irrelevant if these projects were being evaluated at discount rates nearer the cost of capital.)</p> <p>Finally, in a country where so much is subject to public consultation, what possible grounds were there for moving ahead on a change of such (potential) magnitude with no wider consultation whatever?</p> </div> <footer class="entry-meta"> <span class="comments-link"><a href="https://croakingcassandra.com/2025/02/19/really-3/#comments">7 Comments</a></span> </footer> </article> </div> <div class="article-wrapper"> <article id="post-72380" class="post-72380 post type-post status-publish format-standard hentry category-fiscal-policy category-treasury"> <header class="entry-header"> <h1 class="entry-title"><a href="https://croakingcassandra.com/2024/12/27/the-secretary-to-the-treasury-defending-govt-fiscal-policy/" rel="bookmark">The Secretary to the Treasury defending govt fiscal policy</a></h1> <div class="entry-meta"> <span class="posted-on"><a href="https://croakingcassandra.com/2024/12/27/the-secretary-to-the-treasury-defending-govt-fiscal-policy/" rel="bookmark"><time class="entry-date published" datetime="2024-12-27T11:54:36+13:00">December 27, 2024</time><time class="updated" datetime="2024-12-27T12:09:29+13:00">December 27, 2024</time></a></span> <span class="byline"><span class="author vcard"><a class="url fn n" href="https://croakingcassandra.com/author/mhreddell/">Michael Reddell</a></span></span> <span class="entry-categories"><a href="https://croakingcassandra.com/category/fiscal-policy/" rel="category tag">Fiscal policy</a>, <a href="https://croakingcassandra.com/category/treasury/" rel="category tag">Treasury</a></span> </div> </header> <div class="entry-content"> <p>I wasn’t envisaging writing anything more for a while, but….Welllington’s weather certainly isn’t conducive to either the beach or the garden, and the <em>Herald </em>managed to get an <a href="https://www.nzherald.co.nz/business/economy/treasury-ceo-iain-rennie-on-nzs-deteriorating-finances-lets-not-panic-but-lets-actually-sort-it-out/IR6MFKOB6VFTBBFC7NAOIFXXCE/">interview with Iain Rennie</a>, the new Secretary to the Treasury (not usually the sort of stuff for 27 December either).</p> <p>I’ve always been rather uneasy about heads of government departments doing interviews, on anything other than operational/internal matters for which they have specific personal responsibility. When they get onto policy it is never quite clear whether they are expressing their own views or championing those of the minister, and even if the former they are inevitably somewhat constrained by the views and tolerances of the minister. The primary responsibility, after all, of heads of policy agencies is provision of free and frank policy advice to the minister.</p> <p>Rennie does a bit of self-promotion, claiming that he is the sort of “change agent” the Minister of Finance has asserted that she wanted, and that he is at his best reforming things. I guess time will tell on the former claim – although count me sceptical – but his previous years in senior positions (Deputy Secretary at Treasury, State Services Commissioner) weren’t exactly known for being a reforming era, and it wasn’t obvious that he was an exception to that. And he was responsible for the appointment and reappointment of Gabs Makhlouf, who took Treasury in more of self-indulgent direction than one driving forward hardnosed and rigorous policy advice.</p> <p>He claims to be keen on The Treasury being more upfront and public about its view on possible reforms. I’m not sure that’s wise – hardly likely to strengthen effectiveness with the Minister when, as is inevitable at times, those views are very much at odds with those of the government – but I guess that is their call. Lets see, for example, what they come up with in the Long-term Insights Briefing they are required to produce next year. In any case, Rennie – creature of the 80s/90s Treasury – claims to be keen on more means-testing. Views will differ of course, but it has its own problems (especially once done across multiple programmes) and the last attempt to apply it to retirement income provisions did not end well.</p> <p>He also touched on tax. There is some ambiguity about that second para, but I take it that he is advocating taxing capital income at a lower rate than labour income. If so, he’d have my full support, but championing it in public is going to buy quite a fight – even with a notionally centre-right government that has just increased business taxation and shows no inclination at all to do anything about one of the highest company tax rates in the OECD.</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/12/image-17.png"><img data-attachment-id="72386" data-permalink="https://croakingcassandra.com/2024/12/27/the-secretary-to-the-treasury-defending-govt-fiscal-policy/image-313/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/12/image-17.png" data-orig-size="975,226" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/12/image-17.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/12/image-17.png?w=700" loading="lazy" width="975" height="226" src="https://croakingcassandra.com/wp-content/uploads/2024/12/image-17.png?w=975" alt="" class="wp-image-72386" srcset="https://croakingcassandra.com/wp-content/uploads/2024/12/image-17.png 975w, https://croakingcassandra.com/wp-content/uploads/2024/12/image-17.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/12/image-17.png?w=300 300w, https://croakingcassandra.com/wp-content/uploads/2024/12/image-17.png?w=768 768w" sizes="(max-width: 975px) 100vw, 975px" /></a></figure> <p>But the real reason for this post – and the reason why I phrased the title of this post as I did – is Rennie’s apparent complacency on fiscal policy: it could have been channelling Willis. There is, we are told, no hurry to close the structural fiscal deficit </p> <p>“That’s why I’ve been very clear that fiscal consolidation will need to happen over a number of years.”</p> <p>We didn’t get into a structural deficit “over a number of years” (but quickly), we’ve now been running one for more than a few years, nothing done this year reduced the deficit, and on the government’s own projections any return to fiscal balance is still several years away. And this is in a country that was running surpluses less than five years ago (the first – and mostly necessary – Covid splurge was March 2020). Core Crown operational spending this year (24/25) is almost six percentage points of GDP higher than it was in the last full pre-Covid year (18/19).</p> <p>Now, it is certainly true that not all reforms can be done overnight, but that doesn’t mean that fiscal adjustment couldn’t – and shouldn’t – be done a great deal faster than either Robertson or Willis have been willing to contemplate. And there is not a sign of recognition from Rennie that the date for the return to fiscal balance has been pushed out again and again – it isn’t as if successive governments are making steady progress on a well-understood and stable forward track.</p> <p>There seems to much the same sort of elite resignation around productivity issues and failures. He seems willing to acknowledge that it is a significant issue, but with no sense of urgency, and no sense of just how deep-rooted the problems have become – weak productivity growth isn’t just some phenomenon of the last few years, but something that now dates back 70+ years in New Zealand, with no sustained period since when New Zealand has made any progress in closing the gaps.</p> <p>Rennie’s final comments are about comparisons with 1990/91</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/12/image-18.png"><img data-attachment-id="72392" data-permalink="https://croakingcassandra.com/2024/12/27/the-secretary-to-the-treasury-defending-govt-fiscal-policy/image-314/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/12/image-18.png" data-orig-size="952,111" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/12/image-18.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/12/image-18.png?w=700" loading="lazy" width="952" height="111" src="https://croakingcassandra.com/wp-content/uploads/2024/12/image-18.png?w=952" alt="" class="wp-image-72392" srcset="https://croakingcassandra.com/wp-content/uploads/2024/12/image-18.png 952w, https://croakingcassandra.com/wp-content/uploads/2024/12/image-18.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/12/image-18.png?w=300 300w, https://croakingcassandra.com/wp-content/uploads/2024/12/image-18.png?w=768 768w" sizes="(max-width: 952px) 100vw, 952px" /></a></figure> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/12/image-19.png"><img data-attachment-id="72394" data-permalink="https://croakingcassandra.com/2024/12/27/the-secretary-to-the-treasury-defending-govt-fiscal-policy/image-315/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/12/image-19.png" data-orig-size="1003,466" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/12/image-19.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/12/image-19.png?w=700" loading="lazy" width="1003" height="466" src="https://croakingcassandra.com/wp-content/uploads/2024/12/image-19.png?w=1003" alt="" class="wp-image-72394" srcset="https://croakingcassandra.com/wp-content/uploads/2024/12/image-19.png 1003w, https://croakingcassandra.com/wp-content/uploads/2024/12/image-19.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/12/image-19.png?w=300 300w, https://croakingcassandra.com/wp-content/uploads/2024/12/image-19.png?w=768 768w" sizes="(max-width: 1003px) 100vw, 1003px" /></a></figure> <p>Again, it feels more as though he is channelling his Minister, who desperately does not want to be compared with Ruth Richardson.</p> <p>A fair amount of the debate around 1990/91 is more about mythology than hard facts. Reasonable people might differ about the pros and cons of welfare benefit cuts then (as they might about the ill-judged increases in real benefit rates under the last Labour government), but….</p> <p>Here is total Crown primary (ie ex interest) spending in the fiscal years through that period</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/12/image-20.png"><img data-attachment-id="72396" data-permalink="https://croakingcassandra.com/2024/12/27/the-secretary-to-the-treasury-defending-govt-fiscal-policy/image-316/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/12/image-20.png" data-orig-size="828,591" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/12/image-20.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/12/image-20.png?w=700" loading="lazy" width="828" height="591" src="https://croakingcassandra.com/wp-content/uploads/2024/12/image-20.png?w=828" alt="" class="wp-image-72396" srcset="https://croakingcassandra.com/wp-content/uploads/2024/12/image-20.png 828w, https://croakingcassandra.com/wp-content/uploads/2024/12/image-20.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/12/image-20.png?w=300 300w, https://croakingcassandra.com/wp-content/uploads/2024/12/image-20.png?w=768 768w" sizes="(max-width: 828px) 100vw, 828px" /></a></figure> <p>Government spending was not slashed and burned. </p> <p>And what of that story of 15 years of failed fiscal adjustment. Here, from Treasury’s own data, is the primary balance from that era</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/12/image-21.png"><img data-attachment-id="72398" data-permalink="https://croakingcassandra.com/2024/12/27/the-secretary-to-the-treasury-defending-govt-fiscal-policy/image-317/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/12/image-21.png" data-orig-size="884,520" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/12/image-21.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/12/image-21.png?w=700" loading="lazy" width="884" height="520" src="https://croakingcassandra.com/wp-content/uploads/2024/12/image-21.png?w=884" alt="" class="wp-image-72398" srcset="https://croakingcassandra.com/wp-content/uploads/2024/12/image-21.png 884w, https://croakingcassandra.com/wp-content/uploads/2024/12/image-21.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/12/image-21.png?w=300 300w, https://croakingcassandra.com/wp-content/uploads/2024/12/image-21.png?w=768 768w" sizes="(max-width: 884px) 100vw, 884px" /></a></figure> <p>Very considerable progress had in fact been made in the previous few years, with large primary surpluses having been achieved (nominal interest rates at the time were very high, but much of those interest rates were simply compensation for inflation, not an additional real burden). Now, it is certainly true that in the dying days of the 1984-90 government fiscal discipline weakened – primary surpluses were smaller – but there were primary surpluses throughout. </p> <p>It is also true that at the end of 1990, there had been the second (and more severe) BNZ failure/bailout, unemployment was rising, and another recession was almost upon us. There were genuine fiscal surprises for the incoming government – and the ratings agencies – but the basic position, while well short of ideal, was not dire. And if net debt – at about 50 per cent of GDP – was higher than it should have been (and higher than today), it was pretty moderate by the standards of indebted OECD countries today. And, since Rennie rightly notes ageing population pressures on spending now and in the years to come, back in 1990, not only had the outgoing Labour government already put in place a plan to raise (very gradually) the eligibility age for the state pension, but the demographics going into the next 10-15 years were particularly favourable, since the birth rates 60 or so years earlier had been so temporarily low.</p> <p>Instead now we have deficits well into the future, no serious evidence (yet) of a government with a willingness to make hard adjustments, and demographic pressures that are already on us and will only intensify. It is, therefore, more than a bit disconcerting to hear such complacent noises from the Secretary to the Treasury, as if to pat us all on the head and say “don’t worry, we’ll get things sorted out eventually”. No doubt it will make for holiday reading for the public that the Minister of Finance will smile favourably upon. But one can only hope that when Rennie is alone with the Minister he is rather more urgent in his advice. If not, perhaps he really is the Secretary Willis wanted…..but the only sense in which he might then be a “change agent” is in somehow acting to help accustom us to a new grim reality in which neither main party is any longer that worried about returning to fiscal balance.</p> <p>Rennie’s final line was that one about there allegedly being “confidence” our “fiscal institutions” will respond and consolidate successfully. I’m not sure who has this confidence – perhaps a few members of the government party caucuses – or what foundation any such confidence might rest on. It feels more like wishful thinking, or just spin.</p> <p></p> </div> <footer class="entry-meta"> <span class="comments-link"><a href="https://croakingcassandra.com/2024/12/27/the-secretary-to-the-treasury-defending-govt-fiscal-policy/#comments">9 Comments</a></span> </footer> </article> </div> <div class="article-wrapper"> <article id="post-72359" class="post-72359 post type-post status-publish format-standard hentry category-fiscal-policy"> <header class="entry-header"> <h1 class="entry-title"><a href="https://croakingcassandra.com/2024/12/23/fiscal-failure-and-indifference/" rel="bookmark">Fiscal failure and indifference</a></h1> <div class="entry-meta"> <span class="posted-on"><a href="https://croakingcassandra.com/2024/12/23/fiscal-failure-and-indifference/" rel="bookmark"><time class="entry-date published" datetime="2024-12-23T16:27:00+13:00">December 23, 2024</time><time class="updated" datetime="2024-12-23T16:51:38+13:00">December 23, 2024</time></a></span> <span class="byline"><span class="author vcard"><a class="url fn n" href="https://croakingcassandra.com/author/mhreddell/">Michael Reddell</a></span></span> <span class="entry-categories"><a href="https://croakingcassandra.com/category/fiscal-policy/" rel="category tag">Fiscal policy</a></span> </div> </header> <div class="entry-content"> <p>I was away in Papua New Guinea last week when the HYEFU came out, and have only just gotten round to looking at the numbers. Quite possibly, what is in this post will be repeating ground others have covered, and if so the post will end up being mostly for my records (good to be able to look back and see what one said at the time).</p> <p>It was this tweet from a non-partisan analyst that really caught my eye</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/12/image-14.png"><img data-attachment-id="72362" data-permalink="https://croakingcassandra.com/2024/12/23/fiscal-failure-and-indifference/image-310/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/12/image-14.png" data-orig-size="621,765" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/12/image-14.png?w=244" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/12/image-14.png?w=621" loading="lazy" width="621" height="765" src="https://croakingcassandra.com/wp-content/uploads/2024/12/image-14.png?w=621" alt="" class="wp-image-72362" srcset="https://croakingcassandra.com/wp-content/uploads/2024/12/image-14.png 621w, https://croakingcassandra.com/wp-content/uploads/2024/12/image-14.png?w=122 122w, https://croakingcassandra.com/wp-content/uploads/2024/12/image-14.png?w=244 244w" sizes="(max-width: 621px) 100vw, 621px" /></a></figure> <p>Three sets of spending forecasts: those for Labour’s final Budget last year, those from last year’s PREFU (and available to political parties finalising their fiscal promises), and those from last week’s HYEFU. They run out only to the year to June 2027, because that is as far as the forecasts done in 2023 went.</p> <p>Spending on core Crown expenses is as higher or a little higher than in Labour’s last Budget.</p> <p>It isn’t because interest rates are higher (out of the government’s control); in fact, primary spending is also a touch higher over four years than was planned in last year’s Budget.</p> <p>It isn’t because of the state of the business cycle: the output gap forecast now for 26/27 is almost identical to that forecast for 26/27 in last year’s Budget.</p> <p>Overall, core Crown expenses are forecast to be 32.2 per cent of GDP in 26/27, up from 31.5% for 26/27 in last year’s Budget.</p> <p>And net debt (excluding the – quite variable – NZSF assets) is forecast to be $42 billion higher in 26/27 than was forecast just 18 months ago.</p> <p>Of course, defenders of the government will note that revenue forecasts are a lot lower. That is partly a matter of pure political choice – tax cuts – and partly a changed view on the potential rate of growth of GDP (not about the business cycle). But when the family’s income estimate are revised quite a bit lower over the medium term it would be usual to adjust future spending plans. But not, it appears, this government.</p> <p>For all the pre-election rhetoric, the current coalition government seems to be keeping right on with the path adopted by the previous Labour government, which had more or less abandoned (for practical purposes) any serious interest in running budgets in which the revenue raised paid for the groceries. National wasn’t very ambitious in its election campaign fiscal plans, but its numbers now represent deep underperformance even relative to those modest electoral ambitions. Will we see a balanced budget ever under Luxon/Willis. Unless something positive just happens to turn up it seems very unlikely – and with each passing year the ageing population fiscal pressures just keep mounting. If the failure is first and foremost the responsibility of the Minister of Finance, no Prime Minister can ever escape shared responsibility for this kick-the-can down the road approach to fiscal management.</p> <p>As a reminder of the broader fiscal position, here is Treasury’s chart showing the estimated cyclically-adjusted and structural deficits.</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/12/image-16.png"><img data-attachment-id="72377" data-permalink="https://croakingcassandra.com/2024/12/23/fiscal-failure-and-indifference/image-312/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/12/image-16.png" data-orig-size="1046,654" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/12/image-16.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/12/image-16.png?w=700" loading="lazy" width="1024" height="640" src="https://croakingcassandra.com/wp-content/uploads/2024/12/image-16.png?w=1024" alt="" class="wp-image-72377" srcset="https://croakingcassandra.com/wp-content/uploads/2024/12/image-16.png?w=1024 1024w, https://croakingcassandra.com/wp-content/uploads/2024/12/image-16.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/12/image-16.png?w=300 300w, https://croakingcassandra.com/wp-content/uploads/2024/12/image-16.png?w=768 768w, https://croakingcassandra.com/wp-content/uploads/2024/12/image-16.png 1046w" sizes="(max-width: 1024px) 100vw, 1024px" /></a></figure> <p>Not only is no progress at all being made at present, but the imbalances are a bit larger than those Treasury was estimating at the time of the 2023 Budget. People rightly criticised Labour’s fiscal excess, and the structural deficits they chose to incur. The coalition’s structural deficits are also pure choice – bad ones. And we can’t have much confidence in the eventual sluggish return towards balance after the next election – as for any government, forward operating allowances are no more than lines on a graph at this point, and the government has shown little inclination or ability to make and sell sustained hard fiscal choices consistent with those operating allowances.</p> <p></p> </div> <footer class="entry-meta"> <span class="comments-link"><a href="https://croakingcassandra.com/2024/12/23/fiscal-failure-and-indifference/#comments">11 Comments</a></span> </footer> </article> </div> <div class="article-wrapper"> <article id="post-71996" class="post-71996 post type-post status-publish format-standard hentry category-fiscal-policy"> <header class="entry-header"> <h1 class="entry-title"><a href="https://croakingcassandra.com/2024/09/04/should-nz-establish-a-fiscal-council/" rel="bookmark">Should NZ establish a Fiscal Council?</a></h1> <div class="entry-meta"> <span class="posted-on"><a href="https://croakingcassandra.com/2024/09/04/should-nz-establish-a-fiscal-council/" rel="bookmark"><time class="entry-date published" datetime="2024-09-04T12:16:16+12:00">September 4, 2024</time><time class="updated" datetime="2024-09-04T16:19:03+12:00">September 4, 2024</time></a></span> <span class="byline"><span class="author vcard"><a class="url fn n" href="https://croakingcassandra.com/author/mhreddell/">Michael Reddell</a></span></span> <span class="entry-categories"><a href="https://croakingcassandra.com/category/fiscal-policy/" rel="category tag">Fiscal policy</a></span> </div> </header> <div class="entry-content"> <p>The Treasury this morning hosted a guest lecture on the merits (or otherwise) of a Fiscal Council, hosted by the acting Secretary to the Treasury, Struan Little. </p> <p>A Fiscal Council in this context is something quite different from the sort of state-funded policy costings office that many of the New Zealand political parties seem to be gravitating towards thinking would be good idea (more state funding, under the guise of something in the public interest, so why should we be surprised). Over the years I’ve written consistently sceptically about the policy costings unit idea, and was only reinforced in that view by my involvement last year in the contretemps over the costings of National’s proposed foreign buyers tax. </p> <p>The general idea of a Fiscal Council is to have an independent expert-led small agency that provides independent and non-partisan analysis, research and advice on aggregate fiscal policy, aiming to improve the overall quality of debate on fiscal policy issues and, so it is hoped, improve fiscal policy itself. Such bodies have become flavour of the decade over the last 15 years or so. Fiscal councils are particularly common in Europe, where the macroeconomic issues are generally rather different: countries in the euro-area not only give up the option of monetary policy for national cyclical stabilisation (leaving any such national countercyclical activity to fiscal policy), but are also subject, loosely as it may be, to European Union rules.</p> <p>The idea of establishing a New Zealand fiscal council has been championed by the OECD (but there have been other advocates, including a report from a former top IMF fiscal official done for The Treasury a decade or so ago, and the New Zealand Initiative). I also tended to be somewhat sympathetic (but see below).</p> <p>The speaker at this morning’s lecture was Sebastian Barnes, a (British) mid-level manager in the OECD’s Economics Department, and (while working for the OECD) a former long-serving member (and then chair) of the Irish Fiscal Advisory Council (IFAC), that had been set up in 2011 in the wake of the Irish financial and fiscal crises of the previous few years. </p> <p>My impression, from a distance, of the IFAC had been fairly positive over the years, and nothing Barnes said this morning shifted that sense. IFAC is a pretty lean body (apparently costing about EUR1 million per annum), with five part-time council members (a mix of academics and people with more of a policy background), and a <a href="https://www.fiscalcouncil.ie/about-the-council/secretariat/">secretariat</a> of five fulltime economists and one administrator (they apparently share premises, and admin support with the main national economic research institute). If you look at the current council, three of the five members seemed to be non-Irish (two UK-based and one Italian – a retired IMF official who used to be the desk economist for Ireland).</p> <p>Barnes spoke very positively about the Irish IFAC. That wasn’t exactly surprising – he’d spent 10 years on the Council, was present at its creation, and works for the OECD, which has called for New Zealand to set up a Fiscal Council – but his comments and experiences were interesting. For a small entity, they are pretty active and <a href="https://www.fiscalcouncil.ie/regular-analysis/">publish quite a few regular reports each year</a>, as well as <a href="https://www.fiscalcouncil.ie/occasional-research/">more occasional (but not infrequent) research</a>. Barnes noted that the role of IFAC was threefold: monitoring compliance with the fiscal framework, improving fiscal and economic analysis in Ireland, and promoting informed debate on fiscal issues (and not just among technocrats and politicians). </p> <p>He claimed (and I have no reason to doubt him) that IFAC had become a fairly respected and well-regarded entity on the Irish scene, and that (for example) it had established a strong reputation with the media as a credible analytical agency and a clear communicator. Barnes reckoned IFAC’s presence had helped strengthen parliamentary oversight on fiscal policy issues. One thing that he was at pains to stresses is that IFAC focuses on analysis and avoids getting into normative debates. Here he seemed to be primarily referring to choices around raising taxes or reducing spending (as ways to maintain overall fiscal balance and moderate debt), let alone to specific tax policy or (say) pensions spending. There is, it seems, quite enough to do in deepening understanding of the fiscal arrangements and highlighting risks around fiscal policy becoming pro-cyclical, a big issue for Ireland leading up to 2007. It is worth noting that Ireland now has some very distinctive issues, notably an abundance of tax revenue from foreign multi-nationals (and a big budget surplus), of the sort that may (or may not) prove particularly sustainable, and where the associated tax bases are not always hugely well understood.</p> <p>It is difficult to see that the IFAC has done any particular harm. Perhaps it has even done some good for overall economic policy in Ireland. It doesn’t appear to have become politicised, it has maintained a clear sense of an expert-led analytical and advisory body. And it hasn’t cost the Irish taxpayer very much at all.</p> <p>But it is still rather hard to pin down quite what useful difference fiscal councils, there or elsewhere, have made, and thus whether New Zealand really should regard the establishment of one as a medium-term priority. Barnes did note that a very visible effect of establishing fiscal councils had been that more people were now working on fiscal policy issues (he reckoned at least 100 more across Europe) and argued that fiscal policy issues had tended to be under-researched, especially relative to monetary policy. He several times referred to their inspiration as being expert-led research-oriented central banks. More research isn’t necessarily a bad thing, but…</p> <p>I posed a question, noting that across the OECD there had been a proliferation of fiscal councils and yet it wasn’t obvious that overall fiscal management was getting better (he’d opened his talk with a multi-country chart of gross debt as a share of GDP, and if not every country had gotten worse over the decades, the upward trend (dominated by large countries) was pretty clear). Perhaps things were improving relative to a counterfactual (not directly observable) or perhaps fiscal councils might be more in the nature of a nice-to-have, a luxury consumption item – and good for the employment of macroeconomists and public finance people – rather than an effective contributor to better fiscal policies?</p> <p>His (honest) answer was that we “can’t really tell”, but that he thought some had had “some incremental impact”, while going on to note that some of the better-regarded ones were in places (like Netherlands, Denmark, and Sweden) which had long managed themselves fairly well anyway. Perhaps a decent Fiscal Council was then a common output of a wider disciplined approach to good government and effective fiscal management? As for Ireland, I was struck the other day by a <a href="https://www.ft.com/content/bda76023-5cc2-404a-8ad0-c9cba8af4f88">feature article in the FT</a> about Ireland’s fiscal challenges (those big surpluses from the corporate tax revenue), in which numerous Irish commentators were quoted/mentioned, but there was no reference to IFAC or its analysis at all.</p> <p>It was an interesting presentation, but if it was the best case for a Fiscal Council here (and it should have been given his OECD and IFAC background) I didn’t find it very persuasive. It wasn’t helped by the New Zealand experience of the last decade, where (a) the central bank has become anything but expert-led and produces little serious research or analysis of its own (for all its limitations, Treasury is now producing more), and (b) a Productivity Commission was set up, with a vision of being expert-led, and has now disappeared again, amid a sense (well-justified in my view) that the previous government had substantially degraded it (and to be clear this isn’t a partisan critique – active partisan seem to have been appointed by this government to several boards which should be known for being highly non-partisan). How optimistic could one be that a Fiscal Council could avoid being quickly degraded and politicised, in the New Zealand as we now find it? And do we really think that our fiscal challenges – as we drift towards being a normal OECD country in that regard – have to do with lack of sufficient analysis (official or public)?</p> <p>A decade ago I had a somewhat different view. About the time I was leaving the Reserve Bank I wrote a discussion note for my then colleagues, prompted by a recent visit from US academic economist Ross Levine who was championing an arms-length monitoring body for banking regulation, suggesting that perhaps there was a case for a Macro Council, providing arms-length and independent analysis, research and review around fiscal policy, monetary policy, and financial regulation. I put the <a href="https://croakingcassandra.com/wp-content/uploads/2015/05/discussion-note-thoughts-prompted-by-levine-et-als-guardians-of-finance.pdf">discusssion note</a> on this blog back in its early days.</p> <p>These days I’m pretty deeply ambivalent. While such a body might, perhaps, play a useful role (mostly as luxury consumption item, but if one is wealthy and successful there is nothing wrong with luxury consumption) in enriching debate/analysis in a successful and well-governed New Zealand, if I was a Minister of Finance seriously interested in much better institutions for economic policy etc in New Zealand, it isn’t where I would start. Whatever really able people are available, whatever financial resources can be spared, which be much better used in seeking to overhaul and get to (or in some case back to) real and sustained analytical and policy expertise. If I had in mind particularly the Reserve Bank, it is far from being the only economic institution with diminished capabilities (and perhaps limited demand for something better from successive ministers). And it is difficult to see how an effective Fiscal Council, let alone a Macro one, would be appointed (and able composition maintained). We have very few academics working in the area, no non-partisan research institutes, and while there are partisan people with real expertise attempting to tap them is just a recipe for repeated games of partisanship in appointments. And while I quite like the Irish use of foreign expertise, the realistic pool is limited to Australia (travel distance still matters a lot) and that pool itself doesn’t seem deep). And Ireland doesn’t need to stock a quality MPC.</p> <p>It was an interesting presentation, it was good of Treasury to host it, but count me unconvinced.</p> <p></p> <p> </p> </div> <footer class="entry-meta"> <span class="comments-link"><a href="https://croakingcassandra.com/2024/09/04/should-nz-establish-a-fiscal-council/#comments">3 Comments</a></span> </footer> </article> </div> <div class="article-wrapper"> <article id="post-71898" class="post-71898 post type-post status-publish format-standard hentry category-fiscal-policy category-monetary-policy category-treasury"> <header class="entry-header"> <h1 class="entry-title"><a href="https://croakingcassandra.com/2024/08/19/fiscal-and-monetary-policy/" rel="bookmark">Fiscal and monetary policy</a></h1> <div class="entry-meta"> <span class="posted-on"><a href="https://croakingcassandra.com/2024/08/19/fiscal-and-monetary-policy/" rel="bookmark"><time class="entry-date published" datetime="2024-08-19T12:57:28+12:00">August 19, 2024</time><time class="updated" datetime="2024-08-19T13:12:45+12:00">August 19, 2024</time></a></span> <span class="byline"><span class="author vcard"><a class="url fn n" href="https://croakingcassandra.com/author/mhreddell/">Michael Reddell</a></span></span> <span class="entry-categories"><a href="https://croakingcassandra.com/category/fiscal-policy/" rel="category tag">Fiscal policy</a>, <a href="https://croakingcassandra.com/category/monetary-policy/" rel="category tag">Monetary policy</a>, <a href="https://croakingcassandra.com/category/treasury/" rel="category tag">Treasury</a></span> </div> </header> <div class="entry-content"> <p>Over the last few years, The Treasury seems to have been toying with bidding for a more significant role for fiscal policy as a countercyclical stabilisation tool It seemed to start when Covid hubris still held sway – didn’t we do well? – and the first we saw of it in public was at a Treasury/Reserve Bank conference in mid 2021, at which both the Secretary and some of her staff were advancing thoughts of that sort (I wrote about it <a href="https://croakingcassandra.com/2021/06/24/fiscal-policy-in-the-wake-of-covid/">here</a>). More recently, this mentality has shown up in the commissioned report from US economist Claudia Sahm (post <a href="https://croakingcassandra.com/2024/06/12/a-sahm-type-rule-for-nz-i-think-not/">here</a>) and in the consultation for The Treasury’s forthcoming long-term insights briefing (post <a href="https://croakingcassandra.com/2024/07/23/treasury-wanting-to-use-fiscal-policy-more/">here</a>).</p> <p>Last week they issued three papers in this vein (all carrying standard disclaimers that the views presented are not necessarily those of The Treasury itself, let alone the government).</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/08/image-14.png"><img data-attachment-id="71904" data-permalink="https://croakingcassandra.com/2024/08/19/fiscal-and-monetary-policy/image-238/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/08/image-14.png" data-orig-size="999,750" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/08/image-14.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/08/image-14.png?w=700" loading="lazy" width="999" height="750" src="https://croakingcassandra.com/wp-content/uploads/2024/08/image-14.png?w=999" alt="" class="wp-image-71904" srcset="https://croakingcassandra.com/wp-content/uploads/2024/08/image-14.png 999w, https://croakingcassandra.com/wp-content/uploads/2024/08/image-14.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/08/image-14.png?w=300 300w, https://croakingcassandra.com/wp-content/uploads/2024/08/image-14.png?w=768 768w" sizes="(max-width: 999px) 100vw, 999px" /></a></figure> <p>The first one (long, and I haven’t read it yet) appears to be a fuller and final version of something presented at the 2021 conference. The second, quite short, is Sahm’s report (how much did the taxpayer pay for it?). The focus of this post is the <a href="https://www.treasury.govt.nz/publications/an/an-24-07">third paper</a>.</p> <p>In the interests of full disclosure, the author is a former colleague and was my first substantive boss decades ago at the Reserve Bank. We have ongoing connections through the <a href="https://croakingcassandra.com/reserve-bank-of-new-zealand-superannuation-scheme/">troubled Reserve Bank superannuation scheme</a>, where Bruce has been a dogged campaigner for the trustees (appointments of most controlled by Orr/Quigley) to do the right thing, fixing some pretty egregious historical errors, and he was for a time a trustee himself. We have spent many many hours over the decades debating issues around macro stabilisation, in the 20+ years our Reserve Bank careers overlapped and since.</p> <p>It is a 40 page paper covering multiple decades and so I’m not going to try to review the entire document, but rather to pick out a few themes that struck me, including revisiting my ongoing scepticism about Treasury (or Treasury staff/consultants) bids for a new and bigger role. Doing core fiscal policy, and associated analysis, seems quite challenging enough – and if ever that was in doubt the last couple of years should have brought it back into focus. Sticking to your knitting (and doing your own core job excellently) is typically good advice for government agencies.</p> <p>Particularly if you are young, or haven’t followed New Zealand macro policy developments closely, there is useful background material in Bruce’s paper. It is easy for detail and institutional context to be lost as time passes, memories fade, (and embarrassing episodes – think the Monetary Conditions Index – are quietly swept under the carpet, the place the Reserve Bank would probably now like the LSAP losses to disappear to).</p> <p>But I’m inclined to think that the paper is mis-titled. On my reading of things – and I was reasonably close to macro policy from the inside for much of the period – there was very little of what could properly be described as “fiscal – monetary coordination” over the last 35 years. That was mostly by design, and in my view was (and is) mostly a good thing. There have at times been tensions, but that isn’t necessarily a bad thing, but not usually much coordination. It generally hasn’t been needed. The approach was, and is, pretty standard among countries of our sort. So the paper is more of a retrospective on the parallel developments in each of fiscal and monetary policy, with some added thoughts on whether, and if so how, there might be room for more in future. </p> <p>Contrary to one claim in White’s paper, active monetary policy isn’t new. But for a long time, in those countries that had central banks (we didn’t until 1934), interest rate (and related instrument) policy adjustments were mostly about defending exchange rate pegs (Gold Standard or simply fixed exchange rate choices). In the post-war decades fiscal policy sometimes played a part in that (think of prominent episodes like the 1958 “Black Budget” or adjustments following the wool price collapse in 1966), and through those decades in New Zealand both fiscal and monetary instruments were directly in the hands of the Minister of Finance.</p> <p>Floating the exchange rate (in 1985) and making the Reserve Bank operationally independent in conducting monetary policy (formalised in law from 1 February 1990) opened the way for what we call the “consensus assignment” of tasks. The Reserve Bank would focus on delivering inflation at or around target, and in the process – and particularly in the presence of demand shocks – would do something towards leaning against big swings in real economic activity. And the Bank would be accountable for its stewardship. Fiscal policy would be made as transparent as reasonably possible (so that the Reserve Bank could properly take fiscal developments into account), but that fiscal policymakers (ministers) could concentrate on doing stuff voters expect with the public purse (schools, hospitals, Police, Defence, roads or whatever) while keeping debt to tolerable and sensible levels. There were, of course, the “automatic stabilisers” (mostly, the fact that taxes are proportional or progressive, and so government revenue shares some of the gains/losses when times are particularly buoyant or subdued) but they operated in the background, not overly strongly. Any macro stabilisation dimension was an incidental nice-to-have (eg we don’t pay unemployment benefits to try to keep GDP up, but because we don’t think people should simply be left to their own devices and whatever private charity can offer when times get (perhaps very) tough).</p> <p>The separation was pragmatic and practical in the world New Zealand has chosen. People will rightly point out that fiscal choices can, in the extreme, end up dominating monetary policy (hyperinflations are always political – and fiscal – phenomena), but not when government debt as a share of GDP is in the sort of ranges it has been for (say) the last 80 years in New Zealand. </p> <p>And so it has largely proceeded, really since the late 1980s (ie before the changes to the Reserve Bank Act or to the Public Finance Act (or what was initially a standalone Fiscal Responsibility Act). Sometimes the stance of fiscal policy has been working in the same direction (affecting demand) as monetary policy, and sometimes in opposite directions. Sometimes those similarities or differences have been helpful, sometimes not. But there really hasn’t been much co-ordination, in the sense of the Governor and the Minister of Finance getting together and agreeing which party (which policy) would do what when.</p> <p>In his paper, White often conflates “working in the same direction” and “co-ordination”. He recognises that it is his definition, but I genuinely don’t find it helpful and, if anything, I think that usage muddies the water.</p> <p>For example, if there is a really big earthquake at a time when the economy is badly overheated, you’d expect the aggregate effect of the resulting fiscal choices and pressures to be adding more to demand/activity but at the same time would expect that monetary policy would be acting to dampen overall demand (in practice, squeezing out some private sector spending/activity to make room for the post-earthquake repair and rebuild spending). That is a good example of both sets of policies doing what they do best, within a policy framework recognised by both the Minister (and her Treasury advisers) and the Governor (and his MPC colleagues). There is no particular for any further coordination because both parties know how things work. You might – as always – expect that Reserve Bank and Treasury officials would be exchanging notes (understanding respective models and analytical frameworks, and ensuring the RB is well aware of the fiscal plans, including timing) but the ground rules are clear.</p> <p>And if the huge earthquake happened to come when there was a great deal of slack in the economy then we might have a very stimulatory fiscal policy (all that rebuild spend) but monetary policy might still need to be expansionary (just less so than otherwise). Policies now look like they are both working in the same direction, but in fact it is exactly the same framework – no more or less coordination – with the only difference being the (macro) starting point. I was bit surprised that in his account of how fiscal and monetary policy have operated over recent decades, including following shocks, there was little no reference to output gaps (or, less technically, to the starting point, whether of excess demand or excess capacity). It really matters: in 2007/08 for example the Bank’s best estimate was that economy had been badly overheated and thus contractionary monetary was required, whatever fiscal policy was doing, while by 2010/11 (earthquakes) economywide excess capacity was again a thing. But neither earthquakes nor pandemics (or foreign financial crises/downturns for that matter) can be counted on to conveniently time themselves to the state of the NZ business cycle.</p> <p>White covers what is probably the closest example of fiscal-monetary coordination over the 30+ years he looks at.</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/08/image-15.png"><img data-attachment-id="71906" data-permalink="https://croakingcassandra.com/2024/08/19/fiscal-and-monetary-policy/image-239/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/08/image-15.png" data-orig-size="953,1105" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/08/image-15.png?w=259" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/08/image-15.png?w=700" loading="lazy" width="883" height="1023" src="https://croakingcassandra.com/wp-content/uploads/2024/08/image-15.png?w=883" alt="" class="wp-image-71906" srcset="https://croakingcassandra.com/wp-content/uploads/2024/08/image-15.png?w=883 883w, https://croakingcassandra.com/wp-content/uploads/2024/08/image-15.png?w=129 129w, https://croakingcassandra.com/wp-content/uploads/2024/08/image-15.png?w=259 259w, https://croakingcassandra.com/wp-content/uploads/2024/08/image-15.png?w=768 768w, https://croakingcassandra.com/wp-content/uploads/2024/08/image-15.png 953w" sizes="(max-width: 883px) 100vw, 883px" /></a></figure> <p>It is good for governments to be conscious of where their fiscal choices might put pressure on monetary conditions but…..as both Brash and White note…..it often isn’t a particularly robust basis for making fiscal choices. Macro forecasting is notoriously challenging.</p> <p>I don’t think the exercise has been repeated in quite that way. And perhaps, for various reasons, it is better not to. One could think of this year’s tax cuts for example. The government knew that, all else equal, tax cuts would put a bit pressure on demand and inflation but actually neither they, nor their Treasury advisers, nor the Reserve Bank knew whether by the time any cuts came that would be particularly problematic or not. And to, in effect, invite the Reserve Bank to exercise a yea/nay call on whether the political promise of tax cut proceeds seems to risk undesirably politicising the Bank.</p> <p>White structures his discussion of history around four sets of shocks: the Asian crisis in 1997/98, the “global financial crisis” of 2008/09, the Christchurch earthquake(s), and the Covid pandemic. </p> <p>I wasn’t fully sure how helpful this was. Discretionary countercyclical fiscal policy really didn’t play a material role in either of the first two episodes. In the late 00s, fiscal policy had moved into a quite expansionary mode but that had more to do with politics (Labour’s position was slipping, and large surpluses over many years had become an appetising opportunity for the Minister of Finance’s colleagues) and a rather belated – and, it turned out, erroneous change of heart by Treasury, which advised governments that revenue had moved sustainably high – than anything designed to be deliberately countercyclical. As it happened, fiscal policy was expansionary into the recession, but that was more by chance and poor forecasting than by design. Beyond the 2008 Budget, the Crown offered guarantees (for retail deposits and new wholesale bank funding), and that was an area in which the RB and Treasury worked closely together, but the overwhelming bulk of the macro policy discretionary adjustment was monetary policy. We ended up with one of the very largest cuts in our Tpolicy rate of any advanced economy (partly because our economy had been more overheated, and inflation more troublesome, than many other advanced economies).</p> <p>Treasury officials (and advisers/consultants) seem more enamoured with the earthquake and pandemic stories. I don’t think either has much to offer in favour of more coordination. The series of earthquakes from September 2010 created fiscal obligations (legal and political), for spending that needed to happen over a succession of years. At the Reserve Bank, we knew that the earthquakes (especially from February 2011 on) represented a substantial positive shock (positive in a “pressure on resources” sense; serious earthquakes are themselves not positive events) over several years. It wouldn’t have made sense for the government to have tried to hold back the repair and reconstruction effort because there was going to be pressure on whole-economy resources; rather they got on and got things done, and the Reserve Bank was left to manage economywide pressures (and all the uncertainty around them) to keep overall inflation more or less in check. As per the earlier discussion, as it happened, the output gap was negative and the unemployment rate was high at the time, so the OCR stayed pretty low. But bad earthquakes can happen in badly overheated economies too.</p> <p>What of the pandemic? Officials are – probably rightly – proud of the fact that they could roll out the wage subsidy scheme so quickly. They needed to. Their political masters had decreed that we all had to stay home for weeks on end – likely time initially unknown – and thus that many people would have no way of earning an income. The wage subsidy scheme was (largely) an income replacement scheme, with a leavening of “keep existing firms together as far as possible”. The point was not to maintain GDP, or to avoid people being (in economic substance) temporarily under or unemployed (not actually working) – the sort of traditional countercyclical stabilisation goals. If anything, the goal was to shut down a lot of the economy for a while, but to ensure not too much damage (including to individual ability to feed their kids and pay their mortgage) was done in the meantime. It was probably a worthy goal (certainly a politically necessary one) but it really does not have implications for countercyclical stabilisation policy. After all, if the pandemic had struck when the economy was grossly overheated (eg the 4.5% positive output gap the Bank now estimates for late 2022) no serious person would have said “oh never mind about a wage subsidy, it is a good chance to get inflation down”. Any more than we cut off unemployment benefits at the peaks of booms. They are instruments and tools for particular purposes (eg some sense of fairness), but those purposes just aren’t primarily countercyclical macro stabilisation. We have monetary policy to do that.</p> <p>The pandemic is also a good example where the “both pulling in the same direction” approach to coordination is flawed. With hindsight it is pretty clear that the best policy mix in March/April 2020 would have been a stimulatory fiscal policy (the macro effects of the measures governments needed to take to assist the populace – notably the wage subsidy) and a contractionary monetary policy (a higher OCR). Again, that wouldn’t have been a case of policy being at odds, but of the framework working – governments being free to do what the circumstances demanded (and having the balance sheet capacity to do it), while not having to worry about what if anything it might mean for inflation because the Reserve Bank had that covered. (As it is, both the Reserve Bank and The Treasury misread the macro situation and what was really warranted from monetary policy, but that doesn’t change the conclusion. But just think if the Reserve Bank had done its job better – and been raising the OCR in mid 2020 – how much pressure they might have come under from the fiscal – political – authorities, had their been a more-formally coordinated model.) </p> <p>You could imagine a half-respectable case being made back in 2019. Back then, the public finances were in reasonable shape and (after far too long) inflation was also back to around target. If someone had been doing a scenario exercise around a pandemic it would have been easy to talk about fiscal policy: yes, we can do something quickly (timely), temporary and targeted. And, as noted earlier, on the narrow issue of the wage subsidy they did. But what happened to fiscal policy subsequently? It was thrown badly of course, and we now sit here in 2024 – having come thru post-Covid booms and busts still with not the slightest idea as to when the operating balance might be returned to surplus. There was a decent case for some big fiscal outlays in 2020 and 2021, but…..we are years on now, and nothing of the fiscal predicament is directly caused by Covid. But the legacy is still problematic, and the record suggests that Treasury advice was (to put it mildly) not always helpful in that regard. Officials don’t seem to have been focused on the basics – getting back to balance. As a matter of realpolitik it is simply much more difficult to change track on fiscal policy than it is on monetary policy. The Reserve Bank did badly over recent years, but by late 2022 monetary policy was on a contractionary footing and inflation has now largely been beaten. As for fiscal policy, this year’s Budget was still expansionary and no one knows when we might next see a surplus. How much riskier if we were to empower ministers and officials to use fiscal policy more routinely for countercyclical purposes (in reality, almost inevitably, much more enthusiastically to boost demand than to restrain it)? The temptation should be resisted by officials, not encouraged.</p> <p>If there hasn’t been much fiscal and monetary policy coordination over the years, that doesn’t mean there haven’t been tensions between them, and between ministers and the Bank. It also doesn’t mean there haven’t been times when reasonable people have argued that a different fiscal policy might help ease some of the burden on monetary policy and monetary conditions. Decades ago, before the RB become legally operationallly independent, I ran a small policy team that wrote a monthly memo to the Minister of Finance on monetary policy and conditions: every single one of them ended with what became almost a ritual incantation that faster progress in reducing the fiscal deficit would ease pressure on monetary policy. I doubt our view ever made much difference – it was hard enough to get the deficit down just focused on fiscal issues and associated political constraints. </p> <p>White notes that one of the big presenting issues over the years was the exchange rate. Intense upward pressure on the exchange rate would reawaken these issues: all else equal, a tighter fiscal stance would mean slightly lower interest rates and less pressure on the real exchange rate. It was an issue for decades, until it wasn’t. One of the little appreciated aspects of the last decade or more is how much less volatile our real exchange rate has been than it was in the period from 1985 to about 2010 (for reasons that I don’t think are that well understood by anyone). </p> <p>The last such period of angst was in about 2010. After the recession the exchange rate rebounded very strongly, and there was quite a sense of “oh no, here we go again”, including among senior ministers. At about that time, then private citizen Graeme Wheeler encouraged the government to move faster on fiscal consolidation, to take pressure off the exchange rate, citing experiences from 1990/91. It came to nothing much, but did prompt me to write a paper for my colleagues on that earlier experience. After I left the Bank I OIAed that document and wrote about it <a href="https://croakingcassandra.com/2015/07/21/fiscal-and-monetary-policy-interactions-some-new-zealand-history/">here</a>.</p> <p>Over the years, there was angst on both sides of the street. Don Brash was well known (to his colleagues and others) for his hankering for “tweaky tools” – things that might ease the exchange rate pressures. After his departure, Michael Cullen became increasingly exercised about the exchange rate implication of our tightenings in the mid 00s, to the point where we and Treasury were commissioned to provide a joint report on Supplementary Stabilisation Instruments, and then a follow-up report on a scheme for a Mortgage Interest Levy (taxing mortgages to keep down the extent of OCR adjustment). I wrote about that episode in a <a href="https://croakingcassandra.com/2021/08/30/reading-michael-cullen/">post</a> on Cullen’s autobiography. Very late in his term, Cullen became quite vocal – even talking of overriding the RB – and in particular was exercised by our public view that expansionary fiscal policy was exacerbating pressures on interest and exchange rates (his claim was that this could not be so since the budget was still in surplus, but it is changes in balances not the levels of them that matter for these purposes). An open clash of view culminated in a two page box in the <a href="https://www.rbnz.govt.nz/-/media/project/sites/rbnz/files/publications/monetary-policy-statements/2007/dec07.pdf">December 2007 MPS</a>, articulating our approach to these issues.</p> <p>The established framework does rest partly on the willingness of the Reserve Bank to identify honestly fiscal pressures as they arise. A couple of decades ago The Treasury developed the fiscal impulse measure specifically for the Reserve Bank, to help provide a common framework. Over the last 18 months there have been signs of considerable slippage. I wrote last year about how the Bank had suddenly stopped referring to overall fiscal balance measures and fiscal impulse type indicators, and had switched to focusing on just one part of the overall fiscal mix, the level of real government consumption and investment spending. OIAs revealed, unsurprisingly, no serious analytical basis for such a switch, and the most likely story seemed routed in opportunism: government spending was projected to fall as a share of GDP (including from Covid peaks), which distracted attention from the fact that last year’s Budget was really quite expansionary (as the IMF pointed out in public even as the Reserve Bank refused to) and this year’s was also modestly expansionary. Those are political choices open to the politicians, and we shouldn’t expect the Reserve Bank to make a song and dance about them (whether the budget is in surplus or deficit) but we should expect some honest, balanced, and calm analysis of fiscal pressures on demand (as for any source of pressure). We aren’t getting it at present.</p> <p>This has ended up being a long post and only partly focused on the White paper. My view remains pretty strongly that both the Reserve Bank and the Minister/Treasury should continue to specialise; that countercyclical macro stabilisation is best assigned to the Reserve Bank (for various reasons, notably around reversibility, but illuminated by the dubious record of the last 2-3 years), and with the Reserve Bank held to account for its performance in that role. One of the developments of the last half dozen years was the addition of a Treasury observer (formally the Secretary but usually a deputy) on the MPC, as a non- voting member. I championed such a move and welcomed the change that Grant Robertson introduced. That said, I have been struck over the years by the lack of any evidence in the record of MPC meetings that the Treasury observer or the Treasury presence has made any difference (positive or negative) whatever. Perhaps that is just about how the record is written, but perhaps not either. And yet the presence of senior Treasury officials in the MPC meetings must, at the margin, fix them with some sense of ownership for the resulting policy, and in turn impede their willingness and ability to ask hard questions of the Bank – when things turn out poorly, as they have in recent years – and to be part of supporting the Minister of Finance in holding the Bank to account.</p> <p>Tantalising as it might be to Treasury officials to be more active in the countercyclical space, it isn’t a good idea. They have quite enough to do in just sticking to their knitting and doing that excellently.</p> </div> <footer class="entry-meta"> <span class="comments-link"><a href="https://croakingcassandra.com/2024/08/19/fiscal-and-monetary-policy/#comments">1 Comment</a></span> </footer> </article> </div> <div class="article-wrapper"> <article id="post-71753" class="post-71753 post type-post status-publish format-standard hentry category-fiscal-policy"> <header class="entry-header"> <h1 class="entry-title"><a href="https://croakingcassandra.com/2024/07/23/treasury-wanting-to-use-fiscal-policy-more/" rel="bookmark">Treasury wanting to use fiscal policy more</a></h1> <div class="entry-meta"> <span class="posted-on"><a href="https://croakingcassandra.com/2024/07/23/treasury-wanting-to-use-fiscal-policy-more/" rel="bookmark"><time class="entry-date published" datetime="2024-07-23T11:25:13+12:00">July 23, 2024</time><time class="updated" datetime="2024-07-23T11:36:40+12:00">July 23, 2024</time></a></span> <span class="byline"><span class="author vcard"><a class="url fn n" href="https://croakingcassandra.com/author/mhreddell/">Michael Reddell</a></span></span> <span class="entry-categories"><a href="https://croakingcassandra.com/category/fiscal-policy/" rel="category tag">Fiscal policy</a></span> </div> </header> <div class="entry-content"> <p>Government departments are now all required <a href="https://www.legislation.govt.nz/act/public/2020/0040/latest/LMS356994.html">by law</a> to write and publish a Long-term Insights Briefing at least every three years.</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/07/image-25.png"><img data-attachment-id="71756" data-permalink="https://croakingcassandra.com/2024/07/23/treasury-wanting-to-use-fiscal-policy-more/image-213/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/07/image-25.png" data-orig-size="1303,369" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/07/image-25.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/07/image-25.png?w=700" loading="lazy" width="1024" height="289" src="https://croakingcassandra.com/wp-content/uploads/2024/07/image-25.png?w=1024" alt="" class="wp-image-71756" srcset="https://croakingcassandra.com/wp-content/uploads/2024/07/image-25.png?w=1024 1024w, https://croakingcassandra.com/wp-content/uploads/2024/07/image-25.png?w=1021 1021w, https://croakingcassandra.com/wp-content/uploads/2024/07/image-25.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/07/image-25.png?w=300 300w, https://croakingcassandra.com/wp-content/uploads/2024/07/image-25.png?w=768 768w, https://croakingcassandra.com/wp-content/uploads/2024/07/image-25.png 1303w" sizes="(max-width: 1024px) 100vw, 1024px" /></a></figure> <p>and they have to consult the public on both choice of topic and the draft report</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/07/image-26.png"><img data-attachment-id="71758" data-permalink="https://croakingcassandra.com/2024/07/23/treasury-wanting-to-use-fiscal-policy-more/image-214/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/07/image-26.png" data-orig-size="1298,231" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/07/image-26.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/07/image-26.png?w=700" loading="lazy" width="1024" height="182" src="https://croakingcassandra.com/wp-content/uploads/2024/07/image-26.png?w=1024" alt="" class="wp-image-71758" srcset="https://croakingcassandra.com/wp-content/uploads/2024/07/image-26.png?w=1024 1024w, https://croakingcassandra.com/wp-content/uploads/2024/07/image-26.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/07/image-26.png?w=300 300w, https://croakingcassandra.com/wp-content/uploads/2024/07/image-26.png?w=768 768w, https://croakingcassandra.com/wp-content/uploads/2024/07/image-26.png 1298w" sizes="(max-width: 1024px) 100vw, 1024px" /></a></figure> <p>The Public Service Commission gives its take on these provisions <a href="https://www.publicservice.govt.nz/publications/long-term-insights-briefings">here</a></p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/07/image-27.png"><img data-attachment-id="71760" data-permalink="https://croakingcassandra.com/2024/07/23/treasury-wanting-to-use-fiscal-policy-more/image-215/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/07/image-27.png" data-orig-size="1505,606" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/07/image-27.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/07/image-27.png?w=700" loading="lazy" width="1024" height="412" src="https://croakingcassandra.com/wp-content/uploads/2024/07/image-27.png?w=1024" alt="" class="wp-image-71760" srcset="https://croakingcassandra.com/wp-content/uploads/2024/07/image-27.png?w=1024 1024w, https://croakingcassandra.com/wp-content/uploads/2024/07/image-27.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/07/image-27.png?w=300 300w, https://croakingcassandra.com/wp-content/uploads/2024/07/image-27.png?w=768 768w, https://croakingcassandra.com/wp-content/uploads/2024/07/image-27.png 1505w" sizes="(max-width: 1024px) 100vw, 1024px" /></a></figure> <p>Count me more than a little sceptical. Good agencies, addressing significant issues/challenges, would in days gone by been offering serious analysis and free and frank advice in Post-Election Briefings, which used to be written with a clear expectation that the same advice/analysis would be offered no matter which party won (I still remember finalising one such Reserve Bank briefing at about 6pm on election day, with a clear expectation that we had to be finished by the time the polls closed). Good agencies, dealing with complex analytical issues, will also often be publishing research from time to time. So I’m at a bit of a loss to understand what the Long-term Insights Briefing provisions are meant to add, other than more bureaucratic overlay. And if, perhaps, good agencies could readily find a first topic, churning out something different every three years feels like it will quickly become a compliance burden and little more.</p> <p>But government department chief executives are stuck with the law as it is, including no less than the outgoing Secretary to the Treasury. Her staff are <a href="https://www.treasury.govt.nz/publications/consultation/long-term-insights-briefing-sustainable-resilient-fiscal-policy-economic-cycles">currently consulting</a> on a proposed topic for their next Long-term Insights Briefing, complete with the somewhat pointed observation that resources available for “department stewardship work” are “finite” (presumably, “so don’t expect too much”). Submissions close on Friday, for anyone interested in sending them some comments (I sent in a few quick comments yesterday).</p> <p>The proposed topic is focused on “sustainable and resilient fiscal policy over economic cycles”, and thus is quite (and probably appropriately distinct from the long-term fiscal pressures that Treasury addresses in its (also now somewhat repetitive) statutorily-required Long-term Fiscal Statement.</p> <p>Ever since 2020, The Treasury has seemed to be hankering to use fiscal policy more actively for counter-cyclical stabilisation purposes. In a speech in 2021 (which I wrote about <a href="https://croakingcassandra.com/2021/06/24/fiscal-policy-in-the-wake-of-covid/">here</a>), the Secretary (and those around her) were talking up what fiscal policy could do in this area. Those were the days before it was clear that both inflation and fiscal deficits had gone badly off the rails. But the enthusiasm still seems to be there. There was the work Claudia Sahm has been doing for them on so-called semi-automatic stabilisers, which I <a href="https://croakingcassandra.com/2024/06/12/a-sahm-type-rule-for-nz-i-think-not/">wrote about</a> a few weeks ago. And now there is this consultation document, which has in it a very strong flavour of wanting to see fiscal policy used more actively for countercyclical purposes. If it was perhaps pardonable to think about that in the abstract five years ago, you’d have hoped that the actual experience of the last four years would have prompted a rethink, and some fresh humility. But there is no sign in Treasury’s consultation document that they plan any sort of hardheaded review of the experience of fiscal policy here since the start of 2020, or the use of active fiscal policy in other countries either in the 2008/09 recession or since 2020. You’d certainly get no hint that years after the shock – that did warrant deploying some government expenditure resources – we are now stuck with structural deficits, and successive governments repeatedly extending the horizon for a return to surplus. </p> <p>Treasury repeatedly, and after all this time I can only conclude deliberately, choose to conflate counter-cyclical macroeconomic stabilisation (a role that has long been assigned primarily to monetary policy) and other natural or established functions of government (eg income support in crises, or tail risk insurance). Treasury officials like to talk up the wage subsidy scheme. And it isn’t unreasonable that they should do so, as income support (even if it was, arguably more generous than was really needed). When the government compels people to stay at home and directly or indirectly shutters their businesses, it isn’t an unreasonable quid pro quo (citizens might reasonably demand it) that governments ensure people can keep body and soul together (perhaps even keep together established employment relationships). Income support is something governments can do, and do quickly. Macroeconomic stabilisation policy isn’t primarily about income support, and typically doesn’t, and doesn’t need to, operate that fast. And income support might be needed even if the economy as whole was overheating (eg production was cut but expenditure demands stayed high). They are simply too different functions, and shouldn’t be conflated, either conceptually or in practical policymaking. One can think too – Treasury does – of things like the fiscal consequences of severe earthquakes. Such activity is likely to be net stimulatory for the economy as a whole (this was something the RB recognised way back in the first days after the 2011 quake). If the severe quake happens to come at a time when the economy has a lot of excess capacity – as was the case in 2010/11 – there is no tension between the two. But earthquakes don’t conveniently time themselves to fit the state of the economic cycle. The next severe one might hit when the economy happened to be already overheated for other reasons. In those circumstances, what it was right (or legally obligatory) for governments to do wouldn’t materially change. Managing the overall macroeconomic consequences – crowding out other spending to make way for this combination of government and private activity – would then just be the Reserve Bank doing its job. Two quite separate jobs, two quite separate set of tools. And yes, big government spending commitments have macro consequences, but the system is set up for the Reserve Bank to take those into account, to move last, and – as far as they are capable – maintain price stability.</p> <p>One might think it was a bit of a fool’s errand to defend monetary policy after the experience of the last few years. But, if anything, I think it is to the contrary. What the last few years actually show – and I suspect the Governor would agree (he used to say it in 2020 and 2021) – is the potency of monetary policy. When mistakes are made it can do a great deal of damage (viz, the most severe outbreak of inflation in decades) but it can also be turned around very quickly (see the 525 basis point rise in the OCR in 19 months) and inflation is on course for being at target again before long. It would, clearly, have been better if they’d not made the mistake in the first place, but that is a forecasting and macroeconomic comprehensions issue not one about the tools – and an issue that faced The Treasury just as much as the Reserve Bank (noting that the Secretary to the Treasury now sits on the Monetary Policy Committee). Reversing fiscal policy is just evidently a great deal harder – not just here, but in most countries at most times. So-called “shovel-ready” projects, designed to provide short-term stimulus, were still going on years later, having exacerbated inflation pressures in the meantime. </p> <p>Treasury has also appeared to be hankering for a greater role for itself using as justification the effective lower bound on nominal interest rates. This was an issue the Reserve Bank saw itself facing in 2020, belatedly realising it had done nothing for years to even alleviate the self-imposed problem. But it is also an issue that is quite easily fixed technically, and you might think that a Treasury – both sitting on the MPC, and concerned about unnecessary fiscal pressures, difficulty of reversing fiscal imbalances etc – would have been at the forefront of insisting that the Reserve Bank and the Minister of Finance get this technical issue fixed. It isn’t of course a problem today – with the OCR still at 5.5% – but no one has any great confidence where the neutral rate is, or how deeply below it the OCR might need to go in the next severe recession.</p> <p>Treasury may think my comments are a little unfair. There is other stuff in their (short) consultation document, but nothing in what they have presented suggests anything like an appropriate degree of critical scrutiny of options for more active use of fiscal policy, or of their own fiscal policy advice in the last few years. </p> <p>Perhaps it doesn’t matter that much. The new government seems unlikely to be interested in more-active fiscal policy (with asymmetric risks), and in some respects the Long-term Insights Briefing has the feel of a compliance burden they simply have to jump through. But if the work is going to be done it needs to be done in suitable critical and hard-headed way.</p> <p>One of the questions Treasury poses is around “what rules and strategies can be used to support a credible commitment to rebuilding fiscal buffers after negative shocks”. Personally, I think there is a fairly simple response to that. Severe adverse shocks will come, and they will tend to be asymmetric, but fiscal policy is unlikely to knocked off the rails if there is a strong and shared commitment to a modest structural surplus. There will be one-offs that mean that in the year of a disaster (pandemic or earthquake) the cyclically-adjusted balances will be in deficit, but keeping the structural balance in modest surplus – and quickly restoring surpluses if there are unanticipated deviations – is the simplest and surest way to keep fiscal capacity able to do stuff only governments can do, while leaving countercyclical macro stabilisation to monetary policy, the tool best suited (and largely costless to the Crown) to doing that job. Unfortunately, the Treasury of the last decade – and more specifically the last four years – has tended to talk and write in ways that leave political parties more comfortable in deviating from that sort of standard. </p> </div> <footer class="entry-meta"> <span class="comments-link"><a href="https://croakingcassandra.com/2024/07/23/treasury-wanting-to-use-fiscal-policy-more/#comments">1 Comment</a></span> </footer> </article> </div> <div class="article-wrapper"> <article id="post-71516" class="post-71516 post type-post status-publish format-standard hentry category-fiscal-policy category-treasury"> <header class="entry-header"> <h1 class="entry-title"><a href="https://croakingcassandra.com/2024/06/12/a-sahm-type-rule-for-nz-i-think-not/" rel="bookmark">A Sahm-type rule for NZ? I think not.</a></h1> <div class="entry-meta"> <span class="posted-on"><a href="https://croakingcassandra.com/2024/06/12/a-sahm-type-rule-for-nz-i-think-not/" rel="bookmark"><time class="entry-date published" datetime="2024-06-12T17:14:49+12:00">June 12, 2024</time><time class="updated" datetime="2024-06-13T10:17:47+12:00">June 13, 2024</time></a></span> <span class="byline"><span class="author vcard"><a class="url fn n" href="https://croakingcassandra.com/author/mhreddell/">Michael Reddell</a></span></span> <span class="entry-categories"><a href="https://croakingcassandra.com/category/fiscal-policy/" rel="category tag">Fiscal policy</a>, <a href="https://croakingcassandra.com/category/treasury/" rel="category tag">Treasury</a></span> </div> </header> <div class="entry-content"> <p>The Treasury yesterday hosted the first in their new series of guest lectures, under the broad heading “Fiscal Policy for the Future”. In introducing the series Dominick Stephens, Treasury’s chief economist, told us that the focus would be on three sub-headings: policy dimensions around fiscal sustainability, the potential stabilising role of fiscal policy, and ideas around value for money. Which sounds fine I suppose, but it perhaps wasn’t a great example of reading the times that the first lecture was about an idea that would, when it was used, involve the Crown simply giving away a lot more money (automatically).</p> <p>The guest lecturer was the left-wing (a description she embraces) American economist Claudia Sahm. Sahm was formerly an economist at the Fed and these days seems to divide her time between consulting and being chief economist for a US funds management firm.</p> <p>Sahm is best known for the Sahm rule US recession indicator</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/06/image-20.png"><img data-attachment-id="71521" data-permalink="https://croakingcassandra.com/2024/06/12/a-sahm-type-rule-for-nz-i-think-not/image-20-17/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-20.png" data-orig-size="1428,109" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image-20" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-20.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-20.png?w=700" loading="lazy" width="1024" height="78" src="https://croakingcassandra.com/wp-content/uploads/2024/06/image-20.png?w=1024" alt="" class="wp-image-71521" srcset="https://croakingcassandra.com/wp-content/uploads/2024/06/image-20.png?w=1024 1024w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-20.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-20.png?w=300 300w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-20.png?w=768 768w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-20.png 1428w" sizes="(max-width: 1024px) 100vw, 1024px" /></a></figure> <p>She didn’t develop the indicator simply for analytical interest but (as she reminded readers in a <a href="https://stayathomemacro.substack.com/p/no-you-didnt-invent-the-sahm-rule">recent Substack</a>) with a policy proposal in mind</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/06/image-21.png"><img data-attachment-id="71523" data-permalink="https://croakingcassandra.com/2024/06/12/a-sahm-type-rule-for-nz-i-think-not/image-21-17/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-21.png" data-orig-size="1094,199" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image-21" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-21.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-21.png?w=700" loading="lazy" width="1024" height="186" src="https://croakingcassandra.com/wp-content/uploads/2024/06/image-21.png?w=1024" alt="" class="wp-image-71523" srcset="https://croakingcassandra.com/wp-content/uploads/2024/06/image-21.png?w=1024 1024w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-21.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-21.png?w=300 300w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-21.png?w=768 768w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-21.png 1094w" sizes="(max-width: 1024px) 100vw, 1024px" /></a></figure> <p>The idea being that when the recession indicator threshold point is met, the IRS would mail out checks automatically, to lean against the incipient downturn by boosting consumer spending. It would be, in her words, a quasi automatic stabiliser </p> <p>(The “automatic stabilisers” are the extent to which government budgets vary with economic cycle without any discretionary policy changes – you can think of unemployment benefits, but typically the tax side of things is much more important. We don’t have lump sum taxes, rather governments share in the gains/losses when wage bills, spending, and profits rise/fall. Relative to a lump sum taxes benchmark, the actual way we design tax systems – proportional and, in respect of income tax, progressive – tends to dampen economic cycles a bit.)</p> <p>Ever since Covid Treasury seems to have been freshly keen on a more active role for fiscal policy (Stephens indicated yesterday that they are looking at making the stabilisation role of fiscal policy the topic for their next Long-Term Insights Briefing). I’ve <a href="https://croakingcassandra.com/2021/06/24/fiscal-policy-in-the-wake-of-covid/">written previously about a conference</a> Treasury (and the RB) hosted three years ago, before it was really appreciated what a mess Covid macro management and associated misjudgements had wrought. At that point, Treasury people from the Secretary down were very upbeat, partly as a result of misapplying the hardly-surprising “insight” that if you forced people to stay home and, in many cases, not work, income support was going to be done a lot more effectively using income support tools than via monetary policy. As if it was not ever so – we provide income support to unemployed people using direct Crown payments too, rather than simply relying on monetary policy to sort everything out in the end. They were at again yesterday. Yes, there are plenty of things governments need to directly spend money on, but when it comes to macroeconomic stabilisation it is very much still “case not made”. But in fairness to Stephens, he did emphasise that if many people are Keynesians in foxholes (nasty recessions), rather fewer of them were keen on using fiscal policy to take away the punchbowl as the party was in danger of overheating. On yesterday’s showing, Sahm among them.</p> <p>Anyway, that was all by way of introduction. Treasury seems to have been paying Sahm (over a period of several months) to develop her ideas in a way that might be applicable in New Zealand. If I was inclined to wonder whether this might not have been a potential budgetary saving (US macro consulting economists probably don’t come cheap), I actually found the lecture quite useful, mostly in shifting me more firmly into the camp of regarding the quasi automatic stabiliser idea as neither very workable nor very useful in the New Zealand specific context, using New Zealand macro data, and the experience of New Zealand recessions.</p> <p>Sahm started by claiming that New Zealand had worse stabilisation challenges than many other (advanced?) countries, claiming that we had “really volatile output”. I wasn’t quite sure what she was basing that claim on, and just went back and dug out the OECD series of quarterly changes in real per capita GDP over the last 30 years (the period for which the data is fairly complete across the whole membership). New Zealand doesn’t really stand out – actually the median country for the variability of quarter to quarter changes over that period. What is perhaps more notable – and relevant here – is that the United States had the second lowest standard deviation of any of the OECD countries over that period. (It is also worth bearing in mind that many international comparisons, notably the OECD, use the expenditure measure of GDP, which used to be much more volatile than it has since become – an open question as to whether that is a reflection of changing reality or just better measurement by SNZ.)</p> <p>Sahm is keen on the automatic stabilisers. She claims New Zealand’s are more effective than average, although in the past I’ve seen people reach the opposite conclusion (for the good reason that we have flat rate unemployment benefits rather than income-related ones, and that our tax system is not highly progressive, and our taxes as a share of GDP are not overly high). But whatever useful impact the “automatic stabilisers” have in dampening the extremes of economic cycles, it is important to remember that those features of the tax and transfers systems were put in place on their own specific individual merits, and any macroeconomic stabilisation benefits are at best nice-to-haves. We have unemployment benefits because we think people (and their kids) shouldn’t starve. We have progressive taxes because of conceptions of fairness, and proportional rather than lump sum ones for similar reasons. We have bigger governments in some countries than in others not primarily from macroeconomic stabilisation considerations, but because of differing conceptions – fought through political processes – about the role of the state.</p> <p>By contrast, what Sahm is proposing is a fiscal tool that would exist solely for macro stabilisation reasons. It really is a quite different beast. To be fair to Sahm, she argues that her tool isn’t necessarily a case of more total fiscal outlays in downturns, but different or better ones. But you get the sense that her personal politics leans in the direction of bigger government rather than smaller, and as we shall see – whatever might have been the case in her US calibrations – in New Zealand it doesn’t look as though it would have worked that way.</p> <p>Her New Zealand starting point was to identify the agreed upon recessions, using the official New Zealand data.</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/06/image-22.png"><img data-attachment-id="71527" data-permalink="https://croakingcassandra.com/2024/06/12/a-sahm-type-rule-for-nz-i-think-not/image-22-17/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-22.png" data-orig-size="1867,947" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image-22" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-22.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-22.png?w=700" loading="lazy" width="1024" height="519" src="https://croakingcassandra.com/wp-content/uploads/2024/06/image-22.png?w=1024" alt="" class="wp-image-71527" srcset="https://croakingcassandra.com/wp-content/uploads/2024/06/image-22.png?w=1024 1024w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-22.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-22.png?w=300 300w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-22.png?w=768 768w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-22.png 1867w" sizes="(max-width: 1024px) 100vw, 1024px" /></a></figure> <p>One might quibble, but lets take that list and move on</p> <p>She then trawled through the New Zealand data looking for a rule that would be timely, simple, easy to understand (and legislate), involving reliable data, and free from external influence. This is the proposed rule she came up with</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/06/image-23.png"><img data-attachment-id="71529" data-permalink="https://croakingcassandra.com/2024/06/12/a-sahm-type-rule-for-nz-i-think-not/image-23-16/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-23.png" data-orig-size="1713,591" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image-23" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-23.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-23.png?w=700" loading="lazy" width="1024" height="353" src="https://croakingcassandra.com/wp-content/uploads/2024/06/image-23.png?w=1024" alt="" class="wp-image-71529" srcset="https://croakingcassandra.com/wp-content/uploads/2024/06/image-23.png?w=1024 1024w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-23.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-23.png?w=300 300w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-23.png?w=768 768w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-23.png 1713w" sizes="(max-width: 1024px) 100vw, 1024px" /></a></figure> <p>You will quickly see that it is quite a lot more complex than her US rule (which has just one variable – the unemployment rate – to trigger similar sized (in aggregate) payments.</p> <p>Who would be eligible? Her basic proposal was that payments (around $1000 a head [UPDATE altho I suppose larger if children were excluded; she didn’t clarify one way or the other]) should be made to the bottom 80 per cent of people by income (no doubt greatly welcomed by middle class kids doing after school jobs, their older siblings at university, and the retired). In her time working with Treasury she had, it seemed, been regaled with stories of the previous government’s “cost of living” handout, and she (fairly) noted that the advantage of pre-positioning an instrument is that you can sort out all/most of those sorts of issues in advance.</p> <p>Where I started getting uneasy was with the consumption indicator (I wasn’t clear whether she was using private consumption or total but what follows is relevant either way). First, as she acknowledges, she is finding empirical regularities (data mining might be a bit unfair) not laws of nature, and it is over a sample of only five recessions, (two of which really ran into each other, one of which was very very unusual in nature). Perhaps the thing that most surprised me was that there was no sign she had done her analysis using real-time data – which is what any automatic instrument would have to be keyed off. She mentioned the point in passing, but surely between Treasury and SNZ they could have got her the real time (ie first contemporaneous release) data to check?</p> <p>Those revisions matter. As just an example, on a very quick Google around the eve of the 2008/09 recession this was how the Treasury March 2008 Monthly Economic Indicators report saw the latest GDP numbers</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/06/image-24.png"><img data-attachment-id="71533" data-permalink="https://croakingcassandra.com/2024/06/12/a-sahm-type-rule-for-nz-i-think-not/image-24-16/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-24.png" data-orig-size="994,352" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image-24" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-24.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-24.png?w=700" loading="lazy" width="994" height="352" src="https://croakingcassandra.com/wp-content/uploads/2024/06/image-24.png?w=994" alt="" class="wp-image-71533" srcset="https://croakingcassandra.com/wp-content/uploads/2024/06/image-24.png 994w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-24.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-24.png?w=300 300w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-24.png?w=768 768w" sizes="(max-width: 994px) 100vw, 994px" /></a></figure> <p>That was production GDP, up by an estimated 1 per cent. The current official estimate for that series for that quarter is an increase of 0.13 per cent. </p> <p>(In passing I would note that anything that is a legislated mechanical rule then puts a great deal onus on the processes and capability and integrity of the organisation producing the data. Their staff and management will know that a great deal may rest on one tenth of a decimal point in some circumstances. In years gone, I would probably have played that down as an issue in New Zealand, but…..SNZ has been in the headlines in the last 10 days or so for reasons that don’t fill people with confidence in their integrity or capability, and in recent decades SNZ has been run by generalist public servants from the SSC/PSC stable, not fierce statisticians. It wouldn’t be my biggest worry by any means, but….)</p> <p>But much the biggest issue is that inflation line in the rule. I’ve not seen anything similar in her US proposal. The general idea is that if (core) inflation is high you really don’t want to be adding automatic stimulus to the fire (any more than discretionary bits, like the “cost of living payments”). As Dom Stephens pointed out, there is an argument the restriction isn’t tough enough even as Sahm expressed it: after all the Reserve Bank is supposed to be aiming at 2 per cent, and if inflation is above target overall macro policy is still supposed to be bearing down on inflation (although here I would note the lags, and if macro policy isn’t adjusted until inflation is all the way back to target midpoint it is almost certainly rather too late). But lets stick with Sahm’s version.</p> <p>She presented this chart (Treasury sent out her presentation to attendees but hasn’t yet put it on their general website)…</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/06/image-25.png"><img data-attachment-id="71536" data-permalink="https://croakingcassandra.com/2024/06/12/a-sahm-type-rule-for-nz-i-think-not/image-25-16/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-25.png" data-orig-size="1808,1051" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image-25" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-25.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-25.png?w=700" loading="lazy" width="1024" height="595" src="https://croakingcassandra.com/wp-content/uploads/2024/06/image-25.png?w=1024" alt="" class="wp-image-71536" srcset="https://croakingcassandra.com/wp-content/uploads/2024/06/image-25.png?w=1024 1024w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-25.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-25.png?w=300 300w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-25.png?w=768 768w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-25.png 1808w" sizes="(max-width: 1024px) 100vw, 1024px" /></a></figure> <p>…and claps herself on the back. Her fitted rule, she claims, triggers in all the recessions except the 1997/98 one (which had as much to do with drought and bad domestic monetary policy as Asia). Unfortunately, I think she has been misled by some of her data, and doesn’t have any real domestic context. As a starter, from the bottom half of her table (“technical recession”) the 1989 sharp fall in consumption was from a base quarter immediately prior to an increase in GST, so at very least you’d need to adjust the rule for such (easily observable) events.</p> <p>But what about the real recessions (top half of the table)? There is some ambiguity about the 87/88 event as her table says N to automatic payments but her text seems to say yes. But either way, there is absolutely no way that macro policymakers in early 1988 would have been wanting to add fiscal stimulus (automatic or otherwise). Inflation (headline and core concepts) was coming down but was far too high (for the Bank and for ministers), and every single one of the regular Reserve Bank reports in those days called for more fiscal consolidation to ease the pressure on monetary policy and the real exchange rate. Same goes for the 1991 recession. We were still trying to drive down inflation (it was too high relative to the new official target) and fiscal policy was all in a flurry by the averted threat of a double credit rating downgrade. Aggressive fiscal consolidation was the order of the day, both for fiscal reasons (primarily) but also to ease pressure on monetary policy),</p> <p>Skip over 97/98 for the moment and we come to 2008/09. The sectoral model of core inflation – probably the best retrospective indicator of core trends – was well above 3 per cent all through 2008 and into 2009, so although I’m not sure what core measure Sahm is using in the table, inflation certainly wasn’t anything like acceptable to the Bank in the early days of the recession (Sahm’s focus). It was a year of fiscal expansion……but mostly because (a) Treasury misjudged the permanence of the high levels of government revenue at the peak of the boom, and (b) it was election year and the government was losing (and presumably preferred specific own-brand giveaways to mechanised ones). Even had the rule been in place, it probably wouldn’t have triggered before final Budget decisions were being made in April and early May 2008.</p> <p>As for Covid, if I was trying to design an automated rule I’d just take the Covid period out of my sample. The (discretionary) wage subsidy – which might have been too generous, but did its job – was put in place in late March 2020, months before the Q1 consumption data were available. Not only would the rule have been far too late to trigger, but in the specific circumstances it would have been too small to be relevant (swamped by the size of the wage subsidy). And, as it turned out, the last thing that was needed in 2020 was more encouragement to people to spend…..when the overall policy response helped generate the worst breakout in inflation for decades.</p> <p>She calls the current episode a “technical recession”, but the unemployment rate has risen already by more than a full percentage point and per capita GDP is down as much as it was in 2008/09 (and consumer spending has been very weak). So it feels like another downturn when the rule triggered but payments would not sensibly have been made because…..inflation.</p> <p>It was Dominick Stephens who pointed out recessions are sometimes the solution (to inflation) not the problem to be resisted. And I think that does mark our experience out at least somewhat from the US – notably we went into the severe 2008/09 recession with a pre-existing inflation problem, and they did not. </p> <p>So, curiously, what we are left with is that I can think of only one episode in the last 37 years (the data sample) when triggering the rule and making payouts might have been helpful (and I stress “might” because she isn’t modelling responses, or comparing alternatives), and that is the one of her real recessions where payments would not in fact have been made: the 1997/98 episode. Which seems a bit awkward for the proposal.</p> <p>And that is before we start on the other problems with the scheme.</p> <p>For example, if one could identify a new and reliable rule – for indicating that the economy was probably in recession – why not just (a) advertise it widely, and (b) pass it on with a strong commendation to the central bank MPC. If it is a great and reliable rule (a) the Bank would be likely to use it in some form or other, and (b) the markets and the public would recognise that conditions were likely to ease, and respond accordingly. And to turn things on their heads, if there is a preloaded fiscal response, doesn’t that make it more likely that the central bank will be even slower than usual (this isn’t personal to the RB, central banks generally tend to be too late) to react, relying in part on the coming fiscal hit to buy them a bit more time to wait and see? A realistic assessment of such a policy proposal would need to make allowance for those sorts of interactions.</p> <p>And then there is politics. Why would any political party or coalition want to preload lump sum handouts, rather than (a) look to the RB to do its job, and (b) keep the fiscal fuel for its own spending or tax cutting priorities (and perhaps again this is a difference to the US: here the government automatically (by construction, having supply) has a majority for its own budget plans? And why would much of the public think that big handouts to beneficiaries, high school kids, the retired etc would be a great idea at a point in the cycle where – again by construction – the unemployment rate is perhaps only a little off cyclical lows – and some of those lows (as recently) may have been quite extremely low. (This is, incidentally, one of the conceptual problems with the rule – which is just based on empirical regularities. Unemployment rates do drop below sustainable levels, well below at times. There is no good reason to think that additional policy stimulus is required just because the unemployment is finally heading back towards some sort of NAIRU.)</p> <p>Monetary policy isn’t perfect. Our central bank these days is certainly anything but. But the case for looking beyond monetary policy for cyclical stabilisation just hasn’t really been made convincingly, and – particularly here in the New Zealand case – a simple automated rules looks to have been as unfit for purpose as was the idea (touted a bit in the US) of having the Fed mechanically implement a Taylor rule.</p> <p>Oh, and then there was the profound asymmetry. There is nothing in this sort of rule – or even a readily conceivable alternative one – that could credibly operate on the other side of the cyclical; pulling money out of the system according to some rule. It really is easier to give money away than to take it back. Much better to keep fiscal policy doing what it does best, and leave cyclical stabilisation efforts to the central bank (a case that, admittedly, would be more compelling in New Zealand were the central bank and its key public faces not so egregiously bad, and unwilling ever to admit or learn from inevitable errors).</p> <p>But, as I say, I found it useful to think hard about Sahm-type rules in the specific context of New Zealand and its experiences in recent decades.</p> <p>PS. Finally, I thought I’d take a look at the US Sahm rule indicator. It isn’t yet indicating that it is time for additional stimulus (0.5 is the threshold). But then the market doesn’t think the Fed should be cutting yet either. And when it is time for taking the foot off the brake, if I were an American taxpayer contemplating huge debt and deficits, I think I’d prefer to see the Fed do the stabilisation action.</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/06/image-26.png"><img data-attachment-id="71547" data-permalink="https://croakingcassandra.com/2024/06/12/a-sahm-type-rule-for-nz-i-think-not/image-26-16/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-26.png" data-orig-size="1958,898" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image-26" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-26.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-26.png?w=700" loading="lazy" width="1024" height="469" src="https://croakingcassandra.com/wp-content/uploads/2024/06/image-26.png?w=1024" alt="" class="wp-image-71547" srcset="https://croakingcassandra.com/wp-content/uploads/2024/06/image-26.png?w=1024 1024w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-26.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-26.png?w=300 300w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-26.png?w=768 768w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-26.png 1958w" sizes="(max-width: 1024px) 100vw, 1024px" /></a></figure> <p>PPS Sahm did not that a tool like this might be more useful when monetary policy was constrained (ie at a lower bound). But since there are ready technical solutions to lower bound issues – that don’t cost taxpayers billions of dollars – perhaps it would be better for central banks (chivvied along by Treasurys if necessary) to final fix the lower bound issues and leave monetary policy free to do its job, imperfectly (in the nature of human institutions).</p> <p></p> <p>UPDATE 13/6 Thinking a little more about Sahm rule types of proposal, they seem best suited to a world in which the economy is routinely running at or around capacity and then a demand-shock recession arises out of the blue (and thus an increase, even a modest one, in the unemployment rate might reasonably indicate a case for policy stimulus). But that isn’t often the case (probably generally, but certainly not in New Zealand in recent decades). As just one example, around two thirds of OECD countries had their lowest unemployment rates in the period 1995 to 2007 in 2007 itself, often in the December quarter, the very eve of the recession getting underway, </p> </div> <footer class="entry-meta"> <span class="comments-link"><a href="https://croakingcassandra.com/2024/06/12/a-sahm-type-rule-for-nz-i-think-not/#comments">6 Comments</a></span> </footer> </article> </div> <div class="article-wrapper"> <article id="post-71408" class="post-71408 post type-post status-publish format-standard hentry category-fiscal-policy category-monetary-policy category-treasury"> <header class="entry-header"> <h1 class="entry-title"><a href="https://croakingcassandra.com/2024/06/06/comparing-treasury-and-reserve-bank-forecasts/" rel="bookmark">Comparing Treasury and Reserve Bank forecasts</a></h1> <div class="entry-meta"> <span class="posted-on"><a href="https://croakingcassandra.com/2024/06/06/comparing-treasury-and-reserve-bank-forecasts/" rel="bookmark"><time class="entry-date published" datetime="2024-06-06T12:20:34+12:00">June 6, 2024</time></a></span> <span class="byline"><span class="author vcard"><a class="url fn n" href="https://croakingcassandra.com/author/mhreddell/">Michael Reddell</a></span></span> <span class="entry-categories"><a href="https://croakingcassandra.com/category/fiscal-policy/" rel="category tag">Fiscal policy</a>, <a href="https://croakingcassandra.com/category/monetary-policy/" rel="category tag">Monetary policy</a>, <a href="https://croakingcassandra.com/category/treasury/" rel="category tag">Treasury</a></span> </div> </header> <div class="entry-content"> <p>I put a range of charts on Twitter late last week illustrating why, from a macroeconomic perspective, I found the government’s Budget deeply underwhelming. I won’t repeat them but will just show two here.</p> <p>The first is the Treasury’s estimate of how the bit of the operating deficit not explained just by swings in the economic cycle change from 2023/24 (which was largely determined by last year’s Labour Budget) to 2024/25 (influenced by this year’s Budget choices)</p> <figure class="wp-block-image size-large is-resized"><a href="https://croakingcassandra.com/wp-content/uploads/2024/06/image.png"><img data-attachment-id="71411" data-permalink="https://croakingcassandra.com/2024/06/06/comparing-treasury-and-reserve-bank-forecasts/image-172/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image.png" data-orig-size="1008,646" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image.png?w=700" loading="lazy" width="1008" height="646" src="https://croakingcassandra.com/wp-content/uploads/2024/06/image.png?w=1008" alt="" class="wp-image-71411" style="width:844px;height:auto" srcset="https://croakingcassandra.com/wp-content/uploads/2024/06/image.png 1008w, https://croakingcassandra.com/wp-content/uploads/2024/06/image.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/06/image.png?w=300 300w, https://croakingcassandra.com/wp-content/uploads/2024/06/image.png?w=768 768w" sizes="(max-width: 1008px) 100vw, 1008px" /></a></figure> <p>On both these Treasury metrics, things are expected to be a bit worse in 2024/25 than in 2023/24. Not a lot necessarily, but things are heading in the wrong direction: a larger share of the groceries are being paid for by borrowing. And, sure, the projections have the deficits eventually tailing off and returning to surplus eventually – as they have for each of the last few years – but those numbers rely on more fiscal drag and rather arbitrary indications of what future Budget operating allowances might be. Perhaps they will deliver, or perhaps not. We don’t know and neither really do they. At this stage, anything beyond 24/25 is little than aspirational vapourware.</p> <p>And consistent with that, the Treasury’s fiscal impulse measure – designed to measure the overall of fiscal activity on aggregate demand (with the central bank in mind) – is just slightly positive. Fiscal choices for the coming year aren’t estimated to ease pressure on demand and interest rates at all. </p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/06/image-1.png"><img data-attachment-id="71413" data-permalink="https://croakingcassandra.com/2024/06/06/comparing-treasury-and-reserve-bank-forecasts/image-1-27/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-1.png" data-orig-size="612,392" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image-1" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-1.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-1.png?w=612" loading="lazy" width="612" height="392" src="https://croakingcassandra.com/wp-content/uploads/2024/06/image-1.png?w=612" alt="" class="wp-image-71413" srcset="https://croakingcassandra.com/wp-content/uploads/2024/06/image-1.png 612w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-1.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-1.png?w=300 300w" sizes="(max-width: 612px) 100vw, 612px" /></a></figure> <p>When the starting point is quite a large structural deficit, that seems, shall we say, less than ideal. Perhaps the more so when history (and common logic) suggests that the first year of a new government is usually by far the best time for a government to make tough fiscal choices and adjustments. (I dug out some old Reserve Bank estimates the other day and way back in 1976, the first Budget of that new government had a fiscal impulse of around -6 per cent of GDP. Muldoon had inherited a bigger mess than Luxon/Willis did, but…..a deficit is a deficit, and inflation and interest rates have been a problem.) If the 24/25 Budget wasn’t the year for hard choices, which one will be?</p> <p>But for this post, I was more interested in comparing some of the Treasury macroeconomic forecasts in the Budget documents with those published by the Reserve Bank the previous week. Here I should stress an important difference: the Treasury economic forecasts were finished on 5 April and the Bank’s weren’t finished until a few days prior to the MPS. But my impression is that there wasn’t much in the way of crucial or very surprising domestic economic data in that period. </p> <p>First, compare the outlooks for real GDP per person of working age (the RB doesn’t publish per capita projections, so this is the basis on which we can do a comparison). </p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/06/image-2.png"><img data-attachment-id="71415" data-permalink="https://croakingcassandra.com/2024/06/06/comparing-treasury-and-reserve-bank-forecasts/image-2-27/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-2.png" data-orig-size="889,639" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image-2" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-2.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-2.png?w=700" loading="lazy" width="889" height="639" src="https://croakingcassandra.com/wp-content/uploads/2024/06/image-2.png?w=889" alt="" class="wp-image-71415" srcset="https://croakingcassandra.com/wp-content/uploads/2024/06/image-2.png 889w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-2.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-2.png?w=300 300w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-2.png?w=768 768w" sizes="(max-width: 889px) 100vw, 889px" /></a></figure> <p>Neither line represents a particularly rosy outlook. Even Treasury has us just barely back to the 22/23 level of GDP per working age population by 2026/27, but over that full period the difference between the two sets of forecasts builds to something quite substantial (a gap of 1.7 percentage points by 2026/27).</p> <p>After the MPS I wrote here about how there seemed to be nothing robust behind the recovery the Reserve Bank was forecasting for next year (given that interest rates stayed high, lags were long, net immigration was declining etc), but I think one important difference between the two sets of forecasts is nearer in time.</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/06/image-3.png"><img data-attachment-id="71417" data-permalink="https://croakingcassandra.com/2024/06/06/comparing-treasury-and-reserve-bank-forecasts/image-3-27/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-3.png" data-orig-size="945,719" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image-3" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-3.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-3.png?w=700" loading="lazy" width="945" height="719" src="https://croakingcassandra.com/wp-content/uploads/2024/06/image-3.png?w=945" alt="" class="wp-image-71417" srcset="https://croakingcassandra.com/wp-content/uploads/2024/06/image-3.png 945w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-3.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-3.png?w=300 300w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-3.png?w=768 768w" sizes="(max-width: 945px) 100vw, 945px" /></a></figure> <p>There are really striking differences in how The Treasury and the Reserve Bank see excess demand having evolved over the last couple of years. Output gaps aren’t directly observable, but the most recent hard GDP data is still for December last year, but whether for that quarter or the estimate for the March quarter the difference in the two estimates is almost 1 per cent of GDP. On the Treasury numbers there was a significant negative output gap – posing a powerful drag on inflation all else equal – while the Reserve Bank reckons that output gap was only around zero.</p> <p>Perhaps Treasury would have revised their thinking after the CPI if they’d had been able to incorporate those numbers in their forecasts, but there is nothing in the BEFU document that seems to suggest so.</p> <p>If inflation has been a problem and you think that the economy has recently been only at around capacity then it isn’t too surprising that you have rather weak real GDP forecasts for the period ahead (especially the coming year). Both agencies build their forecasts around inflation eventually getting back to target midpoint; the difference is about what doing that will take.</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/06/image-4.png"><img data-attachment-id="71420" data-permalink="https://croakingcassandra.com/2024/06/06/comparing-treasury-and-reserve-bank-forecasts/image-4-27/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-4.png" data-orig-size="1012,680" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image-4" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-4.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/06/image-4.png?w=700" loading="lazy" width="1012" height="680" src="https://croakingcassandra.com/wp-content/uploads/2024/06/image-4.png?w=1012" alt="" class="wp-image-71420" srcset="https://croakingcassandra.com/wp-content/uploads/2024/06/image-4.png 1012w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-4.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-4.png?w=300 300w, https://croakingcassandra.com/wp-content/uploads/2024/06/image-4.png?w=768 768w" sizes="(max-width: 1012px) 100vw, 1012px" /></a></figure> <p>The Reserve Bank reckons the OCR next June quarter will no lower than it is now, and may have gone higher in the interim. The Treasury forecasts the 90 day bank bill rate, and they reckon that will already be a lot lower (4.5 per cent) by next June. Quite who is closer to right (or least wrong) will matter. </p> <p>As I say, perhaps the difference mostly come down to timing – the Reserve Bank had the CPI and Treasury did not – but frankly it seems too large a difference to be explained by a single inflation number.</p> <p>One uncertainty is quite how fiscal policy affects the Bank’s picture. As they noted, their numbers didn’t include the Budget numbers themselves, but Westpac has noted – presumably from something the Bank has said – that the MPC had been briefed on the broad direction of fiscal policy (as you would hope, since it is one of the reasons for having the Secretary to the Treasury as a non-voting ex officio member of the MPC), and speculated that perhaps the Bank’s hawkish tone might have been explained in some sense by that understanding of the fiscals. I’m not sure what to make of that, and after all, the Bank’s chief economist was then at <a href="https://croakingcassandra.com/2024/05/25/underwhelming/">pains to play down</a> the apparent hawkishness in the days following the MPS, with his weird line that somehow it was all just “model output”. More generally, the Bank has been taking a weird approach to fiscal policy over the last year, since that awkward 2023 expansionary Budget, ignoring conventional conceptions of the fiscal impulse and trying to focus attention on real government consumption and investment (in turn very different from either total government spending or a deficit/surplus measure). But for what it is worth, as the chart above shows the fiscal impulse for 2024/25 is estimated to be very slightly positive, and at the time of the HYEFU it had been estimated to be about -2.5 percentage points negative. </p> <p>At very least, whatever was in the Budget simply wasn’t any help in easing pressure on demand and interest rates. Quite where too from here is going to depend a lot on just how much disinflationary pressure was already building up in the system from a now fairly prolonged period of contractionary interest rates. Given how weak last year was, and how weak things like business surveys still are, my sense would be quite a lot. But time will tell.</p> </div> <footer class="entry-meta"> <span class="comments-link"><a href="https://croakingcassandra.com/2024/06/06/comparing-treasury-and-reserve-bank-forecasts/#comments">1 Comment</a></span> </footer> </article> </div> <div class="article-wrapper"> <article id="post-71318" class="post-71318 post type-post status-publish format-standard hentry category-fiscal-policy category-reserve-bank"> <header class="entry-header"> <h1 class="entry-title"><a href="https://croakingcassandra.com/2024/05/22/reading-the-mps-numbers-thinking-about-the-fiscal-situation/" rel="bookmark">Reading the MPS numbers thinking about the fiscal situation</a></h1> <div class="entry-meta"> <span class="posted-on"><a href="https://croakingcassandra.com/2024/05/22/reading-the-mps-numbers-thinking-about-the-fiscal-situation/" rel="bookmark"><time class="entry-date published" datetime="2024-05-22T17:44:58+12:00">May 22, 2024</time><time class="updated" datetime="2024-05-22T17:58:49+12:00">May 22, 2024</time></a></span> <span class="byline"><span class="author vcard"><a class="url fn n" href="https://croakingcassandra.com/author/mhreddell/">Michael Reddell</a></span></span> <span class="entry-categories"><a href="https://croakingcassandra.com/category/fiscal-policy/" rel="category tag">Fiscal policy</a>, <a href="https://croakingcassandra.com/category/reserve-bank/" rel="category tag">Reserve Bank</a></span> </div> </header> <div class="entry-content"> <p>The Reserve Bank doesn’t do independent fiscal forecasts so there is no news in the fiscal numbers in today’s <em>Monetary Policy Statement </em>themselves. The last official Treasury forecasts don’t take account of whatever the government is planning in next week’s Budget, and as the Bank notes they will need to update their assessment in light of whatever the spending and tax plans prove to be.</p> <p>So I was more interested in the Bank’s numbers for the things they do forecast independently, and which in turn have implications for both the tax revenue the government could expect to collect on any given set of tax rates and for the likely expenditure pressures (from things like population growth and inflation).</p> <p>One of the lines the Minister of Finance has repeatedly sought to use over her time in office is something about how much worse the economy was than they had appreciated (or had been clear) pre-election, to soften us up (it appeared) for yet more delay in getting back to fiscal surplus (see, we can’t really help it, it was done to us, and no one told us). It has always been an unsatisfactory argument (to say the least) since the previous projections (say, those in the PREFU and those in National’s fiscal plan) weren’t for a return to surplus for a couple more years anyway (2026/27) and by then whatever the forecast fiscal outcome, it is purely a matter of policy choice.</p> <p>Now, the Budget numbers out next week will use The Treasury’s forecasts as their base. But here are the nominal GDP projections the Reserve Bank was making (a) at the August 2023 <em>Monetary Policy Statement</em> (ie the last set of forecasts pre-election), and b) today. Nominal activity is what gets taxed.</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/05/image-27.png"><img data-attachment-id="71323" data-permalink="https://croakingcassandra.com/2024/05/22/reading-the-mps-numbers-thinking-about-the-fiscal-situation/image-27-15/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/05/image-27.png" data-orig-size="976,627" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image-27" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/05/image-27.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/05/image-27.png?w=700" loading="lazy" width="976" height="627" src="https://croakingcassandra.com/wp-content/uploads/2024/05/image-27.png?w=976" alt="" class="wp-image-71323" srcset="https://croakingcassandra.com/wp-content/uploads/2024/05/image-27.png 976w, https://croakingcassandra.com/wp-content/uploads/2024/05/image-27.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/05/image-27.png?w=300 300w, https://croakingcassandra.com/wp-content/uploads/2024/05/image-27.png?w=768 768w" sizes="(max-width: 976px) 100vw, 976px" /></a></figure> <p>There is a slightly larger gap opening up a couple of years out (when, of course, who knows; both sets of numbers are just anyone’s guess out there) but as late as the June quarter next year the two observations are exactly the same, as they are (a 0.1% difference) for the last pre-PREFU quarter, 2023Q2.</p> <p>Ah, perhaps you are thinking, but what about inflation. If there is more inflation than was previously forecast the revenue just won’t go as far.</p> <p>But there isn’t anything much in that sort of story either.</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/05/image-28.png"><img data-attachment-id="71325" data-permalink="https://croakingcassandra.com/2024/05/22/reading-the-mps-numbers-thinking-about-the-fiscal-situation/image-28-14/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/05/image-28.png" data-orig-size="822,652" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image-28" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/05/image-28.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/05/image-28.png?w=700" loading="lazy" width="822" height="652" src="https://croakingcassandra.com/wp-content/uploads/2024/05/image-28.png?w=822" alt="" class="wp-image-71325" srcset="https://croakingcassandra.com/wp-content/uploads/2024/05/image-28.png 822w, https://croakingcassandra.com/wp-content/uploads/2024/05/image-28.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/05/image-28.png?w=300 300w, https://croakingcassandra.com/wp-content/uploads/2024/05/image-28.png?w=768 768w" sizes="(max-width: 822px) 100vw, 822px" /></a></figure> <p>There were some historical revisions late last year to the estimated level of real GDP. Those revisions don’t have any material implications for anything much, since life had already been lived through that period, and (in any case) it is nominal GDP that more closely approximates the tax base.</p> <p>But in this chart I’ve shown the ratio of the RB’s latest forecasts for real GDP to those it did last August, and it is certainly true that over the full forecast period the latest forecasts are a couple of per cent weaker than last August’s forecasts.</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/05/image-29.png"><img data-attachment-id="71327" data-permalink="https://croakingcassandra.com/2024/05/22/reading-the-mps-numbers-thinking-about-the-fiscal-situation/image-29-12/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/05/image-29.png" data-orig-size="1015,717" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image-29" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/05/image-29.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/05/image-29.png?w=700" loading="lazy" width="1015" height="717" src="https://croakingcassandra.com/wp-content/uploads/2024/05/image-29.png?w=1015" alt="" class="wp-image-71327" srcset="https://croakingcassandra.com/wp-content/uploads/2024/05/image-29.png 1015w, https://croakingcassandra.com/wp-content/uploads/2024/05/image-29.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/05/image-29.png?w=300 300w, https://croakingcassandra.com/wp-content/uploads/2024/05/image-29.png?w=768 768w" sizes="(max-width: 1015px) 100vw, 1015px" /></a></figure> <p>Here is a slightly more obscure chart: the same sort of ratio but this time for the Bank’s estimates of real potential GDP per working age population. Things worsen there by about 1 per cent relative to the position thought to have prevailed just prior to the election.</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/05/image-30.png"><img data-attachment-id="71329" data-permalink="https://croakingcassandra.com/2024/05/22/reading-the-mps-numbers-thinking-about-the-fiscal-situation/image-30-12/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/05/image-30.png" data-orig-size="1090,762" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image-30" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/05/image-30.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/05/image-30.png?w=700" loading="lazy" width="1024" height="715" src="https://croakingcassandra.com/wp-content/uploads/2024/05/image-30.png?w=1024" alt="" class="wp-image-71329" srcset="https://croakingcassandra.com/wp-content/uploads/2024/05/image-30.png?w=1024 1024w, https://croakingcassandra.com/wp-content/uploads/2024/05/image-30.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/05/image-30.png?w=300 300w, https://croakingcassandra.com/wp-content/uploads/2024/05/image-30.png?w=768 768w, https://croakingcassandra.com/wp-content/uploads/2024/05/image-30.png 1090w" sizes="(max-width: 1024px) 100vw, 1024px" /></a></figure> <p>And if weaker GDP per person implies some loss of productivity (some things the government might be purchasing won’t be getting relatively cheaper), it also suggests that (eg) public service wage pressures and NZS adjustments should be less than they might otherwise be.</p> <p>The key point? At least on the Reserve Bank’s telling – and they could of course have a very different view than the Treasury – there just isn’t that much there. We are set to be less well-off per person than the Bank thought just prior to the election, but nominal GDP and the CPI forecasts have barely changed, and even the real output changes aren’t particularly large in the scheme of things (nothing at all like the extent of the revisions that followed in the wake of the 2008 recession). What we have, on the Bank’s numbers, is a recession and a protracted period of excess capacity (slack) that is not quite as deep, but quite as protracted, as the Bank suggested to any and all readers (Opposition politicians included) just prior to the election.</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/05/image-31.png"><img data-attachment-id="71332" data-permalink="https://croakingcassandra.com/2024/05/22/reading-the-mps-numbers-thinking-about-the-fiscal-situation/image-31-11/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/05/image-31.png" data-orig-size="937,583" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image-31" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/05/image-31.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/05/image-31.png?w=700" loading="lazy" width="937" height="583" src="https://croakingcassandra.com/wp-content/uploads/2024/05/image-31.png?w=937" alt="" class="wp-image-71332" srcset="https://croakingcassandra.com/wp-content/uploads/2024/05/image-31.png 937w, https://croakingcassandra.com/wp-content/uploads/2024/05/image-31.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/05/image-31.png?w=300 300w, https://croakingcassandra.com/wp-content/uploads/2024/05/image-31.png?w=768 768w" sizes="(max-width: 937px) 100vw, 937px" /></a></figure> </div> <footer class="entry-meta"> <span class="comments-link"><a href="https://croakingcassandra.com/2024/05/22/reading-the-mps-numbers-thinking-about-the-fiscal-situation/#comments">3 Comments</a></span> </footer> </article> </div> <div class="article-wrapper"> <article id="post-71152" class="post-71152 post type-post status-publish format-standard hentry category-fiscal-policy"> <header class="entry-header"> <h1 class="entry-title"><a href="https://croakingcassandra.com/2024/04/06/tougher-than-that/" rel="bookmark">Tougher than that</a></h1> <div class="entry-meta"> <span class="posted-on"><a href="https://croakingcassandra.com/2024/04/06/tougher-than-that/" rel="bookmark"><time class="entry-date published" datetime="2024-04-06T17:31:51+13:00">April 6, 2024</time><time class="updated" datetime="2024-04-06T18:12:37+13:00">April 6, 2024</time></a></span> <span class="byline"><span class="author vcard"><a class="url fn n" href="https://croakingcassandra.com/author/mhreddell/">Michael Reddell</a></span></span> <span class="entry-categories"><a href="https://croakingcassandra.com/category/fiscal-policy/" rel="category tag">Fiscal policy</a></span> </div> </header> <div class="entry-content"> <p>Thomas Coughlan has a column in the <em>Herald </em>this morning, under the heading <a href="https://www.nzherald.co.nz/nz/politics/thomas-coughlan-nicola-willis-is-just-the-right-amount-of-tory/ZI2ANGZJONHALDMQZZMRL6SPGE/">“Nicola Willis is just the right amount of Tory”</a>. To this centre-right voter it isn’t obvious Willis is (or sees herself) as any type of Tory, but what Coughlan seems to be suggesting is she is just right if the aim is to hold office, and never mind the large structural fiscal deficit the government inherited from Labour. </p> <p>It isn’t an uninteresting column, and this post is just about one snippet where I don’t think the author is quite right. Here it is</p> <figure class="wp-block-image size-large"><a href="https://croakingcassandra.com/wp-content/uploads/2024/04/image-5.png"><img data-attachment-id="71157" data-permalink="https://croakingcassandra.com/2024/04/06/tougher-than-that/image-5-23/#main" data-orig-file="https://croakingcassandra.com/wp-content/uploads/2024/04/image-5.png" data-orig-size="974,320" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="image-5" data-image-description="" data-image-caption="" data-medium-file="https://croakingcassandra.com/wp-content/uploads/2024/04/image-5.png?w=300" data-large-file="https://croakingcassandra.com/wp-content/uploads/2024/04/image-5.png?w=700" loading="lazy" width="974" height="320" src="https://croakingcassandra.com/wp-content/uploads/2024/04/image-5.png?w=974" alt="" class="wp-image-71157" srcset="https://croakingcassandra.com/wp-content/uploads/2024/04/image-5.png 974w, https://croakingcassandra.com/wp-content/uploads/2024/04/image-5.png?w=150 150w, https://croakingcassandra.com/wp-content/uploads/2024/04/image-5.png?w=300 300w, https://croakingcassandra.com/wp-content/uploads/2024/04/image-5.png?w=768 768w" sizes="(max-width: 974px) 100vw, 974px" /></a></figure> <p>The simple maths looks about right: $3.5 billion is 25 per cent higher than $2.8 billion and the CPI has increased by about 25 per cent since Budget 2018 (depends a little on your precise reference point). But that isn’t the right way to look at things: it misunderstands how the operating allowances work. And it doesn’t come even close to meaning that Willis is splashing the cash just like Grant Robertson was doing in his first Budget. </p> <p>There are two things Coughlan seems to have overlooked. First, a big part of what the operating allowances cover is cost pressures on existing government spending programmes. Some increases, eg to welfare benefit rates, are done automatically by statute, and so don’t count against the operating allowance. But most other things do – new programmes of course, but also many of the spending implications of population growth (very rapid at present) and general inflation.</p> <p>One way of looking at this is to compare the two operating allowances (2018 and 2023) with the total government (core Crown) operating expenses in the year just ending at the time of each Budget. </p> <p>Grant Robertson gave himself an operating allowance of $2.8 billion in 2018 against an estimated final level of operating spending then for the year to June 2018 of $81.7 billion (3.5 per cent of that spending). Willis by contrast talks of an operating allowance of (probably just under) $3.5 billion against estimated (at HYEFU) spending in the year to June 2024 of $140.3 billion (or 2.5 per cent of that total). National was very vocal about the increases in spending under Robertson, but they went into the campaign not promising to get rid of many programmes (and needing most of their spending savings to finance promised tax cuts). The programmes still cost, inflation is still a thing, and the population keeps growing.</p> <p>But this year’s story is even tighter than that simple comparison might suggest. Inflation is not something under control of the Minister of Finance – we have the autonomous Reserve Bank for that – and so from any one year’s Budget perspective inflation (as forecast by Treasury) is just one of those things the Minister of Finance is stuck with. In the early 2010s, one thing that made Bill English’s zero operating allowances less extreme than they might have seemed was that inflation was very very (and surprisingly) low. In the 2018 Budget – Robertson’s first – Treasury forecast CPI inflation for the year to June 2019 at a mere 1.5 per cent. By contrast, at least in the HYEFU the Treasury forecast for inflation in the year to June 2025 was 2.5 per cent (and in the BPS last week that forecast was still 2.2 per cent). Willis faces more cost pressures just from inflation than Robertson did in his first year, and that chews up not inconsiderable amounts of the operating allowance.</p> <p>So it seems quite unlikely that the room she has given herself (all nominal) will do anything close to justifying Coughlan’s claim that this Budget will be “one of the more generous right wing Governments in New Zealand history”. Core Crown expenses as a share of GDP will almost certainly be dropping.</p> <p>I’m no fan of this government’s fiscal policy – and the apparent indifference to the deficit, and the spooky scare stories about not being Ruth Richardson or Tony Abbott (both mentioned in the article) – but on the numbers the minister has given herself and the general inflation pressure Treasury is forecasting it hardly looks like being all that generous, even by National Party standards (one could make a case for not in effect being that much different than Steven Joyce’s Budget in 2017). That is neither surprising nor inappropriate coming off the back of six years of very large increases in government spending. And after all in 2018 (fairly or not) Robertson and Ardern were banging on about making up for “9 years of underfunding”, a very different narrative to Willis’s now. But the big difference from Steven Joyce in 2017 is that he was running surpluses, and Luxon/Willis apparently are content to keep running deficits.</p> <p>But….there is the nagging question of what specifically are ministers deciding they don’t want to spend money on that Labour was spending it on (over and above the savings they are now exacting from departments, but on which the promised tax cuts have first claim). We don’t know. Do they?</p> </div> <footer class="entry-meta"> <span class="comments-link"><a href="https://croakingcassandra.com/2024/04/06/tougher-than-that/#comments">10 Comments</a></span> </footer> </article> </div> <nav role="navigation" id="nav-below" class="paging-navigation"> <h1 class="screen-reader-text">Post navigation</h1> <div class="nav-previous"><a href="https://croakingcassandra.com/category/fiscal-policy/page/2/" ><span class="meta-nav">←</span> Older posts</a></div> </nav> </main> </section> <div class="secondary widget-area" role="complementary"> <aside id="block-2" class="widget widget_block"> <div class="wp-block-jetpack-subscriptions__supports-newline wp-block-jetpack-subscriptions"> <div class="wp-block-jetpack-subscriptions__container is-not-subscriber"> <form action="https://wordpress.com/email-subscriptions" method="post" accept-charset="utf-8" data-blog="85004741" data-post_access_level="everybody" data-subscriber_email="" id="subscribe-blog" > <div class="wp-block-jetpack-subscriptions__form-elements"> <p id="subscribe-email"> <label id="subscribe-field-label" for="subscribe-field" class="screen-reader-text" > Type your email… </label> <input required="required" type="email" name="email" class="no-border-radius " style="font-size: 16px;padding: 15px 23px 15px 23px;border-radius: 0px;border-width: 1px;" placeholder="Type your email…" value="" id="subscribe-field" title="Please fill in this field." /> </p> <p id="subscribe-submit" > <input type="hidden" name="action" value="subscribe"/> <input type="hidden" name="blog_id" value="85004741"/> <input type="hidden" name="source" value="https://croakingcassandra.com/category/fiscal-policy/"/> <input type="hidden" name="sub-type" value="subscribe-block"/> <input type="hidden" name="app_source" value=""/> <input type="hidden" name="redirect_fragment" value="subscribe-blog"/> <input type="hidden" name="lang" value="en"/> <input type="hidden" id="_wpnonce" name="_wpnonce" value="dd744982ec" /><input type="hidden" name="_wp_http_referer" value="/category/fiscal-policy/" /> <button type="submit" class="wp-block-button__link no-border-radius" style="font-size: 16px;padding: 15px 23px 15px 23px;margin: 0; margin-left: 10px;border-radius: 0px;border-width: 1px;" name="jetpack_subscriptions_widget" > Follow </button> </p> </div> </form> </div> </div> </aside><aside id="calendar-3" class="widget widget_calendar"><div id="calendar_wrap" class="calendar_wrap"><table id="wp-calendar" class="wp-calendar-table"> <caption>April 2025</caption> <thead> <tr> <th scope="col" aria-label="Sunday">S</th> <th scope="col" aria-label="Monday">M</th> <th scope="col" aria-label="Tuesday">T</th> <th scope="col" aria-label="Wednesday">W</th> <th scope="col" aria-label="Thursday">T</th> <th scope="col" aria-label="Friday">F</th> <th scope="col" aria-label="Saturday">S</th> </tr> </thead> <tbody> <tr> <td colspan="2" class="pad"> </td><td>1</td><td id="today">2</td><td>3</td><td>4</td><td>5</td> </tr> <tr> <td>6</td><td>7</td><td>8</td><td>9</td><td>10</td><td>11</td><td>12</td> </tr> <tr> <td>13</td><td>14</td><td>15</td><td>16</td><td>17</td><td>18</td><td>19</td> </tr> <tr> <td>20</td><td>21</td><td>22</td><td>23</td><td>24</td><td>25</td><td>26</td> </tr> <tr> <td>27</td><td>28</td><td>29</td><td>30</td> <td class="pad" colspan="3"> </td> </tr> </tbody> </table><nav aria-label="Previous and next months" class="wp-calendar-nav"> <span class="wp-calendar-nav-prev"><a href="https://croakingcassandra.com/2025/03/">« Mar</a></span> <span class="pad"> </span> <span class="wp-calendar-nav-next"> </span> </nav></div></aside> <aside id="recent-posts-9" class="widget widget_recent_entries"> <h1 class="widget-title">Recent Posts</h1> <ul> <li> <a href="https://croakingcassandra.com/2025/03/31/not-much-parliamentary-scrutiny/">Not much parliamentary scrutiny</a> </li> <li> <a href="https://croakingcassandra.com/2025/03/31/farewell-to-orr/">Farewell to Orr</a> </li> <li> <a href="https://croakingcassandra.com/2025/03/10/on-the-way-ahead/">On the way ahead</a> </li> <li> <a href="https://croakingcassandra.com/2025/03/08/a-letter/">A letter</a> </li> <li> <a href="https://croakingcassandra.com/2025/03/07/bernanke-on-inflation-targeting/">Bernanke on inflation targeting</a> </li> <li> <a href="https://croakingcassandra.com/2025/03/06/11-billion-and-out/">$11 billion and out</a> </li> <li> <a href="https://croakingcassandra.com/2025/03/05/australias-pandemic-exceptionalism/">Australia’s Pandemic Exceptionalism</a> </li> <li> <a href="https://croakingcassandra.com/2025/03/03/or-not/">Or not</a> </li> <li> <a href="https://croakingcassandra.com/2025/03/01/forty-years-of-floating/">Forty years of floating</a> </li> <li> <a href="https://croakingcassandra.com/2025/02/27/why-is-such-rank-dishonesty-tolerated/">Why is such rank dishonesty tolerated?</a> </li> <li> <a href="https://croakingcassandra.com/2025/02/26/is-compulsory-saving-the-answer/">Is compulsory saving the answer?</a> </li> <li> <a href="https://croakingcassandra.com/2025/02/21/orr-at-it-again/">Orr at it again</a> </li> <li> <a href="https://croakingcassandra.com/2025/02/20/the-mpc-returns-from-its-summer-holiday/">The MPC returns from its summer holiday</a> </li> <li> <a href="https://croakingcassandra.com/2025/02/19/really-3/">Really?</a> </li> <li> <a href="https://croakingcassandra.com/2025/02/18/willis-and-rennie-speaking/">Willis and Rennie speaking</a> </li> <li> <a href="https://croakingcassandra.com/2025/02/03/going-for-growth-perhaps/">Going for growth…..perhaps</a> </li> <li> <a href="https://croakingcassandra.com/2025/01/30/reviewing-covid-experiences-and-policies/">Reviewing Covid experiences and policies</a> </li> <li> <a href="https://croakingcassandra.com/2025/01/22/inflation-but-not-that-sort/">Inflation (but not that sort)</a> </li> <li> <a href="https://croakingcassandra.com/2024/12/31/2025-and-what-might-have-been/">2025 and what might have been</a> </li> <li> <a href="https://croakingcassandra.com/2024/12/27/the-secretary-to-the-treasury-defending-govt-fiscal-policy/">The Secretary to the Treasury defending govt fiscal policy</a> </li> <li> <a href="https://croakingcassandra.com/2024/12/23/fiscal-failure-and-indifference/">Fiscal failure and indifference</a> </li> <li> <a href="https://croakingcassandra.com/2024/12/04/orr-on-qa-part-ii/">Orr on Q&A – Part II</a> </li> <li> <a href="https://croakingcassandra.com/2024/12/04/more-outright-dishonesty-from-orr/">More outright dishonesty from Orr</a> </li> <li> <a href="https://croakingcassandra.com/2024/12/03/where-were-the-central-agencies/">Where were the central agencies?</a> </li> <li> <a href="https://croakingcassandra.com/2024/12/02/the-pm-and-economic-performance/">The PM and economic performance</a> </li> <li> <a href="https://croakingcassandra.com/2024/11/19/what-does-reciprocity-mean-in-new-zealand-laws/">What does “reciprocity” mean in New Zealand laws?</a> </li> </ul> </aside><aside id="archives-7" class="widget widget_archive"><h1 class="widget-title">Archives</h1> <label class="screen-reader-text" for="archives-dropdown-7">Archives</label> <select id="archives-dropdown-7" name="archive-dropdown"> <option value="">Select Month</option> <option value='https://croakingcassandra.com/2025/03/'> March 2025  (9)</option> <option value='https://croakingcassandra.com/2025/02/'> February 2025  (7)</option> <option value='https://croakingcassandra.com/2025/01/'> January 2025  (2)</option> <option value='https://croakingcassandra.com/2024/12/'> December 2024  (7)</option> <option value='https://croakingcassandra.com/2024/11/'> November 2024  (1)</option> <option value='https://croakingcassandra.com/2024/10/'> October 2024  (6)</option> <option value='https://croakingcassandra.com/2024/09/'> September 2024  (4)</option> <option value='https://croakingcassandra.com/2024/08/'> August 2024  (6)</option> <option value='https://croakingcassandra.com/2024/07/'> July 2024  (8)</option> <option value='https://croakingcassandra.com/2024/06/'> June 2024  (6)</option> <option value='https://croakingcassandra.com/2024/05/'> May 2024  (9)</option> <option value='https://croakingcassandra.com/2024/04/'> April 2024  (2)</option> <option value='https://croakingcassandra.com/2024/03/'> March 2024  (1)</option> <option value='https://croakingcassandra.com/2024/02/'> February 2024  (3)</option> <option value='https://croakingcassandra.com/2024/01/'> January 2024  (4)</option> <option value='https://croakingcassandra.com/2023/12/'> December 2023  (11)</option> <option value='https://croakingcassandra.com/2023/11/'> November 2023  (10)</option> <option value='https://croakingcassandra.com/2023/10/'> October 2023  (16)</option> <option value='https://croakingcassandra.com/2023/09/'> September 2023  (15)</option> <option value='https://croakingcassandra.com/2023/08/'> August 2023  (24)</option> <option value='https://croakingcassandra.com/2023/07/'> July 2023  (6)</option> <option value='https://croakingcassandra.com/2023/06/'> June 2023  (6)</option> <option value='https://croakingcassandra.com/2023/05/'> May 2023  (8)</option> <option value='https://croakingcassandra.com/2023/04/'> April 2023  (11)</option> <option value='https://croakingcassandra.com/2023/03/'> March 2023  (7)</option> <option value='https://croakingcassandra.com/2023/02/'> February 2023  (5)</option> <option value='https://croakingcassandra.com/2023/01/'> January 2023  (2)</option> <option value='https://croakingcassandra.com/2022/12/'> December 2022  (6)</option> <option value='https://croakingcassandra.com/2022/11/'> November 2022  (10)</option> <option value='https://croakingcassandra.com/2022/10/'> October 2022  (11)</option> <option value='https://croakingcassandra.com/2022/09/'> September 2022  (5)</option> <option value='https://croakingcassandra.com/2022/08/'> August 2022  (8)</option> <option value='https://croakingcassandra.com/2022/07/'> July 2022  (7)</option> <option value='https://croakingcassandra.com/2022/06/'> June 2022  (5)</option> <option value='https://croakingcassandra.com/2022/05/'> May 2022  (5)</option> <option value='https://croakingcassandra.com/2022/04/'> April 2022  (1)</option> <option value='https://croakingcassandra.com/2022/03/'> March 2022  (2)</option> <option value='https://croakingcassandra.com/2022/02/'> February 2022  (9)</option> <option value='https://croakingcassandra.com/2022/01/'> January 2022  (4)</option> <option value='https://croakingcassandra.com/2021/12/'> December 2021  (8)</option> <option value='https://croakingcassandra.com/2021/11/'> November 2021  (13)</option> <option value='https://croakingcassandra.com/2021/10/'> October 2021  (4)</option> <option value='https://croakingcassandra.com/2021/09/'> September 2021  (8)</option> <option value='https://croakingcassandra.com/2021/08/'> August 2021  (9)</option> <option value='https://croakingcassandra.com/2021/07/'> July 2021  (6)</option> <option value='https://croakingcassandra.com/2021/06/'> June 2021  (7)</option> <option value='https://croakingcassandra.com/2021/05/'> May 2021  (11)</option> <option value='https://croakingcassandra.com/2021/04/'> April 2021  (8)</option> <option value='https://croakingcassandra.com/2021/03/'> March 2021  (9)</option> <option value='https://croakingcassandra.com/2021/02/'> February 2021  (4)</option> <option value='https://croakingcassandra.com/2021/01/'> January 2021  (1)</option> <option value='https://croakingcassandra.com/2020/12/'> December 2020  (3)</option> <option value='https://croakingcassandra.com/2020/11/'> November 2020  (3)</option> <option value='https://croakingcassandra.com/2020/10/'> October 2020  (6)</option> <option value='https://croakingcassandra.com/2020/09/'> September 2020  (13)</option> <option value='https://croakingcassandra.com/2020/08/'> August 2020  (8)</option> <option value='https://croakingcassandra.com/2020/07/'> July 2020  (10)</option> <option value='https://croakingcassandra.com/2020/06/'> June 2020  (10)</option> <option value='https://croakingcassandra.com/2020/05/'> May 2020  (26)</option> <option value='https://croakingcassandra.com/2020/04/'> April 2020  (27)</option> <option value='https://croakingcassandra.com/2020/03/'> March 2020  (31)</option> <option value='https://croakingcassandra.com/2020/02/'> February 2020  (20)</option> <option value='https://croakingcassandra.com/2020/01/'> January 2020  (13)</option> <option value='https://croakingcassandra.com/2019/12/'> December 2019  (17)</option> <option value='https://croakingcassandra.com/2019/11/'> November 2019  (23)</option> <option value='https://croakingcassandra.com/2019/10/'> October 2019  (30)</option> <option value='https://croakingcassandra.com/2019/09/'> September 2019  (25)</option> <option value='https://croakingcassandra.com/2019/08/'> August 2019  (17)</option> <option value='https://croakingcassandra.com/2019/07/'> July 2019  (17)</option> <option value='https://croakingcassandra.com/2019/06/'> June 2019  (25)</option> <option value='https://croakingcassandra.com/2019/05/'> May 2019  (27)</option> <option value='https://croakingcassandra.com/2019/04/'> April 2019  (32)</option> <option value='https://croakingcassandra.com/2019/03/'> March 2019  (39)</option> <option value='https://croakingcassandra.com/2019/02/'> February 2019  (28)</option> <option value='https://croakingcassandra.com/2019/01/'> January 2019  (17)</option> <option value='https://croakingcassandra.com/2018/12/'> December 2018  (27)</option> <option value='https://croakingcassandra.com/2018/11/'> November 2018  (40)</option> <option value='https://croakingcassandra.com/2018/10/'> October 2018  (33)</option> <option value='https://croakingcassandra.com/2018/09/'> September 2018  (30)</option> <option value='https://croakingcassandra.com/2018/08/'> August 2018  (35)</option> <option value='https://croakingcassandra.com/2018/07/'> July 2018  (22)</option> <option value='https://croakingcassandra.com/2018/06/'> June 2018  (30)</option> <option value='https://croakingcassandra.com/2018/05/'> May 2018  (35)</option> <option value='https://croakingcassandra.com/2018/04/'> April 2018  (31)</option> <option value='https://croakingcassandra.com/2018/03/'> March 2018  (29)</option> <option value='https://croakingcassandra.com/2018/02/'> February 2018  (21)</option> <option value='https://croakingcassandra.com/2018/01/'> January 2018  (22)</option> <option value='https://croakingcassandra.com/2017/12/'> December 2017  (15)</option> <option value='https://croakingcassandra.com/2017/11/'> November 2017  (32)</option> <option value='https://croakingcassandra.com/2017/10/'> October 2017  (33)</option> <option value='https://croakingcassandra.com/2017/09/'> September 2017  (39)</option> <option value='https://croakingcassandra.com/2017/08/'> August 2017  (30)</option> <option value='https://croakingcassandra.com/2017/07/'> July 2017  (22)</option> <option value='https://croakingcassandra.com/2017/06/'> June 2017  (31)</option> <option value='https://croakingcassandra.com/2017/05/'> May 2017  (31)</option> <option value='https://croakingcassandra.com/2017/04/'> April 2017  (28)</option> <option value='https://croakingcassandra.com/2017/03/'> March 2017  (30)</option> <option value='https://croakingcassandra.com/2017/02/'> February 2017  (21)</option> <option value='https://croakingcassandra.com/2017/01/'> January 2017  (7)</option> <option value='https://croakingcassandra.com/2016/12/'> December 2016  (15)</option> <option value='https://croakingcassandra.com/2016/11/'> November 2016  (13)</option> <option value='https://croakingcassandra.com/2016/10/'> October 2016  (21)</option> <option value='https://croakingcassandra.com/2016/09/'> September 2016  (9)</option> <option value='https://croakingcassandra.com/2016/08/'> August 2016  (25)</option> <option value='https://croakingcassandra.com/2016/07/'> July 2016  (23)</option> <option value='https://croakingcassandra.com/2016/06/'> June 2016  (29)</option> <option value='https://croakingcassandra.com/2016/05/'> May 2016  (29)</option> <option value='https://croakingcassandra.com/2016/04/'> April 2016  (32)</option> <option value='https://croakingcassandra.com/2016/03/'> March 2016  (32)</option> <option value='https://croakingcassandra.com/2016/02/'> February 2016  (32)</option> <option value='https://croakingcassandra.com/2016/01/'> January 2016  (14)</option> <option value='https://croakingcassandra.com/2015/12/'> December 2015  (26)</option> <option value='https://croakingcassandra.com/2015/11/'> November 2015  (29)</option> <option value='https://croakingcassandra.com/2015/10/'> October 2015  (17)</option> <option value='https://croakingcassandra.com/2015/09/'> September 2015  (25)</option> <option value='https://croakingcassandra.com/2015/08/'> August 2015  (47)</option> <option value='https://croakingcassandra.com/2015/07/'> July 2015  (49)</option> <option value='https://croakingcassandra.com/2015/06/'> June 2015  (45)</option> <option value='https://croakingcassandra.com/2015/05/'> May 2015  (44)</option> <option value='https://croakingcassandra.com/2015/04/'> April 2015  (43)</option> <option value='https://croakingcassandra.com/2015/03/'> March 2015  (12)</option> <option value='https://croakingcassandra.com/2015/02/'> February 2015  (3)</option> </select> <script type="text/javascript"> /* <![CDATA[ */ (function() { var dropdown = document.getElementById( "archives-dropdown-7" ); function onSelectChange() { if ( dropdown.options[ dropdown.selectedIndex ].value !== '' ) { document.location.href = this.options[ this.selectedIndex ].value; } } dropdown.onchange = onSelectChange; })(); /* ]]> */ </script> </aside><aside id="search-5" class="widget widget_search"><form role="search" method="get" class="search-form" action="https://croakingcassandra.com/"> <label> <span class="screen-reader-text">Search for:</span> <input type="search" class="search-field" placeholder="Search …" value="" name="s"> </label> <input type="submit" class="search-submit" value="Search"> </form> </aside><aside id="categories-5" class="widget widget_categories"><h1 class="widget-title">Categories</h1><form action="https://croakingcassandra.com" method="get"><label class="screen-reader-text" for="cat">Categories</label><select name='cat' id='cat' class='postform'> <option value='-1'>Select Category</option> <option class="level-0" value="21635095">Adrian Orr  (85)</option> <option class="level-0" value="14572">agriculture  (1)</option> <option class="level-0" value="153909">APRA  (2)</option> <option class="level-0" value="18939">Argentina  (1)</option> <option class="level-0" value="38350">Auckland  (18)</option> <option class="level-0" value="4330">Australia  (59)</option> <option class="level-0" value="292059">Balance of payments  (1)</option> <option class="level-0" value="34348051">bank capital requirements  (47)</option> <option class="level-0" value="26653">Banking  (20)</option> <option class="level-0" value="580413696">BNZ & Wheeler  (7)</option> <option class="level-0" value="56901951">BusinessNZ  (1)</option> <option class="level-0" value="92788">Cash  (2)</option> <option class="level-0" value="23741298">CBDC  (1)</option> <option class="level-0" value="130789">Central banks  (6)</option> <option class="level-0" value="1470">China  (133)</option> <option class="level-0" value="16897">Climate change  (2)</option> <option class="level-0" value="3226">Commodities  (1)</option> <option class="level-0" value="40676">conflicts of interest  (1)</option> <option class="level-0" value="18174">Crime and punishment  (1)</option> <option class="level-0" value="123802">Currency  (4)</option> <option class="level-0" value="385984558">Current New Zealand data  (5)</option> <option class="level-0" value="8614">Dairy  (8)</option> <option class="level-0" value="384954">deposit insurance  (8)</option> <option class="level-0" value="5845156">e-cash  (3)</option> <option class="level-0" value="10371">Earthquakes  (3)</option> <option class="level-0" value="21836336">Eastern and central Europe  (2)</option> <option class="level-0" value="897444">economic geography  (4)</option> <option class="level-0" value="40690">Economic history  (8)</option> <option class="level-0" value="1342">Education  (13)</option> <option class="level-0" value="1478456">Emissions reduction  (15)</option> <option class="level-0" value="4275644">Emissions targets  (12)</option> <option class="level-0" value="956274">Euro area  (10)</option> <option class="level-0" value="554062">Exchange rate  (19)</option> <option class="level-0" value="9328045">Exchange rate regimes  (4)</option> <option class="level-0" value="153816">expectations  (2)</option> <option class="level-0" value="36354">Exports  (41)</option> <option class="level-0" value="420813">FEC  (1)</option> <option class="level-0" value="487861005">Financial literacy/capability  (2)</option> <option class="level-0" value="478705">Financial stability  (56)</option> <option class="level-0" value="14235576">Financial stabilty  (52)</option> <option class="level-0" value="40680" selected="selected">Fiscal policy  (123)</option> <option class="level-0" value="421050">FMA  (2)</option> <option class="level-0" value="21060">Foreign investment  (2)</option> <option class="level-0" value="1345125">FTAs  (6)</option> <option class="level-0" value="16505">Governance  (49)</option> <option class="level-0" value="2756">Greece  (6)</option> <option class="level-0" value="3392">Greens  (5)</option> <option class="level-0" value="63941">Guest  (1)</option> <option class="level-0" value="299">Housing  (155)</option> <option class="level-0" value="32297">IMF  (15)</option> <option class="level-0" value="4363">Immigration  (201)</option> <option class="level-0" value="35003271">indexed bonds  (2)</option> <option class="level-0" value="161717">inflation  (71)</option> <option class="level-0" value="118871">Institutions  (1)</option> <option class="level-0" value="12498">insurance  (3)</option> <option class="level-0" value="37048">Interest rates  (29)</option> <option class="level-0" value="5142">International  (1)</option> <option class="level-0" value="9937">Israel  (2)</option> <option class="level-0" value="2062">Japan  (2)</option> <option class="level-0" value="514849">Kiwibank  (1)</option> <option class="level-0" value="227869">labour market  (18)</option> <option class="level-0" value="1954">labour party  (36)</option> <option class="level-0" value="763119044">Land taxes and land value rating  (1)</option> <option class="level-0" value="5839">Latin America  (1)</option> <option class="level-0" value="51806">local government  (2)</option> <option class="level-0" value="10748672">LSAP  (14)</option> <option class="level-0" value="25014752">MBIE  (3)</option> <option class="level-0" value="1016696">MMT  (3)</option> <option class="level-0" value="57663">Monetary policy  (311)</option> <option class="level-0" value="763458482">Monetary Policy Remit  (1)</option> <option class="level-0" value="692874">Money supply  (3)</option> <option class="level-0" value="152589">MPC  (36)</option> <option class="level-0" value="434521">National Party  (22)</option> <option class="level-0" value="357514217">New Zealand economic history  (52)</option> <option class="level-0" value="363932892">New Zealand economic performance  (285)</option> <option class="level-0" value="174584263">New Zealand Initiative  (26)</option> <option class="level-0" value="11104">Norway  (3)</option> <option class="level-0" value="2041145">NZ First  (8)</option> <option class="level-0" value="804607">NZ history  (3)</option> <option class="level-0" value="11968">NZ politics  (170)</option> <option class="level-0" value="39978909">NZSF  (8)</option> <option class="level-0" value="101584">OCR  (12)</option> <option class="level-0" value="486600629">OCR leak  (15)</option> <option class="level-0" value="160151">OECD  (5)</option> <option class="level-0" value="788723">OIA  (35)</option> <option class="level-0" value="49370">pandemic  (129)</option> <option class="level-0" value="132985">Population  (10)</option> <option class="level-0" value="9379">Poverty  (1)</option> <option class="level-0" value="217321">Privatisation  (2)</option> <option class="level-0" value="2704">Productivity  (136)</option> <option class="level-0" value="13458928">Productivity Commission  (18)</option> <option class="level-0" value="18215394">Prudential regulation  (5)</option> <option class="level-0" value="107562">PSC  (3)</option> <option class="level-0" value="10020874">PTAs  (17)</option> <option class="level-0" value="560265">Public finance  (2)</option> <option class="level-0" value="26024">R&D  (2)</option> <option class="level-0" value="776129899">RBNZ Superannuation Fund  (2)</option> <option class="level-0" value="448379">Regional development  (8)</option> <option class="level-0" value="5566">Regulation  (9)</option> <option class="level-0" value="64182849">Rennie review  (7)</option> <option class="level-0" value="222096">Reserve Bank  (239)</option> <option class="level-0" value="595757147">Reserve Bank Act reforms  (76)</option> <option class="level-0" value="337262525">Reserve Bank Board  (31)</option> <option class="level-0" value="323052881">Rodger Finlay  (6)</option> <option class="level-0" value="24167">Savings  (11)</option> <option class="level-0" value="774271644">Settlement account remuneration  (1)</option> <option class="level-0" value="5849">Statistics  (19)</option> <option class="level-0" value="3201950">Stress tests  (3)</option> <option class="level-0" value="360948">Superannuation  (16)</option> <option class="level-0" value="8120">Switzerland  (3)</option> <option class="level-0" value="52105">Taxation  (28)</option> <option class="level-0" value="79333">TPP  (12)</option> <option class="level-0" value="1595">Trade  (10)</option> <option class="level-0" value="636">Transparency  (11)</option> <option class="level-0" value="76133">Treasury  (73)</option> <option class="level-0" value="8199">UK  (16)</option> <option class="level-0" value="1">Uncategorized  (564)</option> <option class="level-0" value="9986">unemployment  (18)</option> <option class="level-0" value="699">USA  (10)</option> <option class="level-0" value="256088">wages  (15)</option> <option class="level-0" value="12314">Welfare  (2)</option> <option class="level-0" value="70643">Wellington  (23)</option> <option class="level-0" value="27590543">zero lower bound  (30)</option> </select> </form><script type="text/javascript"> /* <![CDATA[ */ (function() { var dropdown = document.getElementById( "cat" ); function onCatChange() { if ( dropdown.options[ dropdown.selectedIndex ].value > 0 ) { dropdown.parentNode.submit(); } } dropdown.onchange = onCatChange; })(); /* ]]> */ </script> </aside> </div> </div> <footer id="colophon" class="site-footer" role="contentinfo"> <div class="site-footer-wrapper"> <div class="site-info"> <a href="https://wordpress.com/?ref=footer_blog" rel="nofollow">Blog at WordPress.com.</a> </div> <div id="social-links"> <div class="social-links"><ul id="menu-contents" class="menu"><li id="menu-item-8396" class="menu-item menu-item-type-post_type menu-item-object-page menu-item-8396"><a href="https://croakingcassandra.com/papers-and-speeches/"><span class="screen-reader-text">Papers and speeches</span></a></li> <li id="menu-item-58340" class="menu-item menu-item-type-post_type menu-item-object-page menu-item-58340"><a href="https://croakingcassandra.com/china-prc/"><span class="screen-reader-text">China (PRC)</span></a></li> <li id="menu-item-66510" class="menu-item menu-item-type-post_type menu-item-object-page menu-item-66510"><a href="https://croakingcassandra.com/book-reviews/"><span class="screen-reader-text">Book reviews</span></a></li> <li id="menu-item-70355" class="menu-item menu-item-type-post_type menu-item-object-page menu-item-70355"><a href="https://croakingcassandra.com/reserve-bank-of-new-zealand-superannuation-scheme/"><span class="screen-reader-text">Reserve Bank of New Zealand Superannuation Scheme</span></a></li> <li id="menu-item-71259" class="menu-item menu-item-type-post_type menu-item-object-page menu-item-71259"><a href="https://croakingcassandra.com/early-mpss-and-economic-projections/"><span class="screen-reader-text">MPSs & Economic Forecasts from early-mid 90s</span></a></li> </ul></div> </div> </div> </footer> </div> <script type="text/javascript"> var infiniteScroll = {"settings":{"id":"main","ajaxurl":"https:\/\/croakingcassandra.com\/?infinity=scrolling","type":"scroll","wrapper":true,"wrapper_class":"infinite-wrap","footer":"page","click_handle":"1","text":"Older posts","totop":"Scroll back to top","currentday":"06.04.24","order":"DESC","scripts":[],"styles":[],"google_analytics":false,"offset":1,"history":{"host":"croakingcassandra.com","path":"\/category\/fiscal-policy\/page\/%d\/","use_trailing_slashes":true,"parameters":""},"query_args":{"category_name":"fiscal-policy","error":"","m":"","p":0,"post_parent":"","subpost":"","subpost_id":"","attachment":"","attachment_id":0,"name":"","pagename":"","page_id":0,"second":"","minute":"","hour":"","day":0,"monthnum":0,"year":0,"w":0,"tag":"","cat":40680,"tag_id":"","author":"","author_name":"","feed":"","tb":"","paged":0,"meta_key":"","meta_value":"","preview":"","s":"","sentence":"","title":"","fields":"","menu_order":"","embed":"","category__in":[],"category__not_in":[],"category__and":[],"post__in":[],"post__not_in":[],"post_name__in":[],"tag__in":[],"tag__not_in":[],"tag__and":[],"tag_slug__in":[],"tag_slug__and":[],"post_parent__in":[],"post_parent__not_in":[],"author__in":[],"author__not_in":[],"search_columns":[],"lazy_load_term_meta":false,"posts_per_page":10,"ignore_sticky_posts":false,"suppress_filters":false,"cache_results":true,"update_post_term_cache":true,"update_menu_item_cache":false,"update_post_meta_cache":true,"post_type":"","nopaging":false,"comments_per_page":"50","no_found_rows":false,"order":"DESC"},"query_before":"2025-04-02 04:53:38","last_post_date":"2024-04-06 17:31:51","body_class":"infinite-scroll neverending","loading_text":"Loading new page","stats":"blog=85004741&v=wpcom&tz=12&user_id=0&subd=croakingcassandra&x_pagetype=infinite"}}; </script>  <script type="text/javascript" src="//0.gravatar.com/js/hovercards/hovercards.min.js?ver=2025147d8bf6c02970a26c6b0c26b0fcfc89796aa30f84307cffd8fd28d2bcca53dd7a" id="grofiles-cards-js"></script> <script type="text/javascript" id="wpgroho-js-extra"> /* <![CDATA[ */ var WPGroHo = {"my_hash":""}; /* ]]> */ </script> <script crossorigin='anonymous' type='text/javascript' src='https://s2.wp.com/wp-content/mu-plugins/gravatar-hovercards/wpgroho.js?m=1610363240i'></script> <script> // Initialize and attach hovercards to all gravatars ( function() { function init() { if ( typeof Gravatar === 'undefined' ) { return; } if ( typeof Gravatar.init !== 'function' ) { return; } Gravatar.profile_cb = function ( hash, id ) { WPGroHo.syncProfileData( hash, id ); }; Gravatar.my_hash = WPGroHo.my_hash; Gravatar.init( 'body', '#wp-admin-bar-my-account', { i18n: { 'Edit your profile →': 'Edit your profile →', 'View profile →': 'View profile →', 'Contact': 'Contact', 'Send money': 'Send money', 'Sorry, we are unable to load this Gravatar profile.': 'Sorry, we are unable to load this Gravatar profile.', 'Profile not found.': 'Profile not found.', 'Too Many Requests.': 'Too Many Requests.', 'Internal Server Error.': 'Internal Server Error.', }, } ); } if ( document.readyState !== 'loading' ) { init(); } else { document.addEventListener( 'DOMContentLoaded', init ); } } )(); </script> <div style="display:none"> </div> <div id="infinite-footer"> <div class="container"> <div class="blog-info"> <a id="infinity-blog-title" href="https://croakingcassandra.com/" rel="home"> croaking cassandra </a> </div> <div class="blog-credits"> <a href="https://wordpress.com/?ref=footer_blog" rel="nofollow">Blog at WordPress.com.</a> </div> </div> </div> <div id="actionbar" dir="ltr" style="display: none;" class="actnbr-pub-big-brother actnbr-has-follow actnbr-has-actions"> <ul> <li class="actnbr-btn actnbr-hidden"> <a class="actnbr-action actnbr-actn-follow " href=""> <svg class="gridicon" height="20" width="20" xmlns="http://www.w3.org/2000/svg" viewBox="0 0 20 20"><path clip-rule="evenodd" d="m4 4.5h12v6.5h1.5v-6.5-1.5h-1.5-12-1.5v1.5 10.5c0 1.1046.89543 2 2 2h7v-1.5h-7c-.27614 0-.5-.2239-.5-.5zm10.5 2h-9v1.5h9zm-5 3h-4v1.5h4zm3.5 1.5h-1v1h1zm-1-1.5h-1.5v1.5 1 1.5h1.5 1 1.5v-1.5-1-1.5h-1.5zm-2.5 2.5h-4v1.5h4zm6.5 1.25h1.5v2.25h2.25v1.5h-2.25v2.25h-1.5v-2.25h-2.25v-1.5h2.25z" fill-rule="evenodd"></path></svg> <span>Subscribe</span> </a> <a class="actnbr-action actnbr-actn-following no-display" href=""> <svg class="gridicon" height="20" width="20" xmlns="http://www.w3.org/2000/svg" viewBox="0 0 20 20"><path fill-rule="evenodd" clip-rule="evenodd" d="M16 4.5H4V15C4 15.2761 4.22386 15.5 4.5 15.5H11.5V17H4.5C3.39543 17 2.5 16.1046 2.5 15V4.5V3H4H16H17.5V4.5V12.5H16V4.5ZM5.5 6.5H14.5V8H5.5V6.5ZM5.5 9.5H9.5V11H5.5V9.5ZM12 11H13V12H12V11ZM10.5 9.5H12H13H14.5V11V12V13.5H13H12H10.5V12V11V9.5ZM5.5 12H9.5V13.5H5.5V12Z" fill="#008A20"></path><path class="following-icon-tick" d="M13.5 16L15.5 18L19 14.5" stroke="#008A20" stroke-width="1.5"></path></svg> <span>Subscribed</span> </a> <div class="actnbr-popover tip tip-top-left actnbr-notice" id="follow-bubble"> <div class="tip-arrow"></div> <div class="tip-inner actnbr-follow-bubble"> <ul> <li class="actnbr-sitename"> <a href="https://croakingcassandra.com"> <img loading='lazy' alt='' src='https://s2.wp.com/i/logo/wpcom-gray-white.png' srcset='https://s2.wp.com/i/logo/wpcom-gray-white.png 1x' class='avatar avatar-50' height='50' width='50' /> croaking cassandra </a> </li> <div class="actnbr-message no-display"></div> <form method="post" action="https://subscribe.wordpress.com" accept-charset="utf-8" style="display: none;"> <div class="actnbr-follow-count">Join 1,744 other subscribers</div> <div> <input type="email" name="email" placeholder="Enter your email address" class="actnbr-email-field" aria-label="Enter your email address" /> </div> <input type="hidden" name="action" value="subscribe" /> <input type="hidden" name="blog_id" value="85004741" /> <input type="hidden" name="source" value="https://croakingcassandra.com/category/fiscal-policy/" /> <input type="hidden" name="sub-type" value="actionbar-follow" /> <input type="hidden" id="_wpnonce" name="_wpnonce" value="dd744982ec" /> <div class="actnbr-button-wrap"> <button type="submit" value="Sign me up"> Sign me up </button> </div> </form> <li class="actnbr-login-nudge"> <div> Already have a WordPress.com account? <a href="https://wordpress.com/log-in?redirect_to=https%3A%2F%2Fr-login.wordpress.com%2Fremote-login.php%3Faction%3Dlink%26back%3Dhttps%253A%252F%252Fcroakingcassandra.com%252F2025%252F02%252F19%252Freally-3%252F">Log in now.</a> </div> </li> </ul> </div> </div> </li> <li class="actnbr-ellipsis actnbr-hidden"> <svg class="gridicon gridicons-ellipsis" height="24" width="24" xmlns="http://www.w3.org/2000/svg" viewBox="0 0 24 24"><g><path d="M7 12c0 1.104-.896 2-2 2s-2-.896-2-2 .896-2 2-2 2 .896 2 2zm12-2c-1.104 0-2 .896-2 2s.896 2 2 2 2-.896 2-2-.896-2-2-2zm-7 0c-1.104 0-2 .896-2 2s.896 2 2 2 2-.896 2-2-.896-2-2-2z"/></g></svg> <div class="actnbr-popover tip tip-top-left actnbr-more"> <div class="tip-arrow"></div> <div class="tip-inner"> <ul> <li class="actnbr-sitename"> <a href="https://croakingcassandra.com"> <img loading='lazy' alt='' src='https://s2.wp.com/i/logo/wpcom-gray-white.png' srcset='https://s2.wp.com/i/logo/wpcom-gray-white.png 1x' class='avatar avatar-50' height='50' width='50' /> croaking cassandra </a> </li> <li class="actnbr-folded-follow"> <a class="actnbr-action actnbr-actn-follow " href=""> <svg class="gridicon" height="20" width="20" xmlns="http://www.w3.org/2000/svg" viewBox="0 0 20 20"><path clip-rule="evenodd" d="m4 4.5h12v6.5h1.5v-6.5-1.5h-1.5-12-1.5v1.5 10.5c0 1.1046.89543 2 2 2h7v-1.5h-7c-.27614 0-.5-.2239-.5-.5zm10.5 2h-9v1.5h9zm-5 3h-4v1.5h4zm3.5 1.5h-1v1h1zm-1-1.5h-1.5v1.5 1 1.5h1.5 1 1.5v-1.5-1-1.5h-1.5zm-2.5 2.5h-4v1.5h4zm6.5 1.25h1.5v2.25h2.25v1.5h-2.25v2.25h-1.5v-2.25h-2.25v-1.5h2.25z" fill-rule="evenodd"></path></svg> <span>Subscribe</span> </a> <a class="actnbr-action actnbr-actn-following no-display" href=""> <svg class="gridicon" height="20" width="20" xmlns="http://www.w3.org/2000/svg" viewBox="0 0 20 20"><path fill-rule="evenodd" clip-rule="evenodd" d="M16 4.5H4V15C4 15.2761 4.22386 15.5 4.5 15.5H11.5V17H4.5C3.39543 17 2.5 16.1046 2.5 15V4.5V3H4H16H17.5V4.5V12.5H16V4.5ZM5.5 6.5H14.5V8H5.5V6.5ZM5.5 9.5H9.5V11H5.5V9.5ZM12 11H13V12H12V11ZM10.5 9.5H12H13H14.5V11V12V13.5H13H12H10.5V12V11V9.5ZM5.5 12H9.5V13.5H5.5V12Z" fill="#008A20"></path><path class="following-icon-tick" d="M13.5 16L15.5 18L19 14.5" stroke="#008A20" stroke-width="1.5"></path></svg> <span>Subscribed</span> </a> </li> <li class="actnbr-signup"><a href="https://wordpress.com/start/">Sign up</a></li> <li class="actnbr-login"><a href="https://wordpress.com/log-in?redirect_to=https%3A%2F%2Fr-login.wordpress.com%2Fremote-login.php%3Faction%3Dlink%26back%3Dhttps%253A%252F%252Fcroakingcassandra.com%252F2025%252F02%252F19%252Freally-3%252F">Log in</a></li> <li class="flb-report"> <a href="https://wordpress.com/abuse/?report_url=https://croakingcassandra.com" target="_blank" rel="noopener noreferrer"> Report this content </a> </li> <li class="actnbr-reader"> <a href="https://wordpress.com/reader/feeds/34600341"> View site in Reader </a> </li> <li class="actnbr-subs"> <a href="https://subscribe.wordpress.com/">Manage subscriptions</a> </li> <li class="actnbr-fold"><a href="">Collapse this bar</a></li> </ul> </div> </div> </li> </ul> </div> <script> window.addEventListener( "load", function( event ) { var link = document.createElement( "link" ); link.href = "https://s0.wp.com/wp-content/mu-plugins/actionbar/actionbar.css?v=20250116"; link.type = "text/css"; link.rel = "stylesheet"; document.head.appendChild( link ); var script = document.createElement( "script" ); script.src = "https://s0.wp.com/wp-content/mu-plugins/actionbar/actionbar.js?v=20250204"; script.defer = true; document.body.appendChild( script ); } ); </script> <div id="jp-carousel-loading-overlay"> <div id="jp-carousel-loading-wrapper"> <span id="jp-carousel-library-loading"> </span> </div> </div> <div class="jp-carousel-overlay" style="display: none;"> <div class="jp-carousel-container">  <div class="jp-carousel-wrap swiper-container jp-carousel-swiper-container jp-carousel-transitions" itemscope itemtype="https://schema.org/ImageGallery"> <div class="jp-carousel swiper-wrapper"></div> <div class="jp-swiper-button-prev swiper-button-prev"> <svg width="25" height="24" viewBox="0 0 25 24" fill="none" xmlns="http://www.w3.org/2000/svg"> <mask id="maskPrev" mask-type="alpha" maskUnits="userSpaceOnUse" x="8" y="6" width="9" height="12"> <path d="M16.2072 16.59L11.6496 12L16.2072 7.41L14.8041 6L8.8335 12L14.8041 18L16.2072 16.59Z" fill="white"/> </mask> <g mask="url(#maskPrev)"> <rect x="0.579102" width="23.8823" height="24" fill="#FFFFFF"/> </g> </svg> </div> <div class="jp-swiper-button-next swiper-button-next"> <svg width="25" height="24" viewBox="0 0 25 24" fill="none" xmlns="http://www.w3.org/2000/svg"> <mask id="maskNext" mask-type="alpha" maskUnits="userSpaceOnUse" x="8" y="6" width="8" height="12"> <path d="M8.59814 16.59L13.1557 12L8.59814 7.41L10.0012 6L15.9718 12L10.0012 18L8.59814 16.59Z" fill="white"/> </mask> <g mask="url(#maskNext)"> <rect x="0.34375" width="23.8822" height="24" fill="#FFFFFF"/> </g> </svg> </div> </div>  <div class="jp-carousel-close-hint"> <svg width="25" height="24" viewBox="0 0 25 24" fill="none" xmlns="http://www.w3.org/2000/svg"> <mask id="maskClose" mask-type="alpha" maskUnits="userSpaceOnUse" x="5" y="5" width="15" height="14"> <path d="M19.3166 6.41L17.9135 5L12.3509 10.59L6.78834 5L5.38525 6.41L10.9478 12L5.38525 17.59L6.78834 19L12.3509 13.41L17.9135 19L19.3166 17.59L13.754 12L19.3166 6.41Z" fill="white"/> </mask> <g mask="url(#maskClose)"> <rect x="0.409668" width="23.8823" height="24" fill="#FFFFFF"/> </g> </svg> </div>  <div class="jp-carousel-info"> <div class="jp-carousel-info-footer"> <div class="jp-carousel-pagination-container"> <div class="jp-swiper-pagination swiper-pagination"></div> <div class="jp-carousel-pagination"></div> </div> <div class="jp-carousel-photo-title-container"> <h2 class="jp-carousel-photo-caption"></h2> </div> <div class="jp-carousel-photo-icons-container"> <a href="#" class="jp-carousel-icon-btn jp-carousel-icon-info" aria-label="Toggle photo metadata visibility"> <span class="jp-carousel-icon"> <svg width="25" height="24" viewBox="0 0 25 24" fill="none" xmlns="http://www.w3.org/2000/svg"> <mask id="maskInfo" mask-type="alpha" maskUnits="userSpaceOnUse" x="2" y="2" width="21" height="20"> <path fill-rule="evenodd" clip-rule="evenodd" d="M12.7537 2C7.26076 2 2.80273 6.48 2.80273 12C2.80273 17.52 7.26076 22 12.7537 22C18.2466 22 22.7046 17.52 22.7046 12C22.7046 6.48 18.2466 2 12.7537 2ZM11.7586 7V9H13.7488V7H11.7586ZM11.7586 11V17H13.7488V11H11.7586ZM4.79292 12C4.79292 16.41 8.36531 20 12.7537 20C17.142 20 20.7144 16.41 20.7144 12C20.7144 7.59 17.142 4 12.7537 4C8.36531 4 4.79292 7.59 4.79292 12Z" fill="white"/> </mask> <g mask="url(#maskInfo)"> <rect x="0.8125" width="23.8823" height="24" fill="#FFFFFF"/> </g> </svg> </span> </a> <a href="#" class="jp-carousel-icon-btn jp-carousel-icon-comments" aria-label="Toggle photo comments visibility"> <span class="jp-carousel-icon"> <svg width="25" height="24" viewBox="0 0 25 24" fill="none" xmlns="http://www.w3.org/2000/svg"> <mask id="maskComments" mask-type="alpha" maskUnits="userSpaceOnUse" x="2" y="2" width="21" height="20"> <path fill-rule="evenodd" clip-rule="evenodd" d="M4.3271 2H20.2486C21.3432 2 22.2388 2.9 22.2388 4V16C22.2388 17.1 21.3432 18 20.2486 18H6.31729L2.33691 22V4C2.33691 2.9 3.2325 2 4.3271 2ZM6.31729 16H20.2486V4H4.3271V18L6.31729 16Z" fill="white"/> </mask> <g mask="url(#maskComments)"> <rect x="0.34668" width="23.8823" height="24" fill="#FFFFFF"/> </g> </svg> <span class="jp-carousel-has-comments-indicator" aria-label="This image has comments."></span> </span> </a> </div> </div> <div class="jp-carousel-info-extra"> <div class="jp-carousel-info-content-wrapper"> <div class="jp-carousel-photo-title-container"> <h2 class="jp-carousel-photo-title"></h2> </div> <div class="jp-carousel-comments-wrapper"> <div id="jp-carousel-comments-loading"> <span>Loading Comments...</span> </div> <div class="jp-carousel-comments"></div> <div id="jp-carousel-comment-form-container"> <span id="jp-carousel-comment-form-spinner"> </span> <div id="jp-carousel-comment-post-results"></div> <form id="jp-carousel-comment-form"> <label for="jp-carousel-comment-form-comment-field" class="screen-reader-text">Write a Comment...</label> <textarea name="comment" class="jp-carousel-comment-form-field jp-carousel-comment-form-textarea" id="jp-carousel-comment-form-comment-field" placeholder="Write a Comment..." ></textarea> <div id="jp-carousel-comment-form-submit-and-info-wrapper"> <div id="jp-carousel-comment-form-commenting-as"> <fieldset> <label for="jp-carousel-comment-form-email-field">Email (Required)</label> <input type="text" name="email" class="jp-carousel-comment-form-field jp-carousel-comment-form-text-field" id="jp-carousel-comment-form-email-field" /> </fieldset> <fieldset> <label for="jp-carousel-comment-form-author-field">Name (Required)</label> <input type="text" name="author" class="jp-carousel-comment-form-field jp-carousel-comment-form-text-field" id="jp-carousel-comment-form-author-field" /> </fieldset> <fieldset> <label for="jp-carousel-comment-form-url-field">Website</label> <input type="text" name="url" class="jp-carousel-comment-form-field jp-carousel-comment-form-text-field" id="jp-carousel-comment-form-url-field" /> </fieldset> </div> <input type="submit" name="submit" class="jp-carousel-comment-form-button" id="jp-carousel-comment-form-button-submit" value="Post Comment" /> </div> </form> </div> </div> <div class="jp-carousel-image-meta"> <div class="jp-carousel-title-and-caption"> <div class="jp-carousel-photo-info"> <h3 class="jp-carousel-caption" itemprop="caption description"></h3> </div> <div class="jp-carousel-photo-description"></div> </div> <ul class="jp-carousel-image-exif" style="display: none;"></ul> <a class="jp-carousel-image-download" href="#" target="_blank" style="display: none;"> <svg width="25" height="24" viewBox="0 0 25 24" fill="none" xmlns="http://www.w3.org/2000/svg"> <mask id="mask0" mask-type="alpha" maskUnits="userSpaceOnUse" x="3" y="3" width="19" height="18"> <path fill-rule="evenodd" clip-rule="evenodd" d="M5.84615 5V19H19.7775V12H21.7677V19C21.7677 20.1 20.8721 21 19.7775 21H5.84615C4.74159 21 3.85596 20.1 3.85596 19V5C3.85596 3.9 4.74159 3 5.84615 3H12.8118V5H5.84615ZM14.802 5V3H21.7677V10H19.7775V6.41L9.99569 16.24L8.59261 14.83L18.3744 5H14.802Z" fill="white"/> </mask> <g mask="url(#mask0)"> <rect x="0.870605" width="23.8823" height="24" fill="#FFFFFF"/> </g> </svg> <span class="jp-carousel-download-text"></span> </a> <div class="jp-carousel-image-map" style="display: none;"></div> </div> </div> </div> </div> </div> </div> <link crossorigin='anonymous' rel='stylesheet' id='all-css-0-2' href='https://s0.wp.com/_static/??-eJyljEsKgDAMBS9kDUUquhDPom0Qaz/BNHh9KdgTuBl4w2PgIWVzKpgKRFEU5DgTg8dCm72+DTHnCicBGex2Z2EMwM9JeKtdkgvYW+YOftTaqYkaXOOix8noQU+z8S9MR0BZ&cssminify=yes' type='text/css' media='all' /> <style id='jetpack-block-subscriptions-inline-css'> .is-style-compact .is-not-subscriber .wp-block-button__link,.is-style-compact .is-not-subscriber .wp-block-jetpack-subscriptions__button{border-end-start-radius:0!important;border-start-start-radius:0!important;margin-inline-start:0!important}.is-style-compact .is-not-subscriber .components-text-control__input,.is-style-compact .is-not-subscriber p#subscribe-email input[type=email]{border-end-end-radius:0!important;border-start-end-radius:0!important}.is-style-compact:not(.wp-block-jetpack-subscriptions__use-newline) .components-text-control__input{border-inline-end-width:0!important}.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline .wp-block-jetpack-subscriptions__form-container{display:flex;flex-direction:column}.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline:not(.wp-block-jetpack-subscriptions__use-newline) .is-not-subscriber .wp-block-jetpack-subscriptions__form-elements{align-items:flex-start;display:flex}.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline:not(.wp-block-jetpack-subscriptions__use-newline) p#subscribe-submit{display:flex;justify-content:center}.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline .wp-block-jetpack-subscriptions__form .wp-block-jetpack-subscriptions__button,.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline .wp-block-jetpack-subscriptions__form .wp-block-jetpack-subscriptions__textfield .components-text-control__input,.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline .wp-block-jetpack-subscriptions__form button,.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline .wp-block-jetpack-subscriptions__form input[type=email],.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline form .wp-block-jetpack-subscriptions__button,.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline form .wp-block-jetpack-subscriptions__textfield .components-text-control__input,.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline form button,.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline form input[type=email]{box-sizing:border-box;cursor:pointer;line-height:1.3;min-width:auto!important;white-space:nowrap!important}.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline .wp-block-jetpack-subscriptions__form .wp-block-jetpack-subscriptions__button[contenteditable=true],.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline form .wp-block-jetpack-subscriptions__button[contenteditable=true]{white-space:pre-wrap!important}.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline .wp-block-jetpack-subscriptions__form input[type=email]::placeholder,.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline .wp-block-jetpack-subscriptions__form input[type=email]:disabled,.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline form input[type=email]::placeholder,.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline form input[type=email]:disabled{color:currentColor;opacity:.5}.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline .wp-block-jetpack-subscriptions__form .wp-block-jetpack-subscriptions__button,.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline .wp-block-jetpack-subscriptions__form button,.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline form .wp-block-jetpack-subscriptions__button,.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline form button{border-color:#0000;border-style:solid}.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline .wp-block-jetpack-subscriptions__form .wp-block-jetpack-subscriptions__textfield,.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline .wp-block-jetpack-subscriptions__form p#subscribe-email,.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline form .wp-block-jetpack-subscriptions__textfield,.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline form p#subscribe-email{background:#0000;flex-grow:1}.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline .wp-block-jetpack-subscriptions__form .wp-block-jetpack-subscriptions__textfield .components-base-control__field,.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline .wp-block-jetpack-subscriptions__form .wp-block-jetpack-subscriptions__textfield .components-text-control__input,.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline .wp-block-jetpack-subscriptions__form .wp-block-jetpack-subscriptions__textfield input[type=email],.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline .wp-block-jetpack-subscriptions__form p#subscribe-email .components-base-control__field,.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline .wp-block-jetpack-subscriptions__form p#subscribe-email .components-text-control__input,.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline .wp-block-jetpack-subscriptions__form p#subscribe-email input[type=email],.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline form .wp-block-jetpack-subscriptions__textfield .components-base-control__field,.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline form .wp-block-jetpack-subscriptions__textfield .components-text-control__input,.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline form .wp-block-jetpack-subscriptions__textfield input[type=email],.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline form p#subscribe-email .components-base-control__field,.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline form p#subscribe-email .components-text-control__input,.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline form p#subscribe-email input[type=email]{height:auto;margin:0;width:100%}.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline .wp-block-jetpack-subscriptions__form p#subscribe-email,.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline .wp-block-jetpack-subscriptions__form p#subscribe-submit,.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline form p#subscribe-email,.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline form p#subscribe-submit{line-height:0;margin:0;padding:0}.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline.wp-block-jetpack-subscriptions__show-subs .wp-block-jetpack-subscriptions__subscount{font-size:16px;margin:8px 0;text-align:end}.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline.wp-block-jetpack-subscriptions__use-newline .wp-block-jetpack-subscriptions__form-elements{display:block}.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline.wp-block-jetpack-subscriptions__use-newline .wp-block-jetpack-subscriptions__button,.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline.wp-block-jetpack-subscriptions__use-newline button{display:inline-block;max-width:100%}.wp-block-jetpack-subscriptions.wp-block-jetpack-subscriptions__supports-newline.wp-block-jetpack-subscriptions__use-newline .wp-block-jetpack-subscriptions__subscount{text-align:start}#subscribe-submit.is-link{text-align:center;width:auto!important}#subscribe-submit.is-link a{margin-left:0!important;margin-top:0!important;width:auto!important}@keyframes jetpack-memberships_button__spinner-animation{to{transform:rotate(1turn)}}.jetpack-memberships-spinner{display:none;height:1em;margin:0 0 0 5px;width:1em}.jetpack-memberships-spinner svg{height:100%;margin-bottom:-2px;width:100%}.jetpack-memberships-spinner-rotating{animation:jetpack-memberships_button__spinner-animation .75s linear infinite;transform-origin:center}.is-loading .jetpack-memberships-spinner{display:inline-block}body.jetpack-memberships-modal-open{overflow:hidden}dialog.jetpack-memberships-modal{opacity:1}dialog.jetpack-memberships-modal,dialog.jetpack-memberships-modal iframe{background:#0000;border:0;bottom:0;box-shadow:none;height:100%;left:0;margin:0;padding:0;position:fixed;right:0;top:0;width:100%}dialog.jetpack-memberships-modal::backdrop{background-color:#000;opacity:.7;transition:opacity .2s ease-out}dialog.jetpack-memberships-modal.is-loading,dialog.jetpack-memberships-modal.is-loading::backdrop{opacity:0} </style> <link crossorigin='anonymous' rel='stylesheet' id='all-css-2-2' href='https://s1.wp.com/wp-content/mu-plugins/jetpack-plugin/moon/modules/tiled-gallery/tiled-gallery/tiled-gallery.css?m=1692903566i&cssminify=yes' type='text/css' media='all' /> <script type="text/javascript" src="https://s1.wp.com/wp-content/js/mobile-useragent-info.js?m=1609849039i&ver=20241018" id="mobile-useragent-info-js" defer="defer" data-wp-strategy="defer"></script> <script type="text/javascript" id="coblocks-loader-js-extra"> /* <![CDATA[ */ var wpcom_coblocks_js = {"coblocks_masonry_js":"https:\/\/s2.wp.com\/wp-content\/plugins\/coblocks\/2.18.1-simple-rev.4\/dist\/js\/coblocks-masonry.min.js","coblocks_lightbox_js":"https:\/\/s2.wp.com\/wp-content\/plugins\/coblocks\/2.18.1-simple-rev.4\/dist\/js\/coblocks-lightbox.min.js","jquery_core_js":"\/wp-includes\/js\/jquery\/jquery.min.js","jquery_migrate_js":"\/wp-includes\/js\/jquery\/jquery-migrate.min.js","masonry_js":"\/wp-includes\/js\/masonry.min.js","imagesloaded_js":"\/wp-includes\/js\/imagesloaded.min.js"}; var coblocksLigthboxData = {"closeLabel":"Close Gallery","leftLabel":"Previous","rightLabel":"Next"}; /* ]]> */ </script> <script type="text/javascript" id="jetpack-carousel-js-extra"> /* <![CDATA[ */ var jetpackSwiperLibraryPath = {"url":"https:\/\/s2.wp.com\/wp-content\/mu-plugins\/jetpack-plugin\/moon\/_inc\/build\/carousel\/swiper-bundle.min.js"}; var jetpackCarouselStrings = {"widths":[370,700,1000,1200,1400,2000],"is_logged_in":"","lang":"en","ajaxurl":"https:\/\/croakingcassandra.com\/wp-admin\/admin-ajax.php","nonce":"57734522be","display_exif":"1","display_comments":"1","single_image_gallery":"1","single_image_gallery_media_file":"","background_color":"black","comment":"Comment","post_comment":"Post Comment","write_comment":"Write a Comment...","loading_comments":"Loading Comments...","image_label":"Open image in full-screen.","download_original":"View full size <span class=\"photo-size\">{0}<span class=\"photo-size-times\">\u00d7<\/span>{1}<\/span>","no_comment_text":"Please be sure to submit some text with your comment.","no_comment_email":"Please provide an email address to comment.","no_comment_author":"Please provide your name to comment.","comment_post_error":"Sorry, but there was an error posting your comment. Please try again later.","comment_approved":"Your comment was approved.","comment_unapproved":"Your comment is in moderation.","camera":"Camera","aperture":"Aperture","shutter_speed":"Shutter Speed","focal_length":"Focal Length","copyright":"Copyright","comment_registration":"0","require_name_email":"1","login_url":"https:\/\/croakingcassandra.wordpress.com\/wp-login.php?redirect_to=https%3A%2F%2Fcroakingcassandra.com%2F2025%2F02%2F19%2Freally-3%2F","blog_id":"85004741","meta_data":["camera","aperture","shutter_speed","focal_length","copyright"],"stats_query_args":"blog=85004741&v=wpcom&tz=12&user_id=0&subd=croakingcassandra","is_public":"1"}; /* ]]> */ </script> <script type="text/javascript" id="jetpack-blocks-assets-base-url-js-before"> /* <![CDATA[ */ var Jetpack_Block_Assets_Base_Url="https://s0.wp.com/wp-content/mu-plugins/jetpack-plugin/moon/_inc/blocks/"; /* ]]> */ </script> <script crossorigin='anonymous' type='text/javascript' src='https://s0.wp.com/_static/??-eJyVkEFOxDAMRS+EY3U6iG4QR0FJ6ha3iR3FyQC3B6QpIMQClv/rvyfZ+FwgqjSShrlDSX1lMdyoFR/3a8asKvjIEjF0TjOyLCzcCCxWTenIry6zuM1u8Jv1UEYNSeNueHLD5AYwziURVLq4M85sDbevEST1M9XffO2JMhmWHjDwCqHqe1M/YPEXXn1j/QdjOxdILDssGrvBwi8/4b+/Jfqq3Sh97o7iesdDvh/uxnG6Hc+naXsD0nKL0Q=='></script> <script type="text/javascript" crossorigin='anonymous' src="https://s0.wp.com/wp-content/plugins/gutenberg-core/v20.0.4/build/dom-ready/index.min.js?m=1741299224i&ver=222ad38e3e5e302c8bbf" id="wp-dom-ready-js"></script> <script crossorigin='anonymous' type='text/javascript' src='https://s0.wp.com/_static/??/wp-includes/js/dist/vendor/wp-polyfill.min.js,/wp-content/mu-plugins/jetpack-plugin/moon/_inc/blocks/subscriptions/view.js?m=1739403461j'></script> <script type="text/javascript" crossorigin='anonymous' src="https://s0.wp.com/wp-content/mu-plugins/jetpack-plugin/moon/_inc/build/tiled-gallery/tiled-gallery/tiled-gallery.min.js?m=1725888675i&ver=14.6-a.0" id="tiled-gallery-js" defer="defer" data-wp-strategy="defer"></script> <script crossorigin='anonymous' type='text/javascript' src='https://s0.wp.com/wp-content/mu-plugins/carousel-wpcom/carousel-wpcom.js?m=1620989527i'></script> <script type="text/javascript"> (function () { var wpcom_reblog = { source: 'toolbar', toggle_reblog_box_flair: function (obj_id, post_id) { // Go to site selector. This will redirect to their blog if they only have one. const postEndpoint = `https://wordpress.com/post`; // Ideally we would use the permalink here, but fortunately this will be replaced with the // post permalink in the editor. const originalURL = `${ document.location.href }?page_id=${ post_id }`; const url = postEndpoint + '?url=' + encodeURIComponent( originalURL ) + '&is_post_share=true' + '&v=5'; const redirect = function () { if ( ! window.open( url, '_blank' ) ) { location.href = url; } }; if ( /Firefox/.test( navigator.userAgent ) ) { setTimeout( redirect, 0 ); } else { redirect(); } }, }; window.wpcom_reblog = wpcom_reblog; })(); </script> <script type="text/javascript"> (function() { var extend = function(out) { out = out || {}; for (var i = 1; i < arguments.length; i++) { if (!arguments[i]) continue; for (var key in arguments[i]) { if (arguments[i].hasOwnProperty(key)) out[key] = arguments[i][key]; } } return out; }; extend( window.infiniteScroll.settings.scripts, ["jetpack-mu-wpcom-settings","rlt-proxy","wpcom-actionbar-placeholder","grofiles-cards","wpgroho","mobile-useragent-info","the-neverending-homepage","coblocks-loader","big-brother-navigation","big-brother-skip-link-focus-fix","jetpack-carousel","jetpack-blocks-assets-base-url","wp-dom-ready","wp-polyfill","jetpack-block-subscriptions","tiled-gallery","carousel-wpcom"] ); extend( window.infiniteScroll.settings.styles, ["the-neverending-homepage","wp-block-library","jetpack-layout-grid","jetpack-ratings","mediaelement","wp-mediaelement","coblocks-frontend","wpcom-core-compat-playlist-styles","wpcom-bbpress2-staff-css","big-brother-style","genericons","big_brother-wpcom","reblogging","geo-location-flair","a8c-global-print","h4-global","wp-emoji-styles","videopress-video-style","jetpack-sharing-buttons-style","classic-theme-styles","global-styles","big-brother-gentium","big-brother-open-sans","akismet-widget-style","jetpack-global-styles-frontend-style","jetpack-carousel-swiper-css","jetpack-carousel","tiled-gallery","jetpack-block-subscriptions","core-block-supports-duotone"] ); })(); </script> <span id="infinite-aria" aria-live="polite"></span> <script src="//stats.wp.com/w.js?68" defer></script> <script type="text/javascript"> _tkq = window._tkq || []; _stq = window._stq || []; _tkq.push(['storeContext', {'blog_id':'85004741','blog_tz':'12','user_lang':'en','blog_lang':'en','user_id':'0'}]); _stq.push(['view', {'blog':'85004741','v':'wpcom','tz':'12','user_id':'0','subd':'croakingcassandra'}]); _stq.push(['extra', {'crypt':'UE40eW5QN0p8M2Y/RE1mNzc2NTVTamdsRWFxcEV3XUtMXVR5aWlmMVNIcUxBaFstUWRrZVpWQ2tORExSfEpUVm05SlpEZzZWOEtlbW5nZHV0dkhDNjhwP35JbkdHLyZqRVk/NTNQOVdPTjYyfFRyYn5PUHNhVWU9T101R3FaM05FM0h3LHpPYlVzLGd0Z1NTan5maWJSLDNQRWpPLCZ2aGc2ZyZHMT9TYmNoekJvP2pvRFpmR2YvSnFBJnhRMldRb1huR1F2bk4yTXM4fHFkN3dLV2s0WTFyeWo0MFZ3SC1FUnx4UmZlLj9PN3hpMkY4ZzJ8VjIvZiZdMiVsbC0ycitNaWwvcitbeSw5LHg3XQ=='}]); _stq.push([ 'clickTrackerInit', '85004741', '0' ]); </script> <noscript><img src="https://pixel.wp.com/b.gif?v=noscript" style="height:1px;width:1px;overflow:hidden;position:absolute;bottom:1px;" alt="" /></noscript> <script defer id="bilmur" data-customproperties="{"enq_wp-polyfill":"1","logged_in":"0","wptheme":"pub\/big-brother","wptheme_is_block":"0"}" data-provider="wordpress.com" data-service="simple" data-site-tz="Pacific/Auckland" src="/wp-content/js/bilmur-4.min.js?i=12&m=202514"></script><script> ( function() { function getMobileUserAgentInfo() { if ( typeof wpcom_mobile_user_agent_info === 'object' ) { wpcom_mobile_user_agent_info.init(); var mobileStatsQueryString = ''; if ( wpcom_mobile_user_agent_info.matchedPlatformName !== false ) { mobileStatsQueryString += '&x_' + 'mobile_platforms' + '=' + wpcom_mobile_user_agent_info.matchedPlatformName; } if ( wpcom_mobile_user_agent_info.matchedUserAgentName !== false ) { mobileStatsQueryString += '&x_' + 'mobile_devices' + '=' + wpcom_mobile_user_agent_info.matchedUserAgentName; } if ( wpcom_mobile_user_agent_info.isIPad() ) { mobileStatsQueryString += '&x_' + 'ipad_views' + '=' + 'views'; } if ( mobileStatsQueryString != '' ) { new Image().src = document.location.protocol + '//pixel.wp.com/g.gif?v=wpcom-no-pv' + mobileStatsQueryString + '&baba=' + Math.random(); } } } document.addEventListener( 'DOMContentLoaded', getMobileUserAgentInfo ); } )(); </script> </body> </html>