Economic Week - April 12

 by Nick Clark

Wellbeing indicators – what the…?

The Government’s much-touted Wellbeing Budget is only a matter of weeks away.  To inform its policies and spending programmes the Government wants to measure success as a country by using a broader range of indicators than traditional economic data, especially GDP.

Over the past year or so officials have been busily and earnestly working on the new indicators, including holding a workshop late last year pilloried in many quarters for being excessively politically correct.   This week we saw the outcome of this exercise, the announcement of Indicators Aotearoa.  

It is good to see that many existing economic indicators, including GDP, have been retained, but it’s clear that existing social and environmental indicators will increase in prominence and there are some new ones too.  The broader range of indicators might be useful for informing policy, especially those grounded in hard data, but some reflect political concerns of the day (like income inequality) and some, to put it politely, are rather odd.

The most odd are subjective wellbeing indicators such as ‘spiritual health’, ‘satisfaction with leisure time’, ‘ability to be yourself’, ‘hope for the future’, ‘life satisfaction’, ‘locus of control’ (whatever that means!), and ‘sense of purpose’. Putting aside whether there’s any purpose or point to measuring these touchy feely ideas, they all mean different things to different people so it’s unclear how they can be measured accurately and whether the results will have any credibility and be of any real use.

What is more troubling though about Indicators Aotearoa is how they could easily become ideologically driven and politically charged.  In fact, this is already happening with the National Party coming out swinging against them.  

Statistics NZ has a long history of providing independent, objective, credible data but its reputation has been damaged by the 2018 Census debacle.  Sadly, these new indicators won’t help restore it and this does not bode well for sound, evidenced based policy.

Meanwhile, the Treasury – the Government’s key economic advisor, controller of the Budget, and the architect of the wellbeing approach – was mocked this week for its ‘out of touch’ and ‘bizarre’ wellbeing card game, which mentions among other things 'moon and sun feelings’.  While an amusing story, this fluffy nonsense does nothing for the reputation of the wellbeing approach, the Treasury, or indeed the Government.  Hence the Prime Minister’s swiftness to distance herself from the cards.

Brexit – what the…?

Britain’s Brexit agony has been drawn out yet again with a further exit extension given by the European Union.  Britain was originally supposed to leave the EU on 29 March but with its Parliament unable to agree on the type of Brexit – hard, soft, or any Brexit at all – departure was pushed out first to 12 April and now to 31 October, or sooner if somehow Parliament can agree on a way forward.

The odds of a softer Brexit will have increased after this latest extension but much will depend on British MPs actually finding that elusive way forward.  To date MPs have been good at opposing all the plans put to the vote but so far they haven’t been able to get majority support for any single one.  

Six months should provide time to sort this out but remember it has taken three years to get to this point and we are no wiser on what will happen – including what it might mean for us in New Zealand.  

In the meantime there could very easily be a further fracturing of British politics, including leadership changes, an election, or even another referendum.  Amazing.

Food prices up in March

Statistics NZ’s Food Price Index shows food prices rose 0.5% in the month of March 2019.  They were unchanged after seasonal adjustment.

Comparing March 2019 with February 2019:
  • Fruit and vegetable prices were up 3.7% (up 1.9% after seasonal adjustment), with fruit up 5.5% and vegetables up 2.1%;
  • Meat, poultry, and fish prices fell 1.3%, with beef & veal down 1.4% and mutton, lamb & hogget down 4.4%; and
  • Grocery food prices rose 0.6%, with breads & cereals up 0.3% and milk, cheese & eggs up 0.1%.

On an annual basis, food prices increased 1.2% for the year ended March 2019.  Comparing March 2019 compared with March 2018:
  • Fruit and vegetable prices decreased 2.6%, with fruit up 2.7% and vegetables down 6.6%;
  • Meat, poultry, and fish prices increased 0.9%, with beef & veal up 4.6% and mutton, lamb & hogget up 4.4%; and
  • Grocery food prices increased 1.4%, with breads & cereals up 3.0% and milk, cheese & eggs up 0.8%.

Next week sees the release of March quarter Consumer Price Index.  This measure of inflation is a key indicator for the Reserve Bank when considering the Official Cash Rate, although the March quarter Labour Market Statistics (to be released 1 May) now also have considerable weight thanks to the Reserve Bank’s new mandate to include maximising employment along with price stability.

Most economists expect the CPI’s annual increase to reduce slightly from the December quarter’s 1.9%, perhaps to around 1.7%.

NIWA Soil Moisture Data

NIWA’s latest soil moisture maps (as at 9am Thursday 11 April) show drier than usual conditions persisting across much of the country and with it being particularly so in areas like western Northland, Waikato, Manawatu-Rangitikei, inland Marlborough, and Southland.


Exchange Rates

Over the course of the week, the NZ Dollar was down a little against the TWI and down against all our major trading partners, except the UK Pound against which it appreciated slightly.


Wholesale Interest Rates

Over the week, the 90 Day Bank Bill rate was broadly unchanged and the 10 Year Government Bond rate built on last week’s increases adding a further 8 basis points to take it back over 2%.  The OCR remains at 1.75% but the question is will it be cut next month?