Archive for December 2007
September quarter current account – GDP primer
Posted by: Matt Nolan on: December 20, 2007
Today’s Balance of Payments release put the current account deficit at 8.3% of GDP. This was right on the button of market expectations, however some interesting issues cropped up which will be important for tomorrows GDP release.
The actual current account deficit was a touch worse than market expecations, enough to make the deficit as a [...]
$12 minimum wage
Posted by: Matt Nolan on: December 18, 2007
Following on from our post on the minimum wage yesterday, the government decided to announce an increase in the minimum wage to $12, from $11.25.
The money-quote from the stuff story has to be:
“Initially business groups were opposed to lifting the minimum wage, which was set at $7 an hour when Labour took office in 1999.
However, [...]
Higher minimum wage – higher employment?
Posted by: Matt Nolan on: December 17, 2007
Over at Not Sneaky they are discussing how a higher minimum wage may lead to higher employment when we have a firm that has market power in the labour market (hat-tip CPW). The argument is a very interesting one as economists often view a minimum wage as a way of placing a price floor, which [...]
Relative prices and GST
Posted by: Matt Nolan on: December 14, 2007
Over time we have been covering specific issues with how income tax and GST influence economic activity. This post was supposed to describe how an increase in GST with a proportional decrease in a flat income tax would lead to no change in consumer activity. This required the assumption that the incidence of [...]
Moral hazard and central banks
Posted by: Matt Nolan on: December 13, 2007
Central banks have felt obliged to intervene in the recent credit crunch, introducing a bunch of liquidity into European and US financial markets. This has led market participants to say that “It helps with the confidence and the feeling that the Fed is going to help out the financial system“, but is this what [...]
Fed cuts rates to 4.25%
Posted by: Matt Nolan on: December 12, 2007
The US Federal Reserve cut their cash rate and discount rate by 25 basis points. In the statement the Fed said the following about inflation:
“Readings on core inflation have improved modestly this year, but elevated energy and commodity prices, among other factors, may put upward pressure on inflation … some inflation risks remain”
Poll tax on kids
Posted by: Matt Nolan on: December 11, 2007
Sticking to the recent theme of externality taxes, some researchers from Perth suggested that Australians should ‘fine’ parents for each kid they have above two. Now we know I’m a big fan of externality taxes, but I’m not too sure about this one.
As we have already established a carbon trading scheme, this externality tax [...]
The desirability of rent controls
Posted by: Matt Nolan on: December 10, 2007
Over at Marginal Revolution, Tyler Cowen posts on what some people have to say about rent control. Several points are put forward as to why rent controls are a good thing, namely:
People do not become happier from a larger, or better quality house and so a lower quality – lower price equilibrium would be [...]
Will a fiscal stimulus in the US not be inflationary?
Posted by: Matt Nolan on: December 6, 2007
According to Martin Feldstein (hat tip Greg Mankiw):
“Even if the Fed decides that it should not cut rates further at the present time, it would not raise rates to offset the stimulus effect of the fiscal change. From the Fed’s point of view, the tax cuts can provide a desirable short-run stimulus without the inflationary [...]
December 07 MPS – OCR unchanged at 8.25%
Posted by: Matt Nolan on: December 6, 2007
The December quarter monetary policy statement was released today. Alongside this they announced that the OCR would remain unchanged, as they believe “current level of the OCR remains consistent with future inflation outcomes of 1 to 3 percent on average over the medium term”. This times they give the feeling that tax cuts [...]
Australian cash rate on hold – December 2007
Posted by: Matt Nolan on: December 6, 2007
The Reserve Bank of Australia kept their target cash rate on hold yesterday. In a push to increase transparency, they now release a statement with every decisions, which is awesome. Yesterday’s statement was relatively neutral, however as my esteemed colleague CPW says, there is nothing to compare it too so its hard to [...]
Thoughts on the Warehouse Decision
Posted by: agnitio on: December 5, 2007
I found this point particularly interesting
“it is not possible to conclude that the relevant markets would be more competitive if the Warehouse Extra concept is pursued by the acquirer than if the Warehouse is not acquired”
I have always been of the opinion that the Extra concept would be much more effective in the hands of [...]
Are supermarkets too uncompetitive for Warehouse Extra?
Posted by: Matt Nolan on: December 5, 2007
So the High Courts documents on the Warehouse merger ruling have been released. After skimming a couple of things I thought I would say something, then when I’ve actually read the document I can join in the criticism of it
It seems that the High Court overturned the Commerce Commissions decision as it [...]
Fat tax?
Posted by: Matt Nolan on: December 2, 2007
Following the discuss on lower GST for healthy foods I feel it is appropriate to discuss the other side of the coin, a tax on inherently unhealthy food, a fat tax.
You know the type of foods I’m talking about, chocolate bars, chips, V’s (I can see all this on my desk, looks like this tax [...]
Cut GST for fruit and veg?
Posted by: Matt Nolan on: December 2, 2007
Over at Kiwiblog, Mr Farrar noticed a newspaper article on removing the GST tax from fruit and veg. I agree with him on both his points,
1) that the response of consumers to a 12.5% reduction in the price of fruit and veg will likely be small (items that only take up a small part [...]
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