The world is actually becoming a better place

Despite a lot of bad news and dire predictions NZ Herald repeats a story from The Conversation on Seven charts that show the world is actually becoming a better place.

Obviously that means better for people overall, there are some who have had a deterioration in their situations, like in Syria and Yemen (wars are always crap for people, but there are fewer and smaller wars these days).

Of course this doesn’t look intoo the future and what may happen through things like over-population, pollution, depletion of resources and climate change.

Swedish academic Hans Rosling has identified a worrying trend: not only do many people across advanced economies have no idea that the world is becoming a much better place, but they actually even think the opposite. This is no wonder, when the news focuses on reporting catastrophes, terrorist attacks, wars and famines.

Who wants to hear about the fact that every day some 200,000 people around the world are lifted above the US$2-a-day poverty line? Or that more than 300,000 people a day get access to electricity and clean water for the first time every day?

These stories of people in low-income countries simply doesn’t make for exciting news coverage. But, as Rosling pointed out in his book Factfulness, it’s important to put all the bad news in perspective, reports The Conversation.

While it is true that globalisation has put some downward pressure on middle-class wagesin advanced economies in recent decades, it has also helped lift hundreds of millions of people above the global poverty line – a development that has mostly occurred in South-East Asia.

one of the big facts of economic history is that until quite recently a significant part of the world population has lived under quite miserable conditions – and this has been true throughout most of human history. The following seven charts show how the world has become a much better place compared to just a few decades ago.

I won’t include the charts here but this is what they claim:

1. Life expectancy continues to rise.

During the Industrial Revolution, average life expectancy across European countries did not exceed around 35 years. Now it is getting close to 80. It has risen to over 70 in most other parts of the world, except Africa but even there it is on the rise and now over 60.

2. Child mortality continues to fall

More than a century ago, child mortality rates were still exceeding 10% (and were much higher than that 200 years ago). This halved overall, and for many parts of the world it is close to 1%.

3. Fertility rates are falling

 UN population estimates largely expect the global population to stabilise at about 11 billion by the end of this century.

That’s still a lot more than the current population of about 7.5 billion.

4. GDP growth has accelerated in developed countries.

Low-income countries, including China and India, have been growing at a significantly faster pace in recent decades and are quickly catching up to the West. A 10% growth rate over a prolonged period means that income levels double roughly every seven years. It is obviously good news if prosperity is more shared across the globe.

5. Global income inequality has gone down

While inequality within countries has gone up as a result of globalisation, global inequality has been on a steady downward trend for several decades. This is mostly a result of developing countries such as China and India where hundreds of millions of people have seen their living standards improve.

6. More people are living in democracies

As of today, about half of the human population is living in a democracy. Out of those still living in autocracies, 90% are in China.

7. Conflicts are on the decline

Throughout history, the world has been riven by conflict. In fact, at least two of the world’s largest powers have been at war with each other more than 50% of the time since about 1500.

While the early 20th century was especially brutal with two world wars in rapid succession, the postwar period has been very peaceful. For the first time ever, there has been no war or conflict in Western Europe in about three generations.

All of these indicators are positive for us here in New Zealand. We live in the best of times ever in human existence, in one of the most human friendly parts of the world. We have a lot to be thankful for, but shouldn’t be complacent about future challenges.

GDP and Tax Working Group announcements today

Hamish Rutherford (Stuff): Prime Minister’s mix-up could have led to a much more brutal economics lesson

Jacinda Ardern’s confusion over two sets of figures is understandable, given the volume of material crossing her desk, as well as never-ending negotiations with her governing partners.

But with her control of the Government coming under scrutiny, it was exactly the kind of simple mistake she did not need.

On Tuesday, Ardern was asked a clear and straightforward question about her expectations for “the GDP numbers on Thursday”, economic growth figures due out in two days

Although her answer hinted that she and host Mike Hosking were not exactly on the same page, she acknowledged “the GDP numbers” – listeners would probably believe she was giving a hint that the figures were good. “I’m pretty pleased.”

Instead, she was talking about the Crown’s financial statements – the Government’s books – which are not due to be released for about three weeks, and which few people outside Parliament or bond trading circles care much about.

To some it will seem like a meaningless mistake, but the integrity of market-sensitive information is critical to New Zealand’s reputation as a transparent economy.

No-one gets the inside word, or at least, no-one should, even though lots of people want it. Ardern’s comments left the impression that she not only knew, but that she had not kept the secret.

Whatever the economic growth figures do show this week, they will almost certainly move the currency and other parts of the financial markets, amid speculation that new Reserve Bank governor Adrian Orr is prepared to cut interest rates if the economy slows.

The speed with which Ardern’s office acknowledged the mistake underlines how important it was that the comments were not amplified without clarification.

Peter Dunne: It’s time to bury the capital gains tax

All of which raises the question as to why the capital gains issue keeps getting raised, especially since the arguments in favour from both a revenue gathering and efficiency perspective are not that strong.

After all, given both the long and variable lead times involved between the purchase and sale of taxable assets, a comprehensive capital gains tax is at best likely to be a somewhat unreliable and unpredictable contributor to annual revenues. Advice I received when Minister of Revenue was that it could be over a decade from the time of introducing a broader based capital gains tax until it produced any significant revenue gain for the Government.

Also, it has been long accepted that the family home would have to be exempted from any such regime, further diminishing its likely impact. Even in the rental sector, the impact would likely be negative for tenants, with landlords boosting rents to offset any negative tax impact when those properties are sold.

 

National debt on track to approach 100% of GDP by 2028

National debt is currently running at about 77% of Gross Domestic Product, and is on track to reach 100% of GDP in ten years. This, of course, is in the US.

Reuters: Republican tax cuts to fuel historic U.S. deficits

The deficit – the amount that Washington’s spending exceeds its revenues – will expand to $804 billion in fiscal 2018, which ends on Sept. 30, up from $665 billion in fiscal 2017, CBO said.

The national debt is on track to approach 100 percent of gross domestic product (GDP) by 2028, said the nonpartisan CBO, which analyzes legislation for Congress.

“That amount is far greater than the debt in any year since just after World War II,” CBO said, adding that the debt is now about 77 percent of GDP, a measure of the size of the economy.

The Republican tax legislation, passed by Congress without Democratic support, along with a recent bipartisan $1.3 trillion spending package, are expected to drive economic growth faster than initially expected, CBO said.

The analysis “confirms that major damage was done” by the new tax law and the spending bill, said Michael Peterson, head of the nonpartisan Peter G. Peterson Foundation.

“This high and rising debt matters because it harms our economy,” said Peterson, whose group backs fiscal conservatism.

“During a time of low unemployment and economic expansion, we should be taking reasonable steps to put our debt on a sustainable path – but instead we are piling up trillions of bills,” he said.

The debt picture is quite quite different in New Zealand. For last year’s election campaign Labour made a commitment to continue reducing debt as a percentage of GDP to 20%, albeit taking two years longer than National’s promise.

Finance Minister Grant Robertson has just re-confirmed this commitment.


Question No. 3—Finance

3. Hon AMY ADAMS (National—Selwyn) to the Minister of Finance: Is he committed to reducing core Crown net debt to 20 percent of GDP by 30 June 2022?

Hon GRANT ROBERTSON (Minister of Finance): This Government is committed to reducing core Crown net debt to 20 percent of GDP within five years of taking office, as indicated in the Speech from the Throne. In the Half Year Economic and Fiscal Update (HYEFU), core Crown net debt is forecast to reach 19.3 percent of GDP by 30 June 2022.

This is despite he and Jacinda Ardern sounding alarm at a number of apparently sudden crises claiming underfunding of ‘core services’. Instead of borrowing at near record low interest rates to fund urgent infrastructure repairs and rebuilding Labour will steadfastly lower New Zealand

Hon Amy Adams: So to maintain his debt-to-GDP anchor, why won’t he tell New Zealand which of the Government’s stated commitments and expectations he has raised around teachers’ and nurses’ pay will now have to be dialled back because he’s now simply realised that he’s already run out of money?

Hon GRANT ROBERTSON: The member will just have to wait until 17 May, but what I can be absolutely clear about is that this Government understands the importance of a balance between a prudent fiscal approach and making the investments we need to undo the social and infrastructure deficits left to us by the previous Government.

Hon Amy Adams: Can he confirm that the additional Government revenue available to him for the current year alone, tracked from the Pre-election Economic and Fiscal Update projections to the Crown accounts to the end of February, is in fact an additional $700 million?

Hon GRANT ROBERTSON: The member has been paying attention to the monthly statements from Treasury. The final forecasts are still to be done. What’s important to remember, though, is it’s not so much about how much extra revenue might be available to this Government; it’s about what the last Government didn’t do with the revenue that it had.

Hon Amy Adams: Can he also confirm that the HYEFU shows additional tax revenue over the next four years from that which was predicted in the pre-election update is $6.6 billion more?

Hon GRANT ROBERTSON: There is indeed money available to be spent, and this Government will invest that wisely in making sure that we invest in health and education and housing, not the priorities of the previous Government, which were tax cuts slanted towards the most wealthy.


So debt levels are relatively low, interest rates are very low, Ardern and Robertson have started claiming there are a number of suddenly discovered crises due to lack of funding of core services and infrastructure, but the need is not urgent enough to relax their debt lowering targets at all.

There seems to be confusing signals here.

Newsroom: Labour’s budget rules are holding it back

It’s a very strange political alignment when the trade union movement and Matthew Hooton are in agreement. But that’s what has happened over the past week, with both the Council of Trade Unions and the right-wing political commentator speaking out against the government’s continued insistence on adhering to its Budget Responsibility Rules.

These rules are a self-imposed agreement between Labour and the Greens – signed before the election – to reduce core government expenditure to below 30 per cent of GDP, and to reduce government debt to 20 per cent of GDP by 2022. The upshot of this is the Labour-led government has largely adopted the National Party’s fiscal policies, embracing an austerity-style approach to spending. It means they can’t afford to fund adequately housing, healthcare, workers in the state sector, and public infrastructure in general.

The CTU has been unusually outspoken in criticising Labour’s continued adherence to these austerity rules. President Richard Wagstaff questioned whether the government would be able to deal with the crumbling state of public assets, and whether state servants’ need for pay increases would be properly met.

Although some will write off such criticism simply because it comes from the union movement, it’s worth noting that Matthew Hooton also thinks adherence to the conservative fiscal policy is unnecessary and will cause Labour problems. He’s written a column in the NZ Herald suggesting the Prime Minister and her Finance Minister should “more confidently own Labour’s commitment to higher spending and begin the process of gently stretching out the debt reduction target.”

Labour are being questioned quite widely on their current stance.

China growth ‘only’ 6.8%

I’ve got the impression from coverage of the economic situation in China generally and on their share market slide in particularly that things must be getting bad there.

But the ODT reports China’s GDP up 6.8% on year ago.

China’s fourth quarter gross domestic product (GDP) has largely met expectations, coming in at 6.8% compared with a year ago, but still the slowest growth since the global financial crisis.

The revealing of Chinese economic data initially saw Asian markets rise modestly, but an hour later were trading down slightly, the lack of negative news giving some reprieve to markets hard hit in earlier weeks.

Craigs Investment Partners broker Peter McIntyre said release of the economic data had “no real surprises” for the market.

In the global context, China’s growth remained “exceptionally good”, albeit down on previous years’ 9% growth, he said.

Global sharemarket jitters so far this year have been hanging on the GDP delivery, with China’s markets entering a sell-off bear market with around 20% losses, while others are down 5%-10%, since New Year.

Reuters reported full-year growth at 6.9%, as expected by the markets and analysts, and roughly in line with the Chinese Government’s target of around 7%, but it was the slowest pace of expansion in a quarter of a century.

So it’s “the slowest growth since the global financial crisis” and “the slowest pace of expansion in a quarter of a century” – if the quarter century claim is correct the GFC claim must be correct.

Huge growth in China couldn’t be sustained. 7% growth still sounds quite a lot especially considering the size of China’s market.

After being a major locomotive of global growth in recent years, China is now in a protracted slowdown, weighed down by weak exports, factory overcapacity, a soft property market, high debt levels, slowing investment and a government anti-corruption campaign.

Separate data from China yesterday revealed industrial output rose 5.9% in December from a year earlier, but missing market expectations, as its manufacturers struggle with persistently sluggish demand at home and abroad, excess capacity and high borrowing costs; analysts polled by Reuters had expected a 6% factory output increase.

Protracted slowdown, weighed down, overcapacity, soft market, slowing, struggle, sluggish.

How many other countries would love to have GDP growth of 7%?

In the medium to longer more modest growth in China must be a good thing. They couldn’t keep expanding at their past rates without risking serious problems.

Kenneth Kim at Forbes in What’s Going On With China’s Stock Markets and Economy? on whether China is going into a recession:

I highly doubt this. Sure, the estimated Chinese GDP growth rates of about 7% in 2015, and forecasted to about 6-7% for 2016, are kind of hard to believe, but even the most skeptical economists in China still believe its GDP growth rate will be about 3% in 2016. A 3% growth rate is not great, but it’s still positive growth and beats what the U.S. has been doing lately. And a 3% GDP growth rate certainly does not put China into recession territory, especially for an economy that has already grown a lot recently.

It looks like a significant adjustment to lower growth rates but it’s still enviable growth.

Do we need a Plan B?

Do we need a Plan B for the New Zealand economy?

Andrew Little versus Bill English last week:

[Sitting date: 08 September 2015. Volume:708;Page:6295. Text is subject to correction.]

1. ANDREW LITTLE (Leader of the Opposition) to the Prime Minister : Why did he say “Plan A is a good plan” given the state of regional economies?

Hon BILL ENGLISH (Acting Prime Minister) : He said “Plan A is a good plan” because plan A is a good plan. It enables regions to be resilient to shifts in global prices. The Government is supporting regions in a number of ways, including water reform and Resource Management Act reform, recognising that most regional economies are resource-based economies, and we are investing in regions through better alignment in training and skills, education, and research and development. Some regions are under pressure from the volatility in dairy prices. The Government is working with those regions—for example, through regional growth studies—to attract more investment, jobs, and growth.

Andrew Little : Given plan A is a failure that has led to higher unemployment, weak growth, and record debt, why is he refusing to consider a new direction?

Hon BILL ENGLISH : We do not agree with the member’s description of the future of the New Zealand economy. I know he is among the very few people who want to see the economy crash, because he thinks it might benefit his poor leadership and party standing. But, actually, we have a longer-term view that although this is a softer patch for the economy and a difficult period for some industries, we have longer-term confidence in the New Zealand economy.

Andrew Little : Given that plan A has failed, will he update National’s 2014 slogan to now read “Not working for New Zealand”?

Mr SPEAKER : Order! The question was not heard because of the level of interjection, mainly from my right—[Interruption] Order! I invite the member to repeat the question.

Andrew Little : The question is and was: given that plan A has failed, will he update National’s 2014 slogan to now read “Not working for New Zealand”?

Hon BILL ENGLISH : No, because plan A is working for New Zealand, much better than Labour’s political strategy is working for Labour.

What would a Plan B be?

Or if we keep chugging away much as we are (National’s Plan A) are we likely to do ok?

As shown in GDP growth up for June quarter after a slowdown in the March quarter to 0.2% GDP growth has improved in the June quarter to a still modest 0.4%.

What would work best, a reactive economic policy approach, or steady as she goes?

GDP growth up for June quarter

Statistics New Zealand have announced 0.4% growth in GDP for the June quarter, following a 0.2% increase in the March quarter.

Economic growth boosted by services and primary industries

Growth in services and primary industries supported a 0.4 percent increase in GDP in the June 2015 quarter, Statistics New Zealand said today.

Agricultural production increased 3 percent in the June 2015 quarter, due to increased meat and dairy farming.

“Despite falling milk prices, we’re seeing growth in dairy production,” national accounts manager Gary Dunnet said. “But over the year, agriculture is up only a little, due to dry conditions last summer.”

Food, beverage, and tobacco manufacturing was also up in the June 2015 quarter, due to strong dairy product manufacturing. Inventories of meat and dairy products built up as exports of these goods fell.

Mining also made a partial recovery from recent falls, with a 2.5 percent increase in the latest quarter. The main driver was oil and gas extraction, but this was partly offset by decreases in coal mining and oil exploration.

Collectively, the service industries were up 0.5 percent in the June 2015 quarter, but it was a mixed picture at the lower level – six industries grew and five declined. Growth was driven by business services (up 2.3 percent) and rental, hiring, and real estate services (up 1.1 percent), but these gains were partly offset by a 1.8 percent decrease in transport, postal, and warehousing – the biggest fall since March 2009.

On the expenditure measure of GDP, domestic demand was strong (up 1.3 percent). Household spending was up 0.9 percent, with increased spending on fruit and vegetables, and big-ticket items including cars and furniture. Business investment also increased (2.2 percent) – but this was offset by falling exports and rising imports.

The size of the economy (in current prices) was $241 billion for the year ended June 2015.

More data and analysis: Gross Domestic Product: June 2015 quarter