What’s worse? Higher inflation or unemployment? (Image: Tina Tiller)
What’s worse? Higher inflation or unemployment? (Image: Tina Tiller)

The BulletinJuly 27, 2022

What’s worse? Higher inflation or unemployment?

What’s worse? Higher inflation or unemployment? (Image: Tina Tiller)
What’s worse? Higher inflation or unemployment? (Image: Tina Tiller)
newsletter

Research from three New Zealanders caught the eye of a New York Times business writer last week. Why, asks Anna Rawhiti-Connell in The Bulletin.

 

Captain Obvious and Captain Hindsight

Yesterday Stats NZ reported its household living-costs price index figures for the June quarter. Captain Obvious here, but costs have increased by 7.4% on the same time last year. Most of us are in for a “virtual pay cut”. Meanwhile, as Stuff’s Luke Malpass reports, the National Party is hoping criticism of the Reserve Bank (RBNZ) opens up a new front in the “cost-of-living fight with the government”. Finance minister Grant Robertson called opposition leader Christoper Luxon “Captain Hindsight” yesterday in response to National’s calls for an inquiry into the Bank’s monetary policy. Sidenote: Captain Hindsight is a South Park character with perfect 20/20 hindsight.

New Zealand research into inflation and unemployment catches eye of the New York Times

The reality of confronting rising inflation for the first time in decades is probably why research from three New Zealanders caught the eye of a New York Times business writer last week. The study correlated data from the Gallup World Poll from 2005 to 2019 about how people feel about their lives and economic conditions at the time in each country. Former BusinessWeek writer, Peter Coy featured the research in his New York Times opinion column (paywalled) last week, asking “What’s worse, higher inflation or higher unemployment?” Coy writes that the question is at the core of the debate over how rapidly central banks should raise interest rates to cool off the economy and bring inflation down.

Increasing unemployment has much greater impact on our wellbeing than rising inflation 

A version of the study was published online in 2020 but it is due to be published in the American Journal of Money, Credit and Banking. Coy has called the research findings “remarkable”. A 1% point rise in the unemployment rate has 4.6 times as large an effect on sadness as a 1% point rise in inflation. Coy says “the beauty of the study is that it’s unbiased; the people answering the questions about their feelings had no idea that their answers would one day be used to assess the impact of inflation and unemployment on their lives.”

Government should better define what aspect of well-being it would like RBNZ to promote

The Spinoff’s Chris Schulz interviewed one of the study’s authors, Robert MacCulloch this week. The thing is, MacCulloch isn’t that bothered if I write about this, if Chris Schulz writes about this or if Peter Coy from the New York Times writes about this. One of the research’s main takeaways is that the government should better define what aspect of well-being it would like the RBNZ to promote in order to implement its statutory objective. Speaking to Schulz he said “You’ve rung up and the New York Times rang up about it. The amazing thing is that the Reserve Bank’s never rung up. It’s never shown a molecule of interest … I’ve had zero interest. Why not?”

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    A cow walks past a tourist villa in Bali (Photo: RNZ/Supplied: Ross Ainsworth)
    A cow walks past a tourist villa in Bali (Photo: RNZ/Supplied: Ross Ainsworth)

    The BulletinJuly 26, 2022

    Preventing the “doomsday disease”

    A cow walks past a tourist villa in Bali (Photo: RNZ/Supplied: Ross Ainsworth)
    A cow walks past a tourist villa in Bali (Photo: RNZ/Supplied: Ross Ainsworth)
    newsletter

    Following an outbreak of foot and mouth disease in Indonesia, the government is introducing extra measures to ensure it doesn’t reach New Zealand, writes Anna Rawhiti-Connell in The Bulletin.

     

    A “doomsday disease” for the farming sector

    It’s been 21 years since over 6 million pigs, cows and sheep were destroyed in the United Kingdom following an outbreak of foot and mouth disease (FMD). Bill Sykes, a former vet in the Victorian agriculture department flew to the UK to help contain the outbreak in 2001 and recalls the toll it took. It’s estimated the outbreak cost the UK $21b (NZD). Yesterday agriculture and biosecurity minister Damien O’Connor described FMD as a “doomsday disease” for the New Zealand farming sector. To be clear, we have never had an outbreak here but prevention measures are being stepped up after an outbreak in Indonesia, including in the popular tourist destination of Bali.

    Treasury data estimates FMD outbreak could result in lost earnings of $15b

    During yesterday’s post-cabinet press conference O’Connor pointed to New Zealand’s already extremely stringent biosecurity procedures. He also outlined the extra measures being taken, including the introduction of disinfecting foot mats for arrivals from Indonesia, an awareness campaign targeting travellers before they go to Indonesia, an audit of the palm kernel supply chain in Indonesia, and providing resources to Indonesia to help them deal with the disease. There is also a ban on travellers bringing in any meat from Indonesia and an FMD readiness task force being set up. Treasury data from 2018 shows a six month outbreak of FMD in the North Island could result in lost export earnings of $15b.

    Calls to stop flights between Indonesia and Australia

    New Zealand does not have direct flights with Indonesia but Australia does, and there have been calls there to stop flights between the two countries. This has been ruled out by the government, who have cited Australia’s $17b-a-year trading relationship with Indonesia and that there are outbreaks of the disease in 70 other countries.  Australia is introducing further measures and 100% of all incoming parcels from Indonesia and China (where FMD is also present) will now be screened. The increased risk of FMD is also prompting farmers in Australia to consider freezing cattle sperm and eggs to protect bloodlines.

    First outbreak in 37 years in Indonesia causing “mayhem”

    Since May, more than 400,000 cases have been recorded across 23 provinces in Indonesia. The Indonesian government has opted against widespread culling due to concerns about insufficient funds to compensate farmers for lost livestock. There are also concerns the outbreak may impact the tourism industry in Indonesia which is only just recovering from pandemic border closures and travel restrictions. RNZ’s A Country Life recently spoke to a vet based in Indonesia who said it had caused “absolute mayhem” on the bigger islands in Indonesia, Java and Sumatra.