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?”
