Heard about the Kiwi Bureacrats

A correspondent from The Telegraph writes;

The scene of this madness was the Takaka post office which is where ‘rural' households like ours must go to pick up their mail from a bank of rusting old Post Office Boxes.

Recently I concluded some additional business with my landlord who asked me to put a copy of our new rental contract into his PO Box so that he could collect it next time he was passing through town.

So in I pop to the post office to ask the man behind the counter if he would put the envelope into Box No ‘xxx' when they were next being stuffed with the morning mail - the box in question was no more than ten paces from where he was standing -.

He shook his head with the helpless solemnity.

"Sorry, mate. You'll need a stamp."

I pointed at the address on the envelope.

"It's just going in one of the boxes."

"Sorry, mate. You'll need a stamp. That'll be a dollar-fifty."

I looked at him, searching for the hint of a smile. Nothing.

"You've got to be joking, right? That ‘delivery' is ten paces. That's fifteen cents a metre..."

"Sorry, Mate. What kind of business do you think we're running. Dollar-fifty."

I was so shocked, I paid the man his money. Even as I type this, I can't quite understand why.

As if it's any consolation, he explained that my freshly stamped letter will now travel ‘over the hill' to the Nelson sorting office, where it will be sorted and returned to him behind the Takaka post office counter.

Only then, two days and several hundred kilometers later, will the man behind the post office counter shuffle the required ten paces over to the bank of PO Boxes and put my letter in the relevant PO Box.

New Zealand Economist of the Year

The NZIER Economics Award for 2008 has been awarded to Dr John Gibson;

One such topic is that of savings. Contrasting beliefs that New Zealand has a household savings crisis, that inadequate retirement incomes would result from a rapidly aging population, that weak savings records have caused New Zealand to lag behind other developed countries, and that raising levels of savings would deepen domestic capital markets and boost economic growth, have made savings one of the most contentious recent political economic issues in this country. Through research and communication, the recipient of the Award has challenged these beliefs. In doing so, he has significantly advanced the understanding of academics, advisers, the public and students, of savings behaviour, the levels and composition of private wealth, and the adequacy of expected retirement incomes of New Zealand households.

The recipient of the Award has also undertaken substantial research on the education, labour market positions, and wealth of disadvantaged groups in New Zealand. His work on inequalities in income and wealth between Maori and Pakeha, and between migrants and locally born people, on training and job security for ethnic minorities, on Maori educational attainment, and on returns to schooling for Maori, sheds important light on the socio-economic positions of Maori and Pacific peoples.

A hallmark of the recipient’s work has been a willingness to generate new survey data, tirelessly and innovatively, where he has thought this necessary in order to answer empirical questions for which the existing data were inadequate.

This approach to his work has brought about a third major contribution from the recipient. Students at all levels, but particularly graduate research students, and academic colleagues, have learnt from him how vital it is, in economics just as in other fields, to concentrate on meaningful questions, to gather reliable and apposite empirical data, to analyse those data critically and rigorously, and then to disseminate those analyses through channels that will advance understanding of the issues, and inform debate on them. His students, in adopting that approach, are excellently equipped to contribute to New Zealand, and to other societies, in economics and in related fields.

From his acceptance speech;

Looking back, I also had the good fortune to work for the Agriculture Department in Papua New Guinea in the time between my Masters and PhD. Not only did I meet my wife there, I also managed to raise the ire of the Secretary of Agriculture, who was a former politician who ultimately became the PNG ambassador to the UN.

He took issue with research I had done showing that it was far better for Papua New Guinea to trade for rice using tree crops than to try to produce rice in some self-sufficiency effort. After cancelling my contract he went to the unusual lengths of taking out a full page advertisement in the national newspaper to say that all advice that I had given was a load of rubbish. Occasionally I think that Dr Cullen implies as much when he is dismissing my research on household savings with Grant and Trinh, but he has never gone to quite these lengths.

One silver lining of this was that the main private sector sponsor of research, a group not unlike the Business Roundtable, figured that I must be saying something sensible to warrant such venom. So they promptly hired me for two summers of work on food policy in PNG which lead to my working for a year and a half for the World Bank during my PhD, leading a nationwide survey of household living standards. Not many PhD students get million dollar research projects so I was again very lucky.

The second silver lining from this experience was that it provided a lesson that we typically don’t get in graduate school. Economics when applied publicly to currently policy problems is not always welcomed by either the incumbent elites or some of the vested interests. Such groups might occasionally resort to the odd media pot shot at the economist willing to publicise the implications of their research.

It is on that theme that I want to turn from the past to the future. It is my impression that as a society we are not getting full value from our university-based economists, in helping to inform public debate on topical matters. There are several reasons for this and at least some of them reflect factors that a group like tonight’s audience can help to overcome. So I want to bring these to your attention.

New Zealand the model

Willem Buiter talks about the New Zealand model of public financial management;

It is a near-universal rule of time management that the urgent but not necessarily terribly important takes precedence over the important but not terribly urgent. Economic policy making is no exception to this rule. I was therefore pleasantly surprised to read in the papers that Peter Orszag, Director of the Congressional Budget Office (CBO) said on September 9 that “It is the CBO view that Fannie Mae and Freddie Mac should be directly incorporated into the federal budget”. The CBO is the (non-partisan) federal agency within the legislative branch of the US government that acts as a congressional budget watchdog and among whose responsibilities is the projection of the budgetary consequences of proposed legislation.

Why does it matter that the revenues, outlays, assets and liabilities of Fannie and Freddie be put into/onto the budget and balance sheet of the US Treasury? It won’t help or hinder the resolution of the current financial crisis. What is does, is strike a blow for accountability for the use of public funds. It enhances the quality of the information available to the Congress and to the public at large about the federal government’s financial exposure (including its contingent exposures) and about future expected or planned sources and uses of funds. Without high-quality information and without transparency, there can be no accountability for the use of tax payers’ money. Peter Orszag therefore struck a blow for good governance, for better government and for checks and balances....

The only government in the world that gets close to providing all the relevant information to have a go at constructing its comprehensive balance sheet is the government of New Zealand. Since 1989, the Public Finance Act 1989 (PFA) requires the New Zealand government to pursue its policy objectives in accordance with the following principles of responsible fiscal management:

* Maintaining debt at a prudent level by ensuring that, on average, over a reasonable period of time, total operating expenses do not exceed total operating revenue.
* Achieving and maintaining net worth at levels which provide a buffer against factors which may adversely impact on net worth in the future.
* Managing prudently the fiscal risks facing the Government, and;
* Pursuing policies which are consistent with a reasonable degree of predictability about the level and stability of taxes for future years.

That’s rather waffly, but the implementation of these principles is anything but. The PFA requires the government to present, in each financial year, two reports outlining Government’s fiscal policy: the Budget Policy Statement (BPS) and the Fiscal Strategy Report (FSR). The BPS has a short run focus setting out policy goals that will guide the Government’s Budget decisions and priorities. The FSR is presented with the Budget and must state the Government’s long term objectives for fiscal policy over a period of at least 10 years and the Government’s short term intentions for fiscal policy over a period of three years. The FSR must also provide projections of fiscal variables to show progress towards meeting the long term objectives (Progress Outlooks).

In addition, the Treasury is required to publish, at least every four years, a Statement of the Long Term Fiscal Position. This has a horizon of at least 40 years and identifies how demographic and other changes may impact the fiscal position.

Added to this are serious attempts to value such contingent liabilities as guarantees, and to calculate the fair value of such contingent political commitments as social security retirement benefits.

MTEF Expert of the Day - Graham Scott

Dr. Graham Scott, former Secretary to the Treasury of New Zealand. Some of his experience;

Office of the Public Sector Development
Commission, Bangkok in cooperation with the World Bank – Case Study on Thailand’s Public Sector Reform. Writing a case study for inclusion in a book on the Royal Thai Government’s Public Sector Reform to assist other developing countries, particularly Asian countries, contemplating public sector reform.

Advised Royal Government of Bhutan on the development of new financial management arrangements to support the move from a monarchy to a constitutional democracy. This included drafting a Public Finance Act and advising on the design and implementation of reforms associated with this Act. [World Bank project]

World Bank - Governance Reform in Lao PDR. Writing a background report on governance reform in Lao PDR as input for the Lao PDR Country Policy and Institutional Assessment (CPIA).

Advised Government of Latvia on financial management reforms including reforms to the budget process (MTEF etc). Assisting Ministry of Finance and Ministry of Economy with development of new programmes, strategic plans and the linking of this work to the budget and reporting systems.

Advised Ministry of Finance and Economy on the concepts and implementation of MTEF approach to budgeting. Includes advice on roles and responsibilities in the MTEF process, programme design, legal matters, timing and information requests and processing.


Advisor to the World Bank on the public expenditure review for Mongolia.

Advisor to Ministry of Finance in Macedonia on reforms to financial management and organisational developments within the Ministry of Finance, including implementing strategic planning processes

Advisor to the Office of the Auditor General of Canada on the examination of the public service reform initiatives- also 1994,1995.

Visiting Scholar to the Fiscal Affairs Department of the International Monetary Fund. Produced paper for publication- “Government Reform in New Zealand”. Occasional paper No 140, International Monetary Fund, Washington DC, October 1996.

The Secretary to the Treasury, Government of New Zealand
The chief executive of the Treasury responsible for providing policy advice on a broad range of economic, financial and commercial issues. The significant work achieved during this time included:

• Design and implementation of approaches to fiscal policy and public management which revolutionised the way New Zealand governments manage their financial affairs.
• Development of the State Sector Act and the Public Finance Act which brought about the devolution of financial authority to government departments and agencies and pioneered the concepts of output-based budgeting and performance management.
• Initial development of New Zealand’s pioneering Fiscal Responsibility Act which strengthened the accountability of the executive to parliament for sound principles of fiscal management on a medium and long-term framework.
• Design and administration of New Zealand’s corporatisation programme which created State-owned enterprises out of many departmental functions and incorporated them under New Zealand company law. Privatisation of most of these activities.
• Redesign of the functions of the New Zealand Treasury, including privatising the management of pension funds and other functions.
• Establishment of the Debt Management Office, an office which holds responsibility for the policy and administration of the government’s official debt. This has become a world leader in the application of modern portfolio management techniques to government debt management.