Month: January 2024

Conflicts of interest

Michael Reddell Reserve Bank

A while ago I stumbled on the report of Kristy McDonald QC, dated 22 February 2022, which had been commissioned by Hon David Clark, then Minister of Commerce, into aspects of the appointment of the default Kiwisaver providers, and specifically around the handling of conflicts of interest involving the then chief executive of the Financial Markets Authority (FMA) whose brother-in-law was the chief executive of one of the providers. The FMA provided a strictly limited bit of advice to the Minister.

I was less interested in the specifics of the case - which didn’t reflect very well on the FMA or its board/chair, but was (from the report) hardly the worst thing in the world - than in Ms McDonald’s observations on conflicts of interest. This is probably the most useful excerpt from her report (the document mentioned in italics is from the Public Service Commission).

There is a heavy emphasis on three things really. First, avoiding actual conflicts of interest. Second, ensuring that outside (“fair minded”) observers can be confident that decisions have not been improperly influenced. And, third, documentation, documentation, documentation (which helps demonstrate, at the time and if necessary later, that actual and apparent conflicts have been recognised and dealt with appropriately).  As McDonald notes in 6.22 you’d think considerations like these should be particularly important in a regulatory agency, especially one - such as the FMA - with regulatory responsibilities in the financial sector. This is from the very top of the front page of the FMA’s website

You’d really have hoped that the Financial Markets Authority would have gone above and beyond in setting and applying standards for its own people, But…..no. You might remember them banging on a few years ago about “culture and conduct” in the private financial sector. I guess those were aspirations for other people.  One hopes that, in the light of the McDonald report, the FMA has now lifted its game in handling such issues in its own organisation. One might hope…..

One of the classes of financial product/entity that the FMA has regulatory responsibility for is superannuation schemes. It has particular responsibility now for a class of so-called “restricted” schemes, closed off to new members and generally in multi-decade run-off.  One of the FMA’s predecessor entities was the office of the Government Actuary which had in times past been required to consent to any changes in superannuation scheme rules. In old-style defined benefit superannuation schemes - a form of deferred remuneration where the effects (contributions/entitlements), even for an individual, stretch over decades – those sorts of protection and oversights, whether embedded in statute law or in the deeds of schemes are vitally important.  Such schemes are typically established as trust structures in which all trustees are required to undertake their duties with the best interests of members in mind. Being a trustee is, or should be, no small thing, not a duty entered upon lightly.

Conflicts of interest can, at times, be a significant issue. In a typical employer-sponsored superannuation scheme some of the trustees will be elected by members and some will be appointed by the employer. These days - in what is mostly regulatory impost (thank you Key government) – schemes are also required to have a Licensed Independent Trustee. (There were hazy warm thoughts at the time that these might be courageous independent thinkers who’d be a force for good, but the model really seems built more to encourage box-ticking – there are lots of boxes to tick – establishment figures earning a bit of pre-retirement income: you aren’t likely to be appointed to such roles if there is any fear you might rock the boat.)

In a scheme that defers for decades employee remuneration there can be material tensions between the interests of the employer and the members.  But much of the time there aren’t such conflicts. The day-to-day responsibility is to ensure that the pensions are calculated correctly and paid reliably, that member queries are dealt with in an appropriate and timely way, that statutory reporting and compliance requirements are met, and that money is collected properly and invested prudently.  I’ve been a trustee of the Reserve Bank scheme for 15 years and those issues go by pretty harmoniously, with any differences of view rarely falling along Bank-appointed vs member-elected trustee lines. And if the rules are clear and discretion strictly limited the room for seriously conflicting interests is minimised.

But the differences come to the fore when there is any consideration of material changes to the rules or the status of the scheme. Things are especially problematic if employer-appointed trustees form a majority. That is why, for example, it is common to require regulator consent to change rules and to include protections such that member consent is required from any members who might be made worse off by a rule change (to which they might still consent if, for example, one adverse rule change was balanced by other changes the member considered was to their benefit).

And here the situation is supposed to be pretty clear. A member-elected trustee is not generally regarded as intrinsically conflicted simply by virtue of being a member (since the entire purpose of the trust is to benefit members, whose interests all trustees are supposed to advance). A member-elected trustee can, of course, be specifically conflicted and should then recuse themselves (as an example, it turned out some years after I left the Bank that my retirement benefits from the pension scheme had been materially miscalculated. I stood aside for any deliberations on that matter). But the situation of employer-appointed trustees is generally regarded as different: often they will be senior managers or Board members of the sponsoring employer and the potential conflicts between the interest of the employing firm and that of the trust (and its beneficiaries) can be all too evident.

There is very little regulator guidance on these issues in New Zealand - perhaps not surprising when the FMA hadn’t really handled its own well - but shortly after I became a trustee I found a lengthy guidance note from the UK Pensions Regulator, which I have since regarded as something of a guidepost (it is still current). It is a different country to be sure, but with broadly similar culture, a large DB pension sector, and much of the case law that gets cited here comes from the UK. In any case, the question here is not what is lawful, but what is proper (substantively and in terms of perceptions and appearances).

You might remember that the whole “culture and conduct” tub-thumping exercise a few years back was done jointly with the Reserve Bank. You’d have thought that the Reserve Bank might be some sort of exemplar of good conduct, and concerned to be seen as such. I guess you might have thought that of the FMA too. More fool us.

For the last decade the trustees of the Reserve Bank pension scheme have been grappling with arguments and evidence around claims that several significant deed amendments done in the white heat of the reform era (late 80s, early 90s) were not lawfully made and are thus invalid. No one really quite knows what the implications would be if these changes were to be held to be invalid, but it would be unlikely to be good for the Reserve Bank (either reputationally or financially). It would, I think, generally be conceded now that the rule changes were, to say the very least, not handled well by former trustees and management (eminent figures such as Sir Spencer Russell, Don Brash, Suzanne Snively, but also able members’ trustees). In fact, Don Brash himself has raised specific concerns with trustees regarding events on his watch - and trustees simply refused to ever meet him.

Three of the six trustees are appointed by the Board of the Reserve Bank from among directors or staff members (a fourth – the LIT – is chosen by other trustees but long ago declared he never wanted to come between member and employer interests). Those Bank-appointed members can be replaced at will for any reason or none. Over the decade they have included a Governor, a Deputy Governor, a deputy chief executive, a couple of Board members, and a long-serving relatively junior staffer.  As we have dealt with the issues over ten years there has never been any sign of these appointees putting member interests first. It is not that nothing has happened - some serious mistakes have been acknowledged and or fixed – but only things that are not awkward or potentially costly for the Bank. It is, of course, impossible to know whether these trustees have actually prioritised Bank interests, but it is impossible to tell apart their actual approach from the sort of approach that would be predicted were Bank interests to be prioritised.  Nothing has ever been done to acknowledge the serious conflicts of interest or to document how those conflicts are being managed or dealt with (and the Bank trustees have consistently refused suggestions of either using an arbitrator or approaching the courts for (definitive) guidance and resolution).

Tomorrow morning in Wellington there is a meeting of the members of the Reserve Bank scheme, called by a group of members (including two former senior Reserve Bank managers) under the provisions of the Financial Markets Conduct Act. The members say that they want to seek explanations for the thinking behind various decisions the trustees have made (usually by majority). Rather than engage, it appears that the intention of the Bank-appointed majority is to stonewall. The current chair – one of Adrian Orr’s many deputies - appears more interested in pursuing me for openly articulating my dissent and criticisms of trustee processes and advice than in engaging with members or getting to grips with the substance of the issues. And - par for the course – never seems to recognise any sort of conflict.

I’ve put as much emphasis on atrociously poor processes (in one part of the decade I was moved to describe what was going on as a “corrupt process”, words today’s trustee wanted excised from the version of minutes provided to members for tomorrow’s meeting). But the process problems go back to the start.

Way back when these issues were first raised with trustees, Geoff Bascand - at the time one of Graeme Wheeler’s deputies, with overall responsibility for Bank HR and finance issues - was the chair of trustees. His quick response to the initial approach - itself in the form of a letter and 30 page document- was to suggest, in writing, to trustees that we simply write back to the member who had raised concerns stated that the issue was closed. He sought to reassure trustees that they needn’t worry because even if anyone took legal action trustees were indemnified by the Reserve Bank. Bascand was later Deputy Governor and Head of Financial Stability at the time of the “culture and conduct” campaign.

Things, and processes, were mostly a bit less blatantly egregious after that, but the conflict of interest issue was simply never addressed, and the process was often Potemkin-village-like (expensive, time-consuming, but pretty much working towards innocuous ends). On all hard decisions the Bank-appointed trustees voted for the interests of the Bank……and all of them were left in office by a Bank management and Board that (fully informed throughout) no doubt appreciated their services….in the best interests of members of course, as the law required.

I have written a retrospective assessment of the experience.

The Indifference of the Powerful RBNZ Superannuation and Provident Fund, Reserve Bank, and the FMA

It is probably of most interest to present and past members of the pension scheme, but it is - to me - a fairly egregious example of simply ignoring serious conflicts of interest.  The scheme is not itself a regulatory body, but it is sponsored and underwritten by one, and the bulk of its trustees serve wholly at the pleasure of the government-appointed board of another of our financial regulatory agency (Orr and Quigley cannot escape responsibility).

As for the Financial Markets Authority, they’ve displayed almost no interest whatever. I imagine it is mostly a matter of being too small, too hard, and too unglamorous but……this entity’s forerunner (the Government Actuary) actually approved some of the more egregious rule changes, so perhaps turning over rocks would be uncomfortable for them, and of course, the FMA and the Reserve Bank work closely together. You might think that something of a conflict, and a dimension that might mean one needed to be seen to go above and beyond to reassure fair-minded observers. But….this is New Zealand and here you’d be dealing with the FMA and the Reserve Bank.

The latest Transparency International Corruption Perceptions Index is, on past timings, due out any day now. No doubt it will repeat the self-congratulatory self-perceptions that are so standard. No doubt too there are many places more corrupt than New Zealand. But maintaining and preserving standards involves sweating the small stuff….or the not so small when they involve key financial regulatory agencies.

UPDATE: As it happens, the Transparency International results were out less than two hours later, with New Zealand slipping out of the top two places. Seems overdue in multiple ways, sadly.

Avoiding scrutiny

Michael Reddell MPC, Reserve Bank Board

Regular readers will recall that I have, intermittently, been on the trail of the approach taken to the selection (and rejection) of external MPC members when the current crop were first appointed in 2019. I have been pursuing the matter since a highly credible person who was interested in being considered for appointment told me that (a) the Bank’s search company had informed my interlocutor that they would not be considered because they had active research expertise in areas around macroeconomics, and (b) having been somewhat puzzled by this response they had personally checked this understanding with the chair of the Reserve Bank’s Board, Neil Quigley, who had confirmed that was the policy. (The person concerned has never challenged my understanding of those conversations and has reiterated concerns over the years). OIAed documents from the Minister of Finance in mid-2019 confirmed that that approach had also been The Treasury’s understanding at the time (Treasury having responsibility for the ministerial/Cabinet side of the process); indeed that the Minister himself had endorsed/agreed to the ban.

I’m not going to repeat the entire subsequent chain. Everyone believed there had been such a blackball in place (it was even in an OIAed contemporaneous summary of a Board meeting discussion), and that included now-former senior central bankers (eg John McDermott) and the former economic adviser to Grant Robertson. These people may or may not have agreed with the ban, which the Minister himself and the Bank had defended on record in comments to media, but there was no doubt it had been there.

But then last year Quigley told Treasury that there had never been a restriction and Treasury - despite a bit of scepticism from a couple of senior officials – put out an official comment stating that there had never been a ban, and that the particular 2019 document from Treasury to the Minister was all a misunderstanding by another fairly senior Treasury figure (who had - conveniently - now left The Treasury, and whom they appeared never to have checked their new view with). More recently, a former Reserve Bank Board member - who had also been a member of the Board’s selection sub-committee in 2018 – confirmed to the Herald that there had been a ban of the sort generally understood (although his comments suggested Quigley may have conflated in his mind - years on – two quite separate sets of discussions).

The renewed interest last year prompted me to go back and check the OIA response the Reserve Bank itself had provided me in 2019 about the selection process for MPC members.  They had then provided a lot of useful material, but it also became clear that they had chosen to exclude - and not to identify for withholding under specific OIA grounds - all dealings between the Board and management on the one hand and the Board’s search company (Ichor) on the other, even though it was pretty clear that any and all such material had been within the scope of the initial request (“all material relating to the Board’s selection and recommendation of potential MPC members”). This was pretty egregious conduct by the Bank: it is one thing to identify that things have been withheld, and to provide specific grounds, and another to just ignore a whole class of material and never bother mentioning it. 

Anyway, I decided to lodge a new OIA, including explicitly highlighting that the material requesting should already have been covered by the 2019 request. My request (from 7 September) was as follows for:

When the Bank’s response finally came back they explicitly identified 26 documents (all of which should have been covered by the 2019 request), and had explicitly evaluated each of them against the criteria in the Act, concluding that 17 could be released in full, 9 in part (mostly it appeared withholding names on privacy grounds, which - per my request - is just fine), and identifying no documents in scope that would be withheld altogether.

But, nonetheless, they were not going to send me the information, and instead wanted to charge me $786.60, citing “the amount of time required to process your request and the frequency of requests from you over the last three months”.

I was briefly tempted. I have had run-ins with the Reserve Bank over proposed charges previously (some years ago). Almost always in the cases I’m aware of (my own and some other people) their attempts to charge have been, pretty clearly, straight-out obstructionism, when the Bank would really prefer people did not see the documents they had no grounds to withhold.

In this case, the Bank told me it had taken 10 hours to process the request. At just over a day of one person’s time that doesn’t seem particularly unusual – or out of step with requests I and others have previously lodged with them – and there was never an attempt to invoke a common agency line (often used to justify extensions) about needing to search a particularly large or ill-defined body of material (this was a specific request about one search firm on one project in one few-month period, so it must have been very easy to quickly find anything in scope, and it was all several years old). Moreover, they had made no attempt to reach out to narrow down the scope of the request or to suggest ways which might limit the risk of charging - the sort of good faith steps they are required to do, if acting lawfully and in good faith.

Had I made a few requests in the previous few months? Yes, I had, including on matters around MPC appointments, and on the Reserve Bank’s puzzling treatment of fiscal policy issues. They were relevant issues to the scrutiny of a very powerful, but underperforming - and not straight with the public - public agency, whose Board chair had already pretty clearly been shown to have actively misled Treasury and, in turn, the public. (Oh, and one was a request for a specific 2016 document, that was about two pages long and not itself contentious or on matters of policy, for which I gave them the title, the author, the date, and the document number in their document management system - I already had a copy but wanted to be free to use it with another audience.)

I’ve been sitting on the Bank’s response for a couple of months - other stuff demanding my time and attention - not quite sure what to do. I’d be astonished if the Ombudsman did not uphold an appeal against the Bank’s attempt to charge for this request – but that might take two years – especially given that the material should have been included in a response to a request that the Bank had responded to (otherwise) appropriately in 2019, and is on a matter of significant interest to those attempting to monitor and hold the Bank to account (it was after all prompted ultimately by Quigley’s and Treasury’s egregious attempts to rewrite history - and if Quigley really was, after all, telling the truth, these documents should if released support his position: almost certainly they do not).

Just briefly, why do I say that they almost certainly do not? Among other things because in the material the Bank released to me in 2019 there was this email that I’ve included in previous posts on the MPC appointments issue (Mike Hannah then being the Secretary to the Board)

That said, since I have not lodged any OIA requests with the Bank for more than three months now, I am pondering resubmitting my request (it was, after all, them who cited as an excuse for attempting to charge a concentration of requests in a three-month period).

Alternatively, here is the full Bank response

RB OIA response re request for information on Ichor and the 2019 appointment of external MPC members

Anyone else could feel free to submit the request themselves (the exact words are in the document, as is the complete list of documents they had identified and already reviewed, so there will be almost zero marginal cost for them to handle such a request, and no legal basis for attempting to charge.   If anyone else does choose to make the request, I’d be happy to hear/see the response in due course (mhreddell@gmail.com).   

[UPDATE: The Bank’s contact email for OIA requests is rbnz-info@rbnz.govt.nz ]

As it is the clock is now ticking on the terms of two of the MPC members which expire (finally, with no possibility of reappointment) in the next few months.   The documents released last year suggest there is no longer a bar on specialist expertise in external MPC appointments, although the suspicion remains that Orr and Quigley (and the tame underqualified Board) will instead have imposed a bar on anyone who might make life at all awkward for the Governor.   To date, the new Minister of Finance has given no hint of reopening the application or selection process –  despite it all having occurred under the previous government and its appointees – and I guess only time will tell whether she has been willing to go along with such a bar, which might be less visibly egregious, but no better in terms of building a strong and open MPC, the need for which is only made more evident by the deep failures of the current MPC under Orr in the almost five years since the current externals were appointed.

Productivity woes….continued

Michael Reddell New Zealand economic performance, Productivity

In my post on Monday I drew attention (again) to the fact that New Zealand has made no progress at all in reversing the decline in relative economywide productivity (relative to other advanced countries) since what was hoped to be a turning point, with the inauguration of widespread economic reforms after the 1984 election. If anything, the gaps have widened a bit further, and more countries (most former Communist ones) have entered the advanced country grouping, first matching and now overtaking us. Despite being so far behind the OECD leaders there are also clear signs that labour productivity growth has slowed further in the last decade or so.

All that discussion proceeded using simple measures of labour productivity (real GDP per hour worked).  The data are readily available for and are more or less comparable across a fairly wide range of countries, and there is meaningful levels data. Labour productivity is a common measure in such discussions, even though total (or multi) factor productivity (TFP or MFP) is the in-principle preferred measure. It is the bit of growth in output or output per capita that can’t be explained just by the addition of more inputs (labour or capital). Some decades ago the late Robert Solow, recently deceased, observed that in modern economies perhaps 80 per cent of the growth in output per capita had been attributable to TFP.

It is a line that should be taken with several pinches of salt since in practice (a) TFP is an unobservable residual, and b) much of the innovation and new knowledge often thought of as the basis for TFP growth is probably embedded in better human and physical capital and the disaggregation is a challenge (to say the least).  Thriving economies are likely to have better smarter people, better tangible and intangible capital, all used in better smarter ways etc.

But with all these caveats I thought it might still be worth having a fresh look at the OECD’s MFP data for the last few decades. They only have MFP (growth) data for a subset of (24) member countries (mostly the “old OECD”, and including none of the central European countries). For New Zealand, the first MFP growth data is for 1987, and with the annual data available only to 2022 that gives us 36 years of data.

There is a lot of year to year noise in the series, but for illustrative purposes I simply split the data in two, to compare the record for the 18 years to 2004 with the 18 years to 2022. As it happens, the global slowdown in productivity growth in leading economies (US and northern Europe) can be dated to about 2005.

New Zealand averaged annual MFP growth of 0.9 per cent in the first 18 year period, and only 0.2 per cent per annum in the second 18 year period to 2022. It is a pretty dire picture. (All data in this post use arithmetic averages, but using geometric would not make any material difference.)

Now, champions of the reform story might be tempted to look at that simple comparison and say something like “yes, you see. In the wake of the decade of far-reaching reform New Zealand made real and substantial economic progress, but then after the reform energy faded and drift took hold it all faded away to almost nothing.

Unfortunately for that story, here is how New Zealand MFP growth record compares (on the OECD’s particular methodology) for New Zealand and (the median) for the other countries (most of them) for which there is a complete set of data.

We all but matched the average growth performance of those other advanced OECD economies in the earlier period, in the wake of our reform process, but even then didn’t do well enough to begin to close the large levels gaps that had opened up in earlier decades. And then in the more recent period, we’ve done worse again: the comparator group (typically richer and more productive, nearer the productivity frontiers) slowed markedly, but we slowed a bit more still. When you start so far inside productivity frontiers there is no necessary reason why New Zealand could not have made some progress closing the gaps even if the frontier countries themselves ran into difficulties. But no. (Over that second 18 year period when New Zealand averaged 0.2 per cent per annum MFP growth, South Korea - also well inside productivity frontiers on an economywide basis – is estimated to have averaged 2 per cent per annum MFP growth).

It is only one model, and only one set of comparators but there is simply nothing positive in the New Zealand story. There is, and has been, no progress in closing those gaps, and our living standards suffer as a result.

And what of Solow’s 80 per cent? In New Zealand real GDP per capita increased by an average of 1.7 per cent per annum between 1987 and 2004. MFP growth averaged 0.9 per cent over that period. For the period 2005 to 2022 average annual growth in real GDP per capita increased by an average of 1.4 per cent per annum, but over that period MFP growth averaged just 0.2 per cent per annum. (The comparisons are no more flattering if one uses the OECD “contributions to labour productivity growth” table as the basis for comparison.)

Whichever measure of productivity one looks at the New Zealand performance is poor. Champions of reform 40 years ago would, I think, have been astonished if they’d been told how poorly New Zealand would end up doing. I hope they’d be even more alarmed at the indifference to that woeful record that now seems to pervade official and political New Zealand.

[And since I’ve already had one past champion of the reforms objecting to my characterisation in this post and Monday’s post, I’m equally sure that all serious observers now - ie excluding our political leaders and officials - have their own story about what else should (or in some cases shouldn’t) have been done over recent decades. That doesn’t change the fact - on my reading and my memory – that if asked in say 1990 most would have envisaged several decades of catch-up growth as the decline of the previous decades was slowly reversed. It is quite clear from the documentary record that that was the goal, and the intense political disputes of the era were not about that goal.]

40 years on

Michael Reddell New Zealand economic performance

2024 will mark 40 years since the great acceleration of policy reform that began with the election on the 4th Labour government in July that year and ran for the following decade or so. I’m sure there will be lots (and lots) of reflections on the period later this year, most especially from the left where the ongoing political angst seems greatest (yes, it really was a Labour Cabinet that kicked off the process and did many of the lasting reforms, much as some on the left remain very uncomfortable about that).

If one thought about the big economic issues that were around at the time, they could probably be grouped under three broad headings:

  • inflation
  • fiscal deficits and government debt, and
  • productivity

One might add to the list the balance of payments current account, which became no longer a policy problem once capital controls were lifted at the end of 1984 and the exchange rate was floated in early 1985. (Yes, recent deficits have been very large, but as a symptom of other imbalances, rather than a policy issue in its own right.)

Of that list, New Zealand has done fairly well on the first two items. 

We used to have among the worst inflation record among the advanced countries (high and variable), but in recent decades we - like most advanced countries - have done much better. The last three years have been a bad lapse, but if that never should have been allowed to happen, the ultimate test is whether things are got back under control, and we seem now to be on course for that (eventually the lagged infrequent data will emerge). I’m not here going to get into lengthy debates about other countries, but whatever the common shocks once a country floats its exchange rate its (core) inflation outcomes over time are its own choices (see Turkey for any doubters).

We’ve also done pretty well on fiscal policy imbalances. There are plenty of leftists around who think taxes and spending should have been, and should now be, higher, but my focus is imbalances (deficits and debt). Again, the last few years (post Covid spends) have been bad, but under governments led by each main political party, New Zealand has over decades done a reasonably good job of keeping debt low and reining back in deficits when they have first blown out. And our system of fiscal policy transparency is pretty good too (although like almost anything could be improved).

One could throw financial stability into the mix. Almost every country that liberalised in the 80s ran into serious financial sector problems a few years later (neither the private sector lenders and borrowers nor the putative regulators really knew what they were doing, perhaps unsurprisingly after decades of financial repression), but the last 30 years have been pretty good. Lots of finance companies failed 15 years ago, which wasn’t necessarily a bad thing (risk and failure are integral parts of a market economy), but the core of the financial system has been sound and stable. Plenty of countries would have traded that record for their own experience.

The big hole in the story has been around economywide productivity. 40 years ago people were highlighting how far New Zealand’s performance had fallen (official reports from as early as 60 years ago were already drawing attention to growth rates having slipped behind), and the hope/aspiration was to turn that around. This is one of my favourite photos (reproduced in the Herald a decade or more ago, but showing late 80s Minister of Finance David Caygill)

Even though there had been not-insignificant economic reform and liberalisation over the previous few decades, in the early-mid 80s it was easy to highlight the many very obvious inefficiencies in the New Zealand economy (car assembly factories dotted around the country to name but one example). The previous decade in particular had been a very tough time for New Zealand - hardly any productivity growth at all after 1973/74 – probably less because economic policy became particularly bad (one could quite a long list of useful and important reforms, alongside other problems and new distortions - eg Think Big) than because the terms of trade were very weak.

Almost as bad as the worst of the Great Depression, but averaging low for longer. Exogenous adverse shocks to both export and import prices impeded the ability of the economy to generate high average rates of real productivity.

As recently as 1970 (when the OECD real GDP per hour worked data start) and despite decades of inward-looking policies New Zealand’s average productivity still didn’t look too bad. We were below the median OECD country but not by much, just under the G7 median, and more or less than same as the big European countries (UK, Italy, France, Germany). By the time of the 1984 election we’d slipped a long way further.

We were by then around the same as Greece, Ireland, and Israel, and of the G7 well behind all except (still fast-emerging) Japan.

Here is where we are relative to the same group of OECD countries in 2022

We’ve clearly pulled away from Greece, but that is about the only semi-positive I could find (and yes, the gap to Italy has closed somewhat as well). For what it is worth, on the data to hand so far 2023 looks to have been a year when New Zealand average productivity fell.

Of course, the rate at which we’ve been falling down the league tables has slowed. But then remind yourself what happened to the (merchandise) terms of trade

They have trended upwards since the late 80s (I remember our puzzlement at the RB when the first late 80s lift happened) and especially in the last 20 years. On this measure (which excludes services, to get a long-term consistent series) the terms of trade have averaged higher than at any time in the last century. And yet still average productivity languishes.

There are of course a whole bunch of new OECD members since 1984. A large group of them were then either part of the Soviet Union or communist-bloc countries, even the least bad of which had much more messed up economies than New Zealand’s. This is how we compare now with that group

Middle of that pack to be sure, but probably not for long on the trends of the last couple of decades. South Korea is just about to go past us too.

It really has been a shockingly bad performance by New Zealand, against what would normally have seemed a propitious background - a sharp sustained recovery in the term of trade and a much greater reliance on letting market price signals work.  There isn’t much serious basis for wishing away this failure.

And yet there seems to be little sign that our politicians or their official economic advisers have much interest, or any serious ideas for finally reversing the decades of real economic relative decline.

It is as if the powers that be and those around them have simply become resigned to our diminished fortunes, indifferent to what that failure means for actual material living standards now, and those for our children and grandchildren to come.