A stuff-up by Statistics New Zealand

Many readers will recall the fiasco of the leak of an OCR announcement back in March 2016.  It turned out that the Reserve Bank’s systems were had been so lax for years that people in the lock-ups they then held could simply email back to their offices (or to anyone else) news of the announcement that was supposed to be being tightly held.  This weakness only came to light because someone in Mediaworks emailed the news of this particular OCR announcement to their office, and someone in that office emailed me (from memory I was supposed to go on one of their radio shows later that morning).  I drew the matter to the Bank’s attention.

In the wake of that episode, the Bank (rightly in my view) cancelled the pre-release lock-ups for journalists and analysts.  But other government agencies went right on, relying on trust more than anything else.   One notable example was Statistics New Zealand, which produces and publishes many of the most market-moving pieces of economic data.    When asked about any possible changes to their procedures (outlined here) following the Reserve Bank leak in 2016, they responded

Statistics NZ has not undertaken any reviews or made any changes to the department’s policy for media conferences following the Official Cash Rate leak at the Reserve Bank of New Zealand and the subsequent Deloitte report into that leak released last week.

and

While Statistics NZ has never had a breach, if that trust is abused and an embargo is broken, offenders and their organisation would be barred from attending future media conferences.

As I noted back then

Unfortunately, that was probably the sort of discipline/incentive the Reserve Bank was implicitly relying on as well.

Unfortunately, after the confusion the Prime Minister gave rise to earlier in the week, confusing the crown accounts and GDP (which had some people abroad worried that the Prime Minister actually had had an advanced briefing), there was apparently more trouble this morning.  But this time, the fault was entirely with Statistics New Zealand, and not with those in the lock-up.

The embargo for the lock-up on gross domestic product (GDP) for the June 2018 quarter, held today, 20 September 2018, was lifted about one minute earlier than the planned time of 10.45am.

The lock-up is held in Stats NZ’s Wellington offices from 10am to 10.45am, to allow key financial media, bank economists, and other government agencies to understand the information and ask questions about GDP, before the embargo is lifted. It is held under strict embargo conditions.

Stats NZ staff in the lock-up check official New Zealand time on the Measurement Standards Laboratory of New Zealand (MSL) website.

However, a computer script (JavaScript) bug meant that the official time clock website that appeared on the staff member’s phone picked up the phone’s own time setting, which was slightly fast.*

In other words, those in the embargoed lock-up had the data –  and could communicate it to their dealing rooms – a minute earlier than anyone not in the lock-up got the data.     And it seems to have mattered.  GDP was higher than expected and the exchange rate jumped.   People who were in the lock-up got the jump on that.  I’ve heard that the exchange rate moved before 10:45 (the official release time), which isn’t surprising if people in the lock-up had been told the embargo had been lifted.

What is striking about the statement SNZ put out –  and it wasn’t exactly distributed widely (say, to all the people who got the GDP release itself) –  is that there is no mention at all of these possible early trades, which (in effect) distributed money/profits from one group of people (those not in the know) to another (those in the know).  Unlike the 2016 Reserve Bank leak, there seem to have been real financial consequences to this mistake.  And it isn’t clear that Statistics New Zealand is taking it that seriously.   When I asked about any investigation being undertaken, the implication of their reply was that there would be no further investigation or review beyond the narrow technical statement I linked to earlier. I hope that is not correct (and I hope, for example, the Reserve Bank is insisting on something more).

Writing about these data lock-ups in 2016 I noted of the SNZ situation

Is Statistics New Zealand that different?  There is, obviously, no policy message SNZ is trying to put across with its releases, and so no risks of different messages getting to different people.  But the security risks are the same.  Perhaps it is simply more efficient to have everyone in the same room, to clarify key technical points, but couldn’t the same end be achieved –  on a more competitively neutral basis (to analysts based abroad, say) –  by a dial-in (even webcast) conference call held a bit later on the day of the release?

That still seems right to me. I cannot see the case for a pre-release lock-up (and I can see a case for a technical conference call later in the day).   Mistakes will happen while they keep on with lock-ups.   The reliance on trust seems to be as strong as ever, and (as far as we know) that has been honoured.  This time, the stuff-up was by Statistics New Zealand themselves.   It was unnecessary, and it will at the margin (and especially in conjunction with the political contretemps earlier in the week) damage confidence in our statistics agency and the integrity of our data.

A picture in continuity

Here is a summary chart of the real GDP outcomes for the June quarter (expenditure and production), the hours outcomes (QES and HLFS), and the implied change in labour productivity (real GDP per hour worked), taking the average change in hours worked from the average growth in real GDP.

GDP q2 1

There was quite a bit more activity all round, but it took a larger percentage increase in labour inputs (hours) to get the published percentage increase in output (GDP).  In other words, labour productivity fell: not just the growth rate, but the level.

Here is the same chart for the previous quarter.

GDP q2 2

It was worse: less GDP growth, but also an even larger fall in GDP per hour worked.   Productivity growth for the first half of the year was -0.65 per cent.  That isn’t an annualised number, but an absolute change; a significant fall.

Perhaps you think this just shows how dreadful the new government is.  Here is the same chart showing the cumulative growth rates for the last six months of last year (in blue) and the first half of this year (in orange).

GDP q2 3

To me, the similarities are (much) more striking than the differences.    Importantly, the level of labour productivity fell in both halves.

Looked at from a productivity perspective –  and that really is where one should focus, especially when the unemployment rate is not too far from the NAIRU – it is a pretty dreadful performance.    Of course, simply looking at two six month periods on their own doesn’t tell one much, but nothing in these data is inconsistent with the poor productivity record for some years now.

And neither the last government nor this one appears to have any serious ideas for, or any serious interest in, fixing this failure.

 

 

Is this what leadership looks like?

When the news broke earlier in the year that Canterbury University academic Anne-Marie Brady’s house and office had been broken into, and that the only things taken seemed to relate specifically to her longrunning research work on the People’s Republic of China, the initial response from the government didn’t seem too bad.

Ardern said at the post-Cabinet press conference on Monday that “everyone would be concerned” if Brady had been targeted because of her academic work.

“If there’s evidence of that, we should be taking stock and taking action,” Ardern said. “I will certainly ask some questions.

“I would certainly want to be informed if there was evidence that this was a targeted action against someone who was raising issues around foreign interference.”

Brady  herself was impressed (although I think I thought –  and perhaps wrote – at the time that these comments seemed more designed to encourage the Prime Minister, rather than accurately describing any evidence to date of taking foreign interference “very seriously’).

“I am very heartened to see the Prime Minister is taking the issue of foreign interference activities in New Zealand very seriously and that she has instructed the security agencies to look into the break-ins I have experienced,” Brady said.

The story has been back in the media again thanks to the persistent efforts of Matt Nippert of the Herald.  Last weekend there was his widely-viewed (and linked to abroad) article “The curious case of the burgled professor”, and this morning the front page of the Herald has the story “SIS sweeps prof’s office“.

Electronic surveillance specialists from the Security Intelligence Service have carried out a search for listening devices at the University of Canterbury office of the professor revealed to be a possible target of Chinese espionage.

News of the sweep, confirmed by several university staff, comes as academic colleagues of Anne-Marie Brady came out in support of the China specialist….

The Herald understands a similar search for bugs by the Security Intelligence Service (NZSIS) has also been conducted at Brady’s Christchurch home, the site of another suspicious burglary being investigated by authorities.

From what is reported in that story, and in Radio New Zealand’s interview this morning with Anne-Marie Brady, the Police and the SIS seem to be doing a pretty thorough job.  Brady herself praises what she has seen and heard of their efforts.

But what of the Prime Minister?  Remember that this is the “leader” of whom Matt Nippert has reported

She won’t talk about the general issue, and here she is (quoted in Nippert’s article this morning) on the specific one.

Prime Minister Jacinda Ardern, asked about the case on Monday at her post-Cabinet press briefing, said she had yet to be briefed on whether the episode could be attributed to China.

“I have not received any further advice on that, but nor have I sought it. As it were, nothing has since been raised with me to suggest that it was, or wasn’t,” she said.

“Speaking more generally, what the underlying suggestion here is of foreign interference. I’ve been very, very cautious around always stipulating that New Zealand needs to be live to general issues of interference, and that’s something we keep a watching brief on.”

She hasn’t asked.  How convenient.  If she were really concerned about the issue, and the potential, you’d have thought she –  and her office –  would be all over an issue of this sort (as a matter of sovereignty, national security, defence of academic freedom etc, not as “interfering” in a potential criminal prosecution).

And as for that final paragraph, if that is “leadership” we’ve lost all sense of how a leader might actually act or speak.   Of course she probably isn’t in a position to make specific accusations –  especially not having asked for the information –  but what would have been so wrong about a clear and strong statement that she, and New Zealanders, would deplore and push back strongly against any foreign interference in New Zealand, and in particular if agents of a foreign power were found to have been responsible for the Brady break-ins.  She could even have gone on to say that if such evidence were found then –  even if it were not possible to launch criminal prosecutions (after all, we don’t have an extradition treaty with China) –  the damage to our bilateral relationship with such a country would be severe.

Instead we get this vacuous waffle

I’ve been very, very cautious around always stipulating that New Zealand needs to be live to general issues of interference, and that’s something we keep a watching brief on.

saying precisely nothing, from someone who appears to desperately hopes to avoid the issue.  Her response here is much weaker than her February one.

Does the Prime Minister stand for academic freedom in New Zealand, for the rights and freedoms of New Zealanders to do research, to speak out, to challenge other countries here in New Zealand, the rights of New Zealanders to be secure in their homes?  “Stand for” in the sense of being willing to pay a price to protect and defend?  Or is she more interested in doing everything possible to be able to look the other way, prioritising party fundraising, trade agreements, the interests of a few big corporates (and universities) and visits to Beijing over the values and freedoms of New Zealanders, including those like Professor Brady who’ve done in-depth research on PRC efforts here?

She, her party president, and their peers in the National Party together.

An age of diminished expectations?

The Westpac McDermott Miller consumer confidence survey results are out this morning.  To the extent they get any media coverage, no doubt the focus will be on the headline result.  Here is the summary chart.

westpac 1

In Westpac’s words

Consumer confidence fell sharply in September, taking it to its lowest in six years.

There probably isn’t much predictive value in these results for actual economic data, but I find the results interesting in their own right: how people generally are feeling about their economic fortunes and the economy more broadly.  After all, respondents aren’t just the “ideological enemies” of the government.

The Westpac results don’t seem out of line with the most recent Colmar-Brunton poll (taken six weeks ago) in which respondents are asked a single question.

“And do you think during the next 12 months the economy will be in a better state than at present, or in a worse state?”

colmar brunton

The public no longer seem very optimistic at all.

But in some ways I was more interested in the longer-term trends in a couple of the sub-components of the Westpac index.   For example,

westpac 2.png

People are now less optimistic about improvements in their own personal position than at any time in the last 30 years outside periods when the economy was already in the midst of a recession (and materially lower than in the fairly shallow 1997/98 recession).  And look at the contrast between confidence levels from say 1994 to 2007 (across two different governments) and those now.  It looks a lot like a fairly steady trend decline.

And then there is the question about the longer-term prospects for the economy itself.  Respondents might not know much analytically about the issue, but their perceptions are interesting nonetheless.

westpac 3

The latest observation isn’t startlingly bad (and there was that sharp –  but brief – dip a couple of years ago) but look how diminished expectations are now (last three years or so) relative to the entire history of the series.  There are individual quarters that are weaker (though note, not in the 2008/09 or 1997/98 recessions) but in thirty years there has been no three year period where medium-term optimism has been weaker than over the last three years (under National and Labour governments).   And this pessimism isn’t tied to the last recession –  look how upbeat people briefly were in the couple of years after the recession ended.

(The medium-term picture is less bad in the ANZ’s consumer confidence survey, (which has a much shorter run of data) and it would interesting to know the precise question asked, to help understand that difference.)

Then again, in an economy that has managed very little labour productivity growth in the last five or six years, and none at all in the last three years, perhaps it shouldn’t surprise.

real GDP phw jul 18

In an economy where the promises of economic reform decades ago came to little  (for younger readers, that is the then Minister of Finance back in 1989/90)

caygill 1989 expectations

And where none of the political parties – especially not National or Labour that have led all our governments – seem to care much if at all, or have any serious proposals for turning around the continuing decades of underperformance, isn’t the public quite rational in being much less optimistic than they were?

A more interesting question is why they/we don’t find a way of demanding something better.

Having read the Our Plan speech

The Prime Minister’s speech on Sunday has attracted quite a lot of, generally not very favourable, attention.  I was interested in a few things that were there, and a few others that weren’t, particularly when compared to the Speech from the Throne that inaugurated the government’s programme last November.

The first was the apparent lack of ambition around the economy.    The Prime Minister continues to repeat the meaningless claim that “we’ve enjoyed enviable GDP growth in recent years”, as if headline GDP – as distinct from GDP per capita or GDP per hour worked –  means anything at all.    Here’s the track record: it has been pretty poor over the last couple of years (we’ll get an update on Thursday).

gdp pc to mar 18

Productivity growth has been even worse, and for longer.  Here, for example, is the comparison with Australia.

aus nz rgdp phw

The Prime Minister seems to sort of know there is an issue.

We cannot continue to rely on an economy built on population growth, an overheated housing market and volatile commodity markets. It’s not sustainable, and it risks wasting our potential.

That’s why our first priority is to grow and share more fairly New Zealand’s prosperity.

That means being smarter in how we work. It means an economy that produces and exports higher value goods, and one that makes sure that all New Zealanders share in the rewards of economic growth.

So what will we do?

First, we need a concerted effort to lift the prosperity side of the ledger. Working alongside business, we will encourage innovation, productivity and build a skilled workforce better equipped for the 21st century.

But what Our Plan has to offer is slim pickings indeed.  The only specific is

We are doing that by bringing back significant support for businesses to expand their investment in research and development through the R&D tax incentive, a key component of building a new innovative economy.

Perhaps you think R&D subsidies are a good idea. I’m rather more sceptical, and worry that there is no sign the government has thought hard about why firms don’t regard it as being in their interests to spend more here on R&D.   But don’t just take it from me.  I was interested that in the Secretary to the Treasury’s speech about productivity a couple of weeks back, which I wrote about here , there was no mention at all of R&D subsidies/credits as any part of the answer to our sustained underperformance.  If R&D subsidies were the answer, it would have to be a pretty small question, and our economic underperformance is much worse than that.

It was also interesting that the tax system seemed to have disappeared from the list of answers to our economic underperformance.    In the Speech from the Throne this

The government will review the tax system, looking at all options to improve its structure, fairness and balance, including better supporting regions and exporters, addressing the capital gain associated with property speculation and ensuring that multinationals contribute their share. Penalties for corporate fraud and tax evasion will increase.

and in various speeches since the Minister of Finance has continued to talk up tax system changes,  but in Our Plan on Sunday the only reference I could see to the tax system was those R&D subsidies.

And then there was this

After all, we have always been inclined to do things differently. Or to do them first.

Whether it’s Kate Sheppard championing the right to vote, Michael Joseph Savage designing the welfare state, or Sir Edmund Hillary reaching brave new heights – we don’t mind if no one else has done something before we do.

But we do mind being left behind.

and

You asked us to make sure New Zealand wasn’t left behind.

But the problem is, Prime Minister, that we’ve fallen badly behind, and nothing you or your predecessors did seems to be stopping, let alone reversing that decline.  Nothing.

Here are a couple of productivity charts, comparing New Zealand and some other advanced countries in 1970 (when the OECD data start) and 2016 (the last year the OECD has data for all countries).

First the G7 countries.

G7 comparison

As recently as 1970, real GDP per hour worked in New Zealand was more or less that of the median G7 country (100 years ago, we would have been ahead of all but one, and basically level with the US).    Now it would take a 30 per cent lift in New Zealand productivity –  with no changes in the G7 countries –  to get us back to parity with these big advanced economies.

And here is the same comparison for the (small) Nordic countries.

nordic comparison

It would take a 50 per cent lift in New Zealand productivity –  all else equal –  to match the median of these countries.    Even in 1970 we’d fallen behind them, but 100 years ago  –  in fact even when Michael Joseph Savage was in office – we were richer and more productive than all of them.

We’ve been left behind, and our politicians show no sign of doing anything to remedy the failure.

One could say much the same about housing.  The Speech from the Throne –  only 10 months ago –  was actually quite encouraging.  There were hints –  nothing specific of course –  that the government might actually want to lower the real prices of houses, reversing at least some of the disgraceful lift in house and land prices that policy (various strands interacting) has helped deliver over the last 25 years or so.

But what about in Our Plan?  There is talk of warm dry homes, and of the Kiwibuild lottery for the lucky few (“I cannot tell you how exciting it was to open the ballot for those first homes this week”), but of the market generally only this

“But not everyone wants to own, or can right now.”

And nothing –  at all – about what the government might do to systematically transform the outlook for those –  all too many –  who can’t.  It might be terribly exciting for the Prime Minister that a few can win the lottery –  as no doubt it is in the weekly Lotto draw –  but in a serious government wouldn’t it be much more satisfying to have laid the ground work for systematic, across the board, affordability?  In a country with so much land (in particular), it is pure political choice that we fail to have better outcomes.

There were a couple of other bits that took my eye.  There was this, in prominent bold letters.

That’s why our first priority is to ensure that everyone who is able to, is either earning, learning, caring or volunteering.

Frankly, what business is it of the government’s.  We aren’t resources at their disposal.  Provided someone isn’t a financial burden on the state, why does the Prime Minister think it is for her to suggest –  nay propose to “ensure” – that a life of leisure is not an option?  The mindset is disconcerting to say the least.

And then there was the international dimension.

That brings me to our final priority area- creating an international reputation we can be proud of.

In this uncertain world, where long accepted positions have been met with fresh challenge – our response lies in the approach that we have historically taken.  Speaking up for what we believe in, pitching in when our values are challenged and working tirelessly to draw in partners with shared views.

This Government’s view is that we can pursue this with more vigor – across the Pacific through the Pacific reset, in disarmament and in climate change, and in our defence of important institutions.

Ultimately though, my hope is that New Zealanders recognise themselves in the approach this Government takes.

I’d be ashamed if I recognised myself in the approach this government –  and its predecessors – take.  A government that is slow and reluctant to condemn Russia’s involvement in the Skripal poisoning, a government that appears to say nothing about the situation in Burma, a government that says not a word about the Saudi-led US-supported abuses in Yemen (trade deals to pursue I suppose).  And then there is the People’s Republic of China.

The Prime Minister apparently won’t say a word (certainly not openly –  and yet she talks about “transparent” government) about:

  • the aggressive and illegal militarisation of the South China Sea,
  • the growing military threat to Taiwan, a free and independent democracy,
  • about the Xinjiang concentration camps, the similarly extreme measures used against Falun Gong, or the growing repression of Christian churches in China,
  • about new PRC efforts to ensure that all Chinese corporates are treated, and operate, as agents of the state (is the Prime Minister going to do anything about Huawei for example?)
  • about the activities of the PRC in attempting to subvert democracy and neutralise criticism in a growing list of countries.

And what is she going to do about the Belt and Road Initiative, which the previous government –  in the specific form of Simon Bridges – signed onto last year, enthusing about a “fusion of civilisations”?

But then, why would we be surprised by this indifference.  Her own party president, presumably with her imprimatur, praises Xi Jinping and the regime.  Her predecessor, Phil Goff, had his mayoral campaign heavily funded by a large donation from donors in the PRC.   And she won’t even criticise the fact that a former PRC intelligence official, a keen supporter of the PRC, sits in our Parliament, refusing to answer any substantive questions about his position.

If those are her values, they certainly aren’t mine. I hope they aren’t those of most New Zealanders.

If her “response lies in the approach that we have historically taken” it must seem pretty unrecognisable to the people, many on her side of politics, who protested French nuclear tests, or against apartheid in South Africa (and associated rugby tours).   And would surely be unrecognisable to the ministers and Prime Ministers of that first Labour government, who were among those (internationally) most willing to take a stand against Italian and German aggression and repression in the 1930s.

 

Orr on women, and himself

Six weeks or so ago, I wrote a couple of posts in quick succession on issues fitting under the loose heading “women in economics”.   I commented on a recent conference paper produced by a couple of senior Treasury officials (one of whom was male), and on the situation at the Reserve Bank prompted by some comments from the (male) Governor and the release of some statistics on the proportion of female applicants for various positions, including that of Governor.    My overall sense was something along the lines of “there seems to be a real and longstanding problem –  perhaps not easily fixed – at the Reserve Bank, but that it was less clear that there was a wider problem”.    Those posts were not universally well-received, and I received various comments, open and private, suggesting that as a mere male I had no right to comment on these issues, that any perspectives had –  by assumption –  no value, and (in the words of one particularly strident commenter) that I should withdraw quietly and “reflect on how your internal biases are harming women”.

And then a few weeks ago, there was a newsletter around from GEN (the Government Economics Network) advertising a launch event for a Women in Economics Network (for anyone interested, they have a LinkedIn group here), at which the speaker was to be Governor of the Reserve Bank, Adrian Orr.  It was advertised as open to anyone, and since I have an interest in the issues –  particularly as they affected the Reserve Bank (where I was manager for a long time), and the contrast between their experience and that of other entities – I signed up to go along.  I also attended because it must be a decade since I’d heard Adrian Orr speaking in the flesh, and as I’ve been quite critical of some aspects of his nascent governorship, including his speeches, I was interested to see how he now came across to a live audience.

It seemed like a fairly well-attended event, held at The Treasury.  The audience apparently included some high school students and teachers, as well as lots of public service types, and was (as one would probably expect) around 85 per cent female.

The event began a bit oddly, with some sort of introductory greeting or welcome from Gabs Makhlouf, the politically-correct British Secretary to the Treasury.  It was in Maori, and I’d be surprised if more than a handful of attendees had a clue what he was saying.

The Governor was introduced by Vicki Plater, chair of the new network and a senior manager at The Treasury.  She noted in her introduction how, particularly as a  macroeconomist (a sub-discipline of economics with a particularly preponderance of men), it was a common experience to be (or feel like) the only woman in the room.

That resonated.  And so it was strange, and rather tin-eared, for the Governor to stand up and say, in his best jesting style “you know Vicki, most male economists also think they are the only economist in the room”.   It was, no doubt, a self-deprecating dig at a tendency of smart opinionated people to think, or act as if, they have “the” right answer to whatever is being debated.  But it seemed oddly inappropriate, as if to –  no doubt unconsciously – minimise the perspective and experience of women in (macro)economics –  the subject he’d been invited to address.

(It was also a bit strange that in the course of his comments –  speech and later panel discussion – Orr’s only unscripted references to individuals in the audience were to men.)

It wasn’t a long speech, but it was also striking how little content there was.   It was a paean to diversity and inclusion, but only in the most general and unspecific form.  We were told about some project the Bank has underway to re-tell its own story in terms of some Maori metaphor or mythology (the connection to the issue at hand being less than clear).  He asserted that somewhere around the Industrial Revolution humans had lost “the talent of working together in teams”, and we heard a brief snippet of his own experience of perceived exclusion at the recent Jackson Hole seminar (for top central bankers and the like).  He owned up to not himself being a great listener.   It wasn’t necessarily off the subject, but it all seemed pretty tangentially relevant.  If I was looking for the consistent theme it would be something around having to make an effort and break out of the constraints of established, unquestioned, ways of doing things.   There wasn’t much to disagree with, but equally you wouldn’t know that he was head of (and formerly held other senior positions in) an institution that has never had a women in a senior management role in policy or core operational areas in its 84 year history.  Perhaps that wasn’t the point; perhaps the point just was that senior male leaders (Governor and Secretary) cared enough to turn up.

Following the Governor’s talk there was a panel discussion, involving the Governor and a senior academic economist and an MBIE principal advisor (both women).   The Governor was again on form.  The MBIE principal adviser (of a Pacific background) noted that Pacific people in economics had few role models, and that the Governor was the pre-eminent role model.  His response: “I don’t know about being a role model; perhaps a sausage roll.”

There was a great deal of (seemingly) unquestioning acceptance of the unconscious bias model, with quite a few (unexamined) claims of conscious bias thrown in.    There was no discussion at all of how some occupations, and academic disciplines, end up very heavily female and others very heavily male, no discussion of the apparent “gender equality paradox” , just an inchoate sense of something, generically, being wrong. Quite what, specifically, wasn’t clear.

The Governor was the most confident communicator of the three, and since he tends to wear his heart on his sleeve we heard a few interesting anecdotes.  One was, I think, designed to illustrate how those in power can be unaware of the impact they are having on others.  He noted that shortly after his appointment as Governor was announced he’d had an email from a former staff member, who lambasted Adrian for the severely adversely impact he had apparently had, in some past professional role, on this person’s life.  This had apparently come as total news to the Governor, and it sounded as if the searing email had shaken him at least momentarily.  But the effect of the anecdote was rather undermined when he rushed on noting “but I got over it”.   Perhaps the problem really was with the writer, but it seemed to be a strange way to end –  perhaps confirmation of Orr’s earlier acknowledgement that he isn’t a good listener.

There was some discussion on calling out actions or words that display –  or are perceived to display – bias (the senior academic noted that she how did so openly and straightaway –  although when a new graduate later asked about this, it was acknowledged that it was not necessarily an option prudently open to everyone).   Orr told us about coming back from an appearance at Parliament’s Finance and Expenditure Committee and noting that all the Reserve Bank team had been male, suggesting that needed to change.  Apparently –  as these things do –  word got out, and down the organisation, crystallising in an email from somone (a manager I gathered) that in future appearances only women were wanted.   The point of the anecdote was that apparently someone had called this to the attention of the Governor and he’d corrected the messaging.  But it actually sounded more like a warning about the risks of loose words, emoting without a proper framework, from a new CEO.

In fact, you wondered whether those people at the Reserve Bank had really got the wrong message.  There was a question from the floor about quotas and whether or not they were a good idea.  All three panellists seemed a bit ambivalent, but the Governor actually came back to elaborate his initial quick response and stated that “positive discrimination is needed sometimes”.   That such discrimination would almost certainly be against the law seemed not to concern this senior public servant, speaking in an open forum.

In some respects, the Governor was in fine form on Friday.   The phrase “consummate communicator” was running round in my head, but as I reflected further I realised that that isn’t an accurate description at all.  Orr has a great way with words, and can be very entertaining, but effective communication involves getting appropriate alignment between audience, subject matter, and occasion.  In a senior public servant, gravitas also matters (pompous and old-fashioned as it might sound to some).  And as some of the comments above suggest, he tends to be a bit tone-deaf.   At the time, Orr was appointed, I included this snippet (drawing on a Bernard Hickey story)

Only a few weeks ago – when he must already have known that he was likely to become Governor –  Orr gave a speech to the Institute of Directors, in which he reportedly dismissed the views of Deputy Prime Minister on the economy as “bollocks” and went on to suggest, in answer to a question about nuclear risks in North Korea, that perhaps two issues could be solved at once ‘because Winston is going to North Korea”.  Recall that at the time, Orr was not some independent market economist, but a senior public servant.     He might well have been right in his views on the economy, but is this how senior public servants should be operating?

In his talk on Friday –  mostly among public servants – he probably was more relaxed than he usually is in public; it was very similar to the way he used to be when we both worked at the Bank.  But listening to Orr again, I was reminded of David Lange, who also had a great way with words.  Lange’s way with words developed, as I think even he recognised, as a defence mechanism  –  the way an overweight child pushed back and held his own in the playground.  I’m not sure what it is with the Governor, but perhaps he hinted at it himself in his remarks on Friday, noting that having grown up far from the halls of, say, Christ’s College, Auckland Grammar (or the female equivalents) – although didn’t most people? –  he had felt that he was having to push to be accepted, and in turn had had to come to accept that people with other upbringings also have valid and useful perspectives, their own strengths and weaknesses.  It isn’t clear to me that he has yet fully got over that background and the associated insecurities.  Perhaps a lot of it is just shtick –  a comedy routine –  but it is striking how often one hears from the Governor, or sees in profiles, references to his friends and relatives in Taupo and Rotorua, particularly those who didn’t have much formal education or interest in book-learning.  Have I ever heard, I wonder, any senior figure –  not running for office –  reference his conversations with his mates at the TAB (or the Wellington Club, or the golf club, or the church, or….well anywhere)?

The Governor is a smart guy.  No one disputes that.  But there are questions about his depth, his seriousness, and his judgement (see, for example, my comments last week on his recent speech).  Add in a dominant personality and a self-acknowledged reluctance to listen –  although, of course, self-recognition is some small progress –  and it reinforces the doubts about vesting so much power in his hands, or of structuring a Monetary Policy Committee in a way that continues to ensure his total dominance.

Meanwhile, we are still waiting for a thoughtful on-the-record speech on monetary policy and/or the Bank’s financial stability responsibilities.  I’m still waiting for a response to my OIA request about his, apparently rather loose, speech to INFINZ a couple of weeks ago.

And the specific issues at the Reserve Bank, where women have rarely (well never) achieved really senior roles in the central areas of responsibility, await the Governor’s attention.   It is, in my view and my experience, a complex story, but if it isn’t addressed seriously and well over the next few years –  better management, better structures, better people –  it will be increasingly awkward for the Governor and the Board (around half female) paid to hold him to account.

 

Recycled rubbish

That’s the title of my former colleague Ian Harrison’s response to the government’s consultative document on getting rid of (some types of) plastic bags.  The consultation itself closed yesterday, but nobody supposes the consultation itself was remotely serious –  the irrational ban is going to happen anyway.  Having dug fairly deeply into the material used to support/underpin the consultative document, Ian illustrates just how little substance there is to the case.

Here are his key conclusions

Supermarket checkout bags do not materially contribute to littering.  Common sense and overseas evidence tells us that supermarket checkout bags are not littered frequently. There is more littering of very small bags, but mostly they will not be caught by a ban. Supermarket bags possibly contribute only around 0.1-0.2 percent of littered rubbish by weight. The Ministry has neglected to conduct a survey on the actual extent of supermarket bag littering.

Supermarket checkout bags are efficient and cheap.  Checkout bags cost about 2 cents, weigh between 4 and 7 grams, and are generally reused for other purposes. They are best described as ‘double-use’ bags. The amount of plastic in supermarket bags has fallen by 75 percent over the past 20 years. Compliant ‘emergency’ bags weigh around 6 times as much and reusable bags 20 times as much. Research shows that they are typically not reused frequently enough to offset the higher weight, so the use of plastic in shopping bags could actually go up.

Impacts can be perverse.  A shopper cannot be given a cheap lightweight plastic bag that is used to transport goods, and serve as a bin liner. But she can buy a much more expensive lightweight drawstring bin liner, which is used only once.

Supermarket bags likely to have a lower overall environmental impact than many alternatives. Alternatives bags have a much higher environmental impact that is unlikely to be offset by the higher number of times they are used.

Reusable bags are a health risk.   Research shows that reusable bags harbor dangerous bacteria and are not cleaned frequently. Supermarket double-use bags are safe.

A ban is unlikely to materially reduce marine littering.  The reduction in the small amount of plastic entering the marine environment of plastic checkout bags will tend to be offset by increased number of heavier bags littered.

The circular economy approach to environmental and economic management is often irrational.  The circular economy approach to the economy is centered in China and has been part of their 5-year plans. China has one of the worst marine pollution records in the world. The circular economy can be an empty slogan, but if taken seriously it can result in very inefficient decision making because it tends ignores the impact on people and the community when recycling is pursued at all costs.

A ban cannot be imposed by regulation.  Under the Waste Minimisation Act the Minister must be satisfied that the benefits of a ban exceed the costs. As there is no analysis of the cost and benefits in the consultation paper, the Minister cannot be satisfied, unless serious work is done to assess the costs and benefits.

Evaluation methodology rigged to generate the right answer.  The weights and evaluation criteria were set to bolster the score of the preferred option of a ban. The evaluation methodology has many flaws and is not a substitute for a proper cost benefit analysis.

A ban will have an economic cost of more than $75 million per year.  A cost of $75 million a year is our assessment from an illustrative costing model.

A minimum charge is a more efficient response than a ban.  The minimum charge that would reflect the costs of provision and associated environmental and social costs would be about 3 cents per bag.

Many of those points aren’t new in themselves (I made some myself in earlier posts on this issue), although I was interested to learn of the origins of the “circular economy” nonsense that now seems to appear in many government documents and even ministerial speeches.  Nonsense?  Well, here are Ian’s words

It is way of thinking, that comes out of the ‘limits to growth’ perspective (Boulding 1966). The earth is finite, resources are finite, so they must be recycled and not lost to the economy. While this finite resources proposition is literally true in the very, very long run, what the approach tends to downplay or ignore, is the role of the price system in allocating resources. As resources become scarcer, prices increases, resources are allocated to the most valuable uses, and innovation is encouraged that finds new ways of doing things. More natural resources are discovered because they are more valuable. The world economy does not suddenly collapse when the resources suddenly run out.

Prices simply don’t appear at all when the “circular economy” is being discussed.

For anyone interested in looking behind some of the material used to make up the case in support of eliminating supermarket shopping bags, Ian’s paper is useful because he made the effort to read the background papers (those cited and those that should have been), and to work through the logic of the case ministers and MfE are making.   It has its lighter moments, as when he suggests supplementary measures, banning Christmas (all those plastic toys) or

Ban on the sale of pianos.  Littering of pianos on beaches and dumping in the marine environment have been of historical concern in New Zealand (Campion 1993). Piano littering poses a threat to fish and marine mammals, and to human health. The enjoyment of piano playing is a colonial construct and has no place in a modern inclusive multicultural society.

And a much serious side in suggesting that if New Zealand governments really wanted to help make a difference, there are some obvious places to start.

Alternatively we could do something that actually makes a difference.

In 2009 Sustainable Coastlines did a cleanup, with wide community support, on a small Tongan island with a population of 4600. They removed 50 tonnes of rubbish, compared to around 80 tonnes for all their New Zealand opertions spanning seven years.
Below is a table taken from the report (Jambeck 2015) that provided the estimate of 8 million tonnes of plastics going into the oceans each year that has receivedwide spread attention. it shows annual total of mismanaged plastic waste, but this figure appears to be about four times larger than actual flows into oceans. While the individual country figures, the inputs and the methodology may be questionable in some respects, the data provides a reasobable representation of the scope for making improvement in the performance of our Pacific neigbours. Because New Zealand already has a robust refuse collection sytem and a reasonably good antilittering culture, the scope for large cost effective improvements here are limited. As we have demonstrated a plastic bag ban will make almost no difference, but has a large cost.

plastics

Our best strategy is to continue to build on voluntary efforts to clean up the coastal environment and to redirect, or supplement, our aid budget, to Pacific countries, where there will a much higher payoff in terms of reduced plastic pollution.

It is the sort of analysis one might do, or commission, if one were serious about looking at costs, benefits, and ways of maximising payoffs, as distinct from the sort of puff and rhetoric government agencies publish under the guise of analysis when they have a solution their masters want regardless and need to try to make some sort of case.