Population Ageing and the Efficiency of Fiscal Policy in New Zealand

New Zealand’s ageing population is expected to have a significant impact on long-term government expenditure, particularly in the areas of health and superannuation. Recent projections from Treasury’s Long-Term Fiscal Model suggest that, under current policy settings, government expenditure (excluding financing costs) will increase by approximately seven percentage points of GDP by 2050. From the perspective of economic efficiency, we consider several methods for financing that expenditure. We find that tax smoothing is significantly more efficient, from a welfare perspective, than balancing the budget. This result is primarily due to our assumption that the assets accumulated under tax smoothing earn an average return over the government’s cost of borrowing. This excess return is not without risk. By modelling asset returns and economic growth in a stochastic manner we find that tax smoothing with a diversified portfolio of financial instruments may also reduce year-on-year tax rate volatility. Introducing practical considerations, in particular expenditure creep (where additional government spending is triggered by an improving balance sheet position), tips the scales in favour of a balanced budget approach. Hence, strong fiscal institutions are a prerequisite for achieving the welfare gains from tax smoothing.Public Finance; Tax Smoothing; Balanced Budget; Demographics; and Deadweight Loss

Securitisation: A Public Policy Tool?

This paper is a primer for policy analysts on the securitisation of assets and liabilities. It describes key elements of a typical asset securitisation; outlines the reasons for securitising assets; discusses the types of assets that can be securitised; describes the requirements for a successful asset securitisation; examines whether New Zealand's financial infrastructure presents any barriers to securitisation; discusses the issues surrounding the securitisation of liabilities; and analyses the potential public policy uses of securitisation. The paper does not aim to review sovereign securitisations that have occurred to date. The potential public policy benefits include more efficient financing, improved balance sheet structure, better risk management and improved fiscal credibility. However, the Crown's low borrowing costs and diversity of financial exposures limits the extent to which benefits are achievable and measurable. There is scope for securitisation to enhance fiscal credibility, particularly in the area of superannuation where policy credibility is a key determinant of a successful policy outcome. An appendix to the paper examines the costs and benefits of securitising the Crown's student loans portfolio. It concludes that further work could be done to quantify the costs and benefits but notes that the benefits would have to be significant in light of the additional costs associated with securitisation.

Does Crown Financial Portfolio Composition Matter?

This paper considers Crown financial portfolio composition from a welfare perspective. It argues that a broad definition of the Crown’s portfolio is required for analysing the welfare implications of portfolio composition. In practice, this means incorporating the present discounted value of tax and expenditure flows as well as traditional measures of assets and liabilities. Financial portfolio composition affects welfare for a number of reasons: imperfect and incomplete markets; distortionary taxes; externalities; and agency problems. There is unlikely to be a single policy objective for choosing the preferred portfolio composition that integrates all of those factors. However, it is argued that the Crown should be risk averse and aim to eliminate all diversifiable risk in its portfolio. There is a reasonable case for adopting a low-risk Crown portfolio. Importantly, that does not necessarily require a low-volatility financial portfolio.Public Finance, Portfolio Management

Governance of Crown Financial Assets

This paper investigates the agency problems associated with the public management of a large financial asset portfolio. After considering the relevant theoretical and empirical literature, a set of institutional arrangements are presented that should reduce the extent of the potential agency problems faced. Key design features include: mechanisms for enhancing policy credibility; the use of existing market mechanisms and regulation where possible; and the creation of a public-sector institution to perform administrative functions. The paper does not consider the issues of optimal fiscal policy, or the appropriate risk tolerance for the Crown, although the conclusions drawn from this study may contribute to these debates.

Exploring root rot pathogens in wheat-pea rotations in Kansas

In 2018, over 277,000 bushels of wheat were produced on 7.7 million acres of land in Kansas alone. Based on the price of wheat by the end of 2018, this accounted for $1.44 million. This wheat is normally rotated with soybeans or fallow, but recent interest has arisen regarding the growth of peas in northern Kansas. As of 2019, there are both research and commercial growing operations underway. Many plant diseases have been especially prevalent during the summer because of the high rainfall and heat. In order to assess the severity of pea disease in Kansas, as well as explore potential interconnectivity between wheat and pea pathogens, a survey was conducted, and efforts were made to isolate and culture fungal pathogens of both wheat and pea

Higher policy uncertainty curbs business investment and employment growth

The years following the global economic crisis of 2008-2009 have been marked by policy uncertainty, both in the US and across the world. In new research, Scott R. Baker, Nicholas Bloom, and Steven Davis develop an index of economic policy uncertainty to examine how this uncertainty shapes economic outcomes. Using data going back to 1900 and extending coverage to 11 major economies, they find that heightened levels of policy uncertainty leads to firms reducing investment and employment, which in turn contributes to the sluggish growth which many economies have experienced in recent years

Descriptive temporal template features for visual motion recognition

In this paper, a human action recognition system is proposed. The system is based on new, descriptive `temporal template' features in order to achieve high-speed recognition in real-time, embedded applications. The limitations of the well known `Motion History Image' (MHI) temporal template are addressed and a new `Motion History Histogram' (MHH) feature is proposed to capture more motion information in the video. MHH not only provides rich motion information, but also remains computationally inexpensive. To further improve classification performance, we combine both MHI and MHH into a low dimensional feature vector which is processed by a support vector machine (SVM). Experimental results show that our new representation can achieve a significant improvement in the performance of human action recognition over existing comparable methods, which use 2D temporal template based representations

Stabilising Lyme Regis – a strategic approach

Coastal erosion and landslides have been a constant threat to Lyme Regis in West Dorset, UK for over 250 years. By the 1980s, the frequency and scale of coastal erosion and land instability had reached a point whereby the local council realised that a change from the previous ad hoc repair and protection approach was needed to secure the long-term future of the town. An environmental improvements initiative was developed from then onwards to provide a strategic and integrated programme of coast protection and cliff stabilisation measures designed to mitigate the increasing threat of climate change, coastal erosion and landslides, while respecting the site’s unique heritage and environmental interests. This paper outlines the background and principal phases of the project that have been successfully delivered over the period 1990–2015