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Fiscal issues

Fiscal policy is the government’s plan for taxation and government spending. It is one way in which a government can attempt to affect the economy. Fiscal policy includes taxation, government spending, and national debt.

Our research focus

Motu’s current and recent research into economic performance includes:

Tax structures (including effective marginal tax rates for firms, and scope for a land tax).

Publications

Liquidity, the government balance sheet, and the public sector discount rate

Author: Andrew Coleman

Working Paper

Public investments
should cover borrowing costs,
not risk of default.

This paper provides a review of the modern finance literature examining how liquidity affects the private sector demand for real assets and financial securities. This…

Housing, the ‘Great Income Tax Experiment’, and the intergenerational consequences of the lease

Author: Andrew Coleman

Article

Berlin’s wall crumbled
We taxed savings, not houses
Locking out the young.

This paper provides an analysis of how the New Zealand tax system may be affecting residential property markets. Like most OECD countries,…

Local Authorities Finance Data

Dataset

This data provides annual information from each local council between 1991 and 2008. Local council revenues are fragmented by rates, whereas expenditures are fragmented by service and other trading/consolidated activities. Operating budgets for refuse, water,…

Credit Losses in Australasian banking

Authors: Arthur Grimes | Kurt Hess | Mark J Holmes

Article

We analyse the determinants of bank credit losses in Australasia. Despite sizeable credit losses over the past two decades, ours is the first systematic study to do so. Analysis is based on a comprehensive dataset…

Would Adopting the US Dollar Have Led to Improved Inflation, Output and Trade Balances for New Zealand in the 1990s?

Authors: Viv Hall | Angela Huang

Working Paper

Deterministic simulations with the Reserve Bank of New Zealand's core FPS model show how New Zealand's broad macroeconomic environment might have evolved over the 1990s, if a US nominal yield curve and US TWI exchange…

Would Adopting the US Dollar Have Led to Improved Inflation, Output and Trade Balances, for New Zealand in the 1990s?

Authors: Viv Hall | Angela Huang

Article

Trans-Tasman Shocks: A Mediating Role For The NZDAUD

Author: Arthur Grimes

Article

We examine the transmission of shocks between New Zealand and two regions of Australia, focusing on the role of the New Zealand-Australia cross exchange rate in mediating adjustment. The cross rate plays and equilibrating role…

An ANZAC Dollar: Currency Union and Business Development

Authors: Arthur Grimes | Frank Holmes | Roger Bowden

Working Paper

This working paper was commissioned by the Wellington: Institute of Policy Studies

This study is about currency union. Should New Zealand remain the smallest industrialised country to run an independent monetary policy? Should New Zealand instead adopt…

Intra and Inter-Regional Industry Shocks: A New Metric with Application to Australasian Currency Union

Author: Arthur Grimes

Article

We place regional industry structures at centre stage in currency union analysis, decomposing differences between regional and aggregate cycles into industry structure and industry cycle effects. The industry structure effect indicates whether a region's industry…

Regional and Industry Cycles in Australasia: Implications for a Common Currency

Author: Arthur Grimes

Article

If two countries experience similar cycles, loss in monetary sovereignty following currency union may not be severe. Analysis of cyclical similarity is frequently carried out at the overall industry level, then interpreted with reference to…

New Zealand: A Typical Australasian Economy?

Author: Arthur Grimes

Article

We examine trend economic developments in New Zealand and in each of Australia's six states and two territories (i.e. nine regions) in order to inform issues regarding economic policy harmonisation across Australasia.

Our focus is on…

Managing Small Open Economies: Exchange Rate Systems and Real Sector Shocks

Author: Arthur Grimes

Article

One of the most important macro-economic policy choices facing governments is the choice of a country's exchange rate regime and associated monetary policy objective(s). At one end of the spectrum, a country can choose to…

Living Arrangements for the Tasman Currencies: De Facto Partners, Legal Marriage or Just Good Friends

Author: Arthur Grimes

Article

The result of an interdisciplinary conference of the same name that was hosted by the Stout Research Centre and the Institute of Policy Studies, Victoria University of Wellington. This is a chapter in a physical book.

The Impact of Tax Changes on the Short-Run Investment Behaviour of New Zealand Firms

Authors: Lynda Sanderson | Richard Fabling | Richard Kneller

Working Paper

This paper examines firm-level investment responses to exogenous changes in the forward looking user cost of capital associated with reforms to the corporate and personal tax system over the last decade.

Adjustments to personal tax rates and fiscal…

Betterment Taxes, Capital Gains and Benefit Cost Ratios

Authors: Arthur Grimes | Andrew Coleman

Article

"Betterment" taxes can be used to fund infrastructure investments. We relate betterment taxes to the benefit: cost ratio, deriving conditions under which a project can be funded by such taxes, and relate betterment taxes also…

What Does the Taylor Rule Say About New Zealand-Australia Currency Union?

Authors: Arthur Grimes | Christopher Plantier | Nils Bjöumlrksten | Öumlzer Karagedikli

Article

It has been suggested that the New Zealand economy may have similar characteristics and face similar shocks to some Australian states, so lowering the costs of a trans-Tasman currency union.

We test this, under the assumption…

Property Taxation in New Zealand

Authors: Arthur Grimes | Jason Timmins | William McCluskey

Working Paper

Produced as the Lincoln Institute of Land Policy Working Paper WP02WM1

Since European colonisation of New Zealand in 1840, property taxes have formed the foundation of local authorities' revenues. Currently, over half of local authority revenues…

The Long Term Effects of Capital Gains Taxes in New Zealand

Author: Andrew Coleman

Working Paper

This paper develops a model of the housing market incorporating a construction sector, a rental sector, and a housing demand sector to examine the long term consequences for the housing market of different types of…

Fiscal, Distributional and Efficiency Impacts of Land and Property Taxes

Authors: Arthur Grimes | Andrew Coleman

Article

Land taxes are known to be among the most efficient forms of taxation since land is an immobile factor; property (capital value) taxes are less efficient owing to the tax on improvements. However there is…

Tax, Credit Constraints, and the Big Costs of Small Inflation

Author: Andrew Coleman

Working Paper

This paper develops an overlapping generations model incorporating credit constraints, owner-occupier and rental sectors, and detailed tax regulations to examine how the interaction of inflation and the tax system affect the housing market.

It shows that…

Estimating Firm-Level Effective Marginal Tax Rates and the User Cost of Capital in New Zealand

Authors: Lynda Sanderson | Richard Fabling | Norman Gemmell | Richard Kneller

Working Paper

Effective marginal tax rates (EMTRs) can be very different from the statutory rate and vary across firms, reflecting such factors as the extent and nature of taxable deductions (losses, depreciation), asset and ownership structures, and…

Mandatory Retirement Income Schemes, Saving Incentives, and KiwiSaver

Author: Andrew Coleman

Note

All OECD countries have schemes that help people manage their retirement. Some of these schemes are mandatory, and are implemented through the tax system; others are voluntary but receive substantial subsidies. There is considerable variety…

Behavioural Economics: Implications for the Savings Literature

Author: Andrew Coleman

Note

In the last two decades, economics rediscovered its psychological roots. It now imports insights about the way people act from psychology at an enormous rate. The economics based on these insights, which is known as…

PAYGO v SAYGO: Prefunding Government-Provided Pensions

Author: Andrew Coleman

Note

In 2001, the New Zealand Superannuation Fund was created to partially prefund the future cost of New Zealand’s pay-as-you-go superannuation scheme. In 2009, in response to worsening government finances, additional contributions to the Fund ceased.

This…