OnPoint by Keith Ng


Media beat-off

It's time to pull the brakes on the latest meme-plague: Reports of New Zealand's death have been greatly exaggerated.

Exhibit A: “Average family in the red just to get by”. According to the story, in 2004, the “average family” was just getting by, but in 2008, the “average family” was in deficit each week and getting further and further into debt.

Skyrocketing living costs mean the average New Zealand family is going into the red simply to cover everyday expenses, according to detailed new analysis.”

The story was based on this analysis by Bernard Hickey. Hickey's analysis compared average income data from the Household Economic Survey with an independent estimate of the cost of maintaining an average mortgage. That is, he took the burden of the average homeowner, and compared it with the income of an average household.

Why is this a problem? Because the latter includes those who don't have a mortgage, such as those who don't have a mortgage because they can't afford one. So he included people who can't afford a mortgage in the averages, and the numbers show that the average family – woah – can't afford a mortgage.

Hickey's defence was that there aren't income numbers more accurate that the HES, and that it was probably a reasonable estimate. I agree. Hickey's number are not wrong, per se, but there are limitations to how his data can be used. He was clear about it, the Sunday Star Times wasn't.

These “average families” are statistical constructs. When independent data is introduced, the number they arrive at is not a measurement of anything in the real world – it's just a comparison of two different statistics. It is arbitrary, and can't be talked about as if it was real. That's why Hickey draws the conservative conclusion:

...the average household with 2 kids and a NZ$170,000 mortgage is now $38 a week worse off in the last four years because higher food, petrol and mortgage costs have overwhelmed wage increases and Working for Family tax breaks over that period.”

He compared the same household using the same methods, noting the difference between the two, but not going any further. Whereas the SST say:

Where four years ago a family on the average income could each week expect to earn $23 more than it spent on its bills, that figure has now fallen below zero to $15 in the red.”

What's “in the black” and what's “in the red” is simply arbitrary. If we change assumptions about taxes (e.g. Income split between two earners, etc.), or the mortgage, we could easily make both “in the black” or “in the red”. Which means that you definitely can't say things like:

People wanting to maintain the living standard they enjoyed four years ago are being forced into debt or must face the difficult task of sacrificing day-to-day items.”

Which is, plainly and simply, un-fucking-founded.

But one conclusion can be clearly drawn from the analysis: Mortgage, mortgage, mortgage. The biggest change in the four years is the cost of servicing the mortgage.

In 2004, spending on food was 15.6% of after-tax income. In 2008, spending on food was 15.4%. Expenditure on food has not grown faster than income. Petrol has, but remains small: from 4.4% in 2004 to 6.1% in 2008.

Mortgage costs, on the other hand, has risen from 24.7% of after-tax income in 2004 to 29.8% in 2008, according to Hickey's figures.

The upshot is that, before we start going on about food prices, GST and so on, let's keep our eye on the ball here: Housing cost is the biggest and has risen the fastest. So let's talk about interest rates, not bloody cheese.


The biggest BS of last week would have to go to Richard Prebble:

Mr [Richard] Prebble said it was a myth to say rail was environmentally friendly if the production of rail, locomotives and the need for trucks to take goods to destination were counted.” – NZPA, 5 May

How does he know? According to Prebble, when he was the Minister of Railways in the late 80s, the rail bosses told him. It's hard to find any evidence to back him up, but there's a mountain of material to prove him wrong.

The most authoritative is a Energy Efficiency and Conservation Authority (EECA) report from 2000. It worked out the energy intensity of different kinds of transport, and found that freight transport by road used 3.10MJ/t-km (that's 3.1 million units of energy to move one ton of goods one kilometre), while rail only used 0.61MJ/t-km. And that took into account the energy used by trucks to get goods to the railway station.

Chris Kissling, Professor of Transport Studies at Lincoln University, says that the gap is probably not as big now. With rising fuel prices over the last ten years, fleet operators have worked hard to find ways to become more energy efficient. And although rail is New Zealand is less efficient than other countries because of our terrain, Kissling was unequivocal: “[Rail] is less energy intensive, and will always be less energy intensive.”

But what about the cost of laying tracks and building trains compared with building roads and trucks? It's hard to find such studies, but this one conducted by the University of Karlsruhe estimated that the environmental cost of the “up- and down-stream processes” for heavy road vehicles was three time higher than similar costs for freight rail. All the evidence is weighed heavily in rail's favour – unless you count the dark horse of transport, coastal shipping.

It has even lower energy intensity than rail, but is currently held back because of dirty fuels. While Kissling was optimistic about the rail buy-back, he says that it needs to be well-managed, otherwise, New Zealand would be better off turning to the sea.


My Herald on Sunday columns are now here on Public Address. Feel free to peruse. If you are interested in the topic and would like to get your hands on the source material, please let me know. I'm happy to talk with anyone, regardless of political or media affiliation. I'm too lazy to link/reference everything properly, but will endeavour to do posts like this one on a regular basis.

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