Slow, slow, slow

Reading a new biography of Paul Keating, I came across a good example of how the Aussies in recent years are pushing on with reform while we dilly dally. It's in an area close to my heart - competition policy.

The biography tells me that in Oz the National Competition Policy Review (the 'Hilmer' review) started on October 4 1992 and was published on August 25 1993: ten and a half months. It got buy-in from Australia's state premiers on February 25 1994, six months later, and essentially went live from April 11 1995. Start to finish, two and a half years. Call it three years to allow for pre-Review debate on whether to press the green button.

The latest Aussie Competition Policy Review (the 'Harper' review) was announced on December 4 2013, got underway on March 27 2014, and published its final report on March 31 2015: sixteen months. Legislation to implement its big recommendation (reform of the abuse of market power) is well underway: last month it got through the Aussies' Senate Economics Legislation Committee. There's horse trading to come, but it could well pass this year. Start to finish, call it four years.

Meanwhile, in New Zealand there's been no comparable root and branch review at all.

The best we've managed is some useful recommendations from the Productivity Commission (again featuring reform of abuse of market power) in May 2014. The government decided on a follow-up 'targeted review', and in November 2015 MBIE produced an issues paper on three issues (market power, market studies, cease and desist). The consultation and submission process wrapped up in July 2016. And then the trail goes cold. There's been no further news: it'll soon be three years since the Productivity Commission set the ball rolling, and we don't even have policy decisions, let alone laws passed.

And on another part of the battlefield, we thought we had some bright ideas to reform how we treat cartels (notably criminalising them). A bill was introduced to that effect in October 2011. Over five years later, it hasn't reached the floor of the House for a final vote, and has had the criminalisation bit dropped.

So here's the tally. Australia: two major competition reviews, one done and dusted in good time, the other well on its way. New Zealand: no decision on a limited subset of issues, and five years delay (and counting) on a hamstrung cartel bill.

Let's recall that the Hilmer review alone was worth many billions of dollars to the Aussie economy. The Aussie Productivity Commission had a go at measuring it in 2005, and found (pXII) that

National Competition Policy (NCP) has delivered substantial benefits to the Australian community which, overall, have greatly outweighed the costs. It has:

– contributed to the productivity surge that has underpinned 13 years of continuous economic growth, and associated strong growth in household incomes;

– directly reduced the prices of goods and services such as electricity and milk;

– stimulated business innovation, customer responsiveness and choice; and

– helped meet some environmental goals, including the more efficient use of water 

and (pXVII) that

Previous model-based projections by the Industry Commission suggested that the major elements of NCP could potentially generate a net benefit equivalent to 5.5 per cent of GDP. More selective analysis, undertaken for this inquiry, indicates that the observed productivity and price changes in key infrastructure sectors in the 1990s — to which NCP and related reforms have directly contributed — have increased Australia’s GDP by 2.5 per cent, or $20 billion....And such modelling does not pick up the ‘dynamic’ efficiency gains from more competitive markets 

So we've spent years navel-gazing on the fine differences between cease and desist orders and injunctions, and missed the opportunity (which the Aussies seized) to add at least 2.5% to our GDP.

Nice work, guys!

Books for politics junkies

With our mainstream media generally undercovering our closest geographical and philosophical neighbour, you'll have to educate yourself about Australia. For your latest edification, try Troy Bramston's Paul Keating: The Big-Picture Leader, which as the author says "offers a broadly favourable but not uncritical account of of Keating's public life and legacy". It's well written, convincing, highly informed: Bramston has talked to everyone who was anyone. I didn't know, for example, that Keating was the ultimate 'numbers man', with a Lyndon Johnson ability to steer issues through factions, caucuses and Cabinets. It will get you thinking, in particular about the future of once successful combos of social liberalism and economic reform - Hawke/Keating, Lange/Douglas, New Labour in the UK (Blair was influenced by Keating) - who now find themselves uncomfortable coalitions of Chardonnay socialists and the old union-centred left, and have yet to work out a renewed, electorally viable role.

As you read, you'll find many parallels with New Zealand. Critics of our 'Rogernomics' like to think we went on a weird extremist trip of our own, but as this book shows, Australia started before us (1983), as did the UK and the US, and although we blitzed the Aussies for a while with the speed and depth of our own reform programme, and in some respects (eg fiscal policy) we're still ahead, by and large they've kept going while we've slacked off. Few would doubt that (as this book demonstrates) Australia's reforms in Keating's time formed the bedrock for the recession-free period Australia has enjoyed since, and conversely our low productivity record suggests unfinished domestic agendas.

Still on politics, the upcoming French presidential election is in the near term one of the bigger risks to currently richly-priced financial markets and in the longer term to the prospects for the eurozone and the global economy. If, like me, your knowledge of French history goes a bit hazy between the French Revolution/Bonaparte and the World War Two Resistance, then the book for you is Jonathan Fenby's The history of modern France: from the revolution to the present day. He's got some sharp insights: "Successive presidents and governments had applied a self-serving logic in refusing structural change to the economy - if times were hard and growth was low, reform was impossible; if things were going better and there was no expansion, there was no need to change anything. It was an evasion of reality, and of necessity" (p484), which explains why France has been running a Nordic social welfare system but not paying for it (the fiscal budget been in deficit for 35 years).

Does history give us any tips on how the election might go? If you're worried about Le Pen (as you should be), you won't take much comfort from Fenby's conclusion that "the various narratives of the last two centuries have shown that the country invariably opts for right over left with occasional eruptions to prove that its revolutionary legacy is not dead" (p463). Nor from "The idea of the Hexagon [France] as a model for the world is not one which many people could objectively defend in the twenty-first century, but it remains a potent reason to repel change of foreign influences. The French want to see their country as the bearer of a special mission bequeathed by their history...If the present really contradicts such a vision...this leaves them deprived of what they believe should be theirs by historic right and opens them to the temptation of extremist illusions" (p461).

History also reminds us of the suicidal factionalism of the French Left. In 2002 Marine Le Pen's dad Jean-Marie came second (with 16.8%) to Jacques Chirac (19.8%) and made the run-off second round, principally because the Left split between Lionel Jospin (16.1%) and 10 (!) others. And guess what? This year the Left has fielded two big name candidates - the official Socialist, Benoît Hamon, polling around 13%, and independent far-left Jean-Luc Mélenchon (around 11-12%). Unsplit, the left vote could see off the right's François Fillon (around 19%) and give the independent Emmanuel Macron (low to mid 20s) a real run for the second run-off slot, behind Le Pen. What is it about déjà vu the French left doesn't understand?

Are interest rates really biting?

"Increasing mortgage interest rates", the Reserve Bank said on page 18 of its latest Monetary Policy Statement, "combined with a tightening of loan-to-value ratio (LVR) restrictions in late 2016, have contributed to a slowing in the housing market".

Moderating the heat of the housing market may be welcome - though previously low interest rates are far from being the only thing that's been inflaming the market - but otherwise I got a bit worried that higher rates might be crimping the economic outlook. If the average or marginal household is now carrying a bigger mortgage, and mortgage interest rates go up, the impact on already cramped family budgets could see unpleasant things happening (via consequent necessary cutbacks in household spending) to the currently strong state of the economy.

And then I thought, hang on a sec. Yes, it's true that some mortgage interest rates have started to increase. The chain of events is, US bond yields have risen, especially after Trump was elected; NZ bond yields and other local long term interest rates have gone up as well (they tend to track the US rates plus a credit premium); and this has fed through with a lag (via higher funding costs for the banks) to higher fixed mortgage rates. The graph below shows the past year's trends for some of these rates*. Rates bottomed out around the middle of last year and have risen a bit since.

But how much these increases have been contributing to a slower housing market (or indeed slower anything else) is debatable. The first time borrower may be finding it slightly tougher going. But for existing borrowers, most folks these days are on fixed rates - at the end of December last, there were $182 billion worth of fixed rate mortgages compared to $53 billion of floating rate - and they won't have noticed anything, because they haven't come to the end of their existing fixed rate arrangement.

And then I wondered, well, what happens when they do roll over from their existing fixed rate? Will they roll over into something that will have the household worried about how to balance its books?

Quite the reverse, actually. Here's what a borrower who took out an x-year fixed rate mortgage x years ago would pay to roll over into another x-year fixed rate mortgage today (or at least at the end of December, the  latest available RBNZ data, though today's rates are very similar).

Other than for the 1-year fixed rate, where it's effectively the same, the household with an expiring fixed rate mortgage will be rolling over into a lower borrowing cost for another mortgage of the same maturity as before. Large falls in fixed rates in recent years dominate the small increases in the last few months. For most borrowers in coming months, the mortgage rollover will boost disposable income, not restrain it.

There's also the possibility, though, that local fixed rates will keep on rising and upset the calculation. Let's suppose that US interest rates rise by 0.5% during the course of this year (roughly in line with what the latest, February, Wall Street Journal poll of US forecasters expects for US 10-year yields). And let's assume all local rates rise by the same amount. By the end of this year, 3-, 4- and 5-year fixed borrowers would still be rolling over into cheaper loans, but 1- and 2-year borrowers would be paying a bit more, as would first time borrowers. Overall, this wouldn't represent a big squeeze (or possible any squeeze) on household budgets.

So I'm inclined to think that rising mortgage rates will not be any near-term threat to the economic outlook, and somewhat unconvinced that they can have have played much part to date in a slowing housing market. There may be other reasons for a national cyclical slowdown - the latest BusinessNZ/Bank of New Zealand survey of manufacturing had a hint of the construction sector hitting capacity constraints, though on the other hand the equivalent survey of services showed there is still "swift, broad-based, growth occurring in the services sector" - but interest rates, to date, don't look like much of an actual or potential brake.

*Local fixed rate mortgage rates come from the RBNZ's site, but they're not where might think they are (you'd likely expect in 'Statistics', 'Exchange and interest rates', 'B3: Retail interest rates on lending and deposits'). However you can find the full range of fixed mortgage rates in 'Statistics, 'Registered Banks', 'S8: Banks' mortgage lending ($mn)'; they're in section E6. For the very latest rates, if you go to the bottom of the 'Mortgage Rates Table' in the 'Mortgages' part of the Good Returns website, you'll find the up to date median floating and fixed (1,2 and 3 year) rates.

Bits and bobs from the Bank

We all know the big news from today's Monetary Policy Statement - the official cash rate stays on hold, as unanimously expected by the forecasting community, and, assuming the world pans out the RBNZ thinks it will, an eventual rate rise is a bit closer than before.

But there's always less important, but still interesting, stuff to be found in the nooks and crannies of the MPS and in the Governor's 10.00am press conference afterwards.

Here's one thing worth noting from the MPS, as a corrective to anyone who thinks our big rise in net immigration is mainly or wholly because we're being swamped by Asians.

In 2012, we had essentially a breakeven net immigration position (for the record, a small loss of 1,165 people). Since then net immigration has soared to last year's net intake of 70,588. That's a turnaround of 71,753. By far the biggest moving part in the turnaround isn't Asian at all. It's what has happened trans-Tasman, Over the same period, fewer Kiwis decided to go to Australia, and more Kiwis (and some Aussies) decided to come here, as our economic cycle picked up and theirs slowed down. As a result we moved from a net loss to Australia of 38,796 people in 2012 to a small net gain of 1,563 in 2016, a turnaround of 40,359. That's 56% of everything right there.

From the press conference, John McDermott, the Bank's Head of Economics, picked up on a question from the NBR's Rob Hosking, who had asked about the multiple references to 'uncertainty' of one kind or another, and said we should all have a look at "Nick Bloom's website".

This is what (I reckon) he meant - the Economic Policy Uncertainty website, which has some wonderful indices measuring the level of economic policy uncertainty in various economies, and globally. Here's the latest global picture, as at November 2016. No wonder people are talking about high levels of uncertainty: while the index hasn't been going forever (it starts in 1997), current global policy uncertainty is at an all-time high for the period.

Fascinating site - you can read their methodology, and download the data for quite a range of countries (sadly not including us). But the Aussies are there: here's what they look like.

And finally there was a casual reference from the Governor, responding to a question about the future track of interest rates, where he said that in the November MPS, there had been a 20% probability of an OCR cut built into the OCR forecast, but it has now been removed in this latest one.

I don't recall ever reading (or hearing) about these probabilities before. I don't have a problem with them - they would seem to be an eminently reasonable way of thinking about things - but if they are indeed an established part of the policy thinking, I'd quite like to have more detail at future Statements. Central banks seem quite comfortable these days indicating an easing or a tightening bias: sharing some probabilities around it wouldn't go amiss.

Has planning been worth it?

There was a big turnout on Tuesday night in Auckland at the latest Law and Economics Association of New Zealand (LEANZ) event - a panel discussion featuring three members of the Auckland Unitary Plan Independent Hearings Panel. In fine interdisciplinary LEANZ style, they were Judge David Kirkpatrick (the Panel chair), planner Jan Crawford, and economist Stuart Shepherd.

Chatham House rules, so I can't say anything specific about who said what, but I can safely say that all three were very good speakers - informed, persuasive, congenial, thoughtful, and able to put technical stuff into plain (or at least a good deal plainer) English. So full marks to the organisers, Richard Meade (AUT and Cognitus Advisory) and Andreas Heuser (Treasury) for putting it all together. Special thanks to Simpson Grierson who kindly hosted the event: the LEANZ caravan would be unable to travel on without these corporate oases.Though you can help, too: here's that LEANZ site again, so you can pay your $75 sub ($50 for students).

So, noting again that these are my views and not what the presenters may or may not have said, what did I take away from it?

Clearly the members of the Panel did the best they could with the machinery they had to drive, and in particular they aimed to get the availability of housing land up to where it needs to be (though there may be a developing, and less known, shortage of land for business purposes). And they had the added complexity of having to amalgamate the previous jumble of territorial authority plans into one overall plan for the new one-city Auckland, as well as being lumbered with a process not of their choosing. In the circumstances, they did a fine job.

But it's also clear that the planning process for Auckland has become enormously top-heavy and inefficient. Like other parts of our regulatory apparatus (such as the price control 'Part Four' bits of the Commerce Act) it badly needs paring back to something quicker, more targeted, cheaper, and more efficient.

In part the current clunkiness comes from importing an industrial-strength First World planning policy infrastructure, without paying enough mind to what might work for a small distant economy with not-quite-First-World incomes to pay for it. And in part it's because plans have been allowed to become voluminous grab-bags of miscellaneous agendas (price control, income redistribution, architectural design preferences). I've written previously about one bonkers 'food security' provision, where growing vegetables was prioritised over housing development.

The complexity largely speaks for itself, but here, as just one tiny example, is the legend you'll need to understand the Unitary Plan maps.

Six kinds of residential zone. Five kinds of 'open space'. Ten - ten! - kinds of business zone. Five kinds of rural zone (not counting the Waitakeres and the Hunuas, which are two more zones of their own). And seven kinds of coastal zone. 'Micromanagement' doesn't even begin to describe it.

And it's not just a matter of economic inefficiency, though the purely economic costs must surely be substantial: a fair slab of potential housing development, for example, reportedly got put on hold until the Unitary Plan finally saw the light of day at the end of a nearly three year process. It also carries social costs. The process is now so cumbersome and protracted that it is very difficult for non-experts to have their say - a level of difficulty that could threaten to undermine the perceived legitimacy of the outcome amongst the wider public. .

I'm also not sure that the planning process has fully got to grips with what you would imagine would be one of the core outputs of any plan: integrating the plan, infrastructure provision, and the intentions of owners/developers of resources. All three need to be aligned for anything significant to happen. Nor are enough people making even back of an envelope attempts to estimate the net benefits (widely defined) of plan provisions. What about those 'volcanic viewshafts', for example, which protect people's ability to see (say) Mount Wellington from their home? I wonder how Tokyo would have got on if it had to be designed so everyone could see Mount Fuji: not very well at all, I'd say. And if people were given the choice of their kids getting houses (say) $200,000 cheaper but without a view of Mount Albert, which would they pick?

Which brings me to my final point - the role of markets. Yes, we all know that plans may be needed to help address the externalities and coordination issues that can crop up in dense conurbations. But the role of markets and prices (and indeed economic analysis) hasn't been so much assisted as largely displaced. In particular, the housing market has been distorted and suppressed.

The Salvation Army's latest State of the Nation Report, for example, says (p50) that

based on an average occupancy of three people per dwelling...and given that Auckland’s population grew by an estimated 45,000 people for the year to 30 September 2016, accommodating this number of people required 15,000 additional dwellings. Consents for new dwellings over the same period lagged this number by 5000.

Over the past five years, the cumulative shortfall in new housing to cater for Auckland’s population growth is estimated to be almost 18,000 dwellings. 

The Sallies snarked that the recent level of consents (10,000 a year) "has been celebrated as proof that Auckland’s housing problems are being resolved by the market", but that "in a slightly longer context this record is, however, not remarkable". The reality isn't that the market has delivered, but inadequately. The reality is that the market has not been allowed to work properly, or, for some places and activities, not allowed at all.

In sum, on the one side, you have an uncertain quantum of planning benefits, and on the other, clearer and large costs. I wonder what the net outcome has been?

What should we do about 'cartels'?

I've just got back from holidays and as I'm playing myself in, I find that last week the National Business Review ran with an op-ed piece, 'Editor's Insight: Greens kick dead horse of cartel criminalisation'.

It said that the Greens were using cartel criminalisation as part of "a promising anti-business platform"; that cartels may be a non-existent problem - "In recent years, only one significant domestic cartel has been prosecuted (in wood chemicals) while the two others were in international air cargo and freight forwarding" - and that in any event "cartels are not necessarily bad news for customers or competitive business, except in cases of price fixing or blatant rigging of the market...Cartels are commonplace in certain industries where, for operational reasons, companies work together for their own benefit as well their customers’ but otherwise remain competitive entities. Shipping, airlines and similar services are examples".

I don't care about the politics of the issues, but I think the rest of the argument is debatable.

Part of it is people talking past each other. The NBR piece calls the ordinary, sometimes necessary, and as the NBR says, often beneficial cooperation between otherwise rivals in an industry a 'cartel': most people wouldn't. The arrangements that two airlines make to get your baggage to the end point of your journey with them would not normally be termed a 'cartel', and indeed most dictionary definitions don't include that sort of thing, either. Google "definition of cartel", for example, and what comes up at the head of the results is "an association of manufacturers or suppliers with the purpose of maintaining prices at a high level and restricting competition", which is the usual anti-competitive meaning of 'cartel'.

Clearly, there's never been any intention of criminalising beneficial pro-consumer cooperation, what the NBR called "bona fide commercial behaviour". The  debate has always been about those "cases of price fixing or blatant rigging of the market" the NBR also mentioned. So what should we do about those?

Are they too few to bother about? It's hard to tell: by definition, cartels are unknown unknowns until they're rumbled. I'll come back to that in a minute.

But otherwise I'm for criminalisation of the genuine, blatant - what are sometimes called 'hard core' - examples of price-fixing and bid-rigging. Last time I wrote about this, I said I endorsed criminalisation somewhat reluctantly: there are already too many redneck yobbos running around trying to jail people for this, that and the other, and not enough people taking liberal or progressive lines focussed on prevention and rehabilitation. And I've since learned that we already have a distressingly high rate of incarceration by international standards, which ought to give New Zealand lawmakers considerable pause for thought before they write yet another 'crime' onto the lawbooks.

But I'm still inclined towards a hard line. For cases that fit the classic hard core model - anti-competitive intent that is manifestly not bona fide, secrecy, collusion, persistence, materiality - it's beyond absurd that the shop assistant who pockets $25 from the till will end up in the District Court, whereas the shadowy guys who meet on the fringes of industry fairs to steal $25 million from the public won't hear the knock of the cop at their door.

And it's pro-business, pro-market people in particular who should be most concerned about this. The typical cartel is a conspiracy to rort other businesses. One good example is the Amcor/Visy stitch-up of the Australasian markets for cardboard packaging. Businesses who wanted to put their stuff in boxes and send it out the door - even the biggest (Coca Cola, Fonterra, Goodman Fielder) who can normally look after themselves - were being ripped off.

People who believe that, for most purposes, well-functioning markets are the best way to deliver national productivity and consumer satisfaction, should be equally incensed. There's nothing more brutal to the proper working of markets than a cartel that substitutes their own chicanery for the free play of demand and supply. People get less, and pay more, than they would otherwise. How'd you feel, for example, if it was the health service that was on the receiving end of one of these hard core cartels?

The only thing, frankly, that might give me pause for thought is that criminalisation might, just, be counterproductive. The idea behind it was that it would discourage cartel formation in the first place, and arguably would also strengthen the 'ratting out' regimes that competition authorities typically run to encourage cartellists to dob in their former co-conspirators. But it also could strengthen the incentives to conceal a new or ongoing cartel. I'd wondered about this, and subsequently learned that there's some evidence suggesting that today's cartellists could indeed be running deeper and quieter than before.

In short, it's never easy, for obvious reasons, to know the prevalence of (true, anti-competitive) cartels. And it's possible that criminalisation, perversely, might have led cartellists to become more adept at hiding them. We won't know that for a while, and maybe not for a long while, though it might be a straw in the wind that the first alleged criminal cartel cases are beginning to pop up in Australia (latest news here). For the time being we simply don't know how big or how small an issue might be out there.

If criminalisation meant that cartels became much harder to find, I might reconsider. But for now I'm not inclined to cut cartels any slack. They're criminal conspiracies, on the same moral level as guys in balaclavas on their way to the bank with shotguns. They should get the same treatment.

A cork in choppy seas

Every now and then I like to resurrect the Monetary Conditions Index (MCI), which was an attempt to combine both interest rates (the 90 day bank bill yield) and the exchange rate (as measured by the TWI) into a summary measure of the overall tightness of looseness of monetary conditions. It's not perfect - you could argue for including more measures or other measures (such as longer term interest rates) and for building the index differently - but it's better than a simple focus on interest rates alone.

Here's what it looked like at the end of 2016.

Yes, the Reserve Bank has set short-term interest rates on "very easy": the official cash rate (OCR), at 1.75%, is some 2.25% to 2.5% below the 4% or so that the RBNZ would regard as a neutral level. But overall monetary conditions aren't "very easy". The absolute level of the MCI doesn't translate in a straightforward way into "loose" or "tight", but given that it's currently well above its long-term average, you probably wouldn't be too wrong if you said overall monetary conditions were somewhere on the tighter side of neutral.

Focusing on the MCI is a good reminder that our overall monetary conditions are only partially under our own control: we're a small open economy in a world where the big guys' interest rate and currency policies are the ones that matter.. The RBNZ can set the OCR, but it doesn't have a lot of say about longer term interest rates (where our bond yields are set to a substantial degree by overseas yields plus a credit premium), and still less over the TWI, which is the resultant of a myriad of global variables.

Last year, for example, the NZ$ dropped a little against the yen (which strangely had become the 'safe haven du jour'), but rose a bit against the A$ (we offered higher yields and a faster growth rate), rose rather more against the euro (where the ECB is still in full negative interest rate / quantitative easing mode) and soared against the post-Brexit pound. Our ability to steer the TWI to where we'd prefer it is close to half of five-eighths of the proverbial.

It's also a reminder, as a corollary, that achieving our targetted 2% inflation rate can't be wholly under our own control, either. That doesn't mean that we shouldn't hold our RBNZ Governors accountable for making the best decisions they can under the circumstances they inherit. But sometimes - and the last year or two is one of those sometimes - I suspect that, given the macroeconomic hand they've been dealt by the overseas croupiers, there may not be any realistic setting for domestic policy that will meet the target,

A good idea hits a snag

'Dumping'. What a good word for those wicked, wicked manufacturers overseas who 'dump' their goods here at lower-than-fair prices and drive our honest battlers to the wall. And when they've driven our fellows out, they have the market to themselves and can rip us off. Good job we've got anti-dumping laws to protect us, eh?

But hang on a minute. Let's just suppose you're in Malaysia and you make diaries. How likely is it, really, that one day you'll wake up in Kuala Lumpur and say to yourself, "I think I'll flood the New Zealand market with ultra-cheap diaries, and when I've cornered the market, I'll jack up prices and make a killing"?

Because there are two eentsy problems with that plan. One is you'll be making lower than normal profits (or even losses) in New Zealand when you could be making normal ones in New Zealand or somewhere else. And the other is that if you do indeed corner the market with temporarily low prices, the minute you try to jack up prices someone will come in and undercut you. After all, if the New Zealand market is so easy to enter and dominate, anyone can get into that game, including your mates on the other side of town when they spot what you're up to. Low profits now for high profits later doesn't look a realistic runner.

The reality is that 'predatory pricing' strategies like the Great Malaysian Cunning Diary Plan are likely to be rare and unsuccessful. If things turn up in New Zealand at unusually low prices, it's more likely that the low prices come from a genuinely cheap producer, and one who might well be sweetening the pot, if trying to break into a new market, with especially sharp pricing: nothing wrong with that. Or it could be that there's a temporary glut of something - tomatoes, peaches, steel - and producers everywhere are trying to shift what they're lumbered with for whatever it will fetch. Nothing wrong with that, either: you'd do the same. And in both cases New Zealand consumers (including businesses who use the cheap goods as industrial inputs) are the winner, and it's the effect on consumers that ought to be front of mind when we're thinking about policy issues like 'protection' from 'dumping'.

If only. At present, our anti 'dumping' legislation ignores consumers. If a Greek peach canner sells peaches in Athens for say $1 a can, and sells them in New Zealand at say 90 cents a can, a New Zealand peach canner can cry "Dumping!" and get MBIE to slap an import duty on the Greek peaches, even if consumers would have been happy to fill their trolleys with them. And our domestic monopoly peach canner, Heinz Wattie's, has indeed been protesting about those pesky Greek imports since 1998, and very successfully too. MBIE renewed the anti-'dumping' duties in July 2015 and lately there have been no Greek peach exports to New Zealand at all.

And those Malaysian diaries, by the way, are also a real life example. Malaysian diaries from a range of Malaysian makers - and from a range of Chinese ones, which proves my point about the Malaysian guy being unable to corner the market because others both in Malaysia and in China would undercut him - have been hit by anti-'dumping' duties from 2007 to 2015, as you can see on the MBIE web page listing all the completed anti-'dumping' investigations.

The anti-'dumping' law is long overdue for a fix which would allow competition and consumer benefits to be weighed in the balance, and not just the comfy position of the domestic incumbent. And it got one: it took them forever, but MBIE finally got round to it in August 2015. As I posted at the time, 'A good idea finally gets the nod', and you'll find links there to the history of the process. The guts was that there would be a new public interest test:

In future...domestic producers won't be able to have cheap peaches or tomatoes or building materials shut out of the New Zealand market unless they can show that the damage to them is more than the damage to New Zealand consumers. Which it often won't be: there's only a  few of them, and there's lots of us. A process that has been much abused for protectionist reasons, both here and abroad, is finally getting defanged

And then the politics kicked in, when the proposed legislation landed before Parliament's Commerce Select Committee. As the National Business Review reported,  'Politicians split on dumping penalties bill in run-up to Chinese steel inquiry': the National members wanted to go ahead, the Opposition members didn't. They split 5-5, deadlock: "we were unable to agree on whether to recommend that the bill be passed". The Committee's full report on their deliberations is here.

It's kind of strange how things have lined up. National might be thought of by some as in the pockets of big business, yet its members on the Commerce Committee took the pro-consumer side, while Labour, the Greens and NZ First, who some might expect to champion the consumer against the corporation, took the "protect New Zealand businesses" position.

To be fair, the Committee had to give due weight to the submissions in front of it, and the submissions were, as the Opposition members said in the report, "overwhelmingly opposed to this bill, warning that it would be likely to tilt the playing field in favour of dumped or subsidised imports rather than supporting local producers and jobs".

But of course the submissions were overwhelmingly opposed. They were overwhelmingly from the usual suspects (including Heinz Wattie's).That's precisely the problem.

As is often the case in policy matters (and overwhelmingly the case in trade policy ones) the small group of producers adversely affected by change make an unholy racket: the 99.5% of the population who'd quite like cheaper diaries or cheaper peaches don't get heard from.

This time, too, the consumer viewpoint went largely unheard, other than through The Warehouse Group's submission. True, it had its own barrow to push - it had been on the receiving end of various anti-'dumping' measures, including, as it happens, both diaries and tinned peaches - but even so it got to the right answer, that the new public interest test

is necessary to ensure that the legitimate interests of all stakeholders and the wider economy are routinely considered and balanced before punitive duties are imposed.

Yes, there will be genuine instances where domestic producers are getting unfairly shafted (overseas governments' subsidies to their exporters being an example) and we ought to have some backstop protection. Yes, we as a country resort far less to anti-'dumping' protectionism than other places do (notably Australia), so it's not a massive rort that needs a lot of fixing. And yes, you have to feel some sympathy for folks who might lose out from cheaper imports, as you will, for example, if you read the submission from people who grow the peaches for Wattie's. The solution is transitional help for people affected by policy changes, which should be part and parcel of all trade reforms but often isn't (and which has consequently helped provide the political oxygen for the protectionism of the Trumps and the Le Pens).

But for all that, the direction of reform is nonetheless right, and I'd say the same thing (just to be clear) if it were the Labour/Green/NZ First people for it and the Nats against. The process shouldn't cater solely to the "Woe is me" reactions, and it should take account of greater competition, greater choice, and lower prices.

The politics, however, is iffy, as the split on the Commerce Committee showed. Reform could conceivably be presented in a voter-friendly way - as making family budgets go further, for example, or as reducing input costs for New Zealand businesses. But the vocal views of the protected producers make it an uphill sell. Whether the government will have the bottle to keep on the right path in election year remains to be seen.