Introduction

Welcome to Local Knowledge, an occasional blog about economics from a New Zealand perspective. For some of you, this will be the only post that you see when you arrive here, so I’ll try to give you an idea of what to expect. The first substantive post will go up next week.

About me

I’ve been working as a macroeconomist since 2001. I started as a graduate at the Reserve Bank of New Zealand, focusing on market monitoring and financial system issues. From there I joined the economics and strategy team at Westpac where I’ve been working for 17 years, including two stints as chief economist in an acting capacity.

In that time I’ve had the privilege of covering almost every major facet of the New Zealand economy, from financial markets to farming, to housing and household spending, to international trade, inflation and the labour market. Lately I’ve also been thinking about broader issues like the art of forecasting and the communication of economic issues.

After a long and sometimes hectic run, I decided to take a six-month break from the daily grind. The plan is to return next year, so I still want to keep engaged with what’s going on. And I decided that one way to do that was to commit myself to writing and thinking about issues as I came across them. Hence, this blog.

What the blog is about

First and foremost, this is a way for me to keep in the habit of writing. I find that the skills can get rusty pretty quickly, even within the space of a few weeks between publications. (One of the things that I appreciated about the acting chief role was that it forced me to put pen to paper more frequently.) So even if only three people ever read this, it will still have served some purpose – but if it happens to gain an audience, so much the better.

Secondly, it’s an opportunity to stretch out and gather my thoughts on a broader range of topics than I would normally cover in my day job. It’s not that any particular subject is taboo – rather, with only so many hours in the day, the priority has to be on things that will be of most value to our customers (with the single biggest customer being the bank itself). That inevitably means a heavy focus on the forecasts, and especially on the outlook for interest rates. We’ve always intended to supplement this with ‘thinky pieces’ when time allows, but all too often it doesn't. One of my long-running bugbears is that we have a lot of good ideas and conversations that never make it to the publication stage for one reason or another.

What I’m going to cover here is likely to be a mish-mash. Some of it will be ideas that I’ve had brewing in my mind for several years. Some of it will be reporting on things that I’ve discovered in my new-found free time. And some of it will be about applying an economist’s lens to events as they happen.

I’m stepping back from the game of making specific forecasts (I don’t have the resources at home to match what others are doing). And I’ll be amazed if anything I say here could be taken as financial advice.

And since the aim is to do something different, I’m not planning to say much about monetary policy. That said, my entire career has centred around the Reserve Bank in one way or another, so it’s inevitable that I’ll return to the well at some point. I’ll probably pipe up only if I think there’s an angle that hasn’t been explored elsewhere.

Where the name comes from

‘Local Knowledge’ was a monthly report that I produced between 2014 and 2017, which was aimed at making sense of the flurry of high-frequency data on the New Zealand economy. The report itself fell by the wayside, but the work behind it has remained a big part of my day job.

More broadly, it reflects the fact that much of my career has been specific to understanding the New Zealand economy. As much as we’d like to think that economics is universal, there are always differences across countries – in history, in laws, in institutions, in the mix of activity, in how data is collected – which mean that some caution is required when applying one country’s experiences to another. Over the years I’ve picked up a lot of tips and tricks about how to make those translations.

The term ‘local knowledge’ in economics dates back to Hayek, though he used it in a different sense. His concern was essentially one of co-ordination – the information about the highest-value use of our resources is dispersed among individuals, and the only way to get them to reveal that information is through a market price. No one entity can make these calculations, no matter how many data points or how powerful a computer they have. There’s a parallel for economists to keep in mind as well – I can share what I know, but no-one should be considered the authority on anything outside their own backyard.