Review of the New Zealand macroeconomy.

• Author: Chapple, Simon

To go through five editions of a book in New Zealand indicates the authors must be doing something right. What they seem to be doing right is producing a book that is short, clearly and concisely written and consequently very accessible to a considerable target audience--those doing an economics course in the last years of high school and the first years of university.

For those of the authors' generation (and here I include myself), the reforms of the 1984-1991 period were a watershed. This watershed is reflected in the motivation for writing the first edition of this book and is fundamental to its organisation even into the fifth edition. Chapter 2 is on "New Zealand's economic performance 1960-1984" and Chapter 9 is on "New Zealand's economic performance 1884-2003". In between come chapters on the economic reforms and their legacy, international trade, monetary policy, fiscal policy, industry policy and labour policy, and a final tack-on chapter deals with macroeconomic forecasting. This edition is subtitled "striving for sustainable growth with equity", indicating that the intended central concerns of the work have changed in response to the economic agenda pursued by the current Labour Government. In fact, much of the book seeks to evaluate the success of the 1984 reforms in the context of this "growth with equity" worldview.

The purpose of this review is not to simply congratulate the authors on a fifth edition well done, but to suggest some areas of potential improvement for a likely sixth edition. My belief is that there is room for improvement and my argument is set out below.

New Zealand's macroeconomic history in the book very much begins in the 1960s, with a decisive break in 1984, or thereabouts, which is the reform watershed mentioned above. Yet others who have taken a longer view, like historian James Belich, have questioned 1984 as a decisive break point. It would have been interesting for Dalziel and Lattimore to have tackled this sort of view head on and assessed its pros and cons.

My personal view is that a much longer-term perspective on New Zealand's macroeconomy should be presented for the intended audience, regardless of whether a pre/post-1984 periodisation is emphasised. This is essential for a complete understanding of today's macroeconomy in terms of the goals--growth with equity--on which Dalziel and Lattimore focus.

There is quite a lot of good data for a study to take a longer view. For example, there is data on national aggregates, created by Keith Rankin and others, going back to the Vogel years and before, consumer price information created by various Victoria University economic historians going back to the 1870s, terms-of-trade data, created by Brian Easton and others, again going back to the 19th century, as well as gross fixed capital formation data going back...