Lots of ideology, not argument

Written By: Steve Pierson - Date published: 10:16 am, July 10th, 2008 - 71 comments
Categories: uncategorized - Tags: anz national, cameron bagrie, waste

I was going to write a piece on the much anticipated paper from ANZ’s chief economist on government spending. But now I’ve tracked it down and read it, there’s hardly any point. It’s just 4 pages in the Bank’s monthly market report and it reads like something I would expect from an excitable commerce student, not a professional economist.

Allegedly, the report shows ‘back-room’ government spending has increased 40% faster than ‘front-line’ spending but it takes a bizarre, self-serving definition of ‘front-line’ vs ‘back-room’ spending. No logic or arguments are provided for assigning spending to either category. Areas that have grown rapidly are lumped in backroom spending to bolster its growth figures. Health spending is not even included – if health were included in the ‘front-line’, there would be virtually no growth difference in ‘front-line’ and ‘back-office’. It then compares the percentage increases in these two stupid categories (which hides the fact that nearly all government spending is ‘frontline’) with the automatic conclusion that spending on the second category is bad.

In fact, the whole report is premised on the childish position that anything non-‘front-line’ is waste – but you can’t have a ‘front-line’ without back office support. Hell, ANZ’s chief economist has a back office job, is he a waste of money? (don’t answer that)

[Update: “Stick to Banking CTU tells Bank Economist“, ouch]

71 comments on “Lots of ideology, not argument ”

Comments are now closed

J 1

10 July 2008 at 11:01 am

Maybe you should talk to some nurses or hospital patients regards the importance of backroom vs frontline staff. I’m sure it could be enlightening.

As someone who once occupied a lowly paid frontline position in a govnt department we certainly had strong opinions regarding those highly paid ‘essential’ backroom policy analyst churning out insightful reports.
Daveski 2

10 July 2008 at 11:08 am

In my industry (science/research) same thing – there is genuine concern at the front line about the size and impact of the backroom.

Ditto education.

Ditto health.

I agree that there needs to be a back room in order to function – I am one of those back room people. But there is more than a suspicion that the back room has expanded at the expense of the front line operations under Labour.
Steve Pierson 3

10 July 2008 at 11:11 am

well that “more than a suspicion” is not backed up by this joke of a report.
randal 4

10 July 2008 at 11:26 am

for every soldier in the frontline during ww11 it took 19 others to support him…the right whinge want people to go round ignorant and confused so they can be manipulated at will by the marketers and the profiteers.,,economists are as common as dentists anyway…JM Keynes.
leftrightout 5

10 July 2008 at 11:30 am

Why didnt Bagrie include “Im a National voter” in his report. I also see the herald were happy to call him an ‘expert’.
J 6

10 July 2008 at 11:32 am

There is a role for backroom staff as afterall what you can’t measure you cannot manage and for accountabilities sake.

But when people are being left in the corridors of hospitals like my grandmother was after a stroke I would say that money could be better spent on frontline staff who make a real difference to peoples lives.
randal 7

10 July 2008 at 11:32 am

Oh I forgot to mention the big four bank chief economists got their own full page in the SST a couple of weeks ago and now they all think they are akin to moses preaching from on high by holy writ. they are just employees of profit taking institutions pretending to be impartial so they can push their own barrows.
andy 8

10 July 2008 at 11:37 am

ANZ are talking their ‘book’, no surprise!

SYDNEY (Thomson Financial) – Australia & New Zealand Banking Group’s (ANZ) 200 million US dollar one-off loss provision relating to its exposure to a troubled US monoline bond insurer is seen as a ”clearing of the decks,” an analyst said on Monday.

ANZ write down.

They have also moved ANZ technology to Bangalore blah, blah, blah so they could save on back office costs, pity we can’t offshore the NZ govt to India…

/snark
Daveski 9

10 July 2008 at 11:49 am

SP – I could see that being a reasonable response to my comment. At the same time, I suspect that the report is closer to the truth than you would like to admit. I just don’t have the facts at hand to back up my suspicions.

In this case, the verdict must be not guilty which is not the same as innocent 🙂

[lprent: see my note at http://www.thestandard.org.nz/?p=2464#comment-68082 Consider the effects of annoying a sysop]
Matthew Pilott 10

10 July 2008 at 11:51 am

Steve – when you have time i’d be interested to see some stuff about what is/isn’t ‘back office’ according to this report, and what was excluded. Hell, maybe I’ll have a look myself instead of asking you to do it. I’m all for personal responsibility (since it’s just a bloody slogan the tories wish they could coypright).

Cap subsidy racisim – err…no. Only at Orewa.
Steve Pierson 11

10 July 2008 at 11:55 am

J you can’t admit that backoffice staff are a vital part and then say you would prefer the money was spent elsewhere instead.

if you want more hospital capacity, you should support more spending on health – both ‘front’ and ‘back’ – seems people want tax cuts instead.

Daveski. You don’t have an argument, it’s just a bunch of assertions, what’s to seriously discuss?
BeShakey 12

10 July 2008 at 12:28 pm

I don’t think this report is as bad as you suggest, its more of a ‘so what?’ report. Given the number of caveats and the questions/issues/explanations that were either ignored or acknowledged but not investigated its pretty much impossible to draw any sensible conclusions from the report (which does raise the question of why they bothered to publish something that was so shoddy).

The other thing to keep in mind is that there are, and will always be more efficient ways that government could be working (but show me a private business that couldn’t be run any more efficiently and I’ll show you a business you don’t understand). The problem is that saying ‘more front-line staff and less back-room staff’ isn’t a solution, it’s a slogan. If you really want to provide public services more efficiently something a lot more rigourous and well thought-out than most of what is floating round is needed.
Bryan Spondre 13

10 July 2008 at 12:43 pm

Nothing to see here folks, move along, nothing to see.

(Quick, declare victory and move on. And while your at it call the CTU and get them to pull some skeletons out of ANZ’s closet to distract the media.)
mike 14

10 July 2008 at 12:45 pm

So once again any report that paints the govt in a bad light is dismissed.
Steve, don’t shoot the messenger – the ANZ are not pushing an agenda they are reporting on the facts.

“(but show me a private business that couldn’t be run any more efficiently and I’ll show you a business you don’t understand). ”

What the? Have you ever worked in the private sector?
A private business would not survive with a backroom ratio anything like the public sectors.
Positive and ambitious 15

10 July 2008 at 12:58 pm

I think the value of reports like this is summed up best by this definition I heard (at an economist’s conference) years ago….

An economist is a man who knows 100 different ways to make love to a woman….. but doesn’t know any women
BeShakey 16

10 July 2008 at 1:04 pm

Mike – I can now show you someone who can’t read either. I never said that business and government could or should be run the same way. Simply that inefficiency isn’t the sole preserve of government. Try not to let your ideology get in the way of your ability to read.
Steve Pierson 17

10 July 2008 at 1:11 pm

mike. you haven’t read the report, i have, i’ve made fundemental criticisms of it as have others. that’s not shooting the messenger, that’s called informed political debate, you might like to try it
Lew 18

10 July 2008 at 1:12 pm

mike: “A private business would not survive with a backroom ratio anything like the public sectors.”

The primary reason for this (and the primary reason for policy analysts) is that the private sector is held to much less stringent requirements of conduct and management than the public sector. Private business is required to grow profits, and there aren’t all that many strictures on how that’s done. (Contrary to frequent complaints about over-regulation, NZ is consistently rankes as among the easiest developed countries in which to do business).

The public sector has to be inclusive, ethical, transparent, and respectful of the needs of all its customers. The market doesn’t apply as it does in private business, because public service agencies don’t have competition. What this means is that instead of rationalising poor service or poor policy away to `well, customers can go elsewhere’, the public service has to improve its policies and service so as to include those customers. It needs policies and procedures to ensure it’s not excluding people to whom it owes service, and to ensure that its decisions are ethically right as well as right in terms of promoting business. This, which many people deride as `PC’, takes a lot of doing; a lot more than you seem to imagine.

If freed from these extra-business requirements, there would indeed be a need for far fewer `bureaucrats’. What it boils down to is whether you think these non-monetary aspects of the public service have value. I do.

L
Matthew Pilott 19

10 July 2008 at 1:20 pm

Bryan, that comment was directed towards the inside of your head, yeah?

mike – do you think the Government’s goal, its raison d’etre is to make profit for shareholders? If so, then I could see your argument for getting rid of all these back office types. That would also make you a unique, paradoxical combination of communist-capitalist. If not, the comparison between the two is of no value.
Bryan Spondre 20

10 July 2008 at 1:23 pm

“Government bureaucrats wages are up 8.8% this year while wages for the rest of us are up 4.5%.”

It’s clear who is causing inflation, it’s not the poachers it’s the game keepers.
Billy 21

10 July 2008 at 1:26 pm

Positive and ambitious,

That reminds me of:

An actuary is someone who wanted to be an accountant but did not have the personality.
Tane 22

10 July 2008 at 1:28 pm

Bryan:

Annual wage growth in the private sector was 3.5% in the year to March 2008, the largest annual increase recorded by the LCI. Annual public sector wage growth increased slightly to 3.3% in March 2008 from 3.1% in December 2007.

http://www.dol.govt.nz/publications/lmr/lmr-wage-growth-summary.asp
Robinsod 23

10 July 2008 at 1:28 pm

Bryan – although this is off topic I have noticed that you were the one who tried to scoopit Davey’s weak smear on the standard. Would you like to explain why you attempted to propagate an unsubstantiated smear against this site? Is it because you can’t win an logical argument here? It seems like a pretty pathetic and underhanded thing to do. Are you pathetic and underhanded?

[Tane: Sod, that’s off-topic and likely to lead to threadjacking and flamewars. Please restrain yourself. If Bryan wants to act like a jerk on other sites that’s his business. Alternatively, take it to Sodblog.]
mike 24

10 July 2008 at 1:28 pm

“mike. you haven’t read the report, i have”

Correct Steve, but working in the private sector I do not have time to read all the fine print.
I got the gist of it from Bernard Hickey’s business report on Radio Live this morning.
Next I guess you are going to run him down as a tory…
Lew 25

10 July 2008 at 1:29 pm

BS: Source? I’ve seen figures with a much smaller delta.

Edit: Ah, the lag. Thanks Tane. BS, the query stands – put up your numbers or face ridicule.

L
Matthew Pilott 26

10 July 2008 at 1:32 pm

“It’s clear who is causing inflation, it’s not the poachers it’s the game keepers.”

Petrol prices up 63%, food up 23% or thereabouts. I think it’s the game, Bryan, not the game keepers. Where did you get that stat from anyway?

Govt spending as a % of GDP is below OECD average too, which is hardly a damning indictment.
Matthew Pilott 27

10 July 2008 at 1:36 pm

Mike – you still haven’t actually made any decent assertions about the report, a hazy stab at the back-office requirements of private vs public industry isn’t much use. No need to run Hickey down as being a Tory, if what you say is based upon listening to him (coz it didn’t help you).
Robinsod 28

10 July 2008 at 1:38 pm

Sorry Tane – but the little creep comes here, spouts his economically illiterate lies and then gets called on them. The fact that he then slides off to try to smear the standard pisses me off. What an impotent loser. I’ll say no more.

edit: except that he’s shown there’s no point in arguing with the poisonous little oik as he is only interested in his warped agenda. Not the facts.
Billy 29

10 July 2008 at 1:43 pm

Four lifetime apologies (and three in a week).
Bryan Spondre 30

10 July 2008 at 1:47 pm

Lew/Matthew: Ironically those numbers are courtesy of the Government bureaucracy: Statistics NZ.
higherstandard 31

10 July 2008 at 1:49 pm

Lew

Can I take issue with your comments above (appended and abbrevaited below)

‘The public sector …… This, which many people deride as `PC’, takes a lot of doing; a lot more than you seem to imagine.’

While I agree that there is more of an obligation on the public sector and this will often lead to an increase in the “backroom” one could also expect that this increase in the ‘backroom’ would lead to continuous improvements in the service offered.

Where I take issue is there appears to be a number of instances/examples in which there has been little improvement, no change, or a decline in service despite these backroom increases.

Although I haven’t thoroughly read the report I am in complete agreement with the comment as below.

‘…here’s a challenge to Treasury, as guardians of the public purse. Develop a set of fiscal indicators that will allow independent assessments as to the mix and quality of government spending.

And in answer to the question that the report poses slightly earlier – No we do not need 21 DHBs in NZ.
Anita 32

10 July 2008 at 1:51 pm

BS,

Which StatsNZ data set?
Robinsod 33

10 July 2008 at 1:56 pm

A – the one’s from his personal stash. He keeps them under his bed in the same tin as his copies of “Atlas Shrugged” and “how to win friends and influence people” (he hasn’t finished that one yet…)
Anita 34

10 July 2008 at 1:58 pm

‘sod,

I’ll miss you while you’re gone 🙂
T-rex 35

10 July 2008 at 2:03 pm

The funny thing is that if the real world equivalents of John Galt and Hank Rearden did sneak off and form a libertarian utopia you can guarantee they wouldn’t invite Bryan.

Is a tool
|
|
/
Bryan Spondre 36

10 July 2008 at 2:06 pm

Robinsod: I wonder if you would say those things if you were commenting under your real name: I suspect not.
Robinsod 37

10 July 2008 at 2:07 pm

Ha! Classic! He’d probably try to hide in their luggage…

edit: why would you want to know who I am, bryan? So you could poison my dog? Or maybe crank call in the middle of the night… Get a life you spineless little man.
Kevyn 38

10 July 2008 at 2:08 pm

Oh come on. We all know the only problem with our hospitals is they’ve got more managers than nurses. How come when the ANZ says it you start making stuff up about managers being just as important as nurses.
J 39

10 July 2008 at 2:10 pm

“J you can’t admit that backoffice staff are a vital part and then say you would prefer the money was spent elsewhere instead.”

Actually I can. It’s called a balanced opinion as opposed to your kneejerk partisan response on a study which gave an interest insight into government spending which you dislike simply because it shows labour in a bad light.

Your invective on ANZ’s ‘ideology’ is simply nonsense. They are not working for a political party or cause as you are which would make your attack ideological.
Tane 40

10 July 2008 at 2:11 pm

Guys, let’s cool it down a little. There’s no need to get personal.

But Bryan, seriously, you have to understand that you’re going to get ridiculed if you put up stats like that and can’t front with the figures to back it up.
Tane 41

10 July 2008 at 2:13 pm

J, you seriously think banks don’t have a political agenda?
Matthew Pilott 42

10 July 2008 at 2:28 pm

HS – I haven’t the time for a detailed reply, one of which your comment warrants, I’d just like to comment about you asking for treasury to give fiscal guidelines for government spending.

This is dangerous for two reasons. I: Hate to say this (bryan, cover your eyes) but fiscal ain’t everything – outcomes can’t always, or even often, be classified according to some financial imperative.

II: That’s what the private sector is for (yes, it serves a purpose). Once the government adopts the private sector’s goal for provisioning (i.e. purely financial) what will the point of a government be?

This isn’t carte blanche for the Government to blow cash
without any accountability, but implementing fiscal measures will be counterproductive. Good qualitative measures are what’s needed. Eg a recent survey showing that our health system is rated as pretty damn good by a high percentage of NZers, and that most would keep it as it is…
mondograss 43

10 July 2008 at 3:18 pm

I’ve just read the ANZ article and I have to say that it seems to be very poor quality research. Yes they’ve qualified all (or most) of their assumptions, but to not be able to decide which category health spending belongs in, or to exclude welfare spending specifically on the basis that it has had low growth, frankly boggles the mind. I would be ashamed to hand a report like that in for an undergrad economics essay, let alone for publication to the clients of a major bank.
Bryan Spondre 44

10 July 2008 at 3:18 pm

Matthew: To answer your question re source.

“Table 9 in the QES (Stats NZ Quarterly Employment Survey) spreadsheet shows that that the average hourly gross wage for those in the government administration and defence (ie core bureaucracy) sector was NZ$30.93 an hour in the March quarter, up 8.8% from a year ago. The all industries figure was NZ$23.66 an hour, which was 24% below that of the average bureaucrat and up only 4.6% for the year.”

“The government has employed 16% more bureaucrats in Wellington in the last four years and has paid them 18% more per hour to work there. It has asked them to work 1.5 hours less a week. Meanwhile the rest of us are working 1.8 hours a week longer than we used to and our wages have fallen further behind those of the bureaucrats.”

Yep, it’s time to bring back the QUANGO hunters.
Robinsod 45

10 July 2008 at 3:29 pm

You retard. The QES covers all allowances and overtime payments and is a measure of average wages. Your mate should be using the LCI (adjusted) as it measures only the changes in salary and wage rates for the same quality and quantity of work. Which is the appropriate measure for matter under discussion.

I suspect he knows that and discovered it didn’t show the spin he needs to justify his ideology.

And again (for the cheap seats) – you retard.

[lprent: Less of the personal stuff…. What has got you wound up today – I’ll probably find out as I work backwards]

[lprent: Ah and already noted on by Tane. What do you reckon ‘sod? I’m on holiday because of funeral – can’t see a good reason to give you one as well. Of course you could continue in the same vein and get some time to help BIlly with the posts]
Matthew Pilott 46

10 July 2008 at 3:36 pm

So after all that bryan, NZ has an average percentage of workers in the government (1%) and below OECD average expenditure on the public sector. I don’t know what ACT has to do with it, but I suspect it’s based on hype and Mr “Perk-Buster” as opposed to doing anything of value.
John BT 47

10 July 2008 at 4:15 pm

In 1999 we had around 1500 policy analysts working for the government, 3 years later we had 3000. God knows how many there are now and nobody knows what they do. This is the backroom waste we could do without.
Bryan Spondre 48

10 July 2008 at 4:21 pm

Robinsod: Care to dispute the numbers directly on Bernard’s blog ?
Rob 49

10 July 2008 at 4:40 pm

[Tane: So now you’re accusing The Standard of being written by 1500 public service policy analysts hired by Helen Clark for that express purpose? FFS, that’s the dumbest thing I’ve heard all week.]
Robinsod 50

10 July 2008 at 5:13 pm

Robinsod: Care to dispute the numbers directly on Bernard’s blog ?

Man you really need the traffic, eh?

Lynn – I will admit “retard” may have been a little harsh but FFS the guy’s using the QES to argue a situation where the LCI is the natural dataset! And he misuses apostrophes! Words cannot express the pain all of this ~~cause~~ causes me…

[lprent: corrected your syntax. That pains me as well. Programmers really love language syntax. Pity this language does not have a compiler to check it for you.]
higherstandard 51

10 July 2008 at 5:14 pm

Tane

Point of order.

The dumbest thing I’ve heard all week is that a missile defence system is being set up in the Czech republic to defend against attack from the Middle East – sounds like a bizarre plot out of a Simpson’s episode.
Tane 52

10 July 2008 at 5:26 pm

HS, we are agreed on that one.
RedLogix 53

10 July 2008 at 6:05 pm

On RNZ Checkpoint Mary Wilson first of all gives an Auckland DHB person a grilling for NOT having the resource to audit resthomes more often than once per three years, and not picking up events like the elderly resident whose mouth was taped.

Then the very NEXT item Wilson regurgitates the Bagry ANZ report and gives Brownlee free air time to prat on about how all bureacratic backroom activity is a waste and will be cut by a National govt.

Not the slightest hint from Wilson challenging Brownlee, or recognition that you cannot have it both ways, that you cannot have a transparent, well monitored and accountable public sector without the very “back-room” services that National/Bagry are claiming are a waste.

On the other hand it can only be welcomed if they do slash the public sector bureacracy… lack of transparency, muddled policy implementation, poor accountability of spending and inevitably a rise in corruption will result. Will make Nat Ministers an easy target.
lprent 54

10 July 2008 at 6:13 pm

Be interesting getting the FinSec take on the report. It seems to me that the banks have steadily been reducing front-end staff forever. I wonder what the percentage growth in their backend relative to the font-end looks like.
Lew 55

10 July 2008 at 6:22 pm

Lynn: “It seems to me that the banks have steadily been reducing front-end staff forever.”

This is what my wife, who started working on the `front line’ in a major retail bank in 1999 and currently works in the back office of the same bank,. said to me this morning as we listened to the Morning Report coverage.

Not that anecdote is a unit of data.

L
Tane 56

10 July 2008 at 6:39 pm

Lynn, finsec’s release is here:

http://www.scoop.co.nz/stories/PO0807/S00150.htm

[Captcha: fractured cashier]
Anita 57

10 July 2008 at 6:43 pm

BS,

From DoL

The QES is affected by changes in the composition of the workforce as well as changes in pay rates, while the LCI measures changes in pay rates for a fixed set of jobs. The LCI is, therefore the preferred measure of wage growth because it reflects changes in salary and wages for the same quality and quantity of work.

There’s more detail in the appendix if you want/need it.

‘sod’s right, LCI would’ve been the right measure. QES conflates who is employed by the public service, what they are being paid to do, and how much they’re being paid. LCI gives you like-with-like pay increase.

I often wish Stats would provide a “if you’re looking to answer this sort of question you want that dataset there” set of pointers, along with some flags about what not to do with a particular data set. It’s way too easy to grab a set which looks about right and get an answer which is not quite what it looks like.
Anita 58

10 July 2008 at 6:50 pm

BS,

So, the numbers you want for March 2008 quarter

Salary and ordinary time increase over 12 months

Public sector: 3.4%
Private sector: 3.5%

All salary and wage increase over 12 months

Public sector: 3.3%
Private sector: 3.5%

So public sector increases are marginally lower than private sector.

Oops – Tane’s linked to these above, my only excuse is that they’re nice clear numbers which bear repeating 🙂
Robinsod 59

10 July 2008 at 7:07 pm

‘sod’s right, LCI would’ve been the right measure.

‘Sod’s always right. It’s a curse I tell yah, a curse…
Anita 60

10 July 2008 at 7:16 pm

‘sod,

It’s hard to be you, I can tell 🙂
Lew 61

10 July 2008 at 7:35 pm

That’s an unequivocal response from FINSEC. What makes it interesting is that they see this as an attack on workers, rather than a defence of the front-line staff, as the report purports to be. They clearly see NBNZ’s outsourcing move and this as two parts in a pattern.

A union has nothing to gain by criticising a major employer in its sector for attacks against workers in another sector, so it’s a big call.

Curious that Don Brash is involved, too.

L
El_Pinko 62

11 July 2008 at 12:14 am

“Salary and ordinary time increase over 12 months

Public sector: 3.4%
Private sector: 3.5%

All salary and wage increase over 12 months

Public sector: 3.3%
Private sector: 3.5%

So public sector increases are marginally lower than private sector.”

What are the nominal rates that these % increases apply to?

Anecdotally it seems to me that for a lot of my intelligent; well educated and ambitious mates back home they need to apply for either a job with the Govt. or a job connected too the Govt. In order to be paid well and get ahead both financially and in their career.

i.e. I have a mate who works for mgmt. consultants in Welly and he researches the efficent allocation of NZ Police resources. Although he is not a public sector employee his wages do end up coming from the public purse…

It pains me to say it but point to another developed western society where it would seem the best career opportunities are with the Govt.

I can’t decide whether it is an indictment on either;

A) Too much Govt. therefore sucking up good talent

or

B) Piss-poor private sector management that is unable to generate the opportunties that these people seek.

I suspect it is a little of both…
Tane 63

11 July 2008 at 11:10 am

El-Pinko. It’s worth noting that public servants tend to be well unionised while their equivalents in the private sector are not. If you want a pay rise join your union – simple as that.
Anita 64

11 July 2008 at 11:57 am

El_Pinko,

Everything you could every want to know about the LCI is provided by Statistics NZ. This includes discussions of the coverage, methods, etc.

All the stats geeky excitement you could want, and more 🙂
Phil 65

11 July 2008 at 1:40 pm

Tane,

That’s just dumb – The PSA was so short of members they virtually bribed staff to join up a couple of years back.
Being a rational economist, I signed up, took the free cash, then changed jobs and ceased membership… along with almost every other under-30 that worked for the same govt department.

On a broader note, I don’t think you have any hard-evidence to suggest union members recieve better pay, or larger rises, than their non-union colleagues. Equally, I don’t have any hard evidence going the other way.

We could start with an occupational breakdown of the LCI, making assumptions about the relative unionisation of each category, but it’s a fairly tenuous assessment at best.