Encouraging Economic Literacy
While browsing through the report of the Commonwealth Bank of Australia recently my eye fell on an item about the bank's funding of a programme to improve Australians' understanding of basic economics. Balancing bank accounts, preparing budgets and learning to save and borrow wisely are its main aims. Research has demonstrated, they say, that lifting levels of economic literacy amongst the bottom 20% of the population could add as much as $6 billion per annum to Australia's economy, creating 16,000 new jobs. To this end, CBA makes grants to primary and secondary schools, and is helping with the development of school curricula. It also funds a website to assist teachers to improve students' money management skills. Not a bad idea, I thought. While New Zealanders like to regard themselves as superior to Australians, it is an undeniable fact that the average wage in Australia is 30% higher than here, and the gap is widening. This suggests either that Australia has more resources, or its inhabitants are better educated. Like any good Kiwi I'm reluctant to accept the latter.
If New Zealand's Ralph Norris and his predecessor David Murray at CBA can help lift levels of economic literacy in Australia, maybe it could be done here too? With this in mind, I contacted Hugh Burrett, Managing Director of ASB Bank, a wholly-owned subsidiary of CBA. I recall ASB with affection. When I was at primary school in Auckland teachers collected our thruppenny bits each Friday, and wrote the details in our ASB passbooks, a practice, sadly discontinued. I was pleased to discover that ASB is now contemplating a similar economic literacy scheme to CBA's. What with Alan Bollard lifting interest rates and Kiwis spending beyond prudent limits, some improvement is surely necessary? Unfortunately, the credit card has never proved as educational as the passbook!
The modern economy is a much more complex animal than when I was small. Education about its intricacies will always need explaining. When I was young it was axiomatic that everyone would have a job. New Zealand enjoyed what was known as over-full employment. People with few skills shopped around for better pay. We lived in a highly regulated society where consumer goods got dearer and dearer as wages rose steadily. Initially we were richer than Australia, and our dollar was worth more. Nevertheless, our shops were relatively empty of consumer goods. New Zealand manufacturers had no competition from cheaper imports; high tariffs kept them out. Most people couldn't understand why a locally-made fridge cost three times the price of its US equivalent. There, of course, consumers had choices. Both National and Labour governments spent to the hilt, fuelling inflation. They forced banks, insurance companies and finance houses to lend large portions of their funds to the government at interest rates below inflation. When this wasn't enough, Robert Muldoon borrowed big time. New Zealand's dollar slipped behind Australia's because we kept living beyond our means. It took a foreign exchange crisis in 1984, and years of restructuring, before prosperity returned.
But there are few signs that New Zealanders learned from the 1980s. They enjoy greater choices resulting from an end to import licensing and tariffs; they wear cheaper goods, and they drive newer, more affordable cars. Reducing union stand-over tactics has given them the chance to negotiate more employment flexibility that suits modern life styles. But there has been no measurable increase in Kiwis' understanding of economic fundamentals. Auckland's Herald runs what it calls a "Weekend Jury" where each week some topical issue is put to a diverse group of varying ages and occupations. The results are often depressing. By a three to one margin the jury recently thought the government should save the jobs of Air New Zealand's engineers. They favoured subsidies to achieve this. Such knee-jerk, short-term measures compounded in number and cost, and played a big part in the 1984 economic crisis
Unfortunately, lifting basic economic literacy isn't a requirement only for the lowest socio-economic groups. Most Kiwis have no idea which government policies work well, or which are certain to create future problems. Many care little for tomorrow. A bill in the post next week is faraway; a looming economic downturn, beyond comprehension. Today, too many run their personal finances like Muldoon did the country's. They will pay a consequence as the economy slows. My New Year's wish is for CBA and the ASB to succeed with their educational endeavours. Someone has to try.