It is good in Down Under

Four year net policy decisions included in each Budget and Growth in government operating expenses


A new architecture for infrastructure


Corporate tax rates in Australia and the OECD 2008

Making provision for future priorities

IMF gives an A+ to Australia's economic management;

10. Fiscal policy focused on medium-term sustainability has delivered a sequence of surpluses that has eliminated commonwealth net debt. This leaves Australia with a strong fiscal position, an enviable situation by international standards. We support the strategy in the latest budget to save the revenue windfall from the commodity driven boom and thereby allow automatic stabilizers to support monetary policy. Saving some of the revenue from the commodity price boom in three new funds will take pressure off monetary policy in the near term and enable increased infrastructure investment over the medium term.

11. The reduction in public spending growth in the latest budget illustrates the government's commitment to help reduce inflation. With the upside risks to the outlook for inflation, more public spending restraint could be required and we encourage the authorities to identify areas where additional spending cuts could be implemented. In addition, positive revenue surprises should be saved to assist monetary policy until it is clear that inflation will decline. Given the uncertainty about how much of the increase in commodity prices will be permanent, saving the additional revenue in the near-term may avoid sharp changes in taxes and spending in the future.

12. The states have increased capital spending and their budget balance has shifted to a small deficit in aggregate, thereby adding stimulus to the economy. This highlights the importance of maintaining restraint at the commonwealth level.

13. To the extent that the improvement in the budget balance is structural, associated with permanently higher commodity prices, this should provide scope to reduce taxes or increase spending over the medium term. The governments' intention to achieve a positive balance over the medium term should increase public net worth, further strengthening the fiscal position. Our analysis suggests that a combination of lower labor and capital income taxes, along with increased public investment, will generate the largest economic gains. The gains from other options such as lower consumption taxes or higher public consumption are not as large. Despite the expected structural improvement in the medium term, significant long-term fiscal challenges remain, particularly in the area of healthcare spending, and early adjustments will be key to preserving fiscal sustainability.

Search word of the day

Malaysians appear to confuse Australia with Austria- may be Mahathir's work has produced its results.

australia's madman, keep daughter at underground

Industrial Relations laws in Australia

Twenty One accents in Two Minutes

She needs to work a little bit on the Australian accent.

A Primer on Monetary Policy in Australia

A recent speech by Australian Reserve Bank governor;

I turn now to arguments about monetary policy and inflation. The first one that I want to address is the assertion that monetary policy, in adjusting interest rates, is ineffective in controlling prices, because it is failing to restrain demand. More than once I have seen people state that the rises in interest rates seemed not to make much difference.

But if it were really true that the sequence of adjustments that took place to raise the cash rate from its low of 4.25 per cent in 2001 to 7.25 per cent today made no difference to the economy or inflation, it would follow that we could reduce the cash rate by 300 basis points tomorrow and nothing would change. If we put it like that, surely not many people could seriously believe that the changes to interest rates have made no difference.

More realistically, people might think that it is the changes in rates that matter, more than the level, and that the changes were too small. In this view, interest rate changes should perhaps have been bigger, so as to give more of a ‘shock’ to behaviour on each occasion (though they should presumably also have been less frequent – otherwise the level of rates we would have reached would have been much higher).

I suppose it is possible that a different sequence of changes, including some bigger ones, would have changed behaviour in the economy. We cannot know because that alternative scenario cannot be run, but as everyone knows, the Board has on occasion in the recent past considered larger movements. So the idea of larger changes is not absurd.

Yet it is hardly as though interest rate changes were so small that no‑one noticed. There are few issues reported at more length than interest rates; no‑one could say they were unaware of what was happening. Beginning with the March 2005 rate change, moreover, the extent of coverage in the media has been far more intense than it had been prior to then, and far more intense than is the case in other comparable countries. We could debate the reasons for that, but they do not matter for present purposes. On every one of those occasions, there was no shortage of dramatic media coverage, and no shortage of predictions of serious consequences for indebted households, the economy and so on. If we were looking for announcement effects, surely they should have been at work through this period.

My own view is that monetary policy is most effective when actions are seen to be consistent with the factual evidence available on the economy, a sensible assessment about future risks, and a framework that has a clear medium‑term objective for policy. Apart from that, we have to accept that the likely effect of any one move of 25 or even 50 basis points is, while uncertain, probably only modest. It is the combination of changes, and more particularly the level reached, that will do most of the work.

A second version of the ‘ineffectiveness’ argument holds that (1) the price rises are coming from factors beyond the control of any Australian policy, and particularly from abroad, from which it follows that (2) monetary policy cannot do anything about them. For some people, it follows that it is therefore (3) futile, and unnecessarily disruptive, to try.

I have already addressed the question of whether all the price rises can be put down to a few special factors, obviously not under our control. The fact is that the price rises are broader than that.

But even if all the initial impetus for higher prices comes from events abroad, we still have to decide how we will respond to that shock. In the case of energy prices, while the world price of oil in US dollars certainly is completely outside our control, it is the Australian dollar price of oil that actually matters for the Australian motorist. That price is lower at present than it might have been, because of the rise in the exchange rate. Insofar as interest rates have a bearing on the exchange rate, they can affect petrol prices, indirectly, and have done so.

Looking across the economy more generally, we can all see that the main external event of recent years is the rise in the terms of trade, which is obviously completely exogenous as far as Australia is concerned. But higher resource prices generate additional income, which then affects demand for goods and services at home. That is expansionary, and puts pressure on prices for non‑traded goods and services. Even though monetary policy cannot stop the initial shock – of course we cannot stop the Chinese demand for resources – we can, and should, seek to condition the economy’s subsequent response to that shock, rather than simply letting domestic overheating go unchecked. Tighter policy will dampen domestic demand and contain the pick‑up in non‑traded prices as well as raising the exchange rate, which makes imports cheaper, exports less competitive and fosters a move of productive resources into the parts of the economy where more production is needed. That is an appropriate form of adjustment to such a shock, particularly if the shock is likely to be fairly persistent.

So even when events beyond our control occur to put pressure on prices, we should still respond, and that response can be quite effective.

Another line of argument takes quite a different tack. It argues not that monetary policy is ineffective, but in fact that it makes the problem worse by actually raising prices. The logic here is that interest payments are a cost to business activity, and that raising this cost will simply result in businesses passing it on.

It is obviously true that interest is a cost, and for a business to stay solvent it has to cover that along with its other costs in its selling price. But when interest rates rise, can business just pass this cost on without losing sales? It might be possible initially, but since higher interest rates do eventually slow demand, it will get more difficult to raise prices in due course. So when some people say that higher rates will just push up prices, I think the answer is that it is the strength of demand that allows that, and the rise in interest rates will, in time, dampen demand. All the historical evidence is that monetary policy is quite effective in that regard.

I turn now to other arguments, not that monetary policy is ineffective, but that it is not terribly precise. One common expression is that it is a blunt instrument. People rarely define what they mean by that term, but I think they have in mind two things. First, if inflation is rising because particular prices are moving a lot, monetary policy cannot focus precisely on exactly those particular prices, or those particular features of economic behaviour causing the price rises. It is a general, rather than specific, instrument in that sense. Second, I think that when people say ‘blunt’, they mean ‘unfair’ – particularly that when interest rates rise, this affects households who owe money on a home loan. (Presumably the same argument would mean that it is equally unfair to savers to put interest rates down when the economy is weak.)

As I noted before, it is not actually true that the recent rise in inflation is confined to just a few items. To that extent, the use of a general instrument would seem quite appropriate. But there are also a couple of other quite important points to make in regard to the ‘blunt instrument’ critique.

The first is that the transmission channels for monetary policy are much wider than just the impacts on households with home loans. Most businesses have debts, too.2 Floating rate debt costs more for them to service as interest rates rise, which presumably causes some of them to reconsider some things they might have been doing or planning. So the ‘cash flow’ channel of monetary policy affects business.

Monetary policy also affects what economists would call inter‑temporal decision‑making. Incentives to save, as opposed to consume, alter. It is commonly observed that many Australians save rather little, but the household saving rate has in fact risen noticeably in recent years, largely unnoticed by conventional opinion. I do not claim that the increase is mainly due to rising interest rates, but I do not think we should assume that these incentives do not matter. Despite Australia’s extensive use of foreign saving to build up our economy, the bulk of our productive investment is financed via domestic saving of one form or another.

Changes in interest rates affect asset values over time, through effects on discount rates, expected earnings growth and so on. These feed through into behaviour in several dimensions – via the cost of capital to firms, wealth effects and so on. Through complex channels, monetary policy can sometimes also affect the non‑price terms of credit, particularly if it manages to affect expectations about future growth, creditworthiness and risk appetite.

Then there is the exchange rate, as I have already mentioned. Numerous factors affect exchange rates, and the relationships are hard to pin down. However, interest rate differentials between countries do matter to exchange rates, along with expectations about how those differentials may change (a function of growth expectations), factors affecting trade positions (such as commodity prices in our case), investor risk preferences and so on. I have already discussed the case of petrol, but there is surely little doubt that the prices of tradable goods and services generally are lower today than they would have been if the exchange rate had been at its long‑run average level. This is the case even with much more muted short‑term pass‑through of exchange rate changes than we used to have. In other words, changes in the exchange rate alter the terms at which the rest of the world supplies goods and services to Australia in a way that is stabilising for prices.

All these are channels for monetary policy’s effects. They operate at different speeds, and to differing extents in different episodes – but they are all there, and I would say that they are all working at present. The transmission of monetary policy is not just about home loan rates, as important a channel as that is.

Secondly, to say monetary policy is a blunt instrument begs the question: where are the sharp instruments? It is not obvious that there are all that many. People mention supply‑side reforms of various kinds and unquestionably these have been extremely important over the years. To the extent that more can be done, that is all to the good for Australians’ standard of living. But they are long term. It is hard to deploy them in a hurry. And many of them are very general – ‘blunt’ even – rather than specific.

Many people will appeal, perhaps not unreasonably, to the possibility of using fiscal policy to counter inflation pressure. For some time now, fiscal policy has not been actively deployed to manage the business cycle. The focus has mainly been on achieving and then maintaining a structurally sound, long‑run fiscal position and, subject to that, making tax and spending decisions aimed at various other objectives that governments have. This does not preclude allowing the budget’s ‘automatic stabilisers’ to operate over the cycle (though it might be observed that, with an elongated upswing like the one we have been having, it is getting more difficult to decide what should be thought of as a temporary rise in revenue and what can be assumed to be permanent).

It strikes me that in the popular discussion about fiscal policy, many participants talk past each other because they are looking at different time dimensions. It is not unreasonable to say that if the budget is perpetually in surplus, there is no debt to speak of and no other looming large unfunded liability, taxes should probably, over some long‑run horizon, be lower. This, it seems to me, is the economic case for structural reductions in taxes, which some observers articulate. Others argue that such reductions should be delayed, for cyclical reasons, given that demand needs to slow to contain inflation. So there is a structural case for taxes to fall, and a cyclical case for them not to. It is no doubt difficult for any government to reconcile these two, equally valid, points of view, the more so if the same tension persists for a number of consecutive years.

Leaving that aside, let us give some thought to just how effective an instrument budgetary policy is likely to be. If inflationary pressures were just due to specific, narrow issues (which, as is clear above, I doubt), precise targeting of the sources of inflationary pressure via tax and spending measures could nonetheless be exceedingly difficult at a technical level, let alone politically.

If it is accepted, on the other hand, that inflation is sufficiently general that overall demand has to slow, the amount of slowing has to be the same regardless of whether it comes via monetary policy or fiscal policy. It would be somewhat differently distributed across sectors and regions, as the impact of interest rate and exchange rate effects obviously would not overlap exactly with the tax or spending measures that would occur in their place. I would hazard a guess, though, that a good many people who are today paying higher interest rates would instead pay higher taxes in a world where fiscal policy was used more actively to manage the business cycle. We are unlikely, I submit, to witness a situation where income taxes are raised only for those without home loans, or only for those living in Western Australia and Queensland, or those working in the mining sector.

Then there are the time lags in implementing fiscal measures. The Budget occurs once a year, and has a very long and gruelling process in the lead up. I am not expecting to be stampeded by people in this room wishing to do that more often. The economy could conceivably look rather different in mid May when the Budget occurs than it did when the budget processes began, and different again by the time the measures actually take effect. Monetary policy has its full effects with a long lag, but we at least get to reconsider each month, and if need be we can reverse direction quickly.

Don’t get me wrong. I am not arguing that fiscal policy does not matter to the cyclical outcomes, or that fiscal policy should not be made with an eye to the cycle as well as to the structural position. To the extent it can be, of course that is welcome. I am not here to offer any particular suggestion on what fiscal policy should do at present. I am simply saying that the task of fine‑tuning fiscal policy for stabilisation purposes, if that were thought desirable, is unlikely to be any more straightforward than that of using monetary policy. Fiscal policy, in its own way and for its own reasons, is also likely to prove a fairly blunt instrument. Inevitably, even with fiscal policy ideally calibrated for the conjunctural position, monetary policy would still have a lot of work to do managing inflation.

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Glenn Otto

Heath Ledger's best film- Two Hands

Two Hands

Tax Policy in Down Under

THE Rudd Government should scrap dividend imputation credits and instead reduce the company tax rate by about a third if it wants to increase investment in Australia, according to a tax expert and former Labor government adviser.

Nicholas Gruen, chief executive of Lateral Economics and Peach Home Loans, said dividend imputations — which allow companies to pass on to shareholders the benefit of Australian tax paid on profits — cost $20 billion a year but did not substantially improve a company's cost of capital.

Speaking at the Committee for Economic Development of Australia's tax forum in Canberra yesterday, Dr Gruen said imputation credits were an inefficient form of tax expenditure.

"The evidence suggests that it doesn't increase share prices," he said. "If you got rid of dividend imputations and spent the $20 billion on reducing company tax rates, you would make the shares much more attractive to foreign shareholders … The price would go up a lot and the cost of capital would go down."

Dr Gruen, who worked as an economic adviser to John Button as industry minister and John Dawkins when he was treasurer, said the $20 billion in tax revenue gained could then be used to lower the company tax rate from 30% to about 19%.

The Corporate Tax Association's executive director, Frank Drenth, and PriceWaterhouseCoopers partner Tim Cox expressed reservations about scrapping the system, saying dividend imputations helped the Tax Office monitor whether companies paid tax.

The forum also included a panel discussion on how to increase workforce participation. Australian National University research fellow and economist Andrew Leigh said Government should consider earned-income tax credits, which are used in the US and Europe. The credits are paid to low-income earners to provide incentives to work.

Ann Harding, director of the National Centre for Social and Economic Modelling, cited research released last year estimating that 910,000, or 7.1%, of working-age Australians faced an effective marginal tax rate of more than 50%. She said it was difficult to eliminate the problem, where people who earned more money faced the loss of government assistance.

Blog I should be reading more

Harry Clarke from Australia

Macroeconomics from Down Under

Five Questions for: two economists

* Has the Reserve got its policy settings about right? In other words, have they overplayed the interest rate card, or do you think we are in for more rises in the next six months or so?
* The Rudd Government is making much play of its so-called five-point plan to tackle inflation long-term. Do you share their diagnosis about what needs to be done? They say the keys are (1) fiscal constraint—cutting back government spending (2) measures to encourage savings (3) measures to increase the skilled workforce (training investment etc) (4) identify and fund (probably via public-private programs) major infrastructure projects (ports, for eg) (5) lift workforce participation. Is this more or less how you would approach the matter?
* Can the government really achieve the sort of spending cuts they claim to want without getting rid of so-called “middle-class welfare” policies such as family allowances and negative gearing?
* What is different about the US economy—where they are lowering interest rates—and the Australian economy, where we are raising ours?
* The proposed tax cuts I suggest are a political necessity - a promise the new government can’t afford to break. That aside, what do you think of them from a economic viewpoint? Stay or go? Good or bad?

Quote of the Day

“People always feel compelled to sum you up, to presume that they have you and describe you,” Mr. Ledger told The New York Times in an interview last year. “But there are many stories inside of me and a lot I want to achieve outside of one flat note.”

-Heath Ledger, Actor, Is Found Dead at 28

New Zealand Healthcare

When New Zealand outshone the club of Western nations in a graph of deaths following heart-attack treatment, Health Minister David Cunliffe basked in the reflected glory.

"It shows that cardiac health services in this country are among the best in the world," he told Parliament...

The November OECD report says New Zealand had the lowest rate of death in the days following heart-attack treatment in hospital in 2005. It is a measure of the quality of health systems, but it seems at odds with other figures in the report:* New Zealand's below-average placing for a related statistic on the death rate following hospital admission after a stroke, and* The country's high overall death rate from constricted heart arteries.

Dr Feek said New Zealand's stroke placement, at around 19 out of 23 countries, was more in line with expectations, being close to its placing at 22nd out of 30 for economic output per head, a determinant of national health status.

Professor Harvey White, the director of coronary care and cardiovascular research at Auckland City Hospital, said New Zealand's low in-hospital death rate after heart attacks would reflect some elements of better care, but hospital stays here were shorter, skewing the figures because a greater share of deaths would be after hospital.

Also, the way heart attacks were measured in New Zealand meant much smaller heart attacks would be picked up.

Dr Feek said that despite the report's wording, the New Zealand data included deaths at home.

The report shows New Zealand remains among the worst countries for death rate from constricted heart arteries, which reflects its wealth level and lifestyle factors such as smoking, obesity and high saturated-fat consumption.

Among men, New Zealand was 23rd out of 27 on this statistic in 2004. For men and women together, the rate was 133 deaths per 100,000 population in 2001, far worse than Australia on 91 in 2003. Australia's 52 per cent improvement in the preceding 20 years was greater than New Zealand's 49 per cent.

Professor White maintained this related to New Zealand's lower spending on newer heart drugs, such as some statins - the report confirms the country's comparatively low drug spending - and lower intervention rate to treat diseased heart arteries.

Counted together, New Zealand did 187 heart artery bypass operations and angioplasties (balloon expansion of heart arteries) per 100,000 population, compared with the OECD average of 249.

Professor White said these revascularisation procedures reduced mortality in some groups, but the ministry's Dr Feek said: "A lot of the evidence suggests these operations aren't life-saving; they're about quality of life."

-Statistics on recovery from heart attacks tell only half the story

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Winds of Change in Down Under

The turn of the cycle

Is the Howard government running against the issue cycle?

In his book Tides of Consent, the American political scientist James Stimson argues that in US politics the issue cycle turns against those in power. I think this is an interesting idea in the Australian context. In areas where a party enjoys success in the public’s eyes, as the Liberals have with the economy and immigration, the issue stops becoming so important and so becomes less of an advantage. And with the Opposition and interest groups constantly emphasising - and perhaps reality partly matching - the government’s weaknesses in areas of Opposition strength the issue cycle starts to turn.

An Intelligent Model

via Brad Delong

At last a new face in Australia

Bush Ally Defeated in Australia;

Australia’s prime minister, John Howard, one of President Bush’s staunchest allies in Asia, suffered a comprehensive defeat at the hands of the electorate on Saturday, as his Liberal Party-led coalition lost its majority in Parliament.

He will be replaced by Kevin Rudd, the Labor Party leader and a former diplomat. “Today Australia looks to the future,” Mr. Rudd told a cheering crowd in his home state of Queensland. “Today the Australian people have decided that we as a nation will move forward.”

Mr. Howard’s defeat, after 11 years in power, follows that of José María Aznar of Spain, who also backed the United States-led invasion of Iraq, and political setbacks for Tony Blair of Britain...

Mr. Rudd, 50, campaigned on a platform of new leadership to address broad concerns about the environment, health and education. He has said his first acts as prime minister would include pushing for the ratification of the Kyoto agreement on reducing greenhouse gas emissions and negotiating the withdrawal of Australia’s 500 troops from Iraq...

Mr. Rudd’s dry image was altered by the news that he had visited a strip club during a trip to New York in 2003.

He was a diplomat in Beijing and speaks Mandarin. He impressed many with a fluent address to Chinese President Hu Jintao when Mr. Hu visited Australia in September.

Read John Quiggin for more coverage of the elections

Immigration and Body Mass

Who knows other countries may follow New Zealand's lead;

New Zealand has added another cruel cut to the myriad indignities visited upon those of larger girth: anyone with a dangerously high body mass index (BMI) is likely to be denied permission to emigrate there. Richie Trezise, 35, a Welsh submarine cable specialist, was initially rejected because of a BMI of 42 (25 or higher is regarded as overweight); he lost weight, but his wife Rowan, 33, has not found it so easy. For months she has tried to slim down enough to join her husband; if she can't do it by Christmas, he will have to give up his job and come home.

The government's reasoning is simple: it will take only immigrants of an "acceptable standard of health", ie those "unlikely to impose significant costs or demands on New Zealand's health or special education services" (a requirement that raises the even more controversial possibility of applicants being turned down for mental health reasons). Obese people are more likely to suffer from heart disease, diabetes, strokes and high blood pressure; ergo, obese people are not allowed.

via Emirates Economist

Australian Election - definitely not a Seinfeld Election

US style election lawyering

Find the Easter eggs in Google's Australian elections site

A 'Seinfeld election', a show about nothing

Can it be said about the US election.

The Case of Missing Men

The sorry state of men in Kiwiland;

Count the heads, says economist Paul Callister, and it's all too obvious that New Zealand men are increasingly going missing from the education system, missing from families, missing from certain areas of the workforce and literally missing due to unnecessarily early death.

Callister, a senior research fellow at Victoria University, is leading a three-year, $1.7 million study into what has happened to those "missing men".

He says the plight of New Zealand men has historically been desperately under-researched. He blames a mindset which goes like this: men still hold most of the top corporate jobs and have higher average salaries, therefore women are still disadvantaged, and therefore we needn't worry about men.

"It's not either-or," says Callister. "You can have men over-represented at the bottom, and still have them over-represented at the top." No doubt feminism's battle is not yet over, but "it's not like you have to win one before you start with the other".

Some of our most lethal problems can be blamed on our evolutionary heritage, says University of Canterbury psychology professor Garth Fletcher. Since our distant hunter-gatherer past, men have always taken greater risks with their physical safety than women, in the hope of gaining social status and impressing a potential mate.

That risk-taking means many figures that look disastrous for men now "have always looked disastrous".

Once, a man wanting to gain status might have hunted wild animals or picked a fight with a rival. These days Kiwi men drive cars too fast (70% of road deaths in 2000 were male), do dangerous jobs (95% of work-related deaths are male), and break stuff (90% of property-damage arrests are of males). And we still pick fights (83% of 43,000 arrests for violent offences in 2006 were male); even members of parliament don't seem to be able to resist throwing the occasional punch. It gets worse. In the mid-1980s a time of radical economic change the annual male suicide rate in New Zealand leapt from 15 per 100,000 of population to 29, and stayed there through the 1990s; over the same period, the female rate held steady at six per 100,000.

The male rate had dropped back almost to 1980s' levels by 2003, but doesn't this suggest a male malaise specific to the times, rather than an inevitable consequence of our Pleistocene past?

Actually, says Fletcher, you'd expect male suicide rates to rise faster than women's at such times, because of the greater importance men place on status; depression and suicide are characteristic male responses to loss of that status.

Another blunt measure of how a group is faring is lifespan. The fact men die younger than women is often treated as an unremarkable consequence of the differences between the sexes hormones and all that. Life expectancy for men is 78; for women 82 (for Maori, the figures are 67 and 72).

Yes, biology matters, and it would help if men would go to the doctor more often. But look at the data more closely, urges Callister. "Men living on their own die younger; men with lower education die younger; men on the margins of the labour force die younger.

"Are these things genetic, or should we be looking at society?"

Consider attitudes to the mainly female disease of breast cancer versus the male disease of prostate cancer, which occur at similar rates. Notwithstanding genuine concerns over the effectiveness of prostate screening, there's little doubt women's health issues receive more media coverage, better funding and more official attention than men's.

A rather fractured "men's movement" here and abroad has tried to highlight men's health woes, and what it sees as preferential treatment of women by courts in the areas of child custody and domestic violence. But there has never been the coherent sense of mission that underpinned feminism, and the seriousness of the project has often been undermined by the sheer loopiness of its lunatic fringe.

Crucially, "men's" issues are often overlooked by government, perhaps because of an assumption by those who fought in the feminist trenches that the only gender issues that matter are those concerning female disadvantage.

Says Callister: "With men, if there's a problem you blame the individual man his bad behaviour. If it's a female issue you look at what society can do to overcome it. That same structural approach needs to be taken to some of the men's things."

As an economist with a particular interest in labour markets, Callister has been taking just such a structural approach for years.

The economic reforms of the 1980s spelt the end for many blue-collar and rural industries, ejecting hordes of poorly skilled men from the workforce, many of them Maori and Pacific Islanders. At the same time, women were entering employment in growing numbers. Callister, then a new father, was curious to see what was happening to domestic gender roles.

Would the 1990s see 1950s' role models turned on their heads, as these freshly unemployed dads took over the childcare?

Not quite. Some men were taking on caregiving roles, but seldom fulltime, and what stood out for Callister was a rather different trend, one which was being spotted throughout the West: as men dropped out of paid work they also tended to drop out of family life. "When men lose their jobs, marriages can split up."

State support for women raising children on their own, plus a growing intolerance of violence by men towards their partners, bolstered that trend. (Meanwhile, a different set of high-achieving men tended to end up with high-achieving partners, enjoying their double income and putting their children in paid childcare.)

In an influential 1996 essay, the Economist magazine took an apocalyptic, if stereotypical, view: "Consider a neighbourhood in which most working-age women are not in paid jobs. This may conjure up a picture of tidy homes, children at play, and gossip. Now think of a neighbourhood in which most men are jobless. The picture is more sinister. Areas of male idleness are considered, and often are, places of deterioration, disorder, and danger."

The Economist asserted that the solution lay in somehow reinvigorating the mum-plus-dad family, because two-parent families were "demonstrably better at raising trouble-free children than one-parent ones" a popular theory undermined by recent research from Otago University, which suggests other socio-economic factors overwhelm the importance of the adult headcount in a family.

Even after New Zealand's economy picked up in the late 90s and unemployment fell, those marginalised men were still missing in action.