The economist and the 'Mai Chen Effect'

All economists like to be known for discovering at least one unique phenomenon for which they may be remembered – Laffer and Phillips have their Curves, for example.

But I can now name one for the NZIER’s redoutable economist Shamubeel Eaqub, who came up with one reason for Auckland’s spiralling housing market.

His presentation of the latest NZIER Quarterly Predictions was his most optimistic in years – Eaqub lives up the dismal science’s reputation, if not as a person – and the only bit of gloom he could find on the home front was the housing bubble.

The opposition parties and their media cheerleaders, clutching desperately at any straw to try to prove the economy isn’t humming along at 2.5%, now want to prevent the Chinese from buying houses in Auckland, put limits on home lending and generally fiddle everything from interest rates to homebuyer subsidies.

Which brings me to what could be called Eaqub’s Mai Chen Effect.

It is based on a chart Equab prepared about “Filled Jobs By Region” – see the accompanying chart – and shows two rocketing jobs machines, one in neutral and one in reverse (no prizes for picking this one).

Eaqub explains it indicates the rich and powerful are leaving the capital and buying into the plum suburbs of Remuera and Fendalton.

These high-earning and mobile people are following the money – and the power – because Eaqub believes lobbyists, chief executives and top entrepreneurs are finding that easier to do in Auckland, where the key cabinet ministers spend most of their time, or in Christchurch, where the rest of the money is.

Mai Chen is the leading indicator because she has opened her public law practice in Auckland and, more to the point, has bought a house to match in one of Remuera’s most expensive streets.

Other movers and shakers are doing the same, leaving Wellington and its shrinking jobs market.

That’s why the so-called employment crisis is the focus of attention only by the capital’s media such as Radio Labour and the Press Gallery.

Elsewhere, it’s not that big a story. Which makes it odd the capital media and its trade unions friends are all in a lather about the only jobs machine in Wellington – Sir Peter Jackson and his Hollywood mates.

By contrast, Auckland thrives on short-term contracts – and not just in the screen business – and in the lack of unions, except in some holdout areas such as the wharves.

The Obamas and the Argo-nauts

Talking of Hollywood, it is worth noting the White House’s involvement in the Oscars.

Admired mainly for her work in trying to make Americans healthier, First Lady Michelle Obama's long-distance presentation of the top gong to Ben Affleck and company for Argo was a publicity coup for both sides.

Hollywood has many reasons to suck up to the White House – without the tax breaks it would be a far smaller and less glittering place.

In 2012, six of the nine best film nominees were filmed on location around the country because of incentives from various states. In 2010, it was calculated these benefits for Hollywood amounted to some $US1.5 billion.

The liberal Centre on Budget and Policy Priorities think tank, which compiled the above figures, says this could have paid for a lot of school teachers, firefighters and police.

By comparison, Sir Peter and Warners asking for some help from the New Zealand taxpayer (in tax not paid, that is) is piddling.

But the big story of the Oscars was the predicted win for Argo and the country that is at the centre of world attention this week.

Argo, as many agree (including myself), is an excellent and entertaining thriller – but it was not the best of the film of year.

Out of the others, Lincoln, Life of Pi and Zero Dark Thirty, I would narrowly opt for the latter (incidentally, also made by Warners).

The story of how it went from the US critics’ choice before Christmas to virtual pariah status has been well-told by The Guardian’s Jeremy Kay, and even spurred two editorials in the Wall Street Journal, before the Oscars and after, when a Senate inquiry was quietly dropped.

In Iran, meanwhile, the cultural war against the West continued with the bizarre photoshopping of Mrs Obama’s dress during her Oscars appearance.

The Fars news agency, which is run by the Revolutionary Guards at the centre of the hostage drama depicted in Argo, redesigned the dress to cover her chest and shoulders.

Almost unnecessarily, Fars also describes Argo as an "anti-Iranian" film produced by the "Zionist" company Warner Bros.

Doubletalk at nuclear talks

On more serious matters, Iran has been involved in talks this week with the P5+1 (the five Security Council powers plus Germany) over its nuclear weapons programme.

According to reports today, progress is being made in Almaty, capital of Kazakhstan but commentators say Iran will remain as duplicitous as North Korea was when it went through the same process.

The difference is that Iran doesn’t want to seal itself completely off from the world, as North Korea does, and is being hurt by Western sanctions.

There is also a danger the people may riot enough one day to overthrow its reviled and repressive Islamic government, something unlikely to happen in North Korea.

In the Los Angeles Times, Hussein Banai, has some background: Ever since his accession to power in 1989, Khamenei's public pronouncements regarding Iran's relations with the West have oscillated between expressions of radical defiance and grudging accommodation.

Mindful of threats to his power by rival conservative and reformist factions, Khamenei has nearly always undermined efforts by any one of these groups to resolve Iran's long-standing disputes with Western powers, often publicly scolding them for having jeopardized the ideals of the Islamic Republic.

Gary Molholin of Iranwatch, writing for Bloomberg, draws parallels with the North Korea talks back in the 1980s when both it and Iran signed the anti-proliferation treaty but had no intention of honouring:

Iran has been hiding nuclear work and sites since about the same time, although it was one of the treaty’s original signatories. Like Iran, North Korea was soon suspected of hiding things after that initial show of clean hands. It stiffed inspectors and made lame excuses for doing so. And, like Iran, North Korea built plants that generated fissile material that was useful for making bombs, but unnecessary for producing civilian nuclear power.