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      Goolsbee: Bank of Japan Institute for Monetary and Economic Studies Conference 2026
      Submitted May 27, 2026      |From chicagofed.org|3 comments

      In the past few years, I have highlighted the increase in productivity growth and the possibility that it could be a lasting phenomenon and a great boon to the economy. The implications for interest rates, though, remain an active area of debate. The economics suggest that the answer depends heavily on whether the productivity growth happens unexpectedly or is anticipated to be coming in the future. Some view the lesson of the 1990s in the United States to be that faster productivity growth can mean lower rates because it lowers inflation. At the time, then-U.S. Federal Reserve Chairman Alan Greenspan argued that productivity increases had to be behind the aggregate profit, employment, and inflation numbers, even though productivity growth itself had not yet materialized in the data. It was unexpected—and in that circumstance, the fundamentals call for lower rates. But if people expect an increase in productivity coming in the future, it can change their behavior today, making the rate picture more complicated. An increase in expected future income is just like a wealth increase today: It can lead to increased spending and potentially overheat the economy before the productivity boom has actually arrived. In that case, rates would likely need to rise. So it's critical we look out for activity driven by assumptions of future growth: stock market wealth effects on consumer spending, higher capital investment driven by market valuations, and so on. The bigger the hype about future productivity, the more rates may need to rise to prevent overheating. This could affect other countries, too, as the productivity gains or expected gains spread with the new technology across borders. And, importantly, facing a supply shock in the near term—whether from oil prices, disruptions to the supply chain, or other factors—makes the problem worse. Supply shocks reduce potential and limit growth for the economy, but they also make the problem of inflation from anticipated future productivity growth more extreme. According to Fed’s Goolsbee, the more markets expect productivity gains, the more monetary policy may need to tighten.

      NZ: 2026 Budget at a Glance
      Submitted May 27, 2026      |From treasury.govt.nz

      Budget 2026 is a package of new spending, savings, and reprioritisation to frontline services, all within a net operating package of only $2.1 billion per annum, on average. The single biggest allocation of funding is for frontline health services. table The Budget package adds to existing planned expenditure. In total, the Government is expected to spend $155 billion in the next financial year, mostly on health, education, welfare and NZ Superannuation (see chart on “How taxpayers’ money is spent” page). Budget 2026 provides new funding to ensure Kiwis can access timely, quality healthcare. Budget 2026 includes temporary, timely and targeted funding for households and public services facing fuel pressures. Budget Speech 2026 Mr Speaker, This is a responsible Budget. The Government is responding to an increasingly uncertain world with an economic plan and sensible choices that will make New Zealanders more secure in the years ahead. The documents I have tabled in Parliament today show that New Zealanders can look forward to growth, higher wages and rising employment. They can look forward to better public infrastructure, expanded healthcare services, better schooling for their kids, and safer communities. They can look forward to a much stronger set of Government books. Despite the chaos in the Middle East, and challenging global events, the Government’s responsible approach means Treasury is now forecasting a return to surplus in 2028/29 – a year earlier than forecast in December. An earlier surplus means less debt and lower interest costs than would otherwise be the case. The Government is tackling New Zealand’s major challenges, not with shallow quick fixes, but with a responsible and durable approach. Today’s Budget marks further progress towards a more secure future. I don’t expect New Zealanders to read every page of it. What I really want Kiwis to know is that this Budget is about them. It delivers on the Government’s belief that life can be better in this country, not just for the voters of today, but for their kids and grandkids too. Budget Economic and Fiscal Update 2026 Since the Half Year Economic and Fiscal Update 2025 (Half Year Update), the conflict in the Middle East has generated a significant supply shock that has sharply raised global oil prices. There is a high degree of uncertainty as to how the conflict will evolve, the severity and duration of global supply chain disruption and therefore the extent of the impact on the New Zealand economy. A quick resolution to the conflict with limited permanent damage to global supply chains will have different impacts to a lasting conflict with enduring damage. In line with the approach taken by the International Monetary Fund and the Organisation for Economic Co-operation and Development, the Treasury's central economic forecast assumes that oil prices will evolve in line with prices in the oil futures market. Based on prices as at 21 April 2026, this implies that the oil price shock is a temporary supply shock, with oil prices gradually easing and returning close to the pre-shock level over 2026 and 2027. Risks to the economic and fiscal forecasts are weighted to the downside compared to the central forecast. We consider alternative scenarios, including the possibility of greater oil market disruption and a longer lasting impact on the New Zealand economy. Recently, oil prices have stayed higher than assumed when these forecasts were finalised. However, as the oil price futures curve is still declining steeply, we do not consider this would materially impact these forecasts. Fiscal Strategy Report 2026 The Government’s fiscal strategy aims to repair its books after a period of deficits and debt accumulation. The operating balance before gains and losses excluding the Accident Compensation Corporation (ACC), or OBEGALx, has been in deficit since 2019/20 as core Crown expenses have risen faster than core Crown revenue (Figures 1 and 2). Operating deficits, combined with capital spending, led to a sharp increase in net core Crown debt between 2019/20 and 2023/24 (Figure 3). charts The sharp increase in core Crown expenses as a share of GDP after 2018/19 was due to the COVID-19 pandemic and weather events, rising costs of delivering public services, demographic changes, higher borrowing costs, the economic downturn and deliberate decisions to increase spending. Total Budget 2022 new operating spending, for example, was $9.7 billion a year, on average. Table 1 sets out the contribution of different spending areas to the increase in core Crown expenses since 2018/19. The operating deficit will not resolve automatically as the economy recovers. Fiscal consolidation is required to return OBEGALx to surplus and bend the debt curve down. Lower debt as a proportion of GDP will mean the government is in a better position to absorb and respond to future shocks and economic cycles. Recent decisions by both Fitch Ratings and Moody’s Ratings to change the outlook for New Zealand’s sovereign credit rating from stable to negative reflects this need for fiscal consolidation Just in | New Zealand projects a 2026/27 OBEGAL deficit of NZ$14.09 billion, an increase from the NZ$12.99 billion forecast in the HYEFU.

      RBA Bulletin May 2026
      Submitted May 27, 2026      |From rba.gov.au

      Housing investors differ from owner-occupiers in both their incentives and behaviour. Their housing purchase decisions are primarily driven by expected financial or capital returns rather than finding a place of residence, and tax incentives such as ...