An extraordinary and thought-provoking read from our colleagues at Reuters about New Zealand’s economic data.

It suggests the long term running-down of Stats NZ — the Kiwi equivalent of the Australian Bureau of Statistics — lead to a “data fog” that left the country’s central bank “flying blind”.

Some of the key hits:

• NZ struggles with tight funding, outdated data collection systems
• Economists, officials call for improved data collection
• Lagging data impacts policy deliberations

The article contends:

“Years of tight funding by successive governments have left statisticians struggling to keep up with a rapidly changing economy, and nowhere more so than with inflation.”

The system for collecting data on inflation is more than two decades old and not able to calculate monthly data.

“We are behind in terms of most advanced economies,” Karen Silk, RBNZ assistant governor, told Reuters. “Monthly CPI… (it) would be delightful to get that.”

Here’s how it affects decision-making:

The central bank was considering whether it needed to hike rates further to control inflation. By its next meeting in July, private business surveys and card spending data from banks had made it more confident cost pressures were easing.

It had to wait another week for the official CPI data for the second quarter, which showed inflation slowing faster than most predicted.

By August, the outlook had swung 180 degrees and it cut rates a quarter point to 5.25%, flagging a lot more to come.

“We’re still waiting to find out what the June GDP is, that’s months back,” governor Adrian Orr said after the August decision.

While only a small economy of 5.3 million people, the New Zealand dollar is widely traded and investors globally follow its markets. As a result, the RBNZ’s sudden turn last month sliced a whole cent off the currency and sent bond prices surging.

My favourite line in the whole article — and very telling about the importance of data:

“Even the size of the island’s population is in doubt as the government did away with paper departure cards in 2018, making the data less reliable and regularly revised. Stats NZ says COVID-19 had affected their modelling and that they were working to fix this.”

Andrew Lilley, chief rates strategist at Barrenjoey in Sydney, said statistics departments often had tight budgets as data was usually a low priority politically.

“For every 10 basis points that unemployment goes up unnecessarily because you have the wrong read on the data, that’s 2,000 people who are out of work,” Lilley said.

“If people knew this, they might be more willing to pay for good data collection and good statistics.”

Funding of the bureau has jumped about 60% since 2020 to NZ$258 million ($160.76 million) to deal with new initiatives and cost pressure but took a hit this year as the government cut spending to reduce the budget deficit.