Explaining the impacts on groups in New Zealand society
What the criterion requires
- Achieved requires "providing an explanation of the impacts of the contemporary economic issue on various groups in New Zealand society".
- "Various" means more than one. And Excellence requires comparing and contrasting the impacts on different groups, so choose groups whose interests differ.
Finding your groups — take them off the model
- The market model hands you the groups directly.
| On the model | The group |
|---|---|
| Buyers who still buy at the new price | Pay more; worse off, but still served |
| Buyers priced out | Get nothing; the most seriously affected |
| Sellers | Receive more per unit; better off |
| Potential new sellers | May enter if the price stays high |
| Users of the good as an input | Costs rise; worse off |
| Government / council | Revenue and expenditure effects |
| The wider community | Congestion, environment, amenity — often unpriced |
The groups worth naming in almost any issue
Households and consumers
- Split them: low-income and high-income households are affected differently, because the good is a larger share of a low-income budget and they have less ability to substitute.
Producers and sellers
- Split them: those already in the market gain from a higher price; those trying to enter may be blocked.
Firms that use the good as an input
- A higher price for water, electricity, labour or land raises their costs of production — so AS shifts left for them, and they may pass it on or absorb it.
Workers
- Employment in the affected industry; wages; whether they can afford to live near the work.
Government and local government
- Revenue: rates, GST, consent fees. Expenditure: infrastructure, support, regulation.
The environment and the wider community
- Unpriced effects — pollution, congestion, amenity, access. These matter because real GDP does not count them, while net social welfare does.
The three things every impact explanation needs
1 — Name the group precisely.
- Not "people" — "low-income renting households in this city".
2 — Explain the mechanism.
- How does the change in the market reach this group? Use the model: they face Pe1 instead of Pe, or they are the ones between Qe1 and Qe who no longer transact.
3 — Say whether they gain or lose, and how seriously.
- And why it is more serious for them than for another group.
Impacts are not all in the same direction
- The same price rise makes sellers better off and buyers worse off. They are two sides of one movement.
- Finding a group that gains is not a failure of the analysis — it is the analysis. An issue with only losers is usually one where a group has been missed.
Worked ExampleComparing two groups
⚠️ Illustrative issue and invented figures.
Weekly rent in a growing New Zealand city has risen from $480 to $620 over three years, driven by population growth against a highly inelastic supply of dwellings.
Compare and contrast the impact on: (i) low-income renting households (ii) landlords who already own rental properties.
Step 1 — Establish what happened on the model
Demand shifted right from D to D1 against a steep, inelastic supply curve, so rent rose sharply from Pe (620) while quantity rose only slightly from Qe to Qe1.
Step 2 — Group (i): low-income renting households. A serious loss.
The mechanism. They face Pe1 rather than Pe — $140 more per week, about $7,300 a year, for the same dwelling.
Why it is severe for this group specifically:
- Rent is a large share of their income. For a low-income household, housing may already take 40% or more of income, so a 29% rent rise consumes a very large share of what is left.
- They cannot substitute. Housing is a necessity; there is no cheaper version of "somewhere to live". They can only move further away, share, or accept worse quality.
- They have no buffer. With little or no savings, the rise must be met by cutting spending now — on food, power, transport or health.
- Some are priced out entirely. These are the households between Qe1 and Qe on the model: at $620 they can no longer transact in this market at all. They move to a cheaper town, live in overcrowded conditions, or become homeless.
They are on the losing side of both the price rise and the rationing.
Step 3 — Group (ii): landlords who already own rental properties. A clear gain.
The mechanism. They receive Pe1 rather than Pe on every dwelling — the same $140 a week, in the opposite direction.
Why the gain is substantial:
- Revenue rises with no extra cost. The dwelling already exists; the mortgage, rates and insurance are broadly unchanged. Most of the extra rent is additional profit.
- The asset appreciates too. A property producing higher rental income is worth more, so their wealth rises as well as their income.
- They face no competitive pressure to hold rents down, because inelastic supply means there are more tenants than dwellings.
One qualification: landlords with floating-rate mortgages face higher interest costs if the RBNZ raises the OCR, which offsets part of the gain. And landlords entering the market now must buy at the higher asset price, so they do not capture the same windfall.
Step 4 — Compare
Both groups are affected by exactly the same movement — rent rising from Pe to Pe1. Every dollar the tenant pays is a dollar the landlord receives. The two effects are not independent; they are the two sides of one price change, which is why they are strictly linked.
Step 5 — Contrast
Direction. The tenant loses and the landlord gains, from the identical event.
Severity relative to means. The $140 is a far larger share of a low-income tenant's weekly income than of a property-owning landlord's. The same dollar amount does very different damage.
Options available. The landlord can sell, refinance or hold. The tenant can only pay, move or go without — and housing is a necessity, so "go without" is not really available.
Who is rationed. The model rations by price, and price rations out those with the least ability to pay. So the burden of the shortage falls entirely on the low-income group, by construction.
Step 6 — Judge
The low-income renting households are far more seriously affected. They lose more relative to their means, have no substitutes and no buffer, and include the group that is excluded from the market altogether.
But the gain to landlords is the reason to be precise about the mechanism: this is a transfer from tenants to property owners, not a loss of output. That distinction matters, because it means the issue is fundamentally about distribution — and it points at the response, which must be to make supply more elastic so the transfer stops growing.