Hello everyone. It’s that time of the week again where I host an Ask Me Anything thread for paid subscribers about the events of the week that was.
Join us in The Kākā community by becoming a paid subscriber, to Ask Me Anything about the week that was, including:
Angry ‘convoy’ anti-vaxx and anti-mandate protesters besieging Parliament;
The PM defending her record and intentions on housing affordability;
The Govt indicated it would move to Phase II of its omicron response with self-isolation exemptions for close contacts working in essential industries, with a negative RAT;
The Opposition attacked the Government over fast-rising rents and a fall in real wages; and,
US inflation was higher than expected, bolstering expectations of a 50 bps ‘bazooka’ rate hike next month from the Fed.
Paid subscribers should have at it. I’ll be here for an hour. If you’d love to join in, I’d love you to subscribe. Paid subscribers can join the conversation and our growing community at The Kākā.
This is the US$60 trillion question of the moment. Will the Fed blink and bail everyone out again? It depends... Over the last 25 years the Fed was able to point at the structurally low inflation and say that it didn't matter if they kept cutting rates and printing because inflation was staying low. That's not true right now, although it may well be in a year or two. I think there is an element of an automatic stabiliser in this equation. If stock, bond and property markets slumped 30-40%, which is what the the doomsters say would bring valuations back into line with fundamentals, then that would shock the global economy into generating less inflation, which would give the central banks the excuse to stop hiking. Rinse and repeat. Hence so many dip-buying hold-on-for-dear-life types just see every fall as a buying opportunity. Short answer: we'll see, and, it depends. :)
Does the government have any plan for where the 70,000 returning kiwis and migrant workers are going to live? How do you see this impacting rents and house prices?
This is quite an issue, and may be the answer to the question above about whether we have the housing capacity. We could easily see 70,000 NZ-trained skilled workers leave for Australia and UK in next couple of years, and be replaced by 70,000 fruit pickers, dairy farm workers, liquor store 'managers', Uber drivers and Uber eats drivers. Rinse and repeat.
Great question! Short answer is no. But MSD is spending millions per month putting people up in tents, carvans and cabins in camping grounds. And some economists are saying we've filled the housing 'hole' supply shortage and should wind back extra new supply, or put the $2t housing market at risk of falling, and those rents of course.
Any thoughts re the possibility of average Wellingtonians forming up and pushing back on the protestors at Parliament as the work week draws to a close and a couple of days of free time open up?
It’s forecast to absolutely pour down tomorrow and Sunday. Plus, the average Wellingtonian doesn’t live anywhere near parliament, it’s primarily a business area. On the weekend I imagine most will just avoid the area and hope the rain washes the mob away
I think there's a better chance something will happen. The ComCom did tweak a few rules for the fuel industry. Its first report on Supermarkets was a cracker. But changing things in NZ when vested interests are so connected is difficult. For example, here's building materials prices over the last 30 years or so. 9% rise in the first 9 months of 2021. https://datawrapper.dwcdn.net/XysPS/1/
I've come to have this impression that Adrian Orr is particularly not good as Gov of the RBNZ. It seems compared to both heavyweight contenders (Powell, Lagarde) he's quite far behind but also compared to Lowe across the ditch. As someone who's primarily interested in stock markets I've found the market has little faith in Orr compared to his contemporaries, but also National have called for his replacement which is somewhat unique as Powell and Lowe seem to enjoy bipartisan support. First is this impression accurate or just the result of media bias and my own bubbles? Secondly, would replacing Orr actually achieve anything or is there a greater problem inside the culture and staff of the RBNZ itself?
Hmmm. Thanks Samuel. Topical question and often asked in hushed tones in so many cafes along The Terrace and Lambton Quay these days. He would argue credibly that he acted hard and fast when the Government couldn't to stimulate the economy and avoid armageddon in those awful weeks in March and April 2020. Back then, serious people were talking about 15% unemployment and a 20% fall in house prices. Instead, we have 3.2% unemployment and house prices are up 40%. Most workers and asset owners would be happy about that. Voters certainly were in 2020... He would also credibly argue he noticed the inflation building earlier than other central bankers and acted earlier than others. He stopped printing in July, 12 months before the rest, and started hiking in October, which is at least six months before the rest.
However, I argue the decision to remove LVR restrictions was a mistake, and the extent of the printing (along with the funding for lending programme that is still going) was too big and went on for too long. I also have an unpopular view that the QE would have been much better delivered as one-off equal cash grants to all via the Govt, but I'm pretty much alone on that. Hope that's useful. I like Adrian and he's not afraid to piss off a few people in power, including the banks. I like that he's done that. I just wish he'd used a different form of QE and not released the LVR shackles.
Also I still think reducing Interest Rates a flawed (fatally) approach esp. to stimulate the economy. Much better to have brought in a targeted interest subsidy (direct from Govt) if that was considered necessary - and it would have been.
Your analysis of housing unaffordability and how the government is undermining any way it could address it (no wealth tax, avoiding a fall in house prices, etc) seems on the money. So, WHY do you think they are doing this? They don't appear to be cynical and they're not stupid. Is it simply politically untenable to do what's needed? Aren't they just snookered by National? If so, and assuming they would like to solve this, what would be a good POLITICAL strategy?
It would be good to hear Bernard's thoughts but mine are that I think it's a result of Personality Politics in democratic countries taking over. Politicians are Egoists (I'm talking about all political sides here), they love that they have a "mandate" so spend huge amounts of time pandering to the people that voted them in (see $$ spent on Comms/PR etc). They are protecting their own self-interest. The electorate need to accept that Politicians need to make decisions for the good of most people and back them to do that rather than automatically point the finger anytime they don't like it personally. Until that sort of mindset comes to the fore (and I think this particular forum includes many proponents of this thinking) then they will just carry on looking after themselves and everything will remain politically untenable.
Thanks Glen. I don't think they're cynical or stupid. They are snookered by their own median-voter-seeking behaviour, and the democratic deficit of 800k young renters not voting. They can always convince themselves that even if they can't change the status quo because median voters don't want that, they will be kinder and/or more competent managers of the status quo.
I wouldn't pretend to be a political strategist. But the bush politician in me says offering policies via a party willing to go both ways and win a chunk of voters >5% and enough to decide who's in govt has the best chance of nudging change along.
My view is ultimately there needs to be a political settlement across Labour and National to break expectations of house prices doubling every 10 years with a shared commitment to achieve some housing affordability aims and creating some credible and independently managed tools to get there.
I'm going to write this up over the next week or so, but I'll throw the bare bones out now:
A 30 before 30 policy whereby:
National and Labour commit to an Affordable Housing and Climate Infrastructure Bill that;
Creates an independent agency combining Kainga Ora, Waka Kotahi, the Climate Commission and the Infrastructure Commission that;
Has the power and the funds to build whatever number of affordable medium density homes needed;
That would achieve rents and rent-to-own housing costs of no more than 30% of the disposable living full time wage by 2030;
With anyone under the age of 30 when covid came first in line for these affordable flats;
With this new agency funded by a 0.3% annual tax on the value of residential-zoned land;
With a 3% annual tax on the value of residential-zoned land without houses on it;
And a 30% value capture uplift rate on rezoned land made more valuable by public investment;
With this $5b-plus a year of revenue being shared 70-30 with councils to achieve that 30% housing cost by 2030;
Mostly to service public debt issued by the new agency and councils; along with;
achieving transport and housing emissions reductions to levels that are 30% of 2020 levels by 2030; with the accountability borne by Agency Governors and councils 'punishable' with revenue cuts if they don't meet their emissions and housing targets.
Is there any economic rational for Labor utter rejection of Rental Caps, or is it just untenable politically?
What about rental caps for rental companies with over three properties, not the Mom & Pops with only one or two properties to rent, would that be more tenable?
How about the government fund IRD to actually enforce the current laws? We don't need new laws when the current ones are being flouted because of minimal risk of being caught.
Thanks David. I'm going to take a deeper look at this over the next couple of weeks. The libertarian economist in me (I was one once) tells me rent controls are a bad idea in the long run because there are so many ways to get around them and don't solve the ultimate problem of a lack of supply. That's still my current view and the consensus view of economists and policy makers here. The trouble is the 'pure' price signal of rents at the moment doesn't seem to be solving the supply problem either. There's lots of reasons for that, some of which are market structure and infrastructure funding related. My current view is they could be useful for a year or so while a huge number of houses are built, but that's not the current plan. I don't think it would fly politically. A lot of these median voters are now amateur landlords and the optics of going back to the future 'Muldoonist' Polish Shipyard policies is not good. I think more substantial and long run policies are needed, which neither National or Labour want to pursue. So status quo for now.
Bernard rent controls will just make the housing crises much worse, if landlord’s can’t raise rents they will ensure they select tenants who will do the least damage to their housing investments, so if you have children, pets, are young and assessed as likely to party, then rental supply will be very limited for you.
Thanks Alex. I think Luxon's comment was performative and mostly about signalling he was for the 'old' version of monetary policy that didn't print money and that is all about keeping inflation (including wage inflation) under control. Clever optics as appeals to both consumers and small businesses. And remember that low interest rates are fantastic for asset (house) prices. Win, win, win. But I doubt removing that employment guidance would make much difference to how the Reserve Bank actually runs monetary policy, given inflation currently still has primacy, and the recently tweaked Act only says the bank must ‘support maximum sustainable employment’. You could drive a truck through that caveat.
Hey Bernard, why do you think this government (and previous ones gone by) are just so afraid to tackle housing, a rigged system for power prices, fuel, food, building supply monopolies - all things that would tangibly support all families but most importantly those without much headroom in their budgets who are hurting right now. I’m sure in winter the PM will talk about the winter power payment but I actually think some polices like this (while obviously helpful and needed for families in need right now) are actually terrible in concept as not only are they not solving the underlying problem they are actively supporting the status quo using money that could be used to support those same families in other ways? It just seems they don’t want to tackle the underlying issues that are causing poverty and financial stress across the board and I just don’t get why. I thought they were here for the working class so to speak. Are they really beholdent to the commercial lobby groups and aren’t as transparent as they’d suggest publicly?
Thanks Robert. Both National and Labour understand that to win and retain power they need to capture the median voter, who is most likely a worker, semi-professional and a home owner. That means appealing to their prejudices and interests. Rising house prices is good for them. Kicking down at 'lazy, loser, anti-social' beneficiaries makes sense. Politics is pretty raw and simple. It's about winning more votes than the other guy, again and again. In NZ, about 800,000-1m young renters don't vote. If they did, that would change the equation dramatically, especially if there was a party with policies they liked that was willing to go either way, and therefore had some leverage.
Thanks Bernard, it's such a shame when you think of it in those terms isn't it. Feels like a wasted opportunity for all. It feels like there is so much common ground could be found across the spectrum that could benefit all (including asset/housing owners) to fix a rigged power market, to have a more competitive food and fuel market etc. We'd all get access to lower household bills! Maybe a party like TOP or someone totally new can resonate with the younger generation - offer a genuine alternative to our existing anti-competitive political 'market' :)
who would they vote for? there is no political party that has policies to control the disgusting obscenity of some government and council employees and politicians being paid more than ten times the median income (about $32,000, from IRD not Statistics Department bs) in NZ. there is no political party that has policies to massively increase the income tax rate on income packages greater than ten times the median income in NZ (that is on the portion of income greater than ten times the median income). there is no political party in NZ that has policies to reduce the price of housing to an affordable level. there is no political party in NZ that has policies that give young working people a fair chance (although some will sooner or later inherit a dwelling and join the haves).
Hi Bernard, it feels like discussion around vaccine mandates has mainly been the extremes of society screaming at each other. I live in the US and haven’t seen any measured responses on either side of the debate around mandates vs civil liberty. I worry that one government public health mandate could be something entirely different for another, just look at Texas.
I read a quote in Stuff today from an anonymous protester in Wellington who’s main issue was not being able to go to work because of the mandate and why could they not get tested daily (weekly is the standard here). That seems like quite a reasonable question to me. Considering I get 10 RAT per month at home provided by my health insurance and an abundant supply at the local pharmacy for $10 per test, I think that a realistic scenario.
Do you think there’s room for this discussion or has the ship sailed?
I should add I’m fully vaxxed and encourage everyone I know to get it. After living with Covid and constantly getting exposed at work, getting that vaccine was a massive relief.
Thanks AT. The RATs supply problem is real and the Govt faces legitimate criticism on this. It essentially campaigned for two years not to use them because they're not such a good idea in an elimination strategy. Now we're past that, they should have been ordering them from August last year, but we're only getting them in bulk now.
What's it going to take, Bernard, for real climate action to happen? The government and PM talks a good game but actual action isn't happening. I'm a disaffected public servant who quit climate policy due to frustration at not getting anywhere. The Government has a majority, everyone knows what needs to happen. Is it fear of the median voter? The Public Finance Act? Time is seriously running out...
Thanks Sonya. All of the above, unfortunately. You're right the 20-30% net debt limit is the main problem. You can't manage a just transition without investing massively in public transport, medium density housing and converting urban roads and motorways to walkways and cycleways. Then there's the political problems. I broadly describe them as the Mike Hosking problem. He likes driving his Ferrari and/or double cab ute on the motorway fast from his inner-suburban home to work. And woe is any poor cyclist or orange cone that gets in their way. I'd half suggest setting up a givealittle page to buy out his contract on NewstalkZB. Just kidding....sort of. Here's more on that. https://thespinoff.co.nz/business/13-08-2021/bernard-hickey-without-political-air-cover-climate-action-is-all-but-doomed
Listened to "Misinformation threatens our national security" for the third time. However, just blaming the "algorithms" is not enough, when some people are actively exploiting those same "algorithms".
There are people and social accounts which are intentionally "priming the pump" to push out their toxic views toa wider audience.
Once someone become aware that they are speaking to a far wider audience, don't you think that they personally should be accountable to what they post and publish?
Minister James Shaw has conceded we could well end up paying poorer countries to plant trees. With the abundance of suitable land for carbon forestry in NZ, why is planting trees in Indonesia or Papua New Guinea even considered, and why is their no initiatives to replant a mixture of exotic and native species for carbon forestry in NZ? Is the government intentionally ignoring this issue until after election year when it will be too late?
Farmers don't want widespread forestry as it threatens the viability of the sheep & beef industry, rural jobs and freezing works. Mixed forests and natives are awesome but so much more expensive and harder to establish. $1k/ha for pine vs $16k+/ha for natives. But I agree, we should be acting in NZ rather than buying overseas credits.
Just been off-grid for a while (in Dusky Sound). A perhaps more philosophical Q: What is your view on the right balance between applying resources towards conservation for the future (eg bird life in Fiordland) and helping people now (who are struggling).
Do you think your comment yesterday "Then they tried to break into Parliament to lynch a Prime Minister they accuse of murdering children" was a touch hyperbolic? Maybe trying a little bit hard to draw a comparison to the Capitol Riot? I don't know. I wasn't there and you were - but do you really think that was the protestors intention if the police hadn't stopped them? It looked to me like they were just trying to be controversial and get arrested.
I largely agree with the rest of the article. Algorithmic regulation is something governments need to consider. (It is fraught with practical difficulties though.) Protecting journalists and individuals from threats is also a worthy cause. Your point about schools is compelling. But are you sure recourse to possible lynchings and national security is the most effective way to promote these things?
In some ways protests are the best way for these issues to manifest themselves. People out in the daylight expressing their views in a (relatively) peaceful way. Its everything else you've described that is the problem and going after the protestors won't cure those. Rightly or wrongly the kiwi in me likes that people are free to protest and thinks the only thing really under threat from these protesters is the grass of the immaculately manicured parliament lawn.
Thanks Your Servant. That's what they were chanting and had written on their placards and scrawled on their utes. And what they were saying online. I know we often say this is just dickheads bignoteing, but that's what so many 'sensible' people said before Trump's election, the murder of Jo Cox, the Capitol riots and the Christchurch Attacks. All of those people were saying these things before they did these things. Sure, 99% of it was just bignoting, but the 1% is enough to be a threat to democracy.
Thanks for the reply Bernard and its awful you have to deal with personal threats you outlined elsewhere. I was a little bit shocked by your article yesterday but perhaps that is because I should be shocked.
Hi Bernard. Gee, your commentary yesterday on the protests/protestors was vehement. Do you think it was balanced? Do you think any politician should go listen to them? (I do). Do you think all political parties banding together to de-platform and cancel the protestors is good for our democracy?
I talk to them lots. They yell at me. And then find my address and write letters with death threats to me and my colleagues. Those in that group are long gone from being able to be talked to empathetically and reasonably. They're small but loud. You may think I'm being extreme, but we need to be aware of what complacency does. Just look at US and Britain in 2015/16. I'm serious. They're serious. And we have to protect our democracy. Here's an example from this morning. A tweet from a Polish 'activist' about NZ's 'freedom convoy'. https://twitter.com/syfionki/status/1491790353824829441 A classic case of Russian-backed bot networks stirring things up to discredit democracy. The slogan in polish is "When injustice becomes law, resistance becomes a duty" and the picture is a recipe for a Molotov cocktail.
Hi Bernard..Is it complancecy with these groups that threaten democracy or is it really the social media tech giants you were talking about in the same article? Their nearly incomprehenable influence on public opinion in general is starting to be be understood now but only recently by a few.. It feels like we all realise something is wrong but need a bit of help putting our finger on what it is....
Terrible to hear about the threats. That's just not on mate. Putting that aside for a moment, I walked home through the protest yesterday evening and had a few chats. I
found myself wondering how many of these people (of the many non violent ones) are also the part of the group you often write about that have not benefited from asset inflation and have high rent / lack of housing security..or lack job security etc and just feel left behind. I couldn't help but wonder if some of them would have jumped up on whatever protest bandwagon was available in order voice their discontent.
Just some possible links between issues that I know are close to your heart!
Bernard one of my accounting clients is a psychiatric nurse he told me one of the first things you learn as a nurse is not to argue with delusional people, it just makes them angry and difficult to manage as they are incapable of comprehending any viewpoint other than their own.
No. (sorry, didn’t see your comment until now). They were not a homogenous group. You can’t label the whole group mask-rippers, death-threateners. The vast majority were ordinary people.
What’s an issue or a change you see as a shining light, potential genuine and meaningful improvement for Kiwi’s in 2022? I massively appreciate your holding power to account and unfortunately that means a lot of bad news stories - where should we look for reason to be optimistic!
How about we're not all grieving loved ones who have died from Covid? That's what annoys me most about the protesters at Parliament, they have no perspective!
There's many reasons for hope. Views are shifting and there is a very unmoored group of young voters that could go anywhere. And the sheer fact we have somehow managed to avoid covidmageddon is remarkable, even if we struggle at the end.
Absolutely agree re Covidmageddon (I like that term!) and having an 8 week old daughter and 90+yo great grandparents in law I absolutely understand what that means.
Even though I am an (almost) middle aged white salaried home owner I do hope that the renting/waged group find its voice to stop being shafted by both our main political parties
My question is about the housing crisis and rent controls.
Last week associate Minister of Public Housing Poto Williams floated the possibility of looking into rent control areas and then the PM disregared it as an option publicly.
What do you think happened here? Would this be related to the PM's no-plan approach with just intentions as opposed to actions?
What is your personal opinion about rent control areas?
Ivan. I think Poto Williams was just reading the laundry list and wasn't serious about rent controls either. PM and Deputy PM were just repeating their previous rulings out. My original libertarian economist self (yes I used to be one) would dismiss the idea out of hand as distorting the market and removing the price signal to build more. That's true in the long run, but the rent freeze in the first year of covid was useful. It just wasn't sustainable and we're seeing the catchup now. My current view is we should keep our eyes on the prize of massively ramping up supply to suppress rents and achieve affordability. But I'll be looking a lot more closely over the next couple of weeks. Watch this space.
If you mean the link for the weekly Hoon, it is in this morning's Dawn Chorus. Scroll right to the bottom of the email.
(If you are using gmail on the web you will need to click "View entire message" at the bottom of the page first)
See above. :)
Ah. Bugger. That deleted my reply too....
I edited my question while you were replying and it disappeared sorry!
This is the US$60 trillion question of the moment. Will the Fed blink and bail everyone out again? It depends... Over the last 25 years the Fed was able to point at the structurally low inflation and say that it didn't matter if they kept cutting rates and printing because inflation was staying low. That's not true right now, although it may well be in a year or two. I think there is an element of an automatic stabiliser in this equation. If stock, bond and property markets slumped 30-40%, which is what the the doomsters say would bring valuations back into line with fundamentals, then that would shock the global economy into generating less inflation, which would give the central banks the excuse to stop hiking. Rinse and repeat. Hence so many dip-buying hold-on-for-dear-life types just see every fall as a buying opportunity. Short answer: we'll see, and, it depends. :)
I saw it before it went. Hopefully the answer below was relevant to the question. :)
Does the government have any plan for where the 70,000 returning kiwis and migrant workers are going to live? How do you see this impacting rents and house prices?
On top of this comment, is the government concerned on the potential of a "brain drain" occurring in our built up population centres?
This is quite an issue, and may be the answer to the question above about whether we have the housing capacity. We could easily see 70,000 NZ-trained skilled workers leave for Australia and UK in next couple of years, and be replaced by 70,000 fruit pickers, dairy farm workers, liquor store 'managers', Uber drivers and Uber eats drivers. Rinse and repeat.
Great question! Short answer is no. But MSD is spending millions per month putting people up in tents, carvans and cabins in camping grounds. And some economists are saying we've filled the housing 'hole' supply shortage and should wind back extra new supply, or put the $2t housing market at risk of falling, and those rents of course.
Any thoughts re the possibility of average Wellingtonians forming up and pushing back on the protestors at Parliament as the work week draws to a close and a couple of days of free time open up?
It’s forecast to absolutely pour down tomorrow and Sunday. Plus, the average Wellingtonian doesn’t live anywhere near parliament, it’s primarily a business area. On the weekend I imagine most will just avoid the area and hope the rain washes the mob away
We're all praying for rain. Even on a weekend. This is some sort of treason for a Wellingtonian.
Ha!. We should all march down together with our masks on some big charts printed on placards. Here's the chart I'd print out in A3 and brandish: https://ourworldindata.org/explorers/coronavirus-data-explorer?zoomToSelection=true&facet=none&pickerSort=asc&pickerMetric=location&hideControls=true&Metric=Confirmed+deaths&Interval=Cumulative&Relative+to+Population=true&Color+by+test+positivity=false&country=GBR~USA~NZL~AUS
What do you see as the realistic outcomes of the Commerce Commission's second investigation into the building material duopoly?
I think there's a better chance something will happen. The ComCom did tweak a few rules for the fuel industry. Its first report on Supermarkets was a cracker. But changing things in NZ when vested interests are so connected is difficult. For example, here's building materials prices over the last 30 years or so. 9% rise in the first 9 months of 2021. https://datawrapper.dwcdn.net/XysPS/1/
Is there data for labour rates? As it would be interesting to see any correlation.
Let me work on that. Good question.
I've come to have this impression that Adrian Orr is particularly not good as Gov of the RBNZ. It seems compared to both heavyweight contenders (Powell, Lagarde) he's quite far behind but also compared to Lowe across the ditch. As someone who's primarily interested in stock markets I've found the market has little faith in Orr compared to his contemporaries, but also National have called for his replacement which is somewhat unique as Powell and Lowe seem to enjoy bipartisan support. First is this impression accurate or just the result of media bias and my own bubbles? Secondly, would replacing Orr actually achieve anything or is there a greater problem inside the culture and staff of the RBNZ itself?
Hmmm. Thanks Samuel. Topical question and often asked in hushed tones in so many cafes along The Terrace and Lambton Quay these days. He would argue credibly that he acted hard and fast when the Government couldn't to stimulate the economy and avoid armageddon in those awful weeks in March and April 2020. Back then, serious people were talking about 15% unemployment and a 20% fall in house prices. Instead, we have 3.2% unemployment and house prices are up 40%. Most workers and asset owners would be happy about that. Voters certainly were in 2020... He would also credibly argue he noticed the inflation building earlier than other central bankers and acted earlier than others. He stopped printing in July, 12 months before the rest, and started hiking in October, which is at least six months before the rest.
However, I argue the decision to remove LVR restrictions was a mistake, and the extent of the printing (along with the funding for lending programme that is still going) was too big and went on for too long. I also have an unpopular view that the QE would have been much better delivered as one-off equal cash grants to all via the Govt, but I'm pretty much alone on that. Hope that's useful. I like Adrian and he's not afraid to piss off a few people in power, including the banks. I like that he's done that. I just wish he'd used a different form of QE and not released the LVR shackles.
Also I still think reducing Interest Rates a flawed (fatally) approach esp. to stimulate the economy. Much better to have brought in a targeted interest subsidy (direct from Govt) if that was considered necessary - and it would have been.
Interesting Charles. Who would the subsidy apply to? Businesses?
percentage unemployment. what is it a percentage of? a fully comprehensive answer would be most appreciated.
Your analysis of housing unaffordability and how the government is undermining any way it could address it (no wealth tax, avoiding a fall in house prices, etc) seems on the money. So, WHY do you think they are doing this? They don't appear to be cynical and they're not stupid. Is it simply politically untenable to do what's needed? Aren't they just snookered by National? If so, and assuming they would like to solve this, what would be a good POLITICAL strategy?
It would be good to hear Bernard's thoughts but mine are that I think it's a result of Personality Politics in democratic countries taking over. Politicians are Egoists (I'm talking about all political sides here), they love that they have a "mandate" so spend huge amounts of time pandering to the people that voted them in (see $$ spent on Comms/PR etc). They are protecting their own self-interest. The electorate need to accept that Politicians need to make decisions for the good of most people and back them to do that rather than automatically point the finger anytime they don't like it personally. Until that sort of mindset comes to the fore (and I think this particular forum includes many proponents of this thinking) then they will just carry on looking after themselves and everything will remain politically untenable.
Thanks Glen. I don't think they're cynical or stupid. They are snookered by their own median-voter-seeking behaviour, and the democratic deficit of 800k young renters not voting. They can always convince themselves that even if they can't change the status quo because median voters don't want that, they will be kinder and/or more competent managers of the status quo.
I wouldn't pretend to be a political strategist. But the bush politician in me says offering policies via a party willing to go both ways and win a chunk of voters >5% and enough to decide who's in govt has the best chance of nudging change along.
My view is ultimately there needs to be a political settlement across Labour and National to break expectations of house prices doubling every 10 years with a shared commitment to achieve some housing affordability aims and creating some credible and independently managed tools to get there.
I'm going to write this up over the next week or so, but I'll throw the bare bones out now:
A 30 before 30 policy whereby:
National and Labour commit to an Affordable Housing and Climate Infrastructure Bill that;
Creates an independent agency combining Kainga Ora, Waka Kotahi, the Climate Commission and the Infrastructure Commission that;
Has the power and the funds to build whatever number of affordable medium density homes needed;
That would achieve rents and rent-to-own housing costs of no more than 30% of the disposable living full time wage by 2030;
With anyone under the age of 30 when covid came first in line for these affordable flats;
With this new agency funded by a 0.3% annual tax on the value of residential-zoned land;
With a 3% annual tax on the value of residential-zoned land without houses on it;
And a 30% value capture uplift rate on rezoned land made more valuable by public investment;
With this $5b-plus a year of revenue being shared 70-30 with councils to achieve that 30% housing cost by 2030;
Mostly to service public debt issued by the new agency and councils; along with;
achieving transport and housing emissions reductions to levels that are 30% of 2020 levels by 2030; with the accountability borne by Agency Governors and councils 'punishable' with revenue cuts if they don't meet their emissions and housing targets.
Is there any economic rational for Labor utter rejection of Rental Caps, or is it just untenable politically?
What about rental caps for rental companies with over three properties, not the Mom & Pops with only one or two properties to rent, would that be more tenable?
Their are landlords out there who own many properties, but only one property per company. How would you catch them?
I'm not pro rent caps; I'm pro taxing all profits (no capital gains loopholes) when the income is earned.
How about letting the Inland Revenue Department handle the rent control framework?
How about the government fund IRD to actually enforce the current laws? We don't need new laws when the current ones are being flouted because of minimal risk of being caught.
I think any rent control would be govt policy, rather than revenue collection. IRD would run a mile from that one.
My view is a simple annual tax or levy on residential-zoned land values would do the trick. For everyone. Not just landlords.
Thanks David. I'm going to take a deeper look at this over the next couple of weeks. The libertarian economist in me (I was one once) tells me rent controls are a bad idea in the long run because there are so many ways to get around them and don't solve the ultimate problem of a lack of supply. That's still my current view and the consensus view of economists and policy makers here. The trouble is the 'pure' price signal of rents at the moment doesn't seem to be solving the supply problem either. There's lots of reasons for that, some of which are market structure and infrastructure funding related. My current view is they could be useful for a year or so while a huge number of houses are built, but that's not the current plan. I don't think it would fly politically. A lot of these median voters are now amateur landlords and the optics of going back to the future 'Muldoonist' Polish Shipyard policies is not good. I think more substantial and long run policies are needed, which neither National or Labour want to pursue. So status quo for now.
Bernard rent controls will just make the housing crises much worse, if landlord’s can’t raise rents they will ensure they select tenants who will do the least damage to their housing investments, so if you have children, pets, are young and assessed as likely to party, then rental supply will be very limited for you.
What's your view on the RBNZ mandate Bernard? I note that Luxon has said he will bring it back to inflation targeting only and it's the government's job to deal with housing affordability and inequality (https://www.bloomberg.com/news/articles/2022-02-10/rbnz-would-lose-dual-mandate-if-opposition-wins-2023-election).
Thanks Alex. I think Luxon's comment was performative and mostly about signalling he was for the 'old' version of monetary policy that didn't print money and that is all about keeping inflation (including wage inflation) under control. Clever optics as appeals to both consumers and small businesses. And remember that low interest rates are fantastic for asset (house) prices. Win, win, win. But I doubt removing that employment guidance would make much difference to how the Reserve Bank actually runs monetary policy, given inflation currently still has primacy, and the recently tweaked Act only says the bank must ‘support maximum sustainable employment’. You could drive a truck through that caveat.
It sounds like the extension of the mandate is also performative!
Hey Bernard, why do you think this government (and previous ones gone by) are just so afraid to tackle housing, a rigged system for power prices, fuel, food, building supply monopolies - all things that would tangibly support all families but most importantly those without much headroom in their budgets who are hurting right now. I’m sure in winter the PM will talk about the winter power payment but I actually think some polices like this (while obviously helpful and needed for families in need right now) are actually terrible in concept as not only are they not solving the underlying problem they are actively supporting the status quo using money that could be used to support those same families in other ways? It just seems they don’t want to tackle the underlying issues that are causing poverty and financial stress across the board and I just don’t get why. I thought they were here for the working class so to speak. Are they really beholdent to the commercial lobby groups and aren’t as transparent as they’d suggest publicly?
Thanks Robert. Both National and Labour understand that to win and retain power they need to capture the median voter, who is most likely a worker, semi-professional and a home owner. That means appealing to their prejudices and interests. Rising house prices is good for them. Kicking down at 'lazy, loser, anti-social' beneficiaries makes sense. Politics is pretty raw and simple. It's about winning more votes than the other guy, again and again. In NZ, about 800,000-1m young renters don't vote. If they did, that would change the equation dramatically, especially if there was a party with policies they liked that was willing to go either way, and therefore had some leverage.
Thanks Bernard, it's such a shame when you think of it in those terms isn't it. Feels like a wasted opportunity for all. It feels like there is so much common ground could be found across the spectrum that could benefit all (including asset/housing owners) to fix a rigged power market, to have a more competitive food and fuel market etc. We'd all get access to lower household bills! Maybe a party like TOP or someone totally new can resonate with the younger generation - offer a genuine alternative to our existing anti-competitive political 'market' :)
I feel a call for a Kaka Party!
Bang on Bernard - I think I was trying to make that point in the question from Glen Saunders above
who would they vote for? there is no political party that has policies to control the disgusting obscenity of some government and council employees and politicians being paid more than ten times the median income (about $32,000, from IRD not Statistics Department bs) in NZ. there is no political party that has policies to massively increase the income tax rate on income packages greater than ten times the median income in NZ (that is on the portion of income greater than ten times the median income). there is no political party in NZ that has policies to reduce the price of housing to an affordable level. there is no political party in NZ that has policies that give young working people a fair chance (although some will sooner or later inherit a dwelling and join the haves).
Hi Bernard, it feels like discussion around vaccine mandates has mainly been the extremes of society screaming at each other. I live in the US and haven’t seen any measured responses on either side of the debate around mandates vs civil liberty. I worry that one government public health mandate could be something entirely different for another, just look at Texas.
I read a quote in Stuff today from an anonymous protester in Wellington who’s main issue was not being able to go to work because of the mandate and why could they not get tested daily (weekly is the standard here). That seems like quite a reasonable question to me. Considering I get 10 RAT per month at home provided by my health insurance and an abundant supply at the local pharmacy for $10 per test, I think that a realistic scenario.
Do you think there’s room for this discussion or has the ship sailed?
I should add I’m fully vaxxed and encourage everyone I know to get it. After living with Covid and constantly getting exposed at work, getting that vaccine was a massive relief.
Thanks AT. The RATs supply problem is real and the Govt faces legitimate criticism on this. It essentially campaigned for two years not to use them because they're not such a good idea in an elimination strategy. Now we're past that, they should have been ordering them from August last year, but we're only getting them in bulk now.
What's it going to take, Bernard, for real climate action to happen? The government and PM talks a good game but actual action isn't happening. I'm a disaffected public servant who quit climate policy due to frustration at not getting anywhere. The Government has a majority, everyone knows what needs to happen. Is it fear of the median voter? The Public Finance Act? Time is seriously running out...
Westport has had three big floods in eight months.
The Met Office appears to have dropped describing them as a one-in-however-many-years floods.
Perhaps they've realised their models don't fit with climate change.
And we all realised the 1 in xxx was total baloney
Thanks Sonya. All of the above, unfortunately. You're right the 20-30% net debt limit is the main problem. You can't manage a just transition without investing massively in public transport, medium density housing and converting urban roads and motorways to walkways and cycleways. Then there's the political problems. I broadly describe them as the Mike Hosking problem. He likes driving his Ferrari and/or double cab ute on the motorway fast from his inner-suburban home to work. And woe is any poor cyclist or orange cone that gets in their way. I'd half suggest setting up a givealittle page to buy out his contract on NewstalkZB. Just kidding....sort of. Here's more on that. https://thespinoff.co.nz/business/13-08-2021/bernard-hickey-without-political-air-cover-climate-action-is-all-but-doomed
Listened to "Misinformation threatens our national security" for the third time. However, just blaming the "algorithms" is not enough, when some people are actively exploiting those same "algorithms".
There are people and social accounts which are intentionally "priming the pump" to push out their toxic views toa wider audience.
Once someone become aware that they are speaking to a far wider audience, don't you think that they personally should be accountable to what they post and publish?
https://twitter.com/BySteveReilly/status/1492197832207568901
In relation to Climate Change.
Minister James Shaw has conceded we could well end up paying poorer countries to plant trees. With the abundance of suitable land for carbon forestry in NZ, why is planting trees in Indonesia or Papua New Guinea even considered, and why is their no initiatives to replant a mixture of exotic and native species for carbon forestry in NZ? Is the government intentionally ignoring this issue until after election year when it will be too late?
Farmers don't want widespread forestry as it threatens the viability of the sheep & beef industry, rural jobs and freezing works. Mixed forests and natives are awesome but so much more expensive and harder to establish. $1k/ha for pine vs $16k+/ha for natives. But I agree, we should be acting in NZ rather than buying overseas credits.
Just been off-grid for a while (in Dusky Sound). A perhaps more philosophical Q: What is your view on the right balance between applying resources towards conservation for the future (eg bird life in Fiordland) and helping people now (who are struggling).
How might we decide?
Do you think your comment yesterday "Then they tried to break into Parliament to lynch a Prime Minister they accuse of murdering children" was a touch hyperbolic? Maybe trying a little bit hard to draw a comparison to the Capitol Riot? I don't know. I wasn't there and you were - but do you really think that was the protestors intention if the police hadn't stopped them? It looked to me like they were just trying to be controversial and get arrested.
I largely agree with the rest of the article. Algorithmic regulation is something governments need to consider. (It is fraught with practical difficulties though.) Protecting journalists and individuals from threats is also a worthy cause. Your point about schools is compelling. But are you sure recourse to possible lynchings and national security is the most effective way to promote these things?
In some ways protests are the best way for these issues to manifest themselves. People out in the daylight expressing their views in a (relatively) peaceful way. Its everything else you've described that is the problem and going after the protestors won't cure those. Rightly or wrongly the kiwi in me likes that people are free to protest and thinks the only thing really under threat from these protesters is the grass of the immaculately manicured parliament lawn.
Thanks Your Servant. That's what they were chanting and had written on their placards and scrawled on their utes. And what they were saying online. I know we often say this is just dickheads bignoteing, but that's what so many 'sensible' people said before Trump's election, the murder of Jo Cox, the Capitol riots and the Christchurch Attacks. All of those people were saying these things before they did these things. Sure, 99% of it was just bignoting, but the 1% is enough to be a threat to democracy.
Thanks for the reply Bernard and its awful you have to deal with personal threats you outlined elsewhere. I was a little bit shocked by your article yesterday but perhaps that is because I should be shocked.
Hi Bernard. Gee, your commentary yesterday on the protests/protestors was vehement. Do you think it was balanced? Do you think any politician should go listen to them? (I do). Do you think all political parties banding together to de-platform and cancel the protestors is good for our democracy?
I talk to them lots. They yell at me. And then find my address and write letters with death threats to me and my colleagues. Those in that group are long gone from being able to be talked to empathetically and reasonably. They're small but loud. You may think I'm being extreme, but we need to be aware of what complacency does. Just look at US and Britain in 2015/16. I'm serious. They're serious. And we have to protect our democracy. Here's an example from this morning. A tweet from a Polish 'activist' about NZ's 'freedom convoy'. https://twitter.com/syfionki/status/1491790353824829441 A classic case of Russian-backed bot networks stirring things up to discredit democracy. The slogan in polish is "When injustice becomes law, resistance becomes a duty" and the picture is a recipe for a Molotov cocktail.
I can’t imagine why this group would send you death threats, but that is awful. Is it possible you have a jaundiced view
of the lot of them based on the actions of the extreme few? And I don’t think you answered a single one of my questions LOL
Hi Bernard..Is it complancecy with these groups that threaten democracy or is it really the social media tech giants you were talking about in the same article? Their nearly incomprehenable influence on public opinion in general is starting to be be understood now but only recently by a few.. It feels like we all realise something is wrong but need a bit of help putting our finger on what it is....
Terrible to hear about the threats. That's just not on mate. Putting that aside for a moment, I walked home through the protest yesterday evening and had a few chats. I
found myself wondering how many of these people (of the many non violent ones) are also the part of the group you often write about that have not benefited from asset inflation and have high rent / lack of housing security..or lack job security etc and just feel left behind. I couldn't help but wonder if some of them would have jumped up on whatever protest bandwagon was available in order voice their discontent.
Just some possible links between issues that I know are close to your heart!
Bernard one of my accounting clients is a psychiatric nurse he told me one of the first things you learn as a nurse is not to argue with delusional people, it just makes them angry and difficult to manage as they are incapable of comprehending any viewpoint other than their own.
Same as drunks. Don’t waste your time placating or negotiating.
Cliff do you think ripping the mask off the face of a 14 year old school girl, is a reasonable way to express your democratic right to dissent?
No. (sorry, didn’t see your comment until now). They were not a homogenous group. You can’t label the whole group mask-rippers, death-threateners. The vast majority were ordinary people.
Agree Cliff they were not a homogenous group. There was, however, a very unruly element involved in that protest.
What’s an issue or a change you see as a shining light, potential genuine and meaningful improvement for Kiwi’s in 2022? I massively appreciate your holding power to account and unfortunately that means a lot of bad news stories - where should we look for reason to be optimistic!
How about we're not all grieving loved ones who have died from Covid? That's what annoys me most about the protesters at Parliament, they have no perspective!
Exactly Sonya, I have lost a relative in the Netherlands but not here in NZ
There's many reasons for hope. Views are shifting and there is a very unmoored group of young voters that could go anywhere. And the sheer fact we have somehow managed to avoid covidmageddon is remarkable, even if we struggle at the end.
Absolutely agree re Covidmageddon (I like that term!) and having an 8 week old daughter and 90+yo great grandparents in law I absolutely understand what that means.
Even though I am an (almost) middle aged white salaried home owner I do hope that the renting/waged group find its voice to stop being shafted by both our main political parties
My question is about the housing crisis and rent controls.
Last week associate Minister of Public Housing Poto Williams floated the possibility of looking into rent control areas and then the PM disregared it as an option publicly.
What do you think happened here? Would this be related to the PM's no-plan approach with just intentions as opposed to actions?
What is your personal opinion about rent control areas?
Ivan. I think Poto Williams was just reading the laundry list and wasn't serious about rent controls either. PM and Deputy PM were just repeating their previous rulings out. My original libertarian economist self (yes I used to be one) would dismiss the idea out of hand as distorting the market and removing the price signal to build more. That's true in the long run, but the rent freeze in the first year of covid was useful. It just wasn't sustainable and we're seeing the catchup now. My current view is we should keep our eyes on the prize of massively ramping up supply to suppress rents and achieve affordability. But I'll be looking a lot more closely over the next couple of weeks. Watch this space.
Great Bernard, looking forward to it.
Sorry if you have stated this anywhere else, but why won't the PM let the housing market crash?
Because the NZ economy is a housing market with some other bits tacked on