PM ‘goes for growth’ without viable new plan; More tourists & students his short-term fix; Trump’s tariffs inflate our mortgage rates; NZers vote with their feet; A frozen housing market; GDP stagnant
"We saw the end results of this state of economic shock in figures for December in manufacturing, services, retailing and housing..."
Ironically, the stronghold of the sectors that tend to vote National (and Act?)... and bizarrely still defend the actions of the present government and still blame labour.
My observation of many businesspeople is that when times are good, they ascribe that to their own excellence, even if a major reason is the economic conditions courtesy of the government. When times are bad, they tend to ascribe that to the government increasing their costs rather than their own fault.
A personal experience was working in fast food under Labour where sales went up regularly as lower-income folk had more money to spend there thanks to improvements in lower-income support e.g. Working for Families, Accommodation Supplement, minimum wage increases (which annoyed the owners no end, but was a major source of the increased money for their customers who tended to resemble their workforces). Working under National, things were worse for most of the customer base than under Labour, so it was much harder to grow sales and improve margins.
Which reinforces the idea that more money put into less wealthy people's pockets is usually spent locally whereas put into wealthy peoples pockets, it can be spent anywhere.
I wrote what I thought was a clever comment and then I remembered Donella Meadows said it better than I ever could. Over to you Donella: “The world is a complex, interconnected, finite, ecological - social - psychological - economic system. We treat it as if it were not, as if it were divisible, separable, simple, and infinite. Our persistent, intractable global problems arise directly from this mismatch.” The Luxons of the world are not systems thinkers. As a result, they consistently make poor decisions. Instead of learning from system feedbacks and adapting their responses to suit challenges, they do the exact opposite and push back against the system. And voila, a triple-dip recession, falling living standards, mass emigration, and a desperate government - with falling popularity and no ideas - left clinging to a false narrative. The laundry list of the current government’s poor decisions are verging on egregious.
I was going to write something very similar about our new health minister. I don’t know Simeon, although I have heard he is actually a very intelligent and effective minister. However, effectiveness is entirely relative to how you choose to measure/define it. It’s easy to be effective and make decisions when you ignore complexity and nuance, and that may score them some quick runs. The test will be whether the unintended consequences surface before or after the next election, which will determine who gets the blame for them…
Thanks Bernard for breaking down the parameters & how they affect each other.
Something I took for granted was that all construction projects MUST start from the water infrastructure. It's obvious now that I've heard it from you, but just something I never thought about. It makes sense as yet another compounding variable, contributing to our infrastructure deficit.
On a positive(slightly personal note)
I think some family members are coming round to the fact that this governments decisions are inflammatory(in terms of worsening the recession). Eg: it dawned on my Mum the other day how; if there are so many people being laid off as a result of government cuts, jobs are harder to find & government assistance is harder to get... something's gotta' give. She got there on her own after I mentioned the 213,000 people on job seeker benefit (a record high).
I was absolutely convinced that every time the esteemed Boris Johnson announced a new strategy, he’d made it up in the time between leaving his seat and walking up to the podium.. I am now convinced that Luxon is adopting the same approach. What could possibly go wrong.
I agree so many of his decisions seem to be a distraction as he doesn't know what he is doing. With the reshuffle of cabinet ministers he is trying to look as if he is doing something and buying time.
From the migration statistics, the net migration decrease from the year ending November 2023 to the year ending November 2024 was over 100,000 - from ~133,300 to ~30,600. Excluding Covid, that must be the most dramatic drop ever. Stats NZ notes that total departures is an all-time record.
Comparing net outflow of NZ citizens in the Stats NZ table, which goes back to Dec 2001, the last time it was this bad was the GFC (I think this is slightly worse on absolute numbers, but the NZ citizen population is a bit bigger now).
You got to spend money to make money! I heard that a certain pharma business was asked by a minister would they invest in nz and pharma business basically said for them to do that they need government spending on newer drugs to justify it. As it stands we are now in a tipping point where MNCs can no longer justify having a NZ based entity. We are already pretty much a branch of Australia as far as MNCs are concerned.
1. Should foreign investment be limited to building only? And buying is forbidden.
Buying is buying shares on the stock market, buying an established vineyard/winery, buying an office block on Queen St. A buying activity adds nothing; it just rearranges who has some spare cash.
Building could be buying some bare farmland and converting it to a vineyard/winery which earns a higher return per hectare, establishing a coastal freight operation that doesn't just predate on existing activity (Cook Strait), or maybe building a toll road without any government subsidies or guarantees.
2. The government wants to reduce the government share of GDP from 34% to 30% of total GDP. The way they are going about it is to reduce total GDP by about 4%. I.e. a recession. Why aren't they saying "We want businesses to get out there and do more stuff, grow the economy so that what the government is doing now becomes only 30% of total GDP".
P.S. Having said 'Two things' I was tempted to head the two things up as A and B rather than 1 and 2.
I think the emigration story is even worse than Bernard is saying. If we add up the number of NZ citizens with the number of non citizens we get 350 leaving each day. The reason I would include non citizens is there is a reasonably high bar to get into NZ, and the fact that people who have made the effort are now leaving will be driven by the dire economic situation.
In NZ the current government allows residential rental property owners to deduct their mortgage interest from their income before their income tax is calculated/payable. The current government does NOT allow a person buying/purchasing a residence for themself (and family) to deduct their mortgage interest from their income before their income tax is calculated/payable. This gives residential rental property owners a COLOSSAL financial advantage over people who are buying /purchasing a residence for themself (and family). Obviously this is a major reason why extremely large numbers of young New Zealanders are leaving NZ to live overseas. (I have a niece and a nephew (both tertiary educated) who have left NZ and now live in Australia).
The problem for New Zealand is that both Act and National parties have this policy that advantages the already rich/wealthy who buy/purchase more than one residential property over other New Zealanders who are wanting to buy/purchase a residence for themself (and family).
First two sentences explain A Lot about the State of the Econonomy. Way more than Mr.Luxon.
The big problem as I understand it, is not that Landlords get a tax break on what is a normal business expense, but that first home buyers don’t get an equivalent benefit.
But this government can’t afford to do that because of the structural imbalance in government finances ie insufficient income to match expenses because they don’t collect sufficient taxes from those who can most afford it. Or really crank the economy up with infrastructure investment funded by borrowing at cheap government rates.
except for new builds residential rental property owners are not producing anything. therefore mortgage interest is NOT a normal business expense. the previous government correctly allowed residential rental property owners to deduct mortgage interest from their income for new builds but not for existing residential property and the present corrupt government should not have changed that. justice and morality require that a capital income tax is essential in New Zealand but the greedy selfish Act and National party members and ding-a-ling Ardern and not-a-Labour-person Hipkins have prevented this from being introduced.
Dammit I'm 62 and we seem to have spent the last 40 years in some type of "GroundHog" day economic/social/political spin. When are we all going to understand that you can't have unsustainable forever growth. When are our elected representatives going to understand (and yes I know some do) that we have got to plan long term. Short term fixes such as increasing tourism without the capital spend on infrastructure OR welcoming foreign investment that does nothing to grow the skill set of our people, and too often has trashed our environment (Tiwai Point and the waste dumped elsewhere under previous owners) do nothing for our long term social, cultural and economic well-being. And don't get me started on dodgy landlords (yes I know many are good folks) and handouts. Whatever happened to thinking about how we live in a holistic, whole systems manner that is beneficial in these areas, not just one! Yes Bernard, please release.
The DTIs might just save our economy ultimately by forcing people to put their money into productive things. It wasn’t so surprising at the time when Labour allowed it, house prices had been screaming up at unprecedented rates and there was massive pressure on the govt to do something about it - or at least pretend to be seeing doing something. Remember those ridiculous open letters between Robertson and Orr each telling the other to hurry up and restrain prices?
Hmmm. Should we be relying on Curia polling? Or legitimising it by referencing it?
David Farrar “resigned” from his professional body. But this resignation came after a series of events and complaints against Curia:
Multiple complaints: David Farrar stated that there had been numerous complaints against Curia over the past two years, to the point where he couldn’t “even count up how many complaints there have been”. Implying it was a witch hunt… but …
Professional Standards Group (PSG) of Research Association of NZ (RANZ) upheld complaints against Curia for bias and was considering a recommendation that could have involved suspension or expulsion.
Basically a breach of professional standards: Curia was found to have breached industry standards, particularly in relation to political polling.
IMHO we should not reference their polling, we should be constant in reminders about their breaching of industry standards. We should not be cherry picking singular findings that support a view point we wish to promote.
This is a company that manufactures outcomes in research findings by breaching accepted standards. They should be ignored.
Never fear, we shall be saved by digital nomads paying income tax to wherever their overseas employer is based, probably living either on the road or in airbnbs, and maybe even accessing NZ healthcare..
Yes, we shall be saved by 'digital nomads', with great salaries and money to spend, who work from companies such as Google, Apple and Meta etc... oh hold on, they all said they want everyone back in the office, not roaming and working around the world... so who are the 'digital nomads' now?
Also somewhat hypocritical of Nicola Willis to evangelise the benefits of remote working, while demanding that public servants return to the office full-time..
And so concludes Bernard’s state of the nation speech…
"We saw the end results of this state of economic shock in figures for December in manufacturing, services, retailing and housing..."
Ironically, the stronghold of the sectors that tend to vote National (and Act?)... and bizarrely still defend the actions of the present government and still blame labour.
My observation of many businesspeople is that when times are good, they ascribe that to their own excellence, even if a major reason is the economic conditions courtesy of the government. When times are bad, they tend to ascribe that to the government increasing their costs rather than their own fault.
A personal experience was working in fast food under Labour where sales went up regularly as lower-income folk had more money to spend there thanks to improvements in lower-income support e.g. Working for Families, Accommodation Supplement, minimum wage increases (which annoyed the owners no end, but was a major source of the increased money for their customers who tended to resemble their workforces). Working under National, things were worse for most of the customer base than under Labour, so it was much harder to grow sales and improve margins.
Which reinforces the idea that more money put into less wealthy people's pockets is usually spent locally whereas put into wealthy peoples pockets, it can be spent anywhere.
Release please Beenard
Patrick Medlicott
Lets get this over the tone!
I wrote what I thought was a clever comment and then I remembered Donella Meadows said it better than I ever could. Over to you Donella: “The world is a complex, interconnected, finite, ecological - social - psychological - economic system. We treat it as if it were not, as if it were divisible, separable, simple, and infinite. Our persistent, intractable global problems arise directly from this mismatch.” The Luxons of the world are not systems thinkers. As a result, they consistently make poor decisions. Instead of learning from system feedbacks and adapting their responses to suit challenges, they do the exact opposite and push back against the system. And voila, a triple-dip recession, falling living standards, mass emigration, and a desperate government - with falling popularity and no ideas - left clinging to a false narrative. The laundry list of the current government’s poor decisions are verging on egregious.
I was going to write something very similar about our new health minister. I don’t know Simeon, although I have heard he is actually a very intelligent and effective minister. However, effectiveness is entirely relative to how you choose to measure/define it. It’s easy to be effective and make decisions when you ignore complexity and nuance, and that may score them some quick runs. The test will be whether the unintended consequences surface before or after the next election, which will determine who gets the blame for them…
I suspect that the cyclists and pedestrians of Warkworth have their own opinions of the man.
Thanks Bernard for breaking down the parameters & how they affect each other.
Something I took for granted was that all construction projects MUST start from the water infrastructure. It's obvious now that I've heard it from you, but just something I never thought about. It makes sense as yet another compounding variable, contributing to our infrastructure deficit.
On a positive(slightly personal note)
I think some family members are coming round to the fact that this governments decisions are inflammatory(in terms of worsening the recession). Eg: it dawned on my Mum the other day how; if there are so many people being laid off as a result of government cuts, jobs are harder to find & government assistance is harder to get... something's gotta' give. She got there on her own after I mentioned the 213,000 people on job seeker benefit (a record high).
Cheers
I was absolutely convinced that every time the esteemed Boris Johnson announced a new strategy, he’d made it up in the time between leaving his seat and walking up to the podium.. I am now convinced that Luxon is adopting the same approach. What could possibly go wrong.
I agree so many of his decisions seem to be a distraction as he doesn't know what he is doing. With the reshuffle of cabinet ministers he is trying to look as if he is doing something and buying time.
From the migration statistics, the net migration decrease from the year ending November 2023 to the year ending November 2024 was over 100,000 - from ~133,300 to ~30,600. Excluding Covid, that must be the most dramatic drop ever. Stats NZ notes that total departures is an all-time record.
Comparing net outflow of NZ citizens in the Stats NZ table, which goes back to Dec 2001, the last time it was this bad was the GFC (I think this is slightly worse on absolute numbers, but the NZ citizen population is a bit bigger now).
You got to spend money to make money! I heard that a certain pharma business was asked by a minister would they invest in nz and pharma business basically said for them to do that they need government spending on newer drugs to justify it. As it stands we are now in a tipping point where MNCs can no longer justify having a NZ based entity. We are already pretty much a branch of Australia as far as MNCs are concerned.
What are MNCs?
multinational corporations?
Yes that’s it!
Thank you
Also inflation has not gone away as long as we are reliant on imported fuels.
It's a bit bouncy as we may be entering a short period of lower oil prices (unfortunately) ...
Two things: -
1. Should foreign investment be limited to building only? And buying is forbidden.
Buying is buying shares on the stock market, buying an established vineyard/winery, buying an office block on Queen St. A buying activity adds nothing; it just rearranges who has some spare cash.
Building could be buying some bare farmland and converting it to a vineyard/winery which earns a higher return per hectare, establishing a coastal freight operation that doesn't just predate on existing activity (Cook Strait), or maybe building a toll road without any government subsidies or guarantees.
2. The government wants to reduce the government share of GDP from 34% to 30% of total GDP. The way they are going about it is to reduce total GDP by about 4%. I.e. a recession. Why aren't they saying "We want businesses to get out there and do more stuff, grow the economy so that what the government is doing now becomes only 30% of total GDP".
P.S. Having said 'Two things' I was tempted to head the two things up as A and B rather than 1 and 2.
I think the emigration story is even worse than Bernard is saying. If we add up the number of NZ citizens with the number of non citizens we get 350 leaving each day. The reason I would include non citizens is there is a reasonably high bar to get into NZ, and the fact that people who have made the effort are now leaving will be driven by the dire economic situation.
In NZ the current government allows residential rental property owners to deduct their mortgage interest from their income before their income tax is calculated/payable. The current government does NOT allow a person buying/purchasing a residence for themself (and family) to deduct their mortgage interest from their income before their income tax is calculated/payable. This gives residential rental property owners a COLOSSAL financial advantage over people who are buying /purchasing a residence for themself (and family). Obviously this is a major reason why extremely large numbers of young New Zealanders are leaving NZ to live overseas. (I have a niece and a nephew (both tertiary educated) who have left NZ and now live in Australia).
The problem for New Zealand is that both Act and National parties have this policy that advantages the already rich/wealthy who buy/purchase more than one residential property over other New Zealanders who are wanting to buy/purchase a residence for themself (and family).
First two sentences explain A Lot about the State of the Econonomy. Way more than Mr.Luxon.
The big problem as I understand it, is not that Landlords get a tax break on what is a normal business expense, but that first home buyers don’t get an equivalent benefit.
But this government can’t afford to do that because of the structural imbalance in government finances ie insufficient income to match expenses because they don’t collect sufficient taxes from those who can most afford it. Or really crank the economy up with infrastructure investment funded by borrowing at cheap government rates.
except for new builds residential rental property owners are not producing anything. therefore mortgage interest is NOT a normal business expense. the previous government correctly allowed residential rental property owners to deduct mortgage interest from their income for new builds but not for existing residential property and the present corrupt government should not have changed that. justice and morality require that a capital income tax is essential in New Zealand but the greedy selfish Act and National party members and ding-a-ling Ardern and not-a-Labour-person Hipkins have prevented this from being introduced.
Dammit I'm 62 and we seem to have spent the last 40 years in some type of "GroundHog" day economic/social/political spin. When are we all going to understand that you can't have unsustainable forever growth. When are our elected representatives going to understand (and yes I know some do) that we have got to plan long term. Short term fixes such as increasing tourism without the capital spend on infrastructure OR welcoming foreign investment that does nothing to grow the skill set of our people, and too often has trashed our environment (Tiwai Point and the waste dumped elsewhere under previous owners) do nothing for our long term social, cultural and economic well-being. And don't get me started on dodgy landlords (yes I know many are good folks) and handouts. Whatever happened to thinking about how we live in a holistic, whole systems manner that is beneficial in these areas, not just one! Yes Bernard, please release.
The DTIs might just save our economy ultimately by forcing people to put their money into productive things. It wasn’t so surprising at the time when Labour allowed it, house prices had been screaming up at unprecedented rates and there was massive pressure on the govt to do something about it - or at least pretend to be seeing doing something. Remember those ridiculous open letters between Robertson and Orr each telling the other to hurry up and restrain prices?
Hmmm. Should we be relying on Curia polling? Or legitimising it by referencing it?
David Farrar “resigned” from his professional body. But this resignation came after a series of events and complaints against Curia:
Multiple complaints: David Farrar stated that there had been numerous complaints against Curia over the past two years, to the point where he couldn’t “even count up how many complaints there have been”. Implying it was a witch hunt… but …
Professional Standards Group (PSG) of Research Association of NZ (RANZ) upheld complaints against Curia for bias and was considering a recommendation that could have involved suspension or expulsion.
Basically a breach of professional standards: Curia was found to have breached industry standards, particularly in relation to political polling.
IMHO we should not reference their polling, we should be constant in reminders about their breaching of industry standards. We should not be cherry picking singular findings that support a view point we wish to promote.
This is a company that manufactures outcomes in research findings by breaching accepted standards. They should be ignored.
Never fear, we shall be saved by digital nomads paying income tax to wherever their overseas employer is based, probably living either on the road or in airbnbs, and maybe even accessing NZ healthcare..
Yes, we shall be saved by 'digital nomads', with great salaries and money to spend, who work from companies such as Google, Apple and Meta etc... oh hold on, they all said they want everyone back in the office, not roaming and working around the world... so who are the 'digital nomads' now?
Also somewhat hypocritical of Nicola Willis to evangelise the benefits of remote working, while demanding that public servants return to the office full-time..