Crown accounts show $12.2b of land value increases, including $5.8b from state houses; Housing boom drives massive turnaround in operating balance to $16.2b; Borrowing $10b less than forecast
One thing I've always wondered - I know there's no appetite to do so, but if the Government wanted to change or outright repeal the PFA could they just do it? It seems to be treated almost like a religious text, does it require bipartisan support or a supermajority or anything like that?
Brilliant as usual Bernard. NZ inc just consists of us selling grossly overvalued houses to each other because the older white voters refuse to have their unearned wealth taxed for the good of the next generations. I am a boomer and would be happy to have a wealth tax, oh well, come the revolution.
Any chance you can publish a publically accessible article outlining your argument about the public finance act? Seems like a good conversation to attempt to push more widely :).
From what I've read here, the pfa looks like a sure way to control the populace and prevent prosperity for all, and that's easy to do given the indoctrinated misconceptions about money and finance. For example, the notion that a government surplus is a good thing is a bit ridiculous since it means the gov has pulled that money out of circulation, money that is desperately needed by the people since we are constantly subjected to crushing piles of debt from the debt-mongering banking system. We don't need a surplus under these conditions, but withholding money and piling on debt is of course how we are controlled.
And the other entrenched misconception is that government needs revenue in order to operate. This is preposterous when a sovereign government has its own sovereign money. There is no shortage of money for any sovereign government. No, no one is suggesting "infinite" or "endless" money printing, but prudent, intelligent, democratic money printing in the public interest, and we've seen plenty of that in response to the pandemic and it could just as easily be done to solve the housing catastrophe. Government is not a business, it is not a household, it can and should fund whatever needs to be funded via its own RBNZ and not through the debt producing private banks. If NZ was a democracy, the pfa would be very different.
Your comments about the NZ Economy being a housing market with a few other things tacked on are so right.
I felt ill when I saw the Government was revaluing housing assets in its balance sheet much like Goodman Property or the listed Retirement Villages. To account for the increase in the Balance Sheet when Kiwi's rate housing affordability as a bigger worry than Covid seems disingenuous.
Question Bernard. Is there any real evidence or studies that show House Price inflation has a meaningful "Wealth Effect" in terms of spending?
Hi Bernard, I was eagerly awaiting your response this morning and it didn't disappoint. Once again I cannot fathom how the supposedly best forecasters and economists we have (Treasury and RBNZ) ALWAYS get their forecasts so wrong. The budget statement was issued in May but somehow by June 30 "the Government’s deficit of $4.6b or 1.3% of GDP, was less than a third of that forecast in the May Budget" Forgive me but could I have done better on the back of the proverbial "fag packet".
Robertson should be absolutely cringing at that variance and the fact that the government are the biggest winners from the house price increases. But instead is almost gleeful that somehow the handling of the Covid response by his government is responsible for this windfall.
Another fine piece, thanks Bernard. I think the lack of infrastructure investment is the greater crime rather than pure private housing supply. The debt fixation has impoverished the public sector and does need to be reconsidered. NZ debt to GDP - all in NZD - remains insanely low compared to other fiat currency issuers and simply means the governments role has gone from ‘think big’ to ‘too small’ - especially where the public expects government presence (transport, health, education, public/emergency housing).
Inflation is always a wealth transfer, between debtor and creditor, and with house price inflation, between generations. The "magical" gains of one are always paid for by the costs to the other. And now we've seen an even more startling trick, massive asset inflation that primarily benefits the governments coffers must, by this logic, be a transfer from elsewhere. We have here not one generation, but the actual government, expropriating wealth from those without assets. This is tax by stealth on a vast scale. The crime is that they won't spend it (by serious lending) on public/social programs to redress the damage.
I recall that some time last year Sam Stubbs who established the Simplicity a not for profit Kiwi Saver Scheme said that because the Labour Party had been elected so comprehensively this was a golden opportunity for the Government to invest in infrastructure projects not only would it provide employment opportunities but also reduce the costs to future generations.
Boomers have had the benefits created by the past generations so it’s now our time to invest in people now and in the future. Repealing or amending the Public Finance Act would be a start.
Its nice to see other commenters who have studied MMT. The PFA needs to be rewritten based on an understanding of the elucidations from that academy. If the current government makes changes, they wont do it properly, and they will set in stone for another decade or so, the current orthodoxy. What a waste that will be.
How depressing.
One thing I've always wondered - I know there's no appetite to do so, but if the Government wanted to change or outright repeal the PFA could they just do it? It seems to be treated almost like a religious text, does it require bipartisan support or a supermajority or anything like that?
Brilliant as usual Bernard. NZ inc just consists of us selling grossly overvalued houses to each other because the older white voters refuse to have their unearned wealth taxed for the good of the next generations. I am a boomer and would be happy to have a wealth tax, oh well, come the revolution.
Patrick Medlicott
Any chance you can publish a publically accessible article outlining your argument about the public finance act? Seems like a good conversation to attempt to push more widely :).
Wonders if this is tied in with the PM's instant and eternal dismissal of a CGT within 5min of taking power?
From what I've read here, the pfa looks like a sure way to control the populace and prevent prosperity for all, and that's easy to do given the indoctrinated misconceptions about money and finance. For example, the notion that a government surplus is a good thing is a bit ridiculous since it means the gov has pulled that money out of circulation, money that is desperately needed by the people since we are constantly subjected to crushing piles of debt from the debt-mongering banking system. We don't need a surplus under these conditions, but withholding money and piling on debt is of course how we are controlled.
And the other entrenched misconception is that government needs revenue in order to operate. This is preposterous when a sovereign government has its own sovereign money. There is no shortage of money for any sovereign government. No, no one is suggesting "infinite" or "endless" money printing, but prudent, intelligent, democratic money printing in the public interest, and we've seen plenty of that in response to the pandemic and it could just as easily be done to solve the housing catastrophe. Government is not a business, it is not a household, it can and should fund whatever needs to be funded via its own RBNZ and not through the debt producing private banks. If NZ was a democracy, the pfa would be very different.
Your comments about the NZ Economy being a housing market with a few other things tacked on are so right.
I felt ill when I saw the Government was revaluing housing assets in its balance sheet much like Goodman Property or the listed Retirement Villages. To account for the increase in the Balance Sheet when Kiwi's rate housing affordability as a bigger worry than Covid seems disingenuous.
Question Bernard. Is there any real evidence or studies that show House Price inflation has a meaningful "Wealth Effect" in terms of spending?
Agree get rid of the PFA.
Hi Bernard, I was eagerly awaiting your response this morning and it didn't disappoint. Once again I cannot fathom how the supposedly best forecasters and economists we have (Treasury and RBNZ) ALWAYS get their forecasts so wrong. The budget statement was issued in May but somehow by June 30 "the Government’s deficit of $4.6b or 1.3% of GDP, was less than a third of that forecast in the May Budget" Forgive me but could I have done better on the back of the proverbial "fag packet".
Robertson should be absolutely cringing at that variance and the fact that the government are the biggest winners from the house price increases. But instead is almost gleeful that somehow the handling of the Covid response by his government is responsible for this windfall.
Another fine piece, thanks Bernard. I think the lack of infrastructure investment is the greater crime rather than pure private housing supply. The debt fixation has impoverished the public sector and does need to be reconsidered. NZ debt to GDP - all in NZD - remains insanely low compared to other fiat currency issuers and simply means the governments role has gone from ‘think big’ to ‘too small’ - especially where the public expects government presence (transport, health, education, public/emergency housing).
Inflation is always a wealth transfer, between debtor and creditor, and with house price inflation, between generations. The "magical" gains of one are always paid for by the costs to the other. And now we've seen an even more startling trick, massive asset inflation that primarily benefits the governments coffers must, by this logic, be a transfer from elsewhere. We have here not one generation, but the actual government, expropriating wealth from those without assets. This is tax by stealth on a vast scale. The crime is that they won't spend it (by serious lending) on public/social programs to redress the damage.
What about this Bernard? https://www.interest.co.nz/news/112634/dipping-our-toes-podcasting-world-interestconz-probes-whether-it-would-be-possible-and?fbclid=IwAR0ncqolzneWj3qH5SY8cwx7DMo2hNDgRALYt9mOb-yzgFl0aVKTbX9Ip_Q
And on the legality of Employer vaccine mandates https://www.odt.co.nz/business/legal-opinion-employers-can-require-shot
Gary
I recall that some time last year Sam Stubbs who established the Simplicity a not for profit Kiwi Saver Scheme said that because the Labour Party had been elected so comprehensively this was a golden opportunity for the Government to invest in infrastructure projects not only would it provide employment opportunities but also reduce the costs to future generations.
Boomers have had the benefits created by the past generations so it’s now our time to invest in people now and in the future. Repealing or amending the Public Finance Act would be a start.
Its nice to see other commenters who have studied MMT. The PFA needs to be rewritten based on an understanding of the elucidations from that academy. If the current government makes changes, they wont do it properly, and they will set in stone for another decade or so, the current orthodoxy. What a waste that will be.