TKP 26/50: Interviews with Finance Minister Nicola Willis and Treasury's Chief Economic Adviser Dominick Stephens on whether the Government can afford the rising health and NZ Super costs of ageing.
She doesn’t seem to adhere to business dress code, talk to any teacher. I know that might sound trivial but I think it shows her arrogance and disrespect. And she spoke nonsense.
No, not trivial. Some women think the showing of cleavage represents their liberated status; to me it’s exactly the opposite- looks like man- pleasing. Certainly sends mixed messages. Notice men do not do similarly in these settings.
What she said was straight out of the playbook- and completely patronising.
Isn't it true that the Covid induced government spending she discussed, was because of Covid, and other disasters, and this was experienced by every other country too? Isn't it logical that that intended stimulus 'overspend' is not something that could be reasonably paid off in the same timeframe as the crash Covid created? To not acknowledge the damage of Covid is disingenuous.
So if transport infrastructure means that local land and property valuer rise, they will look at clawing back some of that. That's a capital gains tax. It should be universal. It is a travesty that houses are seen as a speculative investment rather than a stable rock supporting the productivity of the family or whanau there.
And isn't it a complete cop out to consider raising the age of the pension to reduce the cost of increasing age with no targeting of those who do not need the pension at all? With IRDs efficient systems now, I would have thought it should be much easier to corral the wealthy and chop their pension off. Surely that would save a bunch.
The tax system, again, needs radical and fair overhaul.
Creating a country of land owners and serfs is not the way to productivity.
I feel the Finance Minister's framing avoids all inconvenient truths.
Well said Roger, agree, means testing our universal super, and perhaps we should then over the next 15 to 25 years realign Kiwi Saver into a universal super, employer/employee funded scheme. Overhaul our tax system, have a capital gains tax, with a higher tax rate over 170k say 3-5% above. The means testing will act as a wealth tax of those over 65. A CGT will direct money into the productive sector, would allow more infrastructure to be funded. Covid is an inconvenient truth that doest suit the coalitions aim for reducing bureaucracy to fund tax cuts.
A question Bernard is why treasury and successive governments especially our current one only talk about debt and never about the benefits it can give a nation if spent wisely?
It is more efficient to pay everyone super and then put all recipients on a steeper income tax rates, than it is to run a means testing system with all the associated bureaucracy, and very intrusive questoning.
Couldn't your start by saying that anyone earning over $100,00 isn't eligible for super and if you claim it, you'll have to pay it back? That might cause those who need it least to delay claiming.
I look around my work at people earning that much who I know don't have a mortgage and who talk about Goldcard travel and feel pretty hard done by that I earn just over the cut off so can't get any working for families help any more and struggle to pay mortgage/childcare/after school care.
Yes, using the existing income tax system (PAYE) makes that easy. Just have a special income tax category for those getting super — set the marginal tax rates such that all super is recovered at whatever level you want. We already have a special income tax category for those paying back those student loans. No need to set up a seperate administrative system. And it would automatically adjust net super payments to reflect changing levels on other income. Avoids the having to separately report income changes, with its attendant lags and high potential for overpayment and demands to pay money back.
"...targeting of those who do not need the pension at all"
yes, it is absolutely essential that superannuation/old age pension is INCOME tested.
eg: when a pensioner's gross taxable income (not counting the pension amount) is twice what they would receive from the pension then they are no longer eligible for any superannuation/old age pension. (simpler than sliding scale reductions)
Indeed. If your wealth (largely the value of your property) increased as a result of something done to the surrounding area, and outside your control (whether that is a new public highway, or Mr Beast moving into town), you should be taxed to help pay forward the "luck" you've benefited from. A land tax is preferable and (IMHO) means Super could also remain a simple (cost-effective) universal entitlement, but a CGT would be better than the nothing we currently have.
This is precisely where taxing unrealised gains doesn't work. You pay a higher land tax for a few years... and then Mr Beast moves out of town. But I'm all for taxing the realised gain if you happen to sell while whatever the special sauce has bumped up your asset value.
I appreciate that is a common concern. However, there is an existing - and enormous - industry entirely dedicated to valuing things for equity and market data reasons. For houses, that includes two of NZ's most visited websites (homes and oneroof) who compile real-time valuations (and provide them for free). Banks here lend billions off the confidence of accurate asset valuation, and their multi-billion-dollar profits suggest it's something you can be very good at! Moreover, the income tax I pay is based on an (HR) industry correctly sizing my value from year to year (sometimes month to month). If the 'Mr Beast Factory Robot (TM)' makes my job redundant, I will immediately pay less tax....This sort of thing is just not the mystical science the anti-unrealized gains lot want us to believe it is. If your land value drops from one year to the next, the tax is (proportionally) reduced alongside it. Meanwhile, a CGT is a tax only paid by 'ordinary' people who have to sell. Specifically, would Luxon, a "sorted" multi-millionaire on a ~$500k salary have sold his mortgage-free properties if he'd had to pay 39% CGT on them? Or would someone in that position just keep them as rentals for taxless equity leverage and to pass on as a taxless inheritance?
It's a clever analogy, but it doesn't work for me. You are actually paid in order to have an income tax liability (for wages). As you correctly say, if you lose your job, you will have no tax liability that year. You are not actually paid as property values bob and weave. It is an imaginary paper gain. As an example, many peoples' homes are valued hundreds of thousands less than they were at the most recent valuation, yet to my knowledge everyone is paying rates based on that higher valuation. If you know of any councils that have rebated rates based on the current lower valuations please post the links. I don't know of any.
As for the wisdom of the industry, the reason banks do dti testing and prefer a 20% down payment is that they don't expect housing values to drop more than that. And every time they do, banks get into trouble. Most bank economists have miserable records of predicting asset prices, witness Sharon Zollner's interviews in this very stack.
As for Luxon, I can assure you that in the many countries around the world that have CGT, wealthy "sorted" people do still sell properties. Over the long haul RE is not a great investment. You'd have made a lot more holding, idk, Rocketlab, over the past 6 months, than holding RE. Those gains should be taxed too btw but only when sold!
"there is an existing - and enormous - industry entirely dedicated to valuing things for equity and market data reasons" - indeed. Lots of registered valuers out there in addition to the valuations provided by homes and oneroof.
30% of gdp is just an arbitrary number from a pre financial sovereign time. Debt is a fiction, we don't need to "borrow" but there are good reasons to do so.
You can't have world class services with an arbitrary spend of GDP figure. It makes no sense.
If the objective of all this is "Growth", then we are all doomed. Instead of obsessing about growth, we should be looking at resilience and co-operation in the face of extreme weather events, already happening and going to increase exponentially. This government is wilfully blind to the reality and are making many lives worse in the process.
spot on, & improving resilience such as in infrastructure, does lead to growth. I don't know why Minister Willis sees these things as separate & unrelated.
It would be interesting reply wouldn't it, if she - or any politician - said, yes we're carefully monitoring debt levels because we believe the country and world need to enter an era of de-growth. We'd all be dumbfounded.
Bernard you had it so right about Willis being like Richardson. I recall the decimation the latter dictated as Finance Minister. In my view Willis is worse with cuts affecting the most vulnerable.
Also noted she talked over & at you. Not a person who listens methinks.
Agree, I also really did not like how, a few times she accused Bernard of "mischaracterizing" this & that. If she wanted to challenge Bernard's points then she should have just said what she had to say instead of accusing him of such things. He was quite reasonable & very patient(meanwhile I was cursing at my laptop).
To be fair Bernard was polite but spent the first half of the interview with a permanent scowl on his face, which I found entertaining. I took this as signalling, you're not going to let me get a word in, but I'm not going to sit here and act like I agree!
Grumble grumble. She says we need better investment and outcomes (good). So why is this government hellbent on ignoring evidence based solutions and replace them with ideology based solutions.
Watched the mood of the boardroom video. Its interesting how the business community have a very high rating of the current government. One thing that has not come up is the poor change management style they have implemented with next to no impact assessment with everything they have stopped. I can't remember Labour canceling all of Nationals plans. I thought the new Labour finance ministry should highlight how this impacts the private sector, who are on the end of implementing changes required through new policy. There are a lot of companies out there that would have been affected badly by the 100 day stop all government spending plan. I thought this would have been a bit more front and center with their feedback.
Also, why does Nicole keep saying inflation was all due to the previous governments spending. There are lots of OCED countries that didn't spend a lot during the COVID and had the same inflation issues as us. Inflation was caused mainly by supply change and lack of cheap labour in countries due COVID border closures, so companies had to pay more for employees which increased product costs. If the countries who hadn't spent much didn't have high inflation then I would support this view.
Bernard, well done for listening well during your interview with Nicola. It must have been harder than the audience could imagine.
Very interesting podcast, Bernard. I was also surprised to learn we have such high % of over 65s still working and am wondering if any work was done to understand why. Is it because they want to work or is it out of necessity because although our superannuation is generous, it isn't generous enough especially if you don't own your home and have to rent.
At about 9mins into the interview Minister Willis mentions Australias' "surplus". They have a TRADE surplus. Anyone please correct me if I'm wrong but I'm reasonably certain that trade surplus is different to government debt(?)
According to Uncle Google, Auzzy has a debt to GDP ratio of 38(ish)%(at time of this interview).
Our Minister of Finance just had her managerial speak memorised and glibly delivered. A lot of what she said could not be justified. She certainly did not answer Bernard’s questions. The big question now is are we going to have a government that delivers all a government should, or are we going to keep selling assets and paying private industry exorbitant sums to get anything done. With austerity and a drive to reduce government we will be less and less likely to be able to afford education/health/superannuation. Two important related issues. If our working population cannot afford housing and choose to move offshore then we will have an even more aged population. Building more roads is not going to help. That has been tried in Auckland for the last forty years and where has that got us? Our over reliance on cars has made us less active (from the age of 5 when first delivered to school) and is part of our health problem.
If you ever play poker with the Finance Minister when she is about to tell a fib her left thumb has a nervous twitch.
If you pull Covid support from the increase in government spend what is the remaining increase?
Also her bristling at being compared to Ruth Richardson was telling.
She doesn’t seem to adhere to business dress code, talk to any teacher. I know that might sound trivial but I think it shows her arrogance and disrespect. And she spoke nonsense.
Yes I knew all the words that she used but I just didn't get it. Perhaps I'm not sorted
No, not trivial. Some women think the showing of cleavage represents their liberated status; to me it’s exactly the opposite- looks like man- pleasing. Certainly sends mixed messages. Notice men do not do similarly in these settings.
What she said was straight out of the playbook- and completely patronising.
You're right. It is trivial. I'm going to pretend I didn't see this and you didn't get these many likes.
A pretty one sided conversation.
Isn't it true that the Covid induced government spending she discussed, was because of Covid, and other disasters, and this was experienced by every other country too? Isn't it logical that that intended stimulus 'overspend' is not something that could be reasonably paid off in the same timeframe as the crash Covid created? To not acknowledge the damage of Covid is disingenuous.
So if transport infrastructure means that local land and property valuer rise, they will look at clawing back some of that. That's a capital gains tax. It should be universal. It is a travesty that houses are seen as a speculative investment rather than a stable rock supporting the productivity of the family or whanau there.
And isn't it a complete cop out to consider raising the age of the pension to reduce the cost of increasing age with no targeting of those who do not need the pension at all? With IRDs efficient systems now, I would have thought it should be much easier to corral the wealthy and chop their pension off. Surely that would save a bunch.
The tax system, again, needs radical and fair overhaul.
Creating a country of land owners and serfs is not the way to productivity.
I feel the Finance Minister's framing avoids all inconvenient truths.
Well said Roger, agree, means testing our universal super, and perhaps we should then over the next 15 to 25 years realign Kiwi Saver into a universal super, employer/employee funded scheme. Overhaul our tax system, have a capital gains tax, with a higher tax rate over 170k say 3-5% above. The means testing will act as a wealth tax of those over 65. A CGT will direct money into the productive sector, would allow more infrastructure to be funded. Covid is an inconvenient truth that doest suit the coalitions aim for reducing bureaucracy to fund tax cuts.
A question Bernard is why treasury and successive governments especially our current one only talk about debt and never about the benefits it can give a nation if spent wisely?
It is more efficient to pay everyone super and then put all recipients on a steeper income tax rates, than it is to run a means testing system with all the associated bureaucracy, and very intrusive questoning.
Fair point Andrew
Couldn't your start by saying that anyone earning over $100,00 isn't eligible for super and if you claim it, you'll have to pay it back? That might cause those who need it least to delay claiming.
I look around my work at people earning that much who I know don't have a mortgage and who talk about Goldcard travel and feel pretty hard done by that I earn just over the cut off so can't get any working for families help any more and struggle to pay mortgage/childcare/after school care.
Yes, using the existing income tax system (PAYE) makes that easy. Just have a special income tax category for those getting super — set the marginal tax rates such that all super is recovered at whatever level you want. We already have a special income tax category for those paying back those student loans. No need to set up a seperate administrative system. And it would automatically adjust net super payments to reflect changing levels on other income. Avoids the having to separately report income changes, with its attendant lags and high potential for overpayment and demands to pay money back.
and if they earn $95k?
"...targeting of those who do not need the pension at all"
yes, it is absolutely essential that superannuation/old age pension is INCOME tested.
eg: when a pensioner's gross taxable income (not counting the pension amount) is twice what they would receive from the pension then they are no longer eligible for any superannuation/old age pension. (simpler than sliding scale reductions)
Indeed. If your wealth (largely the value of your property) increased as a result of something done to the surrounding area, and outside your control (whether that is a new public highway, or Mr Beast moving into town), you should be taxed to help pay forward the "luck" you've benefited from. A land tax is preferable and (IMHO) means Super could also remain a simple (cost-effective) universal entitlement, but a CGT would be better than the nothing we currently have.
This is precisely where taxing unrealised gains doesn't work. You pay a higher land tax for a few years... and then Mr Beast moves out of town. But I'm all for taxing the realised gain if you happen to sell while whatever the special sauce has bumped up your asset value.
I appreciate that is a common concern. However, there is an existing - and enormous - industry entirely dedicated to valuing things for equity and market data reasons. For houses, that includes two of NZ's most visited websites (homes and oneroof) who compile real-time valuations (and provide them for free). Banks here lend billions off the confidence of accurate asset valuation, and their multi-billion-dollar profits suggest it's something you can be very good at! Moreover, the income tax I pay is based on an (HR) industry correctly sizing my value from year to year (sometimes month to month). If the 'Mr Beast Factory Robot (TM)' makes my job redundant, I will immediately pay less tax....This sort of thing is just not the mystical science the anti-unrealized gains lot want us to believe it is. If your land value drops from one year to the next, the tax is (proportionally) reduced alongside it. Meanwhile, a CGT is a tax only paid by 'ordinary' people who have to sell. Specifically, would Luxon, a "sorted" multi-millionaire on a ~$500k salary have sold his mortgage-free properties if he'd had to pay 39% CGT on them? Or would someone in that position just keep them as rentals for taxless equity leverage and to pass on as a taxless inheritance?
It's a clever analogy, but it doesn't work for me. You are actually paid in order to have an income tax liability (for wages). As you correctly say, if you lose your job, you will have no tax liability that year. You are not actually paid as property values bob and weave. It is an imaginary paper gain. As an example, many peoples' homes are valued hundreds of thousands less than they were at the most recent valuation, yet to my knowledge everyone is paying rates based on that higher valuation. If you know of any councils that have rebated rates based on the current lower valuations please post the links. I don't know of any.
As for the wisdom of the industry, the reason banks do dti testing and prefer a 20% down payment is that they don't expect housing values to drop more than that. And every time they do, banks get into trouble. Most bank economists have miserable records of predicting asset prices, witness Sharon Zollner's interviews in this very stack.
As for Luxon, I can assure you that in the many countries around the world that have CGT, wealthy "sorted" people do still sell properties. Over the long haul RE is not a great investment. You'd have made a lot more holding, idk, Rocketlab, over the past 6 months, than holding RE. Those gains should be taxed too btw but only when sold!
"there is an existing - and enormous - industry entirely dedicated to valuing things for equity and market data reasons" - indeed. Lots of registered valuers out there in addition to the valuations provided by homes and oneroof.
Yes, she argued for both a capital gains tax and work from home...
30% of gdp is just an arbitrary number from a pre financial sovereign time. Debt is a fiction, we don't need to "borrow" but there are good reasons to do so.
You can't have world class services with an arbitrary spend of GDP figure. It makes no sense.
"...in the history of the graphs that he produced" Willis 🤦♀️
If the objective of all this is "Growth", then we are all doomed. Instead of obsessing about growth, we should be looking at resilience and co-operation in the face of extreme weather events, already happening and going to increase exponentially. This government is wilfully blind to the reality and are making many lives worse in the process.
I couldn’t agree more. Twitching thumbs while Rome burns and Dunedin drowns. Figuratively speaking.
spot on, & improving resilience such as in infrastructure, does lead to growth. I don't know why Minister Willis sees these things as separate & unrelated.
It would be interesting reply wouldn't it, if she - or any politician - said, yes we're carefully monitoring debt levels because we believe the country and world need to enter an era of de-growth. We'd all be dumbfounded.
The 'we who are doomed' is not them, and that's good enough for them.
"I’m wealthy and I’m sorted" summed it up.
Bernard you had it so right about Willis being like Richardson. I recall the decimation the latter dictated as Finance Minister. In my view Willis is worse with cuts affecting the most vulnerable.
Also noted she talked over & at you. Not a person who listens methinks.
Agree, I also really did not like how, a few times she accused Bernard of "mischaracterizing" this & that. If she wanted to challenge Bernard's points then she should have just said what she had to say instead of accusing him of such things. He was quite reasonable & very patient(meanwhile I was cursing at my laptop).
To be fair Bernard was polite but spent the first half of the interview with a permanent scowl on his face, which I found entertaining. I took this as signalling, you're not going to let me get a word in, but I'm not going to sit here and act like I agree!
I'm not sure why Willis thinks the conversation about superannuation should be like - so to what age we increase it
And not like - we keep it 65 who do we tax more to pay for it.
As usual with National the bipartisan agreement they look for is agreeing with what they want.
Or even lowering it to move towards something like a basic universal income. Heaven forbid we tax the wealthy!
Grumble grumble. She says we need better investment and outcomes (good). So why is this government hellbent on ignoring evidence based solutions and replace them with ideology based solutions.
Watched the mood of the boardroom video. Its interesting how the business community have a very high rating of the current government. One thing that has not come up is the poor change management style they have implemented with next to no impact assessment with everything they have stopped. I can't remember Labour canceling all of Nationals plans. I thought the new Labour finance ministry should highlight how this impacts the private sector, who are on the end of implementing changes required through new policy. There are a lot of companies out there that would have been affected badly by the 100 day stop all government spending plan. I thought this would have been a bit more front and center with their feedback.
Also, why does Nicole keep saying inflation was all due to the previous governments spending. There are lots of OCED countries that didn't spend a lot during the COVID and had the same inflation issues as us. Inflation was caused mainly by supply change and lack of cheap labour in countries due COVID border closures, so companies had to pay more for employees which increased product costs. If the countries who hadn't spent much didn't have high inflation then I would support this view.
Bernard, well done for listening well during your interview with Nicola. It must have been harder than the audience could imagine.
Listening to the same tired old rhetoric that is. She needed to be challenged
My mood has just got angry .. 🤬
Very interesting podcast, Bernard. I was also surprised to learn we have such high % of over 65s still working and am wondering if any work was done to understand why. Is it because they want to work or is it out of necessity because although our superannuation is generous, it isn't generous enough especially if you don't own your home and have to rent.
There’s zealotry veiled behind those words.
At about 9mins into the interview Minister Willis mentions Australias' "surplus". They have a TRADE surplus. Anyone please correct me if I'm wrong but I'm reasonably certain that trade surplus is different to government debt(?)
According to Uncle Google, Auzzy has a debt to GDP ratio of 38(ish)%(at time of this interview).
She's hoping people do not know that.
https://tradingeconomics.com/australia/government-debt-to-gdp
The surplus Willis is talking about is more about government revenue vs. govt. spending.
NZ govt. spends more than it receives, whereas Australian govt. spent less than it receives.
https://www.ceicdata.com/en/australia/general-government-cashflow-statement/government-budget-surplus-or-deficit
But you make a good point that they also have higher debt per gdp than us, so clearly there's been points in the past when they have had deficits.
Sorry, I just have to put in another 5c.
At about 14mins it almost sounds like she is making the case for investing in public transport.
Alas, this was NOT the case.
Our Minister of Finance just had her managerial speak memorised and glibly delivered. A lot of what she said could not be justified. She certainly did not answer Bernard’s questions. The big question now is are we going to have a government that delivers all a government should, or are we going to keep selling assets and paying private industry exorbitant sums to get anything done. With austerity and a drive to reduce government we will be less and less likely to be able to afford education/health/superannuation. Two important related issues. If our working population cannot afford housing and choose to move offshore then we will have an even more aged population. Building more roads is not going to help. That has been tried in Auckland for the last forty years and where has that got us? Our over reliance on cars has made us less active (from the age of 5 when first delivered to school) and is part of our health problem.