Wood doubles fee to buy Ford Rangers and Toyota Hiluxes, but also slashes & removes rebates for full electric cars and new & used hybrids to save short-term cash after faster-than-forecast uptake
May 1, 2023·edited May 1, 2023Liked by Bernard Hickey
Thanks Bernard, appreciate a different an important lens that you put on issues like this, rather than other news outlets which just focus on 'UTE TAX!' or soundbites from Simeon Brown. A real shame about Suzuki Swifts being dropped out - our 2008 model is a good, fuel effecient, effecient option for us. And we don't have to spend piles of money on it. The government should remember that some people may have the money to pay for an electric car, but would rather just choose a lower cost, but still more environmentally friendly (relatively speaking) option.
Quick question, is the under 30 discount still valid? I have seven months left of my 20s, but had my payment suddenly change this past weekend to the full prices subscription. Not sure if I missed something sorry.
Disagree Bernard, Labour will likely need the Greens and Te Pati Maori to get another term. Also I think you are overly dismissive of the Green influence, it flies under the radar because the political media doesn’t report it.
I don't think Bernard means that they don't need them to get power, but that they don't need to negotiate with them because they have no leverage since they ruled out working with National.
So far, every recent poll that I have seen shows that they need the Greens to get into power. The stronger the Greens presence, the stronger the coalition agreement will tilt towards the Greens world view. I don't agree with everything that the Greens (or any party ) stands for. But they are the only viable party that has addressed both climate change and tax neutrality in a meaningful way. What is your suggestion?
I know, where is a smashing head against a computer emoticon when you need one. This scheme works better than expected in getting more EV's on the road & ultimately reducing emissions so "Lets do this" and water down a perfectly good policy.
It's not like Labour don't have a record of questionable decision making for bad reasons, causing unexpected consequences (or more often than not, natural consequences). Why are you surprised?
For those who might use a hybrid as a path to personal emissions improvement and were unable to go full BEV, the incentive to make a better choice is reduced.
For those car yards who transitioned to mostly hybrid vehicles after 2 pieces of vehicle emissions legislation were introduced, they can now bring in petrol cars because both pieces of legislation have been pulled back and consumer behaviour will follow.
I'm also surprised by the announcement given the government's prior behaviour. I had thought they would be trying to avoid giving the opposition more chance to scream 'ute tax' akin to how the government is trying to quiet down the co-governance talk. Realistically most of the purchasers of brand new utes are likely to be right-leaning voters so the number of voters directly impacted for Labour won't be too high, however this will act like a lightning rod for criticism.
I had personally expected more of an adjustment versus what feels more like a restructure.
Couple of other points - still a bit disappointed that we keep hearing almost exclusively about how the clean car rebate system is bringing climate change benefits, yet each one of these new clean cars (or cleaner cars) is helping make our air that little bit more breathable (in NZ, I know). Probably would also be a good time to have the PR teams amp up the news about how we're actually burning very little coal for our power grid now to time in with all this EV charging talk.
Of course they couldn't let their only successful climate policy keep working. Head in hands. Thanks for summarizing the truth of this policy change for us rather than the weasel words the Minister provided. I wonder if it was influenced by recent work overseas that showed that PHEV's aren't especially efficient and that most hybrids use much more fuel in real world conditions than their manufacturers claim. I've had a Leaf for 5 years now and continue to love it, but with a range of 150km it has been eclipsed by newer cars that do 300-450kms. We also have a Honda Fit hybrid that I can drive from Wellington to Tauranga for $50. Our transport costs are very low. I had to sympathesize with a skint driver of an old Commodore shelling out $160 to fill their car in Rotorua. Quickly getting these old clunkers with their belching exhausts off the road and the drivers into zippy little Aquas would be a positive step ahead. Especially in provincial NZ where driving distances are greater and public transport non existent. Are we playing a game of how unpopular the govt can make itself with climate voters before the election?
May 2, 2023·edited May 2, 2023Liked by Bernard Hickey
Time to support the Greens to keep Labour honest! I use a hybrid Estima to haul equipment and large objects. There is no excuse for tradies not to use these cars. With the back seats removed, it generally holds far more than a ute (but, of course, is not as easy to drop bails in the back). They have been on the used market for years. (And mine was the same price as a 100% gas power car.)
Rebates or credits are not anything new or unique to Labour. For example, even the USA gives a $7,500 electric vehicle tax credit.
Great talk on the mantra of being "fiscally neutral" in a low-taxed low, spending nation. The climate is in crisis (as is health education, housing, etc.). Why has continuing a very low taxed, very low spending, low debt economy (that has an undeniable even larger long run cost) been seen as an untouchable subject for the last 40 years in NZ in the media?
Thanks for your essential journalism! I had a question about the IRD report on the 300 wealthy families of NZ. I've looked into it a bit and it seems that IRD's definition of economic income for these families includes unrealised capital gains. Can you confirm? If yes, then why are they doing that? We're not talking about taxing unrealised capital gains, it doesn't make any sense. What would happen if somebody pays taxes on unrealised capital gains but then ends up with a loss? Do they get tax credit?
Taxing unrealised capital gains was never on the cards, so why include it in the definition of economic income? Again, I don't understand why would any government do that - why would anybody invest if they had to pay part of their unrealised gains every year?
Thanks Raoul. Yes on the tax credit. Interesting question on realised vs unrealised. An assumption for the analysis. The profit is real. It can be done. It's what is done in other countries. We're exceptional.
Australia is planning a tax on unrealised gains for shares. Other countries effectively tax those gains on sale, or in an ongoing basis through wealth, land and inheritance taxes.
The NZ government already taxes unrealised capital gains on foreign investment funds, so there is a precedent for it. You pay tax on unrealised gains but don't get credits (as far as I am aware) for any losses.
OK, fair enough if other countries do it, but the CGT bill was supposed to be applicable to realised capital gains only, wasn't it? It just sounds like they're being very optimistic with their assumptions.
No, they don't. It's funny when you look at the countries that have no CGT, and you see you're in a list with the likes of Barbados, Bahrain, Bermuda you realise you are in the hall of shame. I'm all for a CGT and joining the league of sensible nations.
But few countries attempt to tax _unrealised_ capital gains, and it is completely unworkable. What Bernard is talking about could be more like a wealth tax, which Switzerland has, but that is a very low percentage levy against all of your assets. From .05% to 0.3%. When you start talking about taxing _unrealised_ cap gains as _income_ it's crazyville.
I think I'm starting to turn around on this. Imagine if instead of having to report on all of your unrealised gains, the institution that has the asset (like Sharesies if the asset is shares) does that for you, so you just get an invoice from IRD corresponding to the taxes on your share position every year. I mean in my case I wouldn't pay anything because I'm in the red, but realistically if you're investing less than say 100k, you wouldn't pay much in cap taxes tbh. The problem I think is the lack of tax credit if your unrealised gains become a realised loss...
You are correct, above a certain threshold. And it is a complete disincentive to making such investments. I think that's part of why it is done - keep NZ money in NZ.
I'm interested in this idea of 'unrealised gains' and why (or, by who) we've been convinced it is unworkable.
At my work, my income is taxed (PAYE) before it is 'realised' into my bank account. It is also taxed at my annual salary's marginal rate (if I lose my job mid-way through the year, I have to wait until the end of the year to recover any excess tax I might have paid). That's a pretty shit deal if you ask me... No wonder Mark Zuckerberg takes an annual salary (since 2013), of just $1!
We have decades of objective evidence that, beyond a certain level, wealth can be easily leveraged into 'spending money' (via tax-free equity loans etc), and managed wealth is essentially guaranteed to grow... It makes me wonder if all the worrying people are doing about unrealised gains is entirely ingenuous?
Wait you can't equate work income and capital gains, they're not the same thing. The amount you get from work depends strictly on the hours you do. The amount you get from capital depends a lot on luck, but also on timing. The same investment can be worth a lot or nothing depending on when you unwind it. I'm all on board for taxing income at the source - less hassle. I'm all on board for taxing capital gains when they're realised - fairer.
However, taxing unrealised capital gains seems a bit weird to me.
Do you have more info on how the wealthy manage to get loans based on their capital? Because if you get money through loans, you still have to pay monthly/yearly interest. I just think the logistics seem complicated and compound interest means you potentially offset your capital gains with the loans you take out.
Yep, to be fair, it's not intuitive. I think the best way to understand this is the very wealthy live in a different universe from me (and presumably you, given you're asking how this works).
Basically, the first thing to realise is the very rich don't manage their own money. They don't open their banking apps or balance their chequebooks. Other people do all this for them. And, those other people do it exceedingly creatively and well (because their own livelihood depends on it!). Which is all to say, historically, the wealth of the rich has well outpaced inflation for decades because they are fielding very different players than the rest of us (see: any wealth inequality chart of the last 50 years).
So, largely because of this, when they need money, the very wealthy go to the bank and say "I have $50m in shares, and want to buy a boat" and the bank manager says "sure, here's a $10m loan, secured against your shares, at an insanely-low interest rate for the rest of your life (P.S. Please Love Me)". And then, your wealth manager goes off and does their work, and your wealth grows at a rate higher than the bank interest rate and, boom, tax free 'income'!
And, if you think this is all theoretical, I'm not especially rich but I do have a house. And because I have a house, banks are very happy to give me decent credit so, for the last few years, I've put thousands into various '0% balance transfer' credit card offers. I paid the minimum each month, and never a cent in interest, effectively arbitraging 'income' to pay off my mortgage faster (*Banks hate this one weird trick!!*)... I'm not some unique financial genius or a wealth manager, but it was easy, untaxable, money.
Now, imagine what sorts of tricks and offers are available to a professional wealth manager with $300m-odd to work with (...and don't even get me started on the huge industries set up solely to revalue and churn-resell assets to build up equity so the wealthy can borrow more against them)
I'm not saying it isn't an uphill battle trying to convince people about this stuff. At face value, it fundamentally does sound unfair to tax 'unrealised' gains, until you get a glimpse into the 'wealth-dimension' where money just works very differently.
If you're interested in this stuff, I should warn you it's a rabbit hole, but for an alternative approach I'd highly recommend starting at https://pudding.cool/2022/12/yard-sale/
Thanks for the link that was very interesting. So you're saying you've been getting interest-free money from the same bank you have your mortgage with, to repay that mortgage?? That sounds a bit crazy... Why would a bank do that?
Haha, yes, why indeed! A glimpse into the 'wealth dimension' I guess? ;-)
To be fair, the trick to get the most from it is to shift from one bank's credit card offer to the next: Offers are drying up a bit now unfortunately - https://www.moneyhub.co.nz/balance-transfer-credit-cards.html - and obviously it's not something I'd recommend to anyone without very good financial discipline!
But basically when you get near the end of your 0% period, you apply for a new balance transfer offer from another bank, pay off any remaining balance, and max out the new card - they rarely asked for proof of the actual outstanding balance of the old card...All they care about is whether you can service the debt with them - i.e. you have some 'wealth' to secure it against.
They’re completely irrational and keep redoing when they don’t need to to give the impression they’re doing something. None of this is stable or good in terms of planning or leadership for people. As if we all don’t have enough problems Govt keeps taking stupid decisions and also not doing anything it’s obligated to well. Another great policy killed by its own success. They’re nuts. Has a lobbyist got to them?
They could have at least sweetened this announcement with some true environmental friendly policies of pumping money into rail. But no.
Sometimes I feel they should be kicked out to the opposition benches. But then I remember that the alternative is so much worse that I reluctantly think we need to make sure we don't get that option.
Thanks Bernard. We need this successful scheme until zero emissions vehicles approach price parity with ICE vehicles before a gradual phase-out of the rebate. In the meantime we need as many new EVs as those that can afford them can put on the road to provide decent affordable used car stock. In NZ this is particularly important as we keep our cars for a long time and today’s new ICE vehicles will be generating pollutants into the 2040s.
I've been ruminating on this all day now, especially given my current car buying scenario. Here are the thoughts going through my head:
- hybrid is still the best option for me, a renter who needs an option that's not grid dependent but wants to do my bit, it's just getting more expensive and complicated instead of simpler
- seeing as I'm not opposed to paying taxes and generally think we're not generating enough tax revenue to achieve the big infrastructure (you know, EV charging stations for example) goals we have then saying goodbye to a rebate (RAV4 Hybrid) is probably doing my bit.
- I still feel a bit shortchanged and somehow like I've been told off a little, it's bloody hard to navigate these conversations without feeling like every choice has to be interrogated by myself and the neighbours
- it reminds me of a great number plate surround I thought of making for Ford Ranger (wo)man. "It's for work, I swear."
But it also has me thinking about the Tourism Infrastructure Fund opening and where the intersection of economy, climate and politics come together. This announcement with much hoorah this morning:
But as James Doolan (Fantail Advisory/Hotel Council Aotearoa) said on LinkedIn this morning:
"In the year before COVID hit, Central Government took almost $3.9 billion in GST out of tourism. It invested approximately $100 million into Tourism New Zealand (the marketing side), and does very little to spur high-quality, tourism-connected infrastructure. $14 million is not even one half of one percent of the GST that Central Government receives from tourism in an ordinary year. $14 million might build you 25 new hotel rooms if you're lucky (and the land is cheap).
If we want to attract high value tourists, we need better infrastructure that meets the expectations of visitors. #hotelcouncilaotearoa has consistently called for real solutions to the Tourism funding problem in New Zealand. The Tourism Infrastructure Fund shows how incredibly far off track we are."
Now I've read your excellent work on this I'm seeing the fiscal neutrality mantra has all sorts of monstrous cascading impacts everywhere. Not to mention that reducing emissions in the tourism sector through robust EV options for our rental fleets would kill two birds with one stone... charging infrastructure is charging infrastructure after all.
I've been living in the Maniototo for the past couple of years. Here you're odd if you are not driving a 70 series Land Cruiser or Hilux. A lot of that is because of the practicalities - most of the folk around here actually need capable 4wd vehicles to get around and do their business, winter driving, dirt road, towing capacity, farm use etc. I've got a land rover discovery 2 (from 2001, the old classic land rover diesel motor) and a Nissan Leaf. I use the leaf vastly more than the rover, because it is free to run it (solar panels). So far in 2023 I've used about 100L of diesel but put just a bit over 7000 kms on the leaf (all charged by solar). That 100L of diesel though can't be replaced by electricity. There are just no viable electric options for most people living rurally. I guess Labour don't see rural people as potential supporters so it doesn't really matter to them, but the doubling of a 'ute tax' is not going to go down well at all. I'm bracing for locals to throw eggs at my leaf as I glide silently past!
Thanks Andrew. You're right on the lack of a diesel alternative. But you've done a great job with that Leaf. 100l of diesel in five months is way better than the alternative.
Thanks Bernard, I've been incredibly confused by the reporting from various media sources on this story all day. It was driving me nuts trying to cut through the rhetoric! This laid things out nicely for me.
Great climate journalism as always, cheers Bernard. Hope this isn't considered spam, delete if so.
On Wednesday 3 May Climate Clinic (vic uni club) are hosting a panel: "How to save the planet: Green growth vs degrowth".
Can we work out how to grow the economy while improving, rather than damaging, the environment? And if not, what do we do instead?
The panel details are as follows:
Date/time: Wednesday 3 May, 430-6pm
Location: VUW Kelburn Campus, room HMLT104
Zoom link available on the Facebook event page: https://lnkd.in/gTauUYRv
Posting here so Bernard can hopefully see it, anyone else is welcome to come along too! cheers
Thanks Theo. All fine. Relevant content. :)
Thanks Bernard, appreciate a different an important lens that you put on issues like this, rather than other news outlets which just focus on 'UTE TAX!' or soundbites from Simeon Brown. A real shame about Suzuki Swifts being dropped out - our 2008 model is a good, fuel effecient, effecient option for us. And we don't have to spend piles of money on it. The government should remember that some people may have the money to pay for an electric car, but would rather just choose a lower cost, but still more environmentally friendly (relatively speaking) option.
Quick question, is the under 30 discount still valid? I have seven months left of my 20s, but had my payment suddenly change this past weekend to the full prices subscription. Not sure if I missed something sorry.
Let me check on that. I've just refreshed the offer. It expired on April 18. Thanks for the reminder. https://thekaka.substack.com/30dollarsforunder30s
Spot on Bernard. Labour continually boggle the mind
We have a great choice now with the Greens to keep labour honest.
Labour don't need the Greens because the Greens will never go with National.
Disagree Bernard, Labour will likely need the Greens and Te Pati Maori to get another term. Also I think you are overly dismissive of the Green influence, it flies under the radar because the political media doesn’t report it.
I don't think Bernard means that they don't need them to get power, but that they don't need to negotiate with them because they have no leverage since they ruled out working with National.
The leverage could very well be either negotiate with the Greens or sit on the opposition benches. In this scenario they will negotiate.
I agree Alex
So far, every recent poll that I have seen shows that they need the Greens to get into power. The stronger the Greens presence, the stronger the coalition agreement will tilt towards the Greens world view. I don't agree with everything that the Greens (or any party ) stands for. But they are the only viable party that has addressed both climate change and tax neutrality in a meaningful way. What is your suggestion?
Labour knows Greens will never go with National, so can afford to ignore them.
Bernard how could they possibly go with National?
I know, where is a smashing head against a computer emoticon when you need one. This scheme works better than expected in getting more EV's on the road & ultimately reducing emissions so "Lets do this" and water down a perfectly good policy.
It's not like Labour don't have a record of questionable decision making for bad reasons, causing unexpected consequences (or more often than not, natural consequences). Why are you surprised?
For those who might use a hybrid as a path to personal emissions improvement and were unable to go full BEV, the incentive to make a better choice is reduced.
For those car yards who transitioned to mostly hybrid vehicles after 2 pieces of vehicle emissions legislation were introduced, they can now bring in petrol cars because both pieces of legislation have been pulled back and consumer behaviour will follow.
<shakes head, furrows eyebrows>
I'm also surprised by the announcement given the government's prior behaviour. I had thought they would be trying to avoid giving the opposition more chance to scream 'ute tax' akin to how the government is trying to quiet down the co-governance talk. Realistically most of the purchasers of brand new utes are likely to be right-leaning voters so the number of voters directly impacted for Labour won't be too high, however this will act like a lightning rod for criticism.
I had personally expected more of an adjustment versus what feels more like a restructure.
Couple of other points - still a bit disappointed that we keep hearing almost exclusively about how the clean car rebate system is bringing climate change benefits, yet each one of these new clean cars (or cleaner cars) is helping make our air that little bit more breathable (in NZ, I know). Probably would also be a good time to have the PR teams amp up the news about how we're actually burning very little coal for our power grid now to time in with all this EV charging talk.
Yep. Unnecessary. All about short-term cash.
Of course they couldn't let their only successful climate policy keep working. Head in hands. Thanks for summarizing the truth of this policy change for us rather than the weasel words the Minister provided. I wonder if it was influenced by recent work overseas that showed that PHEV's aren't especially efficient and that most hybrids use much more fuel in real world conditions than their manufacturers claim. I've had a Leaf for 5 years now and continue to love it, but with a range of 150km it has been eclipsed by newer cars that do 300-450kms. We also have a Honda Fit hybrid that I can drive from Wellington to Tauranga for $50. Our transport costs are very low. I had to sympathesize with a skint driver of an old Commodore shelling out $160 to fill their car in Rotorua. Quickly getting these old clunkers with their belching exhausts off the road and the drivers into zippy little Aquas would be a positive step ahead. Especially in provincial NZ where driving distances are greater and public transport non existent. Are we playing a game of how unpopular the govt can make itself with climate voters before the election?
Thanks Sonya.
Time to support the Greens to keep Labour honest! I use a hybrid Estima to haul equipment and large objects. There is no excuse for tradies not to use these cars. With the back seats removed, it generally holds far more than a ute (but, of course, is not as easy to drop bails in the back). They have been on the used market for years. (And mine was the same price as a 100% gas power car.)
Rebates or credits are not anything new or unique to Labour. For example, even the USA gives a $7,500 electric vehicle tax credit.
Great talk on the mantra of being "fiscally neutral" in a low-taxed low, spending nation. The climate is in crisis (as is health education, housing, etc.). Why has continuing a very low taxed, very low spending, low debt economy (that has an undeniable even larger long run cost) been seen as an untouchable subject for the last 40 years in NZ in the media?
And Labour still avoiding the most responsible action - subsidies for electric bikes.
That is an excellent point Andrew
Kia Ora Bernard,
Thanks for your essential journalism! I had a question about the IRD report on the 300 wealthy families of NZ. I've looked into it a bit and it seems that IRD's definition of economic income for these families includes unrealised capital gains. Can you confirm? If yes, then why are they doing that? We're not talking about taxing unrealised capital gains, it doesn't make any sense. What would happen if somebody pays taxes on unrealised capital gains but then ends up with a loss? Do they get tax credit?
Taxing unrealised capital gains was never on the cards, so why include it in the definition of economic income? Again, I don't understand why would any government do that - why would anybody invest if they had to pay part of their unrealised gains every year?
Thanks Raoul. Yes on the tax credit. Interesting question on realised vs unrealised. An assumption for the analysis. The profit is real. It can be done. It's what is done in other countries. We're exceptional.
No, no no this is not done in other countries. Please name them.
Australia is planning a tax on unrealised gains for shares. Other countries effectively tax those gains on sale, or in an ongoing basis through wealth, land and inheritance taxes.
The NZ government already taxes unrealised capital gains on foreign investment funds, so there is a precedent for it. You pay tax on unrealised gains but don't get credits (as far as I am aware) for any losses.
OK, fair enough if other countries do it, but the CGT bill was supposed to be applicable to realised capital gains only, wasn't it? It just sounds like they're being very optimistic with their assumptions.
No, they don't. It's funny when you look at the countries that have no CGT, and you see you're in a list with the likes of Barbados, Bahrain, Bermuda you realise you are in the hall of shame. I'm all for a CGT and joining the league of sensible nations.
But few countries attempt to tax _unrealised_ capital gains, and it is completely unworkable. What Bernard is talking about could be more like a wealth tax, which Switzerland has, but that is a very low percentage levy against all of your assets. From .05% to 0.3%. When you start talking about taxing _unrealised_ cap gains as _income_ it's crazyville.
I think I'm starting to turn around on this. Imagine if instead of having to report on all of your unrealised gains, the institution that has the asset (like Sharesies if the asset is shares) does that for you, so you just get an invoice from IRD corresponding to the taxes on your share position every year. I mean in my case I wouldn't pay anything because I'm in the red, but realistically if you're investing less than say 100k, you wouldn't pay much in cap taxes tbh. The problem I think is the lack of tax credit if your unrealised gains become a realised loss...
Exactly. In this case it's socialise the gains, privatise the losses.
You are correct, above a certain threshold. And it is a complete disincentive to making such investments. I think that's part of why it is done - keep NZ money in NZ.
I'm interested in this idea of 'unrealised gains' and why (or, by who) we've been convinced it is unworkable.
At my work, my income is taxed (PAYE) before it is 'realised' into my bank account. It is also taxed at my annual salary's marginal rate (if I lose my job mid-way through the year, I have to wait until the end of the year to recover any excess tax I might have paid). That's a pretty shit deal if you ask me... No wonder Mark Zuckerberg takes an annual salary (since 2013), of just $1!
We have decades of objective evidence that, beyond a certain level, wealth can be easily leveraged into 'spending money' (via tax-free equity loans etc), and managed wealth is essentially guaranteed to grow... It makes me wonder if all the worrying people are doing about unrealised gains is entirely ingenuous?
Wait you can't equate work income and capital gains, they're not the same thing. The amount you get from work depends strictly on the hours you do. The amount you get from capital depends a lot on luck, but also on timing. The same investment can be worth a lot or nothing depending on when you unwind it. I'm all on board for taxing income at the source - less hassle. I'm all on board for taxing capital gains when they're realised - fairer.
However, taxing unrealised capital gains seems a bit weird to me.
Do you have more info on how the wealthy manage to get loans based on their capital? Because if you get money through loans, you still have to pay monthly/yearly interest. I just think the logistics seem complicated and compound interest means you potentially offset your capital gains with the loans you take out.
How does that work, concretely?
Yep, to be fair, it's not intuitive. I think the best way to understand this is the very wealthy live in a different universe from me (and presumably you, given you're asking how this works).
Basically, the first thing to realise is the very rich don't manage their own money. They don't open their banking apps or balance their chequebooks. Other people do all this for them. And, those other people do it exceedingly creatively and well (because their own livelihood depends on it!). Which is all to say, historically, the wealth of the rich has well outpaced inflation for decades because they are fielding very different players than the rest of us (see: any wealth inequality chart of the last 50 years).
So, largely because of this, when they need money, the very wealthy go to the bank and say "I have $50m in shares, and want to buy a boat" and the bank manager says "sure, here's a $10m loan, secured against your shares, at an insanely-low interest rate for the rest of your life (P.S. Please Love Me)". And then, your wealth manager goes off and does their work, and your wealth grows at a rate higher than the bank interest rate and, boom, tax free 'income'!
And, if you think this is all theoretical, I'm not especially rich but I do have a house. And because I have a house, banks are very happy to give me decent credit so, for the last few years, I've put thousands into various '0% balance transfer' credit card offers. I paid the minimum each month, and never a cent in interest, effectively arbitraging 'income' to pay off my mortgage faster (*Banks hate this one weird trick!!*)... I'm not some unique financial genius or a wealth manager, but it was easy, untaxable, money.
Now, imagine what sorts of tricks and offers are available to a professional wealth manager with $300m-odd to work with (...and don't even get me started on the huge industries set up solely to revalue and churn-resell assets to build up equity so the wealthy can borrow more against them)
I'm not saying it isn't an uphill battle trying to convince people about this stuff. At face value, it fundamentally does sound unfair to tax 'unrealised' gains, until you get a glimpse into the 'wealth-dimension' where money just works very differently.
If you're interested in this stuff, I should warn you it's a rabbit hole, but for an alternative approach I'd highly recommend starting at https://pudding.cool/2022/12/yard-sale/
Thanks for the link that was very interesting. So you're saying you've been getting interest-free money from the same bank you have your mortgage with, to repay that mortgage?? That sounds a bit crazy... Why would a bank do that?
Haha, yes, why indeed! A glimpse into the 'wealth dimension' I guess? ;-)
To be fair, the trick to get the most from it is to shift from one bank's credit card offer to the next: Offers are drying up a bit now unfortunately - https://www.moneyhub.co.nz/balance-transfer-credit-cards.html - and obviously it's not something I'd recommend to anyone without very good financial discipline!
But basically when you get near the end of your 0% period, you apply for a new balance transfer offer from another bank, pay off any remaining balance, and max out the new card - they rarely asked for proof of the actual outstanding balance of the old card...All they care about is whether you can service the debt with them - i.e. you have some 'wealth' to secure it against.
Haha in French we have a saying "on ne prête qu'aux riches" which translates to "one only lends to rich people", which is quite fitting here 😂
They’re completely irrational and keep redoing when they don’t need to to give the impression they’re doing something. None of this is stable or good in terms of planning or leadership for people. As if we all don’t have enough problems Govt keeps taking stupid decisions and also not doing anything it’s obligated to well. Another great policy killed by its own success. They’re nuts. Has a lobbyist got to them?
They could have at least sweetened this announcement with some true environmental friendly policies of pumping money into rail. But no.
Sometimes I feel they should be kicked out to the opposition benches. But then I remember that the alternative is so much worse that I reluctantly think we need to make sure we don't get that option.
Another master class in shortermisim from a NZ Govt, excellent work unpicking the gnarly details as always Bernard
Some relevant/interesting reading for those keen on EV's https://www.iea.org/reports/global-ev-outlook-2023
Stand out for me was the fact we are dead last in the countries captured for provision of EV chargers
Thanks Bernard. We need this successful scheme until zero emissions vehicles approach price parity with ICE vehicles before a gradual phase-out of the rebate. In the meantime we need as many new EVs as those that can afford them can put on the road to provide decent affordable used car stock. In NZ this is particularly important as we keep our cars for a long time and today’s new ICE vehicles will be generating pollutants into the 2040s.
Absolutely Colin.
I've been ruminating on this all day now, especially given my current car buying scenario. Here are the thoughts going through my head:
- hybrid is still the best option for me, a renter who needs an option that's not grid dependent but wants to do my bit, it's just getting more expensive and complicated instead of simpler
- seeing as I'm not opposed to paying taxes and generally think we're not generating enough tax revenue to achieve the big infrastructure (you know, EV charging stations for example) goals we have then saying goodbye to a rebate (RAV4 Hybrid) is probably doing my bit.
- I still feel a bit shortchanged and somehow like I've been told off a little, it's bloody hard to navigate these conversations without feeling like every choice has to be interrogated by myself and the neighbours
- it reminds me of a great number plate surround I thought of making for Ford Ranger (wo)man. "It's for work, I swear."
But it also has me thinking about the Tourism Infrastructure Fund opening and where the intersection of economy, climate and politics come together. This announcement with much hoorah this morning:
https://www.beehive.govt.nz/release/eyes-recovery-tourism-infrastructure-fund-opens
But as James Doolan (Fantail Advisory/Hotel Council Aotearoa) said on LinkedIn this morning:
"In the year before COVID hit, Central Government took almost $3.9 billion in GST out of tourism. It invested approximately $100 million into Tourism New Zealand (the marketing side), and does very little to spur high-quality, tourism-connected infrastructure. $14 million is not even one half of one percent of the GST that Central Government receives from tourism in an ordinary year. $14 million might build you 25 new hotel rooms if you're lucky (and the land is cheap).
If we want to attract high value tourists, we need better infrastructure that meets the expectations of visitors. #hotelcouncilaotearoa has consistently called for real solutions to the Tourism funding problem in New Zealand. The Tourism Infrastructure Fund shows how incredibly far off track we are."
Now I've read your excellent work on this I'm seeing the fiscal neutrality mantra has all sorts of monstrous cascading impacts everywhere. Not to mention that reducing emissions in the tourism sector through robust EV options for our rental fleets would kill two birds with one stone... charging infrastructure is charging infrastructure after all.
Thanks Tash. Monstrous is the correct description.
Tui have probably got you covered there for the number plate banner, "It's for work, yeah right".
I've been living in the Maniototo for the past couple of years. Here you're odd if you are not driving a 70 series Land Cruiser or Hilux. A lot of that is because of the practicalities - most of the folk around here actually need capable 4wd vehicles to get around and do their business, winter driving, dirt road, towing capacity, farm use etc. I've got a land rover discovery 2 (from 2001, the old classic land rover diesel motor) and a Nissan Leaf. I use the leaf vastly more than the rover, because it is free to run it (solar panels). So far in 2023 I've used about 100L of diesel but put just a bit over 7000 kms on the leaf (all charged by solar). That 100L of diesel though can't be replaced by electricity. There are just no viable electric options for most people living rurally. I guess Labour don't see rural people as potential supporters so it doesn't really matter to them, but the doubling of a 'ute tax' is not going to go down well at all. I'm bracing for locals to throw eggs at my leaf as I glide silently past!
Thanks Andrew. You're right on the lack of a diesel alternative. But you've done a great job with that Leaf. 100l of diesel in five months is way better than the alternative.
Thanks Bernard, I've been incredibly confused by the reporting from various media sources on this story all day. It was driving me nuts trying to cut through the rhetoric! This laid things out nicely for me.