Kia ora. Long stories short, here’s my top six things to note in Aotearoa’s political economy around housing, climate and poverty on Tuesday, October 1:
PM Christopher Luxon has made $460,000 in tax-free income this year from capital gains on the sale of two of his rental properties, almost as much as the $484,200 gross income from his actual job, which he, like other earners of wages, has to pay tax on. Asked about not paying tax on the income from capital gains, he said he didn’t see the point of questions about a capital gains tax as it removed the incentive for wealth creators. 1News
In the scoop of the day, Guyon Espiner reported for RNZ yesterday that officials advised NZ First Minister Casey Costello that most of the benefits of the Gov $216 million tax cut for heated tobacco products would go to Phillip Morris.
In the deep-dive of the day, Public Housing Futures has produced a map of stalled and empty Kāinga Ora sites throughout the motu, showing thousands of half-finished or bare land where work has stopped, despite close to 100,000 people being registered as homeless. See more in an interview below, done the day after Luxon moved into Premier House, now the drapes and carpets and paint are up to his preferred standards.
In solutions news, the world’s largest battery maker, CATL, has announced it is moving long-life vehicle batteries to production that will last 15 years or 1.6 million kilometres, with a ten-year guarantee.
In quote of the day, Clutha Mayor Bryan Cadogan says he is livid the Government has chosen $14 billion in tax cuts over a proper hospital for the lower half of the South Island.
In charts of the day, business confidence about the future economy and firms’ own futures improved markedly in September, but actual experienced conditions remain in recession territory.
(There is more detail, analysis and links to documents below the paywall fold and in the podcast above for paying subscribers. If we get over 100 likes we’ll open it up for public reading, listening and sharing.)
1. Luxon says wealth generators need tax incentive
Luxon makes more in tax-free income from capital gains than PM’s salary
PM Christopher Luxon was questioned yesterday about the $460,000 in tax-free income from capital gains he is reported to have made this year from the sale of two rental properties, including his apartment in Wellington now that he has moved into Premier House. His gross annual salary as PM from July 1 was $484,200, which IRD’s calculator shows would require he pay $168,260 in income tax, if that was his only taxable income.
He was first asked if he should pay tax on the capital gains income.
“No, we don't have capital gains tax in New Zealand. We think it would be bad for New Zealand because you don't tax your way out of recession."
Asked if he made good money off the sale, Luxon said the "sale is still progressing".
"I don't know what the point of the questioning is.” Luxon via 1News’ Maiki Sherman last night. (From 4:52 on in the video below)
Luxon went on to say wealth generators needed the incentive of not paying tax on income from capital gains.
"We don't believe in a capital gains tax or a wealth tax. We think, for people who actually generate wealth in this country, it's a massive disincentive and as I've said along the way this is a Labour government that took the keys to our economy, put the car in the ditch.
“We're getting it out of the ditch and they want to put it back in there again by increasing taxes, by increasing spending and borrowing more." Luxon.
2. Scoop of the day:
Guyon Espiner reported for RNZ yesterday that officials advised NZ First Minister Casey Costello that most of the benefits of the Gov $216 million tax cut for heated tobacco products would go to Phillip Morris.
Honorable mentions
Health: The 3 key documents about Dunedin Hospital yet to be released RNZ
Auckland: Auckland mayor seeks to scrap city’s economic development agency. Tātaki Auckland Unlimited has been criticised and its budget slashed ‒ and it now faces being disestablished completely The Post-$$$’s Dita De Boni
Councils: Govt's lack of faith in Hawke's Bay Regional Council revealed in letters. Minister for Local Government Simeon Brown told the council he didn’t believe it could deal with situation without a Crown Manager appointed. Stuff’s Marty Sharpe
Health: Man waited at ED for more than an hour as blood poured from his mutilated fingers. He was made to stand in a queue after a workplace accident. Stuff’s Shilpy Aurora.
3. Deep Dive: Mapping less homes and morehomelessness
Housing activist group Public Housing Futures has produced a map of stalled and empty Kāinga Ora sites throughout the motu, showing thousands of half-finished or bare land where work has stopped, despite close to 100,000 people being registered as homeless. I spoke below with Public Housing Futures’ Vanessa Cole about the map and the data
Honorable mention
Climate: No new gas likely for 10 years despite Govt exploration plans. Repealing an oil and gas exploration ban is unlikely to significantly bolster gas supplies in the short term, according to government modelling. RNZ’s Eloise Gibson
4. Solutions news: A battery for buses lasting 1.6m kms
Contemporary Amperex Technology (CATL) is the world’s largest battery maker and has just announced it will start producing a low-density and long-life battery for buses that will last 15 years and 1.5 million kilometres. CATL is even providing a 10-year 1 million km guarantee. BatteryIndustry.tech
5. Quote of the day: Clutha’s mayor rips into Govt
"We're livid. Definitely the messaging that we received was at a tangent to what ministers Reti and Bishop gave last week."
“People will die here if the health facility is not up to scratch now, it won't be fit for purpose purpose in the future, and a building like this that's not fit for purpose ultimately correlates to deaths.
"So they're putting lives of the South on the line to save some money. You can't give $14b in tax relief and then turn around and say 'Oh, I can't make the books balance, I'll build half a hospital' ... If you get one chance to build a hospital, don't build half a hospital." Clutha Mayor Bryan Cadogan speaking with Lisa Owen on RNZ’s Checkpoint last night after 35,000 marched in Dunedin on Saturday after the changes.
6. Charts of the day: Hope before revenues
Business confidece is surging, but activity remains very weak
Experienced activity suggests NZ is still in a recession
Still on track for a recession into 2025
The Kākā’s Journal of Record for Tuesday, October 1
Climate: Greenpeace Aotearoa sued Fonterra, alleging it misled customers by labeling its Anchor butter as 100% grass-fed. Greenpeace claimed up to 20% of a Fonterra dairy cow's diet could be fodder crops, including imported palm kernel feed linked to deforestation in Southeast Asia. RNZ
Economy: ANZ's NZ Business Outlook reported that business confidence was up 10 points in September, and that residential construction intentions were at their "highest since mid-2021". NZ Herald
Environment: The Environmental Defence Society said the Resource Management (Freshwater & Other Matters) Amendment Bill will enable “a full-blown assault" on freshwater and biodiversity, including by establishing a consenting pathway for new coal mines near significant natural areas.
Investment: Ethical investment nonprofit Mindful Money found that socially or environmentally harmful Kiwisaver investments fell significantly over the past six years. Tobacco and alcohol investments dropped 74% and 33% respectively, and nuclear weapons-related investment fell from $100 million in 2019 to $13 million.
Environment: Research from Kantar and the Sustainable Business Council found only 22% of respondents believed NZ businesses were taking significant action to address community and social issues.
Climate: The Environmental Law Initiative launched High Court action against Environment Southland, arguing it breached its duty to use the Resource Manage Act to monitor & protect Southland wetlands. The ELI said drainage of wetlands for dairy farming required a resource consent, but that no resource consents were found for 61 wetland losses investigated in a 2020 report.
Cartoon of the day
To the doghouse?
Timeline cleansing nature pic of the day
Not really a spider about to be scuttled off
Ka kite ano
Bernard
Poor Christopher, he has to sell the family silver to fund his lifestyle now he only has his PM level salary.
Don't forget about his 3 other rental properties (as well as the family home and bach)...
What does ‘wealth creators’ actually mean - they look more like parasites
Interesting to learn that the homunculus that perches on Luxon's shoulder whispering sweet advice into his ear turns out to be an ardent Trump fan, fearful of the 'leftist' Kamala Harris.
I always hated Key. That feeling has moved up to whole other level now.
It's his method of divide and conquer. Setting himself up as a wealth creator when in fact he is a wealth destroyer. But by doing this he can justify excess for the "wealth creators" while strip mining the production of the minions!!
Weird that the Minions vote for this treatment often??
“ Gvt by the rich for the rich” I cant wait for trickle down. Why are the stupid poor not making capital gains? NO CAPITAL!
Patrick Medlicott
Thanks Bernard, think I'd go insane if it wasn't for you and like minded analysts.
How the f$÷* does idiot Luxon think 'wealth generation' that benefits nobody but himself is good for the country??? Is he really thick or the epitome of entitled arrogance. Grrr
Thick
He's both.
he is exceedingly greedy
those who are wealthy enough to buy a residential investment or speculative property are allowed to make an income (capital gain) that is not taxed (unless it is owned for two or less years). this tax-free income is what causes several hundred thousand wealthier New Zealanders to buy investment or speculative residential property. they are NOT "creating/generating wealth" - that term is absurd nonsense that Luxon continually spouts.
weaponised obfuscation: he deliberately uses words that seem like a great idea (wealth creators) but doesn't clarrify that he is only creating wealth for himself.
Definitely not empathetic. Also never had a member of his family have to wait for medical assistance.
The latter
So landlords are wealth creators?
Not if they don't pay tax on capital gains. They are bludgers on society.
Agree
If they don't pay tax on capital gains, they are littel different to burglars and their capital gains. Real wealth creators in the property sector are those who build stuff.
💯 bludgers
The time cleansing pic is epic!
Textured steel(?) on the backdrop of the dark blue sky with the street light offering some spooky ambience. It's appropriate for the month of Halloween.
Avondale spiders are rare now I believe - originally a population of huntsman that established themselves there and would sometimes terrify residents!
Haha, awesome & I love that there is a statue paying tribute to them.
They were very scary & we called them Avondale Spiders. As big as your hand & could run very fast if you missed catching with unlidded Agee jar. So fast spent rest of the night afraid.
Does Luxon’s comment “…incentive for wealth creators” imply an acknowledgement of intention to profit from the sale of property? If so, that’s income: IRD should do a double take and have a closer look.
Would love to see someone at ird run the ruler under this one for sure. That is about 2mill in cash, what are his plans for it? Term deposit? Bank shares? Building an art farm? Also who has brought them and do they have connections to clients of government policies ? So many questions
I dunno Luxon, it sure seems like you were in the driver’s seat when the numbers really started hitting the ditch. Has anyone thought to test him, cos from the words coming out of his mouth he sounds high on his own supply.
It took two terms of Labour to reach this kind of executive arrogance from MInisters. Then again, Luxon did make much noise about wanting to move quickly in government.
Also, second time we’ve heard “you can’t tax your way out of recession”, sure seems like the latest focus group-tested line. It’s also total misdirection.
Luxon has lost the plot. Property speculators are the opposite of "wealth creators." They are grubby parasites sucking the lifeblood from our productive economy. All that (unearned) profit that the PM has booked was contributed by the public in the form of infrastructure, services, and network effects (location is all about what is nearby that makes it desirable).
I've lost count of the number of SMEs and entrepreneurs I've talked with lately who are hampered by lack of access to affordable investment capital because everyone has decided that betting on houses is the only game in town. Aotearoa is guaranteed to become a failed state if this doesn't get fixed pronto.
Maybe we could ask the ANZ CEO how much her bank lends to businesses v property clients.
You definitely cant Austerity your way out of a recession> But you can make the recession bigger using Austerity.
A PM is proud of "creating wealth" by limiting access to a human right to those less wealthy/lucky. ( Yes, housing is a human right https://www.ohchr.org/en/special-procedures/sr-housing/human-right-adequate-housing )
This is the ultimate example of hypocrisy for someone who talks about improving productivity and entrepreneurship and punishing people who take advantage of the system.
Are property speculators “wealth creators”? Ordinary people that work every day are our wealth creators. Crumbs from the table of the very well off are of little help. The economics that Luxon and this government have been promoting have all been discredited - trickle down, austerity, less government, growth built on extraction of natural resources. It’s great to read the similar comments resulting from Bernard’s work.
Last Friday Phillipa Howden-Chapman gave a talk to the Fabians about Kāinga Ora and its demise. Bernard commented on the presentation and asked lots of searching questions. On video here https://www.youtube.com/watch?v=jIZCNgyrUDM - but warning the audio is unfortunately pretty bad in places.
Thank you for this Bernard. If you don't have a disabled loved one you may not be aware of the way this government is trying to tax the contribution to carers. When you have a disabled child their level of need is assessed and as a parent you're given the number of days of respite they think you need to be able to manage being a full time carer. This is paid to the carer you hire as a contribution of $40 for four hours or $80 for eight hours. Prior to this government coming in this was only taxed if the carer was a full time carer. For most parents their carer support was used to give one off contributions to retired family members or other parents in a kind of swap/support scheme. Whaikaha quietly changed at the directive of the Minister their website to say all carer contributions would now be taxed. As such many families lost their carers who were afraid if this once a month $80 contribution was taxed they'd lose part of their pension. Whaikaha then quietly changed it back to say that these contributions *may* be taxed. But the damage was done. So long story short this government loves tax - but only against low income and vulnerable families.
On the idiot PM's logic, wealth creation doesn't occur in any of the countries which tax capital gains. So why do many of them have much higher levels of gdp per capita?
And much higher investment in public infrastructure.
Luton says "...you don't tax your way out of recession."
I see, so we are tax cutting our way into a recession.
I’d really love to see some analysis on the ‘why’ sitting behind many of these seemingly irrational and disjointed policies. Is there an underlying ideological position, are they the result of lobbying (discrete policies), both, or something totally different? Would welcome any reading recommendations.
Agree - I cannot think of previous National-led governments being so irrational. Even if you consider some more obvious political ideology, this current government doesn't seem to adhere to any of them.
They weren't as closely aligned with ACT or as controlled by Atlas as this government is.
Scary that this idiot is 'leading' our country.
He doesn't understand the basic idea that property speculation isn't wealth generation, its wealth TRANSFER.
Luxon is surely "ACT under cover" Maybe that is why the National party put forward so little policy in their pre election promotion.
I had that thought, especially when David Seymour claimed half of the 43 bullet points for Q4. I really think we have an ACT government with a bit of NZF thrown in.
💯
Wealth creator, my foot.
Could wellbeing a disincentive but it is certainly a burden the wages and salaries carry alone - low, broad and equitable seems always to be an afterthought.
The ANZ business confidence chart is really just a reflection of who is in government. That’s the only thing that it correlates with.
"I don't know what is the point of questioning" sums him up.
He doesn't understand why he is being questioned. He doesn't understand that he is NOT a CEO and that a leader of a country should be questioned all the time.
And as CEO of Air NZ he was the worst ever. Lost Ansett, and closed a whole bunch of regional services when it was supposed to be the national airline.
Yep. Stalled at the "wealth generator" comment. What, pray tell, has Luxon generated with the sale of his property? Oh! THAT wealth generating - his own.
Jeez, he is so tiresome.
A few years ago a company I was working for in the UK was acquired and the major shareholders were stressing about whether they would qualify for entrepreneur's relief which meant they paid capital gains at 19%. This relief is there to reward the "wealth creators" who had slaved away for 10 years on their business. They were delighted to only pay 19% as opposed to the full 33% (I think, maybe higher).
I did mention to a few of them that if they were in New Zealand they would pay zilch. No-one believed it. It's amazing for anyone offshore to see what goes on here.
Most "wealth creators" understand that you can't create a company in a vacuum. You build on top of the infrastructure of your country, you access the educated talent and all of the other assets and skills of a country. You get a leg-up through the experience of others and maybe some support of state-backed organisations. All of this cost money and 99.9% of "wealth creators"" will pay a fair percentage to the state and if they can get a discount for being the actual creator, it will encourage more of them!
Buying and selling houses is not creating anything. Maybe you could argue that those who invest in new builds should be incentivised. But it is very easy to copy the GGT schemes and the entrepreneur's relief schemes that are proven and tested in grown up economies without deterring wealth creators. You could argue a well structured CGT will massively increase the attractiveness of investing in business.
Kiwis who slog away and pay income tax are getting played and taken for a ride.
As for Luxon, he has never created anything in his life as far as I am aware. He is a walking LinkedIn post with no contribution to make - intellectually, creatively or in any field I can think of. He is entitled to the entitlement and that is all we will ever hear from him. At some point the levee will break, CGT will be introduced but he will be long gone. He will be balancing a few board positions and he will finally being able to afford a Hawaiian house closer to John Key's pad. He's entitled to it after all, and that's how he rolls! 🤢
This quarterly list of actions approach is such contempt for democracy. For example the list for this last quarter is to pass specific legislation which is still open for public submissions to select committees. What is the point of our submissions when the action of passing the legislation is already committed to?
I would like to see more challenging of these convenient words that are meant to us to keep us in line. I would ask Luxon what he actually means by ‘wealth’, or ‘growth’, or ‘the economy’, etc. He seems to be totally ignorant of the value of community, or wellbeing, or circular economies, or just plain decency and compassion. 35,000 people marching for a hospital, or thousands gathering to win back a haka record. These things are priceless.
Luxon selling rental properties
What does Luxon know about future residential property prices? Why is he selling residential properties just now? Prices have gone down a bit. Is he expecting the prices to go down further?
And for you, Bernard: I think the way to introduce a wealth tax - and the way to sell it - is to explain that it would be introduced very gradually over ten years, say. We will always have PAYE. Over time, the wealth tax rate will go up a bit and the PAYE will come down. The total tax take won't change much over the first few years. The only thing that will change is the tax collected from the richest 25% will gradually increase. Gradually - not dramatically. The revenue from the wealth tax could be ringfenced to infrastructure, health and education for ten years, say. This will make it more palatable for everyone
My thoughts exactly. Since a revolution is hardly likely to happen the only pragmatic and politically feasible way to introduce a wealth tax is gradually. It’s also important to make it easy to administer. Less complexity means it’s harder to avoid.
Thanks to all. We vaulted through 100 likes in record time. I’m opening it up for full public reading,listening and sharing. Nga mihi Nui Bernard
Just a reminder that submissions close today on the Bill to re-allow new oil and gas exploration. The public was given a whole lot of notice on this comment period (not). https://www.parliament.nz/en/ECommitteeSubmission/54SCEDSI_SCF_81DBD590-6E68-48D1-8BE4-08DCDC4C6A57/CreateSubmission
Between the Luxon and Key comments today it's clear National PM's past and present are hideously out of touch
I wonder what else politicians are investing their surplus dollars in. Do some invest in anything that is actually of some value to the country.
Mr Luxon is a strange kind of Christian. If he hopes to have some kind of soul, I hope he stumbles and falls from a bit of a height as we all need him to understand how very unsorted he is.
You r so right. Luv this. He is so far from sorted as a hunan being its laughable
He said he didn’t see the point of questions about a capital gains tax as it removed the incentive for wealth creators
=
We believe in the rich getting richer and just sitting on their wealth.
https://www.rnz.co.nz/news/national/529507/why-sir-john-key-thinks-donald-trump-should-win-the-us-election
My privilege must be protected!
Wealth generators...... generate wealth for whom exactly!
the wealth creators/generators are those who work on farms and in factories and on fishing vessels and to some extent builders (including associated trades)
and they have to pay tax on their income and GST on their private spending
residential rental property owners do not have to pay tax on the capital income portion of their income (unless owned for 2 or less years) and that is one reason why several hundred thousand wealthier New Zealanders are residential rental property investors and speculators
Yup