TLDR: Be careful what you wish for is the lesson from a new poll out overnight that shows more National voters oppose Christopher Luxon’s plan to remove the 39c income tax than support it.
Luxon’s attack on what he describes as the Labour Government’s fiscal profligacy and ‘addiction to spending’ as the cause of inflation may be boomeranging back into his tax cut policy. Even National voters are questioning how any tax cuts by a National Government would improve the Budget deficit and reduce inflation, especially when most of the benefit goes to those who are now much better off (around $600b for home owners) since the outbreak of Covid and would spend some of it, or leverage it up into a rebounding housing market in late 2023 and early 2024.
Paid subscribers can see more detail and analysis of the poll result below the paywall fold and in the podcast above.
A tax cut policy that is boomeranging
A 1News/Kantar poll out last night showed that two in three eligible voters do not support National’s plan to cut the 39c top rate of tax for those earning over $180,000, with just 25% supporting it and 10% saying they don’t know or didn’t answer.
Amongst National Party supporters, 49% opposed the tax cut plan and 41% approved it. Those groups of eligible voters who are more likely than average (25%) to support National’s plan to cut the top rate of tax included:
National Party supporters (41%)
Those with a household income of more than $150,000 (36%)
Men 35-54 (33%)
Aucklanders (32%).
Those groups of eligible voters who were more likely than average (65%) to oppose National’s plan to cut the top rate of tax included:
Green Party supporters (90%)
Labour Party supporters (81%)
Wellingtonians (77%)
Women aged 55+ (76%)
Those with a household income of between $30,001 and $70,000 (75%).
So what? - This poll suggests National’s attacks on what it calls Labour’s ‘fiscal profligacy and ‘addiction to spending’ may be creating some cognitive dissonance among those potential National voters wondering if tax cuts that will go mostly to those already $600b richer under Covid will actually reduce the Budget deficit and remove inflationary pressures.
The bottom line - The assumption that Opposition leader Christopher Luxon’s policy released soon after his November 11 election to the National leadership was responsible for National’s surge in the polls over the summer may be wide of the mark. National has yet to release a fully costed Budget policy that includes both the taxation and spending side of the accounts. Releasing one without the details of the other is causing some angst and confusion, even among its own supporters.
Elsewhere in the news overnight and this morning
In geo-politics, the global economy, business and markets
More oil deflation - Oil prices fell 5% overnight after data yesterday afternoon (see Monday’s Dusk Chorus for more) showed China’s factories slowed more than expected and its consumers slowed spending because of repeated Covid lockdowns, a property development crash and weaker demand for exports from the United States and Europe, which appear headed for recession. Brent crude dropped 5% to $93.16 per barrel. Reuters
Shanghai Ikea panic - Videos emerged overnight showing chaotic scenes and panic-stricken shoppers at an Ikea store in Shanghai trying to get out of the building after child there was reported to have tested positive for Covid after returning from Tibet, where heavy lockdowns are in place. Videos show the guards closing the doors, but a crowd forced them open to escape. BBC
China beef ban fears - The AFR-$$$ reported this morning that Australian and New Zealand beef exporters were on high alert after reports that China may temporarily suspend all meat imports from Australia and New Zealand due to concerns about foot and mouth disease, and potentially as diplomatic punishment in the wake of tensions over Taiwan.
Where’s the beef? - Australian and New Zealand exporters scrambled through Monday to hunt down details after a Chinese beef industry website, World Meat Imports Report, said Beijing was immediately suspending customs clearance and cargo release for all Australian and New Zealand agricultural commodities. Initial checks suggested crossed wires, but exporters are continuing to confirm no changes with buyers.
US confidence slides - US homebuilder confidence slumped more than expected in August as unaffordable prices, construction cost inflation and higher interest rates hammered demand. The National Association of Home Builders’ housing market index for August was published overnight and dropped 6 points to 49, which was below economists’ forecasts for about 55. This was the first fall below the expansion/contraction threshold of 50 since May 2020.
Another deflationary surprise - The New York Federal Reserve survey of manufacturers registered minus 31.3 for August from + 11.1 the previous month. Economists had forecast a result of about + 5. This was the second largest monthly fall for the index on record. The US 10 year Treasury yield fell eight basis points to 2.77% as traders baked in expectations that slowing economic growth will remove inflationary pressures in the world’s biggest economy.
Just briefly
BlackRock in A$1b-plus battery play in Australia AFR-$$$
In Aotearoa-NZ’s political economy
Yeah. Nah - A 1News/Kantar poll published last night found more than two-thirds of voters overall did not support National’s plan to remove the new 39c tax rate. (See more detail and analysis below)
Plea for help - The Human Rights Commission has called for an immediate freeze on rents and an increase in the accommodation supplement to help those hit hardest during Covid by the cost of living crisis. Stuff
“We’re very concerned that some students, low-income or single-wage families are having to make trade-offs between the right to adequate food and the right to a decent home.” Human Rights Commissioner Paul Hunt via Stuff
Quotes of the day
China’s economy is in deep trouble
“China’s growth in (the second half) will be significantly hindered by its zero-Covid strategy, the downward spiral of the property markets and a likely slowdown of export growth. Beijing’s policy support could be too little, too late and too inefficient.” Ting Lu, Nomura’s chief China economist via FT-$$$
“China is definitely in a very desperate situation. The problem now is no effective demand. If you don’t allow people to come out and consume , there is no demand.” Xingdong Chen, chief China economist at BNP Paribas via FT-$$$.
“Usually the Chinese economy has been an important pillar in supporting the global economy. This time, the US and Europe are showing signs of slowing and possibly moving into a recession but the backdrop — China — isn’t there to support the global economy,” Aneeka Gupta, director of macroeconomic research at WisdomTree via FT-$$$
Numbers of the day
Red states
25% - A quarter of the United States’ land mass, which is home to more than 100mn people, faces temperatures of more than 52 degrees celsius within 30 years, according to a forecast released by the First Street Foundation overnight. The number of counties in this extreme heat belt will rise from 50 now in Texas and California to over 1,000 by 2053 right across the middle-to-lower parts of the lower 48 states.
Knowing what’s real wealth and what isn’t
A$80m - A 26-year-old cryptocurrency casino founder in Melbourne who paid almost A$40m for a mansion in Toorak in March has bought another home in Toorak for A$80m at 29-31 St George’s Rd (Street view below). AFR-$$$
Chart of the day
Investors are very confident inflation futures will not equal the past
Today’s must-read
Measuring productivity? Or mouse-jiggling? - This deeply reported piece in the New York Times shows how many companies are increasingly using productivity measuring AI tools post-Covid to force people to stay at their screeens or be on-call as much as possible and for as long as possible. This example of a pastor working for a non-profit hospice shows the unintended consequences.
“This is going to sound terrible, but every now and again I would do what I thought of as ‘spiritual care drive-bys’” to rack up points. If a patient was sleeping, “I could just talk to the nurse and say, ‘Are there any concerns?’ It counted as a visit because I laid eyes.” Reverend Heather Thonvold in this New York Times deep dive on The Rise of the Productivity Score
Some fun things
Ka kite ano
Bernard
Even Nats oppose cutting 39c tax rate