Coalition's zeal for tighter central Govt budgets squeezing inflation out & up into wider economy through councils & agencies hiking rates, fines, fees & charges; Willis warns 26/27 surplus in danger
I worry that the folk who voted for ‘better management of the economy’ will not notice this displacement, unless the media actually step up and tell the whole story.
I wonder also if a consequence of their sleight of hand is another (like GST) nudge of the tax burden onto poorer citizens…
Cost shifting on steroids. Please open it up. The general public need to know that "the new Government zeal for freezing and cutting spending and investment is simply shifting costs and inflations onto Kiwi households".
Was speaking to my cousin who is high up in the construction game and he said with the government putting a halt to school rebuilds etc if the government dont quickly sign up a bunch of new construction projects their will be massive job losses in that sector. Thats one thing we cant afford is to lose those people overseas again as when someone in power actually decides to invest in infrastructure there will be no one left in NZ to do it!
Yep. My friend who is a construction materials sales rep of many years experience got made redundant 3 weeks ago. Indication of lack of confidence within the sector.
I wonder if we really understand the economic concept of "inflation" technically it means money supply is ahead of supply of goods and services - too much money in the system - the only effective way of removing surplus money is to use a tax - raising interest rates simply punishes the innocent and rewards the guilty (the bank). The cost of any physical item increasing in price because it is short supply is not inflationary - it is the market place indicating scarcity. Wage increases without an equivalent increase in productivity is inflationary -particularly if it is endeavouring to compensate for price increases due to scarcity -that is trying to mask the impact of market pricing signals.
Our housing market has had the same effect on our money supply as money printing - it has put about $1Trillion of unearned money into circulation and this "unearned" wealth is slopping around inside the economy causing vast distortions to the entire economic structure, deleterious long term demographic issues - our kids not being able to afford homes and raise families and driving the best of our younger generation to flee the place. It is also creating a demand for goods and services -particularly imported goods that is unsupported by any equivalent productive activity that earns income over the border. We have property millionaires in Auckland who have become millionaires by sitting on capital gains, who have undertaken no useful productive economic activity in their entire lives but who consider themselves to have a greater claim on our ability to import luxury goods than the poor farmer who is actually about the only party in this entire economic circus who actually produces anything that the rest of the world wants to buy. I suggest Bernard you need to get out into rural NZ and see what the state of our rural economy looks like -it is not good.
On top of that all of these "Roads of National Importance" are simply more subsidies for our political leadership's fixation on endless and completely unproductive migration driven population growth. And this only further adds to the inflationary pressures on our housing market.
This infrastructure program is you and me paying for the facilities required for all of those who have decided that our little island offers a better lifestyle than what ever place they may hail from. No one seems to have figured that pretty soon our little spot will be undistinguishable from all of the other overcrowded, and inequitable societies populating our overcrowded little planet.
No one seems to have figured that much of the wealth in this country is fake wealth - like bitcoin it is a mirage that only exists while there are more suckers than conmen.
Fabulous Ciaran! Have you discovered Gary Stevenson? Novara Media, James O'Brien (from LBC) and PoliticsJOE have interviewed him (now we just need Rory Stewart and Alistair Campbell to interview him on their long form 'The rest is politics'l!!). Find Gary on YT "Garys economics" (he's also published a book). While he focuses on the UK's cost of living crisis, he claims that other well-off Western nations will suffer the same to varying degrees: goverment responses to the GFC, and now to Covid, have handed a massive amount of wealth to the very wealthy and consequeny the middle class is being decimated, and this will continue (warning that Britain could end up like India or South Africa- small very wealthy minority and a massive underbelly of the poor). The very rich are hoovering up assets - from the middle class elderly selling their family home , to gold (see Bernard's 5 in 5).
I have just been listening to this podcast and I was going to ask Bernard the same question and particularly Gary’s assertion in all the economic models one studies at uni they don’t take in account of distribution and inequality.
Fabulous Sarah! The podcast I'd love to see is a panel discussion with our very own Bernard (are you reading this Bernard??!!!l), Robert Reich, Yanis Varoufakis, Naomi Klein and Gary Stevenson!!!!
is there any legal control/restriction on the total amount of mortgage money that a bank can loan to all the residential property buyers that have a mortgage with it?
yes and no - bank need to maintain capital adequacy which is set at 8% of the bank loan book - but no limits on capital so they can keep pumping the mortgage market as long as they maintain their capital ratio.
I 'feel' for all of those poor landlords whose tax cuts will be gobbled up by the expected massive council rate rises due to the lack of government funds for building local infrastruture and unsustainably high immigration
People are going to get a tax refund that will be much smaller than the rates bill increase, just for 3 waters, let alone all the other costs the government is dropping onto councils.
So, we are going to be told by Luxon "Aren't we wonderful for giving you a tax refund. And aren't all those councils nasty by raising your rates so much".
If “The Economy” is broadly defined then Labour demonstrably mismanaged the economy because it never came near to achieving many of its own goals.
Spectacularly in the case of urban transport in Auckland. And in building sufficient houses to keep pace with demand. And in failing to successfully articulate the case for 3 waters reform. And in not supporting the enthusiasm of some in their caucus for serious tax reform to fund infrastructure deficits.
And yes they did make progress by some measures of some people, and yes they had Covid and its aftermath, but they had a very large Parliamentary majority for three whole years. Which they didn’t seem to manage successfully either.
I wish more voters understood that voting for a right-wing government means you're voting for smaller government – and that results in shifting the costs to local councils and user pays, i.e. individuals. It means more people will not be able to afford things, and those that can will pay more in the long run. You're not just voting for a change of colour, you're voting for a fundamental difference in how much government should help people. We almost never see this covered in our media; in fact, they go out of their way to insist both sides are pretty much the same and it's just culture wars on the margins that mark any differences.
This idea of private funding for basic infrastructure (e.g. roads) is certainly good for rentier financiers supporting and donating to this government but is a much more costly way of funding infrastructure than using the power of the state to fund infrastructure, given we are a sovereign currency issuing country.
Great piece and great comments from the community. My only addition is that not only will inflation increase via the rates channel for the cost of replacement services, but the subsequent solution (higher interest rates) will further exacerbate the councils costs via the interest cost channel! Right from the get go higher interest rates have made inflation stickier. Kudos to Ciaran’s opening remarks.
What's frustrating is we *should* increase the cost of owning cars; we *should* make costs like interest a deductable expense for small business owners (including residential landlords); we *should* invest in longer-term rehabilitation programs for youth offenders; we *should* make the market responsible for carbon emissions reductions; we *should* offer better curriculum support for teachers... These are good goals! But, if those things cost us all money, they should be implemented in the service of better communities, not the wealth and privilege of select individuals!
Coincidentally, I'm in Tokyo this week, where it costs well over $1000 for a car registration, the public transport is kick-ass, and (despite the population density) you can walk or ride safely right down the middle of most city streets because there are hardly any private vehicles clogging up the roads. Those things are obviously correlated in a way that NFACT seem completely unwilling to see; but the crux of it is, a functional society can't be designed around a million individual conveniences.
This was indicated before the election - where they were saying that they would cut childcare funding and public transport half price fares for low income and children and prescription costs to fund their meagre tax cut refunds. Anyone with children using PT to get to school or going into childcare or anyone who needed medicine was going to be worse off. And three waters was also well indicated, councils were saying before the election that it was needed. I’m just sad the media didn’t make a bigger deal of that and that the general public didn’t connect the dots.
What’s also shocking is that it’s now gone even further - to literally taking food off children, funding off Auckland to have roads, stopping schools from building classrooms to house their students etc
When will they stop taking and taking from the poor and from children to fund their ridiculous landlord subsidies?
The insect scaled humans mirroring the world inside your stunning hibiscus flower.
Nice job capturing together the lacewing (Cryptoscenea australiensis) and the sap sucking passionvine hoppers(Scolypopa australis).
In every ecosystem - some inhabitants are beneficial, and some... not so beneficial. 🌺
I encourage people to squash, hose, feed to the chooks pest insects - but not spray. Our insects are doing it tough. Our natural world is doing it tough. Anything we use to poison pest insects, will impact negatively all beneficial insects.
There's so much poison being used in the commercial production of food and other plants in Aotearoa New Zealand, we can at least control what happens in our own backyards and declare for insects and ourselves a poison free zone. 🐛🦋🐌🐜🐝🐞🦗🕷🦠🪱🪰🫛🍅🥦🥬🍋
Neem is toxic to the beneficial insects that are the predators to the pests you are trying to target.
Sure you can reduce risk to beneficials (good guys) by only using neem at certain times of the day - dawn or dusk / when beneficials are not flying, and not when plants are flowering and attracting beneficials, but neem is still highly toxic and you are disrupting what is a natural cycle and attempting to solve a problem that given more time (and knowledge on the gardener's part) can be (in my opin) better solved in your own backyard by increasing habitat for beneficial insects and being both realistic and philosophical about what is normal in natural habitats.
Infestations at certain times are natural - caused by everything from temperature to moisture levels, to absence of essential habitat.
If insects "good and bad" aren't eating from your garden - then you probably don't want to be eating from it either.
Most people have heard how stress experienced by farmed animals causes meat to have different properties - be tough.
Plants also experience stress. But it turns out that certain stressors trigger an immune response that benefits us - when it comes to consuming the plant.
Studies have shown how "leaf wounding" by insects activates the plants secondary immune system triggering an increase in certain chemical processes. So plants that have been "shared" with insects are higher in certain antioxidants.
Good and bad is in the eye of the gardener.
I prefer my goods WITH the bad.
If you are going to use neem, then do so as a last resort and use it sparingly, with full knowledge that your beneficial insects will also be negatively impacted.
Thanks Sarah. I had heaps of ladybug larvae last year, but this year no. This year the vine hoppers were a plague. I am pretty philosophical about it, but want to help where I can :-)
Also, why can’t people see through the idea that private financing or PPPs or whatever is not free money? The “investors” injecting that money will be aiming to make a profit, not achieve social well-being or any other outcomes for the public good
I've opened this one up for public reading, listening and sharing after paying subscribers asked me to and liked the article and podcast over 100 times. I thank those people paying to support me doing this public interest journalism on housing affordability, poverty reduction and climate change inaction. They pay to ensure it's done and then can ask to make it public. That's how we're solving the paradox of non-publicly-funded public interest journalism in an age when ads don't work online and subscription models do.
Thanks Bernard. I have to say that I can see little as futile as planting more pine trees. They are destructive to the land they are planted on and surrounding rivers lakes beaches etc. Does anybody really see it as a "solution". Or perhaps just political expediency of kicking the can down the road.
I worry that the folk who voted for ‘better management of the economy’ will not notice this displacement, unless the media actually step up and tell the whole story.
I wonder also if a consequence of their sleight of hand is another (like GST) nudge of the tax burden onto poorer citizens…
Cost shifting on steroids. Please open it up. The general public need to know that "the new Government zeal for freezing and cutting spending and investment is simply shifting costs and inflations onto Kiwi households".
Was speaking to my cousin who is high up in the construction game and he said with the government putting a halt to school rebuilds etc if the government dont quickly sign up a bunch of new construction projects their will be massive job losses in that sector. Thats one thing we cant afford is to lose those people overseas again as when someone in power actually decides to invest in infrastructure there will be no one left in NZ to do it!
Yep. My friend who is a construction materials sales rep of many years experience got made redundant 3 weeks ago. Indication of lack of confidence within the sector.
I wonder if we really understand the economic concept of "inflation" technically it means money supply is ahead of supply of goods and services - too much money in the system - the only effective way of removing surplus money is to use a tax - raising interest rates simply punishes the innocent and rewards the guilty (the bank). The cost of any physical item increasing in price because it is short supply is not inflationary - it is the market place indicating scarcity. Wage increases without an equivalent increase in productivity is inflationary -particularly if it is endeavouring to compensate for price increases due to scarcity -that is trying to mask the impact of market pricing signals.
Our housing market has had the same effect on our money supply as money printing - it has put about $1Trillion of unearned money into circulation and this "unearned" wealth is slopping around inside the economy causing vast distortions to the entire economic structure, deleterious long term demographic issues - our kids not being able to afford homes and raise families and driving the best of our younger generation to flee the place. It is also creating a demand for goods and services -particularly imported goods that is unsupported by any equivalent productive activity that earns income over the border. We have property millionaires in Auckland who have become millionaires by sitting on capital gains, who have undertaken no useful productive economic activity in their entire lives but who consider themselves to have a greater claim on our ability to import luxury goods than the poor farmer who is actually about the only party in this entire economic circus who actually produces anything that the rest of the world wants to buy. I suggest Bernard you need to get out into rural NZ and see what the state of our rural economy looks like -it is not good.
On top of that all of these "Roads of National Importance" are simply more subsidies for our political leadership's fixation on endless and completely unproductive migration driven population growth. And this only further adds to the inflationary pressures on our housing market.
This infrastructure program is you and me paying for the facilities required for all of those who have decided that our little island offers a better lifestyle than what ever place they may hail from. No one seems to have figured that pretty soon our little spot will be undistinguishable from all of the other overcrowded, and inequitable societies populating our overcrowded little planet.
No one seems to have figured that much of the wealth in this country is fake wealth - like bitcoin it is a mirage that only exists while there are more suckers than conmen.
Fabulous Ciaran! Have you discovered Gary Stevenson? Novara Media, James O'Brien (from LBC) and PoliticsJOE have interviewed him (now we just need Rory Stewart and Alistair Campbell to interview him on their long form 'The rest is politics'l!!). Find Gary on YT "Garys economics" (he's also published a book). While he focuses on the UK's cost of living crisis, he claims that other well-off Western nations will suffer the same to varying degrees: goverment responses to the GFC, and now to Covid, have handed a massive amount of wealth to the very wealthy and consequeny the middle class is being decimated, and this will continue (warning that Britain could end up like India or South Africa- small very wealthy minority and a massive underbelly of the poor). The very rich are hoovering up assets - from the middle class elderly selling their family home , to gold (see Bernard's 5 in 5).
Actually, @BernardHickey I've, been meaning to ask you your thoughts on Gary Stevenson's views (plus he'd be a great interview guest!)
I have just been listening to this podcast and I was going to ask Bernard the same question and particularly Gary’s assertion in all the economic models one studies at uni they don’t take in account of distribution and inequality.
Fabulous Sarah! The podcast I'd love to see is a panel discussion with our very own Bernard (are you reading this Bernard??!!!l), Robert Reich, Yanis Varoufakis, Naomi Klein and Gary Stevenson!!!!
Maybe Suzy should get Gary Stevenson on Saturday morning mind you a lot of beeps will be required.
is there any legal control/restriction on the total amount of mortgage money that a bank can loan to all the residential property buyers that have a mortgage with it?
No, but the capital consumed by the bank for lending above the value of the property becomes economically punitive.
yes and no - bank need to maintain capital adequacy which is set at 8% of the bank loan book - but no limits on capital so they can keep pumping the mortgage market as long as they maintain their capital ratio.
thankyou. that is what I was looking for.
do you know if the 8 percent is stated in legislation, or somewhere?
its in the Reserve Bank Act - capital adequacy ratios are set by the Reserve Bank
Right On!
Thanks for that!
I 'feel' for all of those poor landlords whose tax cuts will be gobbled up by the expected massive council rate rises due to the lack of government funds for building local infrastruture and unsustainably high immigration
You're right V.
People are going to get a tax refund that will be much smaller than the rates bill increase, just for 3 waters, let alone all the other costs the government is dropping onto councils.
So, we are going to be told by Luxon "Aren't we wonderful for giving you a tax refund. And aren't all those councils nasty by raising your rates so much".
Yeah, but those increases will be passed on to renters, won't they? So renting will become even more hideously expensive....
But can’t those poor landlords deduct those costs from their taxable income.?
they definitely can!
You get what you vote for. Need to keep hammering that point home for all the geniuses that thought that Labour were mismanaging the economy
Demonstrably they were.
The current Govt. are giving lots of indications they’ll be lots worse.
Based on what metrics were Labour mismanaging the economy?
If “The Economy” is broadly defined then Labour demonstrably mismanaged the economy because it never came near to achieving many of its own goals.
Spectacularly in the case of urban transport in Auckland. And in building sufficient houses to keep pace with demand. And in failing to successfully articulate the case for 3 waters reform. And in not supporting the enthusiasm of some in their caucus for serious tax reform to fund infrastructure deficits.
And yes they did make progress by some measures of some people, and yes they had Covid and its aftermath, but they had a very large Parliamentary majority for three whole years. Which they didn’t seem to manage successfully either.
So basically "if I completely redefine the idea of an economic metric, my point stands"
I wish more voters understood that voting for a right-wing government means you're voting for smaller government – and that results in shifting the costs to local councils and user pays, i.e. individuals. It means more people will not be able to afford things, and those that can will pay more in the long run. You're not just voting for a change of colour, you're voting for a fundamental difference in how much government should help people. We almost never see this covered in our media; in fact, they go out of their way to insist both sides are pretty much the same and it's just culture wars on the margins that mark any differences.
And I think Bernard in trying to sound non partisan was reinforcing the message that voting national would be same same economically.
This idea of private funding for basic infrastructure (e.g. roads) is certainly good for rentier financiers supporting and donating to this government but is a much more costly way of funding infrastructure than using the power of the state to fund infrastructure, given we are a sovereign currency issuing country.
We need to continuously say that PPP or any other term they'll use is nothing more than the worst form of borrowing.
Yes. It makes me question who are politicians are serving.
Great piece and great comments from the community. My only addition is that not only will inflation increase via the rates channel for the cost of replacement services, but the subsequent solution (higher interest rates) will further exacerbate the councils costs via the interest cost channel! Right from the get go higher interest rates have made inflation stickier. Kudos to Ciaran’s opening remarks.
What's frustrating is we *should* increase the cost of owning cars; we *should* make costs like interest a deductable expense for small business owners (including residential landlords); we *should* invest in longer-term rehabilitation programs for youth offenders; we *should* make the market responsible for carbon emissions reductions; we *should* offer better curriculum support for teachers... These are good goals! But, if those things cost us all money, they should be implemented in the service of better communities, not the wealth and privilege of select individuals!
Coincidentally, I'm in Tokyo this week, where it costs well over $1000 for a car registration, the public transport is kick-ass, and (despite the population density) you can walk or ride safely right down the middle of most city streets because there are hardly any private vehicles clogging up the roads. Those things are obviously correlated in a way that NFACT seem completely unwilling to see; but the crux of it is, a functional society can't be designed around a million individual conveniences.
except for new builds residential property rentals are not a productive business.
therefore mortgage interest deduction from taxable income should be available only for new builds (and only until they are on-sold).
Exactly! A functional society is designed for the collective public, not privileged individuals.
This was indicated before the election - where they were saying that they would cut childcare funding and public transport half price fares for low income and children and prescription costs to fund their meagre tax cut refunds. Anyone with children using PT to get to school or going into childcare or anyone who needed medicine was going to be worse off. And three waters was also well indicated, councils were saying before the election that it was needed. I’m just sad the media didn’t make a bigger deal of that and that the general public didn’t connect the dots.
What’s also shocking is that it’s now gone even further - to literally taking food off children, funding off Auckland to have roads, stopping schools from building classrooms to house their students etc
When will they stop taking and taking from the poor and from children to fund their ridiculous landlord subsidies?
Loving your photos, Lynn.
The insect scaled humans mirroring the world inside your stunning hibiscus flower.
Nice job capturing together the lacewing (Cryptoscenea australiensis) and the sap sucking passionvine hoppers(Scolypopa australis).
In every ecosystem - some inhabitants are beneficial, and some... not so beneficial. 🌺
I encourage people to squash, hose, feed to the chooks pest insects - but not spray. Our insects are doing it tough. Our natural world is doing it tough. Anything we use to poison pest insects, will impact negatively all beneficial insects.
There's so much poison being used in the commercial production of food and other plants in Aotearoa New Zealand, we can at least control what happens in our own backyards and declare for insects and ourselves a poison free zone. 🐛🦋🐌🐜🐝🐞🦗🕷🦠🪱🪰🫛🍅🥦🥬🍋
How about Neem Sarah - is it okay for the good guys, or bad for everybody?
I don't like neem.
It's impossible to only target pests.
Neem is toxic to the beneficial insects that are the predators to the pests you are trying to target.
Sure you can reduce risk to beneficials (good guys) by only using neem at certain times of the day - dawn or dusk / when beneficials are not flying, and not when plants are flowering and attracting beneficials, but neem is still highly toxic and you are disrupting what is a natural cycle and attempting to solve a problem that given more time (and knowledge on the gardener's part) can be (in my opin) better solved in your own backyard by increasing habitat for beneficial insects and being both realistic and philosophical about what is normal in natural habitats.
Infestations at certain times are natural - caused by everything from temperature to moisture levels, to absence of essential habitat.
If insects "good and bad" aren't eating from your garden - then you probably don't want to be eating from it either.
Most people have heard how stress experienced by farmed animals causes meat to have different properties - be tough.
Plants also experience stress. But it turns out that certain stressors trigger an immune response that benefits us - when it comes to consuming the plant.
Studies have shown how "leaf wounding" by insects activates the plants secondary immune system triggering an increase in certain chemical processes. So plants that have been "shared" with insects are higher in certain antioxidants.
Good and bad is in the eye of the gardener.
I prefer my goods WITH the bad.
If you are going to use neem, then do so as a last resort and use it sparingly, with full knowledge that your beneficial insects will also be negatively impacted.
🦗🐞🪰🦟
Thanks Sarah. I had heaps of ladybug larvae last year, but this year no. This year the vine hoppers were a plague. I am pretty philosophical about it, but want to help where I can :-)
Kia ora Duane
Vine hoppers are having a cracker year - I guess because it has been particularly favorable conditions for them? - warm and humid.
It can be soul crushing watching pest insects desecrate our gardens.
If it's food you are trying to protect (?) physical barriers are your best bet - just for a couple of months. But I'm guessing you know this already.
As you say, we help where we can - that's perfectly natural too 🌱
Also, why can’t people see through the idea that private financing or PPPs or whatever is not free money? The “investors” injecting that money will be aiming to make a profit, not achieve social well-being or any other outcomes for the public good
Not a big fan of robbing Peter to pay Paul…
I've opened this one up for public reading, listening and sharing after paying subscribers asked me to and liked the article and podcast over 100 times. I thank those people paying to support me doing this public interest journalism on housing affordability, poverty reduction and climate change inaction. They pay to ensure it's done and then can ask to make it public. That's how we're solving the paradox of non-publicly-funded public interest journalism in an age when ads don't work online and subscription models do.
Thanks Bernard. I have to say that I can see little as futile as planting more pine trees. They are destructive to the land they are planted on and surrounding rivers lakes beaches etc. Does anybody really see it as a "solution". Or perhaps just political expediency of kicking the can down the road.