IRD initially couldn't find 170k bank accounts needed for Budget 2022's $350 cost of living payments; IRD also pushed back against $100 per Aucklandler helicopter money idea due to logistics
My understanding is that NZ banks have no reserve requirement ratio for lending (https://www.rbnz.govt.nz/hub/publications/bulletin/1985/rbb1985-48-04-02)... I may be wrong, but I gather the OCR is the principle thing used to control the amount of money supply here (NZ banks do have liquidity requirements, but that is a different thing).
This appears to be a very common misconception, and I expect the commercial banks are more than happy for Regular Joes to not fully understand it (not that I would put you, Bernard, in that box of course, so feel free to correct me!)
Thanks Tim. Yes. Not expressed as a reserve requirement ratio any more, but the central bank does require certain quite high tier one equity capital ratios, which has the same effect. The OCR does help change money supply growth by changing the cost of lending, and therefore shifting demand for credit.
Fun fact 1. You've forgotten all about the state taxes. They can vary from nothing to quite a lot. The California state petrol tax is about 50US cents per gallon.
Interesting concept about RB payments in place of payments to business. Unfortunately these too will be inflationary and will also not help businesses maintain staff in times of crisis. Still perhaps we could save our employment crisis by promising all new migrants a payment of several thousand dollars when they gain residency?
Excellent point John. Yes. That would have been quite the footnote with the state taxes too. Yes on the inflationary front, although you could argue we got the inflation in asset prices through the version of money printing we chose. That benefited asset owners at the expense of renters. The migrant idea is interesting. I think we'd have to build the infrastructure to cope with the extras before (rather than after/never) they arrived.
Great plan.Along with proper wealth taxes to cool inflation and recycle all that money to wealthy people and entities (the tax system needs major reform like removing income tax for anyone under about $60k and based on number of dependents and costs). We know the private debt not Government debt presents the greatest risk to the collapse of an economy and the more of Governments obligations they privatise and offload into individuals the worse that risk becomes. A line of credit for each Kiwi could mortgages, direct government aranteed income over periods (or lifelong) when productive caring and reproductive work is being done but unpaid for example. Ut would also provide access to a decent quality of life for everyone (like homes)and be able to take repayments at lower interest and flexible terms over life events for example. Really the question is why not? The economy is meant to work for us not the other way round. A definite move away from inequity and sexism, racism and unnecessary suffering and disadvantage.
Rates aren’t really effective as not all property is freehold so not an indicator of wealth. But agree GST should only be on luxury items like boats and planes. No one “needs” them. Cars are a necessity in NZ unfortunately. By reducing GST and income tax on the poorest working however that gets reclassified for unpaid labour contributions this would raise income levels immediately without such a reliance on private small business for example. I mean are we getting value for money and service for our tax in a few particular demographics really? She asks facetiously. 😂
Just to add to my “hateful” comment 😂 rich people structure and avoid (claim back) GST on big and small items whereas poor people paying it on necessities privately can’t. It’s a regressive tax.
And definitely not a wealth tax. Plus National didn’t consult on it, lied about it and sprung this tax on the gullible public at its time of unilateral introduction. So far Labour has done nothing about it.
There are a number of options. But it’s true I’m not keen on taxing any or particular segments of the population who are not served by Government services legally, properly or equitably. We can clearly see how Government treats its own people using our resources and that’s unacceptable if they’re doing a second rate or no job at all or just creating jobs that are of no productive use. We all generally use the same roads, schools, hospitals and systems as everyone else but those who get privileged above others simply have to pay more by way of wealth tax including everything except the family home I think. So universality in payments up to a maximum works as long as the excess is taxed enough to pay for actually needed equitable public services. In general Governments just target the easiest targets to exploit and leave the rich who have a whole army of lawyers and financiers on their payroll alone. Not much use in continuing to do that. There are massive omissions in the tax system as indicated by David Parker’s announcement that they can only find a handful of people declaring income of $20 million (and that excludes assets etc) in New Zealand which can’t and isn’t true. It’s simply the wealthy avoiding tax and it needs addressing. Personally I would advocate just wipe off Government debt that’s been spent irresponsibly or inequitably (like subsidies to polluters or expenditure or use of banned weapons chemicals etc etc as effectively done by a criminal cartel that risks human life …crimes against humanity) and was not spent with informed consent of the population and has not been in the majority of the populations best interests or with duty of care, and required to be responsible for obligations in democratically elected or appointed office. Plenty of corruption and abuse and misuse of power and failure in legal obligations exists after all. Also bearing in mind the nation actually issues it’s own money. If it all keeps flowing to the same places and not equitably or highly conditionally to others then there’s a major problem anyway isn’t there?
For example childcare in a zoo like environment for ONE child costs $400.00 per week for Mummy to “work” (for the man). That doesn’t work does it? And she gets to work numerous workloads on top of that. For crappy outcomes all round. What’s more that’s if you’re near one and if there’s a space available. This has gone on for decades and Fathers have no obligation to assist according to Government “policy” (not law)Brilliant, guys. How too keep women and children (who are unprotected and monetised and victimised down, exploited in the most disgusting ways imaginable and working for you. Against hopeless odds.
Really interesting post today. I hope you develop it further especially as you're someone who has the credibility and insight which might encourage the more conventional to think harder. NZ, being small, socially-minded and pragmatic, has the advantage that it can do new things and has a long history of doing so.
The Gib crisis is just the tip of the iceberg. I’m in Construction and have been for 25 years, there are cost effective alternatives to the Gib bracing system. Ask yourself this: Who is selling Gib board (and other products) and to whom? Then ask, who specifies what systems are used in building? When you realise that Fletcher Building is selling it’s products and systems to the consumer via architects and designers, and using councils to enforce it, you’ll see why alternatives aren’t used and all of a sudden the crazy cost of building houses here starts to make sense.
I'm really curious to know why it's such a popular bracing system for architects and designers? Do you know why don't they design alternatives as surely they are designing for a particular cost price in mind?
Labour doesn't want all those businesses rushing off and making $14,999 undisclosed donations to National.
Re a windfall tax I'd set it based on a percentage return on equity and not try to pick and choose an industry. So all businesses that make a return exceeding, say, 7% pay the windfall tax.
A central bank digital currency, with everyone having accounts directly with the Reserve Bank, is a great idea. We'll all be able to transfer money to one another through our smartphone wallets (or smart interactive cards), bypassing those Aussie trading banks, which will be reduced to lending money to inflate house prices.
The name 'e-tara' that Bernard proposes won't be a winner, though. How about calling it the Zeal (with a nod to our Productivity Commission). This was a name proposed back in the Sixties for our decimal currency, before we settled for the boring dollar.
Wow Bernard. Great Idea. I doubt whether the Bald headed boardroom bandit or the man in short pants would agree. You cant give money to “ unworthy citizens” who dont “work hard” like middle class asset owning white people,
How much of the banking system would end up in Matariki accounts? I see anyone who isn't stuck with a bank because of a mortgage or other borrowings possibly shifting.
Maybe the banks would like the idea because they could get rid of all those 'dead beat' accounts that don't earn them any, or enough profit. Much like my credit card that is automatically paid off every month. All the bank gets out of me is the annual fee.
Oops, if you have a credit card who will you have it with if not a bank?
But perhaps we are getting too excited here because the 'bald headed boardroom bandit' will have a chat with Grant and just tell him 'No'.
Annual trade deficit close to $10 billion. Then there are the banks taking $5 billion or so out a year. Throw in the insurance profits as well. Are Netflix, Disney+, etc counted in the trade deficit or are they a service?
Definitely a good idea to have something already set up and tested before the next mega crisis arrives. Even if not used at least it would give the government options
An interesting idea, sounds fine for the helicopter payment scenario, but digital currency for benefits has my dystopian sci fi reader alarm screeching (not sure why though)
Love this e-taara idea. Could you please give it freely to any interested Political Party to implement or campaign on to implement? It is about time government agencies/government stepped into the Digital age... it would be great to be able to participate in our democracy in a low-effort digital way as well (vote and do regular referendums, etc).
Hi Bernard, I see a few biases here. I'm not sure why businesses are the richest: ("Why not pay it to everyone, not just the richest") I'm sure you know of business owners whose income went from 100 to 0 overnight when we went into lockdown. I do. Some didn't make it. The government did an excellent job of getting cash to these businesses in a quick, non-bureacratic way, that would have been the envy of covid business loan applicants in other countries. Would they have been better served by having a $1000 one size fits all payment go out to every man womand and child? I don't think so.
Yes, there are examples of organisations that took the subsidy and didn't need to. Some of them thought they'd need it, and didn't. There are probably some who took it cynically, knowing full well they didn't need to. Sad.
In my own case, I neither got any of the subsidies, nor did the company I work for. I worked straight through pretty much BAU. For that matter, a helicopter $1000 wouldn't have been appropriate here either. As a question of efficiency, how well did government do, in selecting those people who needed a subsidy? It wasn't perfect, but one can certainly argue that they did a better job than helicoptering. We did not experience a huge gap up in unemployment, so again we see some success at keeping staff on payrolls. Is it better to stay employed, or to lose your job and get $1000?
It may look like a tidy balance sheet to say money printed = increased money into savings. But again, using my own example, I suddenly found myself unable to eat out, unable to go on holiday, unable to buy much of anything. OF COURSE my savings went up! That would hold true, I'd think, for anyone who kept working. There's nothing sinister in it, and it wasn't the result of government handout or money printing. It was just what happens when you don't spend.
And we need to remember NZ hasn’t had good abortion (it was literally a crime until very recently and male prophylactics and vasectomies aren’t exactly promoted )or destigmatised reproductive education and services for women and girls so we’ve been oppressed and left doing all the work and paying all the bills, then BLAMED, to take the heat off so called men and the establishment (which was and is still, embarrassingly male) for far,far too long. Poor guys.
Not sure that I follow you on cars - they too can be luxury items sometimes even more so than boats and planes! Also not sure of your rationale for not paying tax since it is the price of civisied society!
My understanding is that NZ banks have no reserve requirement ratio for lending (https://www.rbnz.govt.nz/hub/publications/bulletin/1985/rbb1985-48-04-02)... I may be wrong, but I gather the OCR is the principle thing used to control the amount of money supply here (NZ banks do have liquidity requirements, but that is a different thing).
This appears to be a very common misconception, and I expect the commercial banks are more than happy for Regular Joes to not fully understand it (not that I would put you, Bernard, in that box of course, so feel free to correct me!)
Thanks Tim. Yes. Not expressed as a reserve requirement ratio any more, but the central bank does require certain quite high tier one equity capital ratios, which has the same effect. The OCR does help change money supply growth by changing the cost of lending, and therefore shifting demand for credit.
Fun fact 1. You've forgotten all about the state taxes. They can vary from nothing to quite a lot. The California state petrol tax is about 50US cents per gallon.
Interesting concept about RB payments in place of payments to business. Unfortunately these too will be inflationary and will also not help businesses maintain staff in times of crisis. Still perhaps we could save our employment crisis by promising all new migrants a payment of several thousand dollars when they gain residency?
Excellent point John. Yes. That would have been quite the footnote with the state taxes too. Yes on the inflationary front, although you could argue we got the inflation in asset prices through the version of money printing we chose. That benefited asset owners at the expense of renters. The migrant idea is interesting. I think we'd have to build the infrastructure to cope with the extras before (rather than after/never) they arrived.
Great plan.Along with proper wealth taxes to cool inflation and recycle all that money to wealthy people and entities (the tax system needs major reform like removing income tax for anyone under about $60k and based on number of dependents and costs). We know the private debt not Government debt presents the greatest risk to the collapse of an economy and the more of Governments obligations they privatise and offload into individuals the worse that risk becomes. A line of credit for each Kiwi could mortgages, direct government aranteed income over periods (or lifelong) when productive caring and reproductive work is being done but unpaid for example. Ut would also provide access to a decent quality of life for everyone (like homes)and be able to take repayments at lower interest and flexible terms over life events for example. Really the question is why not? The economy is meant to work for us not the other way round. A definite move away from inequity and sexism, racism and unnecessary suffering and disadvantage.
We already have a form of wealth taxes in the form of rates - and GST on rates. Rather than try to pass new legislation why not simply up the ante by including assets such as cars (that congest city roads and take up parking spaces) and boats (that congest/pollute harbours) in the rate base as is done in Virginia US (https://www.vbgov.com/government/departments/commissioner-of-the-revenue/personal-property/pages/taxation-of-vehicles-boats-and-trailers.aspx ); and/or increase the charge for land banking by four times the base rate as has recently been introduced in Christchurch: https://businessdesk.co.nz/article/property/nz-first-rates-hike-for-christchurch-landbankers
Rates aren’t really effective as not all property is freehold so not an indicator of wealth. But agree GST should only be on luxury items like boats and planes. No one “needs” them. Cars are a necessity in NZ unfortunately. By reducing GST and income tax on the poorest working however that gets reclassified for unpaid labour contributions this would raise income levels immediately without such a reliance on private small business for example. I mean are we getting value for money and service for our tax in a few particular demographics really? She asks facetiously. 😂
Just to add to my “hateful” comment 😂 rich people structure and avoid (claim back) GST on big and small items whereas poor people paying it on necessities privately can’t. It’s a regressive tax.
And definitely not a wealth tax. Plus National didn’t consult on it, lied about it and sprung this tax on the gullible public at its time of unilateral introduction. So far Labour has done nothing about it.
You havent left many options for a fair way to tax the population so as to fairly share the cost of keeping us civilised.
There are a number of options. But it’s true I’m not keen on taxing any or particular segments of the population who are not served by Government services legally, properly or equitably. We can clearly see how Government treats its own people using our resources and that’s unacceptable if they’re doing a second rate or no job at all or just creating jobs that are of no productive use. We all generally use the same roads, schools, hospitals and systems as everyone else but those who get privileged above others simply have to pay more by way of wealth tax including everything except the family home I think. So universality in payments up to a maximum works as long as the excess is taxed enough to pay for actually needed equitable public services. In general Governments just target the easiest targets to exploit and leave the rich who have a whole army of lawyers and financiers on their payroll alone. Not much use in continuing to do that. There are massive omissions in the tax system as indicated by David Parker’s announcement that they can only find a handful of people declaring income of $20 million (and that excludes assets etc) in New Zealand which can’t and isn’t true. It’s simply the wealthy avoiding tax and it needs addressing. Personally I would advocate just wipe off Government debt that’s been spent irresponsibly or inequitably (like subsidies to polluters or expenditure or use of banned weapons chemicals etc etc as effectively done by a criminal cartel that risks human life …crimes against humanity) and was not spent with informed consent of the population and has not been in the majority of the populations best interests or with duty of care, and required to be responsible for obligations in democratically elected or appointed office. Plenty of corruption and abuse and misuse of power and failure in legal obligations exists after all. Also bearing in mind the nation actually issues it’s own money. If it all keeps flowing to the same places and not equitably or highly conditionally to others then there’s a major problem anyway isn’t there?
For example childcare in a zoo like environment for ONE child costs $400.00 per week for Mummy to “work” (for the man). That doesn’t work does it? And she gets to work numerous workloads on top of that. For crappy outcomes all round. What’s more that’s if you’re near one and if there’s a space available. This has gone on for decades and Fathers have no obligation to assist according to Government “policy” (not law)Brilliant, guys. How too keep women and children (who are unprotected and monetised and victimised down, exploited in the most disgusting ways imaginable and working for you. Against hopeless odds.
Really interesting post today. I hope you develop it further especially as you're someone who has the credibility and insight which might encourage the more conventional to think harder. NZ, being small, socially-minded and pragmatic, has the advantage that it can do new things and has a long history of doing so.
The Gib crisis is just the tip of the iceberg. I’m in Construction and have been for 25 years, there are cost effective alternatives to the Gib bracing system. Ask yourself this: Who is selling Gib board (and other products) and to whom? Then ask, who specifies what systems are used in building? When you realise that Fletcher Building is selling it’s products and systems to the consumer via architects and designers, and using councils to enforce it, you’ll see why alternatives aren’t used and all of a sudden the crazy cost of building houses here starts to make sense.
I'm really curious to know why it's such a popular bracing system for architects and designers? Do you know why don't they design alternatives as surely they are designing for a particular cost price in mind?
Is Central Bank Digital Currency heading in the direction you suggest?
What's wrong with a good old fashioned one off "windfall tax" on al those companies and household investors that made a excessive profit in 2020-2021?
Hi John
Labour doesn't want all those businesses rushing off and making $14,999 undisclosed donations to National.
Re a windfall tax I'd set it based on a percentage return on equity and not try to pick and choose an industry. So all businesses that make a return exceeding, say, 7% pay the windfall tax.
Re Matariki cards, Matariki apps & e-táras, tū meke e hoa!
A central bank digital currency, with everyone having accounts directly with the Reserve Bank, is a great idea. We'll all be able to transfer money to one another through our smartphone wallets (or smart interactive cards), bypassing those Aussie trading banks, which will be reduced to lending money to inflate house prices.
The name 'e-tara' that Bernard proposes won't be a winner, though. How about calling it the Zeal (with a nod to our Productivity Commission). This was a name proposed back in the Sixties for our decimal currency, before we settled for the boring dollar.
https://nzhistory.govt.nz/nz-adopts-decimal-currency
Wow Bernard. Great Idea. I doubt whether the Bald headed boardroom bandit or the man in short pants would agree. You cant give money to “ unworthy citizens” who dont “work hard” like middle class asset owning white people,
Patrick Medlicott
Hi Patrick
How much of the banking system would end up in Matariki accounts? I see anyone who isn't stuck with a bank because of a mortgage or other borrowings possibly shifting.
Maybe the banks would like the idea because they could get rid of all those 'dead beat' accounts that don't earn them any, or enough profit. Much like my credit card that is automatically paid off every month. All the bank gets out of me is the annual fee.
Oops, if you have a credit card who will you have it with if not a bank?
But perhaps we are getting too excited here because the 'bald headed boardroom bandit' will have a chat with Grant and just tell him 'No'.
Annual trade deficit close to $10 billion. Then there are the banks taking $5 billion or so out a year. Throw in the insurance profits as well. Are Netflix, Disney+, etc counted in the trade deficit or are they a service?
Definitely a good idea to have something already set up and tested before the next mega crisis arrives. Even if not used at least it would give the government options
An interesting idea, sounds fine for the helicopter payment scenario, but digital currency for benefits has my dystopian sci fi reader alarm screeching (not sure why though)
Love this e-taara idea. Could you please give it freely to any interested Political Party to implement or campaign on to implement? It is about time government agencies/government stepped into the Digital age... it would be great to be able to participate in our democracy in a low-effort digital way as well (vote and do regular referendums, etc).
Hi Bernard, I see a few biases here. I'm not sure why businesses are the richest: ("Why not pay it to everyone, not just the richest") I'm sure you know of business owners whose income went from 100 to 0 overnight when we went into lockdown. I do. Some didn't make it. The government did an excellent job of getting cash to these businesses in a quick, non-bureacratic way, that would have been the envy of covid business loan applicants in other countries. Would they have been better served by having a $1000 one size fits all payment go out to every man womand and child? I don't think so.
Yes, there are examples of organisations that took the subsidy and didn't need to. Some of them thought they'd need it, and didn't. There are probably some who took it cynically, knowing full well they didn't need to. Sad.
In my own case, I neither got any of the subsidies, nor did the company I work for. I worked straight through pretty much BAU. For that matter, a helicopter $1000 wouldn't have been appropriate here either. As a question of efficiency, how well did government do, in selecting those people who needed a subsidy? It wasn't perfect, but one can certainly argue that they did a better job than helicoptering. We did not experience a huge gap up in unemployment, so again we see some success at keeping staff on payrolls. Is it better to stay employed, or to lose your job and get $1000?
It may look like a tidy balance sheet to say money printed = increased money into savings. But again, using my own example, I suddenly found myself unable to eat out, unable to go on holiday, unable to buy much of anything. OF COURSE my savings went up! That would hold true, I'd think, for anyone who kept working. There's nothing sinister in it, and it wasn't the result of government handout or money printing. It was just what happens when you don't spend.
And we need to remember NZ hasn’t had good abortion (it was literally a crime until very recently and male prophylactics and vasectomies aren’t exactly promoted )or destigmatised reproductive education and services for women and girls so we’ve been oppressed and left doing all the work and paying all the bills, then BLAMED, to take the heat off so called men and the establishment (which was and is still, embarrassingly male) for far,far too long. Poor guys.
Not sure that I follow you on cars - they too can be luxury items sometimes even more so than boats and planes! Also not sure of your rationale for not paying tax since it is the price of civisied society!