Governor Adrian Orr says RBNZ was only a ‘bit player’ in 2020/21’s explosive housing inflation, but he downplays the role of money printing here in pumping up asset prices, and ignores the LVR removal
Eventually. The Govt backpedalled on this one quickly, saying it was a collective target and the 10% cut still applied. Classic performative announcement.
Big Government doing what big Government does. Socialising responsibilities, for citizens tax, by protecting the wealthy’s wealth. All while the lot of them are printing money and creating debt. While the work and costs fall on the least privileged, most oppressed and woman and their children who are not served, nor have access to standing law, by either. Not even counted. Watch out for what happens to the woman who heckled the PM with a baby while other women surrounded her and scared her child. She will be adjudged a “bad Mother” not someone whose baby was frightened by strangers getting too close and therefore being threatening to both Mother and child. This ALL happens right before our eyes. A system not fit for purpose indeed. She was NO threat other than her words in a public place. The same applies to this system of “trickery” that is marginalising and increasing numbers of the most vulnerable more and more. It IS all quite sinister indeed.
Have you seen any evidence, anecdotal or otherwise, of developers deciding to land bank until the 3x3 rules come into effect? Also, have any, say 2x2, consent applications been withdrawn from councils so the developers can wait for 3x3. If I were a developer I'd certainly be looking at adding up to a million dollars to that piece of land by waiting till I could put an extra house on it.
Haven't heard that. But makes perfect sense. They (and home buyers) won't have to wait long though. It's scheduled to be in place by August next year and it's likely to happen because of the bipartisan support.
More irritating still is that after 2008 and we have been told over and over it’s private debt that threatens the economies not Government debt so relief or at least not increasing it that is protective of the economy and holding it on Government books is more stable and serves everyone best. Because let’s face it Government can create as much as they like and need for everyone in their country’s well-being, clearly. Then reform tax so those who can pay more do pay more because they benefit more than most , for various reasons not many of which are due to superior characteristics, from the people and the collective investments to achieve personal wealth.
Bernard, did any country pursue a helicopter money no QE response? As a small country in the middle of nowhere wouldn’t our currency have been so out of step globally (U.K./EU/Aussie/USA) that it would have walloped our exporters?
None that I've seen, although Australia and America did versions of helicopter money financed indirectly by money printing. A lower currency would not have been a bad thing for our exporters.
Hi Bernard. Its a good long article on house price inflation. My point is small but I think important. The majority of inflation has always been on land not on the house. Most land capital gain is unearned over time and with massive uplifts on rezoning. Owners are rewarded for sitting on large underutilised plots, hence contributing to the housing shortages despite rezoning. Although it is thought of as a political death trap, a capital gains tax would at least allow for redistribution of part of this unearned gain towards other fiscal priorities including infrastructure for growth. NZ is an outlier in this regard and a change is overdue.
Completely agree John. That's why I favour a land tax of 0.3%/year on residential land values, with a 3% per year tax on bare zoned residential land, along with a 30% value capture from zone changes.
Bernard. I am concerned by the widening of the rich/poor gap during covid evidenced by the rapid rise in house and rental prices. At the same time the massive public debt burden will fall on the shoulders of the next generation many of whom will never be able to afford a house unless they are in the 10% with wealthy parents. Im in that bracket but increasingly uncomfortable as this just further widens the divide. Money brings better education, health, job opportunities, lifetime income, general wellbeing, but more and more of NZ stuck in welfare dependency and poverty isnt good. No turkey votes for an early Xmas so it takes leadership, so far Im hearing a lot of buzzing coming out of the beehive, but no solutions to the problem. What do you think should be done to turn the corner without completely derailing the train?
Thanks John. I'm less concerned about the debt. It can be rolled and inflated away. I'd much prefer the Crown borrowed to invest in affordable houses and climate infrastructure, funded by the proceeds of a land tax.
Only the government can solve the housing catastrophe but they refuse to do it. I don't think there's any benefit of the doubt to be given anymore. The government is systematically and deliberately depriving its own people of a basic human right.
No kidding. The usual definition of democracy is government of, by, and for the people. Elections give us an illusion of that while the reality is an absence of democracy. This is elite rule.
Thanks Marc. But it's doing it at the behest of median voters who are very happy with the untaxed and leveraged capital gains they're getting, and believe they need to fund their kids into houses...
My guess is that when house prices fall, and they will, the Banks will be saved again. Whether that will be passed on to the mortgagees will yet to be seen.
One tax debate that Australia was looking to introduce was a 70% to 80% tax on windfall gains from property rezoning. There are issues with how this could be implemented but would be a tax value on the rezoning portion of the gain, either at time of rezoning or sale. I have watched values go up 500% plus at the stroke of a councilors pen, those gains being tax free seems immoral. I have seem this multiple times where a farmers run off on the outskirts of town turns into the equivalent of a very large Powerball win.
If you can obtain a "copy" of the TV program in which RBNZ economist Yuong Ha said that the Reserve Bank was deliberately going to increase the price of housing in New Zealand (the program was about September,October 2020) you will be able to prove that Adrian Orr is a blatant liar.
Excellent link Erina. Sen is a hero.
Bernard, do you think dairy farmers will have to drop numbers?
Eventually. The Govt backpedalled on this one quickly, saying it was a collective target and the 10% cut still applied. Classic performative announcement.
So the greens can spin BS as good as the big parties? If everyone else at COP26 is doing the same, things aren’t looking great!!
So the greens can spin BS as good as the big parties? If everyone else at COP26 is doing the same, things aren’t looking great!!
So the greens can spin BS as good as the big parties? If everyone else at COP26 is doing the same, things aren’t looking great!!
Big Government doing what big Government does. Socialising responsibilities, for citizens tax, by protecting the wealthy’s wealth. All while the lot of them are printing money and creating debt. While the work and costs fall on the least privileged, most oppressed and woman and their children who are not served, nor have access to standing law, by either. Not even counted. Watch out for what happens to the woman who heckled the PM with a baby while other women surrounded her and scared her child. She will be adjudged a “bad Mother” not someone whose baby was frightened by strangers getting too close and therefore being threatening to both Mother and child. This ALL happens right before our eyes. A system not fit for purpose indeed. She was NO threat other than her words in a public place. The same applies to this system of “trickery” that is marginalising and increasing numbers of the most vulnerable more and more. It IS all quite sinister indeed.
Hi Bernard
Have you seen any evidence, anecdotal or otherwise, of developers deciding to land bank until the 3x3 rules come into effect? Also, have any, say 2x2, consent applications been withdrawn from councils so the developers can wait for 3x3. If I were a developer I'd certainly be looking at adding up to a million dollars to that piece of land by waiting till I could put an extra house on it.
Haven't heard that. But makes perfect sense. They (and home buyers) won't have to wait long though. It's scheduled to be in place by August next year and it's likely to happen because of the bipartisan support.
More irritating still is that after 2008 and we have been told over and over it’s private debt that threatens the economies not Government debt so relief or at least not increasing it that is protective of the economy and holding it on Government books is more stable and serves everyone best. Because let’s face it Government can create as much as they like and need for everyone in their country’s well-being, clearly. Then reform tax so those who can pay more do pay more because they benefit more than most , for various reasons not many of which are due to superior characteristics, from the people and the collective investments to achieve personal wealth.
Bernard, did any country pursue a helicopter money no QE response? As a small country in the middle of nowhere wouldn’t our currency have been so out of step globally (U.K./EU/Aussie/USA) that it would have walloped our exporters?
None that I've seen, although Australia and America did versions of helicopter money financed indirectly by money printing. A lower currency would not have been a bad thing for our exporters.
Well explained Bernard but very sad. Politics “Trumps” sense. The rich get richer and don't care. Economics broken?
Patrick Medlicott
Hi Bernard. Its a good long article on house price inflation. My point is small but I think important. The majority of inflation has always been on land not on the house. Most land capital gain is unearned over time and with massive uplifts on rezoning. Owners are rewarded for sitting on large underutilised plots, hence contributing to the housing shortages despite rezoning. Although it is thought of as a political death trap, a capital gains tax would at least allow for redistribution of part of this unearned gain towards other fiscal priorities including infrastructure for growth. NZ is an outlier in this regard and a change is overdue.
Completely agree John. That's why I favour a land tax of 0.3%/year on residential land values, with a 3% per year tax on bare zoned residential land, along with a 30% value capture from zone changes.
Bernard. I am concerned by the widening of the rich/poor gap during covid evidenced by the rapid rise in house and rental prices. At the same time the massive public debt burden will fall on the shoulders of the next generation many of whom will never be able to afford a house unless they are in the 10% with wealthy parents. Im in that bracket but increasingly uncomfortable as this just further widens the divide. Money brings better education, health, job opportunities, lifetime income, general wellbeing, but more and more of NZ stuck in welfare dependency and poverty isnt good. No turkey votes for an early Xmas so it takes leadership, so far Im hearing a lot of buzzing coming out of the beehive, but no solutions to the problem. What do you think should be done to turn the corner without completely derailing the train?
Thanks John. I'm less concerned about the debt. It can be rolled and inflated away. I'd much prefer the Crown borrowed to invest in affordable houses and climate infrastructure, funded by the proceeds of a land tax.
Unfortunately this govt has a pitiful track record. They dont deliver on policies but borrow and spend on vanity projects. ☹️
Only the government can solve the housing catastrophe but they refuse to do it. I don't think there's any benefit of the doubt to be given anymore. The government is systematically and deliberately depriving its own people of a basic human right.
No kidding. The usual definition of democracy is government of, by, and for the people. Elections give us an illusion of that while the reality is an absence of democracy. This is elite rule.
The UN has already declared NZ in breach of its human rights commitments on housing. https://documents-dds-ny.un.org/doc/UNDOC/GEN/G21/096/81/PDF/G2109681.pdf?OpenElement
Thanks Marc. But it's doing it at the behest of median voters who are very happy with the untaxed and leveraged capital gains they're getting, and believe they need to fund their kids into houses...
No kidding. So much for equality.
My guess is that when house prices fall, and they will, the Banks will be saved again. Whether that will be passed on to the mortgagees will yet to be seen.
Too big to fail. Even too big to wobble.
Great Article
One tax debate that Australia was looking to introduce was a 70% to 80% tax on windfall gains from property rezoning. There are issues with how this could be implemented but would be a tax value on the rezoning portion of the gain, either at time of rezoning or sale. I have watched values go up 500% plus at the stroke of a councilors pen, those gains being tax free seems immoral. I have seem this multiple times where a farmers run off on the outskirts of town turns into the equivalent of a very large Powerball win.
Dear Bernard
If you can obtain a "copy" of the TV program in which RBNZ economist Yuong Ha said that the Reserve Bank was deliberately going to increase the price of housing in New Zealand (the program was about September,October 2020) you will be able to prove that Adrian Orr is a blatant liar.
Robert L Taylor