Labour's finance spokesman David Parker is promising "broader" objectives for our central bank when he announces his party's proposals for changes to the Reserve Bank Act tomorrow.
He said that the changes would "help create jobs and take pressure off interest rates".
Appearing on TV3's The Nation programme during the weekend, Parker said: "...We are going to broaden the objective of the Reserve Bank.
"Look at what is happening now, last quarter we had zero general inflation in New Zealand, excluding the increase in tax on cigarettes. And yet we have already got higher interest rates than the rest of the developed world, than our competitors.
"We have got house prices that have gone up forty percent under National and they’re saying interest rates are going to go up more. What’s the affect of that? As you have already said despite the fact that export prices are going down and we are not covering the cost of our imports and interest, our exchange rate has been jacked up and we are losing jobs in the export sector. We gotta change something.
But as for whether one of the policy targets will specifically be about employment, Parker said: "Well you’ll have to wait for Tuesday; it might not be that blunt. We are not going to lose the inflation grounding. Inflation control is important.
"But it is a means to an end, not an end in itself. The end should be high paid jobs, secure work. Too many of our young people are pulling coffees or cleaning the elderly, these are all good jobs, or tucking in tourists. We haven’t got enough secure work for our young people. Young people can’t afford to buy a house. And I know these issues worry not just young people but their parents."
Parker said there would be one "new tool" in the Reserve Bank's policy targets agreement.
"...And in addition to that because the objective of the bank will change the way in which they apply their existing tools... At the moment they change the capital ratios for banks to back their lending based on whether the banking sector is going to fall over, not on whether the housing market’s going crazy. Now they’ll approach their tool differently if their objectives are broader. We can make a difference here. If we change nothing, nothing is going to change."
Asked about what he may do regarding cooling the housing market, Parker said: "Well look you know at the moment the Reserve Bank is in a corner because the Government’s housing policy has just failed in a dramatic way. House prices are up 40 percent under them despite there being close to zero inflation.
"Well there are a number of things you need. You need to tax the speculators….capital gains tax, you need to build some more affordable houses which the Labour party is going to do. You need to ban foreign purchases and you need to address monetary policy so that you are not jacking up interest rates when they’re already the highest, higher than Australia, the United States, China and Europe. But they’re out of whack."
On the subject of the 'speed limits' on high loan to value lending introduced by the RBNZ in October, Parker said these would not be needed if "speculators" were taxed and affordable homes were being built.
"The reason that the government doesn’t do either of those things if that they back the people that they gave 40 percent of the income tax cuts to. They are playing for the big end of town."
Parker said Labour would "less reliant" on LVRs.
"Whether LVRs or any other tool or interest rate rises or the new tools are applied will always be for an independent Reserve Bank. They will never lose their inflation objective but they will have more flexibility to address these issues in a way that doesn’t require them to put as much reliance on things like loan to valuation ratios or jacking up interest rates."
Parker said Labour would consider regionally-applied LVR limits.
"Yes, I mean it’s ridiculous that places that have got no or low house price inflation are caught up in the same rules are Auckland and Christchurch."
Any regionally-focused LVRs would therefor "probably primarily" be aimed at Auckland.
"One of the reasons house prices are going up in Christchurch is of course they had an earthquake and it costs more to replace a house than…new houses cost more.
"The big problem is in Auckland and the answers there lie in building affordable houses. Loan to valuation ratios if they are necessary, certainly not necessary for example where I come from in Dunedin. We haven’t got house price inflation there so why should our economy be hobbled? Why should our young people be prevented from buying houses because of the blunt way in which loan to valuation ratios are being applied?"
42 Comments
I'd suggest like most pollies they have no answer, dont understand, or dont want to rather than dont care.
Parker and Cunliffe however are little better, the ideas above neuture the RB doing exactly what its mean to.
If you have a facebook account join to Cunliffe, its funny and pathetic at the same time, clueless and doesnt want to know.
regards
What a contradiction
David Hargreaves reports David Parker as saying
"we have already got higher interest rates than the rest of the developed world, than our competitors"
Meanwhile
David Chaston over on today's 90 seconds says - really? - lookee here - Really?
ULP-95 at NZ$2.17/litre in New Zealand compared to ULP-95 in California at NZ$1.385/litre
seems actually very inexpensive to me.
Can you not see the irony in that?
Yes if Labour sticks to its reforming housing supply and demand factors to decrease interest rates monetary policy they are onto a winner IMHO.
The housing supply -greenbelts and demand factors -immigration are getting academic support on Macrobusiness
"A Lesson in housing supply stupidity" by Prof Paul Cheshire about the failure of Greenbelts and the UK housing market.
"RBNZ slams population ponzi" about Michael Reddell paper on immigration and housing crowding more productivity producing investments in NZ.
Sorry my or interest.co.nz copy/paste function is not working so you will need to google the links yourself.
Here's Steven Joyce on David Parker's TV3 interview;
Parker wrong nine times in one interview
The Labour Party's attempts to talk down New Zealand's economic performance have hit a new low this weekend with David Parker making at least nine factually incorrect statements in one short interview, Associate Finance Minister Steven Joyce says.
In the interview, with TV3's The Nation programme, Parker made assertions about low export prices, a poor balance of trade, job losses in the export sector, New Zealand’s current account deficit, high interest rates, a lack of business investment, 40 per cent house price increases, no tax on housing speculators, and low levels of house building.
Mr Joyce says all of Mr Parker’s assertions in relation to these nine things are incorrect.
“This is an appalling number of errors for someone who would seek to run New Zealand's economy. This number of errors surely can't have been made by accident,” Mr Joyce says.
“Mr Parker's attempts to describe the New Zealand economy sound much more like the situation this government inherited from Labour in 2008 than anything we are seeing in 2014.
“He must have been thinking of 2008 when he talked of ridiculously high interest rates, a poor balance of trade, and the poor performance of the export sector. All were pretty sick back then and all are in much better shape today as a result of this government's careful stewardship of the economy.”
Mr Joyce says there are two possible conclusions.
“Either Labour is deliberately fudging the facts to fabricate the need for their radical economic policy prescription, or they have truly woken up in 2014 for the election without observing anything that has happened in the last five years. The latter would at least fit their regular denials of the impacts of the GFC and the Canterbury earthquakes.
“New Zealanders know that this country today is doing better than most other developed countries, and in 2008 we were doing worse than most, in fact entering our own recession before the Global Financial Crisis,” Mr Joyce says.
“It might be an idea for Labour to look at the steady improvements that are occurring in the New Zealand economy before they start trying to write up their policy ideas.”
Was Steven Joyce talking about a different interview? In the named TV3 interview, It’s not obvious that Parker makes a single error. The statements Parker made all seem correct, while Joyce seems to have just made up some other comments entirely. Wouldn't be the first time.
Totally disagree with you Stephen. I watched that interview live and have frankly was hugely frustrated listening to it. I'd not heard a more dishonest set of grossly incorrect statements in an interview for a long time. Far too many uninformed people would have taken him at face value and been badly mislead. What got me most was that it came from Parker who I'd normally have expected better from as compared with his leader and some of his colleagues. I put it down to desperation, but I did think that man had more integrity than that.
Grant before you label people as 'uninformed, misleading and desperate' maybe you should actually state what were in your opinion 'grossly incorrect statements'.
Also if you are going to defend Steven Joyce maybe you should read the NBR Mathew Hooten article discussed below and see how he is actually governming this country.
He's not asking you to prove his criticism of Parker - he's done that for himself by citing Joyce's detailing of the "nine inaccuracies", which is here http://www.beehive.govt.nz/release/parker-wrong-nine-times-one-interview. He's asking you to prove your criticism of Joyce.
There are of course statistics, damn statistics, and lies, and for Joyce to claim Parker was incorrect, he would have to be so on any reasonable interpretation of the statements, not just on whatever convenient one Joyce may pluck out of the air.
Looking at the specific 9 points:
Export prices are going down: Milk prices are off 20% in the last few months as I understand it. Tick for Parker.
We are not covering the cost of imports and interest. The current account is still in deficit. 2 nil to Parker.
We are losing jobs in the export sector. This can be frankly interpreted as the certain fact there are less jobs in exporting/import substituting than there otherwise would be with a competitive exchange rate. I’d give them half a point each.
Current account not under control. Minus 3.4 percent of GDP is not “under control”. Another one for Parker.
High interest rates: They are higher than the rest of the developed world. In the context of the RB Act which was the main point of the interview, a reasonable statement, but I’ll be generous and give half each.
Exporters not investing in plant. Both sides playing with stats. The counter factual impossible to prove. Half each.
House prices up 40%. I am pretty sure house prices are up 40% from their lows within the term of the Nats; maybe 30% net in the period of the National government, given they first went down. If my assumption is correct, then tick again for Parker.
Taxing capital gains. There are some taxes now on quick turnover property, but those who hold for a relatively minimal period pay no tax on capital gains as I understand it. Parker not incorrect.
Government not building any more houses. The government is not directly initiating house building as far as I know.
In total I would score it therefore Parker 7.5, Joyce 1.5.
Ironically then Joyce has made 7 incorrect statements. If he had said something like you could put a different interpretation on the data, he would have been correct; but he didn’t. He said Parker was incorrect, when clearly he wasn’t.
Parker's job is to talk about NZ's issues as he sees them, and to talk about how to address them in the future. What Labour did last time they were in is not particularly relevant. In many of his comments he wasn't all that critical of the government relative to Labour's last effort; e.g. on the current account he correctly noted that we have had deficits for over forty years. Labour do appear to be focussing on that deficit more than in the past; and that is the prime reason I currently prefer them.
Similarly, high or low export prices are barely anything to do with a government (although the returns in local currency are), so the fact he is pointing out they are heading down is not so much a criticism as noting that we may well not have the rosy terms of trade we have had the last few years for much longer, and perhaps we should consider doing something about it. Here's a plan. Where's yours, Mr Joyce?
Joyce has actually hoisted his flag by saying he thinks -3.4% current account is good. Labour's Reserve Bank Act suggested changes are primarily about that deficit and what it means to wealth creation, jobs, and rebalancing the economy. Without any changes we are guaranteed a deficit indefinitely, until there is a crash, and international capital flight, or we have sold or mortgaged everything.
In nearly all of Parker's points, there are clear policy differences to National, so they are valid points to address. He is not just taking pot shots at the results under National.
Joyce seems desperate to look back six to sixteen years, rather than forwards, such that I have little time for the man. E.g. A defence of record high house price multiples by saying they went up by a higher percentage under the last lot wouldn't impress me if I was looking for my first house, or if I had a very large mortgage on a recently purchased one.
You seem to think the Parker comments were misleading or deceptive. I don't think they were, but you seem to agree none were incorrect, so you agree that Joyce was in fact wrong in his assertion.
Well Stephen I did see the interview and it was being critical, it bearly acknowledged any improvements under National despite there being many. And yes Parker could well be future focused entirely and basically saying "yes we did as bad, or in most cases worse, but trust us, forget our recent track record, we've learnt from it and we will do better in future". I'm not so trusting obviously. Housing certainly is an issue that neither Govt has found a solution to and all debate on that is worth having, its scary and increditably tough for young FHBers. But when it comes down to those that think they have the solution, I tend to focus upon track records.
Sorry Stephen, here's someone (Kiwiblog) who's done a far better job than me on the facts, and to me facts do count toward creditability.
The nine inaccuracies are:
Schedule of inaccuracies in David Parker interview on The Nation – April 26 2014
1. “Export prices are going down”
Export prices in fact rose 13.8 per cent in the year to December 2013 (Statistics New Zealand).
The ANZ NZD Commodity Price Index rose 11.6 per cent in the year to March 2014 and is just 6 per cent below its all-time March 2011 peak.
2. “We are not covering the cost of our imports (and interest)”
Statistics New Zealand reported a merchandise trade surplus for New Zealand in the year to February 2014 of $649 million (1.3 per cent of exports).
January and February’s merchandise trade surpluses were the highest ever for their respective months.
3. “We are losing jobs in the export sector”
The number of people employed in the agriculture, forestry, fisheries, mining and manufacturing sectors has increased by 16,100 in the last twelve months.
Total New Zealand employment increased by 66,000 in the last year or 3.0 per cent in one year. This is the fastest employment growth since December 2006. (Statistics New Zealand Household Labour Force Survey December 2013).
4. “This challenge of getting New Zealand’s current account deficit under control”
New Zealand’s balance of payments deficit is currently 3.4 per cent and has averaged only 3.1 per cent over the last four years.
Under Labour the Balance of Payments peaked at 7.9 per cent in December quarter 2008 and averaged 7 per cent over their last four years.
New Zealand’s Net International Investment Position is currently down to 67 per cent of GDP after peaking at 85.9 per cent in March 2009.
5. “Ridiculously high interest rates”
Interest rates have just edged up above 50-year lows.
Floating mortgage interest rates are currently between 6 and 6.25 per cent. They peaked at 10.9 per cent between May and August 2008.
6. “Exporters…. Aren’t willing to invest in plant”
Investment in plant, machinery and equipment by New Zealand companies was up 7.5 per cent in the December quarter and 3 per cent for the year. Investment in plant, machinery and equipment is now at its highest level ever (Statistics New Zealand – December quarter 2013 GDP release).
Just yesterday, long term New Zealand forestry processor Oji Limited announced a $1 billion investment to purchase Carter Holt Harvey Processing assets.
7. “House prices are up 40 per cent under them”
House prices under this government have increased at around 5.7 per cent per annum, compared to 10.7 per cent per annum under Labour, according to REINZ figures. Total house price increases over the period is 30 per cent, not the 40 per cent Mr Parker claims. That compares with a 96 per cent increase in house prices under Labour.
8. “You need to tax the speculators. They are not taxing speculators”
Taxpayers who buy and sell houses for income are currently taxed at their personal income tax rate on their capital income.
9. “They are not building any more houses”
The actual trend for the number of new dwellings, including apartments, is up 95 per cent from the series minimum in March 2011.
The trend is at its highest level since October 2007 (Statistics New Zealand February 2014 Building Consents Release).
Export prices are going down: Milk prices are off 20% in the last few months as I understand it. Tick for Parker.
Was this a tongue in cheek reply Stephen ? Are you seriously suggesting that almost record high dairy prices and pay-outs are negated for your argument by two months of lower auctions that everyone has been expecting as supply comes on in response to price - or are we going to blame the Govt for the global supply. NZ's terms are at 40 yr high and that's the current fact.
http://intelact.com/index.php/tools/charts/item/84-fonterra-milkprice
We are not covering the cost of imports and interest. The current account is still in deficit. 2 nil to Parker.
The people in charge from 1999 to 2008 can seriously criticise the current Govt's performance ? http://www.rbnz.govt.nz/statistics/key_graphs/current_account/
We are losing jobs in the export sector. This can be frankly interpreted as the certain fact there are less jobs in exporting/import substituting than there otherwise would be with a competitive exchange rate. I’d give them half a point each.
I've no idea on these stats but overall on average the export community is coping well and doing NZ a great service currently
Current account not under control. Minus 3.4 percent of GDP is not “under control”. Another one for Parker.
See comments on point 2 above
High interest rates: They are higher than the rest of the developed world. In the context of the RB Act which was the main point of the interview, a reasonable statement, but I’ll be generous and give half each.
The people in charge from 1999 to 2008 can seriously criticise the current Govt's performance http://www.rbnz.govt.nz/statistics/key_graphs/90-day_rate/
Exporters not investing in plant. Both sides playing with stats. The counter factual impossible to prove. Half each.
Yes I can't prove one way or the other, and neither can he who made the claim - less than honest
House prices up 40%. I am pretty sure house prices are up 40% from their lows within the term of the Nats; maybe 30% net in the period of the National government, given they first went down. If my assumption is correct, then tick again for Parker.
I'll leave you to compare the performance of the 1999-2008 Govt to the current one. https://www.reinz.co.nz/shadomx/apps/fms/fmsdownload.cfm?file_uuid=BC19…
Taxing capital gains. There are some taxes now on quick turnover property, but those who hold for a relatively minimal period pay no tax on capital gains as I understand it. Parker not incorrect.
Government not building any more houses. The government is not directly initiating house building as far as I know.
So he just ignored what is there and inferred there was none - less than honest at best
As I said all very misleading or outright deceptive
Brendon - do you want me to cut and paste Joyce's comments to reiterate what I felt was misleading and outright wrong? Tell me what Joyce said about Parkers comments that you don't agree with i.e. tell me that NZ hasn't got a record 40 yrs terms of trade for instance when you try to refute the export price one, then move onto interest rates and the rest.
Wow, what a load of waffle, he claims the others guys facts are wrong, provides no countering evidence, and then spends most of the time waffling on about how Labour must think it's 2008, yes Mr Joyce, i bet you right, i bet they really think it's 2008, you've really convinced me with your sound arguments that you aren't running scared and really do deserve another go at running the country.
What is the point, where is the journalism, in simply reporting "Politician A says xyz, Politician B says politician A is wrong" while not providing readers with the actual information which will enable us to form a judgement as to whether A or B is correct? Does interest.co.nz want to promote informed debate or doesn't it?
For if it's the former, at the very least we might have expected a link to Joyce's explanation of what he thinks the nine inaccuracies were. Some fact checking of Joyce's statements would be even nicer
http://www.beehive.govt.nz/release/parker-wrong-nine-times-one-interview
Joyce is correct that NZ was already in recession by the time the GFC hit. The current account and terms of trade were terrible under Labour's last years. You could also attribute rising interest rates to Labour's expansion of programmes like WFF and zero interest student loans and ignoring the effects of their marginal tax increases, tax deductions, negative gearing and bank credit expansion on the property market. Cullen must have been blind not to have recognised what his policies were doing. Paying back government debt with the tax receipts from all that private debt was not financial genius.
But National has continued most of this and its hands off policies on supporting New Zealand businesses in favour of imports have contributed to manufacturing job losses. The current account is still terrible and National itself and Treasury forecast it to get worse as bank profits and dividends from foreign owned companies increase. Nor can National claim credit for the dairy boom or the balance of trade. They're cyclical
Both Labour and National are committed to the wealth effect from property price rises and if Labour wasn't careful, if there was no real shortage of Auckland houses, overbuilding would dramatically increase the odds of an Ireland type crash.
Pox on both the main parties. They have equally contributed to property being too big to fail and trying to maintain nose bleed prices with middle class tax rebates. Their only solutions are more debt and consumption to kick the can a bit longer
Do we have higher interest rates than the developed world? Higher than the US, GB, Japan and the Euro/French/German/Empire yes. What about Russia, India, China, Brazil, Turkey, South Africa? Their economies are a lot bigger than ours and their interest rates are a lot higher.
Wow, can’t believe Wheeler raised interest rates again. Collision course to recession! The ECB and rest of the western world are either talking about, or heading towards further monetary easing and we’re tightening? We’re doing that while there’s an open conduit between rent seeking foreign capital, and all the NZ asset markets, housing included. It’s encouraging the worst kind of foreign investment. Parkers policies seem to make sense to me.
House price inflation used to be included in the general inflation figure. Time to put it back? What would the last 30 years look like? Most commentators don't even refer to it as inflation, rather house price increases. Like calling debt, credit. Avoids the negative connotations
Maybe Steve Joyce is upset his Muldoonist crony capitalist empire with 1500 MoBIE employees, micromanagment by himself and subsidising of loss making companies has been critiqued by Mathew Hooten in the NBR -"Joyce ressurects Muldoonist State." (Unfortunately behind a paywall.)
Very simple questions to Steven Joyce
Q.How long have you been in power
A. 66 months
Q. Why are you still blaming the previous Labour govt?
A. We need a base to measure by
Q. How come most of your references to Parker relate to parts as little as 3 months (e.g. last quarter) of the 66 months and not to the whole period?
A. Dunno but it sounds good to me and the voters are dumb enough to accept my stuff.
.... could go on.....
It is far too easy to get stuck on all the details but that is all part of the game.
How many of the Politicians are truely honourable?
How many Politicians are greedy, cocky manipulators?
It doesn't matter which side of the Political spectrum one is on as none of the status quo practice the fundamental requirements for a proper functioning society.
Until all of man-kind stands free, equal and holds these rights and responsibilities for all then the gap between rich and poor will widen. When man-kind by compulsion must use the legislative and regulatory system to advance their personal wealth they are neither free nor equal and when they know that the legislative and regulatory system is inherently flawed and offers many protections to the users of these mechanisms rather than the protection of the individuals rights, then is it not arrogance to suggest that one Political party has made things better than the next when freedom and equality have been the cost. Any monetary gain obtained at the expense of freedom and equality is poverty.
All the blathering in the world from Parker and Joyce is nothing more then pancake flipping which is Centuries old.
“Six mistakes mankind keeps making century after century:
Believing that personal gain is made by crushing others;
Worrying about things that cannot be changed or corrected;
Insisting that a thing is impossible because we cannot accomplish it;
Refusing to set aside trivial preferences;
Neglecting development and refinement of the mind;
Attempting to compel others to believe and live as we do.”
― Cicero
The economy is engineered !!!!!
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