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RBNZ's Bollard says house price inflation unlikely to create debt-fuelled consumption boom this time
It's different this time. That's the message from Reserve Bank Governor Alan Bollard at this morning's press conference after his decision to leave the Official Cash Rate on hold at a record low 2.5% until the middle of 2010. Bollard said consumers were being much more careful about taking on more debt to go on a spending spree in the wake of the financial crisis. That's why he is less worried about his forecast of house price inflation of 12% by early March leading to a consumption and inflation boom. "We think New Zealanders have taken some lessons out of the financial crisis," Dr Bollard told the news conference. "We don't see the signs of a debt fueled asset bubble," he said.
Meanwhile, Bollard also said the bank was less concerned about banks not passing on lower interest rates to consumers. Earlier this year the RBNZ expressed concern that variable mortgage rates had not been cut enough after very sharp cuts in the OCR, but since then there have been reductions in variable mortgage rates. "We have less concerns about that. They (mortgage costs) are reflecting real costs of raising funds internationally," Bollard said.
65 Comments
And yet the RBNZ expects
And yet the RBNZ expects house prices to increase by 12% in the march year, despite static wages. If that isn't a debt fueled asset bubble what is?
Housing to fall by 30%,
Housing to fall by 30%, it has fallen 10%, but in fact will now rise by 12% levelling off at 2%. A large variance being the result of expectations theory (someones were wrong) and the law of unintended consequences.
Borrow now with 10% equity and in a years time your equity will have doubled. 100% return forecast by the reserve bank, and everyone is confused as to why property is popular.
I was going to invest in the upcoming South Canterbury float of helicopters, coolstores and other productive activities but given the negative press by correspondents and lack of forecasts in these areas by the reserve bank as to their growth prospects, I will follow the reserve banks forecasts and invest in property, the game is stacked in there favour as opposed to the other commentators.
Until the tax working group's
Until the tax working group's proposals come into law and knee you right in the LAQC's, John.
Wasn't it just yesterday that
Wasn't it just yesterday that we were all looking at 'getting out of the NZ$ into the A$" for higher yields?
Forget the 12% per annum stuff! The kiwi has just made a 1.5% per diem move. There goes the interest rate differential. Dr. Bollard sure knows his stuff.
Until the tax working group’s
Until the tax working group's proposals come into law
yeah right
John, your thinking is a
John, your thinking is a perfect illustration of why the RB/ Govt doesn't have a clue about how to build the economy.
Instead of concentrating on positive actions and analysis to encourage business and business investment, the concentration is negative, on how to suppress the property market, and your actions are a perfect illustration of how a dis-incentive will always create an undesired consequence.
I say Leave the property market to sort itself out & concentrate on creating better more secure business & business investment.
Just as a matter of
Just as a matter of interest, Keith, what are your suggestions for "creating better more secure business & business investment"?
The RBNZ note:
"The tax system also influences cyclical pressures in the economy. Our assessment is that the current system exacerbates the economic cycle through its impact on saving and investment decisions, particularly the way it encourages demand for housing."
"That’s why he is less
"That's why he is less worried about his forecast of house price inflation of 12% by early March leading to a consumption and inflation boom.
"
Maybe that because no one has any money left after buying a house to go on a spending spree. What a lot of people forget is the lag impact of bubbles on general consumption. 5 years ago, when the bubble had only been going for a few years, maybe only 10% of mortgage holders bought in at bubble prices and were therefore heavily indebted. So 10% were suffereing, 90% were laughing. As the bubble has been going for another 5 years, maybe now the proportion who bough post bubble is closer to 30% (given that most mortgages are paid off in 25 years and the bubble has been going for about 30% of that time). This means unlike in the past, we have a whole age group 23-33 who have LESS discretionary spend than pre bubble homeowners. The figure can only get worse, even if house prices stagnate, because stagnation wont eliminate the bubble immediately. That is why govt/rba strategy shoule be to engineer a large quick correction of -ve 40% over a couple of years at most.
In essence, Bollard should be less worried about a consumption boom, and more worried about lifestyles being eroded by poor affordability (i'm, talking price to income here). Raise rates now you baffoon and let the market correct for Pete's sakes. And the govt should listen to the tax working group and start stinging ppty owners, including the family home with CGT, negative gearing ring fencing and maybe a land tax as well. Only then can new FHBs be freed from the existing debt monster that threatens to engulf future generations. Yes there will be pain, but the banks and borrowers cant say they were not warned. (but guarantee deposits in the meantime though). If the banks cant handle it then nationalise them, but we are being told all the time how strong they are. This would be a good chance for them to prove it.
Point taken, jimmy(the other one),
Point taken, jimmy(the other one), but I'm not too sure the Australian Government would take too kindly to NZ nationalising 'their banks' operations in this country! I don't think we'd keep getting access to their funding base!
Jimmy: I pretty much agree
Jimmy: I pretty much agree with you. But think of consequences: deflation of the property bubble will cause people to feel less wealthy & spend less. Spending generates economic activity, so the consequence will be straight back into recession. There would be a lot of pain before the economy recalibrated itself into productive activities.
& just how inviting will that be to a government thinking about being in election mode in 18 months time? The threat of being a one-term govt is possibly the most awful any politician can comprehend.
Unfortunately that creates a strong argument for the status quo
Cheers
How does the average working
How does the average working New Zealander invest in the 'productive sector' in this country?
Philly, "Spending generates economic activity,
Philly,
"Spending generates economic activity, so the consequence will be straight back into recession. "
cocaine etc also generates physical activity on a near comatose drunk, but its a short term illusion. the longer we have high house prices, the more households will enter into a market that requires twice as much debt as they should be required to bear. It becomes progressivly harder and harder to withdraw from because more and more people are affected. We need to go cold turkey, and so what if it hurts. And yes it might also affect innocent people. But the reality is there is NO OTHER CHOICE. It almost seems as if western leaders feel there is no way out, so better to go out on a high.
There is nothing wrong with a recession if you need one. What is most perverse about this latest farce is that people now think that the ppty bubble can withstand anything because its come through the GFC. Nothing like a snort of cocaine to make you feel 10 foot and bullet proof.
Sound economic analysis as always
Sound economic analysis as always on interest.co.nz
What Bollard is referring to is the wealth effect... this drives consumption. People feel wealthier because their assets values have gone up and take on more debt and spend more... Its a well documented feature of spending and saving behaviour.
What Bollard is saying it that he doesn't see the wealth effect kicking in as far as house prices go becuase people are still feeling the effects of the recession and investment losses. This will take some time (maybe another 18 months) for people to get over. Also Bollard expects, as quite a few commentators do, that interests rates for borrowing are going up thus putting a dampener on demand for credit. THis will occur despite the low OCR
In fact rising borrowing costs allow the OCR to remain lower for longer. Bollard is in a pretty good position at the moment....
Nicholas a few points to
Nicholas
a few points to get you started:
To Encourage business:
Make available business lending that does not require securing by property.
Lend to Business at a lower interest rate than housing.
Provide R&D tax credits.
Provide Realistic business funding to all levels of viable business, particulaly startups and those with export prospects. How many Kiwi inovations have we seen sold overseas because no-one in NZ would put upfunding ?
Reduce compliance costs to business of collecting money for the Govt (GST, Tax, Student Loans, FBT, etc)
Reduce compliance costs of doing business - Resource consents, Building consents, permit for this, permit for that etc
To Encourage business investment:
Corporate govenance - much tighter controls on company operators (director/ boards /managers) that have been able to abuse the lack of action by the commerce commission etc and steal millions from investors.
Prevent the closing down of one business & immediate reopening of the same business under different name but without the debts. eg developers, builders, high risk business etc.
Safe vehicles for Investment Directly into Business Lending rather than in the business itself- ie public able to invest into lending pool that is used only for business loans, much the same as finance companies provided- takes away the need for each investor to assess each business, & instead places onus on Lender due Diligence
via share market:
Control hedge funds & other large players that maniputlate NZ's tiny share market.
Much better corporate govenance and regulatory control / enforcement. The existing maintenance of company sharemarket listing ie reporting and regulations, give the investor no confidence that the information they are given actually reflects the true state of the business.
Hmm ... now I wonder
Hmm ... now I wonder what caused him to change his tune? This seems to me a near full 360deg about turn. Something feels very, very worrisome about 2010.
Nicholas, "I don’t think we’d
Nicholas,
"I don't think we'd keep getting access to their funding base!
"
All the better. its not like much of it gets to productive business anyway. A nationalised bank would ensure better distribution of credit (and less of it). Lets face it. Market fundamentalism is a failure, or maybe just a well organised conspiracy that has resulted in the enrichment of the financial elite and extermination of the middle class. It has NOT benefitted our economies. A median income bought a far better lifestyle 30 years ago it does now. A median income no longer can support a family. Housing related costs are the primary culprit here. Banks benefit from the status quo, people dont. Thats the crude reality. Let nationalise. Diddums if they dont like it.
Kate, good point. RBA statements
Kate,
good point. RBA statements are about reading between the lines more than anything else.
Bernard, How does the average
Bernard, How does the average working New Zealander invest in the "˜productive sector' in this country?
"i’ve got a question for
"i've got a question for everyone there in nz; how well are the middle class in nz doing? the middle class occupy many, if not most, of the positions within society that keep society strong and healthy "“ teachers, police, firemen, nurses, skilled trades, competent administrators etc "“ all the roles that keep our communities functioning and our collective living standards first world. how are they doing economically? i wonder about this because for me, a kiwi living overseas for quite a few years, but soon to return to nz, nz was always a middle class society "“ with a few rich at the top and a few poor at the bottom. the economic spread was narrow. and because the opportunities to join the middle class were many "“ through education and training and so on "“ the middle class kept growing. and because if you had a financial blow and you dropped below where you were at, the opportunities to rejoin the middle class were many "“ through welfare, retraining and re-employment at a living wage "“ it seemed like this situation was perpetuated. and this to me was truly egalitarian because if you were truly skilled you had the access, opportunity and means to fulfill your potential. and i think how most kiwis like to think of nz is as an egalitarian society. but now i'm not so sure this is the case. and for me it's a damn shame. if the middle class is as burdened and imperiled as elizabeth warren points out the american middle class has become then we will no longer have an egalitarian society where people get a fair go and the best do the best and we will have lost something of our "˜new zealandness' "“ at least as i understand it. i guess the reason i bring this up is as a long time reader of this blog and very infrequent poster, i see a lot of argument along economic lines but not much about what economics is really about "“ and that's society."
this is a post i put up re yesterday's top ten. thanks to 'powerdown' and 'ludwig' for responding but no other comments. the interminable conversation about gold was raging at the time! it's in regard to the elizabeth warren video about the middle class being financially stressed to breaking point. and how their situation is way way worse than it was in 1970 because the consumption of things they don't have much discretion over - like housing, health and education - has increased in price dramatically. and how the belief that their plight is down to irresponsible discretionary spending - fancy gadgets, leisure activities etc - is wrong.
i'm a kiwi living in l.a. and soon to return to nz. be interested to hear more comments re above post.
i agree with 'other jimmy's' earlier post. it shouldn't be about whether or not you can stretch to 'affording' a large mortgage on a house. it should be about whether you can afford the price of a house and still live fairly comfortably whilst being able to take any unexpected financial knocks. it seems to me nz, like many other economies, has a debt-fuelled over-capacity problem and that some deleveredging will have to take place. will nz's middle class be able to cope better now or in the future, if at all?
Thanks, Keith. My response, then
Thanks, Keith. My response, then is:
1) Who subsidises the unsecured lending/lower interest rate lending? You and me as the taxpayer, again! That's just shifting the 'housing' subsidy to the tradeable sector. How about we all do business on its own merit.
2)R&D tax credits; My intuition tells me that, where you have an taxpayer supported incentive, it will be taken advantage of. You'd be suprised what some businesses call R&D!
3)If we didn't artificially support property speculation, there might be a reallocation of our savings base into the tradeable sector. You seem to have a preoccupation with 'provide funding'. Keith, we can't afford it! We have spent our current and future wealth on property! Release whatever savings are left in that distorted sector, and use those funds first, before looking to the state to 'provide' anything.
4)Reduce compliance costs- absolutely! There must be a balance between compliance and safety etc, that does not have to invlove all the rigmarole around the current system.
5)Corporate Governance- absolutely! Having seen first hand how easy it is in our legal/corporate system to allow the 'bad guys' to get away with all manner of crime, again and again, I beleieve we need to set a few deterrent examples. Confiscation of assets unless proven legal, rather than the other way about, and significant jail time for proven criminality.
6)Re phoenix companies- see point (5) !
7)Due dilligence is an individual reponsibility, Keith. If one doesn't understand it, don't do it! Pools of funds, however well intetioned, get subverted over time.
8)The NZ financial markets are part af a massive global animal. We won't change the rules, here.
Regradless, I do agree with many of your points, and thank you for your response. I am sure you equally disagree with some of my answers!
tagrossbilly, It is far worse
tagrossbilly,
It is far worse in NZ than in the US, check out median house prices differences and do the maths. I woudl stay in LA if I was you. The whole notion of the "dire" american economy is a farce - a recession is exactly what that country needs. Households have deleveraged super quick, and guess what, housing is now affordable again just lik the 70s. NZ by comparison had a lot higher prices at the height of the bubble and we have not had a decent correction. I am guessing you will find houses are at least twice as expensive relative to what you earn, and add in higher interest rates for good measure.
The whole notion of "growth" is flawed. It says nothing about a) whether the growth is sustainable and based on productivity and b) who benefits from the growth. Over the last 30 years (and especially the last 10) growth has come from increasing debt not productivity, and it has benefitted banks NOT families. How can it be such a bad thing for this process to reverse a bit as is happenning in America. Yes, there will be some collateral damage (eg temp high unemplyment) but in general it is safe to say that middle income families in the US now are MUCH BETTER OFF than in Aus/NZ. Likewise mortage brokers and retail banks are worse off.
I'm actually starting to feel
I'm actually starting to feel a little annoyed as its become apparent that while central banks don't want to take any actions to prevent asset bubbles forming, they (in effect) will act to mitigate the impact of asset bubbles deflating, since they're bad for the economy.
Its basically wanting to have cake and eat it too. Its making me grumpy.
cheers other jimmy but i'm
cheers other jimmy but i'm not sure middle income families are better off here. almost all our friends here are facing major financial concerns. unemployment in california is over 12 percent and underemployment is almost as bad - bringing the total of those with reduced employment to about 20 percent. we know a lot of freelancers who are dealing with their charge out rates being cut drastically and having to suck it up just to get some of the ever decreasing work. but these are anecdotes, there are swathes of reports illutrating how dire it is here for the middle class. here on the westside of l.a. house prices haven't decreased as much as you would think - maybe 20 percent from a historically unprecedented high. l.a. had the highest income to price ratio in the world at the peak. even though sales have fallen off a cliff, an average house is still way out of reach of a family even on an annual income of 100k u.s. dollars. why i'm not sure but it feels like hold and hope. many banks are holding foreclosures off the market and so keeping realized loses off their balance sheets and it seems that house owners are doing the same - hoping that if they can cut back and just scrape through until the economy picks up...
anyway, economically our family are doing totally fine here but we want to move to nz for personal reasons. and besides, it's home. i like the smell of the place. we'll just deal with what economic conditions we find. but even though we could 'afford' it we won't be buying, not until the housing market reconnects with people's economic reality. and anyway renting is just fine with us.
"A large variance being the
"A large variance being the result of expectations theory (someones were wrong) and the law of unintended consequences."
This would be greed and luck in normal language?
cheers other jimmy but i'm
cheers other jimmy but i'm not sure middle income families are better off here. almost all our friends here are facing major financial concerns. unemployment in california is over 12 percent and underemployment is almost as bad - bringing the total of those with reduced employment to about 20 percent. we know a lot of freelancers who are dealing with their charge out rates being cut drastically and having to suck it up just to get some of the ever decreasing work. but these are anecdotes, there are swathes of reports illutrating how dire it is here for the middle class. here on the westside of l.a. house prices haven't decreased as much as you would think - maybe 20 percent from a historically unprecedented high. l.a. had the highest income to price ratio in the world at the peak. even though sales have fallen off a cliff, an average house is still way out of reach of a family even on an annual income of 100k u.s. dollars. why i'm not sure but it feels like hold and hope. many banks are holding foreclosures off the market and so keeping realized loses off their balance sheets and it seems that house owners are doing the same - hoping that if they can cut back and just scrape through until the economy picks up...
anyway, economically our family are doing totally fine here but we want to move to nz for personal reasons. and besides, it's home. i like the smell of the place. and i bring some valued international skills with me so hopefully i can contribute to the good ship nz. we'll just deal with what economic conditions we find. but even though we could 'afford' it we won't be buying, not until the housing market reconnects with people's economic reality. and anyway renting is just fine with us.
tagrossbilly, i guess the US
tagrossbilly,
i guess the US is a big place, and it seems the LA economy is one of the worst at the moment, as are its house prices. Once things pick up however, I am thinking across the borad US families are in a much better position.
Kate, perhaps the 'something' about
Kate, perhaps the 'something' about 2010 is Sovereign Debt Defaults.
Greece, to test the resolve of the EU, their capacity to avoid a re-run of all that silly war stuff - soooo last century - and the depth of Germany's pockets
Dubai, to see just what all those petrodollars actually produced - sandcastles
Ireland, where they have just reduced benefits and public sector salaries in line with ECB dogma.
Seeing as how it's sunny, and close to Xmas, I'll spare you any further thoughts....
Damn Jimmy there goes your
Damn Jimmy there goes your theory out the window - and you loved using the US as an example too!
Paul, BS. have a look
Paul,
BS. have a look at median price to income in US cities. Families on median incomes have a lot better lifestyle there. Yes there are exceptions, but in the main they are better off.
AB: no replies = no
AB: no replies = no answer (commercially sensitive info to those you have figured it out).
tagrossbilly: Welcome back. I recommend returning 100%. Dont listen to Jimmy. Just dont buy a house in NZ! Rents are incredibly cheap for what you get in my view! Try thinking outside the box when it comes to wealth preservation/creation (well, outside the property box at least).
Jimmy: USA lifestyle? No comparison to NZ when you account for non-income aspects i.e. social stresses. I cant stand the states personally - you cant put a cost on the 'fear factor'.
Also, stuff growing up in
Also, stuff growing up in such a 'pep' fueled lie! You think NZ PC'ness is a joke? Try studying in the US Jimmy - makes me ill thinking back.
if the us debt clock
if the us debt clock is to be believed it has racked up 6474 foreclosure,s in the last 44 hrs ?fat lady has,t sung yet.
everyone keeps bagging on about
everyone keeps bagging on about property investment wrecking the economy on this blog and how 'productive sector investment' is the answer. If you want to stop mum and dad investors from using property as a wealth building vehicle, tell me how one invests in the productive sector in NZ.
pwilkie : " fat lady
pwilkie : " fat lady has,t sung yet " : Yes she has , Susan Boyle's album is going 'like hot cakes . Paul Henry is just green , 'cos she does have talent !
Governments have lost credibility, Banks/Finance
Governments have lost credibility, Banks/Finance Companies are not better off in that respect, Captains of Industry are silent, there is no vision or mission for the nation, and the middle class is shrinking, and the average citizen is scared of tomorrow.
The only thriving game is Politics.
May be they should sell shares in the Government as an investment plan.
AB - see: http://www.interest.co.nz/ratesblog/index.php/2009/11/
AB - see:
http://www.interest.co.nz/ratesblog/index.php/2009/11/30/2025-taskforce-...
Roger - 7.19pm, nice, ha, ha.
AB Aside from investing, blindly
AB
Aside from investing, blindly basically, in certain listed NZ companies, there is no answer to such a question when you take into account how risk adverse 'mum and dad' are with their wealth. Mum and dad are toast mate, lost causes. The government invests on their behalf in education and the like, in the hope young NZers will take up the reins of a falling export sector - individual Kiwis have got to have the nerve first.
My belief is that Bolly
My belief is that Bolly is terrified of destroying the last tattered remains of the export sector by pushing up interest rates & therefore the NZ$, so delivering two hits at once.
I feel that he has passed the ball to Bill & John: "I can't do anything further about Kiwi's love of housing & debt, its up to you guys. How about implementing the recommendations of the tax taskforce, & saving the NZ economy, such as it is now, from itself?"
The trouble is, there are hundreds of thousands of National Party-voting landlords out there, determined to keep porking the LAQC & WFF rorts thru property.
Will Bill & John do the right thing? The history of NZ political short-termism provides a sobering drum roll ...........
adverse means unfavorable; averse means
adverse means unfavorable; averse means opposed.
Risk averse.
AB - they could start a business themselves.
*forgive my typo hmmm. Nice
*forgive my typo hmmm. Nice fence you have there. Start a business themselves? Mum and dad with 1 home, maybe 2 rentals and limited tech abilities for 2009 (goodluck with MYOB, let alone Visual Basic.NET)... tell him hes dreaming.
RT --- interesting interpretation of
RT --- interesting interpretation of a lady
Save, start a business, invest
Save, start a business, invest on the nz stock exchange. I think i will buy another house instead.
Personally, I am debt averse
Personally, I am debt averse unless I see some cash flow. I will continue renting, saving, starting businesses and not investing on the nz stock exchange i.e. keep as much control over my portfolio as possible - not controlled, by definition, pure speculation. To each their own.
Waymad Exactly - and add
Waymad
Exactly - and add to that the UK... raising taxes and slashing spending like there is no tomorrow (oops, perhaps a rather prophetic expression).
pwilkie : Ahhh , you
pwilkie : Ahhh , you gotta either be a single guy , or soon to be . Why are so many scathing of Ms Boyle . She's awesome !
<blockquote> Bollard said consumers were
Meanwhile the Government borrows 250 Million per week to prop up the economy.
Have a look at the current increase in housing debt per month at
http://www.rbnz.govt.nz/statistics/monfin/c6/data.html
Increase in Housing Debt during the boom of, lets say 1,500 Million per month.
Now increasing at roughly 500 - 600 Million per month.
Add in the 1,000 Million Debt being taken on by the Government per month and hey presto! Steady state economy. Total debt being taken on by NZ still about the same. Just the mix of who is taking on the debt has changed from predominantly private debt. To a mixture of private and public debt.
The Growth Lobby appears to have won this round and the can has been kicked down the road.
My issue with this is
My issue with this is that the Gumnut is borrowing heavily to maintain " services " , and to keep itself fed . The money isn't going into assets . A debt is accumulating , and interest compounding on that debt , to allow us to continue living beyond our means . There's not much for the growth lobby to crow about . Plenty for the bankers offshore , who maintain a controlling grip upon us . Mortgaging our future because we're too namby pamby to face up to the present . The Grinch digit is pointing at you Jelly Key , and you Wild Bill English .
Roger T, the tenor of
Roger T,
the tenor of your last post suggests to me that the exuberance of earlier in the day has worn off.
I would suggest the bankers offshore benefit from growth in debt and are inextricably part of the Growth Lobby.
I think you need to check the latest batch of Gummy Bears out. I think you need to experiment to look for a more evenly balanced release of exuberance over the course of the day/night...
tagrossbilly... I found that Elizabeth
tagrossbilly... I found that Elizabeth Warren video to be Amazing.
She uses simple straightforward analysis... nothing complicated.
The conclusions are ... earth shattering...
I think we all hold the belief that if our children get a University education... then that is their ticket to the "Middle Class".
It is really disturbing that the "powers that be" ..don't seem to give a shit.
Having said that, NZ is a great place to live.
Gibber : You'd have the
Gibber : You'd have the wind knocked out of your sails too if 9 o'clock at night the 4 y.o. demanded an upmarket " designer " porridge for tommorrow's breakfast . .......... . Her mum grew up in a bamboo & corrugated-iron hut , for Pete's sake !
Tagrossbilly- I returned to NZ
Tagrossbilly-
I returned to NZ with my partner from Toronto last Feb after 4 years away.
Yep, regardless of the economy it was dreams of cicadas and kahawai that brought me back. Having cash is great, but a good kiwi summer is priceless, for sure.
One aspect that people here don't take into account is lower health-care charges we pay. Health insurance costs for me over the border in NY state would've been $425 a month, easy.
ACC here is unsustainable at it's current levels, but it's ridiculous how much can get written off to it at the moment. It just takes someone with some nuts to strip it back down to what it was originally intended for (no-fault health insurance), and we should be able to squeeze out another 15 years.
The slipping of the classic egalitarian kiwi culture? I think it's still there to be honest, albeit propped up artificially by Working for Families, etc. The writing is on the wall for the future though- it's been pointed out on this website before that we are spending $22 million a day on benefits......when the well runs dry we'll have too many workers supporting too many institutionalised beneficiaries.
This is the main difference between the middle-class of CA, TX or MN and the middle class of NZ- if you have children and earn a low/mid wage here, you get a top-up from WINZ.
Fair? Hardly, but it does extend the middle-class breadth. Or does it just lower the bar?
Education? Most US families pay for their kids to go to college. Most kiwi families don't. The jury's still out on the long-term effects of the NZ student loan system (still paying mine off...it's crippling).
Housing? I'm renting a 3 BR '50's house in Northland, Wgtn that has a great deck, views, terraced back-yard, open fire, good french doors and a garden for $350 a week.
In other words, cheap. Would I buy?.....Nope.
I don't agree with Jimmy....I'd rather be in NZ (or Canada) than the USA right now.
And you're right- the air outside Auckland Airport smells fantastic after LA!
Right, back to cricket build-up. Surely we can't have another batting meltdown?
Ray...I hate to rain on
Ray...I hate to rain on your post but ACC was a no fault accident scheme....nothing to do with health mate.
AB Said "If you want
AB Said "If you want to stop mum and dad investors from using property as a wealth building vehicle, tell me how one invests in the productive sector in NZ."
Its not a matter of there being a single item solution. NZ needs to deflate the propery market, and enact strict regulations/laws/whatever to stop people getting fleeced on the stock market or by investment companies. Its really understandable how properties seem much more attractive, and it is a damning indictment of how useless all of our governments have been so far. The hanover guys need to be punished very very harshly, and warnings given to the rest of the companies that their deceitful and self interest based ways need to stop. Maybe even turn the chatham islands into a sort of debters prison for the various finance companies. I know I am well over the hyperbole line here, but without any confidence in the markets, you average mum and pop won't invest there, so there needs to be a huge increase in accountability, and punishment for breaches of trust.
How to solve it all I am not sure, but maybe a drop of tax on interest/investments would be a good kick to start the movment to the other side (I am sure that would start a bit of a run on properties though, which in itself won't be that great either). At that point maybe the banks would have enough capitial to be able to start to lend to business. Also the equity ratios need to be much higher, maybe even up to 40% so that prices can't bubble up so fast again (obviously only on new mortgages). And the idiotic practice of over leveraging needs to be halted fast, running too much debt is bad for companies, the same as how sometimes having no debt can also be bad for businesses. This will probabaly require changes of law, so that companies can't be punished by the stockholders for not providing enough growth in revenues/profits, which encourages the "penny rich, pound poor" attitude prevelant in businesses today.
But we need to stop looking for a single silver bullet to solve all the problems, and look for a multi faceted approch. And give some of the carrot as well as the stick.
All of this will be worth nothing if the increases in governement spending is not halted. But I am not sure that the level of services will need to decrease, just that our government/public services need to be much leaner and provide more outputs for the same inputs.
Hey Wally, I was mainly
Hey Wally, I was mainly using ACC as a comparative.
Most of us don't have health insurance (unlike americans) but we still end up payng for cover thru our ACC levies.
But yeah, accident cover and genuine health-care are different for sure.
I knew a mate in texas who broke his leg.....no health insurance.... cost him $32K.
And brodie, NZ needs to
And brodie,
NZ needs to "enact strict regulations/laws/whatever to stop people getting fleeced on the stock market or by investment companies."?
I disagree......have you heard of a risk profile analysis?
If you don't understand what you're investing in.... then don't invest in it!!
Yup all the more reason
Yup all the more reason to move overseas....
Atleast you can get paid well and have very good scope for career development in large growing companies in places like aussie, even if houses are just as expensive.
The only people who benefit from living in NZ are the LAZY (WFF, sickness benefits, ACC, everyone knows dozens of stories of people rorting all of these), and property investors. You get paid $$ to have babies, you get paid $$ to be lazy and come up with a good excuse not too work, you get paid $$ to borrow as much as you can to pour into housing.
None of these things help the country or the other people who put there effort into upskilling and trying to become a more valuable person to society (fundamentals of creating wealth in the long run..)
And to all these people
And to all these people who are asking the government for something else to invest in other than property, guess what.... its not the f**king governments job to ensure you get massive amounts of FREE money for sitting on your ass.
Heres an idea. Go to school, get skilled, move to somewhere that rewards these skills (if its a trade NZ will be alright as housing needs these, anything more than this then go overseas).
Get up on the wrong
Get up on the wrong side of bed, did we George?
Jimmy please name the American
Jimmy please name the American cities that YOU would live in with affordable housing?
yeah opened the curtains and
yeah opened the curtains and realised i was still in palmerston north...
C'mon <b>george</b> : Balmy Palmy
C'mon george : Balmy Palmy . You're lucky . Ever been to Gdansk or Warsaw ? There is one hoo-a of alot that could be fixed around Godzone , sure . But NZ on a bad day beats many other places on a good day . Even in Palmy .
think john cleese (monte python)
think john cleese (monte python) sumed it up best:
Cleese calls the city "the suicide capital of New Zealand" and says, "If you wish to kill yourself but lack the courage to, I think a visit to Palmerston North will do the trick."
Cleese did not stop there.
"We stayed in a little motel. The weather was grotty, the theatre was a nasty shape and the audience was very strange to play to."
Cleese said the audience laughed in all the wrong places and he had a "thoroughly bloody miserable time" in the city.
Cleese claims he ordered a
Cleese claims he ordered a 3 egg-omlette for his breakfast , and was served an omlette with 3 fried eggs plonked on top of it ! Ya gotta love Palmy . Balmy to the max........or to the Cleese . And our lord J.C. has spoken . Praise be the omlette .
George...I too have always wondered
George...I too have always wondered about the sense of entitlement of folk who have a bit of money as well as those that don't!
There seems to be a righteous expectation that" one ought to be able to get lots of interest/dividends/reward just for playing golf and doing the garden and checking the rentals".
Its the inverse of "gimme some of your money cos I didn't like school and I want to breed and/or I've stuffed my brain with alcohol and drugs."
I do feel terribly Victorian this morning. Perhaps workhouses will be the new growth investment thereby solving the problem for both ends of the spectrum.
cheers ray. while not our
cheers ray. while not our main reasons, health costs and underperforming public schools would be the two biggest factors to make us leave the states. if we could get around that then we're happy here. kiwis are comparatively super lucky in these regards. our cricketers are a shakespearean tragedy - alas the kiwi batting lineup, i knew it well...
your last line made me laugh roelef. that's like a doctor saying - you have cancer, ebola and your throat has been slit... but hey, your hair looks nice.