Isn't this government crafty - they put it out there that they might clamp down on property, then gauge the public reaction then as soon as it looks like the public are not happy with their plans they pull back from the proposal.

It's almost like they are constantly running a stream of public referendums but doing it by stealth and making all their decisions based on the reactions seen on blog sites, talkback etc.

Last week Key indicated that they may cut back on the transport via the Super Gold Card but within days they gauged public opinion through the media and when they saw that there would be a huge lost vote from the "grey heads" the canned the idea.

It sure is the do nothing government eh! But at least they can hit back and say the public wanted them to do nothing.

THIS GOVERNMENT ARE A BUNCH OF USELESS AND GUTLESS MONKEYS

Matt - thats not being fair to monkeys! Rather the government is a bunch of dodo's..they just don't know that they are extinct yet.

Yes, comparing them to monkeys is an insult to monkeys. At least Monkeys are entertainng to watch and bring a smile to one's face

I just had a meeting with a guy who is in the process of ripping out 20 acres of grapes, next is 12 acres of Apples. We are losing our productive sector to the parasitic local and national Govt's. How far will we let this go?How long will we keep our water quality testers out RMA experts and our OSH inspectors while the real economy crumbles. Idiots!

This all neatly illustrates the unfortunate corner that most western democracies have knowingly painted themselves into.

In handing out entitlements, perqs and goodies, in an implicit intent to buy their recipients' votes, they have triggered the 'endowment effect'.

Simply put, this means that you may not miss something you never had, but you'll fight tooth and nail to preserve something you Do have, no matter how dodgy or corrupt the process of acquiring it was.

This 'ratchet' has now jacked most people's hopes of continued income up, way, way past the point of sustainability. That is, we're running out of Other People's Money (the taxes paid by actual tax-producing enterprises and people).

I frankly don't see any easy way out of this sort of boondoggle. The political way is blocked by the 'entitled', who will simply vote for the More Goodies Party if given the chance - what Mancur Olson calls 'distributional coalitions'.

We see this oh so clearly by the Grey Mob's fury over a few trips to Waiheke. 'How Dare They!' is the cry.

Bill E's sober estimate of less-than-sufficient tax revenues is also no doubt an outcome of a 'John Galt' effect: you cannot force people who can control their net income, and therefore their tax liability, to Produce and be Taxed if they don't agree with the uses to which said Tax is being put.

They will quietly arrange their production to suit their own need for income.

E.g. in most farming situations, the distinction between living expenses and small luxuries is quite invisible, and you can go fishing on the King Quad.

They will minimise the net income externally reported.

E.g. by a doctor not doing those few extra surgeries, or a consultant deciding that 24 billed hours/week @ $150 is enough, ta very much, and going golfing the other two days.

And of course in all these scenarios the tax liability (and national tax revenue) falls sharply.

Or, being smart, ambitious and mobile, they simply up stakes and leave.

I reckon that the Greek outcome is the most likely: as internal economic arrangements are so incestuous - a Gordian Knot, indeed - only the cold eye of external parties - bondholders spring to mind - has any power to force the needed changes.

Which changes are of course bleedingly obvious:

- arrange tax matters to minimise tax arbitrage
- remove welfare traps such as WFF and roll these into a finer-grained tax structure
- means-test universal benefits
- work for dole
- less Gumnut overhead

Then, and only then, does John Galt shuffle back to the pages of badly written if expository novels, because it would only then be clear to all Producers that their hard-earned Tax is not being misapplied to produce more underclass infestations, unintended outcomes, and perverse incentives.

This is the problem with democracy and the modern media. The noisiest and most persistent wheel gets the grease. Whether or not that person/group is on the right track or even has an IQ above room temperature is not considered, what is considered is the amount of time they spend on talkback or on their soapbox in the mainstream media.

It is depressing and frustrating that instead of being run by or listening to the experts or people with knowledge on how to fix these matters, the country instead is effectively being run by those with an agenda and people who are good at whipping the media into a frenzy.

No significant changes now, no significant changes next year, no significant changes until we are living in squalor due to us living beyond our means for too long with no one wanting to do a day's work.

I don't see how you can call a government that increases GST populist. In my view this is a criminal tax that according to Bernard wont achieve much once the compensation is put in place - so why bother with it?

Tax housing! Tax land! I'd be much happier to pay higher rent than fork out more for bread, butter and vegemite.

Hopefully this means they will push further than denying depreciation on investment properties. I for one was a bit dissappointed that a comprehensive capital gains tax or land tax was ruled out. Ring fencing of losses could help so highly leveraged properties with high interest bills and tax losses are not used to offset personal income tax.

Net result: all that happens is we all pay more GST, excise taxes, etc, we all pay more tax overall, of course, because no one has attacked the size of the State (the pronouncements toward that effect are ludicrous - hell, they just created an idiot new Government department, the Orwellian Bureau of Productivity, yesterday. Twenty new bureaucrats without a clue on the private sector or wealth or productivity - for such men would know the very job they were taking was destroying wealth and productivity.)

You have to really be an idiot to be anything other than a beneficiary, retiree, bureaucrat or politician in NZ.

In for a penny, in for a pound, Paul I. If JK is going to disappoint on one front ( tax reductions) then he may as well go the whole hog and disappoint on the revenue raising side as well.

It looks like they may abandon the idea of additional taxing on property (i.e., removing depreciation claims) altogether! - At last they are coming to realize how bad that idea was in the first place!

BE didn't say that actually, OS. He indicated that 'enough' wasn't going to be raised through the suggested means. That could mean that he needs 'more' from the property sector, not less. Where else is it going to come from?

The government are not idiots nor instantly malicious upon being elected. I find the comments here along those lines abusive, simplistic and worst of all, boring.

Please go to Australia where such language is more accepted or passes for anaysis.

The economy is a dynamic system... the TWG's property numbers were simplistic extrapolations... we're dealing with a dynamic system - at least apply some understanding of 2nd order systems and differential equations/basic control theory.

Meanwhile as we drift along you can expect Bolly to delay raising the ocr because the economy is dead in the water. It will only serve to red flag Noddyland as being in serious trouble. Then as the clowns raise gst to boost revenue to pay for the splurging state waste and stupidity...the peasant economy will have to do with less spending...with another downturn!
The only lucky break is the departure of so many unemployed skilled workers and their families across the Tasman. Yes that is a positive!!! Go figure.

So if Beijing spits the dummy...the aussie economy goes splat and back come the migrants to sign up for the benefits. A real bummer. A very real possibility too!

The depressing if logical outcome of my estimate of the situation (and I see Mark H's comment as a John Galt moment, too), is this:

There is no political way out of this. Because the distributional coalitions and the voices of the 'entitled!' are, taken together, a massive majority. And because (as I recall an ex Nat pollie telling us at an MBA briefing a decade and a half ago) MMP is a recipe for stasis - nothing much will change, because nothing much Can change.

So, chaps and chapesses (BH, you owe me a royalty for that term, BTW), don't be going looking to Politicians of any stripe, to solve the pressing issues of our quirky little Isle.

Bernard said, "he is a regular reader, as are many inside his office and Treasury. Hello chaps and chapesses."

Well if you're reading this,
1) You're muppets - the TWG gave you a whole bunch of extra revenue-offsetting options which you junked before actually doing any analysis. That was premature and stupid.

2) You are at risk of a major political miscalculation where, after raising expectations on one side you risk disappointing both those opposed to GST raises and those lobbying for income tax cuts. Unless you have something substantial up your jumper, you could be in a lot of trouble come budget day.

3) The solution to the above is to grow some balls and get some principles. Decide what the hell it is you actually believe in and then provide some leadership. Stop trying to please all of the people all of the time - you can't.

Kate...add to Gareth's proposal:

GMI used as a method for introducing new public interest free money as part of a newly constituted money supply. No welfare, lower taxes, smaller government = productive society.

The choices are limited. All i know is that if costs are not cut to the productive sector exports will be cut, we will retrench to the lowest input systems possible where debt levels allow it.
You cannot have it both ways as China is forcing us into a corner,either we reduce costs or they wipe us out,I dont see any choices, we need wages and costs closer aligned to China's and thats gotta hurt.

Raf - exactly.

Kate and Raf: appreciate the tweaks, but how to get there from here?

JK and crew are castigated for an incremental/pragmatic approach, but political realities and the structures of MMP rule out anything else.

The change process, crudely put, is Unfreeze Existing/Change/Refreeze New.

Your proposals are for the middle bit.

Hitting a wall of some kind (bond-buyer revolt, sovereign debt default, Repo Man, bankruptcy) would seem now to be our best hope for getting the Unfreeze. After that, Change can happen.

But wishing this in public on all of us is, shall we say, Not a Good Look.

So we carry on, just kicking the can down the road. And, some of us, quietly preparing for a harsher, colder world.

OS - yes, leave the property sector alone - immediately withdraw the $1billion dollar per annum 'market rent' subsidy - one of the biggest wasteful allocations of tax money going!

Further to some great comments on this site (and a little gentle ranting of course) I would add that renting is a great deal at the moment compared with purchasing. I am presently renting a house at the equivalent of 4.3% interest, not including the no rates and no repairs and no depreciation of the structure. Yes houses do deteriorate with time folks, and pretty rapidly too. In fact they are not that much better than cars in that regard.

Thanks, Nicholas Arrand. Also, Kate may prefer to pay more in rent and to work harder and harder to support the perennial dole bludgers, state sector extravagancies and tax money going into research and caltivation of ancient witch-type healing techniques...

Yep...crank it up you two clowns...let's have a dose of pre budget spin designed to please the peasants....promise them 'future prosperity'....never mind it'll be 50 years away...peasants soon forget...promise 'future real income growth'...or how about 'affordable property'..haaaarhahaha oh shit that's a good one.....get out there and 'press the flesh'.

This is what happens to a country that continuously lives beyond its means,
"Greece's jobless rate rose to 10.3 per cent in the final quarter of 2009 from 7.9 per cent a year earlier, statistics agency data showed....(and) the rate at which people are losing their jobs is accelerating."
What are we at? 7.3%. It can happen REALLY fast.

And if your right Rob'theNorth ( and I hope you are) I shall 'vote National' for the first time.

Tax cuts will make little difference to many exporters who don't generate a profit. Also to the %43 of income earners who thanks to WFF also dont pay taxes. WE need to cut the cost of running a business by a 'country mile'

As years of plenty rolled by people came to expect that there was a right to the good life, that somehow they could simply sit and let the Government or somebody else pay for a supply the goodies. Nobody was prepared to take less than the biggest piece of the pie.

Now the good times have stopped and now we have every vested interest tearing and decrying everyone else. The same people who were fighting for the biggest piece of the pie previously are now fighting to keep theirs by taking a slice from everybody else. Into this mix we add the engine of inertia that is MMP.

So will there ever be agreement? That there are major problems, absolutely, but vested self interest, political dogma and good old fashioned greed will I fear (and I earnestly hope I am wrong) thwart the radical changes that are so desperately needed.

Despite almost everyone had voice against at the landlords. If you have a chance to un-tighten your knicker and think about the implication. If the govt ping them too hard, who would ultimately provide all rentals for those who can't afford to buy... The govt, local acouncils????

A "Govt.issue Zimmer frame"..made in China!

"John Key ruled that out and seemed to hope he could make a difference to the top tax rate with a few tweaks here and there.

Tweaks will not do it. Bill English just confirmed it. So no change there and little change in either the structure of the economy or the economic outlook. When is this government actually going to do something substantial?"

Says it all = 'Smile and wave' = "seemed to hope" = waster.

Kate: in reality you know the price of properties will not go back to 2002 level. NZ isn't the only country that has the prop price rise trends, in fact we only have a mild one. Becareful what you wish for, you can bring back the property price but there are strings attached - look at Ireland and Iceland as examples

"If the govt ping them too hard, who would ultimately provide all rentals for those who can’t afford to buy… The govt, local acouncils????"

I am sick of landlords bringing up this hoary old chestnut.
There is no change in the housing stock!
again for the hard of hearing.
There is no change in the housing stock!

Those that can afford to buy the ex rentals will and so stop being tenants, otherwise the houses will be purchased by other landlords as rental housing. No changes to the housing stock, just who owns them.

I see Peter Dunne's getting his bit in,
"Peter Dunne has added (today) further weight to widespread expectations the tax system on property investment is to be changed...."

Andrew T - no idea how it is administered - but it's a 'market rent' subsidy - so props up landlord incomes to the tune of $1billion ultimately.

Waymad.....unfortunately the government doesn't want to engage in discussing these issues even in private. but in order to achieve the goals they have, they will need to sit down and talk about how to get there. the debt mountain hangs like the sword of Damocles....all this tax shifting is minor fluff. maybe it's a manpower issue..they just don't have the right people to do the job.

incidentally i'd prefer to see JK spending more time in his office grinding over the hard stuff than flying round the country non-stop opening supermarkets and the like. maybe we should have a president for that stuff. He's the smartest guy there and should be more hands on.

Alistair...yes a republic would give us a president! but we don't need to be a republic to create our own money supply. we can do that right now.......but that would require us to be of independent thought and mind. We can do it.....we can make NZ a model for other countries around the world.....but the hooks of influence are embedded too deeply into our current political arrangements.

i'd be happy just to be able to talk about it.

Kate, maybe we should get Winston onto this :-)

Kate Says:
March 19th, 2010 at 12:31 pm
"Don’t worry – it is coming – and yes I do definitely see them going back to 2002 levels – because those levels reflect proper wages/income affordability levels."

I'm so looking forward to this !!

My prediction is nothing really will change, dole bludgers will get their money, property bulls will keep buying and selling and the rest will keep moaning. Roll on next election

"More tax on property investors -> (possibly) less investment in property -> further increase of housing shortage -> house prices rise again -> prices settle where the fundamental supply/demand puts them and keep going up as a trend (as they always have been)…"

Property investors tend to buy existing houses and owner occupiers tend to build.
Well, why would you put a tenant in a new house?
This drives the overall housing supply and whether there is a shortage or otherwise, not the ownership of the existing housing stock.

Don’t worry – it is coming – and yes I do definitely see them going back to 2002 levels – because those levels reflect proper wages/income affordability levels.”

In real terms only.

There was certainly a dead cat bounce last year.
When interest rates start to climb at the lower end of the yield curve from June we will have interesting times in the property market.

I expect property market values to stagnate for a number of years, rather than collapse, their real values being eaten into by our high domestic inflation.
Inflation of 4-5% over 5 years means houses are worth 20-25% less.

This effect makes me laugh at people who won’t sell below a certain price and hold on until their price is met.
Do they not realise that after 2 years they may get their price, but only because its value has decreased in real terms by 10%.

extract from peter dunnes speech today.

Revenue Minister Peter Dunne has added further weight to widespread expectations the tax system on property investment is to be changed, and personal taxes are to be lowered.

Speaking to the International Fiscal Association conference in Christchurch today, Dunne said changes to the tax treatment of property were likely, to make the rules fairer and more equitable for all taxpayers.

"This is not an attack on landlords, as some have protested, but a rebalancing act designed to address the concerns highlighted by both the Tax Working Group and the Governor of the Reserve Bank over the years about distortions favouring property investment over other forms of investment," Dunne said.

"There are also likely to be lower personal taxes across the board - not just for the top end of the income scale as some allege - to encourage productivity, investment and saving."

buggar...and i see he's the tax Revenue minister.
ring peter barefoot NOW and tell him to sell the whole portfolio...NOW!!!

This "gummint" are just a bunch of greedy sycophants. keeping the outdated "ol boy" network alive and well and looking after themselves ... but the really sad part is that they think the general populous are just to ignorant to realise this, that is where they are wrong.

Anyway, why does someone like Donkey want to be Primeminister anyway .... it can't be for the money? so it must be to keep all his "mates" happy, as above.

So for all of you reading this in the Beehive, you have lost my vote for 2011 ... promising everything but gutlessly sitting on the fence and doing nothing. As you don't want to upset the "status quo" of your precious 'ol boy network.... NZ is just a too smaller country for this sh*t !

And this for the "Chardonnay Socialists" party et al - as jr Says: March 19th, 2010 at 10:27 am
"We need a real opposition party and not the bunch of self interested trough feeders currently filling that role."

Basically you are all in the same boat!

shorts - you already can - buy in Phoenix, Detroit, Las Vegas, Charlottesville, etc. etc.

What makes you think NZ is immune?

shorts - and I'm looking forward to it because I plan to live in it!

"shorts – you already can – buy in Phoenix, Detroit, Las Vegas, Charlottesville, etc. etc."

Are you married to a guy called Phil with the last name Jones?

shorts - c'mon it's a legitimate question - "what makes you think NZ is immune?"

"Different tax treatment on landlords makes house prices fall —> section prices fall, house construction costs don’t change —> new investors can buy either an existing house or new house on an attractive yield in the new tax environment"...

...and further in time the prices keep going up again, so what's changed? - The result will be a blip (if that), a short-lived departure from the normal trend defined by the supply-demand fundamentals...

10% down is still down. Beyond that, there's nothing wrong or unexpected about house prices rising at a pace similar to wage inflation (plus a little for gentrification in faster growing cities).

All this "supply vs demand" discussion focuses on Auckland (and occasionally other main centres). Let's assume for a moment that supply vs demand is the main driver for house prices. Am I the only one who's noticed that regional house prices also (and generally, not in all cases) rocketed up pretty much in sympathy to those in the major centres, despite there arguably not being a supply/demand imbalance?

Is "supply vs demand" a way of talking about the marginal buyer (being a landlord?) supply vs demand, which contains an expectation of speculation? Is it desirable to have the marginal buyer (if its the landlord) having a tax benefit over the alternative - arguably a first home buyer?

No IanC - we certainly noticed regional or provincial prices inflated WAY out of line. I know alot of speculative investors who bought rentals in Taumarunui, Turangi, Tokoroa etc. - geared up to the eyeballs on all of them - based on there always being a ready supply of beneficiaries with government guaranteed "market" rents.

Rent subsequently also went absolutely through the roof in these places.

Compare this to 10 years ago when empty sections in these towns were being sold fo $1.00 as owners just wanted to get rid of the rates burden of ownership on them.

I can see this sort of future scenario in many of the empty section coastal developments (i.e. Matarangi, Wairoa etc.) in future, particularly if the price of oil rises and the banks end up in possession of many of them.

I do feel a bit sorry for English, because I feel that he knows what he needs to do, but isn't able to do much about it himself. Unless our top tax rate is dropped to the company rate, there is little point in dropping it. We need to get tough on property like the gov got tough on telecom, but it is impossible when so many people have a conflict of interest in poperty.

Also wasn't it GST rise that was supposed to pay for th majority of the ta cuts. If tax isn't cut by much, then people are going to be even more anti a GST rise. A GST rise in my opinion is a huge mistake, and will cost many small businesses a lot of money, as they will find it tough to pass on that prise rises. As a small business owner myself, I am going to find it hard to pass on the cost, let alone the compliance costs invloved in doing the change.

I'm hoping it fits in with Rob.
rob of the north Says: March 19th, 2010 at 11:26 am

Slash the company and trust rates to 27% and leave the personal tax rates as they are. Lets support our business owners, rather than the sheep in jobs, that the farmers & business owners have. We need to reward those who create opportunities with lower tax rates - and give those taking far less risk (employees) a punitive tax rate for a lesser commitment to our country

Still better, Peter McM., slash all taxes to 10% and cut state expenditure by confining it only to areas where it is necessarily required to be centralised!

Have you been to Japan? Not many free standing 3 bed 2 bathroom 2 living on 700m2 in Tokyo or surrounds.

"Why do the central banks continue to ignore asset price inflation .....Dozy lot" !! LOL :-)

I don't think it would be possible to replicate Greerton in Japan. I was comparing to my house in Auckland anyway.

The tipping point where substantive change will, must happen is approaching.

Like bankruptcy it happens really fast at the end.

It seems strange, almost surreal, when you read these threads and then look at what is reported in the mainstream media.

Cutting taxes makes no difference to you if you are not making a profit.I like paying tax from the point of view that at least Im making a profit. Ive lost money 4 years in a row on my farm,admittedly some improvements were not such a good idea in hindsight. I need my costs to fall so I have money to innovate and change my systems. Costs are the problem not Taxes. Taxes are a smokescreen to hide behind, instead of facing the real issues.

kate , i dont know if your blonde but come on .....!!.. prices back to 2002 levels ??? dont make me laugh... and if the banks make it like this as they are the only ones with that power... do you think that would be good...? i bet you will be one of those that will buy for investments cause you missed out last time or are you in the one family or person to only have one home camp... ???

pedro - I watch price changes for recent sales on the RPNZ website. I see it already quite common across all price brackets outside the main centres and their satellite suburbs. There are a whole lot of residential properties out there whose owners bought well prior to 2002 - who can afford to par back their price expectations to that level and prior, and still make capital gains. In the main, these are the houses that are selling. Same trend in the main centres at the high upper end of the market - and nationwide in rural and remote coastal.

What's the problem - The Nat's have just committed this Jan to an ETS which will cost NZ $ 110 Billion by Treasury estimates over the next 50 years.

No problem funding that.

All borrowed by definition given we will be running current account deficits into the never never. So we plan to add NZ $ 110 Billion to the already out of control NZ $ 320 Billion of gross external liabilities.

Tax and spend - They are as mad as the last lot.

The scale and stupidity of this commitment is breathtaking given we have just had Prof Jones on the BBC ( Standing down currently as head of the climate gate debacle ) now admit " There has been no statistically signifiant warming for the last 15 years and statistically significant cooling over the last 10 "

Plenty of money to pay the Russian mafia who will promise not to build a new coal fired power station that they had no intention of building any way.
Once they have our money they can safely say when the audit is on two years down the track - Come and look - there's nothing there !

Why do we never discuss the ETS when we are talking tax ?

It dwarfs any of the above yet Joe six pack and commentators seems to have no understanding of the scale of the international commitments we have made.

The fact that no one else has made any commitments is maybe something we should be concerned about. Looks like even trying will cost Rudd his job !

Why would a two bit nation of 4 million people in the bottom end of the South Pacific
with one of the highest levels of indebtedness in the OECD want to show " Leadership " ?

We do seem hell bent on self destruction.

Conservatives by nature do not have what it takes to make substantial change.

Jacko - quite right, they are living up to the titlel "conservatives" admirably
I almost wish we had Labour back in power..... at least they had the balls to make decisions
SO who wants to found the "Young New zealand" party with me?

Dismal, just dismal.

Maybe Bernard is right, X&Y and anyone thinking of investing themselves, effort and resources in productive enterprise should skip on over to Auz.

It's looking more and more like no hope here.

Real, shame. It really is.

Kate says; GBM – in 2002 we bought a lovely 3 bed w/board house (beautifully built, rimu joinery, tawa floors) on a 700m2 established section in a no exit road at the Tauranga City end of Greerton for $120,000. Walking distance to everything – schools, shops, post office, banks.

Well as I have lived right in the middle of this space for a lot of years I would challenge Kate to find even a half section for less than 150.000. There is none and therefore the price is determined by the market. What she paid 120 for would today be about the 300 area and if she hasn't sold it at a good profit for her then she is holding a property with a good value record. A property that will continue to rise as the city grows further out.

On Taxation.
Unless relativities are changed then the same rorts continue. Property is not the issue nor the problem. Tax rates are because too much income is hidden behind trusts and not being devolved to the taxpayer as it should be. There are plenty of trusts earning in the hundreds of thousands of income with the beneficiaries using the cash but a small income declared i.e. 28k to keep the tax rate low and the govt. welfare payments high. eg. WFF.

Lower the personal rates to 25% and leave the company as it is and the trust rates as they are. The incomes will then devolve to the lowest rate of tax and more will pay a lot more tax.

In fact we could soon move to a 20% personal rate for the rush of declared incomes by personal taxpayers would be enormous. If we really want to get serious put the Trust rate to 39%.

The Govt. needs to urgently stop the waffling around with the property market.
There is a very real crisis of confidence out there and growing over this. Why/
Because most SME's have their business funded by use of their property for collateral
to fund their businesses. Currently those SME's are being undermined and the Banks are wary of what is going to happen. If ,as Kate wants ,property values were to decline the 20% she wants then we will have a very serious erosion of the funds available to SME's and a resultant depression for many of them.
It seems that she is a speculator really only interested in her own gains but there are thousands of others out there whose survival and continuing business require a stable property market.
There are no statistics available anywhere that show just how much "housing " money is actually used to fund businesses but its clear that it is a major component of the loan book. The reason for no stats is that the banks didn't want to know for then they would have had to declare the loan which would alter their ratio's under Bassel 2.

So be careful what you wish for. If you think the last couple of years were tough , imagine what would be if those with that think property needs to be dumped on get their way. Imagine 30% unemployed, bankruptcies by the thousands, stability of all NZ banks and finance companies severally under strain. Is that what you all want?

Key appears to be hoping to use inflation to inflate away NZs financial problems. Rising GST will increase inflation too, so it could be that he is using it as a catalyst.

JB...you are so right! People have got no idea what the AGW/carbon trading scam is going to mean for us all . Check out Jo Nova's site . This is an excerpt...

"Six months ago, Deutsche Bank was overcome with concern about the planet—bless its soul–and launched this 70 ft. vision of climate doom opposite Madison Square Gardens, New York. You can feel relieved. The bank paid for the carbon credits (no doubt through one of its own funds), so the 40,960 low-energy light-emitting diodes are “carbon-neutral.”
Kevin Parker for Deutsche Asset Management said: “We hope with this sign that it is going to foster a sense of urgency about the problem, raise public awareness, create a need for education and really spur a call for action”
Spurring action indeed. “Sign Copenhagen; Sign Cap N Trade; Give us that $2 trillion dollar market based on meaningless paper permits, and funded by consumers everywhere. Please!”
In a more candid moment, Parker said: “Well, what we’d like to see is a price on carbon. That is absolutely foremost in everyone’s minds involved in the climate change debate. The governments around the world have to get on with regulations…”
Yes, the real agenda is the legislation: forced payments from citizens. We all know we aren’t going to see the Deutsche Bank Top-Soil Clock coming soon highlighting the problem of erosion, or the Deutsche Bank Falling Fish Stock Clock…or the Deutsche Bank program to save the spotted quoll.
In a brazen gambit, Parker suggested we all might like to invest more in renewable energy: $45 trillion more (over 40 years), and that’s only going to solve half the problem”. There is no end to the audacity. "
Is

One of the reasons I wrote the article above is:
With he current recession the world changed for ever and will change even faster. There are major worldwide events occurring on the environmental, political, economic, financial and health front - happening soon.
As a nation we have to make sure to be self- sufficient as much as possible and prepared for a lower standard of living.

"As a nation we have to make sure to be self- sufficient as much as possible and prepared for a lower standard of living."

- Agreed....its coming to a petrol station near you....or rather it wont be or at a price you can afford....

The crazy thing is Labour had some good if minor ideas like building in some small % bio-deisel requirements...which this shortsighted Govn backed out of...and I expect they will regret....I wonder how long Browlee will last ie until it dawns on JK that this is way more important than tourism or indeed much else..

regards

Walter.....you are dreaming...snap out of it....come back to earth....if you think you can manufacture goods and earn a profit, then get to it...prove to us all it can be done. The forest of red tape will stop you in your tracks. If you do manage to produce something the market wants to buy, expect to face import competition from producers with lower costs of production and more profits to do R&D and therefore able to improve the product.
Off your bum son and buy bales of wool...make something...try selling it....Or do something with a native plant extract...ooops sorry the greens won't allow that...Or maybe...no the greens won't allow that either.
Stop with the preaching and get with doing.
And don't start with the demanding for import restrictions and trade protectionism.

Wally think about why we have this situation as you describe as: The forest of red tape will stop you in your tracks.

Please, don't underestimate the positive correlation manufacturing has to other sectors and the population. You make a number of prejudice and false interpretations.
Read my article again, do some research and think a bit deeper.

Walter

"don’t underestimate the positive correlation manufacturing has to other sectors and the population."...I don't Walter!....what I am pointing out to you is the reality of why we have arrived at our current market. You drive a vehicle manufactured probably in Asia because they do it better than we can...that is the critical factor..The best we ever did in NZ was to assemble the imported bits to make cars with a few items made here like tyres. Even then it proved to be too costly to do it. You are asking others to invest in manufacturing stuff here. Why don't you do this? The wool is there to be purchased....get to it Walter.

Wally is not wrong Walter...Wally knows that if import taxes are applied to goods for the purpose of encouraging the making of the goods in NZ, we will all be paying more for stuff that rapidly becomes out of date and the cost to the economy of using such goods reduces our competitive advantage in the production of other stuff. In the end we become a little copy of Cuba.
"A good portion of those imports could well be manufactured here in NZ"....of course they could be...but at what cost?
When you buy new rubber for your heap Walter..the tyres are probably imported..if you are offered some of the remaining NZ made ones..will you be happy to pay the extra $50 per tyre they will cost..no you dam well will not. That is the reality of lower costs of production in Asian countries.
" reforms are needed to establish and support manufacturing"....which is another way of saying, govt should support NZ manufacturing with import taxes and subsidies...what else is there Walter?....Govt tax cuts for R&D amount to subsidies!
The name of the economic game is to become more efficient than your competitors at producing stuff and to lower trade barriers. Tha last thing the world needs is a return to protectionism.
"Manufacturing must become part of our culture"...why?...look what happens when the international crooks in the banking system and clowns in govt manage to bugger the economies...down goes manufacturing like a shot duck and what would that do for unemployment?.

Nice post AJ...all that electricity and the wiring involved...copper wiring!...
Wonder how many Party members touring Noddyland each month is too many...think of all the ice creams they will consume...spending spending.....
And they don't eat Whale meat Walter...not that I know of....so they won't eat Kaikoura's unpaid tourist attraction....

In my opinion Bill, John, Peter and their lackeys piked on the land tax idea etc because they still think there is a good chance the property market will tank by itself and they did not want to be blamed for it. It would make sense to me to have a zero rated land tax. The threat being enough to temper some of the lust for property.

Oh Walter you are a tease... I'll let you continue using the Japanese manufactured auto for the time being....as to your seeking my advice!...humbug.

@Andy M" "...slipping down the OECD ladder" who says? Im not so sure, despite all the goings on in NZ its nothing like the US and the UK....Ive pondered for a while and thought that to do well in some OECD stats you had to boost via debt/finance which NZ isnt that bad on....so Im not sure we will slip (much anyway), I think others will slip more....I mean the UK was better? cant be sure of that for a while....

regards

Not much of an answer Wally.

Because my English is limited, I spend times tonight to collect some more information, which explain the importance to manufacturing and why I'm so committed to the real economy and production.
This is a very interesting paper. I recommend this to the NZMEA and government also. Wally, I recommend the chapter: Linkage

http://evatt.labor.net.au/publications/papers/42.html#indirect

Also:
http://www.foxbusiness.com/search-results/m/27285297/why-manufacturing-i...

Walter

Manufacturing industries are also the most interlinked sector of the economy. This means that manufacturing industry is the best suited to generate clusters. These clusters can take the form of horizontal or vertical industry integration that takes advantage of increasing returns and the transfer of knowledge.

nice links Walter...

one little quote to tie in to another thread as well...

In 1998 the ALP argued that the Productivity Commission should be abolished and a National Development Authority established. In 2001 it was agreed that the Productivity Commission would remain, but a significant part of its budget would be redistributed to new or existing agencies to strengthen and diversify the advice provided to government

I wonder if our version also allows for funding to strengthen and diversify the advice provided to government , or we just get the 'top' bit (i.e without the advice).

Wally - you are quoting Walter here - ” reforms are needed to establish and support manufacturing”….which is another way of saying, govt should support NZ manufacturing with import taxes and subsidies…what else is there Walter?….Govt tax cuts for R&D amount to subsidies!

Walter - all that's required is a level playing field, "which is another way of saying", a balanced tax system, "which is another way of saying", broaden, flatten lower the rate of the system by including effective land/asset/capital gains taxation, the absence of which, "amount to subsidies!" - for activity and people like .....

Wally - you talk absolute bollocks sometimes - "which is another way of saying" - you make some good comments, but we all struggle with self-interest, eh - " Oh, please, please Mr English, if you continue on with the R&D tax credit (as per Auz - to 45%) how will we ever AVOID having to broaden the tax base - and tax the wealth I derive by the gain on my PNA shares."

Walter - don't waste your breathe with people speaking from self-interest, it's a waste of time.

Cheers, Les.

Not Open Season, AH. More of a targeted cull !

mattinAuck; is the the 'unlucky' you?

"At a Barfoot and Thompson auction of 20 properties in Auckland last week only two homes sold under the hammer – a four-bedroom home in St Heliers with a rating value of $980,000, which fetched $1.1m, and a two-bedroom flat in Epsom (valued at $375,000), which sold for $397,000."

http://www.stuff.co.nz/national/3481734/Auctions-hit-record-high-but-mar...

If my friends in farming,from sheep to beef including dairy, apples and grapes are making losses, then the Govt tax take is going down big time. Will they borrow more to keep the lifestyle we have been accustomed to or will they slash costs. Unemployment is going to destroy housing. Im not so worried about house values as I am about he banks ability to cope with the losses

The obvious implication of that Roger, is that our wages structure is too high. Our wages must fall as the maligned Chinese ones rise. The mechanism to this will be more competition for what jobs we provide; and this will come through increased unemployment - see Andrewj's post on that one.

Quite right Selwyn. We know what we will get and should plan accordingly. The future promises more of the same poor central and local govt. Serves us bloody right.
The rotting buildings saga of incompetent govt is only one example of how useless govt has been.
Maybe we ought to contract out govt. Get some foreign expertise in to do the jobs properly. Had the Germans been in charge of the building standards with their systems of trade training and ruthless efficiency...there would be no rotting Elephant.

Oh I see....no worries Les...you see I do pay taxes on gains Les...go research the FDR tax on capital gains...structured to protect the IRD from claims against losses!...that's the problem with capital gains taxes Les...it cuts both ways. As you ought to know.

Only a small fraction of investments that are subject to the FDR tax structure, do any good, that is to say do any better than an average 5% return pa. One in a thousand Les. The FDR system protects the IRD from claims against losses. I'm sure you are happy Les not to be paying taxes to cover the losses investors had on their investments in the collapse.

" What is it that the Auzzies get?".....think about it Les!...they get to dig holes and sell to China and use the taxes and charges collected to pay for the waste.

Believe it or not but our (NZ) taxation system is simpler than Australia's . And their health & safety rules are more onerous to comply with . And yet they continue to distance us in every positive economic metric . Must be something " in-the-water " ( oooops , another area where we have a massive advantage over them ) .

some Sunday reading

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/748868...

The best
http://www.telegraph.co.uk/finance/comment/jeremy-warner/7483177/Paul-Kr...

and some of the comments
Dr Jonathan Wilson
on March 20, 2010
Jeremy

I think that the thrust of your argument is correct – relatively low manufacturing costs in China has allowed consumers in the West to enjoy a higher standard of living by stretching the purchasing power of the pound / dollar in their pocket. The Chinese have produced but we have enjoyed the surplus in consumption.

Governments on the other hand have borrowed money from the Chinese to spend in ways that cannot replace the value spent. Therefore the correct question to ask is, “which is the more damaging, state spending that does not replace itself other than through higher taxes or the external value of the Yuan?”

My calculations suggest that the added value to the British and US consumers pound / dollar through lower cost Chinese imports is much higher than the lost purchasing power of lost jobs. If we also include the value of wealth lost by state spending (funded by the US / British governments borrowing Chinese surpluses) then a picture emerges that says the real culprit for job loss is domestic state spending leading to higher taxation and lower consumer spending power.

Krugman would lower consumer spending power even further by raising the cost of low cost Chinese imports. How much more pain must consumers endure? How much further must their standards of living fall? Raising taxes to support failed government spending and raising the cost of consumption by increasing import tariffs is the economics of the one-eyed progressive.

Finally, the Chinese should of course revalue the Yuan but we should simultaneously be lowering destructive state spending supported by borrowing and taxation. That is the real cause of high unemployment.

The deal with the Chinese should be: You float the Yuan in lock step with the rate at which we lower state spending, borrowing and taxation

#

Even if Chinese currency appreciate another 50%, Americans' trade deficit won't change much against China. iPhone is a good example, of the $300 cost only $4 goes to Chinese, and the rest $296 goes to the component suppliers, Apple, and all the middlemen. But in US trade deficit it counts as $300 not $4.

Besides, average Chinese factory wage is more than 10 times less than that of the US, not 25% or 50%.

The Chinese currency has already appreciated 21% between 2005 and 2008, but during that period of time, US trade deficit vs China skyrocketed more than 21%. With China's economy of scale, asking the chinese to appreciate the Renminbi will raise prices at New York, will give Chinese much greater buying power (mind you China already has more M2 than the US since 2009, and any appreciation would make them that much richer), but will not make the Chinese visibly less competitive overall.

Development of the Chinese hinterland brought about acute labor shortage for the coastal assembly plants, and trade as a GDP locomotive is falling behind domestic consumption and trending even lower. Besides, the lion's share of Chinese export to the US is by US multinationals.

There is absolutely zero chance that the US will erect a 25% import surcharge on all Chinese goods as Krugman wished, and any other move to make the sino-US WTO treaty more unequal as it already is would have enough incentive to keep China in the WTO, in lieu of pursuing more of its array of bilateral or multi-lateral free-trade-zones.

I'm sure China will let the Renminbi appreciate in order to diffuse the tension and accomodate Obama's spoken desire for the Chinese to float its currency. But any hope that this somehow would solve Americans problems or even thwart Chinese development would be naive and wishful thinking.
xinglongnite
on March 20, 2010
at 03:59 PM
Report this comment

Oh I support you all the way re the uselessness of the clowns we have put into power for some decades. Nothing has changed. We deserve what we have. That said, it is no reason to continue with the same idiocy. But pork the property bubble with immigration is the govt answer to convincing enough fools to vote to keep them in power.
We need less govt. They should not be borrowing the future generations into permanent poverty but the buggers are dead set on doing just that.

Your view of Australian economic success is missing something...they are floating on the most massive property bubble in history...anywhere! When it implodes, so too will their economic miracle. The greatest industry over there is the lying and BS brigade hell bent on keeping the bubble going.

http://economicedge.blogspot.com/2010/03/most-important-chart-of-century...

This is a very simple chart. It takes the change in GDP and divides it by the change in Debt. What it shows is how much productivity is gained by infusing $1 of debt into our debt backed money system.

Back in the early 1960s a dollar of new debt added almost a dollar to the nation’s output of goods and services. As more debt enters the system the productivity gained by new debt diminishes. This produced a path that was following a diminishing line targeting ZERO in the year 2015. This meant that we could expect that each new dollar of debt added in the year 2015 would add NOTHING to our productivity.

Then a funny thing happened along the way. Macroeconomic DEBT SATURATION occurred causing a phase transition with our debt relationship. This is because total income can no longer support total debt. In the third quarter of 2009 each dollar of debt added produced NEGATIVE 15 cents of productivity, and at the end of 2009, each dollar of new debt now SUBTRACTS 45 cents from GDP!

This is mathematical PROOF that debt saturation has occurred. Continuing to add debt into a saturated system, where all money is debt, leads only to future defaults and to higher unemployment.

Re a possibility, Can any reader send me their thoughts on the following to Robchrystall at gmail.com
" Govt to disallow tax deduction on cost of money"

The tax gain on just this is 2.5 billion. so NO 15% gst and full reduction in tax levels.

Background, Whena home owner purchases property to live in m they get NO taxdaduction on interest cost yet a competing house investor gets full interest cost tax deduction plus depreciation and R+M including gst rebates. So the genuine home owner has NO chance.
Further, Farm purchases are often driven by a need to reduce tax liability or convert income into capital through seriuos increase in debt levels such as has occured since the $7.90 dairy price spike.
This scheme is also VERY politically acceptable. It hits the wealthy and the Banks. The only downside is competiton from foreigners so a stamp duty (forien purcahse duty)on all foreign deals of between 38% and 150% would apply

please can i have thoughts on ramifictions of such a scheme?

Too true Walter...so why are you going on about manufacturing being the way to achieve those goals?

Robert : Chrystallise your thoughts around this theory : You buy your best mate a house ( which he selects ) ; and he purchases for you a house of your choosing . You hold the title to the dwelling he loves , and resides in , and he holds the deed to yours . You rent from each other at full market rate . And negatively-gear each other's house . Each of you live in the house of your desires , and each of you achieves negative gearing , but against the other's house . ................. Am I brilliant or wot ???? ( the wot being a 99 % probability , that I am a dribbling babbling gummy-bear sucking nit-wit ........... but I don't care ! )

Roger thompson,
in law a LAQC does that now . A taxpayer forms a LAQC , the LAQC purchases a house for rent which the LAQC rents to the owner shareholder of the LAQC. So the LAQC can claim tax deductions on interest and depreciation, All repairs and maintenence down to carpets lawnmower stove painting etc and gst if registered too . It is a rort of the first order and hasnt been rectified as yet because lots or most labour party MPS own lots of investment properrty.(recall cullens bid to 'ring Fence" income streams).
So Roger,that is not what i asked. The intention of not allowing a tax deduction on interest is "fairness" to all nz taxpayers. We want all to pay their fair share, not to escape the system by creating a very distorted capital asset ownership system.

I humbly withdraw , to suck upon my gummy-bears , and ponder the startling vagarities of life-the-universe-and-everything . St. Nick : IRD can boil their heads' in Wolverine wee wee : 'cos whatever is legal-in-law is OK ! Apologies to Meister Chrystall : I did not fully comprehend the question you posed . But I am applying for the job of Village Idiot , and with a population of 20 million in metro-Manila , there is some stiff competition .

Hopefully you'll get the 'Thank you for your interest in the postion, however......" letter Roger, as we need your comments here in Wally's Noddyland.
I have a suspicion that one cannot set up an LAQC with the intention of renting a property to oneself, or a related party. That's what the woman in Christchurch (?) has been fined a lot of money, recently, for doing. She was an IRD test case (they proved tax evasion), but Mark Hubbard will know the correct answer to that.

Robert C: re farming - I would guess that the majority of agriculture debt (remember farms include ALL agriculture, not just dairy) is such that if the interest deductions weren't allowed there would be massive bankruptcies, walk-offs as the cashflow just isn't there to pay the extra tax. There is a difference between being a landlord and being in agriculture - the former earns no export receipts and the latter does. And at the mo NZ needs all the export dollars it can get. You may well be killing the goose that lays the golden egg.

Golden Possums....that what we need...golden Possums.."you said that"...oh bugger off....we need to GE us a line of golden Possums to flog the skins to the hundreds of millions in northern China....Walter can make golden jackets for Cuculidae clocks and Les can market them for him. How about it Bill...you got millions to throw around at Hide...how about some to GE the Possums before Beijing owns the whole bloody place?

Wally - good point, "they are floating on the most massive property bubble in history…anywhere!" But when the property bubbles all collapse, will Auz or NZ be left with more productive dimensions to our respective economies? Ignoring the red herring of 'the holes' in WA, (or our water) will Auz be better off in terms of remaining economic structure because of the policy differences Phil Rennie highlights? Duh - yup! We got water - yup - we do - and wtf are we doing with that? Wtf are we likely to keep doing with it? How much value to be added? [Get real.] Why tf is that? Unbalanced tax system/policy, limited vision perhaps? The property bubble aspect you highlight is more of reason to make changes NZ side than not - why tf would you infer otherwise? Oh, of course ....

Robert C - useful comments. You won't be welcome here.

Mark - I understand it's more than the odd isolated case. It's been going for yonks - because it's been allowed to. Why do you think that is? It's bent, but that's .....

Wally - re. 'casual observers' comments - subsidies?

Cas.o - why do you think it got like that? Begins with s, ends with s, nine letters - don't bother reaching for the binos. If, "the cashflow just isn’t there", how can such a productive enterprise generate a return? (Begins with s, ends with y ..... )

Cheers, Les.

mark - agree with some of your comment, try:

http://www.interest.co.nz/ratesblog/index.php/2009/08/05/have-your-say-h...

Rorting, porking, troughing, call it whatever, it's like, "Driving, it's in the blood." and has been for a while.

Interesting comment on why hyper-inflation isnt likely...however stagflation isnt ruled out....neither is deflation....

http://krugman.blogs.nytimes.com/2010/03/18/stagflation-versus-hyperinfl...

After reading that I agree that that seems wrong that MP's should be doing that. However not knowing the particular setups for each minister company/trust wise it is hard to say if it is illegal or not or grey areas. I would say this is more of a rule change required for MP's tho and their expenses and how and when they are appropriate as opposed to changing part of the tax system for the whole country. I'm not quite following how stopping LAQC's would stop MP's from renting out apartments to other MP's whilst getting an accom allowance. If MP A were renting to MP B and then MP B were renting to MP A similar properties both in LAQC's and both getting supliments then different story. I mean there is no rule saying if they own an apartment in Well that they have to stay there that I'm aware of. Maybe there should be. I also agree strongly that govt beuracracy/spending such as this and other "expenses" needs desperatly to be reigned in.

Wally - your 6.49am, what a bent comment. Some obvious and emotively attractive observations, but why are any of them good reasons to resist a, "... a call for more manufacturing ..."? Oh, unless we are talking Walter's brand of 'centrally planned', let's build lots of tractors guff. I guess he is, unrealistically, as usual. [Walter - drop the 'central planning' crap, this is NZ, not the Soviet Union.]

What's required is balanced taxation policy, with some obvious subsidies removed, then productive enterprise that generates value, instead of, “the cashflow just isn’t there” type games, could emerge.

Any answers to my questions, 21st, 7.49pm?

My plumber's brother is something important in the IRD, AndrewT. A view from the inside is that ' There's no hurry. The infringement isn't going to go away, and we'll find it if they haven't told us by 31st March". Is there some sort of amnesty until then? I don't know. But he tells me that the IRD have been given an increase in their compliance budget to be let lose this coming year.

But Les.....our stupid govt system encourages pork slicing vote buying behaviour which leads to taxation manipulation for political gain by the clowns. That is not about to change. Already Goff and crew are making the promises. Key and Co are cutting their cloth to win the election.

Your emotive comment..."productive enterprise that generates value"...is meaningless.
It could well be judged to be 'resource wasteful activity that leaves behind a public burden of debt and pollution'.

Wally - It could well be judged to be ‘resource wasteful activity that leaves behind a public burden of debt and pollution’.

Ok, so no change, no progress then - stoneage (cave in Marlborough Sounds) or Auz here we come:

http://www.interest.co.nz/ratesblog/index.php/2010/03/18/have-your-say-g...

There might be a role for you with that wonk Wally.

That's by the way my last comment for a longer time. I expected a debate or new issues about how productivity in NZ could be improved. This morning all eyes are on property again – healing the cold - not my subject.

I better be productive and create more paintings.

Walter

Walter - apols in advance, but if I think you are talking crap, I'm going to tell you. Your 'centrally planned' type ideas for developing manufacturing in NZ are bollocks - and Wally is right to cream them, IMHO. The last Labour govt. tried, and failed, which is just part of the evidence. What is required is adequate pluralistic, balance-the-field policy; as John W put's it, good rules for the jungle, and then the animals can get on with it, without being f**ked around by commie-minded f'wit 'central planners'. Sorry, no cuddles for you today, Walter.

.and Les just in case other bloggers/ people/even politicians :-) are strongly in support with genuine, great ideas/ visions for the productive sector (manufacturing) – a better New Zealand, but have slightly different opinions, don’t be jealous because they are not your ideas and therefore don’t be destructive, support the cause to make progress.

.. and tell that story your buddies from the NZMEA.

Walter