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90 seconds at 9am: Key torpedoes 2025 Taskforce; Farm lending falls
November 30th, 2009Bernard Hickey details the key news overnight in 90 seconds at 9am in association with ASB, including news that the 2025 Taskforce is due to recommend today a flat tax and cuts in government spending, although Prime Minister John Key has already torpedoed the report, saying he does not want big bang reform.
Figures out from the Reserve Bank show farm lending fell NZ$297 million in October to NZ$46.934 billion, the first monthly fall in farm lending since February 2001 when total lending was NZ$12.58 billion.
Meanwhile consumer lending rose for the first time since December last year.
Tags: 2025 Taskforce, Agricredit, Bernard Hickey, Don Brash, Farm lending, John Key
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November 30th, 2009 at 8:51 am
This just proves Key is another gutless socialist. No, worse. A populist. If there was any Prime Minister that could turn the tide of the freedom stifling Nanny State, and her continuing suffocation of our economy, it was John Key and it was now. But he chooses to squander it.
Brash’s report would be finally heading NZ in the direction of the best set of policies to win back prosperity:
Brash’s 2025 Taskforce will recommend on Monday afternoon that the government radically reform the tax system to bring in a flat income and corporate tax rate of between 20% to 25%, but that no capital gains tax is needed.
Yes, yes, and yes.
And slash the size of the State. A great start.
Pity it’s not going to happen.
By the way, and hat tip NotPC’s ( Peter_Cresswell ) twitter feed, for all the capital gains tax enthusiasts, you should read Stephen Kirchner’s report on the failing Australian Capital gains tax titled ‘Reforming Capital Gains Tax:
The Myths and Reality behind
Australia’s Most Misunderstood Tax’:
http://www.cis.org.au/policy_monographs/pm103.pdf
If you think this further distortion of our economy so good, then look at these points from the executive summary of this report:
The economic case for taxing capital gains is widely acknowledged to be weak, even by supporters. CGT raises little revenue, but at a substantial cost in terms of economic welfare. The case for taxing capital gains rests almost entirely on equity considerations.
and:
Looking through the regular cyclical fluctuations in housing activity, the dwelling investment share of GDP has been little changed on average over the post-War period under three different CGT regimes (pre-September 1985, post-September 1985, and post-September1999). However, this investment is yielding fewer new dwelling units per person than at any time since the late 1960s due to increased constraints on the supply of new housing. The result has been upward pressure on house prices and rents and reduced housing affordability. The solution to this housing affordability problem is not to impose new taxes on housing but to alleviate the supply-side impediments to the construction of new homes.
And yet every economist posting articles to this site, including Infometrics, pushes for this further imposition on us.
We need to get Nanny State our of our lives. She’s the problem.
November 30th, 2009 at 9:16 am
Quite right Mark, John Key is hoping that the “slowly, slowly” way of doing things will work …if he remains in power long enough !! Bill English will most probably use the Brash report to implement “slowing” of the budget spending and natural attrition of the state, but any big move is a foregone NO !! CGT never is an option if John wants to remain in office…..or anybody else for that matter.
In the end we will just have to “stumble and bumble” our way out….if ever.
And the hope of catching up with Australia ?? Sure….buy a plane ticket !!
November 30th, 2009 at 9:21 am
I always thought Brash should have been in ACT…this confirms it. Kind of concerning when faulty political ideology (just look at what the tax cuts in the USA have achieved, nothing – at best) from what adds up to 3.5% odd of the population gets so much attention.
@Mark H. Funny but these are what voters want, and have voted for, Key has a mandate for mainstream central policies where there is a balance between public/self/private funded services. Its not a Q of being gutless, if the voter wanted radical change then they could vote it in easily…Hyde would be PM right now and RD would be finance minister, bet we’d see the highest exodus to OZ ever recorded..
OZ housing is different to NZ housing…need to compare apples with apples.
regards
November 30th, 2009 at 9:23 am
As Bollard says, OZ is different to us…I really dont see the drive or advantage in being like OZ….I’d go live there if that is the case.
November 30th, 2009 at 9:35 am
Funny but these are what voters want, and have voted for
Of course Steven because we have:
a) 1.7 million people working in the private sector having to pay for 1.7 million on a benefit or state sector wage, and with the State continuing to grow, while the productive sector diminishes, this is getting worse.
b) We have 1.7 million people working, only, to pay for a Nanny State population of 4.3 million.
So yes, in our tyranny of the majority is it any wonder over half of voters voted for continuing welfarism? Doesn’t make it right. But what will get us is, it doesn’t make it viable, for it’s not. We’re borrowing a quarter of a billion dollars per week to pay for it.
At some stage, because our over-regulated over-taxed productive sector cannot pay for this … well, you tell me, what happens? While we keep voting in Nero, some type of societal collapse it inevitable. It’s not even about philosophy, and from quite some time ago: it’s become a simple matter of economic mathematics.
November 30th, 2009 at 10:00 am
Kin is right…it’s all “stumble and bumble” but I doubt we will ever get “out of it”. The hole is full of household debt with more being thrown in every week. It’s a hole at the bottom of a gully soon to be flooded with public debt care of Bill English. Sorry folks but for those in the hole there is no way out and for those in the gully there is still the chance of clawing ones way up the muddy wall. I was going to use the term ‘bank’ but it has such an awful smell about it.
November 30th, 2009 at 10:12 am
NZ$46.934 billion…!!! Bleeding heck…this is not a debt number I had been awake to but surely it has to raise red flags somewhere….isn’t the household debt up near 190 billion???….this economy has been slaughtered and stuffed with debt..it can be seen nailed to the wall above a fat banker.
November 30th, 2009 at 10:19 am
“Radical changes proposed in a report into ways to increase NZ’s productivity are unlikely to be implemented quickly, if at all, John Key says”
So looks like there is no chance he will bring in CGT or ban LAQC’s either.
What is Key’s vision for NZ – does he even have one?
November 30th, 2009 at 10:22 am
So if 10% of the population pay 40% of the PAYE tax take, a flat rate of tax at 25% and a reduction in WFF etc. would mean that up to 90% of the population will have an effective tax increase by dropping the marginal rate? That will go down well!
“Of the $25b in personal taxes collected each year $10b is paid by just the top 10 per cent of the population.
About half of all households effectively pay no tax, after social welfare benefits like the Working for Families scheme are taken into account.”
http://www.stuff.co.nz/dominion-post/business/3104854/Tax-sytem-overhaul-a-fine-art
November 30th, 2009 at 10:22 am
Key spent taxpayers’ big money to create the 2025 Taskforce and the Tax Working Group, get these poor experts to work hard for half year——
—–and then he says:
“No, No, and No! I am actually not going to it”
How great…
November 30th, 2009 at 10:26 am
More of the same then:(
November 30th, 2009 at 10:34 am
Key is poll driven. He will not lift a finger if it threatens the 2011 result. The system encourages voters to sell their vote to the group promising to provide the most pork. If the pork has to be stolen from a few or borrowed from overseas to buy the votes of many…that is what national will do. You are wasting your time expecting a different policy…This is why the economy will never in a hundred years be anything other than a debt ridden low income state of bludgers and rorting politicians, totally dependent on a constant inflow of migrants from even more depressed and failed states.
November 30th, 2009 at 11:00 am
@Mark H:
a) “1.7 million people working in the private sector having to pay for 1.7 million on a benefit or state sector wage.” This is simplistic and misleading,
If the person on a state sector wage does an efficient job, ie a doctor in the public health service or teacher in a public school, that is no less non-productive than the equiv in a private offering. i) Its more than easy to demonstrate looking at the US health system that the effect on GDP is twice that of a public system…so 8% or more of the US’s GDP is thrown away for worse health outcomes. ii) private education is 10k or more per year v considerably less for public education. I will agree that at this scale private education is probably giving a better outcome per child, however there is no indication that scaling up the private system would remain this effective or work or give such a good result across NZ.
Benefits are indeed a drag/cost, but the choice is offer basic support or nothing, NZ is one of the countries that has chosen to offer basic support. This is a social choice NZers have taken.
b) We have 1.7 million people working, only, to pay for a Nanny State population of 4.3 million. This is simplistic and misleading, there are a lot of children and OAPs. 12.6%(?) for OAPs….forget the % under 15 for children.
“At some stage, because our over-regulated over-taxed productive sector cannot pay for this”
Exporters make us profit, anything else is simply churn and non-productive IMHO. I have said time and time again, we need to get way from investing in housing and into investing in exporters and real producers…clearly the asian countries understand this and have aimed for this by pegging thier currencies (for instance). We need to clean up the financial industry and financial aspects of businesses so its open and transparent…too many vested interests have or are continuing to feather their own nests this is due to a lack of regulation and not too much.
November 30th, 2009 at 11:01 am
…for an educational shake up – import some Chinese Gold & Coalminers to pack & wrap our politicians/ economists and send them to international manufacturer centres.
Reading articles this morning again – all sounds desperate (déjà view) – everybody calls for bargains from the offices – and not much is done on the ground. – just buy (import) a new Transport System for Auckland in the MILLIONS
http://www.railway-technology.com/projects/auckland_rapid/
- easy.
..and increasing productivity building more roads with equipments plus imported – great !
..and nothing changes – same old stories- “Tie Talk !”
Walter
November 30th, 2009 at 11:07 am
@Wally the NZ household debt is huge….and at some point I think there is a real danger that we will see a trigger where NZ households do like the USA and de-leverage, and that’s a 10 year process….I suspect this is why NZ has had such a mild recession no one has really started to de-leverage (though I am) in NZ so spending hasn’t really collapsed. If this second dip happens which seems very likely then it would seem logical that this “triggers”
regards
November 30th, 2009 at 11:08 am
@W. Kunz: Indeed….someone else spend so “my” business benefits…seems looking for an advantage or cost dodge is the name of the game…
Building more roads make no sense….roads have a life of 50years+….oil (ie petrol) has an affordable life of maybe as little as 10years…I just dont see why…
November 30th, 2009 at 11:15 am
Benefits are indeed a drag/cost, but the choice is offer basic support or nothing, NZ is one of the countries that has chosen to offer basic support. This is a social choice NZers have taken.
As a way of life, unfortunately, way more than ‘basic support’. Look at WFF. Look at TPB for an increasing number of teenage mothers.
Spin all you want, Steven Nanny State has crippled us first philosophically, your posts are proof of that, and now, inevitably, She is crippling us financially.
… carry on.
November 30th, 2009 at 11:22 am
Um, DPB, of course …
November 30th, 2009 at 11:23 am
True enough steven and I have no debt so no worries. Either the process is steep and takes a year or drawn out and lasts for ten. There is no way the ponzi economy can ride through the storm without a battering. The dream that national have is for a migration surge loaded with loot and willing to buy all the shite property at bloated prices…fat chance of that. The reason the economy is destined to remain a pig is the govt will not move to deflate the bubble. Too big a threat to bank profits. I don’t believe the crud from Key about some concern he has for overleveraged property investors, sick though it is..he is protecting the banks. There in lies the essence of the poison killing this place. Had the bubble of stupidity been throttled when it was easier to do so..the massive debts would not exist..the incomes would leave room for savings and investment in the export sector. The truth is we have shabby govt and a shockingly non existent regulatory control over the financial rorting that characterises this pigsty economy.
November 30th, 2009 at 11:37 am
“As a way of life, unfortunately, way more than ‘basic support’. Look at WFF. Look at TPB for an increasing number of teenage mothers.”
I tend to agree on WFF…I am concerned that a significant amount of PAYE earners effectively pay no tax…WFF is a mistake IMHO.
The USA has a good policy (on the face of it) of not supporting single mothers past the first child, this seems to have resulted in a significant drop in further children…so yes I see this needs a close look at. What concerns me is children on DPB have significantly poorer outcomes as adults….I dont think there is an easy answer…but clearly parents in these cases should take primary responsibility and they are not.
regards
November 30th, 2009 at 11:48 am
@Wally: “Either the process is steep and takes a year or drawn out and lasts for ten.” I dont think generally a year can be done, steep is I suspect at least 5…and that alone is a massive withdraw of spending that the “economy” cant withstand…its geared all wrong…it has to be firmly re-directed…we have expanded in a certain direction for 30 odd years…
Hence why I think peak oil is going to be such a nightmare. Moving forward oil will take up 4~6% of GDP, at the same time we have to spend some % of GDP on moving to alternatives (another 5%) and some % of GDP paying down debt (another 5%) and some % of dealing with the baby boomer bulge (god knows what% and finally our economy will contract so GDP will drop (another 5%)…From somewhere 20%+ of GDP has to be found just to tread water…end result either public systems will be decimated and we have to pay for private essential needs directly or taxes will go up significantly to allow public services to continue, whichever our lifestyles are going down the pan.
case in point,
http://www.energybulletin.net/node/50827
“the US economy cannot tolerate an expenditure on oil which constitutes more than 5-6 per cent of GDP.”
Mainstream thought in peak oil circles is now that the $147/barrel oil price of July 2008 may represent the “peak oil price”. In other words, we may never see an oil price that high again since, at that level, the high cost of energy cripples economic activity, plunges economies into recession and thus kills demand.”
regards
November 30th, 2009 at 11:49 am
“The truth is we have shabby govt and a shockingly non-existent regulatory control over the financial rorting that characterises this pigsty economy.”
Agree….our elected officials have done us a dis-service.
regards
November 30th, 2009 at 12:11 pm
Economics, as we know it, is going to be turned on its head. If Dubai can send shudders through global markets, imagine what a failure in Ukraine, Greece, Spain, or Japan will do. What if the China bubble bursts; or the world stops buying US Treasuries? What if Israel hammers Iran? There are major disruptions/resets ahead that could happen at any time. I like some of what Brash is recommending, and I’m willing to bet Key does too. Like the canny trader he once was, it’s all in the timing.
November 30th, 2009 at 12:18 pm
No one is commenting on farm lending falling. Does it mean banks and lenders are tightening the credit terms for farms? Will farm prices crash? Lenders with large agricutlural exposures such as South Canterbury Finance could really get caught with this (see http://davidhillary.blogspot.com/2009/11/seven-ugly-gaunt-cows-that-could.html)
BTW I also have a poll running on SCF’s next credit rating: http://davidhillary.blogspot.com/2009/11/credit-rating-countdown-and-poll.html
November 30th, 2009 at 12:24 pm
Doug : You raise a good point . There are any number of ” shoes about to drop ” overseas , which could send world sharemarkets and economies into a tail-spin . It may happen , maybe not . But the risk is real . And JK is doing nothing to strengthen our position , financially , in preparation . A good boy scout is ready for any eventuality . We here in NZ , risk being caught in the wilderness , with our britches down . $ 250 m. extra borrowing each week is ludicrous . Down-right stupid . And unnecessary .
November 30th, 2009 at 1:53 pm
If a business experienced a sharp downturn in sales it would cut costs,if a family had a partner lose a job or a drop in income in would retrench, cut spending.
These idiots running the country have had a cut in income and have decided to borrow more to pour into unproductive enterprises like DPB etc. They have not once mentioned how the intend to repay the 40 billion, which will more than likely morph to 100 billion. This is because Governments don’t repay debt. This Govt has no intention of repaying this debt they will sell something(asset sales mark ll). Why the hell can they not get it through their thick skulls that the best and only sensible option is to cut spending.
November 30th, 2009 at 1:56 pm
@David Hillary
I wonder if the banks have been writing of debt. Its a huge change in lending if not, then yes, stress levels must be high.
November 30th, 2009 at 7:43 pm
To stop Nz from going the way of USA we must avoid the following from happening.
The Control freaks (Govt, Banks and other money lenders) have taken advantage of Bernard’s persistence in pushing for land tax over CGT that they are now signalling thro the media that the changes to NZ tax system will pretty much be,
1 increase GST
2 intro property tax
3 reduce top tax to 30%.
This will mean that the average person will pay a lot more to live. While those who live a life a kin to a money trader will be able to carry on there way of obsession with money and getting one over every else.
The fact that the Govt will end up taxing new zealanders income, saving, spending, local body rates and now their home, makes this country pretty queer.
The biggest problem for NZ wether we are in a recession or a boom is the amount of borrowing and lack of saving. I’m amazed that so many intelligent people can’t identify this. We need to have tax-free income from saving for all individuals. This would encourage people to save which would reduce the inflation rate, lower interest rate for domestic burrowers and help to hold down the exchange rate of the New Zealand dollar.
But the money lenders would not be happy, unfortunately a certain group including the Government (GST) Banks and others is hell bent on making New Zealand a low income, high cost country.