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Auckland University’s Retirement Policy and Research Centre (RPRC) has challenged the Tax Working Group’s (TWG) assertion that New Zealanders have NZ$200 billion invested in residential rental properties, arguing the actual number is less than half that. (Updated with further comments from Michael Littlewood on why he would prefer better IRD policing of current laws to new taxes)

The RPRC has released a briefing paper examining the NZ$200 billion number, which was a central figure in the TWG’s call for reform of the tax rules around property investment. The TWG argued that property investors made losses of NZ$500 million on that NZ$200 billion of property in 2008, creating NZ$150 million of losses in tax revenues and justifying changes to tax rules.

“The TWG gave no source for the $200 billion investment, but suggested that the tax system needed change to reduce this apparent over-investment by households in this sector,” said RPRC co-director Michael Littlewood (pictured left), adding New Zealand does not have good information on home ownership.

“The TWG took what was effectively only a passing comment on a possible level of rental property investment and has turned that into a reason for changing the tax system” Littlewood said.

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Consumer confidence weakened slightly in the March quarter from the December quarter and consumers remain “deeply pessimistic” about their own personal finances as petrol prices rose, interest rates rose and the housing market softened, the Westpac McDermott Miller survey shows.

The survey also asked what New Zealanders thought about potential tax changes that may be announced in the May 20 budget, including a possible GST increase, personal tax cuts and property tax changes. It found an equal number overall who thought it would be good or bad, while older and poorer respondents were most worried about losing from any changes because of either the GST increase or property tax changes.

See the full confidence results here.

The full press release is below

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Here are my Top 10 links from around the Internet at 10 past 2. I welcome your additions and comments below or please send suggestions for Thursday’s Top 10 at 10 to bernard.hickey@interest.co.nz Apologies for the delay.

1. Here comes the wall of debt – The New York Times has written a useful piece pointing out the US$700 billion wave of maturing junk bonds that is due to hit the market from 2012 just as the US governments and others are borrowing heavily. We can be sure of one thing: interest rates will rise.

2012 also is the beginning of a three-year period in which more than US$700 billion in risky, high-yield corporate debt begins to come due, an extraordinary surge that some analysts fear could overload the debt markets.

With huge bills about to hit corporations and the federal government around the same time, the worry is that some companies will have trouble getting new loans, spurring defaults and a wave of bankruptcies.

The United States government alone will need to borrow nearly US$2 trillion in 2012, to bridge the projected budget deficit for that year and to refinance existing debt.

Indeed, worries about the growth of national, or sovereign, debt prompted Moody’s Investors Service to warn on Monday that the United States and other Western nations were moving “substantially” closer to losing their top-notch Aaa credit ratings.

Sovereign debt aside, the approaching scramble for corporate financing could strain the broader economy as jobs are cut, consumer spending is scaled back and credit is tightened for both consumers and businesses.

Even Moody’s is worried.

“An avalanche is brewing in 2012 and beyond if companies don’t get out in front of this,” said Kevin Cassidy, a senior credit officer at Moody’s.

Private equity firms and many nonfinancial companies were able to borrow on easy terms until the credit crisis hit in 2007, but not until 2012 does the long-delayed reckoning begin for a series of leveraged buyouts and other deals that preceded the crisis.

That is because the record number of bonds and loans that were issued to finance those transactions typically come due in five to seven years, said Diane Vazza, head of global fixed-income research at Standard & Poor’s.

In addition, she said, many companies whose debt matured in 2009 and 2010 have been able to extend their loans, but the extra breathing room is only adding to the bill for 2012 and after.

The result is a potential financial doomsday, or what bond analysts call a maturity wall. From $21 billion due this year, junk bonds are set to mature at a rate of $155 billion in 2012, $212 billion in 2013 and $338 billion in 2014.

2. Tax crackdown – Australian authorities are cracking down on rich individuals with money tucked in other countries, Anthony Klan at The Australian reports. Any with money stuck here? This is all part of the global crackdown on tax havens by cash-strapped governments. This will be a theme of years to come.

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By Matt Nolan from Infometrics

Following the global financial crisis people all around the world were angry and they wanted someone to blame. Given that the crisis seemed to originate from credit markets, it became natural for everyone to blame bankers.

In Britain there have been calls to make bankers pay through the introduction of a tax on speculative banking transactions called a “Robin Hood tax”. It even has the all important celebrity backing of Bill Nighy, and 131,919 fans on Facebook. Economists have seen this tax before in a different guise – we call it a financial transaction tax. Instead of attacking bankers, lowering financial market volatility, and raising money for the needy the burden of such a tax would fall mainly on ordinary people while having few of the claimed effects.

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Bernard Hickey details the key news overnight in 90 seconds at 9am in association with the BNZ, including news Moody’s has warned the United States that its AAA credit rating will be endangered within a few years unless it gets its budget deficit under control.

The warning follows similar comments from the other 2 big ratings agencies Standard and Poor’s and Fitch. They are worried America’s interest payments will exceed 15% of income with a few years. America is unlikely to be downgraded any time soon, but this will keep the upward pressure on interest rates for the long term.

Meanwhile, there are revelations from a receivers report that Lehman Brothers used vehicles known as Repo 105s to systematically hide US$50 billion of debts from its creditors and regulators. Legal action over allegations of fraud are likely for its key executives.

Meanwhile, trade tensions are growing between America and China. America is due to declare China a “Currency Manipulator” within weeks, which could trigger sanctions. The pressure is being felt in many places, including with Google, which is set to withdraw from China within days over plans to stop censoring search results.

TVNZ has commissioned a poll by UMR of 1,000 Australians and 1,000 New Zealanders on whether New Zealand should become the 7th state of Australia. It found about 40% of respondents thought the idea was worth debating, but that 71% of New Zealanders and 52% of Australians opposed the idea.

The poll found 37% of New Zealanders believed the economy would be better off if New Zealand was the 7th state, while 27% believed it would be worse off and 25% said it made no difference.

A net 10% of New Zealanders believed the economy would be better off, while a net negative 12% of Australians believed their economy would be better off. The poll found 32% of Australians believed the economy would be worse off, while only 20% believed it would be better off.

The full results of the survey are here on TVNZ’s website.

My view

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