Bernard 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.
Television New Zealand’s Guyon Espiner has reported that Don 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.
Espiner also reported the Taskforce was likely to recommend more privatisation and the reduction some social services.
John Key was reported as rejecting the recommendations before they had been made.
“We campaigned on some key and core commitments and we’re not going to break those promises to New Zealanders. That’s not to say we can’t pick our way through the report and find something that might add to New Zealand’s economic performance, but where we specifically campaigned on something then I’m not going to break my word,” Key says.
Espiner said the reported questioned why a number of social services and benefits were universal. The commission was understood to have looked at restricting access to free student loans.
The author of a report on high Auckland land and house prices has recommended to the 2025 Productivity Taskforce the extension of Auckland’s Metropolitan Urban Limits (MUL) as one way to remove roadblocks to the development of New Zealand’s biggest city.
Motu economist Arthur Grimes told the taskforce that Auckland’s development was at risk from being stifled by high house prices, with current policy settings around the MUL making houses more expensive. The MUL can be seen in red in the graphic on the left.
Auckland is land-rich, Grimes said, adding that the MUL could be extended around existing infrastructure such as the Northern Motorway.
This would have the double effect of lowering Auckland house prices and creating more space for productive ‘urban’ activities not allowed outside the boundaries in rural zones.
‘Urban’ activities not allowed included setting up factories or housing, or even schools in rural zones.
The five members of the government’s 2025 productivity taskforce have been named, Minister for Regulatory Reform Rodney Hide announced.
The taskforce is headed by former National Party leader Don Brash, who before joining the National Party was Governor of the Reserve Bank. Joining Brash will be:
Former Labour Finance Minister (1988-1990) David Caygill who is also current chair of the Electricity Commission, chair of the forthcoming ACC review and is a member of the Regulatory Responsibility Taskforce. Caygill, one of the instigators of ‘Rogernomics’ in the 1980’s, replaced Roger Douglas as Finance Minister in 1988 when Douglas was fired by then Prime Minister David Lange.
Former Reserve Bank Governor and National Party Leader Don Brash has given his first speech since being appointed as the chairman of the Government’s 2025 Taskforce to improve productivity and close the economic gap with Australia.
Speaking to a group of around 100 people at the AUT Business School in Auckland, where he is Adjunct Professor of Banking, Brash said political courage would be needed for New Zealand to make the major changes in tax structures and investment policies to close the gap with Australia and improve our productivity.
Brash steered clear of proposing solutions immediately, given the members of the taskforce have yet to be appointed. But he made some interesting points on the some of the ‘myths’ around the gaps between Australia and New Zealand.
He said Australia’s mining sector did not give it a natural advantage, given it produced only 5% of Australian GDP and 1% of employment. Brash pointed out that New Zealand’s distance from its markets appeared a natural disadvantage, but was shared with Australia.
Surprisingly, he said that New Zealand appeared not to have over-invested in property. He also said a higher savings rate did not necessarily lead to higher productivity, pointing to the experience in Japan over the last 20 years despite a high savings rate.
He also suggested that one of New Zealand’s problems is that capital is taxed too heavily, which might explain our relatively low investment in technology and infrastructure by the private sector.
Brash said he had recommended one person from the Labour side of politics to be a member of the taskforce. The taskforce membership is due to be finalised next month.
Here’s the final section of the speech. The full speech is reproduced in full below that.
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