News and Opinion, sponsored by RaboPlus

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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By Adolf Stroombergen from Infometrics

Many people do not support an increase in GST, or so the polls tell us. I recall the same popular sentiment in 1986 when GST was first introduced. At that time there was a natural fear about a type of tax that was unfamiliar to most New Zealanders. Would it work? Would politicians deliver the accompanying income tax cuts? Who would gain and who would lose? Would government be bigger or smaller? Perhaps these fears still exist even though the change being talked about this time is much less dramatic.

The policy options currently on the table involve a change in the tax mix that deliver the same amount of revenue to the government. Whether the total tax take is too high or too low – whether government is too big or too small – is a different issue. The aim of the current proposals for tax reform is to find a better way to collect the same amount of tax revenue. What is meant by a better way? One that is more conducive to economic growth, fairer to those who can least afford to pay, easier to understand, more difficult to avoid and cheaper to comply with and administer.

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By Infometrics economist Gareth Kiernan

Recently released figures showed the unemployment rate surging to 7.3% in the December 2009 quarter, the highest level in over ten years. The number of unemployed people has risen by 88,000 since December 2007, more than doubling over that two-year period.

Three years ago the number of applicants for vacancies was low and the average quality of those applicants was even lower. The balance of power in the labour market has now definitely shifted in the employer’s favour, so for those people who’ve been made redundant over the last 24 months, finding a new job is currently a tough slog.

Some people see enrolling with an employment agency as a good way of boosting their chances of getting back into work. And in a developed society, experts and intermediaries play an important role in many facets of everyday life. Real estate agents have wider networks and greater marketing skills to help sell your house.

Mortgage brokers know the ins and outs of the banking sector and can potentially get you discounted interest rates. And given that it’s the job of investment advisers and money managers to monitor financial markets, they should have the expertise to provide good financial advice – at least, that’s the theory!

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Mike Pero Mortgages and Infometrics reported their Property Cycle Indicator (PCI) fell in the month of December for the first time in almost two years as the number of houses sold and the time taken to sell the houses deteriorated.  The PCI is a forward looking indicator that includes the number of houses sold, the time taken to sell a house and the changes in prices.

However, Mike Pero Mortgages Chief Executive Shaun Riley said the housing market remained in expansionary territory and he pointed to a rise in the median house price in December. Infometrics forecast in August last year that house prices would rise 24% in the next three years.

Here is the full release below.

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By Infometrics economist John Carran

There has been a renewed focus on public asset sales in some western countries as governments reassess the value they get from owning commercial assets when faced with spiraling public debt. The British Government, for example, has announced it will sell £16bn ($35.8bn) in public assets over the next two years. Several other European countries such as France and Germany are also undergoing or seriously pondering public asset sales.

The New Zealand Government has a considerable amount of capital tied up in commercial assets on its balance sheet – around $15bn as at 30 June 2009. Examples of State Owned Enterprises include New Zealand Post, TVNZ, KiwiRail, and the government-owned electricity generators.

Consider what could be achieved for taxpayers if a proportion of that capital was freed for use elsewhere. For instance, it could be invested in much needed infrastructure such as roads, or it could be invested in schools, hospitals, and other public amenities.

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By Infometrics economist Nigel Pinkerton

Like the 30,000 members of the facebook group “bring back Georgie Pie”, I have fond memories of the franchise. Some would swear by the taste, but the biggest attraction for many was that the pies were cheap. Georgie Pie’s $1, $2, $3, $4 menu became legendary in fact, but therein lies the problem. The economic and regulatory environment has evolved since the 1990s, and the costs of doing business for an outfit like Georgie Pie have increased substantially.

If McDonald’s were to resurrect the brand, they may be able to milk some extra revenue and free publicity out of it. But the cost of a pie would likely come as a shock to many people. The Georgie Pie experience would never be the same.

The average item that cost $1 in 1996 would cost more than $1.35 today because of inflation. The $1.35, $2.70, $4.05, $5.40 menu wouldn’t sell itself in quite the same way the original menu did. But Georgie Pie’s problems would run deeper than this. Georgie Pie’s costs would have increased much faster than inflation, had the franchise not been shut down.

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