Is there such a thing as a rapid slowdown?
I guess so, but it seems funny to say it.
Anyway, that deliciously contradictory-sounding expression appears to be exactly what is happening to the New Zealand economy at the moment. We are cooling off. Fast.
Nobody should be particularly surprised, given that the Reserve Bank (RBNZ) has been hell-bent on slowing the economy down in order to take the sting out of rampaging inflation, which peaked at 7.3% last year and was still at an elevated 6.7% (annual rate) as at the March quarter of 2023.
The RBNZ has been hitting us with everything it has got, hiking its weapon of choice, the Official Cash Rate, up from 0.25% in October 2021 to 5.5% now.
In the same period mortgage interest rates have gone from two-point-something percent to six-point-something percent or even worse depending on your choice of fixed term or if you are on floating.
What has stood out though is that large parts of the general public have (outwardly anyway) appeared almost impervious to soaring costs and ramping interest rates. Eating out and travelling have been on the menu, for example. We did save up a fair bit of money during the pandemic.
All this has gone on while the official figures suggest that (by the narrowest of margins) the country went into a 'technical recession' as of the March quarter.
But I guess it is the way of these things that when conditions turn, they turn slowly enough that you don't necessarily notice, and then suddenly things will seemingly happen in a rush. Remember how the housing market appeared to go from white hot in November 2021 to suddenly cold as ice just a month later?
Well, all that pumping of the OCR throttle by the RBNZ was sure to have a more noticeable effect eventually - and now here we are.
Consider some of the developments of the past week:
• The Reserve Bank's latest statistics for May showed a sharp rise in the number of non-performing mortgage loans, albeit from a very low base.
• The long-running and much followed NZIER Quarterly Survey of Business Opinion showed some marked declines in labour market and capacity pressures.
• Credit bureau Centrix's latest monthly Credit Indicator Report showed that some Kiwi households and businesses are "walking an economic tightrope" - with higher consumer arrears and mortgage delinquencies.
• The latest Crown Accounts for the 11 months to May 2023 showed a deteriorating financial position, with tax revenues coming up more than $2 billion short of projections - a clear sign of a slowing economy.
There might be other things I haven't mentioned there too. But I think you probably get the point. 'Suddenly' it's slowdown time.
I'm sure the RBNZ won't be 'pleased' with these developments as such. But there has to be at least a sense of satisfaction, dare I say interspersed with big dollops of relief, that tangible signs are emerging of the heat coming out of the economy after all the work the RBNZ has been putting in to engineer such an outcome.
However, life wouldn't be life if it didn't have complications attached.
And for all that we are now seeing clear enough signs of slowing demand in the economy, the target of all this attention - inflation - is still looking like it might want to hang around for far longer than anybody wants.
The NZIER survey mentioned above, for all that it showed real signs of slowing momentum in the economy, also highlighted that firms are still facing strong cost pressures.
It would be the worst of all worlds if we were now to see the economy grinding to a halt, BUT inflation stays stubbornly high.
The next Consumers Price Index reading of inflation (June quarter) is due to be released on July 19. The RBNZ is forecasting that the annual rate will fall to 6.1% from that previous 6.7% level in March, and it reckons inflation will be down to 4.9% by the end of the year.
Fingers crossed that there is such a fall. We do need to see it. Because obviously the whole point of us being put into an economic downturn is to kill inflation.
If we do end up with the dreaded combination of a stagnating economy and still too-high inflation then life might not be fun at all for a while and it would become a tough balancing act for the RBNZ.
Personally, while I reckon we will see inflation come down appreciably in the second half of this year, I'm still concerned that it may remain higher and for longer than anybody hopes. The RBNZ is currently forecasting that inflation will be back into its 1%-3% target range by the second half of next year.
I really hope the RBNZ is right. If it is wrong and inflation persists outside of that 1%-3% zone for too long, what does the central bank do? Does it reach for the shotgun and have another blast on the OCR?
At what point does a slowing economy become something rather more serious? After all in terms of what we are seeing with the economy at the moment, well - what are we seeing? Are we seeing the full extent of a slowdown now?
The amount of interest rate hiking the RBNZ has implemented is unprecedented in such a short space of time. There has to be more than element of 'experimentation' about this. Nobody can be absolutely certain what will transpire. Has the RBNZ already done much more than 'enough' in slowing the economy? There's always the danger with a blunt instrument like the OCR, which has such a 'lag' in terms of its impact, that 'enough' might actually have been several OCR hikes ago.
Will we see this slowdown gain a life of its own and extend beyond the hoped-for 'soft landing'?
As the signs of economic decline, such as rising mortgage stress, become obvious does this put us into a kind of negative feedback loop where, from being buoyant, resilient and seemingly impervious to all the RBNZ was doing, we instead now get very down, stop spending and really do make the economy grind to halt? I know the general consensus among economists is that we are going to be able to get away with a relatively mild downturn. But I'm still nervous about the situation. Particularly if inflation doesn't play ball.
I think the danger is that the increased stratification we've seen since the pandemic - the gap between haves and have nots - will only increase from here. Pressures are falling unevenly. Annual food price inflation running at over 12% is clearly going to affect the lower income households much more badly.
Remember too that the RBNZ's OCR hikes are most directly affecting households with mortgages - and by RBNZ estimates only about 38% of households have a mortgage. So, the impact of the downturn is being felt very unevenly across the population and, indeed, that's probably why much of the slowing of the economy to date hasn't necessarily been that visible.
As I have said before, I think the labour market is the key to everything at the moment. Unemployment has been amazingly low. It is 3.4% currently and has been well under 4% since the second half of 2021. The next labour market figures (June quarter) are due to be released on August 2. The RBNZ's forecasting a slight lift - to 3.5%, but with much more to come later. It sees the rate being 4.6% by the end of the year and then rising further next year to be 5.4% by the end of 2024.
With some of us already experiencing mortgage stress even with this unemployment rate so low, the unemployment figures are going to need to be watched. We can't be absolutely certain how well contained mortgage stress will be, even with the full work force we have at the moment.
A lot of people have yet to switch to the higher mortgage rates of now. Exactly two years ago you could still get a two-year fixed rate at 2.59%. Now you might possibly be refixing at 6.79% and be facing a more than 50% increase in your monthly payments.
We are now into the 'slowdown proper'. The phony war period while people watched on placidly as the RBNZ hiked the OCR till it was blue in the face with apparently little impact is now over.
This is where it gets real.
*This article was first published in our email for paying subscribers early on Thursday morning. See here for more details and how to subscribe.
121 Comments
Flying high - Thank You very much. I slept in this morning, been feeling something was missing, like I had something to do.
It's nice to know there are others out there with a good heart ready to step in and warn the poor sheep, (whats left of them).
The Prophet always said " What the Vested Interest Brigade say - Believe The Opposite ! - Interest Rates Will Stay Very Low For A Very Long Time : Translation : Interest Rates Will Go Up At Record Speed Very High.
I will let you all Translate what this would mean taken from the article from the RBNZ.
"The RBNZ is currently forecasting that inflation will be back into its 1%-3% target range by the second half of next year."
I see interest.co.nz are advertising this Amazing Deal on their front page. Not sure who would have the stomach for this right now.
https://www.colliers.co.nz/en-nz/properties/approved-157-lot-residentia…
I agree - pushing rates any higher let alone into double digits is like cutting off your nose to spite your face. Even productive businesses and infrastructure projects with strong fundamentals will struggle under those huge debt servicing costs.
I reckon OCR at 4-5% in the medium to long run should gradually sort out market inefficiencies and asset bubbles.
"A couple months ago David changed his forecast to "soft landing". Has he gone bearish and Hard Landing again. Yes there is room for change but all this flip flopping is too much "
Financial market participants know that new data releases, and news developments require constant recalibration of future potential economic outcomes and their probabilities.
The global economies are interconnected.
E.g
- armed conflict in Ukraine
- housing bubble and failure of banks in US in 2008 / 2009
- 1987 stock market crash
Here was the most recent new developments that the author was using to recalibrate his assessment of future potential economic outcomes and their probabilities.
Consider some of the developments of the past week:
• The Reserve Bank's latest statistics for May showed a sharp rise in the number of non-performing mortgage loans, albeit from a very low base.
• The long-running and much followed NZIER Quarterly Survey of Business Opinion showed some marked declines in labour market and capacity pressures.
• Credit bureau Centrix's latest monthly Credit Indicator Report showed that some Kiwi households and businesses are "walking an economic tightrope" - with higher consumer arrears and mortgage delinquencies.
• The latest Crown Accounts for the 11 months to May 2023 showed a deteriorating financial position, with tax revenues coming up more than $2 billion short of projections - a clear sign of a slowing economy.
This reminds me of the The Great Horse Manure Crisis, where it was predicted in 1894 that:
“In 50 years, every street in London will be buried under nine feet of manure.”
The prediction was based on data such as that "on average a horse will produce between 15 and 35 pounds of manure per day" and London had over 50,000 horses transporting people around the city each day.
Thanks to Henry Ford, this prediction never came to pass.
Significant change can cause past averages to become very poor predictors of the future.
Flying high to new lows.
Your comment is proof of your numerical illiteracy.
Pa1nter's comparison was a bit daft but not incorrect.
People forget, historical interest rates where at much lower levels of principal.
I wonder why nobody calculates an affordability index that is inflation and income adjusted.
Additionally, the comparison actually does make sense. If you look at any long run (and I mean minimum 50 years, but extending out as far as we have any sort of reliable data, so ~500 years) interest rate series, the trend is clearly downwards over time, meaning the series exhibits non-stationarity.
What does this mean? It causes all sorts of problems for linear regression, but most importantly to the current discussion, means that the average interest rate is a biased predictor of future interest rates.
There are a number of obvious reasons why interest rates have tended down over time, the three main factors however, are higher savings rates relative to investment demand, lower risk premiums over time, and deflationary technological advancement (in the inflation targeting era).
So yeah, it might have made sense for the Bank of England to issue Treasuries at 10%+ interest rates in the 1500s, but it also made sense to get a lot of use out of horses at that point in time too. Neither of which is true today.
NZ doesn't have an economy if compared to the other economies around the world. Other big countries have producers and also consumers closer by.
We are merely a population of 5 million consumers dependent on others buying our produce. And we are so far away from consumers. With air travel getting expensive, our produce and tourism is looking less attractive.
We are going back to NZ of 90's and early 2000's. But this time we have so much more debt.
God Save New Zealand
Well said, sir. This and trade deficit are my biggest concerns, especially with this amount of debt it becomes more concerning. It seems we don't have anything in work right now can address these concerns and issues. With high cost of living, our tourism and education won't look as attractive as before.
The NZ trade deficit over the last 2 years is appalling, and it got WORSE when the borders re-opened. So much for Tourism exports.
https://d3fy651gv2fhd3.cloudfront.net/charts/new-zealand-balance-of-tra…
We are going back to NZ of 90's and early 2000's.
I returned to NZ in 2000 after several years overseas and was horrified at the state of my home town. I couldn't believe how bad things had got while I was away. Went back overseas and returned a few years later and things had improved. I now also feel we are heading back down to those same lows again.
There is no doubt that RBNZ's medieval monetarism is slowing consumer growth - although the higher prices we have suffered as a result of higher cost of imports have the same effect of course (reducing the amount of stuff you can buy). But, what effect are higher interest rates and slowing consumer demand having on inflation?
The latest figures released yesterday show that households are actually net beneficiaries of rate rises as savers are getting more than mortgagors are paying (noting that a small group of mortgagors are getting hammered).
The big losers from rate rises are non-financial businesses who are now paying nearly $7 billion in interest costs per quarter - that's about 10% of total consumer spending!!! In other countries, inflation is falling away quickly without big rate hikes as import prices fall (Denmark CPI 3%, Spain 2%, Japan 3% etc). However, in NZ, savings from lower import costs appear to be getting cancelled out by the high cost of credit!
I predict we will see a slower cooling of inflation in NZ relative to other countries because RBNZ has pushed huge costs onto kiwi businesses and they have little choice but to pass those costs on. Those higher prices will then reduce consumer demand further and we will start to see businesses going to wall and unemployment going up. This will coincide with an election period meaning our political leaders will be too distracted to act and we will end the year in a total mess.
A few years ago my rates were $58 per week, they’re now $85 per week and due to go up to $96 per week in Wellington. My house insurance is barely behind this too
In Masterton, my rates are around 2k per year - but this is a rural property so they have no mains water supply or public sewer.
What's the case for higher rates for longer? The US seems more and more like they have the tools and economy to manage it. We will just have to follow suit.
As the U.S. is trying to keep inflation in check by hiking up interest rates, the Federal Reserve is in a pretty solid position to manage bank liquidity and dodge defaults (unlike 2008). They're expecting more inflationary fiscal spending and more bank default issues due to their high rates and are ready for it. The Fed has got a bunch of new tricks up its sleeve like selective bailouts, quantitative easing, and central bank liquidity swaps, which means they're more prepared to shield the economy from major hiccups that could usually lead them to drop the rates.
And, according to the Fed's own predictions, we're likely to see high interest rates sticking around for a while. They are loving this as gives them some breathing room to strengthen their financial standing.
So, it's likely we'll see the Reserve Bank of New Zealand (RBNZ) follow suit and crank up their interest rates in line with the U.S. Federal Reserve.
On top of this, New Zealand's got its own inflation challenges due to government spending. And, let's not forget the need to safeguard our exchange rate, which adds more reason to keep those high interest rates. So, when you put all these pieces together, it seems we need to be prepared for a period of higher interest rates in New Zealand.
As mentioned above many of the local council rates increases are all over 7%
I have noticed many cafes slowly increasing their prices for coffee and food and this is all before the rates increases, the insurance increases etc
Then of course we tend to forget about business borrowing with business overdraft rates now over 16%
with all these increases I can’t see inflation falling anytime soon
I agree that unemployment will be the key, have worked in finance through many of the downturns it was always job losses that caused the most pain especially as many households rely on two incomes to service their debt.
It doesn’t seem that long ago that I was reading the weekly economic forecasts from well known economists ’Low interest rates are here for decades to come’ said one economist Also the words ‘ This time is different’ was mentioned often.
Buckle up the ride has just begun
Soon enough these cafes will price themselves out of the market where only the wealthy will be willing to spend. I've already seen pictures of the odd place selling a hot pie for $12 in parts of the country, and no that's not at a ski field cafe.
The poor are getting hammered, the middle getting less and less purchasing power so buckling down and the wealthy are the only ones left who spend freely.
Something tells me the minimum wage will finally stop getting hiked annually for a few years. The free market must find equilibrium once more.
You can't hike the minimum wage 44% in 5 years and expect prices of goods and services to not go up. Inflation was always waiting in the wings in NZ due to Govt policy, and that's why NZ will struggle to bring it under control. Fortunately Jacinda's last act as Saviour of New Zealand was to obtain Australian citizenship for everyone. So unemployment wont be a problem so long as you have a passport and a work ethic.
Businesses have been able to pass on costs for the past year or two, but that has or will come to a stop soon. People just can’t afford it. Houses is an easy example. But a coffee and a custard slice cost me $19 this morning. If they have to charge me any more I simply won’t bother. Sales will drop, businesses will close, unemployment will go up, and inflation will go down. This point isn’t far away. 2024 is going to be carnage.
Now we are depending on the skill of the pilot, does he know to drop the nose and keep the airspeed above 240kts to keep the turbines spinning and prevent a core lock, or is he going to keep the nose high and airspeed low, thereby core locking the turbines and ensuring there will be no engine restart, just a smoking hole in the ground..
My guy... I know you're a Nat supporter. But the example was to tilt the nose and gently increase air speed. Sounds a whole lot like tentatively spending more.
Ol' mate wants to cut spending, pull up, pull up, pull up... my right thumb would do better as the National leader, and most people couldn't spot the difference.
Not supporting Labour here, but c'mooooon. I mean come. on.
"It would be the worst of all worlds if we were now to see the economy grinding to a halt, BUT inflation stays stubbornly high."
Welcome to the Worst of All Worlds.
New Zealanders don't want the consequences that come with a real slowdown! One that involves lower prices across the board. They want - higher pay to keep prices constant, or even better, to return to the never ending rises we've been told that is our birthright. I mean, there's entrenched Debt to think of, after all.
That 38% of households with no mortgage have never had it so good. I'm one of them. Now I get interest on my savings, and its like winning lotto after years of zero interest income. So I'm spending up large. It feels like free money.
As for unemployment, the various Australian State Governments are bombarding NZ with ads for jobs in Australia. Just yesterday I saw the South Australian pitch "From heart surgery to the beach, in a heartbeat". Plenty of jobs over there still for any NZer who still has a modicum of work ethic left after 6 years of Labour paying people to go on benefits and have babies.
I'm one of them. Now I get interest on my savings, and its like winning lotto after years of zero interest income. So I'm spending up large. It feels like free money.
No mortgage on one house only, or have you made untold capital gains from housing then making bank on TD's and savings accounts and are spending up large to continue contributing to inflation staying higher for longer?
TD's are free money but basically its taking money from those paying the mortgage, the banks clip the ticket and you get the rest. The higher the rates the more people with TD's have to spend. If rates go even higher from here it becomes very disproportionate, you have those who's income is rising rapidly and those who are going negative even faster, the gap gets very wide very quickly.
I believe you are. In nominal terms - definitely. Compared to most other the investments over the last couple of years - definitely. In real terms doing better than most other investments unless you owned a handful of large cap tech stocks over the last six months.
I'm really surprised at the number of people on here who cannot work that out Jesse. Still hardly surprising I have seen people that got given what I have in a TD and 10 years later they had zero. Perhaps pivot to thinking that maybe people who have a TD are not stupid, that's why they ended up with cash to put in the TD to start with. Maybe I could have done even better with other investment options, who knows but really didn't need to at the end of the day, just didn't waste it all trying to keep up with the Jones.
Against CPI, no, against HPI, yes. Against wages, marginal. Less risk than more volatile markets. Depends what your goal is.
I'm assuming you mean against CPI. The real kicker will be realising those TD's while rates and CPI drops. Still getting a 6% return while the CPI is falling down to 2% (if we ever get there) would provide a nice wee buffer while other asset classes take a beating. Greater risk in that scenario that the economy picks off a bank or two.
Yes. I am making a 4.5% return compared to a zero return. While the price of the assets (houses, share market) that I would normally be buying with that money are deflating. So I am currently beating almost every share market and housing index out there. I am not spending this money on buying food, holidays or new cars, so inflation in those goods is meaningless to me, and is more than compensated for by the extra income I am now receiving. I also get to look forward to having extra money to buy a whole lot of assets in the future at prices that are far less than what I sold them for. #winning.
Real CPI inflation. It really depends what your goals are.
I guess these comments really prove the state of play in NZ. "I want more money to consume more stuff."
And actually if your TD came to term right about now and your goal is to buy crap then the timing couldn't be better. Daily bombardment of 30-70% off sales everywhere.
FHB saving a deposit will be loving the return against HPI. Imagine getting a 5-6% return on your deposit while asset prices fall the equivalent of 5% of your deposit monthly. In a TD...
...
Read comments above.
I spent $1,000 on fruit and vegetables a year ago. Might try sell them now for $1,120...
If your goal is to try hop over lilypads to get to the other side, good luck to you. There's a nice concrete bridge about an inch under the surface which will get you to the other side. Maybe you'll get your feet a little wet, but it's better than falling in.
^This. Poor people don't understand rich people. Rich people dont have money in the bank so they can buy more fruit and vegetables. They have money in the bank to buy assets. And asset prices are deflating not inflating. Making all of us looking to buy assets in the future much better off. Even when I was earning a zero return on my cash, I was still better off than being fully invested in houses and shares.
KW,, you say "38% of households with no mortgage"
by RBNZ estimates only about 38% of households have a mortgage
That makes it 62% with no mortgages!
So many replies to your comment, yet no one seems to correct you, do you guys even read the articles before commenting?
No. The statistic quoted looks at mortgages over the house that they are living in (its census data) and is comprised of three groups - owner occupiers with a mortgage, owner occupiers without a mortgage, and those who rent. The Census does not ask if you have another mortgage on a house you don't live in. Around 70% of investment properties have a mortgage. So there will be owner occupiers who live mortgage free in their own home, but who have a mortgage on an investment property who will be feeling the sting of mortgage interest rates as their disposable income is reduced by the increasing costs on the investment property.
Lower economic performance, inflation still roaring, new construction project vanishing, building companies going broke, a lot of mortgages moving from 2% to 7%, milk prices down, balance of payments worse, talk of a bank downgrade from rating agencies, new home buyers priced out by interest rates. Not the best outlook is it.
Risk free money in the bank and a side of physical gold are looking not a bad place to be. The waiting game for the banks to start shooting the speculative continues...
Lock n load.
Whether or not introducing interest rate deductibility, under current conditions, is good policy for the country as a whole is a topic for discussion.
Introducing interest rate deductibility to attract the votes of the affected might be a good policy, if you are a politician trying to win a popularity contest.
Unfortunately, nothing coming from Luxon as party leader can be considered good policy. The last time I checked, landlords and housing investors don't vote for Labour or Greens.
Key and English championed centre politics and every National leader since has foolishly gone after the right fringe at the expense of that large pool at the centre. That explains National's poor performance in the polls despite government MPs making goof-ups by the hour.
FYI Luxon scored lower than Green's Shaw in the 2022 Mood of the Boardroom survey.
The last time I checked, landlords and housing investors don't vote for Labour or Greens.
That's what seems so weird to me - the LL and specuvestors aren't the majority of National voters - on current polling there are 1,000,000 National supporters. There aren't that many landlords. 200,000 - 400,000 if all of them have partners?. The other 600,000 are where the real votes are, plus the undecideds and swing voters. And the swing voters see house prices going don as a good thing - I'd stake a fiver on that.
The others are people who would like to own an investment property one day. Not everyone wants to spend their life being poor or welfare dependent. Read some of the articles recently about people who have moved to Australia. So many young people who stated that not only could they afford to buy their first home over there but now they can save up to buy an investment property. The belief that wealth is generated from housing runs deep.
And most people who own a property and have to pay the value of that property back to the bank, do not want to see house prices falling.
"The others are people who would like to own an investment property one day. Not everyone wants to spend their life being poor or welfare dependent."
Stated by a true charlatan. Truly, truly sad.
The fact that you run those two sentences together so fluently - so it appears they make sense and are some deep sort of wisdom - highlights why we need economics made a compulsory subject at high schools in NZ. (For those that cannot see it for the b.s. it is ... there are many other investment classes than residential property - And many do much, much, much better than residential property.)
I actually agree with you. But since most people are financially illiterate they will invest in things they understand, which is housing. Not share markets or bonds, or whatever other investment products are available. Compounded by the fact that Govt policy actively discourages investment in other simple financial products - international shares are whacked with FIF tax, Kiwisaver has no tax advantages (unlike Australian Super) but still locks up your money until you are 65, and Wholesale Investor regulations prevent most people from ever qualifying for access to many investments. So why are we surprised when people think the key to getting ahead in life is saving up to buy an investment property?
There are political strategists, (aka political consultants, political advisors) at work in the background that are guiding politicians to win the popularity contest.
Does anyone know who is currently working with each party leader?
A couple of interesting well known political strategists in the US are Roger Stone, and James Carville.
So many people on here blaming the increase in costs on minimum wage increases, it has nothing to do with it.
We, as a society have traded property and made it incredibly expensive. Everything from wages to crime to suicides have been impacted. We have failed ourselves.
How many borrowers who took on high levels of debt to purchase residential real estate in 2020 - 2021 are going to be unable to hold on? A previously affordable mortgage may now no longer be affordable.
Under conditions of rising house prices, these borrowers may have chosen to ignore this message from the RBNZ Governor in Feb 2021.
https://www.stuff.co.nz/national/politics/300238808/reserve-bank-govern…
On another note, bank deposits now guaranteed up to $100,000
https://www.rbnz.govt.nz/about-us/responsibility-and-accountability/our…
The Deposit Takers Bill was introduced to Parliament on 22 September 2022, and the Deposit Takers Act received Royal Assent on 6 July 2023.
People say it is the poor being hammered financially by COL crisis - but it is the working poor, to be specific. Anyone with any involvement with Winz will have seen an understandable explosion in demands for more money from the state tap from those not in paid employment, sure ....but ...
the thing is, there's an increasing savviness in people knowing how to achieve/enforce their demands being met by case managers. And an increasing sense of entitlement to everything that can be screwed out of the state. Why not, when they are fed a narrative that the rich are screwing everyone anyway?
So now people needing/wanting more money are happy to make blatant threats that if they don't get from Winz what they want, they will simply steal it elsewhere. Winz staff under more pressure than ever. It is easiest just to say yes.
And who is gonna pay for this 'largesse'?
Are you saying that the rich are not screwing everyone?
Seriously - your lost all credibility with that statement. The rich have been doing it for centuries. If you doubt this, 1) look worldwide at the richest people (they have generations of wealth!), 2) look who they donate political money to, 3) look who pays the most to avoid tax .... I could go on but I hope you get the picture. (I expect you won't.)
By the way - the biggest set of beneficiaries in NZ ... BY A HUGE MARGIN !!!! ... are people over 65. No other group get even close! And yet those over 65 are the wealthiest group in NZ and getting wealthier.
Wow, so literal! Actually there is a lot of wisdom in what i am pointing out. The thing is the subtext, I can see now my reply was too nuanced, sorry! The subtext is that these Winz folk are voters. They may be one of the reasons why Labour is polling so well, amid its constant screw-ups. Maybe these people are now that mysterious creature, the silent majority. (once thought of as sensible middle-ground citizens).
I must point that you have assumed I don't feel your way about the wealthy, but if you read closely, you will see I have distanced myself with passive sentence construction. I have made it kind of neutral by putting the onus on the word 'narrative'. When i say 'fed' there is also a clue...the subtext of media today and its framing of news for a certain agenda. In that way I am also making the word 'rich', ambiguous.
Once again, sorry - I should have put quotes around the word 'rich' - i was sort of meaning or implying the populist perception of rich - someone paying off or who has paid off a house, owns a car or two, works full time but partner is part-time, maybe has a boat, or worse, a rental property.
In this country, "rich" is simply defined as anyone not dependent on Govt welfare. And that is just 50% of households who pay net tax. The other 50% are receiving Govt money in some form or another, and are thus incentivised to vote for those who promise more Govt money. Be that an increase in actual benefits (which now goes to 11% of the working age population), those receiving Working For Families money, Accommodation Supplements, Having A Baby payments, and whatever else the Labour Govt is handing out (like free doctors visits for Maori, $30M in cyclone cleanup payments to Maori households). The more the Labour Govt creates welfare dependency amongst the population, the greater their voter base. Compounded by the fact that those who want to "have a go" to use an Aussie colloquialism, have "got up and gone" overseas.
re ... "In this country, "rich" is simply defined as anyone not dependent on Govt welfare."
No, K.W. That is your definition.
And a definition you've used (nonsensically) to justify your own (ideologically confused) argument while nailing your right wing (and selfish? and bigoted?) colours to the mast of the SS World According To K.W.
re ... "The subtext is that these Winz folk are voters."
Are they? No. actually they are not "voters". Most don't vote. For most of them their experience of "government" is extremely negative.
The assumption that Winz clients vote for Labour is a popular myth because most do not vote at all!
This is - in fact - a completely wrong stereotype that the Right love to talk up. But it's not true at all. It never has been - unless one goes way back to when Unions held Capitalists in check.
Most left-wing support in all countries comes from well educated, middle to upper class voters who feel we should pool resources together to do things better for everyone.
That was true once, re people not voting. Not now. For this election, Labour are mobilising very well. They are into it far more than complacent National. They are arranging transport to the ballot box centres for those usual stay at home folk. They know who they are. This is where it matters, at crunch time and that is, getting people to get up and go to the place and vote.
There are incentives, too. And tech is making this mobilisation easier. Also, the Winz beneficiaries are onto it, sharing their info on their social media networks and making others realise that their comfy state inflow of funds depends on Labour/TMP/greens being in power.
Just look at how the Mongrel Mob is being politically astute, sophisticated and forward-looking in directing its legions who to vote for - identifying their affiliates, messaging via whatsapp, other technologies, maybe thru the black economy, and perhaps old fashioned encouragement, too. Their 'CEO' is showing far more street smarts and business thinking than the man who ran the national airline.
Good article David. Some food for thought ...
You say: "As I have said before, I think the labour market is the key to everything at the moment."
There are other keys.
Rather than trash people's jobs (and lives) while sending many businesses to the wall - which is vastly unfair - why not hit the wealthier who continue to spend and don't give a damn about inflation or unemployment?
I am of course talking about crashing the residential property market even further. The RBNZ can do that quickly and easily using its macro-prudential tools so it can leave the OCR where it is - or even lower it.
I'm pretty damn sure that if the residential property market sees another 20% fall we'll have inflation completely under control. Far too many people treat their houses & rentals like their own personal piggy bank. Consequently, the OCR massively misses its "target" spenders.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.