David Hargreaves tries to overcome his astonishment at the speed with which 2019 has disappeared and outlines some of the key economic developments as he has seen it over the past 12 months

David Hargreaves tries to overcome his astonishment at the speed with which 2019 has disappeared and outlines some of the key economic developments as he has seen it over the past 12 months

It's always, er, really annoying when you get halfway through downloading something on your computer, only to find the thing gets stuck and doesn't load up properly.

In many respects this year has felt like one of those programs that doesn't download properly. It's the year that got stuck and didn't quite happen. But boy it sure disappeared fast anyway.

That was 2019. The year that didn't load properly. Blink and you might have missed it.

Maybe the Government is to blame for that feeling pervading. After all, it was the Coalition that styled this as the 'year of delivery'. But the international scene was no help. The ongoing twin sagas of the US-China trade war and Britain's Brexit Beat-up and general self-flagellation encouraged the sense that this was an 'on hold' year.

Domestically, in terms of things political-economic we now know this year will in future be more known for the things that weren't delivered. There was no Capital Gains Tax, no KiwiBuild and no special fiscal stimulus - well, not till the Finance Minister's late promise of a future infrastructure spend-up given only last week. 

And regrettably, as we move into an election year next year it is with the realisation that with the main political parties now heading into 'promise' mode the holding pattern for politics-economy will probably continue.

That's a shame. I think we'll look back at this three-year term of Government as a lost opportunity. It's been a time of a reasonably stable economy and very low interest rates. It's a time when as a country we could have been getting things done. Like building some much-needed infrastructure and the Government helping out in meaningful way with reducing our housing shortage.

For me, the over-riding impression coming out of 2019 is that the current Government is big on the symbolic gestures but very lousy at implementation. We'll only know in future years how much this poor implementation has held the country back. But any time lost when a country is facing crucial issues such as housing and infrastructure deficits is time you probably won't be able to make up.

KiwiBust

Such talk takes me straight into what was for me the outstanding - and in a bad way - feature of this year on the economic front.

Yes, I'm talking about the collapse of KiwiBuild. 

Amazingly it does seem like the Government, from a public perspective, is going to 'get away with it'. At least for now. 

I find it remarkable that any political party can make something like a KiwiBuild policy such a central part of its election policy, walk away from it once in Government, and seemingly not get caned.

I think Labour is lucky that the house market has to date been so subdued (although in fairness some of the things its done such as the foreign buyer ban will have helped to subdue the market).

As the year ends though the market is showing some signs of awakening. And if we do see investors clambering back into the market. And if we do see prices moving up meaningfully, then the first home buyers who have been able to get into the market recently might find their way-in squeezed again.

And that links into another issue of the year for me - migration. This is a Government that was going to take a breather on migration and has done nothing of the sort.

As a country we still have a dangerous lack of clarity on what we want from migration. This stems from the fact that we don't have a clear idea of what size of population we actually want. A coherent population strategy is something that is long, long overdue.

As long as we continue the kind of 'accidental' mass migration policy that we have currently then so we are going to continue putting pressure on our housing market and infrastructure. 

Which, to come back to KiwiBuild, is why the abandonment of that policy without it even getting under way will be seen as a huge lost opportunity in future, I think. 

In hindsight, and I've said this before, the Coalition was never fully committed to the policy as evidenced by the allocation of only $2 billion towards it and with the fanciful notion that this rubber $2 billion could be constantly recycled with the developing and selling of houses. It never looked realistic.

Aiming for the moon and landing in Wanaka

As to how and why the whole thing failed so abysmally, well, I for one would really like to know. The question is not rhetoric. 

It's not like this policy narrowly missed its targets. No. This was like a 200 metre race starting, being run, finishing, the warm-downs and victory lap being completed and one person (possibly answering to the name Twyford) still standing in the blocks. With KiwiBuild the Government aimed for the moon and landed in Wanaka.

With the abysmal failure of KiwiBuild, then so the Government's decision to ditch any suggestion of Capital Gains Tax becomes more significant - and again possibly something that will cost us in the long run.

I've long argued that in this country we need to level the investment playing field more. We need to try to as much as possible ensure that the public is encouraged to invest across a variety of asset classes. Diversifying. Not putting all your eggs in one basket. 

It's possible that halfway measures such as the bright-line test, the CGT that dare not speak its name, will do some of the levelling out job. But we did miss another opportunity to at least have a decent conversation about a well-applied, sensible, CGT and to be honest its difficult to see the subject ever being raised again. Clearly it's just too much of a political football. The Coalition was 'right' in one sense to torpedo the CGT because the National Party would have just gone on and on and on about it till they beat the electorate senseless. Now the election won't be all about tax. But it is another lost opportunity in a more forward-looking perspective.

Private sector-led housing construction is still bubbling away nicely. And I think as a nation we have to hope that continues. Because without meaningful supportive Government measures to both increase supply and tailor demand we remain vulnerable to the kind off red-hot housing market of a few years back.

Well, that's the Government bashing done.

Just a few words then on the Reserve Bank, which has had a very busy year. I hope it's fair comment to say that Governor Adrian Orr has polarised opinion at times with his tendency to call a spade a shovel. And certainly I've not always agreed with the way he has conducted himself publicly.

A busy year for the RBNZ

But he and the RBNZ should ultimately be judged on the job they have done. Certainly there's an argument to say that the blockbuster double-cut to the Official Cash Rate in August was overdone and maybe not necessary. On the other hand though, you have to say that once everybody got over the shock there's been a pretty decent bounce back in sentiment. We end the year with businesses if not necessarily whistling while they work, at least being a little more upbeat than they were.

The lower mortgage rates promoted by the OCR cut have stimulated the housing market. That could be a mixed blessing, but some activity and house prices rises will obviously help the mood of the country and stimulate the economy. Time will tell whether it leads to overheating.

Anyway, we end the year with it right now looking like the RBNZ might not have to lower the OCR again. Watch this space closely though because it wasn't many weeks ago I was convinced we were heading for unconventional monetary policy solutions and an OCR close to or below zero! The fact that sentiment has changed so quickly would suggest that the RBNZ was right to go for the big OCR hit in August and at the moment the move seems to have done good things.

Likewise on the proposals for banks to hold more capital. For a time this looked an issue capable of creating a world war three between the banks and the RBNZ. In the end though I think the RBNZ has played that one pretty well too. The banks have not officially declared the end of the world (or that they'll now be charging you 20% for your mortgage), so, I think we can take it that in the end the move has been well implemented by the RBNZ.

So, it may be a year that felt like somehow it never got under way. But it's never been dull.

I think we will look back with regret that necessary things for the country in future such as tackling infrastructure problems have not been advanced, but I guess we  have to look forward and hope that even with the distraction of an election year coming up some more solid strategies for improving this country's lot can be formulated and, more to the point, implemented.

In the meantime I would just like to wish everybody a very Happy Christmas. Stay safe.

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57 Comments

21
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Nice to see someone in the media calling out immigration. Disgraceful how it is seldom(never) mentioned prime time when our dear leader is questioned over all sorts of silly things that don't matter.

Nice commentary of the year that's been.

Because the Labour party changed its rhetoric on migration once it came to power.
The government has done little to expand public infrastructure in the past 2 years and is continuing the population Ponzi scheme since the artificial GDP growth from migration allows greater aggregate tax take for the party to splash around on its voter base.
Despite now being a proponent of high migration, Labour-Greens are also conveniently positioning themselves as a saviour for all those being harmed by high migration (renters, exploited workers, social housing waitlisters, poor families, etc.).

Are we following the South American Republic model of polarising into competing patronage oligarchies? Each promises to take from the other lots supporters and give to their mates. Sad. No party seems interested in actually representing the voters interests.

Likewise on the proposals for banks to hold more capital. For a time this looked an issue capable of creating a world war three between the banks and the RBNZ. In the end though I think the RBNZ has played that one pretty well too.

The new capital requirements mean banks will need to contribute $12 of their shareholders' money for every $100 of lending up from $8 now, with depositors and creditors providing the rest. But as the head of the ECB recently sneered - "We Should Be Happier To Have A Job Than To Have Savings"

Flipping amazing if you are a bank shareholder. Not so much for the under rewarded depositor, damn near underwriting the whole operation which allocates 60% of its lending to residential property mortgages for one third of households.

Not wrong again.

He who controls the money sets the rules. Its going to end badly; just when is the question.

The safe bet would be to use the money you have at the bank on enhancing the cashflow of your existing business, at a rate better than the banksters deliver.

"He who controls the money (or power) sets the rules" It's been like that since the beginning of time, why would it suddenly end badly?

G S,

Just who 'controls the money'? Most money is created by the commercial banks, do they control it, does the RB control it through its monetary policy, or does government control it through its fiscal policy?.

Again, 'It's going to end badly'. Just what is going to end badly and how?

Finally, just how do you 'enhance the cash flow of your business' simply by injecting some cash into it? Since many businesses fail within a short time, it may be wise to keep some cash separate, however paltry the return.

10
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CGT ended up in the bin due to the bungling by a former finance minister who was out of touch. The tax working group could have done a better job but lacked vision by going after capital gains in Kiwisaver accounts on an annual basis. That fact got buried with debate over all the other problems.

What was even more strange is that I made a comment here about how I wouldn't work for the low hourly rate that they were paying Cullen. The Government seemed to grasp onto that desperately using his low pay as a defense. Yet they missed the point in that they should have got someone more capable that would demand a higher rate.

It's been a strange year with the parts of Government I deal with regularly acting unlawfully to cause harm to New Zealand.

I am interested in understanding more about the data underlying your last sentence.

It's not data it's direct experience. When the Building Bill comes up I'll have a lot comments to make to the select committee.

. . yes , Sir Mickey did everyone : the government , us ta payers , himself , a huge disservice by his ridiculously onerous CGT ... he bungled the opportunity to etch himself deeper in history , and to take a chunk of tax for the govt ...

And the smartest tax of all ... the Land Tax .. he threw that out at the beginning ... didn't even give it moment of thought .... SIGH !

Not being retrospective the cgt was/is an imposition on younger generations not those who already made a killing. It would have been an unpopular and complex tax as other countries know. Winston would not support it saying we have a capital gains tax ie the brightline which labour had already extended so more fool jacinda who made the brilliant statement that she would never introduce a cgt under her helmsmanship. Jacinda has no clues after the captains call pullava during the election campaign.

And the smartest tax of all ... the Land Tax .. he threw that out at the beginning ... didn't even give it moment of thought .... SIGH !

Yes, because the terms of reference excluded the "land under the family home" from being taxed, which meant a land tax would be hard to administer and skew towards rural land, as well as disproportionality affecting land held in Maori trusts.

It's pretty sad that kiwibuild hasn't been as effective as the special housing zones put in place by National even though the COL is the better party seeing as they are led by a strong androgynous leader.

. . reckon ya got that front to back ... the Gnats are led by a strongly eponymous leader ...

Labour have a hotty ... not alotta positive vision for the country .. but she's a looker ( standing next to Merkel , Trump & Ginsling )

GBH,

"a strongly eponymous leader". I think you need to go back to the drawing board, so to speak. Strongly and eponymous are incompatible. Eponymous relates to giving one's name to something; a place or institution say. It cannot be qualified. You may have meant to put synonymous.

Androgynous? Lol in what context is this important? Your own fantasy perhaps?

10
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Skudiv showing his age, a boomer who associates power with manliness so that any women in power must be... manly. Sad really.

Xena , Warrior Princess ... a strapping big powerful woman ... very much the boss .... and oh so hot ...

or in other words, prefers women who look like blokes

He probably likes them meek and "compliant". I would hazard a guess he's an incel hating on women because these days he can no longer exert power over them so that they "satisfy" his desires.

Could a conversation on interest.co.nz hit this rock bottom. I guess not.

Don't you mean "I guess so"?

Probably - I'm just a bit stunned at what people can write these days. Have NZer's devolved / degenerated that much ?

EDIT spelling.

There has always been sexism and racism in NZ, people are just calling it more often now whereas in the past it was "good manners" to let it slide. Pick a side BadRobot.

I don't doubt it has always existed - just not sure why people devote bandwidth to it that's all it just seems a waste of time and energy.

EDIT - it is not a question of picking sides - it's why bother in the first place.

To shame the racists and misogynists out of existence. May be too late for the oldies and only a grave will change their state of mind. But the next generations need to know calling out racism and sexism is not a bother, it's trying to make the world a better place.

When I say bother I mean why bother having those mindsets (racism etc) in the first place.

And “boomer” is not an insult? No difference in your comments in my mind.

Not an insult, a reference to the state of mind of a generation (those born in the 40s and 50s) where misogyny was more prevalent than in later generations. Happy for Skudiv to deny my contention.

He was picked on at school by a girl with a monobrow and has never gotten over it.

I suspect y'all are missing the hidden '/sarc tag which one must mentally append to all of Skudiv's fine contributions. It's certainly rattled a few chains around the kennels, eh?

The "just kidding" excuse doesn't fly anymore. If you're a racist or sexist take the hit or double down, certainly don't let someone else explain what you "really think".

Skuvdiv is a big fan of that lass Marilyn Manson.

I see the alt right trolls have been out in force, spreading their religious fantasy of binary genders and gender conformity. I missed replying because I was busy organising a gay pride event for the local primary school, where as Chairperson it is my job to ensure the children are getting a quality NZ education. Thankfully they will have progressed beyond the bigotry that is so openly displayed here by people who missed out on a quality education.
The more diverse a person is, the more I will vote for them, I am just waiting for the first muslim transexual leader, which will make NZ the most progressive country on earth and save us from the emergency climate crisis.

13
up

Housing and immigration are linked, and they link with a host of known social ills. Until this or any government breaks open the systemic and structural barriers to affordable housing delivery, and addresses the vast immigration rort, almost every other social policy is irrelevant tinkering or mere virtue-signalling.

13
up

2019 , another year of too many people being allowed into the country ... we need some immigration ... but , we're still being flooded ... the house construction sector can't keep up ...

... a failure on Kiwibuild , a failure on immigration , failure on CGT , flip-flop on roads ....

"Labour has managed to get away with it" I guess we will find that out at the next election. People thought National was bad, I guess its all relative to what you compare it to so just when you thought it couldn't possibly get any worse.......

I vote Labour but I wouldn't mind if National gets in and reverses FBB, ring fencing of losses, reduces bright line back to 2 years and doubles immigration numbers (and likely future National voters). While I think National would be bad for the country they definitely would be good for my pocket.

"I think National would be bad for the country they definitely would be good for my pocket" said Sir Chon

Unfortunately my pocket won't be as full as his:

https://www.stuff.co.nz/business/industries/118217206/sir-john-key-sells...

Indeed. It looked like financial everything bubble might be in trouble, but Brexit got delayed three times, Trump and China cranked up the printing presses again and started a trade war. Locally the RBNZ dropped rates to new record lows to protect the banks, and Labour got scared and backed off the CGT and missed a big chance to change tax to the benefit of all except debt speculators. The Coalition Government had a moment of dementia by forgetting that a pillar of their 2017 election campaign was halting rampant immigration, a decision that continues to further stretch infrastructure and the social fabric of NZ.

2020 is an election year. Have a look at what just happened in the UK and is happening in state elections across Europe. Will the middle class suffer more of the COLs socialist lefty union thinking if immigration based bank protection is not followed through with as campaigned on? I say the answer will be a resounding majority "NO" (Nat's to govern alone).

Its like they (COL) want to be in opposition...

"I find it remarkable that any political party can make something like a KiwiBuild policy such a central part of its election policy, walk away from it once in Government, and seemingly not get caned."

Like John no-gst-increase Key who raised GST anyway and won even more votes.

... true ... but , Tugger Key is not up for re-election next year ... Taxcinda ( " no new taxes " ) is ... so she's the focus of our attention ...

Conveniently forgetting of course the GST increase funded income tax cuts... which is perhaps why he won more votes.

We have seen taxes go up under Taxcinda... without any tax cuts.

At least the old Labour party was 'Tax and Spend'... all we get from this CoL is 'Tax and Spin'

Never forget that Key actually said they wouldn't raise GST and specifically noted "If we're doing a half decent job economically we won't need to."

Which taxes went up? If you are referring to fuel excise, that went up 6x under National without a corresponding tax cut. If it never went up our roads would be in a pretty bad shape.

And? They were in power from 2008 to 2017. In two years Labour has reversed National's tax cuts, added a regional fuel tax in Auckland let their infrastructure projects languish in bureaucrat-land. Doesn't sound like a great deal to me.

Good post.

Labour needs to find its cojones and integrity on KiwiBuild and immigration. Interesting that National has said they'll continue on with KiwiBuild if elected, albeit dropping the label.

Unfortunately, National will in other ways look like only making things worse for young Kiwis all over again. Including likely throwing opening the doors to foreign buyers again.

That makes the erroneous supposition that someone closed the doors. In terms of immigration reform, Labour = National.

Note: "foreign buyers"

Kiwibuild was the big disappointment for me. I just don't get why they didn't set up a prefab factory somewhere and in the mean time start clearing off some sections ready. If they hadn't built a single house by the election but had a factory up and running I think the public would have been happy. Instead they seem to have dropped the whole idea of building houses altogether.
But also the move by National towards the right is very disappointing. I quite liked Bill English's centralist party, I could have voted for either major party last election, but in just 2 years it has changed so much that I don't really want to vote for either.

"It's always, er, really annoying when you get halfway through downloading something on your computer, only to find the thing gets stuck and doesn't load up properly"

Is it coincidence that the "2019 stuck downloading" image is in red, as in Labour red?

There are two fairly basic reasons for the Year of Non-Delivery:

  1. There were so many Grand, Revolutionary Promises bandied about, that concerted effort towards any one of them would have been indeed Heroic. But the effort was hopelessly diluted over those many fronts. Aided and abetted by -
  2. The general lack of competence amply exhibited by the great majority of the Elected Ones, and amplified by the in-fighting inherent in a cobbled-together Coalition of wildly different value systems, personalities and energy levels. As the old saying goes, ye cannae Fix Stupid.....or, it seems, Narcissistic...

Labour 2019 Scorecard
Immigration Minus 50,000 out of 10-20,000. Seriously Failed.
Kiwibuild 300 out of 10,000. Failed dismally.
Capital Gains Tax 0 out of $10,000 (per family per year?). Get out of jail free card played with brightline.
Taxation 10 out of 10.
Beneficiaries Up 20,000 - More counting sickies & teenage poverty makers. Failed.
Gang Memberships Up 30%. Failed.
Released Into The Community? 1,000 more thugs than any media will tell you about. Failed.
House Prices Still going up (that's not great as they're double what they worth when you look at how
they're built. Failed.
World Cup Rugby Failed.
Leadership Missing in Action. Probably dead on arrival.
Party Accountability Failed publicly.

You can add the botched offshore oil and gas exploration submissions cos Jacinda made a captain's call half way thru and banned it. Fail
Plastic bags ban... during submission process. Fail
We found a Chief Technology Officer yet? Fail.
Open transparent government? Fail... Curran out and out lying and an investigation into sexual abuse in the labour party not released but saw the president fall on his sword. Fail
And today.. announcing a deposit insurance 13 days after the RBNZ conclude a long submission and consultation process on bank capital reform. Fail

Election year next year already ?
Should be every 4 yrs although not much gets done in 4 yrs then either