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David Hargreaves with a wish list for 2021, which includes vaccines, open borders and cooling house prices

David Hargreaves with a wish list for 2021, which includes vaccines, open borders and cooling house prices

Christmas is just about upon us, and therefore it's time to think about what we would like and want for the year ahead.

What we want is a better year than 2020!

Whether we get it is very largely dependent on what happens with that damn virus.

That means top of the list would have to be Covid vaccines.

While we wait the arrival of vaccines, for the moment what is needed is to keep the borders closed, make sure our managed isolation processes are effective and keep the country free of community spread. And keep the economy rolling.

It’s possible we may get some vaccines here in the first quarter of next year. And we also have another, larger order for delivery in the third quarter.

Assuming all does go well we need the mass-vaccination progamme and then we can start to move back towards normal. Whatever ‘normal’ is going to look like after this.

Seeking normal

A major first step back towards normality will be the re-opening of our borders and beginning to rebuild our tourism industry. But when?

If we do get the majority of our vaccines delivered in the third quarter of 2021 then we might be able to look at beginning to re-open our borders from the fourth quarter, although that could be a stretch.

It’s possible there might be ‘travel bubble’ arrangements before then, particularly with pacific nations and Australia. 

If a ‘bubble’ or two cannot be achieved you have to wonder how many more once-sound travel-related businesses that have been marooned since the border closure, might be forced out of action permanently.

And this is a really difficult one because once the borders do re-open we will actually need these businesses. We could struggle if we start re-opening the borders but have vital pieces missing from our tourism infrastructure.

To some limited extent our tourism-related business have been supported by Kiwis stuck in New Zealand during winter when many would normally ‘get away’. 

The real crunch comes now. This is the time when normally there would be a big influx of overseas visitors to pump money into the coffers of our tourism sector.

The Government may well have to make another call on whether further support is forthcoming for the tourism industry while we wait on the vaccines. Having got this far down the track now, the Government should do whatever is necessary.

Opening the borders is just a step along the path though. We can’t expect the instant return of the tourist. It’s hard to see us getting back to anything like the numbers of people we had here before Covid until say 2023.

Will they come back?

And, indeed will tourists definitely come back in big numbers after all that has happened? It is going to be interesting to see what the appetite is for international travel after all this. That’s a two way thing, by the way. It will also be very interesting to see what our appetites are like for hopping off overseas again once we are able. Will we want to?

I think it will be a ‘yes’ and ‘yes’ to those two questions. I think the tourists will return and I think we will want to be off overseas again too. I reckon large numbers of us will have itchy feet and will happily travel again. We shall see.

So, the two ‘biggies’ for the Government over the next 12 months will be rolling out vaccines (and coming up with some fairly major Plan B if there’s any glitch on the vaccine front) and then, assuming we do get a largely vaccinated population, the opening up of the borders.

While those two things in tandem will be front of mind for the Government, it would be a mistake if longer term issues are shelved over the next 12 months.

Okay, a Labour-led Government has been re-elected on the strength of its response to Covid. That’s fair enough, I suppose. But we should not and cannot forget that the past three years have been a time of passed-up opportunities. That’s putting it mildly. This Government should never be allowed to forget abject failures such as KiwiBuild and the Auckland light rail project.

We still face massive inter-related problems relating to population, housing and infrastructure. And I make no apologies for saying the success or otherwise of this term of Government will ultimately be measured by how these issues are tackled.

And some sort of progress needs to be made on these over the next year – even if it is only deciding upon the direction we need to take.

I think on a very basic level, this country needs to decide what size it wants the population to be. I really think that is important.

People talk a lot about ‘migration’ as a separate (and much vexed) topic, but I think the subject needs to be broader than that. A migration policy should be a subset of a population strategy. There’s never been any coherent strategy on population and it’s such a fundamental issue, since it relates directly to how much housing and infrastructure we need.

The migration part of the equation has in the recent past been used as a political play-thing to quickly pump the economy when required and to also paper over defects that exist in our economy in relation to education and training. Businesses I think have got lazy and over-dependent on bringing cheap labour into the country.

If as a nation we can reach some basic understanding of the size we want our population to be (and I get the impression most people don’t want our population to be any larger than it is now) then it makes it so much easier to decide on all the other things that need providing, particularly relating to housing and infrastructure.

A population target?

Will the Government be so bold as to set a population target? Sadly, I don’t think it will, but I will keep on arguing this point. We really MUST look at this because it’s the cornerstone issue. We need to talk about population first, before we talk about migration as such.

Okay, so, assuming we don’t set a population target, what about housing?

I hope the market can be cooled in 2021. Hopefully, with the Reserve Bank now reinstating lending restrictions this will help to slow the market. I would still suggest the RBNZ might want to look at increasing the amount of deposits from investors from the 30% they will need to find under the current rule up to say 40%.

While the LVRs may give us some breathing space, however, they are not a long term fix.

Can some progress be made in the next year on the ever-troublesome RMA?

Can we have a definitive assessment of just how short of houses we are and how many we need?

There’s another related issue here though too. I would continue to argue that a significant part of the problem is not just whether we have enough houses for people to live in – but having enough houses for everybody who would like to own investment properties. That’s a very different issue. We like to own houses.

I would still like to see some Government measures that encourage Kiwis to have a more diversified investment outlook.

Having decided to NOT go down the Capital Gains Tax route, the Government has now found itself scrambling for options. I’m not really sure extending the ‘bright line test’ is any sort of long-term fix, remembering that the bright line test itself was only originally a quickly put together sop to public opinion by the National-led Government when the housing market was last really raging in 2015.

Could the Government attack the problem a bit more laterally and seek to incentivise non-property related investment? As a country we are increasingly putting all our eggs in the housing basket. And that leaves us vulnerable. We need our people to be more diversified in their investments.

I still think we probably need to face facts at some point and go down the path either of a CGT or some kind of wealth tax. But clearly that won’t happen next year.

But what will happen? Something needs to be done and it needs to be more than window dressing.

Plenty ahead

There’s plenty to think about.

As I say, I would be happy if the Government went down the path in the next 12 months of at least putting a clear strategy in place on population, housing and infrastructure. That would be better than a lot of piecemeal activity aimed at satisfying public opinion – rather than setting us up well for the future.

In 12 months’ time I think we would all want to be able to feel that the country is moving in the right direction on this one – at least in principle.

This Government has got to prove it is capable of execution, rather than just virtue signalling, which it has gained something of a reputation for.

At the end of the day though, as far as the next 12 months are concerned, I and a lot of people would be very happy if we know that the virus is being contained/eliminated and we can open up our borders again. That will/would be a great start! And I guess we can worry about the other stuff more a little bit down the track.

But not too far down the track, please.   

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48 Comments

10
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Next year will be better but equally as frustrating. Travel bubbles will slowly start and stop with a corresponding increase in COVID cases in NZ. The Govt will push housing, tax and rental policy through under urgency without cross party due-diligence, not fixing the root problems but simply making it harder to get ahead in NZ for both the have’s and havenots. The NZX will continue breaking new highs and the median house price will increase another 10-15%. Trump will still be all over the news, the COVID vaccines will prove effective but the media will focus on the 0.5% who get headaches from the jab. The Speaker will get the sack and Kim Dotcom will be extradited. AirNZ shares will grow to $2 and the Greens will begin to implode with Swarbrick starting to take on more leadership responsibility and she works towards taking Davidson’s position. Auckland will have water restrictions all year and the Port/Navy base will start the transition to move North. Tiger Woods won’t win another major.

11
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2021 sees a huge house crash! Down 5, 6%, the bubble has burst. In absolute panic mode the Reserve bank hands out to the trading banks Billons, Trillions of stimulus cash and are told to slash interest rates to -5%. House prices soar to new heights, all time record gains, up 50% 60% it's an amazing, joyful time. Phew! close call. It was hard work - a lot of sore fingers from typing so many zeros. But the Reserve bank has once again saved the day. True hero's of our time.

- sarcasm

There was a time, not so long ago, that you wouldn't need to put the sarcasm highlight at the end for us to know you where meaning to be sarcastic.

But when fiction beats reality!!!

That sums it up. All we need is someone to fix it?

As house price inflation is our economy now I hope any moderation is only very slight. No doubt RBNZ will deploy more stimulus if they see the market coming back.

My hope would be for productivity growth but that's right up there with peace in the middle east without a new government and industrial commitment to investment in automation and innovation.

Sounds like you're championing further monetary debasement; a nation of peasants on low incomes to serve; and the replacement of those who need to work with technology.

As opposed to our current low wage growth/inflation predicament where the ownership of fixed assets is rapidly surpassing employment as peoples main source of income/wealth?

11
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The only guaranteed bubble for NZ in 2021 is housing. How much more can RBNZ & Labour inflate it...nobody knows.

I don't blame any on party for this, the wider context is that our political class have been allowed to reside in a bubble for too long. As voters we have placed unity and solidarity above fairness and progress in our choices, our fear has created this crisis. We may just need to tolerate a little more friction along the way:
"Our problems are manmade; therefore, they can be solved by man. And man can be as big as he wants. No problem of human destiny is beyond human beings." - John F. Kennedy.

Once we have our front line health workers and elderly vaccinated we can start to open borders. We are going to have to deal with getting used to having Covid in our communities.

Our governments seem to be only able to take very simple and dumb initiatives, driven by a desire to stay in power, by increasing liquidity and population to increase demand.

My hope would be they we can improve our ability to pay our way in the world which ultimately means increased productivity to sustainably lift living standards. Hopefully some of our immigration with be bright wealthy Expats returning who hopefully can continue to run their businesses from a NZ base.

13
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Yes to a population policy. It's the most important thing we will do.
No to the idea that low wages pump the economy. Who needs pumped when there are poor people. A high income nation is a better goal.

I can see the benefit but honestly how are you going to enforce it? A one child policy like China?

10
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I notice the NZ birth rate is already well below replacement so no problem there.

14
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@ Atapene. Sigh. And mention Nazi's while you play with the antiquated thinking.
Current way it works now is it's stable, if not actually drifting down already. So if we went hard on immigration - job done.

23
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NZ could lead the world with a population policy that limits, then reduces, the population within the carrying capacity of the country.

I remember the Greens once had a population policy on their website with a total less than 6 million. Now all I can see is woke nonsense about equal rights for all and sundry to come here with some vague plan to measure the effects on the environment.

The left, with their notions of globalised inclusion, are nearly as bad as the neoliberal right when it comes to population.

Green immigration policy is here.
https://d3n8a8pro7vhmx.cloudfront.net/beachheroes/pages/9597/attachments...
Seems to have been watered down from several years ago. They really should know better.

The issue New Zealand may face is that this type of population sustainability targets may improve the quality of life within New Zealand so much that some large part of the 20%ish of our population that live outside of the country may with to return home and improving quality of life may increase the birthrate as people start to gain financial security.

The tax rules, write offs and incentives around property investment need to be adjusted so it's not the only game in town, and to reduce gains the more properties you own, like progressive stamp tax or something. Really everyone should have a fair chance to own their own home and get the benefit of paint their own mortgage rather than rent to someone else.

Interest to continue to devolve into a slightly more highbrow version of the NZ Herald comments section on Facebook?

Are you suggesting a volume of comments are emotional or just uneducated?

While NZ, MoH sets the PCR Cycle Threshold at 40 (fact check that, apparently its only publicised under OIA request).
Thats got to be the business to be in.
Seems other countries use other (sometimes lower 35-37) numbers.

Problem to fix? The long promised bubble with Australia. Would love to know the "operational why", why its no go. The line by line risk management review.

Having looked at the paper published (see original below) it does not appear any comparative analysis has been done to improve testing specificity yet. Much as to say it's conjecture until someone funds the research to improve testing.

Link: https://www.researchgate.net/publication/346483715_External_peer_review_...

We don't actually create travel bubbles. We talk about them when the Govt has a bad week and needs people to talk about something else. I believe the Cooks have been bought up three times when Ardern has been on the ropes about something. It's starting to get very predictable. Meanwhile, the Aussies have just gotten on with things.

The silver lining is that the light rail project never got started.
What an incredibly expensive, slow and dangerous way to get to the airport. (Wait for the commencement of the car/person-on-cellphone vs train crashes).
PS. The Dublin one is good though. It's clear of the roads.

The airport accounted for a fraction of expected light rail passengers on the Dominion Road line - think single-digit percentages. It was about upgrading a transit corridor that will have so many buses flying down it that they won't be able to stop to let people on or off, and connecting places like Mangere that currently have no public transit access at all.

The "light rail just serves the airport" is a lazy meme and has little to no basis in reality. A simple, cursory check of AT's original three-branch plan for Light Rail would tell you that.

You are being unfair to blame people for thinking that. It was marketed so hard as "light rail to the airport"that it was pointless explaining to anyone that dominion rd saturation is the underlying reason for it.

Why was that? Because we have certain politicians involved who don't let facts get in way of a good story.

Great article. On the population policy, this policy has already been set by large corporates. Ports of Auckland (and others) state that Aucklands population will grow by 1m plus over the next 30 years. We don't get a say in this sorry.

But that's largely predicated on historic growth trends.
New policy could forge a 'new normal' moving forward.
Will that occur? Probably 'No'!

I think 2021 will be patchy. I am very optimistic on the vaccines, I think international travel will be 80% back to normal by early 2022. I hope so, I am getting itchy feet!

For instance:

What is plain? There was a period of economic growth via population growth, a period of growth via increasing participation among females, and now a period of "pseudo growth" via ZIRP, QE, and unrepayable federal debt accrual. And every time the economy hit "full employment" whereupon no further slack or potential employees are available, an economic crisis is declared. What is also obvious is the interplay of ZIRP, QE, and debt to inflate asset prices. All of the rate cuts, QE, and debt are undertaken to purportedly achieve the Fed's mandate of "full employment" but nearly all the real benefits flow to a shrinking cadre of institutional and elderly asset holders. As for the poor, young adults, retirees living on fixed incomes...they are all punished via costs of living rising far faster than incomes thanks to the flow through of the higher asset prices. Link

Here is a good read for context.

https://www.amazon.com/Coming-Neo-Feudalism-Warning-Global-Middle/dp/164...

He foresees a small transnational tech/platform creator caste running our lives, supported by a clerisy of journalists, academics, and "helping professions" (besides the engineers that make it happen). The middle class will be hollowed out further and further, with a few joining the ranks of the lower clerisy and many more becoming gig-economy "precariat". At the bottom, the ranks of those living off public assistance will continue to grow.

For instance anyone buying a house and looking "partner" with air b n b. Good luck.
Hint. Take a look at the small food places gutted by ubereats.

Yes. The decimation of the middle class has been happening for quite some time, but most people are not aware of it. In that respect, house prices are kind of a diversion to placate the reality that is happening through monetary debasement. The 'gig economy' is not bad if you're at the right end of it. For ex, you refer to the 'transnational tech / platform' caste. I'm part of this world. Not running your life, but it's possible to earn our income across 120+ countries while metaphorically 'not getting out of our pajamas.' The answer is to remove the large techs from your own life. For ex, don't rely on Google to run your life for you.

Any body heard of the USA company American Homes 4 Rent.
Has anything like that been tried in NZ or likely to happen in the future.
They own over 50k homes and have just purchased another 55acres to build 198 homes.
Sounds like State Housing but run by a private company.

Sounds like a recipe for disaster

One risk will be the efficacy of the vaccine, if it proves less than predicted it'll create panic.

A return to tourisim as it was would be a shame.

Our debt burdens will start to show some stress next year, particularly once the effects of the stimulus runs out. The housing ponzi is at risk of interest rate increases, entirely possible if inflation gets a toe hold.

Inflation is coming for the US.

When the fed raises rates the rest of the world will follow.

Goodnight property bubble.

19
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To the tourist numbers retuning. Please no, never again.

Blast it. The Covids immigration policy coming to an end. Mass "immigration" with students back. Low level tourism jobs return and those with an air b n b can breathe a sigh of relief and fund their new car, overseas holiday whatever.
Goff can breathe a sigh of relief as all those shoe box apartments can be rented out again with no likelihood of apartment blocks being repossessed and sold off in a fire sale. Tough luck on Auckland ratepayers who have to fill $1billion? operating expense? hole.
Ports of Auckland showing up as a well run business with a CEO no doubt earning around $500,000/year.

2021? Ideally it will start with white-collar professionals working here why their jobs are on the skills shortage lists, when NZ universities pump out thousands of new grads each and every year - and joining the dots between the skilled shortage list and the yawning gap between our wages and Australia's.

But I predict by June we'll be back to 30,000 net gains on migration and back to 50K by the end of the year; with more and more Kiwis selling up and out of Auckland and moving to be mortgage free and have better paid jobs in Oz. But you know, kindness or whatever.

2021 will see house prices rise another 20 percent. The vaccine will allow us to open up again. All of the leverage and debt in the system will force the govt to let in 250k net migrants in per year over the next 5 years.

Despite record numbers of highly skilled kiwis returning Massey Universities Paul Spoonley says returning kiwis are not matching the right skills with the economy and that an open border with India and China along the lines of the EU will be required to get out of recession..

I am hesitant to make property price predictions right now. I think the LVRs will pull things back a bit, but a negative OCR would stimulate the market.
So, if the OCR doesn't go any lower I say a 5-7% increase across the country in 2021.
If it goes negative, a 10-12% increase.

In 2021 Auckland Council will raise rates by an inflation busting 5% and offer the same shabby service they do now.

And lift Council staff numbers by the same ridiculous amount they did this year.

I thought there were significant reductions?

After the travails of 2020, it has to be our wish for free and safe Travel in 2021. Which is the underpinning for growth in economy, income, taxes, infrastructure, and much more..