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Chris Trotter probes the orthodox New Zealand Initiative's stinging attack on what it clearly regards as the Labour Government’s economic and political heresy

Chris Trotter probes the orthodox New Zealand Initiative's stinging attack on what it clearly regards as the Labour Government’s economic and political heresy
Rob Muldoon

By Chris Trotter*

“With no public consultation, a truncated Parliamentary process – and, as it turns out, without much consideration of Treasury and Inland Revenue’s advice.” These three, rather terse observations, offered by the New Zealand Initiative’s Executive Director, Oliver Hartwich, on Friday, 26 March 2021, make it clear that he is not a happy-chappie. Commenting further on the mechanics of the Labour Government’s Housing Package release, Hartwich noted, drily: “This is not how OECD countries are usually run.”

A short sentence, but one freighted with political significance. For many years New Zealand has been held up as the shining example of how an OECD country should be run. Orthodox in its economic thinking; predictable in its politics: when it comes to welcoming business investment, New Zealand has long been feted as one of the world’s most hospitable countries. That same world will, accordingly, raise a metaphorical eyebrow when a body representative of New Zealand’s largest businesses comes out swinging.

“The worst of Muldoonism is back in New Zealand politics. It is a morass of ad hoc interventions and spiralling public debt. We know how that ended last time.” These are hardly words of conciliation! The New Zealand Initiative – like the Business Roundtable, from whose forehead it burst fully-formed in 2012 – is marching as to war in defence of Neo-liberal orthodoxy, determined to strike down what it clearly regards as economic and political heresy.

Significantly, the wrath of the New Zealand Initiative echoes the reported anger and confusion of senior government officials struggling to come to terms with the Labour Government’s intentions in the days immediately preceding the Housing Package’s public release. With a firm resolve, unprecedented in decades, Labour politicians were insisting that their bureaucratic advisers implement their policies. Not advise them as to whether their policies can, or should, be implemented, but simply do as they were bid.

Small wonder Hartwich felt compelled to invoke the spectre of Robert Muldoon. In New Zealand neo-liberal mythology, “Muldoonism” has come to represent everything that was wrong with the “old” New Zealand. The New Zealand where a jumped-up accountant, advised by God-knows-what sorts of friends and cronies, felt entitled to over-rule the advice of experts who could buy and sell him intellectually before breakfast. The New Zealand where colossal debts were incurred in pursuit of “Think Big” projects whose primary purpose was to secure a handful of electorally vital “marginal seats”. The New Zealand that Labour’s Roger Douglas put to the sword in 1984. The New Zealand that people like Hartwich, Eric Crampton, and that veteran of the free-market revolution of the 1980s, Bryce Wilkinson, thought was dead and buried.

The discomfort, bordering on panic, among the government’s official advisers in the days leading up to the Housing Package’s release is, therefore, understandable. Most of us would struggle to remain calm if the dead started coming back to life, and then began pounding on the doors of the Beehive’s fifth floor!

Fear. You can read it between every line of this paragraph from a New Zealand Initiative “Policy Point” entitled “A Risky Place To Do Business”, released by Crampton and Wilkinson on 26 March:

“The normal routes for assessing such issues are being circumvented through haste. The bureaus have been unable to provide advice, and those outside of Parliament who might normally work through the implications of complex legislation have thus far been shut out entirely. We can hope that the eventual legislation will not be passed under urgency, but even a normal select committee process will have difficulty grappling with this issue.”

While the detail of the Labour Government’s Housing Package has been sufficient to unleash the very worst impulses of New Zealand’s landlord class – whose screams of rage and wild threats of social vengeance have pretty much confirmed the rest of New Zealand society’s worst fears concerning “property investors” – it is the rank insubordination of the nation’s elected leaders which most rankles Neo-liberalism's true believers.

The level of official paranoia was admirably reflected in Jack Tame’s dogged insistence that Grant Robertson disclose the identity of his advisers. Tame, perhaps revealing the views of the “experts” briefing him, seemed convinced that the Cabinet had somehow latched on to an alternate (and worryingly heterodox) set of advisers, who were now driving Government policy. The notion that, as Robertson rather testily pointed out, he and his colleagues were democratically elected to lead the country, appeared to cut little ice with the Q+A host.

Had Tame bothered to register the large portrait of Prime Minister Peter Fraser hanging on the wall of Robertson’s office, he might have had less difficulty in believing that a Cabinet made up of MPs elected to drive through transformational change have always possessed the latent executive power to do exactly that.

Those who are now quaking in their shiny leather shoes at the spectacle of a cabinet flexing muscles made weak through years of underuse, should be grateful that this Labour Government did not take advantage of the Covid-19 emergency to do what Peter Fraser did to ensure his government had the powers necessary to manage New Zealand’s fragile post-war economy. The Economic Stabilisation Act 1948 gave Cabinet the power to control wages, prices and rents by means of Parliament-circumventing Orders-in-Council. Without it, “Muldoonism” would not have been possible. The repeal of the Act in 1987 thus constituted one of the neo-liberal revolutionaries’ most symbolic victories.

What the boys and girls at the New Zealand Initiative have failed to understand, however, is that the world of 2021 is a very different place from the world of 1984. A country grown impatient with Rob Muldoon’s idiosyncratic and high-handed management of the New Zealand economy was more than ready for a few years of bridled executive power. Three decades on, however, swapping politicians subject to a triennial electors’ veto, for “market forces” seemingly answerable to nobody, no longer has the feel of a game-winning substitution.

The worldwide populist surge suggests that strong executive powers, harnessed in the people’s interest, are no longer regarded as unequivocal evils. Only the most hardened veterans of the Rogernomics Revolution continue to insist that New Zealanders should trust “the market” to resolve a housing crisis ripping apart their country’s weakest and most vulnerable communities. With the polling resources at their disposable, it is inconceivable that the Labour Party and the Labour Cabinet have not detected a sizeable groundswell of voter opinion that “something must be done” about housing. And, if what we have witnessed over the past week is any guide, they are going to do it.

Hartwich and his colleagues need to think very carefully about their response to this tectonic political shift. Sending out signals to international investors that New Zealand has become “a risky place to do business” is unlikely to be interpreted by many Kiwis as the action of a patriotic group of capitalists. On the contrary, it may speedily give rise to calls for those businesses no longer willing to identify themselves as loyal members of the Team of Five Million, to be given a taste of what life is like outside it.

*Chris Trotter has been writing and commenting professionally about New Zealand politics for more than 30 years. He writes a weekly column for His work may also be found at

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The world is moving on from the likes of Hartwich and his neo-liberal ideology.
I bet he wouldn't be complaining if the government got rid of planning regulations without consultation.

Who needs consultations.. the current environment of extended consultations far and wide are not helpful causing delays, expense and stop progress. I would rather keep consultation to a minimum. Examples.. The national policy statement last august signalled changes to planning rules and was announced overnight. The changes to schedule 1 for building consent exemptions from memory also announced without consultation

I don't necessarily disagree. But the NZ Initiative can't have their cake and eat it too.


Blow-ins Hartwich and Crampton invoking the ghost of Muldoon is unfortunate. They weren't even here

Does one need to have lived through WW2 to be qualified to speak. Sir Robs wage and price freeze was meant to last one year. It was in for nearly 2 years and had to be dismantled by the 84 labour govt. Sir Rob too afraid of the fallout before an election.

Yes, the failure of Muldoon's interventionist policies led to an economic reset with Rogernomics free-market.
Given the current failures we are again in need of another serious economic reset and not the current tinkering.

Oh for a return to freedoms and free market. My point was two fold. That you dont have to have been born at the time to get an understanding and 2. that muldoons solution was a total fk up. This govt going down the same path in my opinion. These last few days GR has been making veiled threats against LL that he will bring out his big stick. Im sure he would like that

Good job, and I hope it is a bloody big stick, the days of the landed rentier class bleeding the rest dry with rents so high that the bulk of a person's income is going to a landlord, who is more like a farmer, extracting everything he can from the animals he farms.
Not only do they bleed others dry, they then turn round and command how people should live their lives in "their" houses.
Has. To. Go. And the sooner the better, it is an appalling situation we have come to.

Wow your mood changes with the weather which today is angry sky and pissing down

I've long held this view on the whole rise of the rentier class in this country, I actually believe it is a big contributor to the breakdown of society, so trust me, anything that can be done to turn it around is fine by me

I've just finished reading William Dalrymple's book 'The Anarchy' about the rise of the East India Company. If anyone doesn't think a world run by corporations responsible only to their shareholders can't turn seriously pear-shaped, this book is an instructive read. Surprisingly modern in fact. Today they [corporates] don't need armies of sepoys when they have governments to do their bidding, willingly.

Sounds interesting. You know, there really is nothing new under the sun, it's just same sh*t, different day


The New Zealand Initiative in their hysteria have completely missed the actual Muldoonism in our property market.

Muldoon was one who actively subsidised and protected a market that was too big and important to fail. One selected favourite for government subsidising and protection, to the point it almost bankrupted the country.

Property is the new favourite industry that has been subsidised and protected in New Zealand's second bout of Muldoonism. Always more subsidies for demand. Always more money and monetary support. Farmers have been replaced by property investors, the new Too Big to Fail.

A free market where prices were allowed to go down was the prescription given to Muldoonism first time around. If Muldoonism is to be medicated once more, investment property would be toppled from its "too big to fail" pedestal.

Aye he was a trick or two within himself alright. The SMPs went right across the bows of a meat industry heading for the rocks and, while perhaps delaying the inevitable wrecking, prevented the reformation, modernisation and new directions the industry desperately needed to undertake. That spectre of over capacity still hangs over the industry today. With some irony at play, Sir Robert Jones was instrumental in ousting the preceding Labour government, remember the mouse suit anyone, but even more instrumental in ousting Muldoon with The New Zealand Party.


Brilliant piece.


It is not by any means an extravagant comparison. Muldoon had a penchant for just letting things flow on through channels of his creation and then when things became awry, either hitting them with a hammer or damming them up. Wage and price freezes for example. Today this government has allowed if not encouraged a huge investment surge into existing housing causing a price explosion, mostly by unbridled immigration, unnecessary low interest rates and ditto for removal of LVRs. The solution, out comes the tax hammer.


A part of the problem Foxy is that when a problem is left unaddressed for too long, by successive Governments, then the risk of becoming reactive, and reactionary increases dramatically. The Government's package may have been quite effective four or five years ago, but as you suggest I think it will not solve the problem as demand outweighs supply and prices remain high. Too little, too late and tempered by fear.

Yes it is not all at the door of this government. Recall returning to NZ in 2004 and a then housing surge leading up to the 2008 “correction.” LAQC companies were then the fashion. Couldn’t myself understand how a company could borrow for investment properties at normal mortgage rates and off set that against income, and on top of that the depreciation nicety. Still these introductions by this government could have been introduced much earlier, plus if you want to use a company to invest into property you pay company interest rates not household mortgage rates. But beyond anything else basically if you keep on filling up the country with people without accelerating housing simultaneously, you create demand exceeding supply for a product that everyone must possess and should be entitled to in any democracy.

Out comes the tax hammer and possibly rent freezes.

In fairness, they absolutely need to address the rampant tax evasion that has been part and parcel of property investment in New Zealand.

It's time the pretense that people are not investing for capital gains is addressed. The planned tax is not the optimal tax, but it goes some way to addressing this mass tax evasion.

Mudoonism! Yes that was my first thought when I heard Jacindas command economy measures over housing. We’ve been down this road before.

Muldoonism is subsidising and protecting one favoured industry from price falls. It's time the Muldoonism that is supporting and protecting investment property is ended. We've been down this road before. Investment property should not be protected as "too big to fall" and subsidies to investors should end. This social welfare for investors and capitalism for workers model needs to change.


Yes, its simple. Nearly everone feels unfairness in their gut, its part of our evolutionary heritage. Thinking people know the world has swung too far to the right, even many who benefit financially from it. A swing back to a fairer society is not a bad thing, it doesn't have to mean central planning, just regulation that minimizes excesses of financial abuse by the wealthier.

This feels a lot like CCP versus dissidents but NZ style

Really? Really??? Back it up with fact, not wild exaggeration.

Oh, for crying down the drain


... firstly they blamed foreign investors , had them banned ... house prices still rose a further 47 % .... now the blame game is being aimed at public enemy # 1 , landlords .... I fully expect this initiative will fail too , and rents will rise .... homelessness will get worse ... this government truly is the biggest bunch of drongos since Rob's Mob ....


So This Bunch is worse than the Bunch we elected in 2008? The one whose new leader told us on the campaign trail the year before that our housing market was unaffordable, and he was going to set about making substantive changes? That one?

They are all tarred with the same political brush; one that's dipped in the can of "Fear of not being re-elected" paint. We all know that. Politics just is a Job after all; an extension of the Ist Form High School Debating Society, not a Calling.


What do we notice about the changes that have just been announced? Very little, if any, complaint from Judith and her team. Perhaps all being painted with the same brush will work this time? Maybe they all recognise that "something has to be done, now" and will leave Labour to sink or swim with it.
National, have nothing to lose in that policy.
- The policies being enacted fail, and Labour sinks in the polls.
- The policies work, and National get to set about being re-elected without the albatross of housing around their necks.

... yes .... Key & English were very popular in power too , and very ineffective .... so were Clark & Cullen before them .... but , at least they consulted vested interest groups and their treasury officials on new policies for costings & consequences ....

Is that the same Treasury whose predictions since Covid have been 100% wrong?

I'll pass thanks.

And who still believe "Wealth Effect" is real?


Having worked public sector in Wellington (and left in disgust at the incompetence) - ignoring their advice is probably beneficial as those departments are typically full of their own importance and agendas.

One wonders how many in Treasury are landlords themselves. How then would you ever get impartial advice from such a department? 'Interest deductions....shit they can't touch that because it will impact my Aro Valley portfolio'.

CT waxes lyrical here about a government with some sort of novel backbone standing up to the bureaucracy. In some ways he is right the last lot that overturned that blasted body of dead hands were Roger Douglas and his merry men. But surely, fundamentally should this not be the way it is. Have witnessed myself at local level a middle level executive of our council telling our elected councillor to nuff off. Our bureaucracy is too big, too reactionary, too sluggish, too expensive. To beat my old drum I say again a bureaucracy that is opinionated, self serving and unaccountable is a threat to society and democracy itself.

Yeah I have done a bit of contract work for government ministries, agree.
Although the cultures are superficially liberal and 'woke', the 'thinking' is usually limited, conservative, unimaginative and wedded to the neoliberal paradigm.

So what are you saying? That they should follow the tax working groups recommendation & implement a capital gains tax? Or the IMF's recommendation of a capital gains tax.

That would seem to be an obvious yes; taxing business income rather than business profit makes no sense. Taxing capital makes a world of sense.

Is that your fantasy - more homeless people?


Whatever you do, don't ask GBH what his fantasies are.

Not if you want to sleep easy, I suggest?

I was meaning his fantasies about people having warm, dry, healthy, affordable housing ;-)

And under our present political parties, it is a fantasy to think like that.

It would be nice to see the modelling or at least the policy note for these latest moves. Just to understand the expected results. The IRD was not keen and Treasury was still in the "what?" mode but there must have been some basis for these changes?

In any regards I think these measures will actually have the desired result in regards to property prices, so whether they thought about it or just struck out makes no difference really I guess.

I don't think rents will be a concern ether as the investment housing stock needing to be shed becomes available to FHB who are likely currently renters and so a neutral impact to demand for rentals.


Of course rents will rise. Lowering interest rates has off-setted the costs of 'Healthy Homes' from which we only
saw small rent increases which can be recouped over a few years......JA is oblivious to this.

All the things that are to blame, those past and those present, are to blame, including foreign buyers who probably lit the touch paper on the house price sky rocket


If these measures pull back the insane rise in the cost of houses, good.

UK govt rolled out very similar interest deductability changes for landlords (although milder) in 2017 to try to stamp out investor greed. Big deal

And end result? Price is still rising...

Even if prices keep rising, fairer taxation is a good result. Contribution needs to be balanced more across society.

Is it fair that wealthy people with no mortgages are not affected at all, where people in the middle with mortgages get hammered with additional tax? A blanket capital gain's tax would be much fairer. But they are so afraid of losing power, so they would never introduce it.

A capital gains tax would indeed be far better. But investors ruled that out.

No, not investors, but the current government ruled it out...... So now they have nowhere to turn, but to attack the middle. perchance happen to notice at whose shrieking request they ruled it out? After all, they themselves advocated for it.

Well, there's no perfect system and always winners and losers. They key is to minimise the losers.

Its not similar at all- investors in the UK can still claim interest as a deduction - its calculated at the base tax rate of 20% instead of the 2 top tax rates of 40% and 45%. The equivalent policy on NZ would be to allow investors to claim interest at the 17.5% tax rate instead of the 33% or 39% tax rates. The NZ proposal I beleive is to remove interest deductibility full stop.

What? No. You must be wrong with those figures. We pay the highest taxes ever known, I've herd it repeated so often.

ikimpaul...when the UK want to move to a fairer system they will have the (new) NZ model to base the changes on.

A fairer system is to tax capital, removing the deductibility of interest is incongruent with business tax.

The UK has CGT on buy to let’s, and all second homes, at a 28% rate, and 20% on many other assets. Plus there’s a hefty stamp duty on all property sales, with a bit extra for investment properties. Their tenancy laws are draconian, too, after some serious issues with slum landlords especially in the dreadful northern cities. I suspect landlords are still better off here, especially as most will have just the residual two-year or five year brightline to sit out. That’s not too onerous a timeline for genuine investors. Have to watch out for overseas sellers, though, who will take the money and run. Need to make lawyers and real estate agents hold back the cash until the sale status is confirmed.


Chris Trotter nails it with this one. "....... Labour Government’s Housing Package has been sufficient to unleash the very worst impulses of New Zealand’s landlord class – whose screams of rage and wild threats of social vengeance have pretty much confirmed the rest of New Zealand society’s worst fears concerning “property investors”..... "

Is a landlord a property investor though?
In my mind there is a difference between someone buying extra residential property other than their own home and leaving them untenanted v somebody who buys extra residential property and manages it as a habitable home for renters? And a variety of scenarios in between those two.

They're all speculators exploiting loopholes now. Get with the programme.

It's like this, all ponies are horses, but not all horses are ponies. Not all investors are landlords, but most of the likely are.


Comparisons to Muldoon and that the Government is unleashed are ridiculous.
What happened is they changed some tax rules. Not a big deal - it's their job.


This is what happens when one acts in haste (last year removing of LVR) and than when realizing that is is misfiring and housing ponzi has gone out of control and instead of controlling, let it reach new unheard heights lik $1000000 rise in just month after $200000 to $3000000 plus rise in past few months and than..... Boom.

Still the main tool / source of cheap and easy money of interest only loan, which spevulators use to multiply their purchasing power is still untouched.


Agree taimaiakka0.

Measures / tool that is specefically been used by speculator is not been touched or delayed - Why.

Controlling Interest Only loan will hit speculators the most as most FHB do want to pay principal and interest as soon as, to be free debt and also genuine investors who are in for very long term except Speculators and I think Jacinda Arden government is trying to target speculative demand, so why the hesitation and delay.

(Inappropriate comment deleted. Ed).


This is unnecessary.

"This is what happens when you have two ladies in charge, Jacinda and Grant"

By this do you mean they have kept their word and are doing what they said they would do prior to getting elected - fixing the housing crisis? If it takes 'two ladies' to do it, how shameful for John Key and Bill English, two men, who couldn't even admit there was a problem in the end. Now that's embarrassing for men.

No, by that I meant they did not keep any of their promise. House prices (got a lot worse under them), Kiwibuild, child poverty, billion trees, homelessness, social housing, climate change (now importing more dirty coal then ever). You name it they haven't deliver, just like bunch of old nanas all talk no action. But people forget very quick about broken promises. And now they portray themselves as some sort of saviours when they have created this incredible mess themselves. But they managed to fool quite a few voters judging by election results.

The biggest problem with this is that there is no major party that provides a coherent alternative. National will only perpetuate Property Muldoonism (subsidies, protection from price falls) as they have in the past.

It's only the minor parties at this point who are providing a more productivity centred proprosal.

However, at least Labour is now making a start on addressing tax-free property investment by adding a little bit of fair taxation.


Labour has dug around inside its fleshy, under-exercised corpus and found a vestigial remnant of a spine.
If the likes of Hartwich aren't attacking them daily, they're not doing their job.

I'm still a believer in the market. Huge caveat is that it should be free, not subject to distortions etc. The problem is, people pretend the market is free then scream that free markets are bad because X has happened. Well, free markets haven't actually been implemented very well at all, being subject to huge distortions, especially wrt land and houses so of course they haven't had optimal effects.

How far back in time would you have to go where the property market was a free one?

Approx. 1993 it was still 3x median income. Truly free markets will almost always result in this multiple.

When I was young it was assumed house buyers were couples with children and one adult having a serious job and the other either housewife or part time. So that 3x with modern lifestyle might settle down to 5x given a reasonably free market. A theory that could be tested by checking NZs semi-zombie towns (does anyone have figures for Dargaville?)

When I was young it was assumed house buyers were couples with children and one adult having a serious job and the other either housewife or part time. So that 3x with modern lifestyle might settle down to 5x given a reasonably free market. A theory that could be tested by checking NZs semi-zombie towns (does anyone have figures for Dargaville?)

The Middle Ages, oops serfdom! Perhaps when we lived in caves?

Yeah, the calls for a free market are, as always, extremely bloody selective.
The fact that housing 'investment' is allowed to operate in a 'business'/'no, not actually a business' tax limbo at the expensive of productive activity is hardly indicative of a free market. As things stand, it's rigged to benefit speculators.

you're right, to minimize tax distortions between different asset classes we need to immediately equalize their tax treatment.


NZ, removing subsidies from agriculture over time (still work in progress with the push on environmental standards etc), but raising subsidies to landlords via accomm supplement, WFF etc.

Exactly, the original sin against the 'free market" was the classifying of capital gain as a tax exempt income. In any other business if you make a gain on sale of an asset this is considered taxable income. Capital gain is a fancy word for gain on sale of an asset.

No it wasn't. The sin was because our system ie Govt. policy, allows two different types of capital growth to exist (can exist at the same time) and therefore two different types of investors (long term rental investors and speculative investors, and you can be both at the same time)

The two types of capital growth are, value-added and non-value added.

For a typical rental investor in a free market, they get neither. They buy the property and make all their return on yield, and money spent on the property on maintenance is just to retain its amenity value and any increase in price (and therefore rent) is based on basic inflation. They get no value-added or no non-value-added growth. For this to work yield has to be higher, which is easily achieved if we lower the price, but only if you get to buy at that price. If you have paid today's price, then you would have to raise rent to achieve a higher yield in lieu of any capital growth, otherwise, take the equity loss.

Any developer investor can get the same as the rental investor but they also get the value-added capital gains by taking raw assets eg land plus building equals finished house, ie the sum of the whole is greater than the value of the individual parts. Thus extra 'sum' they make is because they added value and is the reward for their effort and risk.

Non-value added capital growth is making money from a property without the need for yield or adding any value-added input. This can only happen when there are restrictions (not a free market) in the system eg land supply, consenting cost, and time delays which allow rentier monopoly to occur ie supply is less than demand, and in fact, if you own that supply, the less you do with it, the more you will make relative.

Govt. policy allows non-value-added behaviour to happen, and rather than change the policy, they are going to tax the very behaviour they encouraged.

What a load of gibberish.

There is one type of capital gain. This is an asset that goes up in value. When an asset that goes up in value & is disposed of it is called a 'gain on sale of an asset". This is a form of income. It should be treated as ordinary income but isn't, it is given a tax exempt status. This has created severe distortions in the NZ housing market, notably sky rocketing house prices causing a collapse in home ownership amongst the young.

In a fair system all income is taxable. Including gain on sale of a residential property. There is no special tax treatment for any income type.

basic accounting equation to: Assets = Liabilities + Owners’ Equity + Revenues - Expenses (A = L + OE + R - E)

So because you don't understand something, and it's the next level beyond your understanding, it's gibberish. Funny how some people process information.

In your world, you cannot tell the difference between long-term rental investors or speculators, and so treat them the same.

Your missing why they have gone up in NZ and some other places, and why in other jurisdictions with exactly the same inputs, they haven't.

But don't take my word for it, read a bit of Alan Evans or Alain Bertuad.

If the asset was depreciated you pay tax on depreciation recouped.


We don't have a housing market. If we did it would have tipped over many times in the last 20 years. What we have is a hugely regulated situation where land is constrained and immigration unfettered.

And then the housing 'market' gets bailed out whenever there's so much as a jitter. And then landlords get blamed I.e. used as a scapegoat.

... there has been a property price boom around the world ... the flood of cheap money released by central banks has driven all kinds of speculative manias .... but , its doubly worse in NZ because of our unfettered immigration policy , and our constraints on land & building ... I feel " icky " defending landlords , but they really aren't to blame , even though the majority are enjoying giving them a good kicking , Robbo too ...


And ironically, it was the NZ Initiative that were huge proponents of the mass population growth through migration scheme, to the extent that The Herald published their pro-immigration articles as if they were facts.

And they want overseas speculators to be given free access to our housing market. Numpties.

Davo...agree landlords are not the major problem. The major problems are immigration and not enough new builds. But make no mistake, landlords are still part of the problem.

Who campaigned vociferously against a Capital Gains Tax?

Scapegoated may not be the right word. This new tax seems to have resulted in part because of landlords' past actions.

That's exactly my point above.


Couple problems here Trotter.

First, you seem to imply that we have something of a 'free market' in housing. If that were the case, for better or worse we'd have much more urban sprawl as ad hoc developments popped up at will along state highway one south, no shortage of housing (but rather a much more chronic infrastructure constraint and utterly insane traffic in Auckland) and much lower house prices. You'd also have much more density in very high demand areas without the constraints placed on the market by zoning laws. The Auckland Isthmus in particular would have a much much larger proportion of apartments in inner suburbs if we had a free market.

The fact that the above hasn't happened is because NZ is regularly cited as having some of the tightest (as-in not free) land use regulation in the OECD, and that this is a driving cause of our extortionate house prices.

Secondly, the problem here is knowing that this is the case, knowing that we need to massively increase both the supply of new greenfield land (and the infrastructure to support it) and knowing that we need to hugely increase the density enabled within the existing area (and the infrastructure to support it) the government instead of getting advice from the experts they pay to give them advice on how to best achieve this, instead takes aim at a convenient political scapegoat in a manner which the underresourced Treasury 'hasn't had time to fully unravel'.

If they wanted to stop speculation on housing all they'd need to do is make a credible commitment to force through 30 years of supply in each of our major urban centres as occurred in Christchurch post-earthquake. This pushes down the cost of new land by removing the artificial scarcity present in the currently constrained market reducing expected capital gains from property investment to only that component attributable to inflation and rental growth (2 - 3% p.a in real terms).

The problem with disregarding the advice of your advisors and making knee-jerk reactions like this is that (like Muldoon) you increase uncertainty in the market you're impacting. Since the policy isn't fully thought out, defined and implemented, and since 'new build' & the exact shape of the exemptions it entails isn't clearly defined there is now evidence to suggest that commercial to residential conversions are being put on hold as well as new residential developments due to the uncertainty created by this! You've managed to decrease supply by increasing uncertainty.

Making policy on the fly. Ignoring Advisors. Ignoring the key problem you're trying to solve. Increasing uncertainty in markets. The comparison to Muldoon is fair.


And without even looking at what they are doing wrong, you just have to look at the results, housing is getting more expensive, smaller and quality getting worse.

The issue here and why Muldoonism is being invoked is that the government is acting as though they dont have to consult on policy. I cant recall in the last 30 years a government department (let alone 2) speaking our against a policy within hours of it been released.

IF the government is not going to listen to its ministries whose job is to help formulate policy and then enforce it - then lets do NZ a favour and disband the policy arms of the ministries- we would save millions (if not billions) in public service salaries and at the same time we could move to become a true banana republic.

Chris Trotter forgets one piece of history from the Muldoonism story which was it also led to the creation of the MMP system to minimise the power of one party control of Parliament which enabled bad legislation to be rammed through and inflicted on the electorate. The consequence of this stand by the current government is it will reconfirm the benefits of MMP and voters will turn back to the MMP system in droves to vote in such a way to prevent any one political party again having complete power in parliament.

But house prices would fall in Wellington if we reduced the size of the ministries. So yeah nah.


The IRD cant even run the bright line test
The IRD should be able to immediatley publish the total number of taxpayers declaring rental incomes, the total rent revenues, the net rent revenues, total interest deductions claimed, and the tax-cost of the interest claimed as a deduction

They can't and they dont, yet these are vital national data that Treasury needs to formulate valid advice.
The IRD simply objected

thats an even more damning issue then - why put in policy that you cant enforce. Why not spend the money to put the enforcement in place. A policy that lacks enforcement only serves to mislead the public that something is actually being done.

"only serves to mislead the public that something is actually being done" Hole in one mate, you summarised Labour in one sentence.

Common feedback amongst friends is that all are passing extra costs on to their renters. Some more than others. 30% seemed reasonable to me but have heard higher to get ahead of any more policy changes. Not easy being a landlord but have to be ready to make the tough calls that others shy away from.


As house prices fall, and/or interest costs start to bite, a good portion of renters will buy the houses vacated by rental owners bailing, so suck it up now that YOU have no choice, or sell your property, or you may be left with an empty house and a very big mortgage that you can't service. How does that feel? The five stages of loss and grief are, denial, anger, bargaining, depression and acceptance - the sooner you work through them the better off you'll be.


Watching the comments on the property investment FB can see many investors are still trying to process what is going on. They still believe that 'you can't lose with property' so these changes are causing significant cognitive dissonance for many of them. Many show calculations with negative cash flows so any increase in interest rates over the next 5 years are going to cripple them.

As you say - best to sell first and not last.

I wonder how many of these people in these threads have been honest with the IRD about having purchased for capital gains.

Can expect the cognitive dissonance as it is kind of a cult they belong to. I suppose it will help towards the 'soft-landing' labour are trying to engineer, depending how deeply brainwashed the property ponzi are, and also how banks welcome their new loan applications

Somebloke - The country has a housing/rental crisis why would a Government start a war with the largest private accommodation providers ??
These changes are adhoc and will have unintended consequences on the most vulnerable.
Home ownership rates 64% need to increase but even at the peak they were 74% so even at the best scenario a quarter of our population needed/need rent accommodation.
The huge jump we have seen in house price rises has been from cheap money, dropping the LVR and terrible TD rates surely we can all agree on that ??

If the current changes were part of comprehension changes ie banning interest only, CGT on all property including the family home, commercial rates on rentals etc etc but they were not.

Private investors have been made the bad guys here unnecessarily.

I would have liked to see the Government work with all parties.

The reference and connection to Muldoonism for those of us who lived through that is very real .

So game on F@#@! the Tooth Fairy and the Fat Controller I have "acceptance" they are incompetent.

If you make the private investor the bad guys they will be the bad guys !

Private investors forced CGT off the table.

In the spirit of working with all parties, perhaps investors should come to the table and propose CGT and the removal of interest-only as an alternative to this change?

This will truly cast them as the good guys. Maybe Ashley Church can lead this charge.

Shoreman - you sound like you're starting to panic. I assumed you were debt free on the $15 million of property you own. Perhaps not?

I might need to vote for Labour again next election given how successful they've become ruffling the feathers of the property investor cohort. Just when I was losing hope in them. Perhaps now really is the year of delivery.


Common feedback amongst friends - did those "friends" pass on the 50% reduction in interest costs


Exactly....costs go up so must be passed onto renters. But if costs go down (like the last 10 years as interest rates fall)...we will pocket those benefits thank you very much. The hypocrisy.

Why would your tenants stay if you put rents up 30%? You'd be shooting yourself in the foot and playing right into Labours hands to put rent caps in asap.

Based on what Vittoria Shortt was saying the other day...people won't have that kind of money to spend on that level of increase of rents. And that tax payer is going to fund all of your difference...I don't expect the tax payer to pay the losses of any of the businesses I've invested in on the sharemarket. Why should landlords expect higher and higher rates of accommodation supplements to cover their losses. They shouldn't...

A freeze on Accommodation Supplement rates and a s-l-o-w re-opening of the border to keep migration rates down should curb rent increases.

B727..if you and your kind increase rents by 30% it will not be a tough call for Govt at all. Are you joining the other landlords in evicting your tenants on the coldest day of the year?

Nope not into that at all. Tenants are a great family and kids enjoy the local schools. Think they attend the same church as also.

Good to see that you’re a Christian. Camel and the eye of a needle....

This will be difficult to implement. The Tenancy regulations say a landlord may apply to the Tenancy Tribunal to increase the rent (if disputed by the tenant) and claim they have had unforeseen expenses since the rent was last increased.

So you will need to apply to the Tribunal to get 30% as market rents ( go up much more slowly driven over time by markets raising in line with inflationary costs.

Given the migration tap is off at the moment I do not see a 30% increase in rents at all.

I trust rents dropped by a consummate amount when the OCR plummeted over the last few years, assuming that interest is such a vital driver of rents?

Costs only dropped for long-term holders that didn't leverage up. Newer investors and those who continued to leverage paid higher prices for property hence lower yields.

Speaks volumes that you have so many friends who are landlords. Too many are these days. Has to stop. They are confirming to us, if not you, what a nasty business it is.

The angst could have been smoothly minimised and managed if we had a more decisive leader who was less fixated on her own political capital. The housing crisis has been evident for a lengthy period, that we were in extreme bubble territory evident for a long time. With half decent leadership sound advice from officials could have been obtained, stakeholders consulted and the fallout anticipated and managed. Instead we have reactive ad hoc policy that now requires band aid fixes and propagandised justifications such as Roberstons oft repeated untruth that interest expense offsets are a 'loophole'. Trotter demonises Hartwich as a right wing reactionary but more centrist/leftie commentators such as Baucher expressing similar concerns about unintended consequences and shambolic implementation rate not a mention.

Yes the demonizing of anyone who doesn't like the government's policies as some sort of far right wing nutjob is concerning.

Jack Tame asked Robertson what the outcome of his package might be. Robertson said... that he (Robertson) has no idea... Robertson says , his hope is that more FHbers will step into the mkt and more investors will get out.
If the Govt did not take advice from its primary advisors, and it does not have much of an idea of the likely outcomes of this package, then Tame was right to ask who has advised Govt..????

One commentator called Trotters article ..."a brilliant piece".
I think its a pretty pathetic article... just a rant of some kind... in my view.

if anyone wants to watch Tames interview
I think its a good interview.

My own concern is that if some property investors do sell , what impact does that have on the rental mkt. ?
I'd guess that if rents start going up , Labours next step will be rent controls.
BUT... Labour cant really do much about shortages of rental homes..... ( Housing NZ waiting list will get bigger and bigger ).

Developers only build if there is a demand for new houses, and only if they can sell at a price that is in excess of their costs.

Biggest cost is the price of the land... How will Labours package impact that..??
eg. 550sm section in Flatbush , asking price $930,000

Labour are also presuming that investors will continue to buy new Houses. Will they..?

My line of thinking is that those real 'Mum and Dad' Landlords with one or two rental properties say, that have very little if any debt against them will be in even more of a position to pick and choose their tenants.
The large portfolio type who have been playing the leverage game may try and drive up rents but end up losing tenants. Next stop, a meeting with their banker.
But I admit, I know as much as our finance minister as to how this will play out.

Yes, the Elephant still in the room for me is new builds. This is because most new builds are on the fringe on land that they have paid the landbank price for, which was 'baked' into the cost long ago. IE yes it is some supply, but it is a historically expensive supply.

And focussing on new builds, this will be a bit counter-intuitive, but it actually decreases supply, ie rather than ALL land, both for new and existing, being treated equally, the focus is on a smaller part of the whole ie new builds, so the pie just got smaller, ie less supply to demand.

And the price of all land is set at the fringe, so it will affect the price of all new builds going in.

This is exactly what happened when they introduced the SHA's. Some say it was a great success, I say, did prices go up or down?

It's hard for housing to become more affordable when your input costs are dearer, especially if they are non-value-added costs because they don't improve the amenity value and take money away from other more important areas.

One minute this government is "neo-liberal", the next they are "Muldoonist". The only comparison is that like Muldoon - the Prime Minister is all powerful - yet has a very minimal understanding of any economic issues. Muldoon did understand the economy, but wasn't willing to delegate and could never admit when he was wrong. Ardern thinks problems can be solved with kindness, yet isn't willing to implement the big bold "transformational" policies that she told New Zealanders we could expect. Who knows what Grant Robertson is up to, but at the moment it's just tinkering. Nothing they announced last week is going to increase affordable housing or bring prices down. There's too much cheap money for anyone to be spooked, and not enough guts to create a no bullshit Kiwibuild (or whatever they want to call it now) programme.

Economic truths do not change regardless of the philosophy which guides our governments. We work longer than most Western countries and we produce less. We have used immigration to drive economic growth. We have vast areas of land and a small population yet we have a shortage of affordable housing and people on the streets.

What Trotter is alluding to is if this government continues with it's failure to deliver, and ends up being replaced by a National Government, we may have a repeat of to the worst aspects of Rogernomics. Nearly four decades on, it isn't the much needed opening up of the New Zealand economy that people remain angry about, but the speed of the changes that were required and the direct damage this caused to the vulnerable people in our country.

Agree Sam Hill.

Need courage and wisdom to act.

Need Leader not politicians that we find in each nook and corner of NZ.

If I was a decision maker in Govt, and I was serious about housing affordability and housing shortages, one of the first things I would have looked at would have been immigration levels. What is a truly sustainable level, , in regards to not just housing but also hospitals, schools, roads...etc..etc..

Was this population growth planned for.?

John Key pre election, talked about housing issues back in 2008.... Labour pre election talked about housing issues back in 2017.

If one looks at this chart, 2019 was a year if immigration extremes....

History rubbed out

In 1972 at the time of the first oil shocks the NZ Government enacted blanket price controls over the entire economy. The controls were operated by the Department of Trade and Industry. Businesses were grouped into two categories - large businesses (category A) and small (Category B). Large businesses could increase prices to the extent that they had incurred increased costs, but they could not increase prices beyond the return on capital they had enjoyed prior to the imposition of price controls. Small enterprises could increase prices only to the extent they had incurred increased costs. In other words profits were frozen. Larger companies had to apply to the department to increase prices. A team of price control officers in Auckland numbering about 10 would investigate the application, write up the results and submit the report to the Price Tribunal in Wellington

The system worked well. Interesting thing is you wont find anything about it on the internet. The Department of Trade and Industry has gone. There is no history on the internet about those 1971-72 price controls or the Price Tribunal. It has all been rubbed out

Yes I remember that now that you dust it off. So too, Warren Freer I think, with those little MRP labels on everything. That government did good in many ways,ACC, Springbok Tour vetoed, and compulsory super an, undone hugely by the oil crisis at the time though not to mention the loss of their leader, who alone could withstand Muldoon. But still intervention was employed as the woefully ham fisted tool of the day, spreadeagled by Muldoon, who it turned out, was even worse.

"My Enemies Enemy is my Friend ..." If what he does achieves the right effect and forces the government's hand(s) into taking real action on the Housing Crisis. So be it.

It's interesting that those who cry foul the loudest has no fuss trying to access the property ladder over the bodies of the homeless.

Love the drama.

'have failed to understand, however, is that the world of 2021 is a very different place from the world of 1984.'

Median household price historically up to 1984 and through to 1993 was 3x median income.

The median household price in 2021 is approx. 8x median income.

IE 2021 is 2.42 x worse for housing affordability than when Muldoon was in power.

And the comparison to Arden and Robertson to Muldoon is as you quote:

'advised by God-knows-what sorts of friends and cronies, felt entitled to over-rule the advice of experts who could buy and sell him intellectually before breakfast.'

Muldoon bad, Arden bad x 2.42.

You need to take into account mortgage interest rates at the time. At their height, they were approaching 20%.

20% of a very small number is often less than a small percentage of an astronomically huge number, even more so when wage inflation is a thing. We've managed to import enough population to effectively suppress wages while at the same time driving up prices. It's not the same as it used to be, it's worse.

As per GV 27's reply. It's far better to have a small capital price and a large operation (interest price) than a large capital price and a small interest price because 1) the interest rate drops or even if stay high will be inflated away by rising house prices, and 2) the large capital price also normally means a larger mortgage which the size of the debt is locked in and cannot fall as the interest rate did.

Of course, the best scenario is low price and low-interest rate, which some jurisdictions that have sensible Govt. policies have.

No. Real interest rate = Interest rate - Inflation.
Those periods of high interest rates were during a period of high inflation.
Sometimes inflation was so high that real interest rates were negative.

This one is for CT and is what happens when you allow policies that don't distinguish between rental investors and speculative investors and allow the two to morph together.

To paraphrase George Orwell's Animal Farm and to update 1984 (Piggy Muldoon) to 2021 ('Pick your Avatar' Arden).

"No question now, what had happened to the faces of the Investors. The Govt. outside looked from rental investor to speculative investor, and from speculative investor to rental investor, and from rental investor to speculative investor again; but already it was impossible to say which was which."

I repeat to target Speculative investor, why is government and RBNZ not ........yes ...culprit......INTEREST only loan

I think you will find, as soon as the banks feel there might be a drop in prices, they will regulate than one themselves.

The New Zealand Initiative’s statement reeks of vested interest.

What utter rubbish. To confuse not asking for advice with neo-liberalism is to fall for this commentator's bs.
NZ Initiative's paper, if anyone bothers to actually read it, talks about how making a big change to tax requires analysis to ensure the govt knows the likely consequences. It's not about letting bureaucrats dictate policy at all.

People running rentals as businesses or speculating on housing actively drive up prices by controlling supply and demand through how much of the market they control. Then will act like babies and complain to the government that there's not enough support to supply more houses, which they can then buy up and continue inflating prices. Frankly, these out of control property speculators and slumlords have more of a negative impact on society than organized crime. Housing (in any form) has value because it is a necessity, homelessness is by-product that uses fear of dispossession to continue driving up rental prices.

Perhaps the fault lies with The Reserve Bank Act. The Reserve Bank has been set up as an independent body with a mandate to maintain inflation to between 1% and 3% and to support employment but the only tool at its disposal is the control of interest rates which is done by the buying and selling of government debt.
Along comes Covid and so The Reserve Bank has to cut interest rates to carry out its mandate and the rest is history, it unleashes a tidal wave of commercial bank created money into the housing market.
The only fault and critisism that can be given to the Finance Minister is that he could have used a stronger fiscal response through the Covid crisis.

It was 1999 when the price of land was removed from CPI too, wasn't it?

This truly enabled them to pump land without worry.

Interesting. I don't know my CPI history very well :)
That was possibly a significant factor in the house price boom, would be interesting to dig deeper

But the RBNZ also incentivises the banks as to where they lend to. Based on how much collateral they need to hold against different asset types?

I cannot find anything online about this other than the LVRs, do you have a link?
"A capital ratio is calculated by dividing the amount of capital by a risk-adjusted measure of the bank’s assets (Risk-weighted assets). Standardised and internal ratings-based banks use different approaches to calculate their capital requirements."

risk-weighted assets (by type) can be viewed from that above web page.

Yes, God forbid that Labour actually do something without relying on "experts" who wanted more time to think about it. An elected government doing something re its manifesto??? Bizarre idea to neo-cons eh.
Really, however, if Labour WAS serious about dealing with housing crisis, it would mass build (itself) quality rented 3 bed places. It will not. Hence, still stuck in 1984-94 ideology of private sector good and public sector bad.

Building cheap houses is a myth.

FOMO created has to be killed and that is only possible if the feeling that house price never falls fails.

Jacinda Arden government is still not acting with full conviction otherwise would not have given RBNZ time till may.

How much bigger do you want the public sector to be? Genuinely interested in your response as it's already a big old thing already and not making much headway into major issues.

Who has the more successful economic model now, China or the US? China has built its economy with central planning while the US slowly declines into impoverishment.

Occasionally it might be nice if someone said what two median wages are in Auckland, combined, for anyone 30-40. Interest publishes figures for this yes. But we do not see them alongside the median house price and median deposit. V tedious people doing DTI with one wage when we all know its two in Auckland.
Essentially, if interest rate goes back to 2.5% from current .5, how many of FHB who bought in last 18months will be in deep trouble?
Then we will hear zip from those on this site telling them now is always a good time to buy.
10% price reduction from $1.025m median in Auckland will put it roughly back to where it was in April 2017 in fact. But people keep reciting it as back to January 2021. Take a look at REINZ medians

Don't you love this consultation whine?
What do you call an election?

Trotter should disclose his own bias as a longstanding retro socialist from way back.

Muldoon used to keep saying he could see light at the end of the tunnel. Eventually the train arrived and got him. Jacind's memorable comments are wash your hands and be kind. Oh yes the horse smile.
Is her smile that much different from Muldoon's? Does anyone remember his dimple.
We need to wash our hands and get rid of her out right out of our hair.

No, it's the rentier class we need to do that with

Evidently she cuts right across Investor Entitlement Mentality

I remember in 80/90s you could call a certain number and hear a voicemail greeting from Muldoon with his trademark laugh

Peoples economic realities are not really intested in bureaucratic protocol. Labour waiting and waiting and waiting on advice was becoming less and less important than doing something, anything, to curb specuvestor demand.

New cause for concern: labour email leak of them creating spin around rent increases not really being 'a thing', at same time Grunter is promising to 'do something' (Deja vu, anyone?) they are looking back to history rather than forward to anticipate and mitigate, saying no easy data, probably will form some committee, announcements about announcements, same as they've done the last year while FHB were screwed, now renters with no deposit to be double-screwed with lack of action. Rents are already high. Time to act is NOW not next year; have they learnt nothing from the last year?

Trotter true to form has been selective in his arguments. It is not the free market that has allowed house prices to surge. It is central planning in the form of centralised control of interest rates, with the RBNZ operating in response to the Govt mandates. Suppressed interest rates encourage a demand for credit from trading banks and ever higher asset prices. RBNZ probably has little choice as all democracies have followed similar policies. However Adrian has been particularly enthusiastic in his application of the powers at his disposal, suggesting well before Covid arrived that QE and negative rates were a strong possibility. His no regrets application of his powers means that at least he can sleep at night, unlike those adversely affected by sky high house prices.

I kind of had a soft spot for old Robbie.
Who can forget his drunken stutter on tv??!! Everyone takes themselves too seriously these days, including politicians.

Exactly - well said, Chris.

It is actually fascinating to watch/read - the events of the downfall of neo-liberalism.

I did note that Trump always invoked Lincoln as his GOP 'hero' - never Reagan. Not at all surprising that.

Olivier Hartwich can be relied upon to express sweeping, ideologically and non-evidence based views. That a person with a PhD in law should express such non-evidenced based views is a telling indicator of the agenda of the NZ Initiative. Another example of such views: He was quoted in a column by Gideon Rozner in The Australian newspaper late last year as saying "There is a distinct chance that if we don't sort out our economic challenges quickly, New Zealand could end up a failed state." Well, I've been to a few failed or failing states - e.g the DR Congo - and let me assure the NZ Initiative that NZ is light years away from becoming a failed state - despite our economic challenges. But perhaps I am being too unkind, maybe the housing crisis is such severe challenge it could bring elements of a failing state to NZ if it is not addressed.....

Yes, I doubt any of the neo-liberals did social cost benefits assessments of their policies. If they had they would have never been implemented.

However, it doesnt excuse Labour if they havent done so on the housing investor tax changes.

Government is meant to be by the people for the people. This means that government (including local government) should be undertaking social cost benefits assessment on all its spending with the aim of improving total welfare per capita and its distribution.

The days of focusing on GDP and ignoring its distribution and the externalities needs to be over.

I'd say the reason TSY did not get that work done was 1) ideologically opposed and 2) unskilled in the type of analysis you are talking about.

Instead of debating whys and wherefores of the govt's decision and the effects of it, a look at the reasons why we're in this crazy housing boom might be instructive. The Reserve Bank is creating $100 billion to buy govt IOU's off investors (read speculators - a big chunk of whom are the commercial banks - those who make money from shuffling money [often other people's] rather than generating production) who had previously lent money to the government. The reasons advanced are that it will encourage banks to create and lend more to borrowers who will spend into the economy. Meanwhile government keeps borrowing. Result - more money creation by the commercial banks, more debt, both public and private, and more profit for the banks.
Both the govt and the Reserve Bank need to stop the money-go-round-private-sector-profit-enhancement policy. The Reserve Bank needs to provide government with money directly instead for it to spend into the economy - some of which could be spent on a substantial state house building programme to increase the housing stock. No government borrowing, no debt and interest repayment, spending by the public not based on more debt, less profit for the commercial banks to export out of NZ. Now there's a thought!