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Jenée Tibshraeny argues the Government can't ignore inequality bubbling away, with the poor to pay the price for making the wealthy wealthier

Jenée Tibshraeny argues the Government can't ignore inequality bubbling away, with the poor to pay the price for making the wealthy wealthier

By Jenée Tibshraeny

The Labour Party sailed through election 2020 on the back of a successful emergency response to COVID-19.

It employed a, “Let’s keep as much of middle New Zealand safe and confident as possible” approach, and it worked.

While gunning for the majority is what any popular centrist party would do, the country’s major parties can’t keep ignoring those at the margins.

The “losers” of the Reserve Bank’s (RBNZ) moves to slash interest rates and flood financial markets with liquidity, risk again being the losers of inflation caused by this seismic experiment.

The low income-earners, beneficiaries and assetless elderly, who didn’t benefit from the availability of cheap credit and asset price inflation, will now be hit disproportionately hard by rising consumer inflation.

Someone without disposable income is going to feel the effects of rising food and fuel prices more than someone with disposable income.

Indeed, Statistics New Zealand’s Household Living Costs Price Index for the June quarter shows annual inflation experienced by beneficiaries was 3%, whereas inflation experienced across all households was only 2.5%. Inflation experienced by super-annuitants was also higher at 2.8%, and Maori 2.6%.

An off-kilter starting point

Sure, higher inflation has always hit these groups hardest, but the increases we could face - temporarily at least - are expected to be at levels higher than experienced in recent years.

You could argue interest rates are designed to go up and down, and the Government shouldn’t have to respond to every movement.

However, the stakes are now higher.

The economy is off kilter. There are more beneficiaries and people on the public housing wait list than pre-COVID-19. Housing costs are irreversibly astronomic.

The same people that suffered getting us to this point, risk suffering getting us back to something more balanced or sustainable.

Finance Minister Grant Robertson might argue low interest rates have benefited the majority of New Zealanders by keeping them employed and boosting the values of their houses. Correct. The RBNZ can say it achieved its monetary policy mandate and has always warned the tools at its disposal are blunt.

Some in government didn’t understand monetary policy ahead of the 2020 election. Others saw no political value in responding to its side-effects.

But, ignoring the side-effects of the looming tightening of monetary policy risks exacerbating existing inequality.

A homeowner might be pleased the value of their house has gone up 30% in a year. But their warmth towards Robertson might fade if gang members get housed in the motel in their neighbourhood, or they end up helping their kids with a deposit on a house in a cheaper town, only to see them less.

New mortgage debt issued in 2020/21 50% higher than in 2019/20

If altruism or the fear of how rising inequality might affect ‘middle New Zealand’ don't prompt the Government to pay more attention to monetary policy than it did last year, the increase in mortgage debt should.

The value of new mortgages provided by banks increased by a whopping 50% from the year to June 2020 to the year to June 2021 - driven largely by an uptick in borrowing by investors (67% increase from 2019/20 to 2020/21).

Banks wrote nearly $98 billion of new mortgages in the year to June 2021, according to the RBNZ. 

The value of New Zealand’s mortgage debt sat at $315 billion at the end of May.

Borrowers, who took out large mortgages to buy increasingly expensive properties, will feel the pinch of higher mortgage rates.

But the increase will be broader than that, with around 80% of mortgages up for refixing within the next six to 12 months, according to Kiwibank economists.

Of course, debt servicing costs will be rising from extremely low levels

Just how high inflation and mortgage rates will go ahead of the 2023 election is the multi-billion dollar question.

While inflation and higher interest rates will hurt the already bruised and battered, it might be the impact on the masses that catches politicians’ attentions and prompts a response to rising inequality.


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Policy options

There is no quick fix or obvious politically palatable policy solution beyond making the raft of improvements required to get more houses built.

The structural economic change Robertson is getting advice on is the introduction of a social insurance scheme.

This would see someone who loses their job receive a benefit equivalent to x percent of their income - up to set maximum - for a limited period of time, rather than going straight into the regular welfare system.

The likes of the Child Poverty Action Group and Auckland University Retirement Policy and Research Centre director, Susan St John, are opposed to it, arguing it’ll serve middle to high-income earners.

The removal of interest deductibility and extension of the bright-line test are also designed to disincentivise residential property investment. But the effects of these changes on housing costs are yet to be seen.

National’s solution is to stop trying to reduce demand for housing, and to focus solely on increasing supply.

The Greens, ACT, and TOP have more in common than one would think, arguing for structural tax and welfare reform.

Libertarians want central banks and governments to back off - stop manipulating the economy, let firms fail and let capital be directed to where it’s most efficient.

Social liberals and progressives want governments to do more, and central bankers with blunt instruments to do less to support people and the economy.

While Labour’s social insurance policy might woo “hard working mums and dads” come election 2023, it’s those at the margins, who the minor parties are more attuned to, that Labour and National need to be mindful of.

Inequality erodes social cohesion, which can unravel quickly during times of uncertainty - eventually to the detriment of even those coveted centrist swing voters.

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Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

100 Comments

blame the Wall street and the US.

blame the US dollar hegemony.

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China could end the USD in a second, if it let its currency float.

This is not a hegemony.

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let it float?

you mean let it be the only currency for trading crude oil.

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It floats up and the greenback floats down. When that happens oil exporters will diversify.

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if it was used to trade oil*

very little to do with floating the currency

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Thats nonsense man, the price of assets in china adjust for the currency, as the currency in china rose, the price of the assets would fall. Overall almost nothing would change except for a slight reduction in Chinese exports, a slight rise in the living standards of Chinese workers, a slight drop in the living standards of US workers, a slight rise in the price of US assets and a slight boost to us exports, but all of these effects are slight because the actual prices in the country of china are all already adjusted for the currency and will simply re-adjust to any new currency value.

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Yeah, I should have written "end the USD hegemony" and not "end the USD".

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That doesn't follow logically as all currencies would fall in relative terms against the Yuan. After the policy change was made to allow for the patrician of the yuan the losses would be immediately baked in the cake, and so little could be done to avert those losses. Consequently there would be little value in changing the currency used to settle, but rather they would simply adjust the price of settlement.

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Those losses are only baked in for sellers of oil who remain trading in USD. Whereas commencement of trading in Yuan avoids all of those losses.

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That's not the case, the policy change would create a one time adjustment and recalibration of trajectory which would be entirely discounted in to the price now, after which both currencies would continue to track normally, there would be no ongoing benefit to switching out of USD.

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The Chinese government will know when the Chinese policy change is going to occur prior to it happening. They are not going to be waiting until after it has occurred to take advantage of the situation.

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But I thought the reserve bank said there was no evidence that falling interest rates was increasing the wealth gap? (even though every landlord I talk to tells me how 'rich' they're becoming).

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Orr said many times that its not certain how it will impact wealth inequality but did note serval times that there was a serious risk it would exacerbate wealth inequality, went so far as to publish a traffic light warning system and even said government intervention to manage those externalities would be warranted. The core reasons he is uncertain is that severe downturns tend to cost low income workers jobs and the outcome from those job losses tends to be severe. In effect he is uncertain what would have occurred to poor people if he had done nothing and so he is uncertain what the precise net effects on wealth inequality are. Never the less he was crystal clear he felt house price gains were distinctly possible and that wealth inequality was likely to be made worse than it was before. Orr went way beyond what was required to try and get government to do something, Robertson simply does not have the experience needed and bungled the catch.

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"Just how high inflation and mortgage rates will go ahead of the 2023 election is the multi-billion question".

Judging by the comments, Jenee is playing to the gallery with this hair-on-fire commentary. It's certainly not rooted in any kind of serious analysis. The subtext to this article is ooh, we're heading for 1970s-levels of inflation. Pause, take a deep breath and remember that those inflation levels were caused by government borrowing to offset 2x damned huge oil shocks, one of which caused a balance of payments drop of 47%. Point me to the evidence that we're in any kind of remotely similar situation. Policies of full employment that keep Kiwis in decent wages and off benefits, don't suit the landed gentry because inflation decreases the value of their assets. I'd like to see a broader range of opinions offered on the economy, not solely "business" voices.

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I'm not sure you are replying to me? The landed gentry does well when kiwis are employed and seeing wages rise, it also does well when interest rates fall. High rates make deposits easier to save, and reduce the relative price of assets to cash making the deposit 'go further'. Low interest rates do the opposite. So its not as simple as 'lower rates support employment which is good for workers', higher rates can also bring benefits to workers. Apologies if I haven't understood what you mean, I wasn't completely clear on your point.

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But this kind government is ignoring it!!
I thought it a bit rich when, on Q&A, 2 weeks ago, our very unimpressive minister of police accused the gangs of recruiting for members. Where is the governments campaign to recruit people to an honest productive lifestyle. Successive governments have been responsible for crushing people's hope of ever having a decent life through running an increasingly low wage low productivity economy and failing to address the issues of runaway house prices. They have done everything they can to chase people into the arms of the gangs.

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I'm all for a campaign like this, but I hope the Govt don't use the same outfit who created that horrible 3 waters ad currently running. It's cringe worthy and aimed at 5 year olds.

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It's effective because it infantilises people. An interesting insight into the target demographic of this media management campaign and the way government thinks about the electorate.

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I find that the government sponsored health promotion adds are extremely offensive and racist. Just about all of them portray a young Maori person as some sort of halfwit. I am very surprised that the Maori people have not objected.

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If the target is Māori then it makes sense to use Māori actors. I'm sure there are advertising consultants who have told the government that people need to see themselves in any promotion or they just switch off.

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When our Prime Minister addresses the nation it is done at 5 year old level. She clearly dose not think much of our collective ability to understand anything mildly complicated. But maybe she is right.

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Shes from a PR/Journalist background. I'm pretty sure she went to the same institute I did and we learnt very quickly to assume you are writing for 12 year olds.

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Addressing 5 year olds…. Just like the evening news

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That might reflect her ability to understand anything complicated.

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As the climate change denying, anti-vaxx, anit-mask, anti-lockdown, flat earth, cult and conspiracy groups show us there is a definite proportion of the population with difficulty understanding science above a 5 year old level.

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You can add 1080 to that list.

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She is right. You might understand a complicated message delivered once in a press conference but 80% of the country won’t. Believe me, I do this for a living. Most people need words to be slow, repetitive and emphasised. It’s annoying for a lot of others but you know, that’s a trade off she’s willing to make.

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I can't upvote this enough.

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I seriously doubt that we will see any substantive increases in interest rates, and, even if we do, the impact on the real economy (jobs, wages, business decisions to invest etc) will be limited.

However, this Govt has to do something about the rampant inequalities that are being accelerated by the tax and policy settings that it directly controls (and stop scapegoating the RBNZ). Every Govt Minister needs a clear answer to the simple question: "How are you going to reduce the inequities in income and wealth that are poisoning the wellbeing of our country, and by how much?"

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Good article. The kindest thing government could do for the economically dispossessed would be to cut them a cheque and buy them a plane ticket somewhere else with a promise never to darken our door again. Sometimes a harsh deal is the best deal you're going to get. The probability of government attempting any serious economic reform has long slipped away and it's time to confront a brutal truth, we have too many people for the houses and infrastructure available.

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what a morbid short sighted view. I'm only 35 but having done a bit of travel to china and india, I can tell you that all populations I have been to (even china) run their infrastructure and housing short of actual demand (China is damn good at keeping up but still behind actual demand, actually they do have ghost cities, so in some instances they build ahead of demand, but with their existing tier 1 cities its B.A.U). This is normal my friend.

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Kinder to do what government is doing now, keeping people's lives in a perpetual holding pattern waiting for a miracle that never comes? At least I care enough to suggest a way out, however hardscrabble it may be, it has to be better than waiting for a dawn that will never come. Better to offer a hand up than to look down.

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This article on China and its wealth from George Friedman of Geopolitical Futures is well worth a read he covers their inequities.
https://geopoliticalfutures.com/china-as-a-third-world-country/?utm_sou…

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"" In per capita nominal GDP, China is ranked 59 in the world, behind Costa Rica, Seychelles and the Maldives. In PPP terms, China is ranked 73, immediately behind Guyana and Equatorial Guinea. By comparison, the United States ranks fifth nominally, behind Luxembourg, Switzerland, Ireland and Norway. The U.S. is seventh in PPP terms. Per capita GDP tends to be highest in relatively small, socially and ethnically homogenous countries, built around finance or a single high-value commodity. The U.S. is large and socially and ethnically diverse, with a vastly diverse economy. Under the circumstances, ranking fifth in the world is a significant achievement.""
Well NZ is small but ever less socially and ethnically homogenous. Not because of immigration but because of identity politics and the craze for diversity. I'm a POM and have a Pasifika family with Maori connections and we have Chinese and Indian friends; all of us just want to be Kiwis.

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pom* when you put it in all capitols it makes me think its an acronym and I go searching google...

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China's GDP is already 20% larger than the USA in ppp terms according to the CIA factbook. USA isn't the biggest gorilla anymore.

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Regarding China and it’s citizens. You only have to look at China’s current handling of their floods to realise they simply do not care about their citizens. Heavy rains cause mass floods and dams unable to cope. Dam operators then open flood gates to release water which floods surrounding communities. They give no warning, no alarms. If they do provide advance warnings they have to pay compensation so they don’t and it’s classed as a natural disaster. It’s all about the Yuan. The people don’t matter.

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1991 A decent fresh used Japanese import car 10k. 2021 A decent fresh used Japanese import car 10K
1991 A 3 brm brand new house & land package in South Auckland 100k. Financed with a government guaranteed mortgage at 10% deposit. 2021 The exact same house 30 years used 750K?
1991 BNZ looses 71 M. Sold off to NAB. 2020 FY BNZ (division of NAB) makes 762 M.
1991 Median FT annual pay 30K 2021 Median FT annual pay 53K

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Ive been seeing used Japanese car pricing soar recently, are you sure your still seeing the same prices?

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Nope just brought one the other day 12k 2015..

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Imagine the massive car price depreciation as we all move to electric cars over the next 5 to 10 years. All those petrol/diesel cars worthless and so hugely taxed that they won’t be economically viable for most people.

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That’s a lot further away than 5 to 10 years the electric infrastructure will be rolled out at glacial pace

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Imagine the shock when your lovely and cheap to run EV gets whacked with RUC to make up for the loss in petrol tax, the roads are still there and still need to be maintained, that cost does not go away just because you are driving an EV.
Most of the cost of petrol is the tax, be prepared to pay through the nose for every km driven.

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RCD. So true! Remember back in the early 90's when banks were gung ho for everyone to move to electronic banking? All with the promise of zero fees for electronic transactions! Well we mostly all did in short order. Didn't take banks long to see the impact on profits. Move to now, cant do anything with a bank without a charge!

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Yep remember when diesels were so much cheaper than petrol to run ? Diesel was a fraction of the price per litre and then it all changed and along came the RUC as well. Electric will be no different, the government needs X amount of total tax take so no sooner than the uptake gets high enough the tax will start.

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"1991 A decent fresh used Japanese import car 10k."
You sure about that? my recollection is considerably lower but a quick google dosnt provide any info

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Only from memory really. But fount this via Google
https://whatsoninvers.nz/old-invercargill-flashback-1980s-car-sales-adv…
Its from 1987 and Invercargill. So maybe not exactly illustrative. 26k for a New Ford Sierra Wagon among other adds.
I bet you could have bought a nice house for the same money in Invercargill in 1987.

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yeah but that Ford sierra wagon was a price of shit. A mate of mine had a white one there were big rust holes in the doors after 4 or 5 years. Ford has not got much better but the bodies generally outlast everything else now.

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Just to back up your points:-
here is a stuff article describing how Mike Greer homes was assembling some house kit-sets in TeKauwhata that had been supplied by a Toyota-Panasonic J.V.

https://www.stuff.co.nz/business/opinion-analysis/300140577/what-can-nz…

This article describes how compared to the productivity gains in the car industry, the real cost of building the average house has risen in the last 35 years from the equivalent of 2 Toyota Corollas to 26 Corollas! Clearly this will not persist, there is simply far too much money to be made by the likes of this J.V. doing it efficiently as they are demonstrably capable of doing.

Digging a bit deeper look at the two related web pages

https://news.panasonic.com/global/press/data/2018/08/en180807-2/en18080…

https://homes.panasonic.com/english/

You will notice that the system is very flexible and capable of building a wide range of dwellings.
Note also that the cost figures given for the Taiwanese apartment building pan out as follows:-

Cost 150 million yen = NZ $ 2.2 Million
Size 17,800 square meters
Cost per square meter = NZ $120 !!!!

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That is pretty cool. Very scaleable. You could set up a small depot/warehouse/yard in the middle of large development site near to a port. All containers could come of the ship direct to site. Unloaded and components transferred to each building site as needed. Specialized teams going site to site to do specific parts of each build. So they get faster and faster the more they build. Levittown NZ with a Japanese twist.
If we can recognise Japanese safety standards for import used cars. We should be able to recognise they can probably build quality/safe houses as well.
No need for NZ Bureaucrats to stick their noses in to add cost and complexity where it isn't needed.

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I wonder what the government would do if somebody just helicoptered into our economy and started building houses at these prices?

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There seem to be global efforts to maintain rentier class , check out a great talk by a Cambridge academic
https://www.abc.net.au/radionational/programs/latenightlive/pandemics-a…

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Thanks for the link - an excellent wide view analysis that reframes how I see the NZ economy and 'growth' in developing and 1st world economies.

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Wealth tax would be a good start.

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It would drive all the productive people to leave for Australia. Who will then be left to pay income taxes to pay your welfare benefits?

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The wealthy and the productive are not the same thing.

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Wealth and paying tax are definitely not the same thing

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That's garbage.
It doesn't need to be an ultra punitive wealth tax.

It's as garbage as the idea that the govt's tax changes would drive out masses of investors - it hasn't.

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It reduced building activity as well as the number of investors buying additional property. For now the 5 year phase in creates a situation where even if you want to sell, rationally you should wait out the phase in period before doing so.

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Looking at the way Australia is heading it’s the last place I’d be looking at.

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1. Government create mess through wealth inequality as a result of flawed policies
2. Wealth tax introduced to prop up social welfare system and support state accommodation (grants/social housing).

Anyone ask 'Why don't we wok to addressing the problem rather than simply taxing more? It's the continual bandaid approach to the scab rather than 'put you bloody kneepads on!"

No wonder people are looking at moving money offshore. Death duties, wealth taxes, stamp duty are all around the corner. NZ is in an irretrievable and unfillable hole.

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Yep, income redistribution to reduce income and wealth inequality. Good.

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no it would just lead to more tax evasion -- and be passed on one or another to poor -- look at google and amazon -- much fanfare about them signing a 15% tax agreement -- like 7% less than our benificiaries pay -- and already they have started passing that on directly to suppliers and consumers! Get away from an ideology that is about taking money from teh rich and giving it to the poor -- and work on a premise of how to raise incomes and earning potential for the poorest and reduce their living costs -- the rich will always be rich time to stop focussing on them as the problem - they are not its the lack of earning and incomes of the poorest that is the issue

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'Get away from an ideology that is about taking money from the rich and giving it to the poor -- and work on a premise of how to raise incomes and earning potential for the poorest and reduce their living costs'

Our whole tax system is already predicated on taxing people on higher incomes more, this is an extension of that.

And as I have already said, it's not about lifting benefits. It's about lifting outcomes by investing heavily in education and housing. And guess what? The government needs revenue to help pay for that.

It doesn't *have* to be a wealth tax, or not *just* a wealth tax, it could be other things such as land taxes.

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Re: wealth tax. Our biggest export would become millionaires. Poor decision making is pushing things in that direction. Capital controls combined with a digital currency would ensure maximum totalitarian government control. At the moment we have a "poor tax" of 2 billion dollars per year. It's called tobacco tax. New Zealand tends to swing from one extreme to the other though.

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You mean an envy tax.

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I note a lot of people who have made it in real estate terms believe everyone is envious of them, and the government wants to tax them into oblivion. It's the same kind of paranoia habitual drug users have re the police.

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Hi Jenee, Under Jacinda Arden anyone who does not own a house is poor forever. Worst hit is middle class who do not look at social housing but looking to raise the family in family home.

Biggest crime committed ....bigger than unaffordable home.......is killing the dream / Aspiration of ever owning a home for family.

Even now timely intervention ( though late) may help to mitigate the situation but it is Mr Orr's policy of Wait And Watch thereby allowing the ponzi touch New height and establish itself is .............

FHB even those with support of parents, may enter a house but will bleed for rest of their life under high debt and even a slight change in circumstances will crush them.

Jacinda Arden followed John Key....a step further than him....may be it is power that corrupts.....

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Correct, the only thing which I want to add is, it's not only FHB or middle class owning a home will suffer. We as a whole kiwi society is tarnished by current policies, if any middle class family have kids, today or tomorrow depends on the age kids have to find home to stay with a feeling of love & pride for this country as a kiwi.

But that is not going to happen they have to leave, if not wait for 3 more years (till this tenure end) and the prices will increase at least 25% more which will make it impossible to buy home for average kiwi.

And the policies will stay intact to make rich more richer and poor to the poorer.

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They keep voting for she who tells them what they want to hear.

What can you do.

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They keep voting for she who tells them what they want to hear.

What can you do.

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Finance Minister Grant Robertson might argue low interest rates have benefited the majority of New Zealanders by keeping them employed and boosting the values of their houses. Correct. The RBNZ can say it achieved its monetary policy mandate and has always warned the tools at its disposal are blunt.

Hmmmm... "Jobs saved" - I am sure monetary "stimulus" was sold as a "jobs created" undertaking

I suppose if the distance between these bouts of actual awareness is long enough, we could sadly be in for interchangeable failures of different pieces of statist intervention. We started with Keynesian government “stimulus” that relented to purely monetary “stimulus” and now seem to be heading back toward government spending once more. Once that inevitably fails, “they” will probably resurrect “Friedman” to replace “Keynes”, this time with the “right amount” of monetarism (rereading Chapter 11 in A Monetary History probably). And so it will go back and forth with nary a reference to the actual economy until the entire globe is encompassed in fullblown Japanification for a quarter century or more (which would be a depressing and desolate future, especially as past history surrounding desperate economic times almost always ends in significant conflagration – political history is really economic history without all the math).
And “capitalism” will be blamed the entire time. Link

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Agree. Should have also supported existing house owner in crisis but what was not required was to remove LVR to boost speculative demand specially in very low interest rate environment.

As low interest rate was necessary, could have come up with counter measure to try and control speculation like stopping use of Interest Only loan for house purchase.

Even today despite house prices rising anywhere from 30% to 100% in a year, people in power instead of controlling it by taking action are playing with time.

Now also aware that hard for anyone to touch the monster created by them as trying to control will derail leading to disaster.

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Surely these low income-earners, beneficiaries and asset-less elderly just need to be bold and back themselves. Stop squandering their money on new iPhones and brunches out. Be quick, the time is now!!!
Don't sit there being bitter about things, look at what you can do to improve your position (on the ladder).
Be quick!! Get a job, get a 3rd job, stop frittering your money away on food, healthcare and other nice-to-haves. Be quick! Go all in!! Whatever you speculate now will magically grow in value by 30% by this time next year. Be quick!!

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Bump benefits up abit, keep votes. Easy.

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It shouldn't be just about benefits.
We need much higher levels of investment into education in our poorer communities.
And housing- so our poor have both houses and warm and healthy ones at that.

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It was a sarcastic comment but sadly what happens...

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Structural reforms are necessary to create for economic opportunities for every one, especially those who wants it and we can only help those who wants to be helped.

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I suspect you already have a very blinkered definition of what "wants to be helped" means.
Just because the problems are complex and intergenerational doesn't mean they don't want to be helped, it means it's harder to help, but giving up is a cop out. You have a track record of cop out views in this regard CWBW

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In the same way I suspect you have a blinkered vision of privilege.

This is a free country, people get to choose what they want and that includes whether they want to be helped.

No country should be held back because a few decides to muck around.

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its a great article -- but although Property and Rental costs are a massive past of inequity - fuelled by this governments policies -- its by no means the only policies fueling the divide - the new EV credit /ute tax -- is not simply a lycra / tradie or farmer divide -- its a rich and poor divide - how many people can really afford a 70-K EV - or for that matter take the battery roulette on a 2nd have version ? certainly not the people you are talking about as marginalised -- and a $20 ooops i mean under $15 rise in benefits is hardly compensating for the huge increases in rents, food prices, fuel ( and auck fuel tax) all of which take a massive share of poorer family incomes -

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It's the same the whole world over,
It's the poor what gets the blame.
It's the rich gets all the pleasure
Ain't it all a bleeding' shame

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+1 great article.

1) I personally dont agree with social insurance. The government would be better regulating to set minimum contract requirements for voluntary income protection insurance provided by the private sector. Social insurance is yet another welfare handout to the middle and upper class.

2) The NZ economy has been built on bidding up the real land price since the 1980s and receiving the totally unproductive capital gain. The strategic policy settings are a mess and we are paying for it.

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I didn't read the full article but i agree that poor are being exploited to make rich more richer. I am trying to find out when in the last 40 years did NZ loose the track of equality and we are in this situation now. Police officers, teachers, health workers, etc basically everyone who keep this country going are paid peanuts but politicians and bureaucrats in public service, councils are being paid six to seven figure salaries. How did this happen??

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Exactly right..how is it that someone who shifts paper from one side of desk to another, or taps away in a spreadsheet all day gets three or four times someone out there doing the hard yards? When you really think about it, the most productive side of the society get peanuts, the ones trying to justify there positions as crucial while sitting at the desk reap it in. Bizarre

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Most people can use their hands, far fewer can use their brains. Supply and demand.

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Think it is other way around...people use their brains everyday...few have the skills to use their hands..hence the issues in construction sector, agriculture sector, nursing sector...but plenty of accountants and IT professionals around.

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1 automation engineer can design a digger that can move as much earth as 20 labourers can in an hour. That design can be used over and over again giving the engineer’s work lasting value even after he moves on. The labourer’s productivity stops when he does. If you needed 2 million cubic meters of earth moved would you hire 1 million labour hours at $30/ hour (30 million total) or purchase 1 automated digger for $2 million and hire a technician for $100k to maintain the unit and guide it through the tasks that it can no do on its own? If you’d pick the machine then to you the engineer’s work was worth over $25 million. On top of this he can sell that same design to many people at the same time.

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QE used to save the banks (financial system) GFC 2007/8 and QE used to do the same again 2020/21....the wealthy are (not so) incidental beneficiaries and the poor held in the usual regard.

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Excellent opinion piece. We're all in the same life raft, if you think inequality won't bite you, it will and when it does find the why. RB started dropping rates pre covid to stoke the housing market in Aug 19, we're a housing economy with bits tagged on as Bernard Hickey said. The outcome was obvious, just ignored.

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Not really its like the Titanic, when it came to the crunch there was not enough life boats and those on the top decks got the boats and the rest got left in the freezing water. The only equalizer is climate change, there is only one planet and there are no life rafts leaving for another.

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Regarding climate change, I think property owners are in for a real shock over the next few years. The minimum building code will be increased to be able to achieve passive house status. Friends have just moved into a new home, built in the 1950’s and fully renovated to include double glazing and insulation. Problem is when you sit near the windows you can feel the cold coming through! So much for taking a product that works really well in the rest of the world, messing around with it and turning it into something not much better than than a single glazed window. We are building and renovating to such low standards compared to other countries with similar living standards. Oh and did I mention the power bill was $500 for 1 month. They thought they’d be moving into a much dryer warmer house, sadly that’s not the case.

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Serious question. Do the poor even vote ? Labour doesn't really care about people on the street because they don't vote. At the end of the day what motivates people to vote is vested interests. Politics has turned populist, the right few words out of someone's mouth and they get the votes, never mind about actual policy or even having the faintest idea about delivery, they make that up on the fly. Its about getting in and then trying to stay in power.

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My widowed aunt is 70 and in the past depended on her term deposits which were paying 4-6% to supplement the meagre pension. Now she has to spend her savings, which have been severely depleted. She does have a modest house, which has increased in value sharply, but of course she has to live somewhere and has many friends where she is. In 10 years she will be solely reliant on @ $20,000 a year, unless she sells and rents. She will not go into a robbers’ retirement village at any price! Such people are the real casualties of this reckless monetary experiment as well as first home buyers, who at least have the benefit of ultra low mortgages if they can scrape together a deposit. Real people have been forgotten about by Mr Orr.

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agree..my mother is the same. Term I heard used is they are the working dead, (they need to work until they die) many of these people may be asset rich but end up cash poor. Rates/Insurance take a huge chunk of there super away, little to no interest on any TD they have and within a few years of retirement they have used the cash reserves. (remember this generation did not have KS for majority of their lives). This monetary experiment has just put this cycle in over drive and like a black hole is pulling more and more into it.

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the donald rumsfeld quote maybe"there are things that we dont know that we dont know"but this isnt one of them,there is even a song about it by leonard cohen"everybody knows"that nails it.

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Couldn’t this be managed from the bottom up rather than top down. How about we stop waiting for the RBNZ or Government to do something and just simply stop buying houses and paying ridiculously high prices for poor quality housing. Lets invest in a future based around technical innovation, robotics, medical science etc, you know that good stuff that improves everyone's lives. Won’t happen though here. We don’t think big enough. We are all too concerned with buying up housing here because there really isn’t anything else. When you look at how highly successful people like Michael Saylor and Cathie wood are providing free education and are so far ahead in terms of their critical thinking and plans for the future of their businesses it puts us to shame and we will not be able to compete so will continue to lose people overseas. Time to stop thinking about which fool is going to buy our house and for how much and start thinking about the exponential developments going on in the rest of the world and how our kids can be part of that.

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The structural economic change Robertson is getting advice on is the introduction of a social insurance scheme.

Shows how absurd the name calling of "communist!" or "socialist" is. The social insurance scheme only introduces two-tier welfare, better for the wealthy. The wealthy already have income and mortgage protection available to them.

Good article by Jenée. This puts the cohesion of our society at serious risk. Can't just keep transferring wealth to the wealthy as we have the last 20 years and not expect negative consequences.

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