Have your say: Govt talks up NZ wage gap with Aus, but says goal still to catch up with the 'lucky country'

Have your say: Govt talks up NZ wage gap with Aus, but says goal still to catch up with the 'lucky country'

By Alex Tarrant

Finance Minister Bill English has come under fire for his suggestion that the 30% wage gap between New Zealand and high-flyer Australia is a way of competing with our Tasman neighbour.

Over the weekend, English said the gap should help encourage capital investment into New Zealand as the workforce here was cheaper than in Australia, making New Zealand "much more competitive than most of the Australian economy". That increase in capital investment would then lead to higher wages, English said. (For a brief look at wage-fund theory, see here.)

Despite the fact English could be theoretically correct, the National Party campaigned on closing the wage gap with Australia, and in a coalition agreement with the Act Party, set up the Don Brash-led 2025 Taskforce to look at ways of closing that gap by 2025.

However pretty much every suggestion in the two reports from the Taskforce has been cast aside by National as being politically too unpalatable, leaving the reports as nothing much more than doorstoppers in the Beehive and pillows for Act Party members.

Labour has attacked English's comments as showing the current government has no plan for raising New Zealand wages and catching up with Australia.

Another take on the Finance Minister's comments could be that what changes they have made with their plan (if any) to make New Zealand a more productive, high wage economy, have failed to encourage capital investment (domestic or foreign) over the last two-and-a-half years into areas where the government wants it (tradable sector rather than the housing sector).

What's more, English's comments suggest the government would welcome more foreign capital investment into New Zealand, which would see profits/dividends repatriated offshore at a time when the government is saying New Zealand has too much private sector debt owed to the rest of the world. It is also worried about the outflow of capital from these shores (worried about our current account deficit).

So has the government so far failed in its plan to catch up with Australian incomes, or should we give them the benefit of the doubt and some time to see if their changes (tax, regulatory) will actually do the job they campaigned on doing?

Also, should we be welcoming the government's desire to attract more foreign capital to New Zealand, rather than looking for ways to better use the domestic capital we already have, a lot of which is tied up in property?

Have your say below.

Here's Labour leader Phil Goff's comments on the issue this afternoon:

Here are English's comments on the issue from TV1's Q&A on Sunday morning:

GUYON         Can I talk about the real economy for people?  They see the cost of living keep going up.  They see wages really not— if not quite keeping pace with that, certainly not outstripping it much.  I mean, you said at the weekend to the Australia New Zealand Leadership Forum that one of our advantages over Australia was that our wages were 30% cheaper.  I mean, is that an advantage now?

BILL    Well, it’s a way of competing, isn’t it?  I mean, if we want to grow this economy, we need the capital – more capital per worker – and we’re competing for people as well.

GUYON         So it’s part of our strategy to have wages 30% below Australia?  

BILL    Well, they are, and we need to get on with competing for Australia.  So if you take an area like tourism, we are competing with Australia.  We’re trying to get Australians here instead of spending their tourist dollar in Australia.

GUYON         But is it a good thing?

BILL    Well, it is a good thing if we can attract the capital, and the fact is Australians— Australian companies should be looking at bringing activities to New Zealand because we are so much more competitive than most of the Australian economy.

GUYON         So let’s get this straight – it’s a good thing for New Zealand that our wages are 30% below Australia?

BILL    No, it’s not a good thing, but it is a fact.  We want to close that gap up, and one way to close that gap up is to compete, just like our sports teams are doing.  This weekend we’ve had rugby league, netball, basketball teams, and rugby teams out there competing with Australia.  That’s lifting the standard.  They’re closing up the gap.    

GUYON         But you said it was an advantage, Minister.

BILL    Well, at the moment, if I go to Australia and talk to Australians, I want to put to them a positive case for investment in New Zealand, because while we are saving more, we’re not saving more fast enough to get the capital that we need to close the gap with Australia.  So Australia already has 40 billion of investment in New Zealand.  If we could attract more Australian companies, activities here, that would help us create the jobs and lift incomes.

GUYON         The last headline I saw said Australian had dropped its unemployment rate to 4.9%, added 37,800 jobs.  Unemployment here pushing 7%, wages 30% higher over there – why wouldn’t you go?

BILL    Well, some people will, and that’s fine, but why would we sit round being mesmerised by the fact that some Kiwis go to Australia?  We’ve got a long-term plan to lift the performance of this economy, because we need higher incomes and we need more jobs.  This is an economy that’s taken a few knocks in the short term, and Kiwis are being remarkably resilient about it.  But this is really a matter of attitude.  I think Kiwis have shown a very resilient and positive attitude with all the unexpected events that have occurred.  We are going to get through that, and I think we can have a very positive attitude about the direction our economy’s going in.  One indication of it is I think we are going to be, in many respects, outside of the resources sector, a more competitive economy that Australia.  And over the next four or five years, we should take advantage of that by attracting Australian capital to New Zealand.

And here are Key's comments from Breakfast this morning:

Petra:  Were you surprised to hear Finance Minister Bill English saying that this is something that we should take advantage of, the wage gap?

John:  Well I think he was just really making the point that there is a wage gap.  The government's been working hard on trying to narrow that, and actually we're making progress in terms of real after tax wages, but he's simply saying looking that is a strategic advantage theoretically at the moment that it's lower.  Over time if we do our job properly actually that gap will narrow and so the advantage will go away.  But it's a bit like we have an advantage with the exchange rate at the moment which is in good shape.

Petra:  Over the time period that wage gap would narrow if you do your job properly.  Has it narrowed so far?

John:  Yeah it's started to do that, so in real after tax terms the reason being we've been cutting taxes faster than Australia, and so effectively in after tax terms yes it is narrowing.

Petra:  Have the tax cuts put us in better shape economically?

John:  Yeah I think so, I mean they’ve been neutral, so we've you know changed taxes in certain areas and reduced taxes in others, and look we are in a competition.  I mean actually the person you had on earlier was right, I mean we're in the competition for skilled workers, and the reason we worry about Australia, because I mean Australia's in great shape, it's the number one performing economy in the OECD because of its mineral resources.

Petra:  So then why do we constantly compare ourselves to it?  Why have you set yourself this aim of closing the wage gap when we're such a different kind of a nation?

John:  We are and look they have a lot of minerals they can go and dig up and export to China and that makes their life very easy, but on the other side of the coin every New Zealander has a free option, like they can get on a plane and go to Australia, and they can get a job there, because technically speaking there are no immigration issues like you would have if you went to the United States or the UK or other parts of the world.  So we can't ignore Australia, and I mean to Bill's point, we are actually seeing some investment on that front.  I opened Cannon's call centre on the North Shore last year.  So they service all of their Australasian clients on the North Shore.  Now that’s partly because the quality of workers are really really good, and the wages are a bit lower, but over time we want to eliminate that advantage if you like.

Petra:  But in comparison to Asian countries we can't compete on a low wage front and don’t aim to?

John:  No don’t aim to.  I don’t think he's seriously arguing that.  I mean there's a big difference between some sort of call centre they might run in Delhi, but you see those kind of call centres – well let's take Telecom when they outsourced their 018, that’s a relatively low skill job, and so they pay very low wages in those countries.

Petra:  Are you annoyed that this topic's come up?

John:  Oh look it's just a statement of fact that he's made, but our main game here, and the main aim for the government is how you lift those wages, and lift them relative to Australia, and when you narrow that gap, that is when you see migration coming the other way, and the only other time we've had more people coming from Australia than New Zealanders going to Australia in about 40 years was when our wages were above theirs.

Petra:  And this is an aim that we're going for, but a 30% gap is just absolutely massive.  I feel like saying look let's not even try to do that, because we're not all getting on a plane and going and living in Australia.

John:  And for a lot of very very good reasons.  I mean the quality of living in New Zealand is great and not everything's rosy on the other side of the Tasman by any stretch of the imagination, but the government has to have an ambition of saying in my view, we're gonna produce the best conditions for New Zealanders and that’s because those higher wages let you have more choices and better lifestyle, better things you can do in life.

Petra:  So Bill English is making the best of a bad lot?

John:  I mean it's taken a big out of context.  He was just simply making a point that at the moment we are seeing investment because of those wages, he's not arguing.

Petra:  It's not a new strategy?

John:  It's not a new strategy, he's not arguing that’s the right thing to do, he's just saying that leads to some investment at the moment, just like the very low exchange rate with Australia leads to some greater exports at the moment, but our aim over time is actually to eliminate those advantages, because that means our economy's growing faster.

Petra:  All the best with that aim.

John:  We'll keep working on it.

And Labour Leader Phil Goff's response to English's comments over the weekend:

The New Zealand economy is in trouble with no plan from the Government to address the worsening outlook, says Labour Leader Phil Goff.

“With the rising cost of living and more people worried about their job security, middle and low income earners are worse off.

“There is growing pessimism about the economic outlook and recent surveys show business confidence dropping.

“The best Bill English can do is trumpet that New Zealand wages are 30 percent below Australia’s giving us an ‘advantage’. This from a Government which campaigned at the last election on closing the gap with Australia,” Phil Goff said.

“New Zealand’s depressed position despite record highs in export prices will only get worse, with National planning cuts in the Budget which will further reduce demand.

“It’s hard to understand why National’s plan on behalf of the New Zealand taxpayers is to sell off successful assets like power companies producing a total average return of 17.5 percent while bailing out failed private companies.

“The extensions of guarantees to failed South Canterbury Finance and continuing protection for other at risk finance companies and bailing out foreign owned Mediaworks collectively sends the wrong message,” Phil Goff said.

‘What this country needs is a real plan for the future, not gimmicks.

“It needs a strategy for up-skilling New Zealanders including for the Christchurch recovery. It needs a plan for a clever and innovative economy through research and development. It needs changes to monetary and taxation policy that promote growth in the productive and export sector and growth in real wages.

“And if savings have to be made, then John Key needs to look at hauling back some of the windfall tax cuts he gave himself and his wealthy mates of $1000 per week,” Phil Goff said.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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This is a media beatup. Bill just stated the facts.

"Despite the fact English could be theoretically correct".

Erm, theoretically and factually correct. Wheres the story here?

If Bill had said National policy was to target a large salary gap, then there would be a story.

I've just moved to Oz, catching up with them is all fine but you'd have to take the good with the bad.  Cops are armed, street fights betweens gangs, it's a harder society than NZ, so catching them would mean changes to NZ that some people wouldn't like.

You forgot:

sunburnt, parched, poisonous snakes, poisonous spiders, crocodiles,  flies in their gazillions, giant toads in the garden every night, no water for garden and toilet, and...... the slang they are speaking!

Just came back from Aus myself cause I was there on a visa and there no jobs them. Had to take a paycut in NZ. But yeah, I kinda prefer the cops there have guns. After seeing the episode of Illegal NZ where the reporter talk about how easy it is to obtain a gun, I wonder why we see people not pushing for armed police force.

As far gangs go, well it is best to stay away from those parts of town.

But yeah, hate to agree with Bill English, at this stage with Aussie Dollar so high, NZ should try to attract foriegn investment. Wages are not going to increase, and labour obvious solution of increasing minimum wage would not solve anything in the short run.

I would like GST on essential items like food and petrol come down.

Btw, can anyone present me link to the recommendation of the task force in a summary form

Wild Bill is enunciating the fact that Kiwis will be able to compete with the Chinese soon  on an equal footing ........ as our wages languish , and theirs' rise , to eventually reach parity .

........ Brilliant plan , Bill , oarsome with a capital " O " .

I'm telling David on you....!! 

To answer the question, "So has the government so far failed in its plan to catch up with Australian incomes": so far, yes. As far as I can tell incomes have not risen, definitely not significantly.

Not sure how JK can argue that "we're making progress in terms of real after tax wages" when they've made sure to cancel any gain out by rising GST (+ introducing ETS, not to mention soaring petrol costs).

How many years before we are competitive with Bangladesh, Bill? 

Good to see rednecks have an opinion too.

yeah - we beat them in rugby-  why not start a war ?

Just got a good shake in HB so maybe we are getting closer, hopefully it will take a while and its hard to tell whether we are getting closer or further away at the moment.

Must have been a reasonable sized one, it's showing strongly on all the seismic drums in the central districts, especially Southern Hawkes Bay and Northern Wairarapa. There you go, they've just posted it. 5.1, half way between Dannevirke and Porongahau.

PM’s short thoughts – without a sustainable economic strategy – shier desperation !

.. and then John Key says Greenpeace protesters are standing in the way of legitimate exploration work that could benefit our economy. The environmental organisation is disrupting oil exploration off the East Cape. http://www.nzherald.co.nz/

NZOil production need tougher regulation.

 Obviously petrol prices are on the increase, production stressed and demand endless. The disasters in Fukushima, Gulf of Mexico, etc. clearly demonstrate the limits of what can be done without long- lasting damage for the environment – the planet – massive costs - us.

Last week an earthquake of magnitude 4.6 hit the Taranaki region. Today one of 5.1 magnitude Hawk’s Bay http://www.teara.govt.nz/en/geological-exploration/5

 First question to the government:

PM - explain why a possible earthquake of magnitude 6.5 + of the coast of Taranaki does no damage to life/ infrastructure,  to the environment coming from oil production in the Taranaki basin.

It was BS to start with...just spin...back when the govt believed they could sleepwalk to "recovery" harrrrhahahaha....what has he learnt...that boosting confidence with silly happy talk does not hide $350 billion of debts....welcome to the recession without end.

Actually that is pretty damn good Wolly, keep pushing it.

"The recession without an end"

I don't need to help them scarfie...can you see an end.....dammed if I can....maybe JK should offer a 2 million dollar prize for the best idea to make the debts go away...hell he gave Pita $2m for his vote....!

There are synergies between NZ and Australia that could be developed if we had political union.  If the  likes of Wales, Scotland ,England and Nth reland can utilise the advantages of union, why not NZ with Australia- assuming that Australia would also see advantages in such a move.  And before we get all nationalistic, the Welsh, Scots  still have their own identities, their own football teams (the Scots have their own pounds) etc

Common currency, political union... never going to happen. We are two separate countries separated by a 4 hour flight. At least you can drive between most of the UK.

Why would Australia want anything to do with NZ and all of our problems. Whats in it for them?

Good points engineer, I think people forget just how physically far away from Australia we really are. London to Moscow, something like that I think it is?

I don't think so. I would have thought that Auckland and Sydney had more transactions between them than say Sydney and Perth.  And Auckland is closer to Sydney than Perth, I would have thought.

FYI from a reader via facebook: "No way. whats happened here is an unforgivable crima against the people of NZ. There is simply no way that "giving up" and it's accompanying social degradation and decay is going to be allowed! To the financial community in genera; This is not some sort of game, these are peoples lives and wellbeings we are talking about for Gods sakes! You (and the pollies responsable) don't get a "get out of jail card" with this one, you fix this mess or you will be sidelined in a new order that regulates you into a corner. If the next Govt don't do it, then the one after that will. We are in charge of the monetary system, it is not in charge of us. Ive always said that untill you lop off a few Bankers heads, then they simply won't listen. I would pull the string in a second and I am not joking. How dare these bunch of uncreative crap do this to their own people. Unbelievably shamless, self interested oafs."

New Zealand is fundamentally broken and it will take NZ going over the brink to fix it. We will have to go through a bad credit rating and hyper inflation for the NZ public to accept the policies required to get us back on track.

Why fundamentally broken? Because the government does not have the time or the power to implement the tough policies required. Tasks forces (like catch up to Australia) are set up but their recommendations are never accepted as they are deemed impalatable. I don't understand how we pay intelligent people large salaries to become experts in an area and then ignore what they recommend.

The MMP system and 3 year election cycle ensures government policies have to be popular.

You're not really an engineer, are you?

Too hype-biased, not logical enough.

And most engineers understand physics....

Hyper-inflation, not likely....what is most likely is a depression and an accompanying collapse in tax revenue giving no choice but to raise taxes....

What tough policies? lol....

Intelligent ppl like AGW? Peak oil? bet you dont mean those

The task force? that was an ACT whitewash....anything with Brash near it is liekly to be an idealogical, unworkable mess let alone Rodney, he's making a fine job of screwing up Auckland isnt he...

"Popular" funny that, but its known as democracy.....3 years, to avoid the costs of an upper house....

regards

 

So here's the plan...we are going to sweat shop our way there...make the Nike shoes with a little somethin extra in em ...so's we can walk on water ...cause that minister is the only way in hell it's gonna happen that way......

Americans sometimes call us Mexicans with cell phones....it just gets truer every day..!!!!

well Billy Bob you stopped short of  sayin it like you see it uh..? "now git this in ya head ya dirty bootscrapings...your gonna work cheap..... your gonna work harder.......while me n John Boy gits ta figuring some ways to keep ya'll busy so's we can dig some friggin big holes in the ground...salt it down a might and sell it off......"

It sure as hell is as good a plan as the one you got going at the moment...Billy Bob..!

The sickening irony is that we are going to return this arrogant SOB purely on the basis of lack of choice.

If we can't increase incomes then maybe we could protect our way of life.

It is quite clear National doesn't have a plan, besides continuing crony capitalism and bailing out companies.

I mean, John Key claiming on one hand "after tax kiwis are better off" and "tax changes were budget neutral" are mutually exclusive. Except for National Party supporters, who just have faith. They know that John Key has a plan, and secretly, very secretly, he is a right-winger, and al his actions to the contrary, it will all one day be revealed as a master plan.

Keep dreaming.

You Know Lads and Ladesses.....maybe , just maybe...!  they decided they don't wanna win after all.....so here's the hard bit....how in the hell are they gonna make the Phillistine look good enough to stand in line for.......?

I personally don't want us to be 'like' Australia or to be a part of Australia. And as somebody who's European ancestry in this country goes back to the 1820s I consider myself a true blue 100% New Zealander and not some limp wristed Johnny-cum- lately whinging bludging turncoat -like far too many of you lot are.

I want New Zealand to develop its own strong and separate identity, with people who will stand by this country and throw their lot in with it, who will write the story of their lives here and who have respect for and an understanding of our culture and our history. I want people who want to be a part of shaping our history into the future.

We are not Australia. We are islands, they are not. Their natural resources are very different from ours. Our strengths and weaknesses are likewise very different. Those differences are only going to become more and more pronounced and will in turn make us more and more different. It is inevitable that our differences will manifest themselves in the economic sphere. Why would an Olympic weight lifter try and measure the value of his worth and success by comparing himself against Olympic swimmer? Well he wouldn’t would he because it just doesn’t make any sense to do so. Does it make sense therefore for New Zealand to evaluate its worth by trying to compare itself with Australia? No it doesn’t.

We need to concentrate on our strengths, what makes us great, what we do well, and then do more of it and do it better. We need to get off the back of our innovators and wealth creators, get out of their way, and encourage them to get on with it.  We need to develop the ability to identify genuine talent from the show ponies, and we need to stamp out socialism wherever it is found, quite possibly the single most destructive force that has held this nation back for decades.

Having solid close economic links with Australia is fine and proper and is to the advantage of both our countries. But let’s stop this obsession with competing with or catching up with Australia. Lets’ just get on with the business of making a better New Zealand that the whole world wants to interact with.

Well said. NZ's obsession with Australia is crazy (that said, I don't think we should be happy to be cheap labour for them).

What ??  You having a laugh?

I totally agree. But the cost is that we will continue to see our best & brightest leave the country for greater advantages elsewhere. And despite our hope that many will return & add to our economy - I personally doubt that will happen. I dont have any answers!

We are closing the gap. We're all moving to OZ!

This is a very frustrating topic.

The Government have cut their income and raised their spending....DOH!

New Zealanders with the MOST ability to pay are paying the least and those with the LEAST ability to pay are paying the most, in taxes....DOH!

Nationals grand plan....Please sir may I have some more...DOH!

Cheers

New Zealanders with the MOST ability to pay are paying the least and those with the LEAST ability to pay are paying the most, in taxes....DOH!

I think you will find that is not the case at all. Only 50% of the working population are net effective tax payers. The top 10% of income earners pay 90% of PAYE tax.

Engineer

"The top 10% of income earners pay 90% of PAYE tax."

I hear what you are saying but you mislead. It's the owners of the wealth that I am specifically speaking of. PAYE "penalizes" wage earners.

Not to belabour the point but Sam Morgan spoke to this point when he mentioned how little "income" he had.

Cheers

OK I was coming from the PAYE angle but understand your point.

The tax system is broken in so many ways its hard to know where to begin. The tax rate distortions make the system ripe for manipulation.

A friend of mine working in the private sector decided to start his own company. He contracted back to the company he used to work for (in addition to taking some of his old clients with him) and paid a net effective tax rate of about 7% after his first year compared to the 28% he used to pay under PAYE. Gross income was about the same but was able to expense 22% of his house mortgage, a new car, $6k in petrol, computers, phones, internet... When their baby was born last year, the wife even went on the payroll to lower their tax rate further.

"A friend of mine working in the private sector decided to start his own company. He contracted back to the company he used to work for (in addition to taking some of his old clients with him) and paid a net effective tax rate of about 7% after his first year compared to the 28% he used to pay under PAYE. Gross income was about the same but was able to expense 22% of his house mortgage, a new car, $6k in petrol, computers, phones, internet... When their baby was born last year, the wife even went on the payroll to lower their tax rate further."

Please tell me that all this illegal!!!!!!.....7% tax...you gotta be joking?

All legally within the grey area that is NZ tax law.

Expense all the stuff you would have to pay for anyway if you were in PAYE. Pay yourself a minimal salary to undercut the 28% company tax rate.

They also get working for families credits too now.

He must be having one hell of an accountant. If the accountant is based in Auckland, can you email me details at indiankiwi@mailinator.com. I am working as a contractor in the creative industry and I am seeking a accountant for this year

I don't think our obsession with Aus is crazy at all - its perfectly understandable. Not so long ago our economy was as strong if not stronger than theirs. Last 30 years we've gone backwards big time relative to them. They must have done something right, we must have done something wrong.

No nationalistic ramblings about "how we have unique talents" bla blah is able to get over the fact of our economic divergence.

Life is a breeze in this country if you are either wealthy or are an immigrant who came here say more than 7 years ago cashed up and bought into what was then our "cheap housing". But for the vast majority in this country life is very much  a daily struggle. The grass isn't always greener over the Tasman but many people have created better lives over there.

And you don't think life is a daily struggle for most people from most countries around the world? - Gee dude, you don't seem to get out much. I’ll tell you what happened to this country, mate, it was the fourth Labour government of Roger Douglas and that fat idiot David Lange selling off everything on the cheap. When Douglas said that Governments were useless at business, he wasn't wrong. He can use himself as his own best example.

By the way, perhaps you would care to enlighten us about what is behind the meaning of the term "Aussie battler'.

Let be content with what we have, this endless debate is a complete waste of time – the Aussies are digging up cash from their back garden – there is no way New Zealand (nor any other country) can compete with that.  New Zealand has a wealth that can not be measured in wages and GDP.   If you want to move to Australia – feel free.

Its not just that the Aussies are "lucky" with their mineral wealth - they have done the following things systematically and a lot better than us over the past 30 years:

- actively promoted savings and supernannuation

- developed and implemented business strategies rather than  NZ's more ad hoc and laissez faire approach

- developed better infrastructure   

 Having their mineral wealth and also size is a definite advantage over NZ but much of their gain has been on the back of far superior governance and planning. Unfortunately 30 years of superiority in that area is not going to be undone any time soon 

Its interesting that we had Rogernomics which was supposed to do us oh so much good and the Ozzies went the other way (or maybe just stayed as is). Now it may well be that the mining boom has done more recently than anything else, say the last 5 years easily....but that doesnt account for the growing gap before that.....

So before we continue or maybe go even further with the right wing aka Brash/Act agenda that will lead us to ruin IMHO we should be able to see a clear advantage that the previous round(s) gave us....I cant see any myself and in fact we seem to be bleeding $ as the foreign owners of our NZ companies export their profits as a result of the previous round(s).  This should be telling us heaps IMHO, and indeed I think it is telling the voters, they seem to be very anti-SOE sales etc....

Also the superannuation for one shouldnt be under-estimated the few ppl Ive talked to that are going all say it was a factor.....and we have kiwisaver...gee thanks......

regards

Add to your list that Australia has not let its union movement be denigrated like in NZ.  Strong unions provide strong working conditions and wages. 

The idea we can merely tinker with our system and reach Australian income levels is preposterious. We need to foster a business and development friendly environment.

But what is the appetite for seriously dropping the company tax rate for example? And I mean serious reductions, not just a few percent here or there.

However Australian shouldn't be too comfortable, just watch what the high $AUD does to their high-wage retail sector as consumers realise they can purchase online for 40-50% off.

Oh yeah right....take the US, in effect major US companies pay no tax....and the US citizens are so much better off for it?......yeah right..more on food stamps than ever before. Could it be because if you drop the business rate then that impacts (drops) the tax collected from top rate earners who already seem to effectively  pay that rate anyway, some even claim WFF FFS.

So instead of the failed right wing ideaology of the last 30 years maybe we need to step back and look again.

Oh and whats the company tax rate in OZ?  much lower? no.......

regards

But isn't that the point the US has a high company rate, but multis don't pay it hence outcompete the little guy.

Multinationationals and large corporates are the ones who can already find all the loopholes in the existing company rate and effectively pay less as they can afford to pay big salaries to the legal/accounting talent..

It is the smaller businesses that pay the full rate and as I look at it this is part of the problem, they don't have the capital to expand, hence don't hire, as a chunk of their profits go the state for exactly the wasteful nonsense you outline.

Also, in my short time on this site, I see many comments from you, yet very little in the way of solutions, even attempted ones.

Big v little, without a doubt....NZ needs to get the tax up on the big companies if thats the case, then the overall rate can drop...

 

regards

Wasteful nonsense? that was what?

Solutions, first identify the problem...the problem is energy is now and will remain expensive, get way more expensive and even in short supply.  Right around that everything changes....I cant get my head around jsut what and how much everything is inter-related.....

Lots of comments sure, broken idealogies are not wanted, but Im only one voter one who is looking for solutions....

Some industries are simply doomed, air-lines, tourism related, retail, probably high bulk/mass exporting at least a long way... Bio-desel has to be ramped up....ditto non-fossil fuel electricity, wind, tide, hydro, geo....make sure we have reserves for dry or still years...the important point is to make us robust.

So apart from that we have to curtail the growing debt, the only way around that is to raise taxes and raise them in such a way they are very hard to avoid legally and do it broadly. So  solutions there are fairly simple.....land tax for one...cgt for another, these broaden the tax base, then to give financial stability a tobin tax for another. Bring in bank seperation so the retail arm ie the eftpos machine side can survive even if the lending side goes into receivership.  Its nice to eat after all. 

The biggest problem is these are not without risk to collapsing our economy, such things should have been done when the econmy was robust and could take it....but no one wanted that.

regards

As far as tax solutions go, you can't do any tinkering prior to reform of the monetary system, which I see as the biggest issue and largely responsible for the inequality under the current system.

Surely a government can fund itself with either a flat tax on income, a consumption tax or some form of tax on pollution (where there are negative externalities).

Don't see the need for capital gains/land taxes for reason that under a stable monetary system there shouldn't be the degree of capital appreciation we currently see. If you look at hundred year price history of dwellings you see that it's only really in relatively recent times where there has been this massive discrepancy in pricing. I have no problem with entrepreneurs earning a return on their capital investment in land/property provided it is productive, which does not including buying a house, doing very little to it and flicking it off for a 30% nominal return. Although I accept there may be a need for CGT/land such taxes in the short term until a new system aligns itself.

Intertwined with this is the issue of banks issuing unreserved private credit which would act to undermine any new monetary system implemented as happened in the past

I think the issue for this century will be how China tries to escape from the current monetary system, where they essentially provide the US with goods in return for paper using the blood, sweat and tears of their workers.

To catch up with Australia is just as difficult for New Zealand as for Portugal to catch up with Germany. Just not possible at all. Unrealistic! Government policy's over the years have brought us in this low wage environment. Low worker protection, no penalty rates in most industries, a minimum wage that does not keep up with inflation and no collective barganing to safegard a better income, have all contributed to our low wage economy. Low wages and low productivety go together because investment in better technology is not that urgent. To call it an advantage now is an admission that the present government has no idea on how to change things for the better.

Video of Goff in there discussing what Labour would do. Funnily enough he began talking about what you shouldn't do rather than what Labour would do, so he had to be asked a couple of times...

Later (not in video) I asked Goff how much he would look to increase spending on creating a more skilled workforce.

“If you want to grow the economy you don’t grow it by cutting back on skilled training and investment in innovation and R&D, you do the opposite. Those things have got to be at the forefront of any economic policy, they’re absent from this government’s.

"If the best thing that the Minister of Finance can do is say it’s a great thing that our wages are so low in New Zealand, well he can go out and crusade on that, that’s not my vision of New Zealand.

"We don’t want to be a low wage, poor country, we want to be a high skill, high tech, high wage country, and that’s what Labour’s policy will be around."

[It was actual policy and not just rhetoric.]

"We will invest more in R&D, we will invest more in skilled training, and if you doubt that, look at our track record because we put the investment in, we put our money where our mouth was."

But asked whether he had an idea of how much more Labour would look to spend on those areas, Goff replied, “I’m not going into the details of that policy now, we haven’t worked through the details of costings at this point..."

"Of course it’s a proper policy, it’s a commitment in principal, and that’s what you expect from an opposition party."

Deleted

Far too much rubbish telling from politicians.

Alex/ Bernard/ team - you have such a great blogger community here with many people contributing  knowledgeable articles.

Why not ask your bloggers and compile regularly 5 -10 interesting questions for our parliamentarians to current issues. We (the public/ media) have to challenge our representative body and make them more accountable.

 In my opinion too many questions coming from the media are either too soft, not precise and deep enough, can be evaded or can be answered with yes or no.

 www.interest.co.nz should present our major parties 5- 10 tough economic/ financial/ political questions a month about issues of national interests and publish the results in the media/ online/ here.

 NZoil production.

…..Earlier, Mr Key said the environmental campaigners disrupting oil exploration off the East Cape were standing in the way of "better jobs and better incomes" for New Zealanders…...

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1071...

Oh yes PM - and what about the possible consequences of an NZoil disaster ?

The first question to the PM - please explain why a possible earthquake of magnitude 6.5 + of the coast of Taranaki does no damage to life/ infrastructure, to the environment coming from oil production in the Taranaki basin.

 There must be a number of explosive questions you like to ask - what is your first one ?

So he's talking about the 'knowledge economy'. Didnt have much luck with that last time.

Have just updated with Key talking about this at his post-cabinet press conf.

Cheers

Alex

Where is PDK today?

Want to be like Australia eh. 

What about the chronic shortage of food and water. Perhaps not yet but pending.

The giant aquifer they have been tapping into for water for agriculture is just about empty. Only 30,000 years to fill it up again. Irrigation in a lot of areas has resulted in excess salinity from salts in the water.

When China stops buying their ore, and a shortage of oil stifles their importation of food/water then they are going to be in serious trouble. Physics demands 1000 tonnes of water to grow 1 tonne of wheat.

Yeah we are screwed, but at least we won't go hungry.

Scarfie,

I think your a wee way off the mark on Australian food production.  Their potential is massive.  Everyone tends to think of Auzzie as a giant barren desert - it's not.  Think of the area within a 80 km of the coast from Melbourne to Adelaide you could fit Canterbury into it 20 times and it has very reliable winter rainfall and nice pleasent winter temperatures perfect for winter cereals. 

Off the top of my head its 22 000 l of water to produce 1 kg of milksolids on an irrigated dairy farm in summer - is that a sensible use of resources ?  What have we turned NZ into a floating dairy farm ?  At least Auzz has dairying in the sensible areas (Warrnabool, Bega, Gippsland and Northwest Tassie) with limited town supply in the other areas.  What are we doing in NZ dairy conversions in Hawarden in North Canterbury - real smart.

We will go hungry because dairying ain't the answer everywhere but we think it is.  You say 1000 tonnes of water to grow one tonne of wheat (im not going to dispute can't remember) but that doesnt matter if its autumn sown and harvested before the summer dry - thats good use of water resources.  DM accumlation as measured per ml/h20 is more efficient at lower temperature as less water loss for evaporative cooling during stomata opening.  Why irrigate a pasture during a howling nor-wester and 30 degrees in summer to grow grass to feed to dairy cows.  No I think NZ ag has lost the plot.

Probably a little off topic just thats what you comment made me think of.  Remember Auz is figgin massive and has some awesome agricultural areas and the potential to ramp up production (on the whole though the farmers in Auz are really really crap)

Cheers

So you are talking about the Murray River catchment?

http://en.wikipedia.org/wiki/Salinity_in_Australia

No doubt there are some salinity issues in Northern Victoria.  Those areas are probably better suited to growing salt bush and running Merino ewes anyway.  Dairying in Northern Vic is becoming more challenging.    However I think you will find some of these issues are overhyped.  People have been trying to say that the Murray is dead - its been continously flooding for about the last six months so I don't think its dead.  There are some awesome underdeveloped agricultural areas - The Mt Gambier region and most of SE SA has huge potential with a bit of intelligent agriculture.  Tasmania has as good a climate as North Island NZ with cheaper land and a lot of inbreeding.

I have  some ideas but not very attractive to the electorate

 Fistly we have too much debt and the compounding interest is klilling us, we drop costs in one area and the debt kills us in another. We need to get rid of the debt, we cannot afford 35 billion a year in interest payments. This is going to be ugly but lets get it behind us.

 Then we need to alter they way the average Kiwi thinks about assets. We need to change the way we tax things. We need to make it attactive to be inovative and create wealth not tell people how to, or pre judge the market, just encourage inovative people to give it a go, by lowering costs and letting then get the rewards.

 So we need to tax assets that the average kiwi sees as a road to wealth, while sitting in front of the TV. We need to get rid of speculation and encourage bussineses that create real wealth, ie, growing it, making it or mining it. We have to once and for all get it out of our minds that assets create wealth and to do this we need a good solid monetary policy, no inflation, no bullshiting the people, just living within our means.

 

Just a few thoughts

Right now there is a piece on Close Up on the San Frandicso pertaining to their quake 20 years ago. Mayor then elected to take a practical decision rather than a populist decision and dismatle the freeway.

Please refer to my previous posts on eliminating the motor car for good urban design.

He also made the decision to rebuild a classical building despite its damage from the quake. Difference being it was a true classical structure, not the fascadism we see in CHCHC.

Former Mayor was ditched because of his decision. 

Contrast to our spineless politicians regarding the tough decisions. 

The way it works unforutnately. How about that Andrew.

Its the ditching because he did the 'right thing' thats worrying Jkey.

trolling the telegraph comments

 

 

robbinghood

30 minutes ago

Recommended by 
2 people

 

Basically what we are seeing when you cut through all the fog is a transfer of the ability to consume away to the new wealth producers in the East. This is as it should be.

Western politicians, with the US and the UK in the vanguard and Germany to her credit way back in the rear, have been more than content to oversee a conversion of our economies from producing/manufacturing based to 'service economies' where consumers are king and actual wealth producers are clobbered by regulation and high taxation. This situation is totally unsustainable over any period of time and the evidence is clear from the comparative longterm decline of US and European economies.

In the final analysis, you cannot eat an insurance policy and you cannot drive a financial derivative. The UK in particular is in a parlous position with its exceptional dependence on financial services because, ultimately, successful financial services are built on the back of successful trade and there is absolutely no indication that any politician in any political party has the faintest idea of resuscitating the UK as a successful trading nation. Being able to import substantially more than you export is not successful trading in the 21st c.

 

drjonathanwilson

50 minutes ago

 

Roger

This is a good summary of what many have been saying for a long time, as you recognise.

I think that one of the interesting aspects of this saga is how much pain the populations of the PIIGS will take before they abandon the sunk political cost of supporting EMU.

The same goes for Germany and France. This is the political equivalent of the financial concept of sunk costs. A political investment is only worth its future flow of votes rather than the cost of the political capital invested.

Jonathan

http://www.telegraph.co.uk/finance/comment/rogerbootle/8441470/Eurozone-...

Why join Oz? - I say lets take over the rebel West Islands. Get the inter island ferries loaded up with the armys 120 LAV's, (dependant on securing enough drivers), put the Skyhawks  + trainers on the decks and set sail for Tasmania. Having bolstered our ranks with the said Tasmanians we could take South Australia within days. Western Australia will be (more) isolated and capitulate. Swinging eastward we can complete the rout by crushing NSW and Vic in a pincer movement using (our ) Queensland divisions. A sort of reverse takeover if you like.

Ha. I like your style. 

Maate, we might get more than we bargained for, looks like they'd be well prepared:

http://www.youtube.com/watch?v=RenRILqwhJs&feature=fvsr

and motivated:

http://www.youtube.com/watch?v=hVlGDa5mx28 

Anyway, no need to worry about Australia stuffing NZ, RBNZ are doing a perfectly good enough job as it is, simply by sitting on their hands:

http://www.interest.co.nz/rural-news/53011/rbnzs-bollard-says-higher-terms-trade-being-reflected-higher-currency-rbnz-focus-in 

Who needs enemies with friends like them ....

Why would anyone in their right mind invest capital into NZ?  Smart investors invest (their capital) into companies that make money so that they can earn income and/or increase their capital investment.  NZ is broke.  We borrow $18mil a day so we can pay our public servants, police, doctors, ambulance, firefighters, etc, etc, etc.

Invest in a broke country/company?  Not me!

I take etc etc etc means those other absolutely essential departments like OSH, ACC, Family Court/Legal Aid, Land Transport NZ, Education Department, DHB's, DOC, - have I missed any?

So if our workers are to be competitive compared to Australia, how about our leaders showing real leadership and adjusting their salaries. How is it that NZ pays our Prime Minister such a high proportion of NZs GDP http://liberation.typepad.com/liberation/2010/07/is-the-new-zealand-prime-minister-paid-too-much.html. Come on John, it's not like you need the money. Notice from the graph how Australia is further down the scale - certainly not as competitive as our wage earners!

NZ has its future in its own hands, I have been here 12 years and I am astounded how stupid you all are. NZ has oil, coal, gas, gold, wind and obove all water.  Every time National try to use these recouces to improve NZ the 5% loadmouth greeneis kick up a fuss and the rest of you sit there and let them get there way,  just like we have done in the last few days.  Canterbury could produce piles more food if the water storagelakes were built,  Southland is a coal mine etc.

We have just spent 2 weeks driving around the North Island with two Americans who love to walk without having to worry about snakes and spiders.  Nz is a huge place and there is room for wealth creation and natural beauty.

Get a grip NZ and shut up that tiny group that is ruining your future.

Arrrrrrrrrr yes you hit the greenie on the head with that. First we need to give National an outright majority in November....then we need to press them to run a referendum so that Kiwi peasants can biff out the mmp garbage and the list rubbish with it.  Then we can cut the size of Parliament in half and the costs in half.

Right now the greenie brigade are doing their best to destroy the effort to find oil offshore...the same greenies will have diesel in the boat tanks and many of the boats will be made of oil based plastics and those with sails will have oil based sails and ropes and sheets and liferafts and rescue floats and garments..and when they get back to shore...in a rush to reach winz before closing time...they will fill up their cars and utes with petrol and diesel...

 

A long time since I saw two such ignorant comments.

Keriwin obviously think the world is flat (or has no idea of exponential math) as that's the only form which gives unlimited resource wealth. He also doesn;t understand that it's not when things run out that you stop growing, it's when you get half-way through them - which you do with increasing suddenness.

Wolly has had enough notice here, to know better. Ignorance, last I heard, wasn't a legal excuse.

That goes for the Pollies too.

To extract and consume a one-off resource, so that others don't have the opportunity, can be called competition. To leave the mitigation (pollution, waste stream) to others, might seem 'smart business'.

When the disadvantaged, though, are the yet-to-be-born, and thus a party with no say in the matter, it's fraud.

That's a legal concept which - I suggest - overrules the short-term selfish-gain 'law' being hidden behind by our Pollies.

On behalf of those future generations: shame on you two for your shortsightedness, and your selfishness.

And if you represent the majority at this point in time, it says a lot about the lack of maturity of our society.

Oh look it's PDK...burning oil every day...

If the oil is there....it should be extracted and refined...otherwise PDK might go without.

Get your facts right Wolly.

I do more than anyone to not burn oil, and to demonstrate how to indeed

powerdown.

And I'm quite capable of going without. Do so for days on end. Please chech before presuming.

Sure, I can't get totally clear of a society which is hooked, but I do my best in that regard by attempting to educate.

Pity it falls on deaf ears.  Were you really a teacher?

Shame on you for thinking that,  I never said anything about destroying streams etc,  that is a greenie concept to stop progress. Me, I am retired and have never worked here so I will get no benifit from higher wages and have no reason to be selfis,  low wages help me get things done cheap  but I do love NZ and want to help you get ahead.   I have been around a long time and have worked all over the world as a engineer and your type will not help young NZ people get ahead now or in the future.

Technology will solve longer term energy problems quicker than you think so the next generation will be much better off than this generation because you refuse to use the things you have.

the only way nz is going to catch up with aussie is to move there.