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Gareth Morgan assesses the election policy offering of the two main parties. Your view?

Gareth Morgan assesses the election policy offering of the two main parties. Your view?

By Gareth Morgan

Last Monday's televised leaders' debate demonstrated that the greatest difference between the main protagonists for government are over economic policy.

There are clear options on which voters can express their preferences, although in several cases there is no right or wrong approach, they are just different. These are my takeaways from what was said.

Raising the retirement age to 67, is it necessary?

Labour has pitched for this, National is steadfast on age 65.

The Cullen Fund (aka NZ Super Fund) was launched to partially fund the retirement incomes of the burgeoning numbers of superannuitants that emerge as the babyboomers retire. That fund, Labour contended back then, would reduce the need for a rise in the retirement age.

Again under Labour, KiwiSaver has been launched at considerable expense to today's taxpayers, in an endeavour to shore up the self-provision of retirement savings.

Despite these two initiatives Labour's figuring now says the age of entitlement for NZ Super will have to be raised.

Part of the reason is Cullen Fund contributions have been halted because the Government's own books are under a greater strain, part is because the downgrade will make it harder for the economy to generate the income to pay the pension.

Labour's is a precautionary initiative and will affect everyone under 57, with those under 47 today having 67 as their retirement target.

It is difficult to believe that with a cessation of Cullen Fund contributions and a slump in economic growth prospects there are no adverse consequences for pension policy.

On balance then Labour should be credited for this policy reaction, and providing forward warning.

Should KiwiSaver be made compulsory?

Labour says yes, National is opting for the soft compulsion (employees can still opt out) only.

It isn't rational to make every person save this way in a taxpayer subsidised scheme, certainly many do not need additional savings at all.

The ideal would be for KiwiSaver to be required only of those whose current wealth indicates insufficient resources to fund an adequate replacement in retirement for their current lifestyle. Designing policy to deliver such an ideal is not easy although satisfying a wealth test to be exempt from KiwiSaver membership would suffice. National's soft compulsion is a step closer to voluntary than Labour's alternative so it has to be preferable.

Asset sales, are they necessary?

Labour's case against the sale of 49% of certain state enterprises is that National is doing it for funding reasons.

This is incorrect, it is about putting a financial discipline alongside the social and strategic one that governments generally bring to their investments.

And there is a chronic shortage of blue-chip scrip on the local stock exchange to boot which does not auger well for the future of our capital markets. So government can achieve a win-win from such a policy, much as Fonterra has at long last by escaping the shackles of its 100% collectivist ownership model.

Capital markets have major advantages if you structure your offerings to them appropriately.

National wins this policy tussle hands down.

The Government's responsibility will be to ensure these assets are sold at a value that reflects their full potential value and that these public/private enterprises do not engage in monopolistic pricing practices, at least any more than they do already.

Capital gains tax

Labour needs to be congratulated for at least recognising that the taxation of wealth is inequitable, although I do get annoyed when Goff quotes Sam Morgan as saying he should have been taxed on his Trade Me proceeds.

He's wrong, the price paid for that asset was one for tax-paid future profits, if it wasn't the price would have been higher and taxable.

The point about the rich and tax is about loopholes in the capital income tax regime, not simply about taxing the disposition of assets.

National is deadly quiet on the tax loopholes and that is not a good look for those of us concerned about the inequities in our tax regime. The biggest loophole is enjoyed by the owners of capital that generates an un-competitively low taxable return yet delivers a handsome post-tax return overall. That is unjust, it distorts the deployment of capital around the economy and produces lower GDP than is necessary.

Because National cannot bring itself to acknowledge that reality they should be admonished for that lethargy.

Increasing the minimum wage

Labour wants to do this, National doesn't. We already know that both accept that the minimum wage is not sufficient to live on - hence the raft of top-up transfers (accommodation allowance, hardship allowance etc) that low-income workers can procure.

But we also suspect that the employment of youths has been hampered by the removal of youth rates. So the answer to youth unemployment certainly does not lie in raising the cost of their employment.

For adult workers on this rate, if the Government is saying the rate is insufficient (and both are acknowledging as much by virtue of the top-ups available) then the answer is to redistribute more income to these folk but not raise the cost of employing them.

The way to do that is via the unconditional basic income (UBI) as proposed in our book, The Big Kahuna. At either today's minimum wage of $25,000 or that proposed by Labour ($29,000) the recipient would be better-off under the UBI-based regime we propose - by $6,850 and $6,365 respectively.

This is how you reconcile the reality that some of the wages in your economy are not sufficient to live in dignity. You certainly don't raise the cost of employing those folk. National has the superior quality policy in this area of wages, but only because it's not as deficient.

Child poverty

We are in dire straits in this regard and most but not all of it is centred on Maori and Pacific Island families.

As our book Health Cheque pointed out, this has a lot to do with both a decline in absolute real incomes of the poor (the other side of the coin of the growth in the disparity of wealth over the past 30 years) and the associated bad housing and diet that many of these children endure, as well as the failure of the public health system to fairly allocate the health dollar on the basis of greatest return to well-being of our population.

With our politicised health system the squeaky wheels get an unfair share of the health spend and the group most enjoying that favouritism are old white folk.

The economic reality is that the real wages for lower skilled people have fallen since financial deregulation and globalisation.

The theory of "trickle down" has been an abject failure for them. On this metric then both parties need to be ashamed of their inadequate response and the favouritism they sponsor.

All New Zealanders apparently are not equal in terms of their call on the state purse. Goff rightly points to preventive measures as offering the best return - this is true in education, in law and order and in health.

Key agrees but his solution of free doctors' visits for the under-6s is an ambulance at the bottom of the cliff response, not a preventive one.

Environment and New Zealand's tarnished clean and green image

Both leaders agree there have been issues although Key rightly points out there are substantial economic benefits to be gleaned from expanding mining, citing Australia as being much more progressive in this regard than us.

For Goff, national parks and Schedule 4 land (some other parts of the conservation estate) are out of bounds. Sustainability and economic development do not have to be opposites; it's a matter of the extent to which you price environmental risk to those who threaten it.

Both parties have a long way to go in getting these policies in harmony with the public's preferences.

The polarisation of income and wealth

Key espouses equality of opportunity, the right for all to participate. Goff decries corporate greed.

Thankfully they both recognise that the egalitarian values on which New Zealand was founded are worth protecting. The difference is on how to achieve that, both in terms of vision and policy actions.

Therein lies the voters' dilemma.


Gareth Morgan is a Director of Gareth Morgan Investments
This article was first published in the NZ Herald.

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Gareth I am sorry but I really have to question your thinking here.

You live and breathe capital markets as a fund manager, I do understand this. If all you have is a hammer then everything looks like a nail. If you want to improve the capital markets then it is better to give new opportunities to existing and up and coming companies than it is to sell stakes in already well functioning and profitable enterprises. If the existing SOE's want additional funding they can easily raise it on the bond market given their solid asset backing.

The existing state owned power companies offer New Zealand a competitive advantage which more than outweighs their value to the stock market. They can be used to create deals with international companies for instance public/private cooperation with Nissan could be achieved to build electric cars here in New Zealand with 100% renewable energy and co-branded as coming from 'clean green New Zealand'.

I also disagree with you on the minimum wage. It was a Republican who said 'I don't want any business in my city that cannot pay a living wage to its workers'. If you pay poorer people more they will spend it all typically and this is weighted towards local goods and services because their spending is predominately rent, food, energy etc. Businesses which pay people more will also recieve a lot of that revenue back in additional spending.

In the end it doesn't make sense to build our future upon anything which we cannot sustain. If something is unsustainable or has other unintended consequences then it is worth reconsidering. You would advise someone given $1 Million dollars to invest that money into financial vehicles which offer a steady return so why not apply that same principle to the economy and ecology of New Zealand?

Where you really get it wrong is that you only consider Labour and National as if they are only parties with answers worth considering. In a world dictated by energy where increasing quantities of energy are required just for the homeostasis of the systems already in place the only realistic answer is a party which understands ecology. Renewable energy isn't just a buzz word it means life or death to billions of people around the world. We could not replace even 3% of the worlds oil production, 2.7 million barrels in all per day with human labour.

The Green party has the answers to the right questions. Everything you see and touch is only possible due to the one time endowment of fossil fuels. It doesn't matter what the parties promise in terms of policy because delivering anything relies upon energy and the best party to deliver that energy is the Green party.

Point me at the green party's solutions to the energy problem because what Ive read its window dressing, a bit of insulation here and  to bugger up the SOE's over there........Sorry but the Grren's are to busy handing out $s to the disadvantaged......mitigating the energy problem is urgent and dire if we do no handouts.....give them money for work on such geen projects, yes, otherwise the Green's are as bad as the rest.....its just deck chair shuffling.



Can anyone show me where any political party is promoting rail? There are people doing their best but it's all about roads.

Our endowment of fossil fuels is depleting rapidly. Iran is a big worry. Any attack on them and they will likely close the straits of Hormuz, a dress rehearsal for the collapse of hydrocarbons sold to NZ.




or those with $ could always rush out and spend $60k on a MiEV to cover such issues....


I read somewhere that the resources to make electric vehicles are so constrained and expensive that globally only 2 million cars can be built annually. Well if correct that's about enough for the politicians of this world, ther families and a few cronies. IMO electricity use will decline in a depression as kids go back home to live with parents and the large houses we live in are subdivided into appartments. Real scope there as most people will still have at least some room to start a garden. It will be really interesting to see how all this turns out.

It's like the old FUD about photovoltaics costing more to produce than they are worth, and being environmentally unfriendly.

No matter how often it's demonstrated to be nothing but bullcrap, the anti-renewable energy, anti-environment types continue to repeat it.

So you are comparing a complex bulky mechanism, an electric car, to photovoltaics? Really? 

No, I'm comparing the tendency of vested interests to spread FUD about electric vehicles to the tendency of vested interests to spread FUD about photovoltaics, and about renewable energy systems in general.

Be specific, how many electric vehicles can the world produce annually without causing environmental damage and tell us how they will all be charged? The US buys 5 million ice vehicles per year, so is the 2 million electric vehicle figure wrong?

I rather fancy a Chevy Volt myself but not if I'm one of the last on the road and the dispossed are chucking stones at me.

Gareth Morgan would do well to extract his head from neo-classical la, la land economics.

"Raising the retirement age to 67, is it necessary?"

"Part of the reason is Cullen Fund contributions have been halted because the Government's own books are under a greater strain..."

Remember when the National government decided to stop contributions to the Cullen fund? Oh yeah, right at the beginning of their term. Remember when the National government decided to change the tax system in a 'balanced' way transfering tax from income to gst, remember that this has added 1.1 billion dollars additional debt over the next 9 months. Would the retirement age need to be raised if there were an additional 1.1 billion dollars in the Cullen fund, or the initial contributions were maintained?

"Asset sales, are they necessary?

Labour's case against the sale of 49% of certain state enterprises is that National is doing it for funding reasons.

This is incorrect, it is about putting a financial discipline alongside the social and strategic one that governments generally bring to their investments."

But this is just idealogical propaganda. The National government has always said that asset sales are necessary because the treasury books are in a bad way. Additionally if Gareth Morgans statements were valid then the government would be concentrating on the state assets in the export sector. What is the competitive advantage for the NZ economy of having key business sectors like energy 'efficiently' transfering a larger share of the income to themselves.

"And there is a chronic shortage of blue-chip scrip on the local stock exchange to boot which does not auger well for the future of our capital markets.",

That would be the same capital markets which have consistently lost shareholder value (in real dollar terms by the way) for the last 20 years. No wonder there is a shortage of wealth there, why should the government keep feeding businesses into this sink hole of wealth destruction?

"Capital gains tax"

If you are pinning your hopes on a capital gains tax to balance the economy then, open your eyes. Other countries which have had capital gains taxes for a long time an in conjunction with housing bubbles include, Australia, Canada, United Kingdom, America. Also with varying degrees (all significant) of government debt and private debt. So this policy doesn't even balance the economy in the longer term.

"Child poverty"

"The economic reality is that the real wages for lower skilled people have fallen since financial deregulation and globalisation.

The theory of 'trickle down' has been an abject failure for them. On this metric then both parties need to be ashamed of their inadequate response and the favouritism they sponsor."

Stating an apparent link between 'trickle down' which everybody knows is mad and 'deregulation and globalisation' which are quite different policies fervently supported by 'neo-classical economics'. In fact in my opinion the financialisation parts of globalisation do the most damage. The effect being to make it as easy as possible for foreign capital to be invested, speculating that there is profit to be extracted, and then if things don't pan out the principal can be quickly wisked out from under the economy leaving others to 'hold the can' if everything goes pear shaped. As is readily apparent the only thing this encourages is fraud and speculation as financiers are never exposed to any risk, also explaining the calibre of moral and intellect we see in finance these days.

More biggoted propaganda from the economics professions mainstream.


"Would the retirement age need to be raised if there were an additional 1.1 billion dollars in the Cullen fund, or the initial contributions were maintained?"

Yes it would.

"why should the government keep feeding businesses into this sink hole of wealth destruction?"

So your wisdom is that governments create wealth better than stock markets.  This doesn't have much historic evidence to support it.

"the only thing this encourages is fraud and speculation..."

This is nonsense.  Investors from overseas can (and do) help finance business development inside NZ.

"financiers are never exposed to any risk..."

Tell that to the reinsurance companies rebuilding Christchurch.


Most people can make the connection between economic policy and effect, it takes a true believer to think this is inevitable, necessary or a good thing,

"So your wisdom is that governments create wealth better than stock markets.  This doesn't have much historic evidence to support it."

Actually in some cases (there is no general rule one way or the other) governments do operate businesses better. But why would the economy gain a compeditive advantage by listing companies on a stock exchange which can't grow it's own businesses?

"the only thing this encourages is fraud and speculation..."

So why did NZ have a financial crisis in 2008. Note, financial, banks and finance companies were hit first. If all the speculative dollars didn't suddenly pack up and leave to deal with their own crisis what happened?

There was investment before 'globalisation, a.k.a financialisation' by the way, it was less fraudulent and didn't run on speculation as well.

You are clearly a National party supporter so, sorry to disallusion you. If you think either of the two main political parties are profering policies to deal with this you are deceived. 



 Labour sliding to 25.9...harrrrrrrrrrrrrrhahahaaaahaaahaaaaaaa

Not just the end for Goff but include Klinger...Parker...Cunliffe....indeed the whole sorry bunch of Clark leftovers. Out you go.

..... meebee after ruddy Kev has ousted Julia Gizzard in Oz , she can come over here , and run NZ Labour for them ?

Introduction of a " Super Profits " tax on her own Ozzie bank's Kiwi earnings would be some revenge .

Richard and Nic's comments were very very good and certainly raises the tone of this site's comments. Do we have to have old man Wolly always adding his two cents worth. If National can only offer the thoughts of "the Wollys" of this Country then god help poor little New Zealand. BH you will have to do something about him.

"Two cents"...hah....I'm happy to point out Labours' uselessness for nothing.

Wolly is fine, and yes we do have to have his comments. He's better than you, at least he isnt left wing blinkered stupid...."oh lets censor anyone that dares say anything about our beloved leader or party"......perhaps you would be happier living in North Korea......


Up Wolly! I may not agree with much he says, but will defend to the hilt his right to say it, (as long as it makes me laugh).


now for something completly different

was looking at farm sale site ,amazed howmany farms coming on market everyday

who are they hoping will buy them

So Labour are right on introducing a CGT , but wrong ( annoyingly so ) when claiming that Sonny-boy Sam should have paid some CGT on his TradeMe profits ...... aha !

Concerning asset sales.....the nats can flog air nz anytime they like and good riddance but totally against our energy companies being sold albeit a minority share....theres four votes under my roof and they are not going to the nats for this reason only....bit of a dilemma......................RW and nik....great comment.....thats why i visit this site...



Please don't write off Labour just yet - there is 3 weeks to go. Enough time to offer everyone free Sky TV package (to improve our knowledge) and free Pizzas to earners below 40K..  that'd blow the Nats out of the water!

Jeez Moa, at the speed they are heading down the polly slope of doom, in three weeks their support will be below Hone's mob.

Dunno about that but maybe the Green's should start to try the opposition benches/seats for fit.....



Can't wait to see Klinger's face when she has to go park it at the back.

Perhaps, we could call the beehive as the Temple of Doom!

unfortunately I'm in Epsom..  had Banksie as our mayor before.. so noooooo.  Had worked with the Greens candidate couple of years ago, david is a nice person but as a politican ..noooo.  Met Parker at a function once...  nooooo - quite arrogant chap.  Nat candidate..  a bit too hip and pompous. 

wonder if I can vote for Maori party?  I like Pita..

What about the shared policy of debasing my $100 in my pocket by 2-3% (6% last year) per year.  I worked hard for that money, and they want to make that work worth less, and less every year.  Bunch of crooks, none of the deserve a vote.

George Carlin once said, “When I hear a person talking about political solutions, I know I am not listening to a serious person.” He was right. Politics creates problems, not solutions. 

Thats not true skudiv. The $100 in your pocket is debased at a higher rate than the CPI reports most years. This is primarily because the CPI doesn't track house prices. Of course since 2008 the dollars in your pocket have been increasing in value! That is partly why everybody is grabbing at them harder, but the CPI doesn't reflect this because it does not track housing (or rental).

Prior to 2008 the rate of debasement was probably nearer to 5%-6% hence the massive increase in house prices.

One thing which should be highlighted, the central bank doesn't control the size of the NZ money supply their influence is limited (by their role in the financial system). This means that the government has even less influence on monetary policy than the central bank. No, the parliament doesn't control or manipulate devalueing of the money supply. The main thing both political parties are guilty of is being totally ignorant of how the financial system actually works, buy until they wisen up they will keep making the same ignorant mistakes like trying to fix a debt crisis by shuffling debt around between sectors and accounts.


I used to value Gareth's input as he used to have a unique view on things. I often thought he was misguided but not a fool.

Now I'm not so sure. I think he might have lost the plot.

He seems to favour radical off the wall ideas that are untested. I'm all for creativity (which is what the Savings Working Group lacked) but usually a creative leap needs a lot of work before it becomes something viable. The important thing is to try them out and then rework them lots of times before rolling them out big time. To me his Big Kahuna is interesting as a starting point to explore where it might lead, but not as something to implement. That's the equivalent of putting a junior lieutenant in charge of the army, you risk all on a throw of the dice. Not good.

This analysis seems a bit thin to me. For one thing he seems to be in the CGT camp, which I don't like. How has it helped any other country? Is there evidence that it has been constructive? Doesn't it just encourage those rare types who can create new enterprises to do so elsewhere?

However, that's not really why I just cannot take the guy seriously anymore.

To me anyone who buys a football club is just not to be taken seriously.

Sorry Gareth.

haha, I was reading your comment, waiting for the punch line.

Good punch line. Right on the money.

"And there is a chronic shortage of blue-chip scrip on the local stock exchange"

Yes, thanks to right wing economics (Roger the Doger) and most of what is left used to be owned by the taxpayer.

"Fonterra has at long last by escaping the shackles of its 100% collectivist ownership model"

When you by shares in any company you become part of the 100% collective that own that company. So all companies listed on the stock exchange are collectives.

There was a time when men went to work and paid their taxes while the women became stay at home housewives. The taxes paid by the men was sufficient to pay for everything.

Now, not only do all the men work but also their wives and kids. Everyone works Despite this we cannot aford anything. We have to sell the assets, pay for our education (student loans), save for our own pensions. Yep the more of us that work the less money the government has for anything.

Despite this the government can afford half a billion on irrigation in Canterbury, plus bought shares in an irrigation company. Can also bail out finance companies. Telecom and others do not have to spend their profits on giving us broadband because the government wants to pay for it. Yep, plenty of money for some things.

And where does all the money go?

Total Crown Expenses = $81,040 Million (2010)

Social Welfare = $24,206 million  (29.8%)

Health = $12,673 million  (15.6%)

Education = $12,440 million  (15.3%)

Those three accounting for 60.7% of all expenses.

It's been pointed out here recently that the bulk of SW payouts go to pensioners.

We already invest far too little in health and - frustratingly - education.

The country will never prosper in the future if we don't have an educated and healthy population.

Numerous studies (and good sense) indicate that, in general, educated people are healthier than uneducated people.

Yet there are still many who demand that investment in health and education be curtailed.

Who is stupid, insane and short-sighted enough to want to cut back on either?

My guess is it's pensioners and people who aren't long to retirement.

Why......why are educated people likely to be more healthy than uneducated people Amalgam?

Why can education not take place without extra state funding? The state doesn't fund the teaching of driving skills...yet the learning happens...sometimes verrrrrrry sloooooowly...but it does happen...oh yeah....idiots get punnished and like hitting Homer Simpson on the head, about the 10th time he finally gets it....

So maybe if we extend that concept....apply it in all other areas...if you smoke, you will pay more to see the doctor!....and you will not be put on a waiting list for surgery....and you will pay more for drugs.....get the message stupid....stop smoking.

The same can be said for eating yourself into a giant blob of fat....your doctor will charge more if you are will not get on the surgery waiting will pay for your airline ticket according to your weight...

Crikey...if we take away the state $$$$ safety net, attitudes to 'way of life' might change....gosh!

Excellent point Ralph, if the corporate tax rate was increased this would encourage more profit re-investment rather than profit stripping by existing stockholders. Maybe this would put some kind of a plug in the economic sink-hole which is the NZSX.

This is probably a good explanation for why asset stripping as a business model became suddenly very popular following Rogernomics. I had not realised this sort of thing before, very enlightening.


Here is a clear example of the asset stripping model of finance being applied,

The profits could be invested into the banks capital reserves, but then bonus and dividends would need to be reduced. Instead these european banks are de-stabilising their businesses which is sure to cost actual share value in the longer term.

I had been under the impression that a 50% bankers bonus tax would do nothing good for the UK economy overall (i.e it was just political point scoring) but if it discourages this kind of behaviour (which would become less worthwhile) then actually there could well be a massive advantage to it.



Very disapoint in Gareth's throw away lines about our hydro dams. But before I comment further I think we need to  find out his opinion on imported electricity, is he for it or against it.

This same quation should also be put to John Key and the rest of the National Party candidates maybe the answers will be illuminating.

Fonterra has at long last by escaping the shackles of its 100% collectivist ownership model.

It will be a sad day when Fonterra loses the strength and unity afforded by 100% collective ownership. This is how Fonterra came to be in the first place, through the dairy industry investing in it's own destiny by adhering to co-operative principles, which have stood the test of time for over a 100 years. What corporate investor companies have endured so long, Telecom? Carter Holt Harvey, Fletcher Challenge, Lion Nathan??The world is littered with co-operative carcases which chose to 'evolve' into corporate ownership so as to aquire the money and influence of the likes of Gareth and other money men.

As a supplying Fonterra shareholder I rue the day when trading amoung farmers is implemented thus hybridising a succesful co-operative into soon to be train wreck corporate courtsey of Gareth and whatever other investment vehical wants a stake in dairy whilst disenfranchising the co-operative concept.