By Alex Tarrant
Prime Minister John Key has signalled the Government may look at cuts to the Working for Families scheme for participating families on the higher income levels that qualify for the scheme.
Government is in the process of reviewing all its spending in the wake of last week's Christchurch earthquake.
“There may be the opportunity to make alterations to the generosity of those schemes, particularly Working for Families where it reaches into very high income levels, and where those people have enjoyed reasonably good tax cuts because we’ve lowered the top personal rates," Key said.
"We are looking at those sort of areas. In terms of interest on student loans, it’s not my expectation that we would put interest back on student loans," he said.
People don't understand the economics
Meanwhile, in his interview on Newstalk ZB this morning, Key said he thought there was "quite a lot of confusion around the economics" of the two Canterbury earthquakes.
"Think of it in these two parts: One, [we've] got to rebuild Christchurch – let’s call it NZ$20 billion, about 15 [billion] for the second earthquake, five [billion] for the first," Key told host Leighton Smith.
"We have a good scheme in New Zealand, EQC. When you pay your fire levy or fire insurance on your property you pay 1%, capped at a certain amount, so 60 bucks a household. So that fund, it has NZ$6.5 billion in it, but we’ll take about NZ$4 billion out of it. So that’s four billion," he said.
"We buy reinsurance, just like you have an excess premium. So we’ve got another five billion guaranteed there, so nine billion.
"Then you have the insurers, and they’re on the hook for fixing your house and that sort of stuff. We don’t know exactly but let’s call it another five or six billion."
That added up to around NZ$15 billion.
"Now we’re going to spend arguably maybe more than 20 [billion dollars], but it’ll be over a five to ten year period. So don’t worry so much about the rebuild, there’ll be some implications, but I think that’s sort of covered," Key said.
"Where we get knocked around is that, when you see the May budget numbers - and we met with Treasury night before last – you’ll remember the back half of last year was quite weak from a growth point of view. [The] September quarter [got] knocked around because of Christchurch," he said.
Growth would have been positive but instead went negative.
"That’s now going to be the case for Q1 and Q2 [March and June quarters this year]. So think about it in these terms: From a June to June quarter, in that 12 month period, my guess is we’ve lost NZ$15 billion worth of GDP – in other words, just less activity," Key said.
"Crudely, from the government’s point of view, that’s NZ$5 billion of tax we don’t get, so our revenue goes down, and on the other side of the coin our outgoings go up because we’re paying for all these [earthquake recovery] programs. So that’s what knocks us about," he said.
WfF's upper reach "quite extraordinary"
On the issue of Working for Families and putting interest back onto student loans, Key said he did not think anyone was arguing for the latter.
However, when it came to Working for Families, there were aspects of that policy worth having a good look at.
"For instance it’s reach up into very high income New Zealanders has been quite extraordinary," Key said.
"Now I think there might be an argument that says, there were tax cuts at the higher end, New Zealanders enjoyed those, that’s good - some. Maybe the reach of Working for Families is too high at that very upper end, so that’s worth having a bit of a look at," he said.
"I think it’s worth getting a bit of perspective around that."
(Updates with further Key comments from Newstalk ZB interview on student loans, WfF)
85 Comments
Finally it appears their hand is being forced - I wonder whther they will still go 'for a little more debt' as well.
The NZ$ seems to have taken a knock in the last few minutes - related? Possibly the markets are finally pricing in the enormity of the quake losses.
Sigh...
John Key tells Bloomberg he expects the RBNZ to cut the OCR next week.
So much for an independent central bank that isn't pressured by the PM
“The market has priced in a cut from the Reserve Bank,” Key said in an interview today in Wellington. “That would probably be my expectation, that the Reserve Bank would cut.”
http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=auYBlzniCLns
cheers
And the currency dropped more than half a cent on the news...
In terms of making more savings the earthquake is almost a "god's gift" to JK etc....to make cuts to WFF....he'd be a fool not to IMHO....on th balance side taking money out of the economy just makes it contract more or grow less....less money == less spending....Its pretty clear from history stimulus works...pity that instead of going for tax cuts and WFF boost in 2005 we were not sensible and put the money on a rainy day fund.....controlled by the RB.
regards
Here is one slightly counter intuitive idea that would increase the countries production hugely.
Take away all the online calculators and easily available info that shows how much free money u get for being lazy or for each extra kid you pop out.
Human nature is such that we are hard wired to be expedient. We want something for nothing if we can get it.
I personally know multiple cases of people working less hours or arranging living circumstances in order to maximize there wff or student allowance or other benefit.
They sit on there pc's, use all these online calculators, and get the best "financial package' on offer.
For eg. Student allowance. For every extra hour u work that takes earnings over threshold u effectively get paid ZERO dollars per hour as your allowance is reduced by same amount.
All wff should be paid in food stamps or similar so mum can't go down to the tab and blow it immediately.
I have had direct experience with this very phenomenon and found it hugely counter-intuitive.
It almost seems as if the student allowance scheme was set up to minimise the incentive for students to find work to fund themselves through their studies.
It's plausible that may have been the case, as one can assume we'd rather have students focused on their studies than splitting their attention by working a full (40) or more than part-time (20+) job at the same time as full time study.
Either way, I was baffled as to why a student would want to work less during the holidays, until I realised that with canny budgeting they could get the money for free.
Having the tools online in the fashion they are has a noble purpose and makes it easier for many people to arrange their affairs, the flipside as always is that there are unintended consequences.
In this case, it makes it much easier to see how to play the government coffers.
Personally, I think they should keep student loans interest free, but scrap the student allowance and reduce subsidies giving to the universities (which they spend much of on marketing).
I think people should be enabled to study if they want - and they need easy (non-crippling) finance to do this. But it's unfair that the kid with parents living overseas, or the farmer's son, or the business owner's daughter get free money while others get to borrow.
If everyone's going to Australia after they graduate, we need to pay the workers more, and less welfare for students.
Interesting Simon, I didnt know about these online tools. I worked at student loans and allowances for years (funding my way through uni) and we would definitely get the odd person ringing us up with very very detailed questions specifically for the purposes of designing their annual work so as to minimise their allowance cutbacks.
Out of interest however, how many are doing this? What proportion of taxes are we losing from this?
If its a few rats and mice then I guess who cares, not worth the hassle. If its massive then we have a problem. FWIW the calls I got (not that this represents everyone who was doing it) were few and far between.
What evidence is there to show which category we are in? (evidence, not annecdote)
Cheers
AndyC
If we are so hell bent on giving away free shit why not focus on education. We have families on minimum wage with 9+ kids! There is an education gap that needs filling with these families. Giving them more money to allow them to have a 10th and 11th kid is not the answer.
Poor Johnny Key. Too may late nights. He has let his guard down, woolly ones.
With 2 lambs, Working For Families cuts out at $75k.
Is that a "very high income level", d'ya think ?
Bet you Johnny has spent more on a decent holiday to Hawaii.
You could always tell that WFF stuck in his slavering jaws, but he had to pretend otherwise to gather his sheep into the election fold.
Now his fleece has slipped....run, my prretties, run......
"particularly Working for Families where it reaches into very high income levels" I'd love for him to define what he calls a very high income level. I'd have thought well into the 6-figure, ie 300K, 500K or more. But he must mean that <120K is a very high income because after checking out up-to-date documentation it seems that no one gets WFF over that level.
Ouch!
Financially NZ has taken a king hit, and couldn't have come at a worse time. The equivalent of limping along in a game of monopoly, then taking a chance card and advancing straight to Mayfair where some arse has maxed it with hotels.
Expect the dollar to tumble (it's fallen to 73 cents against AUD already) and cost of living to skyrocket as fuel and food are no longer sheltered by the kiwi dollar.
The disaster was very bad luck. Kiwis being indebted up to the eyeballs was just asking for trouble.
OK, and there are other implications. $NZ dropping, oil rising
http://www.oil-price.net/index.php?lang=en
So what is the likely outcome from that combination?
Cheers
Philly
Probably an increase in the petrol price...
Here's our interactive chart on the petrol price, the diesel price, the oil price component, the tax component and the profit margin component.
http://www.interest.co.nz/charts/commodities/oil-and-petrol
cheers
Bernard
Bernard - cheers for the graph, but I still bleat my bleat;
Name me one activity oil doesn't underwrite.
Food is oil, 1:10 calorific relationship if cereal, 1:27 (or thereabouts) if meat.
Plastic is oil, water, sewer, irrigation pipes, most retail goods.
And if you can spot the odd non-content item, it'll have been transported with oil.
This is across-the-board. At some point (Brent over $100 is a good yardstick - but remember that it's a double-variable) you get a recession, and the price will crash at the margin. Until there is no margin, even at the low-activity rate.
Then all bets are off.
When the price signal gets strong enough, ways to do without oil will be developed and disseminated. It is already possible to make electricity and drive a car without it and these and other technologies yet to be thought of will become more economically viable. Certainly life as we know it will change, but then doesn't it always?
I'm thinking that when that price shock hits, people will rapidly realise that it's more financially prudent to stay at home (on unemployment) or work locally (within walking/biking distance) as opposed to commute large distances to work. There will be resignations en masse and a spike in unemployment registrations. At that point, I'm guessing the government will reduce taxes on petrol and start more heavily subsidising public transport) as a means to try and get people back into work.
Of the $2.00+ per litre you presently pay, nearly 90 cents is tax!
http://www.interest.co.nz/charts/commodities/oil-and-petrol
Of course that will create another hole in the revenue line for government - and another round of "austerity" measures.
A massive adjustment will occur if there is a sudden shock. Given the tensions in the Middle East combined with peak oil and the associated more costly extractions - I'd say that a sudden oil price shock is almost a certainty. They were debating it (at what level such price sensitivity kicks in) on the UK Top Gear programme the other night.
Take folks living in the Kapiti District for example. I think around 70% of the wage earners residing there work in Wellington. The 10 trip fare on rail costs $81.80 - lets say it's about the same to fill up the car for the 10 trip. What's the take home pay for a low/minimum wage earner? Something less than $500.00/week? If the low/minimum wage earner has a student loan - 10% of net pay is automatically deducted. If they've joined Kiwisaver - 2% is automatically deducted. With travel expenses already roughly 15% of their take home pay.... just those three deductions leave them with around $365.00/week cash in hand.
The unemployment benefit for a person in a married or defacto relationship is $323.52 a week in hand. I'd already say a number of low wage earners in Kapiti who have to commute to Wellington for work are thinking twice. Double (or even add on a 25% rise) the cost of the commute and working becomes absolutely a loss making situation for the low paid worker.
Muzza if your thinking about buying property remember that lowering OCR is sending a signal to international investors to remove funds from our country. The intrinsic value of nz property has fallen due to quakes. No matter where your rentals may be there is a chance they could be leveled any day with govt out of cash to bail you out. Yes statistically speaking the chances are likely no greater now than previous, but the market didn't do stats 101 and will be pricing in this added risk as we speak.
A lower interest rate regime also send out the 'no inflation' or... 'deflation' signal. Anyone expecting real house prices to be 'eaten away' by inflation to keep prices steady must realise that to keep the real price steady, the whole of the adjustment has to be taken up by the nominal prices falling. Lower interest rates really means, lack of borrowing demand = lack of consumer spending= lower prices for non essential items.
Yes it an interesting question, the 'risk' suddenly now appreciated to do with holding property. The classic comment always was 'as solid as bricks and mortar'. Problem is we live on a tremulous rock and the threat of catastrophic property events is no longer seen as an existential one. Commercial property holders/insures will also be re-assessing their ideas of risk - the era of seeing property as ultra low risk maybe ending.
Yes something to think about. NZ's OCR is still quite high compared to UK etc, so we have some scope for a lowering, although suspect a lot of investor money would go to Australia if we got too out of kilter with the Australian OCR
By the way, are you saying one shouldn't progress a good buy in Hamilton or Tauranga because of the earthquakes in Chch?? The big Lakes subdivision that would house 6,000 has just gone belly-up in Tauranga, there are going to be some bargains coming up, scope to buy very competetive priced sections and build a very good house for a total package of around $400,000- would have been $600,000 18 months ago.
I guess it went belly-up because no one bought the properties? That means those that did buy, will take a 33% hit ,straight off ( using your estimation of the new sale price) and will be competeing with the new primary market price when they sell. The Chrischurch Effect will spread all across New Zealand. Even that new price of $400,000 in The Lakes, Tauranga is going to look expensive in a years time.
Might be just $300ooo by the end of the year Muzza!.....got your bank account ready to take the petrol hit when the Kiwi$ dives on a Bollard move to play the cheaper for longer again!....expect the costs to flow into every nook and cranny in the economy...even into the nooks and crannies in Goofy's nut.
It's apparently quite a common phenomenon that if you ask people where they think they are along the income scale, most of them think that they are about average; and therefore most people therefore think that "rich" means somebody who earns much more than they do.
It's therefore quite brave of JK to be so clear as to exactly who he means. Be honest now, would you have thought it so outrageous if he had said "the top 20%" rather than "$75k"?
Yet again middle and low income earners are the ones who bear the brunt. $75k being a high income earner - I love it. Why the hell dont they put a tax on and keep it increasing as you go up the ladder - $500k and beyond? Following the concept of society and social responsibility that would then lead to those who can afford it giving an amount commensurate with what they earn, and that amount being a fairer proportion on the lower income earners.
Its funny, old Bill English was stating that we wont rule anything out as a means of paying for this etc etc, yet the one thing they categorically ruled out was a tax. Let me think, a progressive tax would mean their key funders would actually have to pay wouldnt it, and they sure as hell wouldnt want to do that!
All this hand ringing on what we need to cut. A mix of cuts to WFF & benefits (except pension), total abandonment of Interest Free Loans and a levy of sorts is required. As a higher end earner in NZ, it is only $100K I will be pissed off if the Greens proposal came in, $48K and above. Greens and Labour always like using PAYE to pay for their 'free' money to interest groups. Everyone has to contribute and those who receive 'free' money need to realise their free lunch is over.
To help with mitigating this we also need to start digging holes in the ground or else it will get worse.
paula bennett has wat, 20 odd bil a year to spend. theres chch sorted in 1yrs dole! its crazy, no diff subsidizing farmers post '72, its unsustainable. hopefully the dollar plummets and % rates tumble...thats wat i'd call a 'correction'. overleveredged? god help u, coz i'm not.
bugger green, red or blue...go black!
The full quote from Key was actually...
“The market has priced in a cut from the Reserve Bank. That would probably be my expectation, that the Reserve Bank would cut, but it’s for them to determine that.”
...which seems a reasonable thing to say.
Generally the market leads the central banks, so that is not controversial or instructional.
I disagree - his statement has got a weight of expectation for a rate cut, finished with a softening "but its for them to decide" type statement
A rate cut will be disastrous if it occurs - the exchange rate will drop, petrol will soar, inflation will push up
what a bunch of clowns
Anyone looking at the wholesale interest rate markets today would "expect" a rate cut based on current prices. That said, the Prime Minister should in future refrain from interpreting the markets in public.
Not sure that a rate cut would be disastrous. It is unfair to net savers (myself incl) but if commodities will continue to go up - then take those savings and buy commodities!
Isn't this how the US got themselves into so much trouble?
Every time something irrelevant to housing went wrong, they decreased interest rates, and fueled property prices even higher.
I can't see how cutting interest rates help Canterbury at all, it will just have the bad consequences of fueling property and discouraging savers.
theoretically it would reduce the cost of borrowing to ChCh businesses trying to rebuild, but of course the full cut is unlikely to be passed on by the banks, so benefit would be minimal
In fact any benefit would be wiped out as cost of imports rise on the back of a lower dollar
Yeah maybe in theory Matt, but I think most businesses there will be in so much hardship in the next coming months, a half a percent or so off the interest rate won't do much.
Any assistance to them (which there definitely should be) needs to be much more targeted.
It's ridiculous to change something like the OCR which will have a much broader effect on the whole country, and all borrowers countrywide, and also all savers.
dollar drops gas more expensive? good, we'll be ahead of the pack when the shit really hits the fan in 20 yrs. oil @ 148/ barrell in '08 was catalyst for gfc, not housing or any other 'tinkering' factors. saudi light crude...1 kJ in/ 9 kJ out, solar...1kJ in/ 3kJ out...why the thuck did we (whitey) invade iraq? its a race to the bottom with the chinks ppl...but nz's all good, keep polishing ur shotgun and growin ur veges...those italian shoes are gonna get pricey matt
Section 9 of the Reserve Bank of NZ Act states:
"Policy targets
-
(1) The Minister shall, before appointing, or reappointing, any person as Governor, fix, in agreement with that person, policy targets for the carrying out by the Bank of its primary function during that person's term of office, or next term of office, as Governor"
This is the legislative frameowrk. My understanding is that the primary policy target under this section is a maximum rate of inflation of 3%
the "out" that Bollard has used to excuse higher than 3% inflation in the past year is the series of "one offs" - GST etc
But surely he's run out of outs????
..and when you pay more for petrol driving to work and back home, then you earn – stay home, open a bottle of wine from Bulgaria and smoke a Cuban or two in front of the flatone.
Good on you Bernard – telling about protuktifity (difficult word) & consumerism (much easier)
Huuuuuuuuuu - we are going around the circle here again - around, around - daily.
Chairs - G. Brownlee & S. Joyce
John Key must be absolutely loving this. He is almost guaranteed to be re-elected now regardless of the Hone phenomenon. Even I... who despises our smile and wave NWO Agenda implementing show pony... can't help admiring how poised and caring he has been over the last week... I am almost buying it.
And now he can cut loose and roll out his ideological Freight Train and disassemble piece by piece all the gains fought for by generations of caring New Zealanders.
Maybe the conspiracy theorists are onto something blaming HAARP. This sure does quack like an Illuminati Master Plan.
Not so sure about that - the timing is wrong, euphoria too early.
But the master plan is a correct assessment. That Parnell cup of coffee was a serious message to a section of the community, and you can always rely on the rich to need to get richer (having failed to assess their flaw - usually insecurity) even if the ship is visibly going down.
The mass, however, get a vote too, and I wouldn't predict the anger, frustration and resentment that may be floating round in November.
My kingdom for a bourse?
Thanks power downkiwi... you have given me hope.
You have to ask yourself what type of person our Prime Minister really is deep down inside.
Why does any one person/couple need $50,000,000 worth of assets. Surely if they had a smidgen of compassion they would utilise most of those resources to relieve the suffering of tens of thousands of people... actual living breathing Human Beings...
I guess personal worth of say $10,000,000 would ensure satisfaction of ones own needs.... beyond that shouts GREEDY M--------R and SELFISH BASTARD to boot...
I don't mean to judge... just sayin'...
Your thoughts please Sir??
I agree that it was about tax benefits although I would think that an increase in demand for property would have an impact on rental prices considering that they would more people seeking their own property as opposed to renting, once again causing a glut or an oversupply of unrented properties.
As for cash being king. I don't see that being the case for too long especially if the world will be heading towards a resource-based economy and self-sufficiency considering the rise in the cost of oil as well as the depleting supply. I suspect gold and silver prices to go through the roof in the coming months as the world heads into another recession.
"But the rental market was never about returns more about tax free capital gains"
There has been a rental market in NZ for nearly two centuries. Like all business there is a capital component , a cash-flow component and a market cycle. All we are presently witnessing is the is the transfer of focus from capital gains to cash flow. This has been a particularly unspectacular one in NZ so far with average nominal price falls of 6% over the first 3 years since the peak and similar average nominal rent increases.
The main difference between this and the previous cycles is that volume of the vehemence of the vocalisation of those who missed out on the gains in the up-cycle. It's not new, just louder.
To say the rental market has never been about returns is simply not true, (or perhaps truly simplistic.) It has always been a relatively short period of capital gain focus followed by a longer period of focus on returns.
Yes, there has been a rental market for nearly two centuries. But there has only been a property speculation market for the past 8 years. The vehemence and louder vocalisation isn't about missing out on the up cycle - it's about not being able to afford ones own house, about not being able to create a home for ones family.
"But there has only been a property speculation market for the past 8 years"
Please, please tell me you don't believe that. In the early seventies it was so rife the government introduced a "speculation tax" of 90% in a vain attempt to curb it. Next thing you will be telling us is sex was invented about ten years ago and before that babies were delivered by storks.
So if residential property has experienced times in New Zealand when the risk free rate of return was covered; plus a commercial margin to cover the risks associated with renting ( untenanted times; damage etc), plus plus a commerial profit ~ when was that? The best I can recall was part of the the '90's when the rent covered the cost of the mortgage only, or just about! It's always been about capital gains during the business lifetime of most of the posters on this site!
"In the early seventies it was so rife the government introduced a "speculation tax" of 90%"
My bad. I wasn't around in the early 70's. My opinion is based on my personal experience having once owned a property in the early 2000's. In addition, my personal recollection is that the proliferation of advertising/promotion of "investment properties" has really only occurred over the past 8 years. That would assume a break in speculation of approx. 25 years. There were definitely plenty of factors that encouraged the last bout of speculation and maybe it was more extreme than past cycles (before my time). Either way the last cycle was never about the rental market. Do you really think the sheeple and the speculators bought property because they thought they were providing a rental service?
In my opinion those investing in the rental market (prior to the recent cycle) made their decisions on sound investment principles - yield, cashflow, and a long term approach to capital gains, etc. My understanding is that an "investment" is long term, ie 10+ years. Anything less is speculation. How many properties were bought during the recent cycle with the intention of holding onto long term? How many were purchased for a quick capital gain assuming that 15% p.a appreciation would continue? Therefore, the statement posted by AndrewJ should probably be rephrased - "but the rental market over the past 8 years was never about returns more about tax free capital gains
"Next thing you will be telling us is sex was invented about ten years ago and before that babies were delivered by storks"
Now, now. We're all entitled to our opinions here, but there is no need for ridiculous, snarky comments such as this. I never believed that babies were delivered by storks and I don't think sex was ever "invented".
...And Speculation has been rife prior to that, turn of the century, 1894, When the BNZ first went bust, The Colonial Bank soon after lending recklessly on property.
Human nature is such as we know that Greed and fear override rational thought, this is why eceonmists never get it right. Just because something appears overpriced to some doesnt mean it is overpriced to others.
And lessons are forgotten over lifetimes. Unfortunately this has been tragically borne out in Christchurch, not many people know that the spire of the Cathedral has been toppled now 3 times by earthquakes in the last 130 years...Yet no one believed Christchurch to be prone to earthquakes.
What's missing in this debate ? Did this never happen in your neck-of-the-woods? Starting around 2003 or 2004 (in my neck of the woods) there appeared a new group of entrepreneurs called "mortgage brokers" who shopped around the banks and particularly the merchant banks who all had money pouring out of their ears. The next symptom was the almost daily tele-marketing phone call in the guise of a "call centre" or marketing-survey organisation wanting to know if you (a) owned your own home or (b) rented. If you rented they disconnected pretty quick. If you were an owner, the next question was did you currently have a mortgage. Then the pressure-selling started. They offered you a massive mortgage at low cost, or to increase your existing mortgage at no extra cost, or reduce your costs of borrowing substantially with cunningly concealed sweetheart or honeymoon rates on ARM's. The selling pressure was intense. Did you never get any of those pressure phone calls? I got them every second day for about 3 years until the S**T hit the fan. Havent had one since.
Rental returns would have to be based on ones ability to pay. Which in part depends on the government continuing to pay housing supliements. I thought that we always were resource based, I can see that energy could be a spanner in the works but there again making us poorer. Im just pointing out that deflation shouldnt be discounted to soon, for all that the central governments are doing, Europe is a mess house prices are continuing to fall in most of the west and the liquidity being poured in is creating another bubble this time in commodities which when it bursts will severly effect export orientated economies like ours.
This would in turn set off a deflationary spiral which must be a high propability or the central banks wouldnt be so afraid of it, and the destruction it would do to the banking sector, prefering to see the middle class pay and pay and shrink in size.
On the exchange rate issue, if the markets have priced in a 50 bp cut in the OCR (which they seem to have done, especially after Key's comments) and it's only cut 25 bps, then the dollar shouldn't fall further - in fact it could rise.
The question is, would Bollard cut by 25 bps?
Cheers
Alex
Edit: PS. So further on that, if Bollard were concerned about the inflation dangers from cutting the OCR (ie, oil price comments from pple above), Key's 50 bps comment could give him more leeway to cut, but by 25 bps.
Your thoughts?
Inflation through oil is push inflation......Monetery policy via OCR changes is really only suitable for pull inflation IMHO. This increased oil price, it takes money out of ppls pockets so thay have less to spend on desrcetionary items so those will deflate and businesses selling them will struggle even more, even businesses who are passing on oil costs are not making more this isnt really infaltionary.......in other words to me its acting just like a OCR hike would.....and its out of RB's control. Therefore if you take the short term view the OCR needs to drop to compensate for increased oil prices all else being equal....Longer terms there are issues, low interest rates encourage excessive property speculation, thats simply bad....and as oil price continues to rise you can only cut the OCR so may times until its at 0.25% and game over...
The other Q is would cutting the OCR help NZ overall? if not, why cut? A low OCR supposedly helps lower the exchange rate and manufacturers benefit, but a low OCR means OAPs spending is less as they get less income.....so a balancing act....
Right now Im not convinced the RB has to lower....especially if you believe the garbage about signs that the US is recovering....we would in that case follow them up anyway...
regards
When will the RBNZ admit that the OCR is a blunt tool that needs replacing? It didn't acheive anything when they were concerned about the over investment in housing, Has it really acheived anything over the past few years?
Yes the government need to look at ways of reducing spending but a slash and burn approach isn't any good without more work on the revenue side as well.
In the case of rebuilding Christchurch the approach should be more specific. An OCR cut for the whole country isn't the way and the RBNZ and government need to think outside the square. Why not use the public credit policy of the 30's? Print $5b or whatever the cost ends up being and provide this specifically for infrastructure costs in Chch. Use the state of emergency and require that all materials/labour etc are provided at cost. Why should Fletchers etc need to make a profit from this tragedy? The unemployed could all be paid a wage and work as labourers rebuilding the city.
The RBNZ has long said its a blunt tool I believe... Housing, the RB is constrained, its Govn that sets policy...blame the Pollies.
"At cost" often hard to define...and a profit is reasonable....in fact essentail...I wouldnt supply "at cost" I'd walk away.....
regards
Not sure how deflation would set in when prices are at a record high. Commodities could very well be a bubble although don't see the bubble bursting too soon considering the resources are limited unless someone somewhere is holding onto a mine that has plentiful supply and hasn't yet dumped it onto the global market. Although I am very keen to know what the current inflation rate is. Seem to have varying sources citing different values.
Deflation is overall....so somethings are higher, somethings are lower in cost....If there are more things lower in cost, either by degree or quantity v those inflating we have deflation.
The mistake is not to make is to look at your day to day bils like food of fuel bill over one or two months and say things are higher....you need to look at your spending over many months or even a year (to take out seasonal changes in food prices) and you need to look at items that have a multi-year effect.
So for instance in an extreme case in 2 years ago a Samsung 42inch LED TV was $4500, today about $1500 for the same unit (more or less)....yes I know the technology effect is making this look an extreme case....
The same thing can be applied to kettles, cutlery....so I just bought some forks at Briscos at their seemingly now permanant 50% sale discount....
Also last November I bought a laptop with a 15% discount and the new model looks to be at that discounted price retail today....so in 1 year this particualr laptop brand has deflated 15% and become more powerful.....this is something you buy for 3 or 4 years use......
Alternator for my 4wd, 18months ago I was quoted $945 new, got it 6months back for under $700.....
When you go back tot he oil bubble in July 2008 at $147USD it burst very fast, all the way done to $35....
Fontera's milk solid auctions did something fairly similar....
So if we get a second recession things could go worse, in fact way worse because this time no central bank has the reserve borrowing capacity left......this is why Pollies are so glumb faced if not frightened....the line they have sold the voter is not coming true....
regards
Inflation is here on oil related products, whether that can be passed on, or will have to be absorbed will be of interest. Oil is not constrained as far as supply goes, at present its speculation driven. Farm prices are falling and look to be well back, on bank figures more than %50. Its going to be about the debt whether we like it or not and who we vote for isnt going to change that reality. Im noticing strong prices pressures on products but having said that, demand is very very weak so Im not sure they will be able to continue lifting prices and if they do I will have less to spend unless I can pass the costs on, which at present I dont have the ability to do. So im purchasing a lot less and pulling all my expenses in. Im noticing wide variations in prices.
If John Key does not have the guts to make students pay interest on their loans he should at least increase their loans by inflation every year. By daughter is at Harvard and is paying US$45K a year and her Husband is at Cornell and paying the same, they also have interest added to the loan. Kiwi students are getting a absolute bargain on the back of the rest of us.
This is a perfect time to look at how local taxes are paid so that more money can be collected, surely nobody thinks that a granny living on her own should pay the same rates as next door where ther are lets say four working in the family. This would be a good way of finding that extra 10 billion.
Bollard must reverse those stupid rate rises of last year that set us back by so much and virtually destroyed the Far North economy.
and BBs paid for their tertiary education? mostly from what I recall they didnt.....
NZ v US education, we have choices as a society....there is now huge concern that certianly in America the cost of a tertiary education does not give the person a pay back...
Simplisitic cr*p...Granny living on her own where she has a smaller property in a less expensive area will pay less....In terms of a four person family I am the only one who has a job at present so somehow I pay or 4? yeah right...the problem is your idea is simplistic cr*p......oh and Granny gets free public transport and has higher health needs by and large....she doesnt pay for either....I do.
Bollard didnt destroy the far north economy...global banksters did and they very probably will again. In fact he probably did more to keep the NZ economy from collapsing any more than anyone in or near Govn...
regards
The good thing about those lazy students is that there are only so many of them to vote.
Student Volunteer Army, a true picture of the youth of today, lets get them to help pay for the earthquake too, even though we will not even enter into dialogue over the completely unaffordable non means tested universal pension that kicks in at 65.
On the day of the quake John key announced plans to benefit bash again attacking people on a benefit election year, so go for the soft targets. the quake has shifted the focus on to christchurch and rightly so.
I am 51 years old. When I was ten in 1970 I fell from my pushbike and was injured really badly I was to spend 4 years in hospital. because of previous benefit bashing by other political parties I went to court to establish my level of disability.
My level of disability is 75% + so I am badly disabled
My point of posting a comment is this I am on a means tested invalids benefit. I walk very slowly my breathing is a major issue I have had extensive windpipe reconstruction, I have worked most of my life as an electronic serviceman
To the point because of my slow movement and breathing issues if I get caught in the rain and get soaked and cold I tend to get very sick my breathing issues can be life threatening
I have set a business up at home I staryt work at 9 am and finish when I finish in general about 55 hours per week.
I have taught myself website SEO and I am damn good at it, I have joined chamber of commerce, problem is because of my disability I can only talk in a whisper at chamber events people have trouble hearing me so I am treated with disdain making it hard to get any real work coming my way
There is absolutely no assistance available for invalids beneficiaries. I want to work but nobody will help
I own a bunch of websites and would like to sell online advertising and do SEO work then Mr John Keys I would not need the benefit.
If I had a voice I would succeed big time. I have tried every angle, you tell me if I deserve to work, following is just some of my top ranking website names all are page 1 on Google
Newzealandbeaches
Newzealandrestaurants
Newzealandcafes
Newzealandwalkingtracks
Newzealandbikingtracks
If only somebody would listen I could say goodbye to the benefit
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