Here's our summary of key economic events overnight that affect New Zealand, with news central banks in both China and the EU have been active overnight, both dovishly.
But first up, initial American US jobless claims last week came in little-changed at +220,000 so there are now 1.69 mln people on these benefits, also very little-changed. Their long-awaited labour market stress still hasn't arrived. It surely will, but has defied the gloomsters for nearly two years now. They may have a long time to wait yet before their stopped-clock position is achieved.
American retail sales rose +0.6% in August from July and easily beating forecasts of a +0.2% rise. Year-on-year these sales are up only +2.9% however which is less than inflation. But the recent rises point to good consumer spending despite high prices and borrowing costs. But part of the recent increase is due to higher fuel costs. Excluding those fuel costs, retail sales only rose +0.2% in August from July, but they were +4.3% higher than year-ago levels which bests inflation by +1.0%.
On the factory floor, producer prices rose by +0.7% in August from July, the highest level since June 2022, and higher that analysts expected of a +0.4% rise. But excluding food and energy, the producer price index increased by just +0.2%. On an annual basis however, producer price inflation reached a four-month high of +1.6%, while the core rate actually eased and to +2.2%, which interestingly was its lowest level since January 2021.
Meanwhile, neither wholesale nor retail inventories are rising, so there is no inventory stress building in this economy.
In Japan they recorded a drop in new machinery orders in July. This series does not include orders for ships or electric power systems. Including them, orders rose sharply. The decline in core orders was driven mainly by a -5.3% decrease in the manufacturing sector, while the non-manufacturing sector posted a +1.3% increase. Industries in the manufacturing sector with the sharpest falls include for petroleum & coal products where orders fell a startling -57%.
Overnight, the People's Bank of China has announced a -25 bps cut in their reserve requirement ratio for all banks, taking it to a weighted average deposit reserve ratio of 7.4%. The banks already on 5% however got no change. At the same time they doubled down on defending the yuan and the managed rate they want to see.
The ECB hiked its policy interest rates for the 10th consecutive time overnight. But it also signaled that it is likely done with its tightening policy, as inflation has started to decline. After this change, their main refinancing operations rate reached a 22-year high of 4.5%, and the deposit facility rate set a new record at 4%. According to the projections released with this policy change, average inflation is forecasted to be at 5.6% in 2023 and 3.2% in 2024, both higher than previous estimates, primarily due to higher energy costs.
In Australia, there was a bigger than expected surge in employment in August but most of it was for part-time jobs. Full time jobs grew by a tiny +2,800 while part-time jobs grew by +62,100. Their jobless rate stayed at 3.7% in August as expected but that remains a 3 month high matching July's rate. There are now 540,500 people without jobs, up +42,600 from a year ago. (For comparison, Australia has 69.5% of their employed workforce in full time jobs, its lowest level in 10 months; New Zealand has 80.0%, a level we have been at for five years and the best since the 1990s.)
And a new report out from the Australian Productivity Commission shows that almost all (95%) of workers got pay increases equal or better than productivity increases. This conclusion might make uncomfortable reading for the Albanese government and their union supporters who have long claimed the opposite.
Internationally, last week there was a sharp drop of more than -7% in global container freight rates. It was particularly noticeable in outbound rates from China to the EU. Meanwhile bulk cargo freight rates are on the move up.
The UST 10yr yield starts today up +5 bps at 4.29%. Their key 2-10 yield curve is slightly less inverted at -72 bps. And their 1-5 curve is now at -102 bps and also a little less inverted. Their 3 mth-10yr curve inversion is less inverted too, now at -110 bps. The Australian 10 year bond yield is now at 4.11% and down -1 bp from yesterday. The China 10 year bond rate is down -2 bps at 2.64%. And the NZ Government 10 year bond rate is now at 5.01% and down -4 bps.
Wall Street is up +0.9% in its Thursday session with the S&P500 booking consistent gains through the day. Overnight, European markets were all sharply higher with Frankfurt up +1.1%, Paris up +1.0% and London up almost +2.0%. Yesterday, Tokyo started the global push higher, ending its Thursday session up +1.4%, but Hong Kong was only up +0.2% and Shanghai ended barely changed, up +0.1%. The ASX200 ended up +0.5%, but the NZX50 never got the memo, ending its Thursday session down -0.4%.
The price of gold will start today at just on US$1909/oz and down -US$1 from yesterday.
And oil prices are +$1.50 higher from yesterday at just over US$89.50/bbl in the US and back to its ten month high. The international Brent price is now over US$93/bbl.
And perhaps we should note that the price of uranium is rising fast now, approaching a decade high on rising demand.
The Kiwi dollar starts today little-changed from this time yesterday at 59.1 USc, still settled in its tight range. Against the Aussie we are softer at 91.9 AUc. Against the euro we are +½c higher at 55.6 euro cents. That all means our TWI-5 is actually little-changed at 68.7.
The bitcoin price has moved higher from this time yesterday, and is now at US$26,627, a net rise of +1.9%. Volatility over the past 24 hours has been modest at just over +/-1.3%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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128 Comments
And if I see the rent rising I'm going to be peeved. The lord will say he has no choice, here is your rent increase. Immediately followed by, I have no choice but to leave, good luck with that
Adam B the usd exchange is also up a bit. Currency often counter balances oil and commodity prices
It just leads to higher house prices, and rents rise to provide an acceptable return. Until we get on top of supply we are stuck. With the nats flip flopping on MDRS and ACT protecting sparsely populated suburbs at all costs, I am not hopeful.
Edit: I should have added - obviously high immigration means we have to run even faster just to stand still.
Hence why i agree with the Labour policy of interest deductibility for new builds (incentivise supply), brightline to 10 years(dis-incentivise speculation) & a foreign buyer ban to further dampen price rises...why on earth would you want to expose a housing market of 5 million people to hundreds of millions of possible purchasers offshore?
Yes, the interest deductibility is a pretty neat incentive to build. I am a little uneasy about the exemption for landlords renting our via the government - I worry that investment properties switching to social housing provision means the private market shrinks, meaning rents increase, pushing more local residents into requiring social housing. The end result could be very expensive for the government.
This could also be solved by building - if Kainga Ora build enough they won't need to rely on these incentives to private landlords.
Where is all this income coming from to increase house prices?
Most immigrants seem to be debt ridden global tradies - sending their income home.
House prices will decline as more supply comes on. This driven by higher ownership costs (interest rates etc) leading to stressed sales and unoccupied houses coming onto market (air bnb for example).
Supply is more than just new builds when to comes to price influences.
When Covid drove those on work-visas away my CBD apartment rent changed from $525 to $420 and I was happy to gert it because my property was empty for just a couple of months and others were empty for over 6 months. It is supply and demand - bring in the immigrants and that is instant demand.
The OCR will need to go higher. Perhaps one more hike by year’s end. The next CPI read is going to be a bit ugly.
Note - I don’t think that’s the right thing to do. I have a lot of time for JFoe’s views on higher interest rates having an inflationary impact. But based on the RBNZ’s paradigm and mandate, they *should* be hiking further.
Thanks (I was commenting at the same time below!) It's an illogical doomloop. We know that higher interest rates will likely make things worse, but raising rates is what the RBNZ mandate and policies tell them to do... and it is what the market expects them to do as well, which has real world impact. I don't think they will increase the OCR again though - they know they have overdone it and only record migration will keep GDP positive next week (I think it will be very, very close though).
"Transport underpins and touches every corner in NZ with few exceptions" - you can say that about food, housing, internet, etc. For example every employee in NZ needs food to live, when it goes up they will demand pay rises, that will cost most businesses much more than fuel will.
vman stop with the positive comments, you are in the wrong website / country for that. Repeat after me: low unemployment is bad, high unemployment is bad, moderate unemployment is bad, its all Jacinda's fault, 10% interest rates guaranteed, GDP growth is bad, NZ is doing worse than all other countries but if we are doing better it is a strawman argument, Labour caused world wide inflation, I am going to move to Australia (but never actually do), etc.
From last nights finance spokesperson debate;
https://www.1news.co.nz/2023/09/15/katie-bradford-willis-struggled-in-f…
The most distasteful part of the night also goes to David Seymour. When moderator Jack Tame asked what National would do about the budget for the Ministry of Pacific Peoples, Seymour quipped “I guess Nicola might have to increase their security budget”.
Probably tied equal to loud applause and support from the audience was when Seymour promised 15,000 “faceless bureaucrats”, otherwise known as public servants, or real people with jobs, would be made redundant.
While Willis stood her ground, she only proceeded to put more pressure on her party’s policies with a frankly astonishing admission that she doesn’t know what the impact of the combination of the reduction of the bright line test and the reintroduction of interest deductibility for landlords will have on the housing market.
In a room that was until that point largely supportive of National, there were some baffled looks and the vibe in the room certainly changed. She was also under fire when she said overseas buyers would only be a “tiny fraction” of the market, with James Shaw questioned how “a tiny fraction” of the market would raise enough revenue.
New Zealand voted in MMP and not without good reason. Unfortunately though, neither the electorate nor the politicians themselves do it much justice. The electorate may now be realising that having a junior coalition party that is not that much junior in size at least, tends to create a coalition government that is an uneasy balance. This thought may now be tempering ACT’s position which as well has not not been assisted much by some strange and unrequired utterances by its leader plus exposure of an inexcusable laxity in selecting candidates.
Agreed Foxy,it is all fine when the minor party has a couple of MP's,they can be seen as keeping pressure from within a government and keep them a bit more honest,ensuring they stay left or right of centre depending on their colours.But the very nature of being a minor party means they court some pretty disparate voters to get the numbers,which can get a bit scary if their vote increases such as with ACT which has Free marketers,Libertarians,gun toters,anti vaxers,pro intensification,anti intensification in leafy suburbs...when they all start sitting around the same table chaos will ensue.
'...,pro intensification,anti intensification in leafy suburbs...'
Yawn, your list basically can encapsulate anyone and everyone in Aotearoa. So many comments from you spouting the same stuff in the last 45 minutes. You clearly have an axe tro grind and an agenda. As for any upcoming ensuing chaos, have you been living in a silo for the last 3 years? The 3 on the left have got chaos in NZ down pat!
The voters might be a "disparate bunch" but David has done a very good job keeping the current MP's focused and on track - they certainly look like the most disciplined party in Parliament. Nothing suggests that post election will be any different
David has also shown that he can work across the house to achieve legislative outcomes - as a single ACT MP he managed to get legislation for EOL passed - no mean feat and I am sure he has the skill set to achieve ACT's objectives - certainly the big ones
Thats because he doesn't let them say anything,he is the mouth piece,with a few comments from Brooke Van V...the rest most couldn't say who they were or what they stand for...good on David,long may he and a couple of his colleagues be in parliament...just not the whole posse.
did he , then why did he move 4 of the ten to so far down the list that 2 retired and the other two wont make it back.
so out of 10 he moved 40% to a position they will not be back, there have been whispers behind the scenes that they were not happy with his leadership.
in saying that he did a good job of not letting it leak out into the open, and keeping his leadership safe for now, BUT the Board have parachuted 2 people in high up the list who after a period in parliament could challenge him for the leadership, my pick come next election he will not be leader of ACT
"New Zealand voted in MMP and not without good reason." Guyon Espiner in his Top Floor series interviewed Jim Bulger who openly admitted that none of the political parties of the time wanted an MMP system but were bound by the referendum. So he said they created a system they thought that no sane person would accept. Problem was they completely misunderstood the disenchantment that the average Joe Public had with politicians, and when offered a chance to water them down in any way, we all took it with both hands.
Thinking about it now, I would suggest MMP was NZ's Trump moment. And the same problem exists here. Not one politician has stopped to asked why? Why were Kiwis so disenchanted with their politicians, why would they prefer such an obviously flawed model to the FPP one. And most of all, which model would best serve NZ's people?
Yes I remember that scene. One part was that while the Royal Commission had determined that there was no need to increase the number of mps, they went ahead with another 30 regardless. The thinking being if they don’t like much any of of here they are hardly going to want 30 more. David Lange went on record stating in all his parliamentary experience that was the most cynical measure of self interest that he had ever witnessed.
"Why were Kiwis so disenchanted with their politicians, why would they prefer such an obviously flawed model to the FPP one."
because of the 2 FPP elections when the popular vote put Labour in Govt but the gerrymandered electorate system saw National in power.
We had the STV proportional option available which would have been much better than MMP.
Maybe. The STV was possibly an option on that referendum ( I don't remember) but what ever, the people voted for MMP. But the politicians really avoid the probing questions on our form of government and how well it serves the people, as they do all over the world. So really it is 'democracy' in name only as the politicians (ALL of them) corrupt it every way they can.
I think that RBNZ will spin it based on the difference between headline inf vs core inf. Core is likely to remain at a similar (sticky) level while headline will rise (oil, imports). Probably delay any future hikes until post-election. Probably a couple more hikes in the next 6 months.
I do wonder about 'the CPI excluding energy' measures. Most advanced economies literally fun on fossil fuels. Even in NZ where we have considerable renewable capacity, our basic energy requirements are two-thirds fossil fuels (mostly oil). That means that a change in the price of oil (and diesel in particular) is far and away the most reliable leading indicator of inflation. For the nerds, the change in CPI correlates with the change in diesel price by around 80% with a 3 months lag. There is a negative correlation between consumer demand and CPI by the way - changes in consumer demand do not lead changes in CPI in NZ.
We have a sticky inflation problem in NZ - as prices are quick to accelerate when costs increase and slow to decelerate when costs come down or stabilise. That's why we are still up at 6% inflation whilst other countries (e.g. US) are back down in the threes. Two key reasons for me:
- Our low-competition environment means that there is little pressure to reduce prices when costs decrease.
- RBNZ respond to higher prices by aggressively increasing the price of money, which, like fuel, is a key input cost for many NZ businesses. These costs are passed through to prices - so the downward pressure from any reducing costs is offset by upwards pressure from higher credit costs. High prices (inc interest rates) also put upwards pressure on wages and salaries (another key input cost) and on we go...
Anyway, it looks like we are going to see inflation dropping off much more slowly than we thought given the re-emergence of higher oil prices. The question is how do we tackle this? Do we increase the price of money some more, load costs onto businesses and households, stifle investment in luxury items like, errrm, house building? Or, do we have an informed debate about what is actually pushing on prices, and work on actual solutions that don't rely on medieval monetarism?
Do we increase the price of money some more, load costs onto businesses and households, stifle investment in luxury items like, errrm, house building? YES
Or, do we have an informed debate about what is actually pushing on prices, and work on actual solutions that don't rely on medieval monetarism? NO
The issue you raise about interest rates causing inflation is only an issue now because those people/producers loaded up on too much cheap debt while interest rates were too low.
from a control theory perspective, the system is sitting way out in unstable territory, where control has been lost, and the correct path out is going to cause a hell of a lot of pain - all whilst the system lurches from one instability to another. as long as we refuse to let the bankruptcies that need to happen happen, nothing is going to change.
it's plain that the boffins at the RBNZ don't understand control theory (or don't care), and from a stability perspective, have completely failed their mandate. to be fair, it's much harder to see when it plays out much slower than your typical engineering example. Which is why they should have been much more cautious, more reticent to drop rates, and allow them to have played their dampening role correctly. the growth at all costs model is fundamentally flawed.
Can't say much about the rest of the western world, but suspect it's the same there.
[edit: and not helped by the removal of a significant source of inflation - house prices - from their control metric]
The issue you raise about interest rates causing inflation is only an issue now because those people/producers loaded up on too much cheap debt while interest rates were too low
This is a common misconception. Debt is not something that businesses have 'loaded up on' - in fact business debt has come down in recent years to around 45% of GDP, about the same as it was in 1991. Household debt on the other hand has increased from 30% of GDP in 1991 to about 95% of GDP now! For many businesses, debt is just part of their business model - revolving credit for seasonal businesses, mortgages for business premises etc.
High household debt levels (and easy access to credit for speculative use) is a key cause of our instability and should be the topic of political debate. But instead we get endless droning on about Govt 'debts'.
No. That comment and the Government's approach (irrespective of party) just goes to show they don't understand 'money' in the modern context. An alternative to that is that they are being driven to do what they are doing by other forces, the banks, big money, other countries political interests etc. But I'm not a conspiracy theorist. But i am like you I think in being continually baffled as to why the level of incompetence manages to remain in control so persistently.
No a Government must have control of it's currency, including the total quantities in circulation. The problem is that with the introduction of the 'free market' economic policies (Rogernomics) and deregulation of the banks, the Government has abrogated it's responsibilities with respect to managing that part of the economy, hence the resulting chaos.
Bollocks
Overall, the key feature or bug of fiat currency (depending on how you look at it) is its flexible supply and its ability to be diluted. It allows governments to spend more than they tax, by diluting peoples’ existing holdings. With this feature, it can be used to re-liquify seized-up financial situations, and stimulate an economy in a counter-cyclical way. In addition, its volatility can be minimized compared to commodity monies most of the time through active management, in exchange for ensuring gradual devaluation over time.
When things go wrong, however, fiat currency can lose value explosively. Fiat currency tends to incentivize running bigger deficits (since spending doesn’t necessarily need to be taxed for), and generally requires some degree of hard or soft coercion in order to get people to use it over harder monies, although that coercion is often rather invisible to most people most of the time, until things go wrong. And its ability to be diluted can allow for longer wars,
Yeah nah. Current oil prices are lower than most of 2022, so shouldn't we have had deflation in the last year?
Oil is also very volatile, from June 2022 to March 2023 it went from ~$1.15 to ~$0.65 and now back to ~$0.90, if Orr used that to set interest rates he would be yanking his lever all over the place. I think the American's are sensible to remove it from the CPI altogether.
We kind of did that in a roundabout way with the fuel tax discount. But at some stage the money / reserve / etc runs out and you get the inflation you would have had anyway. But yes a reserve would at least help with the short spikes and should be explored, although if it was viable and predictable wouldn't the private sector already be doing it?
"nobody is suggesting using oil prices to set interest rates" - in NZ we already do, its in the CPI.
Bold claim from Nicola Willis over tax cuts pledge
Nicola Willis says she’ll resign if a National Government can’t deliver on the tax cuts it’s promising.
“I would resign because we are making a commitment to the New Zealand people and we intend to keep it,” she told TVNZ’s Breakfast - when pushed about whether the foreign buyers’ tax would work.
Yes,agreed donny,it's going to be a bad look to say we all have to tighten our belts and take some pain,sack 15,000 humans from the public service,leave the hard working squeezed middle to pay their ever increasing mortgages...then re-instate interest deductibility and allow 'investors' who over committed in the good times of cheap money to offload a rental and pay no tax on their capital gain due to the brightline being reduced...
If they are serious about turning things around,tax cuts should be delayed,keep the brightline at 2 years & don't restore interst deductibilty.
If the house market takes off again,we are stuffed..
Agreed. My only assets are owning two properties. Doing my tax return and projection for next year focusses my mind on those interest charges (luckily my mortgages are less than a third of property CVs). Interest deductibility is the major financial factor - way more than rates, insurance and maintenance. I think the next govt of whichever party will leave the deductibility at 50%. It can't be defended on tax principles but is just the best pragmatic level to get most tax income from investment properties. Whether 50% or 25% will hit my income but on the other hand it is actively pushing prices down and that is what my four adult children need.
"cutting the Wellington bureaucracy" wont save much, they tried that last time and ended up having to increase GST instead.
They will need to make meaningful spending changes, I would say Kāinga Ora's budget would be the most likely chop, they will say it is efficiencies but really it will just be less employees building less houses.
Cutting bureaucrats in a dept is almost impossible - the good will leave and the bad will hang on like leeches and then the use of more expensive contractors will increase. The only solution is to simply remove a few departments - are they all needed? And to replace targeted benefits with universal benefits. What is the % admin cost of our universal Super and universal GST compared to the admin costs of WFF, unemployment and accommodation benefits?
https://www.nzherald.co.nz/business/matthew-hooton-tax-cuts-its-spendin…
Even Act and the Taxpayers’ Union are reviewing their calls for immediate tax cuts.
No credible government, anywhere in the world, would even be thinking of immediate spending increases or tax cuts when facing a combination of high inflation, rising interest rates and a fiscal crisis. Inexplicably, National still is.
Christopher Luxon claimed this week that he still plans to increase health and education spending every year, by at least the rate of inflation, and for population growth and other pressures.
He promises a so-far uncosted crackdown on law and order.
Before he could do either, Willis would need to find the money to reverse Robertson’s planned cuts in those areas.
National has also tried to sell a lie that its tax policy is fully funded and non-inflationary.
It is neither.
Everybody on this site is well aware that you hate National, or maybe paid to spruick the left.
But guess what! Any sane person in New Zealand couldn't give a rats arse IF National's tax policy is a little out! All we want is to get rid of the most dis-honest, incompetent, financially illiterate government in New Zealand history!
Incorrect DD,I have voted Nats in the past,Labour & handbrake Winny...but as we are definately going to have a change of government,I am more concerned with where we are going in the future than hand wringing and wanting to 'punish' someone for what we have been through...remember,it was a global pandemic followed by floods & cyclones that struck at the worst possible time.
For what it's worth,I am vehemently opposed to Labours tinkering with GST and most of their other stuff is just re-arranging the deck chairs on the Titanic.
I am also opposed to re-igniting the property ponzi,which in my view has had more to do with the destruction of NZ as we knew than any other single issue...
Vehemently opposed to selling off our homes to foreign 'investor/speculators'
All very good points. The problem is that Labour have increased spending a lot and we have nothing to show for it. We have the same tax brackets as 15 years ago, now the middle are in the rich bracket and min wage workers are a few cents an hour away from being in the middle bracket. With high inflation this was the time to adjust the brackets, but Labour can't be seen to give tax cuts to the middle, so why should the middle vote for them?
Its just a cycle really. National screw over the poor and make the rich richer, then we vote in Labour and they tax the middle too much, then we vote in National again.
Agreed Jimbo,all I am saying,as many are,we can't afford the cuts right now and if rents and mortgages increase due to increased house price presure,the $20 or so that people will get is meaningless.Perhaps some sort of cross party accord to index tax bands in the future?
Means test super?At least while you are still earning,I work with many who earn $150k and collect super,it's their holiday or premium wine fund.
As you say,we have the same tax brackets as 15 years ago,Labour has been in power for 6 of those...and JK raised GST in that time as well.
Fair enough! We probably agree on more than we think, Having said that I absolutely despise this government and Winston Peters! I love this country and always will. I think ALL politicians are tarred with the same brush. However socialism is the absolutely worst form of government. First and foremost when the socialists gain power they think socialism is for everyone else! Not them! How may times does a socialist government (anywhere in the world) have to fail abysmally before people wake up!
A vote for the left in this election that enables them to carry on governing will totally shatter what's left of our once great country!
So sad Sing...But the devil is in the detail. I have come to believe that a lot of contributors to these streams do want the same thing, it is the detail where they go off the rails. That's the discussions I enjoy. getting to understand why someone argues for what they want. I often learn of the flaws in my own opinions by challenging them and theirs. The problem is most are extremists, in that they argue all or nothing, but reality is seldom like that, so some middle ground has to be found, and that's where the agreement comes out. Recognising your own blinkers can be challenging (you might not be aware of them) and/or humbling (you may have to accept you were just plain wrong), but learning is guaranteed.
Not quite so graphically the electorate is nonetheless agreeing with you, unless all the recent polls are rogue. The priority before anything else is both the removal of this government from power or any potential for the calamitous coalition they now offer. That hardline of thought is strengthening National’s position and probably will be too, the undoing of WP/NZF as if it means being in power, WP has a history of changing direction like the wind and so too does Hipkins.
You can be anti National without being pro Labour. I certainly think many of National's policies are just dreadful, every time I comment on that people say I am pro Labour, but I also criticise Labour for their lack of delivery too. I am still undecided who I will vote for but at the moment getting a tax cut seems better than getting cheap fruit. Had Labour delivered on something like Kiwibuild or Light Rail they would have got my vote, but I am not going to pay extra tax for nothing.
I agree that a tax cut at this time would be bad, but National are actually adjusting tax brackets due to high inflation which is perfectly reasonable. Its not a tax cut, its just less of a tax increase. Not all "cost of living" relief has to be targeted at the poor at the expense of the middle. The tax cut to property investors is really bad spending though...
Yep it's a great shame that they didn't just do a bigger tax cut for the 'squeezed middle' (bleugh I hate that term, better describes my guts after a night on the beers and chicken tikka) and tell the investors to get stuffed. Then we could put this whole election to bed already and move on with life as they'd have it locked up. I'm so unbelievably sick of the election already, just wish that it was a 100% clear-cut thing either way already.
Of course that was never going to happen as National has to kowtow to its property ponzi funders, but dreams are free and all.
You have to feel sorry for these guys;
https://www.thepost.co.nz/a/business/350072514/mega-landlord-sold-12-pr…
Mega landlord sold 12 properties after tax change, will sell more if Labour wins
When the Government announced it would phase-out a key tax advantage for investors from October 2021, Garth Cutfield says he immediately sold 12 of the over-50 properties he owned.
That tax advantage was the ability to deduct mortgage interest payments from rental earnings for tax purposes – a tax break that was crucial to Cutfield because of the mortgage debt he had amassed.
“Straight away it would have meant bankruptcy for us if we didn’t change anything,” he said.
He said it was hard to find a cashflow positive rental because house prices had gone so high, and the loss of interest deductibility made it even harder to make the numbers stack up.
Cutfield said he had been investing for 31 years, and said the Governments decision to phase-out interest deductibility had “killed” his business model and “killed the fun of being an investor”.
Run it at a loss each year, top up the mortgage payments with your own funds. If it does start to make a profit use up your brought forward losses and then sell for an untaxed capital gain. Even if you top up $5k per year, after 10 years that's $50k. But if you make a $250k capital gain that is also untaxed, then that's $200k net.
You have to question whether that is a good general tax principle don't you? In my opinion when a company is not paying tax but obviously making a profit, there is something wrong with the tax rules. Why would someone invest in property if there was no profit to be made? And how come they have a nice new merc in their driveway?
The two parties that are most closely aligned are National and Labour.
Wouldn't it be nice if they could work together to agree on the bulk of their agenda (which appears to be almost exactly the same). If by negotiation, National dropped their shit housing policies and kept Labour's and Labour dropped some of their "woke" policies to appease National supporters I'd be much happier than one or the other coalition getting in.
It would demonstrate that our politicians are more aligned than many think, cut some of the nasty opposition for the sake of opposition, and together they could definitely claim they have a majority mandate.
I think MMP was supposed to evolve into this but it's still sort of stuck in the right vs left 2 party paradigm.
I think most kiwis would agree Agno,especially on the 'sh*t housing policy,we are all most happy around the middle,MMP has some positives,but the negative is that the main left & right parties (which is left & which is right is up for conjecture at times) tend to get cannibalised from the minor parties on each side pushing them to the more extremes of their 'colours'...hence Labour becomes more woke,Nats become more right wing for fear of losing votes.As you say,we are all much closer than most care to admit and can see quality candidates on both sides and some oxygen thieves on both sides.
WP will say what is needed to get back in,but once in he generally paddles the waka down the centre,get him in,make him Foreign Minister,he has the experience and personality to carry that one off...be worth it just to see David Seymour & Luxon gritting their teeth and trying to smile..
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