It's the last big piece of the jigsaw puzzle ahead of the Reserve Bank's final Official Cash Rate review for the year on November 27.
Statistics NZ's suite of labour market data, including the unemployment figures, is to be released on Wednesday, November 6.
The universal expectation is that the unemployment figure for the September 2024 quarter will have risen - but by how much? That's the question. And that's the important bit when we consider any potential immediate impact on interest rates.
As people speculate on what the RBNZ will decide to do in its last OCR review for 2024, it's with the thought that the only way the unemployment figures might affect the decision is if they are much worse than is commonly expected. The RBNZ would need to be surprised on the high side by the figures in order to have its collective mind changed about what to do with the OCR on November 27.
And the threshold for a 'surprise' for the RBNZ is a high one. That's because in its latest set of detailed forecasts contained in the August Monetary Policy Statement (MPS), the RBNZ forecast that the unemployment rate would rise from the 4.6% recorded in the June quarter, to 5.0%. That would be quite a rise. But the RBNZ's not alone in thinking the rise may be of that magnitude. And other already released data would appear to be supportive of that view.
Shrinking filled jobs numbers
Statistics NZ's monthly employment indicators (MEI) for September showed that in the past year the number of filled jobs has fallen by over 20,000 (0.9%). Young people have been particularly affected, while the hardest hit forms of work have included construction, administrative and support services, accommodation and food services, and manufacturing. The MEI figures are sourced from income tax figures and so are quite different to the official unemployment figures, which come from Stats NZ's Household Labour Fource Survey. But the MEI has often proven to be a good lead indicator previously. Economists reckoned those latest MEI figures roughly point to the unemployment rate having risen to 5.0%.
The last time unemployment touched the 5.0% level was in September 2020, when it hit 5.2% as part of the brief Covid lockdown-period spike. After that spike, however, unemployment fell rapidly, as demand in the economy continued at much higher levels than had been expected, while employers saw their ability to attract new workers severely hampered by the border closure.
As a result, the unemployment rate dropped all the way to just 3.2% as of December 2021 and March 2022. Extremely low as that figure was, there's actually a fairly good argument to make that the figure even understated the tightness of the labour market. It was so difficult to get workers at the time that there's reasonable anecdotal evidence to suggest that many employers simply gave up trying to fill jobs.
When a labour market becomes incredibly tight this causes the economy to overheat and inflation to emerge - or at least be accentuated. Therefore the RBNZ, while never allowing itself to be seen as actually cheerleading for higher unemployment, was nevertheless looking for 'slack' to start developing in the labour market so that the economy could start to meaningfully cool. All of this, of course, was to get inflation down from the soaring 7.3% level seen in mid-2022 and back into the RBNZ's 1% to 3% target range.
Well, we are back now, with annual inflation as at the September quarter sitting at 2.2%.
The economy certainly cooled. On a per capita basis GDP has contracted for seven consecutive quarters.
When will we recover?
Interest rates are down and will continue to come down for the moment. So, how quickly will our recessionary economy start to recover again and when will job losses abate?
In its August forecasts the RBNZ picked that after hitting 5.0% in September the unemployment rate would climb strongly again in the December quarter that we are now in, hitting 5.3% by the end of the year. The RBNZ picks a peak unemployment rate of 5.4% in the March quarter and for the rate to then start falling - but only slowly - to 5.2% by the end of next year.
Most of the big bank economists are picking the unemployment will go a little higher than the RBNZ thinks and, indeed ASB economists reckon the rate may get as high as 5.9%.
So, to go back to the point about the possibility of any impact on the next OCR decision from the upcoming unemployment figures; well, if they were to be measurably worse than the the RBNZ is picking, this could suggest the economy is in worse shape than the RBNZ has thought - and therefore more instant relief through more rapid interest rate reductions could be needed.
Financial markets are still pricing in about a one-in-four chance that the OCR, currently on 4.75%, will be slashed by 75 basis points at the November 27 review.
Measuring the cuts
RBNZ Governor Adrian Orr during public engagements in Washington DC last week appeared to offer some pushback to the aggressive financial market pricing, saying in response to a question, that the RBNZ "can be more incremental" on the way down with the pace of the OCR cuts. But he did also say, separately, that he didn't regard 50 basis point cuts as "jumbo" cuts. All of which might lead us to think that another 50 point cut could be what we see on November 27 - if the job figures don't suggest more urgent action is required. Don't hold me to that though. This is an RBNZ that can and does defy expectations on regular basis.
Is there any chance at all the unemployment figures might surprise on the downside? And what would the RBNZ's attitude be?
Well, the data we've seen so far, along with anecdotal evidence, tends to suggest it would be a very big surprise indeed if the unemployment figure didn't at least rise, even if it is to something still under 5%. Even if the figure were to stay the same as in June - 4.6%, or 143,000 people, (and, look, it won't) - then I think the RBNZ would largely discount it from its OCR considerations. After all, its all really about inflation. And now that's back in its box, the RBNZ will be looking to keep a steady path with rate reductions in order to allow the economy to recover.
As, I say, I think the chances are far greater that we get an unemployment figure that suggests job losses are happening more quickly and in greater numbers, than expected. And that would give the RBNZ something to think about. As said earlier, with the RBNZ already expecting a sharp climb in unemployment, such a scenario seems unlikely. But not impossible.
*This article was first published in our email for paying subscribers first thing Friday morning. See here for more details and how to subscribe.
129 Comments
https://tradingeconomics.com/new-zealand/gdp-from-manufacturing
This is the main issue. You have to Manufacture your way out of a recession. With all the young leaving for Australia, with them goes the ideas and the innovation. Nz is in deep deep doo doo.
There isn't. There is however inadequate capital to deploy in the productive private sector because much of it has been mis-allocated to the unproductive consumptive private sector, ie house prices, which is highly likely to continue given current policy settings.
Nonsense, I'm a boomer born in 1947 and so was 40 years old and bringing up a young family in 1987, so wasn't investing in anything apart from children's sports and music lessons! It was my husband's father who was investing in the share market in 1987, having been advised to do so by his financial adviser. So it was the generation above the boomers that lost out in 1987. We haven't invested in the housing boom either - we have a few shares and term deposits, as do all our friends of our age. The people we know that have invested and become wealthy from the housing boom are those in their 50s/60s, so younger than boomers.
They've been born elsewhere, most probably in Australia. Pregnancy questions are now really common in the "Kiwis Moving to Australia" Facebook group.
And by "European" I mean born to mothers of the European race in New Zealand - as that is how Stats NZ reports the birth statistics (one outcome of Stats NZ being race obsessed). Note that the 14% reduction only applies to those of European descent, not Maori, Pacific Islanders (where there was only a 4% reduction) or Asians (which saw a 12% increase). Strange, huh? Almost as if there is a "white flight" from New Zealand .....
Nowhere, young women just arent having babies.The fertility rate of NZ European women has dropped considerably over the last few years. Given the fertility rate of the NZ population as a whole was only 1.52 in 2024 and Maori and pacific have higher rates, I'd imagine the birth rate of NZ European women is only around 1.4 or lower. That's alright, plenty of people to import from India.
Core issue behind this of course is that all systems are build on growth and that the population will continue to increase at an exponential rate to fuel this, as well as the resources will be there to be able to harness to fuel growth. This core premise is the issue, and needs addressing, and we need to prepare for stable or lower populations long term for 50-100year models and planning. Exponential growth in the number of humans means exponential growth in the need for resources like food, potable water, fossil fuels, cement, wood etc. Until we address this, immigration doesn't matter apart form the effect is has on resource demand here. Look at adding 220k people in a year to the demand for power, road damage and need for increased frequency of repairs, higher concentration of people in cities leading to increased crime rates.
Bit of important context to this debate.
- Our CPI moved up and down with global trends. The idea that it went up or down because of RBNZ mistakes / successes is small island exceptionalism. RBNZ and Govt might have made a difference in the margins, but we have arrived like every other country at a new price level.
- Our peak inflation was very much at the low end compared to other countries - mainly because we are not exposed to global gas prices.
- We are exceptional in one aspect of our policy response though - we are throwing more people on the dole (or pushing them out of their country) harder than pretty much everywhere else. Only Hungary and Estonia are being more stupid. We might take top spot this week.
Whether the unemployment rate announced this week is 4.9 or 5.X, know that there are tens of thousands of kiwis on the dole completely unnecessarily. Sacrificed to the false gods of Chicago school economics. It's a national disgrace.
No, our CPI reacted in the same way to the same kinds of synchronized actions by our central bank and our government, as happened in many other countries. These 'global trends' you speak of are in fact consequences of globally aligned causative actions (not small marginal effects).
Recent macro research (including from heavyweight neoclassical economists like Blanchard) concludes that supply shock / dissipation drove inflation up and down. But, people still cling to the idea that inflation was the result of a coordinated mistake by all central banks, which they then corrected with their incredible coordinated response. It's just silly.
How has hiking rates in the US tamed inflation while their labour market has boomed? Why were Japan encouraging companies to increase wages to keep up with the changing price level? Why is unemployment way down in lots of other countries with low inflation, while ours is flying up? Are we to believe that interest rates - regardless of the massive variation in transmission mechanisms and impact - are simply the magic inflation-calming sauce? That they just work in lots of mysterious ways? Jeez, modern macro is stupid.
You mean the neo-keynesian IMF guy?
Fact is, inflation in many countries is now very substantially lower than it was, albeit not yet within target in many cases - and this happened during the tightening cycle (ie when money and demand was pulled out of the system). Occam's razor.
Hilarious. The world runs on oil. Oil prices went up, all prices went up. Oil prices came down, price rises moderated. Neither the up nor the down in oil prices had anything to do with monetary policy. Occam's razor indeed.
Yes, I used Blanchard's research because even he recogises what actually happened. I prefer the methods , models and research of Isabella Weber though to be fair.
Hi Jfoe - I agree with much of what you say within this comment string, but then you state that you "prefer the methods of Isabella Weber" - the German queen of price controls - really?
IMO, price controls have always proved to be an unmitigated disaster, even going back to Roman times.
The Western financial casino is neofeudalism where the middle class is being steadily eviscerated. Our current debt debacle is a manifestation of the same failings - especially with regard to the U$ empire, its massive military overreach, and currency debasement.
As long as we...
#1 Cling to the fiat currency model.
#2 Allow private monopolistic private banking cartels to create more than 90% of MS.
#3 Encourage the expansion of our financial capitalism and stifle the real economy with our idiotic taxation system - BTW (FTT could solve this almost overnight)
... we will continue to sail merrily along right into the centre of a giant debt-death vortex.
Cheers
Colin Maxwell
That is an unfair description of Weber's work. Her analysis of how an imported price shock propagates through an economy is excellent, and she advocates sensibly for temporary measures like bufferstocks and price suppression to prevent those price shocks destabilising economies. Her work on China (for which she was first recognised) is also great.
I agree that balance expansion, over-consumption, the rorting of the world's resources by the top 0.1% is abhorrrent and unsustainable though!
Her analysis of how an imported price shock propagates through an economy is excellent, and she advocates sensibly for temporary measures like bufferstocks and price suppression to prevent those price shocks destabilising economies.
Weber accused the major FMCG mnfers and retailers for rorting consumers because of price shocks. Much evidence suggests that this is incorrect. For ex,
The money supply increased in the US by 38% over the past five years. Kroger raised revenue directly in-line with their expenses, and at a slower pace than the growth of money supply. They had flat (and extremely low) profit margins of 1.43%.
You can even look at Kroger's profits in gold-denominated terms and you can see they're not making any more money than they were years ago. Instead, it's the denominator of their profits, the USD, that has gone down due to the printing of a lot more dollars.
Weber coined the term "sellers inflation." This concept suggests that many FMCG manufacturers pass increased costs onto consumers not just to cover rising input prices but also to maintain or even enhance their profit margins. It was quite naive as we know that you can only get away with this under certain assumptions.
https://www.nationalobserver.com/2024/05/14/opinion/corporate-price-gou…
https://www.vice.com/en/article/how-the-us-government-could-lower-food-…
Is it the language I'm using? Weber was quite often quoted by media on seller inflation and suggesting that corporates are price setters. But I'm disagreeing with her to some extent. Put it like this:
- FMCG company A hikes the price of their chocolate snack bars by 20% in ASEAN during Covid to cover input and operating costs. Sales fall off a cliff. If shoppers don't buy your product because they cannot rationalize the price, there is a point where they no longer become viable and the return on effort and the business ROI don't make sense.
- FMCG company B increases costs by as little as 5% during Covid and sales fall strongly. They revert to previous prices and sales vol falls less badly compared to pre-Covid.
The example I gave about Kroger is also at odds with what Weber is saying about seller inflation.
So people don’t ask for pay rises during periods of very low unemployment? I reckon labour inflation is the worst form of inflation; it drives up prices and increases spending power. We definitely had that a couple of years ago, and the RBNZ definitely made it go away. I can’t imagine us getting CPI back to 2% with unemployment at 3.2%.
Labour wage inflation wasnt helped by having a Leftist Govt in charge who handed out extreme pay rises to their Union constituencies. Along with a 44% increase in the minimum wage, which meant everyone else got a pay rise as well or they would have become minimum wage employees.
The Ardern Govt also oversaw a 45% increase in benefit entitlements - which reduced the incentive to work, and exacerbated the lack of supply of labour. The problem with NZ is not that we dont have enough workers, its that we dont have enough people willing to work. See my comment below on how everyone is now rorting the sickness benefit since National cracked down on JobSeekers.
Leftist?!? Really?
Raising the minimum wage was about the only decent thing the previous Govt did for the economy - you know 'the economy' is supposed to work for labour as well as capital, right? When people are working full-time but can't pay for rent, food, and other basics, that means the economy isn't working (still isn't, it's getting worse).
As for benefits - you might want to check your facts. What has happened (as predicted) is that the more forceful implementation of sanctions policy has meant that WINZ have had to move loads of people who are obviously too ill to work onto other benefits. They were parked on jobseekers before. That's why supported living claimants are shooting for the sky.
Jobseeker numbers are going up (200,000 and counting) because we have been losing 500 jobs a week on average for the last year! The economy is crashing, and the Govt are going to have to start taking some responsibility soon. Worth a look at National's hilarious target.
Oh what a crock. If they were too ill to work before they would still have been on the JobSeeker "Health and Disability" benefit. If people are moving between JobSeeker Work Ready and JobSeeker H&D its because they are scamming the system, not because WINZ misallocated them. Hard to take you seriously after that clanger.
Well we are bringing in 20000 RSE workers per year. Yes that is probably necessary because there is not enough people in NZ already that will do what they do for the price they do it for. Some businesses have become RSE dependent and the exploitation at the margins is excused to preserve the system.
Capitulation I don't think. 40' container from Shanghai to Auckland Nov 2019 USD 1700. Same container today USD 4200.
That's approx 150% increase in four years. Yes it has been up and down in between but the general trend is up,up,up.
Oligopolistic control of global container shipping market is real.
re ... 1. ... Sorry those graphs don't prove what you'd like them too. And they certainly do not prove RBNZ and Govt wouldn't 'have made a difference in the margins' had they acted more sagely. But yes. We do have new price levels. And as interest rates fall we may see those price levels stagnate for some time, effectively falling as wages rise. We may even have our RBNZ rabbiting on about what a threat deflation has become (as they did after the GFC.). btw, inflation can turn into deflation in failing economies. We'll see how long those price levels remain.
re ... 2. ... Sorry that graph doesn't prove what your words suggest it does either. E.g. does every country use a b.s. measure like our CPI? No. And what were the natural rates of inflation in those countries before the energy shock? About all that graph does show, and you make the observation yourself, is that many countries were going to be hammered by Pootin's oil / gas shock as they'd become far too reliant on a single supplier. NZ was less exposed as our non-electricity energy sources came from many places, to say nothing of the fact that most of our electricity generation is home grown. How about a graph showing less oil / gas exposed countries? And maybe excluding those countries already in economic turmoil? Or maybe just look at the bottom of the list around where NZ is? (btw, where is Australia?)
re ... 3. ... Not going to argue with that one. We are exceptionally bad at basic economics. But stop for a moment and reconsider this point in the context of the first comment. "The idea that it went up or down because of RBNZ (and central government) mistakes / successes" is IMO exceptionally well founded. Thus the assertion in point 1 that "our CPI moved up and down with global trends" could show our CPI (as b.s. as it is) much lower and I expect your conclusion would be somewhat different. ;-)
Sorry, Jfoe, your comment feels like it is handing out "get out of jail free cards" to those that don't deserve them. It sent shivers down my spine. (I wondered if you'd been at the football yesterday and weren't just a little under the weather.)
I am ressured that we can find some things to disagree on. I genuinely don't think the actions of Govt or RBNZ made much difference at all to our inflation journey. We are a tiny little economy on the edge of the planet - we were along for the ride. Govt took the edge of it with a few subsidies, and, yes, maybe people having some money to spend enabled a bit of price gouging in 2021 (when profit margins elevated CPI by 100pts of so). We threw loads of of people on the dole - but so what? Wages just about adjusted to the cost of living anyway. And, what's the counterfactual scenario here? Zero stimulus in 2020, followed by a low inflation miracle in NZ because people couldn't afford to pay more for anything?
How could the RBNZ's kneejerk reaction to to reduce the OCR (aggregate demand tool) during a supply shock not be a massive causal factor?
Absolutely no concept how fiscal policy (wage subsidies) would affect the demand side.
In hindsight the fiscal response was probably the best, the monetary reaction not so much. What was really missed was effective leadership acknowledging the whole situation was unprecedented, and asking for everyone to hold tight rather than continue with the usual business and investment habits.
It practically required a "wartime" response which no current generations have any experience of.
"Our peak inflation was very much at the low end compared to other countries - mainly because we are not exposed to global gas prices"
We will within 2 - 4 year. See:https://www.gasindustry.co.nz/data/gas-production-and-consumption/
Can we talk about how the unemployment rate is ascertained? My understanding is that it has little to do with the number of people who are unemployed but is instead merely the % of people who self-identify as not employed & are actively seeking employment. So the actual rate of unemployment is significantly higher (double? triple? more?) Why can't we have the actual % of unemployed and maybe the % of the workforce that is underemployed as well?
David asks ‘When will we recover’?
Meaningful recovery won’t be underway till Spring 2025. And even then it will be a moderate recovery, perhaps 1.5-2.0% over 2026.
Most people with mortgages will have significantly more weekly discretionary income by late 2025, once they have moved to rates of circa 5%.
Unemployment to peak around 6% by mid 2025.
House prices will start picking up meaningfully in Spring ‘25, and that together with the return of growth, and a lack of a strong opposition, will see National return to power in ‘26
National won in '08 because house prices reduced after the GFC or because they promised to address unaffordable houses?
Labour won in 2017 because house prices reduced or because they also promised to address unaffordable houses?
And the recent ousting of Labour was because house prices reduced?
Did you forget the sarc tag above?
The voters mistakenly believe government are responsible for and can actually manage the economy.
For all the waffle about supply side economics both govt. and the RBNZ continuously fail to address the demand side.
@ meh - "For all the waffle about supply side economics both govt. and the RBNZ continuously fail to address the demand side."
Oh no, looks like someone has a short term memory. Our last Labour government did attempt to address the demand side. In fact, they pretty much ignored the supply side, which is the sole reason why they were electednin the first place to do, build their 100,000 election promised new homes for sale supply, not rental supply, & instead spent most of their time governing attempting to penalize, restrict, tax & villify one entity in order to dampen their demand, in the hopes that it would increase demand for the other entity.
We all know how that worked out. You win more bees with honey, you don't get a donkey through the corn fields by constantly whipping it. This is very telling - the wrong approaches were used. We have tried a number of punishing approaches to no avail, much to the screams of the neighsayers. It is clear the approach we require to try is one that doesn't attempt to penalize & punish, but instead incentivizes towards a certain direction. & no, punishing one direction & wrapping it up as an incentive is not the right approach either. Already tried that.
If not longer. It's not as if we've got an otherwise well developed and productive industrialized economy to be restarted in the easing cycle.
Invigorating consumption, on the other hand, is very much easier but brings only temporary benefits plus an ever increasing hangover including rising asset prices.
Correct. But that’s why I say the ‘uptick’ will be a mediocre one, housing market and consumption-led.as usual.
Construction will be dead as a dodo for at least another 12-18 months. Will pick up a tad once interest rates are 5%. Won’t boom again unless they are 4% or less - unlikely.
And there won’t be much in the way of big public projects in the next 2-3 years.
What do we expect to drive the improvement in the economy though.
- house prices will be negatively impacted until job security returns? Which means no wealth affect.
- our other industries are too small to have an impact
- migration (of the smart young people we need) is negative
- government isn't announcing any significant spend on infrastructure.
I am not sure who is working on a solution... if an external shock to oil prices or trade were to happen and RBNZ had to stop cutting rates survey we are in the deep doo doo.
Time for govt to step in.
The economy will tick up a little from late next year as discretionary income is freed up a bit and house prices start to rise a bit more. Unemployment won’t have a big impact unless it is more than 7%- unlikely.
It will be a mediocre uptick, and low quality as usual.
I agree with HM that economic data will continue to be ugly, however we may be at the point where LMBFrank's nascent confidence turns into nascent recovery. The business environment feels like the GFC, however there are a couple of fundamental differences.
1) During the GFC there was huge financial loss/destruction in NZ as the finance companies crashed and many savers who chased higher returns lost ALL their savings. So far in this recession there has been no equivalent event, other than the (mainly) paper losses due to real estate values declining.
2) During the GFC it got so dire that for a couple of years the Government tax take declined. This time around, somewhat counter-intuitively, the tax take has continued to increase year on year.
SMEs, the backbone of the NZ economy, have tightened their belts, and adapted to the market conditions. Many have down-sized/right-sized. Recession has done its job, and some have gone under. However it is now absolutely an employers market. Those who want staff can get them, and get them at a fair rate. This favours businesses that can find a growth mode.
I think we may see a half-decent Christmas retail spend (consumer relief rally), followed by a business pick-up in the New Year.
A worst case scenario could still occur while the economy is in its current weakened state, being an external black swan event on the global stage.
‘The tax take has continued to increase year on year’
I suspect there is lag at play. Stackloads of GST revenue from construction will have been received over the past year. That will slow rapidly in ‘25. Remember too we have had high population growth.
I am significantly more bearish than you. There will be the usual seasonal summer boost, then the economy will be sickly again come March / April. It will be another hard winter. Before we start to see things improve a bit late ‘25.
We are not far apart. I see a business pick-up. Not a boom.
A major contributor to NZ's recovery post-GFC was the Chinese stimulus spend, which ramped our primary product prices, and led to lots of Chinese business people making so much money, they were able to send their kids here for an education and/or buy a bolt-hole in NZ. Remember the Asian education boom in our high schools and universities, and the Asian buyer boom in Auckland property last decade?
Foreign buyer restrictions here, and much tighter currency controls in China now, so hard to see that repeating. However I do expect our Government to try and relax the foreign buyer restrictions, just not sure who will want to / be able to come?
Democratic refugees if Trump gets in?
Gst and corporate tax is well below trend. Big difference compared to GFC has been income tax growth thanks to population growth and tax bracket creep. We filled 35,000 jobs in a few months when we opened the borders mostly health, care and ECE. The job growth in those sectors is the only thing preventing a more catastrophic recession (it's also blowing govt budgets out because they budgeted on having vacancies).
"I think we may see a half-decent Christmas retail spend (consumer relief rally), followed by a business pick-up in the New Year."
I suspect you may be disappointed.....the RBNZ toolbox only works in one (blunt) direction...they can crush demand by sucking money out of the economy but they do not control the creation of money in the other direction, that is up to the private banks and consumers and both parties will be wary until such time as sufficient are confident the old trick is working again ....and that will take time.
Black swans are by their nature not a consideration.
Agree.
The big question is when will businesses start to be positive about growth in spend.
Once businesses start to believe spend will accelerate .. they will start to hire and invest. Job security will return and within a very short timeframe we will have forgotten this blip. The danger is a bad Xmas trading period.. more layoffs and we falk ourselves down.
Assuming that we start to take off over the coming monhts the pressing need this time is for the government (possibly with the opposition) to develop a strategy to steer the economy gradually away from housing and toward a more sustainable economic engine that enables us to retain our smart kids and grow exports, grow taxes, invest in infrastructure and interesting jobs. Gradual introduction of CGT for existing investment properties (encouraging new builds for social and rentals) coupled with tax incentives (and perhaps cash incentives) for R&D and starting specific export and tech oriented businesses.. the space stuff is a good example of where we might find a niche and attract resource
The increasing tax take may be counterintuitive if you look at history (the GFC) as just a matter of pattern recognition, but not if you take into account the massive monetary and fiscal alignment that led to a huge increase of liquidity; ie there is now far more money being spent in the 'main street economy', and so being taxed, whereas that didn't happen to anywhere near the same extent in the GFC.
Hi Tom,
Good to see I live rent free in your head. Only way socialists will be completely satisfied, when every rental situation is free.
Not an easy job restoring some basic common sense back into our society after the last 6 years of government propoganda, so I appreciate your able to recognize my efforts. It's a long process.
Just need the nack of achieving this using less words. So also appreciate you highlighting this constructively as well. Cheers for the tips :)
Unemployment rate only tells part of the story. How about underemployment? Very hard for the students about to leave school and uni shortly. Many won’t find jobs in their academic fields. So they will keep doing those part or full time retail and hospo jobs. They won’t show up in the unemployment data, but they will be earning far less than they might have.
Also the influx of apprentices set to get qualified. There was a big uptick in apprenticeship intake over the covid construction boom. Skilled tradies were hard to find so apprentices were a popular option. The Labour government also paid an employer $1000+GST every month, per apprentice for 2 years. Inflation anyone? Ok getting sidetracked, my point. These apprentices are getting qualified soon, which means a big pay rise is on the horizon. I think a lot of these apprentices will be shown the door unfortunately. One way ticket to Australia or settle for less $$ than they’d hoped for.
That's if Aussie is still the alternative it's been for them for the last decade or so? They might be in for a similar bought of realism as well.
"Unprecedented surge in mansions on the market in Melbourne" (AFR. This morning)
In the spirit of "First out, Best out" it looks like many asset holders are realising they've left it too late.
"As at 09 October 2024 Immigration New Zealand (INZ) has approved 128,380 AEWV applications since the scheme opened, and there are currently 29,033 accredited employers and 84,028 AEWV holders. On 7 April 2024, changes were announced to the Accredited Employer Work Visa scheme."
Could it be that Imported labour is ? Reminds of of the 'Ten Pound Poms' tv series , but in that story Ozzies had first bite of the apple.... Are Kiwis too unrealistic with their wage expectations? Or is it just too much hard work keeping up with daily living costs? I suspect inflation isnt as dead and buried as many believe particularly those on low/min wages ... folk are struggling to adjust to the new norms ... but lets pretend otherwise...lol
A quick analysis of the Oct benefit numbers compared to 5 January 2024 shows that there are only 4,332 extra JobSeekers, while there are double that number (8,556) people claiming the "Health Condition or Disability" JS benefit. Add another extra 2,100 people claiming the Supported Living Benefit and it seems the benefit system is still being rorted - something the Govt really needs to look into.
Or if you believe that in the last 10 months 10,656 people have suddenly developed an illness so severe they can no longer work, then perhaps the Health Ministry should be looking into what is causing that?
Benefit numbers in January are always much higher. Take the October 23 to October 24 figures to get rid of seasonal effects...
- Health / disability jobseekers up 11,121 (14%)
- Work ready jobseekers up 10,899 (10%)
- Supported living health / disability up 2,316 (2.5%)
Now why do you think WINZ are moving people off work ready jobseekers? Yep, because they have been told to implement sanctions policy fully. They had lots of very, very ill people parked on jobseekers. They are now moving to the appropriate benefit because making them come in for interviews etc is crazy.
Now, everyone will have their 'i know a guy rorting the system pretending to be ill'. But, sadly these are the exceptions rather than the rule.
JobSeeker is split into two benefits - Those that are Work Ready, and those that are on the Health & Disability benefit. So no, very very ill people would never have been on JobSeeker Work Ready because they would have qualified for the H&D benefit which pays more. Your argument that WINZ suddenly discovered that 10,600 sick people had been on the wrong benefit and so have kindly shifted them over is ridiculous. What is happening is that those that don't want to work are suddenly claiming to be very very ill so they can avoid the new sanctions. Its not that hard now that everyone is self diagnosed as suffering from stress, anxiety, ADHD or have decided that they are on the Autism spectrum. And if WINZ are just rubber stamping these people, then WINZ needs to be investigated.
@ Jfoe - "They had lots of very, very ill people parked on jobseekers."
"Now, everyone will have their 'i know a guy rorting the system pretending to be ill'. But, sadly these are the exceptions rather than the rule."
Boy, you really have taken & swallowed hard the "government always has our best interests at heart" pill haven't you Jfoe. You say some really intelligent stuff, then come up with this drivel? C'mon, you can't tell us you actually believe that do you?
In a world where patients now tell their drs what to prescribe, & what methods they would like to use, it's not hard to have a Dr write up a drs note along with a prescription for anti depressant medication, that says one is suffering from severe clinical depression. It's as easy as taking this in to Winz & volla, just like that they can't argue or question these drs, after all, they're the experts they know best right? Winz has no choice but to take the medical certificate seriously & as gospel, & start handing out the sickness benefit, just like that.
There would be more people on here that could give plenty of examples of those they know taking advantage of the system similar to this, than actual genuine cases.
So its not "the exception" that this happens when almost everyone knows of someone doing a similar situation to this. Just 6% of the country are private landlords, yet the way the media & serial complainers go on about it, you'd think the majority of the country are buying up 20+ property portfolios with almost no job at all. If we can convince ourselves that more people than not are landlording, then we can certainly convince ourselves that more people than not are milking the benefit system. I'd say it's much more likely to be the other way around - that "the exceptions" are the actual genuine cases for needing to be on such a benefit.
It's high time government Crack down on this. Making it so easy to get a benefit, very little hassle or motivation to be removed off it, why would you? It's free money after all. This disentivizes the work force, & progress in general. Why work for something when you know it's just easier to complain endlessly about it, & sooner or later it'll just be handed out to you anyway.
@ Tron - $300 a week into their pockets for having done nothing is money for jam. Top it up with a part time job, & suddenly it all adds up. If your medical certificate says your medically unfit for full time, Winz will still pay you, & you can have a part time job to boost it as well. Add in a couple of kids with "no father" & suddenly they make as much or more than a full time minimum wage worker.
It's not hard to cheat the system. The only thing that stops honest people like myself from doing the same, is we have something to lose if we were ever found out or investigated. Pretty hard to freeze the assets of someone who has none.
If you are genuinely sick, and can't work, then $300 is not enough to pay the bills. You think many are faking depression - who knows, maybe some are but there are a large number of genuinely depressed people in New Zealand who need care and support, and part of that is financial support.
Doctors do know how to check for depression and measure the severity of symptoms. Do you think the patients are all " pulling the wool over their eyes"?
Two points:
- People abusing the welfare system are the exception rather than the rule. This is shown by countless studies. Tax evasion is far more prevalent.
- When we run an economic system that purposefully underdelivers jobs and relies on an involuntarily army of unemployed people to suppress wages... what do we expect? If you set people up to lose repeatedly, people will cheat or seek alternative means of income outside of the formal econmy..
@ Jfoe - "People abusing the welfare system are the exception rather than the rule. This is shown by countless studies. Tax evasion is far more prevalent."
Can you provide the statistics that show both the legitimate cases of welfare & the non legitimate cases?
If not, what are you basing your claim on? That those who abuse the welfare system are "the exception, rather than the rule". Is this based on how many have actually been caught out abusing welfare? If so, they wouldn't remain on welfare. So your assumption relies solely on people's own honesty not to commit benefit fraud, & the government's ability to sniff out those that do.
Again, that's a heavy reliance on government you put to assure that almost every welfare seeker is legitimate. Doesn't sound right, especially when most people could give a number of examples of people they know currently commitong benefit fraud. You can't tell me all these people committing benefit fraud have managed to out smart the government & it's multiple agencies. Do you really have that much trust & faith in government in general Jfoe that most people are compliant, thanks to government interviening? If so, can you provide this information to enlighten me? I'm not as trusting that governments have out best interests at heart or do the best job.
Might I refocus everyone to a couple core facts & principals?
1. The OCR remains contractionary by some 2%. (My modelling says it's actually more if I adapt the daftness they use to come up with multiple 'neutral rates'.)
2a. NZ's economic growth remains in the doldrums ... as it has for 2+ years.
2b. NZ capital investment in plant and machinery (new productive capacity) is now near zero and expected to remain so for quite some time.
3. Two core remits for the RBNZ are a) ensuring inflation is within range and b) financial stability.
4. Unemployment is no longer an economic factor they are required to address - ergo all discussion about unemployment is a red-herring by hawks, unless the RBNZ can show, using facts, not 'reckons', how it would affect either a) ensuring inflation is within range and b) financial stability.
5. Inflation is within range. And modelled to fall further.
6. For the OCR to remain contractionary for any further length of time the RBNZ needs facts, not 'reckons', as to why they can't bring the OCR down rapidly.
7. If the RBNZ claims they can't bring down the OCR more rapidly due to financial stability concerns - but do not tighten DTIs / LVRs to address those financial stability concerns - they must explain exactly why tightening these levers won't help.
My two cents.
(And please note - we wouldn't be in this mess if the hawks (ghouls?) at the RBNZ had started easing back in November 2023.)
I think we're all missing a massive disconnect here.
Economic theory and monetary policy says we must have a certain level of unemployed and underemployed. The theory being those at the bottom competing for jobs will reduce wage rates. This is then viewed as the labour market.
Government desires full employment because beneficiaries are bad. The propaganda encourages the masses to have the same perspective and believe these people are stealing their money. Divide and conquer.
Meanwhile big business doesn't give a shit and views employees as expendable resources rather than assets, and the first line item to be cut.
Financial markets have even less care simply siphoning everything into their coffers.
The economists (RBNZ, commercial banks, big business) demand that everyone else must suffer hardship to fight inflation, brought on by their business models.
The end result is humans arguing and fighting amongst each other because we've been misinformed, uneducated, and lied to. Ignorance is bliss.
@ meh - Couldn't agree more with you.
End of the day it's not rich vs poor, black vs white, tenants vs landlord, right vs left, blue vs red, labour vs national, boomers vs millennials, haves vs have nots, vaxxed vs unvaxxed, government propoganders vs conspiracy theorist...
Separation & segregation, divide & conquer. It is us humans with our differences & uniqueness vs the elites who wish to control everyone else. Interesting how they flash click bait in front of our faces to keep us all distracted & fighting to all be right, while the slide of hand happens quietly off to the side.
"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." - Henry Ford
@ the joneses - I never said that beneficiaries have it sweet. Re read my comment again, youve missed the point.
I said that there will be a number of beneficiaries who are milking the system - not as in making mega bucks, but as in have no real legitimate reason to not work, but free money from government to do nothing is just too good to pass up.
I do strongly agree that milking the benefit system is stupid, that it makes a mockery of those who are on the benefit for legitimate reasons, & that government could spend more time investigating the legitimacy of beneficiaries.
One thing you may be overlooking here is that everyone is wanting free money. Capital gains, especially in property is free money, yet it would appear that those involved in property are the most vehement against others getting free money.
You agreed with my post about divide and conquer and the beneficiary bashing is part of it. Why the hate for a minority group "below" you?
Your comments are simply absurd.
A capitalist system requires unemployment.
We should all be thankful it’s not us on the dole facing highest rent/income ratio rents, high power prices, high interest rates, 6+ hour wait time in ED, etc etc etc.
Too bad about all those in society taking effort free capital gains or extracting renter monopoly or oligopoly profits.
@ kiwi overseas - Thankful? Those on the dole have the government pay their rents for them, y'know that pesky accomodation supplement people like yourself want to abolish. Any rent increase for them, the government pays it. It does not impact the tenant, nor do higher interest rates as tenants do not own the home they live in, despite what they may think.
Wouldn't that be nice if home owners had their entire mortgages paid for by government, including any interest rate increases too.
6+ hour wait time in ED - this is not just exclusive to tenants, it's what happens when previous governments freeze healthcare workers wages during a global pandemic, then cast them out with outdated mandates - you get plenty of them leaving to find the $ in Auz. Frankly I don't at all blame them. Nurses wages in Auz start about where ours top out.
I do agree with you however that a capitalist system does require some unemployed. I do also agree that I am glad it is not myself on the dole expecting it to everyone else's job to financially assist myself.
Don't kid yourself Kiwi overseas, if a true fair & non biast tax system was to be implemented, it would also capture the first primary family home as well. You don't have to be a 20+ property hoarding landlord to recognize that a majority of Kiwis eventually sell their primary first home to upgrade, & this would also be heavily taxed, stopping many Kiwis from making this move.
The only Kiwis that advocate for a capital gains tax either want to replace our current biast tax system with another just as biased tax system - only taxing those who have more than themselves but want to remain excluded from being taxed further themselves, or they simply just do not understand how tax actually works as they have believed the socialist mantra that we can all get wealthy by taxing ourselves more and more, all out of "equality", so long as we are all equally poor. Don't be hypocritical overseas Kiwi - you would not want your gains on your primary home heavily taxed come sale, just like everyone else who sells, you will be wanting top dollar, you won't sell for a large discount just to "do you bit & help the next generation out". See all good & well wanting to tax others heavily, until it applies to you.
Sorry,
I get heavily taxed, but NZs tax system is a joke.
The lack of capital gains has wasted $500bn going into driving up land prices instead of going into productive businesses,
NZ overtaxes income as it under taxes capital gains, gifts and inheritance.
We could have lower income taxes with those in place. Tax is meant to be a level playing field not a free pass to the asset rich.
@ kiwi overseas - "tax is meant to be a level playing feild".
Absolutely agree.
Which is why a true fair & non biast tax system would either tax all forms of profit, or none at all. Why? Because both tax & profit, unlike opinions, is not biast as to how profits are made & by who makes them.
This means that we can heavily tax all primary residence family homes, intergenerational family farms, kiwisaver, inheritance, stocks, bonds, mutual funds, crypto currency & well as investment properties. This would be the fair tax system.
Problem is Kiwi overseas is that you do not advocate for a fair tax system at all, you merely advocate to tip the scales, & again favour certain entities over another. Which in itself is simply.just switching out one biast tax system for another.
We can solve this debate easily, since your such an advocate for the socialist mantra of taxing oursekves to financial prosperiy, lead by example, you first:
- either sell your home for less than you paid for it when the time comes "to help out the next generation", & to avoid such a heavy tax burden, thus leaving your family legacy with little inheritance that would also be heavily taxed upon gifting to your children as well. Now your children won't thank you for cutting into the family legacy, but I'm sure someone else's family will thank you very much for giving them the helping hand up thag I'm sure you never had.
- or sell your home for more than you paid for it when the time comes to help out the next generation in your family & yo help you out in retirement, & pay a heavy tax burden, thus leaving your family with less inheritance that would also be heavily taxed upon gifting yet again.
Either way, the outcome when advocating for tax tax tax is the same. You have two choices: enrich the life of yourself & your family to set them up for life, which is a provider & a man's purpose, or help enrich the lives of another family at the expence of your own.
No? See uts all good & well to want everyone else to be taxed as much as possible, until the tax man comes after you, your family & your families wealth. Suddenly it's an entirely new ball game. That's why I know your tax strategy to be built.on nothing more than envy, for given the chance, you would not lay down your families financial position for another. It's rather hypocritical to expert that others do what you would not.
Your assertion would be akin to a flat tax on all incomes, correct me if I'm wrong here as it's only my interpretation of your comment. Tax is in place to shape behaviour also remember. Property is attractive as there's ways to use it to lower overall tax paid. humans go to the path of least resistance and if an investment is relatively secure and has plenty of tax advantages then it's natural people will gravitate towards it en masse. Currently the lack of CGT is distortionary in that people do flock to property given the tax advantages. Remove these advantages or some of, and then folks will look for other investment avenues more seriously.
@ Interesting - I'd agree with your first half.
"Currently the lack of CGT is distortionary in that people do flock to property given the tax advantages. Remove these advantages or some of, and then folks will look for other investment avenues more seriously."
There is already a capital gains tax on property called The Brightline Tax. It has been around for nearly a decade now. The Bright-Line Property Rule (also known as the "bright-line test") is a law that determines if tax needs to be paid on profits made when a property is sold. Like a capital gains tax, the bright-line rule calculates the difference between what you bought and sold a property for. It then applies an income tax charge on qualifying homes.
The fact that The brightline tax timeframe is only 2 years is irrelivant. An indefiniate tax penalty timeframe does not incentivize multiple property owners to sell, or disincentivize purchasing, most especially those who wish to keep their properties long term for passive income through rent. So we know that taxing indefinitely won't bring more homes to market, won't stop cashflow seeking investors from buying up, & the additional tax take will be considered come sale time & likely tacked onto the price expectation when selling - meaning that ultimately yet again it is would be first home buyers that end up paying this cost.
A tax also only applies when selling, not when using equity position to purchase more property, as the houses aren't being sold to fund the next purchase.
What people are trying to accomplish when they bag on about a tax, is essentially an envy tax. They don't want all profits to be taxed, as that would eventually include themselves. Tax everyone else more, just not me, is what's essentially being asked by the serial complainers. They haven't thought it through at all. Little good will applying an indefinite CGT, & it certainly won't achieve more homes for sale, more homes built, help more tenants into homes, which is the ultimate goal. Though It's evident the serial complainers aren't worried about that, just as long as those who have more than themselves are taxed more in some.envious witch hunt out.
I disagree with your last half regarding why people flock to property as a popular investment choice. It has little to do with the tax side of it, & instead mostly to do with the financial leverage factor. This is almost entirely influenced by a banks financial appetite & willingness to approve lending on investments. Banks financial appetite when lending for investing is geared pretty more solely to property. Here lies the problem. One would be laughed out the bank if one tried to borrow 1 million towards bitcoin. That's not the investors fault.
Nor is it the investors fault that one does not get wealthy leveraging ones own time working in a job, & then using ones hard earnt after taxed dollars to invest. This is a poor mindset. Leverage is the key. Property investors take advantage of using the banks lending to invest larger capitals than they could elsewise invest from their own incomes. If you wish this to change, you will need to change a banks appetite towards lending in "more productive investment options". That ain't on the investor.
Tax law is to impose taxes on income. How it's used is another set of policies and beliefs.
That we believe it's in place to shape behaviour is a serious flaw and abuse of power.
That it does shape behaviour, and only in certain contexts is a serious psychological and emotional flaw, inherited from our predecessors and culture, and economic conditioning.
Wouldn't that be nice if home owners had their entire mortgages paid for by government, including any interest rate increases too.
Some retirees with mortgages get assistance via accommodation supp as well you know, so the government is paying their mortgages via the pension and this.
you would not want your gains on your primary home heavily taxed come sale, just like everyone else who sells, you will be wanting top dollar, you won't sell for a large discount just to "do you bit & help the next generation out". See all good & well wanting to tax others heavily, until it applies to you.
I would gladly pay a land tax and CGT if it meant my income tax reduced accordingly and those who profit heavily form capital gains, never-ending rent increases for their tenants and funneling things like personal cars through company owned rental properties etc had to actually pay their fair share of tax. the only reason property is so attractive is that prices since the 90's have rocketed in accordance with real interest rates decreasing. it is unproductive for our country to continue down this path and destructive in the long term where if continued, we will end up with a small proportion of the population owning a large proportion of the houses, and rents will take up so much of renters income the will be financially locked in place. This isn't taxing our way to prosperity, it is preventing greater concentration of assets to those who already have sufficient wealth to effectively snowball to greater wealth, and allow the middle class a chance.
@ interesting - "and allow the middle class a chance."
Lol You sound like only "rich" people buy more than one property. What do you class as "rich"? I'm curious. It is the middle class that buys property. You make it sound as though most property investors are rich with 20+ property portfolios lol Been listening to too much lamestream media I'd say. The reality is quite different to how your pitching it.
Your complaints are of course mis guided. If you spent more time focusing on what's possible to achieve, & less time complaining it's everyone else's fault on some ficticious witch hunt of those you feel are "rich" as they have one more property than you do, you'd likely find a much more prosperous life.
@ overseas Kiwi- You've clearly been away from NZ far too long if you believe that Nationals 11 months governing can do the last 6 years of damage causes by Labour. Either they or your faith in National to have achieved such is far too strong. They're not as good as your giving them credit for.
Have a little patience. Thats what the decieved Labour voterbase told us for 6 years. "Letsdothis".
@ kiwi overseas - Last 6 years of Labour were far more incompetent than any other government in our countries history. Even more so than the 11 months currently.under National.
If you don't believe this, happy to enlighten you for a much more informed voting decision come next election. Guaranteed there's more dirt on the previous Labour government than the current National government. Though, if I am to provide my evidence, youll need to be ready with yours. Not just parroting typical socialist whinging, moaning & entitlement statements of "I don't like Natiional, they're mean". You'll have to do better than that. I can. Can you?
This is exactly why Labour were voted out. Over 75% of the country who voted chose not to vote for Labour. Doesn't mean they voted National, but it does mean they didn't want Labour back in.
You will be bitterly dissaponted if you actually believe Labour has a shot at getting in next election. National will be governing for a minimum 2 terms, likely 3, based on the string of constant failures from the previous Labour government, our majority will make sure it is a long time before Labour are even considered. If they triggers.you, best you remain overseas. "Letsdothis".
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