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RBNZ chief economist Paul Conway sees dominance of the 'traditional drivers of growth' in the New Zealand economy coming to an end

Economy / news
RBNZ chief economist Paul Conway sees dominance of the 'traditional drivers of growth' in the New Zealand economy coming to an end
house
Source: 123rf.com. Copyright: ssstocker.

New Zealand's long-run economic growth has been about expanding the population, mainly through migration, and rising house prices, Reserve Bank chief economist Paul Conway says.

In response to questions after giving an online speech titled Beyond the cycle: Growth and interest rates in the long run, Conway said those 'traditional drivers' are 'not optimal' from a per capita perspective.

"You know, we are very good at thinking from a per capita perspective when it comes to medals in the Olympics. We are less good at thinking in per capita terms when it comes to our economy.

"But I would say those traditional drivers of growth in the New Zealand economy from a  per capita perspective haven’t delivered as well as ideally they would and I do think the period when they have been dominant is coming to an end."

Conway referred back to a speech he gave in 2022 in which he suggested the tide may have turned against housing being a one way bet for Kiwis.

“And I do think that has come to pass. Capital gains in the housing market have become a bit harder to find, which from my perspective, I think this idea of trading houses among ourselves at ever increasing prices, pretending that we are creating prosperity, like, I don’t think that is a pathway to long run prosperity and well being.

"Because with younger people – affordability comes into it. Not only is it an asset, but it is where people live and I fully appreciate that for many New Zealanders housing is their main investment. But the point of at least part of the speech is that if housing isn’t going to provide that capital gain going forward because we are getting better at supplying houses for a bunch of reasons, then we need other profitable investments for people to save with.

"We would get that with a more productive New Zealand economy. It would become more about equity and become more about businesses doing interesting things internationally and generating a strong return for New Zealanders."

Conway was also asked about what happened to New Zealand's 'rockstar economy' - a reference to a term coined by HSBC chief economist for Australia and New Zealand Paul Bloxham some years ago.

“I don’t think we’ve ever been a rockstar economy since the ‘50s. It was relevant to a cyclical period in New Zealand’s economic history where we were performing well. And it is great from a cyclical perspective for the economy to be going well. From a central bank perspective you want the economy at potential output with inflation at target.

“In terms of New Zealand’s long run performance we haven’t been a rockstar economy for decades.

“We did get a sort of productivity surge in the mid to late ‘90s when the effects of reform in New Zealand in the ‘80s and the early ‘90s kicked in and we were coming out of a huge recession in the early ‘90s, but it kind of faded away.

“Our economic performance to my mind at least has been – and you see it in the data – you know, we have been declining in all sorts of metrics relative to the rest of the OECD. And I think it is really important that we do look around internationally to gauge our performance and what’s possible. So, I think in terms of New Zealand being a rockstar economy – there’s been glimpses in the past – but I think if we play our cards right the best is yet to come."

Conway also discuss the "very large revisions" made to GDP figures and released before Christmas.

“We are not going to talk about the Monetary Policy implications of those [revisions] because we will get to that in a few weeks" at the RBNZ's next Official Cash Rate review on February 19, Conway said.

But he noted the revisions showed much stronger GDP growth than was previously measured over 2022 and 2023.

"For me, when I saw that, I thought that’s more consistent with what we were seeing in the bank at the time because at that time we were talking a lot about non-tradeable inflation, domestically driven inflation in the economy and it was a little challenging squaring that with a very flat GDP track.

"It makes more sense.

"For me those big revisions highlighted an issue of poor data in the New Zealand economy," said Conway.

"Our economy is not particularly well measured. And the point I usually make around that is that investing in our data – which is fundamental to getting policy right – the cost of that is pretty miniscule when you compare it to the cost of us making a policy mistake because of dodgy data.

"We are investing in other data sources here at the bank and we’ve got a lot of high frequency data that we are all across, so, it is not all about GDP. But yeah, important data. It would be better if it was a bit more stable in terms of smaller revisions," Conway said.

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108 Comments

So apt. And perfectly said 

And I do think that has come to pass. Capital gains in the housing market have become a bit harder to find, which from my perspective, I think this idea of trading houses among ourselves at ever increasing prices, pretending that we are creating prosperity, like, I don’t think that is a pathway to long run prosperity and well being

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33

So apt. And perfectly said 

I don't seen anything particularly enlightening here. What do we pay Paul?

In fact, it's almost like he's been sent out as a sacrificial lamb to deliver a message that tempers the behaviors / attitudes of the hoi polloi about the Ponzi going forward in the near term. But why? 

 

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Happy birthday mate 🎂

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Wot capital gain? 

My house cost 100,000 pub beers 22 years ago. If I sold it today, I could still only buy 100,000 pub beers. Sure, I have enjoyed a nominal capital gain, but not a real one. 

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But if youd had those 100,000 beers, you'd have nothing but a big puku.

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And some good memories

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Or maybe some terrible ones too...

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Or lack of any after the blackout

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6 feet under

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"trading houses among ourselves at ever increasing prices"

Clarification on his comment:

"trading EXISTING houses among ourselves at ever increasing prices"

Adding new residential dwellings to supply with new construction is different.

 

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"Adding new residential dwellings to supply with new construction is different."

It is indeed. It creates new stuff. And new stuff is real investment.

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New houses are only a good investment if they are sold for more than they cost to build.

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We should be adjusting tax and other policy to encourage more production and less speculation on existing houses. Reward the value makers not the value takers.

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New Zealand has been badly mismanaged over decades. It's no longer a desirable place to live for the best and brightest. House prices are going to reflect the remaining demographics moving forward.

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Ultimately, living at the expense of following generations via managing house prices up has made New Zealand a less attractive place to the best and brightest. We needed to be rewarding those who would build value not just take it from society.

New Zealand used to get away with lower wages because housing and living costs were affordable. People could move here for the lifestyle. That's been squandered through entitlement mentality to free wealth from existing housing.

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I have had a few experiences in Auckland over the past few weeks that emphasise for me how dysfunctional Auckland has become.

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In what way? Traffic? House prices? 

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I suspect that our “best and brightest” are doing just fine. In my experience, it is those in middle/lower-paid jobs, struggling to make a living, who are moving overseas (usually to Australia). I know a lot of bright people, and they’re all doing well in NZ.

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Ayup. We are running several tiers of income and economics at the same time.

Most people I know at the top of their game are getting rewarded fairly well.

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Then why do we have hospitals that are running with no doctors? I know of at least three hospitals where departments have had to close as all the specialists have taken jobs in Australia and they have been unable to recruit any new ones from overseas.  Its not just about money. 

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You're absolutely right. My observations are limited to people that I know, living in larger cities. It is a sad indictment of successive governments that the funding of more rural places, and less 'sexy' specialties, has seriously faltered (I'm a medical specialist).

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To get a top class rugby player to return to NZ requires money. Same applies to top class doctors. We are only willing to pay just above the 3rd world rate of pay. Now the best from overseas either stay in their home country or choose somewhere better paid than NZ. 

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New Zealand doctors are paid quite well to be honest. I think that GPs, psychiatrists, and non-procedural medical specialists are generally underpaid and under appreciated compared with anybody who can do a ‘procedure’ (surgeons, anaesthetists, gastro/cardio, radiologists). Unless you work in medicine, or have any stats to back your assertion up, I would call it rubbish. I could literally double my income if I chose to drop my public job and work entirely in private. I choose not to because I am quite happy with my income, and there is more to life than money. There are plenty of perks ... Read more

New Zealand doctors are paid quite well to be honest. I think that GPs, psychiatrists, and non-procedural medical specialists are generally underpaid and under appreciated compared with anybody who can do a ‘procedure’ (surgeons, anaesthetists, gastro/cardio, radiologists). Unless you work in medicine, or have any stats to back your assertion up, I would call it rubbish. I could literally double my income if I chose to drop my public job and work entirely in private. I choose not to because I am quite happy with my income, and there is more to life than money. There are plenty of perks of working in public, such as training of our registrars, and a whole host of others. MOST doctors are like me, and it is actually quite common for the worst of us to be the ones whose sole purpose is to maximise income. 
 

I earn the same as everybody else in my public department, regardless of talent. In private I set my own fee, and talent has nothing to do with it. Plenty of incredible surgeons charge less than much worse surgeons. 

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Same here ( I know a lot of bright people, and they’re all doing well in NZ.) The ones moving have some similar traits and mostly find their troubles follow them over.

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In medicine or other fields? If the latter can you expand on the industry?

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Medicine, IT, Marketing.

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Exactly. It’s the middle class battlers and younger generation who move to the great nirvana that is Australia. I was one of them! After a few years of living there earning good money and having a good life they realise that they still can not afford to buy anything coastal or inner west and end up coming back to NZ where a much better suburb and lifestyle can be obtained for a young family albeit on a lesser salary. 

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The remaining demographics will be thinned further. The twenty-year-olds of the 2040s are simply not being born today in sufficient numbers. 

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They are, just not in NZ.

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Not in any OECD country really.

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Here's the stats on NZ births.  Total births over the last 10  years has been stable (around 58,000 per year), with just a 0.36% increase in 2024 births from 2014.  Where it gets interesting is the distribution.

European births - down 14.2% (11.7% of that drop occuring in 2023 and 2024).

Maori births - up 6.17%

Pacific Islander births - up 11.5%

Asian births - up 61.3% with a 23% increase in 2024 alone.  Asian births per year now outnumber Maori births per year. 

 

 

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Liberal Western media has done a wonderful job convincing pakeha women that their career is more important than raising a family.

That, coupled with 2 salaries being required for house purchase.

It's a pincer.

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I’d agree with that. In fact that is a scarily accurate comment. 

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Not just "pakeha women." See also women in Far East Asian nations. 

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“I don’t think we’ve ever been a rockstar economy since the ‘50s."

What has happened since the 50's in NZ:

  • Large government spending on infrastructure to ensure electricity supply and core highways built and maintained
  • Globalisation opening up export markets to grow that sector
  • Effective doubling of the workforce with the opening and growth in opportunity for women in the workforce
  • Lowering birth rate via development of and widespread adoption of contraception as well as large grown in womens education
  • Draw down of resources to draw from locally e.g oil, gas, native timber, seafood
  • Increase in standard of living initially via govt investment in infrastructure in NZ, followed ... Read more

“I don’t think we’ve ever been a rockstar economy since the ‘50s."

What has happened since the 50's in NZ:

  • Large government spending on infrastructure to ensure electricity supply and core highways built and maintained
  • Globalisation opening up export markets to grow that sector
  • Effective doubling of the workforce with the opening and growth in opportunity for women in the workforce
  • Lowering birth rate via development of and widespread adoption of contraception as well as large grown in womens education
  • Draw down of resources to draw from locally e.g oil, gas, native timber, seafood
  • Increase in standard of living initially via govt investment in infrastructure in NZ, followed by the offshoring of labor to manufacture goods in cheaper countries
  • 3 decades of lowering real interest rates allowin for capital gain to draw on to use more resources and build wealth

1./ We will not likely again see the gains made from this historic globalisation effort and international coordination

2./ We will not see the doubling of the workforce again either and can only rely on either keeping locals and immigration to plug the rest

So the question is, with the above in mind, is it even possible to maintain the status quo granted the same opportunities will not be afforded again? An din turn, is GDP even a worthwhile measure worth striving for given it is effectively just a stat used to keep people investing in NZ and maintaining our currency level so we can keep our standard of living? These are some questions we should all be thinking, and discussing with others to ensure more people think past the now or the next election, and start thinking about the long term trajectory of NZ.

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NZ's population in 1965 was 2.6m and we are at 5.2m now - so we can double the population through (mostly) immigration in the same timeframe.

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" Draw down of resources to draw from locally e.g oil, gas, native timber, seafood"

We can double our population through migration but we cannot recreate the resources used and so therefore will continue to spread those remaining thinner and thinner as they further deplete and/or population increases....not a recipe for 'growth'

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Agree but it's a simple level that politicians can't resist pulling on.

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Both points one and two apply largely to the entire world so why do so many persist in expecting to maintain a monetary system that requires those conditions?

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TINA plus gold just in case....

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These are some questions we should all be thinking, and discussing with others to ensure more people think past the now or the next election, and start thinking about the long term trajectory of NZ.

I've been thinking about this for nearly 20 years.

If the income trajectory is down in real terms, the anticipation is things will get worse and lifestyles will need to change.

Instead things will bifurcate and some will have the same, or more, and most will end up with less.

People should be thinking about alternative ways to live, although this will be forced on people regardless.

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Instead things will bifurcate and some will have the same, or more, and most will end up with less.

100% agree. And you can see right now how those who are on the trajectory to have the same or more are furiously stoking division amongst those that will have less. 

Divide and conquer. That is the core objective of the culture war narratives, demonise the other, pick outliers and stoke outrage:  Maori, women, wokesters, liberal elites, the rainbow  community, poor people, cyclists, disabled, immigrants, government officials, council workers, teachers, etc...

It's all about turning people against each other so the super rich can ... Read more

Instead things will bifurcate and some will have the same, or more, and most will end up with less.

100% agree. And you can see right now how those who are on the trajectory to have the same or more are furiously stoking division amongst those that will have less. 

Divide and conquer. That is the core objective of the culture war narratives, demonise the other, pick outliers and stoke outrage:  Maori, women, wokesters, liberal elites, the rainbow  community, poor people, cyclists, disabled, immigrants, government officials, council workers, teachers, etc...

It's all about turning people against each other so the super rich can continue to take more than their fair share of the ever dwindling pie. 

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Pretty much, although it's hard to tell whether the culture war is by design, or just fires are stoked with roots in the end of monoculturalist identity.

We obviously need to be led.

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The Luigi matter really showed that well. Right-wing talking heads in the US trying to make it about Left vs. Right found their own followers telling them to shut up and see that it was not about sides but about rich vs. poor.

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Are celebrating that we've done exceptionally well because of your list or are you just listing an array of events whether they've benefitted NZ or not?

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Looked to be a rough outline of our economics since WW2. Doesn't have to be good or bad, but it's useful to understand the serendipity that landed us where we are, and where we're likely to go.

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It was to get people thinking mainly, and to indicate many occurrences that are not repeatable, and being awareness to the future not being the same as the past in many respects. It is baffling how many people around me don't see past their tangible existence and see the bigger picture in terms of economics, govt, and what the world might look like for their children or future children, and then proceed to vote based on a very narrow scope. To get the best representation of what our country wants, we need to be educated, informed, open minded, and long ... Read more

It was to get people thinking mainly, and to indicate many occurrences that are not repeatable, and being awareness to the future not being the same as the past in many respects. It is baffling how many people around me don't see past their tangible existence and see the bigger picture in terms of economics, govt, and what the world might look like for their children or future children, and then proceed to vote based on a very narrow scope. To get the best representation of what our country wants, we need to be educated, informed, open minded, and long term thinkers. The more we discuss these matters, the more informed and educated those around us can and will be, and the hope is that this at least has some impact for the betterment of the majority, over the few. 

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How does being educated, informed et al materialise parties, politicians & even a political system that deserves our vote?

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NZ's growth has always been pegging on the growth of the big players in the world.

 

I trust NZ's long term growth will depend on Chinese economy and technology.

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And if/when China "invades" Taiwan? There will be pressure to boycott doing business in China

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We are 5 eyes,  the trade ban would technically bankrupt NZ.

 

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your knowledge of world stays around 1950s or 1980s at best.

Need to update bro.

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So you think if war started over Taiwan there would be no repercussions here?! 

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but Taiwan is part of China.  just like Chatham Islands is part of New Zealand. 

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Hence the double quotes around invade...

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but Taiwan is part of China.  just like the Cook Islands and Samoa are part of New Zealand

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It would be more than pressure. Trade with Chiba would definitely be boycotted by all developed, democratic nations

the usual suspects would continue trading with them

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Paul Conway for next Chief Economist, to replace A Orr.

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He could start by cutting the number of staff at RBNZ including DEI. There is a lot of busy work in that organisation to no value.

Set an example Paul!

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He literally said that one of the challenges is that they have poor data, you need people to get more data, and the cost of having better data is tiny compared to making decisions based on poor or outdated data.

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Do you know what data he is lacking? That would be interesting to know….

I bet none of the 20+ DEI people are data scientists…….

Blind Freddie can tell they always are late to the interest rate change party - leave it too long to raise, then leave it too long to lower.

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"Do you know what data he is lacking? That would be interesting to know…."

This misses the point. (Although the point you were making is valid.)

We have two parts to NZ's economic management.

One part is monetary policy (RBNZ). The other is fiscal policy (government).

One is unelected. The other is elected by about 40%.

But when neither part is working working for most Kiwis, what happens next?

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Productivity at the RBNZ has plummeted.

There was a piece on Kiwiblog recently showing that number of staff at the RBNZ has grown from around 250 to 625 during Adrian Orr's time.

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We could get rid of our prime minister, in the same vein. Clearly promoted beyond his ability simply because he matches a set of arbitrary characteristics. Our top-ranking DEI hire.

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Perceived value, by you.

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"Paul Conway for next Chief Economist, to replace A Orr."

Conway is the Chief Economist at the RBNZ !!!

And Conway sits on the Monetary Policy Committee (MPC) - that includes Orr - but also has two of Conway's 'underlings'. And let's not forget that Orr's primary role is governance.

Conway talks a good talk about things that the RBNZ can do little about but constantly stuffs up with things the RBNZ can do a lot about.

I see Conway as one of the heads that MUST ROLL.

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50's after refrigerated shipping we boomed # 1 or 2 riches in the world. 

 

We had ratios of sheep and cattle to people far far greater than today - and they could get on with turning the free rain -> free grass (on cheap land) -> protein to export to the world. 

 

Then greens made it hard. 

 

The rest of the world boomed in tech (IBM, microsoft, apple, now NVIDIA and AI - and comparatively we are mile down the list now. 

 

We are still the most efficient protein producers in the world so not sure why we haven't managed to do more with ... Read more

50's after refrigerated shipping we boomed # 1 or 2 riches in the world. 

 

We had ratios of sheep and cattle to people far far greater than today - and they could get on with turning the free rain -> free grass (on cheap land) -> protein to export to the world. 

 

Then greens made it hard. 

 

The rest of the world boomed in tech (IBM, microsoft, apple, now NVIDIA and AI - and comparatively we are mile down the list now. 

 

We are still the most efficient protein producers in the world so not sure why we haven't managed to do more with that - seems instead of celebrating it we have a long history of punishing it.

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For a while there farmers got a pound for a pound of wool, now not so much.

Its sad but I am starting to look at Australia for retirement.

 

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✈️ ✅

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Oh, that Brock.

If you need to come back here, the new car smell must be wearing off.

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Yeah, me too - I have an Australian parent, and that makes it simpler.

Biggest thing is getting good advice on accounting and pension transferability.

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Seriously? Your conclusion is that "Greens made it hard"? After WW2 the world boomed on the back of reconstruction and a flood of cheap energy. Then energy wasn't so cheap in the seventies and the money printing began in earnest.

Wanting to live in a clean environment may make it expensive for industrialist drones and their mindless extraction/dump the trash on society ideology, but that's a good thing. Suck it up!

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"The rest of the world boomed in tech (IBM, microsoft, apple, now NVIDIA and AI - and comparatively we are mile down the list now."

Look again. We punch above our weight in this space.

And we could do even better (you probably have no idea how much better and the govt certainly doesn't!) with ...
a) a tax system overhaul and,
b) a cheaper cost of living, and,
c) greater respect for the people in the I.T. space that are younger and more mobile

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because we are getting better at supplying houses for a bunch of reasons

Oh. I thought we were getting better at encouraging people to leave - guess that makes means more supply for everyone!

/s

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But he noted the revisions showed much stronger GDP growth than was previously measured over 2022 and 2023.

 

oh dear, we GDP data is going to revised up? 

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Does any party have a detailed industrial policy to improve our per-capita GDP and associated value add?

This is not a rhetorical device, but a serious question, as I have yet to see anything but vague policy noises that mean nothing.

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It's way easier to say things like "increase productivity" and "higher incomes" than it is to work out how you're going to do that.

The theory seems to be if you allow the conditions, the market will meet you in the middle.

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That feels an awfully low bar as we have a collective history of doing what's easy rather than what's best.

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This is most people's nature. Why do anything more than you need to.

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To get a competitive advantage that makes you grow?

It also looks like enterprise is becoming an endangered species here.

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No, because we don't know what we want to be. We need to move to either a 5 year election cycle or bipartisan large-scale infrastructure.

Xi prattles on about China being so much better than NZ and on this, I will concede he is correct.

There is no path to prosperity under the Net Zero jackboot. The irony of so many Kiwi's moving to Australia for higher wages and cheaper houses when NSW has the largest coal export port on the planet is lost on 99.9% of us.

 

 

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A five year electoral cycle? Not without things like electoral recall legislation and binding referendums for greater protections for us, the citizens.

And of course China responds faster than any democracy can: it's a characteristic of single-party, authoritarian states.

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I didn't say it was better, I was specifically referring to strategy and execution with specific reference to infrastructure delivery.

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Bang on TK

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The first step in improving our productivity is very large changes to our tax system, to encourage productive enterprise over speculation.

There is only one party that really wants to do that and its TOP. Everyone elses policy is twiddling around the edges.

But it would take a long time for it to be implemented and then become obvious that is what we needed.  Some short term pain for long term gain. Our 3 year political cycle means that it will almost certainly never happen, given that short term pain will get you thrown out of parliament.

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Agreed, but their policy in this area has been resoundingly defeated 2x elections in a row. The main parties...how many rentals do they own again about covers it. Even Helen was/ is on on the act. Ultimately it is a case of...

I want my, I want my, I want my tax free gain...

Leading to

Burning down the house (the economy struggling under of rent and mortgage enslavement)

And people complain when there is a lack of police, healthcare, educations, roading/transport, and defense services. Decades of tax avoidance based investment, aging population with me first mindset have created this mess. It has created ... Read more

Agreed, but their policy in this area has been resoundingly defeated 2x elections in a row. The main parties...how many rentals do they own again about covers it. Even Helen was/ is on on the act. Ultimately it is a case of...

I want my, I want my, I want my tax free gain...

Leading to

Burning down the house (the economy struggling under of rent and mortgage enslavement)

And people complain when there is a lack of police, healthcare, educations, roading/transport, and defense services. Decades of tax avoidance based investment, aging population with me first mindset have created this mess. It has created a massive Exit Stage West in the next generation of much needed tax payers. Well done.

Look forward to more people in every aspect of life that either do nothing, or speak barely legible english.

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Wot a load of toss. That toss protects the status quo. And ... Where has that got us?

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TOP have some good ideas, but from talking to a few of them they come across as economist zealots, and will remain an electoral footnote until they grasp the principles that politics is about the possible, and that perfectionism is the enemy of the good.

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"Does any party have a detailed industrial policy to improve our per-capita GDP and associated value add?"

It is an exceptionally good question, Mr Golem.

Alas, the answer is no.

All political parties in NZ display a massive void in this space and resort to little more than soundbites when they talk about what industries, or services, NZ should be pursuing.

They all display a massive ignorance of where NZ's absolute and comparatives advantages are in economist speak.

There are some specifics about industries that are 50 years old - and made NZ 50 years into what we see now - but absolutely fuck all about what ... Read more

"Does any party have a detailed industrial policy to improve our per-capita GDP and associated value add?"

It is an exceptionally good question, Mr Golem.

Alas, the answer is no.

All political parties in NZ display a massive void in this space and resort to little more than soundbites when they talk about what industries, or services, NZ should be pursuing.

They all display a massive ignorance of where NZ's absolute and comparatives advantages are in economist speak.

There are some specifics about industries that are 50 years old - and made NZ 50 years into what we see now - but absolutely fuck all about what is relevant in our world today, or in 5 years time, even 10 years, or 50 years.

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When you have a Govt. that believes that reintroducing tax credits on mortgage interest payments for property investors, will "bring down" rents ....well, there's your answer right there ....while what was one of the main drivers in the recent inflation figures  - rental increases !  

Been screaming from the rooftops for years - "ya can't run an economy buying and selling houses to each other" !  ....it is ultimately unproductive....but here we are ! 

You couldn't make this stuff up !! ....an economy run for property investors will ultimately be it's downfall. 

But what else would you expect from "7 house , now ... Read more

When you have a Govt. that believes that reintroducing tax credits on mortgage interest payments for property investors, will "bring down" rents ....well, there's your answer right there ....while what was one of the main drivers in the recent inflation figures  - rental increases !  

Been screaming from the rooftops for years - "ya can't run an economy buying and selling houses to each other" !  ....it is ultimately unproductive....but here we are ! 

You couldn't make this stuff up !! ....an economy run for property investors will ultimately be it's downfall. 

But what else would you expect from "7 house , now 5" Luxon ..... sad. 

 

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Reintroduction of standard tax accounting practices has indeed brought down rents and increased rental choice for tenants.  

https://www.rnz.co.nz/news/national/522961/rents-falling-for-first-time-in-nearly-two-years-data-shows

https://www.trademe.co.nz/c/property/news/nz-rents-hit-eight-month-low-in-september?srsltid=AfmBOoqsFZ8wJ-LCsfCNSg78_Vn27goII9BsIK7Mj6uD9uAxmyG4fwBv

https://www.interest.co.nz/property/131338/trade-me-property-says-residential-landlords-may-need-reduce-their-asking-rents-due

 

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Greater rental availability from people leaving NZ has brought down rents. Supply and demand

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To say nothing of the recent building boom that increased supply - as artificial as it was (Thanks for nothing, RBNZ!)

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Firstly govt make huge revenue from mortgage interest with the help of ocr for all sales homes in last 5 years. All the money end up in govt account. 
So it is not the commercial banks or home owners making much of the interest. 

for you info every house has a mortgage and a newly bought house have 4K payment per month out of which 80% is just interest, means most money become govt surplus.

all issue are due to the govt collecting more from people. All projects which you think should be low priority is a job creator for the elite class. 

 

 

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Productivity isn't everything, but, in the long run, it is almost everything. A country's ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.

I cannot see why we would ever have expected a housing bubble to improve productivity. This is a great country, a land of milk and honey, I don't think we are intrinsically doomed to repeat the mistakes of the last two decades but we must be willing to accept the rapid and profound change needed to rejuvenate our economy.

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A lot of people around me are still struggling to understand what has gone on. They are getting paid more but feeling poor.

The NZ standard of living has taken a massive hit because we have maximised the amount that people will pay for a house, via rent or a mortgage…. and the cost to build has followed suit.

We will need successive Governments that want to unwind this, and I don’t see that happening.

 

 

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Pa1nter was saying the other day, that it's the other way round.  Houses are expensive because that's how much it costs to build.  Not that building costs (land, councils, materials, Labour etc) have chased this extra buying power up.

But it's usually the earlier steps in the process that take the biggest bite.  

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Yet neither perspective addresses cause and effect, without which the problem can't be identified or solutions offered.

There was a point in time when houses weren't so expensive to build, relative to everything else. What changed, both in actual technical economics and financial constructs, and in beliefs/narratives?

Is our "standard" of living really greater, vastly improved than it was 25 years ago? Other than more technology and gadgets, what is really any different? What has really changed for the better bigger picture of society?

25 years repeating the economic growth, productivity dogma has gotten us where? Demanding more output per worker is no ... Read more

Yet neither perspective addresses cause and effect, without which the problem can't be identified or solutions offered.

There was a point in time when houses weren't so expensive to build, relative to everything else. What changed, both in actual technical economics and financial constructs, and in beliefs/narratives?

Is our "standard" of living really greater, vastly improved than it was 25 years ago? Other than more technology and gadgets, what is really any different? What has really changed for the better bigger picture of society?

25 years repeating the economic growth, productivity dogma has gotten us where? Demanding more output per worker is no different than the slave master whipping his serf to work harder. Output requires input - do we have real data on the best input for each person to be at their best potential?

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There was a point in time when houses weren't so expensive to build, relative to everything else. What changed, both in actual technical economics and financial constructs, and in beliefs/narratives?

Due to our constant need for improvement, the nature of house construction and compliance has increased exponentially. They require a much larger roster of professionals to complete (100 years ago a builder would do almost every aspect of construction), which there are less of, and a private individual is largely incapable (either via skill level or compliance necessity) of doing any of this themselves.

We have exported much of our manufacturing so ... Read more

There was a point in time when houses weren't so expensive to build, relative to everything else. What changed, both in actual technical economics and financial constructs, and in beliefs/narratives?

Due to our constant need for improvement, the nature of house construction and compliance has increased exponentially. They require a much larger roster of professionals to complete (100 years ago a builder would do almost every aspect of construction), which there are less of, and a private individual is largely incapable (either via skill level or compliance necessity) of doing any of this themselves.

We have exported much of our manufacturing so aren't exposed to how expensive it is to make anything here now. Rest assured, if your underpants or cellphone were made here, you'd also be making the case for why those have gotten so expensive also.

In regards to your question about whether our standard of living is better, I'd say on balance no. We are paying a high price to finance a regulatory industry with no end and minimal actual improvements. Some would call that "progress".

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Agree! 20+ years ago our standard building specification was 4 A4 pages - one sided. Now its upward of 350pages. And thats representative of what has happened to every step of the building process

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In large part too because the taxpayer and ratepayer found themselves holding the bill after allowing the building industry to self govern while not requiring the industry to take responsibility for what it produced. I.e. the lead in and execution of the leaky buildings fiasco. 

A bit more responsibility could work hand in hand with less regulation. The industry might then build simpler but more robustly.

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OCR … find out who gets that % and who pays it and where it ends.

Govts biggest revenue is ocr. If they don’t have much they will print more and distribute as debt and create more interest through ocr

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For those who took the effort to read Paul Conway's presentation he mentioned that New Zealand has a lack of 'effective innovation'. Hiring people above implementing technology has always been the lazy way out for New Zealand employers apart from a few. So my solution would be to abolish Working for Families and stop the state subsidy on wages and force those business leaders who want to remain in business to look for more sustainable models using technologies.

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Paul Conway should realise and admit to the fact, that the RBNZ has just created yet another boom / bust cycle. And this one was massive !!!

It is these boom / bust cycles, that the RBNZ has just created, but before them it was our government, which is why the young, bright and hardworking, that would otherwise have stayed to create the 'effective innovation' he so applauds, have left - or have been crippled.

Sorry Paul. Introspection isn't your strong point, is it? Please resign.

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"the RBNZ has just created yet another boom / bust cycle. And this one was massive !!!"

The bigger the party, the bigger the hangover.

Needed debt to income ratio measures implemented before 2020 and record low interest rates, however those with their vested selfish interests  (either financial or political) lobbied against this policy measure at the time.

One of the consequences has been that many owner occupier buyers in the 2020 - 2022 period took on too much debt and now potentially facing cashflow and mental stress.

 

This potential buyer was disappointed at the time of being declined for financing for a purchase ... Read more

"the RBNZ has just created yet another boom / bust cycle. And this one was massive !!!"

The bigger the party, the bigger the hangover.

Needed debt to income ratio measures implemented before 2020 and record low interest rates, however those with their vested selfish interests  (either financial or political) lobbied against this policy measure at the time.

One of the consequences has been that many owner occupier buyers in the 2020 - 2022 period took on too much debt and now potentially facing cashflow and mental stress.

 

This potential buyer was disappointed at the time of being declined for financing for a purchase of a residential dwelling in Nov 2021.  However at the time he did not realise that being rejected from the bank was actually a blessing in disguise.  Being rejected for financing is better than getting approved to overpay for a house and take on an excessive amount of debt.   Today, he can take his cash deposit, interest on that cash deposit over the past 4 years and additional savings in the past 4 years to buy a residential dwelling at a lower price with a lower mortgage.

https://www.newshub.co.nz/home/money/2021/11/first-home-buyer-not-very-… 

 

For those who don't realise, the financial consequences of a Peaker and "Buyer Today".

1) Peaker

The median house price at the peak for Auckland was $1,300,000

With an 80% LVR, this is a mortgage of $1,040,000

The 20% equity is $260,000

2) Buyer Today ("BT") - Sept 2024

In 2021, the buyer who waited, deposited the same $260,000 equity into a bank deposit earning interest. Also BT would rent an equivalent house and have still saved money due to the rental being below the monthly P&I mortgage payments of Peaker - in 3 years the savings would have been about $20,000 annually. So a Buyer Today would have an amount of $340,233 to use as a deposit.

The current median house price for Auckland is around $950,000

Equity deposit of $340,233

The mortgage at this purchase price would be $609,767 (an LVR of 64%)

The Peaker has a mortgage which is higher by $430,233 (mortgage of $1,040,000 for Peaker vs $609,767 for BT). BT's mortgage is 41% lower than Peaker's mortgage.

Assuming BT, pays the same exact dollar amount each year that Peaker pays for their mortgage, as a result of that additional borrowing, Peaker is paying $1,232,229 more over the 30 years than BT (This is due to higher borrowing amount of $430,233, and total interest on this of $801,996 over 30 years). BT is mortgage free by the year 2037, whilst Peaker continues to pay their mortgage until 2051 (14 years later) - so after the year 2037, BT can save all that money that Peaker continues to pay on the P&I mortgage.

Assuming same incomes, and same living costs (food, travel, etc except mortgage) , BT can save the total $1,232,229 in payments that Peaker is paying. If BT invests the annual P&I payments that Peaker continues to pay after the year 2037 at 4.0% p.a, then in 2051 this amount will grow to $1,401,500.

Remember that at the end of 30 years, the house price will be EXACTLY THE SAME for Peaker and BT.

BT will have more money available for retirement than Peaker. Conversely, Peaker will have less money than BT at retirement.

That single decision to buy in November 2021 would have cost $1,232,229 extra to buy the exact same house for Peaker compared to a Buyer Today.

Note the equity positions as at Sept 2024 also:

1) Peaker: NEGATIVE $90,000 (negative equity, assuming interest only - house price of $950,000 vs mortgage of $1,040,000) - a loss of over 130% of their initial equity (and likely life time of savings).

2) Buyer Today: $340,233

Owner occupier buyers: CAVEAT EMPTOR

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I can't work out whether he had dumbed down his explaination for his audience, or he is just dumb.

Eitherway, it's such a poor explanation.

It is perfectly acceptable for capital gains if it is via value added gains but most of the capital gains to date has been via speculative non value added gains, which are what we don't want.

He does not even acknowledge, or maybe know the difference.

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.

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The man is so right... We bare the cost of the previous decades competition over housing as a massive drain to overseas of billions of dollars annually. We have miss directed capital away from production and into unproductive assets and now we are hitting the wall and as the writer said we must have reform. That reform must pave the path towards a more lower cost, more efficient and friendly business environment. Our councils are crushing the country through their various activities. They are the first thing that needs to be reformed. 

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