Here's our summary of key economic events overnight that affect New Zealand with news the instability feared over the new US tariff approach is hitting their economy.
First up today, we need to note that US headline CPI inflation rose in January to 3.0% when no change from the December 2.9% was anticipated. Core inflation was expected to fall to 3.1% from December's 3.2%. But in fact it rose to 3.3%. Rents were a key factor. This has set financial markets on edge.
Although not as aggressive, this official data confirms the University of Michigan consumer sentiment survey that reported a sharp jump in consumer inflation expectations.
US mortgage applications rose slightly, almost all on refinancing demand. So it was driven by churn, rather than new demand. But overall levels remain very low; in the past two-plus years these levels have remained static, and down to levels last seen 25 years ago.
All this unwelcome data had a big effect on benchmark interest rates with the UST 30 year yield jumping +9 bps. Clearly the Fed is right to wait before cutting its policy rate. Markets aren't pricing any rate cut until December now. Wall Street equities turned negative after this news too. The USD firmed on risk aversion. None of this was liked by the US President who vented on social media. But behind it all are building fears about the effect of his very misguided tariff policies which everyone but him sees as sharply inflationary.
While all this was going on, there was a UST 10yr bond auction and that delivered a yield today of 4.56%, lower than the 4.63% at the prior equivalent event a month ago. Investor support isn't wavering but bids here were made before the CPI data release. There will be some large paper losses by these bidders now.
(And we should probably also note that with the new Administration kneecapping the Justice Departments monitoring and enforcement of the area, foreign lobbyists are pouring into Washington DC to plead their cases for special treatment. It's open slather.)
Across the Pacific, Japanese machine tool orders came in at an average level in January, up +4.7% from the same month a year ago, but nothing like the spurt in December.
In China, it won't be news to regular readers, but their property development sector woes are now in crisis territory. The fundamental problem has never been sorted and many companies can no longer hang on. They are going from the zombie phase to actual liquidation now.
India's industrial production is leaking growth and at a faster rate than expected. It was up +4.3% in December, down from +5.0% in November and well below what was anticipated. You can see why their recent Union Budget moved into stimulus mode, and the central bank cut its policy rate. India needs a boost to keep the expansion going.
Meanwhile, India's CPI inflation rate is easing, down to 4.3% in January from 5.2% in December. Food inflation fell sharply, but it is still at 6.0%.
The just released 2024 Corruption Perceptions Index by Transparency International has New Zealand's global ranking slipping further, now to fourth, with Singapore moving into third place. This also bumps New Zealand off the top rank in the Asia Pacific region. The Index is published annually and is the leading global indicator of public sector corruption. While still in the top ten worldwide, New Zealand has surrendered its position as a world leader in integrity and transparency. For many years New Zealand scored ‘least corrupt’ alongside Denmark, now it is now 7 points behind its previous peer. This report covers 24 full democracies, 50 flawed democracies, and 95 non-democratic regimes.
In Australia, December home loan data revealed modest changes. The total number of new loan commitments for dwellings fell -0.4% in the December quarter while the value rose +1.4%. Owner occupier activity was positive, but investors pulled back. The number of new investor loan commitments for dwellings fell -4.5% in the quarter while the value fell -2.9%.
And staying in Australia, we should probably note the recently-retired NAB CEO, kiwi-Ross McEwan, has been appointed chairman of the board of Aussie heavyweight miner BHP. That is a long way up for an ex-ASB banker.
The UST 10yr yield is at 4.63%, up +9 bps from yesterday at this time. The key 2-10 yield curve is much steeper at +27 bps. Their 1-5 curve is steeper at +19 bps. And their 3 mth-10yr curve is steeper at +31 bps. The Australian 10 year bond yield starts today over 4.59% and also up +11 bps from yesterday. The China 10 year bond rate is now at 1.63% and unchanged The NZ Government 10 year bond rate is now at 4.65%, up +4 bps from yesterday.
Wall Street has opened its Wednesday trade down -0.2% on the S&P500. Overnight, European markets all closed about +0.3% higher. Yesterday Tokyo closed up +0.4%. Hong Kong ended its Wednesday trade up +2.6%. Shanghai was up +0.9%. Singapore was up +0.4%. The ASX200 ended up +0.6%. But the NZX50 ended almost unchanged.
The price of gold will start today at just under US$2894/oz and down -US$10 from yesterday.
Oil prices are down nearly -US$1 at just on US$73/bbl in the US and the international Brent price is now just under US$76/bbl.
The Kiwi dollar is now at 56.3 USc and down -30 bps from this time yesterday. Against the Aussie we are down -10 bps at 89.8 AUc. Against the euro we are also down -40 bps at just on 54.3 euro cents. That all means our TWI-5 starts today just on 66.7, down -10 bps from yesterday at this time, limited because we rose sharply against the yen.
The bitcoin price starts today at US$95,555 and again down -0.9% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.3%.
Daily exchange rates
Select chart tabs
The easiest place to stay up with event risk is by following our Economic Calendar here ».
116 Comments
Latest USA CPI indicates inflation has ceased falling and is appearing to be poised to rise. The Biden administration was largely blamed and presumably booted primarily because of its affect, cost of groceries as a basic example Therefore it will be interesting to observe if that attitude and reaction at large, is rekindled under the new presidency and even more interesting though , if it isn’t.
Populists often wield the legitimate rage of the common people towards illegitimate targets. This will be a test of how much control dear leader holds over his sheep.
The Party told you to reject the evidence of your eyes and ears. It was their final, most essential command.
SKF
As the fraud and corrupt government spending is stopped by DOGE USD interest rates will drop. Long term rates will drop first.
I liked how Elon said (about the government) that if an organisation doesn't take in more money than it spends it's not viable.
And half his profits are government subsidies.
And his high share value comes from making fraudulent claims about his companies abilities.
The right guy in charge for sure.
Elon finding things like 150 year old people claiming welfare and no personal information attached to welfare claims has to raise some questions.
We are not talking about stupid people here.
He also tweeted $50 million for condoms sent by USaid to Gaza, and to Hamas. Turns out its was Gaza, Mozambique and its was part of HIV prevention program...(but he knew that). His response when caught lying - oh well they should not be sending them at all? (No mea culpa lets just double down). Trump, who was next to Musk at the time of questioning, did not retract his claim.
Stupid is as stupid does
Yeesh. Incompetent, dishonest, or both?
Moreover, this seems like an incredible geopolitical fail for the USA. Recall that Kennedy set up USAID to cultivate the US's soft power around the world and to stave off the Soviet Union's inroads into various countries.
Musk and Trump are collapsing the USA's soft power, handing the opportunity to China on a plate.
Yeesh. Incompetent, dishonest, or both?
Highly competent at using dishonestly and confusion for personal benefit.
Not that regular governments aren't prone to this, but Trumpism takes it to a whole nother level.
Moreover, this seems like an incredible geopolitical fail for the USA.
This is a 5th isolationist US govt in a row
Spot on. With US even crapping on their friends it’s going to get very lonely for them very soon. The Trump crowd won’t care but there are still a good number of decent Americans aghast at what is going on
According to the grapevine there was some big symbolism and message at their last circus (superbowl). It appears the majority missed it, and a large number who did get it were more enamoured by flared jeans.
The number of decent Americans might be a similar ratio to here, not many, if any.
Elon finding things like 150 year old people claiming welfare and no personal information attached to welfare claims has to raise some questions.
Yeah, like exactly how many people Elon?
Did you find one, and ran with it as your proof of evidence? Or Thousands, out of millions of recipients?
You're going to find undesirable outcomes wherever you look. The scale is what's relevant.
100%, there is fraud and waste everywhere, nowhere more than in the private sector, it is unavoidable, nothing involving humans runs at 100% efficiency.
Yeah. I mean he's right about businesses with that statement, but not about governments, as anyone with a shred of macroeconomic knowledge would understand.
How?
Expect the fed to pause for a bit. However reigning in on all government spending and sacking everybody is going to be quite deflationary…will be interesting to see where things are by the 3rd quarter of the year. My pick is still back to QE by then, when the trump bump settles.
I get it, cutting government spending reduces liquidity, which is deflationary. If the US goes into a recession, interest rates usually drop.
However, trade wars and bond vigilantes worried about the size of the US debt could keep rates high even in a US recession. We’re seeing bonds sell off around the world, could be the size of the debt and no growth miracle from demographics.
I don’t think we go back to QE under the Trump/Powell narrative. Powell’s hero is Paul Volcker.
The Trump/Powell narrative is perfect for Trump to be the fall guy, he’ll get blamed for the return of inflation from the trade war. Powell will be the hero, like Paul Volcker, hiking rates to control inflation. The outcome will be blood on the streets.
The trade war and inflation are just distractions from the bigger problem, the debt can't be paid off. That's why we've been seeing bond vigilantes make a comeback and the bond market sell-off since mid-2020.
Sounds great. But I don't think it will pan out that way.
You do know Trump just legalized bribery of foreign officials, something that people are usually jailed for.
Yes, and while the Corruption index is for 2024, The US is at 65. 2025 will likely see it fall further down that list.
One has to wonder how long it will take the US people to realise just what they have unleashed, and try to force the establishment to clean up its act?
Massive inequality fueled by rich pricks = corruption.
Let's not let it happen here. Keep the foreign rich pricks out.
And don't get sucked in by bullshit trickle down economics which says all you need to do is remove democratic railguards that restrain rich pricks so that rich pricks can get richer.
Yes. Luxon doesn't seem to understand what "getting the economy working" really means. For any economy to work requires people to have funds to spend, especially surplus funds. He's not doing a single thing that is effective at lowering living costs. He's not doing a single thing that's increasing employment or wages. Sure some of the things he's doing might have long term benefits, but as some critics point out, that's not likely.
Importing rich pricks is not supporting the country or our democracy. But then he is a banker and they're the people he thinks he relates to.
Now he and ACT are creating more job instability for those on $180k plus, incentivising them to save more and spend less. Daft.
Can I have some of your kool-aid?
Delusional comment Blackdog...
US 2y and 10y selling off. Bond yields to the moon 🚀🥂
Probability of only a 25bps cut next week?
NZ2Y is still around 3.7% so they could cut 50bps. However they could be hiking for the meeting after that which would look silly so maybe only 25bps.
Yep, foresight & proactive behaviour is exactly how our reserve bank rolls 👌😂
I’d still punt a cheeky mince n cheese for morning tea on a 50 next week 🤝🤝
He has to go 50, the wheels are falling off the NZ Bus, after that he is at the mercy of the FED, though he may decide to chuck NZD under the bus. We are in a very perilous position right now, and rate impacts are very delayed, that 2035 bond was massively oversubscribed, so funding is not currently a problem.
I'm still going a hold. Still got a couple of weeks to go of further chaos and the signs are that the US is going to hold. I guess it could drop 50bps now and a few could claim a victory but it will be on the rise again next review anyway so a very narrow range to capitalise on it if your mortgage just happens to roll over.
Ohhh…all the chips on the table…I’ll double down & put TWO mince n cheese’s that they won’t hike till August (if at all this year), pause maybe, jawbone likely
Easy win IMHO I add a raspberry jam donut to the pot... he does not have to lift OCR UNTIL inflation appears in the CPI and with NZ Economy in a hole, unlikely 2025, he will look past imported inflation, what would rising OCR do anyways for this? We need not want most of those impacts, insurance, fuel etc etc. NZ electricity prices going to be tough this year.
The RB will look through most of the tradeable inflation. It's what the local price setters are doing that's their ongoing problem.
Luxon 2025 has us back to Ardern 2019 levels of immigration, meaning wages are being suppressed lowering non-tradeable inflation. A rate cut providing more money to be speculated in NZ most likely result.
If it is a real argument that NZ’s inflation is largely imported, as was repeatedly parroted by ex Finance Minister Robertson and associates, when it was roaring up in his tenure, then surely the RBNZ a with an eye on proceedings in the USA, will begin its defences in advance and should that not mean then, no decrease in the OCR here until more of the overseas scenario crystallises.
Through what mechanism do high local rates tackle overseas inflation?
only if the imported item is discretionary.... does not work for petrol etc...
Yes I thought it was contradictory then too and do believe many interested parties put exactly that question to Messrs Robertson and Orr during that time, which is why I questioned its relevance at the start of my post, and are therefore interested to see if that reasoning will still apply.
increasing interest rates = increasing NZD = lowering import prices (also = lowering export prices = lowering incomes = increased debt =...?)
Dunno why you would believe a politican (especially one without an economics degree), when they discuss inflation from a position of vulnerability lol
The ones with economics degrees, were taught to wear blindfolds.
No point believing what they see ahead
The good ones are making shitloads in the private sector.
The repeatedly inaccurate ones are guiding public policy.
NZs slipping in the corruption index should be a concern for all. This comment is in the piece; "it [corruption] is a key cause of declining democracy, instability and human rights violations". So if we are being seen as more corrupt, then we also face declining democracy and loss of individual rights.
These are topic which regularly get discussed here.
From a treaty principals oral submission. Corruption thrives in our legislative environment.
“Having worked all over the world, I can honestly say that New Zealand is the most corrupt and least attractive regulatory environment I have worked in.
…There are demands for race based payments at every step of the regulatory process and great uncertainty for investors due to the lack of regulatory certainty and the lack of legislative certainty”.
https://m.youtube.com/watch?v=FlFWzn70nuA
It is corrupt due to race payments. Look at what happened with the Dome Valley landfill decision. Local Iwi held out until they were paid off about $10m. Its that simple and in plain sight.
“There has been no engagement with the Ngāti Manuhiri Settlement Trust, with its beneficiaries. We have had no hui, no pānui.”
Looking at what’s happening in the US (both Biden and Trump), NZ is a million times better.
NZ is going banana republic. The uni party has us on a bad path - the parallels here with third world shite holes get more evident by the day.
The USA is in a borderline civil war situation, a few thousand people over there have all the money. 11% of their population are now officially living below the poverty line, do the math.
New York City in the 70's was a shitehole.
The city was bankrupt, look at it now.
The much maligned today Mr Giuliana was instrumental as Attorney General and then Mayor in bringing NY City up and out of that bad situation. Much greater police presence on the streets, zero tolerance and the so called “broken windows” policy. That is now being revisited because it has been slipping back to those unwanted times apparently.
He got the credit, he didn't do the work.
Much of the work was done by removing lead from petrol and legalising abortions. Both lead to a significant reduction in crime 15-20 years down the track.
The US is moving backwards on the latter and it would barely even surprise me if Trump signed a "Make Gas Leaded Again" executive order.
Yep, executive order to bring back plastic straws, and the US was greatest when it had leaded petrol. DDT followed by slavery could be other options for a return to the golden age?
Was it not him who created the policies that did it? Of course he didn't do it single-handedly, but the mayor pushes the direction.
Attorney General then Mayor. In the former there were a good number of critically important and successful prosecutions, of high profile criminals and politicians. The strategy being get the big ones done and dusted first then they will get smaller and smaller from thereon. Of course it wasn’t a singlehanded effort but it is commonly accepted that the campaign likely would not have even have started ,let alone succeed if he hadn’t been in those positions.
Sounds like Ponsonby, doesn't mean the rest of the country is flying tho does it.
In 2023, the official poverty rate fell 0.4 percentage points to 11.1 percent. There were 36.8 million people in poverty in 2023, not statistically different from 2022 (US Census Bureau data). The maths says that leaves the vast majority of the population living above the poverty line.
NZ is becoming South Africa. There's no way off the path now. So where South Africa goes, so shall NZ. The next Left wing Govt will be implementing the Aotearoa Expropriation Act. Get out now while you still have assets.
I would suggest a major fight back against this path is emerging. We have a million or so immigrants who are anti and a growing number of the rest of us also.
I'm expecting Seymour will get more and more support.
Seymour, fundamentally, is the Mr Bean of NZ politics - hard to take him seriously (and I say this as somebody who has met him a number of times - he is very quick-witted but his mannerisms, way of delivery etc don't do him any favours).
It also doesn't help his movement that in order to go along with ACT's "One NZ" vision you need to effectively be ok with the rest of ACT's policy platform e.g. aggressive privatization of things people don't want privatised such as healthcare, free-markets-for-me-but-not-for-thee legislation, refusal to invest in infrastructure and so on.
So while I think that there would be a great many people who would support Seymour's general position on trying to "move past" the Treaty (NB I'm not saying this is the right or wrong thing to do) his own personality and the rest of the ACT party baggage will always restrict how far that can go.
However, I do believe that at some point - probably in the near future - a more populist figure and party will emerge in NZ and shake things up significantly. In fact NZ is potentially one of the better-placed countries for this to happen owing to the vagaries of MMP.
Tax reform favouring workers + law and order + "populist" vision of One NZ, under the auspices of a more Trump/Farage-esque leader, and all bets could be off.
I think much the same, but then the UK elected Boris Johnson as PM, so who knows? Maybe David can pull it off?
Labour will hand the Greens and TPM whatever they ask for in the next election, they will agree to anything to get back into power. So take a look at the TPM policies, because that will be your next Left wing government policy.
This is fear-mongering, detail your grievances on specific policy. What policies did Labour shepherd in that were so horrible as to set us on a 3rd world path last time?
SKF
Lest we forget
This is a list of what happened. There are almost no references to what labour actually did to cause them. I prefer to come to my own conclusions rather than adopting a narrative. Again, tell me what Labour did to put us on a path to third world status? And how exactly will NAFt change that?
It sure as shit isn’t by cancelling our most important infrastructure link between the North and South Island on a whim and being unable to invest in it to the same level as the costs have skyrocketed since. Fucking up, and under funding, infrastructure IS something tangible that puts us on a path to a third world status.
So is deepening an economic recession by running austerity policies. That has never worked and always extends the duration of the recession.
Is there anything of substance you can bring to my attention about what Labour did that caused anything near the level of long term impact as fucking up the ferries?
SKF
Apparently blinkered propagandist partisanship doesn't permit you to recall that Labours Grant Robertson refused to sign off on NZ Rails unbudgeted billion dollar black hole before the 2023 election
https://www.rnz.co.nz/news/political/522218/interislander-how-labour-s-…
Labour would have had an extra 2.9 billion from the landlord tax that could have paid for this. Him not signing off in an election year seems extremely reasonable to me, allowing room for the opposition to make and alterations to the plans and not giving false confidence to vendors with approval that might change in a few months…
You have a brain, I hope, I would suggest using it to consider for a moment the opposing positions before you parrot talking points.
SKF
NZ is becoming South Africa. There's no way off the path now. So where South Africa goes, so shall NZ
It appears nuance is something very difficult for many posters here to distinguish.
It's like claiming any socialism ends in Stalins Russia, or North Korea.
I’ll give you a hint, it’s all feelings and vibes, the thought comes later and is retroactive. Which is why it’s often… insufficient. But it sounds catastrophic and that’s all you need.
SKF
Where are we at now? Are we at pre-apartheid South Africa or post-apartheid South Africa?
I thought you had left already to join Brooke ..?
Just wait till Shane and his buddies start rubber stamping fast track schemes...wink wink
his (Trump's) very misguided tariff policies which everyone but him sees as sharply inflationary.
Good on you for calling it as it is, DC.
Landlords pull out of Melbourne, Sydney apartment markets
Poor capital gains, along with high holding costs have spurred a jump in investors who are quitting the Melbourne and Sydney apartment markets, potentially reducing the supply of rental homes in those cities, data from CoreLogic shows.
Another factor in the burst of investor selling in the country’s biggest housing markets is the slowdown in their rental markets, as demand eases from lower overseas migration and rising household size.
Apartments in Sydney delivered just 1.8 per cent capital growth last year. Oscar Colman
As the door closes on some investors, the opportunity could beckon aspiring home buyers as affordability improves in Sydney and Melbourne, where dwelling prices are falling.
Around 8300 investor-owned properties were listed for sale across Melbourne in December, up 6.6 per cent from the previous year and climbed 14 per cent above the last five-year average.
Sydney investors are also leaving the market in droves. More than 6000 ex-rental properties were listed during the same period, which is 1.7 per cent higher than the previous year and 2.8 per cent above the last five-year average.
Apartments in Sydney delivered just 1.8 per cent capital growth last year, while Melbourne fell by 3 per cent. By contrast, Brisbane racked up 16.6 per cent, Adelaide gained 16.9 per cent and Perth 22.7 per cent.
Slowing demand has pushed Melbourne rents lower by 0.5 per cent compared to a year ago, while Sydney rents fell 0.2 per cent.
Victoria’s higher taxes on property investors and rental laws requiring minimum rental standards have added extra costs and depleted landlords’ cash flows.
“Melbourne is relatively unfavourable for investors, not just because of the new tax policies, but also very sluggish returns,” said Eliza Owen, CoreLogic’s head of research.
“Property holding costs have increased for investors because of the reduction in the threshold to pay land tax at the start of 2024. Some people may be cutting their losses and are trying to exit that market now.”
CoreLogic estimated that investors face a $ 292-a-week cash flow shortfall based on the median weekly mortgage repayments of $896 on a 6.45 per cent interest rate for investors and rental income of $604 a week.
In Sydney, landlords will need to plug a $611-a-week gap between rental income of $773 a week compared to $1384 weekly mortgage repayments.
The portion of investor-owned properties listed for sale ballooned to 31.2 per cent across Melbourne, up from the five-year average of 29.1 per cent.
Nearly 1000 ex-rental apartments were listed for sale in central Melbourne alone, up 44 per cent from the previous year. They are now sitting 30.7 per cent higher than the five-year average.
Investor-owned listings account for 54.8 per cent of all stock on the market in the CBD area, a sharp increase from the 49.7 per cent share over the past five years.
The investor exodus is also underway across Melbourne suburbs. In the Darebin-North district, the proportion of investor-owned listings blew out to 45.5 per cent, up from 38.5 per cent a year ago, after nearly 200 properties were added to the market.
Investors are also pulling out of Moreland-North, Glen Eira, Stonnington-West, Maroondah, Banyule, Whitehorse-West, Stonnington East and Darebin-South, adding a total of 1460 surplus stock to the market in those areas as of December.
Arjun Paliwal, head of research at buyer’s agency InvestorKit said some investors were selling, even for a loss, to get out of the poor-performing apartment markets in the city.
“Some investors who bought units or apartments in Melbourne have not received capital gains now for almost a decade, if not sometimes for the past 15 years, so they want to sell so they can deploy their capital elsewhere, or at least get rid of a property that’s been weighing their borrowing capacity down,” he said.
“Some investors have lost confidence that the potential rate cut will turn Melbourne’s apartment sector around because prices have not recovered even when interest rates fell to record lows a few years ago. Supply is clearly an issue there, so we’re seeing a lot of our clients decide to list the Melbourne units.”
Higher mortgage repayments and sluggish capital growth are also driving Sydney investors to sell.
In Parramatta, nearly 400 investor-owned apartments hit the market in December, accounting for 54 per cent of all listings.
Investors in central Sydney put 536 apartments on the market, lifting the share of ex-rental listings to 51.6 per cent, up sharply from the 47.8 per cent average in the past five years.
Further afield in Sydney, ex-rental listings also flooded the Chatswood-Lane Cove, Botany, Ryde, Marrickville-Sydenham, Manly and Blacktown-North, where they climbed by as much as 51.6 per cent.
Thomas McGlynn, chief executive at real estate agency BresicWhitney said more investors were leaving the Sydney market, compared to those coming in.
“Unfortunately, investors are still looking to sell than buy,” he said. “I think, we’re going to see a continuation of more, smaller investment units coming on the market.”
Ms Owen said those smaller rental apartments were unlikely to attract first-home buyers, despite more affordable price points.
“A first-time buyer isn’t necessarily interested in buying these micro-apartments built in the 2010s that were catered for investors, so even though more first-home buyers are coming into the market, they are unlikely to buy those apartments,” she said.
“I think Melbourne is going through a painful transition process now, with more properties coming into the market, but they don’t suit the home buyers of today, so we’re seeing this ongoing weakness in the market.”
What their property market needs is some downward momentum to assist in resolving the social issues.
They have exactly the social same issues as us and following about 18 months behind.
Agree I see Aussie in many ways has bigger problems brewing then us, sure they are more diversified, but for mining exports they really only have one client.
We're actually twice as diversified.
Our issue is scale, and profitability.
I believe they'd actually dropped around another 10 places recently
Yeah looks like the dataset on wikipedia is from 2018 so wouldn't surprise me.
Probably should of gone with this Harvard one which is a bit more recent (2022) and has NZ ranked at #51 and Australia ranked at #102.
I looked up my old place in Melbourne, its now valued at less than what I sold it for in 2016. It is located in a good inner suburb too, 6km from the city. It is also a spacious 2 bedroom, 2 bath, separate lounge, study, garage and backyard as well. This is a window into what the property valuations of all those shitty shoebox townhouses that have been built in NZ in the last few years are going to be worth in 10-15 years.
Just saw a threads post about Melbourne land tax - someone posted their land tax invoices which has gone up from $3k in 2022, to $38k in 2023, to $83k in 2024, to $115k in 2025. Thats the problem with land tax, once you bring it in, it quickly becomes the piggy bank you can raid every year to cover over budget deficits instead of reprioritising government spending. Bloated and inefficient govt becomes even more bloated and inefficient. And then everyone leaves.
Melbourne is now circling the drain. Its not just people leaving but businesses too. Record numbers of companies collapsing, or moving interstate. And when the businesses go, the jobs go too. Victoria now has the highest unemployment rate in Australia (4.5% compared to 3.9% everywhere else). Victoria is a basket case, thanks to Dan Andrews.
Everything said about land tax there applies to income tax too, with added negative effects of disincentivising productive work and investment.
LVT - at least on unimproved value - has the advantage of incentivising hard work and efficient use of land in cities.
100% it is also the most efficient tax the government can levy. And by that I mean, the imposition of a land tax to fund the government drags on private sector activity less than anything else.
Think about it:
- tax income heavily, people work less (or report less income ;) )
- tax goods and services transactions, people buy less stuff
- tax wealth, high net worth individuals find ways to keep their wealth from being taxed (which can necessitate moving money out of the economy reducing investment), and marginal savings incentives decrease.
- tax capital gains, less capital gains are realised and marginal savings incentives decrease.
- tax corporate profits, less businesses are set up, less businesses strive for profitability, and some businesses bend over backwards to avoid declaring a profit on paper.
All of these things are inefficient and decrease aggregate living standards and their growth rate. You tax any of them, you get less of them in the economy.
But tax land.... and you still have the same amount of land in the economy. The land can't move to Australia, the land can't accelerate depreciation to hide on paper profits, the land can't move it's economic activity to the black market to avoid taxes and the land doesn't need to change hands to be taxed.
The only issue is if you tax land at too high of a rate, and it then is abandoned.
But other than that, honky dorry.
- tax goods and services transactions, people buy less stuff
Correction: People transact more frequently between each other informally to reduce the cost of goods and services.
What are the chances that Victoria is now heading into a GFC style banking meltdown, as owners simply surrender the keys to the properties, and the banks fail to sell the property at a mortgagee auction. Even if the property is sold dirt cheap, nobody is going to take on a $115k a year land tax liability.
Apparently land tax and other surcharges are now upwards of 50% of some industrial property rents in Victoria. Why would any business buy or lease industrial land in Victoria, when they can set up in another State (or another country) and not bear the cost?
Indubitably because there is plenty of money to be made on top of the land, rather than by letting it sit there. Usually this means stacks of units for good rents, paid by people and companies whose taxes on productive achievement is lower because they're not bearing the tax load alone. Land value tax is only high when the land is very valuable.
Any evidence/links to these reckons?
I've read that in the past there were higher income tax rates on high incomes and companies, and the economy and citizens were still doing alright. Living standards still increased.
Maybe it's not tax itself, but the attitude and narrative towards it that has a bigger effect. That a few can exploit it to the cost of the many may be the cause of a lot of the division and angst?
When tax or not paying tax becomes the predominant incentive, there's something fundamentally wrong.
https://www.sro.vic.gov.au/rates-taxes-duties-and-levies/land-tax-curre…
Calling BS on the land tax claims, for someone to be paying $115k in land tax p.a with Victoria's current land tax rates they would have to have $6.145m in land at the current rates. They are either doing very well, in which case this is fine, or they are telling porkies.
Additional note on your point about 'bloated and inefficient government enabled by land taxes'.
Australian tax is less as a % of GDP than in NZ and they are running surpluses. A lot of people would probably think Aussies get better bang for their buck in terms of government spending as well. So it doesn't follow. Please provide data to validate your claim that the introduction of land taxes specifically has led to an increase in the size of the state in Aus, and a reduction in the efficiency of the state. I think we have demonstrated quite remarkably here over the last government that you don't need to introduce land taxes to do either of these things ;)
Finally, re: the Melbourne townhouse as 'window into property valuations of NZ townhouses', a reminder that land taxes crimp land value growth (working as intended). So if you introduce or raise these taxes over a period of time you should expect less land value growth. This is not the case in NZ.
You may have to pay land tax if you own, either individually or jointly with others:
- investment properties, including residential rental properties
- commercial properties such as retail shops, office premises and factories
- holiday homes
- vacant land.
Land tax does not apply to exempt land such as:
- your home, known as your principal place of residence (PPR)
- your farm, known as primary production land (PPL)
- rooming houses and charitable institutions.
By the looks of it policies like the above have made it more affordable for people actually living in Melbourne to purchase property.
then why are they leaving and why is unemployment higher then other states?
I guess its because they didn't lower any other tax they just added the new one?
The GFC made it more affordable for first home buyers too. It also sent millions bankrupt or trapped them in negative equity for over a decade. I doubt many Americans look back on the GFC and go "oh, those were good times".
So if you had a 3 million dollar (land value property) you would pay 57k? wow how would make 57 k of income from said land, lets face it, its a wealth tax grab. your FHBer at 1mil is what like 17k on a pro scale?
edit : ok i read above farms and private homes exempt...
Landlords pay it. Therefore tenants pay it.
Or if its a holiday home, you pay it.
Landlords pay it. Therefore tenants pay it.
So why do some landlords have to top up their rent to pay their mortgage if they can pass on any cost at all, according to the theory you have posited? They should simply raise the rent to provide a desirable yield.
Those that cant pass it on are selling. Thats why 60% of stock on the market in some areas is ex-rentals now.
Landlords pay it. Therefore tenants pay it.
...
Those that cant pass it on
Correct. It cannot simply be passed on.
Wait till you hear about 39% tax on income!
Wait til you hear about the 0% tax rate on $3M of assets!
https://www.sro.vic.gov.au/rates-taxes-duties-and-levies/land-tax-current-rates'
Think it would be $32k on 3 Million Dollar land value as there are different rates at different thresholds.
Incorrect. Add in the surcharges and absentee owner (out of State owner) and to get to $115k in land tax your property would be worth $2.25M
But wait, there's more! From 1 January there is also a vacancy tax imposed on top of the land tax for any property left empty for 6 months.
Really need to see all the figures themselves along with the tax rates to see how the numbers add up rather than taking your word for it. The top land value tax rate doesn't even kick in until $3 million.
so USA tarriffs are inflationary. are EU tarriffs inflationary?
Yeah, but Trump.
Depends on how they’re targeted and promoted. If there is sufficient competition in your local market then the chance of inflation is lower. China could tariff batteries and likely see no inflation. Typically those would be tariffs to protect a thriving existing industry.
However if there is not enough competition, the pricing floor will rise and it may have collateral pricing fallout. Following Trumps last trade war a case study on washing machines found that importers passed through greater than 100% of the cost to consumers and local manufacturers raised their prices to match taking the difference as profit. They also found that dryers, which weren’t included in the tariff regime, also faced similar price inflation. This is an area where many modern economists fail to grasp, the human side to pricing decisions, and in this case the humans saw the tariffs as cover to raise prices.
That last point is why how it’s promoted is important. With Trump it’s a spectacle and everyone anticipates it coming. This provides the justification for businesses to raise their prices without consumer backlash. In industries where price levels are held by consumer sentiment more than competition, this cover is highly inflationary. We saw the same things here with the GST hike to 15%.
SKF
Apparently you can build a super modern ferry for $275m
Austal Limited (ASX: ASB) is pleased to announce Austal Australasia has been awarded a contract valued between A$265 and A$275 million by Gotlandsbolaget of Sweden, for the design and construction of a 130-metre combined cycle, ‘hydrogen-ready’ vehicle passenger ferry. Part of Gotlandsbolaget’s ‘Horizon X’ program, the high-speed ROPAX catamaran will be the largest vessel ever constructed by Austal, and feature a unique, highly efficient combined cycle propulsion system that includes both gas and steam turbines – a first for high-speed craft, worldwide. With a capacity to transport up to 1,500 passengers, cargo and 400 vehicles, the ‘Horizon X’ multi-fuel catamaran will be designed by Austal with construction at the Austal Philippines shipyard commencing the first half of CY2026; utilising “green aluminium”, produced using energy efficient processes and technologies that use less carbon, resulting in lower emissions. Construction is scheduled to complete in mid-2028
That's ~$610m for two in NZD and doesn't mention rail enabled so likely not. Probably add another 50-100m for that.
Makes the $550-600m we were going to pay for rail enabled ferries delivered this year, to be pretty cheap.
You might get a discount for ordering two.
And it needs to not require another $2.5B of new port infrastructure. Because we povvo now
They're also much smaller ferries that aren't built to handle something like the Cook Strait so I struggle to see what your point is posting that someone has purchased less capable ferries that cost less than the ferries we ordered and then cancelled.
Too povvo to build infrastructure to ensure freight security but not too povvo to fund nonsensical road projects.
Theres also this.
The Gotland ferry route from Sweden, specifically the Nynashamn to Visby route, is generally considered a smooth and reliable ferry crossing.
The Cook Strait can get pretty rough which requires a completely different class of ferry.
Plus the iREX ferries would of carried 1910 passengers, and 652 cars compared not even including rail/trucks compared to 1500 passengers and 400 cars for the austal ones so they're not even equivalent products. It's like comparing Corollas to Landcruisers when your looking for a truck to go offroad.
"...his very misguided tariff policies which everyone but him sees as sharply inflationary."
Where is your evidence they are misguided?
You say everyone, really, everyone? That's an extensive statement.
American conservatives are in favor of these tariffs.
tut tut sir, maybe you should work in the news media rather than report on economics.
Can anyone recommend a better place to go for NZ economic news without biased political opinions?
Thanks,
Chris
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.