This is the second of a two part look at the economy as we reach the halfway point of 2023 (already!). The first part, looking at where we are currently, can be read here.
And now I give my view of what might be to come in the second half of the year...
I can't fully explain to you why I was so annoyed at the GDP figures for the first quarter of 2023 that were revealed last week.
It is partly because I was firmly convinced that the economy would NOT contract in the quarter to March. I was actually in the camp of the Kiwibank economists who were picking an exactly flat GDP result, IE 0.0%. And well, they missed by a whisker. A declared outcome of -0.1% was apparently enough for us to now be in recession. We are doomed. (Ok, I'm slightly exaggerating there.)
From my perspective the problem is thus: I was (and am) expecting to see both the June and September quarters of this year turn in negative GDP out-turns. Yes, that's right, I have believed a 'technical recession' would start in the second half of the year.
Therefore, I thought that the economic downturn narrative would start running in the back half of 2023 and into (and perhaps more strongly so) 2024. Gloom ahead.
With what has happened through the March GDP figures, we've effectively got off to an 'early start' to the gloomfest.
That doesn't bode well at all from a psychological perspective and I am now more officially downbeat about the outlook for the rest of this year and for next year than I was a week ago.
Irony. Misfortune. I'm not a betting man, but I would state now with some conviction that I reckon by the time the next GDP figures (for the June quarter) are released on September 21, there will have been an upward revision to that March GDP figure and it will no longer be negative, IE we will NOT have been in recession. Just watch.
Too late though!
The mindset is in.
We are 'in recession'.
Woe is us.
I have tried valiantly in the recent past to put forward my view of why the 'R' word is, taken in isolation, essentially meaningless and unhelpful, but no amount of jawboning on my part is going to change the strange magic power of that word. I suspect a fair few people don't even really know what it means - but it scares the living daylights out of them anyway, as if that word alone makes the world change.
And that's I guess where my annoyance comes in. Because of that fractionally negative March GDP figure, we may now start talking ourselves into bad things. It's human nature. If people get down on themselves they retreat into their shells. They stop going out and they stop spending. An economic downturn can become a downward spiral.
Just by way of example, this would mean we don't eat out in order to try to save money. The restaurant we would have gone to starts losing money and closes down. The staff of the restaurant lose their jobs and because they haven't got jobs they stop going out and spending...etc, etc. Vicious circle.
So, my fear is now we are going to start seeing shadows everywhere when previously we were seeing sun (through the 2023 rain!) and that could be bad for us as we move through the second half of this year. And it could be bad because I reckon that however the GDP figures for the March quarter end up looking (and I'm certain they will be revised up) I think and have felt for some time as said above that the June quarter GDP WILL be negative! And probably the September quarter as well. We could very well now end up being 'in recession' or something like it for a year or more.
And the really bad news is that the June GDP figures will be coming out right slap bang in the middle of the election campaign. That's right, the 'Vote for ME, I need the Job!' season will be in full swing. And I dare say our politicians in full bribe-the-public mode, will be able to make a lot of a contracting economy and a probably darkening mood among the populace. Plenty of potential for glum moods and conflict.
This election was always going to be crucial because of its potential to produce a U-turn in Government policies particularly that affect the housing market (and that includes 'open door' inbound migration - although Labour has already somewhat pre-empted that by reopening the doors anyway). And anything that affects the housing market affects the mood of the NZ people.
If I read the current thinking of the nation correctly (and I guess it always depends who one associates with and talks to), I read that fairly large numbers of people are cheesed off with BOTH of the two main parties. We could therefore see one of those elections where voters sample different flavours - IE vote for parties other than the main two.
With National promising to reverse Labour moves such as the ending of interest deductibility for housing investors and removing the increased time limit for the 'bright-line test' they had always seemed to have enough to get over the line. But boy, they are making it hard for themselves. I'm even still not quite yet dismissing the possibility that come election time National might have a different leader to the one they have now. Long shot. But similar things have been done before.
Anyway, don't rule out the prospect that a potentially increasingly gloomy and cantankerous (just don't call them 'whiny') electorate may deliver an 'interesting' election outcome on October 14. I now wouldn't rule out one of those dreaded MMP standoffs where the 'winner' is not known and might not be for some time. If the general mood in the country is as downbeat at the time as I suspect it might be, then such a delay will not help at all. Uncertainty is a killer.
Depending on what happens then, the election may have a very big impact on the latter part of this year and into next year.
I still think, however, the biggest factor in the economic landscape this year - and it will be even more so in the second half - is the labour market. You can't have a 'good' recession with virtually full employment. Unemployment of just 3.4% as of the March quarter is a key reason why the mood has been so resilient and why people had been prepared to keep spending.
Let's see what happens from now on though. The surge of inbound migrants we've seen in the first half of the year has been filling jobs that you suspect in many instances may have been unfilled for two years or more. The 'slack' in the labour market is being taken up. What next?
If the until-now resilient mood starts to turn, as it might well, things could change quickly. A lot of the reason why spending patterns had remained so relatively strong (and I freely concede it has been 'patchy' out there with some businesses faring well and others not at all) is that a fair portion of the population has been insulated from the Reserve Bank's efforts to rein in inflation by jacking up interest rates.
Only about 38% (according to RBNZ calculations) of the population have mortgages. This means a lot of people are not directly affected by mortgage rates that have gone through, ahem, the roof. But rising unemployment - if it happens faster than currently seems likely - would be a game changer. The RBNZ reckons unemployment will be 4.6% by the end of this year. The RBNZ has under-estimated the ongoing strength of the labour market in recent times. But it has certainly not been alone in that.
If the RBNZ is right this time about rising unemployment, or indeed if unemployment starts to rise faster maybe than even the RBNZ thinks (after all, we are 'in recession', you know!) then life is going to be looking a lot different for significant numbers of people.
Inflation may be one moderately cheering point in the second half of the year in that, if the economists are right, it may start to fall meaningfully. Goodness knows it needs to. I'm still recovering from spending $18.64 on eight tomatoes last weekend (and yes, it was correct, I checked! Just wish I had checked the price before buying!). The RBNZ thinks the annual rate of inflation as measured by the Consumers Price Index (CPI) will be 4.9% by December, down from 6.7% as of March.
Fingers crossed everybody's right about this, because getting inflation back into its 1%-3% 'box' is key to us seeing lower mortgage rates. Unfortunately, I still reckon inflation's got some nasty surprises ahead for us and may be much longer lasting than anybody hopes - and I talk internationally as well. And I'm talking years rather than months, which means interest rates may well stay elevated for longer than a lot of people think - absent a major global meltdown, which, however, is always possible.
Interest rates, along with the early mentioned election, will be key factors in what happens to the housing market.
According to the REINZ's House Price Index (HPI), our house prices are now 18% lower than they were at the peak of the pandemic frenzy in late 2021. But the HPI is still 20% higher than it was at the start of said pandemic in early 2020.
So, our houses are still 'expensive'. But that's not stopped the enthusiastic kiwi house buyer before. Several economists are now calling the end of the house price falls. Even the RBNZ, which has been hitting those mortgage rates with a big stick, now reckons house price falls will be smaller than it earlier expected, and just about be done by the end of the year.
I sense a mood out there, almost of impatience. A mood of 'get the [house price] machine started up again!' We buy houses. That's what we do. You can't stop us.
If inflation's coming down and a National-led government does get in then the hounds will be baying for housing action again before the end of the year.
I think house prices will start rising again and there will be a mood of 'get in, it's good for you' starting to emerge. But I certainly wouldn't rule out a very quick reversal of that either. The RBNZ won't want interest rates to drop any time soon. If it thinks it needs to hike the Official Cash Rate again, it will. Don't doubt that. And if unemployment really does start to rise meaningfully and if we are potentially going to be in recession, or close to it for a year or more - then these are all things that could swipe the feet out from under a fledgling house price surge.
Our house prices were 'expensive' before the pandemic. They most certainly still are. Try to remember that.
The first six months of this year have been like a watery entree. The second half of the year is definitely the main course. It will be meaty, but it might be quite tough and indigestible.
Much will depend on the labour market. Much will depend on the election outcome.
I'm hoping for the best, but rather fearing the worst.
*This article was first published in our email for paying subscribers early on Wednesday morning. See here for more details and how to subscribe.
164 Comments
So we have:
A contracting economy,
Expected rising unemployment,
Banks acknowledging rising interest rates take months to take effect,
Banks and mortgage brokers complaining about a continued rising OCR months ago and the negative effects it will have on mortgage holders being close to breaking point,
An RBNZ that has stated they'll be holding the OCR at restrictive levels for another 12 months,
An OCR pause that can't be confirmed to be a pause until the next meeting or two,
Poor yields for property investors,
Suppressed house sales,
And we're expected to believe that now's the inflection point for a still unaffordable housing market?? We complain about Ministers having conflicts of interest with small amounts of shares they hold yet we're expected to listen with respect to bank economists??
Now may not be the inflection point, but at the same token it's important not to get caught up in hysteria.
A .1% contraction in the economy isn't the fall of Rome. The effects get felt differently, and not at all in some areas.
Likewise with housing, there's a view there of a housing market overpopulated with the overleveraged, who are going to soil themselves and dump property at any cost at the first sign of higher rates or things getting tough.
Anything could happen, but it'll likely be way less sexy than the bears' fantasies.
I have a fair bit to do with economists. I really do think it’s their flawed world view and methods that are the issue rather than conflict of interest (maybe that is operating at a subconscious level). Apart from the obvious spruikers such as TA.
I find their approach very ‘ivory tower’ and often very poorly informed by real world, on the ground factors and dynamics.
Like I said before... When you've got the RB, using a blunt instrument to purposely wreck the economy inorder to fix the " economies poor governance" ( that's you Robertson, Ardern, Parker, mahuta, and chipkin)... You know you're screwed!
Then you throw in the so called experts contradicting each other, and trying to influence the aforementioned idiots, ... You know that nobody has a real grasp over what's happening in real time let alone in the future.
It's just to easy for Robertson to borrow money to waste on nice stuff than to say no and save money for another Rainey day.
"That's the manifestation of co governance and the bullshite MMP system !"
And as for James Shaw... Never has so much money been wasted on a man who has achieved nothing globally. Other than build up our debt!
Are we fortunate to have so many multi billionaires in NZ that can lend their NZ Dollar currency to the government to finance its spending or is it something completely different that is going on? Well yes it is something completely different as NZ Dollar currency can only be created by the government and this happens every time that it spends. All that 'borrowing' does is drain reserves from the banking system which were put there by the governments spending and this allows the central bank to maintain its interest rate target and it has nothing to do with financing spending, no 'borrowed' money is ever spent as the government cannot spend its currency twice. QE proved this when the central bank returned the reserves back to the banks, the currency was never spent and it wasn't 'money printing' either.
100% agree HM - they rely on models rather than what is happening on the street, and the sentiment of Joe Public and how they feel about their current or future economic situation.
But it’s their ivory tower over-confidence on being correct in their assumptions that makes them so flawed
Comparing the economics elite with its equivalent in theoretical physics, Romer notes the same problems: over-confidence, “an unusually monolithic community”, near-religious group loyalties, a tendency to disregard results that don’t match the theory – and too little consideration of the risks of being wrong.
https://www.theguardian.com/commentisfree/2016/sep/19/its-time-to-junk-…
they rely on models rather than what is happening on the street
Curious isn't it. Perhaps if they were on a humble 60k a year they would know what the common man feels and hence be more accurate at their predictions, which are at heart rooted in human behaviours, which are fueled by human emotions. Economists = Sociopaths?
How could that make sense when those rates are already above 12% ?
https://interest.co.nz/sites/default/files/images/anz-rate-range-june-2…
Yay.. We just can't keep be having rosy and beautiful conditions forever. Do we?
The lack of will too introduce a change for better has been lacking. Nature never likes status quo, so if we do not change for better, the worse happens.
Our leaders have been just too lazy and incapable to introduce a change for better in the country in last 25-30 years. So now we have to pay the price and it will be high.
The living conditions in the country are deteriorating day by day and we just talk about houses in this country. Open any nz website and there are still be 5 articles on real estate everyday.
I thought houses were for shelter and living but in NZ they have become a commodity to trade. Silly as
I fucking hate the word change
Change is a word used by people who do not know the solution to the problem but need a quick answer!!!!
It means nothin! Replace the word change with "improvement" and immediately you commit to action.
Does a chess master move his pieces just for change or for a ...
Tactical advantage
To improve his situation. Or to...
Negate a threat
FFS " change" Has no quantifiable value to it!
It seeks not to improve and offers no goal to achieve!
In yacht racing you make adjustments (one at a time) to go faster you never randomly change anything!
Change is a word used by people who do not know the solution to the problem but need a quick "no commitment" answer
The one that triggers me is "stability". It is code for "the status quo benefits me so I call for 'stability' " (eg. a corrupt president who is worried he'll lose his cushy position because starving people have finally had enough of his theft and incompetence). Stability sounds much fancier than calling for nothing to change.
Open any nz website and there are still be 5 articles on real estate everyday.
this proves how important housing market is, and why housing market may 'correct' and will never crash. otherwise, people would just forget about it, not talking about it, and getting on after the crash.
Side note: ever since someone told me that winter tomato farming relies on fossil fuels I've steered clear. It might be an overly simplistic narrative, but the image of trucks of imported coal between Auckland and Huntly is now linked to winter greenhouse produce in my mind!
GDP per worker is a good measure, although the aging workforce issue is not unique to NZ.
In fact, we've had a good run over the last decade at slowing the impact of a retiring workforce with the highest net migration rate in the OECD.
So, it is harder to blame our widening GDP per worker gap from the OECD average simply on a retiring workforce. Slower productivity generally and higher job growth in less value-added sectors (tourism for example with a GDP per worker 33% less than the NZ average) seem to be a bigger problem here.
Agreed but productivity in NZ has been a drag since before Covid arrived. The likes of Estonia, Lithuania and Slovenia surpassed us on GDP per hour worked in the last 10 years.
We obviously didn't make much of the big head start we had over those nations in 1990s.
Joining the EU isn't like winning a lottery, ask Greece and Italy.
Still have to get up in the morning, head to work and create something worth selling to other member states.
We have a trillion dollar-plus high-income economy across the ditch with the wealthiest households in the world and we still incur trade and current account deficits with them.
We have a trillion dollar-plus high-income economy across the ditch with the wealthiest households in the world and we still incur trade and current account deficits with them.
Gee, didn't know that - not good, if so. Is there some website that tracks that? Hard to believe given the favourable terms of NZCER.
That's factually incorrect. We always ran a services deficit with Aussie (largely because of the business services we buy) and the recent service deficit isn't much worse than it was pre-Covid.
In fact, we ran a decent goods export surplus with the Aussies pre-Covid which has vanished since 2020.
With National promising to reverse Labour moves such as the ending of interest deductibility for housing investors and removing the increased time limit for the 'bright-line test' they had always seemed to have enough to get over the line.
I'd suggest these are the policies that are creating a large amount of hesitation in voting for National. I know that's the case for me.
Rents haver been rising much lower than the inflation rate and a huge amount lower than many other places in the world (Sydney and London have been around 20%). This is an area where we have been doing quite well yet people still believe the narrative that was put in place by National about Labour's changes causing rents to go up more. I don't see it.
As I've said and will say it again - the government needs to urgently update/improve their shared-equity scheme;
https://kaingaora.govt.nz/home-ownership/first-home-partner/
Television advertisements, for starters, would be great.
I havent seen any 3 or 4 bedroom houses being built for rent in my local areas, but hundreds of two bedroom townhouses have gone up. The 3 and 4 bedroom rentals have actually disappeared because these were the houses that were demolished to make way for the 6 or 7 townhouses. So for families with kids looking for a 3-4 bedroom rental with a lawn and a garage they are in trouble, because there are few of them around. If you are a single professional or a couple with no kids, those townhouses are fine to rent. For the elderly who cant cope with stairs, or families, or people with pets, they are not suitable.
The tax distortion is also ensuring that nothing but 2 bedroom multi-dwelling developments get built because investors are being steered towards buying new dwellings for rentals, rather than the established 3-4 bedroom house that used to be the rental property mainstay. I remember the days when there was a "shortage" of 1-2 bedroom properties. Now its the opposite.
In the past, people who had finally outgrown their starter house used to buy a new house and rent their old one out, that's how they ended up becoming landlords. Now they don't get any interest deductibility and interest rates are high so they are better off selling the old property and putting the money into their own home which is still tax free.
Yes I'm absolutely passionately voting for Labour because of this. Nothing else matters. It's not just the policies but it's the intent behind the policies which is nothing about being the "party for business" and all about being the party for continuing excessive tax free capital gains encouraging more available funds to go into unproductive assets. I hear no innovative thinking from any of them.
Idiot. You get what you deserve.
Cheap rent but more crime, , taxes, inflation, debt, under education, less health care, freedom ...
A vote for labour is a vote for a expensive, low bro, 3rd world, woke, country
Fill ya boots, I only use NZ for property gains. Yip I'm a greedy asshat that profited from houses because the government s gave me no other options to get ahead.
Join in or miss out. The choice is yours
Have you heard of ChatGPT? It's really good for making whatever you want to say sound more coherent.
I've got my own tech startup thanks. I don't need to rely on property investment and I'm concerned about housing affordability. If that makes me woke then so be it.
Lots of very contentious claims in one rather nasty comment. Can you find facts to support those claims, such as data on how National has historically been making big investments in Education and Healthcare. I'd love to see you try!
Guess we couldn't expect more from any greedy asshat investor who is painting himself/herself as a victim of the current government.
One can only get ahead by leaving another behind. Which is all well and good except you can only get ahead as far as the market will bear, and when the market can no longer afford it, well, down she goes.
I'm sure many renters are now grateful for not jumping in over the last 5 or so years, and finally fell like they are getting ahead so their deposit savings claw away at falling prices.
There are plenty of options to get ahead in New Zealand, many take a lot of work and are not for everybody. PI is the "everybody" investment, gone a little too far.
You can hardly blame people for going with what actually works can you ? If we were a high wage economy, then maybe there would be more drive towards better education and a decent job but most jobs in NZ pay peanuts and hence property was the way to get ahead. Property has probably done its dash for a while so other desperate speculation like Crypto will rise.
You can hardly blame people for going with what actually works can you ?
How about fixing the system ('what actually works') so that NZ's economy rewards people who actually work or contribute in whatever way to improve society, rather than sticking with a system that disincentives hard work, smart work, education and entrepreneurship?
Teachers and nurses are examples of educated people in NZ who can generally not afford to buy houses (without wealthy parents, additional income or extreme measures).
In my experience (a lot of that in the DHBs, to be fair), older Kiwi managers often have little education and boast about getting there due to smarts and savvy. In the process, they're playing down, and even looking down on education. Meanwhile, they're completely out of their depth and flailing around trying to manage a more educated group of younger Kiwis and emigrants who earn relatively little, yet are worth a heck of a lot more.
Higher incomes have been linked to education, but it's not a guarantee. The market decides that.
I work in the private sector and 50+ year Olds here can output 3x as much in a day as a 25 year old. This is because the 50 years Olds can output decent work almost subconsciously, and 25 year Olds have a need to overthink things and/or distract themselves easily.
Anecdotes are great.
The people with the power to "fix the system" have no desire to, as for them, the system isn't broken. It's skewed to improving their lives over the lives of millions of others, just how they planned it.
Having a few shares in Spark and being involved with the communications ministry indicates a conflict of interest and a resignation, but having a few millions of $ of investment property and being involved in housing laws or capital gains tax discussions isn't?
But they have achieved more financial success than you? Envious? I would be. I picked up national awards in Med Res and my friends who are "dumber" than me are all financially more advanced. I learnt the wrong skills but woke up in my mid 20's. Retiring early next year. Can't wait. Me and my Honda 2002.
Real success-get an MA in English Lit. Drink coffee in Ponsonby and struggle to pay bills whilst feeling undervalued as your gut expands?
Malamah, "One can only get ahead by leaving another behind"
I certainly very much disagree with this view. I like to think that I benefit from my employees as much as they benefit from me. To me, the way to move my business forward is to treat my employees with the greatest respect, so that they actually want to work for me. When they're happy at their workplace, they treat our customers very well, so our customers are happy, which is also great for business, which allows me to make more money and pay my staff more money. Win-win-win (owner-staff-customers)
Seems like you run a good business model.
I'm speaking averages though. You're in a room with 9 other people, you each have $10. If you wish to "get ahead", that is have more than average, the distribution of money must change so that at least one other is "left behind". You have $11, one has $9 and the rest have $10. You start a business and wish to take one other person on, bringing them up to $11 too, that additional $1 has to come from somewhere, leaving one more person behind.
It's averaging at it's best, if we all were to "get ahead" without leaving anybody behind, then we would all be suitably average. It's nature of the economy, I'm not suggesting it's in all ways _bad_ - however it does seem to be so now with so many left so far behind. Who knows what happens next, do we get the nasty recession or do we get further stagflation.
I understand what you're saying but your example assumes that the original $100 remains the same, I would hope that, together, the 10 people you mention can increase this $100 to say $120 and share the profits so that each ends up with $12. Now add zeros to your example.
Sad but true in NZ, if you had about the average wage even though you had good qualifications and even tertiary quals because of your chosen career then buying a house has been the only way to make it. Although the irony is that I only purchased a house to actually live in, the intention was never to make a killing. You could be focussed on your career trying to make it go somewhere but in the background your house was making all the money.
Very true. My house earned in 18 months, even with the most recent falls, what it took me 3 years of hard graft to make. I think NZ takes the phrase "easy money" to the extreme.
However, it took a lot of work over many years to get my house, and it is certainly something that would be more difficult now, what with the cost of living increases making is hard to save, the death of my father meaning the bank of Mum and Dad is empty, and mortgages rates being 6~7% instead of 2~3%.
To be able to afford those prices, somebody has to pay the debt back somewhere in the chain. So for 2fold gains on income, could take 6 years to pay back as a portion of income. Just the gains. On top of everything else. We simply do not have the income to support that much debt.
How people can still believe this rubbish is beyond me. Look at Australia. They have land tax, stamp duty, capital gains tax, vacancy tax, Foreign Buyer tax. They have every housing tax known to man, and STILL house prices are in the stratosphere and rents have gone through the roof. Ditto for Canada. If you think whacking taxes on housing is going to make them cheaper you are sadly, completely deluded.
As for Labour diverting money into productive assets, what have they done in the last 6 years? Have they removed FIF tax on international shares? Have they assisted farmers to grow production? Have they helped businesses to expand? No, no, and no. How many companies have abandoned NZ in the last 6 years to move to Australia or the US? Xero. Rocketlab. Allbirds. Labour is all about more taxes, but no clue what to do with that money. All that will happen is that welfare beneficiaries will get paid more to be unemployed and produce babies.
Affordable houses🤣🤣🤣🤣😂😂😂🤣🤣🤣, since when have houses been affordable.
Change Affordable houses to " fiscally challenged public"!.. or dumb voters that allow the economy to become inflation ridden.
What's an affordable house? 300k in Bluff v 2million in remuera.
and what's a " income v outgoings" balance that buys a house?.
Stop wasting your money!!
You dumb fockers really need to look at what you vote for, how you live, and what your real priorities are.
Affordable houses🤣🤣🤣🤣😂😂😂🤣🤣🤣, since when have houses been affordable.
Hmm, probably a huge waste of time to write a response to this one, but here goes..
There is a big world outside of NZ's borders. Have you ever lived anywhere else? If you had, you'd realise how ridiculously unaffordable houses are in NZ. Even if you were up to date on historic affordability measures for NZ for the past two decades you'd know better than to post such a silly question.
Ah, yes. Houses in Melbourne, London and Sydney are also expensive/unaffordable. So therefore NZ houses are not expensive/unaffordable? Or what is your point?
100Bucks question's was: "since when have houses been affordable." Houses have been and are more affordable in most counties outside New Zealand. Houses were even more affordable in New Zealand during earlier decades.
Whatever the case, the current 'correction' in NZ houses should not come as much of a surprise (except perhaps to those with vested interests such as banks, mortgage brokers and TA).
The price of a house is set by the number of people that actually want to live in it where it is. Plenty of "Cheap" places in NZ, go live there. No such thing as an overpriced house that goes up for sale and someone buys it, the price is the price, don't like it move to somewhere cheaper but there is always a reason its cheaper.
There's not really much correlation between affordable housing and things like CGT and investment controls.
Investors will play a role, but most of house pricing is dictated by supply and demand. Where everyone wants to live, it's usually more expensive. Grey Lynn used to be cheap as, because who'd want to live so close to town in cruddy old villas. Then everyone got sick of commuting, and it's gold.
So if renting property is no longer a business then hairdressers aren't either as both own or rent premises and someone works to cut hair or manage property and thats just a start. And logically if property owning/managing isn't a business it must be a hobby so not taxable in the first place.
I find that statement interesting. An investment there mostly minimal expenses that you can deduct for tax purposes. With a business there are numerous expenses and I see renting a house with allowable expenses to be deducted as a business. The fact the Labour decided not to allow interest deductability is distorting the tax system. That's why a disagree with not allowing interest to be deducted from a rental property. There are other means to curb purchasing of houses for renting purposes.
I don't own a rental property
Hi Rumpole, I'd love to see our landlord get up early every morning, as my hairdresser does, and sometimes working late into the evening. Like my hairdresser, he could then spend all day on his feet actively managing our rental - doing what exactly?
Would you like to classify all investment as a hobby? Last time I checked, investment gains were taxable.
Higher rents are derived from higher costs which are driven by poor governance of the fiscals.
Eg: if you raise wages, then prices rise thus everything rises!.. its not rocket surgery? 😉🤑🤙
Thus higher rents are driven by Ardern, Robertson, Hipkins etc.
You get what you vote for
Higher rents are derived from higher costs which are driven by poor governance of the fiscals.
Eg: if you raise wages, then prices rise thus everything rises!.. its not rocket surgery? 😉🤑🤙
Thus higher rents are driven by Ardern, Robertson, Hipkins etc.
You get what you vote for
Specuvestors are a 'business', so get to have a mortgage and claim interest back as an expense off their tax.
OO are not a business, so get to have a mortgage and .. not .. claim interest back off their tax.
Businesses are businesses, and get to claim their rent back as an expense off their revenue and thus profit and thus tax.
Tenants are not a business, and do not get to claim rent back off their tax.
Better yet, tenants, having paid a percentage of their tax equal to the percentage of their after-tax income on rent, have now just paid tax on behalf of their tax-avoiding landlord - those landlords/businesses can claim back their own rent (interest) as tax deductible. -though that is now being fixed and the landlords are crying about it and calling it 'unfair' even though it is actually fairer.
Specuvestors have long enjoyed a system stacked in their favour, purchasing an item needed by others to live, under tax condition tjeu don't get to have.
Specuvestors have long enjoyed a system stacked in their favour
That'll be because the majority of MP's qualify as specuvestors, so anything coming out of the Beehive should be in their favour, although some recent changes, such as the tax deductibility of mortgage interest payments, got through as it was a Labour-only Government, and only around half of Labour MPs have multiple properties compared to the 80% of opposition. Of course, this is why National are promising to reverse some of those changes out. Not because it would be better for the majority of Kiwis, as it wouldn't, but because it would be better for themselves.
Lots of good thoughts and questions for us in the above article. But if there's one unnerving sentiment in it, it might be that.....
Ugly, will be an underestimation.
What's the word they are bandying about in the UK this morning after their latest set of figures? Catastrophic. And that looks much more likely than Ugly.
Something like that has to grab the attention of our speculative asset holders. The irony is that those who didn't want to see what was obvious 18 months ago, are now refusing to look at what's even more obvious today, and will now stick with their holdings/view until the bitter end. And ignoring the obvious is going to be, well, catastrophic.
There ae many businesses out there struggling where the owner is making less than min wage and thus less than their own staff.
Never mind folks, we would rather legislate what you must pay as opposed to what you can produce, thus both owner and multiple staff will soon be on the couch.
The ones that survive being family business with free labour and migrant exploiters.
Local coffee/bakery struggling. The only one for 20 miles. Community service for many. But... the owner cannot work enough hours to avoid staff. And at minimum wage it don't work. He wants to stay open and his staff want a job.
But govt says no. You cant run that business unless you can pay staff more than they can produce.
Replicate that around NZ.
Case and point why we don't need such a high minimum wage. Low skilled work needs to be lower paid so that there's a good spread across the middle and those on said low minimum wage are incentivised to work hard, develop and educate themselves towards higher pay. Imagine having average to crap pay rises for 5-10years and then seeing those doing less than half the work get more and more pay every year thus eating away at the worth of your contribution top a business. Welcome to NZ, where the middle class gets chewed up and taxed out, the low skilled workers get guaranteed pay rises form the government, and the elites care not as they are the least effected.
Minimum wage was meant to be a starter wage, to encourage employers to take on young workers and give them time for them to gain skills and experience, at which point they would be paid more. However, somewhere along the line minimum wage has become a wage level that people are expected to be on for life, and to be afford things in life like houses, holidays, and children. People arent supposed to be in minimum wage jobs for life, the low wage was supposed to encourage them to work hard and get promoted to a better job as quickly as possible, freeing up the starter job for another school/Uni leaver.
if the government is running budget deficits then it is always spending more money into the economy than it is removing through taxation and so leaving us with a surplus to add to our savings. https://theconversation.com/how-government-deficits-fund-private-saving…
New Zealand wont be richer under Labour/Greens. The wealthy and skilled will leave. This will however make NZ more EQUAL. And reducing inequality is what is important to Labour, not making everyone better off. For the quickest way to reduce inequality is to get rid of those at the top, thus lowering the mean/median. Then they get to trumpet how successful they have been in improving inequality in NZ, but statistics dont make your life better.
Looks about right.
Central Banks have pumped up the Everything Bubble and unleashed inflation, but the weird trick of dropping interest rates / juicing liquidity no longer works. It no long works in China, Japan, Europe, the US or the developing world: diminishing returns are systemic. Economies that become dependent on zero interest rates / juicing liquidity habituate to this constant stimulus and become dependent on speculative bubbles rather than on organic growth funded by earnings, savings and the advances of productivity.
"Bringing Demand Forward" always had an expiration date. You can't bring demand forward forever. Eventually consumers tap out, bubbles pop, speculative gambles go bust, debt service eats up consumers' disposable income, credit cards get maxed out and enterprises bloated by decades of bubbles and credit-funded spending implode under their fixed costs and debt loads.
The fantasy is that inflation will plummet to zero, and we can all go back to "Bringing Demand Forward." The reality is what's plummeting is.... Demand.
From the UK this morning, and coming to a friendly property sector near us all.
In a falling housing market, you want to deal with it sooner rather than later. If you’ve got a....mortgage going from 2pc to 6pc which you can’t afford, then you have to find a way to borrow less money....buyers are increasingly turning to mortgages of 35 years, or even longer... If landlords are unhappy with (mortgage) rates available, they should consider selling their properties...
https://www.telegraph.co.uk/personal-banking/mortgages/survive-mortgage…
Don't worry David, the R will be shallow but long - 4 quarters or more. Inflation will fall slowly. Unemployment will rise only slightly. House prices will stagnate. Tiny OCR cuts beginning after Christmas stats are in - maybe just 4 x 0.25% for all of '24.
Welcome to the new normal where nothing much happens - including another government that does sweet f.a. - so much like what we've had for the past 20+ years.
It was the best of times. It was the worst of times.
I was chatting to a young Kenyan lady yesterday. She's with Fifa and here for the ladies world cup. She's staying on Hobson street. She had some disappointing comments about how unsafe her and her colleagues feel at night in the city and how expensive everything is. She said all up NZ has been a disappointing experience. It's sad to hear to be honest.
That's in the city.....it's a dump.
I drove into the city during the lockdown to kill some time and have a look around. It's very depressing, homeless beggars with their hands out, shops closed, plywood over the windows, the suburbs are much safer and better to shop at.
Why scoff at -0.1%?
The pull back is UNBALANCED.
Those with no or little debt are growing.
Those with debt or need to access finance are slammed.
Those dependent on government income to support their income AND accommodation needs are sheltered.
Construction has been slaughtered.
Some are in recession and it is painful.
Averages are SMOOTHING - they don't show the real picture.
Break-down the determination of that -0.1%.
How about a little bit of critical thinking? Oh, yes, we don't do that any more in NZ.
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.