The New Zealand Government ran a $12.9 billion deficit in the year ended June 2024, as revenue growth was outpaced by increased spending.
This spending mostly reflects decisions made in Labour’s Budget 2023, although the National-led government made changes after the election at the December mini-budget.
In a summary of the financial statements, Treasury said total revenue had increased by $14.3 billion during the year despite the softening economy. This was driven primarily by high levels of employment and wage growth but was partly offset by weaker business profits.
However, total expenses grew $18.2 billion due to a wide range of factors. A large share was the increased cost of providing services as wages increased, as well as cost-of-living policies. Other drivers included indexed benefit payments, a higher number of retirees, the settlement of pay equity negotiations, and boosted borrowing costs.
The net result was an operating balance before gains and losses (OBEGAL) of $12.9 billion, up $3.4 billion from the prior year, and equalling 3.1% of gross domestic product. This was the largest annual deficit since the pandemic in 2020, both in nominal terms and as a percentage of the economy.
Besides covid, New Zealand last ran a bigger deficit after the Global Financial Crisis and Christchurch earthquakes. It climbed to $18.4 billion in 2011 which was equal to 8.9% of GDP at the time.
Net core Crown debt, the Coalition’s preferred measure, rose $20.2 billion to $175.5 billion or 42.5% of gross domestic product – net debt, which includes the NZ Super Fund, was at 19.9% of GDP.
Struan Little, the acting Treasury Secretary, said another important measure was overall net worth, which was “the most comprehensive view of assets and liabilities” held by the Government.
Net worth has remained stable at $191 billion, or 46.2% of GDP, as the operating balance deficit was offset by valuation gains on physical assets such as state highways and electricity generation.
This means the Government’s wider balance sheet was still strong even though OBEGAL had weakened and core debt had climbed, he said.
No ‘major’ taxes
Finance minister Nicola Willis said the Crown accounts for 2023/2024 financial year underscored the need for ongoing spending discipline.
While Willis didn’t get to set this budget, she took office halfway through the year and made policy changes which improved the OBEGAL balance by $1.1 billion.
“To bring revenue and expenses back into balance, the Coalition government … is focussed squarely on controlling spending and restoring fiscal discipline. It is committed to reducing core Crown expenses as proportion of GDP and returning to an OBEGAL surplus,” she said in a statement.
“With prudent control of spending, the Government does not see any need to seek major additional sources of revenue.”
In a note prior to the release, ANZ economists said that annual spending was up $15 billion even after accounting for the increased cost of delivering services and tax-cut spending reductions.
“In other words, the Minister of Finance’s reprioritisation approach certainly appears economically feasible, though politics are always another matter,” it said.
167 Comments
If you want to increase productivity, you need a CGT to direct the available capital away from houses and into businesses where the ROI is far higher but also riskier.
RBNZ, take note: the next outsized OCR cut (for it is inevitable) must be accompanied by tightening LVRs and DTIs - especially for residential property 'investors' - so banks are forced redirect their lending to where it is needed.
You are forgetting that the reason we buy all these house in New Zealand is because a) because everyone else does it, and b) people in NZ are not educated well enough to know how to run a business or invest anywhere else, c) they remember investing in the sharemarket pre-1987 when NZ companies with no real value went through the roof, and then obviously went bankrupt and everyone lost their money. Going forward, that is a big problem, and will not be solved by the CGT that you wish for, and seem to constantly dream about.
According to the census we are the most well educated we’ve ever been - but you claim we are not educated enough to run businesses?
Perhaps we are being educated about the wrong things. Anybody have any stats to back this up?
edit - fixed typo (‘not educated enough’)
Perhaps we are being educated about the wrong things. Anybody have any stats to back this up?
The immigration skills shortage list?
We're quite confused as a society. We want individual freedoms and liberty, but then get cross when we don't like the outcomes of that liberty, with what we do with our education, debt, etc.
As if letting everyone do what they wanted would somehow have them making personal decisions for the betterment of wider society.
@ Pa1nter - "As if letting everyone do what they wanted would somehow have them making personal decisions for the betterment of wider society".
Who ever said that every choice made by every individual had to first pass a "does it help my neighbour out" policy? Where ever does it state in the book of life that we are all living life for others enjoyment?
Quite the opporsite actually. We are consumers. That doesn't nesasarily make us greedy, it makes us human. Anyone who tells you otherwise is selling something. We live life to enjoy it ourselves, with our friends and family. Domt kid yourself, no one is running the race of life for someone else's family unit. All that we do is geared towards improving our own lives. If one can assist others along the way then so be it, but handouts have become all too expected in recent times. There's a high price to pay to pay to let someone else do the thinking for you.
We certainly don't want it the other way around - by where everyone is told what they can and can't do with their money, with what they say, with their general life decisions. That's a dictatorship. We had an introduction to that over the last 6 years with the last government, we voted it out. Dictatorship finds a way to eventually gain control by justifying actions as being "harmful". Hence the last lot in charge were voted out when they tried to push free speech as being an act of terrorism. They lost the plot, got too power hungary.
End of the day, individuals are responsible for only themselves & their family unit. The world will destroy everything that was once good, fun and enjoyable when we obsess over trying to control what others say or do. Just focus on you, your family unit & what you can control.
You are blind if you think you're not already bound by serious limits on what you can do with your own resources. You can't buy a kidney. You can't sell a kidney. You can't order a hitjob on your annoying neighbour. You can't opt out of paying taxes that inevitably "help out your neighbour".
Many people actually live fairly altruistic lives, especially those that have received help themselves along the way and want to give back to that "system".
It's pretty solidly proven now you can get as much enjoyment helping others as helping yourself. It's almost the Christian modus operandi.
My grandmother spent her final years that she was able volunteering to deliver meals on wheels to other people of a similar vintage in the 90s. Nothing made her happier than to have that as her final "career". As a young person that left an impression with me that by the time you've done everything you wanted for yourself and brought up a successful family, all that's left is to help others.
Many people actually live fairly altruistic lives, especially those that have received help themselves along the way and want to give back to that "system".
They do, but if most people lived with that in mind, we wouldn't need things like centralized social welfare systems.
Exponentially shrinking family units only exacerbate this problem further.
Unless you have been living under a rock, there have been multiple stats/reports over the last few years confirming that our schooling system is pumping out graduates with very limited literacy and numeracy skills by global standards.
40pc of kiwi adults unable to read at functioning level | RNZ News
21% of working-age New Zealanders have either low literacy or numeracy proficiency Link
"According to the census we are the most well educated we’ve ever been - but you claim we are educated enough to run businesses? "
That made me LOL.
Surely you're not implying that many residential property 'investors' aren't that bright?
If it's any reassurance, I_O, all the residential property 'investors' I know (and me, if I may be so bold) are pretty well educated, have businesses & skills outside of that soulless endeavor and, have diverse and balanced investment portfolios of which IP is but a part. Why is it even a part when YoY returns aren't that flash? Our seriously unbalanced Tax system! Pure and simple.
Funny to think our tax system is making people dumber, ay?
There was no dig at property investors or any trade in this comment - intended to cover the whole economy and all types of employment.
Just remember from the census saying we now have the highest proportion of tertiary educated people as a % of population - but it’s claimed we’re not educated well enough to run businesses.
I agree with you on this, it’s a shame because people who missed the education boat often feel less than and never try out of fear of failure, society tells them they need Uni for this kind of path.
Showing up everyday when it sucks with no guarantee is ultimately the pre requisite for success.
As exemplified by Asian countries. Hyper-competitive education system churning out PhDs as a minimum qualification level, but terrible levels of actual creativity and entrepreneurship in the main. Much more likely to be career grinders than inventers.
True entrepreneurship, vs clipping the ticket in something like retail or investing, requires creativity more than education. Wide experiences, global knowledge of trends, ability to spot a gap. It's why those hyper-educated countries fomerly sent kids to be educated over here in droves. Helps to peel their blinkers off.
Sadly NZrs aren't as well travelled or globally educated as they once were, and I think that's probably more the issue. More NZ people getting degrees from polytechs here, fewer getting them in Oxford, or Maine, or even Tokyo.
True entrepreneurship, vs clipping the ticket in something like retail or investing, requires creativity more than education. Wide experiences, global knowledge of trends, ability to spot a gap.
Pretty much. True entrepreneurship will involve seeing what most others do not. Which is at odds with everyone sitting in a lecture hall, learning the same thing.
You can learn things like accounting practices, organisational structure, etc, but the ability to pull that all together, find and target a niche, etc, is another matter entirely.
IMO the best way to foster entrepreneurship, is to get out of people's way. Pretty tall order to start and run a business, and satisfy all the regulatory requirements imposed.
"...but it’s claimed we’re not educated well enough to run businesses."
Sorry? Who claimed that?
I make the observation 'we're not that bright' because of our herd mentality with regards investment (and the shallowness of who we vote for).
But I'm pretty damn confident, nay 100% confident, that with the right tax system & settings, Kiwis will astound everyone.
That's most people everywhere though, conditions permitting. I've an affinity with Kiwis obviously, but I wouldn't say we're inherently more adaptable than most.
We used to have more indigenous innovation when the tyranny of distance was more than it is today. We often had to import really expensive stuff from the likes of England, slowly, or we developed a local alternative. Or went without.
Most of the things we have a competitive advantage in are already done at scale - because capitalisation is inherently easier. Finding new things to sell the world they can't easily get elsewhere cheaper gets exponentially harder.
@ Chrisofnofame - Ah the ol socialist mantra left wingers desperately resight & regurgitate "Lets tax our way to financial prosperity".
If only we could all tax our neighbours who have more than us more tax, then we can all be equal and happy, as long as we are all equally poor.
So you tax your neighbour more tax because he has more stuff and that's not fair right? How dare he strive to get ahead more than you. That's just greedy and selfish of him. Now what? We tax the crud out of him, more than the average guy, why? Well because he has more stuff obviously.
But what happens when suddenly we've taxed our neighbours so far and so heavy that they suddenly begin to have less than yourself?
Is that neighbour then allowed to tax you back at a high tax rate? Why? Well because then you'd have more than him, and that's not fair, that's greedy.
Taxing ourselves out of no other logical reason other than pure envy, is a poor man's mentality. It's also a complete cop out and excuse because it totally removes the self responsibility that it is not the job of others to see one's self prosper, it is the job and responsibility of each individual. Fail to do so, and one will pay a high price for life to have someone else do it for you.
Don't believe? You let the government do the thinking for you and they take away your freedoms You don't make the sacrafices required towards home ownership and one will stay a renter for life. One can forever scorn their "greedy landlord", but it's neither helpful nor does it bring a tenant any closer to home ownership. It just fuels the envy train, which later on in life becomes the train of regret.
It's not about that. It's about "rebalancing" the tax. If done like almost every other country, it doesn't cut anyone down or prevent wealth. At the moment, as many will point out readily, our tax system incentivises people not to earn an ordinary wage or start a productive business to the maximum extent possible. The system is set up to state that the only real path to money is to be in the capitalist class, investing, ideally in property. That suits many in the government who decide on tax policy just fine. It allows many people to get rich. But it doesn't help our productivity.
So we can definitely tax our way to prosperity if we simply do it to rebalance our economy to look like the ones we aspire to catch up to, like AU or the US. Not like anyone would ever leave NZ over a CGT, because they've got nowhere else to go to avoid one.
Any expert report commissioned by either the left or the right in this country has consistently reported back that our tax system is broken and that NZ needs to rebalance taxes to take the burden away from small business and wage earners and place it more on things like capital. That's not about striking people down with envy, it's simply about giving a leg up to those who create, who work, who run the local mechanics shop. Not the ones that collect houses and shares and lounge by their pool and sponsor political parties that argue for the status quo. It's those overtaxed productive people that inevitably leave NZ for somewhere else after all.
@ Chrisofnofame - "The system is set up to state that the only real path to money is to be in the capitalist class"
What do you think our infrastructure is built on? Hopes and dreams? More smiles and kindness mantras of the last labour government? Charity? It was and still is the capitalist class that built this for you socialists to enjoy. If it were up to socialists, everyone would be "kind" to one another out of "equality", but at the expence of everyone being equality poor, and nothing would get done because we would all be waiting for our hand outs. Hard to give out hand outs when there's no capitalists there to give them to you.
Face it, it's not capitalism that you dislike so much, it's progress. The problem is you don't get progress without a level of inequality. You have to incentivize the go getters, to become capitalists that actually make the progress happen and get stuff going. Socialists don't build houses, they expect to be housed in one out of charity because they play on their victim mentality. It's capitalists who build houses, and they rightly capitalise on the profits. Capitalists actually build far more that socialists and society can enjoy than socialist ever could. One asks for constant handouts and to penalize those that have more than them while staying stagnant in protest, and the other quietly gets on and does what's required to prosper, they should absolutely be rewarded for such.
With the right lens, all "infrastructure" comes from a place of socialism - charge everyone a little bit, give back to everyone as to their needs. The road outside your house costs you more or less as much as it costs your neighbour. If you don't own a car, you still end up paying for the road.
A country that doesn't pool resources to have schools, hospitals, roads, playgrounds isn't a nice place to be. Paying per metre to walk your dog down the footpath doesn't incentivise positive habits.
There's almost nowhere on earth where the best bits of socialising costs of things isn't the norm. The capitalists seem to now accept that having weekends and sick leave (both products of socialism) are actually probably good ideas on balance.
This is the best comment I've seen in a while. I like the spinning back of the political spin about taxing our way to prosperity that we so often hear which is used to shut down this whole topic. You're totally right about the incentives in NZ being messed up. It's too easy to keep leveraging the banks money for tax free gains and not do much else to become wealthy (despite everyones purchasing intention meaning they are really avoiding tax)
Then you have many of our smartest hard working people finding it too hard here so they leave. Our house prices should be more in line with our lower incomes so that it makes sense to live here.
There’s a wealth of international literature that shows inequality leads to reduced economic growth and overall prosperity. It’s nothing to do with envy, as others have written it’s about rebalancing. Social stability matters. It’s not just about fairness, but what is best economically for the country.
Personally, I’d like to see revenue neutral changed to tax policy, although our infrastructure and healthcare systems need massive investment going forward
@ Independant Observer - absolutely happy to provide some stats on that for you:
NZ Stats show for that every 100 people age 65 on average:
25 are passed
20 have annual incomes under $10k (below poverty level)
51 have annual incomes between $10k & $35k (median is $18k)
4 have annual incomes over $35k
1 in every 100 is a millionaire
Today's average 50yo has only $2,300 saved towards retirement
Only 5% of the pop can put their hands on $10k when they are 65.
The average NZ lifespans 85yo. A good 20years of retirement. To have just an extra $500pw (pre tax) to live on at retirement, that’s $743k will need to have saved (assuming that 3.5% average interest on savings, which is a very confident rate of return). That’s $1,193 weekly for 10 years! Anotherwords, cannot save ones self to wealthy.
Therefore, if one wants to succeed, one needs to figure out what most people are doing & do the exact opposite. And no, despite the envy crowds cries, not everyone is investing in property. Just 6% of the country actually invest in property, & of that, 80% own just one rental property - hardly enough to secure a passive income coming into retirement.
Now wealth is defined by how much money your money is making & your financial survivability (ability to fully cover your expenses). Your wealth is determined by how many days forward you can survive.
Considering that 98% of all businesses fail within the first 2 years, & that one has to be constantly present to over see the day to day runnings, it's not at all surprising that people who want to both relax & enjoy a long retirement will generally not be interested in starting their own company. Too much work involved for too little reward & too big of a risk that it won't pan out anyway.
Now the only difference between a rich person and a poor person is what they do in their spare time. Poor people spend their time complaining that it's everyone else's fault why they are financially disadvantaged compared to their peers. They are distracted, and therefore remain poor because of not only lack of financial education, but lack of financial restraint & personal accountability. Too busy acting a victim mentality, rather than a Victor mentality.
You can see this clearly with the Stats above, that a majority confuse the difference between academic education & financial education. For if the Census rated based on financial education, it would produce the results we see above, that show you can be as well educated through the academic school system, yet still be financially illiterate & retirement dead broke, hoping the government's $288 weekly pension post tax will save you. If the Census actually measured Wealth (how far your income or savings stretches without having to physically work for it), it would tell a totally different story.
The reality is our country is not full of well educated people at all, they are simply educated in the wrong areas. Well educated with tall poppy syndrome and victim mentality perhaps, but of course the Census doesn't provide stats based on emotions. There's a reason why they don't teach financial education in schools anymore. The Stats above shows your fancy degree won't save you from a retirement of poverty, nor will a fancy high paying job. For more money won't solve money issues if money management is the issue. The real issue facing the country is poor money management. Too busy expecting it's our greesy bosses fault for not paying enough or our greedy landlords fault for not charging less.
@Baywatch - the Coalition has been governing for just 11 months now. They cannot undo 6 years of labours taxing, penalizing, restricting, deviding policies in just 11 months. They're good, but not that good. Give them a chance. We gave labour 2 chances during 2 elections. Be patient.
Labours decieved voterbase blames covid & every other entity possible for their constant failures. They blamed until there was nobody left to blame. Then the rose colored glasses came off, people saw them for what they really were, and we voted them out. If left wingers can use blame as a scapegoat instead of holding their government accountable, then it can certainly be applied in opporsition as well. Fair is fair. If Labours 6 years of constant failures are not their own, but it's all covids fault instead, then the coalition can certainly use a 2nd global financial crisis that we currently find ourselves in and is impacts economies world wide as a pretty solid excuse for any failures under their governing.
Cannot have it one way, and not the other. What's it gon be? We going to to continue to keep using blame, denial, deflection & deception for failed election promises of governments past and present, and to protect voter pride? Or do we actually hold all governments to account and start making some actual progress? Blaming blue or red, red of blue, is counterproductive.
@ Baywatch - What planet are you on?
During Labours 6 years Labour kept trumpeting low unemployment figures, however Carmel Sepuloni from Labour announced in parliament on 31/8/23 that since 2017 there were 52,404 more people on job seeker support and 34,872 on it for more than a year.
July 2022 there were 345,807 people on main benefits, 171,195 on Job Seeker, more than 100,000 work ready. That is still 23,000 (30%) higher than 2019. How is that possible with record low unemployment? 55% increase in those on jobseeker for more than a year since 2017, during a time when people are crying out for employees.
When National took over from Labour the number of public servants is 28% higher than in June 2017. The economy-wide employment increase was only 12%.
Labour kept gloating about the NZ unemployment rate only approx. 3.5 per cent, but what they didn't tell us is they are not deemed as unemployed if they are not actively seeking employment. The proportion of the working-age population on the Jobseeker Support benefit is 6%. When you include all other main benefits like sickness benefit, it balloons out to 11.7 per cent of the working-age population (up from 9.7% when Labour took office).
Let's not even get started on Labours massive failures in the health care sector, soft on crime approach, favoritism to certain races, housing, roading.
I could go on..and I'm happy to enlighten you. After all, woke is the opporsite of awake, & it certainly sounds as though you've drunk the labour coolaide and gone straight to sleep. Stockholm syndrome is strong with this one. Take off your rose colored glasses. It's people like you that conveniantly excuse the mess of the previous government that we are in this mess to begin with.
Nice try, but the evidence against your claim that Labour was anything but beneficial to the country is overwhelming incorrect. Facts over feelings. Try again.
Because @GoWokeGobroke left out the only real source of retirement savings for all boomers - home ownership and rental properties.
80% of folks over 65 own their own home.
Here is a 2020 stat: Those aged over 65 have $112.7b in real estate assets and $8.32b in real estate debt.
What’s the reference for those numbers? I would have thought with KiwiSaver the average 50 year old would have been further ahead than that.
A solution to this would be making KiwiSaver or an equivalent retirement account compulsory, with minimum contribution 6-8% matched by the employer. Plus some of the tax changes Andrew Coleman suggested in his article series
Agree, and found the average Kiwisaver balances by age group. Still no reference or link to your stats source Go Woke? Based on the accuracy of your stats you're more likely to Go Broke.
People aged 41 to 45 had $34,741 and those 46 to 50 had an average of $43,600. As people entered their 50s, so too did their average balances. Those aged 51 to 55 had an average of $50,446. For 56 to 60-year-olds, their average balance was $55,632. Those in the last five years before becoming eligible for the pension had just under $60,000.
https://www.rnz.co.nz/news/business/527203/how-much-should-your-kiwisaver-balance-be-at-your-age
Now you need to add the important bit - 80% of people over 65 own their own home(s). That is an asset that can and should be included in the income/net worth calculations.
A lot of those homes were bought for modest amounts by now retirees who worked hard and wanted to be responsible for themselves in their old age.
Many have been caught in a trap where their homes have increased in value by huge amounts..but so have their costs.
Rates and other costs have sored .
I personally respect those whom work hard all their lives to look after themselves in their old age.
Everyone did not lose their money. Some did but most lost some money. The astute ones just bought more blue chip dividend paying company shares and did well as equity markets always recover. The American indexes are currently at their all time highs. The secret is not to panic, always have cash on hand and buy quality when markets dip.
It's time in the market, not timing the market that makes the difference.
How do we know we are at a bottom of any market for prices? Prices start rising again. This is when the chicken little skeptics advice not to buy. Equally so the opporsite is true, how we know when we have reached the top price of a market, the prices of course start to decease. This is also when chicken little skeptics advice not to buy. In fact, chicken little skeptics all round advice is just not to buy, period, after all, they think no risk no chance of loosing right? Gotta be right and spot on 100% of the time, otherwise you could miss out, or over pay. Funny logic the chicken little skeptics often never seem to have the illusive thing they claim to be waiting for the opportune moment to buy or sell. For them, their strategy is just to wait, wait and wait, till one day they realise they missed out.
Waiting is not the same as investing. Successful people don't wait for success to hit them in the face, they find a way to make it happen.
That's assuming people have wads of cash on hand just ready to go, when the reality is quite different. The worst cost of living crisis in over 20 years, most average people have all but depleted what little savings they had to begin with, simply just to get buy. One also only ever makes little gains on little spent, and that's all people got at the mo.
I don't think it is a lack of education to blame for investing in housing - for the vast majority of people the incentives (leveraged, tax free, low risk returns) it is the logical investment decision!
Also found it amusing irony using poor grammar when blaming a lack of education!
Good points. The sheeple of this country lack financial discipline and need regulators to make sure low interest rates aren't viewed as another opportunity to load up on cheap debt to buy stuff they cannot afford.
The government of the day should also make CG/wealth/land tax fiscally neutral by adjusting income tax brackets lower to garner more support behind such taxes. Without that, it is just more moolah in the hands of our political parties to hand out as election lollies.
Chris,
At some point, I think we may have a CGT, but more for tax equity purposes than anything else. I think the link you make between CGT and productivity is tenuous at best. If there is a simple answer, which I doubt, then surely it lies in a much greater spend on R&D in both the public and private sectors. Our spend/investment in R&D is well below most developed economies. We need companies to invest in better equipment and in raising the skill level of employees and that should be encouraged by tax breaks for genuine R&D. We need more companies to think like F&P Healthcare which spends/invests some 10% of turnover this way.
"I think the link you make between CGT and productivity is tenuous at best."
You may want to research that one a bit. (Use it again and I'm likely to do what I'm criticized for ... become 'uncivil', apparently.)
Re ... R&D underinvestment ... 1,000% agree.
You've heard me harp on about how unbalanced our tax system is? IMO our woefully out of date tax system is the root cause.
But they do have issues with productivity. In fact we're more productive than most countries with a capital gains tax. I guess maybe they could be less productive still, if they didn't have one either?
So if business foundation, function, investment and productivity is directly influenced by the level capital gains on housing is taxed, we would expect that the more you tax, the more business investment you'd get.
I'm just inquiring at how you've derived the link between capital gains tax and business investment/financing. Is it a common observation we can witness?
The problematic assumption is that active business pursuits are directly competing for the same money that's going into housing.
"Should I buy a 3 beddie rental in Sth Auckland, or invest a mill or so in a high risk business venture with an 80% chance of failure in the first few years" is unlikely to be a very common mental exercise.
A CGT doesn't disinsentivize people to invest in property anymore than gross pictures on a cigarette pack disincentivizes more smokers to stop smoking. I've never heard any smoker or ex smoker say they gave up or giving up smoking due to nature of how it's packaged.
A CGT would instead be considered and factored in at time of sale, tacking this onto the end of what ever expected profit one expected to make. This ultimately means that it is once again would be FHBs that end up paying this tax. CGT would actually then make property prices even higher. A higher purchased property for an investor means that higher rents will follow.
Those who heavily advocate to tax their neighbours more out of "equality" very rarely consider the flow on effects. Suppose your one of these diehard left wing socialists that thought the last governments restricting, penalizing, taxing and deviding policies actually reduced rents, property prices, homeless rates and got more houses built? Lol
You need to start a comedy skit, you’re hilarious. Everyone you disagree with you call marxist, communist or left wing. And your anecdote around cigarettes, priceless. Comparing CGT and investing in housing to a physiologically addictive substance which people have physical and mental withdrawal symptoms from, sound like apples and apples hey. Perhaps you’d like to enlighten us all on how the middle class ever became more prevalent in society vs the days of old where the rich had estates and castles, controlled law, and inherited everything by bloodline while the majority were poor, sorely uneducated, working class folk who often served them. I’ll tell you how, effective taxation to prevent wealth accumulating too heavily at the top where the wealth gains too much influence on law and further favours the wealthy. My view is egalitarian, and the only reason you live in the world you do, and are lucky enough to have whatever education you have, is through this historical taxation that allowed it.
If you want to increase productivity, you need a CGT to direct the available capital away from houses and into businesses where the ROI is far higher but also riskier.
Is there an evidence based case for this theory?
I.e. some sort of strong link between taxing capital and restricting housing lending, and economic and productivity growth?
On the surface, it seems like territories that have CGTs and more restrictive house lending practices don't fare much better, if at all.
If we wanted growth in businesses, you'd probably need to be doing more than just trying to carrot and stick housing. Like maybe making businesses cheaper to operate.
It's a long-term play. Either discouraging speculation or in some way assisting non-speculative purchases (stamp duty?) contributes towards a goal of home ownership. Home ownership should be almost the top of the list for government KPIs, because without it:
- People who don't attain it will place a huge burden on our superannuation system, and use it to pay rent for life
- People without houses can't leverage against their equity to start a business, which is about the only way to do it in NZ
- Their kids will also likely never own houses nor inherit much, creating a cycle of if not poverty, then certainly a cycle of dull lives
- People who don't own significant assets here won't have a strong tie to their community or country, and are more likely to leave one day
This hasn't really reached crisis point yet, but having policy setpoints that effective encourage a society of renters like that's not a problem is a problem.
The reason NZ has done well up to now is in large part due to a large class of mortgage-free people who have been able to invest with the security of knowing they had their own home behind them.
So it's bigger picture than just stopping investment - it's really about tipping the balance back the way it was when NZ was a better place to be.
I'll grant there is quite possibly no correlation. Home ownership trends aren't much better across the ditch.
Probably other policies like DTIs to limit negative gearing are more effective at this.
The hope is a CGT causes people to seek out incomes from areas other than capital, and anecdotally every country with more of that going on has a CGT in place, but correlation != causation.
Within our family we have both property investment and real actual business going on, and I can assure you the property side of things makes vastly more money for the effort put in. And that's pretty ugly and demotivating.
Probably other policies like DTIs to limit negative gearing are more effective at this.
There's also not a great experiential case for this. Hinders ability to finance new supply, larger pool of buyers end up competing for decreased supply.
The benefit of a DTI is it improves the resilience of your mortgage market from credit over extension.
To make houses cheaper, you have to make the cost of new houses competitive with old ones.
It would. It would also make sellers think twice about selling to overseas investors simply to pocket the tax free capital gains.
Or any investor.
What I don't like about that is:
- a business usually is valued on it's net returns
- you already pay tax on your net earnings
- there's often a significant amount of unpaid sweat equity a business owner puts in to make a business viable/worth anything.
People buy houses because it works and anyone can do it and it has until recently been very low risk. Running a business is hard work and beyond being self employed, having to have employees is a nightmare. Self employed is the way to go but for most people its just not an option. We don't need a CGT in this country.
People can put the money into equities instead. But you can't generally borrow money from the bank to do this, and so you miss out on the capital gains on the borrowed money. That is why housing has such big advantages in NZ. Although most seem to buy investment houses for the capital gains over a long period, it seems crazy that CGT doesn't apply.
I agree with your framing of the risk reward relationship. The incentives drive the behaviour. A CGT kind of just becomes a ticket clipping exercise and then those that rely on the income stream just want to keep the gravy train going, which further incentives it to continue. The cost of shelter in New Zealand is a key issue and it will need to be solved.
They will never get a GST across the line if they also lump it with a wealth tax. A wealth tax and inheritance tax is essentially intergenerational wealth theft IMO. In the US Vice President was saying they want to help and support intergeneration wealth for future generations.
Okay - here we go. On display is what it cost just to keep the lights on in an economy that ranks weak on productivity. Those precious tax cuts whom a few commenters salivated "watch this space" were unaffordable after all. Now is the time Government needs to drastically increase deficit spending to pull us out of this hole. I suggest that if interest rates fail to ignite meaningful and productive growth, political pressure says they'll give it a shot. I suggest then our currency will probably tank leading to higher inflation and higher borrowing rates.
We've certainly found ourselves in a hole.
I agree - these tax cuts were simply not affordable.
This Government is doing the right thing by trying to cut the enormous waste and all fake jobs created in the public sector but the previous Government, but it absolutely did the wrong thing by cutting taxes, by not removing all the welfare support given to housing speculators, and also by re-introducing interest deductibility on parasitic housing speculation.
She is playing the hand she has been dealt. Clearly there was a massive increase in spending during the last 6 months of the Labour government, including various expensive hopeless projects that sucked up a lot of money and are now cancelled, and a massive increase in the public service (both salaries and new staff (vote buying). This deficit is the exact reason all these things that have been cancelled (and complained about by the hopeless left) have been cancelled. We cannot afford them (and they mostly provided no value anyway).
So, the solution is the following, and what is already being done.
i) Cancel hopeless and un-needed projects (where they can actually be backed out of, ring fence what has been done and close it down).
ii) Right size public service, cut out all dead wood.
iii) Live within means, and find more productive ways of delivering public services, i.e. more automation, less staff.
iv) Never elect another Labour government (I know it will happen some day, but dreams are free).
Treasury infer that Labour attempted to buy the election with spending we couldn't afford - & that we're now paying for
"The Treasury put these higher costs down to a number of factors that both the current and former finance ministers influenced.
It said decisions announced by former Finance Minister Grant Robertson in Budget 2023 were expected to add $5.6b of expenses in 2023/24.
Meanwhile, decisions made by Willis in her late 2023 mini-Budget and Budget 2024 were expected to reduce expenses by $1.1b during the year."
https://www.nzherald.co.nz/business/government-deficit-widens-by-more-t…
No.
Labour was going to use deficit spending to keep us out of recession, provide employment and spend on much needed infrastructure, without picking winners, enriching donors, and generally looking after all Kiwis rather than a select few.
While National ... well ... you're seeing it now.
Perhaps you have missed the part where this government - perhaps the one you voted for? - thanks to an ACT Party gun freak - is ensuring gangs can get guns and ammunition without any way to trace them??
So, Firstclass, how do you feel about that?
From the same article ... and especially for the debt freaks:
"Turning to the Government’s debt position, net core Crown debt rose by 13% over the year to $175.5b.
While this was a little below what the Treasury forecast at the May Budget, it still surpassed Willis’ debt target."
Da-amn!
When does it become the Coalitions budget, they were in charge >50% of the period?
It turns out we can't afford the property tax relief - there is zero ambiguity around that now.
Increasingly an organ donor of talent to Australia while importing generally unskilled labour from the sub-continent, rotten productivity, cyclical downturn and self-harm to our export engine room. Our Capital has been decimated as a place to do business.
We are living beyond our means and the only way out is to take some risk.
"They bought the election with tax cuts the country couldn't afford."
This is how the mind of the capitalist ideologue works. Everything is for sale, including principles. Absolutely focused on buying their way back into getting "back on track" with turning NZ into an industrial wasteland.
Nats are such great money managers they couldn't imagine looking wider than their tunnel vison "what's in it for me" sales pitch. "We're not Labour" was the clincher. Nothing more!
Buying elections is in NACT DNA. They have no comprehension elections can be won other than appeals to greed. A team of chimps could have won last election, with a promise of bananas for all.
They were pretty cheap tax cuts, as far as election bribes go. I can't believe the number of people who have now told me tax brackets have been adjusted to make up for the decades they weren't and everything is as balanced as it was in 2008 again.
And the promises of hospitals, surpluses, eliminating te reo from daily life - well those promises were cheap and hollow.
But what do they have to promise in 2026 other than continuing to not be Labour?
@ Chrisofnofame - And Labour bought the election with a 100,000 kiwibuild ghost homes promise in just 10 years, another 670 years to go to forfill their election promise. And the majority bought it hook line and sinker....twice! Lol Fool me once shame on you, but fool me twice...
Fair call.. But National's equivalent this round is that they'll be building 19 new highways of which they've currently started none. We're only a year in, but Key and Joyce had got some serious rungs on the ladder by this point in their first term, despite the GFC. It's not looking good.
@ nnz - ill admit that although building new highways is nesasary it will be a challenge for National given that under our last Labour government road maintenance budget was only 78% of what it was in 2012, even though population has increased.
We also know thag during the cost of living crisis, Labour thought it was a priority to spend money on changing road signs to be bilingual.
Labours transport delivery we had: record number of potholes, the Cook Strait ferry breakdowns, the Wellington bus network shambles, the 1000 daily Auckland bus cancellations, the track maintenance shutting down chunks of the Auckland train network for years, cancelled more significant roading projects than started (Mill Rd, south of Auckland, Stage 2 of the Takitimu Northern Link near Tauranga, Whangarei to Port Marsden highway, the rescoping of Otaki to Levin), slowed down Auckland by allowing the dropping of speeds on 1600 roads and the $51 million spent on a cancelled bike bridge.
At this point, even attempting to slander Nationals 11 months governing and trying to pitch somehow that Labour in any way did it better, is just a joke. Can you say it with a straight face? It's like the Trump debate. One does not know why they don't like him, media spin all sorts of constant hit pieces that help you to make an "informed decision", when likely, you feel a dislike quite simply "because the TV told me so". The fact that one just does not like National is irrelevant. Nothing will excuse 6 years of Labours constant failures. Own it.
by safeashouses | 10th Oct 24, 1:32pm "I am quite a fan of Nicola Willis"
Nicola.Willis@parliament.govt.nz
Let her know your innermost thoughts and expectations of being a Landlord.
I thought it was obvious to anyone with half a brain that the deficit is nothing to do with the tax cut, and simply to do with incompetent management over the last six years. Any fool knows that yes tax cuts cost money but they were well overdue and will be offset in time by slashing nonsense ministries and public service morons along with a multitude of unneeded projects and other white elephants. I was simply implying that most people that leave New Zealand do so for better professional prospects and understand these simple concepts. This comment implies that they don’t, in this case anyway.
@ Overseas Kiwi - Clearly you've been overseas far too long.
You think that's bad;
Our countries net debt went from $5.4 billion in 2019, to $78.7 billion in 2023 (1357% increase) under Labour.
Tax take in 2017 was $69 billion, when National took over from Labour it was $107 billion, an increase of $38 billion in tax every year = over $100 million in extra tax every single day! Thats $17,500 in extra tax per household each year.
Labour government increased consultant spending from $900 million the previous year to $1.25 billion the year they were elected out of office. A massive 38% increase, even after Labour increased public service employees by 50,000 since Labour took office.
Stats NZ data showed a deficit of $10.5 billion between export earnings and import costs for the year ended June last year, the highest annual deficit since current records began in 1960.
316 foreign entertainers, including 64 DJs, were fast-tracked through MIQ in 2021. Taxpayers have spent $1.2 billion on MIQ. That's $660 for every household in the country.
If you cant let National off the hook while navigating our 2nd global financial crisis then this can equally be applied to Labour over the covid years too. Cannot have it one way and not the other. We either keep making excuses for governments to protect voter pride and the need to be right all the time, or we take accountability. Which one is it?
What's absurd is that people who dislike the current government expect that they should be able to clean up the last last governments 6 years of constant failures in just the 11 months they've been governing. What ever damage this current government could do, is most likely to still be an improvement on the last government. And we haven't even touched on crime, housing, education, Healthcare. I can go again if you can?
Too much cherry picking your numbers. Without any substantial tax rate changes other than the 39% bracket between 2017 and 2023 why do you think the tax take would increase? That's right, GDP increased by about the same amount as the tax take. The number of households you're dividing that tax increase by also changed markedly over that period, so actually if you run the numbers on a per household basis taking into account the growth in households it's basically flat. And you can expect that trend to continue.
The public sector and spending did grow faster than GDP however. That would be a valid argument that they spent more than they were able to raise in taxes.
Ah. Here come the 'whataboutism' defenses. They're tired and old, and darn near useless when it is clear the situation has now been made worse by this lot!
I'll bet the NACTF wished they'd left the employment component in the RBNZ's remit now, ay?
The RBNZ may not have held the OCR so high, for so long.
All the money made available for new roads and rent seeking while neglecting the maintenance and replacement of existing critical infrastructure (hospitals? ferries?) says a lot about this government's ability (or willingness) to prioritise people and the economy.
Why on earth would you spend money on a fancy new shed when you can't replace your leaky roof? I guess if the leaks are in the kid's bedroom and not yours...
We also import money (for banks to lend), insurance (in the form of re-insurance), government funding (from seekers of tripple AAA rated investments), etc.
With regards China's lower production costs, we could under cut many things they produce if we had cheap electricity again. We don't. Ask the National Party why that is ... (or can someone explain that on my behalf. thanks.)
With regards China's lower production costs, we could under cut many things they produce if we had cheap electricity again.
We would have to cut the cost of electricity by what, 50% to be energy competitive with China. How much money would we have to spend to accomplish that savings?
And do we want to produce things with relatively higher energy costs than the costs of say, labour and raw materials?
My power bill isn't stopping me from manufacturing t-shirts or making a smart phone.
Ah the battle cry of incompetence:
"IT'S NOT MY FAULT, I BLAME XXXXX"
National have been in power for long enough for that excuse to carry zero weight, especially as they campaigned on their strong financial management skills and getting us back on track.
Dear Nichola, please let us know when you're going to deliver on that, we're all waiting.
The simple fact here is remarkably simple:
You can't run a country on tax cuts and tax breaks.
Distract yourselves as much as you want in the relative merits of CGT, but we have a country to pay for, there is no hiding from that.
I will be very, very surprised if they come out with any sort of ferry replacement plan, despite them repeatedly saying they are about to release their plan "soon". Because when they look at even a corolla replacement, its going to cost dramatically more than the original were going to cost as we were getting a great deal for those already.
Luxon is holding up a rug and Willis is sweeping furiously.
We are in the throes of government austerity that seems to be aimed at delivering the very clear message that out-of-budget-and-control government activity will not be tolerated under any circumstances and to hell with the sunk costs - likely becasue the finger can be pointed at the previous government.
The ferries, government jobs, Dunedin Hospital and the like are the collateral damage from that.
However: where are the practical measures to make government activity less siloed, and more intelligent, coordinated, effective and efficient?
Do we actually have the will and capacity to make the required changes, or is poor performance irretrievably baked in to public institutions? Will most things always cost more and take longer than they should becasue of politicisation overtaking information driven decision making?
However: where are the practical measures to make government activity less siloed, and more intelligent, coordinated, effective and efficient?
There are information sharing agreements which can help revamp and coordinate processes and services, such as between DIA and immigration to check peoples eligibility for citizenship. These however come with the risk of being used for the wrong purposes and there's a loss of privacy involved. Should there be a scandal if the information were used for purposes outside the specific intention laid out in these agreements, they would simply revert back to the silo'd format and as we know, these scandals happen like clockwork every once in a while. Privacy breaches are key example, as one that is large enough or publicly broadcasted usually causes access and processed to be re silo'd and extra layers and processes added to prevent it happening again, thus adding time and inefficiency. Govt departments go in a cycle of this where they make progress then another one happens and they go backwards for a while before things start changing again due to said efficiency issues.
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