Labour has overseen massive inequality increase – Bernard Hickey

Written By: - Date published: 1:14 pm, January 27th, 2022 - 154 comments
Categories: benefits, covid-19, Economy, inequality, Politics, Social issues - Tags: , , , , , , ,

The Government’s Covid 19 response, mainly via Reserve Bank measures, has enabled a mind-boggling increase in inequality, according to influential financial commentator Bernard Hickey in his blog, The Kākā.

Unquestionably, the government’s Covid response has saved multiple lives, but its refusal to simultaneously address inequality via capital gains, wealth or inheritance taxes raises uncomfortable questions about how a leftist government has overseen a once-in-a-generation shift in wealth.

Hickey, in an interview with Kathryn Ryan says the policies of Jacinda Ardern’s government have made the already wealthy “hundreds of billions of dollars” richer, while beneficiaries’ debt to the government itself has risen $400 million to over $1 billion.

The end result of that has been an absolutely massive increase in inequality.

He says emergency Covid response measures, such as the RBNZ’s $50b money printing exercise, euphemistically called “quantitative easing”, fuelled an explosive rise in asset prices, including a whopping 40 percent lift in house prices over two years.

You are effectively doing social policy as a central bank by engineering inequality and that’s not what central banks should be doing.

Hickey bases his comments on this week’s Statistics NZ National Accountants figures that assess how households, businesses and the government have used their cash and how their net worth has changed.

By following the money through the Covid crisis the SNZ data show the government gave $20 billion in cash, via wage subsidies and resurgence payments, to businesses. Additionally, the RBNZ purchased over $50b of government bonds via its QA program. The result was that over the 21 months of the Covid period, the net worth of businesses rose by more than $300b and the net worth of the households rose by over $600b.

Hickey told Ryan

What we can see is that Covid has actually been fantastic for people who already had assets at the beginning of the crisis, but for those people who are renters and who don’t have assets, they are now significantly worse off.

The latter group received relief amounting to just $48m while their incomes have been whittled down by inflation running at a 30-year high of 5.9 percent.

Hickey said that while many businesses in the early stage of the crisis needed cash support, it became clear after a few months that many no longer needed it. Gross operating profits over the 21 months was $27b which compares with just $11b in the previous 21 months pre-Covid.

What we have seen here is that businesses increased their collective profits by $15.5b, which, magically, is not much different from the extra $18.9b that was given in cash by the government.

Hickey says while it quickly became apparent early in the crisis that the economy was recovering strongly, there has been no attempt to claw that money back.

On the other hand, looking at people who needed personal assistance via such things as Ministry of Social Welfare & Development grants, the government has been very aggressive in reclaiming that money from people on benefits.

Now, those who want to jump the gap from renter to asset owner are almost out of options. Ironically, the ability to bridge the gap has been made harder by further RBNZ actions, clamping down on access to credit to try to tamp down runaway house prices.

In effect, Covid was the moment that blew away a generation’s hope for their first home.

Simultaneously, the precarious class are much, much worse off because rents have risen twice as fast as wages and the costs that the poor must pay has hurt them far more that the rest of society.

Hickey acknowledges there was fear of a full-blown depression and that businesses receiving cash hugely boosted confidence and saved jobs. But he says there are two things the government and RBNZ could have done differently. When it was clear that the economy was rebounding quickly, the payments kept going. There had been little reflection by the government on how useful the wage subsides were and where the money has gone. In fact, the National Accounts measures of cash holdings show it has largely gone into bank accounts of the wealthy households.

The SNZ figures show that from the beginning of Covid, businesses collectively increased their cash balances and term deposits by $26b. Households increased their balances by $25b.

That tens of billions of dollars of government cash, effectively went straight into the cash accounts of businesses over that period.

Hickey said that many of the small businesses that have struggled during Covid even struggle in the best of times. They only exit because of the continually-rising and leveraged value of their equity in their homes. The value of those homes and property rose in total by $952b, post Covid.

The government has failed to address the question of whether those businesses really needed that money. The accounts of companies whose accounts are publicly available show many made substantial profits during Covid, paid shareholder dividends, but refuse to return government support cash.

They include the likes of Harvey Norman, Kathmandu, Fulton Hogan and many, many others.

He said that the fact that businesses have pocketed via extra profits nearly all the $19b cash of the wage subsidies means that the Social Contract is not being fulfilled. Hickey expressed surprise at the business community’s lack of initiative to rebuilt that contract.

Hickey also questions why the government and the RBNZ has not unwound its economic stimulus, particularly as it relates to the housing market. Prime Minister Ardern has even stated that one of her roles is to protect the main savings vehicle of most families – their house.

In effect, the government has given an implicit guarantee that houses prices only ever rachet up, or when they go down, they don’t go down by much.

Hickey said RBNZ made a fundamental mistake at the start of Covid by removing all loan-to-asset ratio (LVR) restrictions at the same time as drastically lowering interest rates and also telling banks to lend more.

We then had an 18-month frenzy of lending to people who were leveraging up the equity in their own homes to buy rental property.

Hickey believes the economic stimulus provided to get us through Covid should have been more weighted towards fiscal policy, which can help people directly, rather than through the central bank to underpin asset prices. Many countries gave one-off cash payments to each citizen, which Hickey argues is a much fairer method of stimulus.

The method this government and the RBNZ chose, to massively boost asset prices of those who already had assets and a refusal to unwind it

…has changed New Zealand society for decades to come. The scale is enormous. We are talking a trillion dollars of wealth has landing in the hands of those who are already wealthy.

This happened as the government refused to increase benefits by $50/week at Christmas because it was worried it would increase government debt.

Hickey called on the government to put in place measure to claw back some of the asset wealth it has helped create for businesses. He also called for MSD to forgive all debt to beneficiaries and substantially increase beneficiary incomes as advised by the Welfare Advisory Group nearly three years ago.

Simon Louisson reported for The Wall Street Journal, AP Dow Jones Newswires, New Zealand Press Association and Reuters and briefly was a political and media adviser to the Green Party.

154 comments on “Labour has overseen massive inequality increase – Bernard Hickey ”

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  1. Dennis Frank 1
    27 January 2022 at 1:23 pm

    The obvious thing for Labour to do is to use the budget this year to fund a significant lurch towards good old-fashioned socialism, to rescue the victims of increasing inequality. Labour's advisors & consultants will reassure them that it need not be real socialism – it need only be a sufficient semblance to fool enough voters who might be thinking of switching to National.

    But it would help to market it as socialism to the poor, eh? It's a label without currency but enough history to provide the illusion of authenticity. Just the kind of thing that Labour has come to depend on, in other words.

    • Dennis Frank 1.1
      27 January 2022 at 1:26 pm

      Dividing the people into winners & losers is what capitalism does by design. Now that Bernard has provided the economic evidence, we have proof of the current govt doing exactly the same. Best response possible from the Greens? “We didn’t do it. Blame the Minister of Finance!”

      Government’s interventions to print $58b and give $20b in cash to business owners helped make owners of homes and businesses $952b richer since December 2019.

      Meanwhile, renters have missed out on that asset growth and have been hammered with real wage deflation and rents rising faster than incomes. The poorest are now $400m more in debt and need twice as many food parcels as before Covid.

      https://thekaka.substack.com/p/covids-big-winners-and-losers-revealed

      • lprent 1.1.1
        27 January 2022 at 3:10 pm

        He has kind of missed that most of that money wasn't actually for business owners. Most was in the form of wage subsidies to keep people employed during a pandemic. Some was in the form of cash loans (against taxes) to allow business owners to keep the doors of premises open so their employees could continue to be employed after lockdowns.

        By the sounds of what happened, most of that money was used for those purposes. Which is why we still have a functioning economy.

        We didn't have a problem as happened in the GFC (and earlier similar episodes like asian flu of the late 1990s, and the mother of all budgets) where National essentially became tightwads. Rather than helping businesses and their employees get over a sudden shock, they preferred to pay the same kind of money expanding the bankruptcies, welfare staffing levels, and unemployment rolls.

        And that led to a significant economic shock that persisted for more than 6 years that has done for more damage to social inequalities than this pandemic.

        • Dennis Frank 1.1.1.1
          27 January 2022 at 3:20 pm

          That seems a fair assessment. As tactical crisis management, it worked. Some media commentators spotted the irony of the appearance of business bailouts but those in the USA in the gfc were to corporate titans & ours were to businesses large & small.

          Someone could even make a case for Labour doing neosocialism via that method but that would imply strategy rather than tactical crisis management. However it will be interesting to see if Labour arm-twist Robertson into a budget that rolls back the loss of equity of renters. If they do, I expect them to frame it as a technical adjustment.

  2. Tricledrown 2
    27 January 2022 at 1:33 pm

    This is neoliberalism socialism died in 1984 ironically.

    Pumping money into the banks a great short term fix but no longterm benefit.

    In the 1930's money was given to the mainstreet now its given to wall st in an economic crisis.

    Now supply constraints are adding to the problem with out of control inflation.

    When interest rates are the only lever govts use to slow inflation it affects the poor again.

    What's the solution.

    Tino National ACT Labour and the Greens largely support the status Quo as Hickey points out.

    Treasury and our Universty economics degrees all follow the same neoliberal chicago school economics ideology.

    Otherwise your called a communist if you have any alternatives.

    • arkie 2.1
      27 January 2022 at 2:12 pm

      The Greens have been advocating against the status quo their whole existence. From their economic policy:

      Success should be measured by human and environmental wellbeing

      • A sustainable economy operates within the limits set by the natural environment and ensures just living standards for all people.
      • Government and businesses should measure and report on social, environmental, and economic indicators including gender equity.

      The tax system should be progressive, comprehensive, and encourage sustainability

      • A broad-based tax system should include taxes on personal and business income, consumption and expenditure, pollution, and environmental resource use.
      • People with the least ability to pay tax should pay the least as a proportion of their income, while those who can pay more should do so to contribute to the welfare of society.
      • Taxes should discourage speculative investment in non-productive assets. A capital gains tax should be applied to property investment, excluding family homes.
      • Ecological tax reform should shift taxes away from income and enterprise and towards resource use, waste, and pollution.
      • Internationally, Aotearoa New Zealand should actively work to develop a financial transactions tax.

      They have also been called socialist/communist for that very reason. Labour like to think of themselves as socialists (based on their history), but how do they measure up to their own constitution:

      Principles

      • All political authority comes from the people by democratic means including universal suffrage, regular and free elections with a secret ballot.
      • The natural resources of New Zealand belong to all the people and these resources, and in particular non-renewable resources, should be managed for the benefit of all, including future generations.
      • All people should have equal access to all social, economic, cultural, political and legal spheres, regardless of wealth or social position, and continuing participation in the democratic process.
      • Co-operation, rather than competition, should be the main governing factor in economic relations, in order that a greater amount and a just distribution of wealth can be ensured.
      • All people are entitled to dignity, self-respect and the opportunity to work.
      • All people, either individually or in groups, may own wealth or property for their own use, but in any conflict of interest people are always more important than property and the state must ensure a just distribution of wealth.
      • The Treaty of Waitangi is the founding document of New Zealand and that the Treaty should be honoured in government, society and the family.
      • Peace and social justice should be promoted throughout the world by international co-operation and mutual respect.
      • The same basic human rights, protected by the State, apply to all people, regardless or race, sex, marital status, sexual orientation, gender identity, age, religious faith, political belief or disability.

      Objectives

      • To elect competent men and women to Parliament and local authorities through free elections for the purpose of giving effect to Party policy and principles.
      • To build and sustain an economy which can attract and retain the intelligence, skills and efforts of all citizens.
      • To ensure the just distribution of the production and services of the nation for the benefit of all the people.
      • To promote and protect the freedoms and welfare of all New Zealand citizens.
      • To educate the public in the principles and objectives of democratic socialism and economic and social co-operation.
  3. Chris 3
    27 January 2022 at 1:58 pm

    When it comes to addressing inequality Labour's very good at talking the talk. When it comes to doing it it almost always either pretends to do it, does a half-arsed job, targets the wrong people or just says no.

    • Stuart Munro 3.1
      27 January 2022 at 6:32 pm

      Why single out Labour? I can't recall any NZ government in my lifetime offering more than lip service to the problem.

      • pat 3.1.1
        27 January 2022 at 7:00 pm

        That may be true but they are not the incumbents….its difficult to express your displeasure at the past.

      • Chris 3.1.2
        31 January 2022 at 9:59 am

        Because the post is about Labour's response to inequality.

        • Stuart Munro 3.1.2.1
          31 January 2022 at 4:59 pm

          Really – I imagine it's about NZ governments of every stripe falling short of their duty to the public good. Labour is merely the incumbent non-performer – their predecessors were as bad or worse.

  4. tsmithfield 4
    27 January 2022 at 1:59 pm

    Yes. Probably the value of real assets such as housing hasn't actually changed that much.

    What has happened is that the value of money has decreased dramatically due to a massive increase in supply of fiat currencies.

    Those who are hedged against the currency drop in value are obviously those who already own assets. Those who don't have had effective huge pay cuts. Not easy for the government to do much about. Taxing more in a shaky Omicron environment probably isn't a great idea.

    In normal times if we had been printing money like this we would probably be like Zimbabwe by now. However, the rest of the world has been doing the same, so our currency seems relatively stable against other fiat currencies. But not against real assets.

    • lprent 4.1
      27 January 2022 at 2:35 pm

      What has happened is that the value of money has decreased dramatically due to a massive increase in supply of fiat currencies.

      Extremely unlikely. If that had happened then you'd also see a corresponding major inflation rate. ie consistently >10% annual inflation rate at our current house prices.

      Curiously enough when you look at the CPI which effectively ignores housing and rental values – then what we see over the last 30 years is peak inflation of 5.9% (right now) and a average inflation rate of around 2-3%.

      It sounds like you're just tossing knives blindly to avoid looking at the underlying issue – which is pretty much the relative income issues.

    • Nic the NZer 4.2
      27 January 2022 at 2:37 pm

      "Probably the value of real assets such as housing hasn't actually changed that much.

      What has happened is that the value of money has decreased dramatically due to a massive increase in supply of fiat currencies."

      Why limit yourself to probably when the country collects the statistics?

      What your describing would show up in economic statistics as a high inflation rate. The latest inflation rate has been attributed to supply side factors relating to the pandemic, however it was still higher for brief periods during 2011 and 2008 than the present. The question seems to be will this inflation be a temporary spike or will it flow over into wages where by it might persist for longer. However we can already conclude the inflation spike of this magnitude is not even particularly unusual.

      https://www.rbnz.govt.nz/statistics/key-graphs/key-graph-inflation

      We also have the statistics in house prices which have increased substantially relative to other prices.

      https://www.rbnz.govt.nz/statistics/key-graphs/key-graph-house-price-values

      So we can be much more definitive, in fact your primary claims are refuted by the statistics. As is the claim of a "currency drop in value" which is refuted by the statistics here

      https://www.rbnz.govt.nz/statistics/key-graphs/key-graph-exchange-rate

      and yes you later walked that back saying that there was no actual currency drop in value relative to other currencies to see anyway.

      • Blazer 4.2.1
        27 January 2022 at 2:54 pm

        'What your describing would show up in economic statistics as a high inflation rate'

        Your link shows CPI…yet supposedly property isn't a metric for that.

        So the Q.E since 2008 is not inflationary in your world?

        U.S.

        'Since the beginning of March 2020 to Feb 2021 the M1 money supply rose from $4trillion to $18.1Trillion. They increased the base money supply by over 4 times. So we have 4 times as much physical currency now in the last year alone. We printed more money last year than we did in the proceeding 100years of currency. If we think back to our supply/demand examples, we now have 4 times as much currency chasing the same amount of goods/services.'

        Is preventing deflation the primary goal of QE?

        'There are really two major risks with fiat currency: political instability and mismanagement of the money supply.

        Let's talk about political instability. Money, whether fiat or gold-backed, is a shared fiction: It's worth something because we all agree it's worth something. With fiat currency, the foundation is trust that the government that issued it will remain stable and in power, keeping the currency worth what we all agree on. Without a trustworthy, well-run, and resourceful government, faith in a fiat currency can erode, resulting in steep inflation as it loses spending power.

        Mismanagement of the money supply — particularly increasing the money supply — is a risk that many people fear with fiat currencies. This is particularly concerning for many due to massive government stimulus efforts during the COVID-19 pandemic in 2020 and 2021. Using the U.S. as an example, the money supply increased almost 40% from the beginning of 2020 through December 2021:'-Motleyfool.com

        • Nic the NZer 4.2.1.1
          27 January 2022 at 3:08 pm

          "Your link shows CPI…yet supposedly property isn't a metric for that"

          Too right, maybe lookup what a metric is in fact. I wouldn't want my inflation rate measured in units of properties either.

          "So the Q.E since 2008 is not inflationary in your world?"

          No. I have seen some Austrian (Economists) claim that an increase in the money supply is by definition inflation, but in my world inflation is a change in prices and such an effect as QE causes inflation was never evident in the US CPI (Or the Japanese who have been at it for far longer).

          https://tradingeconomics.com/united-states/consumer-price-index-cpi

          (see 25yr horizon).

          "Is preventing deflation the primary goal of QE?"

          Debatable, its probably a mechanism where by the central bank lends to the government indirectly as its quantity seems to match present deficit spending, and this is how some institutional lenders understand it. Of course this is regularly denied by politicians.

          • Blazer 4.2.1.1.1
            27 January 2022 at 3:14 pm

            Q.E arrives at the primary lenders who decide how to allocate it.

            Their first use of this 'money' in the U.S at least has been share buybacks ,propping up impaired assets and hoarding .

            The Fed has opined that inflation is 'transistory'…yeah right,just like Q.E was …'temporary'.

            • Nic the NZer 4.2.1.1.1.1
              27 January 2022 at 3:35 pm

              You seem to have moved on to new assertions. Does this mean you agree all the prior assertions (those which I demonstrated were wrong) have been incorrect?

              • Blazer …
                27 January 2022 at 7:52 pm

                Not at all…you are the one who changed the topic.

                I agree with this…

                'What has happened is that the value of money has decreased dramatically due to a massive increase in supply of fiat currencies'

                • Nic the NZer …
                  28 January 2022 at 8:33 am

                  Blazer we both know your prone to making unsubstantiable claims of fact. But am I now to understand a comment where I quoted and discussed assertions which you made (to highlight they are untrue), is changing the topic?

                  And you want to resume with a quote? Unreferenced? And also unsubstantiated by any evidence.

                  You are of course welcome to believe a range of untrue things.

                  • Blazer …
                    28 January 2022 at 9:20 am

                    We both don't.

                    Most dialogue on these matters is opinion.

                    Even referring to economists ,just restates their…opinion.

                    Lies,damn lies and statistics are often not convincing.

                    • Nic the NZer …
                      28 January 2022 at 9:38 am

                      Your lucid description of why your prone to posting unsubstaniable opinions not withstanding, I still don't think addressing your statements directly constitutes changing the subject.

                  • Blazer …
                    28 January 2022 at 9:47 am

                    You were actually addressing TSmiths statements.

                    As for 'unsubstaniable opinion's-you are chartering new territory ..there..

                    'An opinion is a judgement, viewpoint, or statement that is not conclusive, rather than facts, which are true statements.'

                    • Nic the NZer …
                      28 January 2022 at 10:01 am

                      Untrue, 4.2.1.1 is a reply to 4.2.1 written by Blazer and quotes only from there.

                      But clearly if official economic statistics say nothing about which ever economic opinions your following presently then these opinions are held 'religiously' not scientifically.

        • Nic the NZer 4.2.1.2
          27 January 2022 at 3:08 pm

          "Your link shows CPI…yet supposedly property isn't a metric for that"

          Too right, maybe lookup what a metric is in fact. I wouldn't want my inflation rate measured in units of properties either.

          "So the Q.E since 2008 is not inflationary in your world?"

          No. I have seen some Austrian (Economists) claim that an increase in the money supply is by definition inflation, but in my world inflation is a change in prices and such an effect as QE causes inflation was never evident in the US CPI (Or the Japanese who have been at it for far longer).

          https://tradingeconomics.com/united-states/consumer-price-index-cpi

          (see 25yr horizon).

          "Is preventing deflation the primary goal of QE?"

          Debatable, its probably a mechanism where by the central bank lends to the government indirectly as its quantity seems to match present deficit spending, and this is how some institutional lenders understand it. Of course this is regularly denied by politicians.

      • tsmithfield 4.2.2
        27 January 2022 at 3:10 pm

        See my reply to Iprent. Inflation is a lagging indicator, and is probably actually much higher than what is showing.

        • Nic the NZer 4.2.2.1
          27 January 2022 at 3:39 pm

          Yep seen it. It seems to be demonstrating you don't have any statistics to demonstrate your point.

    • UncookedSelachimorpha 4.3
      27 January 2022 at 11:53 pm

      Bit weird that money has decreased in value enormously in relation to housing and shares, and much less in relation to things like wages or flatscreen TVs. Almost like money hasn't decreased in value, but the price of certain assets and not others has inflated.

  5. Blazer 5
    27 January 2022 at 2:08 pm

    The irony is that by increasing the wealth of the rich ,there will be no benefit to Labour at the ballot…box.

    Piss poor allocation of largesse.

  6. Enough is Enough 6
    27 January 2022 at 2:08 pm

    For anyone who claims the economy is booming under this government, they are correct. But they also need to ackowledge who is paying for it as Bernard has brillianty demonstrated.

    Things need to change. Only a strong Green Party in cabinet can bring some sense of responsbility for the poor back into government.

    If you have a local Labour MP you need to be talking to them and getting them to acknowledge this shameful and inconvenient transfer of wealth.

    • lprent 6.1
      27 January 2022 at 2:54 pm

      If you look at the parts of the economy that are booming, they're pretty specific.

      Property and anything related to them, share values, and pretty much all export industries from farming to tech. The first two are asset based. That latter

      Most of the rest of the economy is just plugging along at close to normal levels, with bump downs when we have lock downs or overseas supply chain issues like triple priced containers.

      Or then there is part of the economy rapidly or slowly failing because they were dependent on overseas visitors, immigration, or people congregating together to share their micro fauna.

      The basic problem is that we have an economy that is rapidly increasing accommodation costs through both rentals and house purchase prices. That cuts straight through any income increases outside of asset values.

      My apartment apparently rose in value by 26% last year. But I simply couldn't afford to sell it. I don't think that I could afford to buy anything equivalent in Auckland. In fact we've been looking at what we can purchase with a low mortgage from the money from the sale of two single bed room apartments.

      They don't appear to exist in Auckland. And that is a cleft stick as well.

      Hickey is incorrect in that rising house prices don't confer increased wealth in the hand – unless you sell up in Auckland and move to Invercargill (or the equivalent).

      • tsmithfield 6.1.1
        27 January 2022 at 3:23 pm

        Why was your property worth more?

        It can't be that much to do with increased population relative to housing, because that has been relatively stable since 2020, I assume due to immigration restrictions to do with Covid. A google search shows the NZ population 5.08 million in 2020 and 5.12 million in 2021. So, a bit of an increase but not enough to explain a 26% increase in the value of your flat.

        Unless something has been done to increase the value of your flat such as adding an extra room or something, there is no real reason other than inflation to explain the increase.

        We have just been offered by the government to purchase back our property that the government purchased off us in 2013 due to the Northern arterial being built right next to it. We were able to build a new house in another suburb.

        We originally sold the house on valuation for $488 k in 2013. Now we can buy it back for a valuation of $530k. So it has gone up by a nominal value of $42k in that time.

        However, our new house (without a motorway next door) has increased in value by $400k over the same time frame.

        This goes to show that capital gains on housing are really meaningless in terms of value. What is more meaningful is the relative value of property.

        • pat 6.1.1.1
          27 January 2022 at 5:03 pm

          Indeed.

          And the best relativity measure is median house price to median income ratio….which has climbed and climbed and now sits at around 13X in Auckland.

          Central Banks ignore asset inflation by design….and serviceability has been maintained by falling interest rates to enable the increased debt.

          The end of the road is pretty much here….unless they want to chance their arm on even more QE and risk the credibility of themselves and the NZD for one last throw of the dice.

          • Blazer 6.1.1.1.1
            28 January 2022 at 11:06 am

            From 'Generation Rent'-

            , according to economists like Shamubeel Eaqub. He crunched the numbers back to 1957 for his book "Generation Rent".

            From 1957 to the late 1980s the average New Zealand house price was between two-to-three times the average annual household income.

            The average house price had risen to four times the average household income by the late 1990s.'

            In the 50's,60's,70's….average household income was usually …one wage…as neo liberalism took hold,it became the norm for both partners to be earning.

            So when you make the comparisons…today it is more like 26x the average annual wage,equating to average 'household' income.

            A huge difference from 3-4 times. income years..ago.

            • pat 6.1.1.1.1.1
              28 January 2022 at 11:54 am

              Yep…and it was staring everyone in the face for years and nobody was brave enough to do anything about it….I say brave enough because they are not stupid, they can see it better than anyone, and it was their job to make sure we didnt end up where we are.

        • lprent 6.1.1.2
          28 January 2022 at 10:20 am

          It can't be that much to do with increased population relative to housing, because that has been relatively stable since 2020, I assume due to immigration restrictions to do with Covid. A google search shows the NZ population 5.08 million in 2020 and 5.12 million in 2021. So, a bit of an increase but not enough to explain a 26% increase in the value of your flat.

          I keep reiterating – 30 years of insufficient housing and rising housing prices.

          The value of my apartment has been steadily rising ever since I brought it in 1998. However it has really kicked off since about 2015/6 when the annual percentage price increases became double digits.

          Part of the recent price increase is situational. There is a major shortage of cheaper 1 bedroom apartments > 50 square metres and two car parks near central Auckland (I live by the Corner of K Rd and Ponsonby Road).

          Most of the new 60-75 sq metre 2 bedroom apartments going up near us (and there are a lot) start at more than $1 million (and those are pretty shitty) and 1 bedroom apartments don’t appear to exist. There are a lot of 35 sq metre, no car park apartments available in the city. But you’d have have to be a pretty dedicated couple to want to live in them. Normally they’d be occupied by overseas students.

          When you look at any issue of economic scarcity, you seldom see a linear response over time. Initially people start with packing more people into a housing, taking smaller and cheaper housing, putting people into garages etc. Works for a while, but effectively just bottles demand.

          Most of the current housing issue is in that massive drop in consents after 2008 which only started rising again in 2014. Immigration didn't stop. It just kept increasing until 2020.

          Now we don't have immigration, but what we do have a steady trickle of transients who were caught here going out and returning kiwis coming home.

          So fewer people in student flats, camping grounds and the like. Plus large numbers of returning cashed up couples and families hunting homes. Plus a lot of speculation buyers looking at those massive returns on property. Both of those fuelled by low interest rates on mortgages.

          BTW: I'd check that valuation (especially if it was in Auckland). Unless the house has deteriorated markedly that sounds extremely low. I suspect that a purchase and a market sell would make a significiant profit.

          • pat 6.1.1.2.1
            28 January 2022 at 10:40 am

            Housing numbers per se are not the issue…..available housing is.

            NZ private housing stock 1991 1.307 million

            Population 3.5 million

            Ratio 2.67 per dwelling

            Private housing stock 2020 1.963 million

            population 5.1 million

            ratio 2.59 per dwelling

            We also know the average size of dwellings has increased, despite apartment/terraced developments.

            We also had a reduction in state housing stock of around 10,000 units (that has since returned to previous absolute level) that remains per capita well below historical levels.

            And then there is the issue of un/under utilised housing (holiday homes, Air BnB, vacant for capital gain)….unmeasured.

            • lprent 6.1.1.2.1.1
              28 January 2022 at 11:08 am

              We also had a reduction in state housing stock of around 10,000 units (that has since returned to previous absolute level) that remains per capita well below historical levels.

              I suspect that is a primary cause. Building state housing was a counter cyclic event. We had a recession and a cut in private homes – state housing would get put in. Kept builders and building suppliers sticking over rather than tradies buggering off to aussie and not coming back.

              It also provided the low-cost smaller housing the was required for the lower-income market

              We also know the average size of dwellings has increased, despite apartment/terraced developments.

              If you're willing to waste hours per day driving and pay extra costs running and maintaining a vehicle. Personally I add about three thousand dollars to my expected annual pay for every kilometre of daily travel over 5 kilometres. All of my jobs for the last 12 years have been within 5km or done largely remote, and I don't get rear-ended on the bridge. But I suspect few people have that opportunity to control their working costs.

              The airbnb is well down at present. I use them when I have to go to Hamilton for my new (mostly remote) job (started September). When I checked them out in April, there were a lot. When I went down a few weeks ago for the first time, there weren't many available.

              • pat …
                28 January 2022 at 11:49 am

                Yes the exodus to Australia in the 90s no doubt had an impact, and many of the policies put in place had good intentions but id suggest most of them should have been short term and revoked but we instead built and built upon them to save ourselves from having to make difficult decisions

      • Foreign waka 6.1.2
        27 January 2022 at 4:53 pm

        I wonder whether increase in so called values just aims at taking more rates and taxes and increasing insurance/acc etc. Someone has to pay for those billions of dollars we have printed and borrowed to have the shares of corporations showing record profits when everybody was locked down. Peculiar, no? Wait until we are straddling the wall with our back, GST increase is the next thing…. wait and see.

  7. Gosman 7
    27 January 2022 at 2:29 pm

    "Hickey called on the government to put in place measure to claw back some of the asset wealth it has helped create for businesses. He also called for MSD to forgive all debt to beneficiaries and substantially increase beneficiary incomes as advised by the Welfare Advisory Group nearly three years ago."

    Given we have a labour shortage already this would cause even greater problems in that area and lead to wage price inflation.

    • weka 7.1
      27 January 2022 at 2:34 pm

      might as well move straight to a UBI with welfare bolted on in that case. Unless we want to keep all beneficiaries, even the ones that can't work, and their kids, in poverty.

      • Gosman 7.1.1
        27 January 2022 at 3:48 pm

        A proper UBI replaces welfare. It wouldn't make sense to bolt it on. You manage inequality of income via the progressiveness of taxation under such a system I believe.

        • weka 7.1.1.1
          27 January 2022 at 4:55 pm

          nope. I've written posts about this stuff. If you don't bolt welfare on you have a system that increases poverty and inequality for many people.

          https://thestandard.org.nz/ubi-what-is-it-good-for/

          https://thestandard.org.nz/the-failure-of-tops-youth-ubi-policy/

          • Gosman 7.1.1.1.1
            27 January 2022 at 5:13 pm

            Your analysis seems to focus on the long term sick and disabled. As you mentioned the solution to their specific set of issues is that they are provided specific help and services for their conditions from the health system. Their cost of living expenses are covered by the UBI. I would argue that additional top up above that would be looked after by other means outside govt support but even if there was a top up provided by the govt for this group they do not make a large proportion of society (around 3% of the workforce). There would be no need to provide welfare to any other group though and it would start to distort the system through abatement rates.

            • McFlock 7.1.1.1.1.1
              27 January 2022 at 5:19 pm

              Then there's the accommodation supplement at different rates depending on area. So a UBI sufficient for one area might be insufficient for another.

              • Gosman …
                27 January 2022 at 5:25 pm

                That is like saying the UBI should be set at different rates based on the cost of living of where you live. The UBI only works if it is set at a flat rate otherwise it will lead to distortions such as subsidising rental accomodation in expensive urban environments when it would be better for people to more to areas where costs are lower.

                • McFlock …
                  27 January 2022 at 5:36 pm

                  It's almost like saying that even if we look beyond disabled people (which we shouldn't) and try to minimise their needs or wave them away to other organisations, a single flat rate might not be sufficient across the board.

                  It's the basic flaw in UBI: partof the hand-waving to make it add up is reduced administration costs. But these costs aren't really reduced if you just transfer them to other arms of the government, and this might be reflected in accommodation costs, heating costs, clothing costs, transport costs…

                  Works on the back of an envelope, becomes more doubtful when looking at the real world.

                  • weka …
                    27 January 2022 at 6:37 pm

                    thankfully Gosman edited that part of his comment out, because it was nonsense (and the opposite of what I say in my posts).

                • weka …
                  27 January 2022 at 6:35 pm

                  That is like saying the UBI should be set at different rates based on the cost of living of where you live.

                  For people that can't work, they need additional assistance. How could one set rate be enough for all people? I don't think it should be based on cost of living by area (that's already fraught with inequity in the current system)

                  The UBI only works if it is set at a flat rate otherwise it will lead to distortions such as subsidising rental accomodation in expensive urban environments when it would be better for people to more to areas where costs are lower.

                  That's how you kill communities and undermine families. People should not be financially coerced into uprooting and moving.

                  Set the UBI at a flat rate for people who can work, providing there is adequate work available. This solves the issue of the working precariat.

                  But, you have to bolt welfare on because not everyone's circumstances are the same, and people on low incomes still need additional help.

                  None of the UBI models I have seen are set at a rate that would replace current disability or DPB support.

                  And yes, housing costs need to be resolved, and this is a very difficult thing to do.

              • Nic the NZer …
                27 January 2022 at 5:38 pm

                The UBI rates proposed are well below a replacement for present benefit levels to begin with, at least as proposed by TOP. As far as I can make out this is justified by some magical thinking called efficiency gains due to universality but that doesn't actually change that the policy is to significantly cut the income of low income people.

                This is going to be the case for any UBI which is universal and doesn't alter the fiscal balance. Benefit payments have the advantage of being targeted to those who need the income, even if there are plenty of problems with the present policy about who actually receives that income.

                Beyond that its pretty clear that making UBI rates the minimal income level across the whole economy will see an adjustment to price levels of primary goods to some extent. My expectation being that this then just ends up with a wider gap between welfare levels and the low paid work level of income. If that's a goal then it needs to be sold along with the policy and explained why that's a good idea.

                • arkie …
                  27 January 2022 at 5:54 pm

                  Minimum Wage once meant that, that there currently exists such a gulf between that and the 'Jobseeker' Benefit seems punitive. What would you see as the negative adjustments to matching them?

                  • Nic the NZer …
                    27 January 2022 at 6:19 pm

                    Not sure what you are asking.

                    Having a significant gap between minimum wage and benefit levels is a problem. Skipping over the problem of invalids (who should be provided with sufficient income for their health needs and living needs) the problem is that at most times there are insufficient jobs to actually employ everybody who wants to work.

                    Its worth noting that the economic establishment dismisses this fact (clear from unemployment surveys) and claims that the government is unable to effect the unemployment rate without generating inflation, and people who are unemployed are such because they have a preference for leisure, and so the work would be there if they were searching for it. But this is clearly not true.

                    My alternate policy would be a job guarantee where anybody who wants to work could apply to be allocated a job with up to full time hours. The pay rate is the minimum wage of the economy. The actual work is something in aid of the non-profit sector or something needed by the government. Application for a job in this scheme would always be voluntary. I would not make any changes to the existing benefits system to implement this scheme. Having said that I would expect a high uptake even if the benefit rate was the same as the schemes full time wage rate (many would prefer to work usefully for their benefit as it stands).

                    This policy improves all the social and career disadvantages which make such a problem from long term unemployment. It doesn't have the large income gap present between somebody who can't be employed and someone employed.

                    • weka …
                      27 January 2022 at 6:43 pm

                      I like that idea. I suspect the abatement issue would still need to be solved, but it's a lovely straight forward solution.

                      Apart from trusting Labour and National to not fuck up the actual work provision and voluntary nature.

                    • Nic the NZer …
                      27 January 2022 at 6:59 pm

                      I don't think abatement is a big issue here. As I understand it, the big problem with abatement rates is that often people are going from a benefit to part time work with abatement rates. The problem is if the hours are not guaranteed or there are few of them then the trade off often takes their income backwards overall.

                      But with a guarantee they can immediately make the step to as many hours as they need to make up the income, and those hours are guaranteed.

                      The basic principal of abatement of the benefit income when actual work is available is not unfair.

                    • arkie …
                      27 January 2022 at 7:37 pm

                      Having said that I would expect a high uptake even if the benefit rate was the same as the schemes full time wage rate (many would prefer to work usefully for their benefit as it stands).

                      I agree, and a job guarantee is a policy worth exploring. My thinking was around the pressure on employers that would be generated by a non-punitive benefit rate (or in fact a job guarantee), the idea being that raising the floor of income (not solely with minimum wage rises) should necessitate higher wages and benefits being offered by the private sector.

                      the large income gap present between somebody who can’t be employed and someone employed.

                      This is one of my primary concerns and any acknowledgement from this government that they share that concern would be heartily welcomed.

                    • Nic the NZer []
                      27 January 2022 at 11:42 pm

                      As I suggested I think the wage pressure is overstated. The belief that there should be a wage gap stems from rather simplistic ideas of why people engage in work. But I do think zero hour style contracts would end with a job guarantee and private sector employers would have to offer a little better than the govt (in most cases).

                      My initial point about the UBI income gap is just that everyone gets the UBI but without a benefits system employed people get clearly more and unemployed nothing else. I think that eventually resolves so the unemployed have a non participatory income level.

                • weka …
                  27 January 2022 at 6:40 pm

                  tbf, TOP did improve their UBI policy over time. The original Gareth Morgan one was horrendous. TOP's still has issues last time I looked.

                  UBI with welfare bolted on has some distinct advantages over current welfare. It stops the insane application and documentation required by WINZ. It allows people to earn money freely from work without being penalised. It removes some of the precarity for people doing part time, seasonal work or work in industries like hospo that often don't give FT permanent positions.

                  The biggest challenge is how to Tory-proof, and that if Labour designed a UBI it would almost certainly be as an economic tool, not one of helping people out of poverty.

      • Ross 7.1.2
        28 January 2022 at 8:18 am

        might as well move straight to a UBI with welfare bolted on

        Sure, if we want to increase our indebtedness. I expect it won’t be far off before the age of eligibility for superannuation is increased because we cannot afford it in its present form. A UBI is the last thing we need or can afford. I expect to see cuts to health, education and welfare in the future. If we have to cut services, we sure as hell won’t be able to afford a UBI.

        • weka 7.1.2.1
          28 January 2022 at 9:08 am

          read the post. NZ has a shit load of wealth.

          • pat 7.1.2.1.2
            28 January 2022 at 9:24 am

            "read the post. NZ has a shit load of wealth."

            Do we?

            We have a shit load of overvalued assets…..a very different beast.

            We also have a persistent trade deficit and a lack of domestic capability/capacity in necessity provision

            That "wealth" can disappear as quickly as it arrived…or even faster.

            • weka 7.1.2.1.2.1
              28 January 2022 at 11:09 am

              it's not like we have debt and no income and no functional wealth.

              Besides, there are baseline UBI models that a) use the dole and other benefit funding and b) use taxation to take back the UBI from higher income earners.

              And we could easily be taxing the very wealthy.

              • pat …
                28 January 2022 at 11:40 am

                I have no problem with taxing the wealthy…indeed I advocate for it, however the point I am making is that 'wealth' is dependent on our ability to maintain it.

                It is very much like we have debt and no income…we certainly have debt, some of it not even denominated in NZD and we currently have (and have done for decades) negative income in that we buy more than we sell…..a bit like putting everything on a credit card and thinking that we must be rich because we have all this spending power….and the credit card company will call in the debt as soon as we cant make the minimum payment due,

                And then we are back to paying cash (or savings) equal to that which we can generate from sales.

                The simple version.

              • Blazer …
                28 January 2022 at 11:54 am

                But,but if you tax the very wealthy they will…fuck off!….and then we will really be…fucked!

                • weka …
                  28 January 2022 at 12:04 pm

                  some will fuck off. Let them. Others, the ones that actually value NZ, will stay and keep their money here

          • Robert Guyton 7.1.2.1.3
            28 January 2022 at 11:22 am

            We have … water.

            • Blazer 7.1.2.1.3.1
              28 January 2022 at 11:55 am

              We do…but it's not worth anything….no one owns water….HonKey Tonks…said…so.

              Help yourself,bottle it and sell it…free.

            • weka 7.1.2.1.3.2
              28 January 2022 at 12:05 pm

              Aē, I was going to go down that track. We have so much wealth that exists beyond the mainstream economic thinking.

    • Nic the NZer 7.2
      27 January 2022 at 2:42 pm

      Wage price inflation would be an obvious benefit to the economy. It would both devalue houses relative to incomes and boost incomes.

      • lprent 7.2.1
        27 January 2022 at 2:59 pm

        If that had been possible, then don't you think that three decades of low wage growth would have stalled house price rises?

        It hasn't.

        All that is likely to happen under your scenario is that the house prices would increase faster. Certainly tat is what happened the last few times that we had high wage growth, high inflation, and limited new housing going in.

        Basically the wealth issues are as much to do with a shortage of accommodation – especially the the low cost end of the market.

        • Blazer 7.2.1.1
          27 January 2022 at 3:09 pm

          House prices have accelerated with the availability of historic low interest rates.

          Mortgages are an easy earn for banks.

          Non taxed capital gains,i.e unearned income became increasingly popular.

          The 40,000 empty homes in Auckland alone suggest there is existing inventory .

        • Nic the NZer 7.2.1.2
          27 January 2022 at 3:26 pm

          Not that I was suggesting how to achieve this, but just that Gosman's basic implication that just anything called inflation would be necessarily a bad thing, is wrong.

          I think of the housing situation in reverse. We have had prolonged period where inflation and productivity growth has not translated over into wage increases (especially at the lower end). This I put down in particular to a lack of wage bargaining power.

          We have also had a great deal of financial liberalization. So people are competing in who can get into the longest term debt in order to get into the housing market these days. Its going to be very difficult to put this competition under economic control such that it generally behaves in line with the CPI inflation rate.

          But I don't see a present link between wage rates and house prices, so I don't see why wage increases would necessarily drive up house prices automatically (its not like getting into excess debt is an advantage, its still a negative). But on the other hand nobody likes to sell their house below purchase price if they can avoid it, so the lower inflation is the harder it is for wage rates to keep up with the housing debt contest going on.

          Basically house price increases are very hard to limit to near the inflation rate, so if your economic policy is keeping wages muted then house price increases are likely to run above your CPI over the longer term.

        • tsmithfield 7.2.1.3
          27 January 2022 at 3:36 pm

          Actually, I heard some interesting commentary on this subject the other day.

          Apparently the number of people per house has been dropping over recent years, meaning more houses required even if the population stayed static.

          So, that could explain a great deal of the house inflation.

          • The Unliving 7.2.1.3.1
            27 January 2022 at 4:24 pm

            It really depends on why that number is decreasing. I would imagine the number of people per house would naturally be strongly correlated with declining birthrates. As such, this shouldn't have a huge impact on house pricing.

  8. Patricia Bremner 8
    27 January 2022 at 2:38 pm

    Ad has indicated a "Huge" budget to come. Perhaps he could indicate what might mitigate this situation.

    Govt is dammed if they do and dammed if they don't, and those helped become resentful of needing help. No-one is suggesting something workable in a pandemic.

    We also need to face the climate crisis. This year we have not had any bees. It gets harder.

    • Ad 8.1
      27 January 2022 at 2:59 pm

      Hickey is inviting bullshit counterfactuals about what Treasury, MSD, IRD, and DPMC could have done differently with 72 hours notice, and the Reserve Bank, then got the entire cabinet to agree particularly Ardern and Robertson, hours before a nationwide multi-year global pandemic.

      His complaints amount to "could have done better".

      And he can just fuck off.

      • Blazer 8.1.1
        27 January 2022 at 3:05 pm

        As the pandemic has been rolling on for 2 years its hard to give your notion any credence.

        Hickey supplied the statistical data to back his conclusions.

      • pat 8.1.2
        27 January 2022 at 4:06 pm

        Lol

        Theres one crucial factor Hickey dosnt have to worry about…..he isnt elected to be a commentator.

        Hickey has been consistent in his analysis and in confronting those who are making these decisions and he has used their own numbers to again confront them….job well done.

        • Ad 8.1.2.1
          27 January 2022 at 4:24 pm

          Let me get this straight.

          Ardern and Robertson should have been able to simultaneously:

          • solve a once-in-a-century global pandemic
          • get the entire population of New Zealand vaccinated, be able to shop, be able to live actual life without permanent damage, and adjust the entire way we operate socially
          • sustain 3% unemployment and full national export production
          • increase productivity across the entire economy
          • sustain and improve all benefits right across the lower 20%
          • keep every single public sector system running at the same time from health to education to transport to broadband
          • fix the attendant supply chain crisis
          • fix a housing crisis built up over 30 years
          • stop the entire economy collapsing
          • form a comprehensive nationwide all-sectors plan against global warming
          • balance every part of that, every day, against BORA…

          … and have no unintended consequences.

          • pat 8.1.2.1.1
            27 January 2022 at 4:28 pm

            "… and have no unintended consequences."

            Then you obviously havnt understood what Hickey is saying….it was not 'unintended'…. it is well understood and a feature….a deliberate policy.

            • Ad 8.1.2.1.1.1
              27 January 2022 at 4:37 pm

              Hickey wouldn't stand up well in court with that kind of proof-of-intent.

              No one is going to "claw back" anything – and there's no policy good in doing so.

              What we have as a result of the same policies Hickey bemoans is a contented population, well-regulated, highly subsidised, in a cohesive and high-trust society, with high economic performance and productivity, where instead of assets tanking we have assets booming, and no rents didn't increase massively despite the higher welfare payments. Headed by the most popular government we've had since Clark's first term, gaining massive international recognition for competent leadership in a global crisis.

              For which the stats and datasets are generously available, but that's not the narrative Hickey wants to drive.

              • pat …
                27 January 2022 at 4:44 pm

                If you believe all of that cheer-leading why so worried about a lone bloggers 'opinion'?

                Hickey has plenty of evidence…as do the RBNZ and Treasury….there are numerous studies validating what he says.

                As to his motives, from what Ive seen of his commentary the past few years I suspect he held high hopes Labour would attempt to reverse these policy settings and is deeply disappointed that they have instead supercharged them……he's not alone.

              • weka …
                27 January 2022 at 4:58 pm

                there is no depression in NZ.

              • Foreign waka …
                27 January 2022 at 5:14 pm

                Are you talking about a sect or party in parliament? I mean in a democracy one would expect that issues about successes and failures can be discussed and not all just swallowed hook line and sinker. Despite you painting such fab picture, surely you understand that average people out there will and have seen their income eroded with no compensating counter measures. The bulk of those increases actually comes from Government charges (rates, fees etc.) and/or inaccessible health services. There are 5 people with Covid in Hospital. (!!!) Don't get me wrong but if the health service breaks down with that number god help NZ.

                The poorest will be hit the hardest.

                https://www.1news.co.nz/2022/01/27/34-new-omicron-community-cases-in-nz-on-thursday/

                Former US vice president Hubert Humphrey said:

                “The moral test of government is how that government treats those who are in the dawn of life, the children; those who are in the twilight of life, the elderly; those who are in the shadows of life, the sick, the needy and the handicapped.”

                The report card does not look good.

            • Bill 8.1.2.1.1.2
              27 January 2022 at 8:57 pm

              Here you go Pat. If you haven't stumbled across this already, there is also a long interview of Fabio on Rokfin by Blumenthal if listening is your preference)

              https://thephilosophicalsalon.com/a-self-fulfilling-prophecy-systemic-collapse-and-pandemic-simulation/

              Between September 2019 and March 2020, the Fed injected more than $9 trillion into the banking system, equivalent to more than 40% of US GDP.

              The mainstream narrative should therefore be reversed: the stock market did not collapse (in March 2020) because lockdowns had to be imposed; rather, lockdowns had to be imposed because financial markets were collapsing.

              • fender …
                27 January 2022 at 9:35 pm

                Far out, I read the first sentence of the link you provided and immediately wondered if it was worth taking this Fabio seriously with such a shit opening.

                • Bill …
                  28 January 2022 at 12:40 am

                  Typical go to/ knee jerk reaction of a Covidian Cultist there fender – ie, "those words don't skweem out the twoof I has come to believe in, and so those words are bad words and bad peeple are saying bad things (and I want my mummy)"

                  I guess your hesitation (wonder) comes down to there being no blue line … 😉

              • pat …
                28 January 2022 at 8:43 am

                Have seen some of the referenced articles and papers before. I dont doubt that a crisis wasnt 'let to go to waste' and that the problems of the financial system were coming to a head pre the pandemic, but i draw the line at the implication the pandemic was fabricated to implement policy….for a start they have shown themselves incapable of of organising a piss up in a brewery.

                • Bill …
                  28 January 2022 at 12:08 pm

                  Can't say I took any "fabricated pandemic" message from the piece, but hey…

                  Maybe what you're referring to is the "mountains from molehills" narrative that's justified a huge non-health based public health response across the globe? That's not the same as the conspiratorial "plandemic" thang I hear some people believe in.

                  Governments generally jumping aboard Big Pharma's bandwagon to pursue a "vaccination only" strategy, and actively suppressing early treatment options while also silencing public and scientific debate and banning some anti-virals in direct contradiction to their pre-existing pandemic planning documents, isn't something I've heard an explanation for…

                  • pat …
                    28 January 2022 at 12:18 pm

                    I certainly see an inference..

                    "19 September 2019: Donald Trump signs Executive Order 13887, establishing a National Influenza Vaccine Task Force whose aim is to develop a “5-year national plan (Plan) to promote the use of more agile and scalable vaccine manufacturing technologies and to accelerate development of vaccines that protect against many or all influenza viruses.” This is to counteract “an influenza pandemic”, which, “unlike seasonal influenza […] has the potential to spread rapidly around the globe, infect higher numbers of people, and cause high rates of illness and death in populations that lack prior immunity”. As someone guessed, the pandemic was imminent, while in Europe too preparations were underway (see here and here).

                    18 October 2019: In New York, a global zoonotic pandemic is simulated during Event 201, a strategic exercise coordinated by the Johns Hopkins Biosecurity Center and the Bill and Melinda Gates Foundation.

                    21-24 January 2020: The World Economic Forum’s annual meeting takes place in Davos, Switzerland, where both the economy and vaccinations are discussed."

                    but hey…

                    • Bill …
                      28 January 2022 at 1:51 pm

                      Well sure Pat. But that reads as planning a specific type of response (for whatever the reasoning may be) – not planning a pandemic. Those listed events did actually take place.

                  • pat …
                    28 January 2022 at 2:03 pm

                    yes they did take place….so did a lot did other things. It is the insertion of these particular events as somehow relevant to the piece that creates the inference….as Im sure you know.

                    Again, yes vested interests will seek to take advantage of events, yes the financial system is on the verge of collapse (and everyone trying anything and everything to avoid/delay it) and yes the pandemic response has been messy and mistakes made.

                    The three are not part of a master plan…shit, we cant even organise an international trade pact.

                    • Bill …
                      29 January 2022 at 9:12 am

                      Yup. No "master plan".

                      But a certain 'lining up of ducks' that might better serve certain (and not necessarily always aligned) agendas should given and somewhat anticipated conditions prevail?

                      How many years has "Pandemic!" done the rounds?

                      Anyway. I see what your saying, but tend to read the piece as a legitimate 'working backwards' from a premise to find supporting bodies of evidence or potentially indicative events.

                    • pat …
                      29 January 2022 at 9:23 am

                      So its SSDD.

          • weka 8.1.2.1.2
            27 January 2022 at 5:00 pm

            Labour's inaction on poverty and welfare started in 2017, well before the pandemic. It's ideologically driven, economic ideology according to some, but also ideology around work and welfare. To Labour welfare is a necessary evil. They will pull some people out of poverty and leave the rest behind.

            The good things that Labour do don't mean they had no choices about beneficiaries and low income people.

            • Ad 8.1.2.1.2.1
              27 January 2022 at 5:09 pm

              They've done plenty as you well know.

              That it is not enough is well attested.

              • weka …
                27 January 2022 at 6:13 pm

                maybe consider how it comes across when you repeatedly post about how great Labour are doing when people criticise them over welfare. It comes across like 'we're doing really well, never mind the poors'. I'm sure you don't mean that, but there's nothing wrong with Hickey or anyone pulling Labour up on this stuff. It's glass half empty because some people are have nice full glasses and far too many have an empty one. Just how long are they supposed to wait?

            • Foreign waka 8.1.2.1.2.2
              27 January 2022 at 5:19 pm

              Its the bible belt philosophy still left over from the 17th century missionary times. I am a Christian but no one told me that the poor need to be punished.

              • arkie …
                27 January 2022 at 5:33 pm

                Pretty sure Christ said the opposite in Matthew:

                21 Jesus told him, “If you want to be perfect, go, sell your possessions and give to the poor, and you will have treasure in heaven. Then come, follow Me.”

                22 When the young man heard this, he went away in sorrow, because he had great wealth.

                23 Then Jesus said to His disciples, “Truly I tell you, it is hard for a rich man to enter the kingdom of heaven. 24 Again I tell you, it is easier for a camel to pass through the eye of a needle than for a rich man to enter the kingdom of God.”

                • Foreign waka …
                  27 January 2022 at 6:11 pm

                  Yep, absolutely right…..the lot living of minimum pay, benefits, fixed income and elderly will always pay the price for those who count the gold coins in the front of the temple. Nothing has changed despite so many promises. And the unwashed are as naive as ever… I doubt that neither this nor any other government has the gumption to have those money counters pay their fair share. In fact, this government gave them even more to count!

                  The SNZ figures show that from the beginning of Covid, businesses collectively increased their cash balances and term deposits by $26b. Households increased their balances by $25b.

                  The method this government and the RBNZ chose, to massively boost asset prices of those who already had assets and a refusal to unwind it

                  …has changed New Zealand society for decades to come. The scale is enormous. We are talking a trillion dollars of wealth has landing in the hands of those who are already wealthy.

            • Stuart Munro 8.1.2.1.2.3
              27 January 2022 at 6:39 pm

              Labour's inaction on poverty and welfare started in 2017,

              I think the expectation on the Clark government, after the black decade of the 90s, was of a little relief from the vicious incursions of Ruthenasia and Jennycide. There was none.

              • weka …
                27 January 2022 at 6:44 pm

                worse, they removed Special Benefit from welfare and replaced it with TAS, thus ensuring poverty for long term beneficiaries.

            • UncookedSelachimorpha 8.1.2.1.2.4
              28 January 2022 at 12:04 am

              "Labour's inaction on poverty and welfare started in 2017, well before the pandemic. "

              I agree. The question for me lately has been – do Labour want to do better but believe the electorate won't support that – or do they truly believe in entrenched poverty and disadvantage?

              I thought they had a neoliberal ideology – and they do – but conversations with a Labour insider made me more sympathetic to the view that Labour believe they will get chucked out of office if they do anything serious to tackle inequality and poverty. A great many New Zealanders seem to genuinely despise the poor and less fortuate, we have become quite mean and materialistic.

              • weka …
                28 January 2022 at 9:15 am

                makes sense to me. But then why not do the mahi on shifting public perception? Turei move the welfare Overton Window, there's a lot that Labour could have built on in that time. Then covid redunancies made people more sympathetic as well.

                And there are a lot of low hanging fruit issues with WINZ that they could easily have worked on, but haven't.

                I still see an ideological issue, maybe a belief that poor people are inherently lazy and need motivation. I doubt many in Labour would frame it like that, but that's what the whole 'work will make everything ok' position is about.

                • UncookedSelachimorpha …
                  28 January 2022 at 10:11 am

                  100% agree with all of that. And leadership to shift the Overton window is the first step.

                  But Labour probably feel even talking like that will not be popular. Plus as you say, a large chunk of them truly and deeply believe in chucking the "undeserving poor" under the bus (i.e neoliberal philosophy)

                  • weka …
                    28 January 2022 at 11:12 am

                    I really should wrote a post about the low hanging fruit. They could have done things that nobody would have really noticed. Or things that are more obvious but are opportunities for shifting understanding eg individualising benefits. ‘Let’s make welfare more fair’ kind of thing.

                    • weka …
                      28 January 2022 at 11:14 am

                      fuck, fuckity, fuck, just remembered Robertson has this plan for an employment insurance scheme. Of course Labour are going to look after the well off before the poors.

      • Patricia Bremner 8.1.3
        27 January 2022 at 5:16 pm

        devil Personally I don't rate him, so quite pleased you feel the same about his reckons.

        Bernard is a Nat imo.

        He makes a hypothesis, then scrapes up supporting data, ignoring counterfactuals.

  9. Ad 9
    27 January 2022 at 2:41 pm

    Jesus talk about glass half empty

  10. tsmithfield 10
    27 January 2022 at 3:08 pm

    There is a moral hazard with all the money printing that has been happening.

    That is that people start to think of it as normal economics, and start to rationalise that the government can do anything it wants. All it has to do is print a bit more currency.

    • lprent 10.1
      27 January 2022 at 3:28 pm

      That is an issue. Most notable in places like the US and UK who got hooked on quantitative easing in the GFC 15 years ago (and before that in Asian flu in the late 90s).

      It hasn't been a notable feature on the NZ economy under either the Keynesian Labour government in the 00s, neolib National in the 10s, or this government – which has effectively stopped almost all QE for the pandemic already.

      Hard to see how that argument relates to anything to do with NZ. I suspect that when you dig into Hickey's argument, he'd probably wind up arguing that it should continue but be redirected further down the income levels.

      Personally I'd prefer to see more targeting myself – but mostly towards churning out more low-cost public housing. Which as far as I can see is the main cause of the current economic inequities.

      Basically if more than 50% of your nett household income is going towards housing costs through rents (or mortgages), then it is hard to see how you can actually do anything except slowly migrate to lower income brackets. There is no realistic room to do anything apart form running on a wheel like a lab rat.

      • Patricia Bremner 10.1.1
        27 January 2022 at 5:22 pm

        Yes, Bernard does not do as you have, make workable solutions. The supply chains are now an issue… It all gets harder.yessmiley

  11. mikesh 11
    27 January 2022 at 4:12 pm

    We then had an 18-month frenzy of lending to people who were leveraging up the equity in their own homes to buy rental property.

    How can one leverage up the equity in their homes by borrowing. Equity is equal to the value of the property (including capital gain) less what is owed to the bank on it. So borrowing would, in fact, reduce one's equity.

    • pat 11.1
      27 January 2022 at 5:20 pm

      In a rising market (nominal) equity is increasing as of course…..and why a declining market is such a problem for the leveraged.

  12. ianmac 12
    27 January 2022 at 4:22 pm

    Big topics for we mortals to just read and wonder

    TV Poll out at 6pm tonight.

  13. weka 13
    27 January 2022 at 5:08 pm

    If a beneficiary needs to get urgent financial help at the moment there is an hour to hour and half wait on the phone just to get through to the call centre.

    Sepuloni couldn't or wouldn't even fix such low hanging fruit. There's no actual rationale for the stuff that could have been mended by now but wasn't, other than it's just not a priority for Labour.

    • arkie 13.1
      27 January 2022 at 5:27 pm

      When people [in power] show you who they are, believe them

      To paraphrase Maya Angelou

    • Patricia Bremner 13.2
      27 January 2022 at 5:30 pm

      There is an 0800 number, the client number is recorded for a call back. Stuff says a 40 minute wait for calling in.

      • weka 13.2.1
        27 January 2022 at 6:10 pm

        never come across a call back system. I can tell you categorically that wait times at the moment vary from 60 – 90 mins. Probably not all the time, but not unusual. Phone the number yourself at different times of the day. They tell you what the wait time is in the first minute.

        • UncookedSelachimorpha 13.2.1.1
          28 January 2022 at 12:07 am

          Like many things at WINZ (and ACC for that matter) – I’m convinced that long wait times and other difficulties are not accidents, but deliberate strategies to reduce demand for assistance.

          • weka 13.2.1.1.1
            28 January 2022 at 9:12 am

            I waver between that and just incompetence because of successive Ministers and who they put in place as senior managers. I've known some really amazing people working at WINZ, including senior people, but for some reason Labour can't seem to make that the norm. But I agree there's a fair amount of ideology in it.

            IRD seem to have sorted their shit out, but it took people killing themselves or threatening self harm to get them to make the shift. All governments since 1984 need to take a good hard long look at that.

  14. Ed 14
    27 January 2022 at 5:56 pm

    Can't see why Hickey and others are so surprised by these statistics.

    Labour is a neoliberal party and has been one for 40 years.

    It is keen for the votes of the property class so it enriches them to gain their vote.

    It is no longer a party of labour with socialist principles.

    New Zealand is sadly a neoliberal wasteland where no current party inside it- not even the Greens or the Maori Party – offer any alternative to free market capitalism,

    This is sad.

    And it is reality.

    • Stuart Munro 14.1
      27 January 2022 at 6:43 pm

      Absolutely – and it says quite a bit about the systemic integrity of our now only procedural democracy that the workers have no one in their corner.

      • arkie 14.1.1
        27 January 2022 at 7:55 pm

        The Greens are on the workers side and opposed to the status quo. Just last year:

        “We totally support an increase in wages for those under $60,000, but we do not need to rob Peter to pay Paul. We know that the Government’s coffers are in better shape than expected, alternatively we could further tax the rich with a Wealth Tax. Nurses, teachers and other essential workers shouldn’t, and can’t, bear the brunt of this.

        “Our conversations with the Union have shown massive hurt and disappointment for this decision.

        “Labour have long stood with our public service workers who keep our country ticking over. We are hoping with our petition and pressure from workers that they’ll reverse their decision”.

        Jan Logie May 07, 2021

        • UncookedSelachimorpha 14.1.1.1
          28 January 2022 at 12:09 am

          I agree – the Greens do have policies that are significantly different to Labour and National – and they seem to be the only party fielding policies that are socialist in any way at all.

    • mosa 14.2
      28 January 2022 at 2:24 pm

      Yes Ed thank you for highlighting those points.

      I was going to say that there was one thing Hickey ( amongst all his data and figures ) said that I totally disagreed with that New Zealand has a " leftist " government.

      The last one I can recall was the 1972-75 Kirk-Rowling government with some variations practised by Muldoon and his colleagues.

  15. pat 15
    27 January 2022 at 6:57 pm

    Im guessing that the demographic represented here will be inclined to dismiss the impact of Hickey's piece but I know that there is a cohort that will be very receptive and many of them have supported Labour in the previous election or two…..it would be very risky for Labour to assume there are no other options for this cohort.

  16. infused 16
    27 January 2022 at 11:29 pm

    All I can say, after having a pretty good 2 years is:

    It seems the government is lost at the wheel right now. This year looks to be rough as fuck.

    It's going to be interesting now. I believe the government will try to open the borders sooner if possible, but of course roll out the usual spin around why they are doing it.

    Inflation is going to be a massive killer in NZ. More so than the rest of the world, simply because of the massive interest rate rises we are going to incur, which are going to slam the first home buyers.

    There's going to be an uproar later this year.

    • UncookedSelachimorpha 16.1
      28 January 2022 at 12:11 am

      My guess is a terrible, global financial crisis starting in the next 12 months or so….but only a guess!

  17. DS 17
    28 January 2022 at 12:52 am

    To be honest, the real problem here is not actually QE or easy money. It's that our tax system rewards property investment in a different way from other forms of investment (including retirement savings).

    If we didn't have such a warped tax system, low interest rates would result in investment in productive assets – as it is, low interest rates just means everyone piles onto the unproductive assets.

    • Stuart Munro 17.1
      28 January 2022 at 2:48 pm

      You've hit the nail on the head there. Most non-real estate investment in NZ offers low returns and questionable security. Something more is needed – a sumptuary tax on excess properties is an obvious step. Another 5% capital value tax on each extra property after the first would encourage more productive investments.

  18. Ross 18
    28 January 2022 at 8:28 am

    Bernard could have saved himself a lot of time by simply admitting that during our lifetime we all receive the same amount of ice. The rich get theirs in summer, while the poor get theirs in winter.

  19. david may 19
    28 January 2022 at 8:32 am

    Simon, you have stimulated an interesting debate. Although to me the root causes are few.

    Central banks and then globalisation have kept inflation low for 30 years. And pretty full employment. People-particularly the better off had more to spend. Keep housing supply constrained and supply more and more cheap money(been going on for a while now) means scarce asset prices-particularly housing -go up lots. You can only drink and eat so much and own so many cars and video consoles and gym memberships. And everyone wants to improve their own housing Then supercharge it by providing even more and even cheaper money to everyone and you get omicron like growth in riches for the rich pricks who own shares, houses and Banksies.

    Tax system is warped in favour of asset owners but it wouldn't have prevented explosive growth-it's a global phenomenon maybe exaggerated here a by high immigration and a bit by tax regime. Too late to tax capital gains now-horse has well and truly bolted. Solution probably much more housing and tighter money and a collapsing housing market. Which politician will do that?

  20. tsmithfield 20
    28 January 2022 at 9:07 am

    Iprent,

    Just continuing our discussion on house inflation vs general inflation.

    I agree that house inflation has far outstripped general inflation over the last 30 years. But I don't think the top 5% of income earners have contributed much to that.

    Firstly, so far as general inflation is concerned, over that time we have had huge advances in automation, a major move of manufacturing to China, and various other factors that have kept general inflation relatively low.

    Secondly, so far as house inflation is concerned, it has been well documented that land prices have been a major contributor to that with councils not releasing sufficient land for development etc, and a rising population over that time.

    Also, house construction has changed considerably over that time. My parents built their first house in the late 60s for $5000 including the land. But house construction has changed considerably since then. For one thing, people expect a lot more in their houses these days. For instance it would be rare to build a house these days without an ensuite.
    Also, houses today tend to be a lot bigger than what was built years ago. My parent’s house was tiny compared to the average build today.

    Also, houses these days include a lot more insulation, double glazing etc. Then there is the increasing cost of health and safety to factor in these days that wasn't an issue so much in previous years.

    So there are plenty of factors to explain house inflation that don't require reference to the top 5% of income earners.

    • Blazer 20.1
      28 January 2022 at 10:44 am

      House inflation has occurred all around the world,especially since 2008 and the GFC.

      The factors you mention cannot be consistent in all those countries.

      Quite plausible to me that massive Q.E ,along with historic low interest rates are the main drivers.

      All the new Asian millionaires discovered buying property in the West was a sure thing.

      They're too dumb in Asia to allow foreigners to buy up their property.

      • tsmithfield 20.1.1
        28 January 2022 at 10:52 am

        Absolutely agree with QE and interest rates.

        But those have been recent factors. As Iprent pointed out, house inflation has been going a lot longer than that.

        • pat 20.1.1.1
          28 January 2022 at 11:10 am

          The rise in house inflation is aligned with the easing of credit. You may or may not remember before the liberalisation of banking rules in the 80s and 90s how controlled the lending for housing was…the problems origins predate QE.

          QE facilitated the continued reduction in interest rates.

        • Blazer 20.1.1.2
          28 January 2022 at 11:11 am

          Depends what you call recent!

          Simple arithmetic-$500,000 home @ 8%….basically same repayment as a $1million home @4%.

          I track the huge surge from 2008,the GFC on.

          When I was young you could buy a pie for 10c…its now $4-$5…why?

          • Incognito 20.1.1.2.1
            28 January 2022 at 11:27 am

            Simple arithmetic-$500,000 home @ 8%….basically same repayment as a $1million home @4%.

            Are you sure about that? What mortgage calculator are you using? Please show a working example.

            • Blazer 20.1.1.2.1.1
              28 January 2022 at 1:56 pm

              You are right.

              It doesn't equate.

              $450000 loan @8% for 30years=$3302 rep per mth.

              $450000 loan@4% for 30years=$2149 rep per mth.

  21. Corey Humm 21
    28 January 2022 at 10:27 am

    Meanwhile talk to someone from young labour at a uni and they'll be some upper middle class wannabe lawyer/poli and tell you all about how Mickey Savage was so loved people had pictures of him in their living rooms, they'll then say labour is the party of Savage then reject any idea of doing anything similarly redistributive to that government and usually say class is died in the 70s and how labour can't do anything like that anymore.

    Mind you Savage wasn't particularly redistributive he had to be pushed by members of his cabinet, unfortunately all the lefty's in labour left long ago and now the only voices in labour are people like the above so there's noone to push Labour.

  22. tsmithfield 22
    28 January 2022 at 12:19 pm

    So far as inflation is concerned, I think there is a lot of politics with this at the moment, with the opposition trying to say it was all the government's fault and the government trying to argue that it is a global thing that NZ is caught up in.

    https://www.newshub.co.nz/home/politics/2022/01/prime-minister-jacinda-ardern-absolutely-refutes-that-high-spending-led-to-record-inflation.html

    Obviously, a substantial portion of the inflation is to do with the action of our own RB and government spending. For instance, inflation in Australia was only 3.5% at the end of December, just over half our rate. So, it is reasonable to assume that our own policies have contributed to the inflation rate.

    https://www.afr.com/policy/economy/economists-predict-rate-increases-from-mid-2022-20220125-p59qz5

    But to be fair, National would probably have done similar in the same circumstances, so it is obviously political point scoring from National and deflection from Labour.

    One of the things that is leading to inflation is the very squeezed labour market. I understand the arguments for public health that has lead to the borders being effectively closed.

    But now that Omicron is here, there seems to be little benefit in keeping our borders closed as the amount of Omicron from local infections will probably far outshine any imported Omicron in the fairly near future.

    So, I think it is well and truly time for the government to reopen the borders and let kiwis get back home so that the labour market can be freed up.

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