Minister pleased with anemic economy

Written By: - Date published: 7:57 am, May 18th, 2012 - 38 comments
Categories: class war, housing - Tags:

You have to take your hat off to National’s spin doctors, coming up with the plausible-sounding nonsense line that low interest rates mean affordable housing isn’t needed. But it led to this on RNZ this morning (no links yet)- Phil Heatley: “we’re pleased that we’re managing the economy such that interest rates are so low”. Ten minutes earlier, Tony Alexander: “lower interest rates reflect the weakness of the economic outlook”.

For quite some time, National has beem trying to claim credit for low interest rates but, of course, it is the weak economy causing them as central banks and governments desperately try to lift business investment (btw, economists, is it correct that real return on capital must align with real growth in the long-run?). National can take a lot of blame for the poor performance of the NZ economy – but not all of it.

And, of course, low interest rates don’t make buying a house more affordable.

They actually hinder people trying to save up a deposit because their savings get lower returns.

And they lead to higher house prices. The market for housing will always be shaped by the size of mortgage payments people can afford to service – if interest rates fall, then new buyers will be able to pay more up front and housing remains just as unaffordable to those on low and middle incomes.

That’s precisely what we’re seeing in Auckland, where National says affordable housing isn’t needed.

38 comments on “Minister pleased with anemic economy”

  1. Carol 1

    I agree with your first paragraph, Eddie. But why do so many on the left respond to the unaffordable housing issue by merely continuing to promote the idea of home ownership for all?

    Good affordable living accommodation shouldn’t be a market, but a right It shouldn’t be necessary to compete in a home ownership housing market that benefits the wealthiest and leaves the least wealthy in an insecure position.

  2. BillODrees 2

    Phil Heatly made a mess of himself on the National Radio this morning. He denied was he had said in a speech when the Hobsonville Point project was launched. The interviewer had the speech to hand. Clearly he got a flea in the ear from Key’s office for letting Annette King upstage him yesterday. Poor Phil, not the sharpest tool in the shed. Off to “How to handle Interviews” school yet again.

    • Socialist Paddy 2.1

      I thought Heatley sounded half cut. If he is like that when he is sober god help the country when he is pissed.

      • deuto 2.1.1

        That was an awful interview by Heatley, even though I was only half-listening. Big fail. I was pleased they had Annette King back on later, who also had Heatley’s various earlier speeches to hand and was able to refute much of what he had said with the support of the interviewer.

        • Brooklyn

          Yeah. Being torn apart by Simon Mercep is not exactly career enhancing.

        • AnnaLiviaPlurabella

          We should be glad Annette King was not bound by any restrictions regarding public appearances. She came to a New Lynn public event on Policing a few years ago and gave a great speech. She was insightful and entertaining in the Q&A. She took on board our feelings about retaining a Police Stn in the Electorate.
          Time to have her back.

  3. Matt 3

    Not sure I like how the interest issue was phrased. In some obvious ways lower rates do indeed make housing more affordable to purchase, and it certainly makes it easier on anyone who already has a mortgage (since in NZ “fixed” rate mortgages, aren’t). And yes on the other hand low rates can help propel prices upward, but not always, depending on other factors. And of course not everywhere is Auckland and the dynamic may be quite different.

    • Deano 3.1

      people who already have a mortgage aren’t purchasing a house, are they?

      • aerobubble 3.1.1

        Do they live in ChCh?

        The debate is quite tightly defined. Other effects on home ownership include job security and pay after tax, which have only got worse under National if you earn below the median.

      • Matt 3.1.2

        If the only thing that mattered were people buying a house, as opposed to people who might struggle to stay in a house as rates rise, you’d be onto something.

  4. Zeroque 4

    Yep, spin, spin alright and not very effective either. Having said that it has been nice to not have to pay high interest rates on the mortgage. This is through no impact the Govts had as far as I can see.

  5. Bored 5

    Yesterday in Wellington the young lads and lovelies with their graduation gear on were parading along Willis St, smiles and full of hope for the future. So many of them, so much debt and expectation I thought. Degrees in arcane arts such as design, media studies, law, economics, such much supply, so little demand. Where to for their hopes and dreams (and real needs) I wodered, Makkers I thought cynically.

    Further up the street there outside WINZ were the rest of the youth, the huge chunk of under 25s who through no fault of their own are out of work. Some idiots would say they too need to get a degree and a debt, do we really need to get qualifications to be able to wipe our arses?

    This is the depressing picture of an aneomic economy where these people dont matter, all that matters to National is ripping off the assets for their mates benefit. Of cutting everything that costs a rich person a slice of tax. Of denying the young a future unless their parents were lucky enough to be 1%ers.

    • Carol 5.1

      Excellent, real world graphic depiction of the problem, Bored!

      Maybe it’s time to revive the (updated, 21st century version of) workers’ education movement and bring REAL democratic, critical and relevant learning back into “education”?

    • NattyM 5.2

      Actually no they don’t all have degrees in arcane arts subjects. If you look at the colour of the hoods, we are overwhelmed by degrees in business and commerce because students and people advising them think those degrees will make them bucket loads of money.
      If only they did have degrees in history, philospohy, English etc. Then at least theyd be able to spell, use halfway decent grammar and put together some coherent writing without all that ridiculous management jargon – going forward etc. The most meaningless stupid phrase ever invented.

    • Jeremy 5.3

      The inclusion of “design” in your list of “arcane arts” is a good illustration of one reason why the New Zealand economy is failing. All forms of R&D are dangerously undervalued by New Zealand’s employer culture, and the economy will continue to slowly crumble and fail until that changes.

      • Colonial Viper 5.3.1

        Graphic design has very little to do with R&D. Product design, as taught in uni a little bit more, but not much more.

  6. ianmac 6

    Radio and TV have been good at highlighting that this or that Minister was “unavailable” for response, but giving a good opening to the Opposition. Yesterday Heatly would not comment till next month. Annette King had a run yesterday. Today Heatly became “available” after all, made a real mess of his excuses, while another opportunity was given for Annette King to refute.
    Interesting strategy and congratulations to National Radio NZ.

    • BillODrees 6.1

      Aye ianmac, we have a more articulate senior team by a country mile. And we don’t have to defend the un-defensible.
      Never again can we let the screw-up of last weekend happen again: the damage from trying to suppress talent etc etc was too much.

  7. tsmithfield 7

    Interest rates in NZ are relatively high, compared to other major economies such as the US that can’t drop interest rates further, and are having to print money instead. Hence the strength of our dollar which vexes exporters.

    The reason interest rates are relatively high here is because our economy is strong in relative terms compared to many other developed economies in the US and Europe.

    The economy in NZ isn’t great compared against the period immediately preceding the great recession. At that time the world economy was going gang-busters and we reaped the benefits. Now we are in a low growth global environment, and so can’t realistically expect the same levels of growth we previously enjoyed. There isn’t really a hell of a lot the government can do about this.

    Sure we lag Australia at the moment. However, one of the big concerns at the moment is that China is slowing. China has been one of the few bright lights that has kept the world economy growing, although slowly. If China continues to slow, and there demand for commodities reduces, then Australia will be in deep shit.

    We have one great advantage over Australia. We produce food. With an increasing world population, people still have to eat, regardless of the world economy. So we are well positioned strategically.

    I agree that the NZ economy isn’t great. However, it is a hell of a lot better than the likes of the US, where previously well-off families are now living in tents or in drain pipes according to a doco that aired recently, and Europe where there is also a lot of hardship.

    • ghostwhowalksnz 7.1

      Only if you are selling raw materials to China , or luxury goods that are fully imported to China.

      Of course China implemented a massive stimulus from their government earlier in the GFC to keep their economy from slowing down.

      • tc 7.1.1

        As Rudd did in Oz whereas over here……

      • tsmithfield 7.1.2

        “Of course China implemented a massive stimulus from their government earlier in the GFC to keep their economy from slowing down.”

        Yes they did have massive stimulus. Including building ghost cities like this.

        So what happens when China decides it has enough ghost cities?

        • bbfloyd

          what happens when TS decides to start saying something useful for once….. the apologist/ naysayer impersonation got very boring a long time ago…. now it’s just sad….

          it wouldn’t be so pathetic if the “points” made had any more than a passing relationship with reality, but that would take thought….. and there lies the fatal weakness with that plan…

          • Lanthanide

            Seems like an entirely legitimate question to ask to me – what are China gonna do when there’s no more cities to build or the whole thing collapses on itself?

            I guess it depends on the real purpose of these cities. If they are building them with the expectation that cheap oil has a very limited shelf-life and they’re building these things now when it’s ‘cheap’ to do so, then they’re going to set themselves up very well.

            But I suspect that’s not what they’re doing, and if it was, they could have built things on much the same scale but with a far larger sustainable bent than what they have; cities with built-in public transport, lots of cycleways, district heating and other such things. These cities just look like bog-standard business as usual. Which in fact means they might even be more vulnerable to oil scarcity: not only do they have to deal with the oil price, but deal with the fact that they wasted all that money on stuff that ultimately doesn’t cope with the new normal.

        • mike e

          tsm {the silly monetarist} excuses excuses The US and Ireland have ghost cities as well but to fix the problem the free marketers bulldoze the buildings to create demand. while China plans long term and will just wait for the next growth period.

        • Jeremy

          Hate to ruin all your fun but that story in the Daily Mail is a pretty bad hoax. I’m not sure whether the fact they used fictional place names makes it a better hoax or a worse one.
          None of the pictures are what they seem either. You can make similar pictures yourself by finding a place with wide enough roads and zooming out on Google earth until all the cars vanish. The ground shot is also deceptive: it’s the main road leading from Hong Kong airport to the city, taken when traffic had been diverted for maintenance.
          I actually spent a weekend last year in one of the two places named in the story that actually exists: good place to buy cooked river snails! (oh, and when you sit in the restaurant eating them you can watch more people walking past than you could in Auckland)

    • Matt 7.2

      You watch too much TV, and no you’re not well positioned strategically when you have a tiny, one-trick pony commodity economy and your strategic assets will soon be owned by someone else.

  8. Georgy 8

    Phil Heatley would have absolutely no idea how the economy and interest rates are related.

  9. Roger 9

    I sometimes wonder if some people even realise that there is a world wide depression out there! Think Greece for a minute….. So many people want government to spend, spend, spend and to hell with the idea that the money has to come from somewhere. We already have interest free student loans and working for families that we couldn’t even afford when they came in and certainly can’t afford now. I have yet to hear Labour say just where they would cut spending-oh yes tax the rich they scream- as if that would actually solve anything. The so called ‘rich’ (just recall that Labour in government said that it was people earning over $60,000 pa) would just find ways to avoid it paying and would in the case of the very rich, leave the country.
    Time for some realism surely.

    • Draco T Bastard 9.1

      oh yes tax the rich they scream- as if that would actually solve anything.

      Yeah, actually it would. It would stop the over accumulation that was the primary cause of the GFC.

      The so called ‘rich’ (just recall that Labour in government said that it was people earning over $60,000 pa) would just find ways to avoid it paying and would in the case of the very rich, leave the country.

      Nobody has called $60k rich it’s only the RWNJs have used it as a spin line. Avoiding paying tax needs a minimum 20 year prison sentence, confiscation of all wealth and a minimum of five years after sentence of not being allowed to own or manage a business. That said, just because some people will try to steal from the rest of us is not a viable excuse not to do something that needs to be done.

      • Roger 9.1.1

        In the nine years under Labour the people earning over $60,000 were taxed extra and no adjustment to their tax rate was made during that time. Michael Cullen said that there was no need to adjust their tax as they were ‘rich’. The fiscal creep was allowed to continue. When National adjusted that they were accused to giving tax cuts to the ‘rich’. Lets put the blame where its is due.

        • Colonial Viper

          Tax those earning more than 10x the average income @ 91%.

          And implement a 0.5% asset tax on assets held over $1M.

        • Draco T Bastard

          Michael Cullen said that there was no need to adjust their tax as they were ‘rich’.

          Really? Prove it. It shouldn’t be hard to back that up with newspaper links.

          Tax brackets don’t determine if people are rich but their ability to pay tax and, no, they’re not perfect.

          When National adjusted that they were accused to giving tax cuts to the ‘rich’.

          That’s because that’s what they were.

    • Jackal 9.2

      I wouldn’t mind if a few rich pricks toddled off. New Zealand has a low to moderate corporate tax rate and lots of tax breaks for the wealthy, so they might get a wake up call elsewhere. The regressive GST changes of 2010 ensured those on the low end of the scale are paying comparatively more while rich people are paying less. It’s no real surprise then that New Zealand’s inequality has recently increased faster than any other OECD country. What we need is a progressive income tax system… not more neo-liberal bullshit!

    • rosy 9.3

      I sometimes wonder if some people even realise that there is a world wide depression out there!
      There’s not a world-wide depression out there. Countries that are undergoing ‘austerity’, especially Greece, are in recession.

      See for example

      The EU actually had positive growth last quarter – powered by Germany… a country that thinks austerity is for others. And the EU is barely a trading partner – Asia, the U.S and Australia are much more important to NZ in terms of GDP growth

  10. captain hook 10

    the thing is what more can you expect from someone who charges up hamburgers on a credit card.

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