Nick Smith commits to raising average wage to $250,000

Written By: - Date published: 10:55 am, August 27th, 2016 - 37 comments
Categories: housing, national, uncategorized, useless - Tags: , , , ,

Wow! On The Nation this morning Nick Smith committed to raising average NZ wage to $250,000! Here’s how it works:

Now I understand Bernard’s confusion here. Smith wants house prices to keep chugging along, and he wants a wage / house price multiple of 4 instead of the current 10. It seems impossible, but it isn’t! With prices at $1 Million, all we need to do is raise the average NZ wage to $250,000, and the multiple of 4 is achieved.

Great news Kiwis!

37 comments on “Nick Smith commits to raising average wage to $250,000 ”

  1. b waghorn 1

    By nationals usual logic this average wage rise will be best achieved by giving all those on $500k or more nice big pay increases and maybe a tax cut or two.

    • Macro 1.1

      Exactly! Those with lesser income don’t count anyway, and if they want to be considered – well they just have to get off their butts and work as hard as I do hehehe. /sarc

      • whateva next? 1.1.1

        the elite wages are so obscenely inflated, maybe the average wage is this much, what about using the mode wage, and compare to the top earners instead?

  2. The Chairman 2

    Special housing areas were suppose to help fast-track development and produce a number of more affordable homes – not help facilitate further land-banking.

    Smith says the Government doesn’t set house prices. However, with house prices continuing to soar, it’s clear National doesn’t have the policy setting right.

  3. Siobhan 3

    So for folk with better maths than me… how much of an increase would we need for a $600,000 ‘affordable’ house to become, well, affordable, to an Auckland working couple with 2 kids, currently relying on Family Tax credits to get buy and paying $450 a week rent in Otara?.

    • Craig H 3.1

      Not sure how much income this family earns currently, but to receive sufficient working for families to meaningfully rely on it, the annual household income wouldn’t be higher than $80,000 (and is probably closer to $60-70K), so would need to nearby double that to reach the 4 x income test, assuming house prices don’t increase.

    • Sure. Let’s assume a dual-income household where both partners earn the full-time median wage, $51k. At that income they’re no longer eligible for WFF (surprise!)

      You’ve stipulated a $450 (weekly) rent. Let’s also give them $500 in monthly bills, (for their internet, cellphone, and power services) Finally, we’ll give them a $350 weekly grocery bill. If they never spend anything else, they’ll save about $55,200 a year, but that’s a little unrealistic, so let’s give them at least $1,000 spending money on average a month. That gives us an annual savings of $43,200.

      At that rate, they would need to save for about 14 years to afford an affordable house, or just over 23 years for an average-priced house. And that’s a pretty strict budget on a dual median income. Good luck if you’re a single parent, or your children have special needs and one of you needs to be at home on weekdays, or anything like that. If I double the spending money, it takes 32 years to afford an average house, or just over 19 for an affordable one.

      Of course, this is assuming you buy your house outright. Let’s start looking at mortgages. Right now rates vary at 4.75% at the low end to 6.7% at the high end.

      If we assume you’re saving a 20% deposit, you’ll need 6.4 years for an average house, and 3.8 or so for an affordable one. (that’s with the doubled spending money, because let’s be realistic)

      Let’s look at a loan for the affordable house. Your deposit was $120,000, so your opening balance is -$480,000. You have enough wiggle room to pay about $2,000 fortnightly on mortgage payments, and if you fix your loan at 5% interest, that means you start off only paying off $1,000 of the principle every fortnight, and you’re only setting aside about $84 each week for rainy days. At that rate, you’d pay back the mortgage within about 14 years, so likely they’d make you go a bit slower. But yes, $6,000 is affordable on a dual median income, if you structure your life around affording the home. The difficulty comes when you don’t have said dual income.

      Of course, all that assumes house prices at least freeze, which realitically isn’t happening, and is the real reason that home ownership is going to be out of range for your median income household- because once they’ve saved the deposit for the old price, they find that the amount they need for a deposit has increased, and they have several more years to save, and this process repeats for their whole lives.

      • Sam C 3.2.1

        Who the fuck spends $350 per week on groceries?

        • Lanthanide 3.2.1.1

          Yeah, for 2 people, these numbers seem pretty far off.

          Maybe $500/month for bills in winter, due to power prices. You can get a good internet connection for $90/month, you can get reasonably good cellphone plans for $30 a month each, so that’s $150 on telecoms. $350 on electricity a month is a huge amount, for 2 people presumably working full time and so not at home during the day.

          $350/week grocery bill for 2 people is a lot; you could eat very well on $200/week for 2 people.

          • Takere 3.2.1.1.1

            Depends on where you live ….

            • Sam C 3.2.1.1.1.1

              Well I live in Wellington and we feed a family of four for $170 per week and we certainly aren’t rationing.

          • Craig H 3.2.1.1.2

            This is for a family of 4, not 2, so there will be extra food and power over 2 people, and they also need to cover transport and insurance somewhere in this budget. $350 per week is on the high side for groceries even for a family of 4 but remember that it’s not just food.

            However, it’s missing PAYE, so the figures are a bit off. Also, since we’re saving for a house, I will assume both partners will avail themselves of Kiwisaver of 3%, and that the matching employer contributions are extra to the salary (rather than a TRP).

            Annual budget:

            Gross (before tax) Income = $51,000 x 2 = $102,000
            PAYE = $9,028.90 x 2 = $18,057.80
            Kiwisaver deductions = $1,530 x 2 = $3,360
            Net income = $80,882.20 ($1,555.43 per week)

            Expenses:
            Rent = $23,400 ($450 per week)
            Internet = $4,680 ($90 per month)
            Cell Phone plan = $720 ($30 x 2 per month)
            Power + Water = $2,760 ($200 + $30 per month)
            Groceries = $13,000 ($210 food, $40 other groceries, total $250 per week)
            Transport = $7,800 ($150 per week – assumes 2 cars, 2 children in school, fuel, WOF, registration, maintenance)
            Insurance = $1,200 ($100 per month – contents, car x 2, life x 2)
            Clothing = $1040 ($20 per week, includes footwear and school uniforms)
            Medical/dental = $520 ($10 per week)
            Education – $2000 (2 children, includes stationery, school donation, camps/trips/discos etc.)
            Childcare (OSCAR) – $7000 (2 children, working full time, Auckland traffic so will require before and after school care and some holiday programmes)

            Total expenses = $64,120

            Total available to save = $16,762.20 per annum.

            This assumes no contingencies, no holidays/entertainment, no other debts to repay, no replacing appliances or cars etc for 5 years. Some of the figures may be a bit high, some may be a bit low, some expenses are probably missing, but hopefully they even out.

            After 5 years, total savings could be $83,811 (there would be some interest as well).

            After 5 years, the Kiwisaver part of the deposit would be $43,132.50 including all credits and the $10,000 home start grant, but not including investment returns (probably another $1,000-$2,000).

            Total deposit could reach the 20% deposit being $120,000 (the rest being spent on various expenses associated with buying a house).

            If 5% interest rate and 30 year duration, this is $594 per week, so $144 per week extra from the $450 rent, with house insurance and rates now added as well (around $45 per week rates, $25 insurance, total $70), so $214, and then maintenance, repairs etc.

            Possible, but very tight, with very little margin for error.

            • Anno1701 3.2.1.1.2.1

              “Gross (before tax) Income = $51,000 x 2 = $102,000
              PAYE = $9,028.90 x 2 = $18,057.80
              Kiwisaver deductions = $1,530 x 2 = $3,360
              Net income = $80,882.20 ($1,555.43 per week)”

              you forgot student loan deductions

              quite likely if your earning 50k or over…

              • Craig H

                I didn’t forget them, but since it’s a blue collar family, I assumed they wouldn’t have any remaining. Agreed that student loan deductions would impact significantly, though!

  4. mac1 4

    Nick Smith has just got the superannuitant vote! At 66% of the $250,000 average wage (after tax) for a couple and 40% for a single pensioner, it would be $116,542 p.a. and $70,632 p.a.

    Well over three times the current rates of $30,780.88 and $20,072.52 p.a.

    Winnie, eat your heart out!

  5. Muttonbird 5

    Under Dr. Smith’s policy announcement, parsnips will soon cost $10.00 each at the supermarket.

    • lprent 5.1

      Good idea raising the cost of parsnips. Real food is definitely something to be discouraged.

      But seriously, all that is required is to increase the inflation rate to something like 100% whilst simultaneously increasing the current unmoderated four-fold for less than 5 years. Easy for the party of Muldoon.

      I am sure that will satisfy national voters.

    • mosa 5.2

      It wont matter unless the kiwi staple diet of a McDonalds menu goes up then it will provoke a backlash.

  6. Leftie 6

    ha ha ha ha…. ha ha ha ha…. hilarious!! thanks Nick Smith, needed a laugh today, you nats never fail on that score!!!

  7. it is time for old Smithy to be sent out to the Knackers yard.

    His used by date expired many years ago.

    • Leftie 7.1

      After doing a year in the sin bin, John key will only drag Smith back just like he did last time when Smith was sacked.

  8. coffee connoisuer 8

    Its easily achievable provided you do two things.
    Move away from the debt based monetary system to one not based on debt but instead based on enabling people ro wqhatever it is they need to be happy.
    And
    second move away from the redistribution of wealth model.
    a redistribution of land model could be good.

  9. Dave 9

    There just saying anything there just no substance the whole system is broken and all these pricks can do now is make hollow promises they can never keep they won’t even pay workers the livening wage or is smith going to turn on the printing press and cause hyperinflation this government is on planet key there in lava land.

    • Leftie 9.1

      Time to give John key, his nats and partners in crime the sack.

      • mosa 9.1.1

        Leftie the sack is too good for them.
        Let them be charged and pay massive fines and face a Serco run prison and make all their crimes public in an open court.
        I bet Key wont find the prison rape jokes funny anymore eh.

        • Leftie 9.1.1.1

          Yeah, true Mosa. I would like nothing better than to see Key and his cohorts face court and prison time, they deserve nothing less.

  10. righty right 10

    smith said if the bubble pops lots family will go broke .well all bubbles go bang theirs never been a bubble that hasn’t those families are screwed their even going to loose there kiwi saver funds .smith got one thing right he doesn’t control the market well sooner or latter the market will reset and tears and suicides are going to rocket.
    you must pay the piper when the party ends.

  11. Thinkerr 11

    Clarification:

    1. Dont you mean AUCKLAND average income? But, this is still great news for JAFAs – especially those who fancy dipping their toes in the dirt south of the Bombay Hills, where the house-price to income multiplier would have created quite different economies. (imagine living in Auckland & shopping online in Greymouth, where the sub-economy of the wages to prices ratio made prices so much lower)

    2. Suggest you read up about the German economic hyperinflation, post-ww1. They proved that phenominal wage growth wasn’t impossible, even in bad times. You just have to print lots of money. The risk for this would be house prices growing in proportion and wages still chasing them, but isn’t that the fun part of hyperinflation- watching your savings grow, without you doing anything?

  12. jcuknz 12

    All you folk wishing dire endings for the National seem to forget who voted them into power … YOU DID … so what is good for the gander is good for the geeze

    • dave 12.1

      this must be the something special key promised the last stand at Alamo end of days desperation drama mass diarrhea rivers turning to shit.bodies on the streets

    • Stuart Munro 12.2

      Democracy is not a licence to steal. Democracy is not an invitation to lie. Democracy is not an invitation to abuse the authority granted you to exercise in the public interest. People who commit these crimes deserve to be punished thoroughly.

      Democracy is an opportunity to win lasting respect by serving one’s people well. The Gnats have instead chosen to serve foreign criminals and tax evaders. This precedent must not stand, they must be treated in an exemplary fashion.

  13. Wayne 13

    The multiple (of 4) is typically regarded as being of household income rather than individual income.
    Anyway I reckon a multiple of 4 in Aucland is unacheivable, and for most of my life has always been higher, typically 5 or 6. Current interest rates will tend to keep the multiple higher.
    It seems to me that Auckland prices have hit a peak. In fact a serous increase in supply may reduce prices, perhaps by 20%. That kind of reduction has occurred before twice in the last 20 years though usually if the economy has stalled and migration has slowed.

    • In fact a serous increase in supply may reduce prices, perhaps by 20%.

      How much increase in supply would it take to sate Chinese demand for foreign property investment, Wayne? And, assuming we did manage to build enough houses to sate that demand, at current prices a fall of 20% would make the average Auckland price around $800,000 – which would make Nick Smith still full of shit, even at a multiple of 5 or 6.

      That kind of reduction has occurred before twice in the last 20 years though usually if the economy has stalled and migration has slowed.

      Foreign investors aren’t affected by the state of our economy. What you’re saying would be true if we had some decent rules covering foreign investment in property, but we don’t and your party steadfastly refuses to implement them.

      • Muttonbird 13.1.1

        This is of great concern. The ‘normal’ corrective mechanisms Dr Mapp suggests worked in the past, and will do again this time, in stopping rampant price rises and even reducing them by a modest 20% don’t apply under current government policy.

        When you have NZ real estate companies direct marketing to China, and the deliberate under reporting of Chinese influence in the NZ residential housing market there is just no end to the unregulated, cheap and inexhaustible supply of funds available to keep inflating, no matter how many houses are built.

      • The Chairman 13.1.2

        Even Fran O’Sullivan is calling for the Government to act.

        http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11700890

  14. Mike Bond 14

    What a BS article! Nowhere did Smith “commit” to rising the average wage to $250k!!!!!! He has said he would like to see the multiple of 4 for housing affordability. But “commit”? I doubt it.

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