web analytics

NRT: All about distribution

Written By: - Date published: 1:54 pm, April 30th, 2014 - 29 comments
Categories: Economy, equality, jobs, monetary policy, wages - Tags:

no-right-turn-256No Right Turn points out the obvious that our political parties often seem to ignore which is the effect of policy on the distribution or earnings that people (and the country) make.

Distribution – who pays, who gets what – is one of (or perhaps the) key question in politics. And as the Herald points out this morning, its the big problem with Labour’s new monetary policy:

Households struggling to keep on top of their mortgages would be the winners under Labour’s proposed interest rate shake-up, but at the expense of those who can’t afford to get a foot on the property ladder, a budgeting service warns.


But New Zealand Federation of Family Budgeting Services chief executive Raewyn Fox said the policy to keep interest rates low while forcing everyone to save more raised issues of fairness.

“The people who don’t have mortgages will be in effect subsidising the economy for the people who are obtaining an asset by buying a house.”

To be fair, the policy document addresses this (@5.21), saying that “Distributional and hardship effects for the lower paid would need to be considered”, and raising the possibility of a low-income exemption. But we’ve all seen how the theoretical ability to compensate the losers of policies which produce net gains tends to be forgotten in practice. Which means that the acceptability of the policy is going to depend crucially on whether Labour follows through on this promise. Because otherwise what they’re proposing is lowering mortgages for the middle classes (and of course themselves) on the backs of the poor – something which is against everything they’re supposed to stand for.

(Meanwhile over on Twitter we have Labour apparatchiks talking of the need for government to “set policy conditions that create jobs & lift wages”, while airily ignoring any distributional effects. Exactly the same rhetoric is used by National to justify lowering wages and employment conditions. But the whole point of Labour is that it supposed to care about the effects of government policy on ordinary people – not just steamroller them in pursuit of growth for the few).

lprent: No Right Turn linked to Clinton Smith on twitter, a former author here who consistently said that he was mostly a Green supporter. I believe he subsequently worked for the parliamentary library. Just for the record, I believe he is now a Green “apparatchik” working for Gareth Hughes. (Updated: I stand corrected “He was hired by David Cunliffe’s office earlier in the month.”)




29 comments on “NRT: All about distribution”

  1. wtl 1

    The analysis is missing a crucial point. Contributions to Kiwisaver are not lost to the original earner. Instead they locked away so they cannot be used immediately. As things stand, these contributions can be withdrawn to pay for a first-home, and if used this way, the scheme becomes a compulsory home deposit savings scheme.

    • One Anonymous Bloke 1.1

      Well spotted.

    • Tamati 1.2

      Try telling the power company you’ll pay the power bill when your get you Kiwisaver in 40 years times.

      • wtl 1.2.1

        Try telling the power company you’ll pay the power bill when your get you Kiwisaver in 40 years times.

        Yes, but if this occurs the problem would be more to do with the fact that people are not being paid a living wage, rather than the fact that Kiwisaver is compulsory. I don’t think the scheme is a instant fix that is going to solve everything, but I certainly think it is a very interesting proposal that is worth exploring. As Geoff said below, this proposal has to be seen in the context of all the Labour’s policies.

        • Tamati

          Indeed. They would have to implement actual policies raising wages before implementing this policy.

          • One Anonymous Bloke

            You mean like the promised minimum wage hike in the first one hundred days?

            • Tamati

              It would help some, but those on 16-20 dollars per hour would still feel the pinch and be worse off.

          • Ant

            Like raising the minimum wage to $15 immediately. There you go son, that’s an actual policy.

      • One Anonymous Bloke 1.2.2

        You mean the lower power bill once a single buyer market is implemented?

        • Tamati

          It was an example. You could replace power with petrol or groceries.

          • Ant

            Well with some good policies from Greens on better public transport, cycling and walking to work and school that should lessen the burden on petrol a bit.

    • Ant 1.3

      The latest Horizon poll has 70% of respondents supporting compulsory Kiwisaver so it looks like there is a reasonable amount of support out there for it.


  2. geoff 2

    This is why Labour will need to demonstrate how all its policies are going to mesh together.

    Any single policy is not going to solve all problems and it would be silly to think it could.

    • Ant 2.1

      Well we have from Labour:

      • Kiwipower
      • 90 day fire at will gone and rebalancing of power in the workplace
      • Minimum wage to $15
      • Move towards the living wage starting with core government
      • Favouring Kiwi suppliers in Government contracts
      • Best Start
      • CGA to try and cool speculation
      • Kiwibuild
      • Talk of easing LVR restrictions outside of Auckland and Christchurch

      The election campaign hasn’t even started properly and it looks like there is already a lot of stuff in there for people without mortgages like renters, freehold owners, or looking to get a house. The worst case scenario is that you have some retirement savings.

      • just saying 2.1.1

        -I believe this will make a difference of about $100 per year per household
        90 day fire at will removed.
        -One small but worthwhile clawing-back from a six-year blitzkrieg of war on the poor from National. What about the rest?
        Minimum wage $15 and a move towards a living wage for govt employees
        Favouring kiwsuppliers
        -Not exactly set in concrete- more an aspiration than a promise
        Best start
        -far from best, but a small step in the right direction
        -I’ll wait to comment until concrete details are announced
        -middle-class welfare
        Talk of…
        -talk is cheap

        So SFA for low income earners from the puku party of the comfortably off. National takes us 20 steps back and Labour might take us one step forward if we’re lucky and we’re supposed to vote for them for it?
        You do get that they are still calling themselves the Labour Party?

  3. lprent: No Right Turn linked to Clinton Smith on twitter, a former author here who consistently said that he was mostly a Green supporter. I believe he subsequently worked for the parliamentary library. Just for the record, I believe he is now a Green “apparatchik” working for Gareth Hughes.

    He was hired by David Cunliffe’s office earlier in the month. See here:


    • lprent 3.1

      I stand corrected. I’ll change the note.

      Nice to see that Labour is getting some good people. His posts here were sorely missed.

      I’ll have to send him a note about being stuffed into the war-room.

  4. NZJester 4

    By directing those savings into KiwiSaver instead of the big Aussie banks are we not in fact possibly giving those without a house a leg up in the property market?
    It does say on the kiwi saver website and I quote: “If you’ve been a member of KiwiSaver for 3 years and you’re buying your first home to live in yourself, you may be able to withdraw your KiwiSaver savings.”

  5. Lanthanide 5

    what they’re proposing is lowering mortgages for the middle classes (and of course themselves) on the backs of the poor

    Let’s consider all of the people who don’t have mortgages that are currently unaffected by the OCR raises:
    1. Poor people who can’t afford a house
    2. People who are renting, for whatever reason
    3. Rich people who own their houses mortgage free

    Of course going a bit further, we see that #1 and #2 are actually affected by OCR rises, because it factors into the rent they pay.

    The only people who do not suffer when the OCR goes up are those who are wealthy enough to live in a house mortgage free. Any other lending they choose to take in addition to that, because they can, can hardly be said to be making them suffer when the OCR goes up.

    In fact, people who own their own houses and don’t have mortgages benefit when the OCR goes up, because the interest they get on bank savings goes up.

    So truly, this is pushing the burden of fighting inflation onto the rich, more than it is pushing it onto the poor, because they poor already got hit, at least indirectly.

  6. Mike S 6

    In the NRT article, John Key was quoted as saying – “In fact, inflation’s quite often caused by rising international commodity prices for things like oil, by business spending and by Government spending.”

    Government spending doesn’t cause inflation, government borrowing does.

    Just nit picking, but you’d think being the prime minister and a currency speculator he’d get things like that right.

    • Phil 6.1

      Inflation, at the most conceptually simple definition, is “too much money trying to buy too few goods”. If the government increases spending, even if it’s all sourced from an increase in income taxes, then it will be inflationary. The reason is that households have a propensity to both save AND consume part of each new dollar they earn.

      What that means is; when you take away a extra dollar of income (through increasing taxes) from the household sector – or any sector for that matter, they won’t respond solely by reducing their consumption purchases by a dollar. The result will be some combination of reduced income and reduced savings. The end result is you get more inflation, because overall consumption has gone up.

      • Lanthanide 6.1.1

        You’re assuming that the all of the taxes raised by the government are spent.

        Well, under National that’s true. Under Labour they actually pay back debt, which by your definition must be deflationary – the government is taking $1 from a taxpayer who may have saved some and spent some of it, and in turn using that entire $1 to pay back debt.

        • Phil

          I wasn’t “assuming” anything – I was taking Mike S’ statement that ‘government spending doesn’t cause inflation’ and pointing out that the reality is a lot more complicated.

          … pay back debt, which by your definition must be deflationary

          Again, the answer depends on the mix of ‘spend vs save’ decisions that the household and the government choose.

          You’re right that, in general, when a country pays down its overseas debt you should see lower pressure on inflation, but again that is going to depend on where the repayment is coming from. It could come about from a change in the the ‘spend vs save’ preferences of a country, or it could be a change in the level of money being printed by a government or central bank; those two scenario’s produce very different outcomes for inflation.

          Of course, all of this needs to be overlaid with thinking about global economic conditions. It’s entirely appropriate that a government would change its spend v save decisions as the the global picture changes over time.

        • Mike S

          Yep, if that $1 is removed from the overall money supply it is deflationary. It’s crazy when you see it for the scam that it is. If everybody paid off all their debts and government and business did the same so nobody owed any money at all, then there would be no money at all. That is of course because all money is created as debt. The only way new money (apart from notes and coins which only make up around 3% of the overall money supply) can be created and enter the economy is if someone ‘borrows’ it into existence from a private bank or if the government ‘prints’ or ‘borrows’ it by selling bonds.

          Which is why finance ministers only half halfheartedly talk about wanting people to pay off debt. In reality they don’t want people paying off debt and saving money because that would crash the economy unless government borrowed and spent more to compensate.This is one of the many ridiculous situations that arises due to the fact that our entire economic and financial system is based upon exponentially increasing consumption and new money must always be ‘borrowed’ (created out of thin air) to fund that consumption.

          If the private sector starts saving more and paying off debt then the public sector must borrow and spend more or the economy nosedives and vice versa. You can’t have both the private and public sector saving money and paying off debt at the same time.

          just for some fun inflation examples, if the average rate of inflation over the next 50 years is the same as that for the last 50 years then within many peoples lifetimes…..

          A $10,000 car will cost $320,000

          A $4.50 bottle of milk will cost $144

          The minimum wage (if increased by inflation rate) will be $432 p/hour

          The average wage will be $32,000 p/week or $1,664,000.00 per annum

          A ticket to the movies will be $640

          A hamburger will cost $96

          An average priced Auckland house will cost $17,600,000.00 (of course currently the prices are rising way faster than the reported (not the real) inflation rate so could be much much higher.

          That’s the problem with exponential growth, when does it all come crashing down?

      • Mike S 6.1.2

        The most simple and accurate definition of inflation is that it is ‘an increase in the overall money supply’, nothing more, nothing less. In other words, any new money borrowed into existence by government, business or individuals increases (inflates) the existing overall money supply and is thus inflationary. If government spending is sourced from income tax then it is not inflationary as the money gathered from the income tax is already circulating in the money supply and therefore has already had it’s inflationary effect.

        An increase in income tax could be inflationary, if money needs to be borrowed somewhere along the line to pay for it. But if that was the case then the increase in income tax would be the cause of the inflation, not the government spending using that increased tax revenue.

        Don’t confuse inflation with price increases or the cpi which are symptoms of inflation.(if more money is in the overall money supply then prices will tend to go up).

    • Lanthanide 6.2

      He gets many things wrong. In some cases I’m sure it is deliberate, to con the public and the lack-witted media who just repeat it without question.

      • Mike S 6.2.1

        Yep, i’d say in more than just some cases it is deliberate as his legion of 30 odd PR team will know that the thing that sticks in peoples minds is generally the first thing they hear, even if that thing is revealed later to be untrue, most people still store it as factual in their minds.

  7. It’s macroeconomic policy. If it’s designed to benefit some group of voters and disadvantage others, yes that would be shitty macroeconomic policy. But if it’s designed to make the economy work better, that’s the main subject for discussion. Arguments about whether someone will have to pay something they’d rather not, or whatever, are largely irrelevant. That stuff can be sorted out at a lower level.

Recent Comments

Recent Posts


  • A charge on plastic bags – debunking some myths
    The launch of my Members’ Bill last week, which would introduce a 15 cent charge on single-use plastic bags at the check-out, has generated a lot of comment on mainstream and social media. From The Paul Henry Show at the ...
    GreensBy Denise Roche
    12 hours ago
  • National’s $1trillion property sandcastle
    The National government's failure to fix the housing crisis has seen the ballooning and unsustainable property market touch the $1 trillion mark, Labour’s Finance spokesperson Grant Robertson says. "Labour wants an economy that creates high wage work that is based ...
    13 hours ago
  • Government failure on housing crisis drives Reserve Bank to add tools
    If the Government was delivering a comprehensive plan to fix the housing crisis, it is unlikely that the Reserve Bank would be continuing to pursue debt to income limits for lending for housing, says Labour’s Finance spokesperson Grant Robertson. ...
    1 day ago
  • International embarrassment for NZ likely over National’s failure to protect Maui dolphin
    New Zealanders who care about Maui dolphin should prepare to feel embarrassed: the Government is about to be put to shame on the international stage for its lack of action to protect Maui’s dolphin. The International Whaling Commissions’ 66th Biennial ...
    GreensBy Eugenie Sage
    4 days ago
  • Why don’t we spend $1b to keep people out of jail, rather than spending it on keeping them in?
    Earlier this week, Corrections Minister Judith Collins announced the government’s ‘solution’ to our burgeoning prison population. It seems that most, if not all, of Bill English’s hard-won surplus is going to disappear into another round of prison-building.  That must be ...
    GreensBy David Clendon
    5 days ago
  • PKE Ship Sent Packing – Not Too Soon
    It is appropriate that the palm kernel expeller (PKE) ship off Tauranga has been sent packing. For weeks I have been saying this ship needed to be sent away, but it seems as if MPI has been trying to find ...
    GreensBy Steffan Browning
    5 days ago
  • Do you #LoveSnow?
    I was a lucky kid. When I was about five or six my mum and auntie took me up to Whakapapa on Mt Ruapehu and taught me to ski. As a young kid I thought there was no bigger ...
    GreensBy James Shaw
    5 days ago
  • Awa Kairangi/Hutt River – Swimmable?
    On Thursday night I hosted a great swimmable rivers meeting organised by the local Greens in Heretaunga (Hutt Valley). It was great to see about 70 people attend and engage in the topic. We were welcomed by Te Atiawa representative ...
    GreensBy Catherine Delahunty
    6 days ago
  • September benefit figures disappointing
    The Government is out of touch with the reality that fewer people are going off the benefit and into employment or study, says Labour’s Social Development spokesperson Carmel Sepuloni.  “The quarterly benefit numbers for September are concerning. They show that ...
    6 days ago
  • MFAT officials refuse to back Prime Minister on Saudi sheep claims
    An Ombudsman’s interim decision released about the existence or otherwise of legal advice on the multimillion dollar Saudi sheep deal shows MFAT has failed to back up the Prime Minister’s claims on the matter, says Labour MP David Parker. “The ...
    6 days ago
  • Barry Coates on his first weeks in Parliament
    Week one in Parliament has been quite an occasion. I would like to share the experience. I had given up on the prospect of getting into Parliament before the election and had been enjoying the diverse work I was doing ...
    GreensBy Barry Coates
    6 days ago
  • Nats still planning to take Housing NZ dividend
    Housing New Zealand’s Statement of Performance Expectations shows that the National Government intends to pocket $237m from Housing New Zealand this year including a $54m “surplus distribution”, despite promises that dividends would stop, says Labour’s Housing spokesperson Phil Twyford. “After ...
    7 days ago
  • Parliament must restore democracy for Ecan
    Parliament has a chance to return full democracy to Canterbury with the drawing of a member’s bill that would replace the Government’s appointed commissioners with democratically elected councillors, says Labour’s Canterbury Spokesperson Megan Woods. “In 2010, the Government stripped Cantabrians ...
    7 days ago
  • Police struggle to hold the line in Northland
    Labour’s promise of a thousand extra police will go a long way to calming the fears of people in the North, says the MP for Te Tai Tokerau Kelvin Davis.  “Police are talking about the Northland towns of Kaitaia and ...
    7 days ago
  • Vote Sooty Shearwater/Tītī for Bird of the Year
    Sooty shearwater (Puffinus griseus) are amazing and deserve your vote in Forest and Bird’s Bird of the Year competition.  They make one of the longest known bird migrations, flying an annual round trip of 64,000 kms across the entire Pacific ...
    GreensBy Eugenie Sage
    7 days ago
  • Urgent action on agriculture emissions needed
    Immediate action is required to curb agricultural emissions is the loud and clear message from Climate change & agriculture: Understanding the biological greenhouse gases report released today by the Parliamentary Commissioner for the Environment, says Labour’s Climate Change spokesperson Megan ...
    1 week ago
  • Super Fund climate change approach a good start
    Labour Finance Spokesperson Grant Robertson and Climate Change Spokesperson Dr Megan Woods have welcomed the adoption of a climate change investment strategy by the New Zealand Super Fund. “This is a good start. It is a welcome development that the Super ...
    1 week ago
  • Energy use going in the wrong direction
    New data out this week from Statistics NZ paints a concerning picture of energy use across the economy under this National Government. You won’t be surprised to hear that there is some seriously worrying information here about how dirty our ...
    GreensBy Gareth Hughes
    1 week ago
  • Raising the age the right thing to do
    The announcement today that the Government will leave the door open for young people leaving state care still means there is a lot of work to do, says Labour's Spokesperson for Children, Jacinda Ardern "The Government indicated some time ago ...
    1 week ago
  • Junior Doctors go on Strike
    Thousands of junior doctors took strike action for 24 hours this week for better working conditions and safer working hours.  The Green Party supports their cause, and particularly their claims to reduce the number of days worked from up to ...
    GreensBy Denise Roche
    1 week ago
  • Coleman plays down the plight of junior doctors
    Junior doctors are crucial to our health services and the industrial action that continues tomorrow shows how desperately the Government has underfunded health, says Labour’s Health spokesperson Annette King.  “Jonathan Coleman’s claim that he has not seen objective evidence of ...
    1 week ago
  • Inflation piles pressure on National and Reserve Bank
    While many households will welcome the low inflation figures announced today, they highlight serious questions for both the National government and the Reserve Bank, Labour’s  Finance Spokesperson Grant Robertson said.  "While low inflation will be welcomed by many, the ...
    1 week ago
  • Officials warned Nat’s $1b infrastructure fund ineffective and rushed
    Treasury papers show the Government rushed out an infrastructure announcement officials told them risked making no significant difference to housing supply, says Labour’s housing spokesperson Phil Twyford.  “Like so much of National’s housing policy, this was another poll-driven PR initiative ...
    1 week ago
  • More cops needed to tackle P
    New Police statistics obtained in Written Questions show John Key is losing his War on P, highlighting the need for more Police, says Opposition Leader Andrew Little.  “New Zealanders expect serious action on P but today’s hodgepodge of half-measures won’t ...
    1 week ago
  • Strengthening our relationship with the Rātana movement
    It was a privilege to visit Rātana Pā last week with fellow Greens’ Co-leader James Shaw, our Māori Caucus and senior staff to meet with the leaders of te iwi mōrehu, to strengthen the ties between the Green Party and ...
    GreensBy Metiria Turei
    1 week ago
  • MBIE docs show country needs KiwiBuild, not Key’s pretend “building boom”
    John Key’s spin that New Zealand is in a building boom does not change the massive shortfall in building construction as new MBIE papers reveal, says Labour Party housing spokesperson Phil Twyford.  “We can fix the housing crisis, by the ...
    1 week ago
  • 1 in 7 Akl houses now going to big property speculators
    Speculators are running riot in the Auckland housing market making life tougher for first home buyers, says Labour’s housing spokesperson Phil Twyford.  Newly released data from Core Logic shows a 40 per cent increase in the share of house sales ...
    2 weeks ago
  • Disconnected thinking dirties the water
    Iain Rabbitts’ belief that drinking water quality, charging for water use and the land use that leads to water quality degradation should be treated separately is part of the problem we have right now in this country. The connection is ...
    GreensBy Catherine Delahunty
    2 weeks ago
  • Report back from Hands Off Our Tamariki hui
    This week I attended a hui in Otaki organised by Hands Off Our Tamariki about the proposed reforms to the Child Young Persons and their Families Act. Moana Jackson and Paora Moyle spoke.  They expressed deep, profound concern about the proposed ...
    GreensBy Jan Logie
    2 weeks ago
  • Labour mourns passing of Helen Kelly
    Helen Kelly was a passionate advocate for working New Zealanders and for a safe and decent working life, Leader of the Opposition Andrew Little says.  “Helen Kelly spent her adult life fighting for the right of every working person to ...
    2 weeks ago
  • National’s visionless immigration policy
    National’s recent immigration announcement is a continuation of the visionless approach to government that it has displayed in the last three terms. Rather than using the levers of government to implement a sustainable immigration policy that benefits new and current ...
    GreensBy Denise Roche
    2 weeks ago
  • Andrew Little: Speech to the Police Association Conference 2016
    Police Association delegates, Association life members and staff, representatives from overseas jurisdictions. Thank you for inviting me here today. The Police Association has become a strong and respected voice for Police officers and for policing in New Zealand. There is ...
    2 weeks ago
  • 1,000 more police for safer communities
    Labour will fund an extra 1,000 Police in its first term to tackle the rising rate of crime, says Leader of the Opposition Andrew Little. “Labour will put more cops on the beat to keep our communities safe. ...
    2 weeks ago
  • Call for all-party round table on homelessness
    Labour is calling on the Government to take part in a roundtable meeting to hammer out a cross-party agreement on ending homelessness.  Labour’s housing spokesperson Phil Twyford said the country wanted positive solutions to homelessness, and wanted the political parties ...
    2 weeks ago
  • Seclusion rooms in schools
    Schools are undoubtedly stretched and underfunded to cope with students with high learning support needs. But this cannot justify the use of rooms (or cupboards) as spaces to forcibly isolate children. It has emerged via media that this practice continues ...
    GreensBy Catherine Delahunty
    2 weeks ago
  • Public should get a say on new Waikato power station
    I had an opinion piece published in the Waikato Times about a controversial proposal to build a new gas-fired power station. It’s not on their website yet, so here it is: If you think the public would get a say ...
    GreensBy Gareth Hughes
    2 weeks ago
  • MSD and their investment approach
    The Government talks about investment but there is no investment. It is not investment if it isn’t over the whole of life and if there is no new money  — Shamubeel Eaqub   Investment sounds like adequate resourcing but this ...
    GreensBy Jan Logie
    2 weeks ago
  • Certainty needed for community services
    A couple of months ago I was at a seminar where three community organisations were presenting. Two of the three presenters were waiting to find out if their organisation would get a contract renewed with MSD. Not knowing if their ...
    GreensBy Jan Logie
    2 weeks ago
  • Domestic Violence – some advice for the media
    For the purpose of this piece, I’m going to use Domestic Violence (DV) as a proxy for intimate partner violence. DV is not isolated to physical abuse in a relationship between people with the same power. DV is a pattern of ...
    GreensBy Jan Logie
    2 weeks ago
  • Leroy’s New Paw Prints
    Leroy, an Auckland great dane recently received a new 3D printed bionic leg after cancer was discovered. I think this is a fantastic story and highlights the real potential of additive manufacturing, or 3D printing Leroy’s prosthetic was printed in titanium and was ...
    GreensBy Gareth Hughes
    2 weeks ago