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Open mike 22/02/2021

Written By: - Date published: 6:58 am, February 22nd, 2021 - 192 comments
Categories: open mike - Tags:

Open mike is your post.

For announcements, general discussion, whatever you choose.

The usual rules of good behaviour apply (see the Policy).

Step up to the mike …

192 comments on “Open mike 22/02/2021 ”

  1. Incognito 1

    However, [epidemiologist Professor Nick] Wilson reiterated the Government should take this opportunity to review the alert levels, adding additional steps at 2.5 and 1.5 to create a “more nuanced” system.

    https://www.stuff.co.nz/national/health/coronavirus/300235706/covid19-no-reason-auckland-shouldnt-move-to-alert-level-1-on-monday

    I disagree. The advantage of the current system is its simplicity and familiarity. In addition, regional rather than blanket changes in alert levels allows for a more focussed use of the currently available tools.

    • Sacha 1.1

      We all owe him so much for the Covid modelling work that persuaded our government to switch to an elimination goal, but Wilson is not a comms expert.

      • Incognito 1.1.1

        Precisely! A few experts are starting to stray into areas where they trample around like an elephant in a China shop.

        • You couldn't possibly be thinking of Des Gorman by any chance?

        • woodart 1.1.1.2

          yes, whenever I see a headline like " expert claims this" I think of a lazy journo, ringing up someone, looking for an easy column filler. If you got all of the "experts', and all of the economists in one room, apart from hot air, I dont think anything else useful would come out.

    • McFlock 1.2

      yes – nuance is good, but alert levels are aimed at the lowest common denominator.

  2. Ad 2

    Good to see 7 out of 10 kiwis saying benefit levels for both waged and unwaged are too low.

    https://www.nzherald.co.nz/nz/survey-finds-support-for-increasing-income-for-low-or-non-waged/YQRTL5WGZPR2HBCHRL32QNVOJU/

    It 's a UMR polls commissioned by more than 40 organisations including unions, iwi groups and poverty-focused organisations.

    Surely Ardern must be running out of excuses by now.

    • Incognito 2.1

      Surely Ardern must be running out of excuses by now.

      As soon as this pandemic is over and burgeoning Government debt is under control we’ll get moving again. Ardern and Robertson’s hands are tight tied.

    • weka 2.2

      won't be long now, just need a bit more time to [burble, burble, economy, burble, don't scare the horses, burble burble]

      • Ad 2.2.1

        The first benefit increase last year was a start.

        It's not making evident inroads into our very high levels of deprivation.

        • weka 2.2.1.1

          It was, but even then it was easy to see that they either just don't get it, or actually believe that helping beneficiaries stops them from working or something (eg the lack of an upfront cash payment so beneficiaries could buy hand sanitiser and make plans at the start of the pandemic and going into lock down). Or being really cynical, that was an election year move.

          Ardern and Roberston have a real problem here. Unless they do the big transformation (something like the GP policy, or using the WEAG report as a road map, and it has to include non-neolib responses to the housing crisis), they will continue to tinker and never get ahead of the problem.

          Tinkering will mean many people will end up hating Labour. Not their core vote, but it will play out in the MSM and SM in the third term, and this is how we end up with Luxon as PM.

    • Craig H 2.3

      Agree, although my understanding is that the government favours social insurance (or something like that) as the leading option, so they aren't doing nothing.

      • RedBaronCV 2.3.1

        Grant was muttering about some insurance type scheme. Personally I wondered how anyone would be able to afford it particularly the younger crowd.

        Even the better off pay income tax of 20%- 30%, GST of 15%, Student loan repayments 12% , ACC about 2%, Kiwisaver if they want a home 3% or more, all of which adds up to about 62% of their wages. Not much room to add anything to that.

        Plus these schemes are catnip to the RW who at some future time would expand them and let the welfare net go.

        Benefit raises would be good but I'm a lot more in favour of the lower paid getting better wages than continuing to subsidise employers. Wage and salary earners need a bigger share of the GDP plus spreading it more equally.

        Also wonder if it’s time to go back to the old days of flat child benefits.

    • RedLogix 2.4

      Income support levels have been at least 20% too low since Richardson's 'Motherfucker of all Budgets'.

      The NZ economy is going very well post-COVID (for most people – not all) and move to restore them back to a 'liveable' level in this year's Budget. The opportunity and timing has never been better.

      Ideally I'd love to see some form of GMI as a baby step towards reforming the entire welfare system.

      • Ad 2.4.1

        I'd like to see a New Zealand economy that doesn't depend on public infrastructure to prop up our entire economy for years on end. It's kinda useful, kinda good at soaking up unemployment, but not going to to drive wages up higher enough to pull the working poor out of poverty.

        I'd like to see an unemployment rate with the number 3 in front of it, and Maori and Pasifika unemployment down from 10 to a number 5 in front of it.

        I heard that Robertson's main economic advisor for several years just gave up and left and went to the CTU.

        We are far, far too dependent on government to be a high functioning economy.

        • Pat 2.4.1.1

          "I'd like to see an unemployment rate with the number 3 in front of it, and Maori and Pasifika unemployment down from 10 to a number 5 in front of it."

          Write to the stats Minister then….the numbers are largely made up anyway

        • RedLogix 2.4.1.2

          Totally agree. Another way of putting it is that because so much of our economy effectively 'farms for capital gain rather than cashflow' – too much equity 'sticks' in places where it's not very productive. And as a result we finish up relying the govt (one way or another) to keep money flowing rather than private enterprise.

          Which in turn means that opportunities to invest outside of property have been very thin indeed. It's become a very 'unvirtuous' feedback loop.

          I keep coming back to the tranche of tax reforms that TOP were proposing, especially their Comprehensive Capital Tax, an intelligently designed measure that was specifically designed to address this exact issue. You don't have to like the party to look at the concept and think about pinching it.

          • Ad 2.4.1.2.1

            I can easily see by the end of March New Zealand will have the Reserve Bank requiring an LTV ratio of 40% deposit to buy a flat, and also Governmetn making the Bright Line Test extend to 10 years for properties bought after Budget this year, and also Government proposing something tough like floating a maximum number of rental properties able to be owned by a single person or company or Trust that doesn't have charitable status, and also some stronger social or 'sweat' equity moves for getting people with poor credit records into home ownership.

            And I would not put it past the major banks to go: we expect you to get to 60% equity within a year to bring down our Bad Debt risk which the Reserve Bank tracks. I think the major banks can read.

            I think this Government in the mood to act.

            After the May budget, those who are on a near-50% debt-to-equity ratio might start to divest a few more.

            • Pat 2.4.1.2.1.1

              If they are leveraged that much that they’d do better to sell now before any announcement and get out with the handsome capital gain provided by the FOMO…it pays to panic first.

          • bwaghorn 2.4.1.2.2

            Stopping business that have owning property as part of the setup from running in interest only would be a good start ,many of the empire builders in farming never plan to pay principal so can pay over the odds for property,.

            If they had to pay 3% principle every year then they could only purchase land at a cost that allows 5,or 6% profit each year.

          • Nic the NZer 2.4.1.2.3

            On the contrary to your characterisation of TOPs politics, I disagree with their policy. The problem is their over reliance on economic theoretical ideas which have a poor track record in practice. On the UBI front this has lead to positions (from Morgan) where beneficiaries are thrown into an insufficient UBI regime without necessary topups based on their actual circumstances.

            On the CCT proposal the basic assumption is that property and other investors are 'rational' (meaning they know the actual odds of their investments succeeding and invest accordingly, as if playing roulette). If they are not and don't then there is no reason for investment to reposition itself more productively in response to a CCT anyway. This is coupled with an idea that there is a relatively fixed amount of investment available to the economy and so its about how that is distributed. In practice the amount of investment isn't really traded off between sectors, somebody investing in their property business doesn't detract from somebody investing in their orchard business in almost every case. Of course you can always do your analysis by turning all these individual investments into proportions of total investment but that is not how the institutions involved work and looks like the tail wagging the dog form of analysis.

            As you have identified, a lot of property investors don't seem actually rational, in fact they don't seem to even be investing very wisely and could probably be earning more in equity funds. At least we should understand everyone definitely isn't cashing out at present prices.

        • woodart 2.4.1.3

          NZ businesses are far far to dependent on the government to be a high functioning economy. .there, fixed it for you.

        • Craig H 2.4.1.4

          Said economic advisor is now the chief economist of the CTU (Bill Rosenberg's former position), so hardly a downgrade.

          We have among the lowest government economies in the OECD as a % of GDP, so it’s not like the government spend up large compared to other economies.

          • Ad 2.4.1.4.1

            If you think that the CTU is equivalent to the office of the Minister of Finance, you're dreaming. Even the most starry-eyed socialist deep mole in The Terrace would laugh.

            You should demonstrate your claim with OECD figures. The last I can find are from 2018.

            I'd see an extra $70billion into the economy from government spend in just 2 financial years as a massive over-reliance on the government to prop up our economy.

            • Nic the NZer 2.4.1.4.1.1

              The alternative of the economy cratering in response to lockdown would still seem to be vastly inferior of course.

              But your looking at govt financial indicators of govt intervention and then concluding things about how 'normal' the economy looks. Say the RBNZ writes off 37% of central govt debt (which they could) does that make the economy 37% less govt involved? Well no, it makes no difference at all outside of the govt books. If there must be another lockdown then it should obviously be accompanied by a similar wage subsidy and this should be understood as sensible economic policy, not some unhealthy dependence of the economy on the countries policy.

              • Ad

                As you've pointed out yourself before, ours is the government that has had to make the largest per capita set of interventions.

                Pointing out that we are so brittle that the same scale of intervention would have to be done again is not a note in our favour. It points simply that we are one of the least resilient developed economies in the world.

                • Nic the NZer

                  This is completely incorrect. The government didn't have to intervene, they decided to and the economy is doing better than others partly due to that (and partly due to fewer lockdowns).

                  This is not a sign of economic weakness, its a sign that the government is able to intervene in the economy to halt recessions. In fact basically it works in the other direction and the willingness of the govt to step in will determine how much/little any recession bites. Other countries have done less and are economically weaker as a consequence.

                  • Ad

                    It's sophistry to say they didn't have to intervene in what was the largest economic shock we'd had in a century. Even in the National counterfactual they would have intervened – as Canterbury showed multiple times over. Their intervention at scale is not a note of weakness on their part as government.

                    It is however an economic catastrophe.W hat's inarguable is the scale of shock we faced compared to other developed countries. Any of treasury's GDP graphs show it. Our largest industry has been shown to also be the most vulnerable to economic shock, and other large industries have been devastated. It's a very definition of brittleL easily snapped.

                    Most of this massive economic shift we are having to go through is being smoothed over with public spending on public projects. So in the medium term all we've been given is just the time it takes to do infrastructure projects to completely rebuild both tourism and tertiary education.

            • Craig H 2.4.1.4.1.2

              I remember reading about it in the Tax Working Group initial issues document which had charts, but that seems to have disappeared from their website. However, from memory, NZ is a bit under 30% for central gov't (not increasing this was also a focus of the 2017 election debates) and another 5% for local govt. OECD average is somewhat higher than that, mostly because of European countries with stronger safety nets and more subsidised education (for example).

              Bill was the main economist voice of unions and consequently was on a lot of tripartite forums and working groups – hardly just a socialist in an office somewhere.

    • Treetop 2.5

      A study needs to be done to establish how much rent people are paying on a benefit or low waged and how much they are left with once the rent is paid.

      • Sabine 2.5.1

        Treetop

        i read a few weeks ago that the median rent in Rotorua was 460.00 per week.

        And article from feb last year stated that the median rent in NZ was 515.00 per week.

        https://www.newshub.co.nz/home/money/2020/02/national-median-rents-hit-record-high-of-515-per-week-trade-me-says.html

        Here you can have a look at the benefit rates 2020

        https://www.workandincome.govt.nz/products/benefit-rates/benefit-rates-april-2020.html#null

        You don't need a study to be able to look at the numbers do your math and realise that the math of the government does not work.

        Sadly we don't have someone like Katie Porter – who is good with numbers – and her magic white board to question the power that are currently as to their math, their compassion, and their fuckwittery that keeping people below the poverty level begging for help is going to teach anyone the value of work.

        Maybe that would be a question for Jacinda Ardern, Grant Robertson and Carmel Sepuloni. Mind they know the value, that is why they are polititans and not workers.

        • Treetop 2.5.1.1

          I probably came across as being naive. I have been a benefit rights service advocate for 3 years 20 years ago. I still look up stuff. I am aware of the imbalance of income and the cost of rent.

          A study needs to establish how many in a dwelling, how much income and the cost of rent or mortgage payments?

          The median figure does not give a true representation of how much a person is left with once the rent is paid.

          • McFlock 2.5.1.1.1

            So would this be in the ballpark of what you are after?

            This looks at households with kids (because "Child Poverty Monitor"), but the MSD report (cited as "Perry 2019" in the current link) includes households with high "outgoing to income" ratios.

            So the population is in income quintiles (20% blocks from poorest to richest), and we can look up a variety of stats on the proportion of household income that is spent on housing costs.

            Again, relating only to households with kids, half of the poorest fifth of households spend more than 40% of their income on housing, while only 10-15% of wealthier households spend >40% of their income on housing.

            I could probably look through the MSD report for specific information tomorrow if you want, depending on whether my boss is watching lol.

            • Treetop 2.5.1.1.1.1

              Thank you for that.

              Some sort of precision monitor is required. If genome sequencing can be done for a virus the same needs to be done for the proportion of household income (of everyone recieving income in the dwelling) that is spent on rent and mortgage payment.

              This would need to be expanded further for other living and health costs.

              • McFlock

                I'm not sure what your genome analogy means.

                Basically, what statistic are you actually looking for? The proportion of household income spent on housing is sliced and diced multiple ways in the perry report. We can explore that before expanding the scope to other costs.

                P40, figure C.11 Shows the proportion of all households that are paying more than 40% of their incomes on housing, by quintile. For the poorest quintile, it's 30%. But recall the same data with households containing children, it's ~50% for that quintile. So now we have an idea on the position of households without children, too.

                Genome sequencing tracks a single type of virus as it infects from patient to patient. It doesn't really apply as an analogy to economic data as far as I can see.

                • Treetop

                  Genome sequencing deals with precision, not the best analogy.

                  When it comes to data for housing I want to know what the income is without the accommodation supplement (AS) and then with the AS and if temporary additional support (TAS) is accessed for rent?

                  I just skimmed through your links and I will read them properly.

                  • McFlock

                    Hmmm. There's a little bit about AS payments and housing costs in Perry, some of which seems to be from "iMSD".

                    If there's nothing specific enough, it might be a job for an OIA.

                    There was a stat a few years ago about the number of AS recipients receiving the maximum amount of AS. I'll have a think.

                  • McFlock

                    It might take a carefully-crafted OIA, especially regarding the pre-AS income.

                    A very interesting question, though.

      • McFlock 2.5.2

        MSD has one or two people who do massive amounts of work on incomes material hardship.

        The "incomes report" has a lot of before- and after-housing-costs information by demographic and income. The downside is that it's almost a data dump, easy to drown in, running to 360 pages. But if questions can be nailed down enough, it's pretty useful when talking poverty and equity.

        • Sabine 2.5.2.1

          maybe increase the number from 1 to 2 people working in that rather understaffed department to say maybe 10?

          and if you only dumb raw data you can still say you did a report. You just have to know how to find it, read it, and put it together. Its done…here ….have the raw data and a few filters. That counts as doing it or cya.

          • McFlock 2.5.2.1.1

            Yeah, lots of research units could do with more staff, not just in government, either.

            And sure, data analysts just press a button and the outputs generate themselves, lol

    • Sabine 2.6

      Well good to now that despite pretty much all of the NGO's saying so, all of the non formal NGO's – local help groups saying so, and people like me and Weka or Bill and thousands others saying so Jacinda Adern has yet to make any statement about her statement before the election …….there will be no increase in base welfare levels.

      She did not have an excuse then, and she still has no excuse. But she got her national voters to vote for her and her troupe of handmens, and I guess that was important to her.

      Priorities, she has them, and one was getting re-elected and well now she is elected. Why on earth would she bother finding an excuse?

  3. arkie 3

    An incredibly popular proposal that a particularly popular PM could use their personal popularity to push for policy implementation:

    A survey has found seven out of 10 New Zealanders believe the government should increase income support for those on low wages or not in paid work.

    "Prime Minister Jacinda Ardern promised to govern for all New Zealanders but right now many members of our communities are being locked into poverty by low income support rates," Ruby Powell, the economic fairness campaigner from ActionStation said.

    "The time for excuses is up. This poll shows the government has a clear social licence and mandate, on top of its moral obligation, to lift inadequate welfare payments to 'liveable' levels, and it needs to be done now, in this Budget round."

    No date has yet been fixed for Budget 2021.

    A report from the Child Poverty Action Network showed that none of the recommendations from the Welfare Expert Advisory Group have yet been implemented.

    https://www.rnz.co.nz/news/national/436866/survey-finds-69-percent-want-income-support-for-those-in-need-increased

    • RosieLee 3.1

      Raising income levels is all very well, if it happens, but until something meaningful is done about housing and rents it's a complete waste of time. We all know where the increased income will go – landlords' pockets.

      • Pat 3.1.1

        Indeed

      • Barfly 3.1.2

        Agree totally Rosie Lee – nearly 200,000 empty houses in the last census = property owners bricking their investments only looking for tax free capital gains.

        The excessive commidification of housing has given us obscene numbers of empty houses while people are living in garages, couch surfing, in cars and on the street.

        Exacerbating a housing shortage by "investors" bricking them also helps greatly distort rental prices in an upward direction. Can we have a large "ghost house" tax please……FFS

      • RedLogix 3.1.3

        We all know where the increased income will go – landlords' pockets.

        And from there is it will go into the capacious pockets of – the bank, the council rates, the insurance company, the property manager, the guys going gangbusters putting in insulation, kitchen vents, painting, replacing the hotwater cylinders, fixing windows, unblocking drains again, the lawnmowing dude, the people doing the smoke alarm inspection, the accountant, and of course the taxman.

        All going well that is.

        • arkie 3.1.3.1

          lol

        • Peter chch 3.1.3.2

          Yep agree Red, when I used to work Public Practice accountancy (a fate worse than death), I can't say I ever saw many landlords making much in the way of income profit, or even a meaningful return on monies invested.

          And then there's the stress of bad tenants, unpaid rent, damage, compliance requirements so on. Domestic rentals are sure not something that i would ever take part in.

          Demonising all landlords is just plain silly.

          • weka 3.1.3.2.1

            #notalllandlords only works if the industry heads and most landlords aren't rorting. But they are. Yes, there are good landlords (mine are relatively good), but the point here is that there is a culture, sanctioned by lack of legislation and policy, that means landlords get to make excess income at the expense of poor people. It's just wrong.

            Not sure when you were an accountant, but obviously the current situation is that many people are making very large sums of money from capital gains and that rents are going up beyond what people can afford to pay.

            • Peter chch 3.1.3.2.1.1

              Weka, yes I agree that rents in many parts of NZ are getting to crazy and unaffordable levels, but I would disagree as to cause.

              And yes again, huge tax free capital gains are possible, especially in the likes of Auckland, and I think that is the key.

              I would strongly disagree that '.. landlords makes excess income…'. Of course some do, but in our society (for better or worse) both tenants and landlords need to understand that domestic rentals are a business, just like any other.

              I am not too sure what '.. lack of legislation…' you are referring too, but the most obvious one and the most fairest would be to introduce a capital gains taxand actually enforce it (taxing capital gains is already in the Income Tax Act, but I have yet to see applied by the IRD).

              Its weird, if I sell a business asset for a profit, depreciation recovered is taxed, yet if I was to sell a domestic rental at a profit/capital gain, it is tax free.

              P.S. I left public practice in 2007 and regained my sanity.

              • I still prefer the Green's Wealth Tax that they put forward at the election (or similar). It has the potential to reduce house prices as well as making NZ a fairer place to live.

                Incidentally, and this is anecdotal, rents in Queenstown and Wanaka have dropped considerably due to the crash in the local economies due to the borders being closed.

              • weka

                ok, so you understand that what is happening now is completely different from 2007?

                This piece from the Spinoff is an eyeopener,

                We made 110% profit in two and a half years and once we pay back the bank we will have a new car, a holiday, and a lot left over. We put none of our own income into the property and ‘wrote it off’ against our personal taxes as well. It was all legal, and easy – like a joke really, or a game. And this story is nothing new or unusual in this country. It happens every day. It’s The Kiwi Way of Life, Simon Bridges said. If anyone ever tries to tell you they are not making money at this game, feel free to tell them they must be playing it horribly wrong. Landlords are making plenty of money out of this game.

                Mum and Dad investors. And yes, they put the rent up by 1/3, not because they had to, but because "That’s what landlords do".

                https://thespinoff.co.nz/society/26-02-2019/i-was-a-landlord-and-i-hated-the-person-it-made-me-become/

                That is excess income. Both the capital gains and the rent increase. I'm not saying landlords should make nothing, or that it's not a business. I'm saying that too many landlords are making more than a living at the expense of poor people.

                The legislation and policy I was referring to was tenancy rights. But yep, the govt needs to make major moves on the whole crisis, CGT is but a small part of that. They won't though, because people making money from housing is propping up the economy and too many of those people are Labour voters.

                • RedLogix

                  That kind of story is only possible because:

                  I bought our below average rental in its unpopular town, dragged it into the 21st century with a few improvements,

                  I guarantee you they bought it really cheap – spent a minimum on it – and then sold in a rising market. The difference between this story and providing a modern, comfortable, 3 bed home in a popular city suburb is night and day.

                  The people who wrote this piece were never landlords – they were property speculators right from the outset with no long term intention of staying in the business. That they rented it out for a few years was just a minor consideration on the side.

                • sam green

                  "Mum and Dad investors. And yes, they put the rent up by 1/3, not because they had to, but because "That’s what landlords do"."

                  I've never done that. And the term Mum and Dad investors? Pick a different term.

                  • McFlock

                    oh look, another #notalllandlords.

                    Can all of these nice landlords join the real estate lobby groups and ask for rent controls and housing quality standards? I mean, they're already charging below market rates for good properties, so they won't face the same costs as slumlords or profiteers.

                  • weka

                    You've never done that but plenty do. Have you not been paying attention to what is going on?

            • RedLogix 3.1.3.2.1.2

              that means landlords get to make excess income at the expense of poor people.

              An actual 'in the hand cash flow income' usually only happen if the business is carrying no mortgage, and in the normal course of events it can take 2 – 3 decades to get to that stage.

              Before this the owner of the business is often subsidising the company with their PAYE income from their day job. (The old LAQC tax smoothing scheme was introduced to specifically handle this almost universal scenario.)

              And yes the capital gains have meant a big increase in equity – but that can only be accessed when you sell. Well not only can you only do that once – and of course on the tenant side it hugely contributes to insecurity of tenure.

              • Or if you refinance. At current interest rates, I am sure many are taking tax free cash out of their rental by increasing the mortgage, and this must surely be a contributor to rising rents.

                Beyond introducing and applying a capital gains tax, I think only increasing supply can make a meaningful difference. Lets hope that now Twyford is gone, this term the government will make some meaningful increase in supply.

                • Pat

                  Supply is not the issue…as Christchurch demonstrates…zero population growth, excess subdivision and development and yet the prices and rents continue to rise.

                  The (main) cause is excess liquidity and the wrong incentives.

                  • Hi Pat. I think that ChCh is a bad example. Since the earthquake the city has spread out hugely to the west, north west and south west. In the east of course, which has historically been lower cost housing, its just one huge barren landscape in many areas. The whole market is totally distorted.

                    The new dwellings are all of a certain type. Flashy, expensive and not really good rental material. So, I would strongly disagree that supply has increased in the rental market.

                    Agree with you re excess liquidity, along with interest rates sub 3% and the wrong incentives (lack of Capital Gains Tax).

                    PS: Are you sure that there is zero population growth in ChCh? That just seems counter to what I am seeing.

                    Would love to hear your views on other wrong incentives, and actions to take. This is a complex area for sure!

                    • Pat

                      The growth is in Selwyn and Waimakariri…Christchurch city has barely recovered to its pre quake population…and the number of subdivisions particularly around Halswell and Hornby/Wigram makes the lie of insufficient land being a major driver, not to mention the number of unoccupied sites and unoccupied houses.

                      The wrong incentives relate to preferential tax treatment, artificially supporting above market rents with AS and no real control on outside speculation…we dont measure the true rate of offshore investment because we dont wish to have to address it.

                      The strategy is ever increasing house prices to provide the 'growth the financial system needs to continue as we have given up on being competitive with production.

                      Changing the incentives towards production carries big financial risk and will take time to show effect….risks the politicians (and in all honesty , most voters) are not willing to take.

                    • Pat. Difficult to disagree with your points and thank you for well thought out reply.

                • Incognito

                  Exactly. The equity is not locked away but can be used (semi-unlocked) in all sorts of various ways without having to sell up. It is completely different from an asset-rich but cash-poor super annuitant who cannot afford to pay the rates on their own home, for example.

                  • RedLogix

                    The equity is not locked away but can be used (semi-unlocked) in all sorts of various ways without having to sell up.

                    It's not quite like going to an ATM. And once you stop working full time the big issue in accessing equity is serviceability. And of course with a bigger debt, comes bigger repayments, so all you've really done is kick the can down the road. I would only consider it in the event I had an investment opportunity that was going to put the equity to better use.

                    So yes you can go to the bank to get a bigger loan, but it's not 'free money'.

                    • Incognito

                      Servicing is done by tenants, which is one reason why rents go up even when interest rates are going down: freeing up money for the owner.

                    • RedLogix

                      The bank only considers some fraction of the rental income. It's not usually enough by itself – they definitely want to see evidence of other income to cover your living costs.

                    • Incognito []

                      Huh??

                    • Yes Incognito, pull out $100,000 tax free by increasing the mortgage by $100,000. Thats only an extra $60 or so per week in cost (tax deductible) for the landlord, which in turn can easily be passed over to the tenant in the form of increased rent.

                      And of course the reduction in equity (of $100,000) will be replaced over time by the capital gain. Yes, not 'free money', but a helluva incentive to take tax free money now and let the tenant pay for it.

                    • Incognito []

                      There appears to be a renovation boom that’s partly driven by low interest rates and partly by Covid-19. Much of these are done with an eye on the future at which they need to give a return, e.g. a higher asking price when put on the market. This will drive up house prices for some time. The other thing to note is that some people will want or need to free up equity as you explained to fund those renovations. This, in turns, puts an upward pressure on rents. Lastly, some property owners will take the opportunity to renovate their rentals. You can guess what that will do to rents for a long time to come. It is too easy, relatively speaking, to get credit from banks and/or to free equity for property owners and I don’t blame landlords for that. Of course, the tax regime helps too.

                    • RedLogix

                      @Incog

                      Increasing your mortgage is not as simple as ringing the bank and demanding they give you money.

                      The three big hurdles are proof of equity, your ability to service the loan, and age.

                      Serviceability relates to income – and the bank never allows for the whole rental income. Usually they only count some fraction of it like 60% or even less. These days with rents so low compared to the value of the property (I know that sounds bizarre) this is usually the limiting factor on how much equity you can access.

                      Plus they have their own internal policies around exposure to specific risks that change all the time and you only find them out when you thought you had a watertight case – they say 'no'.

                    • Incognito []

                      Increasing your mortgage is not as simple as ringing the bank and demanding they give you money.

                      That sounds more like an armed hold-up 😉

                      Actually, it is, although banks prefer things in writing so e-mail generally works better, via the internet banking channel, of course. In some cases, you won’t even have to go into an actual bank for anything! For example, do you know how easy it is to apply for a new credit card with a ridiculous limit? Hint: way too easy! Yes, I know, it is guaranteed but it is essentially the same thing: increased funds for ‘discretionary spending’ AKA consumption.

                      The three big hurdles are proof of equity, your ability to service the loan, and age.

                      Depending on your situation and what you’re instructing the bank to do, these are not all that big hurdles. Proof of equity is not always required if you have a long-term relationship (AKA history) with your bank and do all your business with/through them. They have their own ways of doing background checks too. Banks want to know about change of circumstances regardless whether you refinance and increase the mortgage on one property and decrease it on another (e.g. your home). Yeah, age is a bit of bastard but if you have a good personal super scheme a lot of things are possible with a kind and friendly bank 🙂

                      So, it all depends.

          • RedLogix 3.1.3.2.2

            I guess my real point is that it's the wider housing market in NZ is where the locus of the problem lies. At present tenants are living in fear of the next rent rise, and their landlord who is likely doing their annual accounts this month – looks at their very thin, or negative, cash flow and realises the rents have to go up again.

            So in essence Rosie is correct – unless this govt can find a package of measures to reduce housing costs and asset inflation – then any improvement in income support will indeed likely get absorbed in housing costs. Blaming the landlord does diddlysquat to fix this.

            • Ad 3.1.3.2.2.1

              The anxiety will go down somewhat now that rents can now only go up once a year, it's now very hard to give tenants notice, and the minimum standards for heating and insulation have gone up significantly.

              It might take a few months for all to catch up with that.

          • anker 3.1.3.2.3

            Simply really. Don't be a landlord if it's not working for you.

            I was a landlord once. It came about not because I bought an investment property (that would be against my principles) but because I moved cities and I wanted to keep my house in the city I moved from in case it didn't work out in the new city.

            I eventually sold it when I realized I wasn't going to move back. The realtor at the time broke the "bad" news to me that I could have been charging $100 extra a week in rent. I told him I thought I had charged a fair rent and thats what mattered to me. The rent covered my expenses a little bit plus.

            I don't believe its o.k. to make a big profit out of offering a basic need to others.

            • RedLogix 3.1.3.2.3.1

              to make a big profit out of offering a basic need to others.

              What 'big profit'? Even if you'd been charging that extra $100pw that amounts to barely another $5kpa. Before tax.

              As for ' basic needs' how do feel about your supermarket, and all their suppliers? Or any of the myriad other businesses/services you use to meet your 'needs'. Are all of these 'against your principles'?

              • Ha! You've got him there Red.

                I have absolutely no truck with this idea that all landlords have horns and a tail and are exploiting renters by making excess profits out of supplying basic needs. Of course some do, but in my experience they tend to be of certain migrant groups exploiting their fellow migrants. Most Kiwi landlords are just ordinary middle income people who think they will make their fortune in RE and find out its just not that easy.

                • arkie

                  they tend to be of certain migrant groups exploiting their fellow migrants

                  This isn't my experience, and this statement feels a little more problematic than "All Landlords are Bad" which precisely no-one in this thread has said except for you and RL.

                  • No I never said 'all landlords are bad'. In fact have repeatedly said the exact opposite. Best you read my postings again if you think that. LOL.

                    As for migrant groups, browse through the court cases and prosecutions and you will see that two particular groups stand out for appalling rental abuses, the same two groups that stand out for paying appalling wages. LOL (which seems your default answer to everything Arkie).

                    • arkie

                      No one is 'demonising all landlords', no one has said 'all landlords have horns and a tail'. You said both of these in response to reasonable criticism of the current system, it's disingenuous as no one was arguing that.

                      Otherwise I have no time for forming problematic opinions of migrants, thanks.

              • Drowsy M. Kram

                What 'big profit'? …barely another $5kpa

                $5kpa here, $5k there, pretty soon we're talking real money – for some wink

                Revealed: How your wealth ranks compared to other New Zealanders
                "The bottom 10 percent has a collective $13 billion of debt. The top 10 percent has $800 billion in wealth – more than the other 90 percent combined."

                I do feel a bit sorry for you RL, but that’s just the way the cookie crumbles – not everyone can turn the size of profit they feel they’re entitled to.

                • RedLogix

                  I was never here for sympathy.

                  The NZ housing market has many, many problems – and while for many people the rent they pay is the most proximate symptom of this, and the one they get most upset about – the root causes lie elsewhere.

                  • Drowsy M. Kram

                    I was never here for sympathy.

                    Good to know. Re "root causes lie elsewhere", might the growing inequality of wealth distribution in NZ be a root cause?

                    In a more equal New Zealand we'll all be better off. Like anker, I don't believe its o.k. to make a big profit out of offering a basic need to others, mainly because that grows inequality, and inequality is, if not the root cause, certainly a root cause of social problems. A little bit like the love of money, tbh.

                    Revealed: How your wealth ranks compared to other New Zealanders
                    "The bottom 10 percent has a collective $13 billion of debt. The top 10 percent has $800 billion in wealth – more than the other 90 percent combined."

                    Make private sector renting better

                    Life as a renter holds up the enticing possibilities of freedom and choice about when to move and where to live without the burdens of property ownership, debt and maintenance. The reality is that for many people on low incomes choice is seldom the case. The 90-day notice option for landlords hangs over every renter’s head. The desire to maintain social and community networks often means accepting sub-standard housing. Changing personal circumstances (separation, becoming a sole-parent, growing families, disability or illness) can suddenly threaten the ability to stay in your chosen home. The average tenancy lasts around 18 months which points to the transient and short-term nature of the NZ rental housing market.

                    Some small improvements are now in effect. which is good.
                    https://www.newshub.co.nz/home/money/2021/02/what-the-residential-tenancies-act-changes-mean-for-you.html

                    • RedLogix

                      Like anker, I don't believe its o.k. to make a big profit out of offering a basic need to others, mainly because that grows inequality,

                      And like anker I invite you to explain why you believe it's OK to provide other legitimate needs like food, clothing, etc for profit – but for some unspecified reason it's wrong to do this for housing.

                      Taken to it's conclusion this logic means that anyone who profits from providing housing – builders, banks, developers, material suppliers, etc – should all be condemned as equally illegitimate.

                      As for this idea that 'big equity = big profit' – well that's only partially true. It's not always so easy to access, and there are downstream consequences of doing so.

                    • McFlock

                      RL seems to be on the cusp of recognising an inherent flaw in capitalism: people profit most off folks who can't avoid it, regardless of the product or service.

                      Take the Hutt Valley landlord of a couple of days ago – literally putting someone out of their home of seven years because he wanted more money. Or the repeated accusations of profiteering by NZ's supermarket duopoly (didn't some supermarkets get bad press for hiking prices during the covid panic buying?). Or tobacco companies actively misleading their customers about addiction and health effects related to their product.

                      And many get a pass on their behaviour because "it's just business", as if greed is an excuse for exploitation. "Business" reduces every other person into two categories: a resource to be consumed in the production of the product being sold, or a customer to from which to extract as much money as possible.

                      Every person in a capitalist society is guitly of this alienated behaviour, the only question is the extent of our own personal guilt. But pretending that we're somehow the blameless exception is a fantasy.

                    • Incognito []

                      When goods & services are sold, they change hands. You have certain protections under the Law too. It operates as a market as much as can be expected between fairly equal parties.

                      When a hotel charges for a room, it incurs GST. The price reflects quality of room & service and availability.

                      When a landlord rents out a property, nothing changes hands, and no GST is paid. There are few protections. The power balance is badly skewed in favour of the owners. There’s a relatively weak correlation with quality, at best. It seems to be scarce all the time.

                    • RedLogix

                      Take the Hutt Valley landlord of a couple of days ago – literally putting someone out of their home of seven years because he wanted more money.

                      And as I showed at the time – the rent was still $100pw less than the market rent he could have asked. And you moan about it this.

                      What level of rent would you have been happy with?

                      people profit most off folks who can't avoid it, regardless of the product or service.

                      Well no – the tenant is in principle free at any time to leave with minimal notice and find something better. That they would prefer to stay and enjoy their community roots and connections – well that's their choice surely?

                      That in reality the NZ housing market isn't providing much in the way of better choices at the moment, is a much wider problem than just me providing a service to people that they're happy to pay for.

                    • McFlock

                      And as I showed at the time – the rent was still $100pw less than the market rent he could have asked.

                      No, you you made assumptions that a specific property was of a certain value based on only two dimensions: geography and bedroom number. You don't even know the dwelling could be legally rented out beyond 1 July, which would limit its "market rent" to the short-term low-quality section of the market, for a start.

                      That in reality the NZ housing market isn't providing much in the way of better choices at the moment, is a much wider problem than just me providing a service to people that they're happy to pay for.

                      "happy to pay for" lol.

                      But you obviously missed the bit where I said it was a wider problem than just being about you. Those particular blinkers are common in people "just doing business" – it's part of the alienation caused by the "wider problem"*

                      *It's capitalism. Capitalism is the wider problem.

                    • RedLogix

                      The average tenancy lasts around 18 months which points to the transient and short-term nature of the NZ rental housing market.

                      In the first 15 yrs of running our business, this was pretty much our experience too. But not counting a couple of legitimate evictions that we had to undertake – in every single case the tenant moved on for reasons that had absolutely nothing to do with us, the quality of the unit, or it's affordability. Usually they just wanted to move elsewhere because something in their life had changed.

                      People rent mostly because owning just doesn't make any sense for them at this particular stage of their life. They value the flexibility renting gives them.

                    • McFlock

                      People rent mostly because owning just doesn't make any sense for them at this particular stage of their life. They value the flexibility renting gives them.

                      Alex, I'll take "What the more mild-mannered capitalists tell themselves to sleep at night" for $100, please.

                    • RedLogix

                      No, you you made assumptions that a specific property was of a certain value based on only two dimensions: geography and bedroom number. You don't even know the dwelling could be legally rented out beyond 1 July, which would limit its "market rent" to the short-term low-quality section of the market, for a start.'

                      Do you have any evidence of these assertions?

                      And as a rule the govt tenancy website that lists rental bands is very reliable. In this case the band for this type of property in Wainui is $500 – 550pw and even the 'increased rent' was well under this at $430pw. For the purposes of this discussion it's entirely reasonable we regard this information as accurate unless proven otherwise.

                      Besides if we go with your idea that maybe the property was not legally rentable after 1 July – then why are we blaming the landlord? The tenant has been living there for seven years, and seems very unhappy at the prospect of having to leave – and if the landlord reluctantly decides to sell because he chooses not to keep throwing good money at it – then exactly who is to 'blame' here?

                    • McFlock

                      For the purposes of this discussion it's entirely reasonable we regard this information as accurate unless proven otherwise.

                      I'm not saying it's inaccurate. Population statistics do not give reliable inferences to individual case conditions.

                      I'm suggesting that the "bottom quartile" value is not the same as "absolute lowest rate charged in every tenancy agreement lodged in the last six months".

                      but I'm totes sure #notalllandlords /sarc.

                    • RedLogix

                      I'm suggesting that the "bottom quartile" value is not the same as "absolute lowest rate charged in every tenancy agreement lodged in the last six months".

                      Having spent 20 odd years doing this, all I can tell you is that the quartile bands pretty much cover at least 90% of new bonds lodged.

                      Sure there will be some exceptional outliers that fall well outside the band, but basing your case on them takes the discussion nowhere.

                    • McFlock

                      Sure there will be some exceptional outliers that fall well outside the band, but basing your case on them takes the discussion nowhere

                      So you didn't show that he was undercharging, as you previously claimed. You were simply guessing that a landlord who thinks healthy housing regs will force him out of the market was not renting out homes in the bottom 5% of value.

                      Now, you might be right and the landlord is a charitable dude. But in my 30 years in the rental market, charitable landlords are pretty rare. Easygoing, sure. Willing to ignore a missed payment if we ignore the slight fire hazard or poor maintenance, sure. But charitable? Rare as hen's teeth.

                    • RedLogix

                      But charitable? Rare as hen's teeth.

                      Given the tenant's circumstances – I'd bet good money on this being exactly the case.

                      And some landlords – especially the ones who're not using professional managers – put off increasing the rent until a change of tenancy. Given that on average this happens about every 18mths it's not an unreasonable, if somewhat lazy strategy, but it can bite you in the arse when a tenant stays for many years.

                      And it especially bites you in the butt when you realise the rent has fallen to 30% below market (530 – 380) *100 /520 and the govt is going to limit any future rises to 10% pa. Oh well unintended consequences and all …

                    • McFlock

                      Or he could just be kicking them out because although they were stable tenants for a substandard house, he won't be legally able to rent it out in a few months so needs to either fix it or sell it while it's rentable.

                      Toss a coin.

                    • RedLogix

                      Or he could just be kicking them out because although they were stable tenants for a substandard house, he won't be legally able to rent it out in a few months so needs to either fix it or sell it while it's rentable.

                      More unintended consequences …

                    • McFlock

                      Not really. Regulations are needed to keep arseholes out of the market, in order to stop people figuring out that capitalism is exploitation.

                      But it would mean that a particular home needs significant renovation or would most likely be purchased as owner-occupier home rather than a rental. But then the new occupiers lived somewhere else previously, so that home is freed up…

                      But of course that's all a distraction from your assertion that random landlord in the news is charging a low rent purely out of the kindness of his heart rather than the quality of his property.

                    • RedLogix

                      But of course that's all a distraction from your assertion that random landlord in the news is charging a low rent purely out of the kindness of his heart rather than the quality of his property.

                      Because you have zero experience of being a landlord you have no reference point for what is likely or not.

                      What almost certainly happened here is an aggregation of factors – that he'd let the rent fall so far behind market (for whatever reason), and that he had determined a need to upgrade the property (for whatever reason) – and that new govt rules were closing down his opportunity to resolve both problems.

                      As I said – good rules but unintended consequences.

                      As for your implication that some alternate economic system (that you don't specify but I'm going to assume in the absence of information is some form of neo-Marxism) – would somehow quite magically not require any regulation … well here you are worrying about me making informed guesses about a business I know quite well.

                    • McFlock

                      Because you have zero experience of being a landlord you have no reference point for what is likely or not.

                      My "reference point" is every landlord I've ever had.

                      We know two things:

                      • His rent was at the lower end of the scale; and
                      • he was concerned that healthy housing regulations might force him out of the market

                      You might think they are largely unrelated.

                      And Big Tobacco just wanted to make cigarettes a more pleasant experience for consumers, not more addictive. /sarc

                      As for your implication that some alternate economic system (that you don’t specify but I’m going to assume in the absence of information is some form of neo-Marxism) – would somehow quite magically not require any regulation

                      There you go again, making shit up. I made no such implication.

                  • Drowsy M. Kram

                    And like anker I invite you to explain why you believe it's OK to provide other legitimate needs like food, clothing, etc for profit – but for some unspecified reason it's wrong to do this for housing.

                    Dear RL, I will politely but firmly reject your efforts to attribute to me beliefs that are not in evidence. At the risk of repeating myself, and as anker stated, I don't believe it's o.k. to make a big profit out of offering a basic need (food and water, sufficient rest, clothing and shelter, overall health) to others. Like anker, that's just the way I see the world.

                    Question for you; is NZ’s private rental market decreasing inequality, decreasing inequality, or making little difference to inequality?

                    Heck, since we're talking "root causes", why not go for broke. Is the current level of inequality in NZ sustainable? I don't see how it can be, but maybe the answer depends on personal wealth – which could explain why one’s answer might change over time wink

                    • RedLogix

                      I will politely but firmly reject your efforts to attribute to me beliefs that are not in evidence.

                      And then you go and repeat the exact belief you claim is ‘not in evidence’.

                      At the risk of repeating myself, and as anker stated, I don't believe it's o.k. to make a big profit out of offering a basic need (food and water, sufficient rest, clothing and shelter, overall health) to others.

                      As I've explained carefully a number of times – your characterisation of 'big profit' just doesn't match up to reality. Unless of course you're talking equity inflation which applies regardless of who owns the property, and what purposes they put it to.

                      Personally I would much prefer just to run my business for a reasonable cash flow return and forget about the equity – because the moment capital gain becomes the main consideration I'm in a different kind of business altogether.

                      And that's a much wider problem across many NZ business sectors, than just residential rentals.

                  • Drowsy M. Kram

                    Careful RL, you're on quicksand. At 1:14 pm you replied to me:

                    And like anker I invite you to explain why you believe it's OK to provide other legitimate needs like food, clothing, etc for profit – but for some unspecified reason it's wrong to do this for housing.

                    I intepreted that as an attempt by you to attribute to me the belief that "it's OK to provide other legitimate needs like food, clothing, etc for profit – but for some unspecified reason it's wrong to do this for housing." As it was you who introduced "supermarket" and "the myriad other businesses/services" (@3.1.3.2.3.1), and the idea of a distinction between shelter and other basic human needs vis-à-vis profits, into this thread, I politely reaffirm my rejection of your erroneous attribution of belief.

                    To be absolutely clear, it was you who introduced basic needs other than shelter into this thread, and I’ve made no distinction between the various basic needs when providing them for a (big) profit – that’s all on you.

                    • RedLogix

                      , and I’ve made no distinction between the various basic needs when providing them for a (big) profit

                      OK so that's the answer I was looking for. Essentially you're rejecting the idea that it's acceptable to make profit. Which is a very common left wing sentiment but it just took a while to get it out of you.

                      And just one last time – in terms of cash flow most residential rental businesses make very little, if any profit, directly off their tenants. So that gets rid of your (big) qualifier.

                      Indeed the primary reason for anyone to stay in the business at present is in fact the capital gain – and as I've said before – there really is no particular distinction here between rentals and many other business sectors in NZ.

                      After all most farmers make most of their (big) money from capital gains – are you suggesting this makes their business somehow 'wrong' as well.

                  • Drowsy M. Kram

                    Essentially you're rejecting the idea that it's acceptable to make profit.

                    An intriguing conclusion, reflecting a common right-wing belief. I do believe that the pursuit of excessive profit is problematic, as is the definition of ‘excessive’ in this context.

                    Oh, the morality: why ethics matters in economics
                    Writing four decades ago and seeking to give some respectability to this ideological perspective, the right-wing US economist Milton Friedman posited that “the social responsibility of business is to increase its profits”. “Maximising shareholder value” is how it would be described today.

                    It should be patently evident, however, that this is not a reliable route to a good society. Five big problems bedevil the strategy: instability, insecurity, inequality, monopoly power and unsustainability.

                    Btw, any thoughts about these questions?

                    Question for you; is NZ’s private rental market decreasing inequality, decreasing inequality, or making little difference to inequality?

                    Heck, since we're talking "root causes", why not go for broke. Is the current level of inequality in NZ sustainable? I don't see how it can be, but maybe the answer depends on personal wealth – which could explain why one’s answer might change over time wink

                    Moral Recovery and Ethical Leadership
                    Interface’s customers were no different and had begun to ask what the organization were doing for the natural environment. The research division of the company organized a task force made up of the company’s international representatives to develop a response to this question. Anderson was invited to make an address to initiate the first meeting of the taskforce, and admits to not being initially interested in the question beyond the level of legal compliance.

                    In preparing to deliver this address, he read Paul Hawken’s The Ecology of Commerce (1993) which details the huge amount of irreparable damage which industrial processes inflict on the natural world. Anderson described its impact as a life altering moment in injurious terms: “Hawken’s message was a spear in my chest that is still there”. Anderson’s description of the impact of this knowledge, and his investigations in the damage that his own company was doing to the natural world, are full of the language of sickness. For example, near the beginning of Mid-Course Correction he writes that learning the amount of material extracted from the earth “made me want to throw up”.

                    Anderson’s ‘spear in the chest’ analogy has been described by him and others (e.g., Bakan, 2004*) as an ‘epiphany,’ but this paper posits that it might be better described as a moral injury. Epiphanies are “sudden and abrupt insights and/or changes in perspective that transform the individual’s concept of self and identity through the creation of new meaning in the individual’s life”. Epiphanies result in an individual changing their pre-existing idea of who they are, or what their life means. “The experience of epiphany involves an often sudden realization by an individual that they have been living their lives according to a framework that has not served them or others well, and a shift to another which is more positive”. Epiphanies, however, “are preceded by periods of anxiety, depression, and inner turmoil”. Moral Injuries, on the other hand produce mental anguish rather than preceding it. Prior to his engagement with questions of what damage being done the natural environment by Interface’s operations, Anderson initially “never ‘gave a thought to what we were taking from the earth or doing to the earth in the making of our products’”.
                    *Bakan, J. (2004). The corporation: The pathological pursuit of profit and power. London: Constable.

                    https://link.springer.com/article/10.1007/s10551-020-04658-3

                    • RedLogix

                      That's a whole other discussion – but in a nutshell if you want to make an argument to burn down the entire modern economy – because it's 'pathological' – then I'll call you on the inevitable consequences.

                  • Drowsy M. Kram

                    but in a nutshell if you want to make an argument to burn down the entire modern economy – because it's 'pathological'

                    It's a hackneyed argument, no future in it and best avoided imho.

                    Transitioning to a sustainable economy might be possible – some would say essential. But your defense of (and desire for?) big profits, and this critique of 'doughnut economics', don't fill me with hope.

                    Doughnut (economic model)
                    Branko Milanovic, at CUNY’s Stone Center on Socio-Economic Inequality, said that for the donut theory to work, people would have to "magically" become "indifferent to how well we do compared to others, and not really care about wealth and income.

                    Mmm… Donuts! Like profit, you can have too much of a good thing.

                    Question for you RL; is NZ’s private rental market decreasing inequality, decreasing inequality, or making little difference to inequality?

                    Heck, since we’re talking “root causes”, why not go for broke. Is the current level of inequality in NZ sustainable? I don’t see how it can be, but maybe the answer depends on personal wealth – which could explain why one’s answer might change over time.

                    • RedLogix

                      It's a hackneyed argument.

                      And what am I to make of your argument when all you ever seem to do is characterise modernity solely by it's flaws.

                    • RedLogix

                      Question for you RL; is NZ’s private rental market decreasing inequality, decreasing inequality, or making little difference to inequality?

                      The interesting thing about a society that's growing more prosperous is that the nature of that growth is more like multiplication rather than addition. The fundamental way to think of multiplication is that it takes a base vector and stretches it, while addition takes that same vector and shiftsit.

                      In other words as we become more prosperous, those who start close to zero tend not to move much, while everyone else does, and those with a small advantage at the beginning – all other things being equal – gain much more in absolute terms. So while everyone might gain at a constant rate – the absolute gap between the richest and poorest innately grows over time.

                      At core we should recognise that inequality is an unavoidable result of all human progress – and once we have this firmly in mind – we can then start to define why we think the extremes of wealth and poverty are a problem, and what actions we might take to start shifting the people at the bottom of the scale up toward those at the top. (A fundamentally different kind of operation to our pure economic growth model.)

                      And quite different than the ideas you seem to keep returning to which is to somehow cancel the modern economy so that we all collapse back into poverty. Sure that's one trivial solution to inequality, but most people are not going to think it an impressive one.

                  • Drowsy M. Kram

                    And what am I to make of your argument when all you ever seem to do is characterise modernity solely by it’s flaws.

                    More hyperbole RL? You’re nothing if not reliable. I have, however, written here about the benefits of modern medical care and treatments, e.g. vaccines, so make of that what you will.

                    Despite some Luddite proclivities I'm a fan of many aspects of modernity – quite dependent/captured in fact. This hasn't blinded me to its flaws, chief among them the unsustainable nature of civilisation.

                    At my age the prospect of collapse doesn't worry me on a personal level, but I do wonder how our collective love of money will play out for human civilisation.

                    Man is a victim of dope/In the incurable form of hope” – Ogden Nash

                    Civilisation peaked in 1940 and will collapse by 2040: the data-based predictions of 1973
                    Their view is a bit sunnier, anticipating a world where global governments are forced to cooperate to solve complex problems, people widen their cultural horizons and work fewer hours, and limited consumption – not wealth – becomes a mark of prestige. Viewed today, it makes for an engrossing artifact, raising far more questions than it answers about humanity’s ability to effectively predict its future and correct its course.

                  • Drowsy M. Kram

                    @RL (4:39 pm)

                    In other words as we become more prosperous, those who start close to [or below] zero tend not to move much, while everyone else does…

                    At core we should recognise that inequality is an unavoidable result of all human progress…

                    Does it follow that less progress would mean less inequality? And is there truly no example of human progress that doesn't result in greater inequality? Personally I reject such a bleak worldview. Wealth inequality, and particularly the magnitude of that inequality, is a choice, one that we've both made.

                    And quite different than the ideas you seem to keep returning to which is to somehow cancel the modern economy so that we all collapse back into poverty. Sure that’s one trivial solution to inequality, but most people are not going to think it an impressive one.

                    You know my proposed solution to extreme poverty (perpetual indebtedness) in NZ . And you know that it doesn’t require that we “somehow cancel the modern economy so that we all collapse back into poverty“, but whatever floats your boat.

                    Why poverty in New Zealand is everyone's concern
                    Liang describes poverty as a "heritable condition" that perpetuates and amplifies through generations: "It is also not hard to see how individual poverty flows into communities and society, with downstream effects on economics, crime and health, as well as many other systems. Loosen one strand and everything else unravels."

                    A Kete Half Empty
                    Poverty is your problem, it is everyone's problem, not just those who are in poverty. – Rebecca, a child from Te Puru

                    • RedLogix

                      Does it follow that less progress would mean less inequality? And is there truly no example of human progress that doesn't result in greater inequality? Personally I reject such a bleak worldview.

                      Take a rubber band, hold one end of it fixed at some point on a table top and stretch the other end to say double the length. Congratulation's you've just doubled activity and wealth in this tiny little toy economy. (It's not an even close to accurate model, but it'll do for a first pass.)

                      Note carefully, while on average everyone is better off, the people who were close to the fixed (the poor) end have scarcely moved at all, while those close to the end you moved (the well-off) are now doing twice as well. And that while the gap between the poor and rich started out as say 1unit – the gap is now roughly 2units.

                      So while we've increased total prosperity on average, we've also increased relative inequality at the same time. What then is the best strategy for retaining prosperity while at the same time decreasing inequality?

                      Ideally we might propose releasing the fixed end of the rubber band so that instead of growth being all about stretching the band to achieve growth, instead is became more a case of shifting the whole band in the desired direction.

                      Closer to reality we might think of what has happened globally in the past 200 years as a combination of both stretching and shifting, that while the very richest have extended their wealth by some huge non-linear factor, the poorest in the world have actually seen their absolute position shift significantly as well. So all is not lost – we know that in practice something of what we would like to achieve can and has been done.

                      Part of the solution is I think going to happen anyway over the course of this century, as demographics age almost everywhere, the nature of economic growth may well shift from being dominated by 'stretch mode' as it has been for the past two centuries, to more of a 'shift everyone up mode'. And indeed the so-called “Elephant Curve” can be interpreted as a direct demonstration of this happening.

                      https://en.wikipedia.org/wiki/The_Elephant_Curve

                      The other reason for hope is that capitalism in itself is not really an ideology, rather I see it as an emergent economic methodology that's demonstrated a remarkable adaptability over time.

                      What I do reject however is any suggestion that amounts to saying that inequality is all the pathological fault of the rubber band for being elastic and getting longer over time – and therefore we should burn it.

                  • Drowsy M. Kram

                    What I do reject however is any suggestion that amounts to saying that inequality is all the fault of the rubber band for being elastic and getting longer over time – and therefore we should burn it.

                    The rubber band is blameless. Burning it isn't a good idea – so smelly!

                    Could we perhaps stretch your rubber band analogy to include the 10% of NZers carrying a collective $13 billion of debt?

                    If so, then I would amend your analogy by placing the fixed point some 10% from one end of the rubber band, and then stretch the band in opposite directions away from that fixed point. Is growing debt (stretching the band in one direction) a necessary consequence of growing wealth (stretching the band in the other direction)?

                    One thing your analogy makes abundantly clear (pun intended) is that there's plenty of wealth in NZ, and that net wealth is growing all the time. What I don't understand is why those at the weathly end of the band (and if the band represents wealth, then the wealthy end is large indeed) suffer so greatly from ‘sharing hesitancy‘; it's almost as if what's happening at the other end of the band is of no concern. How might that play out? Still, it's only a rubber band; gummit will sort it out.

                    https://blogs.worldbank.org/governance/wealth-tax-address-five-global-disruptions

                    Let's not park that thought. If the 'top' 10% sacrificed ~1.6% of their collective wealth, that would be sufficient to forgive the crippling debt of the 'bottom' 10%.

                    While I acknowledge that a 1.6% decrease in wealth could cause mental anguish, it's doubtful that the material comfort of many 'top' 10-percenters would be seriously compromised. Some might even derive satisfaction from thoughts of the good their gift would do to improve the quality of life and mental health of tens of thousands of NZ families facing life in debt.

                    The questions you raise are intriguing, but IMHO they're poor reasons for doing nothing. If you have an idea for an easier way to address the indebtedness of the 'bottom' 10% of NZers, then by all means let's hear it.

                    In her essay below, Liang describes poverty as a “heritable condition” that perpetuates and amplifies through generations: “It is also not hard to see how individual poverty flows into communities and society, with downstream effects on economics, crime and health, as well as many other systems. Loosen one strand and everything else unravels.

                    A Kete Half Empty

                    Poverty is your problem, it is everyone’s problem, not just those who are in poverty. – Rebecca, a child from Te Puru

                    • RedLogix

                      What I don't understand is why those at the weathly end of the band (and if the band represents wealth, then the wealthy end is large indeed) are reluctant to share; it's almost as if what's happening at the other end of the band is of no concern.

                      As I hinted above, and the Elephant curve I referenced shows, the stretching of the rubber band globally has probably not been a simple linear 'stretch'.

                      At the very top 0.1% level income growth has been astronomical, and the coarse percentile aggregation in the graph hides that. At this level I think we both agree there is a very good case to unwind the gross extremes at the billionaire level and above.

                      But interestingly if we look again at the Elephant Curve, while it describes global income growth, the whole of NZ would probably fit in the percentiles from 90% up. In effect NZ's experience with growing inequality is only a small slice of a much larger global story.

                      And to loop back to something else we touched on a while back – you ask why it is that the extremely wealthy don't seem to 'care' about the fate of those so much further down the wealth ladder than themselves. This is a fair and valid question, and does touch on why I keep thinking that inequality is less of a strictly economic issue, and much more of a moral one. And that maybe arguing to 'smash capitalism' to solve inequality is a bit like burning down the house because your partner had an affair.

                      At present humans value wealth because of the status and power it bestows on them – perhaps a world in which wealth was seen as a means to improve society and be of service to others would see this whole question in a quite different light.

                  • Drowsy M. Kram

                    At present humans value wealth because of the status and power it bestows on them – perhaps a world in which wealth was seen as a means to improve society and be of service to others would see this whole question in a quite different light.

                    Well said RL, certainly we can agree that some people value wealth because of the status and power it bestows. For myself it's about financial security, which in my case doesn't take much wealth.

                    What behaviours might model the sharing wealth to reduce inequality and be of service. Philanthropy, certainly, but how to grow charitable behaviour? So many seem to be in need in NZ alone.

                    http://www.nzchildren.co.nz/

                    https://www.greatpotentials.org.nz/

                    https://philanthropy.org.nz/

                    https://www.onepercentcollective.org/

                    https://www.acornfoundation.org.nz/application/files/3216/0332/3111/Acorn_Foundation_Annual_Report_2020_WEBSITE.pdf

                    http://montececilia.org.nz/uploads/8a12f4509874b6a26db5a8e5a0f5c6b8.pdf

                    https://atwc.org.nz/wp-content/uploads/2020/09/ATWC-Annual-Report-2019.pdf

                    Is there something similar to GiveWell for Australasia?

                    Btw, I’d like to meet these people that are arguing to ‘smash capitalism’ to solve inequality and give them a stern talking to. But I do wonder if ‘sharing hesitancy’ and capitalism are inextricably linked, and if so then what’s the best way to decouple them.

                • McFlock

                  I'll never understand how capitalists can be convinced they're barely getting by while regarding thousands of dollars as chump change.

                  • RedLogix

                    Well the bill I paid a few weeks back for a new heat pump install was over $4k. Chump change?

                    • McFlock

                      "barely".

                    • Stuart Munro

                      It raises a separate question though. A heat pump is basically a fridge – why are they so expensive?

                    • RedLogix

                      It was a decent sized Mitsubihi (much bigger than any refrigerator ) and I paid to have it installed.

                    • Sabine

                      If your business is set up correctly ill will go against your taxable income, write offs etc and you – in the end will not pay a cent for it.

                      You can now charge more for your dwelling because a law change forced you to add integral heating to your rental property.

                      Thus you increased the value of your asset and could potentially get more from a buyer, but also from your bank as your asset has increased in value.

                      You know what that is called?

                      Cost of doing business.

                    • RedLogix

                      in the end will not pay a cent for it.

                      Still had to pay the bill for it this year out of this year's cash flow. And as a capital improvement item it will be depreciated off taxable income, that doesn't mean 'I'll never have to pay a cent for it".

                      In our experience adding value to a property like this has a very marginal impact on rent. Rents are primarily determined by location, number of bedrooms and condition – in that order. Improvements do potentially make the property more attractive, which helps with good occupancy rates in an over-supplied market, but if it has an impact of rent, it's maybe $10 -20pw which would take 4 yrs or more to repay the investment.

                      As for it increasing the value of the asset – that's an even more marginal assumption. Valuers simply don't drill down to this kind of detail.

                      Yes it's a 'cost of doing business' – but so are a lot of other things and they all add up. And then you wonder why the damn rent is so high.

              • anker

                I have to eat so therefore like most urban kiwis I have to use the supermarket.

                I don't have to own a rental property, although actually I could. I have a choice, like all landlords. I am not aware of anyone who owns a rental property who got their arm twisted to do so…………but if someone knows of examples of this, by all mean let me know.

                I am glad the Govt has launched some sort of enquiry into the profits supermarkets make.

                I am really sorry I haven't been following your arguements Red.

                I have very little if not xero empathy for landlords. I suppose I have a little empathy if there places are trashed.

                My empathy lies with the tenants unless they are very bad tenants.

                You might be making very little on your property, but you will realize capital gains unless there is a crash. So now might be the time to take the money and run although I am not predicting there will be a crash. When I was a landlord it didn't involve too much work.

                Sorry its just the way I see the world.

                • RedLogix

                  I have to eat so therefore like most urban kiwis I have to use the supermarket.

                  I don't have to own a rental property,

                  That's comparison just doesn't work – the 'basic need' is not to be in business to provide the housing service, it's the need people have to be housed, like they do to eat. You’ve stacked oranges up against apples there.

                  My question to you is this – why do you think providing housing for people is an illegitimate business, while providing food for them (for example) is not?

                • RedLogix

                  xero empathy for landlords

                  lol … are you sure you’re not an accountant?. cheeky

                  • anker

                    lol Red. No not an accountant. Many years ago when I let our my house my lawyer referred me to an accountant though who gave advice as to how to set up my affairs to pay as little tax as possible. I think accountants are probably reasonably empathic towards property investors.

                    I didn't say being a landlord was an illegitimate business just one I don't have much empathy for.

                    I'd like to see the state provide housing and Kiwibuild to help young people get into homes.

                    If landlords aren't happy campers and are not making enough money then they know what to do. Sell up and let young first home buyers have a better chance of getting a house.

                    Btw, the $5000 extra I could have earned didn't seem right as I had to do so little to earn it and I worked a 40 hour week to make a living

                    • RedLogix

                      Sell up and let young first home buyers have a better chance of getting a house.

                      That would be nice if total supply was keeping up with demand – but it isn't. At present all that would do is drive a shortage of rentals and push up rents even further.

                      Keep in mind there is always a legitimate demand for rental housing. Roughly 15% of the population will for one reason or another never qualify for a bank mortgage, and another 15 – 20% are at a stage in their lives where they are not interested in or needing to buy a home – regardless of affordability.

                    • McFlock

                      At present all that would do is drive a shortage of rentals and push up rents even further.

                      Why? Does the house stop existing if the rentier sells it? Surely the new owners were living somewhere before they bought that particular house – wouldn't their old home be freed up? Or the old home of the people who bought their old home? Sooner or later a renter will buy some home in the chain…

                      The only things that lower the rental market are 2nd homes and ghost homes. A beefed up CGT would deal to both – not on Lab6's radar, but sooner or later it'll happen.

                    • RedLogix

                      Why?

                      Well McF – all the evidence suggests this is exactly what is happening at the moment. As I said – if total supply isn't keeping up with total demand – then everything else is just shuffling deck chairs.

                    • McFlock

                      "if".

                      The particular symptom through which the capitalist problem currently manifests itself in the housing market isn't a lack of homes.

                      It's a surplus of capitalists: ghost homes in Auckland – 39,000 empty dwellings. 200k in NZ overall.

                      But the odds are still good that a currently-occupied home would get re-occupied after being sold. So no, a sale doesn't destroy a dwelling. What makes a home vacant is a landlord who sees more profit in accruing capital value than in providing a home, and bugger the renting class.

                    • RedLogix

                      What makes a home vacant is a landlord

                      Pretty much by definition if the house is vacant – they're not a landlord. It makes them property speculators first and foremost.

                    • McFlock

                      Pretty much by definition if the house is vacant – they're not a landlord. It makes them property speculators first and foremost.

                      lol now you're doing the No True Scotsman.

                      They're all capitalists who buy up homes to make money. Whether they rent out those homes or feel sitting on them for the capital gain is better value for their time is moot. As markets change they switch from one to the other. You're just as much a speculator as someone who owns a ghost home.

                    • RedLogix

                      You're just as much a speculator as someone who owns a ghost home.

                      Or anyone who owns any asset that increases in value, including ordinary homeowners for that matter.

                      But I think I'm pretty safe to say that someone who owns a property that they neither live in, nor have tenanted, are first and foremost property speculators.

          • Brigid 3.1.3.2.4

            "Domestic rentals are sure not something that i would ever take part in."

            I wonder why so many do then

            • Peter chch 3.1.3.2.4.1

              I think it is a false belief that that way lies riches, which for most it does not. that is based on having done maybe hundreds of financial statements and tax returns as a chartered accountant for landlords.

              • Brigid

                Then surely that should be demonstrated by there being truck loads of rental property on the market.

                I think we know that their motivation is not to gain profit from renting but the tax free capital gain.

                • RedLogix

                  Which is something the rental business has in common with many other business sectors in NZ – too many are operated for capital gain not cashflow.

                  What we have here is an awful intersection of this entrenched structural issue, the relatively high capital intensity of the rental business, and high levels of deprivation at the bottom of the income scales.

                  If we want to fix this chronic problem – we need to look at the real causes. Tinkering with band-aids on symptoms usually only has unintended consequences.

                  • Brigid

                    "too many are operated for capital gain not cashflow."

                    Could you give me an example where the capital gain on a business equals that of a rental property and where similarly tax on the capital gain is not paid?

                    • RedLogix

                      Residential property is inherently a very capital intensive business, so it's always going to be more susceptible to the impact of capital gain than many others.

                      Farming would be another obvious example. And many small businesses that depend on property, goodwill, or intellectual stock of some kind will look to capital gain on the hoped for sale of the business to make up for decades of marginal operating profits.

                      McDonald's is another example that comes to mind – the capital gains many franchisees make on their shop location may well exceed that of the actual food business.

              • anker

                Peter maybe they don't make so much from the rent, but they do on the capital gain.

                BTW whoever said about the council taking the profit I agree with. We pay o much for so little

                • Incognito

                  Are rates correlated to the average house price? I don’t think so. For example, if all house prices go up by 10%, the rates will essentially stay the same.

          • mikesh 3.1.3.2.5

            I don't demonize landlords – I just call them silly buggers for borrowing too much, and then acting surprised when they find that interest is gobbling up all their profits. Make interest non deductible and they would then be looking at a much improved bottom line (in bookkeeping terms) and paying a decent amount of tax – even though they would have to pay that tax from their own pockets. Under those circumstances I think that many would be thinking about off-selling their unsound investments.

            • RedLogix 3.1.3.2.5.1

              Under those circumstances I think that many would be thinking about off-selling their unsound investments.

              And the landlords remaining in business would simply increase rents in the face of increasing costs and demand. How do you think this helps?

        • Treetop 3.1.3.3

          There are some really great tenants who maintain the property and require a tradesman yearly if that. House prices increasing are the only sure thing for home investors. If you cannot afford the cost of being a landlord don't be one.

          If a tenant had a community services card the landlord got a 50% subsidy for insulation.

          I do have sympathy for landlords who get the place trashed and ripped off with unpaid rent.

          • RedLogix 3.1.3.3.1

            More than 90% of tenants are wonderful and look after their home better than we might even. (Or at least they do on the inside – we always pay to have the sections maintained.)

            But all properties need maintenance no matter how well the tenants look after them – lawns mowed, walls and roofs washing, blocked gutters, fences, drains, trees trimming, appliances like stoves, hot water cylinders and heaters break, carpets wear out, windows get broken, door locks and window stays replaced. In the usual course of events we budget for about 6% of the rental income towards R&M over the long term.

            • Treetop 3.1.3.3.1.1

              I have noticed that less and less landlords maintain the section with the exception of the lawn mowing. I would like to see landlords offer to dump the weeds. Many tenants would do weeding and benefit from the out door exercise.

              I lived in a row of 7 flats and I used to weed the whole drive, fence line and door paths, (I did ask permission from any new tenant). I am no longer there but I walk past regularly – it is all over grown now. A looked after drive and section greets you.

    • Louis 3.2

      "none of the recommendations from the Welfare Expert Advisory Group have yet been implemented"

      Your link doesn't show that.

      • arkie 3.2.1

        The Child Poverty Action Group’s stocktake of progress on the Welfare Expert Advisory Group’s (WEAG) 42 key recommendations has found none of them have been fully implemented.

        https://www.rnz.co.nz/news/national/431739/work-to-reform-welfare-system-unjustifiably-slow-child-poverty-action-group

        Yes it does. Twice. Those are direct quotes from the article, no editorial.

        • Louis 3.2.1.1

          I know, I read it and if you read the full article there's a contradiction with that statement. For example, indexing benefits to wage growth was a recommendation was it not? that's been implemented and note, the government doesn't agree with all of the recommendations.

          • arkie 3.2.1.1.1

            Well take it up with the authors of the RNZ article I quoted, the 'contradiction' is not of my doing.

          • Brigid 3.2.1.1.2

            The Government set up the Welfare Expert Advisory Group in May 2018 with the explicit purpose to investigate the welfare system. Surely having commissioned the report they are not in the position to disagree with any of the recommendations but simply implement them.

            Otherwise what was the point of the group or the report?

            • Louis 3.2.1.1.2.1

              They do disagree with some of it, its in the linked article, but it doesn't say which recommendations the govt disagrees with.

  4. aom 4

    ACT bleating again. Seymour seems to want business to have its cake and to eat it too as the MBIE figure only covers one side of the equation. However, if any of the existing holidays are to be done away with, in exchange for Matariki, there are plenty of Christian ones that could go. Would he want to explain his decision to the God Squaders who vote for ACT?

    • RosieLee 4.1

      There is no reason why, once the Queen dies, we cannot do away with QB weekend, leaving Matariki as the main public holiday between Easter and Labour weekend.

      So many cultures around the world have festivals connected to the summer and winter solstices and the passing of the seasons. Think Stonehenge and the Scandinavian festivals. Matariki marks so much in this regard if we study the history of Polynesian cultures, the significance of the Pleiades etc – and it's distinctly NZ. It's not just about another public holiday.

      Bring it on.

      • McFlock 4.1.1

        QB weekend is officially "the birthday of the reigning Sovereign (observed on the first Monday in June)".

        So without a law change, it would simply become "King's Birthday weekend".

        We can ditch it at any time.

    • woodart 4.2

      I wonder if act actually do any real research. long holiday weekends are a real boost to NZ economy. even the moaners who have to pay for a days holiday for their workers do well out of them. economic activity spikes every long weekend, and a mid winter long weekend will be a real economic winner. all to difficult for actoids to understand.

  5. Ad 5

    With Boeing having its entire 777 fleet grounded, it's pretty easy to see an increased likelihood of squealing about bankruptcy to get more billions of Federal aid.

    https://www.theguardian.com/business/2021/feb/22/boeing-777-grounded-by-airlines-after-faa-japan-issues-emergency-order

    Taking out the 777s will also be a hit to the remaining airlines.

    • Scud 5.1

      I see its only related to P&W Engines only not GE, RR, CFM Engines. It's very rare for an engine explosion like to happen and I think the last one to happen from memory was the Qantas A380 after takeoff from Singers a few yrs back. Old mate flying that A380 was very lucky to get that A380 bird back on the tarmac from all accounts (I haven't read old mates book, but read most of the summaries incl Training & crew management or whatever its called when i was doing training and training development on top of my Operations/ Plans for the RAAF Darwin Sec FLT before i got the boot.

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