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Tax policy for economic stimulus and growth

Written By: - Date published: 12:00 pm, February 26th, 2011 - 79 comments
Categories: Economy, equality, labour, national, tax - Tags:

Last week, Treasury issued a press statement saying it had commissioned research on the impact of governments’ fiscal stimulus packages, now published in the influential publication the Economic Journal. One article, “Tax policy for economic stimulus and growth”, had this to say:

The tax change that shows the most promise in terms of both increased growth and
economic recovery is the reduction of income taxes (including social security contributions)
of those on low incomes. This would stimulate demand, increase work incentives and reduce income inequality.

The papers were commissioned by New Zealand Treasury’s chief economist Norman Gemmell who confirmed the above finding in his introductory paper. It didn’t get a mention in Treasury’s press statement, however it does support Labour’s plan for tax cuts at the bottom rather than National’s tax cuts at the top. Regarding that, the paper had this to say:

In some cases, such as the reduction of corporate taxes and the top rate of personal
income tax, it is unlikely that these growth-enhancing changes will help the recovery
from the current crisis.

That would seem to be the case in New Zealand at the moment.

79 comments on “Tax policy for economic stimulus and growth ”

  1. Draco T Bastard 1

    We’ve got to get away from the delusion of economic growth. We just don’t have the resources to support it.

    • Colonial Viper 1.1

      But our leadership does not have the psychology to do anything else.

      For instance we need living wages and four day work weeks for people. $650/wk in wages for a 30 hour week.

      Otherwise in a static or declining economy, the number of jobless and the number in poverty will just grow, and grow and grow. And that’s another kind of growth that we definitely don’t want.

    • burt 1.2

      Draco T Bastard

      History shows us that all we need to do to get away from the delusion of economic growth is to elect a Labour govt.

      • bbfloyd 1.2.1

        i’ve watched so many people try, in a rational fashion, to inform you of why your opinions are ill thought out burt. but. after all this time, all you have to say to them is “look at me, i’m a total fuckwit, and there’s nothing you can do about it”, accompanied by generous helpings of tongue poking and finger waving.

        i hope you at least can remember to pull down your trousers when you feel the need to defecate.

      • RedLogix 1.2.2

        Your comment scarcely begs a rebuttal burt; but I cannot help but recall Bob Jones’ saying once that ‘he preferred Labour govts because the economy did better under them.’

        But otherwise what bbfloyd says.

        • Every farmer I have spoken too ,and I live in the Waikato,tells me they are better off under Labour Governments. Many in the depression had their morgages cancelled under the Savage Labour Government . But they still vote National .
          They built up their farms with cheap ” work for the dole ” unemployed workers . yet they begrudge any payment to working people.
          I doubt if they will ever vote Labour other than the few who have seen the light.

          • Colonial Viper 1.2.2.1.1

            Forget about convincing the creatures-of-habit farmers, we gotta start focussing on the farmhands, and the farmer’s children.

          • burt 1.2.2.1.2

            The people who do best under a Labour govt are people like Bob Jones – not the people who vote for Labour. But still the muppets like bbfloyd would rather take a shot at an easy target like me rather than have a good long look in the mirror.

            But sure, lets celebrate how people with good incomes and malleable tax arrangements do well under a govt voted in to serve the low income people. Yeah, shit that’s the best news I have heard for a while!!

            • SPC 1.2.2.1.2.1

              burt Treasury pointed out that economic growth is more likely when the stimulus is focused on those with lower incomes. Thus if Labour is doing that, that is why Jones would note the economy does better under Labour.

            • burt 1.2.2.1.2.2

              That’s simple SPC. The same thing that allows them to exploit favourable private enterprise spending. The have the wherewithal and the capital to take advantage of the situation.

              I have absolutely no argument that increased welfare spending and increases in the minimum wage are a stimulus to growth. However my experience is that for the genuine low income people growth is inflation, the same inflation that really means the that for them the increased benefits/wages just maintain equilibrium. Meanwhile the Bob Jones’s bank millions pumping up inner city lease values while buying and selling and investing in construction projects.

              So yes it trickles up…

              Want to talk about a minimum social wage and flatter taxation perhaps ?

              • Colonial Viper

                However my experience is that for the genuine low income people growth is inflation, the same inflation that really means the that for them the increased benefits/wages just maintain equilibrium.

                Well this is a load of economic nonsense you’ve spouted Burt.

                Economists do not understand at all well what causes inflation in industrialised productive economies.

                And giving those on low incomes additional monies to help pay off their debts (mortgages, credit cards, etc) is clearly not inflationary as that money does not enter general spending.

              • SPC

                sure burt, if the increase in the minimum wage or WFF tax credits is not matched by a balancing restraint (such as a CGT and such as a 1% surcharge on mortgages for rental property) it could be inflationary.

                However of late inflation has been a factor of oil, power and food prices – and the sense of wealth from asset bubbles that leads to increased consumer spending where there are not the incentives to save.

                • Colonial Viper

                  and the sense of wealth from asset bubbles that leads to increased consumer spending

                  And who is it who might have gotten this increased sense of wealth from the property price bubble? Not the minimum waged, under and working classes who do not own property, I’ll tell you that much.

                • burt

                  Increased consumer spending…. Perhaps CV would like to tell us how minimum wage workers given an increase in their minimum wage would save the difference rather than spend it…..

                  I won’t hold my breath for him to admit that is going to be almost universally true because that would require him to acknowledge that the solution isn’t as easy as voting Labour because they promise to increase the minimum wage and benefits and that will of course fix everything!

                  • Colonial Viper

                    Burt, I’m just checking that you do realise one thing – National is committed to policies of sucking the wealth away from 95% of your friends, family and neighbours and giving that wealth to the already enriched top 5% in this country.

                    isn’t as easy as voting Labour because they promise to increase the minimum wage and benefits and that will of course fix everything!

                    Min wage etc. is really just a stop-gap measure to reduce poverty in this country, and cut down on the number of working poor. More fundamental changes will be needed.

                    • burt

                      More fundamental changes will be needed.

                      We agree on at least one thing then.

                    • burt

                      Oh, and still waiting for you to backup your previous claim that increases in benefits and the minimum wage do not just create inflation leaving minimum wage people no better off without the more fundamental changes we both agree are required.

                      Want to talk about a minimum social wage and flatter taxation perhaps ?

                    • Colonial Viper

                      Oh, and still waiting for you to backup your previous claim that increases in benefits and the minimum wage do not just create inflation leaving minimum wage people no better off

                      Oh I think the best thing to do is just try it mate and see. No more silly economic pie in the sky theories.

                      Funny though how you never said that John Key giving himself a $1000/wk tax cut or Bill English’s household getting a $300-400/wk tax cut would be inflationary.

                      Double standards Burt. The working poor need more than the 25c/hr increase that Overlord Key granted them.

                      You do know that National is making 95% of your extended family, friends and your neighbours poorer, right?

                    • burt

                      Yeah sure – dodge the fact you just can’t acknowledge that your grand ideology will fail again like it has every other time it has been tried. Yep that the easy way for a myopic partisan.

                    • burt

                      CV

                      I spat the dummy many times during the tyranny of the Clark & Cullen misadventure when the continual circa 9% pay increases given to the MPs were seeing Clark getting around $20K pay rises… I was severly shot down because Clark isn’t setting her own salary. Take a deep breath CV and think for just one moment that National might not be adjusting the tax rates purely for Key’s benefit.

                    • Colonial Viper

                      Come now, you never complained about those MP’s pay hikes being inflationary, nor Key’s and English’s tax cut gifts to themselves as being inflationary.

                      Why not? Double standards my man.

                      Take a deep breath CV and think for just one moment that National might not be adjusting the tax rates purely for Key’s benefit.

                      I know that, its for the benefit of the top 5% of earners, and particularly his millionaire mates.

                    • burt

                      CV

                      I can only guess that you have no real life experience at both ends of this spectrum. I grew up in a state house with minimum (or no wage) parents and I have worked bloody hard my entire life to not stay in that piss-hole place. Now I’m in that horrible top 5% you hate so I can tell you one thing for sure – I know from my own experience how the bottom and the top live – do you ?

                    • Colonial Viper

                      Given that I married into quite a wealthy family, I would have to say yes. Thanks for asking 🙂

                      Doesn’t change the fact though – you never complained about Key’s and English’s tax cut gifts to themselves as being inflationary. Double standards, mate.

                      And you are aware of course that National has a policy of taking wealth away 95% of your extended family and friends giving it to enrich the top 5% of people (e.g. yourself as you claim), right?

                    • burt

                      CV

                      I never complained about the inflationary effect of tax reduction on big earners because big earners don’t rampantly increase their consumer spending when their net income increases – they save more.

                      That was the whole point that you won’t acknowledge – increasing benefits and the minimum wage increases consumer spending and hikes inflation which just leaves low income earners maintaining status quo.

                      Face it – just giving it a go will fail again… Why can’t you acknowledge this reality?

                    • burt

                      How quaint… You married into a wealthy family and you protest against wealth – what a fraud – what a sell out. A classic Chardonnay socialist.

                    • Colonial Viper

                      I never complained about the inflationary effect of tax reduction on big earners because big earners don’t rampantly increase their consumer spending when their net income increases – they save more.

                      Wrong. The tax cuts were designed to stimulate the economy. They were part of what National is now calling their ‘stimulus package’. That means they were meant to be spent.

                      😀

                      Face it – just giving it a go will fail again… Why can’t you acknowledge this reality?

                      “reality”? No, its economic fantasy theory.

                      Inflation haha the rich are so scared of it as it makes their piles of money worth less and less each year.

                      what a fraud – what a sell out. A classic Chardonnay socialist.

                      I prefer a good gewürz, if you don’t mind 😀

                    • felix

                      “How quaint… You married into a wealthy family and you protest against wealth – what a fraud – what a sell out. A classic Chardonnay socialist.”

                      Well fuck me, I never thought I’d hear you say that rich people aren’t allowed to advocate for policy to benefit those who aren’t, burt.

                      ‘Cos with you being so devoted to consistency and all, that means you won’t be able to have a bar of anyone without money advocating for policy to benefit the rich.

                      And what with you being in that top 5% and all, you’ll surely be disregarding all economic opinions of the other 95.

    • The Baron 1.3

      Oh look, more opinions masquerading as facts from Draco. No explanations, just dictums on high from “he who knows everything about everything”.
      So once you’re made chairman, after the revolution, what will you do first, Draco?
      1. Ban any discussion of economic growth because it’s heretical.
      2. Pass an edict forcing all established orthodox economic texts to be immediately burned as anti-revolutionary
      3. Allow people to start printing their own money
      4. Ban bananas
      So many good ideas, it must be so hard to know where to start!

      • Colonial Viper 1.3.1

        Meh, obvious attempt at derail is obvious.

        3. Allow people to start printing their own money

        You do know that the hundreds of billions of quantitative easing dollars the US Treasury has given the big US commercial banks has allowed those big banks to create trillions of new USD in the forms of loans, right?

        Brand new electronic bank dollars out of thin air. Trillions of US$ magicked up.

        • Draco T Bastard 1.3.1.1

          We’ve told him that hundreds of times but he doesn’t want to believe it. It’s normal RWNJ behaviour – a total denial of reality.

          • The Baron 1.3.1.1.1

            “a total denial of reality” – isn’t this why you have a cellphone, Draco – to help those out of touch with reality? And yet I still don’t know the number! The reality hotline has a customer waiting in desperate need! Help me chairman Draco!

            What I think is super duper funny is that all I’m doing is holding up a mirror to YOUR OWN COMMENTS ON THIS SITE. and WOW you seem to hate iso rats as if you’re ashamed by your own nuttiness…

            • felix 1.3.1.1.1.1

              If it really is the case that you’re just “holding up a mirror to YOUR OWN COMMENTS” (that’s what quote marks are for btw – for containing actual quotes) then you should have no problem linking to a comment by Draco where he/she advocates any of the things you listed. Which were:

              1. Ban any discussion of economic growth because it’s heretical.
              2. Pass an edict forcing all established orthodox economic texts to be immediately burned as anti-revolutionary
              3. Allow people to start printing their own money
              4. Ban bananas

              Links or retraction please Baron.

              edit: Ah, I see you’ve edited your quote. Jolly good. Now about all that other shit: Links or retraction.

            • felix 1.3.1.1.1.2

              Come on The Baron, tick tock…

      • Draco T Bastard 1.3.2

        Jeez Baron, you’re acting more and more like a scratched record every day.

      • Jeremy Harris 1.3.3

        Not banana’s..!

      • bbfloyd 1.3.4

        are you related to burt TB? and did you know that your initials are the same as a nasty disease? i’m sure you didn’t pick them deliberately???

  2. Afewknowthetruth 2

    To believe in perpetual growth on a finite planet you either have to be a madman or an economist. We might add politician.

    It gives me an uneasy feeling knowing that all major decicions for the future of NZ and for the Earth are made by mad men and mad women.

    • Tel 2.1

      I’m more queasy about the future especially with regards to architecture outcomes for CC. A lot of the rebuild funds are going to be leaving the country, to be spent in the pursuit of architectural aestheticism that is imported, because architects and designers are for the most part incapable of creating and or supporting our own.

      We seem to be stuck in some form of perpetual status anxiety, conditioned to think that if it’s made anywhere other than NZ it must be good. Whatever is left of the NZ vernacular will most certainly not appear in a rebuilt CC. It’ll end up looking like every other city in the world, made by every other city in the world, and that is neither an economic stimulus I aspire to or want, and yet it’s going to be served up like a plate of cold sick.

      • Afewknowthetruth 2.1.1

        With a worldwide economic meltdown inevitable within 5 years (and possibly as early as this year) it hardly seems worthwhile worrying about rebuilding Christchirch -especially when we don’t even know whether the current round of earthquakes have finished.

        Don’t forget the first European migrants lived in tents and raupo huts till they build wooden-framed houses -no problems with earthquakes.

        By contructing multi-storey building that have no long term future we’ve been headed backwards at ever increasing speed in recent years.

        • Zorr 2.1.1.1

          Despite being a proponent for successive future economic collapses on a massive scale I can’t agree with this sentiment. Making extreme decisions based on future probabilities that have no real time scale associated with them (because it is all still reasonably up in the air) will force the populace of Christchurch in to an even worse position.

          Sure, make intelligent decisions to recreate Christchurch as an example of an efficient, modern city – but answers to problems are very rarely found at the extremes.

        • Tel 2.1.1.2

          I concur with the statement below, sustainable growth is an oxymoron. 😆 Even if CC were to recycle the broken rubble back into new buildings (call them Follies!) there is still unsustainable costs attached to any construction work. It needs to be about damage limitation in both use of new and existing re-used materials.

          CC suits a low rise vernacular, and if I was head of city planning right now I would be seriously considering flattening a city block(s) and turning it into medium to high density residential/small business low rise apartments. Some of the cleared sites being used as green spaces around it, encourage community inner city gardens, something that the people of CC are renowned for. Upgrade and maintain the tram network throughout the city centre to encourage people to ditch their cars.

          The apartments needs to be funded by Housing NZ and made available for rent. Hopefully this might go some way to encourage confidence and potential in the inner city, and giving the people of CC a new vibrant reason to live there. By funding a building like this lessens the social cost of rebuilding CC and at the same time goes some way to repaying the money borrowed to rebuild it.

          Too logical though for the average RWNJ.

  3. SPC 3

    There is a column in the NBR this week by Owen McShane where he argues that the economy needs the stimulus of more new home building. I agree.

    There is a routine failure in the market where recessions are deepened and growth periods result in asset value bubbles (and related finance company crashes/bad debts for banks) and this is where intervention is required. The RB offers some input at these times with its OCR policy but this alone is insufficient to overcome investor fear or greed.

    There is a looming housing shortage that will place upward pressure on house prices while there is pressure on the RB to lower interest rates (exacerbated by the earthquake). And we know that increasing house values means rising foreign debt as per GDP – and this is what could worry foreign creditors. There is some need to act now lest we once again lose control of the housing market and allow it to undermine the nations economic well being (let alone the perpeturate house un-affordability).

    So we do need government to finance new home construction. If the intent is to then sell them to private buyers there is no credit rating issue. And the economic activity raises more tax revenue than the debt cost – so would improve the budget position.

    • Afewknowthetruth 3.1

      May I suggest you focus on the looming energy crisis and looming resources crisis rather than a housing shortage (which is actully non-existent because there are tens thousands of dwellings which are empty or only parly occupied).

      Without energy nothing happens. Energy and oil in particular underpin everything in industrialised economies: we’re about to fall off the energy and resources cliff, with both becoming increasingly unaffordable.

      The other aspect to consider is that we are already in population overshoot in most parts of NZ, so covering more land with concrete and asphalt will only exacerbate the coming famine.

      • SPC 3.1.1

        Tell it to those who cannot find rentals in Auckland and those soon to be priced out of rental property let alone home ownership.

      • ianmac 3.1.2

        Energy: 91 Petrol 202.9pl today. Tomorrow?

        • Colonial Viper 3.1.2.1

          I put Premium 95 in the car yesterday $2.109/L. OUCH. For me that’s a ~$105 fill and $105 less I have to spend at the hairdressers, the cafe, the supermarket, the movies, on getting the gardens done etc. That money is sucked out of the rest of the economy.

          So what is $2.11/L, a 25% rise in about 2 years? From ~$1.70/L. (Sorry I don’t have access to any historical NZ pricing data, this is just a guess).

          A 25% rise from now = $2.64/L

          These days most peeps I talk to consider $3/L and $4/L just a matter of time, and not a lot of time necessarily either.

    • Rosy 3.2

      Is that Owen McShane who also believe houses cost so much because the council won’t extend city boundaries, and thinks sustainable development is a crock? If so, he might identify the problems but his solutions are worse than the disease IMO.

  4. SPC 4

    The new luddites have landed.

    • Afewknowthetruth 4.1

      You are obviously yet to learn that the Luddites were absolutely right. They opposed rampant industrialism, exploitative capitalism, the destruction of nature and the dehumanisation of employment by industrialists, who were only concerned with a quick profit. The Luddites were deliberately given ‘bad press’ by the system in order to keep the bilk of the slaves believing in the system -as you obviously do.

      The best kind of slave is one who thinks he is free.

      After another year or two of the collaspe of industrialism you might start to ‘get it’.

    • Colonial Viper 4.2

      tell it to those who cannot find rentals in Auckland

      IMO its insanity to have 40% of the population of NZ within 40km of K Road. It’s simply nuts to even try, although I don’t see anyone changing course soon.

      There is a looming housing shortage that will place upward pressure on house prices while there is pressure on the RB to lower interest rates (exacerbated by the earthquake).

      I believe you may be making a fundamental mistake here – even though you are spot on in part of what you are saying.

      Yes there will be a shortage of accommodation. But this shortage of accomodation =! increased buying pressure for houses. Paradoxical I know.

      Its that latter part which is needed to drive house prices up not the former. (Eg Ireland where there was no increased demand for accommodation but there was hugely increased buying pressure for houses, forcing prices to escalate wildly and speculatively).

      From my view it is just as likely that as debt deleveraging continues (we have barely started the process, the ratio of private debt to GDP in NZ is well over 100% still) and as more retiring boomers look to sell their investment rentals, cash up in order to spend up for their retirements, there will actually be an oversupply of sellers (NB I did not say an oversupply of houses).

      Prices will go down because even though demand for accomodation will be up, a house will remain a relatively unaffordable purchase so purchasing demand will not be up at the same rate.

      No doubt I made a hash of the explanation but I think you get my drift.

      • SPC 4.2.1

        We will disagree about the impact of a housing shortage on prices. My point is that prices need to fall to make them affordable to buyers and this won’t occur while there is a shortage.

        In the absence of a fall in price there are fewer home buyers in the market – there we might agree.

        But a shortage of houses will increase rents and thus create good returns to landliords (holding up prices). This will result in overcrowding (health problems) and accomodation supplement cost to government increasing their budget deficit.

        If prices hold up (because of rising rents) we have a higher foreign debt against GDP (it has actually fallen since 2008 to 85% of GDP), whereas if we built more houses – we get economic activity reducing the budget deficit (lower accomodation supplement costs etc), we get people in affordable homes and we reduce our foreign debt per GDP.

        • Colonial Viper 4.2.1.1

          My point is that prices need to fall to make them affordable to buyers and this won’t occur while there is a shortage.

          Placing restrictions on the mortgage market and making a few other changes will cause house prices to tumble, if that’s what you want.

          1) Go back to historically required 30% deposits.
          2) Limit the total sum of a mortgage issued to what can be paid back by a realistic rental value of the house. E.g. $1800 per month.
          3) Limit the total sum of a mortgage issued to what can be paid back by the highest earning partner in a relationship. (Not the total household income).
          4) 10% stamp duty on all houses sold which have been owned for less than a year.
          5) CGT

          This will push all the speculators and highly leveraged players out of the market overnight.

          You will also get a collapse in housing prices to their historical norms (houses will be much more “affordable”) but there will also be an extremely unhappy upper middle property owning class who will throw out literally overnight any Government which does this.

          (it has actually fallen since 2008 to 85% of GDP)

          Thanks for the update, I’m behind the times.

          EDITED – actually this Treasury report says that our total foreign debt is 132% of GDP, Although I have heard other reports which quote the ~85% figure (which might be a net position, explaining the difference).

          http://rbnz.govt.nz/statistics/extfin/e3/data.html

          • SPC 4.2.1.1.1

            I agree with both of you – about other ways to reduce house prices and that while there is uncertainty the private sector home building is dead.

            But we can have new home building now – because it is needed and because it actually is good for the economy and for reducing the budget deficit.

            If we get a statement of government plan (over time) to reduce house prices to incomes, then private sector investors can plan what to do and when and the government can then leave them to it. But till we reach that point the governmenet needs to build and on-sell into the market.

          • RedLogix 4.2.1.1.2

            I’d fine tune that a little CV.

            Historically the required deposit was more like 20% not the 30% you suggest.

            Steven Keen suggested a slightly simpler way to achieve the same thing. Again historically we know that house prices tended to average around 15 times the annual imputed rental value.

            At the moment the average rental income is about $15,000 and the average house value about $350,000 which is about 23 times.

            Now if you combine these two ideas you will realise that it is a simple matter to restrict banks to lending no more than (15 * 0.8) = 12 times the imputed rental value of a property.

            (Imputed rental values are easy to determine, property valuers do them all the time.)

            In order to prevent a dramatic collapse in the housing market (which has major implications for everyone with a mortgage, especially ordinary first home buyers) it would work to progressively introduce the rule by making the ratio say 22 times in the first year, and then reduce it by 1 each year thereafter for a decade…ending at 12 times. Essentially letting inflation do the work for you.

            But otherwise I agree totally… the root cause of property bubbles is banks flooding the market with excessive credit in pursuit of their own profit.

            • Colonial Viper 4.2.1.1.2.1

              Thanks RL.

              Now that I think about it that 30% number was probably off one of Keen’s podcasts so was probably only relevant to the Australian situation.

          • felix 4.2.1.1.3

            “… but there will also be an extremely unhappy upper middle property owning class who will throw out literally overnight any Government which does this.”

            Last I heard they number ~8%

            All things being equal that’s obviously enough voters to throw out most govts, but what about the inverse of that ~8%?

            • RedLogix 4.2.1.1.3.1

              Traditionally homeownership in this country ran at about 70%. In the last decade or so that’s dropped somewhat, but it’s still over 60%.

              Most people transition from renting to ownership sometime around the age of 30, and leave this mortal coil some 50 years later. That implies that the turnover of homeowners is about 2% per annum…without allowing for population growth or decline.

              That 50yr period of ownership is divided roughly into three segments, 15 yrs with a new mortgage at less than 20% equity (thats the evil way table mortgages work), another 15 yrs with a mortgage with more than 20% equity… and the balance in retirement with no mortgage.

              Roughly this means that at anyone point in time around 20% of all home occupiers (owners and renters) have a mortgage with a less than 20% equity. Collapsing the market by this amount leaves these people ‘underwater’.. ie they owe more on the mortgage than the house would be worth.

              As long as the mortgage is being serviced the bank is not likely too worried, but any number of events can cause a crisis… loss of a family income, pregnancy, a disabled or seriously ill child, forced to move town, or most commonly a relationship breakdown. Any of these things can force a mortgagee sale… leaving the erstwhile owners with zero equity (or under NZ’s draconian commercial law the bank can sell at any price and leave the mortgagee with a large debt). In either case there is very little chance that any bank will qualify them for a loan again.

              These people are then forced back into the rental market. That is likely the main reason why there is a ‘rental crisis’ developing especially in Auckland… it only takes 1 in 10 of this high-risk group to fall over in any one year to amount to around 2% of occupiers transitioning the ‘wrong way’ from owning to renting.

              Even those lower-risk group who have more than 20% equity are potentially hit when they too inevitably need to sell (on average we do so every 5 years). They may well find themselves with far less equity than they need to buy a home of similar worth in a new location.

              A deflating property market dominated by high levels of debt (especially 25-30 yrs table mortgages) creates huge problems for a very large portion of the population.

        • RedLogix 4.2.1.2

          I’d agree with that analysis SPC.

          Added to that was the opinion given to me by a large builder several years ago that investors building new homes consisted of about 15% of the build market (a figure that is admittedly difficult to verify in any way). Well it’s true for me, having built six new units myself between 2002 and 2007. Of course in the last few years all that has come to a complete halt.

          Right now I have the land, access, plans, services, resource and planning consent for a new 3-bdrm unit in the Wellington area…but with the current numbers and especially with everyone threatening changes to the tax system….it’s never going to get built.

          • Colonial Viper 4.2.1.2.1

            Changes need to occur to make making a living as part of a landlord class building new homes feasible and reasonably attractive.

  5. SPC 5

    Some people seem to confuse the necessity for sustainable growth with the impossibility of unsustainable growth.

    • Afewknowthetruth 5.1

      Sorry mate, ‘sustainable growth’ is an oxymoron.

      • SPC 5.1.1

        How many years of waiting before you will stop saying, in a few more years the system will be dead?

        Do you come from a background in a religious group that believed in a coming advent?

        There is growth in energy efficiency, there is growth in renewable energy and that’s all sustainable as far as I can see. There is growth in building homes – it’s all local labour and material etc.

        • Colonial Viper 5.1.1.1

          The Hubbert curve for oil production is going to take care of (stymying) growth, even if human beings do not.

          As for growth in energy efficiency and renewable energy, yes that is all good stuff. Carbon intensity per dollar of GDP has gone down something like 30% over the last 30 years, reflecting efficiency/productivity improvements etc.

          Only problem is that world GDP has scaled up significantly more than 30% over that same time. So we are still using far more fossil fuels than ever before, despite those efficiency improvements.

          I’ve heard that carbon intensity per dollar of GDP will have to fall to 1/10 or perhaps 1/20 of what it is now for consistent growth to be sustainable at this stage. As yet, we have absolutely no idea how a global economy can work under those conditions, nor the technology required.

          • SPC 5.1.1.1.1

            Sure much of the change that will occur will come from production using non carbon sources or production using less energy input (the western economy is moving away from reliance on production of goods anyhow).

            For now we have the growth of India and China driving world growth despite rising energy prices and this could go on another 20 years (greenhouse impact and all), we have about this time to move to low carbon use economies and get to some structural balance to the economy (more saving and less debt, more ownership of the economy and less reliance on foreign owners, more exports, less imports). It will be hard to reform when global growth is constrained less by carbon energy cost and more by energy limits (or cost of alternative energy/nuclear energy most likely) and this places limits on global credit.

        • Afewknowthetruth 5.1.1.2

          Peak energy per capita was in 1979. It’s been falling ever since. And the rate of fall will accelerate rapdily from here on.

          We have till 2015, at best, before it gets really nasty.

  6. Tel 6

    There must be some way to turn the CC rubble into a tax stimuli? The building materials that will end up as landfill from this earthquake would probably qualify as a crime against nature and humanity in the not too distant future.

    With some irony I could build a warm safe happy home out of the materials that will be discarded into landfill, but no systems are in place to compile, clean and stockpile the materials, and we have a building act and consenting process that makes recycled building materials a litigious nightmare best avoided.

    I would love to have been a fly on the wall documentary film crew to see who lobbied government to stymie recycled material use, so they could profit from selling us new things like untreated framing!

    Tax stimuli? What about linking it to lifestyle stimuli? Recycle – reuse? Not a chance, unless someone can make money out of it eh!?

  7. Afewknowthetruth 7

    The entire economic and political system has been set up to reward wastage. The more that is wasted the better the GDP figures look. That\’s one of many reasons why there is no hope for the present system

    • ianmac 7.1

      And the more prisoners we have the better the GDP figures look. So take more prisoners folk.

      • Colonial Viper 7.1.1

        I think that is what Shipley and Wong’s company is betting on. Pretty safe bet observing our vindictive societal attitudes towards law and order / corrections.

  8. randal 8

    well shipley and wong are on the hovercraft route.i.e. throwing money away and then claiming the tax rebates.
    they wouldnt know a proper business if they fell over one.
    what has shipley and co ever made.
    you cant buy a good with their names on it.
    they are in the business of taking money off people and supplying intangibles that seem to offer lots but are basically worthless.
    national is supposed to be the party of business.
    well lets see the business.

  9. randal 9

    dont make me laugh mike smith.
    this government is predicated on winner takes all and bashing the losers.
    they dont do rational.

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