The widening gap

Written By: Marty G - Date published: 11:12 pm, January 10th, 2011 - 93 comments
Categories: class war, housing - Tags: recession, tax cuts

No, this post isn’t about Smile and Wave’s failure to close the gap with Australia. It’s about the widening gap between the tiny wealthy elite in this country and the rest of us. Even before the Great Recession, 10% controlled more wealth than the rest of us combined. The housing market shows that their wealth is still rising while ours falls.

There’s no question that the housing bubble needed to pop and is still in the process of deflating. House prices are down 11% from their peak in real terms. But it’s obviously a painful process for those who are experiencing the value of their properties falling, especially if they have leveraged debt off that now declining value. What’s clear though is that the pain is not being shared evenly.

Load up a newspaper site and it won’t be long until you find an article about how million dollar plus property sales are going strong (ever notice that there’s a hell of a lot more stories on the rich than the rest of us, despite their proportion of the population)? Take this one from the Herald yesterday, for example:

Finding new building projects doesn’t seem hard for the head of an Auckland residential construction firm specialising in the luxury end of the market.

Philip Lindesay of Lindesay Construction says the downturn is having little effect on his business.

Lindesay is building new houses in Auckland and the Bay of Islands and his forward-order work book shows few vacancies.

“We’ve got 15 contractors working on two sites in the Bay of Islands alone,” Lindesay says from his offices in the basement of a Newton apartment.

His firm built Eagles Nest, the much-awarded resort near Russell where guests pay $37,000 to $42,000 a night – a rate which covers all activities including chef and butler. His firm also built the Mann house near Russell and is now working on a further six new houses.

With two teams of contractors working full time in the Bay of Islands, where he specialises in waterfront homes, Lindesay has carved out a specialist niche.

Some houses are more than 1000sq m, almost 10 times the size of an average Kiwi villa…

Lindesay was not hit by the recession: “The past two or three years, we have been busier than ever and taken on more builders. The coming year is very promising and we have inquiries coming in regularly…

Beveridge says expensive new houses are not that rare, even in the downturn. “Things are happening at the top end of the property market. There are a lot of other builders, apart from [Lindesay], that would be as full in that high end of the market, including around Queenstown.

“New Zealand is a great place to build a house and now is a good time to be doing it … This is a good news story in a property market devoid of good news,” says Beveridge.

Statistics NZ figures show the value of house building is falling.

Consents were issued for buildings worth $9.8 billion in the October year, down from last year’s $9.9 billion and 2008’s $11.6 billion, although volumes are up lately from this decade’s low of 12,311 in the year to October 2009, to 15,228 in the year to October 2010…

Nick Horton of Luxury Real Estate is marketing some of New Zealand’s iconic properties, including the $20 million-plus Paoneone Farm in the Bay of Islands, owned by interests associated with venture capitalist Bill Birnie…

“Primary homes in the city suburbs and fringe areas are selling well [with] multiple sales in the $8 to $10 million range for the last six months.

“I am also doing some trips promoting investor immigration. I have teamed with ANZ Private Bank, PricewaterhouseCoopers and Malcolm Pacific. We recently travelled to Asia running seminars and finding applicants for the new scheme. All of them are interested in luxury property,” Horton said.

Although the downturn has been longer and deeper than many expected, not all projects have turned to custard. The successful developers are carrying on.

OK, leaving aside queries over why some pillock chose to name his luxury resort after Hitler’s mountain retreat (we don’t even have eagles in this country), lets concentrate on the question that the reporter failed to ask despite it being something you learn to ask in form 2 writing class: ‘why’.

Why is the luxury end of the property market going gangbusters when the rest is tanking?

It’s certainly not because their are lots of new millionaires looking for a place to kip that befits their new found wealth. The number of people with incomes over $250,000 a year actually fell for the first time in a decade in 2009 (from 13,240 to 13,220).

It’s because the wealthy are getting even wealthier. The top 5% of New Zealanders saw their combined pre-tax incomes climb by nearly a billion dollars in 2009 to $150,000 on average. On top of that, their income tax bill has fallen by an average of $7,500 since 2008. The average real after-tax income of the 5% has risen 10% since the beginning of the Great Recession while GDP per person has fallen 4.6%.

In New Zealand, we have about 50%, probably more, of the population shut out of the housing market unless they were lucky enough to get in when prices were lower. Then you’ve got another 40% or so who are watching the value of their property ebb away at the same time as their real wages fall and they worry if their job is going to last the year. Then, you’ve got a few percent, the elite, who are getting wealthier because the whole response to the Great Recession (and National’s default economic policy) has been targeted towards preserving and enhancing their wealth above all else.

Recessions are a time of upheaval, when the different interest groups in society make grabs for a larger share of a shrinking pie with results that can lead to radical change in the distribution of power and wealth. During this Great Recession, however, the bulk of the population has stayed asleep, if not cheered, as the elite has done all the grabbing, taking more of the nation’s wealth for themselves.

93 comments on “The widening gap ”

Comments are now closed

Draco T Bastard 1

10 January 2011 at 11:21 pm

Some houses are more than 1000sq m, almost 10 times the size of an average Kiwi villa…

As I said, it’s not envy but disgust.
- Marty G 1.1
  
  10 January 2011 at 11:30 pm
  
  and the reporter’s tone… that this is all something to be celebrated…
  - RascallyRabbit 1.1.1
    
    11 January 2011 at 4:43 pm
    
    Assuming villa means house, New Zealand floor areas for homes are actually more around 200m2
    
    Housing Market Trends
    
    Just semantics though – doesn’t take away from the fact that the NZherald seems to have some twisted sycophantic outlook towards developers who are building properties solely for wealthy foreigners….
    
    Captcha: Somebody
Colonial Viper 2

10 January 2011 at 11:51 pm

Look up to your Betters, Serfs, and Weep.
Lanthanide 3

11 January 2011 at 12:34 am

(ever notice that there’s a hell of a lot more stories on the rich than the rest of us, despite their proportion of the population)?

Fairly obvious why, though, right?
1. All the stories would be the same because money = opportunity, so lack of money = lack of opportunity
2. Most of the stories would be depressing or uninteresting
3. It is the wealthy who are the movers and shakers – they make decisions and do things that change society. Average people are just cogs.
4. From 1 and 2, variety and interesting upbeat stories sell newspapers
luva 4

11 January 2011 at 2:34 am

Just out of curiosity who coined the name “Great Recession”. Is that you Marty or have others started calling it “Great” as well.
- Zorr 4.1
  
  11 January 2011 at 2:54 am
  
  http://en.wikipedia.org/wiki/Great_Recession
  
  Now that that particular strawman is out of the way, any serious consideration of the topic there luva?
- Marty G 4.2
  
  11 January 2011 at 6:51 am
  
  the term has been in US usage for a while, I picked it up when Key and English led us back into recession because it seems stupid to talk about the recession in the past tense when we’re still going backwards and, indeed, were going backwards on a per capita basis throughout the ‘recovery’
B 5

11 January 2011 at 8:32 am

A table of taxable income is misleading & virtually worthless. These are the people who actually pay tax. Most of the wealthy don’t have taxable income. Those that do are often able to minimise it to the extent they will be in a low bracket of this table, not a high one (and thus qualify for family support and student allowances for their children). A reduction in the number of people in a high band may just mean that many of them have ‘restructured’ their income to avoid tax.
RedLogix 6

11 January 2011 at 8:35 am

This is the defining issue of our era… the growing and obscene extremes of wealth and poverty in this world.

When this happened during the first round of globalisation between roughly the 1840’s and WW1, the response from ordinary people resulted in events like the October Revolution in Russia, paralleled by similar movements throughout Europe. Looking back we can learn that extremist movements are always lead to unintended consequences… but they always arise in response to extreme circumstances.

It’s a salient truth that in fact the upper classes in the much of Europe owe a great debt to the Union movement. For without the unions acting so successfully moderate the extremes of wealth distribution of the time … there is no doubt in my mind that the same sequence of event that occured in Russia would have occured elsewhere.

But that success has nowadays become our fatal weakness. Who was the NZ politician of the 1940’s who said, “they turned up in rags to vote us into power, and drove up in their cars to vote us out”? The simple truth is that once a man has something to loose, he naturally becomes more cautious, and caution is so very easily manipulated by fear and greed into conservatism.

This is the left’s problem now. Our electorate all has mortgages (death contracts) hung around their necks, either directly or indirectly via their landlord. They are too frightened to change much for fear of loosing what little they have.. Talk of real change makes them very nervous and prone to wanting to change channel.

Moreover the people have been very thoroughly manipulated into having their faith in the power of the collective destroyed from under them. They no longer believe that you can organise into groups to acheive anthing meaningful. The broad social institutions of the churches has been trashed by fundamentalism into something that is both dangerous and pitible at the same time. Ordinary working people no longer have any idea of what the word ‘solidarity’ means. Most people express nothing more than a lazy undifferentiate contempt for all political insititutions… and refuse to engage their minds an inch furhter.

Our power to organise has been systematically taken from us… because it is the one thing the wealthy truly fear of us.
- just saying 6.1
  
  11 January 2011 at 9:59 am
  
  This is the left’s problem now. Our electorate all has mortgages (death contracts) hung around their necks, either directly or indirectly via their landlord. They are too frightened to change much for fear of loosing what little they have.. Talk of real change makes them very nervous and prone to wanting to change channel
  
  Exactly RL, and people already doing it hard are prepared to vote for the guarantee of more pain in this climate of fear partly becasue of a misunderstanding about the economy that must be strongly challenged by the opposition for us to have any hope of a change of direction IMO. I don’t know the rules about this, but I’m confident LPrent will delete this pretty smartly if it goes beyond the bounds. I’m borrowing part of a reply from Victor, to a blog at Bowalley Rd, because s/he has said this so well:
  
  Victor said…
  “… a nation’s finances aren’t the same thing as a household’s.
  
  Faced with huge private international debt and a substantial (and inevitable)increase in
  public debt, the average prudent and intelligent householder finds Treasury belt-tightening to be an obvious and responsible policy option.
  
  It will take a massive shift in awareness to convince the mass of voters that… a degree of ‘deficit spending’, however counter-intuitive, may be relevant to our circumstances.
  
  Unless Labour is able and willing to articulate and explain a different approach to the economy, it will always be easy to paint it as the less realistic and responsible of the major parties…”
  
  And I love the way this analogy has been turned upside down anyway. In hard times it is the luxuries that are cut back not the essentials. National is cutting back essential services and supports, in order to maintian the luxuries for the wealthy. Any householder knows this way lies bankrupcy.
  
  I find it deeply disturbing that Labour is still not challenging the rhetoric of austerity as TINA.
Hilary 7

11 January 2011 at 8:40 am

What annoys me is that these luxury projects drag up the ‘average’. It’s like that breathless report on TV3 news the other night which said the average wage was $71,000 in Auckland, but didn’t explain how that figure was calculated, or that only a small proportion would actually earn that or above, as the figure was dragged up by a few huge earners. If you asked people they probably still think the average is the median.
- Colonial Viper 7.1
  
  11 January 2011 at 9:13 am
  
  Yep. I mentioned somewhere before that news reports like that would simply lead to a lot of people feeling discontented as they would be personally placed as “below average”.
  
  BTW around 91% or 92% of NZers earn less than $71,000 p.a.
  
  That’s a lot of people wondering why in hell they are so far away from being the “average” NZ’er.
  - Puddleglum 7.1.1
    
    11 January 2011 at 8:04 pm
    
    It’s a bit dated (2006-2007) but this Wealth Disparities Survey gives the general ‘net worth’ picture in New Zealand. In particular, see Figures 1 and 2. As an indication of what is being talked about they point out this:
    
    “The top 10 percent of wealthy individuals own over half (51.8 percent) of total net worth. Some 16.4 percent of total net worth is shown as owned by the top 1 percent of wealthy individuals, and as noted above this is likely to be an underestimate. Perhaps a more revealing statistic is that at the halfway mark, the bottom half of the population collectively owns a mere 5.2 percent of total net worth, although this takes into account the considerable negative net worth of 6.5 percent of the population.”
- Lanthanide 7.2
  
  11 January 2011 at 9:43 am
  
  That report in particular was mentioned by someone in the comments a few days ago. It was a survey done by Seek I believe, one of the job sites anyway. They averaged all of the currently advertised jobs for each city and as mis-representated that as the ‘average pay’ for that city, which is obviously completely different from what people are actually being paid in that city. As usual, ‘journalists’ say they’re there to report the news, not supply analysis, so TV3 just regurgitated it without finding out why the numbers were so bollocks. Of course most of the people working for TV3 who would be putting the news together would be above average, so to them it would seem reasonable.
Nick K 8

11 January 2011 at 9:06 am

I think it’s fantastic the guy is taking on more and more builders, creating jobs and providing tax revenue for the government.

I think it’s fantastic that flowing from this will be orders from trade merchants creating revenue for them.

I also think it’s fantastic that architects will be busy and so will manual labourers, real estate agents and their office assistants, people working hard in the economy.

But I’m weird as I’m a glass-half-full sort of guy.
- Colonial Viper 8.1
  
  11 January 2011 at 9:16 am
  
  Nick, we need an economy which serves all, not a small concentrated service sector which serves the very wealthy.
  
  Answer me this:
  
  How many brand new five million dollar houses does this country need today?
  – How many builders and labourers would be employed doing that?
  
  versus
  
  How many brand new two hundred thousand dollar houses this country need today?
  – How many builders and labourers would be employed doing that?
  
  So you are correct – its not bad the glass being half full.
  
  Its bad that only the top ~8% of NZ’ers get to drink from it.
  - higherstandard 8.1.1
    
    11 January 2011 at 9:19 am
    
    An additional important question is who’s paying for both these options ?
- Blighty 8.2
  
  11 January 2011 at 9:18 am
  
  I think you’re a ‘doesn’t understand opportunity cost, still believes in trickle down’ kind of guy.
  
  The alternative to a very few wealthy people being able to afford to employ builders for their mansions isn’t nothing. The alternative is really a fairer distribution of wealth that would actually create more employment opportunities for builders and other workers.
  - higherstandard 8.2.1
    
    11 January 2011 at 9:21 am
    
    How does this fairer distribution of wealth work ?
    - Blighty 8.2.1.1
      
      11 January 2011 at 9:31 am
      
      “How does this fairer distribution of wealth work ?”
      
      very well in most of the countries that are wealthier than us.
      
      Here’s the GINI Index and other measures of equality/inequality by country. http://en.wikipedia.org/wiki/List_of_countries_by_income_equality
      
      put it in ascending order of GINI index. Noticethat all but three of the twenty-odd countries that are wealthier than us have a more equal distribution of wealth.
      
      How do you make a fairer distribution of wealth happen? Progressive income tax, capital gains tax, higher wages and stronger work rights. Like those more successful countries have.
      - higherstandard 8.2.1.1.1
        
        11 January 2011 at 10:28 am
        
        We have progressive income tax, I agree we should implement capital gains tax but neither of the major parties will run on it as the general public will crucify them – perhaps an agreement between the two parties that it will be implemented who ever gets in ?
        
        Higher wages for all would be great and in terms of work rights I suspect we aren’t that much different from many of those other countries.
        
        Blighty 8.2.1.1.1.1
        
        11 January 2011 at 11:13 am
        
        “I suspect we aren’t that much different from many of those other countries.”
        
        then your suspicion exists in defience of the facts. you haven’t even bothered to look at the table I’ve shown you. A fairer distribution of wealth is possible and exists in countries that are doing better than us. It used to exist here, too, when we were a more successful country.
        
        Colonial Viper 8.2.1.1.1.2
        
        11 January 2011 at 11:20 am
        
        Our progressive income tax system needs to lower the bottom tax rate significantly and introduce new bands at 5x the median income (approx $140K p.a.) and 20x the median income (approx $600K p.a.).
        
        Beyond a CGT, an estate tax is also required. 25% of everything not including the family home plus first million in assets would be a start.
        
        burt …
        
        11 January 2011 at 11:27 am
        
        Colonial Viper
        
        Although I’m not a fan of progressive taxation because it always gets used as a popularity lever at election time, the thresholds you mention make sense.
        
        However like I mentioned the popularity ‘policies of envy’ lever that progressive taxation enables your estate tax is exactly that – policies of envy.
        
        If people accumulate wealth after paying your progressive taxes then what right has the state got to take more off them simply because “they are rich pricks and can afford it” ?
        
        Colonial Viper …
        
        11 January 2011 at 11:36 am
        
        Because its not your money until the state decides how much it needs to take off you to keep a society that we can be proud of running smoothly.
        
        Of course, income tax doesn’t touch those who have millions in assets but have arranged their affairs so that they look like they have zero income. Thats why new tools are needed.
        
        And yes, the rich pricks can afford it and do not fear they will not miss out on their new BMW X5 V8 turbo or their weekly $150 bottles of Veuve Cliquot.
        
        The politics of envy and greed – I am impressed that the Right Wing always plays this game to the hilt. Bravo to you, cheering on the 650 millionaire earners in this country who suddenly got an extra $1K-$2K per week in their pockets due to Bill and John’s tax cuts. Extra money for doing not extra work, who can turn it down eh.
        
        The progressive taxation system, CGT and Estate Tax does something very simple. It leverages the power and nature of capital to acquire more and more capital over time (partly through disadvantaging labour), and allows some of that to flow back to the ~95% of NZ’ers who earn less than $80K p.a.
        
        higherstandard …
        
        11 January 2011 at 11:45 am
        
        Estate tax is an interesting concept.
        
        http://en.wikipedia.org/wiki/Estate_tax_in_the_United_States
        
        Again it would need to be mutually agreed between labour and national as no party would run on it by themselves, certainly trust lawyers would have a field day.
        
        Draco T Bastard 8.2.1.1.1.3
        
        11 January 2011 at 12:43 pm
        
        We have progressive income tax,
        
        No we don’t. We have an illusion of a progressive income tax but what we really have is a flat tax. As the poor spend most of their money GST makes up a considerable portion of their taxes but the wealthy pay very little GST and have ways to dodge paying tax. The result is that everyone pays close to the same amount of tax. Hell, there’s probably a few rich people out their who pay less tax relative to their income than the poor do.
        
        higherstandard …
        
        11 January 2011 at 1:11 pm
        
        Do you actually believe the tripe you write ?
        
        Draco T Bastard …
        
        11 January 2011 at 4:44 pm
        
        What I write isn’t “tripe” – it’s fact. The “tripe” is what comes out of the people who believe in delusion such as yourself, otherwise known as RWNJs.
        
        The Baron …
        
        11 January 2011 at 5:05 pm
        
        Draco Draco Draco – come on, this stuff is basic.
        
        $0 – $14,000 12.5%
        $14,001 – $48,000 21%
        $48,001 – $70,000 33%
        Over $70,000 38%
        No-notification rate 45%
        
        So it goes from 12.5% to 38%. Looks pretty damn progressive to me.
        
        How about we tone down the insults and insane rhetoric for once and try reading readily available material first? Only an idiot has to resort to insults instead of ideas.
        
        I’d also love to know how a salary earner in any wage bracket can dodge paying PAYE, since you seem to think that that avoidance is so wide spread? Oh no, talking out of a hole in your head agian, putting a hard educated worker on $80k in the same bucket as your “scum of the earth” multi-million asset owner.
        
        So much hate, Draco. I really do fear what will happen when you’re Chairman – once you’ve banned all the bananas of course.
        
        Colonial Viper …
        
        11 January 2011 at 5:08 pm
        
        Draco Draco Draco – come on, this stuff is basic.
        
        $0 – $14,000 12.5%
        $14,001 – $48,000 21%
        $48,001 – $70,000 33%
        Over $70,000 38%
        No-notification rate 45%
        
        So it goes from 12.5% to 38%. Looks pretty damn progressive to me.
        
        Lolz These RWNJs really have no fraking idea about our economy, our monetary system or our tax system do they.
        
        They need to learn a lot from us Leftys by the looks of it.
        
        Oh no, talking out of a hole in your head agian, putting a hard educated worker on $80k in the same bucket as your “scum of the earth” multi-million asset owner.
        
        Don’t fuss too hard Baron, only one in twelve or one in fourteen NZ’ers are well off enough to earn $80K p.a.
        
        The vast majority of NZers (80+%) earn less than ~$60K p.a.
        
        The Baron …
        
        11 January 2011 at 5:15 pm
        
        Your point? That 12.5 – 38% aint progressive enough?
        
        Come on, since your such a bloody genius why haven’t I seen your alternative policies get you elected?
        
        All I hear from you guys is oh so much hate about anyone who dares to earn in the top tax bracket. It really does scare me.
        
        Colonial Viper …
        
        11 January 2011 at 5:20 pm
        
        You have no idea of our economy do you Baron, and continue to have no idea.
        
        I am concluding now that you are just posting lines and microfactoids that you have been given in a file, and have no actual knowledge or experience around the financial, tax and economic issues you are talking about.
        
        I’m actually interested in your post now because you are the second RWNJ in a month who has made this exact same error.
        
        What a ‘co-incidence’.
        
        The Baron …
        
        11 January 2011 at 5:26 pm
        
        LOLZ – who would give me these lines?
        
        And come on then brainiac – what point am I missing? I live in work in this economy – have paid tax at all of those rates. And I have a different viewpoint from you, that someone earning over $70k is not some evil capitalist prick that needs to be violently bought down to size.
        
        So come on then genius. Since you know so much, maybe you can explain to me how a salary earner can dodge PAYE?
        
        After that, you can explain to me how 12.5-38% is not a progressive taxation system.
        
        Aaand to finish off, you can explain how 80% of the population earning under $60k a year justifies your apparent hatred of everyone over that arbitrary threshold – even though the progressive taxation is in place above.
        
        Come on then – if I’m so out of touch, you wanna educate me on these key “facts”?
        
        Colonial Viper …
        
        11 January 2011 at 5:31 pm
        
        Lame, don’t have time to be your teacher go back and learn the basics yourself.
        
        You business-finance-tax-economy whizz kid. Lolz.
        
        Or perhaps a Lefty kinder than me who can be assed to help out a RWNJ.
        
        The Baron …
        
        11 January 2011 at 5:35 pm
        
        Seriously pal, that is just pathetic. I’m not the one alleging I have no clue – I’m the one asking you, who claims to know all and see all about this economy, to explain some of the frankly ridiculous bullshit that backs up your world view.
        
        And you clearly can’t.
        
        So, no answer to why 12.5-38% ain’t progressive.
        No answer to how to dodge PAYE as a salary earner.
        And no justiifcation for your hatred of ordinary workers who earn over the arbitrary threshold that is the top tax bracket.
        
        Conclusion – you make a lot of noise for someone who really is just a myopic idealog.
        
        Draco T Bastard …
        
        11 January 2011 at 6:06 pm
        
        No answer to how to dodge PAYE as a salary earner.
        
        Generally speaking, I don’t count PAYE earners in the “rich” category. Not saying that some of them aren’t of course but those that are probably filter those earnings through trusts and/or companies. The “rich” can afford lawyers to restructure their income to dodge tax, most people on PAYE can’t.
        
        And, as I’ve said many times, I don’t use the PAYE tax brackets as an indication of wealth. Especially the old brackets.
        
        burt …
        
        11 January 2011 at 6:13 pm
        
        The Baron
        
        I think CV would like to cap take home earnings at the same level for everybody and have people who are paid more just contribute a lot more to the glorious state that provides the environment they need to earn money for the state. Droids would make a perfect communist society and the idiots talk of freedom…. go figure.
        
        burt …
        
        11 January 2011 at 6:26 pm
        
        Draco
        
        CV seems to think everyone earning over $60K works through a trust and pays no tax. I do wonder what world he lives in some times.
        
        But that’s not to say sharply progressive taxation isn’t played by people who have the ability to do so; this graph produced by Gareth Morgan in 2005 (“The impact of ideological burps”) clearly shows the effects Cullen’s (and CV’s) hatred for high earners had on people who were able to rearrange their circumstances to reduce their PAYE paid income.
        
        I like this quote from 2005;
        
        Hot on the heels of the Reserve Bank’s acknowledgement that it has lost control of inflationary pressures from this overheated economy, the Treasury unleashed a salvo of condemnation of the Clark-Cullen administration’s high tax regime. That regime, since 1999, has steadily eroded under their tutelage to the point now that Treasury argues it is holding back growth.
        
        They were bang on…
        
        Lanthanide …
        
        11 January 2011 at 7:25 pm
        
        Baron – here’s a hint for you: you got the tax rates completely wrong. The rates you list are pre-Nationals tax cuts to the rich.
        
        And yes, you are the second righty to have this EXACT error and be completely oblivious to it.
        
        Puddleglum …
        
        11 January 2011 at 8:20 pm
        
        Seems I’m just sitting around twiddling my thumbs with nothing better to do …
        
        Here’s the link to current tax rates.
        
        I guess this makes me a ‘Lefty kinder than CV’?
        
        Lanthanide …
        
        11 January 2011 at 4:19 pm
        
        I’m not sure how you determine that the wealthy pay very little GST. That’s just bizarre.
        
        Draco T Bastard …
        
        11 January 2011 at 4:38 pm
        
        They spend less of their income on consumption so, in relative terms, the GST that they pay is less than that paid by the poor. On top of that they have ways to remove GST from their consumption. Sure, they’re not supposed to do so but they can and do.
        
        logie97 …
        
        11 January 2011 at 5:01 pm
        
        Want an example of wealthy paying less GST
        
        The wealthy buy at warehouse prices. JoBlo pays retail.
        
        Company Director
        $1000 warehouse price – @15% = $1150 – wealthy pay $150 tax, but claim it back against the company and then write the item off against depreciation over time.
        
        Company employee
        $1400 retail price – @15% = $1610. Employee pays $210.
        
        Q.E.D really
        
        The Baron …
        
        11 January 2011 at 5:12 pm
        
        OK so that is valid for the couple of hundred company owners. Wow, shock and horror. But is that a reasonable proxy for the “wealthy” of NZ?
        
        Everyone I know on $70k + isn’t able to run those sorts of dodgems to get around GST. A more realistic example goes like this:
        
        Person on 20k a year buying a $1000 (pre-GST) item = $3010 in income tax, and $150 in GST. Total tax is $3160
        
        Person on 80k a year buying a $1000 (pre-GST) item = $19,950 in income tax and $150 in GST. Total tax is $20,100.
        
        A far more realistic comparison therefore looks pretty fair to me – but I guess this doesn’t suit your “hate the rich” angle.
        
        Sounds like you need a reality check mate – not everyone in the top tax bracket is some fat cat in a top hat. Hell, you can get there and still be on working for families.
        
        Colonial Viper …
        
        11 January 2011 at 5:17 pm
        
        OK so that is valid for the couple of hundred company owners.
        
        Huge underestimation. Probably over 100,000 actually.
        
        Count up all the small trades operations, contractors, SMEs, etc out there for starters. Look in the phone book under “plumber”, “electrician”, “consultant” and what not and you will pass a few thousand likely business owners straight away.
        
        The Baron …
        
        11 January 2011 at 5:21 pm
        
        Every plumber is able to buy at wholesale from every retailer? Wow, who knew.
        
        Christ CV, that’s pretty myopically idiotic even from you. How much tax do you think is “avoided” under the example given by Logie – and how will you close it?
        
        Colonial Viper …
        
        11 January 2011 at 5:24 pm
        
        Interesting Baron that you had no idea of the number of business owners in this country, and indeed guessed wrong by perhaps two orders of magnitude.
        
        Claiming a “couple of hundred” business owners only in the whole country? LOLz there may be perhaps that many in Keri Keri and surrounds alone.
        
        You really have no understanding of the scale of the issues.
        
        The Baron …
        
        11 January 2011 at 5:29 pm
        
        The scenario called for a company director that can buy at wholesale prices.
        
        The number of people that can do that for anywhere near a significant proportion of their spending is likely to be a couple of hundred people – not everyone earning over $70k.
        
        Another question for you then, Oh Informed One – how much of their weekly spend do you think the average plumber is able to write off in the manner used in this scenario? A couple of tap fittings for around the house?
        
        Draco T Bastard …
        
        11 January 2011 at 6:20 pm
        
        OK so that is valid for the couple of hundred company owners.
        
        Considering that every business owner can do that then it’s significantly higher than a couple of hundred. Most of them aren’t rich though and that is actually an example of why I keep saying that everybody needs to be working under the same rules.
        
        I was commenting more upon proportionality. Someone with a $1m income can save most of it whereas someone on the median wage will spend all of it (they have no choice as that’s what it costs to live). The person who spends all of their income is obviously paying a higher portion of their income as tax in the form of GST.
        
        The person with $1m income will also be hiring lawyers and accountants to minimise their taxes as they can afford to do so while the person on the median wage can’t. In other words, the rich person can change their tax status so as to pay even less tax than the “progressive tax brackets” would indicate. A couple of months ago someone posted that they had an income of $165k and paid just under 15% tax on that income. So much for the “progressive tax”.
        
        It really actually sux to be on PAYE in NZ.
        
        higherstandard …
        
        11 January 2011 at 5:21 pm
        
        So all the wealthy are registered for GST and are illegally making GST claims to rort the system ……. as me old mate r0b we say “got a link for that” bluebaiter ?
        
        logie97 …
        
        11 January 2011 at 6:51 pm
        
        Talk to any self employed over a beer about tax and the conversation will go to how they avoid tax and put so much down to the “company”.
        The wife / husband sub contracts to the business as well. Both the cars, the office space, fuel, heating… the list goes on. And the company claims a heap of GST back as well as writing the assets off over time.
        
        That probably includes the farmers as well.
        Wouldn’t mind betting that there are a good few children who were able to claim student allowance at university on the basis that the combined incomes of the parents fell inside the criteria.
        
        The mugs are those on PAYE.
        
        Lanthanide …
        
        11 January 2011 at 7:29 pm
        
        The poor pay proportionally more of their income as GST. But the rich by far and away pay much more in absolute terms. Of course you know this, but your wording wasn’t clear on the point.
        
        logie97 …
        
        11 January 2011 at 7:41 pm
        
        It’s not about envy, but rather about fairness. PAYE and GST are in
        theory reasonably fair tax systems, but in practice punishing.
        And many above know it. If everyone paid what he/she is supposed to
        pay, it would be a good starting point for further evaluation.
        
        captcha: FACT
        
        ZeeBop …
        
        11 January 2011 at 10:11 pm
        
        Government subsides lower the cost of many services that the rich use multiple times,
        and the poorest never use. Passports, airports, public statistics, etc. The cost of a passport must be lowered so the poorest can get one! Though I doubt how the poorest could pay up! So the rich should actually pay more because as Buffet pointed out there is no way that he created the wealth he has! If Buffet get’s it then shouldn’t absolute you?
        
        Anyway a rich prick have relatives who they start charities and write the donation off against tax. their relatives then have a job care of the taxpayer not charging them tax, but a average joe gives their relative a job and they have huge complianc costs!
        
        So please grow up, the rich screwed the world economy over writing themselves too much bonus and are now raiding soverign funds to get a bail out, they should get the sack like averages joes.
- mcflock 8.3
  
  11 January 2011 at 11:55 am
  
  A “glass-half-full sort of guy” is also known as an “optimist”.
  
  A “glass-5%-full sort of guy” is in denial.
  
  Which one are you closer to?
- bbfloyd 8.4
  
  11 January 2011 at 5:32 pm
  
  nick.. so they have been able to take up the slack from other sectors of the building industry? of course not.. but by all means try to ignore reality in any way you can… it’s only you that needs to be convinced, so it is irrelevant if your opinion turns out to be an uninformed and pointless one.
Nick K 9

11 January 2011 at 9:25 am

This guy clearly has a market for his product and sells his product to that market. In the process he creates jobs, and probably helps our international profile because I am sure most of these will be rented/sold to offshore residents.

Auckland has a housing problem, but that’s got nothing to do with this story. Auckland couldn’t solve it’s housing “problem” if it tried because greenie planners refuse to expand the MUL. Then when apartment or townhouse complexes are proposed the greenie planners oppose those to because of heritage and urban design reasons.

BTW, what’s a “fairer distribution of wealth that would actually create more employment opportunities for builders and other workers.”
- Blighty 9.1
  
  11 January 2011 at 9:35 am
  
  see comment above. nearly all of the countries that are leaving us for dust have a fairer distribution of wealth. your trickle down theory doesn’t work and never has.
  
  “This guy clearly has a market for his product and sells his product to that market.”
  
  not arguing with that genius. The problem is that the concentration of wealth in the hands of a few creates that market while denying us a more vibrant market that would be created if the wealth of the nation was distributed more equally. Sure, a few mansions are being built but, as Marty points out, inequality means most people will never be able to afford to get a house built.
  - TightyRighty 9.1.1
    
    11 January 2011 at 9:47 am
    
    Interesting that comment you make. Due to inequality people wont be able to build houses. I can build a outset home for around 3000 a square metre. The problem isn’t the lack of new builds, its the poor quality that has been associated with them. Now the quality is so high and the build cost is reasonable, I will probably by a plot and customise a outset home. Everybody is a winner. Except the owner of an old Villa in newtown expecting someone of imagination like me to come by an offer top dollar.
    
    Happy new year from Europe btw.
- Lanthanide 9.2
  
  11 January 2011 at 9:46 am
  
  Yeah, ’cause what Auckland needs is even more exurbs and the roads built out there to serve them!
  
  Auckland’s future is up, definitely not out.
alfa 10

11 January 2011 at 9:53 am

Oh look over there, another envy post. The only widening gap that is happening right now is between the labour party and its flunkies chances of winning an election anytime soon.
- burt 10.1
  
  11 January 2011 at 11:06 am
  
  Exactly… Lets see if we can win an election by promising to bash the rich some more…. so 1999….
  
  Suck it up lefties, not everyone thinks that queuing for bread and toilet paper is nirvana.
  - Bright Red 10.1.1
    
    11 January 2011 at 11:15 am
    
    “so 1999”
    
    Labour won in a landslide in 1999 and went on to govern for nine years. Moron.
    
    Lefties think everyone should be well-off, not a few obscenely wealthy while a million live in poverty.
    - burt 10.1.1.1
      
      11 January 2011 at 11:18 am
      
      If lefties think everyone should be well off then why did unions settle for 1%-3% pay rises for their members during the 9 years Labour MPs were getting circa 9% pay rises every year?
      - Colonial Viper 10.1.1.1.1
        
        11 January 2011 at 11:26 am
        
        were getting circa 9% pay rises every year?
        
        This is a lie.
        
        For example, at the end of 2006 MPs were awarded a pay rise of 3.8% – 4.1%.
        
        If lefties think everyone should be well off then why did unions settle for 1%-3% pay rises for their members
        
        The first idea has nothing to do with the second idea, apart to act as a distraction.
      - Lanthanide 10.1.1.1.2
        
        11 January 2011 at 11:33 am
        
        The remuneration for MPs is handled by an independent body. That’s how Key was recently able to get his cake and eat it too when he said “oh we don’t want a pay rise” but get one anyway. Of course you know that.
        
        burt 10.1.1.1.2.1
        
        11 January 2011 at 11:34 am
        
        Of course I knew that – but the left think that all should be well off not just a few elite… Or if the elite in question are the dear leaders do the left turn a blind eye ?
        
        [lprent: I’d have thought that you’d have learnt the troll phrases that cause auto-moderation (and therefore my moderate attention) by now. I guess you’re a slow learner? ]
        
        burt …
        
        11 January 2011 at 12:01 pm
        
        You have become a whining bitch these days lprent. What made you think for one moment I take your auto moderation phrases into account when expressing my views ?
        
        [lprent: Being able to comment here is not a ‘right’, it is a privilege, and we expect people to contribute to the content of the site. Trolls behaviours don’t. They just waste everyones time in pursuit of the self-stimulation of their own egos.
        
        The auto-mods are there for a reason. They allow me to detect people trolling with the least amount of effort on my part. But pulling people out of moderation involves me in effort which I don’t like repeating. Having to do it for an individual too often means that it becomes easier for me to kick them off the site for having a clear inability to learn. That is what you should concern yourself with.
        
        BTW: I’ve just been scanning your comments for the last week and you do appear to have dropped into a troll pattern with very little thought on the content of your comments. I’d suggest that you change that pattern rapidly. ]
        
        ghostwhowalksnz 10.1.1.1.2.2
        
        11 January 2011 at 2:22 pm
        
        And on top of that Key claims he ‘gives it away ‘
        Love to know the details of the worthy charities he supports .
        Unless hes giving away to political campaigns and his childrens trust funds and their sporting hobbies why would he hide the details yet gain the political credit of being a ‘giver’
      - Bright Red 10.1.1.1.3
        
        11 January 2011 at 11:44 am
        
        “why did unions settle for 1%-3% pay rises for their members during the 9 years”
        
        they didn’t. remember how you’ve been complaining that the teachers had it easy getting 4% year after year? And many others did even better.
        
        burt 10.1.1.1.3.1
        
        11 January 2011 at 12:02 pm
        
        Bright Red
        
        Keep making stuff up… find a link where I complain that teachers are getting too much when they get 4% and I’ll donate $20 to the standard.
- Colonial Viper 10.2
  
  11 January 2011 at 11:23 am
  
  Interesting how the Right always brings up the Politics of Envy and Greed.
  
  First and foremost topics in the Right Winger’s brain.
  
  Perhaps you’ll let the people eat cake?
  - burt 10.2.1
    
    11 January 2011 at 11:35 am
    
    Yes that’s right. Because only myopic lefties think we are all better off when we punish success to support failure.
    - Bright Red 10.2.1.1
      
      11 January 2011 at 11:45 am
      
      yeah, we should be supporting the Hotchins of this world because hey’re manifestly successes and punishing the cleaners and factory workers becuase they’re failures.
      
      idiot.
    - Colonial Viper 10.2.1.2
      
      11 January 2011 at 12:17 pm
      
      burt, you calling the 50% of NZ’ers who earn less than $27500 p.a. “failures”?
      
      You calling the microfraction of NZ’ers who earn over a million dollars a year – whether or not they did anything productive or useful in doing so – “successes”?
      
      Face it burt the success you are talking about is a big tall pyramid scheme with frak-all seats at the top and a lot of people crushed at the bottom with zero or negative net worth, earning less than $27500 p.a.
      
      But good on ya for backing the system mate, tread on a few more of your fellow citizens while you’re at it.
    - The Economic Illiteracy Support Group 10.2.1.3
      
      11 January 2011 at 1:18 pm
      
      Because only myopic lefties think we are all better off when we punish success to support failure.
      
      Burt – As has already been posted on The Standard, the median Maori income has fallen 11.5%, Pacific Islanders 19% and Pakeha are down 2.6% since National’s assumption of power.
      
      By any reasonably standards, National’s economic reign is an unmitigated failure. If only there was some success in the economy for the lefties to actually punish! As it stands, patching up the damage from National’s ill-conceived policies will take many years.
      - Nick K 10.2.1.3.1
        
        11 January 2011 at 2:22 pm
        
        National’s reign has led to this?
        
        No.
        
        The Great Recession has led to this. That started under Labour’s reign. In fact, we were the first country to go there.
        
        Bright Red 10.2.1.3.1.1
        
        11 January 2011 at 2:38 pm
        
        “In fact, we were the first country to go there.” no we weren’t: Ireland, Iceland, Italy, Japan, and Portugal all had negative quarters before we did. http://stats.oecd.org/index.aspx?
        
        and, anyway, surely you’re not blaming Labour for an oil price spike, a drought, and a global housing bubble bursting.
        
        Now, National’s in charge, has been in charge for two years, and it’s their responsibility. What have they done? Led us back into recession.
        
        Lanthanide …
        
        11 January 2011 at 4:39 pm
        
        “Now, National’s in charge, has been in charge for two years, and it’s their responsibility. What have they done? Led us back into recession.”
        
        What’s more, they went into election 2008 knowing that a recession had started. The full scope of it wasn’t quite apparent at the time. But they still promised their tax cuts, while simultaneously saying “don’t trust Labour, they’ll promise tax cuts but won’t implement them”. After winning, they rushed through tax cut policy for 2009, 2010 and 2011, and then several months later promptly rushed more legislation under urgency repealing the 2010 and 2011 tax cuts because they couldn’t afford them any more. Funny how they got to say “don’t vote Labour they won’t follow through” and then do exactly that themselves.
        
        Then they came up with a hokey “tax switch” with very manipulated growth numbers to make it look like their even bigger tax cuts were going to help the economy and be ‘revenue neutral’, and passed these in 2010 to come into effect in 2010.
        
        The Economic Illiteracy Support Group 10.2.1.3.1.2
        
        11 January 2011 at 2:57 pm
        
        The Great Recession has led to this.
        
        I see the Right is still using “the dog ate my homework” style excuses, rather than ‘fessing up to their own inability to run successful economic policies.
        
        The reason NZ is still bumping along the line between positive and negative growth is because National lacks the intellectual ability to do any better. It seems highly unlikely that their poor performance is because they deliberately want to destroy the livelihoods of Kiwis – it’s far more likely that Key and English and Joyce are simply rubbish at their jobs.
        
        For instance, dairy prices are now nearing their all-time highs, yet there seems to be no active government policies to ensure the benefits of an increasingly strong exporting primary sector are felt right across the economy – a typical example of right-wing economic mismanagement.
    - bbfloyd 10.2.1.4
      
      11 January 2011 at 5:58 pm
      
      burt.yet another piece of insightful drivel from the high priest of natland
randal 11

11 January 2011 at 1:19 pm

burt loves winners because then he can chuck off at the losers.
burt is a pinhead.
J Mex 12

11 January 2011 at 4:20 pm

I saw this story. It is great that a developer/construction team is doing so well. Most aren’t. Most of the high end real estate market is complete tits.

This story is the equivalent of a Herald story about a 103 year old woman who is still active and plays tennis daily. It is a story because it is not normal (in this market), that’s why it is newsworthy. The reporter could find 100 stories about bedridden and immobile centurians, but that isn’t interesting. This is the story of an outlier.

In the same way, the reporter could do a story about failed luxury developers (currently normal), but that has been done to death of late. Much better to do a twist story and fine one that is doing well.

Still, doesn’t stop Marty hanging his hat on the story as a basis of how “the haves” are loving the reccession cos they can grab more money.
- Colonial Viper 12.1
  
  11 January 2011 at 4:24 pm
  
  Still, doesn’t stop Marty hanging his hat on the story as a basis of how “the haves” are loving the reccession cos they can grab more money.
  
  Not quite precise.
  
  In this capitalist system, a recession is when “the haves” grab more assets at discount prices.
  
  And in the next upturn, capital wealth will be even more concentrated in the hands of a few.
  - J Mex 12.1.1
    
    11 January 2011 at 5:47 pm
    
    If that is the point,then the story is utterly irrelevant to Marty’s point.
    
    The luxury housing market involves one group of wealthy people selling property to another group of wealthy people. Within that group it is almost certainly a zero sum game, with real estate agents taking a percentage on every transaction.
    
    Marty couldn’t have picked a worse example of the rich exploiting the poor in a recession. If anything, in a recession, the luxury real estate market is the ‘new rich’ (or ‘always rich’) exploiting the ‘used to be rich’.
    - Colonial Viper 12.1.1.1
      
      11 January 2011 at 5:52 pm
      
      Marty’s post wasn’t about the rich exploiting the poor, though.
      
      It was about one small sector of society doing very very well for themselves – and everyone else being on pretty hard times.
      
      The “widening gap” in other words, and the system which has led us there.
      - J Mex 12.1.1.1.1
        
        11 January 2011 at 8:45 pm
        
        But Marty is using an article to illustrate his point, and using a novel article that one luxury developer is doing well. If you take the sector as a whole, you will find that the luxury real estate market is in very poor shape.
        
        “Although the downturn has been longer and deeper than many expected, not all projects have turned to custard. The successful developers are carrying on.”
        
        Yes. Successful developers are carrying on, but the many many developers (many of whom previously made ‘The NBR Rich List’ are gone or almost gone – many of those in the luxury development market space.
        
        I would also wager that of the people forced to sell some real estate during this ‘financial crisis’ that the majority would have fallen into the ‘rich’ as opposed to ‘poor’ category’
  - mcflock 12.1.2
    
    11 January 2011 at 5:52 pm
    
    Agreed – bail outs to banks are paid to speculators as bonuses for collapsing the bank so much it needed a bailout.
    
    Speculators who short-sold stocks and commodity bets made millions of dollars while millions of people lost their jobs and homes.
    
    Oil companies made millions when derivatives speculators increased “demand” for oil via futures gambling (and other factors, but they did expect a lot of cheap oil from Iraq). They got nice bonuses for profits that were the result of skyrocketing prices and pretty stable operating costs.
    
    Lots of people are making money out of the current misery – but it’s a comparative few of the same people, rather than the public benefits the “invisible hand” is reputed to bring (although even Smith didn’t go so far as the current RWNJ concepts).
Rich 13

11 January 2011 at 5:35 pm

It’s all part of the Big Con that is modern capitalism.

Years ago, one could earn a decent living from working. By working a bit harder or smarter, it was possible to get a better standard of living. If you weren’t that smart, you could still support a family. Basics like health and education were free, and housing and food was reasonably priced. People didn’t have to borrow to make ends meet.

Nowadays, that’s all gone, and with remarkably little protest. One way the system has managed to avoid such protest was to create the biggest Ponzi Scheme ever – the “housing ladder”. If you found you weren’t getting anywhere on your earned income, by borrowing to the hilt you could make an imaginary second income from house price inflation. That placated the middle classes and let the corporations and the super-rich (conveniently at the top of the pyramid) continue to coin it.

That scheme’s been showing a few cracks lately: The subterfuges needed to keep people borrowing to that extent have been failing in spectacular style. The many young people who are now being denied education and jobs to pay for the scheme are beginning to kick back. More and more money is needed to avert peak oil and climate change, stretching the ability of governments to keep the middle class comfy.

There’s going to be radical change eventually – it isn’t going to come from the likes of Goff though.
- Draco T Bastard 13.1
  
  11 January 2011 at 6:23 pm
  
  There’s going to be radical change eventually – it isn’t going to come from the likes of Goff though.
  
  Yeah, Labour in general is holding on to the capitalist meme. They really don’t seem to be able to think outside of it.