Leaky homes are a slowly unfolding disaster for the country. Someone is going to have to come up with $11bn (at least) in costs for repairs, and the government hasn’t a clue as to how to handle it. Still, every cloud has a silver lining they say:
Leaky homes a disaster and a $2b tax windfall
The leaky-building crisis is New Zealand’s most expensive catastrophe, but it will enrich the Government by at least $2 billion, says a study commissioned by the North Shore City Council. The study puts the cost of rotting homes as three times that of the annual road toll and more than any natural event. But it also claims that the Government reaps at least 25c for every $1 paid on leaky-house repairs.
The Government has previously rejected council claims that it would gain financially from GST on leaky-home work. North Shore Mayor Andrew Williams said he would present the findings of the study, by consultants Covec, to today’s Auckland Mayoral Forum meeting. … GST and company tax paid on spending for materials and experts’ fees generated the $2 billion. …
Mr Williams backed Justice Terence Arnold’s Court of Appeal decision identifying government deregulation of the building industry in the 1990s as the root cause of the leaky-homes disaster.
Yes, a National government stuffed up totally in the 1990s, creating the leaky homes crisis, and 20 years later another National government stands to profit $2bn from the mess. No doubt they will cite the extra income as proof of their “excellent” management of the economy. Voodoo economics indeed.
But there’s another point to make here. We’ve made it before, but leaky homes provides a compelling example. Because the extra economic activity caused by the leaky homes fiasco will also show up as an increase in GDP. It will (by the usual measure) count as a Good Thing for the Economy. Gosh – think how great the economy would look if we knocked over all the houses and started again! As Marty summed it up:
All GDP does is measure economic activity. It doesn’t count anything that isn’t bought and sold – volunteers, clean air, cost of crime, etc etc. It doesn’t measure how much of the wealth produced is retained and continues to increase our welfare into the future. It doesn’t measure how much wealth is destroyed in making new stuff. It doesn’t measure whether the economic activity is for good stuff spending on military equipment or building a new coal power plant counts as well as spending on teaching a child.
There are alternatives, such as the Genuine Progress Indicator (GPI) described in Marty’s post. We need to pick a better measure and adopt it. Because until we get beyond GDP as our measure of success we are going to continue to get a uselessly narrow view of our economy. And until we get beyond growth as our only goal we are going to remain on a collision course with the inescapable limits of our finite, fragile planet.
[Update: Brian Rudman makes many of the same points today]