What we need in the Budget

Written By: - Date published: 12:00 pm, May 27th, 2009 - 81 comments
Categories: budget 2009 - Tags: , , ,

We need to keep paying into the Superannuation Fund.
Never heard anything so dumb as the idea of stopping making payments right now. Invest now and make a tidy sum to pay for super in the future. If we don’t we’ll have to put up taxes in the future or cut super. I’m looking forward to my super.

We need a real jobs policy.
The Greens’ home insulation package will create a few thousand. That’s a good start but it’s not much. Drop in the ocean compared to 43,000 jobs from the Greens’ full Green New Deal. That’s a real jobs package. Remember most new unemployed go on the UB. That costs ten thousand a year per person. Plus the loss of income tax. Keeping people in jobs makes sense and dollars.

We need to be building for the future.
Cheap oil’s history. Next time oil hits $150 a barrel and we’re halfway through knocking down Mt Albert to build a motorway we’re going to look like a bunch of complete monkeys. Cut motorway funding and put it into public transport. Not the other way around. More jobs in public transport too.

We need a sustainable debt track.
Debt’s not a huge problem but the less the better. The simple way to do that is forget tax cuts. Ideally, undo the previous ones too. But I suspect Key wants to keep his hundred bucks a week. Introduce a capital gains tax. Screw the property traders (see them in the paper already trying to create the next bubble). Capital gains will stop overinvestment into housing as well as keep debt under control. Oh, and raise taxes for the richest few percent like they did in the UK.

It would be nice to see Key admit the Jobs Summit was just hot air. Won’t hold me breath.

81 comments on “What we need in the Budget”

  1. Re We need to keep paying into the Superannuation Fund: I’ve yet to see anyone satisfactorily explain why, if it would be completely insane of me to borrow money to invest in the share market, it’s a good idea for the govt to do it.

    Re: Cheap oil’s history: you’re not the first to say so, and quite possibly won’t be the last to be wrong. I recall people last year parroting this when petrol prices crossed $2 per litre, and oops it turned out that high price was due to speculators, not a shortage of oil. The fact that cheap oil will inevitably be history at some point doesn’t necessarily mean that point is now.

  2. gingercrush 2

    In other words. A far leftist fanatic of a budget.

    • IrishBill 2.1

      That’s your idea of a far left budget? What’s your centre? Pinochet?

    • Mr Magoo 2.2

      That is just ridiculous.

      Half the things on there have already been promised by this government. (e.g. jobs summit/debt management) The other half are just good financial sense. (e.g. investing in funds when things are cheap & reducing foreign dependance and carbon cost)

      The difference is that they had no intention of actually delivering anything except government departments up to Rodney’s Razor gang and playing shuffle the money.

      Honestly, this government is completely out of any real valued ideas. The only thing they have ever been good at so far is PR…and that was after 9 years practice and millions of PR dollars.

      And that is fading too…

      Kiss your tax cuts goodbye also NZ. My god, I just about laughed my cynical ass off when I heard them back pedalling on that one. Enjoy your block of cheese, it will be the last one you will get for some time.

    • burt 2.3

      The budget the lefties always wanted from Labour…

      Of course when Labour couldn’t do it that was fine because there were bigger issues to deal with but if national don’t deliver it is because they eat babies.

  3. the sprout 3

    nice one IB.

    Quite agree Zetetic, but can i add:

    We need responsive, or at least competent, or failing that at least plausible, leadership and government.

    wishful thinking i know, but it doesn’t make the need any less acute.

    • Pat 3.1

      Surely that is a meaningless statement. I mean, how to you measure “plausible” leadership and government.

    • burt 3.2

      Yes it’s been over a decade since we had that so it is way over due.

      • exbrethren 3.2.1

        Are you suggesting Bolger?

        • burt 3.2.1.1

          No. But I are saying that NZ’s first retrospectively validated PM was hardly an example of good leadership. Key is yet to prove himself good or bad – Clark removed all doubt when she killed off a standing court case to save her own ass from prosecution.

          OH: I didn’t think much of Shipley either.

          • r0b 3.2.1.1.1

            Clark removed all doubt when she killed off a standing court case to save her own ass from prosecution.

            Clark didn’t kill it off – ACT did. Well, they didn’t vote for it to proceed. Why not Burt?

          • burt 3.2.1.1.2

            rOb

            You are a darling. We had this discussion didn’t we. You said Rodney supported RV and you quoted from Hansard to prove it.

            I then gave you a subtle heads up that you were quoting out of context when I said;

            “I think that snippet is hard to put into context against other things Rodney said in that same speech, perhaps that only talks to the misappropriated spending not the alleged illegal spending, I’ll read some more from various people on that page and digest it some more.”

            Then I had to quote it some more and give you an English lesson (how absurd is that!) on the word that.

            Still you persist. Oh boy… It’s going to be one of those nights.

          • r0b 3.2.1.1.3

            You’re a bit confused Burt. I didn’t ask about RV (and I don’t agree with your interpretation of what we discussed).

            I asked why ACT didn’t vote for this court case that you think was so important to proceed? Why didn’t ACT vote for it?

          • burt 3.2.1.1.4

            rOb

            A little searching and I found a reference for you.

            KiwiBlog demolishes a failed analysis and adds the following;

            The MPs voted down an amendment that would have allowed the Darnton vs Clark lawsuit to continue, so that a court ruling could have been obtained on whether or not the pledge card was illegal.

            Silly buggers, like they were ever going to get a ruling from a court !

            Still you defend. You will be legless if National do some silly shit like this rOb, concede it was odorous and bad.

          • r0b 3.2.1.1.5

            You’re still confused Burt, I think now deliberately because you can’t answer the question – why didn’t ACT vote in support of the court case you keep quoting? You never will answer the question eh Burt. Never mind, I’ve better things to do, good night.

          • burt 3.2.1.1.6

            rOb

            “The MPs voted down an amendment that would have allowed the Darnton vs Clark lawsuit to continue,

            We are on track here aren’t we?

            “so that a court ruling could have been obtained on whether or not the pledge card was illegal.”

            Is it this bit that confuses you?

          • r0b 3.2.1.1.7

            One last time then, just for you Burt:

            “The MPs voted down an amendment that would have allowed the Darnton vs Clark lawsuit to continue

            ACT did not vote against this. Why not?

          • burt 3.2.1.1.8

            rOb

            You will need to make yourself more clear. You started off with;

            “ACT did. Well, they didn’t vote for it to proceed. “

            I told you why, twice, so you then asked;

            “ACT did not vote against this. Why not?”

            So what answer do you want rOb, it seems that when I give you the answer you ask the same question again then when I answer it again you change the question?

    • Micro 3.3

      “We need responsive, or at least competent, or failing that at least plausible, leadership and government.”

      Why would you expect that when we’ve never had it in the past ?

  4. gingercrush 4

    the sprout is simply an idiot. He wouldn’t know what leadership is.

    • Mr Magoo 4.1

      And your evidence of your leadership spotting credentials is?? Actually, do you have any evidence of anything at all??

      Nice ad hominem though. Textbook.

      The only thing I could fault you on though is your complete lack of anything viable to say and the fact that responding to what you think is an idiotic statement with just an insult is even more idiotic.

      Otherwise…good stuff ginge.

      • gargle 4.1.1

        Have you been eating poo Mr Magoo ?

        IrishBill: Dad you are banned.

        • Mr Magoo 4.1.1.1

          yup…nothing but class on the internet.

          Nothing changed there.

        • dad4justice 4.1.1.2

          Slander is a crime IrishBill. Get your fucking facts correct matey!

          • Mr Magoo 4.1.1.2.1

            That’s an interesting counter acusation there.

            Can you legally slander an anonomous internet avatar?

          • the sprout 4.1.1.2.2

            yeah it’d be libel in written form, or defamation in general. slander is verbal.
            but i guess for dud4jaundice all sorts of imaginary things are quite real. poor creature. thank heavens for pharmac.

    • felix 4.2

      You’re a nasty little prick under your banal and stupid exterior, aren’t you gc?

      • gingercrush 4.2.1

        If you say so. You’re just a prick. Simple. Nothing big or small or little about it. You are an utter prick.

        • the sprout 4.2.1.1

          gc you really need to get some perpective little friend – it’ll help you come up with comebacks that don’t sound like the simperings of an untalented child.

          are you unhappy about the pasting National is getting in the House today? there there, the msm will cover it up, don’t worry yourself so.

          • gingercrush 4.2.1.1.1

            Oh yes because the media is that bias. I would have thought people judge the performance of he house on what side of the politics they’re on. I thought some National ministers performed well. Some could have been better. There was nothing too horrible.

            Of course you’re such a partisan hack that your opinions are wholly irrelevant. I’m sure you think National did such a horrible jb today. No doubt, you don”t think much of any Minister. Like I said, you’re just a partisan hack.

          • the sprout 4.2.1.1.2

            um the word is “biased” gc, it’s an adjective. “bias” is typically a noun.

            and yes, unlike you i am a terrible hack incapable of any judgement, but at least we have luminaries like you to help us see clearly, with magnificently objective observations like “some National ministers performed well. Some could have been better. There was nothing too horrible”. thank you so much for that, and with such humour too 🙂

            you are truly an asset to your party gc

          • whatapairofgits 4.2.1.1.3

            Are you two in love ?

          • felix 4.2.1.1.4

            Hey Sprout, glad you’re getting a laugh out of ginger, he’s our own little golem isn’t he?

            I bet the Nats wish that humourless thoughtless talentless bastards like ginger would just stop trying to represent them in public, but that just makes it funnier for me.

  5. Jasper 5

    We need to keep paying into the Superannuation Fund.

    PsychoMilt – If you borrowed on a personal level to invest in the sharemarket, you can claim interest back on the loan from the IRD as long as the investment in the sharemarket will produce a taxable income. Not such an insane thing to do.
    From the governments perspective, it’s a good idea to borrow to invest because it’s not investing in a black hole which tax cuts are. Borrow and Hope leads to 1984, but Borrow for the Future? Now there’s a radical thought. Anything borrowed to invest in speculative returns generally tends to outperform if it’s for the long term. NZSF won’t be needed for another 15 -20 years, so plenty of time to repay our $2B loan. Shares are relatively low priced right now so any bounce back will make our money. Take Orrs self satisfying smirk proclaiming the $1.75B gain… which might be lost again by Christmas, but I digress.
    Notwithstanding the fact that if the $2B is canned this year, we need to find $2B next year (NZSF only requires a $1B deposit each year, Cullen did $2B as he has the funds to do so)
    If we don’t have $2B next year, we’ll need $3B in 2011, etc etc. Government doesn’t need to borrow $2B, just the $1B. At least deposits are being made that won’t need to be made up in the future.
    Maybe now you see why it’s a good idea for the government to borrow and invest this year?

    We need a real jobs policy.
    Oh but there is one. It’s called the cycleway and will create 4000 jobs, because like Key said, he wants to see wages drop. Employing masses of people on a collective contract paying $2.46 an hour will make that happen.

    We need to be building for the future
    Buses carry people. Buses use roads. Buses need more roads to carry people quickly. Buses can’t use goat tracks. Buses on motorways mean people get from South Auckland to the Mt Albert offramp in 15 minutes, and not 2.5 hours later + 4 bus changes.

    We need a sustainable debt track.
    “Debt’s not a huge problem but the less the better. The simple way to do that is forget tax cuts. Ideally, undo the previous ones too.” – actually, reinstate Labours .At least they were capped, and due to be clawed back from 2013 thanks to inflation.

    ” But I suspect Key wants to keep his hundred bucks a week” Don’t you mean $2500 a week?

    ” Introduce a capital gains tax. Screw the property traders (see them in the paper already trying to create the next bubble). Capital gains will stop overinvestment into housing”
    False. Excepting the primary place of residence, a CGT doesn’t work unless it applies to all vehicles used for property purchase. Australia has a CGT for all indivudals but it doesn’t apply to corporates, business and trusts. If we were to get a CGT it needs to apply to LAQCs, Trusts, Businesses purchasing residential properties (can be identified through district plans – surburban zone, industrial etc) otherwise it won’t work.

    ” as well as keep debt under control” it already is under control. Cullen kept it well under control during his tenure.

    Oh, and raise taxes for the richest few percent like they did in the UK. And look how fucked they are now with over 30% of their income gone to the Caymans.

    • RedLogix 5.1

      Mostly agree Zetetic but you’ve fallen into one major fallacy. There ALREADY IS a CGT for property traders.

      Any trader who makes a profit buying and selling property is liable for normal company tax on the profit. It’s that simple.

      Problem is that the Nats quietly told IRD in the early 90’s to make the definition of a property trader extremely loose so that few were caught in the net. The law was so loosely enforced that no-one actually paid, and most people have forgotten that it exists. Billions of dollars in tax has been avoided over several decades. Huge rort.

      Over the last few years Labour instructed IRD to tighten up on the traders, and they’ve picked up hundreds of millions in Queenstown alone.

  6. Good suggestions. Particularly in terms of housing policy and transport.

    I’m pretty gutted that people renting won’t get anything out of the home insulation package though.

    • the sprout 6.1

      yes well that raises the issue of adequate tenancy protection. it’s little wonder people in this country plow so much into home ownership when all you have by way of tenancy protection is a few weeks’ notice. proper longterm leases like they have in most civilized countries would go a long way to encouraging more diversified investment and less volatile housing markets in this country.

      • RedLogix 6.1.1

        proper longterm leases like they have in most civilized countries would go a long way to encouraging more diversified investment and less volatile housing markets in this country.

        Would love them myself. The bank would love them too. But in reality the Courts will simply not enforce them. If someone leaves town for whatever reason (new job, new relationship, etc.) in reality there is no way to make them pay for a home they are no longer living in.

  7. vto 7

    Cut motorway spending and put it into public transport?

    Look, you eggs that want to force everyone else into buses – go friggin’ get a bus yourself. Dont force everyone else to follow your great and wonderful luddite ideas. They are just boring with their short-sighted ignorance and lack of historic perspective.

    In fact, with about 50% of NZ being left type voters why dont all of you from the left take a bus. That will nealry halve the number of vehicles on the road. Problem solved.

    This exemplifies half the problem with left policies – they involve forcing everyone to live the way the left wants. Well just piss off. Where do you think the term nanny state came from. Nosybody bossypant fusspots.

    • r0b 7.1

      Anybody else notice that the right wingers are getting a bit twitchy lately? Bit grumpy? What’s up with that do you think?

      • the sprout 7.1.1

        pasting in the House, pasting in even the most obsequious msm, soon to get a pasting in the polls…

        i guess all pasting and no glory makes righties twitchy grumpy boys.

        now it looks like Sharples is keen to hide from what’s coming tomorrow
        http://www.scoop.co.nz/stories/PA0905/S00454.htm

        • gingercrush 7.1.1.1

          That would be your opinion. I think National are doing very well in the house. Labour gets some hits in. But pathetic behaviour and questioning of the speaker just makes them look desperate. There certainly has been no pasting like you seem to think. Hence why I accuse you of being a partisan hack.

          As for the media attention. National was always bound to have a bad few weeks eventually. One usually hopes that happens later in the term. Of course if you’re a National voter you found it disappointing. Yet despite the media being critical. You still accuse them of bias.

          As for the polls. If you really think they’ll be looking good for the left anytime soon you are kidding yourself. I know what you think of this government. You don’t see them in a very good light. I suspect you didn’t even think they’d make it into government last year. I’m sure you think anytime soon the public will somehow wake up to this maddening and corrupt government. I can support optimism but I do feel pity for those that are just stupid.

          • Pat 7.1.1.1.1

            Pasting? We had the Ginger Whinger trying to argue that Labour should be allowed to table documents that don’t exist, and Mallard evicted for having a cry.

      • vto 7.1.2

        usually the end of a hard day keeping the wheels of the country turning and paying the major part of the tax take that’s what.

        plus constant harassment to live like the likes of your lot r0b.

        plus being hit square in the chops with the current downturn. bearing the brunt.

        plus being constantly told they are evil and greedy and responsible for all the world’s ills.

        … being smacked around by all and sundry really. It all highlights very distinctly the sheer stupidity of so many left type policies.

        grump grump

        captcha: hornet showing hee hee

        • the sprout 7.1.2.1

          gosh that’s terrible vto – the poor things! i wonder how Nationalites will feel if they get another term or two? or even in another 12 months when things get really tough?
          with skin that thin and all the stamina of anemic kittens, National’s leaders must really be feeling the heat.
          how very mean of the Opposition to do their jobs when clearly the Government doesn’t have the strength to endure criticism.

          • vto 7.1.2.1.1

            ha ha. I was more referring to the antics of left policy dreamers not so much the govt versus opposition.

            But you know various groups within any society can only take so much vilification before things take a turn for the worse.

          • the sprout 7.1.2.1.2

            so true vto. and you know the best way to stop villification is to stop behaving in a manner that so readily invites it.

          • vto 7.1.2.1.3

            ?? Sprout. Point missed by a country mile.

            Sometimes it seems there such a HUGE chasm in understanding between the left and right that it is in danger of becoming hardset and leading to troubles of the kind seen in other parts of the world. Which would just be silly and sad.

            Lordy knows how such a chasm-closing would be achieved though

        • r0b 7.1.2.2

          vto: usually the end of a hard day keeping the wheels of the country turning and paying the major part of the tax take that’s what.

          The end of hard day at 3:50pm? You poor thing vto, I had no idea.

          sprout: i guess all pasting and no glory makes righties twitchy grumpy boys.

          That’s true sprout, I guess we should go easy on them, like they went easy on the last Labour government eh?

          vto: But you know various groups within any society can only take so much vilification before things take a turn for the worse.

          I guess we lefties have a sterner constitution vto, after all we survived many years of it. You’ve only had months! Perhaps you should read some other blogs, something more comforting for you, something less challenging…

          • the sprout 7.1.2.2.1

            for sure r0b. return the favour in the interests of fairness and all.

          • vto 7.1.2.2.2

            No r0b this blob is great. Get to let off steam and do some challenging myself. In fact this site isn’t really challenging at all – after all the ideas sprouted here are nothing new.

    • indiana 7.2

      vto said: Look, you eggs that want to force everyone else into buses – go friggin’ get a bus yourself. Dont force everyone else to follow your great and wonderful luddite ideas.

      isn’t that why we brought Kiwirail?

  8. gingercrush 8

    Pat when did the eviction happen? I switched off when question time ended.

    BTW if anyone was watching the house. During Ardern’s point of order when she sought leave of the house. Someone on Labour’s side interjected with something rude. Who was that person?

    • Pat 8.1

      At the very end of Question Time, Mallard was making his usual hopeless attempts at Points of Order complaining that one of the National members always makes up lies about him. (Was listening on radio BTW). Lockwood warned him several times that it was the end of the matter, but Mallard wouldn’t shut up, in the end crying out “But she always makes up lies about me!” or something to that effect. (on the radio he sounded like a 5 year old). Lockwood gave him his marching orders.

      Almost as priceless as Hughes complaining that Lockwood won’t let them table documents that don’t exist.

      • Pat 8.1.1

        I’m being a little unfair. He sounded more like a 10 year old.

        His final pathetic cry was an interjection, so not sure if it would make it on Hansard.

          • gingercrush 8.1.1.1.1

            Question Time was irritating. Labour decided to pick on the Speaker Lockwood Smith today.

            The feature of today’s Question Time was Trevor Mallard getting chucked out by the Speaker.

            Mallard had just finished upbraiding Education Minister Anne Tolley on the wrong spelling of the word “academies” in some literature she had put out.

            Funny that. Mallard’s recent post on the Labour MPs’ blog site Red Alert has the following words: denomitated; incoherant; speechs; catelogue; and Brethern!

            He should have been chucked out for bad spelling at least, but perhaps hypocrisy.

            I can’t believe I missed that. LOL Mallard is such a fool.

            —-

            Though I also agree with Young about Key and English getting on-message.

          • r0b 8.1.1.1.2

            Blog typos get you off GC? Mallard thrown out gets you hot Pat? Bread and circuses for fools (sorry folks).

            How about quoting the main substance of Young’s post, which was was actually about something a bit more interesting:

            Prime Minister John Key and Finance Bill English simply have to start finding out what the other is saying. That way they can stop contradicting each other in public.

            How about this for the day before the National Government’s first Budget?

            John Key said this morning at Francis Xavier school in Tawa: “Our primary focus out of this Budget is to avoid a ratings downgrade because we think that would add about one and a half per cent to mortgages for New Zealand home owners.”

            And this is what Bill English said less than two hours later when he was asked on his way into Question Time if the “primary focus” of the Budget was to avoid a ratings downgrade.

            “No it isn’t. The primary focus of the Budget is making the right decisions for New Zealand, to manage our way through a recession and deal with the consequences of that.”

            It is not as though that was a one-off. …

  9. gingercrush 9

    Oh r0b. You know for a fact that had a National MP been so hypocritical as Mallard was being you would have called that out too. And I did acknowledge what else was said by Young. I’m sure you will be glad that both TV One and Tv Three covered the English/Key difference. Doesn’t change the fact Mallard was a fool.

    • r0b 9.1

      Oh r0b. You know for a fact that had a National MP been so hypocritical as Mallard was being you would have called that out too.

      Actually GC no, the day you catch me “calling out” an MP for a typo on a blog is the day I turn in my keyboard.

      Doesn’t change the fact Mallard was a fool.

      Mallard blogs, and good on him for it. The Red Alert blog is a great idea, I wonder if the Nats will ever follow. I doubt it, doesn’t suit their micromanaged style.

      • Pascal's bookie 9.1.1

        I doubt it, doesn’t suit their micromanaged style.

        I love the columns thatsome of the Nat MP’s have in the little giveaway rags in the provinces. Apparently those that do have time to write a little something to show their constituents how much they care, all have exactly the same thing to say. It’s quite remarkable.

      • gingercrush 9.1.2

        You completely miss the point. The point is when you are using question time to criticise how others are misspelling you should be careful yourself to make sure you spell properly at all times. That is why Audrey Young included it in her blog and why she called Mallard a hypocrite. That is why I see him as a fool.

        You really can’t bring yourself to criticise anything Labour does can you.

        • r0b 9.1.2.1

          Your fixation is quite something to behold GC, as indeed is Audrey’s. If you think the same standards are required of an official publication from the minister of education, and a comment on a blog, well good for you, but to those of us with better things to worry about you both look like tossers.

          You really can’t bring yourself to criticise anything Labour does can you

          Have done so on many occasions GC. Mostly for being too timid and not green enough. Although they accomplished much of significance, Labour should have been much more true left while in power.

          But no, sorry to bother you with anything too taxing GC, You get back to frothing about typos on blogs. Go for it. It looks good on you.

        • Pascal's bookie 9.1.2.2

          So ginger, was this coyly alluded to ‘literature’ that Tolley put out something like a blog comment? Otherwise I’m not seeing the hypocrisy.

  10. SPC 10

    Super Fund

    We simply need to allow the Fund to borrow to finance its investments for the next 5 years.

    It has $12.5 B in assets so it can borrow at good rates and any debt it gathers will be offset by the rising value of its assets.

    As no debt accrues to the government, this should not concern ratings agencies.

    Jobs

    The Greens jobs programme – not just insulation, just copy it down and enact all of it.

    Building for the Future

    Yeah sure the Greens public transport focus, and also their lands and waterways environment policy.

    Also R and D tax credits up to say 25% and of course Fast Forward (farmer partnership finance with government should come from a CGT on farmland sales – thus those leaving the industry leave a share of the CG profit to finance the farm industry future – as some in the industry advocate)

    Debt Policy

    Yes as S and P noted our problem is the foreign debt financing of our home mortgages – this is why they ask for a tougher debt management regime for our government to maintain our credit rating. We should deal with the problem at source – end loss attribting, restrict mortgage cost writeoff for rental property business paying company tax on their profits, and apply CGT on the other landlords.

    Otherwise we need better RB policy tools. We need to enable the RB to manage domestic inflation without harming our international competitiveness/export returns.

    This can be done by establishing a surcharge on mortgages (from 0 to 2% – 0/.25/.5/.75/1/1.25/1.5/1.75/2.0%). This can be moved up or down while the OCR stays at a constant (meaning a more stable dollar value to enable better economic planning). The economic advantages are lower business borrowing costs and a lower dollar (less upward value pressure from a rising OCR). This formula should allow strong productive sector growth (rising government revenues from income gains) and with CGT constraint (and surcharge on mortgages as necessary) on home values ensure lower foreign debt forecasts.

    • r0b 10.1

      Thank goodness for comments like this, they give one hope again after GC and his typo fixation!

    • SPC 10.2

      PS Correction

      We should deal with the problem at source – end loss attributing, restrict mortgage cost writeoff TO only rental property business paying company tax on their profits, and apply CGT on the other landlords.

      • RedLogix 10.2.1

        We should deal with the problem at source – end loss attribting, restrict mortgage cost writeoff for rental property business paying company tax on their profits, and apply CGT on the other landlords.

        Sighs. For the last 2-3 years of the property bubble, the numbers simply did not stack up and most investors had their cheque books firmly shut. Yet the bubble kept on inflating without us. That doesn’t exactly point to landlords being the ‘source of the problem’. (And now the bubble has popped I don’t see too many folk complaining that there are some investors back in the market either.)

        And how does your prescription stack up for investors like me, who build rather than just buy?

        LAQC’s are simply a cash flow smoothing mechanism. All they do is allow the tax that would be rebated at the end of the year in one lump sum, to be rebated progressively each PAYE period. Over the period of a year, an LAQC does not materially alter the cash position.

        I’m not sure why you think mortgage interest should not be deductible? Every other form of business can. And why just residential property? Why not commercial, industrial and so on? How about the tenant who is resident in their place of business? Or the bach that is rented 3-4 months a year? Or the live-in border? And so on. Gets complex very quickly.

        As for CGT’s. They simply don’t work. The property bubble was just the same all over the world, even in countries with quite aggressive CGT regimes. It made no difference.

        And given that CGT is only payable when the property is sold, you’ve just given some landlords a huge incentive to NEVER sell, to simply accumulate property in the business or trust from one generation to the next. That really is a recipe for the appearance of massive slumlording.

        And as I pointed out about, if you are buying and selling property, then you will be assessed as a trader, and any profit made on capital gains SHOULD be fully liable for normal 30% Company Tax.

        The real cause of property bubbles has NOTHING to do with investors. We are just ordinary people who have no faith in the pump and dump snake pit that is our share market, or the pack of failed slime-balls who run our finance companies. We simply want a reliable investment that we can have some control over. No the real root cause of the bubble was a banking industry greedy for profits, relaxing LVR ratios, documentation, credit history and servicing criteria. It was the uncontrolled expansion of credit to the whole market that drove prices up, regardless of whether the buyers were home owners, or investors.

        • Zaphod Beeblebrox 10.2.1.1

          The are ways around paying CGT on property, these have been perfected to a fine art in Australia .
          They still have plenty of property speculation with a CGT. I don’t see why you should be allowed to negative gear property however.
          If you are stupid enough to incur a large debt on an existing fixed asset, which contributes to our foreign debt and which lowers our national credit rating with S and P, why should Inland Revenue allow you to pay reduced tax.
          As seen last year, the effect is inflation based on absurdly high property prices which causes to reserve to increase interest rates, inflating our currency which stuffs up our productive exporters.
          We are contributing to our own impoverishment.

          • RedLogix 10.2.1.1.1

            ZP,

            Agreed. It may come as a surprise to you, but rapidly inflating property prices are actually not all that welcome to the real long-term investor. (as in quite distinct contrast to property traders.) All it does is reduce our returns from historic levels around 10%, to absurdly low numbers like 3-5%.

            People forget that investors actually don’t drive demand. It doesn’t really matter whether a home is owned by the occupier, or an investor.. it can only be lived in once. Even if every investor dumped their units on the market tommorrow, and there were no more landlords, almost every single unit would have to be immediately purchased by an ex-tenant now needing somewhere to live. The total balance of supply and demand wouldn’t change much.

            And we sure as hell don’t drive prices either. The professional investor actually looks for properties that are UNDER market price (or build for less than market) that we can add value to.

  11. SPC 11

    Red Logix

    First, I did specifically provide for rental property business to have mortgage interest as a cost because they pay company tax on their profits (including from buying and selling property) as any other business – they finance by capital or debt.

    Second, our property market is extremely overvalued compared to nations which have CGT.

    Of course their values went up to for the loose credit reasons you cited (and in the USA the sub-prime loans extreme form of that), but here it resulted in extreme unaffordability despite higher mortgage interest rates than elsewhere. There is a reason for that – tax favour for investment in property.

    Your suggestion that people not paying company tax on their property trransactions will not sell up and realise their CG if it is taxed is ludicrous – it would be set at a rate less than company tax (if/as they did not qualify for any mortgage interest cost) and it’s the only way to cash up c80% of the realised profit.

    Third, I am not a fan of loss transfer in taxation (especially when there is lack of CGT on the profit) – whatever payment method applies. People buying property even though the mortgage cost was higher than the rent were in it for the tax free capital gain and these people did push up house prices.

    The only point on which we will agree is that if there is a CGT applying for those not paying company tax on their property business – it would need to have an adjustment for the CPI over the period of ownership for it to be fair. Similarly interest income should not be subject to tax until the annual CPI was deducted.

    As to whether a CGT would impact on the number of new homes built – on the rental properrty business there is no change, for those seeking a new home to live in no change. The only sector affected by the change is those who buy property to offload and avoid company tax or any CGT – and how many of those actually develop property themselves (don’t most buy renovate and flick on)?

    • SPC 11.1

      Is there any proof that the extreme unaffordability of housing here was caused by rental property investors rather than people buying their own homes?

      In the USA there was a rise in home ownership (sub-prime loans) as home values boomed and here there was a fall in home ownership rates while home values rose.

  12. RedLogix 12

    Second, our property market is extremely overvalued compared to nations which have CGT.

    Compared to Australia? Don’t think so.

    tax favour for investment in property.

    Another myth. Residential rental investment companies are treated EXACTLY the same as all other businesses.

    Your suggestion that people not paying company tax on their property trransactions will not sell up and realise their CG if it is taxed is ludicrous – it would be set at a rate less than company tax (if/as they did not qualify for any mortgage interest cost) and it’s the only way to cash up c80% of the realised profit.

    A person who buys and sells property is a trader. Any profit their business makes on capital gain is taxable at the 30% Company Tax rate.

    Any person who holds property long-term for the cash flow, is not interested in ‘cashing up’ (except perhaps for the purposes of reducing debt)… a CGT is simply a huge disincentive. Far better to hold the property in some multi-generational trust and never sell.

    The only sector affected by the change is those who buy property to offload and avoid company tax or any CGT – and how many of those actually develop property themselves (don’t most buy renovate and flick on)?

    The majority of people doing this are just ordinary couples LIVING in the property in question. None of them would ever be caught by any proposed CGT regime.

  13. SPC 13

    Red Logix

    The cost of a home compared to wage is higher here than in Oz.

    – Tax favour for investment in property –

    “Another myth. Residential rental investment companies are treated EXACTLY the same as all other businesses”

    I mentioned for those not paying company tax – while buying and selling houses.

    – Your suggestion that people not paying company tax on their property trransactions will not sell up and realise their CG if it is taxed is ludicrous – it would be set at a rate less than company tax (if/as they did not qualify for any mortgage interest cost) and it’s the only way to cash up c80% of the realised profit-

    “A person who buys and sells property is a trader. Any profit their business makes on capital gain is taxable at the 30% Company Tax rate.”

    I am referring to those who buy to rent and then change their mind and buy another rental instead – by denying their business is property and denying an intent to buy and sell for profit they avoid IRD by the claim that they are just making an investment in rental property and then changed their mind.

    “Any person who holds property long-term for the cash flow, is not interested in ‘cashing up’ (except perhaps for the purposes of reducing debt) and a CGT is simply a huge disincentive. Far better to hold the property in some multi-generational trust and never sell.”

    Really and how many invested in property for the “cash flow” since 2002?

    -The only sector affected by the change is those who buy property to offload and avoid company tax or any CGT – and how many of those actually develop property themselves (don’t most buy renovate and flick on)?-

    “The majority of people doing this are just ordinary couples LIVING in the property in question. None of them would ever be caught by any proposed CGT regime.”

    True some of those living in the property they invest in would avoid CGT – these people are people who need to be looked at in regard to property business tax rather than CGT (but at least they are not claiming mortgage interest as a cost while they live in the house). But there are others with more than one property claiming one as a residence and the other/others as investments they happen to flick on. A CGT will catch more of them than the IRD is now.

    • RedLogix 13.1

      I put it to you that this whole focus on landlords and investors (who are only a portion of the market) is counterproductive. We’ve been around since the beginning of the market, and yet it booms and busts regardless. You are focussing on the wrong cause.

      The real drivers of market prices are fundamental total supply and demand (driven mainly here in NZ by net immigration) and more importantly by the supply of credit. The best way to prevent property bubbles is to strictly regulate LVR ratios. Anything over 80% drives prices up.

      Even better, would be for the Crown to make ALL residential land leasehold. (Instead of paying rates, you would pay rate to your local TLA.) Bubbles are primarily driven by LAND price speculation. Take the land off the bank’s mortgage asset value, and all of a sudden… no more bubbles.

    • RedLogix 13.2

      But there are others with more than one property claiming one as a residence and the other/others as investments they happen to flick on.

      Nope. They are Property traders. Company tax applies. Problem is that the 90’s National govt told IRD to look the other way. Massive rort for decades. It’s been going on so long many people have forgotten that the tax even exists.

      We don’t need a complex, counterproductive CGT. We just need to properly implement the existing tax laws, and properly regulate the banking industry.

  14. SPC 14

    I would prefer a CGT to direct “unofficial” property traders into company tax paying business status. How is that counter-productive?

    This is not inconsistent with also having tighter bank lending rules (adjustment of
    these rules could be used by the RB to manage house value led inflation)

    Is it really speculation in land value – what happens is that the inflation/investment
    supply and demand factor is placed onto the land component of the value of the property – so it seems like a purely land value speculation bubble. Part of the rise in value of a property is simply the rising inflation cost of building new property – which pushes up the value of the old building as a residence (but the valuation system does not account for this, but simply bumps up the land value alone).

    • SPC 14.1

      Its not as if anyone would believe in any declaration by National that they would enforce the rules when they have not in the past, and not when an under-staffed and over-worked IRD does not have the resources. A CGT is the only measure likely to be effective.

  15. SPC 15

    We priobably need to have tertiary debt write-offs to doctors, nurses and teachers and CRI scietists – at 10% per annum. We need to maintain staff levels to ensure a functioning public education and health system.

  16. Ilai 16

    It would be nice to see Key admit the Jobs Summit was just hot air. Won?t hold me breath.

    Nope infact I heard a bit of a clap or cheer for the summit… Hmm..

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