Windfall tax on bank super-profits needed to help fund repair

Written By: - Date published: 3:57 pm, February 20th, 2023 - 69 comments
Categories: budget 2023, climate change, debt / deficit, Economy, Environment, tax - Tags: , ,

According to Finance Minister Grant Robertson the repair bill for the recent cyclones will be similar to the direct cost to government of the Canterbury earthquakes, in the $13 billion region.

Even if a chunk of that is, as he says, absorbed by insurance and the existing budgets of government agencies, there will still be a gaping budget hole. As well, the need to fund climate adaption measures and costly managed retreats is even more urgent.

That hole should be partially filled by a windfall profit on our banking sector, which has been making super profits recently. Former Massey University Banking Professor David Tripe once declared that any return above 1 percent on total assets was excessive and all four of main Australian-owned banks, which make up 85 percent of this country’s banking sector, are currently in that position.

The combined net profit of the big four, ANZ, ANZ, BNZ and Westpac, was around $10 billion last year according to Reserve Bank data.

The RBNZ data shows the average turn on equity for the four behemoths was 13.7 percent. ASB, last week posted a 10 percent lift in half year profit to $840 m despite what Chief executive Vittoria Shortt described as “challenging times”. It is on track for a full year profit of close to $2 billion and its return on equity is a whopping 17 percent. It paid out a $400 million dividend to shareholders which was actually down on last year’s massive $650 million.

ANZ Bank made a net profit of $2.3 billion last year, while BNZ made $1.4 billion and Westpac $1 billion.

These excessive profits have been aided by the cost-of-living crisis, where the RBNZ has been hiking interest rates to tame inflation and the banks’ margins have been rising even faster than interest rates. So, people have been hit by a double whammy – dealing with the steeply rising cost of living and having to pay higher interest rate bills as the banks rack up super profits.

The time is right to impose a one-off windfall tax. Financial commentator Janine Starks even last May in a commentary on the cost of living crisis said that despite high inflation fuelling a cost of living crisis, many companies are making record profits. “So why are we not discussing a windfall tax? In other countries the debate runs hot.”

With damage from the cyclone so catastrophic, we have a doubled-down rationale for acting.

Windfall taxes are a method of rebalancing the fairness of extraordinary circumstances. They can also be used to reduce inequality and fund social policies that help those now experiencing hardship. They were used in Aotearoa during both world wars.

There are plenty of other precedents. EU countries such as Italy and Spain are currently imposing such taxes on energy companies which have been making super profits as a result of the Ukraine war. Italy last year introduced a windfall tax of 10 percent on energy profits.

The most interesting former example comes from former Conservative UK prime minister, Margaret Thatcher, who in 1981, introduced a windfall tax on banks.

The opposite of a socialist, the hard-line monetarist raised the equivalent of about $NZ6 billion in today’s money that represented about a fifth of the profits banks were pocketing at the time.

In her memoir The Downing Street Years, Thatcher responded to critics of the move, saying “the fact remained that they had made their large profits as a result of our policy of high interest rates rather than because of increased efficiency or better service to the customer.”

If Margaret Thatcher can do it, it is pretty hard to argue why a Labour government can’t.

Some experts believe the infrastructure deficit as result of the cyclones will cost hundreds of billions to fix. The government has just $40 billion of wriggle-room before its debt ceiling is hit.

The forestry industry should be the other industry that should be shoulder-tapped to help foot the repair bill. However, a windfall tax is not appropriate for this industry as their profits are made over a very long time-frame. It is more a matter of getting these companies, almost all owned by large overseas-based pension funds, to pay for some of the damage for their irresponsible practices.

There is also needs to be a large government push to more tightly regulate these companies so the same kind of damage from the slash does not reoccur.

The government has already received significant political momentum from how it has responded to the disaster, so much so that it must be the frontrunner to win October’s election, and a bold and popular move to impose a one-off windfall tax on banks, will help lock-in its advantage.

(Simon Louisson is a former reporter and briefly a media adviser for the Green Party)

69 comments on “Windfall tax on bank super-profits needed to help fund repair ”

  1. tsmithfield 1

    Former Massey University Banking Professor David Tripe once declared that any return above 1 percent on total assets was excessive

    I would be interested in seeing a link to justify that statement. I don't know any business that would be happy with a 1% return on assets. If profit is that low, companies would be better to cash them up, and, well, put the money in the bank.

    As per the link below, as a general rule of thumb for businesses, 5% ROA is considered good, and 20% is considered excellent.

    https://www.investopedia.com/terms/r/returnonassets.asp

    • JeremyB 1.1

      If you assume a Bank is a normal business, you might be correct.

    • Simon 1.2

      Banks are different beasts to other companies- assets include customers’ deposits so as you can imagine that hugely alters things and thus a 1 % return on total is massive.

      • Liberty Belle 1.2.1

        Customer deposits are a liability in a bank's balance sheet, not an asset.

      • mikesh 1.2.2

        Customer deposits are not assets, they are liabilities.

      • Incognito 1.2.3

        This might help – the smart alecs that parroted each other didn’t provide any useful info for edification.

        https://bankdashboard.rbnz.govt.nz/balance-sheet [read the notes under the graphs]

        For many banks, deposits are the largest liability. Equity is the amount that assets exceed liabilities and represents the economic value of the bank to its owners. Note that owners’ equity is similar but different to the concept of regulatory capital.

        • Nic the NZer 1.2.3.1

          Lol. Do you think Simon actually needed correcting about this topic?

          I figured he just threw in the wrong word because the implication is still that banks protect customer deposits.

          • Incognito 1.2.3.1.1

            I, for one, needed the edification, and I assume I wasn’t the only reader of this Post & Comments to do so. Plus it was a clear hint to those smart alecs who’d already shown off their ‘superior’ knowledge and couldn’t wait (gotcha!) to laud it over the Author (Simon).

            • Ghostwhowalksnz 1.2.3.1.1.1

              Assume good faith. They just corrected an simple error , a typo almost.

              Simon should have said the [outstanding] loans are an asset.

              • Incognito

                IMO, if one wishes to show good faith in helping others to correct their misunderstandings, then one offers more than just the correction, e.g., one could add some explanation, a link, or something else that could be instructive and/or informative, i.e., something truly helpful.

                If one assumes it is a typo or accidental omission, one could make that clear and respond accordingly and in good faith.

                Smart alecs fail on both conditions.

                QED

    • Simon 1.3

      Banks are different beasts to other companies- assets include customers’ deposits so as you can imagine that hugely alters things and thus a 1 % return on total assets is massive.

      • tsmithfield 1.3.1

        Yes, that is fair. Though I am not sure that customer deposits would be assets of the bank. Surely, the customer deposits are held in trust on behalf of the customer. But anyway, here is a link that explains bank ROA.

        From the link:

        An important point to note is since banks are highly leveraged, even a relatively low ROA of 1 to 2% may represent substantial revenues and profit for a bank.

        • pat 1.3.1.1

          Bank deposits are an unsecured loan to the bank and as such are way down the list of claimants should an institution become inslovent….however that is expected to change (to a degree) once the deposir insurance is implemented in a year or so (assuming it goes ahead)

        • mikesh 1.3.1.2

          Surely, the customer deposits are held in trust on behalf of the customer.

          That's what I think. However, banks maintain that cash deposited by demand depositors belongs to the banks, and offset by liabilities (to the depositors). The distinction as implications when it comes to using depositors' funds for the purpose of making loans, and also the position of those depositors in the event of the bank becoming insolvent.

      • mikesh 1.3.2

        Depositors' deposits have nothing to do with the calculation of "return on assets", and therefore they don't count when estimating whether a bank should be hit with windfall tax.

  2. Mike the Lefty 2

    Good idea. A form of poll tax was suggested after the 2011 Christchurch earthquake but John Key's government dismissed it summarily, of course.

    Although a lot of businesses are struggling now there are a few that are doing very nicely thank you very much – banks, supermarkets and fuel companies to name a few.

    These outfits should be putting their hands in their pockets and pulling out big dollars rather than the loose change they have been doing so far. They like to trumpet how they are there for Kiwis – so now is their chance to prove it.

    And what of the Cullen fund? It is supposed to be for a rainy day isn't it? Well I think what we have seen over the last two weeks counts as a rainy day.

    • lprent 2.1

      Nope. It isn't there for a "rainy day".

      It is to solve a demographic problem of eventually having too few working age taxpayers to pay for the superannuation of a large number of over 65s hitting over a 20 year period.

      The problem really hits at about 2030 and runs through the 60s and 70s baby boom kids of the postwar parents.

      Because of the mess that Muldoon made of the supernniation system in 1975/6, current working age tax payers paid taxes for the superannuation of their grandparents and parents. It meant that they saved less for their own pensions. Doesn't work well when the proportion of the superanuiants goes from 15% of the population to over 30%

      • lprent 2.1.1

        Looks like I can't spell on a cellphone..

        • Mike the Lefty 2.1.1.1

          The MSM keep referring to the Cullen Fund as a "rainy day fund". I guess I should have known better than to believe them.

          • Nic the NZer 2.1.1.1.1

            The Cullen fund is itemized for investment.

            Thing is the govt sits over the RBNZ which ultimately makes the payments to/from the govt anyway. Its one of the RBNZ jobs to clear govt payments coupled with being the only institution to issue the NZ$.

            This makes the Cullen fund irrelevant to payment questions. Also the debt ceiling limit described is merely an aspirational stated target of the finance minister and treasury forecast.

            • Ghostwhowalksnz 2.1.1.1.1.1

              Westpac is/was the governments banker and clears the payments that you are thinking of.

              This their function

              • managing inflation to keep prices stable while supporting maximum, sustainable employment.
              • regulating banks, insurers and finance companies.
              • producing New Zealand's banknotes and coins.
              • operating effective wholesale payment and settlement systems.

              During the pandemic they 'bought' Bonds issued by Treasury ( both new and existing )for Government borrowing known as Large Scale Asset purchases LSAP They also did it on a smaller scale for the trading banks and Local Authorities borrowing

              • Incognito

                I assume good faith …

              • Nic the NZer

                Westpac, just like all other NZ trading banks, clears its payments through NZClear which is run by the RBNZ. This includes the separated govt account.

                The rest of your comment seems to 'Depend on what the meaning of the word' their is.

                • Ghostwhowalksnz

                  'Their' was RBNZ.

                  Thanks for the info on NZ Clear which seems to be for high value transactions only. 'Bills bonds and equities'. There s a xlx file of the entities

                  https://www.rbnz.govt.nz/payments-and-settlement-systems/nzclear

                  I was thinking the run of mill regular transactions done by Westpac

                  • Nic the NZer

                    Agree. As I guessed you were saying those are all RBNZ functions.

                    Another function is to settle inter-bank transactions, including the govt account settlements. Now, its valid to say either side is 'clearing' the payments, I agree. But each side does a different job in this process. Westpac enters the payments into the clearance system and updates the customer facing side of the govt accounts (and its own accounts). And the RBNZ transfers the funds between the bank settlement accounts. So that's how that works. It also works this way in other countries which have a different name for their settlement processes.

                    In order not to get bogged down in technical jargon you might start with the payment system overview.

                    https://www.rbnz.govt.nz/hub/publications/bulletin/2022/payments-primer

  3. bwaghorn 3

    Instead of the ets going into some global slush fund, a carbon tax levied in nz that goes towards fixing the damage caused by cc, start with $100 on all tourists into the country.

    • Shanreagh 3.1

      This has merit, Bwaghorn. I am keen on the idea of a tax on tourists whose journeys are not carbon neutral.

      What about a windfall tax on supermarkets & fossil fuel firms?

      • bwaghorn 3.1.1

        I think there needs to be a 2 teir system for carbon tax higher for frivolous unnecessary stuff, ie tourism, and at the rusk of starting a shit storm less for food related carbon and other necessary products,

        I've found it ridiculous that labour claimed cc was our nuclear moment then lowered tax on fuel.

  4. Ad 4

    So the obvious things happen if something as mad as this is proposed:

    – interest rates go up by whole percentage points, not fractions, because the costs get passed on. Watch your mortgage payments skyrocket

    – one of the Big 3 banks just leave, because they can

    – Kieibank is downgraded and everyone does a run on Kiwivank

    – the stockmarket and NZSuperfund and ACC and Kiwisaver fall massively and don't recover. they all invest in banks. At-risk in that is our ability to retire for multiple more years.

    But what is the one business you could tax and is completely immobile?

  5. Nic the NZer 5

    "The government has just $40 billion of wriggle-room before its debt ceiling is hit."

    Is this the govts self imposed budget restraint?

    Say it becomes clear the recovery will cost more than this $40 billion, what should take precedence the recovery or the budget?

    • Tricledrown 5.1

      I wouldn't believe a lot in this story the big 4 banks don't pay any tax in NZ they act as cartels. T They are more powerful than our government while the big 4 had to refund hundreds of millions in over charging by forcing mortgages to have double insurance. NZ hasn't stopped these practices.The big4Cartel had to pay $100s of millions in fines as well as the refunds.This newshub article looks more like a PR stunt on behalf of the banking Cartel.NZ is run greedy profiteering cartels Labour and National take huge donations from these cartels so are happy to let the rip offs to continue

  6. Mike the Lefty 6

    Well one thing is certain.

    ACT's self-described "common sense" policies of reigning in government spending and tax cuts is now shown to be the populist posturing stunt that it always was.

    Those kind of policies are not common sense after a disaster like this, despite the Facebook posts that keep popping up telling us so.

    The people of Auckland, Hawkes Bay and Gisborne may not realize it at the moment, but one fortunate thing for them is that ACT is not in government, otherwise they would largely be fending for themselves in the economic recovery.

    • Liberty Belle 6.1

      The idea of running an economy with lower government spending and taxes is sound economics.

      This government threw huge sums away from the Covid recovery fund on corporate welfare and ideological posturing, when that could have been directed to infrastructure. So here’s a suggestion; take the $28bn on the low value Auckland light rail project and rebuild infrastructure people will actually use.

      Time to wake up from the multi-billion-dollar fantasy of Auckland's light rail | Stuff.co.nz

      • mikesh 6.1.1

        The idea of running an economy with lower government spending and taxes is sound economics.

        Lower than what? The above is a pointless statement unless you say what levels you think spending and taxation should be at.

        • Liberty Belle 6.1.1.1

          Lower relative to current spending levels. I was linking to your comment about ACT policy around 'reigning in government spending'.

          Edit – I replied before you edited your comment. There is no ‘perfect’ level of government spending, because there are events that can be significant contributors to unpredictable movements in expenditure. But there are numerous examples of spending (actual and proposed) by successive governments that do not, IMHO, pass a reasonable sniff test of use of public funds.

          • Liberty Belle 6.1.1.1.1

            Contd.

            Between 2017 and 2022, core crown expenditure has risen from $76bn to $126bn, an increase of 66%.

            If we consider the Covid response (which I consider to be especially fiscally irresponsible) as a subset, according to Bernard Hickey, "the government of Aotearoa has delivered one of the biggest fiscal and monetary policy responses in the OECD in terms of taxpayer money spent and central bank money printed, relative to GDP."

            And the result? Well, the rest of that article is depressing reading. Essentially the rich have got a lot richer (primarily through asset price inflation), while homelessness has gone from crisis to catastrophe, state house waiting lists have consistently hit new records, and despite spending almost $2bn on mental health, we're going backwards.

            NZ has been failed by a succession of insipid governments, choosing to hurl money ainlessly at their pet projects rather than address the fundamental issues holding us back.

            • Ghostwhowalksnz 6.1.1.1.1.1

              Whats the increase in Government revenues in that 2017-2022 ?

              The 2022 yr is a bit of outlier as it covered the 2021-23 covid expenditure, depending if you have cherry picked the meaning of 'core'

              This says 2022 total revenue was $142 bill while in 2017 it was $105 bill ?

              https://www.newshub.co.nz/home/politics/2022/10/government-s-108b-tax-take-what-s-behind-the-haul-and-are-tax-cuts-on-the-table.html

              NZ Superannuation payments increase by billions each year just from the larger numbers reaching 65

              • Incognito

                NZ Superannuation payments increase by billions each year just from the larger numbers reaching 65

                How many billions each year? For example, are you talking about the Joyce Number or googol?

                • Ghostwhowalksnz

                  Did a google search but couldnt find it- too many ads promotions for kiwisaver and the like.

                  MSD seems to have benefit numbers more easily found than superannuatants

                  • Incognito

                    It should have been an easy claim to support with a link to clear and unambiguous information unless you made it up on the hoof, which wouldn’t be commenting in good faith.

              • Liberty Belle

                "Whats the increase in Government revenues in that 2017-2022 ?"

                I'll work with the numbers from your link and comments.

                The increase in tax revenue is simply the other side of the same coin as government spending. The government has massively overheated the economy with borrowed/printed money. That has created inflationary pressures which have impacted most on the less well off. Because a significant amount of that money went to corporates/businesses with virtually no strings attached, company taxation has also risen, so the government is simply recycling at least a portion of the money it has borrowed/printed.

                The RB is now playing catch up, lifting interest rates, which will again hit low-income families disproportionately, and push up unemployment.

                This is being repeated in many countries across the planet, and it's not going to end well.

                "depending if you have cherry picked the meaning of 'core'"

                'Core' crown spending (and revenue and debt) is the terminology used by Treasury, professional organisations, etc.

                • Ghostwhowalksnz

                  So the increase in gross government debt under National from $20 bill to $90 bill in 2017 fueled an increase in government spending over and above income and resulted in inflation.?

                  Every other OECD country has the same inflation, some much higher ( even though places like US, EU, Britain have had the QE funded spending in place since 2011 or so .)

                  Even Trump tax cuts replaced income funded by borrowing was there a big uptick in inflation from 2017?

                  You should really update your 90s economic thinking as the GFC threw out a lot od 'standard theories' in that field

                  • Liberty Belle

                    "So the increase in gross government debt under National from $20 bill to $90 bill in 2017 fueled an increase in government spending over and above income and resulted in inflation.?"

                    No. The inflation rate under the Key government never reached anywhere near the heights it is today, mainly because the borrowing was targeted more towards infrastructure investment (eg rebuilding Christchurch) than the covid fund, which has been poorly targeted.

                    "Every other OECD country has the same inflation, some much higher ( even though places like US, EU, Britain have had the QE funded spending in place since 2011 or so .)"

                    Did you read my comment:

                    "This is being repeated in many countries across the planet, and it's not going to end well."

                    But in fact NZ's latest inflation rate isn't that flash. At 7.2% it is higher than the US, Norway, South Africa, France, Canada, Spain…it's a long list.

                    "You should really update your 90s economic thinking as the GFC threw out a lot od 'standard theories' in that field"

                    Economic orthodoxy is not confined to any particular decade. The GFC emphasised the value of that orthodoxy.

                    • Nic the NZer

                      Could you explain all the measure the Key government took to funnel spending towards infrastructure?

                      Because in policy terms they said they would rather not and were targeting a govt surplus as soon as possible.

                      Also in policy terms they said they would rather not and were delivering PAYE cuts and GST hikes which is not infrastructure spending enhancing.

                      Also they left office with deficits in actual infrastructure spending in most areas.

                      Also they were clearly busy selling off multiple forms of govt infrastructure, such as public housing.

                      It would be truely startling to find out they were focusing spending on infrastructure the whole time while saying this was not a priority and cutting back so I'm certainly looking forward to the massive enlightenment I'm about to experience.

                    • Liberty Belle

                      It would be truely startling to find out they were focusing spending on infrastructure the whole time while saying this was not a priority and cutting back so I'm certainly looking forward to the massive enlightenment I'm about to experience.”

                      You haven’t provided any context or references to support your claim the government was “saying this was not a priority and cutting back ‘claims. In fact, the history of period reflects something quite different, particularly considering that period included a GFC,

                      A good place to start is the 2017 budget document. The graph on page 2 shows that the Key/English government spent more on infrastructure investment in every year than any if the last 5 years of the Clark government.

                      Also from 2017, Infrastructure NZ published this document Infrastructure-New-Zealand-Scotland-Report.pdf.

                      a) As can be seen on the graph on page 6 of this document, after recovery from the GFC, capital spending grew for each of the four years 2013-2016, and was then forecast to continue to grow through to 2019.

                      b) In the 2017 budget, the government set aside "by far the largest nominal investment in New Zealand infrastructure in history."

                      A few examples of infrastructure funding prioritisation during the Key/English years are:

                      1. Fast-tracked public projects give $500m boost | Beehive.govt.nz provides a list of fast-tracked infrastructure projects from February 2009 through February 2017.
                      2. The $1.7bn Crown Fibre Holdings UFB roll out.
                      3. Natural disaster recovery – Christchurch and Kaikoura. (These specifically link back to Ghostwhowalksnz comments about crown debt).

                      Finally, the Infrastructure NZ document states this:

                      "After reducing the state’s role in telecommunications, energy and irrigation from the 1980s and sweating increasingly stressed transport and housing assets for three decades, central government is embarking on a new cycle of investment. Budget 2017 allocates over $7 billion in new capital investment, more than doubling 2013 expenditure."

                      None of these actions or spending assignments are indicative of a government not prioritising infrastructure investment.

                    • Nic the NZer []

                      Is that your best case argument?

                      I mean its the election year budget of a government inside the last 6 months of their 9 years in office. The budget shows large jumps in investment entirely during the forecast period which dwarf the sums during the actual term of the govt. As far as I can see its demonstrating exactly what I said, that National didn't invest in infrastructure during their term.

                    • Liberty Belle

                      "I mean its the election year budget of a government inside the last 6 months of their 9 years in office. "

                      You didn't read my comment, did you? I used the 2017 budget to counter your claims around intent and action.

                      The 2017 budget document shows both. It shows that "the Key/English government spent more on infrastructure investment in every year than any if the last 5 years of the Clark government." (my words from the previous comment) And it demonstrates a financial commitment to infrastructure spend that then ramps up significantly in the subsequent years.

                      The data directly contradicts your claims.

                    • Nic the NZer []

                      Yeah, yeah. Pull the other one.

                      We all know about Bill English fiscal strategy of nominal spending increases just less than inflation.

                      Its one of the reasons that (despite apparent commitment to roading infrastructure) there are masses of potholes forming.

                      Yes, I had of course read every word of your comments.

                    • Liberty Belle

                      "Its one of the reasons that (despite apparent commitment to roading infrastructure) there are masses of potholes forming."

                      Based on the data, you'd better write to the Clark government and complain.

                    • Incognito

                      What a lovely link you provided. I was impressed by how closely NZ inflation rate tracked that of Australia during the Key regnum. That sure was a testament of National policies keeping inflation under control at our neighbours too.

                      But in fact NZ's latest inflation rate isn't that flash. At 7.2% it is higher than the US, Norway, South Africa, France, Canada, Spain…it's a long list.

                      Inflation has been highly dynamic over the last little while and it would be very silly if not disingenuous to focus on only the data of the latest Q.

                      Even though it is rather meaningless, the list of countries with inflation rate higher than NZ is twice as long as the countries with lower rate. Go figure.

                    • Liberty Belle

                      "Inflation has been highly dynamic over the last little while and it would be very silly if not disingenuous to focus on only the data of the latest Q".

                      So click on the 'previous' column, and you'll find NZ's rate of inflation, again at 7.2% was ahead of the US, Norway, South Africa, France, Canada, Spain etc. Or compare NZ with G20, and we sit about mid table for both quarters. Or compare NZ's latest annual rate (7.22%), with the USA (6.4%), Norway (5.9%), South Africa (6.9%), France (6%), Canada (5.9%), Spain (5.9%).

                    • Incognito []

                      You obviously like an exercise in futility. Never mind, keep at it.

  7. Tiger Mountain 7

    Now lets see…to varying degrees in different locations during Gabrielle…
    –Communications down–(Radio seemed to remain pretty bullet proof though)
    –Extended power outages
    –Drinkable water supply affected
    –ATMs not working/payments not made
    –Supermarkets unable to operate/restock
    –Petrol stations unable to operate/restock
    –Medical emergencies and mental meltdowns galore
    –Crumbling road network crumbled again

    The link is penetration of public infrastructure by private capital, worker/citizen asset sales, and hands off the wheel regulation and fudged accountability. I heard various reports of cross agency squabbles over who should fix what. Meanwhile community groups just got on with it.

    It is pretty clear–Climate Disaster is not going away, so the Parliamentary parties need to move on from their beloved monetarism and managerialism. We need big Govt. and a whole bunch of nationalisations.

  8. tsmithfield 8

    The good thing about profitable banks is that it means they are willing to invest in NZ, making it easier to get finance for both the public and businesses.

    Some businesses need to make "excessive'' profits to make up for the bad years that often come along. So, I think it is better to look at average profits over time to get a better indication of the profitability of different businesses. I imagine that banks would be subject to these effects to some degree, given the occurence of recessions etc from time to time.

    The problem with a "windfall'' tax, especially unannounced, is that it would cause massive capital flight from banks, and likely other businesses. If such a thing was to be introduced, it would definitely need to be done in consultation with businesses.

    The other problem is that businesses could likely easily avoid it, by, for instance, bringing forward expenditure to a forecasted high profit year.

    If profits are "excessive", however that is quantified, the high profits are a symptom of insufficient competition in the market.

    These things normally correct themselves. Because, if profits are higher than expected, then other businesses will be attracted into the market due to the high profits on offer. Eventually, the increased competition brings prices down.

    So, if governments are really interested in getting the best deals for tax payers they should be reducing the barriers for competitors to enter the market.

    A good example is the regions where Gull was operating. Fuel prices tended to be lower in those areas due to the higher competition.

    We now have a number of independent fuel operators in Christchurch. So it will be interesting to see the affect on prices here.

  9. Tiger Mountain 9

    “Capital Flight” is way over rated. It has been Capital and Finance Capitals go to stock scary phrase for decades.

    I recall John Key’s Offshore Trust scam, engineered with his personal lawyer at the time, partially exposed in the Pandora & Panama Papers
    https://www.nzherald.co.nz/business/pandora-papers-sir-john-key-defends-his-governments-oversight-of-foreign-trusts/RZUDOHP7C4KPNAWKMRAST3TSEY/

    https://www.nzherald.co.nz/business/the-antipodes-email-john-key-his-lawyer-and-foreign-trusts/IMOIQIND4BUXLAZQLZCHGY7LJM/

    https://www.stuff.co.nz/national/politics/78838228/prime-minister-john-key-deposited-money-with-company-specialising-in-foreign-trusts

    Once IRD required more than an A4 sheet of scant information for registered Offshore Trust holders 10,000 odd of them melted away into the night.

    And so it will be if the banksters got sent packing, their export offshore is capital they have squeezed from holders of thumping great mortgages.

  10. tsmithfield 10

    When we are talking about multi-national companies, including banks, they will often invest their funds where they will get the best return.

    If they suddenly have increased taxes lumped on them, their tendency will be to invest more of their funds where the tax regime is easier. So, that could end up being really bad for kiwis who want to take out loans for various things.

    The best idea is to encourage more banks to come here. Then the profits will spread out more over time over more players. There will be a lot less tendency towards ''excessive'' profits, whatever that means, and the government will end up taking at least as much, if not more tax.

    • Liberty Belle 10.1

      You've hit the nail right on the head.

    • Ghostwhowalksnz 10.2

      Muldoon used to force the banks and life insurance companies to invest in government bonds at govt decided interest rates . I think it was a longstanding policy but he increased the government stock ratio even higher.

      Some background here

      They didnt take their money and run.

      • tsmithfield 10.2.1

        ”It didn't happen over 40 years ago so it won't happen now” isn't a good argument.

        Things were quite different back then in terms of our banking industry. And now banks have lots of options and can move money around at the push of a button.

        A good illustration of how money flows is that of water. Water tends to find its fastest course to the sea. In a similar way, money tends to flow towards the best profit opportunities.

        Governments are most effective when they harness that flow for the maximum benefit for those in the economy, and set environments that increase the flow to the maximum. But, a lot of left wing ideas I see are more akin to trying to pump water uphill.

        • Nic the NZer 10.2.1.1

          Your calling lake Onslow left wing?

          • tsmithfield 10.2.1.1.1

            Don't start me off on pumped hydro…

            • Ghostwhowalksnz 10.2.1.1.1.1

              We have our own massive hydro station that could be on standby. Wave Comalco goodbye . The state buys Manapouri and its generation used exclusively for that dry year- winter peak generation problem we have. ( perhaps a small flow use to keep the station live)

              Best of all we dont have to buy power from the existing generators to pump water uphill. When unwanted the water just flows freely down the Waiau river in Southland and the lake is left full.

              • Nic the NZer

                While Comalco leaving would free up significant capacity I don't think its clear this strategy makes a better power grid. It probably makes sense for a battery generator to be designed for that purpose, leaving Manapouri to replace existing fuel based generators, and otherwise facilitating more (relatively cheap, but undependable) wind power.

        • Ghostwhowalksnz 10.2.1.2

          All our big banks are Australian owned , why havent they just moved back home then.

          The reason is they factor in their costs of business and make their money from there.

          Same goes for the banking segments they are active in. Residential mortgages are different rules than say commercial buildings and different gain say for land development ( a tricky one). Farm lending is different again and then theres the big one under the radar funding mergers and acquisitions.

          The risks in each sector and the rules both from RBNZ and the banks own criteria change to . But its still they are happy to work in ( or not as sometimes happens).

          Your ideas are very Muldoon and I guess come from that era in the 80s and 90s when you might have been in the thick of it.

    • roblogic 10.3

      No way, the banks are glorified crime syndicates and need to be nationalised for the future of humanity

  11. georgecom 11

    I would favour a CGT with funds tagged at least initially to a rebuild myself

  12. thebiggestfish7 12

    This post can't be taken as credible when the author cannot even get the first sentence right. The cost of the cyclones will not come as a direct cost to the government of $13billion. A large portion of this $13billion number that has been cited will be covered by insurance and reinsurance.

    • Incognito 12.1

      Way to go, writing off a whole Post because you dislike and/or disagree with the first sentence that actually cited Grant Robertson.

      Robertson said on Sunday that Cyclone Gabrielle would cost the Government “billions” and potentially up to nearly $13 billion.

      https://www.stuff.co.nz/business/opinion-analysis/131288785/tom-pullarstrecker-cyclone-leaves-less-room-to-deal-with-more-shocks

      The second paragraph of the Post actually mentions insurance.

      He qualified that by saying, on the one hand, that some of that cost would be covered by insurance, and, on the other, that “each day, we discover more, each day we understand more”. [from above Stuff link]

      Why don’t you start learning to read before you start shooting the messenger? It makes you look foolish and without credibility.

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  • The Kākā's Chorus for Tuesday July 16

    Luxon has told a Financial Times’ correspondent he would openly call out China’s spying in future and does not fear economic retaliation from Aotearoa’s largest trading partner.File Photo: Lynn Grieveson / The KākāTL;DR: The top six things I’ve noted around housing, climate and poverty in Aotearoa’s political economy on Tuesday, ...
    The KakaBy Bernard Hickey
    1 week ago
  • The Kākā’s Pick 'n' Mix for Tuesday, July 16

    TL;DR: My pick of the top six links elsewhere around housing, climate and poverty in Aotearoa’s political economy in the last day or so to 6:00 am on Tuesday, July 16 are:PM Christopher Luxon has given a very hawkish interview to the Financial Times-$$$ correspondent in Washington, Demetri Sevastopulu, saying ...
    The KakaBy Bernard Hickey
    1 week ago
  • The Kākā’s Journal of Record for Tuesday, July 16

    Photo by Ryunosuke Kikuno on UnsplashTL;DR: The top six announcements, speeches, reports and research around housing, climate and poverty in Aotearoa’s political economy in the last day to 6:00 am are:BNZ released its Performance of Services Index for June, finding that services sector is at its lowest level of activity ...
    The KakaBy Bernard Hickey
    1 week ago
  • The second crisis; assumption was the mother

    Late on the night of July 16, 1984, while four National Cabinet Ministers were meeting in the Beehive office of Deputy Prime Minister Jim McLay, plotting the ultimate downfall of outgoing Prime Minister Sir Robert Muldoon, another crisis was building up in another part of the capital. The United States ...
    PolitikBy Richard Harman
    1 week ago
  • Can we air condition our way out of extreme heat?

    This is a re-post from The Climate Brink by Andrew Dessler Air conditioning was initially a symbol of comfort and wealth, enjoyed by the wealthy in theaters and upscale homes. Over time, as technology advanced and costs decreased, air conditioning became more accessible to the general public. With global warming, though, ...
    1 week ago
  • Review: The Zimiamvian Trilogy, by E.R. Eddison (1935-1958)

    I have reviewed some fairly obscure stuff on this blog. Nineteenth century New Zealand speculative fiction. Forgotten Tolkien adaptations. George MacDonald and William Morris. Last month I took a look at The Worm Ouroboros (1922), by E.R. Eddison, which while not strictly obscure, is also not overly inviting to many ...
    1 week ago

  • Charity lotteries to be permitted to operate online

    Minister of Internal Affairs Brooke van Velden says lotteries for charitable purposes, such as those run by the Heart Foundation, Coastguard NZ, and local hospices, will soon be allowed to operate online permanently. “Under current laws, these fundraising lotteries are only allowed to operate online until October 2024, after which ...
    BeehiveBy beehive.govt.nz
    6 hours ago
  • Accelerating Northland Expressway

    The Coalition Government is accelerating work on the new four-lane expressway between Auckland and Whangārei as part of its Roads of National Significance programme, with an accelerated delivery model to deliver this project faster and more efficiently, Transport Minister Simeon Brown says. “For too long, the lack of resilient transport connections ...
    BeehiveBy beehive.govt.nz
    6 hours ago
  • Sir Don to travel to Viet Nam as special envoy

    Sir Don McKinnon will travel to Viet Nam this week as a Special Envoy of the Government, Foreign Minister Winston Peters has announced.    “It is important that the Government give due recognition to the significant contributions that General Secretary Nguyen Phu Trong made to New Zealand-Viet Nam relations,” Mr ...
    BeehiveBy beehive.govt.nz
    9 hours ago
  • Grant Illingworth KC appointed as transitional Commissioner to Royal Commission

    Minister of Internal Affairs Brooke van Velden says newly appointed Commissioner, Grant Illingworth KC, will help deliver the report for the first phase of the Royal Commission of Inquiry into COVID-19 Lessons, due on 28 November 2024.  “I am pleased to announce that Mr Illingworth will commence his appointment as ...
    BeehiveBy beehive.govt.nz
    9 hours ago
  • NZ to advance relationships with ASEAN partners

    Foreign Minister Winston Peters travels to Laos this week to participate in a series of Association of Southeast Asian Nations (ASEAN)-led Ministerial meetings in Vientiane.    “ASEAN plays an important role in supporting a peaceful, stable and prosperous Indo-Pacific,” Mr Peters says.   “This will be our third visit to ...
    BeehiveBy beehive.govt.nz
    10 hours ago
  • Backing mental health services on the West Coast

    Construction of a new mental health facility at Te Nikau Grey Hospital in Greymouth is today one step closer, Mental Health Minister Matt Doocey says. “This $27 million facility shows this Government is delivering on its promise to boost mental health care and improve front line services,” Mr Doocey says. ...
    BeehiveBy beehive.govt.nz
    10 hours ago
  • NZ support for sustainable Pacific fisheries

    New Zealand is committing nearly $50 million to a package supporting sustainable Pacific fisheries development over the next four years, Foreign Minister Winston Peters and Oceans and Fisheries Minister Shane Jones announced today. “This support consisting of a range of initiatives demonstrates New Zealand’s commitment to assisting our Pacific partners ...
    BeehiveBy beehive.govt.nz
    10 hours ago
  • Students’ needs at centre of new charter school adjustments

    Associate Education Minister David Seymour says proposed changes to the Education and Training Amendment Bill will ensure charter schools have more flexibility to negotiate employment agreements and are equipped with the right teaching resources. “Cabinet has agreed to progress an amendment which means unions will not be able to initiate ...
    BeehiveBy beehive.govt.nz
    11 hours ago
  • Commissioner replaces Health NZ Board

    In response to serious concerns around oversight, overspend and a significant deterioration in financial outlook, the Board of Health New Zealand will be replaced with a Commissioner, Health Minister Dr Shane Reti announced today.  “The previous government’s botched health reforms have created significant financial challenges at Health NZ that, without ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • Minister to speak at Australian Space Forum

    Minister for Space and Science, Innovation and Technology Judith Collins will travel to Adelaide tomorrow for space and science engagements, including speaking at the Australian Space Forum.  While there she will also have meetings and visits with a focus on space, biotechnology and innovation.  “New Zealand has a thriving space ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • Climate Change Minister to attend climate action meeting in China

    Climate Change Minister Simon Watts will travel to China on Saturday to attend the Ministerial on Climate Action meeting held in Wuhan.  “Attending the Ministerial on Climate Action is an opportunity to advocate for New Zealand climate priorities and engage with our key partners on climate action,” Mr Watts says. ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • Oceans and Fisheries Minister to Solomons

    Oceans and Fisheries Minister Shane Jones is travelling to the Solomon Islands tomorrow for meetings with his counterparts from around the Pacific supporting collective management of the region’s fisheries. The 23rd Pacific Islands Forum Fisheries Committee and the 5th Regional Fisheries Ministers’ Meeting in Honiara from 23 to 26 July ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Government launches Military Style Academy Pilot

    The Government today launched the Military Style Academy Pilot at Te Au rere a te Tonga Youth Justice residence in Palmerston North, an important part of the Government’s plan to crackdown on youth crime and getting youth offenders back on track, Minister for Children, Karen Chhour said today. “On the ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Nine priority bridge replacements to get underway

    The Government has welcomed news the NZ Transport Agency (NZTA) has begun work to replace nine priority bridges across the country to ensure our state highway network remains resilient, reliable, and efficient for road users, Transport Minister Simeon Brown says.“Increasing productivity and economic growth is a key priority for the ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Update on global IT outage

    Acting Prime Minister David Seymour has been in contact throughout the evening with senior officials who have coordinated a whole of government response to the global IT outage and can provide an update. The Department of the Prime Minister and Cabinet has designated the National Emergency Management Agency as the ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • New Zealand, Japan renew Pacific partnership

    New Zealand and Japan will continue to step up their shared engagement with the Pacific, Foreign Minister Winston Peters says.    “New Zealand and Japan have a strong, shared interest in a free, open and stable Pacific Islands region,” Mr Peters says.    “We are pleased to be finding more ways ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • New infrastructure energises BOP forestry towns

    New developments in the heart of North Island forestry country will reinvigorate their communities and boost economic development, Regional Development Minister Shane Jones says. Mr Jones visited Kaingaroa and Kawerau in Bay of Plenty today to open a landmark community centre in the former and a new connecting road in ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • 'Pacific Futures'

    President Adeang, fellow Ministers, honourable Diet Member Horii, Ambassadors, distinguished guests.    Minasama, konnichiwa, and good afternoon, everyone.    Distinguished guests, it’s a pleasure to be here with you today to talk about New Zealand’s foreign policy reset, the reasons for it, the values that underpin it, and how it ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Delivering 24 hour pothole repairs

    Kiwis and freight operators will benefit from the Coalition Government delivering on its commitment to introduce targets that will ensure a greater number of potholes on our state highways are identified and fixed within 24 hours, Transport Minister Simeon Brown says.  “Increasing productivity to help rebuild our economy is a key ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Peer Support Specialists rolled out in hospitals

    Five hospitals have been selected to trial a new mental health and addiction peer support service in their emergency departments as part of the Government’s commitment to increase access to mental health and addiction support for New Zealanders, says Mental Health Minister Matt Doocey.  “Peer Support Specialists in EDs will ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • Consultation opens for the Emissions Reduction Plan

    The Government’s draft Emissions Reduction Plan shows we can stay within the limits of the first two emissions budgets while growing the economy, Climate Change Minister Simon Watts says. “This draft Emissions Reduction Plan shows that with effective climate change policies we can both grow the economy and deliver our ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • Benefit stats highlight need for welfare reset

    The coalition Government is providing extra support for job seekers to ensure as many Kiwis as possible are in work or preparing for work, Social Development and Employment Minister Louise Upston says. “While today’s quarterly data showing a rise in the number of people on Jobseeker benefits has been long ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • School attendance continues to increase

    Provisional school attendance data for Term 2 2024 released today has shown more students are back in class compared to last year, with 53.1 per cent of students regularly attending, compared with 47 per cent in Term 2 2023, Associate Education Minister David Seymour says. “The Government has prioritised student ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • $22.7m of West Coast resilience projects underway

    Transport Minister Simeon Brown has welcomed news of progress being made by the NZ Transport Agency (NZTA) on the first of several crucial resilience projects underway on the South Island’s West Coast.“State highways across the West Coast are critical lifelines for communities throughout the region, including for freight and tourism. ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • Migrant school leavers to get part-time work rights

    The coalition Government is providing migrant school leavers with greater opportunities, by increasing access to part-time work rights for those awaiting the outcome of a family residence application, Immigration Minister Erica Stanford has announced.  “Many young people who are part of a family residence application process are unable to work. ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • Funding to support use of NZ Sign Language

    Seven projects have received government funding totalling nearly $250,000 to maintain and promote the use of New Zealand Sign Language (NZSL). Initiatives that received an NZSL Board Community Grants this year include camps that support the use of NZSL through physical and sensory activities, and clubs where Deaf people and ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • Inflation data shows progress in economic recovery

    Today’s Consumer Price Index data which has inflation at 3.3 per cent for the year to July 2024, shows we are turning our economy around and winning the fight against rampant inflation, Finance Minister Nicola Willis says.  “While today’s data will be welcome news for Kiwis, I know many New ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • Experts to advise Minister on Oranga Tamariki

    The Oranga Tamariki Ministerial Advisory Board has been re-established by the Minister for Children, Karen Chhour. “I look forward to working with the new board to continue to ensure Oranga Tamariki and the care and protection system, are entirely child centric,” Minister Chhour says. “The board will provide independent advice ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Expectations set for improved medicines access

    Associate Health Minister David Seymour says he has set clear expectations for Pharmac around delivering the medicines and medical technology that Kiwis need.  “For many New Zealanders, funding for pharmaceuticals is life or death, or the difference between a life of pain and suffering or living freely. New cancer medicines ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Regional Development Minister to host summits

    Regional Development Minister Shane Jones will hold a series of nationwide summits to discuss regional priorities, aspirations and opportunities, with the first kicking off in Nelson on August 12. The 15 summits will facilitate conversations about progressing regional economic growth and opportunities to drive productivity, prosperity and resilience through the ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Government delivers new school for Rolleston

    The Coalition Government is addressing growing demands on Canterbury’s school network, by delivering a new primary school in Rolleston, Education Minister Erica Stanford says. Within Budget 24’s $400 million investment into school property growth, construction will begin on a new primary school (years 1-8) in Selwyn, Canterbury.  Rolleston South Primary ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • New speed camera signs to improve safety

    The Government is welcoming the rollout of new speed camera signs for fixed speed cameras to encourage drivers to check their speeds, improving road safety and avoiding costly speeding tickets, Transport Minister Simeon Brown says. “Providing Kiwis with an opportunity to check their speed and slow down in high crash areas ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • NZ, Korea strengthen relationship

    New Zealand and the Republic of Korea continue to strengthen their relationship, Foreign Minister Winston Peters says.   “New Zealand and Korea have a long history – from New Zealand soldiers fighting in the Korean War, through to our strong cooperation today as partners supporting the international rules-based order.    ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Investing for future growth in tourism and hospitality

    The Government is moving forward with recommendations from the Tourism Data Leadership Group, beginning with establishing a Tourism Data Partnership Fund says Tourism and Hospitality Minister Matt Doocey. “The Tourism Data Partnership Fund is funded through the International Visitor Conservation and Tourism Levy (IVL) and will provide up to $400,000 ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • 4000 more job seekers to get case managers

    A new over-the-phone employment case management service will see thousands more job seekers under the age of 25 supported to find work, Social Development and Employment Minister Louise Upston has announced. “MSD case managers provide valuable support to help people into work, but less than a third of those receiving ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Trade Minister to attend G7 meeting in Italy

    Trade Minister Todd McClay will attend the Group of Seven (G7) Trade Ministers meeting in Reggio Calabria, Italy next week. This is the first time New Zealand has been invited to join the event, which will be attended by some of the world’s largest economies and many of New Zealand’s ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Ministers reveal consequences for unruly Kāinga Ora tenants

    Ministers are pleased to see Kāinga Ora taking a stronger approach to managing unruly, threatening or abusive tenants, Housing Minister Chris Bishop and Associate Housing Minister Tama Potaka say.    “For far too long, a small number of Kāinga Ora tenants have ridden roughshod over their neighbours because, under Kāinga ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Prime Minister wraps up US visit in California

    Prime Minister Christopher Luxon has finished a successful four-day visit to the United States with meetings in California on his final day focusing on innovation and investment.  “It has been fantastic to be in San Francisco today seeing first-hand the deepening links between New Zealand and California. “New Zealand company, EV Maritime, ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Prime Minister leads Indo-Pacific Four at NATO

    Prime Minister Christopher Luxon today chaired a meeting of the Indo-Pacific Four (IP4) countries – Australia, Japan, the Republic of Korea and New Zealand. The IP4 met in the context of NATO’s Summit in Washington DC hosted by President Biden. “Prosperity is only possible with security,” Mr Luxon says. “We need ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • District Court judges appointed

    Attorney-General Hon Judith Collins today announced the appointment of three new District Court Judges.   The appointees, who will take up their roles in July and August at the Manukau, Rotorua and Invercargill courts, are:   Matthew Nathan Judge Nathan was admitted to bar in New Zealand in 2021, having previously been ...
    BeehiveBy beehive.govt.nz
    2 weeks ago

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