Doubt National have been too happy with Hooton bagging Key and senior ministers lately either.
Is Matthew Hooton NZ's answer to Boris Johnson in some ways, with the exception of the mayoral chains?
How does that create a * fiscal * surplus, though?
That 'wealth effect' - all residential property rising in value, which increased more local borrowing (lots of commentators refer to using the house as an ATM) and hence, spending to renovate, travel, buy a new car, start-up new businesses, etc. So increased GST returns, increased small business/local merchant returns, more builders employed (at higher margins) hence greater company tax receipts etc. And at the same time, wages were still inflating and Cullen didn't move the tax brackets (he took advantage of 'bracket creep').
Former Reserve Bank economist Michael Reddell points out that overseas investment is part of the cause, but inward migration levels and restricted supply are far more significant.
Hi Mike, I responded to another one of your comments on a different thread, about a different thing. My responce to this thing, is that economics is an interesting science, which I am a novice. So when I say I wonder why Michael Reddell is a ” Former Reserve Bank economist” I can only guess that he might have fucked up, or I'm not reading what he said there in is proper context.
I imagine that offshore investment and human intellect could also enhance our overall wellbeing. I don’t think selling productive assets such as hydropower generators, agricultural land and IT are at all good. But as a novice economist, I find it difficult to understand how paying over a million dollars for a house in Auckland is a good idea, when half that money could buy a house in Wellington, leaving enough left over to invest in somthing productive.
And at the same time, wages were still inflating and Cullen didn’t move the tax brackets (he took advantage of ‘bracket creep’).
so did Muldoon during 70s hyper-inflation – in fact I suspect just about every finance minister does this, it’s a situation where you actively have to do something that makes your life worse, inaction is probably easy.
Ideally we should have brackets (and benefits, and the minimum wage, and ….) tied to an inflation index
Regulars will know I’m no great fan of Brian Rudman, but I’ve got to admit today’s column makes a lot of sense
He misrepresents the economic reality of the effects of globalization;
Unfortunately, the finger is being pointed at citizens from our largest trading partner, flush with the cash we and other developed countries have sent them in payment for the appliances and clothes and kitchenware and even the Kiwi tourist souvenirs we can no longer be bothered making for ourselves. Why not? We’re too busy investing all our spare cash in the property merry-go-round.
The answer to ‘why not’ is primarily one of wages – the race-to-the-bottom – or as per a Marxian analysis: profit-seeking enterprises looking to reduce the labour- value content of their production as a means to compete in a capitalist economy.
He really loses all credibility – and hence, his opinion lacks rational argument. Looks more like sarcasm to me.
PS. Also, isn't our largest trading partner still Australia?
we should have tax brackets (and benefits, and the minimum wage...) tied to an inflation index
e.g. tied to ministerial salaries, which would markedly change incentives.
Regulars will know I’m no great fan of Brian Rudman, but I’ve got to admit today’s column makes a lot of sense – someone at Te Harold has to.
I really, really dislike that article.
My reason for that is by saying mainland China migration to Ponsonby is not the cause, and getting your facts wrong (as Brian has if you go to the census data, but I would prefer not to explain in detail why as it will just give fuel to racists) you give fuel to racists arguing "see you are wrong so they are a problem" when immigration is orthogonal.
Yes, and the problem for Key and co. has been that wages are not inflating to any great degree over the term of their incumbency. So they reduced the top rate, rather than move the brackets.
Edit: selling IT to overseas, is good! I had a writing mistake back there.
I've been following Steve Keen and went to his seminar a couple of years ago. He's been a long time observer of money in economies (unlike many including some at RBNZ and the Treasury). I've posted a slide he used to show private debt to GDP in both Australia and New Zealand. Tho not specifically mortgage lending, it obviously largely is (covering the large part of bank activity). Debt acceleration and its relationship to unemployment is a very strong part of his work on capitalism as a money economy and his anticipation of GFC as you probably know.
I have little difficulty in accepting his view. This view and the sector balances of Godley & MMT etc.
But not the activity of the Reserve Bank - their financial stability fears very much acknowledge the mortgage-finance->bubble theory of rising housing prices (as it does in general apply to asset prices - look at the impact of borrowing on other asset prices like the U.S. share market.)
Bizarre though it may seem, banks hate public understanding of this and there's alway a spare bank pundit (sorry, economist) hanging around blogs, news etc. who'll try to bat the idea down.
Since the GFC we've moved on (the public, like me) and occupied money-economic territory. Just not enough to go around the territory occupied by money-deniers,
I'm afraid. Think demand & the reasons for demand when looking at house prices, not that old shibboleth of equilibrium economics, supply.
My reason for that is by saying mainland China migration to Ponsonby is not the cause
Well, you've done a splendid job of rebutting an argument Rudman wasn't actually making. Care to take another pass?
Ok I will try again,
by writing things like
"Of course in gentrifying areas like Ponsonby, the $20,000 villa of the 1970s is now fetching closer to $2 million than $1 million. All without anyone from mainland China in sight.
The only ethnic change in these desirable suburbs is the Polynesian renters who'd made the suburb home were driven out to the fringes by Pakeha baby-boomers like myself."
Where he is factually wrong in a delicate area, any discussion of his factual wrongness feeds into a wrong-headed focus arguments about what percentage of houses in Ponsonby have been bought by Chinese people. I wish he hadn't written that whole section, and had stuck with carefully thought out factual based arguments. Being factually wrong about anyone is bad, and drawing attention to the Chinese immigrants to Ponsonby is going down the wrong route.
Yup, it's pretty glib stuff. Just because Ponsonby's extraordinary growth isn't the fault entirely of mainland Chinese doesn't really prove anything at all about what Salmond's research shows. It's not to the point at all. The aspirational person looking to get into the Auckland property market isn't looking at Ponsonby anyway, and haven't since the 20th century. But getting priced out of suburbs like Albany and New Lynn are experiences entirely new to people trying to grasp what it is to be getting started in Auckland property. Getting priced out by foreign capital influxes is something that even living Maori wouldn't have personally experienced, even if the bitter taste of having lost their inheritances that way is still with them.
This is quite aside from the point that Rudman offers no evidence at all to support his assumption that foreign capital hasn't also become a factor even in Ponsonby. How would he know? By not noticing Chinese faces on his street??? Really? That's part of the point of Salmond's analysis - that it's not easy to know who owns what here at all.
It's also aside from the frustration many people who at least roughly do understand how to model property values must feel - that all debate about it boils down to silly single issue rebuttals. When value is a function of a number of variables, then of course it's not a function of only one variable. That's always a straw man. The argument needs a lot more sophistication in it than that, but it seldom gets it because understanding such modeling isn't simple. So we get a lot of opinions presented as facts, the feelings of real estate agents, of speculators, of economists, of the PM.
We get babyish rebuttals like "It isn't capital influx, it's a lack of supply". Rather than looking at the possibility that it's both (and a lot of other things besides) and one is a whole lot easier to solve than the other. You can legislate to slow capital influx but to increase supply significantly you need one hell of a lot of money. More money than the government even has at all, probably. And to legislate to encourage supply is possible, but it's a whole lot more of an ask because it's a vast bundle of different laws across multiple bodies, and many of those laws exist for sensible reasons.
Metro's Simon Wilson has some housing answers for any politicians bold enough to lead.
Barfoot & Thompson have fired the leaker.
I really hope their statement said "As real estate agents, we pride ourselves on the highest standards of integrity at all times." That would be awesome.
I like his checklist as a starting point, but as he notes, there's plenty more possibilities.
This is quite aside from the point that Rudman offers no evidence at all to support his assumption that foreign capital hasn’t also become a factor even in Ponsonby. How would he know? By not noticing Chinese faces on his street??? Really? That’s part of the point of Salmond’s analysis – that it’s not easy to know who owns what here at all.
Even taking it to the place of counting Chinese-looking faces in a suburb was a weird thing to do. That column was well below Rudman's usual standard.
Could be worse - check the utterly deranged Colonel Trotter's latest reckons.
Could be worse – check the utterly deranged Colonel Trotter’s latest reckons.
Col Trotter's trying to play the Waitakere Man "PC gone mad" card again. He goes to show the neo-cons don't have a monopoly on playing it.
Nah he doesn't have a special trump card, he just calls misere every time and dares the Liberal Intelligentsia to outbid him so he can send them out the back door. It's amazing how many tricks you can lose with a good hand playing that way. He'd chuck the joker and both bowers out in the kitty just to play misere against the LI one more time.
"We get babyish rebuttals like “It isn’t capital influx, it’s a lack of supply”"
Except that one fundamentally affects housing costs (i.e. rent), the other merely affects asset prices.
The wealth effect is not that significant. There's quite a bit of research on this even in NZ.
Hands that do dishes....
With respect of course.
Crampton nails it