GDP and Tax Working Group announcements today

Hamish Rutherford (Stuff): Prime Minister’s mix-up could have led to a much more brutal economics lesson

Jacinda Ardern’s confusion over two sets of figures is understandable, given the volume of material crossing her desk, as well as never-ending negotiations with her governing partners.

But with her control of the Government coming under scrutiny, it was exactly the kind of simple mistake she did not need.

On Tuesday, Ardern was asked a clear and straightforward question about her expectations for “the GDP numbers on Thursday”, economic growth figures due out in two days

Although her answer hinted that she and host Mike Hosking were not exactly on the same page, she acknowledged “the GDP numbers” – listeners would probably believe she was giving a hint that the figures were good. “I’m pretty pleased.”

Instead, she was talking about the Crown’s financial statements – the Government’s books – which are not due to be released for about three weeks, and which few people outside Parliament or bond trading circles care much about.

To some it will seem like a meaningless mistake, but the integrity of market-sensitive information is critical to New Zealand’s reputation as a transparent economy.

No-one gets the inside word, or at least, no-one should, even though lots of people want it. Ardern’s comments left the impression that she not only knew, but that she had not kept the secret.

Whatever the economic growth figures do show this week, they will almost certainly move the currency and other parts of the financial markets, amid speculation that new Reserve Bank governor Adrian Orr is prepared to cut interest rates if the economy slows.

The speed with which Ardern’s office acknowledged the mistake underlines how important it was that the comments were not amplified without clarification.

Peter Dunne: It’s time to bury the capital gains tax

All of which raises the question as to why the capital gains issue keeps getting raised, especially since the arguments in favour from both a revenue gathering and efficiency perspective are not that strong.

After all, given both the long and variable lead times involved between the purchase and sale of taxable assets, a comprehensive capital gains tax is at best likely to be a somewhat unreliable and unpredictable contributor to annual revenues. Advice I received when Minister of Revenue was that it could be over a decade from the time of introducing a broader based capital gains tax until it produced any significant revenue gain for the Government.

Also, it has been long accepted that the family home would have to be exempted from any such regime, further diminishing its likely impact. Even in the rental sector, the impact would likely be negative for tenants, with landlords boosting rents to offset any negative tax impact when those properties are sold.

 

30 Comments

  1. Alan Wilkinson

     /  September 20, 2018

    I find it not credible that Ardern mistook what she was asked.

    • Someone pointed out the contrast between the last two Prime Ministers who spoke about finance authoritatively, to Ardern who doesn’t seem to be on top of it.

      • Blazer

         /  September 20, 2018

        ‘someone’ did did they.
        As an ex forex gambler, Key was well aware of the effect on the market of financial stats.
        English talked o.k but borrowed and ran straightline deficits.
        We know insider trading and rigged financial markets is a feature of the present system.
        Both ex P.M’s were knighted for some reason .
        I note we have a former National P.M and Dame before the courts to face charges relating to financial misfeasance.
        Also in the dock is another Sir……Paul Collins…god knows what he was knighted for!

    • PDB

       /  September 20, 2018

      The fact Hosking was asking her about 0.5 etc, which is not a measurement the crown financial statements use suggests to me she was simply making it up as she went along – oh, and the fact Hosking mentioned ‘GDP’ multiple times and she asked for clarification and then said “GDP figures” to confirm they were on the same page.

    • Kitty Catkin

       /  September 20, 2018

      Alan….I don’t.

      Isn’t her ‘degree’ a Polytech one in communication ? Not the most intellectual of academic achievements.

  2. High Flying Duck

     /  September 20, 2018

    I’ve heard from a little bird that GDP figures might be “quite good”….

    • PartisanZ

       /  September 20, 2018

      Oh no … there goes the early election …

      I don’t expect anything other than some oblique sideswipe from the THIRD TWG about CGT or perhaps, borrowing more from TOP as both parties are continuing to do, “Wealth & Asset Tax” … ?

    • Blazer

       /  September 20, 2018

      I heard the P.M had to duck…for cover.

    • PDB

       /  September 20, 2018

      I take it back – Ardern saw the figures in advance after all.

    • Gezza

       /  September 20, 2018

      I’ve heard from a little bird that GDP figures might be “quite good”….
      @ Kitty
      I know you said that Sparky’s not into politics – but is he by any chance an economist?

  3. PartisanZ

     /  September 20, 2018

    Strategically placed article in todays Newsroom. Politics at play once again in the Fourth Estate …

    ‘Dunne: It’s time to bury the capital gains tax’

    https://www.newsroom.co.nz/2018/09/19/244073/dunne-its-time-to-bury-the-capital-gains-tax?preview=1

    I agree. It’s time to stop thinking of it as tax on Capital Gains from the sale of property, and render it as an integral Wealth & Asset tax offset by reductions in income tax?

  4. Alan Wilkinson

     /  September 20, 2018

    The TWG should put paid to any recovery in business confidence now:
    https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12128569

    At the same time as consumer confidence is also falling:
    https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12127981

    Strangely GDP is remarkably up. I find it even harder to believe the PM did not indeed have a sniff of this either directly or indirectly.

    • David

       /  September 20, 2018

      I wonder now if she did have a heads up and slipped up in the Hosking interview in another way than what is being portrayed but covered it up by appearing absolutely economically dumb.

  5. David

     /  September 20, 2018

    Pretty impressive GDP figures for the quarter, given the usual form I would expect Blazer, Partisan, Zedd, Joe Bloggs et al will give credit to Key for this performance given they still credit the spectacular US growth to Obama. We have come to expect consistency from the virtuous left.

  6. David

     /  September 20, 2018

    One thing we can credit Ardern for is dropping the dollar which is having a really good impact on the export sector and while my European vacation is getting a bit pricey now I have booked the flights its a good thing for NZ inc.

  7. PDB

     /  September 20, 2018

    When the govt doesn’t like what the tax working group presents they will send it back until they get the predetermined answer they were wanting…

    https://www.stuff.co.nz/business/107131315/capital-gains-tax-would-have-pros-and-cons-says-tax-working-group

    • High Flying Duck

       /  September 20, 2018

      Good to have a definitive statement on CGT after all this time – “it may or may not be a good thing.”

      • Alan Wilkinson

         /  September 20, 2018

        Winston is the only one who can give a definitive statement in this Govt.