Q & A today

Today on NZ Q & A (TV1, 9 am):

Hawkes Bay water bottling

Whena Owen returns to Hawke’s Bay where she finds growing tension over the region’s burgeoning water bottling business.

Water bottling, especially for export, and especially with foreign owned companies involved, its a very contentious issue.

It’s also quite complex. Currently water is free for everyone in New Zealand, unless you choose to buy a supply that has cost money to provide it to you.

If water was charged for who would receive the income? The property owner where the water was sourced? The property owner of the source of the water? The Government? Iwi?

Should we all pay for all of the water we use?

Is rain free? Or could it be taxed?

Immigration and economic growth

Political Editor Corin Dann sits down with Treasury Secretary Gabriel Makhlouf – his take on the immigration debate plus the risks facing our economic growth.

Waikato War defined New Zealand History

We have the first look at a new book that claims the Waikato War was the defining battle in New Zealand history – not Gallipoli. Historian Dr Vincent O’Malley talks about The Great War for New Zealand with Dita de Boni.

http://www.nzhistory.net.nz/war/war-in-waikato

I don’t think the Waikato wars can be defined as ‘the defining battle in New Zealand history, but it is a very significant period in our history that deserves more attention and commemoration.

 

 

 

Hickey’s housing slant

The official description of ‘Bernard Hickey’s Opinion’ column says that  ‘Bernard is an economics columnist for the NZ Herald’.

In his column today, Use that power, renters, Hickey has strong words about Auckland’s housing problems

Finally, Auckland’s Generation Rent has found someone who is talking about the elephant in the room – rampant speculative demand for housing by landlords.

Everyone worried about Auckland’s astonishing house prices should read Reserve Bank deputy governor Grant Spencer’s speech.

He spelt out in the plainest language yet that property investors are taking advantage of tax incentives to use cheap debt to buy as many houses as they can.

The Reserve Bank has exhausted its toolkit, having put up interest rates and set limits on high loan-to-value ratio (LVR) lending. It is looking to increase capital requirements for landlords’ mortgages, but it knows it’s not enough.

Exasperated, the Reserve Bank has asked for help to control the risks to New Zealand’s banking system, which relies on house values to back 60 per cent of its loans.

Spencer called for the Government to revisit the tax incentives for landlords.

Fair enough listening to and quoting the Reserve Bank Governor.

The Government’s top economic adviser has said landlords’ tax incentives should be reduced and central Auckland apartments should be built in defiance of the Nimbys controlling Auckland politics.

Council and Government politicians are refusing to take that advice.

What I find interesting about this is the apparent one-sidedness of Hickey’s column. It seems that he has used the Reserve Bank Governor to support a hobby horse.

Now this column may have been written before yesterday morning.

But at 9 am yesterday Hickey participated on a Twitter discussion for The Nation about their interview with Treasury Secretary Gabriel Makhlouf who has different views on housing than the Reserve Bank Governor.

Join our Twitter panel and at now!

Those alternatives weren’t mentioned at all in Hickey’s column – and he should have been well aware of them before listening to the Makhlouf interview.

On the panel Hickey displayed what looked like a pre-decided slant. He has a clear preference to Reserve Bank advice to Treasury Advice.

Here’s another view on China for ‘s Gabs Makhlouf to read after

He tries to educate Makhlouf on his angle.

Big gap there between @nztreasury & @ReserveBankofNZ. Gabs Makhlouf sceptical about CGT just 3 days after bank called for debate.

But Hickey doesn’t seem \want debate, he wants to promote his views which happen to side with the Reserve Bank advice.

Got a feeling the @ReserveBankofNZ would have liked a bit more support from @nztreasury on housing taxation than that.

Ok, he has ‘a feeling’ he and the reserve Bank are right.

In Muldoon era it was the @nztreasury offering the freest and frankest and most critical advice. Now it’s the @ReserveBankofNZ

Is that because it’s the freest and frankest? Or because it’s ‘most critical advice’ that happens to fit his opinion?

For #nationTV3 viewers wanting an alternative housing view, here’s the speech from @ReserveBankofNZ’s Grant Spencer http://www.rbnz.govt.nz/research_and_publications/speeches/2015/action-needed-to-reduce-housing-imbalances.html … …

Diverting viewers to something he prefers to the Nation interview.

Another example here of how NZ’s leaders today are pushing the costs of current consumption onto their kids/grandkids http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11433784

He’s not discussing the Makhlouf interview at all, he dismissed it and is linking to alternatives he agrees with.

Counter-factual for a CGT is what happened to Auckland house prices post-election after buyers realised no CGT. Up 20%

Has Hickey got any evidence supporting that ‘counter-factual ‘? House prices almost certainly didn’t go up 20% solely because the election result meant no wider Capital Gains Tax. Did it have any effect at all?

Unless Hickey can produce facts I will remain very dubious about that claim.

And I’m very disappointed he simply dismissed Makhlouf  and made no attempt to lead any discussion. In his The Nation panel tweets and in his Herald column he looks more like an economic activist than a balanced economic columnist.

Treasury Secretary – ” the right place with immigration levels”

In an interview on The Nation the Treasury Secretary Gabriel Makhlouf said that “I think we’re probably in more or less the right place with immigration levels”.

Immigration levels are often talked about in relation to housing issues. The simple fact is that if as a country we want growth in New Zealand then we need immigration. And a growing population needs more housing.

But the thing is people see immigration at high levels, they see house prices going up, they see the need for more schools — those are the things that they see.
Sure, and we need immigration because we need the sort of— our businesses need particular types of skills that we haven’t got right now, so I think that plays a big part. We need immigration for just the generation of ideas. Don’t forget that currently some of the net immigration numbers are as much about New Zealanders not leaving the country and some of them returning from Australia.

So do we need to keep growing, then, do you think?
I think we absolutely need to keep growing as a country.

But more immigration?
Well, I think we need to— We’ve got currently— The OECD, when it last looked at our immigration settings said they were broadly right. We have to keep looking to make sure they’re actually meeting our needs, and I think it’s something you keep under constant review, because we also want to develop— we want our education system to be developing the skills that we feel we need for our people, so I think immigration meets a gap, but I mean we can, sort of, fill that gap ourselves by making sure the education system delivers.

So do you think we’re in a sweet spot with immigration levels, or can we and should we be bringing more people in?
No, no, I think we’re probably in more or less the right place with immigration levels. As I said, I mean, the current numbers are as much about people not leaving New Zealand or returning from Australia, and we need to take account of the impact of those numbers, so we do need to build new schools; we do need to critically build new houses.

A lot of those migrants come to Auckland, and you have said that you believe that Auckland should be the focus of growth, and you’re happy to see it get bigger, then?
Am I happy to see Auckland grow?

Yeah, see Auckland grow even more.
In general, I’m happy to see Auckland grow. I think what we’ve learnt from history, and certainly what we’re learning at the moment from around the world, is agglomeration — the bringing together of activities in a large urban area, like Auckland — makes a massive difference to the overall— ultimately the overall living standards of a country as a whole. It needs to be managed growth. It absolutely needs to be managed growth, but the trend — you know, over the last hundred years; New Zealand’s rural population has basically stayed stable. It’s the urban areas that have been growing, and that trend is going to continue.

Immigration is used as a political football, often with particular groups of immigrants getting the kicking.

The number of immigrants can’t just be turned off and on at the whim of opposition politicians. Rules and quotas are used and while they can be tweaked it would be poor practice to keep making major changes. If we want to encourage good immigrants we need to have clear and consistent rules and requirements.

And a major factor that can’t be controlled is New Zealanders leaving, and New Zealanders returning. We are free to come and go as we please.

There’s currently a surge in net migration into New Zealand because the flow to Australia has dropped significantly and the flow of returning Kiwis has increased significantly. That has changed in a relatively short time and will change again if the Australian economy picks up again.

If we want growth we need to maintain immigration numbers at approximately the current levels and increase housing to cater for them.

Video: Interview: Treasury Secretary Gabriel Makhlouf

Full transcript (Scoop): Lisa Owen interviews Treasury Secretary Gabriel Makhlouf

Treasury Secretary – Capital Gains Tax won’t help Auckland

The Treasury Secretary Gabriel Makhlouf was interviewed on The Nation yesterday and said he doubted a capital gains tax would help the escalation in property prices in Auckland.

A CGT isn’t a quick fix and it won’t address the current problems.

Well, just this week the Deputy Reserve Bank Governor, Grant Spencer, is calling for a capital gains tax, or some kind of tax on investment. What do you make of that?

Well, I think what Grant Spencer was talking about was the need for us to address the housing issues in Auckland, and at the heart of the housing issue in Auckland is that we’re not building enough houses, and the Productivity Commission said a few years ago when it looked at this issue that building more houses is the answer. Looking really carefully at our planning regulations is the single biggest thing that will make a difference to how we build— how many houses we build in Auckland.

So you don’t think a capital gains tax or a tax like that is part of the solution?

I’m quite sceptical. If the issue that people are talking about is house prices, London and Sydney have got capital gains taxes and they’ve got similar issues as us. This is a phenomenon that’s actually playing out in large urban areas which are successful, right? And New Zealand is successful, Auckland is successful, so one of the consequences of that, as in Sydney and London and in Vancouver, is the current phenomenon, house prices. But we need to build more houses to actually meet the needs that we’ve got.

So in your view, it’s a supply side problem, then?

That’s the principal issue, is the supply side problem. And it’s not just my view; it’s the Productivity Commission’s view as well.

A Capital Gains Tax would do little or nothing to address the soaring property prices in Auckland.

A CGT (as proposed by Labour last term):

  • It would phase in very gradually so would have little immediate impact
  • It would not tax capital gains already realised
  • It would affect the whole country, not just Auckland
  • It has proven to not limit property inflation in other countries

So it’s a solution to a different problem, the broadening of the tax take. That’s a different debate with varying views on it’s worth.

Capital gains are already taxed on property speculation – where property is bought and sold with the aim of capital gain (according to IRD rules). Capital gains on share trading is also taxable.

Makhlouf is correct saying “building more houses is the answer” – building more houses in Auckland where the biggest demand is. For this to happen more land must be made available more easily. It’s land inflation that’s the problem, and that’s happening due to a shortage of supply and too many restrictions on higher density use.

Video: Interview: Treasury Secretary Gabriel Makhlouf

Full transcript (Scoop): Lisa Owen interviews Treasury Secretary Gabriel Makhlouf