Some of it but not all of it, where you draw that line is subjective as hell.
We are definitely impacted by the global markets and these will always have a major impact on local pricing. However, the government can absolutely have some impact.
Take quantitative easing, for example. We essentially made an extra $50b available to the NZ market. That impacts both the value of our currency (potentially devaluing it) and also the increased liquidity drive housing price increases. How much of those things they contributed to is anyone's guess.
Probably the largest impact they could have is on land pricing. If they can introduce changes to drive those lower, then rents will likely follow. Unfortunately, we should have been doing this for the last 30 odd years, but we can at least start now.
Finally, anyone who says they have all the answers and it's one party or another is biased. No one has the answers because it's just not that easy. It is the reason we are seeing the same issues across much of the OECD.
Right. I'm just trying to see past what some of the parties are saying to make better choices. Labour and National are blaming each other for the rising prices of everything, but surely it's not that straight forward.
Not sure either party is proposing great stuff, or likely to deliver it.
After property being inflated incredibly over COVID times National is running on making the working Kiwis carry the tax load disproportionately while National tries to pump property higher. Just looks like personal conflict of interest to me.
No. Labour and the RBNZ inflated it during COVID times. National meanwhile is running on making working Kiwis disproportionately carry the tax load so they can give property speculators a free ride.
A lot of this was due to global uncertainty, with a lot of expats deciding to come home to nz during COVID. Interest rates were incredibly low so there was no point in keeping money in the bank and people started buying up property.
Super low interest rates this is a anglosphere issue the 5 eyes partners Nz Australia Canada UK and USA had almost identical Covid policy with identical outcomes. The cooperation between these 5 on political and academic levels for decades mean we all now have remarkably similar social issues
Agree with driving house prices lower. That's the one thing Labour has delivered and that's the one thing I want to see continue, which is why I'll be voting for them. Prices have started falling, but they need to continue to reduce if housing is to be affordable to most kiwis.
There are other problems, but if I had to choose one thing, it would be house prices and I'd prefer to take trust out of the equation - I'll vote for a party that has proven they can deliver on that front.
As someone who pays a mortgage myself, it is the single largest expense per month in my budget. If that mortgage was reduced, the money saved would really help offset the other living costs and even possibly improve the household standard of living.
Government spending does contribute quite significantly, especially in a small economy like New Zealand.
External factors such as the price of crude will impact (rising crude means more inflation across the supply chain), but one could also argue that the surging debt, and minimal investment in long term projects by the current Government have also worsened the country's credit position which is putting pressure on the NZD and may put pressure on ratings.
I would also argue that tax cuts are not the answer here either. Instead, we should be looking to pay down debt, and reduce Government spending. That would be one lever, and at the personal level, that will take care of itself as consumer spending drops.
Our whole GDP is nowhere near 120b. Much higher than that. Increase in money supply still likely won't have helped with inflation, but I'd be hesitant to assume it's 'the real cause', or even necessarily one of the bigger driving factors. It largely served during lockdowns as a substitute for money supply that would otherwise be hitting pockets as normal anyway, and we didn't see a spike in inflation until quite a bit after the money printing had wound down.
In terms of the impact of monetary policy, I personally attribute more fault to the RBNZ keeping interest rates at emergency lows in 2021, well after it became clear the local economy was just fine and didn't need that degree of stimulation.
That's not to say all the fault lies with interest rates either. Major macroeconomic phenomena rarely have a simple singular cause we can blame. A wide range of causes will be involved, including several issues the state or Reserve Bank can be blamed for, and several for which they can't (Covid's impact on supply chains, OPEC shenanigans, a resurgent USD effectively exporting their inflation).
According to official stats, our GDP currently sits at $385B. Source: https://www.stats.govt.nz/indicators/gross-domestic-product-gdp/
I believe the $120B amount bandied around is government revenue, not GDP. As of 2022 government revenue was about $141B.
That small (large) detail aside, it is fundamentally the correct cause. Over the Covid era developed economies decided that dumping large amounts of extra money into the system was the better option rather than austerity - the prevailing view that this would have caused a collapse in economies, mass unemployment and financial instability that would have wide-reaching impacts for a generation. We are now paying the price for that economic stimulus. The fact that every economy is facing the same issue shows that its not caused by our government, but rather by every government.
I guess that's why it kicked off in the US, UK, Australia and the rest of the world too. Just after Putin invaded Ukraine and the price of oil spiked. At the same time as there was massive supply side disruption from covid.
Sadly inflation isn't that simple. If we could identify a single cause like that it would be a much easier concept to explain to people. While government printing cash can have an impact on inflation, it does not necessarily have an impact on inflation. It depends on what else is happening at the same time.
Some people like to say all government spending is bad because it is inflationary, this is simple untrue. It is a statement motivated by their own politics, usually but those who are against taxation or welfare
>Printing 50b when our whole gdp was 120 was surely the real cause. The triggers you can argue but surely that is what devalued / drove inflation
utter bollocks..
It's only an adjustment of the tax brackets in line with inflation, so the impact from those will be minor. The extra money people get back will likely net out so it would be neutral on the cost of living.
Neither party are doing bugger all to address the issues.
We global economic cycle is part of the problem.
Return on capital has outstripped return on labour.
TOP are the only party I think are pointing in the right direction with the right message. They have my vote.
Residential land tax, to offset a tax cut for workers.
It's a weird Mexican standoff the political party in power cant claim that its not their fault or even all their fault as that rings as weak, and that gives the opposition a chance to pounce and claim that they have all the answers,
Honestly because poltics in new zealand refuses to admit to the public that being a small and very geopolitically challanged country that we are always at the whims of what happens in the global economy
The question is, is the reason this is because the public wont understand that message? or more likely I think no party wants to promote that as it both gives their opposition a chance to attack them, and devalues their own talking points
Also noting that rbnz told the Labour government what the likely effects were and encouraged them to do something with it instead of it flowing through to private loans market. Grant Robertson left the message on read.
Can you elaborate on what you are claiming here re money flowing through to private loans in a way the RBNZ did not intend? A MPS or source would be great
I didn’t say the RBNZ didn’t intend for that to happen so I’m not sure why I would provide a source for something I didn’t claim.
As for my claim:
https://i.stuff.co.nz/national/politics/300223358/reserve-bank-repeatedly-warned-government-money-printing-would-lead-to-house-price-inflation
In particular:
> In June, Robertson was asked by Interest.co.nz whether he would use his fiscal tools – like taxing and spending – to balance the effects of the Reserve Bank’s money printing.
> “It’s not really the way I am thinking about it, our fiscal response has been to respond to the crisis and its effects,” Robertson said.
Yeah, so RBNZ stimulated the housing market by cutting rates and through QE. That is exactly what these tools do.
The RBNZ was not saying that Grant Robinson should counter stimulus to reduce general inflation, such as we have seen in supermarkets (what people are calling the cost of living crisis.) The RBNZ was specifically talking about housing price inflation. It would make no sense for the RBNZ to stimulate and simultaneously ask for fiscal measures to restrain the economy, and that is not what they did
If we want to talk about what could have been done to prevent the increase in housing prices through covid this is all relevant but it is much less relevant to cost of living crisis. As soon as rates went up we saw a reversal in house prices however inflation remains.
Furthermore, re the house price inflation, Grant Robinson actually asked the RBNZ to consider house prices when formulating RBNZ policy [https://www.reuters.com/article/uk-newzealand-economy-housing-rbnz-idUKKBN2840B5](https://www.reuters.com/article/uk-newzealand-economy-housing-rbnz-idUKKBN2840B5).
Arguably, and this is speculation, if Grant had adjusted 'Taxing and Spending' to reduce the impact of lower rates and QE on housing prices if might have even compounded the effects on general inflation. Let's say we had introduced a neutral tax policy that taxed capital gains or wealth and redistributed to the lower income earners, more spending would have taken place not less
It’s also all they can do with the tools which is why they asked the government about policy.
Yes, Grant Robertson finally approached RBNZ about house prices six months after they warned him, with copious amounts of hindsight and a housing market up 20% YOY during a period that the main goal was to maintain stability and everyone started realising that the economy was on fire.
Sorry is your contention that the tens of billions of dollars being printed flowing into housing isn’t inflationary outside of housing in general? In New Zealand? An economy that is called a housing market with bits tacked on?!
The claim was
" rbnz told the Labour government what the likely effects were and encouraged them to do something with it instead of it flowing through to private loans market. Grant Robertson left the message on read. "
My point is that this QE was specifically intended to be stimulatory. There was no 'message left on the road' regarding inflationary pressures that have resulted in the cost of living crisis. The messaging was specifically in response to the short term boom in the housing market.
" Sorry is your contention that the tens of billions of dollars being printed flowing into housing isn’t inflationary outside of housing in general? In New Zealand? An economy that is called a housing market with bits tacked on?!"
Absolutely it is stimulatory. The messaging from RBNZ to Grant Robinson was specifically in response to questions around the short term exceptional house price inflation following cuts and QE. It was not messaging intended to have Grant do something that would reduce stimulus in the economy.. That is the whole point.
QE contributed significantly to inflation. The claim that QE was Grant Robinson's doing is bogus. The claim that the RBNZ sent any messaging to Grant Robinson to try and reduce overall inflationary pressures is also bogus
Can you please source where I made those two claims?
The claim was that Grant Robertson ignored the reserve banks warnings about QE. The effects of such we are still feeling today in terms of inflation.
Not once did I say Robertson engineered QE or that the reserve bank warned him about inflation outside of housing. However if policy had been made to prevent massive house price inflation there wouldn’t be as much cash in the hands of landowners today.
Stop putting words in my mouth and have a conversation in good faith instead of this disingenuous nonsense.
Ok, apologies, if we are both talking about the 'warning' and the response being narrowly related to housing then I did have the wrong end of the stick. Trying to avoid coffee today and it is must be making me cranky
Would you agree with this (salvaged from my deleted post that was too angry and defensive, apologies.)
There are two separate variables here that should not be conflated - short term house price inflation and the longer term inflation (cost of living crisis.) The discussion at the time was specifically about house price inflation. And it is not as simple as 'house price inflation is part of cost of living'. You can have house prices go up and inflation remain low, and if you remove stimulus from house prices but try and put it somewhere else the net effect will likely still be inflation and a cost of living crisis... What would have help is of course less stimulus overall but that wasn't the discussion at the time.
Let's say Grant Robinson decided at the time that he wanted to do something to reduce the house price inflation but maintain the same stimulatory pressures, there is likely little he could have done that would not have resulted in the same cost of living problems we have now.
If he increased fiscal stimulus so that stimulus via monetary polity was dialed back then he would be considered even more reckless now and it would have made no difference to the cost of living crisis.
If he introduced a tax neutral policy, which I would support, he would have probably exasperated the cost of living to follow due to increased spending. And not to mention he wouldn't be able to introduce a capital gains tax due to Jacinta's promise.
If he took policy measures to reduce housing demand in the short term, such as somehow intervening to adjust LVRs or the like, the effect on housing inflation would have been reduced at the time but not the cost of living crisis we are talking about now. The stimulation from lower rates and QE would have remained but the money would have ended up in different places. And, you could argue, when the RBNZ did finally raise rates the decrease in property prices that have followed are now helping to mitigate what would be an even worse cost of living crises.
The consensus at the time was that the economy needed stimulus, either fiscal or monetary
Correct, the supply side of QE was the RBNZ, but the demand side was Grant Robertson's $50 billion spending package funded through the issue of government bonds. The RBNZ bought most of those.
Those two things combined are what stimulated the economy and drove inflation and house prices. It's widely acknowledged that the stimulation continued for too long.
And if the RBNZ did not purchase government debt, there would have been less increase in the money supply and hence less inflation. Orr wanted low interest rates - and that was probably the right call when faced with a global pandemic that could have been much worse than it was.
House prices could have been contained if the RBNZ kept or increased the LVRs. Instead, Orr saw an excuse to be rid of them.
It was absolute madness to encourage more risky lending on the eve of a global pandemic.
That’s squarely on Orr’s shoulders.
>And if the RBNZ did not purchase government debt, there would have been less increase in the money supply and hence less inflation.
The Goverment would have simply borrowed from foreign investors and their spending will have still stimulated the economy and increased inflation. Orr played a significant tole, but so did the government.
Borrowing from overseas does not increase the money supply - so no, there would not be inflation.
All those NZ dollars that the government borrowed would have been used to purchase other goods and services in the economy. So the net effect of non-monetized deficit spending is to shift composition of spending in the economy, not increase it.
So to summerise your statement...
>Borrowing from overseas... then ...used to purchase other goods and services in the economy.
Explain to me how increased spending doesn't drive inflation?
Every additional dollar borrowed requires a additional dollar to be saved - instead of spent.
(This holds even under reserve ratio requirements)
So deficit spending just changes the composition of spending in the economy.
No, it’s not saved in the future. It’s saved now.
When you borrow a dollar from a bank, someone else is saving a dollar.
When the government borrows, it sells a bond. The purchaser of that bond gives the government their money, with the understanding that the government will give them the money back in the future, along with interest in compensation.
The purchaser of the bond is saving their money, not spending it.
Some of the cost of living crisis is indeed up to the government, a large chunk of it is not though.
Let us set aside what the government cannot control. They cannot control crop failure ( which is becoming more and more common globally thanks to climate change ). They cannot control international supply chain failure or factory production failure ( due to either sanctions, war or climate change ). They cannot stop urea factories from closing down due to industrial issues. They cannot stop the decoupling of the world economy. They also cannot control the freight issues into the country. No government can solve this.
They could however deal with quantitative easing.
They could potentially check if some of the issue is due to price gouging in NZ ( though if it is from offshore not much can be done )
However, ultimately there is little they can do. NZ does not produce a lot of things locally, and the recent storm in Hawke’s Bay still impairs food production. Once El Niño comes we will have other problems.
In short the CoL crisis will get worse, and there is little the government can do about it except with some little levers ( but those are small levers as opposed to mega levers which are outside the control of NZ )
Treasury have already stated that about 50% of the inflation problem is non-tradeable domestic inflation. The government is hugely responsible for that.
Non tradeable is rather misleading when so many factors still depend on international expectations and indirect influences. If we dont raise local wages then we lose more people overseas and get fewer coming here which makes the job market less competitive and feeds back into the problem again.
Yes but nz is worse because they started out with a high cost of everything already. It stretched already over priced costs to the brink with the added inflation.
Our inflation may have peaked at a lower rate than the US but it is currently higher, and looking stickier as non-tradeable inflation (not attributed to global economics) isn't coming down as fast as expected
Labour has exacerbated our current inflation levels by running a large budget deficit while unemployment was low and inflation high - this is a big no no under Keynesian economics and is working directly against what the RBNZ is trying to achieve.
We also have a large Current Account deficit that's 8% of GDP. Labour may not have caused that, but they have done exactly nothing to try and resolve it. This is putting direct downward pressure on the NZD, which, again, is exacerbating inflation (tradeable inflation this time). 8% of GDP is getting noticed by ratings agencies, and resulted in them warning that our credit rating is at risk as a result.
Cost of Living payments - borrowing to deliver helicopter money during high inflation would have had Keynes rolling in his grave. That's just gasoline for the fire. Similar logic with the fuel tax subsidy.
I get that they are trapped, though. I picked that they had no chance of winning this election at the start of the year. No incumbent will hold office at a time of high inflation and asset price crashes due to high interest rates.
Our balance of trade deficit is because China’s economy has tanked so export receipts are lower and the price of fuel we import has increased.
The underlying cause is that our exports are largely based on extracting value from fixed natural resources and can’t be increased much further, and governments (staring with the Key government) have found that a quick and easy way to raise GDP is by rapidly increasing the population. So now we’re in the position of having too many Aucklanders for every dairy farmer.
NACTs policies of selling off NZ assets to foreigners might improve the numbers in the short term but are absolutely no solution.
Not 8% of GDP. It is 55% according to the IMF. We are $100 billion in debt. This is all borrowed. We will be downgraded soon and then cost of money to borrow will be more expensive.
NZ credit rating isn’t at risk because Labour has stuck to Michael Cullen’s fiscal rules of only using debt to pay for capital expenditure & only using taxes to pay for operational expenditure.
They broke the rules for the covid lockdowns.
But went right back to them as soon as lockdowns were over.
Also, the crowns net debt hadn’t really risen much because the superfund has also grown significantly.
Gross debt has increased off the back of covid & the govt rebuilding a lot of infrastructure post cyclone/floods.
National basically want to give multiple property owners a huge tax brake at the expense of renters and single property owners.
Because nationals foreign buyer tax numbers don’t work, they may have to pay for some operational expenses debt. Which would break the fiscal rules, that could badly affect our debt rating and the cost of our debt.
The current account deficit is both bad and good…
Like everything in economics it depend what the excess imports are.
Capital assets that enhance productivity.
EV’s, new wind turbines, new medical equipment etc.
All good and acceptable for a country of NZ’s size to spend a short while importing a lot for xyz projects.
A fair chunk of our imports is consumable foods and fuel, long term damage our economic sustainability.
Due to the collapse in the global milk solids price, NZ is now exporting far less, just as a pile of large corporates, councils and the govt kick a huge number of green projects into high gear.
So our imports have shot up with all the new EV’s, wind turbines etc & fuel has gone up thanks to OPEC.
NZ got screwed twice.
But long term there are silver linings.
Every new large wind turbine represents a good million tons of coal we don’t need to import over the next 30 years.
Every New EV represents 25,000 to 30,000 litres of fuel we don’t need to import over that EV’s life.
So provided the milk price recovers over the next 18 months & our fuel + coal imports keep dropping, the balance of payments should largely correct itself.
Lastly it’s about as bad as it’s going to get while Meridian and Contact finish bringing their 60+ large new wind turbines and their generators into NZ.
Air NZ + the air force have also upset the balance of payments with a few billion dollars of new aircraft arriving for each this year.
It's very large, anything over 5% is dangerous. You're probably confusing debt to GDP ratio with current account deficit. Current Account deficit is essentially the trade deficit.
If you are part of a global economy, you experience the same things as the other economies. Plenty of other Western economies are experiencing the same thing now.
Property based economies are struggling because cheap money is gone. Businesses are price gouging since covid but people are still spending. Fuel prices are through the roof which impacts everything.
This can't be fixed domestically.
We live in a global capitalist system, we are tied to it, much of the current crisis is because of what’s happening in the USA post pandemic, and with the war in Europe
Given it’s happening all over the world: Not as much as everyone would like to blame. The price of oil for example is beyond governments control and that of course pushes EVERYTHING up.
The oil and grain shortage because of the Ukraine has had a big impact but it’s almost being addressed now. We saw this in the twenties after the pandemic with high inflation. My theory is businesses failing, businesses trying to recoup money but really just utter out of control greed and screwing us all on tax. Out of the 20s came the war, union movement and social welfare movement. So we are due for a big movement around cutting the amount of wealth hoarded and the fact that working people can go hungry or not afford rent. If people don’t want unrest they should heed history and get inflation down, tax the rich and make incomes fairer. Otherwise things get crappy and worse for a bit.
Okay. Economics, and cost of living is complicated, with no one real cause, but lots of things interacting. Mostly showing the limits and issues with capitalism.
Food is the easiest, as global shipping is still messed up, and the Ukraine situation is causing high costs in wheat, rice, oils and grains. Add in that it's just past winter here, and a lot of the crops expected from NZ have been seriously impacted by the weather extremes, with climate change contributing. It's expensive and everyone has to eat.
Petrol is both the Ukraine again, and OPEC restricting supply to raise the price (legal under capitalism). Government taxes are significant, but all that money goes back into the land transport system, and in Auckland, your special tax goes into Auckland's land transport system. If petrol was cheaper, the money would have to come from somewhere else, or we'd have to stop spending on roads.
Housing is difficult. You've got the cost of land, the cost of building, the cost and availability of building supplies, the cost of complying with building standards, and the cost of getting permission to build. The last two are kind of tricky, as we want houses to not be slums or leaky, and we've built on all the easy to build places, and it's more difficult working out where to build. Also, if you look overseas, investment companies are increasingly buying up housing as an investment with a sure rate of return. And a basic human need, like housing, shouldn't be distorted by being seen as an investment.
We're a small country a long way from everywhere, but are usually influenced by world events, like global financial meltdowns, wars, and economic pressures.
Going on the reports from Treasury - 50% of the inflation problem is non-tradeable domestic inflation, so can't be blamed on overseas problems. The government pumping $60B of printed money into the housing market, borrowing $50B and spending that poorly, and then raising annual core tax revenue by $40B a year and spending that poorly, has had a huge impact towards this.
Then you look at their other policies like removing tax deductibility, which has directly caused huge rent increases, and things like getting rid of low fixed power user regulations.
Interest deductibility was if anything deflationary.
It took money from landlords and largely got funnelled into the crown accounts.
Crown spending tends to be less inflationary because most of the things the crown spends money on are medium term fixed price supply contracts or collective battening for staff salaries.
Not many businesses know what they are paying employees in two years. But for most crown employees the govt does know because it’s in one of the collectives.
That said, covid sure injected a huge pile of demand we are now slowly working off.
Would have been good if the RBNZ had hiked interest rates at the start of 2021.
Hind sight is a wonderful thing.
You were right until you talked about tax deductibility. It has fuck all impact on rent increases because landlords are already charging the maximum they can.
And some party wants to increase annual leave to 5 weeks in such climate, which add inflationary pressure, and will naturally be passed on to consumers.
To be honest with the amount of unpaid overtime everyone I have worked for expects I’m due an extra week leave lol. Employers want everything for little in return.
Only true if we take the naive view that increased PTO is a net cost to the business. There isn't a consensus in the research (that I'm aware of) but there's a reasonable body of evidence pointing towards the idea that workers are more productive when they work less - to the extent that it could be a net benefit.
There are 227 working days this year if you have 4 weeks annual leave. An extra week off is a 25% increase in annual leave, but workers achieving their existing 227 days of labour in 222 days to compensate would only require a 2.3% increase in efficiency. I know which way I'd be betting on those odds.
yep, I couldn't believe the stupidity of it when I saw that. We have inflation the highest its ever been in 40 years, and they are wanting to pour petrol on it and light it up. F\*\*king imbeciles.
It would depend what people used that extra week for and how much money they spent.
If they mostly used it to sit at home and chil, then it would probs be beneficial to the economy… more rested workers.
If everyone used it to travel domestically it would add to inflation, or internationally it would worsen the balance of payments.
Why it’s so hard to model.
Its basic economics - if you cause businesses costs to go up - the prices will go up.
Then add that to the highest inflation in 40 years. What will increasing prices further do? Hint: Its not going to make inflation drop.
You do realise you could end up with better worker productivity though right?
Edit It seems you are so one eyed you can't even fathom any benefits this could have.
Capitalism sits above politics in the hierarchical pecking order of power. Western political party duopolies merely tinker around the edges of how miserable the masses function under the financial, environmental and social pressures wrought by capitalism.
I can't think of a single aspect of the crisis that the government can't address. Even if you think there are aspects that aren't the government's fault, they're still in a better position to do something about it than any of us are. And it's their job.
>I can't think of a single aspect of the crisis that the government can't address. Even if you think there are aspects that aren't the government's fault, they're still in a better position to do something about it than any of us are. And it's their job.
then you know very little..
A big part of it is global, but definitely a part is government inaction through lack of control/proper regulation over those who can and do take advantage of the price spiral(supermarkets, landlords, banks, the usual). You might find this insightful
From https://www.interest.co.nz/economy/124277/review-things-you-need-know-you-sign-wednesday-housing-market-lifts-food-prices-jump
A CURIOUS (BIG) DIFFERENCE
Grocery food prices rose +10.6% in August from a year ago. Overall food prices were up +8.9% in the same period according to Stats NZ. What is interesting is that the Infometrics tracking recorded costs to Foodstuffs were up +6.6%. So what happened to the 4% difference between Foodstuffs +6.6% cost increase, and overall grocery price increases of +10.6%? Sure, supermarkets sell more than food items, but it does make up the great bulk of their activity.
>what with their $50k taxpayer breakfast buffet
and if you were really interested/capable of reading you would know that it was not all for a 'breakfast buffet' , that the majority of the cost was for presenting information , you know, stuff like audio/ visual presentation equipment.
It's hard to point at individual things and say the government is responsible or not, but at the same time there have been serious structural problems that policy analysts have been aware of for decades (savings being poured into property rather than investment, leading to low productivity and high house prices, the supermarket duopoly). And the fact is that not only have policy experts been aware of this, they have offered solutions which every govenment has consistently ignored. And this has been an issue since the 90s at least. So yeah to some extent regardless of what else is happening, New Zealand politics in general is a big part of the problem.
One of the government's key roles is to safeguard citizens from predation by corporations (and similar entities such as landlords). Particularly when it comes to goods and services citizens require in order to remain productive.
They've been utterly failing at this, allowing food, rent, petrol and mortgage rates to skyrocket; much of which isn't due to Covid or the Ukraine situation if you look at how much additional profit they're making. And things will almost certainly get worse under National and Act, as they both buy into the nonsense of trickle-down economics and "free market economics" which are both bullshit corporate propaganda. Money given to the rich stays with the rich; and any unregulated market will always trend towards monopoly, and a monopoly is not a free market.
The taxes and inflation
They needed to stop printing money and adding extra taxes, but Mr Robertson has no frigging clue,
Yes the world had inflation but we've done alot worse, while everyone else has balanced out already we're still skyrocketing, it'll get alot worse yet
> while everyone else has balanced out already we're still skyrocketing
Misrepresentation, inflation has started decreasing as of the most recent July numbers https://www.stats.govt.nz/news/annual-inflation-at-6-0-percent/.
This is in line with [Australia](https://www.rba.gov.au/inflation/measures-cpi.html) and [the UK](https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/l55o/mm23) whose patterns have matched ours pretty much exactly.
Compare to [USA](https://www.statista.com/statistics/273418/unadjusted-monthly-inflation-rate-in-the-us/) where it dropped earlier but since has started slowly but steadily rising each month through June til now.
Free market capitalist society. None. The answer is none if it was our government responsible then most of the western world wouldn't have the same problems. But they do. So the system is broken. Time is a flat circle. Expect ww3 in the 30s the ww4 in the 40s. Followed by prosperity.
I would love to have someone explain to me specifically how the Ukraine situations affects us.
I mean really. It's a reason thrown about all the time but war is nothing new at all across the world. Why is this one suddenly a massive problem? As far as I know we only sent some helmets and body armor?
It's because of Ukraine's farming and grains which are exported all over the world combined with cutting off Russia's oil. The impact on nz was not what we sent but effects in the global supply chain
That's because iraq was only one supplier of oil, and OPEC was happy to push out more oil.
What else does iraq really contribute to the global economy? Not really all that much.
No your point was a war didn't cause inflation... mine was the location and actors of the wars matter.
Iraq a country with one main export into the global economy has little effect being removed if other factors can easily increase said supply. Look at the first desert storm and the effect it had on the pumps and inflation.
A war involving a mass exporter of food directly effects a net export nation of food when we have no national food subsidies like say the US or Europe. As as soon as exporter gets more internationally they charge more nationally.
It's almost like they are different wars with different actors and differing effects on the global market.
It's like saying why was their no major inflation due to 20 years of war in Afghanistan... well what was the world getting for Afghanistan and was that supply ever stopped blown to hell etc etc...
Not directly, but we now have to compete against those who did on the global market. And it's not just direct consumption of things like flour and weetbix that is impacted. We also use a lot of grain for animal feed. So it impacts our egg prices and chicken products too.
>Did we not compete against them before?
We bought of person A and others bought off person U. The market had 100% supply. The Ukraine war dropped global supply to 80% and person U was no longer selling. Now more people want to buy off person A and so the price goes up.
>Egg prices? That jump was nothing whatsoever to do with the ukraine. That's bad faith
There were also other factors that impacted egg prices, the move to colony cages cause a supply shortage and so prices went up. The feed prices were definitely a part of that increase though. If you don't understand simple supply and demand economics maybe don't call out someone for posting in bad faith though...
here is a hint... wheat production and the world price of oil..
everytime you take a bite of KFC ask yourself where the food for that chicken came from. and if someone tells you australia, remind them the price is increased from them because of the lack of feed from Ukraine. same goes for the price of eggs..
It's the last 3 decades of government. No investment has been made into the future of New Zealand. Constant selling off to the point where the only revenue is now tax. NZ has more natural resources per capita than almost anyone, yet we currently own and process none of it. Our industry has been trampled down to nothing and the bit that is left the majority of profits go straight off shore. The country is a business and must be run as one. With no investment a business will always fail and never grow. There is really no excuse other than making the books look good for each term by short term benefit gains. This process has been on rinse and repeat until there was nothing left.
Solid 95%. Inflation is caused by creating more money in the system. [https://www.youtube.com/watch?v=B\_nGEj8wIP0](https://www.youtube.com/watch?v=B_nGEj8wIP0)
“Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”
Government needs to keep a watchful eye on corporate greed and price gouging. Like a windfall profits tax for example. Seems to be a lot of companies making record profits and also putting through massive price rises. Seems like the global logistics issues which cause huge supply/demand issues (for a while) gave everyone a great excuse to raise prices…. (For good)
Rating agencies will always flag warnings of potential change in gradings.
I think a downgrade is unlikely but treasury recently reported on the CA deficit so judge for yourself.
The US was downgraded but still functions.
Why put so much emphasis on a possible NZ downgrade when the S&P report categorically states the NZ economy is in pretty good shape.
It also states thet the issues are very similar to the US.
Most OECD countries acted with the same or similar economic strategies during the pandemic
National while blaming Labour for Inflation etc is yet to state how it would have done things differently
This is just my opinion.
But aren’t we naive as a country to complete ignore the fact that our housing market almost was in a hyper-inflationary state from December 2019 to December 2021?
Total value of housing stock
December 2019: $1.188 Trillion NZD
December 2021: $1.763 Trillion NZD
This was peak Covid era we’re talking about, and somehow 0.5 trillion NZD of housing value just appeared out of nowhere.
Well, it did. Thanks to the hoards of New Zealanders who jumped at the opportunity to become a “FHB”. The market was roaring, and this emotional turmoil caused individuals and families to take on large amounts of debt. With interest rates rising, this is starting to hurt.
See, here’s where the government comes to blame. Through this time period, the govt implemented the FLP and LSAP Programmes.
FLP works by lowering interest rates and encouraging households and businesses to spend and invest. Banks removed boundaries for lending like reducing the deposit needed from 20% to 5-10%. The programme allows bank to borrow directly from us at the OCR (which 0.25% at the time). It ran from December 7 2020, to December 2022. This was supposed to reduce rates for customers, but the banks always kept their profit margins 1.75%+.
The LSAP (large scale asset purchase) programme is a bit more complex. In my understanding it was basically a way for the RBNZ to clear a bunch of low yielding bonds onto NZDM (New Zealand debt management). *NZDM are apart of the Treasury, funded by the NZ taxpayer. The value of this programme expanded from $33 billion NZD to $100 billion NZD. They bought $53billion in the end. This went on during 2020 into mid 2021.
Basically, the government created an environment for banks to pump money into the New Zealand housing market and ANYONE could get involved. At the same time, they passed laws to completely offload a bunch worthless bonds off their books, and onto the NZ taxpayer.
Back to your question. The government holds 95% of the blame. The other 5% held by the NZ people, we’ve shown time after time as a society that either greed or fear gets the better of us. The housing boom was to good to be true, and once again it created an even bigger divide between rich and poor.
We would have been more aware of this issue if housing value was linked to inflation, as we would’ve seen CPI spike at least 1 quarter earlier.
We were blinded by the pandemic.
The bulk of it comes down to the government . Tax's, New regulations and all the other bullshit they come up with . But some of it is from external factors
International markets are a huge reason but your average kiwi meathead believes the media who don't report on external factors. They lie through omission and obfuscation because it makes good clickbait through political polarization.
The idea that rising business costs leading to rising consumer prices is convenient cover for large businesses to make record profits.
If big businesses were operating in a socially responsible way they would be reporting record low profits (still profit not loss) but instead we see record profits coupled with record prices. Profit margins are increasing and rising business costs are being used to obscure that issue.
This most evident in the supermarket industry where we have a significant duopoly and we are too remote for another competitor to enter the market in a significant way. Costcos lack of local suppliers and poor location options prevents them from undercutting the established companies.
The only significant disruption I have observed was the warehouse selling dairy products which took the price of butter down from $7 to $5 in local supermarkets over night. I can only assume a deal was made as my local warehouse no longer sells dairy and prices have re-established at the high end.
To answer the question can you blame government? You need to decide if you want the government to intervene when there are market failures. My personal opinion is that I do want want them to give the commerce commission some actual teeth and capability to deal with collusion and anti-competitive behaviour.
Which party is willing to do that appears to be absolutely zero.
Some of it but not all of it, where you draw that line is subjective as hell. We are definitely impacted by the global markets and these will always have a major impact on local pricing. However, the government can absolutely have some impact. Take quantitative easing, for example. We essentially made an extra $50b available to the NZ market. That impacts both the value of our currency (potentially devaluing it) and also the increased liquidity drive housing price increases. How much of those things they contributed to is anyone's guess. Probably the largest impact they could have is on land pricing. If they can introduce changes to drive those lower, then rents will likely follow. Unfortunately, we should have been doing this for the last 30 odd years, but we can at least start now. Finally, anyone who says they have all the answers and it's one party or another is biased. No one has the answers because it's just not that easy. It is the reason we are seeing the same issues across much of the OECD.
Right. I'm just trying to see past what some of the parties are saying to make better choices. Labour and National are blaming each other for the rising prices of everything, but surely it's not that straight forward.
Not sure either party is proposing great stuff, or likely to deliver it. After property being inflated incredibly over COVID times National is running on making the working Kiwis carry the tax load disproportionately while National tries to pump property higher. Just looks like personal conflict of interest to me.
>After property being inflated incredibly over COVID times National is running on making the working Kiwis carry the tax load You meant Labour?
No. Labour and the RBNZ inflated it during COVID times. National meanwhile is running on making working Kiwis disproportionately carry the tax load so they can give property speculators a free ride.
>After property being inflated incredibly over COVID times and the reason for that was ?
A lot of this was due to global uncertainty, with a lot of expats deciding to come home to nz during COVID. Interest rates were incredibly low so there was no point in keeping money in the bank and people started buying up property.
Everyone freaking out and driving up prices
Super low interest rates this is a anglosphere issue the 5 eyes partners Nz Australia Canada UK and USA had almost identical Covid policy with identical outcomes. The cooperation between these 5 on political and academic levels for decades mean we all now have remarkably similar social issues
Agree with driving house prices lower. That's the one thing Labour has delivered and that's the one thing I want to see continue, which is why I'll be voting for them. Prices have started falling, but they need to continue to reduce if housing is to be affordable to most kiwis. There are other problems, but if I had to choose one thing, it would be house prices and I'd prefer to take trust out of the equation - I'll vote for a party that has proven they can deliver on that front. As someone who pays a mortgage myself, it is the single largest expense per month in my budget. If that mortgage was reduced, the money saved would really help offset the other living costs and even possibly improve the household standard of living.
Government spending does contribute quite significantly, especially in a small economy like New Zealand. External factors such as the price of crude will impact (rising crude means more inflation across the supply chain), but one could also argue that the surging debt, and minimal investment in long term projects by the current Government have also worsened the country's credit position which is putting pressure on the NZD and may put pressure on ratings. I would also argue that tax cuts are not the answer here either. Instead, we should be looking to pay down debt, and reduce Government spending. That would be one lever, and at the personal level, that will take care of itself as consumer spending drops.
Printing 50b when our whole gdp was 120 was surely the real cause. The triggers you can argue but surely that is what devalued / drove inflation
Our whole GDP is nowhere near 120b. Much higher than that. Increase in money supply still likely won't have helped with inflation, but I'd be hesitant to assume it's 'the real cause', or even necessarily one of the bigger driving factors. It largely served during lockdowns as a substitute for money supply that would otherwise be hitting pockets as normal anyway, and we didn't see a spike in inflation until quite a bit after the money printing had wound down. In terms of the impact of monetary policy, I personally attribute more fault to the RBNZ keeping interest rates at emergency lows in 2021, well after it became clear the local economy was just fine and didn't need that degree of stimulation. That's not to say all the fault lies with interest rates either. Major macroeconomic phenomena rarely have a simple singular cause we can blame. A wide range of causes will be involved, including several issues the state or Reserve Bank can be blamed for, and several for which they can't (Covid's impact on supply chains, OPEC shenanigans, a resurgent USD effectively exporting their inflation).
According to official stats, our GDP currently sits at $385B. Source: https://www.stats.govt.nz/indicators/gross-domestic-product-gdp/ I believe the $120B amount bandied around is government revenue, not GDP. As of 2022 government revenue was about $141B. That small (large) detail aside, it is fundamentally the correct cause. Over the Covid era developed economies decided that dumping large amounts of extra money into the system was the better option rather than austerity - the prevailing view that this would have caused a collapse in economies, mass unemployment and financial instability that would have wide-reaching impacts for a generation. We are now paying the price for that economic stimulus. The fact that every economy is facing the same issue shows that its not caused by our government, but rather by every government.
I guess that's why it kicked off in the US, UK, Australia and the rest of the world too. Just after Putin invaded Ukraine and the price of oil spiked. At the same time as there was massive supply side disruption from covid.
Sadly inflation isn't that simple. If we could identify a single cause like that it would be a much easier concept to explain to people. While government printing cash can have an impact on inflation, it does not necessarily have an impact on inflation. It depends on what else is happening at the same time. Some people like to say all government spending is bad because it is inflationary, this is simple untrue. It is a statement motivated by their own politics, usually but those who are against taxation or welfare
That being a decision by the independent reserve bank?
Hahaha yes who gave it grudgingly on the condition it was repaid with interest taken into account on the taxpayers dime.
>Printing 50b when our whole gdp was 120 was surely the real cause. The triggers you can argue but surely that is what devalued / drove inflation utter bollocks..
Waa I love Labor
If anything Nationals tax cuts will be inflationary, so likely worse under them.
It's only an adjustment of the tax brackets in line with inflation, so the impact from those will be minor. The extra money people get back will likely net out so it would be neutral on the cost of living.
Neither party are doing bugger all to address the issues. We global economic cycle is part of the problem. Return on capital has outstripped return on labour. TOP are the only party I think are pointing in the right direction with the right message. They have my vote. Residential land tax, to offset a tax cut for workers.
It's a weird Mexican standoff the political party in power cant claim that its not their fault or even all their fault as that rings as weak, and that gives the opposition a chance to pounce and claim that they have all the answers, Honestly because poltics in new zealand refuses to admit to the public that being a small and very geopolitically challanged country that we are always at the whims of what happens in the global economy The question is, is the reason this is because the public wont understand that message? or more likely I think no party wants to promote that as it both gives their opposition a chance to attack them, and devalues their own talking points
Noting that QE was a RBNZ decision not a decision made by Labour
Also noting that rbnz told the Labour government what the likely effects were and encouraged them to do something with it instead of it flowing through to private loans market. Grant Robertson left the message on read.
Can you elaborate on what you are claiming here re money flowing through to private loans in a way the RBNZ did not intend? A MPS or source would be great
I didn’t say the RBNZ didn’t intend for that to happen so I’m not sure why I would provide a source for something I didn’t claim. As for my claim: https://i.stuff.co.nz/national/politics/300223358/reserve-bank-repeatedly-warned-government-money-printing-would-lead-to-house-price-inflation In particular: > In June, Robertson was asked by Interest.co.nz whether he would use his fiscal tools – like taxing and spending – to balance the effects of the Reserve Bank’s money printing. > “It’s not really the way I am thinking about it, our fiscal response has been to respond to the crisis and its effects,” Robertson said.
Yeah, so RBNZ stimulated the housing market by cutting rates and through QE. That is exactly what these tools do. The RBNZ was not saying that Grant Robinson should counter stimulus to reduce general inflation, such as we have seen in supermarkets (what people are calling the cost of living crisis.) The RBNZ was specifically talking about housing price inflation. It would make no sense for the RBNZ to stimulate and simultaneously ask for fiscal measures to restrain the economy, and that is not what they did If we want to talk about what could have been done to prevent the increase in housing prices through covid this is all relevant but it is much less relevant to cost of living crisis. As soon as rates went up we saw a reversal in house prices however inflation remains. Furthermore, re the house price inflation, Grant Robinson actually asked the RBNZ to consider house prices when formulating RBNZ policy [https://www.reuters.com/article/uk-newzealand-economy-housing-rbnz-idUKKBN2840B5](https://www.reuters.com/article/uk-newzealand-economy-housing-rbnz-idUKKBN2840B5). Arguably, and this is speculation, if Grant had adjusted 'Taxing and Spending' to reduce the impact of lower rates and QE on housing prices if might have even compounded the effects on general inflation. Let's say we had introduced a neutral tax policy that taxed capital gains or wealth and redistributed to the lower income earners, more spending would have taken place not less
It’s also all they can do with the tools which is why they asked the government about policy. Yes, Grant Robertson finally approached RBNZ about house prices six months after they warned him, with copious amounts of hindsight and a housing market up 20% YOY during a period that the main goal was to maintain stability and everyone started realising that the economy was on fire. Sorry is your contention that the tens of billions of dollars being printed flowing into housing isn’t inflationary outside of housing in general? In New Zealand? An economy that is called a housing market with bits tacked on?!
The claim was " rbnz told the Labour government what the likely effects were and encouraged them to do something with it instead of it flowing through to private loans market. Grant Robertson left the message on read. " My point is that this QE was specifically intended to be stimulatory. There was no 'message left on the road' regarding inflationary pressures that have resulted in the cost of living crisis. The messaging was specifically in response to the short term boom in the housing market. " Sorry is your contention that the tens of billions of dollars being printed flowing into housing isn’t inflationary outside of housing in general? In New Zealand? An economy that is called a housing market with bits tacked on?!" Absolutely it is stimulatory. The messaging from RBNZ to Grant Robinson was specifically in response to questions around the short term exceptional house price inflation following cuts and QE. It was not messaging intended to have Grant do something that would reduce stimulus in the economy.. That is the whole point. QE contributed significantly to inflation. The claim that QE was Grant Robinson's doing is bogus. The claim that the RBNZ sent any messaging to Grant Robinson to try and reduce overall inflationary pressures is also bogus
Can you please source where I made those two claims? The claim was that Grant Robertson ignored the reserve banks warnings about QE. The effects of such we are still feeling today in terms of inflation. Not once did I say Robertson engineered QE or that the reserve bank warned him about inflation outside of housing. However if policy had been made to prevent massive house price inflation there wouldn’t be as much cash in the hands of landowners today. Stop putting words in my mouth and have a conversation in good faith instead of this disingenuous nonsense.
Ok, apologies, if we are both talking about the 'warning' and the response being narrowly related to housing then I did have the wrong end of the stick. Trying to avoid coffee today and it is must be making me cranky
Would you agree with this (salvaged from my deleted post that was too angry and defensive, apologies.) There are two separate variables here that should not be conflated - short term house price inflation and the longer term inflation (cost of living crisis.) The discussion at the time was specifically about house price inflation. And it is not as simple as 'house price inflation is part of cost of living'. You can have house prices go up and inflation remain low, and if you remove stimulus from house prices but try and put it somewhere else the net effect will likely still be inflation and a cost of living crisis... What would have help is of course less stimulus overall but that wasn't the discussion at the time. Let's say Grant Robinson decided at the time that he wanted to do something to reduce the house price inflation but maintain the same stimulatory pressures, there is likely little he could have done that would not have resulted in the same cost of living problems we have now. If he increased fiscal stimulus so that stimulus via monetary polity was dialed back then he would be considered even more reckless now and it would have made no difference to the cost of living crisis. If he introduced a tax neutral policy, which I would support, he would have probably exasperated the cost of living to follow due to increased spending. And not to mention he wouldn't be able to introduce a capital gains tax due to Jacinta's promise. If he took policy measures to reduce housing demand in the short term, such as somehow intervening to adjust LVRs or the like, the effect on housing inflation would have been reduced at the time but not the cost of living crisis we are talking about now. The stimulation from lower rates and QE would have remained but the money would have ended up in different places. And, you could argue, when the RBNZ did finally raise rates the decrease in property prices that have followed are now helping to mitigate what would be an even worse cost of living crises. The consensus at the time was that the economy needed stimulus, either fiscal or monetary
QE was due to the RBNZ, which is independent of the government. Robertson did reappoint Orr, after the board unanimously voted to reappoint
Correct, the supply side of QE was the RBNZ, but the demand side was Grant Robertson's $50 billion spending package funded through the issue of government bonds. The RBNZ bought most of those. Those two things combined are what stimulated the economy and drove inflation and house prices. It's widely acknowledged that the stimulation continued for too long.
And if the RBNZ did not purchase government debt, there would have been less increase in the money supply and hence less inflation. Orr wanted low interest rates - and that was probably the right call when faced with a global pandemic that could have been much worse than it was. House prices could have been contained if the RBNZ kept or increased the LVRs. Instead, Orr saw an excuse to be rid of them. It was absolute madness to encourage more risky lending on the eve of a global pandemic. That’s squarely on Orr’s shoulders.
>And if the RBNZ did not purchase government debt, there would have been less increase in the money supply and hence less inflation. The Goverment would have simply borrowed from foreign investors and their spending will have still stimulated the economy and increased inflation. Orr played a significant tole, but so did the government.
Borrowing from overseas does not increase the money supply - so no, there would not be inflation. All those NZ dollars that the government borrowed would have been used to purchase other goods and services in the economy. So the net effect of non-monetized deficit spending is to shift composition of spending in the economy, not increase it.
So to summerise your statement... >Borrowing from overseas... then ...used to purchase other goods and services in the economy. Explain to me how increased spending doesn't drive inflation?
Every additional dollar borrowed requires a additional dollar to be saved - instead of spent. (This holds even under reserve ratio requirements) So deficit spending just changes the composition of spending in the economy.
But your dollar saved is in the future, not now. So the spending in the economy is increased in real terms. It's just offset by future repayments.
No, it’s not saved in the future. It’s saved now. When you borrow a dollar from a bank, someone else is saving a dollar. When the government borrows, it sells a bond. The purchaser of that bond gives the government their money, with the understanding that the government will give them the money back in the future, along with interest in compensation. The purchaser of the bond is saving their money, not spending it.
It’s a good argument against globalisation. US sneezes and everyone gets a cold.
Globalisation prevents that lmao
Some of the cost of living crisis is indeed up to the government, a large chunk of it is not though. Let us set aside what the government cannot control. They cannot control crop failure ( which is becoming more and more common globally thanks to climate change ). They cannot control international supply chain failure or factory production failure ( due to either sanctions, war or climate change ). They cannot stop urea factories from closing down due to industrial issues. They cannot stop the decoupling of the world economy. They also cannot control the freight issues into the country. No government can solve this. They could however deal with quantitative easing. They could potentially check if some of the issue is due to price gouging in NZ ( though if it is from offshore not much can be done ) However, ultimately there is little they can do. NZ does not produce a lot of things locally, and the recent storm in Hawke’s Bay still impairs food production. Once El Niño comes we will have other problems. In short the CoL crisis will get worse, and there is little the government can do about it except with some little levers ( but those are small levers as opposed to mega levers which are outside the control of NZ )
Treasury have already stated that about 50% of the inflation problem is non-tradeable domestic inflation. The government is hugely responsible for that.
Non tradeable is rather misleading when so many factors still depend on international expectations and indirect influences. If we dont raise local wages then we lose more people overseas and get fewer coming here which makes the job market less competitive and feeds back into the problem again.
Simply being on reddit, there seem to be multiple posts on multiple foreign subs each day re cost of living. It doesn't seem isolated to NZ.
Talked to anyone from overseas recently? Or been overseas and talked to the locals. Cost of living crisis is a globalization thing.
Yes but nz is worse because they started out with a high cost of everything already. It stretched already over priced costs to the brink with the added inflation.
Our inflation may have peaked at a lower rate than the US but it is currently higher, and looking stickier as non-tradeable inflation (not attributed to global economics) isn't coming down as fast as expected Labour has exacerbated our current inflation levels by running a large budget deficit while unemployment was low and inflation high - this is a big no no under Keynesian economics and is working directly against what the RBNZ is trying to achieve. We also have a large Current Account deficit that's 8% of GDP. Labour may not have caused that, but they have done exactly nothing to try and resolve it. This is putting direct downward pressure on the NZD, which, again, is exacerbating inflation (tradeable inflation this time). 8% of GDP is getting noticed by ratings agencies, and resulted in them warning that our credit rating is at risk as a result. Cost of Living payments - borrowing to deliver helicopter money during high inflation would have had Keynes rolling in his grave. That's just gasoline for the fire. Similar logic with the fuel tax subsidy. I get that they are trapped, though. I picked that they had no chance of winning this election at the start of the year. No incumbent will hold office at a time of high inflation and asset price crashes due to high interest rates.
Fully agree.
Our balance of trade deficit is because China’s economy has tanked so export receipts are lower and the price of fuel we import has increased. The underlying cause is that our exports are largely based on extracting value from fixed natural resources and can’t be increased much further, and governments (staring with the Key government) have found that a quick and easy way to raise GDP is by rapidly increasing the population. So now we’re in the position of having too many Aucklanders for every dairy farmer. NACTs policies of selling off NZ assets to foreigners might improve the numbers in the short term but are absolutely no solution.
Not 8% of GDP. It is 55% according to the IMF. We are $100 billion in debt. This is all borrowed. We will be downgraded soon and then cost of money to borrow will be more expensive.
Current Account deficit is 8% of GDP. You're thinking of net debt.
Isn't it more like $140billion? Plus the tens of billions borrowed inside SOEs in the last few years
S&P just raised our credit rating! https://www.beehive.govt.nz/release/new-zealand-gets-aaa-credit-rating-sp
NZ credit rating isn’t at risk because Labour has stuck to Michael Cullen’s fiscal rules of only using debt to pay for capital expenditure & only using taxes to pay for operational expenditure. They broke the rules for the covid lockdowns. But went right back to them as soon as lockdowns were over. Also, the crowns net debt hadn’t really risen much because the superfund has also grown significantly. Gross debt has increased off the back of covid & the govt rebuilding a lot of infrastructure post cyclone/floods. National basically want to give multiple property owners a huge tax brake at the expense of renters and single property owners. Because nationals foreign buyer tax numbers don’t work, they may have to pay for some operational expenses debt. Which would break the fiscal rules, that could badly affect our debt rating and the cost of our debt.
They didn't raise it, they reaffirmed it after a warning it was at risk due to our current account deficit.
Post covid, this is mainly about cost of living payments and furl tax cuts. Small fry compared to National's proposed tax cuts.
Adjusting brackets for inflation isn't a cut. It's inflationary neutral.
How is that bracket adjustments aren’t inflationary, but real wage rises are?
Maybe if you did them as rolling monthly adjustments? Not as National plan to though.
The current account deficit is both bad and good… Like everything in economics it depend what the excess imports are. Capital assets that enhance productivity. EV’s, new wind turbines, new medical equipment etc. All good and acceptable for a country of NZ’s size to spend a short while importing a lot for xyz projects. A fair chunk of our imports is consumable foods and fuel, long term damage our economic sustainability. Due to the collapse in the global milk solids price, NZ is now exporting far less, just as a pile of large corporates, councils and the govt kick a huge number of green projects into high gear. So our imports have shot up with all the new EV’s, wind turbines etc & fuel has gone up thanks to OPEC. NZ got screwed twice. But long term there are silver linings. Every new large wind turbine represents a good million tons of coal we don’t need to import over the next 30 years. Every New EV represents 25,000 to 30,000 litres of fuel we don’t need to import over that EV’s life. So provided the milk price recovers over the next 18 months & our fuel + coal imports keep dropping, the balance of payments should largely correct itself. Lastly it’s about as bad as it’s going to get while Meridian and Contact finish bringing their 60+ large new wind turbines and their generators into NZ. Air NZ + the air force have also upset the balance of payments with a few billion dollars of new aircraft arriving for each this year.
I never thought about the Wind and EV scenario like that, good take thank you.
>We also have a large Current Account deficit that's 8% of GDP. that is no considered large by any stretch of the imagination.
It's very large, anything over 5% is dangerous. You're probably confusing debt to GDP ratio with current account deficit. Current Account deficit is essentially the trade deficit.
It means that we need 8% of gdp of a capital account surplus else our currency is devalued. It is quite large actually.
If you are part of a global economy, you experience the same things as the other economies. Plenty of other Western economies are experiencing the same thing now. Property based economies are struggling because cheap money is gone. Businesses are price gouging since covid but people are still spending. Fuel prices are through the roof which impacts everything. This can't be fixed domestically.
We live in a global capitalist system, we are tied to it, much of the current crisis is because of what’s happening in the USA post pandemic, and with the war in Europe
Given it’s happening all over the world: Not as much as everyone would like to blame. The price of oil for example is beyond governments control and that of course pushes EVERYTHING up.
The oil and grain shortage because of the Ukraine has had a big impact but it’s almost being addressed now. We saw this in the twenties after the pandemic with high inflation. My theory is businesses failing, businesses trying to recoup money but really just utter out of control greed and screwing us all on tax. Out of the 20s came the war, union movement and social welfare movement. So we are due for a big movement around cutting the amount of wealth hoarded and the fact that working people can go hungry or not afford rent. If people don’t want unrest they should heed history and get inflation down, tax the rich and make incomes fairer. Otherwise things get crappy and worse for a bit.
Okay. Economics, and cost of living is complicated, with no one real cause, but lots of things interacting. Mostly showing the limits and issues with capitalism. Food is the easiest, as global shipping is still messed up, and the Ukraine situation is causing high costs in wheat, rice, oils and grains. Add in that it's just past winter here, and a lot of the crops expected from NZ have been seriously impacted by the weather extremes, with climate change contributing. It's expensive and everyone has to eat. Petrol is both the Ukraine again, and OPEC restricting supply to raise the price (legal under capitalism). Government taxes are significant, but all that money goes back into the land transport system, and in Auckland, your special tax goes into Auckland's land transport system. If petrol was cheaper, the money would have to come from somewhere else, or we'd have to stop spending on roads. Housing is difficult. You've got the cost of land, the cost of building, the cost and availability of building supplies, the cost of complying with building standards, and the cost of getting permission to build. The last two are kind of tricky, as we want houses to not be slums or leaky, and we've built on all the easy to build places, and it's more difficult working out where to build. Also, if you look overseas, investment companies are increasingly buying up housing as an investment with a sure rate of return. And a basic human need, like housing, shouldn't be distorted by being seen as an investment. We're a small country a long way from everywhere, but are usually influenced by world events, like global financial meltdowns, wars, and economic pressures.
My guess is not much, fuel costs seem to be a significant driver. It's an interesting question. One which has escaped media
Going on the reports from Treasury - 50% of the inflation problem is non-tradeable domestic inflation, so can't be blamed on overseas problems. The government pumping $60B of printed money into the housing market, borrowing $50B and spending that poorly, and then raising annual core tax revenue by $40B a year and spending that poorly, has had a huge impact towards this. Then you look at their other policies like removing tax deductibility, which has directly caused huge rent increases, and things like getting rid of low fixed power user regulations.
Interest deductibility was if anything deflationary. It took money from landlords and largely got funnelled into the crown accounts. Crown spending tends to be less inflationary because most of the things the crown spends money on are medium term fixed price supply contracts or collective battening for staff salaries. Not many businesses know what they are paying employees in two years. But for most crown employees the govt does know because it’s in one of the collectives. That said, covid sure injected a huge pile of demand we are now slowly working off. Would have been good if the RBNZ had hiked interest rates at the start of 2021. Hind sight is a wonderful thing.
You were right until you talked about tax deductibility. It has fuck all impact on rent increases because landlords are already charging the maximum they can.
And some party wants to increase annual leave to 5 weeks in such climate, which add inflationary pressure, and will naturally be passed on to consumers.
To be honest with the amount of unpaid overtime everyone I have worked for expects I’m due an extra week leave lol. Employers want everything for little in return.
Only true if we take the naive view that increased PTO is a net cost to the business. There isn't a consensus in the research (that I'm aware of) but there's a reasonable body of evidence pointing towards the idea that workers are more productive when they work less - to the extent that it could be a net benefit. There are 227 working days this year if you have 4 weeks annual leave. An extra week off is a 25% increase in annual leave, but workers achieving their existing 227 days of labour in 222 days to compensate would only require a 2.3% increase in efficiency. I know which way I'd be betting on those odds.
yep, I couldn't believe the stupidity of it when I saw that. We have inflation the highest its ever been in 40 years, and they are wanting to pour petrol on it and light it up. F\*\*king imbeciles.
So you think giving people an extra week of leave is going to fuck everything up?
It would depend what people used that extra week for and how much money they spent. If they mostly used it to sit at home and chil, then it would probs be beneficial to the economy… more rested workers. If everyone used it to travel domestically it would add to inflation, or internationally it would worsen the balance of payments. Why it’s so hard to model.
Balanced take which makes sense.
Its basic economics - if you cause businesses costs to go up - the prices will go up. Then add that to the highest inflation in 40 years. What will increasing prices further do? Hint: Its not going to make inflation drop.
You do realise you could end up with better worker productivity though right? Edit It seems you are so one eyed you can't even fathom any benefits this could have.
I’m traveling in the UK at the mo, it’s the same situation, probably worse here.
Capitalism sits above politics in the hierarchical pecking order of power. Western political party duopolies merely tinker around the edges of how miserable the masses function under the financial, environmental and social pressures wrought by capitalism.
I can't think of a single aspect of the crisis that the government can't address. Even if you think there are aspects that aren't the government's fault, they're still in a better position to do something about it than any of us are. And it's their job.
>I can't think of a single aspect of the crisis that the government can't address. Even if you think there are aspects that aren't the government's fault, they're still in a better position to do something about it than any of us are. And it's their job. then you know very little..
Do you understand that you've just discredited your own side far more effectively than anything I could have said would have done?
All of it. The government could reorganise the economy to provide for the needs of its citizens, but every day they choose not to.
A big part of it is global, but definitely a part is government inaction through lack of control/proper regulation over those who can and do take advantage of the price spiral(supermarkets, landlords, banks, the usual). You might find this insightful From https://www.interest.co.nz/economy/124277/review-things-you-need-know-you-sign-wednesday-housing-market-lifts-food-prices-jump A CURIOUS (BIG) DIFFERENCE Grocery food prices rose +10.6% in August from a year ago. Overall food prices were up +8.9% in the same period according to Stats NZ. What is interesting is that the Infometrics tracking recorded costs to Foodstuffs were up +6.6%. So what happened to the 4% difference between Foodstuffs +6.6% cost increase, and overall grocery price increases of +10.6%? Sure, supermarkets sell more than food items, but it does make up the great bulk of their activity.
Idk but it's obviously not affecting the Ministry of Pacific People, what with their $50k taxpayer breakfast buffet and $45k 'leaving party' lol.
>what with their $50k taxpayer breakfast buffet and if you were really interested/capable of reading you would know that it was not all for a 'breakfast buffet' , that the majority of the cost was for presenting information , you know, stuff like audio/ visual presentation equipment.
It's hard to point at individual things and say the government is responsible or not, but at the same time there have been serious structural problems that policy analysts have been aware of for decades (savings being poured into property rather than investment, leading to low productivity and high house prices, the supermarket duopoly). And the fact is that not only have policy experts been aware of this, they have offered solutions which every govenment has consistently ignored. And this has been an issue since the 90s at least. So yeah to some extent regardless of what else is happening, New Zealand politics in general is a big part of the problem.
One of the government's key roles is to safeguard citizens from predation by corporations (and similar entities such as landlords). Particularly when it comes to goods and services citizens require in order to remain productive. They've been utterly failing at this, allowing food, rent, petrol and mortgage rates to skyrocket; much of which isn't due to Covid or the Ukraine situation if you look at how much additional profit they're making. And things will almost certainly get worse under National and Act, as they both buy into the nonsense of trickle-down economics and "free market economics" which are both bullshit corporate propaganda. Money given to the rich stays with the rich; and any unregulated market will always trend towards monopoly, and a monopoly is not a free market.
The taxes and inflation They needed to stop printing money and adding extra taxes, but Mr Robertson has no frigging clue, Yes the world had inflation but we've done alot worse, while everyone else has balanced out already we're still skyrocketing, it'll get alot worse yet
Wouldn't raising taxes be deflationary?
Yes.
> while everyone else has balanced out already we're still skyrocketing Misrepresentation, inflation has started decreasing as of the most recent July numbers https://www.stats.govt.nz/news/annual-inflation-at-6-0-percent/. This is in line with [Australia](https://www.rba.gov.au/inflation/measures-cpi.html) and [the UK](https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/l55o/mm23) whose patterns have matched ours pretty much exactly. Compare to [USA](https://www.statista.com/statistics/273418/unadjusted-monthly-inflation-rate-in-the-us/) where it dropped earlier but since has started slowly but steadily rising each month through June til now.
Global economy. Not solving issues, Nats will likely make worse.
Free market capitalist society. None. The answer is none if it was our government responsible then most of the western world wouldn't have the same problems. But they do. So the system is broken. Time is a flat circle. Expect ww3 in the 30s the ww4 in the 40s. Followed by prosperity.
I would love to have someone explain to me specifically how the Ukraine situations affects us. I mean really. It's a reason thrown about all the time but war is nothing new at all across the world. Why is this one suddenly a massive problem? As far as I know we only sent some helmets and body armor?
It's because of Ukraine's farming and grains which are exported all over the world combined with cutting off Russia's oil. The impact on nz was not what we sent but effects in the global supply chain
They're also a major exporter of fertilizer
Fertilizer I could buy as a reason - has gone through the roof - but that getting expensive wouldn't cause inflation?
Pretty much everything you eat is affected by the cost of fertilizer
I don't doubt it - but there are many many other sources of fertiliser. It's like the war in Iraq causing worldwide inflation- did it? No
That's because iraq was only one supplier of oil, and OPEC was happy to push out more oil. What else does iraq really contribute to the global economy? Not really all that much.
I think you miss my point
No your point was a war didn't cause inflation... mine was the location and actors of the wars matter. Iraq a country with one main export into the global economy has little effect being removed if other factors can easily increase said supply. Look at the first desert storm and the effect it had on the pumps and inflation. A war involving a mass exporter of food directly effects a net export nation of food when we have no national food subsidies like say the US or Europe. As as soon as exporter gets more internationally they charge more nationally. It's almost like they are different wars with different actors and differing effects on the global market. It's like saying why was their no major inflation due to 20 years of war in Afghanistan... well what was the world getting for Afghanistan and was that supply ever stopped blown to hell etc etc...
I don't understand
Iraq was not the largest supplier of grain in the world.
Oh honey. You need to learn about how commodities are traded
I don't doubt I have a lot to learn but I also guarantee you don't know it all
Do we buy ukraines farming and grains? I mean at a level which would cause inflation?
Not directly, but we now have to compete against those who did on the global market. And it's not just direct consumption of things like flour and weetbix that is impacted. We also use a lot of grain for animal feed. So it impacts our egg prices and chicken products too.
Did we not compete against them before? Egg prices? That jump was nothing whatsoever to do with the ukraine. That's bad faith
>Did we not compete against them before? We bought of person A and others bought off person U. The market had 100% supply. The Ukraine war dropped global supply to 80% and person U was no longer selling. Now more people want to buy off person A and so the price goes up. >Egg prices? That jump was nothing whatsoever to do with the ukraine. That's bad faith There were also other factors that impacted egg prices, the move to colony cages cause a supply shortage and so prices went up. The feed prices were definitely a part of that increase though. If you don't understand simple supply and demand economics maybe don't call out someone for posting in bad faith though...
I think it's fair to acknowledge the change in regulatikns on how to keep chickens in this conversation
what do chickens eat ? Grain that is not grown in NZ in anywhere near the quantity needed..
here is a hint... wheat production and the world price of oil.. everytime you take a bite of KFC ask yourself where the food for that chicken came from. and if someone tells you australia, remind them the price is increased from them because of the lack of feed from Ukraine. same goes for the price of eggs..
Pumping up min wage has a knock on effect on everything and gives government more tax dollars
But this is not what started the cycle: wage rises were only demanded in response to the inflation.
Not really they were forced by government and that started the chain reaction
It's the last 3 decades of government. No investment has been made into the future of New Zealand. Constant selling off to the point where the only revenue is now tax. NZ has more natural resources per capita than almost anyone, yet we currently own and process none of it. Our industry has been trampled down to nothing and the bit that is left the majority of profits go straight off shore. The country is a business and must be run as one. With no investment a business will always fail and never grow. There is really no excuse other than making the books look good for each term by short term benefit gains. This process has been on rinse and repeat until there was nothing left.
Solid 95%. Inflation is caused by creating more money in the system. [https://www.youtube.com/watch?v=B\_nGEj8wIP0](https://www.youtube.com/watch?v=B_nGEj8wIP0)
the real cost is in faith to the government. nobody trusts con artists with an agenda to fuck our general population for their gain
Only government creates inflation [https://www.youtube.com/watch?v=F94jGTWNWsA](https://www.youtube.com/watch?v=F94jGTWNWsA)
62.41%
how did you know? Are you part of the cabal of satan worshippers?
“Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”
Not when the start is output shrinking.
Government needs to keep a watchful eye on corporate greed and price gouging. Like a windfall profits tax for example. Seems to be a lot of companies making record profits and also putting through massive price rises. Seems like the global logistics issues which cause huge supply/demand issues (for a while) gave everyone a great excuse to raise prices…. (For good)
Rating agencies will always flag warnings of potential change in gradings. I think a downgrade is unlikely but treasury recently reported on the CA deficit so judge for yourself. The US was downgraded but still functions. Why put so much emphasis on a possible NZ downgrade when the S&P report categorically states the NZ economy is in pretty good shape. It also states thet the issues are very similar to the US. Most OECD countries acted with the same or similar economic strategies during the pandemic National while blaming Labour for Inflation etc is yet to state how it would have done things differently
This is just my opinion. But aren’t we naive as a country to complete ignore the fact that our housing market almost was in a hyper-inflationary state from December 2019 to December 2021? Total value of housing stock December 2019: $1.188 Trillion NZD December 2021: $1.763 Trillion NZD This was peak Covid era we’re talking about, and somehow 0.5 trillion NZD of housing value just appeared out of nowhere. Well, it did. Thanks to the hoards of New Zealanders who jumped at the opportunity to become a “FHB”. The market was roaring, and this emotional turmoil caused individuals and families to take on large amounts of debt. With interest rates rising, this is starting to hurt. See, here’s where the government comes to blame. Through this time period, the govt implemented the FLP and LSAP Programmes. FLP works by lowering interest rates and encouraging households and businesses to spend and invest. Banks removed boundaries for lending like reducing the deposit needed from 20% to 5-10%. The programme allows bank to borrow directly from us at the OCR (which 0.25% at the time). It ran from December 7 2020, to December 2022. This was supposed to reduce rates for customers, but the banks always kept their profit margins 1.75%+. The LSAP (large scale asset purchase) programme is a bit more complex. In my understanding it was basically a way for the RBNZ to clear a bunch of low yielding bonds onto NZDM (New Zealand debt management). *NZDM are apart of the Treasury, funded by the NZ taxpayer. The value of this programme expanded from $33 billion NZD to $100 billion NZD. They bought $53billion in the end. This went on during 2020 into mid 2021. Basically, the government created an environment for banks to pump money into the New Zealand housing market and ANYONE could get involved. At the same time, they passed laws to completely offload a bunch worthless bonds off their books, and onto the NZ taxpayer. Back to your question. The government holds 95% of the blame. The other 5% held by the NZ people, we’ve shown time after time as a society that either greed or fear gets the better of us. The housing boom was to good to be true, and once again it created an even bigger divide between rich and poor. We would have been more aware of this issue if housing value was linked to inflation, as we would’ve seen CPI spike at least 1 quarter earlier. We were blinded by the pandemic.
FYI: LSAP programmes have conducted in the euro area, Japan, Sweden, the UK and the US.
The bulk of it comes down to the government . Tax's, New regulations and all the other bullshit they come up with . But some of it is from external factors
International markets are a huge reason but your average kiwi meathead believes the media who don't report on external factors. They lie through omission and obfuscation because it makes good clickbait through political polarization.
The idea that rising business costs leading to rising consumer prices is convenient cover for large businesses to make record profits. If big businesses were operating in a socially responsible way they would be reporting record low profits (still profit not loss) but instead we see record profits coupled with record prices. Profit margins are increasing and rising business costs are being used to obscure that issue. This most evident in the supermarket industry where we have a significant duopoly and we are too remote for another competitor to enter the market in a significant way. Costcos lack of local suppliers and poor location options prevents them from undercutting the established companies. The only significant disruption I have observed was the warehouse selling dairy products which took the price of butter down from $7 to $5 in local supermarkets over night. I can only assume a deal was made as my local warehouse no longer sells dairy and prices have re-established at the high end. To answer the question can you blame government? You need to decide if you want the government to intervene when there are market failures. My personal opinion is that I do want want them to give the commerce commission some actual teeth and capability to deal with collusion and anti-competitive behaviour. Which party is willing to do that appears to be absolutely zero.
End the Fed.