Category Archives: Manifesto

Party policy

Home affordability the big issue

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Today there was a great programme on Q+A on TVOne. Murray Sherwin from the Productivity Commission spells out the facts. Median house price for the country is $372,000 and for Auckland it is $500,000. The big factor is the price of land in Auckland is 60% of the value of the section. Don Brash, a commentator quoted a 500 sq metre Pukekohe section as costing $230,000. Bernard Hickey says a young couple might have to borrow 7-8 times their income, but if they have a pregnancy, get sick or if interest rates rise from 5% to 8%, they are in big trouble. Moreoever they often have high student debts as well.  A generation of New Zealanders won’t be able to own their own homes and this is a cause of social strife. We are 10,000 to 15,000 homes short and the problems are mostly in Auckland and Christchurch.

Bernard Hickey said between 2004 and 2007 when house prices rose so steeply, many had leveraged up their equity in homes, and the total increase in wealth of homeowners was in the region of $300b to $400 billion. All of which was private gain for homeowners and banks. My comment is that this was public money and should have been publicly gathered.

The programme highlighted the fact that most of the homes which have been built have been top end houses from spec builders. We need better economies of scale and only Fletchers can do this. There are too few factory built modules.

Dr Bryce Edwards, a political scientist commentator, said no political party has campaigned on affordable housing. Helen Kelly from the CTU said families are struggling and living in poor quality housing. There are 4000 on the Housing NZ waiting list. Wages are too low and the price of renting is rising.

Whereas once 75% of households were owned their home this has now dropped to 65%.

Hickey said that land taxes and capital gains tax must be discussed but the former is a political hot potato. We need land prices to come down. Brash said Capital Gains Tax was not working in Australia and they had the same problem.

Annette King, spokesperson for Labour has apparently said that the Accommodation Supplement needs to be revisited. Sherwin said that all up it is a $3-4 billion subsidy to landlords.

Building costs and consenting costs are too high. There is a monopoly supply of building materials, which add 20% to the building costs.

The answer is not in extending city boundaries. That raises the burden on supply of infrastructure and make travel distances too far. Our challenge as a party is to find a politically acceptable method of imposing a land tax, while reducing the price of building and using the current housing stock efficiently. We must work towards a future where good, low cost houses are provided without increasing costs to local authority in infrastructure.

Even Don Brash said the price of land was the core issue. Nobody on the programme raised the issue of currency reform. It is time to connect the creation of money with land, but do it at government level.

 

Nobody owns the water but charge a rental for the privilege of the 49%

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So John Key is right. Nobody owns the water. But that doesn’t mean that any private company or public/private company should be able to use it without a regular rental to the public for the privilege.

Whether this rental should be paid to Government for the commercial use of the water or partly to Tuwharetoa needs of course to be resolved. What did surprise me was that David Clendon the Green Party spokesperson missed the opportunity to apply Green Party policy on a tax on the commercial use of water. Well if he was just the Treaty spokesperson, where were the leaders in the resource rental business? Have they forgotten their policy or are they just focussing on the snub John Key gave to the Waitangi Tribunal by announcing he didn’t have to take any notice of their findings?

It was fine when Mighty River Power was a publicly owned power company (well it still is, let’s keep it that way despite the empowering legislation!). Tuwharetoa was happy for the public to use the water. But sell 49% to private owners and the scene changes. Now 49% of the water is going to be used for a private purpose, so there should be an appropriate rental paid for the privilege. 49% private ownership means those private owners don’t own the water because, as John Key said, nobody owns water. Therefore those who use it in commercial quantities should pay a regular rental to the public.

Does this mean charging half water rental to the company once half is bought by private people? No it doesn’t actually. It means charge a full rate to the shareholders for the water the shareholders have the privilege of using. That is the principle of resource taxes. Private/public partnerships make the whole set up ridiculous. When it is fully publicly owned there doesn’t have to be any rental paid to the public. It is only when a subset of the public owns it or part of it that a rental should be charged.

All this talk of extra shares and so on is wrong. The fact is that there should be an ongoing rental charged, not a one off charge.

Otherwise the whole selling thing should be called off, which is only logical

Agrarian anarchist Professor Dr Guy McPherson speaks to Kim Hill

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The promos for the Kim Hill interview announced that Guy McPherson’s recipe for saving humanity is to help the global economic system collapse! Fly and help rise the price of oil, then it will collapse and we can save the planet. Take your money out of the big banks too. The Radio New Zealand podcast can be accessed here. This turns environmentalists’ thinking on its head.

Guy lives on a rock in the middle of a desert in New Mexico with his small community. His visit to New Zealand has made a remarkable impact. I had never heard of him before three weeks ago and we were lucky enough to host him and his super wife Sheila last Monday and have him show his life changing slide show in our home.

And I have bought his book Walking away from Empire. It is the stimulation from people like Guy that challenges my beliefs. He says we are now at the stage with climate change where the positive feedbacks are kicking in and we are on target for a six degree warming by 2035. The International Energy Association forecast this if it is business as usual. Only if nations honour their promises will we get to 3.5 degrees by 2035 and they are not going to do this.

He told us that climate change activists are divided into those who want to save industrial civilisation and those who don’t. Seems an awful choice to most of us. But logically he is right. Those who love the planet and want it to survive should hope for economic collapse. So next time I am faced with the option of flying I will do so.

Last night I followed the story on the standoff in the Straits of Hormuz, the 30 mile wide stretch of water near Iran which carries 14 oil tankers every day. One commentator was saying that it the tension between US, Europe and Iran is going to escalate over the next weeks and months. Iran is already drawing up legislation to block oil tankers there. I recommend following developments here, because the rising tensions may trigger a spike in the price of oil and a global economic collapse. All economic recessions have been preceded by a spike in the price of oil.

 

Import substitution will only happen with currency reform

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Last Friday I went shopping in our local village, Otaki. First I went to the chemist to order a prescription for aspirin. Probably this is an import.

Then I was keen to suss out black coats as mine had been going for over twenty years and was faded. Our wonderful department store had a good selection and as I tried them on I looked at the labels. They said they were Cashmere and of course the inevitable “Made in China” label was on them.  Goodness knows how many middle men were involved or how much transport was involved. Did we send the wool to China and then ship it back as clothing? Probably. The clothing manufacturers in nearby Levin have nearly all closed down these days and factories lie empty.  Jobs have gone to China.

Then I went to the local butcher to buy some cat’s meat and a lamb shank. (Oh I know I should be a complete vegetarian but I like lamb shanks and anyway when we move towards permaculture and mixed farming, it won’t be so energy and water intensive in its production and I am anticipating this day). The butcher wrapped both in plastic bags, sealed with more plastic and then put them together in a third plastic bag.

So how do we move our economy to a new economy? By currency and tax reform, that’s how. All this talk about sustainable development for the last thirty years has been only so much rhetoric. It can’t happen without dual currencies and without being able to design the second currency ourselves and issue it backed by land.  All this talk about ‘Green growth’ is just an oxymoron when we insist on using a single monopoly currency, bank issued as interest bearing debt. All this talk about smart growth is just talk. They can go on doing it for another century and wishing won’t work without getting the underlying structure right.

What we want is to move to a truly sustainable economy. We can’t wave a magic wand or lecture people or choose winners to change that butcher from wrapping the meat in three plastic bags. We do it by designing our money system and our tax system in a smarter way.  If we add in another currency, based on land, and have it only for trade within our country, then we are cooking with gas. We can grow our own trees and turn them into brown paper and wrap our meat in that. There is no need to spend our precious New Zealand dollars buying plastic to make into bags  or importing them. Given the right currency signals, a paper making factory could come to Otaki, Levin or a small town near you.

And the empty factories can get going again using our own wool and our own labour and our own skill to make the coat I want to buy.

As for the aspirin, maybe kawakawa might be processed. I don’t know if it is the right plant or if it is possible, but I suspect all the older people like me who need to take a regular blood thinner to prevent heart attacks could well be serviced by a New Zealand product made with some natural product grown in New Zealand .

I guess the lesson is this. If you get the structure right that is all you have to do. We have seen this in abundance in recently revealed ACC’s structure. If case managers are given financial incentives to get long term claimants off ACC and the incentive is high enough, it will work. Leaving aside the totally immoral action in doing this, the policy was implemented and was successful in that the financial situation had a dramatic turn around.

NZ borrowing to lend to IMF, the latest absurdity

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It’s a strange world this world of money.

In the melee of the Greek elections and the frantic ramming through of the asset sales legislation came a strange announcement, but it was lost. It wasn’t even reported in the Dominion Post. The Government would be lending $1.26 billion to the IMF’s new bailout fund for the debt-wrecked Eurozone, but it would have to borrow this first. In addition to earlier billions for the stabiility fund, the total cost to NZ would now be over $4 billion, according to Bill English.

Ponder on that one! We borrow in order to lend in order to save Europe. Whew. The child in us will ask how money is created in the first place. Can only banks create money? Of course not. We the people can create our own money without the burden of interest. But we stupidly use banks. These days we don’t even use our own banks. So to add insult to injury, when we want to borrow, we go to overseas banks for loans because their rates are cheaper.

So let’s get this again. We borrow $1.26 billion at interest and then lend it to the IMF. What? At interest? They don’t say. And they will give it back, the part they don’t use apparently. The Minister of Finance says it is our insurance policy. And it is the banks who are in trouble.  So we pay interest to the overseas banks so we can protect them from future bad debts. This is Alice in Blunderland stuff.  Where is the cartoonist?

Reuters has just reported “Ireland’s High Court began hearing a challenge to the European Union’s new bailout fund on Tuesday, launched by a politician who said the European Stability Mechanism (ESM) was not compatible with the Irish constitution.”

The Guardian reports: “This, for certain, is a high stakes game. Part of Europe’s fighting fund has already been spent on bailing out Greece, Portugal and Ireland. Spain has also pledged funds to the EFSF and ESM, and these clearly cannot be spent buying up the country’s own debt…. If the gamble fails, Spain will still need a bailout and Europe will have nothing left in the kitty for Italy.”

So let’s go back to the Pre-election Fiscal Update and see what it assumed about Europe. I seem to remember …yes here it is: The PREFU’s main forecasts critically assume the reasonably orderly resolution of sovereign debt problems in the euro area. Wow they were so wrong. And these our best economists and financial experts? An ordinary person listening to the news can do better. They could see that if you are solving debt by lending ever more money to a country, the problem won’t be solved.

And here is another thought. If Greece is too big to fail, and Spain is too big to fail and Europe is too big to fail, then it is going to apply to UK, US and China too.  Who knows where it will stop? The size of the global economy is about $63 trillion. According to Bernard Lietaer et al in Money and Sustainability, the Missing Link, “one day’s currency speculation represents more than the annual economic output of Germany or China changing hands. The notional amount of currency derivatives are now more than $700 trillion today. Currency derivatives by themselves represent therefore almost nine times the entire global annual GDP”. And that is only one type of derivative.

No, the IMF’s bailout fund is going to fail and it must fail because it can never match the power of the investment banks.

 

 

Low interest rates fuelling another housing boom?

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This morning we heard a commentator on radio expressing his concerns that the continuing low interest rates would fuel another housing boom. A valid concern.

I remember a few years ago when I was arguing that interest rates should be zero, someone pooh poohed my argument and said “If anything interest rates should be higher.”  There is the dilemma that Social Creditors and all monetary reformers need to face. Low interest rates bring on housing booms. Any real estate agent knows this. It is a fact of life under the current regime of holding land.

And housing booms cause inflation which steals from all of us. As one of my colleagues wrote on a skype chat yesterday: “Why should I have to see my purchasing power eroded thanks to speculative property bubbles? Why should I be starved for working capital because the banks are lending into still more housing? Why should I accept official figures for CPI rates that exclude the price of land and therefore mask the real inflation rate? If given the choice between paying a land value tax which would by its design remain in the region (or country) and paying interest on a mortgage which will go to any number of collateralized note holders, I know which I will pick.”

Auckland has over 20,000 homes which are above 1 million. A Campbell Live programme on housing affordability showed the price of home in Auckland so high that the average person on an average wage can’t afford to buy one.  The average price in 2012 is $402,000 there, up from $$193,000 in 2002. During that time the average wage only went up 37%. That housing boom of 2002 to 2007 was the steepest on record.

We are faced with a good sized challenge – to come up with policies which deliver radical monetary reform, (turning money on its head) and puts a big enough price on the holding of land sufficient to stop housing booms. It is a big challenge and discussion will help us develop these policies. We are committed to halting land speculation and committed to doing it in the most effective way.

We believe you should pay for what you hold or take but not for what you earn or make.

Wellington members are organising a meeting on July 1st, a Sunday afternoon to form a Wellington branch. No doubt they will be discussing policy.

ACC’s profit and its purpose

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Last night we were treated to an outstanding Sunday interview on TV3. Top journalist Melanie Reid had finally managed to get complainant Bronwyn Pullar give an interview, and it was revealed what we all in our bones knew. ACC has for years been trying to reduce its claims and it does this by going after and harrassing long term claimants. These people are the most vulnerable. While some accident victims will obviously try and wrought the system, the majority are genuine innocent victims of accidents.

So I looked at their latest financial statements. After making losses of $2.4billion in 2007-8 and $4.8billion in 2008-2009, it reversed its position in 2009-2010 to make a surplus of $2.5 billion.

Now this is up again. Chairman John Judge writes in his 2011 annual report “I can report that we have achieved a net surplus in excess of $3.5 billion as at 30 June 2011”. They appear to have another figure as well called the actuarial release. The Annual reports said “As at 30 June 2011, ACC had achieved an actuarial release of $4.4 billion.” I think that was the one quoted by Bronwyn Pullar, a huge sum indeed.

The purpose of ACC is to compensate for those unfortunate enough to have accidents. Some accidents leave more permanent damage than others. It is clear they have the money to pay Bronwyn Pullar and to stop harrassing her and other genuine claimants.

Looking at the composition of the board of ACC, I would say it appears to lack in victims of accidents and in community representatives. Board members have business experience and may be in danger of looking at ACC as a profit making company.