Free Press: ACT’s new regular bulletin
Free Press: ACT’s new regular bulletin
Capital Gains in
Housing
After years of pointing out the problems
with unaffordable housing, the government is finally acting
- by tinkering round the edges. Opposition parties are
exasperated as they had wanted to do the same tinkering
themselves. We used to say that only the Labour party would
propose a tax to encourage supply, we are revising our
lines.
If They Were Serious
There
would be measures on land use planning, infrastructure
funding, and the proper role of local government (hint, it
is to provide essential infrastructure, not build wee
empires). We are not holding our breath.
We are
Not Revolutionaries
You won’t find any Che
Guevera T-shirts at the ACT office. The problem is that
National seems to have abandoned even incremental change
toward freer markets. David Seymour’s alternative budget
proposals can be read here: http://www.act.org.nz/posts/free-thoughts-act%E2%80%99s-budget-priorities
What
are the Proposals?
ACT’s incremental changes
include; indexing tax brackets to inflation, reducing
company tax one point per year at the expense of corporate
welfare, allowing state schools to convert to Partnership
School status, having a referendum on Super, and reforming
the principles of the RMA. All of these would make the boat
go faster. They are also all moderate, but apparently not
moderate enough for the Nats.
Freedom Ain’t
Free
This week the Government will announce
it’s going to confiscate and spend around $80 billion in
just one year. If you do not give it to them, they may
imprison you. ACT’s budget is 20,000 times smaller, and
we’re asking nicely here: www.act.org.nz/donate
Foreigners
Buying NZ Housing
Non-residents will have to
open a New Zealand bank account and provide an IRD number,
with a view to paying a withholding tax on trading income
from mid-2016. Sometimes we have to admire John Key’s
ability to compromise. He has pricked the wind out of the
xenophobes’ sails, while marginally improving tax
transparency.
Diversification is
Good
Foreigners are buying a tiny bit of our
land and housing. But remember, the entire global
stockmarket is wide open to kiwi investors/savers, who can
invest via just the one share, via one of the World
Sharemarket exchange traded funds. Everybody with a
Kiwisaver account (balanced or growth) will be invested in
small slices of all the major companies in the world. We are
all capitalists now.
Environmental
Entrepreneurship
David Seymour was a judge at
the Environmental Entrepreneurship Competition. The
competition was started by students and is entered by high
school students. They come up with business ideas that do
some environmental good, and are profitable. The winner was
a home gardening kit somewhat akin to My Foodbag. The
runner-up was recycled paper with seeds, so you can plant
and grow your business card/invitation when finished.
Remember when environmentalism was just more rules and
regulations?
An Inspiration
Another
judge was Sam Judd of the charity Sustainable Coastlines
(and a former young New Zealander of the year). He is
starting nurseries in prisons to produce trees to plant near
waterways. They suck up run off nutrients countering one of
the major objections to farming. The prisoners get
qualifications in horticulture and the waterways get
cleaned. Two problems that the state failed to solve are
being solved by an extraordinary private
organisation.
From the Mouths of
Babes
Whale Oil has run an investigative series
wherein a correspondent visits Partnership Schools and
interviews people about their experiences at the schools. In
the latest edition, the correspondent takes her daughter to
interview the students. In our experience, the best cure for
Partnership School scepticism is a visit to the schools,
read about these visits here:http://www.whaleoil.co.nz/2015/05/charter-schools-perception-series-the-students/
Housing
Mightn’t be so Hot After All
We had some data
to hand for the five year period to June 2014. Considering
annualised returns we get: Inflation 2.0% per year, NZ house
prices 4.7%, Auckland house prices 6.6%. Other investments?
NZ shares 13.9%, listed property companies 13.4%, NZ
Government bonds 3.8% (higher if you bought corporate
bonds), simple term deposits 4.2%. Housing wasn’t that
flash.
Leverage
Most people borrow a
large part of their housing investment. That leverage
increases their returns when the asset price increases (and
destroys them when prices fall). But the same applies to all
other assets. The world is awash in cheap funds, so asset
global prices have generally moved up strongly since 2008.
Perhaps the bigger mystery is why the rest of the NZ
property market has been so sluggish.
What Goes Up
Can Also Go Down
Global bond yields (interest
rates) have been falling for the past three decades, as
inflation was conquered. If you fancy speculating on
housing, dairy farms, or anything else, don’t forget that
these trends can’t continue forever. And do note that
global bond yields have lifted sharply in just the past few
weeks.
Is Auckland Special?
No. Like
many other cities around the world where councils restrict
the availability of land, housing gets expensive and low
income households get hammered. Auckland is up near the top
of the league tables, amongst some of the largest cities in
the world for lack of affordability. Top rankings, but not
in a good way. The curse of good
intentions.
Taxing Charities
The New
Zealand Initiative's latest report, titled Giving Charities
a Helping Hand, observes that commercial firms owned by
charities (think Sanitarium, Mission Estate’s wines, and
Ngai Tahu’s various enterprises) are allowed to retain
profits without paying tax on these funds. There is little
oversight over how these funds are used, and the current
regulations create the potential for unfair competition in
the market. This is an important document. We agree that
government needs to review the centuries-old definition of
charitable purpose, restore fairness to the regulations and
tax all for-profit firms equally, while making all donations
to charity
tax-deductible.
ENDS