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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.

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.


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