“Even the Tax Working Group has acknowledged the “major hole in the tax base concerning the taxation of capital, which is manifest in high investment and low returns for the property market”.

And the Government’s own Savings Working Group has also pointed out that 50 per cent of our housing bubble (larger than bubbles in the US, Australia and the UK) was due to the lack of a capital gains tax.”

Read Tapu Misa’s full article at the Herald Online

“The lack of such taxes (CGT) on property, the OECD said in a survey on New Zealand in April, was one of the reasons our house prices went so high. The Kiwi boom was one of the nuttiest in the world, with prices rising more steeply than nearly anywhere else.”

Read more of Anthony Hubbard’s article here

Introducing Capital Gains Tax would bring New Zealand one step closer to rebalancing the economy in favour of exports and jobs instead of imports and passive asset inflation, says Selwyn Pellett of the Productive Economy Council.

While we must wait till next week for details of Labour’s proposal, the PEC, like Treasury, RBNZ, New Zealand Exporters and Manufacturers Association and the Tax Working Group, favours a broadening of the tax base to include a tax on capital. read more »

What had looked like being a non-election may yet turn out to be a real one if Labour can follow through on the bold approach outlined Monday night by David Cunliffe and David Parker before a largely sceptical audience at the Manufacturers and Exporters Association in Christchurch.

Labour obviously faces an uphill battle, hampered by its inability to articulate a clear, long term economic strategy in the past few years. Its audience last night, well familiar with the pain of trying to run real economy businesses in an investment poor environment where the fluctuating exchange rate hammers their every effort, were understandably initially lukewarm about what Labour had to offer.

And yet Cunliffe outlined a plan that was bold, practical and admitted that the time for tinkering was over. Both in his speech, and in Q&As with the audience, Cunliffe and Parker acknowledged that the previous Labour government had made mistakes. Nor were they dismissing everything the current government has done out of hand, saying, for example, that they won’t argue that there needs to be spending cuts, but that they will challenge National on whether it is making the right tax cuts. Overall this new Labour message was clear: Government needs to structurally support exporters and the productive economy, and not just pay lip service to it as they believe National is doing. read more »

Over at The Dimpost, Danyl ponders the right wing’s emerging promotion of Singapore as a shining example of free market economics at work. His conclusion? That this love is “is strange, because Singapore is the world’s ultimate nanny-state”.

“My point is that the right – notoriously Don Brash – endlessly insist that we need to ‘be like Singapore’. But what they actually mean is that we need to be completely unlike Singapore in almost every way imaginable, with the exception of a tiny number of policy areas that massively benefit the rich and harm the poor. This is a zero-credibility argument.”

Read more here.

Bernard Hickey’s presentation – attached – should be a stimulus for all political parties to stop their populist policies and start focusing on strategic imperative of regaining control of our economy. New Zealand’s debt position is serious and rising alarmingly. Our income per person is being eroded. Skilled migration is gutting our ability to respond to rebalancing our economy. And, most serious of all, our income as nation (exports) are falling off a cliff. This is an unsustainable position and selling assets isn’t a cure, it’s simply a postponement of the inevitable corrective action that is required. read more »

“The IMF has recognised and publically admitted there is a need for restricting capital flows from country to country under certain conditions,” says Selwyn Pellett of the Productive Economy Council.

The IMF’s executive board said that capital controls are “squarely within the toolkit”. Most of its directors “broadly supported the substance of the proposed policy framework” – suggesting there is greater consensus than before between developed and developing countries on the use of controls.

“This is what we at the PEC have been saying and advocating for some time and it’s reassuring this thinking is finally becoming mainstream. For those who have advocated the free flow of capital under any conditions this announcement will be a jolt to their belief system,” says Pellett. “Economists around the world will have to rethink their training as clearly one model does not fit all circumstances.” read more »

Medium and long-term solutions to the crisis facing Christchurch will be required, but right now there is an urgent need for some quick and entirely practical help to be given Christchurch businesses, says PEC spokesperson Selwyn Pellett.

“The time for political and economic debate on recovery funding will come, but right now we need to focus on what we can do to get businesses in Christchurch back to work. There is an economic impact, one that will have serious medium and long-term consequences, one that is happening right now, and one that will get worse the longer businesses stay closed,” he says. read more »

America’s FIRE Economy: The secular decline in manufacturing and the rise of finance, insurance, and real estate (FIRE) is shown relative to U.S. GDP:

You can read more about it here

Both the media and the public need to look deeper than the carefully constructed sound bites coming from the government on its asset sales plan, because the long term consequences for New Zealand are massive.

In effect John Key has, by resurrecting a failed strategy from our past, signaled that he and his government have no idea how to grow the economy and demonstrated that National’s ideological views are driving its decisions without reference to the reality of the situation we find ourselves in.

There are a limited number of arguments in favour of asset sales and so far that’s what most of the media is picking up on. But let’s ask the serious questions about what sits behind such a move for New Zealand’s economy, and how it may affect our society. read more »