Free Press 25/05/2015

We Rate the Budget Speeches
Free Press observed the Budget Speeches live.  The media underreported the Government’s momentum and the opposition’s flat-footedness.  It was one-way traffic as the opposition sat dumbfounded at National stealing their policies. 

Death by Assimilation
National have returned to their traditional governing style, managing other parties’ ideas.  Labour promised to introduce a capital gains tax and build houses, the Greens promised to deal with child poverty, New Zealand First promises to do nothing on Superannuation, and Peter Dunne promises to do nothing on the RMA.  National are now, to an extent, doing all of that.

Bill English (7/10)
Bill is the policy architect of this government.  He provides his colleagues with the alternative to government by pork barrel, and often succeeds.  He has managed to refocus the civil service on achieving outcomes instead of consuming inputs.  The biggest disappointment was that his courage cutting the $1000 Kiwisaver kickstart wasn’t matched on fixing Superannuation.  As a result, a generation is paying twice.

Andrew Little (1/10)
Free Press feels sorry for Little.  His speech has been panned as the worst ever.  Some would have sat down upon running out of material, so we are giving him one point for speaking right through his time allotment. He talked about a ‘rooster on heat’ and then about ‘fiscal gender reassignment.’ Clearly Little needs biology lessons. But he’s got bigger problems too.

What he Needed to Do
Little theoretically wants to be the Prime Minister.  His 20 minutes of rage showed he is out of touch with the country – New Zealand in 2015 is not exactly at a low point in history.  Unless he’s proposing a total revolution, he could have spent five minutes talking positives.  That would have given him fifteen minutes to lay out Labour’s alternatives.

There is No Alternative
The problem is Labour doesn’t have any.  They have abandoned most of the policies they stood for last election.  Changing the electricity market, reforming Superannuation, capital gains taxes, changing the Reserve Bank Act, all gone. What do they stand for?

John Key (8/10)
John Key delivered a tub thumping speech crowing about Little’s failure.  We give him an eight because he mentioned David Seymour and ACT twice and endorsed Partnership Schools.

Meteria Turei (4/10)
Turei mentioned sustainability once, 15 minutes into her speech.  RIP the Greens as an environmental party.  The grandstanding on child poverty was cringe worthy.  A person who got free university, lives in a remote castle and complains about urban sprawl tried to appeal to younger generations on housing and finance - priceless.  A four is generous.

Winston Peters (5/10)
You have to hand it to him.  We have no idea what he was on about (did he?) but it sounded great.  His main refrain was “I See Red” a la Split Enz, complete with his caucus holding up fire hazard signs.  Free Press understands “That was my Mistake” and “I Hope I Never (Have to See You Again)” have become more popular among Northland voters recently.

Te Ururoa Flavell (6/10)
Flavell gave a solid defence of the Maori Party’s wins for Maori in government.

Peter Dunne (6/10)
Dunne is an exceptional parliamentary speaker.  Without any notes at all he gives perfectly structured essay-like addresses.  Nonetheless we don’t know what Dunne’s end game is.

David Seymour (7/10)
Along with Little, David gave his first budget speech, certainly the best of the rookie speeches but he has room to grow.  He gave a spirited defence of Partnership Schools and the people who step up to run them and change young people’s lives.  He also pointed out that the budget lacks the kind of long-term view that younger New Zealanders need.  Where is the Superannuation reform, where is the housing market reform?  Where, in all this focus on child poverty, is the recognition of those who save, sacrifice, and delay having children to bring them up without poverty?  Where are the company tax reductions aimed at bringing capital and more interesting jobs to New Zealand in years to come? You can watch David’s speech here.

Bonus Speech
Parliament sat late to pass Budget legislation, which makes for some noisy night-time debate when MPs think no-one’s watching. But Free Press sees all. If David’s Budget speech was too proper for your tastes you might prefer this onslaught, congratulating National on their Kiwisaver action, but challenging them to show the same courage when it comes to the increasing cost of Superannuation.

Greens don’t get Dependency
Catherine Delahunty tweets: Rise in benefits welcome but extra work expectations and pressure on sole parents is punitive. No, that balance is essential if you want to reduce welfare dependence. The government’s approach is informed by the Nordic model. Nordic states expect mothers to return to work when their child is 1 to 3 years old. Employment is front and centre in the Nordic welfare strategy. It works.

Responsible Parenting
Moves to tackle child support debt and encourage parents to pay what they owe in child support are also a welcome move.

Government as Land Speculator and Land-Banker
After all the months of commentary about speculators, land bankers and foreign buyers in the Auckland property market, it now turns out that the biggest land-banker of them all was the government! The move to free up Crown land for housing development is sensible and long-overdue. But again, this is only a short term fix – we will soon use up the available 430 hectares. We still need fundamental reforms to allow the market to respond to rising demand for housing.

Where’s Maurice Williamson Going?
Betting site iPredict has opened up stocks for a by-election in Pakuranga, and for incumbent Williamson to be the candidate by 2017.  The interesting thing is the opening odds, respectively 30 and 25 percent likely.  iPredict’s operators, who have deep political connections, set these odds.  Something’s up.

ACT’s Board has unanimously rejected an approach by the hapless Don Brash (no joking, this is too good for us to have made up) for Williamson to join ACT’s caucus.  “My own party don’t want me no more” is not an attractive pitch. For similar reasons, what poor country would accept him as ambassador?

Free Press - 18/05/2015

Capital Gains in Housing
After years of pointing out the problems with unaffordable housing, the government is finally moving - 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 Guevara 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:

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:

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:

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.

ACT’s budget priorities

Next week's Budget will show continued steady progress away from the massive deficits associated with the aftermath of the global financial crisis and Christchurch earthquakes. The National government will continue to make incremental gains, albeit from a firmly centrist political position.

For every halting step forward, there will continue to be the occasional step backwards.

New Zealand doesn’t need a policy revolution, but we need much more than this tentative incremental change.

Here’s what ACT would like to see in the Budget.

A clear message to investors, entrepreneurs, and the business sector that New Zealand is on the path to a much more favourable business environment.

A willingness to confront big fiscal issues like the structure of NZ Superannuation.

A promise to households that their tax rate won’t be sneakily lifted each year.

A pledge to provide education opportunity to all children; the current monopolistic state education system, while serving most children quite well, fails all too many children.

Recognition that, with 20% of children born in 2014 being dependent on a benefit by the end of the year, more must be done to reform welfare, thereby reducing child poverty.

A commitment to wind back corporate welfare, using the funds to cut the tax rate on all businesses, not just subsidise a few.

The guts to tackle the housing market malfunction at root through substantive reform of the RMA. That means removing the anti-development bias and, with it, excuses for councils to restrict the supply of land for building.

Our specific proposals for Budget 2015 focus on the following priority areas.

The fiscal elephant in the room is NZ Superannuation. Life expectancy continues to rise. In 2006 we had five working people for every one person over 65 years of age. By 2050 we will have just two people for every one person over 65. In just 15 years’ time NZ Super costs, as a percentage of GDP, will rise by 50%. We are just fiddling with the fiscal levers if this is not addressed.

Most people understand that we need to make some changes. NZ Superannuation is one of the simplest retirement income systems in the developed world. So long as we make the necessary changes to keep it affordable and fair across the generations, it is an effective pension system. But it is also a political football, and politicians have proven incapable of making these vital adjustments.

An ACT budget would signal that the future structure of NZ Superannuation would be decided by referendum. An expert committee would be formed to consult with the public and come up with reform options which, together with a no-change option, would be decided by the voters. I am confident that common sense and a sense of fairness would see the public support changes allowing NZ Superannuation to remain a sustainable pension system for all New Zealanders through this century. Oddly enough we have a process for this, but we are only using it to decide on a flag design.

Next, we need to signal the future environment for investors and the business sector. We would foreshadow an eight year programme for reducing the company tax rate by one percentage point each year, until we reached a 20% tax rate. That would signal New Zealand as open for business, stimulating investment and allowing companies small and large to create new jobs and boost wages.

To fund much of this we wouldn’t have to cut core services. Instead we would allow the lapse of programmes that are simply targeted corporate welfare – bureaucrats picking winners and distorting competition through unjustifiable business subsidies.

For households, we would index tax thresholds to inflation, putting an end to the ongoing stealth increase in tax rates. If government wants to increase your tax rates, they should do it openly.

We would make genuine reform of the RMA a priority. Substantive changes here could hugely boost investment, jobs, incomes and the welfare of all New Zealanders. Ensuring that councils focus on allowing development of land would return affordable housing to our major cities, making a huge dent in inequality and poverty.

And for a genuinely brighter future for our children, we would expand the Partnership Schools policy by allowing state school conversion to a Partnership School funding model, whenever school boards choose to do so. This would be a visible manifestation of a core empowering principle for ACT - choice. 

These advances would create jobs and reduce poverty by fostering a thriving, innovative economy.

David Seymour
ACT Party Leader

Free Press 11/05/2015

The Gen-Y Manifesto
Andrew Dean, a Rhodes Scholar, has gotten some press for his book, Ruth, Roger and Me.  It is a plaintive cri de coeur about how bad people under 40 have things these days. Free Press doesn’t usually endorse books from the left, but Ruth, Roger and Me is short and worth a read.

The Good
Dean raises some worthwhile points: housing, super, and student loans are all putting the squeeze on the young.  That doesn’t mean many people didn’t have it hard a generation ago, or that many don’t have it good today.  Nonetheless he’s addressing important trends, good on him.

The Bad
He’s written about a golden age in the 1970s that he wants to go back to.  New Zealand, he tells us, was wealthy, equalitarian, warm and friendly.  Only a 26-year-old white, presumably straight, male could think that.  He wasn’t there and if he was he wouldn’t have had it that bad.  He also writes as though globalisation never forced changes on all societies.

The Ugly
Dean is a junkie for the first person pronoun.  On one page the word ‘I’ appears 12 times, and that’s reading off an iPhone.  Enough people thought his generation protest too much before he provided written proof.

Still a Uniting Issue
Despite his style, Dean shows what a uniting issue intergenerational politics will become.  Dean is from the hard left.  He probably regards the current Labour party as sell-outs.  Nonetheless the problems he identifies, with housing, superannuation, and education are not so different from concerns ACT raises.  Our solutions are, of course, quite different.

The 1980s revolution happened when baby boomers took the helm from the WWII generation.  The same teenagers who rebelled in the ‘60s started running the show.  It happened in every anglo country, New Zealand’s revolution was just the most acute.

Revolution II
John Key may be the last boomer PM and cannot keep his finger in the dyke forever.  If not, he will certainly be the second to last.  Expect 25 years of policy stability to end abruptly with superannuation and housing market reform.

From the Front Lines
Free Press regularly hears of this building floodtide, in response to a previous edition:
In my house we now have 8 people, as my daughters and their partners and babies have moved back as they cannot afford to live in Auckland any more.
One daughter is a neurology nurse and the other an osteopath. Careers that used to give a living wage well they can live but they can't afford Auckland housing.
My neighbour has 10 people in his house, his wife, himself, 3 grandchildren, 2 partners and 3 great grandchildren.

Free Press has written at length about the need to reform the RMA to free up housing supply and to reform superannuation, and get some innovation in education so that the next generation will be able to compete and pay for all of the above in an increasingly globalised market.  We will spare readers this week.

Regulatory Standards Bill Survives Nats’ Assassination Attempt
ACT’s Regulatory Standards Bill is the Holy Grail for better regulations.  It would involve forcing politicians and regulators to, by law, answer questions such as: What is this regulation for?  What are the alternatives?  Does it affect property rights? Who wins and who loses from this regulation? National members on the Commerce Committee voted for the bill not to proceed.  It will now face a parliamentary vote.  Imagine a world where the National Party wanted these questions answered.

$400m in Regulatory Favours
David Seymour asked Steven Joyce what would happen if the government backed down from its gambling concessions granted in the International Convention Centre Bill.  The answer, given in parliament, is $400 million in penalties, transferred from the taxpayer to Sky City. Imagine if the National government was busy improving the regulatory environment for everyday New Zealanders instead of distorting it for casinos.

Just When You Thought….
The Auckland Council is considering spending $10 million on a new chamber so that civil servants don’t have to walk to the existing one.  Note the elected representatives are moving to suit the unelected ones.  These are the same people who want to raise residential rates by 10 per cent and make you walk up Mt Eden.

NCEA Reporting Scandal?
One assumes that pass rates for the NCEA are based on the number of kids who entered the school at the beginning of the year and the number who exited with qualifications when they left the school.  However a major daily paper has reported pass rates based only on those who actually sat. 

Seven Per Cent?
Free Press has been told that, on this basis, pass rates for some schools are as low as seven per cent.  If true, we hope the opposition and press will investigate this instead of decrying the nine small Partnership Schools that seem to be their unending focus (and where students are succeeding by any measure).

Further Gaming?
We are also informed that a credit is not a credit under NCEA.  You can game the system by getting credits for going skiing, or for studying physics.  If true, then what attempts are being made to compare the choices that students at different schools make about credits?

ACT Cameo in New Maori TV Show
Free Press is informed that Maori TV’s new show, Find Me a Maori Bride, is based on a Kuia’s ultimatum to her grandsons.  The sanction is that she will donate her $50 million fortune to the ACT Party if they fail to find wives. 

Freedom Ain’t Free
Of course we wish the boys every success in finding true love, so we’re relying on you, Free Press readers, to donate here

Free Thoughts - Auckland rates reaching crisis point

Yesterday, the Auckland Council budget committee voted for an additional targeted rate of 4.4 per cent to top up spending on transport, leading to an overall rate increase of 9.9 per cent.

What is the inflation rate in New Zealand?  Effectively nil. Just 0.1% in the past year.

This huge increase in rates can’t be blamed on inflation.  It is driven by spending.  And this is just the first of many instalments. Auckland ratepayers are being set up for a beating through the next decade.

There are various features of the council rating plan that result in a wide range of rate increases across greater Auckland, from negligible to massive.

The lack of a transitional period for the move to set rates on a standard region-wide property value basis is causing a shock to many ratepayers, with rate rises of over 20% for about 30,000 ratepayers. Fairness would mandate that these changes be phased in.

That would not help in reducing overall costs of course, they would just show up elsewhere. There was an attempt in the committee to cap rate increases at 20%, which would have resulted an additional 0.6% in the general rate increase to offset it. That shows how large the additional costs are for these 30,000 ratepayers.

You either pay now or, via debt funding, in the future.

Grandiose capital spending plans are driving projected rate rises of 4-5% a year through to 2022. The draft annual plan has capital expenditure running at over 10% a year from 2017 to 2020. Operating expenditure is projected at 4-5% a year.

The Council’s debt level is set to nearly triple in just ten years, rising from $4.8 billion to $12.5 billion by 2022. This mountain of debt will still exist in 20 and 30 years’ time. What happens when global interest rates start rising, as they have been in recent weeks?

And who could possibly believe there won’t be cost-overruns pushing this even higher?  Every few months the demands on ratepayers seem to be increasing.

When facing a gargantuan blowout in debt you should slow down the spending, scale back the plans, and focus on just the most important issues.

The most important problems in Auckland are affordable housing and near-term transport issues, not the longer-term major project wish lists.

In April the Auckland Council reported results of a poll asking residents whether they supported just a ‘basic transport network’, or a more ‘comprehensive transport network’. To ensure they got the result they wanted, the poll question line kept the sketchy and optimistic details of what that might cost for a later question. We all know what the Mayor was wanting.

The track record around the world for local government infrastructure plans, such as inner city rail loops, is massive cost over-runs.

All the more so when they become posturing legacy projects for politicians. You think the Auckland Council plans seem a little expensive? You ain’t seen nothing yet.

Growing cities do need more infrastructure. But the issue is whether Auckland has the right plan, whether the investments are being delivered in the right sequence, and whether they are funding this appropriately.

It’s hard to argue in the affirmative on any of these points.

And how did we end up with unaffordable housing? Auckland’s population is not large for a major city, and the land area is vast.  We have lots of land available. We can build both up and out.

There is simply no excuse for unaffordable housing in Auckland.

This is entirely self-inflicted harm. It is caused by council decisions. It is a burden to middle income earners. But it is devastating for lower income earners.

Unaffordable housing is a major cause of child poverty in Auckland.

The Mayor and council planners should be held to account for the appalling consequences of their decisions – extreme financial stress on the most vulnerable in our communities, and the major factor behind child poverty.

Auckland’s problems are entirely manageable. We just need some common sense, fairness, and a degree of realism about our options.

The infrastructure costs of new housing developments need to be fairly reflected in the price of the houses. Longer term, funding should become more user pays.

Councils are service organisations that exist to provide a limited range of core services. This Council’s diverse objectives indicate it is straying far beyond these core functions, to ratepayers’ cost.

Free Press 4/05/2015

Cycleways Appearing on the Paul Henry show this morning talking about cycleways, Green MP Julie Ann Genter claimed the Greens had achieved more spending than any of National’s confidence and supply partners. We love cycleways too. They are one of the more successful small-scale initiatives of the past few years. But doesn’t the comment speak volumes? Success in politics is all about grabbing the most money taken from taxpayers and spending it? That’s not a view ACT shares. But it explains why taxes are so high and why government wastes so much money.

Zero Hour Contracts
In the UK the Telegraph asserts 68 MPs from Labour, which has been campaigning to ban zero hour contracts, have employed staff on these contracts in the past two years, including Miliband’s Parliamentary Private Secretary, suggesting more than a smidgeon of hypocrisy around the issue. But let’s be clear. Everybody hires people on zero hours contract. Have you ever called an electrician or plumber to fix some small issue at home? Of course you have. We don’t worry about that because they are not getting paid the minimum wage. What we are really worried about is low wages, not zero hour contracts.

Low Wages
The more education, skills, and work experience people have, the more they will be paid, and vice versa. That’s obvious. The better the infrastructure and the more capital (think business investment) our society has, the more we will all earn, and vice versa. That’s less obvious, but it explains why an unskilled worker in, say, Vietnam, earns a lot less than an unskilled worker in New Zealand. Lots of good policy ideas flow naturally from these observations, if you think it through carefully.

Simple Plan
Kiwiblog covers our policy idea for boosting wages: cut company tax by one per cent each year for eight years, from 28% to 20%. This would only cost a fraction of the Government’s yearly allocation for new spending initiatives, while sending a strong message to potential overseas investors: “New Zealand is open for business.” Attractive tax rates are key to our long-term strategy to boost wages.

Expensive Housing
There is one thing we could remedy immediately. Last week ACT Leader David Seymour released a short document summarising the housing cost problem and its source in the RMA and council planning processes. House ownership is falling amongst younger New Zealanders, creating generation rent.

Housing Cost a Driver of Poverty
While an overly expensive home is a burden on middle income New Zealanders, it is devastating for the poorest in our community. Child poverty could be halved if we fixed housing affordability. Anybody claiming to be concerned about child poverty should be demanding urgent moves to increase land availability and reduce council consenting costs. If they are not engaged in these issues, then they are simply not serious about reducing poverty levels in our society.

Make More Land Available
When the price of land inside Auckland’s Rural Urban Boundary is almost nine times more expensive than that outside, you have a section cost problem that is largely caused by planning rules. Change them!

More Posturing from the Greens
In an extraordinarily fatuous stunt, even by Green Party standards, tomorrow the Green Party's 14 MPs will “starve” themselves to highlight the threat climate change poses to food supply. That’s not starving, that’s a fad diet. Go a week and we will know you mean it. Meanwhile Green MP Jan Logie is today tweeting “It's time for a Budget to end child poverty in NZ for good.” Start talking about RMA reform and we will know you’re serious.

Making up Stuff
Speaking in the House last week, Chris Hipkins in a typically muddled speech moved on to the topic of Partnership Schools, and claimed that “charter schools do not even need to employ registered teachers at all”. He surely knows perfectly well that this is simply not true. Is it just us that finds this sort of attack pathetic?

The Reality
All Partnership School teachers must be registered with the Teachers’ Council, or be able to show they are appropriately qualified in the subject matter taught. How does this play out in the real world? Staffing requirements are outlined in individual school contracts. For example, Middle School West Auckland’s contract requires a minimum of 80% of curriculum time to be taught by registered teachers.

Labour Tactics?
It seems the Labour strategy is that old and disreputable political tactic of continually repeating an untruth in the hope that it becomes a kind of “factoid” in the public mind. If that’s the way they want to conduct their politics, good luck to them. ACT’s strategy is to keep telling the truth about their and our policies.

Funding of Partnership Schools
Hipkins went on to claim that the government is pumping millions more into Partnership Schools than it would put into any public school in New Zealand, a line of attack repeated in Saturday’s Herald. Hipkins and the Herald need to familiarise themselves with the data. New schools always look expensive while they are building up their rolls. If they want to see expensive schools, just check out the cost of some of the new state schools!

Be Nice
Recall that line about how you should be nice to the nerds at school, as they will probably be your boss one day. In a variant of that, David Seymour last week in the House speaking to the Immigration Amendment Bill reminded New Zealand First members that as most hospitals and hospices are heavily staffed with recent immigrants these days, New Zealand First members – especially the more elderly amongst them - should be careful what they say about immigrants, as they may be getting a sponge bath from one before too long. The ACT Party welcomes recent immigrants, as they add much to our wonderful country.

Free Press 28/04/2015

A Programme of Phased Cuts in Company Tax Over-taxing mobile capital is not a good idea – not if you want jobs and higher wages anyway. Last week the ACT Leader announced a plan for a programme of phased reductions in the company tax rate, with one percentage point per year reductions in the company tax rate for eight years, to a target of 20%. He said Budget 2015 should be signalling continuous improvement in our business environment, and this proposal does that. The idea is to give a clear signal to investors and entrepreneurs of a future tax structure which encourages investment and productivity growth.

Tax Rates, Jobs and Wages
David Seymour also released a six page document reviewing the academic literature on the relationship between company taxes, economic growth and real wages. Tax incidence is a complex topic. Suffice to say, who you tax is often not the one that actually pays the cost. See the research cited in the document.

Funding Tax Cuts
A small slice off the existing plans for expenditure growth could fund part of this, but most could come from existing corporate welfare, which has become steadily more lavish and widespread.  How much cash are we prepared to throw down the deepening hole of NZ Rail?

Speaking of Corporate Welfare
It looks like funding another America’s Cup challenge is now off the table – so there’s the first saving from the corporate welfare sector. But last week we discovered that an NZ-based but overseas-owned supplier to the Oracle syndicate was receiving corporate welfare, of up to $17 million!  Who wants to argue that this would not be better shared around all businesses via lower company tax rates?

Short Version of the Policy Statement
We need higher wages in New Zealand. But wishing doesn’t make it so. That needs strong business investment to boost productivity. We won’t get any of this without a more competitive tax rate on business.

On Subsidies
If you give subsidies to X, then you will get more of X.  Or to be more precise, you will get more of what is claimed to be X.  Give subsidies to R&D?  Then you will find that a lot of what companies are doing anyway will be labelled R&D.  The hands will go out. It’s corporate welfare.

Driving up Mt Eden
Some questions. Are there any reports assessing the claims of damage to the cone of Mt Eden from traffic? Is there any expert measure of the quantum of damage? Have alternative ways of dealing with any such damage been considered, other than banning some or all vehicles? Why does a gate have to cost $100,000? Has any consultation been undertaken with groups representative of the maunga’s visitors?  We think we should be told.

An interesting item on the economics blog Marginal Revolution addressed the issue of why the TPPA is a better trade agreement than you might think.  The answer?  Vietnam. Of all countries, Vietnam is set to gain the most, due to export growth once tariffs drop to 0% on its apparel exports. Isn’t that really what we want? A trade deal where all will benefit, but the poorest countries will benefit the most.

Auckland House Prices
The PM was reported last week as saying: "If there hasn't been a correction over 45 years, it's an indication of the fact that at this point -- for decades -- there's been a general belief that they've been appropriately valued at the time." That’s the sort of thing they were saying in the US not long before the great housing bust there. He might be right, but this is tempting fate.

Housing Issues
Following reports of advertising in Singapore and Malaysia encouraging people to invest in NZ property, our local TV has shown opposition politicians standing beside apartment construction sites, dismayed that some apartments may be bought by offshore investors. So let’s get this straight. We are panicking because foreign capital is helping to employ thousands of kiwi builders, plumbers, electricians, cement truck drivers, steel workers etc, to build apartments which will be rented out to NZ residents for probably quite modest rentals. What might be the end point of all of this?  Probably more houses and apartments built than needed and cheaper than otherwise rent.

Migration and Housing
Winston Peters often identifies genuine problems, then uses that observation to peddle unpleasant nonsense to his political constituency. The latest example was his comment last week related to the strong inflow of migration and the slow growth of infrastructure to support this population growth. That is a genuine problem, and of course one that everybody is aware of. The next step is to diagnose the problem, and advocate for a solution. We all know what that is. Put some pressure on councils to stop blocking development, and fix the related RMA problems.  That is all tough work. You need to be on top of the details. You have to fight the vested interests.  You need to work with other political parties to fix a problem which is at the root of so much poverty in NZ. Instead of all of that, Winston’s approach is to say this: "You pick up the Herald today, you'll find we're the third-most popular destination for what? Chinese crooks. That would alarm us in most parts of our history, but right now we're numbed down to accepting absolute crap.” It’s pitiful really.

Real Life
Racial tolerance is not a chattering class matter. It directly affects people’s quality of life. In the Epsom electorate, David Seymour encounters Asian residents who suffer frequent verbal and occasionally physical abuse due to racial intolerance.

Dame Susan Devoy?
The Race Relations Commissioner has been curiously silent.

It’s Tough to Kill Bad Regulation
Apparently there are raisins stored in California warehouses as part of the U.S. government’s National Raisin Reserve — who knew? The program is part of post-World War II-era program that forces raisin producers to give part of their annual crop to the government to prevent an oversupply of the dried fruit. A Supreme Court challenge may bring an end to it. But it’s a case study in how difficult it is to kill off even the daftest regulations.

Anzac Day
On the centenary of the first Gallipoli landings, David Seymour attended three different Anzac ceremonies, including at the Auckland War Memorial Museum where he had the honour of laying a wreath alongside Auckland Central MP Nikki Kaye. A commemoration of those who made the ultimate sacrifice for freedom, and a poignant reminder of our peacetime privilege.

Free Press 20/04/2015

Sharing Economy to be worth $335 Billion. Price Waterhouse Coopers project that the sharing economy, Uber, Air BnB, Chariot and the like, will be worth $335 billion worldwide by 2025. Long term surveys show people are becoming less trusting, while increasingly using sharing apps where trustworthiness is recorded over successive transactions.  Technology is complimenting free market activity and reducing the need for government regulation. 

Markets of Virtue
It is popular to decry market activity as cynical.  Here is a simple experiment that shows how markets bring out the best in people.  Go to TradeMe and view feedback on some traders’ profiles.  People with a visible reputation rush to make good their misunderstandings and build goodwill. That’s the market in action.  Now go to the comments section of a political blog.  That’s politics.

The Case for Economic Growth
The New Zealand Initiative have published an excellent essay entitled “The Case for Economic Growth”. See here.  Among their many well-made points, people subsisted on an average of 50c per day for 100,000 years until 1820 when capitalism came along.  Today New Zealanders are around 200 times wealthier. They also present evidence that wealth makes us better environmental custodians, and even makes us smarter.

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Job Opportunities
US trends are often a useful guide to how technology will affect the NZ workplace. CareerCast rates 200 jobs on the basis of the work environment, stress levels and hiring outlook.  The top jobs tend to use math and coding skills, have a demographic tail wind from the aging population (audiologists, optometrists), or first world problems (dental hygienist, dieticians).  Way down at the bottom, number 199 and 200 were respectively lumberjacks and newspaper reporters. Make sure the kids do their math homework.

It’s not All Bad
The job outlook may not be great for journalists in traditional newspapers, but other US data shows rising demand for the skills of journalists, due to the surge in online sources of written news and commentary, as well as in related industries like public relations. Also, lumberjacks have apparently re-emerged in the hipster world, which covets “lumber-sexuals”.  Big beards and plaid shirts!

Equipping our Kids with the Right Skills?
We should take seriously that NZ math and science performance fell sharply in the last 2012 global PISA survey.  The most worrying aspect was the decline for Maori. We must equip our kids with the essential skills for the 21st century, so they can find meaningful jobs.  That is why we need new education strategies, such as ACT’s Partnership Schools.

Capital Gains Taxes
Last week the Reserve Bank deputy-Governor recommended more capital gains taxes on housing which resulted in a brief flare-up debate. By the end of the week all that was left was a gentle smoulder, more smoke than heat.   Free Press is relieved that the CGT is off the table for both major parties.

CGT Winners and Losers
A capital gains tax on housing would increase costs for landlords.  The person renting would pay all or most of the new tax.  Why? In the longer run, capital will only flow into rental housing if the return is adequate. Costs get passed on.

What about the Regions?
The last thing the regions need is another tax for Auckland’s sins.  It would be a rerun of the debate over the Reserve Bank’s LVRs, an initiative made necessary by Auckland and paid for by everyone.  Free Press wonders if the Wellington-based Reserve Bank has hatched a plot to make Aucklanders more unpopular than they already are.

Once More, With Feeling
It’s the Supply Side.  From the Deputy Governor: “Urban planning rules are complex and often restrictive. Planning must take account of the Resource Management Act, Local Government Act and Land Transport Act.”  He went on to quote the Productivity Commission estimate that the cost of planning regulatory requirements is between $32,000 and $60,000 per house in a subdivision, and $65,000-$110,000 for an apartment.  That’s why regulatory reform matters.  Free Press apologises for banging on about this, week after week, we’re getting tired of it, too, but regulatory reform is the only way to cure the disease, not the symptoms of a housing shortage.

The Real Culprits
The real reason for housing shortages is the zealous drive to intensify cities at all costs. Last week the New Zealand Planning Institute hosted its annual conference ‘back to the future,’ with the kind of zeal that would make real clergy blush.  Headline speaker Charles Montgomery corrected Q+A’s Heather du Plessis Allen that he doesn’t ‘think’ that living closer together will make you happy, he knows.

The Greatest Challenge since WWII!
Attendees told Free Press that Green MP Julie Anne Genter spoke and compared the need for more compact cities with the challenges faced during World War II.  We wonder if she’ll be using that speech on Saturday.  When the troops returned they built lots and lots of… suburbs.

Take it Easy on Landlords
In politics it seems to be “landlords bad, house buyers good”; all very George Orwell. But we need plenty of landlords as well as owner-occupiers.  People are mobile these days.  The transactions costs in buying and selling houses are huge – agent commission, legal and accounting costs.  Housing prices can be flat for many years, maintenance costs are high, people often over-capitalise, and people forget about the opportunity costs from alternate investments. If you wanted a leveraged investment you would have done far better in the share market in recent years than in Auckland property. People who have ended up with a leaky building are very aware of the old adage that housing is often a highly leveraged liability masquerading as an asset.

Free Press 13/04/2015

It’s Catching Vernon Small of the Dom Post says ACT’s call to index tax brackets to inflation is a ‘canny policy.’ The only real downside? “Let's face it, when it comes to vote-harvesting, drip fed tax cuts will never beat a multi-billion dollar election year tax package.”  That people will keep their own money without having to wait for an election lottery is actually another reason to support the policy.

Defending John Campbell
Tribal politics has erupted from the inkling that Campbell Live might be cancelled. Rookie National MP Todd Barclay offended more people with one anti-Campbell Facebook post than some will manage in their entire career.  Not to be outdone, Labour have issued a press release defending Campbell.

John’s Our Boy
Campbell thinks and even says he’s a leftie, but look at what he does:  He fundraises for people in tough spots, most recently Vanuatu.  He goes after shonky business practices, last year shaming the nation’s malls into getting rid of a particularly predatory and irritating sales company.  He advocates for people getting a rough deal from government departments, such as the Immigration department.  He does all of this without government help, while entertaining thousands and making an eye-watering salary.  If you’re reading this John:

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Adam Smith’s Boy, Too
The father of capitalism was a moral philosopher in a time of great poverty.  He invented economics to explain ‘the nature and causes of wealth,’ but he died perfecting his favourite work, ‘The Theory of Moral Sentiments’ where he said, The great pleasure of conversation and society, besides, arises from a certain correspondence of sentiments and opinions… But this most delightful harmony cannot be obtained unless there is a free communication of sentiments and opinions. The Campbells of the world are essential to a free society.

Spiritual Son of Sir Roger
At 51, Campbell came of age under Rogernomics.  Older lefties would spend their time calling on the government to ‘do something’ where Campbell uses argument, persuasion, and private fundraising.  What’s more, he does it on New Zealand’s first privately owned TV channel, whose history is one of deregulation and foreign investment.  The creative destruction that made his show may now end it, but not its spirit.

“This House Believes Internet Access is a Human Right”
David Seymour’s team convincingly negated the above moot in front of 200 high school students, who were assembled for a UN Youth camp last Friday.  Free Press readers might have certain presumptions about such an audience, but they’d be wrong.  Opponent Laila Harre completely misread them.  Losing the debate, she started attacking David but the audience took to Twitter and told her to get some arguments instead of ad hominem.  The times they are a-changing.

Bring Back Nandor
Wellington-based Green Party leadership contender Gareth Hughes was late to the debate due to flight delays.  Were none of the 14 Green MPs available in Auckland?  To his credit, Nandor would have taken the train (and flown at the same time).  The Greens they have a-changed.

ACT is the last party to call for a new tax, but some of them should be better labelled.  Bill English has admitted another billion dollars may need to be dropped into the ailing Kiwirail.  ACT says let’s be up front about this:  one billion dollars is the same as businesses paying an extra cent of company tax (currently 28 cents on the dollar) for the next four years.  It would be more honest to say the company tax is now 27 cents, plus a one cent levy for Kiwirail.  Let’s make it crystal clear that but for the rail bail, company tax could be reduced by a point.  Transparency.

It’s Already a Crime
One News reports on an Indian student at Canterbury who likes to wear a Turban.  Probably a good idea in Christchurch at this time of year, but he has had death threats after false accusations were made against him on Facebook.  As David Seymour has pointed out, inciting violence is already a crime (Crimes Act 1961), and the police can easily find people on Facebook, but they didn’t bother until they were shamed by journalist Rachel Parkin.  It is important to enforce the laws we have already before making new ones such as the proposed Harmful Digital Communications Bill.

Winnie and the Wailer
It’s said that in politics you should accuse your opponents of your own worst trespasses.  New Zealand First MP Tracey Martin bizarrely attacked Hekia Parata for barracking in Parliament.  David Seymour sits one along from Parata and reports she is one of the most dignified parliamentarians.  MPs who sit near Martin, however, will need hearing aids before they retire.

More Private Greening
A fertiliser company has been sponsoring a series of regional awards through the New Zealand Farm Environment Trust.  It’s for farmers who, among other things, manage run-off.  According to the farmer versus environment mindset this shouldn’t happen, but  ACT has long said that property owners make the best environmentalists.  An example is the Bay of Plenty Supreme winners: “The mud soils are high in phosphate and to reduce phosphate loss John has constructed up to 200 detention dams throughout the farm, which slow the runoff and collect sediments.”  The whole story of these farmers working with the land is a good read for those of us who think meat is made at Countdown: 

Free Press 7/04/2015

Outstanding Performance
Over the weekend, David Seymour used an interview on TVNZ’s Q+A to outline ACT’s relevance.  Correspondence has poured in saying it is his best performance yet. It’s still online here.

The Real Outcome of Northland
You’ve heard it before, but a point worth repeating from Q+A: By refusing to compete in the heartland provincial seat of Northland, Labour’s Andrew Little ceased being the prime opposition leader. Winston Peters destroyed Bolger and Clark in their respective third terms. Little would have to accommodate a strong Winston in his first term.  ACT is as relevant as ever to voters who want a stable coalition on the right.

A Costless Poverty Measure
Among David’s points: ACT has the soundest poverty policy, making housing affordable by fixing the regulatory framework.  The Listener recently suggested child poverty would be more than halved (from 285,000 to 130,000) if only housing returned to affordable levels.  Surely the poverty lobby should be on board here?

It’s the Land…
A major attraction to New Zealand is abundant land (it’s no coincidence that the Kiwi Dream is a place of one’s own) but now you’re not allowed to build on much of it.  Overwhelming international evidence tells us that overbearing land use planning strangles the housing supply, pushes up prices, and fuels speculation. This evidence comes from North America where tax and monetary policies are similar nation-wide but land use planning varies by State and City. You don’t build a $150,000 house on a $500,000 section, so the poor get cut out when land is scarce.  You also don’t mass produce housing if there’s no pipeline of land to put it on, so those who can’t afford bespoke homes lose again.

An Intellectual Wasteland
The greatest disappointment of the program came from Grant Duncan, a little-known Massey University academic on the pundits’ panel.  Rather than considering, let alone refuting, the arguments above, he described ACT’s concern for poverty as a ‘joke’. His contribution to the world of ideas didn’t improve throughout the session, consisting of petty ad hominem attacks.  He referred to ACT as a lapdog and Epsom voters as sheep.  His argument against ACT was not about policy but polling.  So much for politics as the contest of ideas. Free Press wonders if Mr Duncan was having an off day, or if his performance reflects the standard at Massey?  If so, should Massey students ask for their money back?

Super Policy
Also covered in the interview is ACT’s call for a referendum on superannuation.  If New Zealand can appoint an expert committee to generate options for changing the flag, then vote on them in two referenda, why not do the same for the critical issues of fiscal sustainability and intergenerational fairness?

Watch this Space
David has written to and is talking to nearly all leaders about the Super Referendum idea. The reception has been cordial so far – more to come.

Dr Cullen Strikes Back
We know Labour’s fiscal blowout sunk the tradable sector of the economy from 2005 on, and forced New Zealand into recession before the great financial crisis. But, as a thought experiment, could Helen Clark have won a fourth term if Michael Cullen had cut taxes instead of spending more in her third term?

Here we go Again
As David revealed in parliament, the stealth tax increase of bracket creep has cost the average Kiwi family $1036 since 2010.  This year it will cost them another $431.  Things are starting to sound familiar.

A Clark II Prime Minister
The final point from the interview was: After seven years of National, is this as good as it gets? Centre-right voters accept that after earthquakes, a global financial crisis, and an attempted coup by Kim Dotcom, we’re damned lucky to have the government we have.  But John Key has effectively declared a truce on Clark’s policies.  What about housing, super, and tax?  Are we merely holding our ground when in power and going backwards when out?

ACT goes to Tanzania
The world now has two ACT parties. The Alliance for Change and Transparency (ACT-Tanzania) party was officially launched in Dar es Salaam earlier last week.  They adhere to principles of “patriotism, democracy, freedom of thought and action, dignity, equality, integrity, transparency and accountability”; and believe in “self-reliance, hard work, sincerity and professionalism towards bringing positive change in the country”.

Monetary Policy Confuses Everybody
Bill English said the outlook for interest rates depends on "whether you think zero inflation is permanent or temporary, and it's a bit hard to tell right now. The question of whether it's permanent or temporary: that's exactly the challenge the Reserve Bank Governor has got.” Actually, it’s simpler than that:  the Reserve Bank’s job is to keep inflation within the 1-3% target band, regardless of whether global inflation is high or low. So the medium term inflation path should be determined so long as the Bank does its job. What’s hard to judge is just how long near-zero, or even negative, nominal and real yields will persist in the major industrialised countries.

But it Confuses NZ First the Most
Winston has always been good at making complicated issues seem simple, perhaps a little too good. He’s claimed that high interest rates are both crippling the economy and creating a consumption boom. So high interest rates discourage spending and investment and encourage spending and investment. Welcome to Planet Winston.

Easter Time
Apparently every MP receives a generous box, perhaps $100 worth, of Easter treats from the Food and Grocery Council.  What is the purpose of these big boxes? Surely no MP would be influenced by Easter eggs, even an inexplicably large number of them, but then why go to such an effort?  For the record David sent his straight back.