Thursday, October 15, 2009

Hooked on Housing

Rachael Carson has been quoted as saying, “Change is the only element of life which is constant.” How true that is, but there are times that I wish it did not move so quickly.

I was just getting used to the idea of a long drawn out recession when, ‘blow me down’, international trade has picked up and the banks are lending again. Dairy farmers are getting an increase in milk payouts too - even at a time when the New Zealand dollar has surged in value, making petrol and imported manufactured products more affordable.

Does that mean the recession is over and the warty ogre of depression has been sent to pack its bags? Will I need to stop dusting off books on self-sufficiency and gardening - like “Dig For Victory” that my father used in the last depression?

Some financial commentators are expressing caution and the Governor of the Reserve Bank, Allan Bollard, has voiced his concern about our love affair with houses as the best investment. He fears that an economic upturn will again suck in overseas capital to increase our unrealistic levels of debt and so begin the property boom and bust roller coaster all over again. Perhaps he was trying to influence a Government committee on tax reform that is working, somewhere deep in the Beehive, on sorting out how tax policies have allowed harmful distortions in our economy.

Thirty years ago, when I bought my first property, it took about three times the average wage to buy a house. Today, it takes six to seven times the average wage to do the same. This must put an incredible amount of strain on young families. If I was in their situation, I would feel quite resentful seeing so many affluent Baby Boomers renting out several houses to those who cannot afford to buy them. They also seem to pay very little tax on speculative gains while claiming expenses against their other incomes.

How this came to pass would take more room than this column allows, but suffice to say, the Government wants to change this situation where too much money is being stored in paper values instead of productive enterprises.

One method to change this is a capital gains tax. However, these words put a chill down the spines of most property owners and it would be a very brave government to attempt to bring it in and employ bureaucrats to enforce it. Much more likely would be incentives to invest elsewhere, or even some coercion to save more.

In Australia there is a compulsory superannuation scheme that has an age limit before you can access it or pay your house off with the accumulated funds. These funds are now huge and I think this is how they managed to cope with the current recession much better than most other countries. We benefited too, because many of our banks are Australian owned and were therefore protected from the worst effects of the international ‘credit crunch’.

Another complicating factor in high property prices is the fact that the human population in our world is expanding and there is only so much land to go around. Our present foreign investment and tax laws are attractive to land hungry investors and this puts further pressure on land prices.

A recent article that I read in the Economist magazine claims that some of the enormous trade surpluses being accumulated by Asian and oil rich Arab states are being used secure land in Africa to grow food for their investors. This sounds very laudable, but in some cases aid money from elsewhere is being spent feeding starving people who have to watch food grown in their area being exported.

Obviously, Government reforms will have to factor in the risk that the same could happen here if we undervalue our independence and opportunity to own our own piece of dirt.

Saturday, October 3, 2009

Farmers Go Ape Over Palm Kernel Imports

More Weddings And A Funeral

Writing this column can be a risky business, especially when I have a look at political issues. Events can quickly change in the time it takes to complete a draft with my pen and the printing of the paper – and when I looked at the creation of Auckland’s ‘Super City’ this week, the situation was changing day by day.

Auckland is certainly in need of local body reform and a Royal Commission on the matter gave its findings to the Government earlier this year. Local bodies, MPs and other vested interests persuaded a government committee to change the boundaries proposed, but excluded the recommended separate Maori representation.

At first these changes meant that the Kaipara District would gain the northern half of the Rodney District. However the Rodney Mayor, Penny Webster and others have managed to persuade John Key to return Rodney back to the Super City. The wishes of Kaipara’s mayor, Neil Tiller, to get control of the Kaipara Harbour and its rural hinterland, remain unfulfilled.

The Minister for Local Government, Rodney Hide, is one of the prime movers and shakers of the Super City reforms and it is curious to often hear him advocate “One man, one vote” as a cornerstone of democracy and yet deny Maori representation. He has also not offered residents in the greater Auckland area a vote on which area they would like to be in. Instead he has gone along with good old-fashioned “squeaky wheel” democracy.

This is probably the due to the prime ministerial power of John Key who effectively uses his skills as a risk management professional. His pragmatic approach appears to involve flying kites of intention, keeping the parts that have popular support and then ditching the rest without losing the essentials he was after.

Helen Clark labelled him “Mr Flip Flop”, but this label did not stick to him for very long. I would favour the name “Johnny Jandals”. I still have a pair of jandals that are proudly made in New Zealand and sure enough, you can hear if jandal wearers are about by the “flip flop, flip flop” sound they make.

Time and time again, I see John Key using a political style that reminds me so much of Sir ‘Kiwi Keith’ Holyoake, who oversaw an unparalleled period of prosperity in New Zealand. He kept most of the previous Labour Government’s reforms in place and encouraged New Zealand owned businesses to expand in a more market orientated economy - free from unfair trading practices employed by international competitors. Thanks to him, I was not sent to Vietnam as a National Service conscript and I lived to earn a good income from my craft.

Rodney Hide is another kettle of fish altogether. He says that he supports the principles of democracy and yet he appears to me to have autocratic tendencies by the way he has managed the establishment of the Super City. Whenever I draw him in a cartoon I cannot help following the tradition of other cartoonists who depict him as the Rottweiler of New Zealand politics.

On the plus side, I think he makes a useful contribution to New Zealand politics by representing a small but influential constituency – even so, I can feel his enjoyment of power as I watch him pursue his ideological ambitions. Thankfully, there are few like him and so far he seems willing to accept John Key’s leadership.

Green Party spokesperson, Sue Kedgely, says that Rodney wants to asset strip local bodies in the same way the various monetarist government regimes stripped nationally owned assets in the nineteen eighties and nineties. He denies this and it remains to be seen if the wedding of Auckland local bodies into a Super City will also mean a funeral for existing social infrastructure that culturally enriches all of the community and protects its poorer residents.