by frog
The Families Commission is apparently releasing a report today on the well-being of families. I can’t find it online yet so I’m guessing it is being released later today but the Dominion Post reports news from it that many ‘Kiwi families are living on Struggle St’
A drop in the buying power of wages means a single family income is no longer enough to keep a family out of poverty, even with state support, the report says.
More than one in 10 families are unable to manage debt, with single parents, Maori and Pacific Island families most vulnerable.
It also quotes Child Poverty Action Group analyst Donna Wynd (and Green Party candidate):
“For low income families the combination of rising food and energy prices, the collapse of credit and housing markets and increasing housing costs is shaping up to be a perfect economic storm.”
When a family needs more than one income to keep its children out of poverty and when the state needs to supplement full time wages and salaries with benefits, its clear that wages are too low. There is a real need to put aside the debate about tax cuts and admit that the real problem is wages not taxes. Even massive Roger Douglas style tax cuts that crippled our social sector and environment would not lift wages the amount that they need to climb.
The crazy thing is that many employers who pay low wages complain that minimum wage laws is the government interfering. The real interference is the government paying benefits to working people to subsidise employers who don’t pay a living family wage.
The answer has to be twofold. First we need to provide families with alternatives for the most expensive bills their home faces – that means things like high quality insulation and energy efficient homes, widespread affordable public transport and quality housing. And second we need to remove the employment law power imbalance that allows some employers to keep workers’ wages too low and beneficiaries incomes lower still.
Published in Economy, Work, & Welfare by frog on Thu, June 19th, 2008
Tags: , donna wynd, families commission, income, poverty, wages
on the trolls and those who are unable to keep on topic
Pushing for higher wages is great while you have employers. What happens when these run out (Crane Group the latest to quit 70 jobs)?
All become state servants? Who will be around to pay the taxes?
While it might be great rhetoric to increase wages you need to decide where the money will come from. Decrease investors ROI and they will simply pack up and go elsewhere.
No, it is going to take a whole new long term approach to get wages up.
Suggest we start by encouraging investment into real job creation enterprises through tax credits (not cuts – you have to create tax paying turnover through income to receive tax credits).
Another place to start is by cutting the public service so that those who contribute to the tax take, can actually afford to create purchase power and kick start the economy.
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The real purpose of the minimum wage is generally misunderstood.
Commerce is the backbone of every country, and to have commerce you have to have businesses, which are pretty much exclusively private sector affairs. The purpose of a business is to add value, as it is the added value that provides wages and supports taxation which allows a country to operate.
The real purpose of the minimum wage is to prevent really low value businesses from existing. Really low value businesses are bad because they cant afford to pay reasonable wages to their staff, and thus their staff require welfare payments to make ends meet.
Welfare payments are a tax on good business supporting poor business, or to put it another way; a subsidy to poor business from good business.
Business people hate taxation on principle, but should fear subsidizing their competitors more, hence every decent business person should be in favour of minimum wage legislation, and should favour it rising, to squeeze bad competition.
What NZ is truly lacking is innovative business people, who can build world leading businesses. Its not about money; its about lack of capability.
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The problem of one wage being not enough to support a family is one that has been caused not only by current economic conditions but by the long-term trend in jobs over the last century. A hundred years ago few women worked (compared to now), and the wage of one man was enough to support a family. Then the womens lib movement started pushing for more opportunities for women to work, and it most certainly is a women’s right to work if she wishes. However the unintended consequence of this is that effectively, 100 years later, we have twice as many people competing for effectively the same amount of employment. This means that the average hours worked per week per person must be lower (hence the trend to hire people part time rather than full time), and the average wage must be lower too in real terms due to competition for positions. Effectively, the situation has moved from women wanting the right to work 100 years ago, to being expected to work, to now having to work whether they like it or not.
The issue is not exactly wages being too low or living costs being too high – it is a combination of both issues, resulting in the buying power of wages being poor. The issue can be tackled from either end.
As Gerrit has pointed out, we cannot just push for higher wages – the money has to come from somewhere. Higher wages = the government telling others to spend more of their money. This drains money from the business sector that could feasibly be used to develop more jobs. However we can lower taxes (or provide tax credits), as this is the government choosing to take less money from families and the business sector, leaving more money for current wages and the development of new jobs.
We must also refrain from implementing policies that will increase the cost of living and further exacerbate the situation (such as the ETS). Such policies might be feasible when families are doing well but are irresponsible when families are struggling.
Your two solutions – state-supplied help (insulation, public transport etc) and state-ordered wage rises are both examples of the state interfering with the economy, and do not actually provide new sources of money to pay higher wages or help commodity prices to reduce.
Rather, we must have policies that stimulate the economy to ensure there is enough money in the system to pay wages and taxes. All money in the country (whether private cash or state taxes) ultimately comes from the business sector, and this must be making a good profit for anything to work. We also need to ensure primary producers (the producers of the essential commodities that families must purchase) can do so with the minimum of interference and extra cost imposed by the state, to keep commodity prices down.
We can increase wages through stimulating the economy, by manipulating tax rates (reducing business tax to help businesses stay in the country and make money to pay employees and taxes with), and by ensuring regulations promote profitable business rather than imposing extra costs (ie not have the ETS). We can help families by reducing overall tax and tax on bare essentials (so even poorly waged families can afford the basics), and recognising the role of home-making parents (through income-splitting).
With a recession looming, and the tax cuts I am mentioning, we will have less state funds to slosh round. We will need to prioritise spending to ensure taxes are not being wasted on bureaucracy but achieving the desired results with the minimum cost.
I think you recognise the problem fine, but like Gerrit feel your proposed measures to fix it are fundamentally flawed.
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By the way, if you increase minimum wages, you increase the cost to business. This cost must be passed on to consumers (the money must come from somewhere). So the business must raise its prices, increasing costs to families, and at least partially negating the positive effect of the minimum wage increase.
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Too much money chasing too many goods with too much to chose from because thaats what we want DAMNIT!
Therein lies our problem folks.
We have families with flat-screen televisions and Sky TV (with movies and sport) who cannot afford proper food or independent housing.
We complain if we can’t buy lettuce in June (it’s winter damnit)
We expect prices to stay the same for ever. (When I bought my moggie minor from the dealer in 1969 it had a 12 gallon tank and cost GBP5 to fill. Now, damnit, I have japanese thing with a 60litre tank and it costs me $125 to fill it – it’s not right Damnit – thats 9.78% GAIR. My wages have only changed from GBP15 per week to $675 that’s only just over 7% CAGR, it’s not fair!)
Problem is, the world was never fair, and no society based on markets and progress ever will be either.
So what is “Poverty” in New Zealand? a kilo of rice a week for a family of five, plus all the meat and veg you can grow? NO? then what?
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PS – If fuel were to increase to $10 a litre, there would be far less pollution and the earth would, by all accounts, stop warming up! Perhaps that’s what the government should aim for – instead of lowering taxes increase them to the point where everyone has to work at home and groe their own fruit and veg. YEAH!!!!!!!!! (said Kermit the little green frog)
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Strings:
“We have families with flat-screen televisions and Sky TV (with movies and sport) who cannot afford proper food or independent housing.”
Good point. A good chunk of the problem is people expecting higher living standards than past generations, maybe we are just as well off as we used to be but just want more now? The luxuries of one generation become the necessities of the next.
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Mr Dennis said: A hundred years ago few women worked (compared to now), and the wage of one man was enough to support a family. Then the womens lib movement started pushing for more opportunities for women to work, and it most certainly is a women’s right to work if she wishes. However the unintended consequence of this is that effectively, 100 years later, we have twice as many people competing for effectively the same amount of employment.
Ah, it’s all women’s fault. Nothing to do with Muldoon’s wage freeze in the 1980s! Nothing to do with the Employment Contracts Act, nine years of mainly nil minimum wage increases, and skyrocketing unemployment in the 1990s!
Nope, it’s all the fault of women! And those pesky immigrants too I suppose, Mr Dennis?
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“However the unintended consequence of this is that effectively, 100 years later, we have twice as many people competing for effectively the same amount of employment.”
If that were true, 50% of us would be on the dole. Actually I can’t recall the women’s movement ever pushing for more opportunities for women to work – did they stand over employers and insist they create more call centre positions or what? The women’s movement pushed for equal wages and non-discrimination in hiring for existing jobs, not for the creation of jobs.
It seems to me that part of the trouble is the number of unproductive jobs we all have to pay for, be it government consultants or private sector advertising executives. Not to mention shipping profits and productive jobs overseas.
In the absence of well organised unions, wages tend to fall to what is considered survival level – if you’ve got a culture that accepts the requirement of two income earners per family to sustain a family rather than one, wages will fall to compensate.
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Sam,
It still does not answer the question of where the money for higher wages will come from.
Reduced profits for the investors, increased costs for the customers?
Non inflationary increases in wages can only came about by increased productivity.
Achieved by stimulating investment activity through tax credits for the investor to enable smarter and increased production and (most importantly) increased education of the wage earners to facilitate productivity.
Simply increasing wages is inflationary. Even unions readily agree to that.
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Gerrit,
You didn’t actually debate the points that Sam made.
Because we’re such a low wage economy theres no incentive for business to invest in plant and capital to make their workforce more productive. The whole economy is structured around the low wage and the few exeptions (finance, real estate) don’t actually contribute to higher productivity (cuts costs ). Well not to the extent that they claim.
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STH,
If the desire is to move from a low wage economy then I did offer suggestio on how to do that.
“Achieved by stimulating investment activity through tax credits for the investor to enable smarter and increased production and (most importantly) increased education of the wage earners to facilitate productivity.”
The change to a high wage economy must start with those two principals.
And guided by a New Zealand startegic plan. Where do we want to be in 2020? How are we going to achieve that? What is the budget? What are the action steps? Who is responsible?
etc.
Every business owner will recognise those steps. Something our politicians would do well to emulate.
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So here’s the other key point to debate.
“Work expands to the capability of the available workers”
We have more “production” than ever before, but less productivity outside the manufacturing floor. A GREAT man (Jack Walsh) in the early 1970s, used to sit with the management team of one of his operating divisions for an afternoon and develop a three year business strategy for the division. I met him in the late 1980s as we were readying a bgook for publication. (The original title of the book was “eliminating waste in the bootleneck of a large organisation”, the publisher, at the last minute, renamed the book “Downsizing” and Bob Tomasko, one of my most treasured staff members, was castigated for evermore.)
Jack laughed when we told him what the book was aboput, andf told us a story. It transpired that as General Electric grew, he delegated strategic planning down to the SBU Managers, they sub-delegated to their subordinate product managers who scoured the business schools for MBA graduates to do the work. One day, not long before we met him, Jack had been asked to approve the hire of 100 BMAs into corporate headquarters – he couldn’t understand why, so went and found out. The new hires were for a new department being created to compress SBU Strategic Plans, as JAck had issued an edict that they were not to be given to him for approval if they were more than three pages long. He was laughing when he said “I was being asked to hire 100 MBAs, to read what 1,000 MBAs had been hired to write; so I got rid of the lot and went back to spending half a day a week with amanagement team. The outcome was just as good as we had got from 1,000 people,we just weren’t producing as much waste paper as they were!
Something tells me that we could give one half of all parenting partnerships an 80% pay rise, as long as the other half promised to stay home and raise the children, and our true productivity wouln’t suffer one iota.
THEN we could start growing new off-shore revenue streams so as to raise the standard of living.
Riddle that with holes (if you can).
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Mandatory retirement savings is the only way to generate an investment pool big enough to make a difference in New Zealand’s underlying economic base – and even then, only if the investment policy for the funds is adventurous enough to encourage true speculative investment. Otherwise we will remain a country of non-savers putting our revenue into homes in the home they wioll appreciate enough to keep us in our old age.
Investment Tax credits won’t do it – they reward capital, which we don’t currently have enough of to create dynamic, new, competitive businesses with!
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You can sum this one up pretty well. New Zealanders expect a first world lifestyle with a third world economy. Now people either we get a first world economy or a third world lifestyle. You choose?
However what I find strange Frog is why are you posting this now, I mean surely it must have been clear the moment the government passed the working for families that something was very very wrong in Kiwiland.
That legislation is a classic ambulance at the bottom of a cliff.
I know this will probably sound strange to most people reading this blog but you can’t build an economy based on selling wood, wool, milk and lord of the rings tours.
In order to build a 21′st century economy in NZ we are going to need a plan I haven’t seen an economic plan from the green party but that said I haven’t seen one from Labour or National. Btw to the die hard Hellenists Hellen Clarke saying in a speech that NZ is going to build a knowledge Economy doesn’t mean that many years latter you will have a knowledge economy. Political speeches are only good at getting uneducated retards to vote for you they’re not good at actually doing anything.
I my self am an example of what is wrong with NZ I was educated their but left for New York at the first chance I got, I received a degree in Computer Science but wasn’t going to hang around in NZ earning nothing when I could go overseas. I also had student debt which needed to be paid off. The people of NZ offered me no reason to stay so I didn’t stay.
Any economic plan needs to involve 2 things educational investment and investment activity via tax credits/tax breaks.
A very good example thinking long term would be investment in engineering and science, especially anything to do with the oceans, given New Zealands very large continental shelf resource’s this could be a good investment
Encourage business ventures in these areas as well, why can’t NZ be leading the world in offshore wind turbine tech and wave power as well as
tidal power.
I feel like we have lost our pioneering spirit in NZ and instead of doing we are all sitting around waiting to follow the rest of the world.
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Strings I thought that New Zealand now had a super saving scheme I’m sure some of that capital can be invested in new business ventures.
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In quoting a Green Party candidate in their report, have they violated the EFA?
(Tongue in cheek, hopefully, but I’m some of the anti-EFA crowd would claim they have).
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Gerrit,
“Achieved by stimulating investment activity through tax credits for the investor to enable smarter and increased production and (most importantly) increased education of the wage earners to facilitate productivity.?
The problem with that is that that the firms will invest in capital, not to increase the productivity of labour but to replace it, which will further reduce a workers bargaining power as he has to compete with more workers for fewer jobs. Thats what happened after George W. Bush implemented Accelerated Depreciation in the United States. Analysist have concluded that after its introduction they were suprised about the slow job growth figures despite the booming economy, but concluded that the accelerated depreciated allowed the companies to invest in plant and capital, but instead of the increased hiring that was expected those companies invested in measures that allowed them to either replace workers or at the very least defer new hiring.
http://bigpicture.typepad.com/comments/2004/09/accelerated_dep.html
Although if Accelerated Depreciation could be targeting at certain capital investments such as energy efficiency measure it would stimulate the economy in a manner that wouldn’t be detrimental to the interests of workers and could actually be good for business and the economy as a whole. Its a Green Policy or was at least in the days of Rod Donald.
http://bigpicture.typepad.com/comments/2004/09/accelerated_dep.html
Not to mention the current timing whilst he global economy is incredibly unsettled isn’t good.
I agree that education is important and I think Labour’s revival of the apprenticeship scheme was one of the few industrial policies that they got right in my opinion, but how that’ll translate automatically into high wages isn’t certain.
I think we’ve got to realise that in a “free market” economy most of our economy is committed to merely distributing products made elsewhere, whether its in finace, warehousing, retail, transport, customs, and even construction.
I think what we need to focus on, isn’t to compete through increasing trade volumes or import substitution, but in cutting domestic costs like energy use and real estate costs.
Strings,
Thats because the economic orthodoxy being taught in internationally in managment schools is unmitigated nonesense and is a reflection of the political bias of those that teach it.
It teaches that labour is merely a cost factor in production, which must be cut as close to the bone as possible regardless of the mid to long term reprecussions, whilst categorising inventory as an asset!
“He was laughing when he said “I was being asked to hire 100 MBAs, to read what 1,000 MBAs had been hired to write; so I got rid of the lot and went back to spending half a day a week with amanagement team.”
Bill Waddel and other lean thinking theoroticians have been trying to get car makers to fire their MBA graduates for ages and start learing to manufacture.
I’m thinking of enrolling in Cantebury’s business programme as its headed by one of New Zealand’s premier Lean Thinking advocates, because they consider the industrial system in the U.S. in contrast to Japan, post World War II manufacturers have become marketing enterprises with an attached subsidiary manufacturing function.
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toad:
“Ah, it’s all women’s fault.”
No, I didn’t blame women. Women have as much right as anyone to work. However I was pointing out that as women moved from home to the workforce this inevitably ended up with more people competing for jobs. This is just what has happened, and was recognised in some way by other posters as shown in the following quotes:
Sam Buchanan:
“if you’ve got a culture that accepts the requirement of two income earners per family to sustain a family rather than one, wages will fall to compensate.”
Strings:
“Something tells me that we could give one half of all parenting partnerships an 80% pay rise, as long as the other half promised to stay home and raise the children, and our true productivity wouln’t suffer one iota.”
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Toad, Mr. Dennis raised some valid points about the entirely predictable consequences of the change from the old paradigm of men and women having completely different dominions. Any discussion of a family wage has to acknowledge those points if only to see clearly why we can’t simply turn the clock back 50 years.
Much of the feminist movement did denigrate motherhood, stigmatising full-time mothers as repressed by the patriarchal society. That has placed an unjust pressure on women to be in the workforce, even if only part time. Worse still, the same social stigma has rubbed off on the emerging alternative of full-time fathers.
As with most things the way forward begins with accepting that their has been a pendulum swing or overcorrection from the old patriarchal society. Perhaps that old society’s balance of patriarchy and matriarchy only occured beneficially amongst the wealthy and/or middle classes. In which case I would argue that the paradigm has also only been beneficial amongst the wealthy and/or middle classes.
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erratum – In which case I would argue that the new paradigm has also only been beneficial amongst the wealthy and/or middle classes.
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Kevyn said: Much of the feminist movement did denigrate motherhood, stigmatising full-time mothers as repressed by the patriarchal society. That has placed an unjust pressure on women to be in the workforce, even if only part time. Worse still, the same social stigma has rubbed off on the emerging alternative of full-time fathers.
I disagree completely, Kevyn.
What actually happened was that capitalism, aided by Government, exploited the feminist movement to ensure that even if women became part of the workforce, the family income would not improve so women and children would be no better off economically.
Kevyn, I’ve been there, with good social and political and sexual relationships with feminist women for over 30 years.
The denigration of motherhood you speak of is a fallacy born of male stereotyping of feminist women. Kevyn, even most lesbian feminists want to be parents, despite them having to run through somewhat bigger hoops to be so than you or I or straight women do.
You do get closer to the point at the end of your post Kevyn, where you start to get into a class analysis, rather than a gender analysis. I think that’s a much more valid point to start from in terms of family incomes, and one that won’t blame women for their and their family’s economic circumstances.
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Toad, The denigration of motherhood I mentioned isn’t a fallacy as it is there in pamphlets and speech recordings. But I will meet you half way on this. Those comments come from a few radical feminist and have probably been focused on by the MSM, probably with the intention of undermining feminism, but with the unintended (or possibly intended) effect of creating the “superwoman” expectation.
If your first paragraph uses Government as a simily for socialism, and the ending “women, children and men would be no better off economically.” then I think that pretty much somes up what happened. Those who benefitted most from the status quo ensured it remained in place even as they went through the motions of “welcoming” women into the workforce and wage slavery.
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Now, that’s more like it, Kevyn.
But I don’t think the “denigration of motherhood” you refer to is in most cases a desire to not be a mother. It reflects a desire of women not to be economically dependent upon men if they become mothers.
Of course there are a few exceptions – women who don’t want children – just as there are men who don’t want children. That’s just a matter of personal choice that oppresses nobody.
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The issue is a more a case of how we can retain our national sovereignty.
There is a looming crisis in the sustainability of our public sector – we will not be able to afford wage increases (necessary to retain essential staff) and tax cuts.
General migration to Oz will hit new highs in the next three years and the reality of serious talks about enacting a political union with Australia will be soon be with us.
If our overvalued currency has done anything, it has prepared us for being part of Australia.
The good thing will be a new impetus to join a union and obtain the Australian award wage. Which is why most of us will be tempted to vote for the union.
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still only half-way through this thread & my reply is already growing unmanageably long, so i’ll just stick it in now & go back to reading the rest of the thread after.
could be just what our foreign-debt-laden economy needs right now.
good insight. in a world economy, this situation is intensified as those countries without a minimum wage develop comparative advantage in low-wage industries & those with a minimum gain comparitive advantage in high-wage industries. given time this might become inertial.
it helps if the minimum wage policy is accompanied by government assistance with professional training, paying people to become apprentices rather than unemployed for instance.
i’m not sure if 100 years ago is the correct period. for most of history most women worked! not always for wages, but doing necessary chores around the farm for instance, manufacturing clothing for the familly etc. i think the housewife was more a mid-century phenomenon in the west.
your honesty robbed your statement of impact. a crueler individual would respond “yeah, so?”
it was a wage AND price freeze. so no.
not ALL. but that is part of the problem.
the main problem is that unions have gone soft. i blame the previous benign regime for this more than the subsequent ECA regime.
no but women did begin supplying their labour in the waged economy to a greater extent. wages & labour demand would naturally both adjust to this situation.
as per dbuckly’s post, a minimum wage is just like a tax credit for high-wage industries.
see comment above about soft unions… anyway a minimum wage rise still raises real minimum wages even after a round of inflation. (see “yeah, so?” above)
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sorry that was totally unreadable. i really should use the preview function.
try this:
total debt equals total foreign debt… we’re non-savers because of the huge asset sell-off to foreign investors & then the ferocious defence of the currency.
a sound investment as long as the population keeps rising.
i don’t know, we seem to have created them in the past.
i think labour has a plan involving improving internet services or something.
a lovely country?
new technology normally doesn’t have such a fast effect – the first thing that happens in the short term is that extra staff have to cover for the training sessions (which of course employs a trainer too!).
i must say Accelerated Depreciation sounds like a licence to discard stuff which still works – not such a green solution perhaps?
well happy full moon folks & happy solstice
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Blame policies, not people
Metiria Turei MP, Green Party Immigration Spokesperson
5th September 2002
“Governments have the responsibility to manage the resources of the land in a fair and sustainable way so that its people are adequately fed, housed, employed and cared for.”
http://www.greens.org.nz/searchdocs/PR5579.html
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Now if only we could get the right! government!!!!!
How about a The Bright-Guys/Girls Party?
(if only).
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Andrew,
Your comments on
“And guided by a New Zealand startegic plan. Where do we want to be in 2020? How are we going to achieve that? What is the budget? What are the action steps? Who is responsible?”
It is one thing to shoot down all proposals. What is your strategic plan for the New Zealand?
You can increase wages through active union ism all you want. You still need to answer the question “Where will the money come from to pay the higher wages”.
Joining Australia will not increase wages to Australian levels. Jobs will go to the Australian mainland (aka Tasmania). They wont stay here.
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Andrew
Are you the lecturer in this ‘class’ or just the interlocutor?
The most obvious ‘fowda’ (an artabic term which is the only appropriate word here, it’s like the American snafu – but more pointed) is your comment that :
>
>>Investment Tax credits won’t do it – they reward capital, which we don’t currently have enough of to create dynamic, new, competitive businesses with!
i don’t know, we seem to have created them in the past.
>
Living in the past is why things are going backwards – you are trying to reachieve past achievements while the rest of the world is moving forward to the future.
Our economic base has three parts, Manufacturing, Services and Capability.
Our manufacturing base is exactly the same as it was 50 years ago, pastoral products – if I remember my statistics right, something like 8% of the population are involved in farming and they produce 90% of our economic wealth.
Our service providers are the fastest growing bunch amongs our population. They exist in not only the Public Service, but also throughout the breadth of our society. As an example, there are now more Real Estate Agents than ever before, their msain objective in life is to clip a percentage off the price of a property when it is sold; when challenged to take a fixed fee they balk at the concept as not appropriate. Realtors add no value to the property, but they do add cost, as an intelligent seller will add the fee to their expectation of price so as to end up cost neutral. Add to this the legions of accountancy and legal graduates being churned out by the tertiary education system and you have a significant services drag on our overall economic value add as a nation.
Our capability sector is small, and does not have a conducive environment in which to pprosper and grow due to the lack of risk capital. Examples dpo exist, where a single entrepeneur has been able to create something astounding and reap the rewards of that endevour, but they are few and far between and not truly representative of our true capability. Examples such as Trade Me, which is the New Zealand equivelant of Wallmart, and Rod Drury, our equivelant of Bill Gates, are great to have, but we need a dozen of each, to continue to grow their businesses and patriate the profits rather than cash them up off-shore, if we are to have an economic foundation from providing the world with the capability to do something that has value.
Penultimately. Property is a passive investment. It greates no value and grows wealth only as long as there is wealth creation elsewhere in the economy so that there is demand led inflation. We need Active, not passsive, investmernts for the country to grow.
Finally. Kiwisavewr is a voluntary scheme, with few deep incentives to participate in and a sadly conservative investment profile that is perdominantly off-shore in nature. I would guess that the actuaries are proboly not getting too involved in the fund’s profile, as there is no insurance component toi it. If they were, I would expect them to find that the dominant demographic for the scheme is people in the pre-generations X & Y segment of the community, to whom a gift from both government and employer to a soon to be needed pension fund has attraction. If the scheme was compulsory, there would be a greater spread of maturity, enabling the accounts of the young to be inversted in more speculative, and so higher long term overall potential return, investmentsm and so stimulate growth.
My overall view? We need to open up our doors to people from ‘eastern europe’ and asia who have numerate degrees (preserable engineering and ICTechnologies,) and focus on achieving a reasonable domestic market (say 8-10 million, with a high proportion of income coming from capabilty sales to overseas purchasers (e.g. SaaS).
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“you can’t build an economy based on selling wood, wool, milk and lord of the rings tours”
Dunno about that, that’s pretty much what neolithic people did, though the Lord of the Rings tours were somewhat more realistic.
Part of the problem here is that people still talk about a “national” economy or a “New Zealand” economy when we have allowed our economy to become an undefined region of the world economy. It makes no difference if New Zealanders start saving money if the resulting capital is invested overseas. Nor does it make sense to invest in education if the people educated then head elsewhere where wages are higher.
We can let in all the trained engineers we want, but it won’t make much difference to the economy if they are designing things to be made in China and the profit to be repatriated to Australia. They’ll earn a decent wage for a bit, until somebody discovers that there’s engineers in India who can do the design work competently for half the price.
New Zealand needs to concentrate on places where we have an international comparative advantage that can’t be bought out, removed or under cut. That means muttonbirds. A truly Kiwi product unlikely to ever be produced elsewhere, easily transported, full of vitamin A and deeply yummy (and you can use the oil in place of petroleum products).
Prepare for the 21st century muttonbird economy (which will bear a startling likeness to New Zealand’s 18th century economy).
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I don’t follow the economic argument about having a larger population (8 to 10 million) so we have a reasonable domestic market. it suggests that under any (what?) circumstances there is always an optimium size. We can’t all be Japans.
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Ethiopia has a pretty big population, Luxembourg is pretty small, which economy do you prefer?
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I’d prefer the weather in Ethiopia but not the flies.
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Jh
The argument has to be taken from the point of view of investment in manufacturing with a reasonable expectation of economy of scale.
Let’s take for instance a situation in which we have devised a product that has an appeal to families with kitchens. For the sake of argument it takes the waste product from tree felling and turns it into base proteins that it transforms into food.
The current population of NZ is circa 4 million and there are circa 1 million ‘homes’, each of which needs something that transforms raw materials (from a supermarket or forest,) into a meal.
The average ‘stove’, which this new product will replace, has a reasonable life expectancy of 8 years.
Over a ten year period a ‘revolutionary’ product such as that proposed can build a 30% total market share, which, for the sake of investment profiling, it will achieve equally over time.
Our potential annual market is, therefore
(1,000,000/8)*0.3 = 37,500 or (on a 46 week year to allow for leave and public holidays) 815 per week or 21 per hour.
If the investment required to make the product is $10,000,000, which is straight line depreciated over three years to allow for the rapid pace of technological advance, the depreciation burden of the product is (10,000,000 /3) / 37,500 or $89 per unit.
If the same investment was spread over a population of 10 million, with the ratio of people to homes, and all other things being equal, the depreciation burden drops to $36.
$36 is about the same per unit cost as bringing the product in by sea from overseas. Which makes local production for a 1 million home market, at retail = depreciation *4 about $208 more expensive than importing (all things being equal).
So as a venture capitalist, I would not invest in local production in NZ, I would persuade the inventor to manufacture in Malaysia, at the same labour and raw materials cost as is available in New Zealand, and address the NZ market through imports. Thus exacerbating the balance of payments and forcing interest rates in New Zealand to stay high so as to not allow the cost of imports, on which the country depends, to escalate due to currency devaluation.
BOTTOM LINE, there is an economic population that makes investment in the production of THINGS, which is what people work to be able to afford, worthwhile. I think (but would not gamble my shirt on, that it’s somewhere between 8 and 10 million in a reasonable land mass (we don’t have that either, but what the heck, I’m trying to keep this simple!
Happy daze
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Sam
Luxenbourg’s economy is based on service provision – mainly legal and speculation – I don’t think people will travcel this far for the speculation and we don’t have a suitable commerce legal structure. We are also not a monarchy, so never have the sustained leadership that such an economy requires to establish itself.
Look at Singapore – an amazing economy and a population of upper middle class people, achieved through the long term vision and leadership of one man. We have two and a half year visions and compromise leadership – resulting in a nation of mediocrity rather than achievement.
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I wasn’t suggesting emulating Luxembourg, just pointing out that big countries don’t have strong economies. Lux happens to be a small region surrounded by rich people which can capitalise on being a nation state.
Singapore managed to set up as an entrepot state in a populous region with lots of raw materials before surrounding nations developed their transport and services industries. Don’t think NZ ever had, or will have, that opportunity.
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Sam
We do, we do
it’s called ‘capability export’ and we have the people to do it – we just have to
a) Stop tall poppy syndrome so they don’t leave the country
b) Create a large enough long term savings pool to have risk capital
Each revolution (industrial, sexual, information, comunication) had its own winners and losers. As we enter the start of a capability revolution (needed to take over from travelling to experiences if we are to get past the hike in energy prices to unasffordable to most) NZ has the potential to be there first!
OK . . . . . . . . . I’ll stop . . . . . . . . . I’m enthusiastic and want to see things done . . . . . . . . . . . . . . . . I better emigrate to Aussie . . . . . . . . . Sorry about that flare up. . . . . . . . . . I’ll start the moving process this weekend . . . . . . . . . Honest. . . . . . . . . . Sorry again.
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Mr Dennis wrote:
Your two solutions – state-supplied help (insulation, public transport etc) and state-ordered wage rises are both examples of the state interfering with the economy, and do not actually provide new sources of money to pay higher wages or help commodity prices to reduce.
In the case of insulation and public transport, the cost is usually negative for the economy because so many other efficiencies are achieved, creating the very capital you are looking for to improve wages. Bring it on, I say! The KEMA report, by no means a leftist report, states that there is easily 30% gains in efficiency at negative cost throughout our economy. This is free money that our so called market refuses to pick up off of the floor. So much for market efficiency.
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There are
i CAN TAKE 30% OUT OF THE COST OF THE PUBLIC SERVICE, WITH NO DETRIMENT TO PRODUCTIVITY, AND BY PUTTING THOSE PEOPLE ON THE DOLE i CREATE A NEGATIVE IMPACT ON THE ECONOMY – AS THEY GET LESS ON THE DOLE THAN THEY DO ON THE PAYROLL, BUT ALL i’VE DONE IS RELEASE TAXES TO BE SPENT ON OTHER FRIVOLITIES, UNLESS A TEX REDUCTION TAKES PLACE.
WHERE WOULD YOU LIKE TO GO WITH THIS DISCUSSION NEXT?
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Now Strings. I’m talking about genuine energy efficiency gains that can be had at zero or negative cost, that improve productivity. I don’t believe for a minute that you could cut the public service by 30% without a loss of productivity, that’s just nonsense. Of course there are efficiencies there too, but the same people who whinge about the size of the public service are the ones who whinge when the work gets outsourced at a higher cost. AND FIND YOUR CAPS LOCK BUTTON!
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“We are also not a monarchy, so never have the sustained leadership that such an economy requires to establish itself.”
Strings, look at this article http://en.wikipedia.org/wiki/Monarchy_of_New_Zealand
We are a monarchy you idiot – our head of state is Queen Elizabeth II; notice the title Queen
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Frog, How come the cost of PT is usually negative for the economy because so many other efficiencies are achieved?
What efficiencies?
Fewer imported cars? That assumes cars are replaced when they get worn out rather than when they get too old for the dealers to stock spare parts. It also assumes we will all use rental cars or taxis for the few trips that we will still have to make by car rather than keeping a car in the garage “for emergencies”. Economists might make economicly rational decisions all the time but the rest of us are too impulsive, emotive, lazy and generally human to behave that way.
Less imported fuel? Only if PT is electrified, especially buses.
Less money tied up in vehicles? Maybe, but not a huge difference. If we want attractive and reliable PT the vehicles are going to have to be replaced as often as trucks or cars currently are. Buses seem to be ten times more expensive that an average car, which seems to make each occupied seat just as expensive.
The impact on employment should be neutral. All the people made redundant from Repco and Supacheap can get jobs as bus drivers or train drivers. Mechanics and panel beaters can simply switch from cars to buses.
Less external costs? Not if buses continue to pour diesel particulates into CBD streets. Safety might improve but I don’t know if injuries from violence are recorded as thoroughly for PT travel as they are for car and bicycle travel.
All the evidence I’ve seen shows that there are more efficiency gains available from changing cars than from changing modes. Except if we want to evacuate the heartland’s and cram everybody into a couple of cities the size of Christchurch. PT works at its best when jobs and housing are both densely packed at iopposite ends of a rail line.
Building energy efficiency is a different story. There really are so many ways to cut those costs and they almost always have trickledown savings – especially the avoided costs of importing turbines.
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Gerrit
“Joining Australia will not increase wages to Australian levels.”
Doh. Of course they would. A national award is a national award.
“Jobs will go to the Australian mainland (aka Tasmania). They wont stay here.”
So. Jobs are transferring from here to Oz now within CER. Workers are leaving here to Oz at an even faster rate because jobs there pay more, because their economy is booming (minerals).
The only jobs which would go, would be those surplus to state government requirements in Wellington. A bigger cut than National will ever make.
All our public service delivery would remain here – with workers paid the Australian award for police, teachers, nurses, military etc. Huge pay increases.
People would still work in forestry, horticulture and fishing and farming here.
Our modern IT companies already have to match Oz pay to retain staff.
In local government, banking and real estate and retailing and distribution – workers would be seeking Oz award wage rates.
It is the only viable way to improve our standard of living.
Our economy has been focused on beating inflation – the RB has destroyed the possibility of our becoming an export led economy – because for most of the last 20 years we have had an overvalued currency and high business borrowing costs. It is not an environment to encourage reinvestment let alone new investment.
The price for this is impoversihment, or joining Australia. There is no third option, not anymore. Our economic sovereignty as a First World nation has been ruined by 40 years of economic mismangement. We can pay the price or take up th 1901 offer.
This is the Advent of greater material blessings (minerals boom in Oz) greater than the Pascal’s pineapple lumps we have now.
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On other matters
A rising minimum wage is a way to re-allocate jobs – having low wages only encourages low productivity (it discourages reinvestment). It also reduces the need for government subsidy of a living wage.
On the issue of women in the workforce, that issue is not about economics, (except for the fact that two incomes enables a higher market price for residential land) but politics. Once families have to have two incomes to afford a home, they begin to resent support to non working women (those on the DPB) and the unemployed underclass. Sometimes they also resent the WFF support to one income families and of course they the oppose income splitting (read Richard Long Dom Post this week) which only helps the one high income earning Ohariu couple set.
In this sense two income families has made the society more materialist and more focused on their own (sort of) familiy well-being – because the nature of family has changed and become much more diverse. Thus a less homogenuous society with less interests in common. Compounding this is the fact that we can no longer afford universal benefits, so we fight more over the division of the cake in our politics.
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SPC,
Yep agreed, joining Australia will result in higher wage levels.
And as you and I both point out, will move those jobs over to Australia mainland (or Malyasia, Thailand and Vietnam).
Still does not address the issue of where the money will come from to pay the higher wages.
For the public sector (nusese, teachers, etc.) will come out of increased taxation, meaning your wage increase requires a higher tax take and thereby cancelling out the gains made.
For the private sector it can come from either profits (meaning reinvestment is reduced) or increased productivity. If it comes out of profits then the cost of the prchases will go up to you the customer. So your wage increase is eroded by increased prices.
No the only way is to increase productivity. Starting with education.
Have you noticed that not one commentor has come up with suggestion for a New Zealand strategic plan?
That is the real problem. No planning to enable increased wages based on productivity.
Reason has been alluded to. Governments of red or blue (and including green) bent are short term focussed on re-election. Not the long term picture or plan.
Asked Sam this earlier and repeat this it now. What would your strategic plan consist of for New Zealand?
Frog, It would make an interesting post to have the Greens strategic plan for New Zealand. Not just a list of policies but a list of policies in priority, budgetted for and timelined.
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Interesting thread. No vision, no plan except “grow the economy” and a whole lot of smoke and mirrors and obsufucation (which is a necessary part of our adversarial political system). I should add a lot of ignorance (including myself) and lobbying by the self interested…….
………….
I tend to think though that whatever plan we have we have to factor intangibles into it. There used to be a saying “the best things in life are free” but you just don’t here that anymore.
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Ho ho ho… this is going to be a good thread.
I am going to start by asking the first question that any really highly skilled person will ask. Where’s the work? The NZ economy currently is based on selling wool and milk and wood and WETA workshops.
There’s a mob in Christchurch that does precision crystals, and we have some GPS production… but there isn’t a NZ demand for high-tech that could support the sort of industrial activity I’m used to. We don’t do a lot of robotics. We haven’t got much of an aerospace industry. There’s not much defense industry either. Hell, we don’t even build cars and tractors.
Those are the fields where the high-tech work is done. If we want to do them, we have to export product to places that actually can do those SAME things… and likely can do them more easily because the market here is pretty small.
We could also come up with ways of applying tech to our primary production. This isn’t all that rewarding. Which means that there actually isn’t ever going to be a lot of work for people like me. I never really considered that, when I came here I changed over to doing system integration and wound up working for telecoms and for government… but the problem is completely real.
( and I should move to Oz ).
The answers come down to a societal decision. Does the nation want and need people like me to hang around? The knee-jerk “yes” is assumed to be true but the implied requirement of society and government actually pushing one of the tech sectors hard enough to put us at the top of that sector, is not even on the radar. I reckon that there’s good reason for that. Nor am I proposing that I know the answer to the conundrum… this is however, a good part of why good people leave for Oz.
respectfully
BJ
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“I am going to start by asking the first question that any really highly skilled person will ask. Where’s the work? The NZ economy currently is based on selling wool and milk and wood and WETA workshops.”
Sadly BJ, our governments and policy institutes have been run by people who have been educated in a economic ideology that was deliberately engineered to appeal to the political bias and class interests of the wealthy, which was then used by corporate pirates to loot the public wealth that was built up over generations.
You only have to look at the exerpt from the publication that I refered to above and what transpired in the “high times” in the 1980s and 1990s to know that its true.
I’m a libertarian, but at least I have the honesty and awareness to point out what is plainly obvious, yet few other libertarians, and zero neoliberals will admit it.
On principle I don’t support government intervention in the economy, but I am smart and honest enough to recognise that it has to due to the constraints of the current economic system as it stands its necessary.
They’ve been told that its best for the government to have a “hands off” approach to the government and any intervention that they make would be inevitably bad.
So over the last twenty years our political leaders have taken the advice of the technocrats to heart and inevitably we’ve seen the country’s economic standing progressively decline. And the neoliberal fckwits blame the government! Of course the reforms didn’t go far enough!
So they abrogate the responsibility for their own lack of vision and imagination and place it all at the feet of the government.
It appears that they have changed their tune. Now its all about Public/Private Partnerships, because business is ALWAYS SO MUCH MORE EFFICIENT. Cue the Tui ad. Cough, Sydney City Tunnel, cough.
Public/Private partnerships are just a means by which business can engage in risky enterprises, whilst shifting the cost of any consequences onto taxpayers, and it allows them to use the States powers to price gouge their customers.
Though to be fair to Kiwi business there are a few exceptions, though admittadly they tend to attract offers from overseas that they can’t afford to refuse and then their production and even IP is offshored.
I’d recommend that anyone who is interested in the future of this country read two great books. One is Reinventing Paradise, written by the business journalist, Rod Oram, and is a compilation of his columns about the challenges that our country and economy face in the future and his advice on how we can overcome them. He covers Peak Oil, climate change, and makes it plain that he believes there needs to be a major shift in attitude amongst the business community. The other one I’d recommend is New Zealand Unleashed by Steve Carden, a former consultant from McKinsey and Co who has recently returned from the United States.
http://nzedge.blogspot.com/2007/06/new-zealand-unleashed.html
Isn’t it interesting that the greatest economic growth rates over the last 20+ have been in the most socialist countries/blocs?
Ireland, Finland, PRC, Singapore, South Korea, and Taiwan all make considerable interventions, whether its investment or State Owned Enterprises being dominant in their economies.
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What you say makes sense BJ. I think NZ’s case is analogous to a country town saying “we need to increase our population so we can have the factories they have in the city”. Can you do engineering design work from home or in a small lab?
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I have to agree with you BJ, i’m looking at heading back to NZ in a few years and I ask the question where are the Jobs Frog!!!
We have wasted the last 20 years in NZ doing pretty much nothing, this nothingness has come from both major political parties however I don’t know if the green party would have done any thing different.
I agree with you Sleepy there is nothing wrong with a state owned enterprise as long as its mangement is open and accountable, the problem with SOE’s is that those in charge often don’t have a responsibility to run the company efficiently, I support the chinese method that if the manager stuffs up then its off with their head.
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My re-reading of my own post gives a pretty obvious answer. We should be concentrating on building the things WE need first… which would be electric or methane or fuel cell based cars and farm machinery, and the means to power them. Something related to this concept perhaps?
http://news.bbc.co.uk/2/hi/technology/6129460.stm
At the end of the day though, production and IP needs to stay HERE if it is to be useful to the overall economy, and while that entails some business “inefficiency” it is also necessary to keep NZ from sliding backwards.
It was inefficient to build cars here. They are built cheaper elsewhere. The same will be true of any product of technology. If NZ is to retain any tech base at all it must decide and be quite determined, to maintain it… or it should cede its sovereign position and become an Australian Farm.
respectfully
BJ
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bjchip,
“It was inefficient to build cars here. They are built cheaper elsewhere.”
Manufacturing cars is rather inefficient wherever they’re made. GM and Ford may have to shut down 30% of their productive capacity, because of the current crisis. They’re only “successful” in that they’re able to use accounting methods that misrepresent the actual current state of their business. They treat workers as an expense to be minimized as much as possible, whilst they regard inventory as an ASSET.
http://mutualist.blogspot.com/2008/06/book-review-rebirth-of-american.html
The only real exception is Toyota, who have developed their own management and accounting system, lean manufacturing, whilst in the Toyota the value of workers is recognised an in a downturn its the management dividends, salaries and bonuses that are cut before any workers are layed- off. American or even New Zealand management would not even conceive of doing that.
Even Toyotal now recognises that large economies of scale yields few unit-cost savings as they compared the performance of their George Town factory (500,00 cars per year) and their Melborne factory (90,000). The larger plant doesn’t yield any unit-cost savings. Toyota have indicated that they will not consider a building a plant like it in future, for this reason.
I’m thinking that Lean Manufacturing can be downscaled for production for the local market.
I think we may need to, because if fuel prices continue their current trend and if our dollar falls, products imported may from China may rise considerably, reducing their artificial competitive advantage.
China’s inflation rate is now at 8-10%, which will I’m sure, fuel higher wage demands, especially in light of the fact that they recently cut itheir energy subsidies, which have led to an increase of 16% for gasoline and a 18% jump in diesel.
The fact that they use three times as much energy per dollar in GDP, which would only exacerbate the inflationary effects on imports.
“But China is also a world-class waster. University of Alberta political economist Wenran Jiang calculates China spends three times the world average on energy — and seven times what Japan spends — to produce $1 of gross domestic product.”
http://www.businessweek.com/magazine/content/05_15/b3928070.htm
http://wallstreetexaminer.com/blogs/winter/?p=1736#more-1736
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I was listening to Chris Laidlaws program. Apparently in Vanuatu the cash economy is only 20% and the rest is family owned plots etc where they grow vegetables.
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See this post from bernard Hickey about the surge in migration to Aus:
“My view is that the long term decline in our productivity growth and our foreign-debt fuelled property investment and consumption binge of the last 5 years have left us weaker than our Trans-Tasman neighbours, with slower growth and a similar inflation problem…”
http://www.interest.co.nz/ratesblog/index.php/2008/06/22/the-emigration-surge-to-australia-is-not-normal/#more-1048
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STP,
Could you give a quick synopsis of what Rod Oram recoomends when you suggest New Zealand “needs to be a major shift in attitude amongst the business community”?
Biggest hurdle as I see it to business development is the high cost of capital, lack of trained staff, business compliance costs, compertitors in overseas countries enjoying tax holidays to get eastablished, etc,.
Be interested to see what Rod Orams fixes are.
BJ,
“At the end of the day though, production and IP needs to stay HERE if it is to be useful to the overall economy, and while that entails some business “inefficiency? it is also necessary to keep NZ from sliding backwards”
Totally agree but we have a government hell bent on free trade agreements where it will be hard to protect your intelectual property.
The biggest problem with IP is that as soon anything is in the public domain anybody and everybody will copy it.
Free trade agreements also precludes New Zealand from having local preferences for manufacturing and purchasing.
For example the ARC are about to order 35 electric train sets for the Auckland area. They should be designed and manufactured in New Zealand (A&G Price in Thames can do the heavy casting of bogies, etc. that they do already for overseas markets).
But free trade agreements mean that we have to look at Chinese trainsets as well. We cant protect local industry, even when our competitors choose to subsidise their manufacturing through low wages, free factories, easy access to capital, etc.
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This is what bernard Hickey says at http://www.interest.co.nz :
“We need a dose of long term tax reform, a more robust inflation-fighting monetary policy framework, more productive government spending* and an infrastructure building spending spree, as opposed to a townhouse and apartment building spree. This might do something to make us more attractive to our own people.”
*My mental association: end part of Agenda: youths around the liquor outlet in Manuerewa.
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“Could you give a quick synopsis of what Rod Oram recomends when you suggest New Zealand “needs to be a major shift in attitude amongst the business community??”
Basically he criticises the business communities’ noted lack of vision and imagination, which has been illustrated to their reaction to climate change and the ETS. All they could think of was the costs related to meeting our environmental obligations, when theres huge oppurtunities in developing a leaner and more environmentally benign economy. Its also illustrated by the recent ANZ business survey, where the conclusion is that most business are planning on playing safe and are focused on domestic expansion, rather than taking advantage of oppurtunities afforded by international trade.
http://tvnz.co.nz/view/page/411749/1856917
“Biggest hurdle as I see it to business development is the high cost of capital, lack of trained staff, business compliance costs, compertitors in overseas countries enjoying tax holidays to get eastablished, etc,.”
There needs to be a massive push in on input minimization, whether its energy, material, or speculative costs like high real estate prices. Big Business and their propoganda organs (MSM, business schools) in New Zealand focus too much on labour costs, because it appeals to their class interests and political bias.
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STP,
Totally agree with you on the need for businesses to focus on the opportunities that spring up whenever there is change of any kind.
I disagree with you on the fact that business in New Zealand is focussed on Labour costs. Never seen any research to back that up, maybe you could provide?
Business of any kind is totally focussed on the bottom line. If that is not showing a return then the business will fold.
Sure the bit between the top and bottom line comes into focus when the bottom line is not as it should be. But to say that only reducing labour costs will solve the problem for a failing business is hokum. Yopu either increase the top line by careful investment of resources and capital or cut the bit in between business pratise efficiencies and possibly labour cost reductions.
“most business are planning on playing safe and are focused on domestic expansion, rather than taking advantage of oppurtunities afforded by international trade”
Cost of capital has a lot to do with that.
Reserve bank keeps the daily cash rate high and business thinks twice about investing to expand internationally.
Comes back to the strategic plan. What does New Zealand need to put into place to achieve this expanded international business structure?
More investment capital? Lower taxation for exporting companies (farmers will love that one!)
What is the answer. Or is the answer that business should just commit to the capital required to expand internationally and hope that the government wont tax the “rich pricks” when they make a bundle.
Take all the risks while wage earners (and the government trhough PAYE taxation) reaps the rewards?
What investment should the wage earner contribute to a strategic plan that will see their wages increase?
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My take is that we can and should be able to build a decent “Volkswagen”. Not changed every model year, not the fastest thing on 4 wheels, not the Prancing Horse of the South Pacific… but a utility vehicle that runs on electricity or (my preference) liquid methane. The second design we could approach is a turbo-electric methane burning heavy… suitable for tractors and trucks. This leverages infrastructure we have and permits use of infrastructure we would like to have. Converting electricity, water and CO2 into CH4 via electrolysis and the Sabatier reaction gives a source of natural gas that is inexhaustible as the sun and wind that create the electricity. Transporting the gas in a pipe rather than in a high voltage power line gives much more flexibility of use at the end points…
And you can burn it in a car you own today without changing all THAT much.
respectfully
BJ
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I think my last comment is in moderation. Shouldnt use the r*ch pr*ick comment I suppose.
BJ,
How do we get that project up and running.
Sounds interesting and viable.
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“My take is that we can and should be able to build a decent “Volkswagen?.
A company is looking at manufacturing a indigenous electric car based off of the Waikato University’s NZ Eco Ultra-Commuter. Its the brainchild of the funder of the above project and he’s trying to set up a Austrialian, UK, and New Zealand consortium.
http://www.scoop.co.nz/stories/BU0806/S00078.htm
Not changed every model year, not the fastest thing on 4 wheels, not the Prancing Horse of the South Pacific… but a utility vehicle that runs on electricity or (my preference) liquid methane.
Theres also an open sourece car project that was in development in the United States of a crossover SUV that is built on a modular platform that provides a variety of propulsion choices, which could be adapted for domestic manufacturing and use for example as a replacement for sport utilities and SUVs on farms.
There haven’t been any updates for awhile on their site so I don’t know the status of their project, but it wouldn’t hurt to get in touch with them.
http://www.osgv.org/kernel-electric-car-green-suv-phev/
“How do we get that project up and running.”
My employer is a friend of Nick Gerritsen, the guy who assisted with the startup of Aquaflow (biodiesel derived from algae) and Windflow Technologies (Manufacture of Turbines), perhaps you could approach him for assistance with finding capital etc.
He runs a business incubation company called Crispstart. It wouldn’t hurt to float the idea by him.
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Bad jokes about the guy who gave us the first “Volkswagen” omitted.
What is required is cheap hardware to do conversions for existing cars and a hellishly high price for petrol. The CH4 we would probably use initially is the stuff being flared off the Maui field. We apparently have enough of it for a fairly cheap startup cost and utilizing that currently wasted resource would be carbon neutral even if it isn’t. The gas is getting burned to no purpose at all now. Using it to displace petrol would be a good thing.
Research and development (probably a government led project here) to create a compact and efficient plant design to convert water and electricity and air into methane.
One has to note that the current electrical infrastructure will be altered to accommodate each new renewable source, no matter how remote. My bet is that the electrical infrastructure is harder to do than LNG tankers or pipelines to some remote but energy rich sites.
But the production of the car disappeared when I thought about it. We already HAVE cars. Two per family or more. It’ll take a while to get them all converted. We will want replacements eventually but the market for the car I’m thinking about doesn’t really appear until the luxury of the current stuff is priced in. Conversion hardware would be the business opportunity.
What to do with all the diesels is probably the part that would interest me. For that to happen you have to figure out how to burn Methane in a diesel engine (nobody I know of is willing to try that including me)… or find a way to drive a heavier vehicle with a similarly torque happy system.
Which is where the turbo-electric (micro gas turbine) gets a look in.
respectfully
BJ
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“What is required is cheap hardware to do conversions for existing cars and a hellishly high price for petrol.”
If we develop a viable infrastructure for production of our own fuel would substantially reduce our trade and current account deficits, which would only be a good thing for the economy, especially if its the cost is competitive, with oil, which is unlikely to drop below $80-90 a barrel if the Saudi’s successfully force the banks to drop their positions in the oil markets as is being rumoured.
http://uk.reuters.com/article/oilRpt/idUKN1737971720080617
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This is the sort of Volkswagen we need:
http://www.seriouswheels.com/cars/top-vw-1-liter-car.htm
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I propose biotechnology. we will grow parts in the ocean using organisms that extract minerals from the ocean.
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JH
If the fuel is renewable and carbon neutral there is not so much advantage in trying to create such a tour-de-force of engineering. There is an old Austrian saying which is I think, a response to the German tendencies to overengineer their hammers. “Too clever is dumb”. I love the car. I would not want to repair it, nor protect it, nor be near it in a fire.
Bio-engineering growing parts??? The introduction of unnecessary complexity offends my engineering core philosophies.
respectfully
BJ
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this i know. but i don’t see that an individual should forgo a sound investment option for them simply because it is not what the country needs.
we have capital, if it is not available in sufficient quantities for starting new productive projects, that is becuase it is swallowed up by less productive investment opportunities.
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A group at Purdue university is proposing a process termed H2CAR:
http://www.purdue.edu/UNS/x/2007a/070314AgrawalBiomass.html
which takes biomass and uses hydrogen to convert it to liquid or gaseous fuels (removing some or all of the Oxygen atoms in the biomass).
This idea has been rubbished in countries that use lots of gas and coal for electricity generation, but could turn out quite useful for New Zealand once we get close to our 90%+ target of renewable electricity.
Trevor.
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People invest in property because it is “safe” and because a lot of other investment opportunities have become very public and complete dead losses. They go there because the banks rate of return isn’t big enough. They go there because they know, based on past behavior, that the government will act to protect property investors in ways that make the tax on investment in anything else, a burden to onerous to bear. The reserve bank is fighting inflation to beat all, but the carry trade and means that overseas “hot money” shows up here every day seeking places to go. So the inflation continues and the tax advantages given to the small property investor in the form of the LAQC continue to penalize everyone else in favor of the property investments that are funded by mortgages held by Aussie banks with interest flowing like blood back to Oz, and with ordinary taxpayers having to make up for the blood loss.
The problem is highly intractable as long as the government leaves the distortions in the tax code in place. The bigger hurtles to overseas ventures are related to the costs of establishing a presence in those markets. The tyranny of distance hurts us. Lack of skills in Mandarin, Russian and Thai hurt us a lot more than our lack of skills in Maori.. Lack of a domestic market big enough to support our product hurts us too.
Whatever we sell, it has to work here and in Oz before we can branch out to the rest of the planet. This is both to get some operational reputation and to get the base cash-flow to make the next steps feasible. So we have to get the basic agreements in place to make our products as accessible in Adelaide as in Auckland.
It will take generations for the problems to be corrected and that is only after some of the issues raised are addressed.
So our best and brightest bleed off to Oz, following the money and giving the Australian economy the added advantage of their participation in the workforce there.
I blame it all on the misuse of the LAQC.
respectfully
BJ
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laqc eh? can’t say i’ve heard of it before. can you explain how it is misused in your view, & how it leads to rising prices?
i’m very interested in learning anything novel to me
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I wonder what Nationals position is on LAQC’s etc. I fear (come to believe rightly or wrongly) that a certain self interested section leans heavily on National. My crude barometer is the number of very wealthy property developers and investors who support Act (and Don Brash) and by default (as ACT support is tiny) National.
Note also the comments of the Real estate Institute re better treatment from National.
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Wow, it’s Monday, and this thread is full of such great fun!
STH
>>It teaches that labour is merely a cost factor in production …….. whilst categorizing inventory as an asset!
Sadly, that is the truth of the matter when using accounting terms – you can’t ‘own’ labour, so you can’t sell it, so you can’t count it as an asset. In other forms of valuation, you can and looking at a direct/indirect vs tangible/intangible matrix will enable you too look at things in a different light. If you take the theory of economic value add, even investments in peoples’ training counts as an asset – but that’s economics, and if you laid every economist in the world end to end you still wouldn’t get a promise!
>Manufacturers have become marketing enterprises with an attached subsidiary manufacturing function.
Correct – and? What alternative do you propose?
TOAD
>It reflects a desire of women not to be economically dependent upon men if they become mothers.
Perhaps the most interesting aspect of modern society is the use of the term “partner? to indicate a (legal or not) spouse, when the concept of partnership has, in fact, vanished from the relationship.
When my children were young, my wife stayed home, looked after them and our home and ensured they were taught the basics of living in a polite society; I worked hard and earned enough money to sustain our life-style. It was a partnership in that we each had a role and we benefitted or suffered from our collective input and achievement. That isn’t happening today. Equality means both try to do everything and, in the best traditions of socialism, the best does not come to the fore but the mediocre does. (I know, I’ve tasted both my daughter’s and my son-in-law’s cooking – he shouldn’t be allowed in the kitchen, even in the name of equality!
Sam Buchanan:
June 20th, 2008 at 11:12 am
Well Said sir.
Toad
>I don’t believe for a minute that you could cut the public service by 30% without a loss of productivity, that’s just nonsense.
Sorry friend – you are the one talking nonsense. I have worked with many NZ government departments and have been nothing short of appalled by most of them. Indeed, in one I did a study to look at the way a particular type of transaction as processed from end to end, and with the assistance of four people from INSIDE the department was able to design a process that used half the labour and a third of the time to complete the transaction; the report was put on the shelf and I was asked to sign a confidentiality agreement to ensure no one knew about it. In another Ministry, when looking at the Value-for-Money potential of possible initiatives, I included in my report an appendix indicating that overall V-F-M could be significantly improved by tasking as more disciplined approach to the management of executive diaries and meetings; the appendix was deemed ‘commercially confidential’ and not released to ministers and opposition members when asked for under the OIA. Thirty percent is a mere bagatelle to what could be achieved with some real innovation, it’s simply picking off the low hanging fruit!
(One last example. A $10 million project I reviewed had spent the money, but had yet to deliver a single valuable output because the external contractor retained ($250 per hour) to lead the project was pursuing as personal academic interest through their involvement, and hadn’t yet accepted that the basic premise of the project was valid. Their point was that when they were happy with the project brief, irrespective of how much research and market testing it took, the project would move ahead, money wasn’t the issue, academic rigour and appropriateness was far more important!)
> AND FIND YOUR CAPS LOCK BUTTON!
Very, very, very, very, very, very, very, very, very, sorry about that
JOHN-STON
>We are a monarchy you idiot – our head of state is Queen Elizabeth II; notice the title Queen
I’m not an idiot, you are! We are a constitutional monarchy, with the monarch almost given an interesting role in grace and favour, but NO royal power whatsoever. If we were a real monarchy, one of the Royal Princes would be here as Governor General and would truly have (as does the President of the USA) a veto on any Act of Parliament that he thought was detrimental to the good of His Family’s people.
Monarchs rule – we have Helen instead.
SLEEPYTREEHUGGER
>Isn’t it interesting that the greatest economic growth rates over the last 20+ have been in the most socialist countries/blocs?
Sir, methinks thou doest jest! Ireland isn’t a socialist state, it’s a democracy with as many problems as New Zealand minus 2 – they have a BIG market on their doorstep and don’t have the vast land mass that we do. Singapore – you’re joking, if ever there was a benign dictatorship this is it! What about the middle east and it’s plethora of monarchies? What about . . . . . . well, no need to go on! As the great experiments of the USSR and China have shown, the general standard of living goes up, and food queues close down, when capitalism is allowed to establish itself.
BJCHIP:
>At the end of the day though, production and IP needs to stay HERE if it is to be useful to the overall economy, and while that entails some business “inefficiency? it is also necessary to keep NZ from sliding backwards.
Let me see if I’ve got this right. We are at the furthest possible point from any mass market, so have a major transportation issue to address – meaning we have to manufacture at 80% or less of any other producer, or go broke because no one will buy our over-priced goods. OR We have to get into luxury niche markets – such as luxury yachts for billionaires – which we are very good at and need to maintain excellent apprenticeships to maintain a value-for-money profile against the people who built the most luxurious hotel in the world! (These people do make comparisons, believe me I’ve seen them!)
Add to that the high energy usage that international shipping incurs, and the fact that that fuel is increasing in cost at a rate that no amount of productivity gain can keep up with, and we’ve got a bit of a problem being a manufacturing based economy.
ANDREW
Strings Says:
June 20th, 2008 at 10:06 am
>Property is a passive investment
This i know. but I don’t see that an individual should forgo a sound investment option for them simply because it is not what the country needs.
I agree wholeheartedly.
>we have capital, if it is not available in sufficient quantities for starting new productive projects, that is because it is swallowed up by less productive investment opportunities.
Exactly my point, we need to generate more venture capital which we could do with a mandatory “kiwisaver’ type thing that would enable some of the available investment capital to take a long term view as it will have circa 40 years before it is needed for payout.
Happy Mondaze all
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On inefficiency in the public service I was reminded of a converation about somones son who works in the oil industry in the UK…. along the same line: wasting money and enormous wages.
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Loss Attribution Qualifying Corporation – Not unique to NZ but not common and intended for small business in general, not for real-estate.
Not a bad idea, but the arrangement with respect to Real Estate means that there is deductibility of Mortgage Interest and Expenses. This applies not to income earned by a property but to the individual income tax as well. The result is that by forming such a corporation and organizing to purchase property which is rented out to someone, the effective cost of the property is covered by the rent and the deductions from the loss attribution. The property increases in value, but there is no capital gains tax, you bought it with the intention of making money off the rental (not necessarily but that’s what you tell the IRD) and the result is that you don’t care so much how high the interest rate goes as THAT is covered by the other taxpayers.
People who actually LIVE in houses they buy are paying the full freight and their taxes are covering your “losses” and deduction. It is complicated and it isn’t always successful (the IRD is trying to keep it from working but the legal wording makes it very difficult for them). The scheme is common enough that many accountants here have pre-printed handouts and examples about just how to do it and what you can expect to gain.
respectfully
BJ
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Strings
What you are saying is that it is impossible for NZ to be a manufacturer of anything. Which is a lot like what I said… except I gave some conditionals which make it possible for us to do some manufacturing IF WE DECIDE to do it. I think that you are agreeing with me but only with the negatives I outlined… not looking for any way to actually overcome them. This is as typically Australian an attitude as I’ve ever seen.
I don’t think that importing those things across all that distance is the best of ideas any more than exporting them might be. The cost of sea freight is not small but it is smaller per Kilometer traveled than most others and we know how to make it smaller yet. As a percentage of the price of an object manufactured here, it is not going to be 20% if we are reasonable about what we choose to produce. The nature of our trading partner choices is also important.
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but in my mind, the capital gain on property should be taxed exactly the same as my capital gain on trees.
WRT manufacturing. I see the cost of shipping going through the roof as energy prices continue to test their elasticity till they reach equilibrium, then they’ll stay at (I thimk) about $7 per litre. We need to generate income to NZ through provision of capability – But more on that elsewhere!
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Fishing businesses ‘crippled’ by fuel costs
http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10515470
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It’s not just oil prices that are crippling the fishing industry. The fact is, despite being renowned worldwide for our ‘sustainable’ fishing practices, our fish stocks are crashing and it is simply not as profitable as it used to be. Then you add fuel prices…
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Forgive me folks, but I have no idea what the Capital Gain on a tree is in New Zealand. Strings, you’ll have to clarify for me. I THINK you’re saying that there should be no cap-gain on property and I don’t think there is any conditional on that. Under some circumstances that can work. With the LAQC as it is, it cannot.
I know that there’s been a lot of contention about forestry taxes, but the complete story hasn’t penetrated the armor-plated workweek. Frog? This’d be a place where you could summarize and educate.
respectfully
BJ
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BJ
A quick explanation.
To grow a forest, we cleared some land (capital) bought some seedlings (capital) planted them (expense) and allowed them to grow.
Very roughly, it cost about $10 per tree to do the clearing and $10 to buy a seedling. THere is also the cost of the land, but let’s leave that to one side for now.
Once the planting is done, there is some husbandry to allow optimal growth (a bit like decorating to get the best price for a house), but essentially you sit back for 20 ish years then cut down what has grown from your $20 investment and sell it for about $600, giving you a ‘gain’ of $580 per tree. (all numbers approximations of course). The added benefit is that, unlike a grain type ‘crop’ you don’t HAVE to fell the trees if the current price is low and there’s a chance it will rise in a year or two, you just sit back and wait.
In general expense, you might end up over the 20 years spending about $50 per tree, doing pruning and insurance and management and road upgrades and all that stuff, and having a LAQC you get to off-set those ‘losses’ (of course you have no revenue) against your other private income.
In the case of a house, with the same numbers, you would not pay tax on the $580 capital gain, in the case of a tree you pax tax on the $600 profit. Seems lopsided to me. I agree with not taxing capital gains of primary residences, that ius equitable as the replacement costs have also risen; however, in the case of an investment property, it seems to me that the entire purpose of the investment is to make money, and that money, be it annual profit or one-off capital gain should be taxed. Not doing so encourages people to buy bricks and morter investments rather than interest bearing deposits in savings, retirement, or share-market funds, all of which are taxable at the income stream level. I postulate that the reason I put money in a bank deposit ios to ensure its value increases (gains) at at least the level of inflation – but the IRD totally disagree with that posture
HAppy daze
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“In other forms of valuation, you can and looking at a direct/indirect vs tangible/intangible matrix will enable you too look at things in a different light.”
I’m in favour of the new “Lean Accounting” method that was designed to complement the Toyota Production System or “Lean Manufacturing”
I’m a complete layman in this regard, but it just appears a far more efficient and logical means of accounting. It seems as if you know what you’re talking about obviously having had extensive experience that I lack.
Perhaps lean accounting would be relevant to you? Heres a couple of links.
http://www.aicpa.org/PUBS/jofa/jul2004/kroll.htm
“Correct – and? What alternative do you propose?”
As the Toyota Production System consultants suggest, fire the MBAs and learn to manufacture.
“Bill Waddell and other lean consultants have been trying to convince manufacturers that if they would only fire the MBAs and actually learn to manufacture, they could do so much more cheaply locally than they can by offshoring their production.”
http://mutualist.blogspot.com/2008/06/book-review-rebirth-of-american.html
“Sir, methinks thou doest jest! Ireland isn’t a socialist state, it’s a democracy with as many problems as New Zealand minus 2 – they have a BIG market on their doorstep and don’t have the vast land mass that we do.”
“Sir, methinks thou doest jest! Ireland isn’t a socialist state, it’s a democracy with as many problems as New Zealand minus 2 – they have a BIG market on their doorstep and don’t have the vast land mass that we do.”
Perhaps socialist isn’t particulary accurate. Using political labels is so hard these days as everyone has different interpretations of what they mean.
Perhaps a better description would be fascist or at the very least mercantilist.
You can’t expect me to believe that Ireland or any of the others are “free-market” economies. T
One of the few nations to have the right to claim that is Vanuatu. Virtually no tax, with the exception of an income tax, a completely hands of government, most investment comes from overseas aid.
The preferential access that Ireland receives from the European Union can hardly be construed as true free trade, the development grants it received from other European nations on the basis that it had one of the least developed economies in the bloc when it joined, certainl contributed to allowing them to make considerable investments in public infrastructure and the ability to attract transnational corporations to make greenfield investments through preferential treatment such as tax breaks whilst still balancing the budget, nor would it have been able to afford its highly skilled and qualified workforce, which they were able to afford through providing free tertiary education.
“As the great experiments of the USSR and China have shown, the general standard of living goes up, and food queues close down, when capitalism is allowed to establish itself.”
Well tell that to the Indians or the who suffered more frequent and severe famines or the Irish who suffered through the Potato famine, subsequent to the British imposing “free market” capitalism on them.
According to a British statistician, who analyzed Indian food security measures in the two millennia prior to 1800, there was one major famine a century in India. Under British rule there was one every four years.
http://www.doublestandards.org/engler1.html
http://www.zmag.org/znet/viewArticle/10167
Oh I’m sure you’ll say that, oh, thaaats not capitalism!” Cue the Tui add.
If its not, then there never was and never will be capitalism.
Besides the Centrally Planned Soviet Economy was the brainchild of Leon Trotsky who Stalin called a fascist. Funny that.
Most neocons were formerly Trotskyists and their conception of an economy has a great resemblance to Trotsky’s vision, which is not suprising as many are “former” Trotskyites.
“The other important influence on neoconservatives was the legacy of Trotksyism–a point that other historians and journalists have made about neoconservatism but that eludes Ehrman..”
http://tinyurl.com/7xekz
The Chinese government actually dismantled collectivism of agriculture even before the rise of the neo-capitalist “market economy” and it can be argued that this formed the basis of the future economic growth.
http://www.jstor.org/pss/2158986
The market economy is great if people have enough money to pay for food, but because labour’s wages in country’s that aren’t regulated are dicatated by Ricardo’s Law of wages, “the natural price of labor is that price which is necessary to enable the laborers to subsist and to perpetuate their race, without either increase or diminution”, though when theres money to be made by the landlords, the wages of the landless aren’t even enough for that.
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Thanks for the explanation Strings… There’s certainly a problem here. The folks from the IRD don’t let you do income averaging, it’s called in as a Capital Gain? Interesting. I reckon it isn’t right either, but never DID have much luck telling the IRD or the IRS what was right and what wasn’t.
The deal with the investment property is that either it should be taxed or it AT LEAST should not be handled through LAQC arrangements. The difference between it and most other things is that property is not ALWAYS investment property, it is necessary for everyone to have someplace to live and most of us have to pay for that place to live out of actual income, not deductions of our other taxes.
“The Man” wonders why we all want to leave these happy shores… needs to come visit me I reckon.
respectfully
BJ
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Ahh such complex debate, why do I always see it as dead simple?
NZ has a long term balance of payments deficit. therein is the root cause of nearly every social ill we suffer, including tagging,shooting, bag snatching etc.
I’ve suggested before to make every dollar that comes into the country tax free.
Just as today we are heavily skewed towards capital gains because they are tax free. Then imagine the ‘gold rush’ towards export if, export earnings became the new ‘capital gain’.
More dollars flowing into the country than flowing out, by definition we’d all have to get richer. Good ol’ greed would do all the work….
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