Russel Norman

Liam Dann on defending the status quo

by Russel Norman

Liam Dann continued his series of defending the status quo on banking and monetary policy (here and here) this week with his column on Reserve Bank policy. While I appreciate Dann’s contribution to the discussion, his failure to offer a single positive solution effectively denies the huge difficulties our productive sector is facing or the crisis in housing affordability.

The closing of the Oamaru woollen mill is an example of the kind of crisis we’re in. The mill was founded in 1881 and, since then, has survived eight economic recessions and two depressions – including the Great Depression – but couldn’t survive the current economic settings under this National Government. For 200 workers, the impact will be particularly devastating.

Unlike Dann, I believe our export and manufacturing sectors are worth fighting for and I’ll continue to work constructively on new policy that might help rebalance the New Zealand economy towards productive enterprise not property speculation.

I have put together a suite of measures that will help address the high New Zealand dollar, favour productive investment, and address housing affordability. The suite of measures that I’ve been proposing (since 2007) include:

  1. A lower Official Cash Rate and the use of complementary tools to otherwise control house price inflation – like loan-to-value ratios. A lower cash rate will take pressure off our overvalued exchange helping our export and manufacturing sectors and the valuable jobs they create. Loan-to-value ratios help curb bank lending excesses that fuel house price inflation and can be designed to exempt first home buyers or target high-priced homes, as has been done in Canada, Finland, Norway, and Sweden.
  2. A capital gains tax (excluding the family home) to remove the current tax incentives to speculate in property. This will help reduce demand for property.
  3. Limit the sale of land to New Zealand citizens and permanent residents only. Australia, Hong Kong, China, and Singapore have similar policies which help limit property speculation and dampen demand.
  4. Increase the supply of affordable housing. Our Green Jobs initiative would see the state build an additional 2000 new energy-efficient state and community houses.
  5. Help lower-income families into their first home through our Home for Life package announced last month. Our progressive ownership policy will give families that are otherwise locked out of the housing market a pathway to home ownership.

Lian Dann can continue his quest for a silver bullet solution – the kind that neo-liberal market reformers promised in the 1980s – but I prefer to roll up my sleeves and look for smart, practical reforms that will help move New Zealand towards a fair, prosperous, and more sustainable economy.

We owe the mill workers of Oamaru nothing less.

Russel