Denise Roche
Workers moving back to 19th Century

“There are twenty-four hours per day given us; eight of these should be for work, eight for sleep, and the remaining eight for recreation and in which for men to do what little things they want for themselves”

So said Samuel Duncan Parnell when he emigrated to New Zealand in 1840 and established the eight-hour day by organising his fellow carpenters to refuse to work the much longer hours that had been the norm in their native United Kingdom.

The eight hour working day (and the 40 hour week) was a standard that was rapidly picked up by workers across the land as they sought to create a fairer society from the one they had left. It became enshrined in workers’ employment conditions and lasted until the international move towards ‘labour market flexibility’ of the mid-1980’s and was pretty much dismantled by the bargaining reforms of the Employment Contract Act introduced by the National government in 1991.

At the second day of the Precarious Work and the Living Wage in our Community Symposium, the focus has been on how to ensure that workers can once more enjoy a standard of living that enables them to participate fully in society.

We’ve all heard the appalling statistics around inequality in New Zealand (we are placed 23rd out of 30 OECD countries for how well we’re doing on equality) and we know that 270,000 children are living in poverty with two out of five of those kids coming from families where one adult is in the paid work force.

At today’s workshops we heard from Deborah Littman, who is involved with the London Living Wage campaign and also the Metro Vancouver Alliance.    Her message was that these campaigns are affordable and are winnable but the community has to be pushing for it because workers cannot do this on their own.

She spoke about how communities had come to realise that poor wages affect everyone, not just the workers.  She pointed to the costs associated with poverty wages.  These include the cost of people’s poor health outcomes, poor education outcomes for children and the loss of the economic contribution they could make as well as the cost of the justice system for those kids who slip into crime.

She also pointed to the fact that low wages weaken local economies.  Lower paid people tend to spend what they earn (they don’t keep their money in off-shore accounts for example) and economists argue that for every dollar earned in a low income family it has the value of at least $1.60 as it circulates through the local economy.

She also spoke of how communities are weakened by low wages.  As the adults in a family struggle working horrendously long hours and sometimes several jobs to make ends meet, our communities become poorer because those adults do not have any free time to volunteer. It’s hard to put your hand up to coach a netball team or deliver meals on wheels when every hour is spent trying to earn enough to feed your kids.

Several speakers today have made the point that we cannot afford to keep wages low because we all pay the cost of that.  The challenge for all of us – especially those who are better off – is to pass that message on to others in our communities so that together we can all have a decent standard of living.  Low paid workers cannot do it by themselves. I am hopeful that we can create a fairer future for our most vulnerable citizens – a future Samuel Duncan Parnell might have wanted.

For more information go to www.livingwagenz.org.nz

159 thoughts on “Workers moving back to 19th Century

  1. economists argue that for every dollar earned in a low income family it has the value of at least $1.60 as it circulates through the local economy.

    Sounds like an economic rationalisation for keeping them poor, then? If you raise their wages, the economic multiplier effects will presumably decrease!

    Like or Dislike: Thumb up 4 Thumb down 3 (+1)

  2. This problem can not be solved independent of the complementary issue of our society benefiting from the slave labour of people in 3rd world and developing countries.

    Like or Dislike: Thumb up 2 Thumb down 1 (+1)

  3. I look forward to Denise Roche’s posting on how businesses are going to be able to afford to pay the wages that the Greens want to be paid to the workers.

    So far we have a lot of people being very liberal in their positive interpretation of results if wages paid were higher.

    So will we get to see a visit from Denise Roche to a host of New Zealand SME’s to discuss wage affordability versus business income and viability?

    One side of the coin to wish for higher wages, the other side is the businesses ability to pay.

    Wage increases for state servants can only come from increased taxation. Who will pay this extra taxation and how will that impact on the viability of private sector businesses?

    How will the extra PAYE taxation, to pay increased state servants wages, impact the wage earner?

    Is WFF included in the wage increases discussion?

    Like or Dislike: Thumb up 4 Thumb down 3 (+1)

  4. I look forward to Denise Roche’s posting on how businesses are going to be able to afford to pay the wages that the Greens want to be paid to the workers.

    The issue is not whether it’s affordable or not, it’s what is required to meet an obscene cost of living – which in part – has been caused by the capitalist class (and want-to-be capitalist class “residential property landlords”) who, quite frankly, have been sitting on the pigs back for a long time.

    They are quick to go to the government (read “taxpayer”) with their hand out to be rescued from their reckless finance company “investments”, receive wage subsidies (read: taxpayer) for employees and keep their property profits well oiled through indirect subsidies like accommodation benefit (read: taxpayer), and still their greed knows no bounds when it comes to their lowest paid workers.

    The upshot is – if they can’t afford to pay their employees properly they should stop kidding themselves that they have a business and they should downsize or shut up shop. But, more likely, it will just mean they get a new car every other year instead.

    In this evaluation I exclude small business owners, many of whom are just as much “working class”.

    Like or Dislike: Thumb up 7 Thumb down 5 (+2)

  5. Michael,

    So many generalisations, so little information on facts.

    “Capitalist class” sitting on a pigs back? Good Tui’s billboard that one.

    Sounds like you know a lot about how businesses can pay more, maybe Denise should just contact you and get the “good unbiased oil” instead of asking SME themselves (80% – I think – of wages are paid by private enterprise SME’s).

    But you saved the best for last

    The upshot is – if they can’t afford to pay their employees properly they should stop kidding themselves that they have a business and they should downsize or shut up shop.

    So more job losses, less wages, less taxation for state servant wages, less potential growth.

    Are you serious in your comment? Beggars belief if you are.

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  6. So more job losses, less wages, less taxation for state servant wages, less potential growth.

    Fine by me.

    I personally think there is too many pointless soul destroying “jobs” in the world and I’d rather pay these people to do some other job – or even no official job – as long as they stay out of trouble. If the work they do is truly not worth a living wage then the “job” is not worth doing.

    By “growth” you mean in profits…. and enviromental destruction?

    Beggars belief if you are.

    It beggars belief that your capitalist clique has the audacity to claim we need low paid jobs… which we know full well is merely a euphemism for “increased profits”. As I said useless job obviously means useless business Does this truth dent your pride?

    Like or Dislike: Thumb up 4 Thumb down 8 (-4)

  7. To pay more, companies need to make higher profits.

    But the vast majority of Green policies would mean lower profits for businesses.

    SO if you REALLY want higher wages for workers, first you’ll have to stop seeing profit as evil, and completely reverse your mantra, and REALLY WANT businesses to make bigger profits (and design policies for better profitiability).

    There is NO bigger driver for wage and job growth, than higher profitability.

    And there are few things that will hold back business profitability, as much as Green policies.

    Like or Dislike: Thumb up 5 Thumb down 5 (0)

  8. Michael says “The upshot is – if they can’t afford to pay their employees properly they should stop kidding themselves that they have a business and they should downsize or shut up shop.”

    As a many Kiwi businesses have been doing little more than keeping their heads above water the last few years, Michaels solution to improve things is to shut them down – DUH!!!!

    As Gerrit says, that comment beggars belief. It’s stunningly stupid.

    Like or Dislike: Thumb up 6 Thumb down 4 (+2)

  9. Michael,

    oh dear

    I personally think there is too many pointless soul destroying “jobs” in the world and I’d rather pay these people to do some other job – or even no official job – as long as they stay out of trouble. If the work they do is truly not worth a living wage then the “job” is not worth doing.

    1- Where is the money to pay “wages” for non soul destroying unofficial “work” to come from?

    2- Are you the arbitrator to define “soul destroying” jobs? What is soul detroying to you may well be a soul uplifting job to another. You playing god?

    3- Define a living wage. What is it for a 16 year old school leaver living at home vesus a 45 year old with a family and a morgage? You saying that employers need to pay not for skill level and earning power (productivity) but simply on the living need wage of the employee?

    By “growth” you mean in profits…. and enviromental destruction?

    You are either a naive school kid or extremely obtuse.

    4- Where do you think the money comes from to pay higher wages?

    5- You been in business and know about making extensive profits? Most SME’s dont make a huge amount of profits.If you know any SME’s making extensive profits AND not paying staff well, you should name and shame them. Go on, I bet you cant.

    6- Do you think that the Greens policy for “green growth” (profits pay wages – debts never can) is damaging the environment?.

    It beggars belief that your capitalist clique has the audacity to claim we need low paid jobs… which we know full well is merely a euphemism for “increased profits”. As I said useless job obviously means useless business Does this truth dent your pride?

    7- your fixation with ant-capitalist sentiment is quite obvious. Please feel free to expound the virtue of your personal favourate societal mangement system. Paint us a picture of how your society will function, how all meaningful jobs will pay a “living” wage and how drudge will be banished. Should be interesting. Easy to say what you dont want, hard to outline the alternative. My preference is anarchy (ultimate freedom but at the cost of a societal function), but I feel it will be a minority view.

    8- Again define a “useless” job and by extension, a useless business. Playing god again?

    9- Your “truth” is in your own mind and has no capacity to dent my pride. Your question should be to yourself. Is the “truth” as I see it a correct interpretation of real world scenarios are am I just dreaming?

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  10. “To pay more, companies need to make higher profits”.

    To pay more companies need customers.

    Low pay throughout an economy means fewer customers.

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  11. Only one in 10 Kiwis workers are involved in exporting, the result of decades of inaction from both sides of the House, he says.

    “We’ve given up on the pollies,” he tells the manufacturing inquiry MPs. Not one of them bats an eyelid.

    http://www.stuff.co.nz/business/rebuilding-christchurch/8312083/Manufacturers-tell-of-doing-hard-yards

    Denise Roche was spoken to there by this exporter and yet keeps up a viral campaign for higher wages.

    As reported, she did not bat an eyelid on HOW to increase business for manufacturers so that higher wages are possible.

    Sums it up really, no idea from Russel Norman or a Green politician.

    Not that I have any faith in Labour or National.

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  12. There are several connected issues in “A business’s ability to pay” and most are affected by what our government does and does not do. There are also aspects to how the business does pay, which affect us.

    The overall equations have been, over the past 40-50 years unprogressively shifted to make the owner of plant ever more powerful.

    The “market” is now such that they can have multiple luxury houses scattered about the planet and effectively own/control everything. They get to arbitrage labour, regulation and tax costs across oceans and national boundaries. Their power exceeds that of governments. They own members of Parliament, and representatives in the Diet of Japan and the Congress of the United States. Where the Senator from Washington was once referred to as “The Honorable Senator from Boeing” and people scarcely noticed… of COURSE he was.

    The person who is selling his labour is forced to compete with the labour market around the world, but has to pay the taxes and buy merchandise at the prices dictated for his country. This is little different from working in a company town and having to buy at “the company store” back when that was common. It is the same model writ large. The company pays a bit less than the cost of survival buying from its store, effectively enslaving its workers.

    http://www.realitycheckers.com/words/shEs/scam_sentinel/companyStore.php

    Slaves are paid enough to live but not to save money. Their hand to mouth existence is maintained by keeping expenses higher than wages. A final indignity is that they can’t leave the plantation to buy cheaper provisions since travel is illegal or impractical from these remote areas. And so they must buy everything from “The Company Store” at oppressive prices.

    That is ONE aspect of the wage and price problem in New Zealand. Not recognizing it is ONE reason why National gets its policies wrong. The multinationals own us… and that isn’t right, but how do we break the chain of debt that they have shackled to our ankles?

    The worst imbalance of power is at an immense scale. Locally the owners of businesses and plant here, are as often victims as culprits. The debt however, is the chief tool. Notice how vehemently it is argued that we cannot change the supply of money as a sovereign nation, but must instead borrow from banks at interest, to create it. The adherents to this are effectively worshipping their masters. Clever idiots. The market is merely a rivet in the chain.

    The only way out of this is to recognize, finally, that we are a sovereign nation and that the laws and the money are in FACT ours to control. It is a power we must use wisely but it is the only power that countervails the almost unlimited power arrayed against us.

    It is a power which has been largely neutered on the global stage, by the neo-conservative religion of “free market fundamentalism” but it is our right and in fact our responsibility to take this control back into our own hands.

    Yes, it is a power that is fraught with risk and responsibilities, but if we do not take both we can never break the chain of debt that enslaves us.

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  13. It is funny to see the “capitalists” here arguing for society, their workers and tax payers, to cover the shortfall, for businesses that cannot pay their own way. Subsidies are usually the sort of argument you would expect from us socialists.

    Capitalism says that businesses that cannot meet the costs of the resources they use should fail to allow more efficient uses of those resources.

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  14. For a steady state economy we need to bite the bullet that a lot of jobs are either unnecessary or even counterproductive.

    Meaning that, we will have to end up with a classical style economy where people ARE paid to stay home.

    There are many jobs, now, which depend on planned obsolescence, fashion changes, unproductive speculation and unnecessarily complicated legislation, where it would be more economically and socially productive to pay them to stay at home. Too many jobs depend on finding ever more clever ways to rip off your fellow citizens.

    Our environment says we cannot continue with a system that requires ever increasing depletion of natural resources.

    Whatever happens we cannot continue to concentrate wealth in fewer and fewer hands. Starving the majority so that a few can be very wealthy.
    As Obama says.
    ” It is not envy, it is math”.

    Workers share of the economy has dropped from 62% to almost 40% since 84.
    Looks like their is plenty of room for wage increases for useful workers, and small business, (Low wages also put a brake on how much SME’s earn) as well as a GMI for those we cannot employ. So we can progress towards a fair, steady state economy.

    No one is going to vote to reduce their standard of living, to allow our environment to survive, while the wealthy continue to increase theirs by an undeserved 17%, as they did last year.

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  15. Kerry,

    What you are seeing is not capitalism, but socialism for business.

    Capitalism would have let the inefficient users of resources go broke and encourage others to use the resources more “resourcefully”.

    Socialism provides the subsidies, not capitalism.

    What you are arguing (and 100% supported by me) is that we should have no state interference in the form of subsidies for business.

    Though the Greens “green business growth” incentive is actually a subsidy to encourage new business.

    I still maintain that we need to tax profits (and tranfer pricing money) leaving New Zealand at a higher rate then profits retained and reinvested in New Zealand.

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  16. As a many Kiwi businesses have been doing little more than keeping their heads above water the last few years, Michaels solution to improve things is to shut them down – DUH!!!!

    As Gerrit says, that comment beggars belief. It’s stunningly stupid.

    About as stupid as the biznusman (or women) (sic) who rents a shop, fills it with crap, hangs a sign out front and expects the profits to come flowing in.

    In the past 5 years the world has continued to turn round, people continued to buy stuff they need (and in many cases want) and the birds still tweet from the trees… so what has gone wrong with these biznusus (sic)?

    Is the truth they were simply no damn use?

    Capitalism would have let the inefficient users of resources go broke and encourage others to use the resources more “resourcefully”.

    In corporate ideology, what makes the human worker any different from any other resource? Nothing actually. Seems the whiney biznusus (sic) is merely suffering from an inefficient use of “human resources”.

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  17. I have to say that I work 12-14 hours a day just to pay all the debts that I have. So the 8 hours for recreations are long gone. I`m happy with 6 hours of sleep.

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  18. “I still maintain that we need to tax profits (and tranfer pricing money) leaving New Zealand at a higher rate then profits retained and reinvested in New Zealand”.

    Agree with that one. But isn’t that still a subsidy?

    My experience of “capitalists” is that they are happy with socialism, and the benefits of an inclusive and co-operative society, so long as it is them that gets the money. And someone else pays for it.

    Nothing shows cognitive dissonance more than a person whose career, or business, depends entirely on a functioning and co-hesive society advocating, “shrinking the State” and libertarianism. Notice they never want to shrink the parts of the State that help their sucking at the teat.

    One interesting one lately was the Aussie boat business who went bankrupt lately, despite moving production to Thailand. The complaint was the lack of people buying 300k boats. It did not seem to occur to them that Thai workers on $2 a day do not buy 300k boats. The Aussie workers, on $35/hr, they sacked did!

    New Zealands problem write large. No wages = no domestic demand. No start up business.

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  19. Gerrit. All our most successful businesses, like those in most countries, have been nurtured by the State. That is a necessity while all competing countries do the same.

    Note the high level of support farming gets. The rest of the economy is buggered to support farmers, including the chase for the, wholly illusory, advantages of “free trade agreements. It is no accident tat dairy is the most successful exporter..

    However, investment should be for those industries that benefit the country as a whole. Any help should be industry wide, transparent and directed towards a sustainable, steady state economy.

    The idea that we are going to prosper by out exporting every other country is a logical fallacy. The system is, obviously, rigged by the big commodity buying countries. They are never going to let us run surpluses against them.

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  20. My experience of “capitalists” is that they are happy with socialism, and the benefits of an inclusive and co-operative society, so long as it is them that gets the money. And someone else pays for it.

    Nothing shows cognitive dissonance more than a person whose career, or business, depends entirely on a functioning and co-hesive society advocating, “shrinking the State” and libertarianism. Notice they never want to shrink the parts of the State that help their sucking at the teat.

    This assumes a co-hesive state *wouldn’t* be the result of less state intervention. Why assume this?

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  21. Gerrit. All our most successful businesses, like those in most countries, have been nurtured by the State. That is a necessity while all competing countries do the same.

    TradeMe? What do you mean “nurtured” by the state?

    I don’t think anyone is arguing for no state intervention and no regulation of markets, just questioning the degree.

    As far as I’m aware, only anarchists tend to argue that no state intervention is a good idea.

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  22. I would agree about politicians having to much power. However that is an argument for the “State” being more democratically controlled by us. Not more control by the “market” which in reality means control by corporate power.

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  23. Who runs the education of Tradme’s employees, the telecom network infrastructure trade me uses, not to mention NZ post?

    Sure, but that doesn’t mean those services wouldn’t exist if the state didn’t run them. The private sector would respond to the need and run them.

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  24. Not more control by the “market” which in reality means control by corporate power.

    I agree a market shouldn’t be controlled by corporate power, but I think when it happens it tends to be the result of poor market regulation.

    What do you think of state controlled monopoly power?

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  25. No problem with State controlled monopoly when the State is controlled democratically by its citizens. I.e. The State is all of us.

    Some things, like distributed power supply, roads and ports, work much better as monopolies.
    Which means that introducing a business model, of fake competition, in a small market like ours, is detrimental to the well being of the country as a whole.
    And much better when they are controlled for the benefit of everyone. Democratically and transparently. Not by corporates whose interests are purely short term profit for one sector.

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  26. How about when, say, vested interests try to artificially retain monopoly status and use the political mechanism – particularly party funding – to do so?

    I’ll give you an example: education.

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  27. That is what happens now. National has very few individual members so they rely on corporate funders. I suspect that is starting to happen with Labour also. When corporates, or individuals acquire too much wealth they also acquire too much power to influence Government and market regulation. Another reason for progressive taxation. And democracy!

    I presume by vested interests you mean Teachers. In fact Teachers have little power. Otherwise parliament would leave them alone. Like they do the accounting and medical professions. The best performing education systems give a lot more power, autonomy, status and pay, to Teachers than ours does.

    That is where transparency and democracy comes in.

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  28. Teachers Unions. They fund the Labour Party. Do they offer funding to the Greens, too? It’s an example of how a state monopoly position can be protected via the political process.

    In the market, a consumer can choose not to purchase the product of entity X. In the case of a state monopoly, that’s not the case. They must suffer the tyranny of the majority. They pay for state education whether they like it or not.

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  29. Sure, but that doesn’t mean those services wouldn’t exist if the state didn’t run them. The private sector would respond to the need and run them.

    Will the fact you very likely have broadband, and it costs far less then $99/Gb*, be considered in this deluded view of the private sector’s ability to provide utility services?

    *$99/Gb was what Telecom charged when they had free reign.

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  30. this deluded view of the private sector’s ability to provide utility services?

    Broadband in the US averages 29.6 Mbps, 82% of homes can achieve 100 Mbps or higher and entry-level pricing for American broadband is the second lowest in the OECD. The private sector provides it. Most of it isn’t capped.

    The private sector can and does run broadband services. Tellingly, the price began to drop once competition in the market increased here.

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  31. Broadband in the US averages 29.6 Mbps, 82% of homes can achieve 100 Mbps or higher and entry-level pricing for American broadband is the second lowest in the OECD. The private sector provides it. Most of it isn’t capped.

    So why do most users in Australia and United States have ADSL2/2+ (or similar speed coax cable delivery) broadband?

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  32. Why is ADSL 1/2+ the dominant broadband in New Zealand despite widespread availability of near fibre speed VDSL2 service?

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  33. VDSL2 isn’t that widely available.

    Disclaimer: I’m working on making it widely available :)

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  34. Michael, you said I had a deluded view that the private sector could provide utilities. I provided one example – US private sector broadband provision – that proved you wrong.

    Now you’re changing the topic and asking about why the provision of different technologies doesn’t happen as fast as in other countries. I imagine that – given a small population – it isn’t worth upgrading as fast as in other countries where consumer numbers and density is higher.

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  35. sage 50 said: “. . .To pay more, companies need to make higher profits.”

    We all know what a stunningly outrageous disaster “trickle-down economics” or, more affectionately known as “the rich pissing on the poor” theory has been, especially for those in poverty and ‘struggle street’.

    Now is probably an ideal time to turn the Reaganomics voodoo on its head. I propose we call this “trickle-up economics” by raising the minimum wage, raising across the board hourly rates of those on traditionally low wages. More spending power in the hands of the people [ not just the top 1% ] will greatly boost the economy. Businesses will reap the benefits of more people [ consumers ] having greater spending power i.e. higher profits, better job security, more wage increases, higher tax take for the government. Society as a whole will finally be able to rise to a new standard of living, a new level of satisfaction and achievement – everyone will be richer in every sense of the word.

    An absolute vital aspect is nurturing our local economies – consumers buying local and homegrown products as opposed to cheap imported goods. By raising wages people will be able to support local businesses; meaning manufacturing stays secure and grows in this nation. I’m almost tempted to say ban all imports, except for crucial life essential items that cannot be physically manufactured in this country. . . but of course our finite resources will mean we’ll have to import various raw materials. Furthermore, strictly adhering to a 100% Green philosophy of protecting our environment in this process is crucial to our survival.

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  36. Go start a business and do it, Vaughan.

    How will you get on when our exports face tariffs and other retaliatory action? You import costs would shoot up in price and you’d have little ability to pay for any imported essentials.

    NZ is not big enough or rich to produce 1st world living standards. We’re highly dependent on large economies to do the heavy lifting. Take drug development – how many cancer drugs could we afford to develop? How about cars from scratch? Mobile phones? Just think of what it takes to emulate those supply chains! I don’t think that’s going to do your environment much good – we outsource a lot of environmental damage as it is.

    Your “plan” would send NZ to the wall and make everyone much poorer.

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  37. I provided one example – US private sector broadband provision – that proved you wrong.

    You did nothing of the sort. In case you missed the point: The vast majority of Internet users want broadband that is:
    a. Fast enough for web surfing and email including bandwidth inefficient sites.
    b. Watch the odd video on Youtube or download Windows stuff
    c. Is *cheap*

    The number of people who care about fibre is few. The number who will actually put their money where their mouth is – even fewer.

    Very few websites (and probably no International ones) can sustain 100Mbps (or anywhere close) speeds. 20-30Mbps is about the best you can get out of “fast” sites.

    The fibre rollout is a ridiculous waste of taxpayers money. It would have been far better expenditure to hurry up the deployment of ADSL2+ service to the many rural areas in New Zealand that still don’t have broadband.

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  38. Bless. I remember the same stupid arguments when we were going from 56K to 256K.

    The demand for bandwidth is near infinite. Your imagination appears remarkably finite. In ten years time, your argument will have all the merit of Gate’s 640K is more than enough memory.

    Fibre is one of the better decision National has made. It’s the equivalent of upgrading a dirt track to a motorway in the 1930s.

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  39. I remember the same stupid arguments when we were going from 56K to 256K.

    Back then 256kbps was ok. Apparently, according to Telecom* (yes, you know the one – your great pillar of the free market) it still is.
    See: http://www.oyster.net.ck/about/index.php?about=idsl

    However, your statement is of little use, as we are well past 256k now and into “diminishing returns”. This means going from 128k (and later 256k) “Jetstart” ADSL1 plans – to ADSL2+ – is a far bigger gain then going from ADSL2+ to fibre.

    Your statement is further illogical, because if these speeds are lousy as you suggest, why should cities be upgraded to 100Mbps fibre, when many rural areas can’t even get ADSL? Shouldn’t the slowest areas be the priority?

    But like all capitalists you act on pure self interest. This is the self interest that has caused the UFB rollout plans in some areas to be “tweaked” to suit the personal interests of a few well placed people. Is this fair for a government funded project?

    This is the same reality that means if you are Mr or Mrs average and live in a rural area you wait upto 3 years for broadband to be connected – that is – if it’s even planned at all.

    If you are an MP and live in an equally far placed rural area, you get Parlimentary Services to write to Telecom/Chorus and, um… things happen…

    and my list goes on. This is how it works in the real world. Not a fantasy free market one.

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  40. Telecom is not my “great pillar of the free market”.

    NZ is an internet backwater. We’re riding a donkey, especially compared to Japan.

    Diminishing returns? Jesus. We haven’t even *started* yet. We’ll have full-HD, and higher, on demand, wall-sized. We’ll be served from fat cache servers sitting on ever-increasing local nodes. The pipe will never be big enough.

    Mr & Mrs Average living in rural areas cannot expect city services in rural locations. They trade space and quiet for fewer services and lower land prices. They will ALWAYS be behind due to economies of scale.

    Priority should go to wherever the most commercial users reside. They are, after all, subsidising rural users.

    This is how it works in the real world. Not a fantasy free market one

    You live in an imagination free zone.

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  41. Mr & Mrs Average living in rural areas cannot expect city services in rural locations. They trade space and quiet for fewer services and lower land prices. They will ALWAYS be behind due to economies of scale.

    Mr and Mrs Rural Resident is not expecting city services. Just something faster then dialup and cheaper then satellite.

    However, as I have stated to you and you have not responded to, is that the “free market” is often economically irrational.

    This is why a major NZ taxpayer funded organisation’s rural internet access network was “tweaked” to deliver to someone well placed in the organisation – because they just happened to have a property in the waps…

    This is what goes on. “Free market” is far from reality.

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  42. that the “free market” is often economically irrational.

    Why are you placing free market in italics?

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  43. Vaughan says “I’m almost tempted to say ban all imports, except for crucial life essential items that cannot be physically manufactured in this country. . .”

    Then because of lack of scale, we’ll be paying $100,000 for a basic car, $10,000 for a tv, $20,000 for a computer – and nobody will be able to afford anything.

    Then the head comrade can change their name to Castro or Mugabe or Jong-un , and tell us all how happy we are.

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  44. Vaughan said: “I’m almost tempted to say. . .”

    photonz1, I said I was almost tempted to say – Imagine if I had said, “I want to stop all imports”? I’m glad I didn’t say that. . .

    My point is re-focus production and manufacturing here in this country, stop off-shoring jobs and rely less on imported goods so jobs may stay in New Zealand. While the consumer should be passionate and patriotic about NZ made products, and support the NZ business community by buying 100% NZ made when they can. It’s a win-win, what is wrong with that?

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  45. Vaughan says “My point is re-focus production and manufacturing here in this country”

    When we made cars in this country in the early 1980s, it cost $35,000 for a standard 2 litre car – that’s over $100,000 in todays money.

    This raises a couple of points -
    1/ With economies of scale, NZ is even less competitive today than it was in past decades.
    2/ New technology and better productivity means manufacturing is now only a small part of the world economy (dropped from just under 30% in 1970 to around 15% today).

    I agree we should make as much as we can here, but can you force people to pay $10,000 more for a vehicle just because it’s NZ made?

    You might get a few more people in work, but you will also lower the whole countrys standard of living because everything is so expensive.

    Because the only way you can do it is to lock NZ off from the rest of the world with trade barriers.

    Which is a really dumb idea considering we would die without trade as we are
    - just about the most isolated country in the world
    - don’t have (or won’t mine) minerals
    - don’t have (or won’t drill for) the fossil fuels we currently need
    - don’t have the scale to efficiently manufacture most things.
    - likely to get shut out of our biggest export markets if we put up trade barrriers.

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  46. So Photo. We just give up and join the third world?

    Because that is what happens to countries who do not protect their own manufacturers and workers. All successful economics have some form of protectionism. USA and UK were the most protectionist of them all. Ask the Indians about when they tried to export cars to the UK, in the 50′s.

    It is not all or nothing, either. We do not have to produce cars.

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  47. Unilaterally removing all our trade barriers, in the dream that other countries would be stupid enough to follow us, was one of the most bat shit crazy things a New Zealand government ever did.

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  48. Arana, when I start my hemp plantation franchise you can come and work on one of them and be the operations manager – you won’t have to start as a hemp picker, don’t worry. You’ll earn very good money with wage increases that aren’t tied to phoney CPI. Mind you, a hemp picker will also earn the same amount as you & me too is that a problem? Anyway, we’ll supply the hemp to associated industries that make the fuel, building materials, clothing and so on, that’ll in part help re-focus this nations sustainability. Yes I can see now many dairy farms being converted to hemp plantations – oh hell I’m thinking aloud again. . .

    Arana said: “. . .Just think of what it takes to emulate those supply chains! I don’t think that’s going to do your environment much good – we outsource a lot of environmental damage as it is.”

    True, we shit in our own fish bowl at our peril. Regardless of origin of production, in a closed system pollution will eventually come around and bite us on the arse whether it is made overseas or locally – if we don’t follow strict guidelines. Take plastics in our waterways and oceans, nuclear fallout from Fukushima and Chernobyl, pollution from coal powered industrialisation and power stations, effluent contamination from dairy cows by industrialised farming et al. Thanks to out of control consumerism, driven by corporate greed and infinite growth figures / returns demanded from shareholders, the planet is being raped and pillaged recklessly.

    At least with Manufacturing and production focused on a local level in this country, we can better police and control the work processes with rigid environmental standards and protections. Well that’s the theory – mind you, having a bogus environmental protection agency like we do at the moment that has big business’ interests [ Fonterra ] first doesn’t really help matters! So yes, it’s going to take a change of government, new laws and regulation, a completely new mindset in business leaders and Green innovators to be allowed to step-up – essentially the will of the nation.

    Excuse me for being young, dumb and full of enthusiasm ;-) but we as a civilisation face a troublesome future. We need to focus on a local level first not a global level – think community first!

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  49. Photonz

    Can you not see or accept that the addiction to cheap imports is wrecking the economy of this country and that we have to make more stuff here and import less.

    I know YOU know that Ricardo never meant it to go as far as New Zealanders have taken it. Nor was Vaughan wrong in his sentiment. He expressed his frustration with that addiction and you responded with your usual failure to understand it.

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  50. bj asks “Can you not see or accept that the addiction to cheap imports is wrecking the economy of this country and that we have to make more stuff here and import less.”

    No.

    Today we can afford more cheap imports than we’ve ever been able to afford at any time in our history.

    If we make everything here it becomes really expensive and I can’t afford it. Neither can the other 80-90% of workers who don’t work in manufacturing.

    If manufactured goods get more expensive, my quality of life goes down – not up.

    I then have less to spend on other things like food, drink, entertainment, travel, housing etc.

    Cheap imports mean I have more money left over to spend on other parts of the economy where the vast majority of people work – often service industries where a larger percentage of my dollar goes into labour rather than materials.

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  51. It always seems counterintuitive to suggest that higher wages actually improves the economy for everyone, but there is significant historical evidence to suggest just that.

    When Henry Ford raised the wages for his factory workers to $5.00 per day in the early 1900s it was considered “foolhardy” and “reckless” by business owners and many economists at the time.

    What they found, however, was that these “outrageous” wages led to the creation of a “middle class”. A larger portion of the population that could afford to spend on discretionary products. The multiplier effect of this discretionary spend is hard to calculate but the rise of the middle class has a wealth effect on the entire economy. Most especially the owners of capital who are paying the wages.

    The key is not just paying a minimum wage, but rather a wage that allows the workers to have money for discretionary purchases.

    In the Ford case, for example, five dollars a day at the time was significantly above the average wage paid a factory worker. This discretionary income created more consumers for Ford’s cars, which in turn created more successful suppliers and multiplied the profitability and job creation throughout the supply chain.

    It is unfortunate in the 21st century that the debate is stuck at this level of merely providing a wage that a human being can subsist on. The real debate should be on how to move more humans into the middle class. It is not only the morally correct path, but it is the economically sustainable path.

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  52. If we make everything here

    You definitely have it bad mate.

    There wasn’t any hint that we should make EVERYTHING here. We make almost nothing here now. Everyone who actually lives and looks for non-existent work here can’t afford even the cheap imported cr@p, because they don’t have work to go to. The rest haven’t seen a real pay rise in a decade and wonder how to meet the real cost of living changes. The ones that include housing, food and petrol.

    Your economy is built on selling each other hamburgers and houses, exporting farm product, importing cheap crap instead of producing anything, and borrowing to meet the difference from Australian banks. It doesn’t work so you want to sell the country out from under our children.

    Ricardo knew better than that. Comparative advantage was never meant to become what you want it to be… because HE knew as you do not want to understand. That if taken that too far comparative advantage will destroy any economy that went that route.

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  53. Cheap imports mean I have more money left over – as long as you still have a job.

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  54. How many people out there can still afford to buy your products Photonz?

    Tourists might keep you afloat. Henry Ford knew better than you.

    We’ve been down this road many times. You’ve hit the wall at the end enough of them. It boils down to that religion of yours… “free market fundamentalism” and the problem that the reality doesn’t agree with you.

    Now I am sure you will dredge up some statistical argument, you’re good at that, that argues that we are all better off… but you’ll just be bullshitting the board again. See we all live in that same real world that is destroying NZ society. Those who have leveraged their way to the top are still isolated from it, but everyone else has to deal with the mess your lot (not National… Free Market Fundamentalists) are making of our country.

    We’ll have to buy back assets just like we had to buy back the damned railroad. We’re going to have to restart manufacturing from scratch. In the long run National’s policies are always more expensive than Labour or Greens, because the beneficiaries THEY are trying to keep happy are a lot bigger and fatter and want a lot more money, than the beneficiaries who actually need help.

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  55. Arana, when I start my hemp plantation franchise you can come and work on one of them and be the operations manager – you won’t have to start as a hemp picker, don’t worry. You’ll earn very good money with wage increases that aren’t tied to phoney CPI. Mind you, a hemp picker will also earn the same amount as you & me too is that a problem? Anyway, we’ll supply the hemp to associated industries that make the fuel, building materials, clothing and so on, that’ll in part help re-focus this nations sustainability. Yes I can see now many dairy farms being converted to hemp plantations – oh hell I’m thinking aloud again. . .

    Great. Go do it today.

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  56. BJ says “The rest haven’t seen a real pay rise in a decade and wonder how to meet the real cost of living changes.”

    Yet $100 of goods in 2000 now costs $139.

    But $100 of wages in 2000 has risen to $152.

    Your negativity knows no bounds – not even the boundary of reality.

    Perhaps if you stopped exagerating the importance of manufacturing you’d see the bigger picture. Nearly 90% of employment is NOT in manufacturing.

    And new technology and efficiencies mean manufacturing has nearly halved globally, as a percentage of gdp.

    Looking for economic salvation in an industrial sector that has been declining world-wide for decades (and will continue to do so) is just a slow version of trying to make money by buying shares in a typewriter manufacturer.

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  57. “But $100 of wages in 2000 has risen to $152″.

    Here we go with the Photo-stats again.

    Quoting average wages. Against average dodgy CPI figures.

    For most New Zealanders $100 in wages in 2000 is still $100 in wages in 2013, for those that still have jobs, that is.

    Average wages have been pushed up by 17% increases at the very top and people dropping out unemployed at the bottom.

    The reality for 90% of New Zealanders has been falling incomes.

    And the price of necessary staple foods increasing at much more than the CPI.

    Photo is betting that most of the readers do not understand statistics.

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  58. Kerry – in your world (lala land) you claim food has gone up 20% in the last year when in the world everyone else lives in average price changes amounted to less than 1%.

    Kerry says “For most New Zealanders $100 in wages in 2000 is still $100 in wages in 2013″

    Even the minimum wage has gone up 80% since 2000.

    Talk about delusional…..

    If you had a better grip on reality you’d be a lot happier instead of the continual misery you complain about.

    I couldn’t stand to be as negative about the world as you are.

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  59. National make everything worse so manufacturing in New Zealand is unlikely to be an exception.

    Nationals economic plan support more cows and cow shit, more exploitation of the land and more mining and drilling. ….. and more american ass licking.

    National are about exploitation and that includes workers, they will have to be booted out before workers conditions and pay begin to improve again.

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  60. In the real world, Photo, people live on potato, baked beans, noodles and rice, not steaks.

    In the real world shop assistants have had their pay REDUCED to minimum wage, and staff numbers cut, Farmhands work on less than minimum wage and many people who were paid are now un-employed.

    On planet Key, where bankers run away with millions of our wealth I suppose all is rosy. The real world looks increasingly dire for most New Zealanders.

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  61. Kerry – I don’t know why you bother getting out of bed in the morning.

    It’s one thing to continually winge and moan about things that are actually wrong.

    But when you make up problems that don’t even exist to winge about (20% food inflation in the last year), you should seek help with your negativity.

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  62. Looking for economic salvation in an industrial sector that has been declining world-wide for decades (and will continue to do so) is just a slow version of trying to make money by buying shares in a typewriter manufacturer.

    One wonders if those like BJ may have been smashing looms in 1812?

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  63. National make everything worse so manufacturing in New Zealand is unlikely to be an exception.

    Go start a factory. Pay top wages. There is absolutely nothing stopping you.

    Make green stuff. It’ll be great.

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  64. Kerry – minimum wage inflation has definitely outstripped CPI 2000-12.
    Photonz1 – average wages have definitely outstripped inflation by about 14% 2000-12.

    However, the words ‘minimum’ and ‘average’ are pertinent. They indicate that the figures don’t tell the whole story.

    I can’t be bothered doing the analysis, but an important measure would be the adjusted population flows between income bands to determine whether there is (broadly) a shift rightward into higher incomes and who in benefitting – handily available from Stats NZ in 1 and 5 year blocks if anyone wants to give it a shot.

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  65. Funny but the wages of my co-workers went down. All of them. Counting the time involuntarily unemployed due to redundancies and companies going bankrupt, it went down considerably. Even though all of us eventually found more work.

    These aren’t slackers. Hard working, tech savvy engineers and designers. The work however, isn’t consistent and is relatively worse-paid every year.

    That collective experience caused 3 out of 5 of these people to move to Melbourne or Sydney. Similarly most of the other people I know who are working in niche export manufacturing. No extra, not for a long time.

    So who is getting all this extra money Photonz? Because it sure as fuck isn’t anyone who actually works for a living.

    I hear about the difficulty of attracting skilled techical staff. I wonder about that too. If the pay offered were $120k instead of $60k per annum would the employer have a shortage?

    Well no… and that sort of tells you what the problem is ACTUALLY. It isn’t that there aren’t any skilled staff available, though a fair few would have to re-re-locate from Oz at this point. The problem is that the pay for every productive non-farm worker in this country is basically a joke.

    Anyone living in the real world will understand the sort of lie you are promoting here. We are all struggling except for the property speculators and bankers. Who give us such a wonderfully productive economy as they shower the golden benefits of their unearned wealth over us.

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  66. BJ says “So who is getting all this extra money Photonz? Because it sure as fuck isn’t anyone who actually works for a living.”

    Wages in NZ have increased 50% since 2000, but because you don’t actually know anyone that’s had a pay rise, you don’t beleive anybody has got one.

    With such depth of thinking, can I interest you in a second hand car?

    Or perhaps a cult.

    No? You’ve already got one?

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  67. Anecdata:

    My salary (when in permanent roles and apart from self employment) over 12 years has nominally gone up by about 30% – I have commensurately gone a way up the corporate food chain as well so have expected this salary increase.
    When working as a contractor in NZ my rate has gone up about 20% over the same period.
    I consider myself highly skilled in my field having worked in Telco IT field since ’98 (excluding 3 years self employment).

    In terms of spending power, in 2000 I rented a 2 bedroom place on the Terrace for $220 p/w. The same place I saw recently rented for $600 p/w.
    In 2000, gas cost me less than $1 a litre. Now its about $2.10 a litre.
    In 2000, electricity cost me about 13c kw/h. By last bill was 22c kw/h – and I’ve shopped around for the best deal.

    Take from that what you will.

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  68. Gregor –
    Power for me is similar – around 13c in 2000 up to to 22c, but a 22% prompt payment discount brings that back to 17.9c.

    Petrol – I bought a much more fuel efficent car, so I use half the fuel I use to, and use supermarket coupons, so in real terms my fuel costs are cheaper than in 2000 (at the end of 2000 petrol was $1.21).

    However fuel has certainly gone up faster than inflation in the last decade, though went down in real terms the previous two decades.

    Housing. As mortgage rates are the lowest they’ve been in decades, my housing costs are also considerably cheaper than they were in 2000.

    One thing that is different is that these days most people I know have to have constant ongoing training, aquiring new skills, or gaining additional qualifications – just to stay in the same work.

    Anybody who doesn’t do that is going to go backwards fast as everyone else passes by them.

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  69. BJ says “If the pay offered were $120k instead of $60k per annum would the employer have a shortage?”

    What’s wrong with $60,000? – that’s a really good salary. We live very comfortably on less than that, and have done for over a decade.

    When we earn more or have a second wage, it can all go into investments, or paying off debt, or on holidays.

    We’ve got friends who earn considerably more than us, but are always struggling – it’s all about spending your money intelligently.

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  70. Heck… We got good pay rises – 10% one year… but the company suddenly couldn’t get capital to finish a project and stiffed us 3 months pay before going out of business. The owner took a serious hit himself trying to make it work and I’m not blaming him (apart from the lack of warning and I am not sure he had much himself). No help from the government… and that was Labour then, but the Kiwi disease afflicts both parties. Money gets invested in housing speculation here. Not in industry.

    Too late I discovered the truth of the NZ marketplace and economy. I should have simply bought a house the day I arrived here, rented it out and watched the money roll in and the taxes roll back. Negative gearing… that’s the ticket. A fundamentally dishonest advantage handed to the property speculator. I didn’t know then and didn’t realistically have that opportunity, but that IS what would have worked …and the only problem with that model of wealth creation is that I’m an engineer, not a landlord, and I’m too much Boy-Scout to want to steal from other people that way.

    The concentration of wealth in NZ, by area, date and quantity of property purchased, is astonishing. The lack of support for industry is as stupid as anything in the history of this nation.

    There isn’t anything to support your position that won’t prove in the end to be untrue. You’ll trot out your statistics, not knowing what they fail to measure… and then find more that miss the point.

    People who actually live in the real world can see what is happening to New Zealand as a whole and the divergence between the owners and the peons who get peed-on is experienced first hand by everyone who caught the wrong end of that home-ownership stick and anyone who tries to produce anything but milk for a living.

    Stupid I’ve called it and stupid it is. The Kiwi disease.

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  71. We live very comfortably on less than that, and have done for over a decade.

    Do you have 2 kids in High School and a mortgage? Oh yeah, the wife can’t work but there’s a means test on here collecting a dime. If I divorced her we’d collect heaps. Her disability and the childcare supplements… but we wouldn’t be a family.

    Some would. I won’t.

    Photonz, if it were just me, or the two of us, I could live on half of what I make… but that is NOT the point. The point is that my skillset is worth significantly more in just about any other country in the OECD, and the difference has nothing to do with making NZ more equal… it has to do with the structural dog’s breakfast that the NZ economy has become under successive governments, by following Friedman’s Free Market Fundamentalist Fantasy… The Kiwi disease.

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  72. bj asks “Do you have 2 kids in High School and a mortgage?”

    Yes (though high school not until next year).

    You’re right that too much money gets inversted in housing rather than industry, but wrong that you can only get ahead if you speculate on property – that’s nonsense.

    I live in a very modest house, so my housing costs are relatively low.

    And I’ve invested in industry, because housing is overpriced by 25-30%, and the bubble won’t last forever.

    A 5% rental return is typical these days, which means after rates, insurance, maintenance etc, only a 2-3% return for a rental house.

    So rental returns certainly aren’t driving house prices. They could be driven by wage increases, but that’s only fractionally (about 1%) ahead of inflation on average over the last ten years.

    The thing that’s been driving such steep house price rise is debt – $60 billion to $160 billion mortgage debt during just a few years in the mid 2000s.

    And that’s just not sustainable.

    If there’s so much wrong with NZ, and you could get so much more somewhere else, and you have a never ending complaints list about everything, why don’t you go somewhere you’ll be happier?

    You’re obviously totally miserable here.

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  73. Invest in your own business, BJ. That’s what I did.

    You can pay people high wages. Make some of that smart, green stuff we keep hearing about – whatever that is.

    The downside is, of course, the risk involved in growing business here is high. Very easy to start, very hard to scale.

    I tire of people who whine about businesses here yet don’t start their own. I’m sure there are a lot of well-off Greens with spare capital to invest. Leverage networks. Tap those skill-sets. Get together. Show us how it is done.

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  74. One thing that is different is that these days most people I know have to have constant ongoing training, aquiring new skills, or gaining additional qualifications – just to stay in the same work.

    Spot on photonz1.

    This is precisely my experience. Expending money to stay at effectively the same place in terms of earnings – in the same field but not in the same work.

    Industry hiring practices have changed so much in fact that in order to take the next jump I need a minimum of a masters degree, so I’m playing catch up ‘investing’ in an MBA – not cheap in terms of opportunity cost both financially and family time.

    Oddly, the most valuable thing for me is still a personal network – something that can’t be acquired through training – but if I want to move horizontally into another sector, a lot of expensive tertiary paperwork is required to even get into the ‘CV considered’ pile.

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  75. it has to do with the structural dog’s breakfast that the NZ economy has become under successive governments, by following Friedman’s Free Market Fundamentalist Fantasy… The Kiwi disease.

    BJ, you weren’t here in the 70s. Nothing was moving. Strikes, graft. Expensive and shoddy material goods. It’s much livelier and pleasant now.

    Aren’t you American? Not that it’s any of my business, but why on earth would someone leave such a diverse and powerful country and come live in some impoverished backwater like NZ? Nice and quiet, n’ all, but there are plenty of nice quiet little towns in the US, too.

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  76. Basically workers have gone backwards in New Zealand and other countries because we are being ruled by the rich for the rich.

    Wealth concentration,speculation, exploitation, and out of control financial sectors have distorted and weakened economy’s and society’s in the world.

    Large corporations with their tax dodging and low wage exploitation are also a threat to workers everywhere.

    The economy is not a rule of nature and its humans and governments who decide how they are structured and who is rewarded.

    National works for the rich and that’s who does well under them. Everything and everyone else does worse when the Nats are in.

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  77. A modest house still whacked me for $260k. I would have done better to have gotten in BEFORE the prices got bubbled but the wife’s health made that impossible.

    The housing market here has been discussed ad-nauseum. $60K would not allow us to service the mortgage, rates and insurance… and eat. Maybe someplace rural and less money… but a 20 year mortgage is what it is.

    No Arana… I won’t start my own business. I am NOT a businessman and I am not interested in running a business…. Any more than I am a landlord.

    Tech weenie. I might do it for a little while but I have zero interest in doing it… and we both know what happens to a business if the boss is not interested in it.

    I am amused by the notion that there is anything left to “invest” with 2 kids on < $60k. I have the sneaking suspicion you're just yanking my leg here.

    America is not a democracy Arana. You have to understand that as sick as the NZ economy is with its failure to invest anywhere but housing, the US economy is in reality in far more difficulty. The precipice is there, and the honesty is gone.

    Still, I *personally* would have done better to stay in the USA. My kids would not. In no particular order…

    The gunfire on a Saturday evening and lack of gun owner control… and yes Arana, you can easily get shot in a small town in the USA.

    The primacy of the bankers and their control of the country.

    The loss of democracy.

    The voting system.

    The divisiveness.

    The disparity of wealth.

    The religious ignorance… particularly in the small towns.

    The religion of ignorance.

    The historical precedent.

    The vulnerability to climate change (population, energy).

    The wars.

    The Medical Insurance.
    .
    .
    .

    I would've be better off there anyway, not having spent the money and taken the effort to come to NZ. JPL was a good stable and VERY enjoyable job. I could've stuck to it and maybe retired there… but what for my kids?

    In the long run, the kids are better off here. Particularly if I can stake out a base for them.

    New Zealanders do NOT in general, recognize the downsides or trends in the USA, and most Americans are only vaguely aware of what has happened and is happening to them. The culture of ignorance is pervasive… as is Faux News.

    I remember when the USA seemed to be actually living up to its promise… and I remember when it all started to go sour. I still love it, and there are things that New Zealanders could learn from Americans, but I want my kids to have the choice of living here when it all hits the fan.

    …and yes Gregor… trying to get a job without that "personal network" is a beeyatch and I know very few people here. Knew very few when I arrived. Just me and my CV. I would not take an MBA because I am as I pointed out, not a businessman and have no interest in it but a senior engineer here is not allowed to stay a tech weenie and get paid. Has to manage. No more coding, debugging or puzzles. That used to be the case in the USA too, but they learned better. People should do what they are good at and I am better at what I do than just about anyone in NZ.

    But it doesn't get me paid except in Auckland and THERE I'd have to fork out double for a place to live :-)

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  78. In the seventies the country was in shock from the loss of its trading arrangement with Great Britain. I have had that explained to me. I do not however, buy the viewpoint you bring about that period. I did visit briefly around 1983, didn’t get an in-depth picture but the people I met were quite happy. I have heard other sides to the story of the seventies.

    Enough so that I don’t believe everything I hear. For what its worth.

    My take on this is that a sheltered economy with a single guaranteed trade arrangement was suddenly cut adrift and had to make it on its own as the Vietnam war was winding down. There was political confusion over why NZ was involved and there was a strong union movement. The far left was farther left. The Gold Standard disappeared and the banks were already in control of our money… and debt. People were happier with what they had and the country was more “relaxed” but the cheap oil got scarce and Britain quit buying our stuff. We needed industry and Muldoon did the right things in that effort but he failed to do the first thing and NZ borrowed from bankers and not from itself. His “inherently risky” strategies were actually correct and no real risk at all, but he was hammered by his borrowing and interest rates, the economic debacle that the US created with its inflation and the oil prices, and by starting too late.

    Hindsight is easy of course, but the macro issues for New Zealand were no different then than they are now, only the context of the seventies was really different from now. The fraud that is fractional reserve is not a new thing and we COULD have understood it.

    The problems with the way money works were present and obvious.

    The fact that we are an island nation is not diminished by whatever millimeters we have moved in the direction of Australia.

    Our population was small for our land base.

    All the pieces that tell us we have to build stuff here to reduce our import bill, were present then. Muldoon’s “Think Big” recognized them and while he just wasn’t very good at dealing with money and screwed up big time in many ways, those projects have done quite well overall. Had we built on them we’d actually have an economy rather than a running joke.

    Instead, in the eighties we got Rogernomics… the same sort of free-market fundamentalism that took over in the USA at the time. Whether recognized or not, Roger Douglas employed a form of “Shock Doctrine” http://en.wikipedia.org/wiki/The_Shock_Doctrine

    This led to a lot of “free money” and speculation and malinvestment, which in turn gave us the crash in 1987 and a lot less of what we’d been looking for. What it did NOT give us was an economy that was structurally capable of supporting itself.

    “Government can’t pick winners”… isn’t even right. It does in general do as good a job as private enterprise, but the market works OK IFF the price signals it needs are in place.

    Putting those price signals in place is NOT a matter of picking winners but preventing damage. A big CO2 tariff would work wonders for the renewable energy and storage sectors here. Coupling that with CO2 Tariffs would have the effect of making local manufacture of some things possible.

    So what should Labour have done when Muldoon was pushed out?

    They’d already gotten their 20% devaluation… but instead of deregulating the financial industry and creating a lending feeding frenzy, they should have done the thing Muldoon failed to do. They should have taken control of the NZ Dollar.

    Then they should have lent into productive enterprises and the Nation’s future. Instead they deregulated everything and the financial industry took over (exactly according to plan), and capital flowed into it instead of into productive enterprises and we still produce nothing but farm products and graduates on airplanes to Oz.

    That is why the notion that “Government can’t pick winners” is nonsense. It is true only in a very very limited sense and even then it isn’t as if any other method does better overall.

    Hell, Social Credit was smarter than Roger Douglas.

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  79. 1984 was disaster capitalism write large.

    The start of the EU and the consequent loss in European export markets was treated as an excuse to bring in all the Neo-liberal burglary, that has happened since.
    The constant mantra of TINA was deafening as was the meme we had to make sacrifices now for gain later.

    We made the sacrifices, overseas corporates, and a few barrow boy New Zealanders gained.

    The currency devaluation and float, all in one hit, which Muldoon begged Douglas not to do, was a gift to currency speculators costing NZ billions. Reducing and removing tariffs, development assistance and import protection just when NZ industry most needed it, to develop alternatives to the European markets, was another disaster. Selling the think big assets, at fire sale prices, before they started earning an income was another. De-regulating the financial and share markets meant NZ was wholly exposed to the 87 crash. To name but a few.

    The Douglas “reforms” have been so successful we have dropped, by all indicators, against all the OECD countries that did not follow the religion.

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  80. In the seventies the country was in shock from the loss of its trading arrangement with Great Britain. I have had that explained to me.

    New Zealand had a golden age from the 50′s to the 70′s. A “generous”, big state living off the back of fat farming exports, thanks to the UK. Most on the hard left can’t get over the loss of it – they pine for a return to that past, but it is no longer there.

    As you know, it all changed when Britain entered the EEC. NZs income tanked and the policy response was ridiculous i.e. keep on spending money we haven’t got. Some people still advocate this today.

    People like Kerry seem to think it was just some right-wing conspiracy. It wasn’t. It was as clear as day – we spent more than we earned.

    Here’s what NZ looked like:

    http://www.freeradical.co.nz/content/twilight/two.php

    The economy only started growing again after Douglas’ reforms. The left hate him not because he was wrong, but because he was right.

    They’ve yet to explain how we’re supposed to sustain an economy if we spend more than we earn.

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  81. Douglas was just as wrong as Reagan was. Voodoo economics don’t work. Remember that it was Bush the elder who coined that phrase… but Reagan got the Presidency and the economic sector got drunk with power.

    Those results are quite clear to everyone but the economists at this point. In time the results will become clear and I suspect economists will finally learn basic thermodynamics by being burned at the stake.

    There isn’t a requirement that we spend more than we earn. There never was. This is the Green party… “sustainability” is a concept etched into our brains… and there is no way to sustainably CONSUME more than you PRODUCE.

    Note the shift in emphasis… economists don’t get this at all. Pinning them down about what their money is, is like that “nailing a jellyfish to a tree” metaphor I offered earlier.

    That’s how Muldoon and Douglas (and Reagan) all fucked up… on different sides of that same error about money. The Rogernomics reforms pushed investment and capital out of industry and into financial markets… the growth was NOT productive, it was financial and consumptive and our debt has been growing ever since.

    Greens know better than anyone, that money represents work done. “Social Credit” almost understood it, but didn’t have anything like a simple explanation, and to this day I don’t know if their schemes were actually sustainable. They understood the problem pretty well, but their solutions left me with an itch I can’t scratch.

    What Rogernomics did was screw the productive industries of the country so that NOTHING would in the long run, be able to be produced at a profit except the farm products which were exported.

    Everything else is cheaper as an import. That’s a natural result of our position and population and resources. To ALTER that equation so we produce things here, even though they may not be “globally” competitive and exported, is the goal. A high dollar pushes it further out of reach.

    The object isnt to export but to reduce imports. This makes government’s role clear to anyone who does not suffer from the Kiwi disease. Some clear places where we could be doing this are wool garments, furniture, whiteware and wind turbines… the production has to be real and it has to be of usable quality.

    I cannot count how many times the story of the electronics disassembly and reassembly plants have been retold for my edification… as that error more than 30 years ago (work that produces nothing is of no value), is the only thing apparently remembered by anyone here. The Kiwi disease.

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  82. Why should we focus on areas in which we have no comparative advantage and high disadvantages?

    Doesn’t it make more sense to focus on what we’re good at – growing things and whining – and for other countries to focus on what they are good at?

    The focus on manufacturing is quaint and, I suspect, has a whiff of self-interest about it. We were never good at it. We never will be as we don’t have the scale. We’re much better off focusing on niche manufacturing that won’t come up against competitors who focus on scale.

    The tyranny of distance is being eroded by communications. It is in these industries – and those hanging off it – where our future lays.

    And growing stuff.

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  83. BJ,

    At times you suffer from another typical Kiwi disease. That is being and pontifying like a Noel.

    One of the sad things I see happening here on frogblog (and by extension I suppose in the Green party) are a lot of negative rants about what happened and who was to blame thirty years ago.

    Forst f**k sake can we move on?

    Grew up in a bombed out WW2 city not that many years after the war, where people had nothing but worked together to produce something.

    Christ I get annoyed at the whinging whinners here that just look backwards at the wrongs done without ever looking forwards to the rights that can be done.

    It is no wonder that Russel Norman does not feature in the prefered prime minister stakes.

    Negative, Negative, Negative, we was wronged, oh what will become of me, hand wringing dispair here.

    Would be great if the postings at frogblog and from Green MP’s foccused on what can be done.

    Be a revelation the attitude change that it would bring to the Green party.

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  84. Considering that NZ went backwards against all comparable countries ever since Rogernomics, a slide which has only, briefly, been slowed when later labour governments partly reversed Rogernomics, claiming that it was a “success’ must be rather tongue in cheek.

    And we now have a National Government putting us even more in the pooh than Muldoon ever did. But that is OK because it is right wing pooh..

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  85. are a lot of negative rants about what happened and who was to blame thirty years ago.

    The far left are obsessed with it. It’s like they ground to a philosophical halt in the mid 1980s are are now completely unable to define a left vision for 2013 and beyond – other than “let’s pretend it’s 1972″.

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  86. And. Arana. Muldoon partly killed off the niche manufacturing we were good at, in favour of agriculture. 1984 Labour administered the coup de gras. I was on a ship carrying manufactured exports to Australia over that period. Successive NZ Governments killed it with incompetence.

    Photo. As we have a net deficit with China, what are the benefits of the FTA? Really?

    Comparative advantage or no, we cannot afford to import everything except agricultural products.

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  87. Considering that NZ went backwards against all comparable countries ever since Rogernomics, a slide which has only, briefly, been slowed when later labour governments partly reversed Rogernomics, claiming that it was a “success’ must be rather tongue in cheek

    Nothing to do with Australia mining, then.

    We are in a slow-dive into the terrain because we don’t produce more of what the world wants. It’s got nothing to do with Douglas and everything to do with the face in the mirror.

    We’d rather whine about the present and feel guilty about the past. We refuse to use our natural resources lest a snail gets upset. We hold private sector business and personal ambition in low regard.

    Strangely, this doesn’t lead to economic prosperity. Who would have thunk…

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  88. We have given plenty of examples of what we need to do to move on and ahead, but the right wingers cannot see past financial stealing and giving up!

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  89. So long as New Zealand’s private sector are obsessed with making a profit by screwing their workers, who also happen to be their customers and we pay people more to cheat around with money, than do something sustainably productive, we will never advance.

    So long as policy settings, and banks encourage cheats and speculators rather than owners/starters of real useful business we will get no-where.

    So long as NZ businesses think the only path to profit is screwing their customers and staff, we will continue to lose business, to those countries who pay good staff to delver to their customers.

    Current policies suits the right wing as the party for cheats, thieves and owners of un-earned capital.

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  90. Why should we focus on areas in which we have no comparative advantage and high disadvantages?

    Doesn’t it make more sense to focus on what we’re good at – growing things and whining – and for other countries to focus on what they are good at?

    This IS the Kiwi disease in a nutshell. The misunderstanding of Ricardo.

    The difference between “focus” and “not neglecting” is part of it because Ricardo didn’t say “do not do” those other things. He explicitly didn’t say that.

    http://www.huffingtonpost.com/ralph-gomory/manufacturing-and-the-lim_b_227870.html

    Suppose that the demand for wine is small compared to the demand for cloth. And also assume the two countries specialize: England in cloth, Portugal in wine. Portugal, while supplying all the wine that England consumes, will get for it only a small amount; the small amount that England is willing to spend on wine. This small value received for wine exports will buy only a small value of cloth imports. This leaves Portugal without its own production of cloth, for which there is a large demand, and only a small quantity of imports. The Portuguese will be ill clothed; they will be a poor nation.
    With these demands, a far better solution with Ricardo’s actual numbers is for Portugal to make all the wine for both countries while continuing its own cloth production to supply its cloth needs beyond what its wine buys from England.

    The tyranny of distance is being eroded by communications. It is in these industries – and those hanging off it – where our future lies.

    The tyranny of distance where it pertains to STUFF (not information but consumable product) is only eroded by a lowered price and time to transport. A function of cheap, subsidized fossil fuel burning, transport modes. A major risk to our future prosperity.

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  91. Current policies suits the right wing as the party for cheats, thieves and owners of un-earned capital.

    Do you own a house?

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  92. Stupidity is repeating the same things and expecting them to work. National, and probably Labour, are continuing to follow the last 35 years of failure.

    What is different about National borrowing, now, for un-affordable tax cuts and Muldoon borrowing for social welfare for sheep. Don’t you lot ever learn from the past?

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  93. That is being and pontifying like a Noel.

    ????? This is a completely blank reference for me ??????

    As for 30 years ago, it is what is brought up every time someone suggests that government COULD or SHOULD do something.

    As arguments I wish to hell New Zealanders could be “neuralized” (Reference to MIB) with respect to the seventies and eighties. Those decades were unmitigated disasters, teach opposing lessons and are best understood from the outside. Argue from the present… agree, but if I do, the argument is dragged back to them one way or the other.

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  94. What is different about National borrowing, now, for un-affordable tax cuts

    They’re not. They’re borrowing for WFF and “free” student loans. National should have scrapped them, of course.

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  95. And. WFF which I do not agree with by the way, it is just hidden corporate welfare, was covered by taxes. The extra borrowing has resulted directly because of tax cuts. Tax cuts which have also cut the money available for State spending, sending the economy into a pro-longed recession just when other places are coming out of it.

    So you want students to be trained exactly as required for your business, right, but you do not want to pay taxes, or fees, towards training them, or have I missed something. Sounds like you want State welfare for your business, but oppose it for everyone else.

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  96. I actually agree that if a business wants someone trained specifically to suit them, they should pay for it!

    Why should we pay for specific training through general taxes.

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  97. Yes I own a house Arana. Which cost far to fucking much because of policy settings.

    If you sell it for more than you bought it for, will you hand the difference to the government?

    I can build you a warm, green, nice family house, near a major city, for 350K including section. But your smart planning mates and councils think they are the work of the devil…

    This sort of thing:

    http://livinggreenmag.com/2012/10/11/home-garden/how-green-are-todays-modular-homes/

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  98. So you want students to be trained exactly as required for your business, right, but you do not want to pay taxes, or fees, towards training them, or have I missed something.

    One or the other.

    If they insist on taking money off me for education spending, then produce the workers I need. If they can’t do that – and they can’t – then stop taking the money off me, and other similar businesses, and we’ll put that money into industry training.

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  99. Noel, slang for knowall.

    When someone in conversation comes across as a knowall, we simply call them out by naming then as a Noel.

    “Yes Noel, whatever.” Even if their name is BJ.

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  100. Yes, but if you are typical of many NZ business you pay fuckall tax, fuckall wages and still expect other tax payers, or your staff, to pay for your trained staff.

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  101. Thanks for the explanation.

    … is that another way to say you’re stuck for a better argument?

    The NZ pronunciation (leaving out vowels) keeps this from me
    :-)

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  102. Yes, but if you are typical of many NZ business you pay fuckall tax, fuckall wages and still expect other tax payers, or your staff, to pay for your trained staff.

    Didn’t you say you were in business?

    Let me guess – you’re different. You pay a lot of tax, pay high wages, and you don’t expect anything from other taxpayers.

    And you don’t know me.

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  103. So, unlike others, if i build a house and sell it I pay tax.

    All property speculators pay tax – as they should.

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  104. Kerry says “Considering that NZ went backwards against all comparable countries ever since Rogernomics”

    OECD placings for NZ GDP per capita were

    1970 – 9th
    1980 – 18th
    1990 – 19th
    1999 – 20th

    We dropped a massive 9 places in the 1970s, but only one place in the 1980s and only one in the 1990s.

    As rogernomics came in in the 1980s, that points to rogernomics stopping the slide, rather than creating it.

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  105. No BJ,

    Usually used when a one sided spiel is taking place where the speaker is ranting on about from their perceived knowall position (Al Gore comes to mind), without interacting with the listener.

    Unless the spiel presenter is named Noel, it is a perfect slayer of knowall spiel presenters.

    A polite “Thanks for that, Noel” is usually enough to gets the message through.

    Speaking requires listening.

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  106. Right Gerrit… but this is pretty one-sided as arguments go… I haven’t heard your counter to the position that we should produce more here.

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  107. No, I am not in business at the moment.
    I was for 15 years. Sold it when National got in. A wise move as it turned out.

    And paid good wages, and taxes.
    Eve the work experience kids i was not allowed to pay got tools, food and accommodation..
    I was rewarded with some excellent workers, at a time when many builders were finding it hard to get people.
    The best one was a retired housebreaker. A young fellow no-one else would employ..
    I do expect some things to be paid for by my taxes, including a basic education for staff, including teaching them to “think”. . I prefer to train apprentices myself, to the standard I want.

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  108. GDP per Capita is a very shoddy bit of statistical rubbish trotted out every time someone wants to justify the advantages of making rich people richer.

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  109. Though I would be a lot wealthier, now, with a lot less effort, if I had simply spent the same amount of starting capital to leverage a dozen rental houses, which shows what a nonsense, policy, lending and tax settings are, at present.

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  110. Arana. If you think property speculators, private home builders and renovators and many others who work at the edges of the building industry, pay taxes on their gains you are even more delusional than I thought.

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  111. Photo. Didn’t you just finish saying the slide in the 70′s was due to losing the European market?

    The slide downwards after the 80′s continued despite other countries rallying.

    And, Why are you supporting present National policies of borrowing and hope then?
    Borrowing for election bribes was Muldoons failing also!

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  112. BJ,

    I haven’t heard your counter to the position that we should produce more here.

    You wont becasue I’m all for producing here. Everytime I look at the rail electrification steel being erected I think, I hope that is Glenbrook produced.

    Whilst saying I want more produced here I fully understand there are counter arguments.

    I come across frequently where raw materials are getting harder to source due to manufacturing reduction.

    For example I use a reasonable amount of 100x40mm 6061 alloy solid bar stock.

    Supplier now says that as there is such a slowdown it is not worth their while stocking that size anymore. Meaning either I have to take 100x 50mm bar (25% wastage) or take a container lot at anyone time.

    Similarly they dont want to cut up below 5mm plate so you have to take a full sheet. More money tied up in material inventory.

    This happens across the suppliers market from raw materials to tooling.

    How you can ever ramp up production with suppliers retrenching is difficult.

    Never mind trained labour, try getting supplies at good rates and in quantities that are affordable (wont break greatly into cashflow or tie up money into raw material stock) by the business.

    Am now actually not competing with Chinese machine shops (they are not so good doing custom and short run stuff), but with USA ones. Great number of machines sitting idle there so they are pricing way way low.

    One complex part in mild steel I priced for 10 unites at $80 per unit.
    USA machine shop quote was US$12 each excluding airfreight.

    Won the order by being local and having the ability to do trial runs to finalise design but it was not easy. Trial run stuff is hard to charge out.

    Should not moan to much, just packing up an order to go to Sweden. Again custom work that local swedish machine shops cannot be bothered with.

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  113. Arana. If you think property speculators, private home builders and renovators and many others who work at the edges of the building industry, pay taxes on their gains you are even more delusional than I thought.

    So you’re saying they are all tax evaders and therefore criminals?

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  114. The situation for the exporter/niche manufacturer is never anything but precarious for the reasons you mention. The people with idle machinery will run at a loss, if the loss from not running at all is larger.

    I don’t have any magic to take away that issue. Can’t imagine one at the moment anyway.

    The part that is relevant to my argument is that the local suppliers can’t source lower demand materials here with the demand having sunk so low that it isn’t economical for them.

    Demand for materials comes from local production of “stuff”… which then makes life easier for you indirectly. We ignore this at our peril, and all too often now, without reference to which major political party is in power. Which is why I regard it as the “Kiwi disease” not the National or Labour disease.

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  115. Kerry / Arana – if you don’t pay tax on cashies, then that’s income tax evasion.

    So while it is widespread, it is in fact breaking the law in terms of breaching the Income Tax Act 2007.
    It’s just not policed actively.

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  116. I was responding to:

    “If you think property speculators, private home builders and renovators and many others who work at the edges of the building industry, pay taxes on their gains you are even more delusional than I thought.”

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  117. If, a non-builder, builds or renovates a house and makes a profit it escapes tax in most cases. Someone who makes money buying and selling houses usually manages to escape capital gains tax. Speculators and developers dodge tax because capital gains tax is not enforced.

    And then of course there is the blatant avoidance like cashies.

    All is of course morally wrong, and hurts those who do follow the rules.

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  118. Kerry says “Someone who makes money buying and selling houses usually manages to escape capital gains tax.”

    They’re taking a big risk. Our local Property Investors Association advice is that if you sell a rental property within two years of buying it, and you have a good excuse for selling it, you’ll get away with, but only once.

    If you do it a second time there’s a very high chance you’ll have to pay CGT.

    The IRD did a clampdown in Queenstown a while back and quickly collected an extra $50m in CGT.

    Family houses are excluded from this, unless there is a pattern of buying and selling.

    Similarly if I TRADE in shares, I get taxed on capital gains. If I hold them long term for dividends, I don’t.

    It’s all to do with intent, at the time you buy the property, and comes down to one simple clause in the tax law.

    “An amount that a person derives from disposing of personal property is income of the person if they acquired the property for the purpose of disposing of it.”

    There’s a bit of a myth that we don’t have any capital gains tax in NZ. That’s partly because we don’t call it capital gains tax. When you profit from buying and selling houses (or shares, cars, caravans, boats etc), the profit is just considered income and taxed as such.

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  119. Many do not sell property for the CG, they leverage against the gain to buy another property. Just as farmers live off the CG of the rising farmland value as much as farm income – except they don’t leverage to buy other farms they borrow against the farm to supplement income. When farmers retire as millionaires they won’t have paid any tax on any CG. Same for many rental investors.

    The best way to contain that practice is mininum equity in rental property – 20% at time of deposit + say 2% for each year the property is owned. So a property owned for 20 years would have 60% equity and if not would say be ineligible for mortgage interest deduction as a cost.

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  120. SPC says “The best way to contain that practice is mininum equity in rental property – 20% at time of deposit + say 2% for each year the property is owned.”

    It’s very late, but that that sounds like an idea worth exploring tomorrow.

    There’s got to be a good way to help bring down house prices. CGT can backfire like in did in Australia and led to HIGHER prices. Everyone put their money into the family house, as it was exempt, and ALL house prices went up (you can’t ring fence prices for rental properties separately from family homes).

    And the other point is the only reason it’s sustainable that landlords can have rents at such a low rate (a lower % than interest rates), is that they make their money on selling the property in 10 or 20 years time.

    If land lords can’t makle money on capital gains, then rents would have to be 6% (current low interest rates) + 2-3% (insurance, rates and maintenance) + a few percent profit – that’s somewhere around double what they are now.

    They may not go up that much but it certainly puts huge upward pressure on rents.

    So a system like your that puts a squeeze on finance, rather than a tax, may get some results without all the drawbacks of CGT.

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  121. Just a note that our standard of living has been declining since the fifties, but certainly the common market and the policies of several governments since have not helped matters.

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  122. photonz1 – SPCs Squeeze Tax + Tobin Tax would probably do the job I reckon.

    Saying that, a comprehensive CGT not excluding the family home would be equally as good to remove the distortion you talked about – maybe with some form of commensurate rebate based on the length of ownership? (i.e match the 2% p/a equity increase requirement with a 2% p/a CG exclusion for the family home.)

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  123. Gregor says “Saying that, a comprehensive CGT not excluding the family home would be equally as good to remove the distortion you talked about ”

    Agreed. A CGT has to be all or nothing. Otherwise you leave behind millions of dollars of gains on Paratai Drive, while coming hard on the person in Bluff who works hard to own a $150,000 house with a rental of the same value.

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  124. As photonz rightly points out, we already have a capital gains tax. I’m open to the idea so long as it is revenue neutral – I have doubts about it achieving what proponents claim it will – but agree that if it is implemented formally, it must go across family houses, too.

    Else we’re just creating waves of McMansions.

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  125. Those proposing a CGT including the home have to cover two things

    1. it is politically impossible, so arguing the economic benefit case would just lose a party an election
    2. the economic cost of an adverse impact on labour mobility – people would not move because of the loss of equity in their home – the CGT payment would diminish their level of equity in their next home.

    As for my idea – a fixed level of equity in a rental property, the problem is valuation changes.

    I personally have no problem with a CGT on rentals only and people upgrading their home property as an investment. This either improves existing house stock or creates a boom in new building freeing up existing housing for first home buyers. While the average price in Oz has risen, this is not the same thing as the median price for first honme buyers.

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  126. I personally have no problem with a CGT on rentals only

    I’m guessing you don’t have a rental but you do have a family home?

    Any argument about fairness regarding capturing “unearned” earnings goes out the window if we don’t include the family home. The fact people cite that as a reason for CGT yet would vote against the family home being included just reveals their hypocrisy.

    Rents will rise under CGT. The landlord must make above the RFROR else it’s not possible to be one. Presently, they make up the difference in capital gain. Tenants will likely pay the same amount individually, they’ll just be sharing with more people.

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  127. 2. the economic cost of an adverse impact on labour mobility – people would not move because of the loss of equity in their home – the CGT payment would diminish their level of equity in their next home.

    There’s no loss of equity. It’s potential equity unrealised.
    The is a subtle but important difference.

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  128. Someone buys a home for $250,000 in Auckland 2002. They get offered a job building in Christchurch. Their house is now worth $650,000 in Auckland 2012.

    If they sell they pay CGT on their $400,000 CG. Under Greens policy they pay 30% on the $400,000 less CPI over the period. Under Labour 15% on the $400,000. Under Greens nearly $100,000, under Labour $60,000.

    If he takes the job and sells the home they have $60-100,000 less equity when they buy another home. If the new home cost is the same he takes up $60-100,000 in new mortgage debt.

    Effects

    - he does not build in Christchurch, we have to use trainees and foreigners.
    - he rents out his home and takes a new mortgage to buy a second property (as many MP’s do) where he works in future. This decreases home ownership
    - he rents out his original family home and rents where he works later. This decreases home ownership
    - 50,000 people consider the CGT payable on selling their home on their willingness to start a job in Oz. Unemployment here rises.
    - people stay in their family home until they die and borrow against the home in late life reverse mortgages.

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  129. 70% of the housing market is not rental. Of the 30%, how many are going to be sold if you implement a capital gains tax? Landlords will be incentivised to hold them.

    So, how much is the tax going to raise if you don’t include the family home? 5/10ths of SFA. And you’ll drive up rents.

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  130. Arana, saying that rents can only be held down by landlords making CG and these CG being untaxed – is saying

    1. the few who own rentals should be privileged under our tax system
    2. we should ensure they keep making CG to hold rents down
    3. the price for this should be met by those trying to buy homes at high prices

    Given a home is something that has to be replaced on sale it is not an investment – if you want to call Macmansions an investment then determine a reasonable value for a CG tax exempt home (say $M) and tax those bought or built for more upon sale.

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  131. Arana, how many homes will be sold if there is CGT?

    As for the rental property market – if one applies an increasingly strong equity test for mortgage interest being a cost, then landlords will have to reduce their portfolio.

    What lowers rents is lower property cost for new landlords.

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  132. What I’m saying is that nothing is free.

    Landlords aren’t “privileged”. The total return – including the tax-free capital gain – is, in many cases, modest compared to other investment classes.

    If the *total* return – however you want to break that up – doesn’t justify being a landlord, then landlords will exit the market until the point where rental income makes being a landlord worthwhile. Not everyone wants to buy a house i.e. those on transfer, young people, people recently separated, etc.

    Physically building houses hasn’t got any cheaper. The sale price of an ex-rental house is not set by the rental return. It’s set by supply and demand.

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  133. Arana

    The sale price of an ex-rental house is not set by the rental return.

    Rubbish! The rental return is a key component to how much a house is sold for even if it will no longer be rented. Buyers often look for a net rental yield in the property, and the better the rental yield was the more the property can be sold for.

    Net rental yields have increased with a dwindling rental market because it creates scarcity, which has increased rental costs even faster than property prices.

    In 2012, the national median house price rose by 6% btw… Claiming that nobody makes much money out of housing is clearly wrong!

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  134. Rubbish! The rental return is a key component to how much a house is sold for even if it will no longer be rented.

    Wrong.

    On commercial, it’s determined by the rental. On residential, the rent barely comes into it. The only exception is where there is little or no expected capital gain.

    When it comes to residential, the deal is often negatively geared in terms of rental returns.

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  135. In 2012, the national median house price rose by 6% btw

    6% is a miserable return. Many dividends are higher than that.

    And most regions are below that figure, and have been since 2007. That’s four years of sub-par returns. Landlords won’t be making that loss back for a while yet.

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  136. First Arana says:

    The sale price of an ex-rental house is not set by the rental return.

    Then she changes it to:

    On residential, the rent barely comes into it.

    You’ve contradicted yourself Arana… Either the rental return has no effect on the asking price or it barely comes into it… You can’t have it both ways unless you’re a bit touched in the head?

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  137. What contradiction? In both instances, the rent is not how the sale price is determined.

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  138. The IRD did a clampdown in Queenstown a while back and quickly collected an extra $50m in CGT.

    If this is so, it is excellent evidence that the law is most often honoured in the breach.

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  139. Hi Denise,

    I think you make very valid points. I’d also like to see some dialogue around why we are taxed at a higher rate for secondary incomes than primary incomces. In my experience, someone has a second job because they aren’t making enough from their first job to survive but are trying to do the best they can to provide for themselves and their families – so why should we be penalising this activity? It’s certainly more commendable than the alternative.

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  140. I’d also like to see some dialogue around why we are taxed at a higher rate for secondary incomes than primary incomces.

    Julia – this is not the case.

    The IRD website has an excellent explanation if you’re interested but essentially, what you pay in secondary tax is rebated to ensure that everyone is equally taxed on gross income over the FY irrespective of sources (for example, the marginal tax rate is set higher for someone earning 10k(primary) + 10k(secondary), but it washes out at the end of the tax year to ensure that you are paying the same tax as someone earning 20k total).

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  141. So how come the rent is only $595 p/w, Jackal?

    Probably because the current owner isn’t 100% leveraged, Arana.

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  142. It’s not an atypical rent vs capital value. Try it with as many properties as you like, but in most cases, the rent bears no relation to the capital value as it does in commercial property. If you used rent to value the property, it would, in most cases, halve.

    So, are landlords mad?

    Well, some might be, but they’re getting their return from the (hoped for) increase in capital value.

    Houses don’t cost any less to build, and the land price is only being driven higher by false-scarcity imposed by smart growth planning. There is only one way to reduce housing costs, and that is to build a lot more of them – cheaply.

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  143. If they sell they pay CGT on their $400,000 CG. Under Greens policy they pay 30% on the $400,000 less CPI over the period. Under Labour 15% on the $400,000. Under Greens nearly $100,000, under Labour $60,000.

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  144. Maybe more discussion on living standards would be in order.

    NZ Superannuation payments are based on the average weekly ordinary time earnings. But living standards are based on household income?

    The number of people per household in 1996 was about 2.8 dropping to about 2.7 in 2006 census.

    I have found on the Stats website household income back to 1998 which was $914 or about $326.5 per person. And in 2012, $1550 or at least $574 per person as number per household is probably still dropping. So that is an increase of 76% average income per person overall.

    Average weekly ordinary time earnings, however, 1998 $906 2012 $1478
    is a much smaller increase of 63%.

    So for people living on NZ Super living standard must have dropped back.

    And the people who are working are working longer hours, and more per family. So that must be reducing the family contact for youngsters, which is a reduction in standard of living?

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