Posts tagged Labour

Predictions – for 2011 and beyond

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OK, here are some big (and no so big) predictions for the next 12 months and beyond:

  1. Apple will release its 5th generation phone (iPhone 5, or 4s) in September.  Potentially more significant, it will also do is push the 3Gs as an entry level phone (or less likely, introduce an iPhone lite), with a far lower price point, and sell it outright (no contract).  This will be the nail in the coffin for Nokia et al, and mark the move of Apple into more ‘mainstream’ mobile phone market.
  2. Google+ WILL eventually be the major social networking platform.  It will be significantly large to be one of two (FaceBook being other other) by the end of 2011.  FaceBook will survive though.
  3. National will win the next election in New Zealand.  I actually predicted this in 2009, but wanted to restate it here.  Labour will get caned, but not as much as current polls say.  Even if National can govern alone (which will be close), they will invite others into a coalition.  Key is clever like that.
  4. Obama will (re)win the US Presidency in 2011.  It will get nasty.
  5. The NZ dollar will stay high (around 80c against the US $) for most of this year.  But drop back to 70-75c by late 2011/early 2012
  6. The US economy will crap itself in 2013.  Finally.  China will help.

The above predictions were written on 27th July 2011.

Update 4 August 2011: The 2011 Rugby World Cup final will be between Australia and NZ.  If NZ make it to the final, they will win it.  South Africa will bomb out early.

Black and White Version: My predictions for 2011 and beyond.  Who knows if I am right or not.  Time will tell!

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Capital Gains Tax – the numbers

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I think someone got the numbers MAJORLY wrong on this story. Today it was leaked (probably by the Labour Party) that Labour will introduce a Capital Gains tax policy as part of its election campaign sometime next week, as reported in the NZ Herald.

While all speculation at present, the details appear to be:

  • a 15% capital gain tax
  • excludes the family home
  • excludes property purchased prior to when it is introduced (so around 2012) (this has to be the case, since Govt’s cant pass retrospective laws).

The article reports it will raise around 4 billion.  I think that’s wrong, and here’s why:

  • The tax workging group sais a FULL capital gains tax, on ALL property at the marginal tax rate of 33% would raise around 9 billion (around 2007/8) (they admit this is a very rough figure).
  • It’s estimated that around 15% of property is investment property (ie not the family home).  So 15% of 9 billion = 1.35 billion
  • At a marginal tax rate of 15% this would raise $613 million

Now many of these figures are rough.  Many will even be wrong, but my point is that its VERY hard to raise any large amount from this tax without making either the tax equal to the marginal tax rate (ie 33%) and/or putting it on the family home too – a sure vote killer.

In addition this tax only raises money when property prices are rising.  At present they aren’t ( by any large factor).  So the value from this tax in 2012 might be closer to zero.  In 2013 I would doubt it would raise $100 million.  This si going to create issues for Labour, since none of this helps with paying for their billion of dollars of already announced policies (remember GST off fruit and veges which will cost almost a 1/4 billion alone?)

Now I would also add that I am in favour of some sort of capital profits tax, but not of this sort.  Its too watered down to be effective, and too forced on “tax the rich” to actually do anything other than piss a bunch of people off.

Of course that last point isn’t a worry for Labour – they have so few supporters at the moment they need bold initiatives like this to give it a go.

Black and White Version: Capital gains taxes aren’t all bad – but the one proposed by Labour just wont work, because it wont raise much money.

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Misleading Press, and scaremongering Labour MP

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Today the Christchurch Press reported Chch door open for asset sales, and quoted ChCh Central Labour MP was today on National Radio saying that the ‘sale of assets must be stopped’. The Press reported:

A legal loophole means city ratepayers’ stakes in Christchurch City Holdings Ltd’s (CCHL) assets – including electricity company Orion New Zealand, Christchurch International Airport Ltd, Lyttelton Port Co, Red Bus and City Care – could be sold to help pay for the estimated more than $20b rebuild of the central business district.

Well it’s all just rubbish. Here’s what wrong with this story:

  • The headline is misleading.  This is no open door.  The door was never closed.   There is also no loophole. The Council can, if it chooses, sell any asset it owns, and has always been able to do this.  There is no new provision that the CERA act creates that didn’t already exist.
  • Labour are trying to make a story put of this by trying to ‘block CERA from forcing sales’, yet the Minister for Earthquake Recovery (Gerry Browlee) is VERY clear that it’s a CCC decision, not CERA.   Mayor Parker (both Browlee and Parker were also interviewed on National Radio this morning) agrees and says the Council aren’t even considering this, and if they did it would be done with full community consultation.
  • The Government and the Council are both clear on their roles here.  Only a Labour MP (and the ChCh press) seam to think there is an issue.

The Press should know better that running such a misleading headline (that or just being stupid and falling for the spin from an MP).

While it’s not my intention to make this post about the merits or otherwise of selling such assets (my gut reaction would say keep em), it was interesting to note that the CCC has $2 billion in assets, that reportedly returned $600 million over the last 10 years.  So that’s $60 million a year, or a return of 3% (that’s simplistic, since I have assumed the asset’s value was $2 billion throughout the last 10 years, and its very likely that the assets have increased in value over the period).   Based on that I might suggest that at the very least this issue is looked at and the question of are they a good investment?, earthquake or not, is asked.  The problem with ideological approaches of don’t sell or always sell is that such questions aren’t asked.  IMHO, asking that question would be a far more interesting and valuable story.

Black and White Version: Just coz an MP says it’s true, doesn’t make it so.  Media need to do their job and RESEARCH before printing misleading headlines.

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bad_economics

Labour and National – Recent Economic Policy Announcements

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Both Labour and National have announced various economic policies for New Zealand over the least few days. (although the media seam more interested in Goff’s hair dye, maybe coz that’s more interesting?)

The mainstream media, and plenty of blogs give plenty of views and in depth commentary, so here’s my back and white take on them both.  Before I start the context needs to be set:

  • NZ (and most of the world) just out of a global recession
  • NZ borrowing $300m a week just to fund current activities
  • Govt expenditure as a % of GDP extremely high (ver 40%) due to massive growth in last 10 years (almost 50%)
  • NZ close to a downgrade from credit rating agencies due to high dept and future borrowing – something needs to be done (downgrade means higher interest rates in NZ – hits everyone).

Richard’s Black and White Summary

The summary Labour: Up to 1st $5,00 tax free Partial sale of selected Govt assets floated, as part of 2011 election policy
Good, bad, other? Stupid.  Aimed at vote catching. Interesting.  Novel.  Courageous even
The good Everyone gets some cash.

Frees up capital for other projects.

Being on selected assets ony , we know what we are voting for.

Means (ultimately) less borrowing.

The bad Not feasible.  It will cost 1.1billion, and even a new top tax will only collect in 30% of that.  The rest is made up with reducing tax evasion, but in fact introducing a new top tax bracket will only make tax avoidance happen more through income shifting.  remember Labour also has a policy of no GST on fruit and veges – costing a further 250 million in lost revenue.  We have to BORROW this!

Some wont like “selling stuff”.

In a perfect world we wouldn’t sell anything some would say, but I think AirNZ is a perfect example of how it can (and does) work well.

Feasibility? It isnt. Very.

Overall rating

(our of 5 stars)

Two stars (only coz some uninformed people will vote for it) Four stars

Black and White Version: Labour still has no vision.  National shows that you can put options to the people to vote on.

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