Your confusing what I posted and what Cullen proposed is inexplicable. Try again.

A levy on fixed rate mortgages would increase the cost of money and therefore force some marginal owners to sell, thus increasing the supply of houses and shifting the supply curve to the right.

Higher interests costs would also restrict people’s borrowing capacity, thus reducing demand for houses.

More houses, cheaper + less demand = housing crash = upside down mortgages = foreclosing borrowers = national financial meltdown.

Cullen surely wouldn’t be THAT stupid….but then, didn’t Theresa say the same thing 9 months ago about local loop unbundling?

I note we’re all paying for that government decision now.

1. dirty float at 80 cents Oz (reducing the link between our attractive interest rates and the dollar)
2. replace a portion of the cash rate with a fee on all loans (this reduces the interest offered on deposits – which can be compensated for by only taxing interest once the CPI rate was deducted).

He would probably increase the cash rate, if government cut taxes in anyway but phased year by year.

I personally support ways to reduce inflationary pressure without so much reliance on the cash rate.

Thos includes a capital gains tax on non residential property (foreign owned and rental).

Will house prices will go further through the roof – possibly? But thet’ll eventually reach their real value then there will be more investment in product business instead of unproductive land.

Retarding property price inflation to the detriment of the productive sector and balance of payments is, well, retarded.

I’d rather see the government retard the banks ability to lend through the use of Basel II, than use the OCR to clobber all of us.

I note National did not promise to cut back any of the health or education spending made.
It just intended to cut taxes and reduce the size of the surplus. Now that would have been the most inflationary course.

Awarding tax cuts to the public and so generate a demand for imported consumer products, is not spending in the productive sector or domestic infrastructure (education enables future growth, health care maintains the existing workforce – so along with roads/communications/power etc are part of necessary investment) is the most inflationary course.

Until National can find a way to target tax incenticves to the productice sector, they are increasing the inflationary risk (deterring investment in anything but retail and cost plus service sectors).

Inflation equals the difference between the increase in the money supply less the increase in total productivity or net output.

Massive poor quality government spending creates inflation because the additional dollars spent do not create a corresponding amount of additional output. The government gets poor value for money and we pay the price through a decrease in our individual purchasing power.

Not only are they taking too much of my money but they’re not even spending it properly. Thanks Labour.

1. Context. I was responding to those suggesting lower taxes was the way to improve incomes.

Tax rates are not the mechanism for that. Though income support for families (from tax revenue or targeted rebates) is common around the world.

The struggle is to do this (maintain our social infrastructure) and also upgrade our economic infrastructure on our low wage incomes.

2. Infrastructure does not fail within the term of one government cycle, it is the legacy of lack of investment in past decades.

We have been struggling here since the 70′s for the combination of surpluses and associated adequate investment in infrastructure. The current government is one of the few that is not culpable.

3. How to get real gain in wages (we have for 20 years been falling behind Australia)? Good question – does any party have an answer. And is government the one responsible/capable of resolving this?

Labour has tried to end the hands off government era and look at tax incentices (increasing depreciation allowances to encourage capital investment of profits, R and D, apprenticeships etc) –

I note that we have struggled since we floated the dollar (uncertainty over it’s instability and it’s over-valuation discourages productive investment) to even get a trade surplus let alone one sufficient to compensate for our low savings/reliance on borrowings.

Allowing providers to determine courses based on demand was National policy.

I see it as allowing people to retain as much of their own money as possible while taking enough to maintain and improve a solid infrastructure. Yet have high taxes and a failing infrastructure (as pointed out by John).

The corollaryof your theory, then, must surely be a policy which causes sustained growth in real wages, thus retaining and attracting back the skills we need to build the economy… a level of wages so fulsome that no one cares they’re being overtaxed by Dr Cullen.

Could you point me to the Labour policy(ies) which achieve that, please?

“We’re trying to build a knowledge economy”

“Which begins with spending on education …”

Value for money in education spending has gone down 10-100 fold in the time of high tax take. Most of our education spending is on watered down, wasteful, feel-good, non-vocation courses.

Those that do good courses are often out of here, never to return – often contributing to the economies of our competitors.

The other one that gets me is – big business prospers and small business suffers under labour. Of course the answer is obvious – it is much easier to control a small number of large businesses and let them control their employees than it is to control a large number of free, prosperous people with the brains and money to see through their scams.

And you get the spin-off of low wages -> high employment, enforcement of ludicrous overregulation, EEO compliance, …

Subsidies and rebates are the opium of the voting masses. Once hooked they’re impossible to give up. How about not paying the tax/levy/tariff/charge/excise in the first place?

Taxing and rebating is a horrendously expensive and inefficient exercise that does nothing but product a set of lovely looking figures to quote “we gave families $150 million of additional support this year”, and make thousands of families believe that Labour is giving them a higher standard of living.

But then, as we’ve seen with their attempts to deny the underclass with an army of statistics, that appears to be all that Labour cares about – lies to sell the voting public.

That is utterly priceless, yet sadly true. The growth in Government has had an infaltionary effect on the rest of us too. Our rent in CBD Wellington has increased by 36% over the last 4 years because of the pressure put on limited commercial rental space by Government Departments et el.

We we pass that cost on which contributes to inflation, so Cullen’s sollution is to wollop mortgagors with a tax to cool off the housing market, take a look closer to home “Dr”.

I agree in general principle that popularity is not conclusive, but I was originally responding to the idea that support for middle class families was something unique to Labour.

In New Zealand National offered a mortgage interest rebate and a family tax rebate – very middle class family friendly policy (from the days when they were the party ofgovernment).

SPC, a little logic 101 – “everyone else is doing it” doesn’t qualify anything as a good idea.

If it did I’d be taking on loads of credit card debt, divorcing my wife and having illegitimate children.