Labour’s job plan

October 18th, 2012 at 4:00 pm by David Farrar

As far as I can tell most of ’s so called job plans, is to have more inflation and have prices go up. Here’s the speech, and my comments.

Our policies will ensure our high and volatile dollar doesn’t undermine the competitiveness of our exporters.  We’ll give them the best possible opportunity to succeed.

We are a trading nation. We can only grow wealthy if we export.

That means an independent Reserve Bank that’s given a wider mandate to support exporters and jobs, not just focus on inflation.

Make no mistake – this is the deluded belief that having more inflation will lead to more jobs. I thought the 70s killed off that idea. Any gain in jobs from more inflation is temporary. It’s like a quick sugar fix. You feel good at the time, but get bloated.

We’ll pursue pro-growth tax reform that includes a capital gains tax to take pressure off house prices and ensure people invest in businesses, not the Auckland property market.

Umm, are you seriously suggesting taxing the capital gains people make from their businesses will lead to more investment into businesses? There are some sound reasons to have a comprehensive capital gains taxs – but it is snake oil to try and suggest it will lead to more investment into businesses.

And a research and development tax credit that rewards ingenuity and encourages innovation in our businesses.

Actually, they encourage people to reclassify their expenditure as R&D. National does R&D grants, Labour prefers tax credits. The difference is not going to impact jobs much.

President Obama brought in a “25% rule” for stimulus projects. Unless a foreign company is 25% cheaper making a product, the work should be contracted to a US company.

Australia has other checks for local contracting as does Singapore and many other countries.

That’s why we’ll ensure government agencies contract New Zealand businesses wherever possible. To build businesses, jobs and skills.

Note that Shearer has not said he will bring in such a rule. He has just said Obama has. He knows under CER such a rule would be illegal. He is trying to con people into thinking Labour will have such a law.

Labour will also introduce a ‘one in a million’ target for significant government contracts.

It would require companies that are awarded major contracts to take on one apprentice or trainee for every $1 million contract it receives.

Oh Good God, and they’ll sack an employee at the other end if they don’t need that many staff. The Government can’t dictate staffing levels to a business. Again this is pure snake oil – sounds good, but won’t do anything.

We’d raise the threshold so that businesses need to prove they’ve engaged with WINZ and Industry Training Organisations before they get approval.

We’d require Immigration NZ to consider the competitive impacts, particularly on wages and conditions when it considers granting an approval to bring in temporary workers.

I’d also like to see conditions about wages and working conditions attached to the employer’s approval. And, where it’s appropriate, to require the employer to offer apprenticeships to young New Zealanders.

Finally, an actual policy that may impact jobs. But there are no details. Anyone can say raise the threshold. I do not disagree that work permits should only go to people, when no NZer can be located.

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81 Responses to “Labour’s job plan”

  1. Auberon (868 comments) says:

    The man’s a danger to shipping.

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  2. gazzmaniac (2,317 comments) says:

    I do not disagree that work permits should only go to people, when no NZer can be located.

    I do. I do if that New Zealander wants to charge more for his labour than an immigrant does, and I do if the immigrant will be better at the job than the New Zealander. There’s no doubt plenty of other reasons why I would disagree with that idea.

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  3. wreck1080 (3,725 comments) says:

    The point around capital gains, is that people don’t put money into businesses because housing gains are tax free. So why bother with businesses?

    Somehow , you’ve come out with the complete opposite conclusion from most people regarding capital gains tax.

    All the economists (that I’ve heard) say a capital gains tax will make property less appealing and investing in businesses more appealing.

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  4. KiwiGreg (3,169 comments) says:

    @ wreck one obvious point would be every CGT in the world provides an exemption for the principal residence so the CGT actually falls on the business owner.

    But raising taxes under any guise is never pro-business.

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  5. Peter (1,577 comments) says:

    The reason people don’t put money into businesses is that they tend to be high risk in such a small economy. Houses are – for the most part – low risk, dull and predictable.

    Different risk profiles, so it’s nonsense to assume that money is going to jump across. It doesn’t happen in other countries, either.

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  6. lastmanstanding (1,201 comments) says:

    If the Gumint delivered the mail and defended the shores and did nothing else and got outta our lives then and only then would we see economic growth.
    The more Gumints fiddle the worse they make the situation. Look at the past 5 years.

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  7. TheContrarian (1,073 comments) says:

    Stagflation!

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  8. anonymouse (694 comments) says:

    I particularly liked the

    require tenderers to outline the use of NZ components and suppliers in every bid.

    Great, more red tape if you want to tender for a government contract,

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  9. wreck1080 (3,725 comments) says:

    @kiwigreg::

    A CGT would need to be offset by a reduction in income tax rates (ie fiscally neutral). I’m unsure if labour are advocating that.

    Many kiwis own more than one home. A CGT would rightly apply to these people . My parents have 3 houses around Auckland for example — price/income rations were ridiculously cheap back in the 80′s/early 90′s . They’ve become millionaires without paying any tax on the main source of their wealth.

    And, there are a lot of people around like my parents.

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  10. wreck1080 (3,725 comments) says:

    @peter — you assume that the only way people can put money into businesses is by starting their own.

    The sharemarket is a good way to invest in businesses and over the long term provides higher returns than housing.

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  11. rouppe (914 comments) says:

    @wreck1080

    The sharemarket is a good way to invest in businesses

    Are you deluded? If I buy shares in a listed company, do you really think that the money I hand over goes to the business? It goes to the person who sold me the shares!

    No new shares are created, no extra money is available to the business, they can’t hire anyone, or make more product or import more raw materials or anything like that with the money I invested in some of their shares.

    They never see that money!!!

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  12. Kevin (1,122 comments) says:

    I think businesses already pay capital gains as part of their profit.

    An unrealised capital gains tax, which I am sure is what the econazis will insist on, will actually depress the economy.

    What we actually need is a simplification of business tax laws ie one law for all,income no matter how its made, including rent on get, and the same tax on any profit on capital sales as on any other sales.

    But even then it’s 20 years too late. We’ve been raped because both 90s national and naughtiest liebour could have brought in equitable taxation but didn’t.

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  13. gazzmaniac (2,317 comments) says:

    Instead of pushing for a new capital gains tax, why don’t people push for lower income taxes?

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  14. Kevin (1,122 comments) says:

    Thanks for the reminder gazz. I think it goes without saying that lowering taxes is the way to fix the economy, we’re just specifically responding to liebours latest puke up.

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  15. RRM (9,427 comments) says:

    It seems wrong that people making things and selling things pay tax on all of it, whereas you don’t if you’re buying and selling rental houses, while facilitating a flow of interest from your tenants to the bank in the meantime…

    If there isn’t enough productivity in the economy, providing tax incentives to encourage people to basically do each other’s laundry instead of productively making things and selling things seems pretty perverse, but then I’m far from an economist!

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  16. Alan Johnstone (1,055 comments) says:

    We have a job crisis for one reason, we have an educational and skills crisis.

    At the same time as we have unemployment, we have desperate employers unable to get good staff to grow their business;

    So we import them from overseas.

    The problem was hidden in the past by large numbers of low skilled jobs in the primary sectors which no longer exist.

    NZ needs to skill up or it’s screwed.

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  17. Flyingkiwi9 (54 comments) says:

    The fact is, the last point would drive business away from New Zealand.

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  18. joana (1,983 comments) says:

    What happened to National’s job plan?

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  19. Spam (593 comments) says:

    Anyone wanting to get a work permit for a prospective overseas employee already has to justify to immigration nz why there are no locals who can do the job.

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  20. williamsheridan (63 comments) says:

    I note the following from this piece of economic lunacy that is the Labour’s jobs Plan:

    “That’s why we’ll ensure government agencies contract New Zealand businesses wherever possible. To build businesses, jobs and skills.Labour will require government agencies to do a wider economic analysis of major contracts to ensure they deliver the best price and quality as well as the maximum benefits of the NZ economy.Labour will also introduce a ‘one in a million’ target for significant government contracts.It would require companies that are awarded major contracts to take on one apprentice or trainee for every $1 million contract it receives.”

    The only jobs that will create is the increased compliance and administration costs in government to do this – to say nothing of the extra cost that this will vreate on the economy, to say nothing of the lessing in competition that would be created by such a neanerthalic stance.
    I hope that sopme economists crunch a few numbers on this to show twhat a price spiral would be caused by this sort of shoddy thinking.

    We have a government now that has substantially reduced expenditure die to an enlightened approach of having state agencies work together to get ome leverage out of their buying power…. if an NZ company is good enought it gets the business…. what would be a disaster is to sacrifice quality and innovation in the name of “jobs protection….. it’s not job protection or even job creation…. its extra taxation.

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  21. UpandComer (506 comments) says:

    A capital gains tax should not kick in for any gains under 50 thou.

    It will just kill small investors – most NZ”ers have fuck all savings to invest anyway, so how is being taxes first on your wage, then your savings, then whatever gains you miraculously get on those savings you invest going to help small investors.

    They need to put a threshold on the thing if they win, otherwise it’s just bullshit.

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  22. Kevin (1,122 comments) says:

    Since you are obviously a hard working small investor you can be sure a capital gains tax from $zero is exactly what the red greens will do.

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  23. Elaycee (4,297 comments) says:

    Labour will also introduce a ‘one in a million’ target for significant government contracts. It would require companies that are awarded major contracts to take on one apprentice or trainee for every $1 million contract it receives.

    Given Labours track record of commercial ineptitude re matters commercial (TranzRail etc), I can only laugh at the suggestion they could tell me when to employ staff and how to run my business.

    So, if I won a contract to supply widgets via a Government tender, I’d have to include in my pricing all extra staff costs that winning the contract would entail. Even though no new staff would be required in order to supply the widgets….

    Sure. Of course. How logical. Makes sense. Pfffttt.

    What complete muppets. This idea is so daft, I had to check that it wasn’t really the ‘brainchild’ of the Gweens.

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  24. wat dabney (3,655 comments) says:

    The left knows that harmful economic policies are often good politics. Better to have a “plan for jobs” that letting market forces operate, even when the result is lower growth and a lower standard of living; and better to spend billions on something you call a “stimulus bill” than not, even if you know the money will do more harm than good.

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  25. Reid (15,917 comments) says:

    Actually, they encourage people to reclassify their expenditure as R&D. National does R&D grants, Labour prefers tax credits. The difference is not going to impact jobs much.

    Given this country survives on its IP, the R&D regimes enuciated and enacted by both sides are derisory and inadequate. If you want a job creation initiative, don’t look past this.

    DPF’s comment on this sounds like it was taken straight from an IRD white paper and remember, IRD is not there to encourage growth, it’s there to protect revenue leakage, which it does very well. But revenue leakage is not the full story and the difficulties inherent in policing a more realistic regime designed to encourage R&D should not be the full and final argument on the matter.

    Ireland in its Celtic Tiger phase used massive R&D tax credits to encourage multinationals to setup facilities in depressed regions. The fact Ireland blew its advantage which led it to become the world’s biggest software exporter in 2002 through the liberal lending policies of the later years, should not be taken to mean the Celtic Model failed. It didn’t. It succeeded. The reason the Irish economy tanked is NOT because of those policies, only idiots conflate the two dynamics. The fact Ireland was in the EU is why it succeeded so well in the 90′s and early noughties. Mostly US companies saw it as a gateway into the EU.

    Well guess what? We’re sitting in the region which has the highest global growth prospects for the foreseeable future and guess what again: we’re English-speaking European background which means our legal framework and heritage is purpose built, same as Ireland’s was, to encourage European and US companies to base themselves here without any cultural difficulties inherent in places like say, Malaysia. And guess what again? We have an FTA with China. The fact all of this isn’t discussed and measures similar to the Celtic Tiger aren’t already being introduced is a great mystery to me, for it’s an obvious job creation sitter. My theory is that the politicians on all sides haven’t yet got their heads around the fact that Asia is our future, not Europe and the US. They also, I think, aren’t aware of exactly what the Celtic Tiger model was. For those who don’t know, they:

    (1) Picked a small number of industries to focus on: they chose (in the early 90′s), software and bioinformatics. (Bioinformatics is number crunching for drug company genetic research and they calculated for every scientist, it takes 6-8 IT specialists to support them.

    (2) Oriented their education system to turn out graduates with the appropriate skills.

    (3) Heavily marketed and incentivised multinationals in the relevant industries to setup their R&D centres in Ireland, specifically denoting depressed areas and providing significant tax credits to said multinationals who setup their centres in said depressed areas, calculating the employment opportunities and the transfer pricing within said areas would pretty soon lift them out of depression and into prosperity.

    There are a few more details but that’s the big picture. Simple, isn’t it. This was all explained by one of the Celtic Tiger architects guest-speaking at the University of Auckland in 2002.

    I repeat, it worked. Fact. Ireland, as I said, was a bigger software exporter in (I think from memory) 2002 than the US. We all know the reams of articles about the “Celtic Tiger” miracle. This wasn’t fluff, it was real. I also repeat, don’t conflate the Irish economy today with the success or failure of that model. They are two different things.

    So the question is, why not? Australia, AFAIK isn’t doing this. We lost a major R&D contract (think it was one of the mobile phone companies) during Hulun’s regime. This architect in 2002 was on his way to talk to Hulun the next day. Obviously she didn’t listen. What do we have to lose? Nothing. What do we have to gain? Gee. Maybe we can become established as the world’s leading centre for plant and animal DNA research and innovation, to name two significant global industries that would suit our current expertise and economic platform.

    You know what’s really nuts about all of this? Liarbore constantly criticise the Nats for not focusing on jobs. As we all those of who know how many beans make five know, Liarbore managed to convince the morons electorate that they were focusing on jobs by not actually doing anything, but by talking about it, constantly. But the Nats remain completely and utterly silent. Possibly on the basis “the market” will perform its majik and somehow, jobs will magically appear, a bit like the pixies in the forest that the Maori’s talk about when they detail what it was like for them before the hated Pakeha arrived in submission after submission to the Waitangi Tribunal. But actually studying and applying the Celtic Tiger model, has a real chance of this actually happening and newsflash, it also means you have a plan, which you CAN talk about, and trumpet to the said morons electorate but instead of Liarbore, it means you actually ARE doing something real, actual and factual, as opposed to what Liarbore did, which was mere, vapid words.

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  26. RF (1,263 comments) says:

    Mr. McGoo is bat shit mad. Labour are trying to push us back to the days of the horse and cart.

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  27. davidp (3,540 comments) says:

    >It would require companies that are awarded major contracts to take on one apprentice or trainee for every $1 million contract it receives.

    My employer has recently won a contract of more than $1million. We’re an IT consultancy. What do Labour expect us to do with the apprentice or trainee we’d be expected to hire? Would we be allowed to add the cost of the apprentice or trainee to the contract price? In six months time when the contract is complete, then would we be able to sack the apprentice or trainee?

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  28. wreck1080 (3,725 comments) says:

    rouppe
    Are you deluded? If I buy shares in a listed company, do you really think that the money I hand over goes to the business? It goes to the person who sold me the shares!

    You are the deluded one. The sharemarket exists to provide additional capital to businesses without having to borrow money. Why on earth do you even think the sharemarket exists?

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  29. Pauleastbay (5,035 comments) says:

    wreck

    only existing shares ar being traded on a daily basis- I’m buying your shares- the company sees none of the dosh unless they have another share issue for future developement – I am just betting you aren’t a complete fuckwit and run your business into the ground – if you run a good business I make a few quid. The share market is a posh TAB

    I hope your mum and dad have a guardian to look after your inheritance

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  30. thedavincimode (6,528 comments) says:

    Oh, capital gains tax with a family home exemption will keep house prices down. Oh well, if Shearer said it then it must be true.

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  31. Ross12 (1,144 comments) says:

    Great post Reid.

    I’ve said before and I’ll say it again –Nationals biggest weakness is that it is hopless at communication. !!!

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  32. allgoodal (14 comments) says:

    We’d raise the threshold so that businesses need to prove they’ve engaged with WINZ and Industry Training Organisations before they get approval.

    He should be taken to task over what he means by this. We already have stringent conditions around granting work visas and much of that is centred on current conditions in the labour market. What exactly would Labour change to current policy?

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  33. gazzmaniac (2,317 comments) says:

    RRM – if you’re “buying and selling rental houses” then you’re a trader and you are liable to pay income tax on those trades.

    If you buy a rental property for use as a business, and you derive your income from rents and not from trading rental properties (in other words, the capital gain is incidental), then you are a landlord not a property trader.

    If you change the law so that capital gains on businesses that rent property, you have to change the law so that businesses that make their money doing anything have to pay tax on the capital gain of their business. That would include everyone who builds a small business from scratch. How is that going to promote growth?

    We should be looking to reduce taxes, not introduce new ones.

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  34. Luc Hansen (4,573 comments) says:

    I find the trainee thing a bit wacky in this day and age.

    Much simpler to have a policy that, say, takes into account any overvaluation of the exchange rate when awarding contracts and having a preference for NZ suppliers who are competitive when their price is discounted accordingly.

    But in general, using government purchasing power to benefit NZ workers is a sound strategy, if done transparently.

    As for DPF’s bleat about inflation targeting – well, it’s just increasingly seen as luddite in forward thinking circles. No, we don’t want runaway inflation to recur, but the factors that once caused that monster no longer exist to the same degree. Even a sudden hike in oil prices ( a certainty if Iran is attacked) won’t be as distorting as it once was, given today’s expertise in renewables and an ability, in an economy with spare capacity, to quickly scale up our windfarms, for example.

    No, the danger today for our economy is not inflation, it’s stagnation or even deflation.

    So specific measures to combat an overvalued exchange rate are overdue, and this is a responsibilty of the government, not of the zero sum zombie money traders.

    Having said all that, no it won’t be simple or easy but hey, that’s why people get paid the big bucks!

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  35. questions (168 comments) says:

    Hysteria.

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  36. Reid (15,917 comments) says:

    DVM if you do work in the PM’s office, please pass that thought in my 6:32 on. It really would work. That guy was from the University of Limerick, he shouldn’t be hard to track down.

    Thanks Ross.

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  37. davidp (3,540 comments) says:

    Luc Hansen>Much simpler to have a policy that, say, takes into account any overvaluation of the exchange rate when awarding contracts and having a preference for NZ suppliers who are competitive when their price is discounted accordingly.

    Exchange rates go up. Exchange rates go down. You’re going to pick a particular value that you think is fair or correct and use that as the basis for our economy? That’s like the Eastern European countries that used to have an official exchange rate, and then the realistic rate that would be used in the black market on the street. Or the African countries that still do.

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  38. pq (728 comments) says:

    When they say
    “Our policies will ensure our high and volatile dollar doesn’t undermine the competitiveness of our exporters. We’ll give them the best possible opportunity to succeed.
    We are a trading nation. We can only grow wealthy if we export.”
    but through the Reserve bank they say. Other people say [ Matt Nolan Infometrics ] that playing with the exchange rate is just that, and will lead to a stealth tax for some and a dividend for others.
    What does all this mean, it seems to imply clearly that there could be be money printing or contrived devaluation.
    I have so little money I will not take the risk, and maybe Australia dollars for few years.

    I don’t know how Mr Farrar can say that a Capital Gains tax on homes will not encourage people to look for other opportunity, thereby owering the total amount of money available for housing

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  39. gazzmaniac (2,317 comments) says:

    pq – why tax stuff more? Nobody seems to be able to tell me how more tax is going to grow the economy.

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  40. chris (558 comments) says:

    @wreck1080

    rouppe
    Are you deluded? If I buy shares in a listed company, do you really think that the money I hand over goes to the business? It goes to the person who sold me the shares!

    You are the deluded one. The sharemarket exists to provide additional capital to businesses without having to borrow money. Why on earth do you even think the sharemarket exists?

    If you buy shares when the company does its IPO or sells subsequent shares in an additional public offering the money goes to the company. All subsequent trades of those shares on the share market are between the buyer and the seller and the company in question never sees any of that money.

    I’m sorry, but you are the deluded one.

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  41. chris (558 comments) says:

    @pauleastbay

    The share market is a posh TAB

    That’s just classic. And pretty much sums it up…

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  42. Cow Cocky (18 comments) says:

    A one cent drop in the NZD versus the USD equates to a 10 cent increase in the dairy payout (or approx $100m additional export dollars). With the payout at $5.10 net of dividend many farmers will make a cash flow loss in the coming year, the provinces will be in alot of pain in June of next year. NATIONAL NEED TO LOOK AT DOING SOMETHING ABOUT THE EXCHANGE RATE OR FARMERS WILL START LOOKING AT ALTERNATIVES.

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  43. Scott Chris (5,870 comments) says:

    Make no mistake – this is the deluded belief that having more inflation will lead to more jobs.

    You’re talking bollocks Farrar and you know it. Labour is saying that the RBNZ’s sole focus shouldn’t be just on inflation, but on the exchange rate as well. That doesn’t mean it would ignore inflation.

    Sheesh.

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  44. Cow Cocky (18 comments) says:

    Exactly Scott Chris, at least Parker is talking about ways of bringing the dollar down, Joyce is not interested which is amazing given it would be the quickest way to improving the countries wealth. What are National actually doing to get NZ out of the shit? Joyce will say “improving our competitiveness”…what the hell does that mean? i’d say bring the Kiwi down would be a good start!

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  45. swan (659 comments) says:

    pq,

    A CGT doesnt just apply to homes, it applies to all capital. And as for Labours version, they proposed to exclude 2/3rds of all homes from the CGT. So thats 1/3rd of houses, 100% of shares, 100% of businesses etc.

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  46. nasska (10,622 comments) says:

    Economics is not in any way my forte but isn’t there a relationship between a high exchange rate & correspondingly low interest rates? My understanding was that if the dollar drops we’d pay more for overseas borrowings.

    Meaning, that as most dairy cockies are up to their arses in debt chasing the economies of scale then a rise in mortgage interest rates could hurt them more than the status quo of the Kiwi dollar.

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  47. Johnboy (14,911 comments) says:

    Change to Tatua Cow Cocky and send half your extra payout to me and we will both be much richer than we are now! :)

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  48. Johnboy (14,911 comments) says:

    And the new Range Rover would cost a tad more too Nasska. Not to mention the gas to fill it up! :)

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  49. nasska (10,622 comments) says:

    JB

    The flow on effects will be crippling. :)

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  50. Spam (593 comments) says:

    Actually, the reserve bank did try meddling in the currency market, remember? Bought half a billion used or some such, dropped the NZD for a short period… But then it went right back up again.

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  51. Johnboy (14,911 comments) says:

    Fortunately for me I ride sheep not Range Rovers, though sometimes that can be crippling too! :)

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  52. Peter (1,577 comments) says:

    Investing isn’t for you, wreck.

    Might I suggest you stick to Sociology/Maori studies.

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  53. Peter (1,577 comments) says:

    Reid is correct.

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  54. Reid (15,917 comments) says:

    I keep explaining that Peter but no-one seems to listen. I wish I had some sort of doomsday device and a volcano hideout. Then they’d listen.

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  55. Johnboy (14,911 comments) says:

    Try Magpies Reid. Everyone talks to you if you have one of them! :)

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  56. Johnboy (14,911 comments) says:

    You have to be insane as well of course! :)

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  57. Reid (15,917 comments) says:

    I’m gunning for the latter Johnboy, but the damn volcano is full of crows. Do they count?

    Not to mention full of guano as well, but every evil genius has to start somewhere, don’t we. Now, where’s the Student Job Search website?

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  58. Johnboy (14,911 comments) says:

    White paint Reid. White paint.!

    Don’t tell anyone I told you about it. It’s strictly on a “need to know” basis! :)

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  59. Reid (15,917 comments) says:

    Why is it white though Johnboy. I wonder if there are any jobs in that particular research task? It could be a world-first: “CNN announces on the eve of William’s coronation that the New Zealander, Wan Fong, has discovered precisely why birdshit is white, and explains what to do about it when it happens on your driveway.”

    Think about it. If we throw as much money at it as the US did at the space program in the 60′s, THIS, could be our finest hour. Awesome…. Take THAT, NASA. Velcro. So yesterday.

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  60. Johnboy (14,911 comments) says:

    What other colour paint would you use to turn a Crow into a Magpie?

    I think you may pass the insanity test (after all you are talking to me) but fail the Ishihara test Reid! :)

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  61. nasska (10,622 comments) says:

    It’s moments like this we need Redbaiter…..a quick comparison with him & we’re all totally sane by contrast. :)

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  62. Johnboy (14,911 comments) says:

    Unless we talk to him nasska! :)

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  63. Tauhei Notts (1,602 comments) says:

    Johnboy at 9.23 – spot on.
    A dairy company run from the boondocks, like Morrinsville, will always outperform an outfit based in Princes Street, Auckland.
    Tatua Co-Op Dairy Co Ltd is the ultimate proof that the economies of scale is the worst example of economists’ bullshit.
    Tatua started before Waitoa, Waharoa, Te Aroha or Morrinsville. They have never ever merged or taken over any other dairy company. Their research and development expenditure per supplier matches Fonterra’s public relations expenditure per supplier. Tatua knows that public relations expenditure is inversely proportional to the honesty of a company’s directorate. Tatua spend sweet f.a. on PR. Indeed, their payout was understated because they did not want to embarrass the Jafas that run Fonterra. What I mean by that is that Tatua’s tax free payout that was attached to their 20th April 2012 milk payout; the portion that was TAX FREE, was omitted from their declaration of the final payout. Their announced payout of $7.50 per kilogramme milksolids ignored that tax free component. The gap between Tatua and Fonterra is bigger than many people realise. I have attended the Tatuanui Garden Circle where Fonterra suppliers are suitably embarrassed by their company’s performance.
    Fonterra’s tanker drivers pay more income tax than Fonterra does.
    Tatua pays income tax.
    Fonterra is run by gentlemen whose truthfulness I doubt a bit.
    I use a pseudonym, but I think that Fonterra people “in the know” will know who I am.

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  64. wreck1080 (3,725 comments) says:

    @chris — are you a leftie ? You have a very rudimentary understanding of how money works.

    Investors would not buy shares in a newly listed company if it were not possible to trade in future. Without the possibility of future liquidity the IPO would fail and the company would raise no cash.

    More importantly, the share price is an indication of both the health and value of a company. The more people demanding shares in a particular company pushes the price up, thus increasing the value of the company for all shareholders. It is not only a transfer of ownership from one person to another. A rising share value benefits all of the shareholders in the company.

    In addition, a company can borrow to fund future growth and earnings on the basis of it’s current shareprice – so, if a share price is rising the company can borrow to expand without affecting the balance sheet ratios. It is rather an art to keep the balance sheet in order .

    Whats your comeback?

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  65. Tom Jackson (2,458 comments) says:

    the deluded belief that having more inflation will lead to more jobs.

    I take it by “deluded belief” that you are referring to the economic commonplace that there is a trade off between inflation and unemployment. This is true unless there are special circumstances like in the 70s, but we aren’t in that situation now.

    Look, you just have to accept that the current economic model has failed. Reid has about he only decent post in the thread.

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  66. Tom Jackson (2,458 comments) says:

    More importantly, the share price is an indication of both the health and value of a company.

    Lol

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  67. Kimble (4,375 comments) says:

    wreck1080 give it up. You are wrong, just deal with it.

    1. An IPO does not go through the share market. The IPO or subsequent offerings happen on the primary market. The NZX is a secondary market. Warrants may complicate things, but they are not fundamental to the operation of the market.

    2. The rising share value may benefit shareholders (who only really benefit if they sell at that higher price) but none of that money goes to the company. It doesnt lead to new jobs. That sale at a higher price is offset by a purchase at the higher price. It is a transfer of wealth, not a creation of it.

    3. A company cannot borrow more money because their share price increases. Their share price may increase because of a improved perception of several factors, and those factors may also make the company more attractive to lenders. A shareholder may be able to borrow more using shares as collateral.

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  68. Kimble (4,375 comments) says:

    Labour is saying that the RBNZ’s sole focus shouldn’t be just on inflation, but on the exchange rate as well. That doesn’t mean it would ignore inflation.

    I am sick of inflation amnesiacs.

    Inflation is under control, so now is the time to mess around with that control mechanism? Brilliant.

    Whats worse is that the RBNZ has been very successful at controling inflation EXPECTATIONS. What would happen to the perception of their inflation efforts?

    Oh, how you whine that surely the RBNZ can keep inflation under control AND control the exchange rate! What happens when those objectives conflict? Which one wins? It cant do both. It probably cant even do the second one.

    So you lose control of inflation expectations, for no real gain.

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  69. Viking2 (11,125 comments) says:

    October 19th, 2012 at 6:51 am

    Hooper told last night’s gathering that entrepreneurs had a big chance to lift economic prosperity, yet did not have a seat at the table with policymakers. “It is entrepreneurs, not governments, that create jobs. I believe it is the Government’s record on job creation which will prove to be the critical issue of the 2014 election.”

    Hooper said Ernst & Young was talking with government ministers in the hope of giving entrepreneurs more policy influence.

    Isn’t that so correct.!

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  70. Viking2 (11,125 comments) says:

    The answer as always is for the Govt. to spend less, to be less of the economy and to get the fuck out oof people’s and business lives.
    Less spend + less tax needed therefore people left with more money. People who will do what they want or desire with their own money.

    Rocket science not.

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  71. chris (558 comments) says:

    @wreck1080 Nope, certainly not a leftie. And everything I said was true. When the company offers shares in the initial offering or in subsequent offerings the money for the shares goes to the company as capital. When those shares are subsequently sold by shareholder A to shareholder B the money goes from A to B and the company never sees it.

    And Kimble far more eloquently explains how it works that I ever could.

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  72. Lee C (4,516 comments) says:

    Reid at 6.32.

    Brilliant contribution. Unfortunately I personally believe that the ‘get up and go’ which NZ once prided itself on ‘got up and went’ during a protracted brain-drain that started with Helun and continues under Jonkey.

    In short our leaders are too blinkered and short-sighted.

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  73. Cunningham (811 comments) says:

    Can someone please explain why a capital gains tax that also taxes profits on shares, the profit from selling business etc supposedly encourages people to invest in the proeductive sector? Surely a land tax is the better way to do this?

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  74. chris (558 comments) says:

    I’ve always wondered that too. Even if there were a CGT on property and not on shares etc, I’m still not convinced it would encourage that much more investment in the productive sector rather than property, simply because it’s so much more risky. With a business you risk losing all your investment, far less likely with property.

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  75. rouppe (914 comments) says:

    @wreck

    As others have said.

    When Fairfax bought TradeMe, the money went to Sam Morgan and the other shareholders of the then private company, and the entire parcel of shares owned by those private individuals went to Fairfax. The headlines weren’t “Trademe makes $700 million”, they were “TradeMe sells for $700 million” and “Sam Morgan stands to make $400 million” (or whatever it was). When TradeMe listed, members of the public bought shares, the shares went to them, and the money went to Fairfax.

    TradeMe only makes more money if it makes more profit from its business. The transfer of share ownership is completely independant to that. If no shares in TradeMe are sold for 6 months, do you think TradeMe faces a cashflow crisis? No. TradeMe only faces a cashflow crisis if no-one sells anything via TradeMe for 6 months.

    Goodness me, I didn’t think the average NZ’er was so economically challenged…

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  76. Luc Hansen (4,573 comments) says:

    Make no mistake – this is the deluded belief that having more inflation will lead to more jobs. I thought the 70s killed off that idea. Any gain in jobs from more inflation is temporary. It’s like a quick sugar fix. You feel good at the time, but get bloated.

    You have some heavyweight opposition to your simplistic TINA fixation.

    http://www.imf.org/external/pubs/ft/spn/2010/spn1003.pdf

    The Chief Economist of the IMF warning that advanced economies shouldn’t let inflation drop much below 4%. There is no clear evidence that moderate inflation is harmful – say, up to 7% – but lots of evidence that it is beneficial.

    Your sugar fix analogy is nonsensical.

    Essentially, NZ is knocking on the deflationary door and woe betide us if it cracks open.

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  77. wreck1080 (3,725 comments) says:

    @chris:: Historically shares have outperformed the housing market by a significant amount. Even now, shares in the US are not far from record highs regardless of the biggest recession since WWII.

    There are various techniques to minimise risk when buying shares. eg, Diversification is where you spread your money across many different shares so you are not overly exposed to any single company.

    You can google it, plenty of info on the internet.

    The biggest risk in shares is using investment advisors with high fees .

    There are also plenty of expert economists who believe a capital gains tax or land tax will result in more funds being invested in the productive sector. It is simple commonsense.

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  78. Kimble (4,375 comments) says:

    There is no clear evidence that moderate inflation is harmful – say, up to 7% – but lots of evidence that it is beneficial.

    Just plain bullshit.

    You dump that link and expect no one to have read it? The “warning” is about the risk of quickly hitting a zero interest rate during a crisis, restricting a central banks activity and putting too much reliance on fiscal stimulus.

    It acknowledges only COSTS to higher inflation, and merely suggests that those costs may be acceptable given the benefits of being able to rely more heavily on monetary policy than fiscal policy in a crisis.

    There is nothing in the piece that argues FOR higher inflation outside of that context.

    Did YOU read the thing at all?

    Did you happen to read this part?

    It is important to start by stating the obvious, namely, that the baby should not be thrown out with the bathwater. Most of the elements of the precrisis consensus, including the major conclusions from macroeconomic theory, still hold. Among them, the ultimate targets remain output and inflation stability. The natural rate hypothesis holds, at least to a good enough approximation, and policymakers should not assume that there is a long-term trade-off between inflation and unemployment. Stable inflation must remain one of the major goals of monetary policy. Fiscal sustainability is of the essence, not only for the long term, but also in affecting expectations in the short term.

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  79. chris (558 comments) says:

    @wreck Yes, investing in shares may well have a good return over time. But that’s not actually investing in the productive sector. You still fail to understand how trading on the sharemarket doesn’t actually return any money to the company, other than during the IPO and subsequent floats. I think what Labour wanted people to do is invest in businesses, not trade shares. Buying shares, other than during an IPO or subsequent float, does not invest in business.

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  80. Luc Hansen (4,573 comments) says:

    Kimble

    I don’t have a problem with your quotes. And I don’t disagree at all. This is the problem with you types – the rush to reductio ad absurdum.

    The main message I was trying to get across is that the IMF suggests it is OK to relax inflation targets in the short term and yes, carefully. I accept as valid the view that because we are not at the zero-bound that we can move on the interest rates instead of QE, but that brings other problems, as well.

    Blanchard recommended 4% inflation target: I suggested a wider spread as a point to debate, that’s all.

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  81. Kimble (4,375 comments) says:

    I bet you wish you could edit your original post and remove this then: “Your sugar fix analogy is nonsensical.”

    See, that line proves your original intent. The supporting link says nothing to contradict DPFs analogy, it does the opposite in fact! Blanchard AGREES with DPF, and admonishes any politician who thinks there is a long term trade off between inflation and unemployment. That exception proves the rule; implies the existence of short term trade offs.

    You said theres “no clear evidence that moderate inflation is harmful”, but again the linked piece doesnt agree. It described a number of concerns about moderate inflation, with accompanying recommendations to try to mitigate them. But it doesnt suggest anything helpful, just that something should be done. And it leaves the issue of most concern with even less than that!

    You also said there was evidence that inflation was beneficial. Bullshit. Nothing in the link supports that assertion.

    You googled, found something from sufficient authority, a 10 second perusal lead you to believe it could be used to contradict DPF and justify a stupid policy from your inept team, and you jumped at the chance.

    So dont give me any crap about “suggestions” and “point to debates”. You thought you could phone it in and not get called on it. Thats lazy and dishonest.

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