NZers and Aussies: Switching it up

[Wall Flower]

58 minutes ago, Jeor said:

Still, I secretly hope that they do manage to pass some of these tax reform measures. There's more chance of them doing that than the Coalition.

And I say this as a generally Liberal voter who is likely to benefit from policies that suit the wealthy down the track. (To be sure, I don't have millions in super - about 220K which is okay for a 37 year-old).

I think it's increasingly difficult for Governments to be courageous on these kind of reforms when even small changes generate hysterical screeching about class warfare from the usual suspects. The media's propensity for demanding things be ruled in or out in perpetuity is also not helpful to long term reform.

On a brighter note (for this leftie), Nigel Farage has apparently announced that Australia is now the wokest place on Earth. I guess New Zealand lost the crown following the resignation of Jacinda Ardern or the Queen of Woke as the Australian Merdochracy papers prefer to call her.

[karaddin]

I saw Bolt was screeching about Albo being more "dangerous" than Whitlam. This is why there's not much point in running from the left wing, it doesn't matter how little you do the hysterical right wing media will still act like you're building communism again (for real this time).

[Paxter]

15 hours ago, Jeor said:

Still, I secretly hope that they do manage to pass some of these tax reform measures. There's more chance of them doing that than the Coalition.

And I say this as a generally Liberal voter who is likely to benefit from policies that suit the wealthy down the track. (To be sure, I don't have millions in super - about 220K which is okay for a 37 year-old).

This reform is so minor as to be almost beneath our notice. Long way for Chalmers to go yet.

And I can be very confident in saying I won’t get to $3m!

[Skyrazer]

The hysteria over it is absolutely stupid, yet totally predictable.

Just makes me SMH hearing some idiots, who would be nowhere near the 3m+ super club, lose their minds over it. It's the "mining tax" all over again. It kinda pisses me off how any attempt to correct our structurally inefficient tax system is always met with such hysterical fear, no matter how miniscule and benign.

[Impmk2]

The latest polling on the issue should give Labor some comfort, with 2/3s of the public approving of the change.

But yeah the hyperventilation on the issue just shows how impossible any kind of meaningful tax reform would be. Could you imagine how much the (murdoch) media would blow up if they did touch capital gains or negative gearing?? They just won't go there. Ghosts of 2019.

[The Anti-Targ]

On 3/6/2023 at 2:54 PM, Skyrazer said:

The hysteria over it is absolutely stupid, yet totally predictable.

Just makes me SMH hearing some idiots, who would be nowhere near the 3m+ super club, lose their minds over it. It's the "mining tax" all over again. It kinda pisses me off how any attempt to correct our structurally inefficient tax system is always met with such hysterical fear, no matter how miniscule and benign.

But they believe that if only they work hard enough and believe strong enough that they will get there. So the aspiration to achieving that level of wealth causes people who are no where near it to oppose such policies.

We have almost no CGT, and loads of tax and economic experts say we need one. But Labour are too scared to introduce it or campaign in a general election on a CGT platform, and National has far too many donors and MPs who benefit greatly from not having CGT.

[karaddin]

They also act like slightly increasing the tax rate on super above that level would cap their retirement savings. You're still able to put more in, and you still have millions in other assets if you're making enough money to have that much super. You're going to be fine. They all like to see it as a nest egg for their kids when the entire point of it is to fund their own retirement and be used up, kids inherit whatever other estate you've got left.

[Paxter]

18 minutes ago, karaddin said:

They also act like slightly increasing the tax rate on super above that level would cap their retirement savings. You're still able to put more in, and you still have millions in other assets if you're making enough money to have that much super. You're going to be fine. They all like to see it as a nest egg for their kids when the entire point of it is to fund their own retirement and be used up, kids inherit whatever other estate you've got left.

True, it’s kind of a back-door inheritance tax (which I thoroughly support).

[The Anti-Targ]

Cool, cool, cool, cool, cool. Last Q of 2022 saw, unsurprisingly, negative GDP of -0.6%. RBNZ in it's interest rate panic reaction has steered us right into stagflation, since there is very little doubt that Q1 2023 will also be negative, with additional interest rate rises, cyclones and flooding. RBNZ said it was looking to deliberately plunge us into recession towards the end of 2023, but we're there already.

Bloody marvellous!

[Paxter]

With unemployment at historic lows in NZ, it is a little early to call stagflation. 

Of course, it's possible that you will be proven correct, and that unemployment will surge during a period of high inflation. It's also possible that inflation will begin to moderate with a return to average (rather than high) unemployment. 

[Makk]

I feel underemployment is almost a more important metric than unemployment right at the moment. Unemployment stats are amazingly good and have been for some time. I hope it is genuinely representative of economic strength but I can't help feeling there is a fair bit of missing data there. 

[Paxter]

9 minutes ago, Makk said:

I feel underemployment is almost a more important metric than unemployment right at the moment. Unemployment stats are amazingly good and have been for some time. I hope it is genuinely representative of economic strength but I can't help feeling there is a fair bit of missing data there. 

If you’re right, and there is a ton of slack via underemployment, I highly doubt inflation and wages growth would be running so hot. 

From Trading Economics:

Quote

Wages in New Zealand increased 4.30 percent in December of 2022 over the same month in the previous year. It was the biggest annual growth recorded. 

Edited March 16, 2023 by Paxter

[Makk]

I wouldn't say there is a ton, but just looking it up now, the underutilisation rate is 9.4% in the December quarter.

I would say wage growth was largely spurred by rapid increases in the minimum wage, wages rising for inflation, plus a very constrained labour supply about 6-12 months ago. And although wage growth looks OK, it is in fact only a little over half of inflation which is not good at all but understandable given outside factors.  

 

It's a complex moving picture. There are a lot of external factors largely beyond our control which will hopefully get better soon. The recent US bank collapses are another example of this which is exactly what we don't need. 

 

[The Anti-Targ]

Sure, stagflation has 3 pits, inflation, negative economic growth and increasing unemployment. The first two pits are already established facts. The third pit is all but guaranteed as a stated aim of pretty much every RB that has been putting up interest rates and while I doubt the next official unemployment figures will show high unemployment in an absolute sense, I am pretty sure it will show increased unemployment.

[Paxter]

30 minutes ago, The Anti-Targ said:

Sure, stagflation has 3 pits, inflation, negative economic growth and increasing unemployment. The first two pits are already established facts. The third pit is all but guaranteed as a stated aim of pretty much every RB that has been putting up interest rates and while I doubt the next official unemployment figures will show high unemployment in an absolute sense, I am pretty sure it will show increased unemployment.

I disagree with the definition bolded above - the standard definition involves high rather than increasing unemployment. 

Of course, you may be right, and we may eventually get to high unemployment. But it's not baked in at this point.

Edited March 21, 2023 by Paxter

[Jeor]

The question of the day is whether inflation can be brought down without significantly raising unemployment. Conventional economics says that's not really possible (unless inflation has been the result of an external shock that then goes away, which is also being debated).

I tend to think that inflation isn't going to come back down to 2% but it may get down to 3-4% without too much increase in unemployment, and given the RBA's mandate is between 2-3%, there is still a bit of scope for a soft landing. But we're also a hostage to global events and the possibility of another financial crisis still looms large.

[Paxter]

You could argue the global financial stability issues are a weird sort of a win for the Reserve. The Fed will probably have a lower terminal rate now, which could give the RBA some breathing room. They were looking at significantly more tightening until the events of the last two weeks.

Edited March 22, 2023 by Paxter

[Jeor]

The RBA has always had a better hand than the Federal Reserve. 

For one thing their inflation target is a bit more flexible at 2-3% (as opposed to the Fed's 2%) and their interest rate movements have a far greater transmission mechanism through the variable home loan rates.

This does tend to suggest that the exchange rates will not work in the AUD's favour as the Fed would tend to have higher rates than the RBA, which does not bode well for our family's trip to the USA in December 2024...maybe it's time to change some USD now!

[Paxter]

6 hours ago, Jeor said:

This does tend to suggest that the exchange rates will not work in the AUD's favour as the Fed would tend to have higher rates than the RBA, which does not bode well for our family's trip to the USA in December 2024...maybe it's time to change some USD now!

I wish I had opened a US-denominated bank account during the parity years…

[Jeor]

4 minutes ago, Paxter said:

I wish I had opened a US-denominated bank account during the parity years…

When the AUD briefly hit parity, I changed 2000 USD on a whim knowing that it was unlikely we'd see that happen again in the future. Now several years on from COVID non-travel and lots of inflation which has seen that little cash pile dwindle in value. And 2000 USD doesn't get a family of four very far these days...