NZers and Aussies: Switching it up

[ants]

12 hours ago, Paxter said:

@ants: On profiteering, many firms from across the supply chain have been using rising prices to also boost their margins. Margin compression has not been a thing for many companies in the last two years. 

That’s reacting to inflation and why we try and control it. If there wasn’t demand  and initial inflation they couldn’t/wouldn’t do that. 

[Paxter]

45 minutes ago, ants said:

That’s reacting to inflation and why we try and control it. If there wasn’t demand  and initial inflation they couldn’t/wouldn’t do that. 

Dealing with inflation would simply be raising prices to preserve current margins. Margins have been going up. It’s exploiting inflation, not just reacting to it.

[Makk]

14 minutes ago, Paxter said:

Dealing with inflation would simply be raising prices to preserve current margins. Margins have been going up. It’s exploiting inflation, not just reacting to it.

What you are claiming, I believe, is that consumers expect prices to be going up while suppliers are rising prices more than they should because they can get away with it. But this doesn't really make sense. Prices are set by the intersection of demand and supply, for what you are stating to happen is that there is massive market failure, a highly inelastic demand curve, with no competition while competition existed previously (or prices would have already been higher).

Basically money has been printed or borrowed while suppliers costs have gone up across the board for several years. That is always going to be inflationary. In NZ 15% of companies reported increased profit margins between 2019 and 2022 while 39% decreased (8% unknown, the rest staying the same). Evidence and economic theory point to there being nothing particularly unexpected in this inflationary cycle given market conditions and government policy over the last few years. 

[Paxter]

I am not at all disputing that easy money and supply chain constraints have been the primary sources of inflation.

But profiteering from the oil and gas industry (for example) hasn't helped. As you said - in cases with highly inelastic demand, it is pretty easy to increase margins. 

[Makk]

The oil shocks of 2022 followed completely normal demand and supply. Supply was reduced due to the Russian invasion plus a variety of other factors while demand remained strong. This naturally pushes up prices. So yes those suppliers who could maintain their usual supply chain were able to profit more in that period but this was a symptom of market, the cause in that case was 100% a supply issue.

If the suppliers didn't raise their prices there would be shortages in various markets across the world.

   

Edited April 19, 2023 by Makk

[Makk]

The NZ inflation figures are just in and it is great news. Down to 6.7% for year to march (1.2% increase in first 3 months) where all the projections were going for over 7%. There should be a number of short term spikes in that figure as well so looking much better than I was expecting. 

[ants]

On 4/19/2023 at 1:33 PM, Paxter said:

Dealing with inflation would simply be raising prices to preserve current margins. Margins have been going up. It’s exploiting inflation, not just reacting to it.

But that’s what usually happens when inflation is high, and one of the reasons governments nowadays try to keep it within a range. Because higher inflation causes a spiral exacerbated by greed and fear. 
 

that wasn’t the initial driver if the high inflation though. 

[Paxter]

Vale Burry Humphries.

[Paxter]

On 4/19/2023 at 5:04 PM, Makk said:

The oil shocks of 2022 followed completely normal demand and supply. Supply was reduced due to the Russian invasion plus a variety of other factors while demand remained strong. This naturally pushes up prices. So yes those suppliers who could maintain their usual supply chain were able to profit more in that period but this was a symptom of market, the cause in that case was 100% a supply issue.

If the suppliers didn't raise their prices there would be shortages in various markets across the world.

   

So you're telling me that Exxon just needed to raise its dividend and return massive wads of excess cash to shareholders last year (at the expense of consumers), because without it there would have been a shortage of oil? 

I don't buy it.

There is a fair amount of margin expansion going on because businesses are passing on more than the increased cost of production to consumers. And consumers are fucked because many of these goods and services are necessities. Now I agree that the underlying source of the problem is an imbalance between demand and supply. But the "symptom" is quite grotesque in that businesses' profits are preserved while the consumer loses out.

Edited April 23, 2023 by Paxter

[Jeor]

Defence review paper has landed with a pretty hawkish stance. Ballistic missiles, nuclear subs etc. Likely to cost a bomb (pun intended). In these tough economic times with many calls on the budget, it's difficult to see where the money comes from. Also, it may be a little late as these defence projects typically work in decades and a major conflict might happen sooner than that.

[The Anti-Targ]

https://www.stuff.co.nz/business/131862801/richest-kiwis-pay-about-half-as-much-tax-on-the-dollar-as-the-average-new-zealander

Quote

Richest Kiwis pay about half as much tax on the dollar as the average New Zealander

This is what happens when you have 15% GST and [almost] no CGT.

Between when I bought and sold my last house (the family home, which would be exempt from CGT, probably) the capital gain I made on the house represented 21% of my combined salary + house capital gain over the 16 years of ownership.

On my total income from the period I paid a tax rate equivalent to someone earning about 1/2 my salary. If that house was a rental I'd only pay CGT if I sold it within, I think, 5 years. But since I owned it for 16 years it would attract no CGT if it was a rental. 

 

[Paxter]

Just in case you haven't read enough about my favourite hobby horses lately, here's another, relating to the $243bn tax cut (over ten years) that the Albanese government is about to let sail through:

These tax cuts are set to reshape Australia's budget - ABC News

[The Anti-Targ]

If you're gonna bring us into your the Voice debate at least get your facts straight...

https://www.stuff.co.nz/pou-tiaki/131876087/australian-politician-jacinta-price-claims-waitangi-tribunal-holds-veto-power-over-new-zealand-government

Quote

An Aboriginal senator has been called out after claiming the Waitangi Tribunal had veto powers over the New Zealand Government.

Country Liberal Party Northern Territories’ Senator Jacinta Nampijinpa Price made the comments while appearing at a debate in early April on the Voice to Parliament referendum, which aims to recognise Aboriginal and Torres Strait Islander peoples in the Constitution.

The Voice will take the form of an independent body which will be able to advise the Australian Parliament and Government on the views of Australia’s indigenous people.

Price made the erroneous claim about the Waitangi Tribunal during The Voice to Parliament debate to support her argument against the motion that “The Voice to Parliament is needed to address indigenous matters”.

...Who am I kidding expecting politicians to get their facts straight, esp when there is scaremongering to be achieved?

[Paxter]

31 minutes ago, The Anti-Targ said:

If you're gonna bring us into your the Voice debate at least get your facts straight...

https://www.stuff.co.nz/pou-tiaki/131876087/australian-politician-jacinta-price-claims-waitangi-tribunal-holds-veto-power-over-new-zealand-government

...Who am I kidding expecting politicians to get their facts straight, esp when there is scaremongering to be achieved?

First time coming across Jacinta Nampijinpa Price ey?

She comes up with plenty of gems including:

Quote

70 per cent of Aboriginal men and women incarcerated are incarcerated for acts of violence against their loved ones. [The Left] don't care because the perpetrators are also black, people only care if there is seen to be a white perpetrator.

 

[ants]

The logic of both are astoundingly bad. For the Voice, even if she was right about New Zealand, how would that be relevant for the Voice given there will be no veto powers? And for the statement above by Paxter, it's the left who are the ones who do care about indigenous incarceration rates. 

[ants]

On 4/26/2023 at 2:37 PM, The Anti-Targ said:

https://www.stuff.co.nz/business/131862801/richest-kiwis-pay-about-half-as-much-tax-on-the-dollar-as-the-average-new-zealander

This is what happens when you have 15% GST and [almost] no CGT.

Between when I bought and sold my last house (the family home, which would be exempt from CGT, probably) the capital gain I made on the house represented 21% of my combined salary + house capital gain over the 16 years of ownership.

On my total income from the period I paid a tax rate equivalent to someone earning about 1/2 my salary. If that house was a rental I'd only pay CGT if I sold it within, I think, 5 years. But since I owned it for 16 years it would attract no CGT if it was a rental. 

It is usually also a symptom of the rich being better at minimising recognised income. Such as being allowed to use trusts. 

One thing I like in Australia is that capital gains are (mostly) recognised as income and taxed at the same rates. 

3 hours ago, Paxter said:

Just in case you haven't read enough about my favourite hobby horses lately, here's another, relating to the $243bn tax cut (over ten years) that the Albanese government is about to let sail through:

These tax cuts are set to reshape Australia's budget - ABC News

I hate this. We need a review of our entire tax system, including the PHI rebates, superannuation, pensions, trusts and mortgage bonuses. It's been too long since it was all reviewed as a holistic whole. 

[The Anti-Targ]

14 minutes ago, Paxter said:

First time coming across Jacinta Nampijinpa Price ey?

 

Australia's Candace Owens?

[Jeor]

And the RBA surprises with another 0.25% rate increase, just one month after they had paused.

[Paxter]

10 hours ago, Jeor said:

And the RBA surprises with another 0.25% rate increase, just one month after they had paused.

They surprised the market, but it's not really surprising on a quick scan of the macro environment. Inflation has likely peaked but is still running hot, unemployment is at historic lows and a floor needs to be put under the Aussie Dollar. Obviously Lowe is worried about hurting home-owning households, but the reality is that the role of the central bank in this situation is to continue to slow the economy. 

Oh and let's not forget - a cash rate of 3.85% is still not high by recent historical standards. In late 2011, the cash rate was 4.75%. 

Edited May 2, 2023 by Paxter

[ants]

9 hours ago, Paxter said:

Oh and let's not forget - a cash rate of 3.85% is still not high by recent historical standards. In late 2011, the cash rate was 4.75%. 

Although I absolutely agree with this, it is also worth noting Australian households weren't as leveraged in 2011, and so weren't as sensitive either.