NZ dollar & economics

[idb]

I am not an economist.
I am a tradesman in my own business.
Can someone clever please explain the following to me;

the NZ dollar rises against foreign currencies
imports become cheaper
NZers buy lots of imports
our balance of payments suffers
Reserve Bank tells us off for buying imports
Reserve Bank raises interest rates so that NZers suffocate under the weight of their mortgages and can't afford imports
overseas investors see that NZ interest rates are now among the highest in the world
overseas investors start investing in NZ currency
the NZ dollar rises against foreign currencies to its highest value in decades
imports become cheaper


What's likely to happen next I wonder?

[ManDownUnder]

Good question - and after much deliberation and soul searching I've come to the following (highly educated) conclusions.


Exporters suffer
Someone ineffective with suitably romatic policy gets elected into our highest office and put in chanrge of fiscal policy
Importers beat the crap out of each other cutting prices so everyone losesDid I miss anything?

[idb]

Good question - and after much deliberation and soul searching I've come to the following (highly educated) conclusions.


Exporters suffer
Someone ineffective with suitably romatic policy gets elected into our highest office and put in chanrge of fiscal policy
Importers beat the crap out of each other cutting prices so everyone losesDid I miss anything?
What's that I hear....the sound of thundering hooves.....they're getting closer.....it's.........it's.......Winston Peters and he's on a white horse!!!!

[cowpoos]

I am not an economist.
I am a tradesman in my own business.
Can someone clever please explain the following to me;

the NZ dollar rises against foreign currencies
imports become cheaper
NZers buy lots of imports
our balance of payments suffers
Reserve Bank tells us off for buying imports
Reserve Bank raises interest rates so that NZers suffocate under the weight of their mortgages and can't afford imports
overseas investors see that NZ interest rates are now among the highest in the world
overseas investors start investing in NZ currency
the NZ dollar rises against foreign currencies to its highest value in decades
imports become cheaper


What's likely to happen next I wonder?

its a massive subject....involves alot of emotion and insight...and guessing...the ups and downs [the strength of the dollar being a higher value]
involves money flowing in and out of the country...there fore buying and selling NZ dollars...or investing in NZ dollars...or investing in our country...it creates a supply and demand senario...demand pushes the value of the dollar up...as the main driver is currently our higher than the average[for a western world country] interest rates...is attractive for higher returns for investers over sea's...some one here will have a better and bigger explaination than mine....especially if you get the reasons why with it...
try sending a email to a accountant...or the reserve bank...try a google search?

CP

[Yokai]

This is a pretty awesome site for those interested in Economics

http://www.bwlimited.co.nz/index.htm

yeah - I have a vested interest, and yeah, I know the archives page needs a little work

Nope - that's not me in the photo - I just do webdesign

[Lou Girardin]

It's what happens when you have a Reserve Bank with practically only one goal - to keep inflation between 1% and 3%.
Using interest rates only to achieve this is like cracking nuts with a sledgehammer.
Every other 1st world country has capital gains tax to moderate the excesses of the property market, why haven't we?

[idb]

It's what happens when you have a Reserve Bank with practically only one goal - to keep inflation between 1% and 3%.
Using interest rates only to achieve this is like cracking nuts with a sledgehammer.
Every other 1st world country has capital gains tax to moderate the excesses of the property market, why haven't we?
In reality though the property market isn't what's ruining our balance of payments surely and isn't that the BIG worry?

[TwoSeven]

I am not an economist.
I am a tradesman in my own business.
Can someone clever please explain the following to me;

the NZ dollar rises against foreign currencies
imports become cheaper
NZers buy lots of imports
our balance of payments suffers
Reserve Bank tells us off for buying imports
Reserve Bank raises interest rates so that NZers suffocate under the weight of their mortgages and can't afford imports
overseas investors see that NZ interest rates are now among the highest in the world
overseas investors start investing in NZ currency
the NZ dollar rises against foreign currencies to its highest value in decades
imports become cheaper
What's likely to happen next I wonder?

Its pretty simple to understand at the end of the day.

Money supply is what dictates the base value of the NZ$ - there is a fixed amount of money in circulation going around inside the country - given the demand for goods on the local market, the money has a set value (price is set by supply and demand).

Given that, when you export something, the other country must purchase new zealand dollars in order to pay for the goods. This increases the demand for NZ dollars and therefore increases its value - so the exchange rate for NZ $ increases. Thus future imports (not exports) become cheaper - future exports become more expensive.

When you import goods, you must sell NZ$ to buy foreign currency to purchase the goods. This increases the supply of NZ$ on the foreign market and reduces its value. So the NZ$ exchange rate drops and future exports become cheaper, but imports become more expensive.

To calculate the net impact on the NZ$ in local terms, just subtract the value of imports from exports. The result if positive is good for the economy as it means money coming in. If the result is negative (too many imports), then it means money going out. You dont want money going out.

When you import stuff, you have to sell NZ$ on the foreign market, which reduces the value of the NZ$. This means that things on the local market get more expensive because the dollar you are using is worth less each time.

There are two ways of fixing the problem - remove money from circulation and increase demand for it, or penalise people for using it (interest rates).

The reserve banks current account is where normal banks borrow their money from. They do so given a fixed interest rate - called the base rate. They then lend it to the consumer to purchase the house at a morgage rate (usually base rate + a profit margin).

If the bank borrows too much, then the reserve bank may increase the base rate to stop them doing so, result is your mortgage increases as the bank passes the cost along.

If too many people buy houses because the mortgage rates are too low (compared to overseas), then the reserve bank will increase its rates to such an extent that people will borrow there money from elsewhere (laws of substitution) because there is a current housing shortage (population increased by half a million recently). So overseas investers chip in to cover the demand (overseas borrowing).

The opposite is true, if the value of the NZ dollar drops in relation to the world market then overseas speculators will chip in and buy up the excess stock, raising its value - they make a profit by selling it back at a higher price (forex market).

Because of the now raised value of the NZ$ imports are now cheaper (however, note that its balanced by higher costs of living).

There is a really neat diagram in one of my economics books. I'll see if I can scan it later and upload it.

Hope I got the model right, sometimes I get it round the wrong way.

[Marmoot]

The hope of Reserve Bank to stem economic growth to a sustainable level.....hmmm...

Anyways, this is my opinion (insert disclaimer here):

The policy of "increasing interest rate to steer economic growth" is a classic concept that I believe do have the same absolute-effectiveness nowadays as it was before.

In the old days, when the interest rate goes up, people put their money in the bank and spend less. Currency exchange did not matter too much as it does today. That was before globalization and internet.

Nowadays, increased interest rate would trigger massive foreign investment, meaning a lot of money coming into NZ$. This in effect increases our currency strength, making everything overseas look cheap! Because of Internet trading and globalization, shopping becomes cheap. The increased interest rate has an opposite effect from what it was intended to be: people spend more instead of less! The increased load interest rate lose to the savings created by increased NZ$ on the imported-item prices.
Retail industry becomes more frantic and economic growth seems to increase. But this is not sustainable, as indicated by business confidence. Sooner or later, people will run out of money, and because exporters suffer (and our country relies heavily on exports) sooner or later businesses will colapse. People will get laid off, and wages will be cut. This is the CRASH! Which, in my calculation (with present rate of economy) could happen sometime mid next year.

The government is now stuck! The world economy has become something we have never seen, mainly due to Internet and Gulf war. They can't reduce the interest rate (for fear spending on property mortgage will spiral out of control and cannot stem spending which will increase inflation) and they shouldn't increase the interest rate either (for spending would increase and trigger inflation even more).

Probably the only cure would be increasing tax. But that is like getting rid of cancer pain by inducing heart attack. :mellow:

Any thoughts on how accurate this is?

[idb]

Thanks TwoSeven.
So exporting is it's own enemy cos in your explanation the more we export the higher the dollar goes?
But if importing lowers the dollar then surely the dollar should be spiralling down as we speak?
And I don't understand what exactly the problem is with people buying houses. It's all within the local economy.
Could it be as simple as that there are no absolutes in economics - even that it is nothing more than a pseudo-science praps?
It's all very interesting though.

[idb]

The ...
That all seems fairly logical.
It looks like the argument for small countries to amalgamate their currencies with others is going to become stronger as the world economy changes with globalisation pressures.
I can't see what increasing tax would achieve. Wouldn't that result in less money available to contribute to producing exports which is supposedly the panacea for all that ails us economically?

[Marmoot]

That all seems fairly logical.
It looks like the argument for small countries to amalgamate their currencies with others is going to become stronger as the world economy changes with globalisation pressures.
I can't see what increasing tax would achieve. Wouldn't that result in less money available to contribute to producing exports which is supposedly the panacea for all that ails us economically?

Thank's for the thoughts.
Yes, I agree it seems more reasonable nowadays to amalgamate currencies due to globalization. It does have it's own pitfall, like in European Union where the jobs/growth/migration keeps on shifting to wherever cost is the lowest, creating unstability. But this is a whole different discussion and we'd better not go there in this thread.

Increasing tax would stem spending, of course, as people will have less money available to them. This, in turn, can offset the negative effect of imports caused by strong currency rate. Of course the government would also have to keep the export-based industry tax rates to reasonable amount (or even lower it) to promote growth.
But, anyone knows, increasing tax rate is a hugely unpopular policy. And in a country with half of the population belonging to swing-voters, it does not seem to be a plausible option.

[Brian d marge]

Thanks TwoSeven.

But if importing lowers the dollar then surely the dollar should be spiralling down as we speak?
And I don't understand what exactly the problem is with people buying houses. It's all within the local economy.

It's all very interesting though.

This thread has been a jolly good read ...The house buying thing I think is due to people not saving ( I think NZ people tend to invest in houses rather than save cash in the bank ) So the supply of local money isnt enough, and overseas money is used .

So what I would like to see ,,,is all you fellas rip into the internet shopping and buy Stacks of goodies for Xmas ,,,,, Drive that bally dollar down

Buy a fully worked GSXR engine from ebay ,,, oh and you will need new riding gear !!!
Remember you are helping drive that dollar down ,,,,so that a fellow KB er
bank account increases in value!!! ( at the mo its nearly 1 to 1 :doh:)

Stephen
:bash: down you nasty dollar !!

[idb]

Of course the government would also have to keep the export-based industry tax rates to reasonable amount (or even lower it) to promote growth.
But, anyone knows, increasing tax rate is a hugely unpopular policy. And in a country with half of the population belonging to swing-voters, it does not seem to be a plausible option.
They could lower the export-based taxes without raising the rest to strengthen the export sector in relation to the importers?

[heavenly.talker]

What's that I hear....the sound of thundering hooves.....they're getting closer.....it's.........it's.......Winston Peters and he's on a white horse!!!!


Don't you be scaring me like that!:crazy:
:lol: :lol:

[Marmoot]

They could lower the export-based taxes without raising the rest to strengthen the export sector in relation to the importers?

haven't you heard about tax-break, tax-incentive, tax-rebate and tax-exempt-products?

It is possible to raise the general tax level while keeping one particular sector down.

However, maybe I need to correct myself: government can increase income-tax rate to stem spending.

Not that I want them to do that either. I'll get depressed if they take another cent out of my skinny payslip!

[TwoSeven]

idb. I'll look into the mortgage side for you if you want.

I have an interest in macro-economics because I used to be interested in the forex market.

[idb]

haven't you heard about tax-break, tax-incentive, tax-rebate and tax-exempt-products?

It is possible to raise the general tax level while keeping one particular sector down.

However, maybe I need to correct myself: government can increase income-tax rate to stem spending.

Not that I want them to do that either. I'll get depressed if they take another cent out of my skinny payslip!
Yeah but I meant as an alternative to putting anyones tax up it would be more palatable to decrease the target sector's burden.

Anyway, this still doesn't help in figuring out the Reserve Bank's strategy in raising interest rates.
It looks pretty counter-productive at the moment or am I just impatient?

[Lou Girardin]

The opposite is true, if the value of the NZ dollar drops in relation to the world market then overseas speculators will chip in and buy up the excess stock, raising its value - they make a profit by selling it back at a higher price (forex market).
.

I thought that the dollar was driven up by investors attracted by our high interest rates.

[kerryg]

A strong currency is generally a reflection of a strong economy with good fundamentals. NZ's case is a bit different because our domestic economy is so small. Instead of reflecting good fundamentals (e.g. productivity) our dollar is over-valued because of speculation in it by overseas speculators attracted by the high interest rates to be earned in NZ (they're vastly higher than in the USA for instance).That can change in a very short time if the interest rate differential changes back the other way. We are pawns in a global poker game, you could say if you were a conspiracy theorist.OK I may be a bit of Luddite when it comes to these things but I figure it like this: we make stuff to sell overseas to earn our "income", right? And our exporters are struggling with a high NZD making many of them uncompetitive (eg forestry industry, a real good current example) so production volumes are down, plants working reduced hours, workers being laid off. So our income is shrinking. Meanwhile our laissez-faire trading policy allows cheap imported goods (cheap because of the high value of the NZD) to flow into NZ, practically without restriction. So our spending is increasing (mainly on crap so far as I can tell....although that is a different subject). Now...I can't run my household budget like that, not for long anyway. So...WTF?

[idb]

idb. I'll look into the mortgage side for you if you want.

I have an interest in macro-economics because I used to be interested in the forex market.
Cheers TwoSeven, any educating I can get is a good thing.

[Marmoot]

Yeah but I meant as an alternative to putting anyones tax up it would be more palatable to decrease the target sector's burden.

Anyway, this still doesn't help in figuring out the Reserve Bank's strategy in raising interest rates.
It looks pretty counter-productive at the moment or am I just impatient?

Idb, that is correct and I have overlooked that idea. That could help to some extend in making our export price quite competitive despite high currency rate.

But as answer to your last question there, I believe increasing interest rate is actually counter-productive and would worsen our crash because it would worsen our export (reducing our income) while increasing the currency exchange. When the crash happens, the drop would be more significant than otherwise; the fall would be higher.

And yes to kerryg, foreign exchange investors do operate in a mob fashion, raiding one country to the other. They shook Asia in 97. Soros and his friends tried real hard to shake US 1 or 2 years ago (?I am not good with dates?). So you are not simply a conspiracy theorist. It is a reality.

[TwoSeven]

I would suggest getting a couple of books from your library. First one is econoic concepts and applications 3rd edit, stewart & moodie (addison wesley)

The other is Economics 16th edition, samulson & nordhouse mcgraw-hill.

The second book is pretty much tought all over the world and been around for about 50 years (it gets updated fairly often). The first book was a course text when I did my economics class. It covers very similar content to the samualson book, but uses NZ examples which is why I like it.

[TwoSeven]

Couple of things with trade is that 1) countries tend to specialise eg. nz with dairy etc. 2) prices tend towards a world price, so you get a competitive advantage if you can compete with that.

As an example, china can produce clothes really cheap, but they cant produce wool and food as cheap as we can. So we sell them wool and food and they sell us clothes.

Not only that, but if we can sell them better luxury clothes, they will buy that as well (ie. marino wool suits). In fact, there are many markets where we can make goods cheaper than china can, which means its cheaper for them to buy from us than to use their local market. This rule is why global trade works.

Sometimes a country makes something cheaper than us, but it cant make enough of it, so they have to buy in expensive stuff to make up the difference. An example is us selling milk powder to america.

[Marmoot]

It may seem unpopular, but I suggest taking economics books with a grain of salt nowadays, especially ones that are written years ago.

Globalization and Internet has set an unprecedented changes in the way things relate to others, especially when it comes to exchange rates, international trade and export/import businesses.
:hitcher:

On the other hand, common sense seems to be more and more accurate when used as economic analysis tool. What appears to contradict the age-old philosophies often come true.

[TwoSeven]

Both books are current 2004 updates (samuelson now has an 18th edition).

Economic theory hasnt changed with the internet and globalisation - the former just speeds things up, the latter has been around for a couple of hundred years (remember the world was global free trade before socialism closed it down).

However, when looking at economics you really do have to know about global politics and events.

[cowpoos]

I'm drinking this cheap beer...called ranfurly...20:95 a dozen of 440ml cans...not the nicest draught out there...but for bang for buck...not bad at all....whats everyone else drinking tonight?

[Marmoot]

I'm drinking this cheap beer...called ranfurly...20:95 a dozen of 440ml cans...not the nicest draught out there...but for bang for buck...not bad at all....whats everyone else drinking tonight?

I'm drinking a cheap soft-drink made of Aloe Vera juice from China. And I notice the price hasn't change a single cent even though our currency has strengthened....Maybe a sign that small retailers of everyday-life necesities are not affected by globalization.

A sign that there is still hope?

[cowpoos]

I'm drinking a cheap soft-drink made of Aloe Vera juice from China. And I notice the price hasn't change a single cent even though our currency has strengthened....Maybe a sign that small retailers of everyday-life necesities are not affected by globalization.

A sign that there is still hope?
or capitilization????

me cheap beer in NZ made

[idb]

I'm drinking this cheap beer...called ranfurly...20:95 a dozen of 440ml cans...not the nicest draught out there...but for bang for buck...not bad at all....whats everyone else drinking tonight?
All my effort to raise the level of general discussion just a bit undone by a random meaningless comment.
Grrrrrrrrrrrrrrrrrrrrrrrr
Vandal!!!!!!!!!!!!!!!

[cowpoos]

All my effort to raise the level of general discussion just a bit undone by a random meaningless comment.
Grrrrrrrrrrrrrrrrrrrrrrrr
Vandal!!!!!!!!!!!!!!!

have a beer....you'll feel beter...and we can start the intelectual convo in the morning...work finnished hours ago...

[Hitcher]

I suspect that there is at least one generation on this site that doesn't remember the "good old days" when HP and credit card credit rates hovered dangerously close to 30% per annum; when you needed overseas funds to buy a new car; when second-hand cars were worth more than new ones; you needed a doctor's certificate saying you were disabled to get an automatic one; and when heaters were dealer fitted extras. Mrs H and I had a first mortgage at 18% when we bought our first home and that is only 17 short years ago.

Inflation in New Zealand in the 1970s ran at about 15%, plus or minus, for years. This is what set the scene for Roger Douglas' economic reforms of the mid-1980s.

We were precipitously close to falling into the third world. People who scoff at the Reserve Bank's current inflation target have no idea of the havoc that rampant inflation causes and should wake up and smell the coffee. Our nation's current account deficit scares me silly. I should stop here before I get too excited about left-wing political agendas and the journey to hell in a handcart...

[TwoSeven]

All my effort to raise the level of general discussion just a bit undone by a random meaningless comment.


It wont happen. Generally if they try using the intelligence center in the brain they end up curled up on the floor thumb in mouth making baby noises - I think the single-cell suffers from neural overload causing a short circuit. :doh:


Following on with Hitchers post, does anyone remember what the top tax rate was in that period. It was something like 70-80% I think - compared to the current 48%.

[idb]

A strong currency is generally a reflection of a strong economy with good fundamentals. NZ's case is a bit different because our domestic economy is so small. Instead of reflecting good fundamentals (e.g. productivity) our dollar is over-valued because of speculation in it by overseas speculators attracted by the high interest rates to be earned in NZ (they're vastly higher than in the USA for instance).That can change in a very short time if the interest rate differential changes back the other way. We are pawns in a global poker game, you could say if you were a conspiracy theorist.OK I may be a bit of Luddite when it comes to these things but I figure it like this: we make stuff to sell overseas to earn our "income", right? And our exporters are struggling with a high NZD making many of them uncompetitive (eg forestry industry, a real good current example) so production volumes are down, plants working reduced hours, workers being laid off. So our income is shrinking. Meanwhile our laissez-faire trading policy allows cheap imported goods (cheap because of the high value of the NZD) to flow into NZ, practically without restriction. So our spending is increasing (mainly on crap so far as I can tell....although that is a different subject). Now...I can't run my household budget like that, not for long anyway. So...WTF?

Sooooo....doesn't that just show that economics is all voodoo and that economists might as well wear big grass skirts and wooden masks while leaping around rattling bones and bleeding goats?
That is to say, economics is a pseudo-science trying to predict cause-and-effect when the whole model can be so easily upset by something as unpredictable as human nature, or a big wind on the other side of the world....

[idb]

And in fact make economists the most dangerous group of people in the world because, despite dictating government fiscal policies and social agendas, in fact they have no f*cking idea what's going to happen......?
I propose a jihad.

[riffer]

Following on with Hitchers post, does anyone remember what the top tax rate was in that period. It was something like 70-80% I think - compared to the current 48%.

I can remember 68% but I never qualified. - I must have been around ten at the time (1977).

[idb]

I suspect that there is at least one generation on this site that doesn't remember the "good old days" when HP and credit card credit rates hovered dangerously close to 30% per annum; when you needed overseas funds to buy a new car; when second-hand cars were worth more than new ones; you needed a doctor's certificate saying you were disabled to get an automatic one; and when heaters were dealer fitted extras. Mrs H and I had a first mortgage at 18% when we bought our first home and that is only 17 short years ago.

Inflation in New Zealand in the 1970s ran at about 15%, plus or minus, for years. This is what set the scene for Roger Douglas' economic reforms of the mid-1980s.

We were precipitously close to falling into the third world. People who scoff at the Reserve Bank's current inflation target have no idea of the havoc that rampant inflation causes and should wake up and smell the coffee. Our nation's current account deficit scares me silly. I should stop here before I get too excited about left-wing political agendas and the journey to hell in a handcart...
I remember it Hitcher but it was just a bit before I was old enough to care.
Alcohol, bikes, cars and gir.......no, mainly alcohol, bikes and cars were my concerns.
No argument about the inflation target, my query is whether the method of control is working.
Maybe Marmoot is right - the old ways just aren't appropriate any more.
A shared currency with a big player is looking more logical the more I think about it. Maybe Indonesia - what's that, is it the Baht or something?
That would teach Australia for shitting on us twice over the World Cup!

[idb]

have a beer....you'll feel beter...
Heyyyy....you're right...!!!

[scumdog]

idb, I agree with you initial post on this thread, as a selfish prat I want to know why I can't get my T'bird at a $ for $ rate instead of 69 cents for the (US) $.

And as we are so dependent on imports does it NOT make sense to have the dollar high?

Paradoxicaly I guess that to pay for these imports we need top dollar for our exports - hence the need for a 'lower' dollar... what a conumdrum eh?

[idb]

idb, I agree with you initial post on this thread, as a selfish prat I want to know why I can't get my T'bird at a $ for $ rate instead of 69 cents for the (US) $.

And as we are so dependent on imports does it NOT make sense to have the dollar high?

Paradoxicaly I guess that to pay for these imports we need top dollar for our exports - hence the need for a 'lower' dollar... what a conumdrum eh?
Hmmmm, a conumdrum indeed.
But what to do..........?
Still 69c is damned good compared to 3 years ago or so.
It used to hover around 52c as I recall (not always reliable).
Isn't it over 70c at the moment?

[scumdog]

Hmmmm, a conumdrum indeed.
But what to do..........?
Still 69c is damned good compared to 3 years ago or so.
It used to hover around 52c as I recall (not always reliable).
Isn't it over 70c at the moment?

Got married in las Vegas in 2001, licence cost $35, not bad thinks I - but then the NZ dollar was worth only 40 cents US!!:doh:

In 1980 it was dollar for dollar.

[Brian d marge]

Heres the Solution . Buy NZ , ( I know they tried it, but the stuff that was made was crap ... you could buy better overseas ,cheaper ,,)
So we buy NZ , if its crap we say so .... and with the internet we can do a lot ... So instead of buying that Harris exhaust ,,,you buy NZ made and demand quality and GOOD service OR you will get it from Overseas

Oh and Save money in Kiwibank Countrys come to NZ for its farming expertise ..I am sure they can come to NZ for other stuff as well


Just a thought ....( but not Canterbury Draught ,,,you couldnt inflict that on an unsuspecting world !)

Stephen

[Marmoot]

Maybe Marmoot is right - the old ways just aren't appropriate any more.
A shared currency with a big player is looking more logical the more I think about it. Maybe Indonesia - what's that, is it the Baht or something?
That would teach Australia for shitting on us twice over the World Cup!

Dammit, I'm absolutely right! I'm always right and you know it! Long live me...

If we want to peg it, the choices would only be Euro, USD, Chinese RMB or JPY. There is no point pegging it onto anything else except from those as they are normally the benchmark for export/import and stability (well....relatively speaking, at least politically)

Indonesian Rupiah is crap. The country may be big (220milion people, 1/8 world circumference, 13k+ islands, etc) but the economy is as stable as a prancing horse standing on a jelly pudding (yes, thank you I like that idiom. Newly invented by me).
Country size is not an indication of how good their currencies are. The political situation is the good indication.

Mr. Hitcher, the 'good ol days' is good, but if the government is not careful (or if we stop whinging) then next year may become back-to-the-future for us. :blip:

And Brian'd'Marge suggesting Buy-NZ in bike forum? never :nono: You know you want that Akrapovic exhaust :yes:

[Lou Girardin]

Inflation in the '80s did me a big favour. House prices soared, wages followed, and my good old Housing Corp mortgage stayed the same.

[Brian d marge]

And Brian'd'Marge suggesting Buy-NZ in bike forum? never :nono: You know you want that Akrapovic exhaust :yes:

I admit ..I would like the ohilns and My Enfield does have a Carrillo rod and Kibble white valves set up ..

But knowing how some of these after market people make stuff.. I am sure people could do better in NZ (2 smoke expansion chambers)

For example I offer as evidence in my defense F1 engineering footpegs/rearsets beautiful stuff
Suspension tech .... why deal with america for the same stuff

I do where i can , for example I deal with local engineering shops ( F1) and I live miles away !!!!

Stephen

[Skyryder]

It's what happens when you have a Reserve Bank with practically only one goal - to keep inflation between 1% and 3%.
Using interest rates only to achieve this is like cracking nuts with a sledgehammer.
Every other 1st world country has capital gains tax to moderate the excesses of the property market, why haven't we?

1 Because the government has taxed almost everything else.

2 Every one one in this country wants to be a property developer.

3 There are now more property developers in this country than sheep.

Skyryder

[Hitcher]

Following on with Hitchers post, does anyone remember what the top tax rate was in that period. It was something like 70-80% I think - compared to the current 48%.
66 cents in the dollar. Bless.

[scumdog]

Following on with Hitchers post, does anyone remember what the top tax rate was in that period. It was something like 70-80% I think - compared to the current 48%.

Does that 48% include the 12.5% GST component???

[Lou Girardin]

Does that 48% include the 12.5% GST component???


ZAP! POW! KABOOM!
Got 'im

[Marmoot]

ZAP! POW! KABOOM!
Got 'im

I was really tempted to mention petrol tax, parking cost, minor traffic infringements, levies including vehicle registrations, various permit costs including warrant of fitness, etc.....but I managed not to :hitcher:

[TwoSeven]

Does that 48% include the 12.5% GST component???

Cant remember, but its the average tax paid in NZ - includes indirect taxes and everything so probably.

[TwoSeven]

Actually, just thinking.

Buy NZ is probably not such a good idea either. I think it needs to be Save NZ (as in Save Money).

There is a formula for the money equation of exchange. Its MV=PY where M is money, V is velocity, P is price of all goods (CPI) and Y is quantity sold.

Velocity is the rate at which money goes from consumer to producer and back again in one year.

So if you buy NZ you will increase V and also Y but... because producers suddenly cant make more goods, you will increase demand which will put the price of the goods up (P). That means the value of M must also rise to balance it. So at a guess buy NZ will increase inflation.

I also guess that means that Save NZ will decrease inflation for the opposite reasons.

Not sure if this is true or not, just taking a wild guess with the forumula :)

[Lou Girardin]

NZ'ers are not really highly taxed, we're pretty much mid-field.
It's like all the complaints about company taxes vis a vis Australia. Sure our rate is higher, but we don't pay payroll taxes, medical insurance and other levys Aussies have to.

[Marmoot]

NZ'ers are not really highly taxed, we're pretty much mid-field.
It's like all the complaints about company taxes vis a vis Australia. Sure our rate is higher, but we don't pay payroll taxes, medical insurance and other levys Aussies have to.

If you want to compare apples with apples, we don't get paid at european pay rate here either. At the end of the day, the amount of $ we can save is much less than theirs.

If I want to simply compare tax rates, 3rd world countries seem to be a nice place to live in, until you realise that their pay rate is 1/10th of 2nd world countries.

[cowpoos]

NZ'ers are not really highly taxed, we're pretty much mid-field.
It's like all the complaints about company taxes vis a vis Australia. Sure our rate is higher, but we don't pay payroll taxes, medical insurance and other levys Aussies have to.

we pay huge amounts of medical insurance....ACC...check you bill for rego...work out what you pay in your PAYE....and on top of that your employer will be paying around $1000 for every $20,000 in wages he or she pays...ACC made a fuckin 801million dollar profit last year...thats bullshit...and my acc rates for myself [I'm selfemployed] and my workers hav gone up 16%...how can a state run medical insurance provider be allowed to make a profit....let alone give shit service...

and theres alot your missing from your argument on comparing auz to nZ in regaurd to bussinesses...its easyer top do business in NZ....but shitloads more profitable in auz...and that is mainly to do with there tax laws...I could get away with paying next to no tax in auz if my bussiness was running over there...and if that was the case...I would make more money...net result would be....I would hire more employee's and do fuck all work myself.....

[TwoSeven]

As much as I hate the way ACC raise their money, I suggest you live in a country that doesnt have ACC before complaining too hard about it :)

[Brett]

The retarded monkeys that try to run this economy only know one way of controlling the economy, housing market, imports exports etc...and that is to go and raise the interest rates...then they think that it will be an instantaneous thing, and when in a few months time nopthing has yet changed, they raise it again...then a few years down the line (maybe not quite so long) the economy starts struggling because of the extremist measures taken a little way back...
Welcome to economics run by meatheads...

[Brett]

Plus they are now talking about removing our no tax on capital gains system...that is going to remove a HUGE drawcard that overseas investors see in NZ, let alone tighten things on investors already here. Gutted.

[Marmoot]

Plus they are now talking about removing our no tax on capital gains system...that is going to remove a HUGE drawcard that overseas investors see in NZ, let alone tighten things on investors already here. Gutted.

and when the foreign investors pull back, they'll be wondering why the economy slumps down, and will do another knee-jerk reaction towards the other direction.

Deja vu.

[MacD]

NZ'ers are not really highly taxed, we're pretty much mid-field.
It's like all the complaints about company taxes vis a vis Australia. Sure our rate is higher, but we don't pay payroll taxes, medical insurance and other levys Aussies have to.

And guess what, the OECD agrees with you (http://www.oecd.org/dataoecd/29/27/1891375.pdf). Compared with countries that offer a similar level of social services NZ is not highly taxed. You also missed stamp duty and capital gains taxes in Australia.

Abstract from the OECD document linked above:





New Zealand’s tax system is one of the most neutral and efficient in the OECD. Bases are generally broad
and rates are moderate. The full imputation system for dividend payments works to reduce tax distortions
for corporate financing decisions, while efficiency in corporate investment decisions is encouraged by the
low level of targeted tax incentives. The tax system is also more neutral vis-à-vis private saving than in
most other countries, in particular because no general incentives are provided to private pension saving.
There is hence no immediate need for major tax reform, but several second order issues should be
addressed in order to reap the full benefit of an otherwise well-functioning system. The most important
improvement would be to broaden the income tax base by including capital gains on a more
comprehensive scale as well as introducing a tax on imputed rental income of owner-occupied housing.
These two steps would not only reduce horisontal inequities and hence tax shifting incentives, but also
contribute to a better allocation of private savings, which is currently biased strongly towards housing. It
should be emphasized, though, that tax policy is unlikely to be very effective in raising the level of private
saving in New Zealand.





What is significantly different about Australia is that salaries are now on average 25% higher than in NZ for equivalent jobs.

[Hitcher]

Plus they are now talking about removing our no tax on capital gains system...that is going to remove a HUGE drawcard that overseas investors see in NZ, let alone tighten things on investors already here. Gutted.
I think not. Given New Zealanders love of investing in property and garnering capital gains from said, any Government that pulled such a stunt would not only get thrown from office but be condemned to an eternity of political obscurity and insignificance. And the chances of doing this in an MMP environment are as remote as a remote thing.

[cowpoos]

As much as I hate the way ACC raise their money, I suggest you live in a country that doesnt have ACC before complaining too hard about it :)

I was a hell of alot happier when ACC was allowed compitition...FMG acident insurance was a tenth of what I have to pay now...a tenth...!!!!!!!!!

[TwoSeven]

And guess what, the OECD agrees with you (http://www.oecd.org/dataoecd/29/27/1891375.pdf). Compared with countries that offer a similar level of social services NZ is not highly taxed. You also missed stamp duty and capital gains taxes in Australia.

Abstract from the OECD document linked above:





What is significantly different about Australia is that salaries are now on average 25% higher than in NZ for equivalent jobs.




So thats where the dumb bastards got the idea of intruding tax on rental properties. Probably the most stupid idea of the century.

NZ has this great propensity for taking stupid ideas and implementing them without any thought. One will have to wonder whats going to happen to all those people living in flats provided by people who are providing them as a retirement investment.

I could understand them doing it for professional rent firms and property developers who are in it to make a professional profit, but they could at least leave out the grannies who have the extra house.

[Lou Girardin]

Why should property investment be treated differently from other forms of investment?
Property's other than your primary home should bear a capital gains tax.

[TwoSeven]

About 1/3 of NZrs live in rented property provided as second houses. If you put a tax on this, many people will dump their houses. Where will everyone live ?

[Skyryder]

Inflation in the '80s did me a big favour. House prices soared, wages followed, and my good old Housing Corp mortgage stayed the same.

Just another reason why Rodgernomics and the so called level playing field was rolled out of the economic laboritory. "Can't have the plebians getting cheaper money than us" says Rodger Kerr to Rodger Douglas.

"We'ill fuck em" says Rodger Douglas and rodgered we were, good and proper.

Skyryder