Let them eat cake

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1

Red-Velvet-Cheesecake-Cake

Full marks to Labour for trying to do something about the narrow objectives of monetary policy.  The current account and resulting high overseas indebtedness have been the Achilles heel of the New Zealand economy for a long time.

However the economics behind the proposed variable KiwiSaver policy is highly contestable.

Labour’s argument is that the current account deficit is fuelled by a shortfall in national saving and that by forcing every worker into KiwiSaver and then gradually raising the combined contribution rate to 9%, individual saving will rise and therefore national saving will also rise. This will reduce the need to borrow and sell assets to foreigners to fund the current account deficit.

The presumed advantage will be that interest rates do not need to rise as much to reduce demand in the economy. Thus the exchange rate will be lower and exporters encouraged more than otherwise would be the case.

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But inflation is actually very low.  What is the demand that actually fuels the current account?  It is not the spending of the low income families that are barely surviving. Forcing them into KiwiSaver is going to reduce the very demand that keeps their local economies going. Making them save even more to balance the economy in boom times is a bizarrely regressive idea for a Labour government-in-waiting.

Other higher income employees are capable of reducing their other saving if they are forced to put more into KiwiSaver, hardly contributing therefore to any increase in national saving. Moreover if the state continues to subsidise KiwiSaver an increase in member numbers is costly to public saving.  This offsets any gain to national saving, if in fact there is any.

It is the wealthy baby boomers in early retirement who are spending like there is no tomorrow. They are sitting on expensive real estate and feel wealthier than ever, many are still working and are getting a very large hand-out from the state in the form of universal NZ Super as well as the advantages of the gold card.  Spending on imported cars, overseas trips, property upgrades helps blow out the current account much more than spending by the poor on basic food, school expenses, rentals and travel costs.

But will the over 65s be affected by a compulsory or variable KiwiSaver? No way.  That burden falls only on the working age. Many of whom are already struggling with student loans repayments, poorly designed working for families abatements and high housing costs.

Let’s do the sums for someone earning $36,000. Assuming the employer contributions result in lower wages over time, an extra dollar effectively is taxed at 17.5% PAYE. With 12% student loan repayment, 25% (by 2018) abatement of Working for Families, 9% KiwiSaver the effective marginal tax rate becomes 53.5%.

And no, don’t expect the struggling 30 year-old with two kids to be grateful because increased contributions to KiwiSaver is still their money. They can’t access the money for 35 years and there is no guarantee that an offset wont be made to  New Zealand Super by then. After all  Michael Cullen has recently advocated this, and Labour Australian scheme that so impresses Labour has at its heart a means-tested age pension.

Labour will raise the age for NZ Super affecting the least well off the most in terms of a drop in living standards. But the higher age won’t come in for a long time and the impact on the current wealthy, capital-gains-rich over 65 year olds will be nil.

As Piketty in Capital in the 21st Century is surely highlighting, you don’t cure the ills of modern economies by taxing the poor more. He points out when the rate of return on capital outstrips the rate of growth, (a situation the financial services sector thinks is normal), inherited wealth will always grow faster than earned wealth. KiwiSaver contributions are only on earned labour income. In an increasingly unequal world, what a perverse tool to use to cure the ills of the economy.

 

36 COMMENTS

  1. Thanks Susan for bringing clarity to this policy. As John Minto says -Labour are ‘playing in the same neo-liberal sandpit” as National. Who on earth do they get their economic advice from? Certainly not anyone who cares about those on low incomes. While Chris Trotter raves about the ‘talented Mr Parker’ – when are Labour going to expand on this policy and show us how those left behind by successive Labour and National Governments will finally be shown some human kindness and consideration?

    • Who on earth do they get their economic advice from?

      From the economists who’s hypothesis is what landed us in the mess in the first place. The economics taught at school and university is wrong.

  2. Hold your horses there, Susan St john.

    Parker has specifically said this policy wouldn’t punish the poor so you’re being disingenuous about the situation. We haven’t heard the detail of how but to attack Labour on that front is singing from National’s book of hymns.

    You may have a point about those with wealth adjusting their private savings to compensate for their kiwi saver contributions but that then contradicts your point about inflation being caused by early retired baby boomers who wouldn’t have to compensate because they’re retired, right?
    And to what degree will this compensation mechanism you describe alter the effectiveness of this policy? I certainly can’t find this out from your post.

    Or are the baby boomers still working? What percentage? Your piece is all a bit vague with no numbers to go on.
    For instance, your claim that inflation is low. That may be true but the reserve bank has said that price pressures are building. So what is your point? Are you saying that inflation will remain low? That the reserve bank is just making shit up on behalf banks so they can screw a bit more dosh out of those with mortgages?
    Again, I would be more inclined to nod my head in agreement if you actually provided some evidence for your claims.

    • “Parker has specifically said this policy wouldn’t punish the poor so you’re being disingenuous about the situation.”

      It will. What he has said is that unless you’re working part-time, Kiwisaver will likely be compulsory. So if you’re struggling, but working full-time, you’re in Kiwisaver. His plan for not hurting the poor is that contribution rates will rise slowly from just 1%.

      Except even 1% is going to hurt and punish the poor, and by the time it raises to 3% and then onto 4.5% a few years later, he’s slapping them in the face.

      I’d much prefer to see the variable saving rate introduced but Kiwisaver kept as voluntary.

      • Labor and the Greens are going to raise the minimum wage with annual reviews to push it up to the living wage. This will put more pressure on all pay brackets. Then there is a capital gains tax. If you look at the suite of policies Labor want to introduce they all complement each other and make for a fairer society. You cannot look at this policy in isolation!

        What you are championing is that the extremely poor remain poor forever … the status quo is not a relevant position anymore.

        • That doesn’t happen automatically. It takes time. It is a process.

          What Labour needs to say is: this is policy for the end of our first term, start of our second term. We will not implement it until living standard and wages have had a sustained period of improvement.

          If they don’t, I just can’t agree with the policy.

          • This isn’t Labour policy anyway. It is an idea to be investigated. Which says it all really.

      • DISRAELI GLADSTONE – Do not forget, please, the elephant in the room, that is an increasingly aging population, which will mean higher costs for pensions and retirement payments the state covers, and also higher medical costs for the health system. So all those costs will somehow need to be paid. Those that oppose lifting the retirement age will need to tell us where the money is going to come from to fill the gaps, as the working population compared to the retired population will shrink, unless you want to encourage more migration and push the population up, also causing further pressures on infrastructure, education, health and housing costs, which that brings.

        Taxing the high earners is one option, to balance the burden, but there will be limits too, believe it or not.

        We are heading into difficult times, no matter what is done or proposed, and in that regards it makes sense to provide for more savings, that stay in the country, preferably, and get invested here, at least more than so far, lessening the need to borrow.

        It is convenient to go on about baby boomers living it up, but they will leave values, assets and investments too, when they pass away. They will have off-spring in many cases, who also often get help with financing study and getting their first car or even home. It is not all that clear cut and simple.

        Even the rich are mostly only rich in asset values, and when you would nationalise that, this will of course create more equality, but it will not immediately mean everybody ends up with wallets full of more pay. Much of what we are discussing are accounting aspects, and what is counted as what, and how much it is worth, in whose hands it may be.

        So we need to see at the whole set of policies that Labour and other parties offer, to judge whether they have answers that make sense, not just one financial or monetary policy that is just part of the whole tool set.

      • “I’d much prefer to see the variable saving rate introduced but Kiwisaver kept as voluntary. – Disraeli

        Except, it won’t work as an alternative to the RBNZ OCR system…

  3. I’m wondering why they aren’t brave enough to announce a financial transactions tax…. but then maybe it is simply because they are not brave enough.

    • True Kingi. I was just talking to friends about FTT today.
      How could Labour not have a financial transactions tax?
      I try not to negative about Labour, honestly I try my best, but reality keeps getting the better of me.

      These policies would be a start (yes, a start). AFAIK, only the CGT is on the table right?

      – Introduce FTT
      – Introduce CGT (yeah, 30 years too late, but it still has to come in)
      – Lower or finish GST
      – Increase the top tax rate
      – Lower the taxes for low income earners…even bring back Goff’s or Shearer’s first $5000 tax free.

      Who would have guessed that almost one year into Cunliffe’s leadership we’d be hoping he’d reintroduce Goff and Shearer’s policies?

      Can someone point out where Cunliffe has decreased the tax burden on the most marginalised people in society?
      I’m not being a smartass, this is an honest question. Tax policies ain’t my strong point. I just know our poorest people are getting screwed over. I hope I’ve missed something?

  4. Excellent points.

    It always seems to be the poor that end up paying no matter if it’s National or Labour in power.

    And even Piketty doesn’t realise that we need to get rid of inherited wealth.

  5. I am willing to wait and see whether and how some of the concerns about this policy are met. For one thing, it is just one policy, and as such, cannot address everything that one would like to see addressed. And on the positive side, it is an attempt to regain some control over the local economy, which is necessary if investment is to be directed away from housing and toward productive enterprise.

    The concern that it will make the poor even poorer is a fair one. However, given that the accommodation supplement and WFF subsidise landlords and low-paying employers, I cannot see why kiwisaver contributions could not be paid by the government, where incomes are sufficiently low. Before medicare began in Australia, people were obliged to belong to a government insurance company, the levies of which were paid by the government for those with low incomes, and I do not see why something similar cannot occur with kiwisaver. Sticking with the making-the-poor-even-poorer theme, there is also the possibility that people, while they cannot get their hands on their kiwisaver accounts, could still borrow against them, thus increasing private debt while reducing government debt. This would be particularly sad if their borrowing was just to get by.

    Some of these things are less likely to happen of course, if the envisaged strengthening of the local economy materialises, which leads me to my last point. The road to neo-liberal ruin has so far been paved with good intentions. The sub-prime mortgage fiasco, for example, began with the noble idea of a stake-holder, home-owning society on the part of politicians, but bankers had different ideas, and their ideas won. It is imperative that Labour keeps its eye on the target of strengthening the real economy, and does not allow that target to be subtly replaced by a new one that does no such thing. They need to remember that changing the RBA is a means to an end and not an end in itself.

  6. I don’t think the KiwiSaver thing is a universal panacea, but I do think it is a step in the right direction. What I’m now looking for from Labour is a package of policies that this is nested within. No question it has implications for the working poor, but they are always the ones to get rogered. Let’s see if there are things to mitigate that effect and remember that the principle behind it is fantastic in that it doesn’t strip people of their own money but protects it for them. The bigger issue is the constant redistribution of wealth from the poor to the wealthy that has been the relentless reality for thirty plus years now. My take on this latest Labour initiative is here: http://thatluxton.com/2014/04/30/the-labour-party-surprisingly-not-dead-yet/

  7. Thank you Susan for your critique of this new Labour monetary policy.
    It also raised questions for me and identified points for discussion – as a lay person of course.

    1. Forcing them into KiwiSaver is going to reduce the very demand that keeps their local economies going.
    That assumption arises because they won’t have the extra money to spend on things in the ‘local economies?’ If I earned $36,000 I would eventually have to use $3240 of that to pay for Kiwisaver. Compare that say to the presumed lowering of interest rates, exporters earning more and therefore able to provide more jobs, and/or higher paid jobs and the other presumed spin offs. At this stage I guess everything is presumption. My husband who owns a small business, works extremely hard, employs a few people knows that the high kiwi dollar and higher interest rates are hurting. He’s lost 2 workers but can’t afford to employ more because of this.

    2. Making them save even more to balance the economy in boom times is a bizarrely regressive idea for a Labour government-in-waiting.
    Yes I agree. However when we lived on one income, had a young family and were poor I drew out my super and have lived to regret it to this day. If I had kept it there and continued to contribute, we would be in a much better position, nearing retirement, than we are now. Yes it would have been hard but sometimes if you don’t get the money you don’t miss it. Or we could be like Spain and pass a law requiring the young to look after their parents. lol.

    Can’t agree with you regarding boom times though. It may be boom times for some but the slashing and cutting of; benefit, education, and health provision, there are fewer sustainable job opportunities, coupled with increased food prices (my daughter who lies in England is shocked at the comparative price of food here.) Along with the really sad state of our environment, it is the low income earners who have provided the rest of NZ, with the ‘boom’ times. They may not be taxed more but they sure have given up a lot so we can be a ‘rock star’ economy. My big question though is; which of the 2 major parties is most likely to empathise most with their plight?

    3. It is the wealthy baby boomers in early retirement who are spending like there is no tomorrow.
    Yes. Just the wealthy ones though and they would number? As a baby boomer I do feel we have gotten such a good deal. I don’t know Im not an economist but isn’t it baby boomer pay back time?

    4. Let’s do the sums for someone earning $36,000. Assuming the employer contributions result in lower wages over time, an extra dollar effectively is taxed at 17.5% PAYE. With 12% student loan repayment, 25% (by 2018) abatement of Working for Families, 9% KiwiSaver the effective marginal tax rate becomes 53.5%.

    Wow. So even without the 9% by 2018 the effective marginal tax rate will be 44%.

    5. You don’t cure the ills of modern economies by taxing the poor more. No you don’t. But perhaps by looking at this policy in relation to others and reiterating my points 1, 2 and 3, this may, as opposed to the current regime, assist the vulnerable and low paid to take a more equitable place in this society?

    Good though that you have raised these points. It may help to strengthen the policy even further.

  8. While there are some aspects that deserve critical consideration, I think that David Parker’s and Labours proposed monetary policy has some merit. It is indeed partly due to lack of savings why New Zealand needs to borrow so much for investments (very much in housing) and in varying degrees also for government spending.

    What is the main problem is the continued borrowing for housing, and with house prices sky high in large centres like Auckland and Christchurch, and also in some other places, this is also affecting rents, New Zealand and New Zealanders are caught in a catch-22 situation, which is hard to get out of. So incentivising saving and making Kiwi Saver compulsory, it is a step in the right direction.

    Of course these are measures that do primarily benefit the middle class, that is in the longer term, but it will also have benefits for lower earners. When the minimum wage incomes will be lifted, the pressures to save will be eased a little for the low earners, and when boosting construction of housing, which really should also include substantial investment in state housing, the pressures on housing costs will be reduced.

    So in that regards Labour has two useful measures in place to somehow address the housing and income issues there are, which is of course not a magic bullet, but a step in the right direction. Less borrowing, which happens via largely Australian owned banks, could be reduced. With a lower NZ Dollar, due to new tools that the Reserve Bank can use, exporters will benefit, and importers will face slightly higher costs, which means imported goods will rise a bit, which means consumers may also reduce credit uptake to buy cars and gadgets and so forth. Add a sensible public transport policy and investments in that, and New Zealanders, adjusting to different ways of travel, could save in fuel imports, which will also improve the balance of payments.

    New Zealand is tied into the global financial market place, so those that favour issuing more local credit and investment on that, they forget, that this can have some adverse effects, as the currency we use is still traded against others. To stop that, you would have to change the whole banking and finance system, but with New Zealand being so dependent on exports and international trade, this will have adverse consequences as countries like Venezuela are admittedly presently facing.

    You would be forced to impose currency exchange and other controls, which will be something most voters and consumers will not support. This is all difficult stuff to deal with, and whatever is changed, it will have consequences in other areas, and they are not necessarily all beneficial.

    What I would expect Labour to do is, to also address the financial and housing issues that people on benefits have, and that is where they are truly lacking, as we hear almost nothing on welfare policy. All we get is the usual slogans on them wanting to address child poverty and income inequality. Well then, increase benefits, or introduce a fairer UBI, at least create a fairer treatment regime for those sick, disabled, looking after children as sole parents, and without jobs without fair reasons. As long as Labour is silent on this, and does not resolve the injustices that only got worse under National and their lackey parties, few will trust Labour, that is few of the poor – working or not working.

    So Susan has some points, but should consider that what Parker presented for Labour is not all bad. Compulsory savings in Kiwi Saver will force people to commit to the future of this country, and discourage them to simply pack up and leave, which some have done. That may force them to make more responsible decisions also, and to vote accordingly, for the interest of their country, not just short term opportunities and benefits.

    The short term thinking and planning of too many Kiwis is a real problem, and which has led to the situation we have, besides of the elite few rich and powerful manipulating the voters.

    • “It is indeed partly due to lack of savings why New Zealand needs to borrow so much for investments (very much in housing) and in varying degrees also for government spending. ”

      That’s largely a myth, as the late Roger Kerr wrote here http://rogerkerr.wordpress.com/2011/10/28/friday-graph-the-myth-that-new-zealands-net-external-indebtedness-is-a-savings-story/.

      The reason we continue to borrow, as Kerr points out, is not because of a lack of savings as much as it is because it took us to long to recover from the pre 1984 economic vandalism of Muldoon.

      It’s also worth noting what Kerr describes as the “2004-2008 loss of competitiveness and government spending discipline”.

      So we have past National and Labour Govt incompetencies to blame, not our savings history.

      • Roger Kerr, yeah, what political lot did he belong to, and sympathise with, IV?

        Ah yes, was there not some association with the Business Round Table and those flirting with the ACT Party and so?

        Tell us another “myth”, my friend, as those “experts” lost their last credibility with the GFC!

        If we had kept the retirement savings plan that Labour brought in under Kirk, I think it was, this country would now be swimming in saved money and returns earned on it, and not have any significant financial and economic problems at all.

        It would potentially have become a truly developed country, not a wannabe one, that has a structure similar to many developing countries, over dependent on exporting raw materials, minerals, other resources and low value added products.

        But you just love the darkness attached to lack of vision, do you not, IV?

      • Re-writing history as always, ACT-Supporter Intrinsicvalue?

        Of course we have a poor savings records? What part of reality eludes you? That only a far right fanatic like Kerr could deny that speaks volumes about his dedication to “Free” Market dogma.

        If we’d kept the 1973 Labour scheme, this country would have saved an estimated NZ$278 billion by now and our reliance on foreign capital would be minimal.

        As usual, your knowledge of basic economics is coloured by your blind adherence to neo-liberal ideology.

  9. Instead of Kiwisaver contributions being deducted only from wages and salary, why not extend it to other forms of income such as dividends, interest and gambling winnings?

    • Indeed Marcus. At the bare minimum, everyone should be in Kiwisaver; employers and self-employed. And maybe multiple property owners (landlords) should be charged double, as they contribute to higher interest rates.

      • I’d like to know how Labour, or anyone else, is going to stop the pollies from dipping into the lolly jar, or shifting the goalposts to suit their dogma.

        Twice, now, National has busy-fingered with the attempts to have a robust superannuation scheme and healthy money reserves.

        Insurance companies and trust fund managers are bad enough – but when your own elected government starts thieving from the public rainy day account…

        How do we bind ALL governments to stop this happening? How do we make it hard for the short term public servants to ruin our future security?

        (And I agree with the poster who wondered about how many of the early baby boomers are living the high life. Won’t be the truckies or the older casuals at the supermarket, for sure. A hefty number left school at fifteen and had no advantage from the fabulous ‘free ‘varsity education’ with the exquisitely expensive text books.)

  10. There is a stinging critique of the policy out from the BNZ economist Tony Alexander at http://www.stuff.co.nz/business/money/10000740/Bank-warning-for-Labour-KiwiSaver-plans.

    “Labour’s policy would achieve exactly the opposite of what is recommended for long term savers to invest in equities through the economic cycle, even boosting purchases when prices are cyclically low “rather than running with the herd and contributing to boom then bust asset price cycles”.”

    “”It would probably act as an incentive to raise one’s debt level thus boosting New Zealand’s external debt rather than lowering it as Labour would like,” he said.”

    On so many fronts, this ‘idea to be investigated’ is looking like another major policy stuff up by Labour.

    • Yeah cos Tony Alexander is completely independent eh?
      Sheesh, you’re a joke IV. All the economists who front for the aussie banks are crapping their daks that theyll miss out on the profits from interest rate rises.

      • That’s completely untrue, and actually quite ignorant. The Banks will make the same amount of money either way, but under Labour’s plan they’ll have even more money to make money with, given that most are also KiwiSaver Fund Managers!

        • ACT-Supporter Intrinsicvalue – it beggars belief you’d rather see money go to foreign-owned banks rather than invested here, locally. Are you that far gone in your slavish adherence to neo-liberal dogma?!

          Anyway, you and Alexander have missed the point (again) when he sez,

          “The policy would boost Kiwisaver contributions when the economy was booming and presumably asset prices like shares rising firmly and at high levels.”

          Again you are not telling the whole story. That is precisely the policy used by the RBNZ’s OCR mechanism. Let me adjust Alexander’s comment thusly,

          “The OCR policy would boost INTEREST RATES when the economy was booming and MORTGAGES”

          Interestingly, though, ACT Supporter Intrinsicvalue, you left out this stunning admission from Alexander,

          “Whereas higher interest rates act as a tax on borrowers and take away funds which they will never get back, that would not be the case with an increase in one’s Kiwisaver contribution. You will eventually get the money back when you reach 65. ”

          Bingo.

          With that sorted, the only problem remains how to offset this policy to low/fixed income earners so that they are not unfairly disadvantaged.

          Something that Parker said soon after the release of this policy (I wish I’d kept the link) leads me to suspect Labout has something else in store for us by way of a pleasant surprise.

  11. Interesting take that Susan.

    Would it be possible to clarify/back up the statement that says baby boomers and retirees are the big spenders in the economy as a proportion to other demographics of the economy? Evidence based or left wing guilt based? I don’t know which of the other is true having not seen the evidence but I am not a fan of cognitive dissonance hence my question.

    “What is the demand that actually fuels the current account? It is not the spending of the low income families that are barely surviving. Forcing them into KiwiSaver is going to reduce the very demand that keeps their local economies going. Making them save even more to balance the economy in boom times is a bizarrely regressive idea for a Labour government-in-waiting.”

  12. Let them eat cake? And we know what happened to those let-them-eat-cake-rulers eh?

    Don Brash leaves Reserve Bank Governor and becomes National Party Leader the ACT Leader. What does that tell you about the “Reserve Bank Tool Mechanism?” – no, not Don Brash’s tool mechanism, which was probably worn out by RSI, we all know he is a Tory tool, who raised interest rates when the Govt told it to or vice versa [sic.]?

    The tool of raising interest rates is a right-wing Keynesian tool. If the right drives up interest rates, it then tightens the squeeze on exporters and businesses. Then the capitalist cronies either lay off workers, or lower wages, or fall back on supply-demand curves that we all studied in 6th form economics until the equlilibrium point is reached and lower both wages and interest rates.

    What is the tipping point? How many unemployed does it take living below the poverty line, before there’s a rebellion strong enough to call out the army and eat the cakes near the top of the cup-cake pile? Depends how many drugs are legalised and how close an election is?

    Well it depends. If you can keep the masses subdued, by keeping them stoned enough, or media brain-washed enough by Paul Henry, Corin Dann, Paddy Gower, Mike Hosking and Godforbid Slater, or the Warriors winning.

    Or National does what happened in Gemany when the Deutschmark devalued to zilch – give the masses an ultra-nationalist incest-friendly ACT or any-worm-but-pink Colin Craig to support. Then the right is AOK for a while. The right also have to get rid of effective opposition like Countdown Warrior Jones and rid itself of criticism of gay-rainbow-over-Pakuranga Maurice and Tory-arrogance like Aaron Gilmore.

    Trickle-down economics doesn’t work for the bulk of New Zealanders as a monetary experiment (except 1-5% NACT voters). Labour was banished for 9 years for not understanding the concept of monetary policy that disadvantages New Zealanders’ egalitarian core values. Now that National has sold off half of OUR assets (OUR means New Zealand Taxpayer Assets), voters need to give the same 9 year banishment to the opposition benches to Shon Key and his crony capitalists. NO to “Let them eat cake”-attitude to kiwis. NO to crony capitalism. No to Shon Key backdoor deals. Now that corruption has been clearly exposed, New Zealand needs to say. 再见裙带资本主义

    Kiwis need to draw on that spirit that saw oppressed ‘cake-eaters’ leave England, Scotland, Ireland, Wales, Denmark and the Pacific Islands in their thousands for a better egalitarian life in the Antipodes New Zealand. Later immigrants will probably side with a Tory government. But those that are at the bottom eating the shit-cake of the Tories mobilise, voters will vote in a left-wing-leaning Govt. So what will that produce?

    More cake for 95-99%, instead of $5,000 a head fund-raisers and $56,000 golf games with the Tory oligarchy, or #22,000 donations to National by wife-beaters.

    Who’s going to be eating the cake on September 21st?

  13. If this was Labour’s only policy, you’d have a good point. But it’s not their only policy, it’s their policy re what to do about the distortions caused by having the Reserve Bank look only at inflation and use only interest rates to affect it.

    Yes, compulsory retirement insurance amounts to a pay cut for the working poor (if we accept your treatment of this as Labour’s only policy). However, rising interest rates and house prices also affect the poor. If the Reserve Bank makes the mortgage rates on my rental property go up, you bet I’m going to raise the rent to cover it. If a Labour government can find some other way to deal with inflation, the people renting my property will definitely appreciate it – and maybe they’ll appreciate it even if it means they’re made to save money they’d rather spend.

    • “If this was Labour’s only policy, you’d have a good point. But it’s not their only policy, it’s their policy re what to do about the distortions caused by having the Reserve Bank look only at inflation and use only interest rates to affect it.”

      I agree with you there Psycho Milt. I quite like this policy, but it needs other policies to as well. I think this policy will stop the haemorrhaging of money to banks. However I think we need other policies with it if we are looking to reduce inequality

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