A focus on the cost of living (Inflation)

Labour is doing a lot to focus on ‘ it’s the economy stupid’ and the main way they are signalling this shift is by dropping high profile policies that National has previously targeted.

Like the efficient car subsidies. The Greens were disappointed in their policy being dropped but in truth it was a truly dumb policy not because the intent was bad but because the reality is the businesses that supply cars just raise their base price to absorb the subsidy, i.e. the overseas producers of cars can read english, so they just move their base price to absorb the subsidy. 

This is the same problem that happened with Mr Robertson’s first budget when he increased the accomodation allowance by $50 a week. Landlords simply raised their rental prices to absorb it and laughed in his face all the way to the bank. It was entirely predictable, and same with this car subsidy.  The pricing process is driven by neo-liberal logic to maximise profit; pricing under neo-liberalism is too independent of price restraints. 

The easiest way to get round this price inflation is for the government to take over supply of part of the market, like it once did for housing construction, insurance, banking, electricity supply etc etc. That is the only true competition model with a proven track record of keeping prices low. (If you want a competition feature in your economy). 

In terms of keeping inflation down, Labour appears to doing the right thing by sticking with three waters boards and the Resource Management Act centralisation into boards. The councils are simply inefficient and out of their depth when managing three waters and applying the nationally set rules for the Resource Management Act. Councils currently run costly, inefficient and untimely processes, so the boards will allow great experience levels and specialisation to grow. 

Council rates should therefore come down or stabilise with these boards. I can see why Labour wants simplified processes for house building. This  means less chances for challenges so that the boards don’t get swamped with ‘small cases’. But Mr Parker and Megan Woods have taken the wrong approach. They should generically protect the finite and small number of remaining historic residential suburbs to reduce the challenges. If they don’t voters will be furious with losing sun, privacy, heritage, and liveability of their cities. 

Labour can then permit mid rise housing in central commercial areas. For example Napier around Thackeray and Carlyle Street is just low level horrible cheap commercial buildings surrounded by customer car parks. This would be better for mid-rise social housing with all the services right on their door step. The insane current plan to build social housing way out in Te Awa where there has just been high levels of flooding is stupid. 

Cyclone Gabrielle has given the greatest focus yet on climate change being a real and dangerous threat to business. Not that long ago business groups scoffed and cheered anti science slogans. Voted for right wing politicians who with lies inflamed wilful ignorance. Or said even if climate change was true it was too difficult and could be left to future generations; like previous generations left us problems. E.g. the colonial generations of not that long ago who chopped down the forests or set fires on steep hill country. Almost all that hill country now needs to return to native bush and not pine plantation.  

All these costs to get business back to ‘normal’ can’t be met us, by government, we are simply not rich enough. It is simply too much money. These steep country farms must simply close or find ways to work in harmony with indigenous forests, e.g. they could plant Manuka and collect honey.  But the rural roads that go to those farms must become the farms and users responsibility, it’s just too much money to publicly fund these roads. This is very harsh. But think of the Dust Bowl farmers who had to simply abandon their farms and move with nothing to California. 

Loss from climate change is simply a normal business risk and loss is simply the neo-liberal market mechanism of accountability for risks taken. Climate change was always high risk for business but rather than be conservative and take it seriously and minimising risk by going along with Helen Clark’s Fart Tax, they vigorously protested and carried on exposing their farms and homes to the risk of climate driven damage. It’s tough; just like it was for city workers who lost their jobs under the neo-liberal market reforms.  

Excellent that Waste Management NZ’s Ingrid Cronin has called out ‘fast fashion clothing’ as mostly ending up being dumped. We need to buy locally produced so more expensive but better quality, and less of it. 

We can easily do this by creating a comparative advantage for small scale domestic production, by:

1. Taxing Gross income (no deductions for expenses except domestic salary and wages paid through Inland Revenue). No deductions means no losses and this applies to the 2nd step; we tax gains; and losses stay with the risk taker. 
2. Removing the capital revenue distinction for non-individuals (any gains are income to a non-individual entity. ) I.e. define income very simply and very broadly so it is truly a broad based low rate tax system. 

These two things would allow a tax rate of 10% and it would collect more tax than is currently collected with 28% on net income. It would remove the current tax subsidy for high cost farms or wasteful and exploitive businesses.  And we could fully get rid of the unjust GST which contributes to inflation and a distortion of our economy towards cheap imported products.