Opinion: Imitation is the sincerest form of flattery, according to that incisive political analyst Oscar Wilde.
Earlier this week, trying to understand the stark differences between National Party’s economic projections for house sales to foreigners, and those of every other economist, I remarked to one of Nicola Willis’s advisors: “Five economists walked into a pub, six opinions walked out.”
I was a little taken aback, then, sitting in a back corner of the ASB Queenstown finance debate, to hear Willis wheel out the same line. “I’ll tell you about economists, you get six of them in a room, there’ll be seven different opinions,” she said.
Wilde was being flippant. And my line was flippant. And it was flippant of Willis, too.
But it dodged the real question. The argument about National’s tax policy is not (just) about competing opinions; it’s about the lack of any supporting evidence for some of the assumptions. And critically, it’s about the basic arithmetic.
“We think there’ll be a lot of high value homes and obviously, there’s more than 97,000 homes in New Zealand worth more than $2 million,” Willis told the Queenstown audience. “We think we’ll start with between 1600 or 1700 homes at an average price of $2.9 million. This is an economics lecture. It’s boring. We can keep talking about that – but I want to ask Grant about the hole that he has created….”
This morning, Trade Me’s Property Price Index showed houses selling six days quicker than the previous month, the proportion of auction sales doubling, and the first increase in asking price in 10 months. Trade Me says the market has turned – and if that’s so, then it’s because there are (again) more people wanting to buy homes than there are properties available.
So it’s timely that we now learn which levers the political parties would pull to address the resurgent problems in the housing market.
1/ National says its plan to return more investors to the markets by removing interest deductability and rolling back the bright-line test (as well as reintroducing a few foreign buyers at the top end) won’t affect house prices.
That’s wrong. It’s basic supply and demand economics. My 13-year-old daughter is learning this stuff at school.
Talking to media after last night’s debate, Willis was asked for evidence to support her claim. Five times, she was asked. Five times, she replied, “We don’t think it will affect the price of houses.”
She had no evidence. Finally, she said: “The evidence is from economists around the world that the biggest determinant of house prices is the imbalance between supply and demand.”
Precisely. Supply is critically important – but demand matters too.
2/ Act would allow builders to opt out of council building consents to improve the supply and cost of housing. And it would go further than National in reframing the Reserve Bank remit, not just to remove the dual focus on unemployment as well as inflation, but also to require the bank governor to bring inflation down faster.
Tempting as that sounds, it would risk an erratic rollercoaster of interest rate hikes and cuts. And in the short-term (David Seymour doesn’t like the ill-defined “medium term”) that would mean more rate hikes, causing house prices to drop further.
When I asked afterwards whether a National-Act Government would follow that course, Willis said that was not National’s policy.
3/ The Greens would provide low-interest Government-backed loans for first homebuyers, and Government-backed mortgage refinancing for those caught in a debt-to-equity trap.
And it would scale up the Kāinga Ora building programme and cap rent rises at 3 percent a year.
James Shaw dismissed talk of a war on landlords saying: “I think that we should stop the war on renters, that we’ve had for several generations.”
The Queenstown business audience seemed unconvinced by Shaw. Shaw seem unconvinced by them. “This particular crowd here are people who have got assets over $4 million, so that doesn’t surprise me.”
4/ Labour would continue its house-building programme, and modernise the 30-year-old building consent system to stimulate urban development. And it promises an $82m trial of a “deep retrofit” rebate scheme aimed at decarbonising homes.
“We need to build more, and we need to make sure that we’ve got out of the workforce that can enable us to do that,” said Grant Robertson.
Debate moderator Jack Tame retorted: “I don’t need to mention KiwiBuild. But … KiwiBuild!”
Labour’s problem is that it’s been too slow to ramp up construction – though Kainga Ora is trying. And the Labour Government still hasn’t freed up land supply and consenting.
Accused of extensive and ill-targeted spending over the past three years, Robertson said: “I hear a lot of professors of hindsight economics up on the stage here.”
Last night’s finance debate was useful. There was no time wasted on rubbish like cellphones in schools and which women can use women’s toilets. Those are the polarising distractions that, I suspect, are causing many New Zealanders to disengage from this election campaign.
Outside the Queenstown venue, Taxpayers Union campaigners who worry about New Zealand’s debt levels (some of the lowest in the world) approached passersby. “I’m on holiday,” retorted one woman. “I’m not talking politics.” Fair enough. I think many people would like to take a break from this campaign.
So the hosts – ASB chief executive Vittoria Shortt, Queenstown mayor Glyn Lewers and the Queenstown Business Chamber – challenged the politicians to answer some of the big questions that actually matter to the future of New Zealand.
Climate leadership and investment, and Treasury’s failure to account for the cost of New Zealand international climate liabilities. Making sure New Zealanders have good homes, and weighing up the often competing interests of landlords and tenants.
And the high-powered line-up did not shy from those questions.
But there was one question, on adding up the numbers, for which Nicola Willis simply had no answer.
If National leads the next government, that hole in National’s accounts will become a hole in the Crown accounts; filling it will likely be her problem. “It would be a resignation offence if I didn’t deliver tax reduction,” she tells Tova O’Brien at Stuff.
To quote Wilde again: “There are only two tragedies in life: one is not getting what one wants, and the other is getting it.”
Author’s note: It’s only fair, if I’m to throw Oscar Wilde quotes at people, that I finish with one more: “By giving us the opinions of the uneducated, journalism keeps us in touch with the ignorance of the community.”