Word of the day

13/04/2021

Ruthful – tender; full of pity or sorrow; rueful; woeful; compassionate; merciful; sorrowful;  causing or apt to cause sorrow or pity;  feeling remorse or self- reproach.


Yes Sir Humphrey

13/04/2021


Rural round-up

13/04/2021

Red meat retreat – Neal Wallace:

This year’s prime lamb production is headed to be the lowest on record, reflecting low farmer confidence, and could result in fewer ewe numbers, Beef + Lamb NZ (B+LNZ) is warning.

The number of lambs likely to be processed this season is estimated at 18.2 million, a drop of 4.5%, or 900,000, compared to 2019-20, with total export production of 347,600 tonnes bone-in.

“This will be the lowest lamb production on record. Confidence in the industry is subdued,” the B+LNZ report said.

“Farm gate prices have eased from recent high levels, farmers are wary of the volatility of weather events and environmental regulation is weighing heavily on morale. Forestry is also spreading into sheep farming land. . .

Bills on tax creep and sound law-making deserve public debate – Feds:

A government committed to fairness and responsible law-making should not allow two bills recently drawn from the Member’s Ballot to sink without debate, Federated Farmers says.

“At the very least the Regulatory Standards Bill and the Income Tax (Adjustment of Taxable Income Ranges) Amendment Bill deserve to go to select committee for examination and public submissions,” Federated Farmers President Andrew Hoggard said.

The Regulatory Standards Bill would require any proposed legislation to be subject to clear analysis of the problem the legislation is aimed at solving, a thorough cost-benefit analysis of expected outcomes and adequate consultation with affected parties.

“Quite frankly with such requirements, the Essential Freshwater legislation and the Crown Pastoral Land Reform Bill – to name just two recent examples – would not have got through as written,” Andrew said. . . 

Resting in fleece – Annette Scott:

Choosing an end of life in wool has become a popular option as woollen caskets take off in New Zealand.

Ten years ago when Polly and Ross McGuckin launched Natural Legacy woollen caskets in NZ the idea struggled to gain traction.

“We were seen as eco warriors, there wasn’t the interest then, I was flogging a dead horse, but now people are waking up, the public is listening and the table is turning,” Polly McGuckin said.

“The world is changing and funeral homes want to do the right thing by being eco-friendly and sustainable – it’s a lot easier to talk about wool now, every year we are seeing interest grow. . . .

Love of the land a Shaw thing:

Farm Environment Plans are not just about cows, grass and other farm management practices, says Ross Shaw – they are an integral part of any farmer’s connection to the land.

Shaw, along with wife Karla and parents Jim and Helen, have a deep and strongly held philosophy about the land. That dovetails with his recent enthusiastic embrace of a Farm Environment Plan (FEP) – one of the many compulsory (by 2025) calls on farmers’ time and wallets in order to improve nutrient management and reduce farming’s impact on water quality.

Jim and Helen Shaw bought the Reporoa property 36 years ago when it was 62 hectares and with 150 cows; it’s now 400ha, with many more cows and farmed, for the last 13 years, with Ross and Karla.

It is also the subject of a long-held family belief in multi-generational farming and what that means in terms of custodianship of the land: “We are like most New Zealand farmers – we want to be here for multi-generations,” Ross says.  “We were farming in our own right [before joining up with his parents] and our kids will be the third generation on this farm. . . 

Relief in Australia as welcome mat goes out for New Zealand shearers – Sally Murphy:

Australian farmers are breathing a sigh of relief as much needed New Zealand shearers will now be able to travel over for their busy spring season.

Covid-19 border closures have meant nearly 500 New Zealand shearers who normally travel to Australia to help out have been unable to.

Shearing Contractors Association of Australia secretary Jason Letchford said it’s been tough going with farmers paying almost double per sheep to have them shorn.

“It’s been really tough and there’s been months of delays. The standard rate over here for shearing a sheep is $A3.24 [$NZ3.51] but now in New South Wales which has about 40 percent of the country’s sheep it’s hard to get a shear for under $A3.72. . . 

China trade tactics didn’t hurt AUstralia as anticipated – Jamieson Murphy:

CHINA’S aggressive trade tariffs have cost the Australian economy millions of dollars, but the damage isn’t anywhere nearly as bad as originally anticipated, according to leading think tank economists.

Across the affected commodities, trade to China is down about 78 per cent. But the trade sanctions took place against the backdrop of COVID-19 which “significantly clouds the picture”, Lowy Institute lead economist Roland Rajah said. 

Nonetheless, one can parse the evidence to arrive at some conclusions and it would seem the impact has in fact been quite limited,” Mr Rajah said.

“Exports to China have predictably collapsed in the areas hit by sanctions, but most of this lost trade seems to have found other markets.”. . .


Yes Sir Humphrey

13/04/2021


Complicating tax won’t build houses

13/04/2021

Norman Gemmell writes that New Zealand’s new housing policy is really just a new tax package:

Economists like to talk about “optimal policy instruments” – essentially, policies that achieve their objectives more effectively or efficiently than the alternatives, and have minimal unintended consequences.

Judged by those criteria, the New Zealand government’s recently announced package of housing policy instruments is a long way from optimal. You might even call it a shambles. . . 

The aim of the policy is fine, but like so many of this government’s policies, it has several unintended consequences which will almost certainly make matters worse.

Arguably, the primary target of this policy package is stopping the inexorable upward march of (mainly Auckland) house prices. Failing to achieve that would simply put it among a long line of attempts by previous governments (National and Labour) over the past 20 years at least.

In all cases, the biggest problem has been insufficient political commitment to boosting housing supply. . . 

And in spite of its supposed focus on wellbeing, reducing poverty and solving the housing crisis, this government is not tackling the root causes of too few new builds.

All taxes cause “distortions”, mostly unintended, which need to be mitigated. Furthermore, policies that have conflicting objectives are “incoherent” and typically among the most distorting. This applies to the housing package’s removal of interest deductibility. . . 

That wasn’t, as the government claimed, closing a loophole. It was treating landlords differently from every other business which can claim interest as a tax deductible expense.

Making matters worse is extending the bright line test to 10 years.

It would be rare to find a liability based on transactions and timing among the principles of a good tax policy. But the bright-line test manages both – it incentivises delaying property sales to avoid the tax even when selling would otherwise be in the taxpayer’s best interest.

It was originally introduced in 2010 with a two-year threshold, without supporting evidence, supposedly to stop so-called speculators from flipping properties for quick profits. A 10-year threshold cannot be branded an anti-speculation policy, it is simply a back-door CGT.

As with most back-door policies, this CGT is inevitably less transparent and coherent than a policy designed to tackle the problem head-on would be. . .

It might, as taxes can, contribute more to the government’s coffers but it won’t build more houses.

If there are better alternatives, they do not lie in even more ad hoc fiddling with a coherent tax regime.

Instead, like the famous real estate mantra of “location, location, location”, the mantra for New Zealand housing policy should be “supply, supply, supply”. Specifically, supply in Auckland.

Successive governments have aimed policies nationwide when rapid house price inflation is almost exclusively urban and essentially an Auckland phenomenon.

Without policies that reform construction sector regulations and open up more land for urban housing, there is little prospect of Auckland house prices stabilising while current demand-driven trends persist. To make matters worse, the government’s first-home buyer schemes will merely raise demand without incentivising supply.

With too many objectives and the probability of numerous unintended consequences, the government’s housing policies risk being seriously incoherent.

What would help are policies which make it easier, less expensive, and less time consuming for new builds.

Complicating the tax system won’t do that but it will  increase rents thus making life even harder for the poor and those already struggling to save enough for a deposit to buy their own homes.


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