Doom..Dooom..DOOOOM !! [Archive]

Lizard

05-02-2012, 09:27 AM

Okay, a stab at some random thoughts (and plenty you can argue about :p)

In NZ:

Dairy production is up 10% this year - our biggest export - and prices have stabilised again and are still high against historical prices
With latest gas discoveries (Mangahewa, and Greymouth Petroleum's one) in Taranaki, plus other lower risk fracking of older known deposits in the area, NZ may finally be heading back in energy balance on the petroleum side for long enough to avoid running up trade deficits while waiting for useful electric vehicles and plentiful renewable energy (marine?)
Christchurch rebuild stimulus is coming closer - and the Cantabrian diaspora may help spread the benefit to other centres. Earthquake strengthening work will provide jobs in Wellington to replace the no longer required public servants.

House prices are still too high, along with private debt. Fortunately, Christchurch has given the govt an excuse to keep in deficit and give the private sector time to de-lever. Lets hope they don't get too keen on trying to impress the world with a surplus before they need to. The biggest risk to our government debt is the need for a bank bail-out (think SCF), so need to avoid defaults on private debts (e.g. mortgages) and preferably get some more capital into Kiwibank.

Interest rates are staying low, giving everyone more time to pay off that debt. The government is borrowing for 20+ years at rates we can all be happy with and which provides them with a good base for investing in the economy.

The World:
I think we are getting to the point where if Greece announced "no deal" tomorrow and defaulted on 20th March that the world might be positioned to cope. Definitely it seems the market is no longer concerned, as the news reports would suggest 50:50 odds on the outcome, yet markets shrugging it off. Without Greece, I think the rest of the Euro seems more committed to Angela Merkels vision of slowly drifting towards a United States of Europe, with both fiscal and political union. That solves Europes current deficit/surplus issues.
The other big deficit/surplus situation between China and the US is moderating. China's trade surplus is now about half what it was 3 years ago. Besides which, with most of their reserves in US Treasuries, the value of their international reserves is shrinking quite quickly... and will shrink even faster if they have to try to re-patriate some for any reason (e.g. to bail out the amazing local govt credit bubble). The US Economy is showing signs of picking up steam again. China is also looking more at investing in overseas assets rather than US Treasuries - don't be too scared by this... a quick look at their international investment position shows foreigners own far more of China than China does of foreign countries. I suspect the days of China currency pegging could be on the wane, which restores the natural balance.
We are well on the road to getting competitive sources of renewable energy from marine and solar. Mongolia is the new Australia of resources that we can dig up for another 100 years until we get smarter at recycling (and population pressure declines). Africa is preparing to become the last continent to join the developed world. The 1990's wave of privately funded biotech is finally maturing into real world cures that could lead to cure over long-term treatment in some diseases and eventual reductions in our health spending.
Now we just need scientists to identify another feedback loop in climate change that slows warming predictions going out another 100 years, so we can have enough time...

In the end, when it comes to the financial system, there are many self-fulfilling spirals of confidence. The market has chosen to turn confident in the face of some daunting odds. This could be the turning point.

Stranger_Danger

05-02-2012, 10:47 AM

Doom?

Markets are going up. The average person on the street in NZ seems to have 100% confidence the NZ Government owes them a living and will handle things if they need a hand.

Doom? I'd say there is too much optimism, frankly.

troyvdh

05-02-2012, 01:17 PM

Im with you stranger...way to much ebulliancy...mkts are up...no big surprise really...the "mkts"..have historically looked forward....

Stranger_Danger

05-02-2012, 03:22 PM

I am going to try and avoid this turning into a rant.

Greece, oil, debt, jobs, USA, subprime, China etc etc - all side issues, in my opinion.

The key issue facing the entire western world is this :

(a) A population that has been taught they are "entitled to" or "deserve" stuff that must ultimately be paid for by others.
(b) A constant game - from the bottom to the top - of trying to never be the "other".

Something for nothing. I deserve it. Why should I wait?

All the other issues feed into this
- too much leverage
- all the cheap stuff bought from China, the idea that you can deserve everything to be cheap and Chinese, the fact your son can't get an entry level manufacturing job, but those two things aren't related to each other, and the Government should DO SOMETHING! cough.
- the lady I used to see in her SUV driving on her own to put up signs for the local "Green Society" dinners she used to host about saving the planet.
- the global western game of either reducing your taxes, or increasing your benefits, or both, with the aim being to "get back my share" because "I paid my taxes" (even if you didn't.)

If you ever want to find out what time it really is, start doing the following in your personal lives. On as large a scale as possible, try talking about choices, taxes, welfare. Lead in with where we are, and that choices need to be made, actions taken etc etc.

After 4 years of what westerners think is austerity, after 4 years of stabilising us at the top of a 50 year credit boom (words chosen carefully), here is the bold prescription you're likely to get in return.

"Yes, things need to change. They should only pay Working For Families for up to 4 kids" (respondent has 4 kids)

"They need to get rid of the DPB! People shouldn't be paid to breed and do nothing!" (respondent is married, does not work, hubby works 30 hours and their WFF, which to them is a "tax credit", is more than the people they're referring to get on the DPB)

"Capitalism is out of control! Evil rich people!" (respondent works for a heavily unionised Government department, paid for by taxes, the only non-recycled portion of which came from capitalists making and selling things. They send their answer in on an iPhone. Their pay is up because, despite unionism making sense when there is a disparity of power between employer and employee, their union fights for their wage, everyone else involved, from the minister, to their manager, to the renumeration consultant, is paid for by the taxpayer. Who is the taxpayers union rep? Where is the REAL disparity of power?)

"The problem is poor, lazy people. People should stop pandering to them" (respondent owns 10 fast food joints located in poor communities. He only hires people that qualify for the JobOps subsidy, or people who wouldn't want a pay increase because it would impact their WFF. He offsets his income tax substantially with residential property investment, largely propped up by the accomodation supplement paid by the Government to the poor people he intentionally targets as tenants)

You guys get my drift.

IF Joe Average senses we're in a "new paradigm", his take on it is yes, change has to happen, and he's fully supportive, and by total utter luck, all the changes need to happen to OTHER people. He'll vote accordingly and live accordingly.

In other words, nothing has changed.

I don't want to be too bearish, because opportunities do abound, but we are a long, long way from finished, and there will be pitchforks before we get there.

Major von Tempsky

05-02-2012, 03:44 PM

Read Martin Hawes in today's Sunday Star Times on reasons to invest now (he's been holding off for 5 years).

Like Craic I'm busy investing more in Tel, ...6,000 more and I will have reached my target and start investing elsewhere.

Angela Merkel, who maybe not so much stupid but a prisoner of other forces in Germany, is not aiming for a USE (United States of Europe) but a Germany first.
And they can't lose the way they are going. Putting the pressure on Greece, Spain, Portugal, Ireland, Italy and constant crisis keeps the euro low.

A low euro vastly benefits German exports, growth, jobs, standard of living. Europe will go nowhere unless the Germany firsters in Germany are beaten. Which they won't be, even the Social Democrats are Germany firsters. All the other countries in Europe need to gang up to displace German economic hegemony.

Luckily, here in NZ, Helen Clark's long term, strategic aim is being thwarted.
That aim?

To make every significant section of NZ society at least partly dependant on Government benefits and hence voting Labour in perpetuity.

Stranger_Danger

05-02-2012, 03:53 PM

"Luckily, here in NZ, Helen Clark's long term, strategic aim is being thwarted.
That aim? To make every significant section of NZ society at least partly dependant on Government benefits"

No it isn't. John Key called Working For Families "Communism By Stealth" (quite correctly), and then he kept it.

All that does is provide proof of how effective the stealth was and introduce interesting questions about whether he is a Communist.

Lizard

05-02-2012, 10:14 PM

Now we just need scientists to identify another feedback loop in climate change that slows warming predictions going out another 100 years, so we can have enough time...

Seems even that is getting some more hopeful press these days:
http://www.dailymail.co.uk/sciencetech/article-2093264/Forget-global-warming--Cycle-25-need-worry-NASA-scientists-right-Thames-freezing-again.html

S.D., much as I admire your posts, I think you are being overly pessimistic. This sense of entitlement is not some new thing that suddenly arrived on the planet. There will always be those with a more needy outlook, those that choose to be victims and those that carry a chip on their shoulder. There will also be those that really do have higher needs, really are victims and really do have a right to be angry.

I would be interested to know if you will be choosing to accept a pension at 65 (assuming that choice is still available)? After all, New Zealand Superannuation payments represent nearly half of all the transfer payments and subsidies, with working for families about a quarter of the size. These are all dwarfed by the size of "Core Crown" operating expenses and D&A - probably much of which relates to healthcare. But perhaps you would prefer if everyone self-insured for health or received healthcare based on ability to pay as in the US?

My views are not particularly left wing. However, I do think that in exchange for being part of a civilised society and observing property rights, we are all entitled to some level of equality at birth. Having to over-save in case of a rainy-day is not particularly helpful to the global economy, since an overall equilibrium between saving and spending is required.

We can all see that transfer payments create a degree of moral hazard - it is an impossible balancing act to get right. Transfer money to relieve "Child Poverty" and it is quite likely to simply ensure that a higher number of children are born in impoverished homes. I guess the best we can do is to change sides of centre every 3-6 years and keep everyone just a bit nervous that their entitlements won't always be there.

Personally, I'm really impressed by most of the young people our schools are turning out today. I think most of them are keen to contribute and get ahead - and have a lot of fun along the way. Good on them. I look at the problems we've solved and the problems we're working on solving... and I think that ultimately we are getting to a better place and your pitchforks will be beaten into ploughshares. :)

winner69

06-02-2012, 07:19 AM

[QUOTE=Lizard;367021

I would be interested to know if you will be choosing to accept a pension at 65 (assuming that choice is still available)? [/QUOTE]

How dare you ask such a question Liz ..... In a few years time I expect to get the spending money to be put into the bank every two weeks .... after all it has been proomised to me all my life .... and I expect hospitals to look after me (for free) in emergencies as well

Why .... cause wenare what David McWilliams calls the Jagger Generation .... we benefited from free education and being on the right side of a property boom and all that sort of stuff ....accidental millionaires is his term .... and we do not want to give it back

Great article .... from an Irish perspective but relevant to NZ ... and written a few years ago so the gap between 'rich' and 'poor' is prob greater as well

Todays issues are all about generational changes

http://www.davidmcwilliams.ie/2007/09/10/the-generation-game

winner69

06-02-2012, 07:21 AM

So how we going to fix 'inequality' in Auckland

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10783692

craic

06-02-2012, 10:14 AM

I had the good fortune to grow up in abject poverty in an Irish village.the term "unemployment" was never used nor the word "equality". If one person in a household had work, any work, they were considered to be comfortable. Oddly enough, we often gave a penny or two to the "poor" and we were quite unaware of our own condition. I cringe when when I hear those terms used here in in relation to people who live in three or four bedroom State houses, have a state income, a television set and a car. My first act to change my fortunes was to scrape up the train fare to Belfast to join the British Army at seventeen. I sometimes had real trouble dealing with people in the Justice system who lived their whole lives, dependent on the "welfare" supplemented by crime and who came in to moan about something they were not getting - in some cases the family was on an income from the state that was higher than mine and I had to get out of bed and go to work every day.
The paper reported the other day that Walmart was having to pay up to $13 per hour in some northern states to get staff and not the $8 they usually paid in other areas. It seems that $8 is the minimum wage over there. I guess where I am trying to go is to the original Fred Dagg philosophy - "You don'y know how lucky you are, Boy, you don't know how lucky you are."

winner69

06-02-2012, 11:00 AM

Great post craic

janner

06-02-2012, 12:50 PM

It is practically " SNAP " Craic.. On the outskirts of a village. Newton Poppleford.. Devon. Royal Navy at 15.

Todays paper has the areas of poverty in colour .. They should also show the density of grog shops by area.

Money for grog .. Unable to afford a bag of rice.. Onion weed ( Gai Choy ) is free..

Sideshow Bob

06-02-2012, 01:45 PM

Todays paper has the areas of poverty in colour .. They should also show the density of grog shops by area.

Perhaps also include pokies.....

percy

06-02-2012, 02:26 PM

Hi Craic and Janner.
You confirm what an old guy told me, The Royal Navy thaught him;good discipline,good habits and good food lay the foundations for a successful life.

fungus pudding

06-02-2012, 05:59 PM

I think a major reason for the income inequality that we have here in New Zealand is that we are a low wage economy, particularly for those at the lower end of the skills range.

There's only one way to make us all equal - just make everyone poor.

neopoleII

06-02-2012, 06:19 PM

quote
""And the family home MUST be included to promote sensible asset allocation away from property!""

mizz clark and cullen pontificated about this in their first term....... lots of folks who paid off their mortgages instantly felt threatened that they would be taxed for doing the right thing........ saving and paying off their home..... what with the high interest rates in those times.

so ...... some..... alot, went and got a mortgage and invested that money in shares and finance companies to avoid the proposed clark/cullen housing tax.

few years later...... crash bash and ripped off.

so we have alot of hard working older folks totally broke and nothing to pass on.
and the pass on ees ..... their kids are already deep in credit debt.

end result....... a land of hard working folks asset striped by politics.

the family home has to be untouchable.

otherwise whats left??

nzx50 shares?, finance co's? oh yes!....... ostriches and llama's or maybe giant alpha alpha beanpods for bio diesel!

this nation has been taken to the cleaners and the only ones winning at the moment are the folks who cash in on the 20 billion of benefit payments given annually to those in "need"
4 million NZers ....... 20 billion social spending.

1 + 1 = ???

peat

06-02-2012, 06:29 PM

So how we going to fix 'inequality' in Auckland

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10783692

Craig might be broke
but at 51 hes bonking a 29 year old.
Cant have everything I guess ;).

Lizard

06-02-2012, 07:19 PM

this nation has been taken to the cleaners and the only ones winning at the moment are the folks who cash in on the 20 billion of benefit payments given annually to those in "need"4 million NZers ....... 20 billion social spending.

So I guess you're another one who won't be accepting NZ Super?

Don't agree with Belg on Capital Gains Tax. In a recession, you're likely to end up with high income earners claiming losses and getting CGT credits against their income tax. Just exaggerates the impact of asset bubbles. If you are going to tax assets, tax them as though they made the risk free rate less inflation.... since inflation erodes them anyway and anything higher than the risk-free rate is return for taking a risk (which might as easily be a loss next time). You'll probably be disappointed with the tax take from that though. However, I reckon it's a bit of a myth that the rich are making heaps off assets. It's pretty hard to be rich and spend money without cashflow - which is taxed anyway. And if you're rich and not spending money... well probably not feeling very rich!

Stop looking for new taxes.

If people are given choices, then we can't stop some people choosing to create their own misery. If we want to limit their ability to do so, we will need to remove some freedoms. In my view, I'd rather we just made sure that there were always more opportunities provided to then make "better" choices in the future.

Since choosing a route into the work force is one of the key financial choices, my first move towards engaging people in society would start with more active careers guidance counsellors in most schools. I just asked 3 students from years 11-13 at our local college who their careers guidance counsellor was and none of them knew!!! I have asked a few students from different colleges who are struggling to get a job or considering what they intend to do when leaving school as to whether they had spoken to their careers department - none of them had. Too much room for kids to slip through the gaps and think nobody cares and that getting a job is too hard (especially if their parents don't take much interest)! Gateway is a great programme, but it only catches a few.

GTM 3442

06-02-2012, 08:04 PM

In the agricultural society, people live by producing food, for consumption or sale. Come industrialisation, people live by producing things. Once an economy passes a certain level of complexity, a literate class arises to keep track of the things and food being produced, the sales, and the money.

Technology improves, and you need fewer people to produce the food (mechanised farming), fewer people to produce the things (automation), and fewer people to keep the records and track the money (IT).

We are now commencing a transition from a post-industrial society to a post-employment society. It will not be pretty. Neither was the agrarian revoultion (millions swept from the land by enclosure, mechanisation), nor was the industrial revolution with it's urban misery.

Simply put, there are more people than there are jobs.

The challenge is to move to the new post-employment society with as little social upheaval (riots, wars, famines) as can be managed.

It will not be pretty.

Oh - and there's probably not enough money in the world to repay all the debt in the world, either !

elZorro

06-02-2012, 10:34 PM

Quite a lot of work going into this thread - I hope the politicians are reading it - we're trying to do their job for them. I'm quite optimistic about NZ, but then I don't travel too far.

GTM: we need to be niche manufacturers over here, we have a relatively well-equipped and well-paid labour force compared to many countries, so the end-user price for our output needs to be high. That will provide the big range of jobs we need, to keep everybody paying taxes and feeding the "system". CGT taxes and R&D tax credits could combine to provide small incentives for investors to move in the right direction, for the good of everybody. Add in some cheaper carbon-neutral energy from some (non-forage) biofuels, wave or lower cost solar energy in future, and we'll be well on the way to prosperity and easier times for all. At the moment we're spending too much of our income on energy needs, to make any headway.

Stranger_Danger

07-02-2012, 04:14 AM

I would be interested to know if you will be choosing to accept a pension at 65 (assuming that choice is still available)?

Personally, I'm really impressed by most of the young people our schools are turning out today. I think most of them are keen to contribute and get ahead - and have a lot of fun along the way. Good on them. I look at the problems we've solved and the problems we're working on solving... and I think that ultimately we are getting to a better place and your pitchforks will be beaten into ploughshares. :)

Liz,

No, I won't be accepting a pension at 65, but, I don't think this fact proves my argument, or anyone elses. I'm just an oddball, and I get that - to prove your point, I'm quite sure most people advancing a right wing argument will go right ahead and take a pension.

I feel really strongly about this stuff (Imagine the guy wandering round a public hospital trying to find out actual cost so he can pay it. Imagine the guy a board of directors would fire for turning down Government subsidies despite being "entitled".) and am in the position where I can be fairly confident I'll either be dead or not needing the pension at 65.

More importantly, I'd like to think I wouldn't take it even if I did "need" (the most overused and inaccurate word in the western world) it, and my life choices to date have tended to back up that I'm not fooling myself on that one. I'd take the blanket man lifestyle over relying on money forcibly taken from others any day.

I agree with you that the sense of entitlement is not a new thing. But I suspect there wasn't a great deal of entitlement coming out of World War 2.

However, like a very long credit boom, a sense of entitlement boom takes a long time to build up, and what you see at the beginning isn't the same as what you see at the end.

Just like a mortgage written at the start of a boom doesn't resemble a mortgage (except in theory!) written at the end of a boom, at the very beginning of an entitlements boom, the entitlement is probably a polite hope that a bomb won't drop on your head and the end of rations will be a permanent thing.

Towards the end of the entitlements boom, I would argue that the idea that your two school teacher parents can lower their income by owing rental properties, allowing you, despite not being able to spell or add up your benefits without a calculator, to accept a student allowance and loan to get degrees in womens studies and political science, interrupted only by getting knocked up by a guy in a pub, taking the DPB and accomodation supplement whilst living with the parents, then being quite sure you're worth $120k a year once finishing your studies finally at about age 32.....yeah..I'd argue thats a somewhat different sense of entitlement.

The one thing we (sort of) agree on, is the young people, but I'd strongly argue that it doesn't have much to do with how the schools are turning them out!

I think the schools are doing a shocking job, but they're only doing what parents want, to the degree that the parents care at all.

I remember when I was at school (and its got worse since then) and the school had a class along the lines of "how to prepare nutritious meals on a low budget". I asked the teacher which room the "how to become a millionaire and have meals made for you?" class was being held in, and they just laughed. I was serious.

Most of the young people I talk to and work with (and I make a point of trying to spend way more time with young people than oldies, who I regard as largely doomed) come out of school unprepared and with a chronic sense of entitlement. They can't spell, can't think and are frankly insulted if you suggest they do either.

However...

They can turn on a dime. I know young people that came into the 2007 -20?? period without a clue and with massive debts, and they've had a massive wakeup call. There will always be some no hopers, but I personally know many who have just stopped, gone "this is bull****", worked their butts off, got debt free, then gone from there. They can turn on a dime when they want to, and are shocked, truly shocked, to learn that hard work, self sacrifice, creating genuine REAL self worth, based on actually doing things, can be really really fun. Sometimes they almost seem angry that they've got through 20 years without anyone showing them that?

I currently know a girl in her early 20's who is pretty much teaching herself to spell, read and write properly, after work each day. In hindsight, she can't believe people - parents, teachers etc - just validated her based on looks and personality, literally let her be sociable and pleasant whilst learning nothing, with all sides thinking that would somehow prepare her for the real world. More importantly, she owns her share of these failings, and she is turning herself into a potential winner.

So yes, the young are our future and I do have some confidence about our future in their hands. I do suspect, however, it won't be pretty in the middle. I'd certainly be cautious in a few years time handing over that super gold card to get to Waiheke Island in full view of a few Gen Y folks! As it becomes clear that everyone knew SOMEONE would have to pay down debts and the costs and changes this brings (Buffett's "Squanderville Vs Thriftsville" is the simplest explanation) and that THEY have been nominated as the "someone", they're gonna be pretty annoyed.

Pelican

07-02-2012, 04:46 AM

Stranger_Danger

07-02-2012, 06:01 AM

"But most of all we must find some new ways to generate more wealth sustainably. Ideas anyone?"

Sure - Incentives. It is all about incentives. We need to redefine how people look at the choices, and we need to encourage people to look after themselves more. We need a lot less carrot and a lot more stick, in this regard.

Let me give you one example : saving for retirement.

We have this scheme called KiwiSaver. When it came in, the talk was needing people to save for their retirement, to rely less on the Government and to get away from welfare dependance. All sounds good.

So how did it work?

They launched KiwiSaver. Initially, the carrot was free money from the Government - there was no employer contribution at the start.

Then, they snuck in compulsory employer contributions - sneaky.

Even more sneaky, they had an employer tax credit - this meant that most employers weren't actually contributing. The idea was that UP TO $20 per week of the employers contribution was paid for by the Government. In reality, it meant many employers just made their contribution $20, to pass through the Government money.

The Government should have been honest and had true employer contributions at the start. Instead, they were sneaky and did it by stealth. Then employers were sneaky and didn't think too much about the future - they just passed through the maximum that the Government would pay for.

At this point we had the KiwiSaver sweet spot - the employee contributed, got lots of free money from the Government, then also got free money from their employer, that actually came from the Government.

Fast forward. The Government killed the employer tax credit. They changed the contribution rates. From 1 April, they're making the employer contribution taxable.

So where are we now?

Without the Government money, KiwiSaver is a lot less attractive because, well, now, you save mainly your own money, get a return, and go from there. Shockingly, thats actually how the real world works, but people are destined to be let down, because they've all been sucked in by fairy tales and other peoples money.

What was supposed to be about saving and self reliance became yet another benefit. Get your Government job. Get your WFF, Get your KiwiSaver. Sorted - no need to think.

Even worse, go talk to a 20 year old about KiwiSaver. They don't even think its a retirement savings scheme! The main "pull", which many providers pushed to sign people up - is the ability to take the money out and use it as a home deposit. Property. The national obsession. Back to that old chestnut!

(Lets pause for a quick commercial. Folks, subprime IS coming to New Zealand in a couple years, just in time to mop up the baby boomers investment properties. Our subprime? The KiwiSaver home buyers. You heard it here first.)

Someone who has not been able to save any money of their own is able to use their RETIREMENT SAVINGS as a deposit to buy a house, the majority of the money coming from the Government and employers, the saving only occuring because it was forced.

Even worse, it is rational (in a sick way), for the person to then go on a contributions holiday, ceasing all future retirement savings, the contributions holiday meaning extra cash in the hand, which is basically the only way such a person will be able to service a mortgage, and with low interest rates, its actually quite do-able (until they rise. talk about a "teaser rate").

Now, lets go back to the start....

This was supposed to be a retirement savings scheme, because incentives are needed!

See how all this Government money goes round in a big circle? See how the whole thing has been perverted to be the opposite of what was intended? See how, if the incentive is really to just take what one can (because "I deserve it") you don't actually end up saving for retirement at all?

I've picked KiwiSaver as one example, but I could have picked anything. The minute Government money is thrown in to "create incentives", the water is muddied and people just take the easy money.

We need to create the right incentives - its that simple.

So, what are the incentives for saving for retirement?

Real simple.

When you are old, you'll need money.

If you save it, you'll have money.

If you don't, you won't have money, and you'll likely starve.

Starving really sucks.

Therefore, we'll teach you saving, try and promote economic growth, lower taxes and educate you.

With that help, its your call. But we'd recommend saving. Because starving sucks.

There is your incentive.

The incentive then needs to be honestly and consistently communicated. Year after year.

Politicans need to resist the urge to deviate from message and give out lollies to get votes (yeah, theres the hard part. sigh).

elZorro

07-02-2012, 07:22 AM

This 'We need hi tech industry in NZ movement' has so far as I understand it blossomed since a speech made by Sir Paul Callaghan at the strategy NZ forum as shown here http://www.youtube.com/watch?v=OhCAyIllnXY . Every Kiwi should hear his speech.

I broadly agree with the idea but the reality is that we have a neo-liberal government which believes in cutting tax, getting rid of regulation, more mining and most crucially; closing our eyes tightly and crossing our fingers while hoping for economic growth. They wont help tech companies pay for R and D, they don't believe it is their job and it isn't part of their vision for our future.

While the arguments for National's current policies do sound tempting (I work extremely hard and cant help but resent the fact that others do not) the truth is that National has a very bad economic track record compared with Labour. When John Key came to lecture my Uni class last year he said he was optimistic about our future on the basis of our ability to ride Asia's coat tails and sell them our resources. This sounds like nostalgia for the 'Golden Weather' of the fifties when we sold meat to Britain and had the highest standard of living in the world. Too bad John that times have clearly changed.

Evidently more creative and constructive thinking is required at the top and yeah, maybe a bit more hard work at the bottom.

But most of all we must find some new ways to generate more wealth sustainably. Ideas anyone?

Hi Pelican, yes, I've seen that video, it's remarkable. Hi-tech businesses can be located near staff, usually have a very small footprint (compared to the large land area used by farming, for example) and yet create a variety of well-paid jobs. We should not attempt to make high volume consumer products here in NZ, however. That is doomed to competition from overseas. National immediately removed the R&D tax credits that Labour had carefully put in place to give exactly this sector more recognition among investors and entrepeneurs. They refused to give a policy that has worked well overseas a chance, and confirmed that they are a stick-in-the-mud lot who will not ultimately help NZ forward.

fungus pudding

07-02-2012, 08:03 AM

Liz,

No, I won't be accepting a pension at 65, but, I don't think this fact proves my argument, or anyone elses. I'm just an oddball, and I get that - to prove your point, I'm quite sure most people advancing a right wing argument will go right ahead and take a pension.

Surely if you don't want the pension you should still take it and give it to some needy accquaintance, or charity. That is unless you feel the govt. will do better with it than you.

Pelican

07-02-2012, 08:29 AM

In regards to the political side of this discussion (sharetrader really bucks the trend, most of the internet just hates rather than discusses), in studying NZ voter behaviour I came to the conclusion that a huge swathe of the voting public voted for Nat because they perceive it to be the realistic, shake-em up party which we need in these times of Doom-Doom-Dooooom. I dispute this and firmly believe that Labour for all their stomach turning antics are prepared to be proactive in their approach to our current problems and would provide technocratic government.

The stick which Stranger Danger mentions is probably part of the solution in moving our economy away from services and mass consumption driven by credit to productive manufacturing (I say follow the Germans but go higher tech, higher value) and savings/investment.

Besides R and D tax credits which seem like a good start how about: -more technical education with class sizes directly tailored to target shortages in skill areas
-like in Germany circa 2000, introduce modest employment conditional subsidies (did he really say subsidies?) for manufacturers to give them some breathing room and keep smart workers here
-do something to break our addiction to property investment and encourage more investment in equities. Like CGT but make it sound sexy and not before an election ffs

Stranger_Danger

07-02-2012, 08:35 AM

Surely if you don't want the pension you should still take it and give it to some needy accquaintance, or charity. That is unless you feel the govt. will do better with it than you.

I don't think the Government can do better with it than me, but that side of things is another argument.

Unless I wished to be a tax minimiser or avoider (I don't), then all I can do is maximise my income and pay the appropriate taxes. Thats what I do.

On the other side (what I try and "get back") I have full control, so I don't attempt to "get back" anything.

Do I wish I could have things "my way" on the other side, ie, do some deal where I say "look guys, I want to give less, but take nothing"?

Absolutely! I'd love it. But that isn't the deal, so while I choose to stay here and remain a taxpayer (which is a choice in itself, I could always leave) I just pay what I owe, but, follow my personal beliefs when it comes to the other stuff regardless of whether I'm "entitled".

The "give it to charity" argument is the same one John Key uses when accepting his PM's salary despite being worth 50mil plus.

I'm clearly a simpleton, because I always thought the point of getting 50mil plus was so you didn't need to take a salary in the first place.

Lizard

07-02-2012, 08:36 AM

Towards the end of the entitlements boom, I would argue that the idea that your two school teacher parents can lower their income by owing rental properties, allowing you, despite not being able to spell or add up your benefits without a calculator, to accept a student allowance and loan to get degrees in womens studies and political science, interrupted only by getting knocked up by a guy in a pub, taking the DPB and accomodation supplement whilst living with the parents, then being quite sure you're worth $120k a year once finishing your studies finally at about age 32.....yeah..I'd argue thats a somewhat different sense of entitlement.

The one thing we (sort of) agree on, is the young people, but I'd strongly argue that it doesn't have much to do with how the schools are turning them out!

Actually, S-D, we are probably close to agreement on many things. I often take umbrage at exactly the same things you do - like financial incentives having been all back to front and penalising the "right" decisions while rewarding the "wrong" decisions. I also admire your stance on the pension and hospital bills - although I swing in the balance as to my views - I think there is a great deal of economic efficiency in some central insurance as compared with everyone needing to save for "worst case".

Where we differ most is that I take a much more optimistic view on how easily these things might change (and what society has already achieved) - though it does seem to need a bit of financial strife to get some recognition for problems. Holding up the post-war years as an example of some kind of virtue makes no sense to me from the versions I heard in familial recounts.

Blendy

07-02-2012, 09:47 AM

Stranger Danger - really liked your post. Thanks for the time you put into it! And everyone else in the thread too - it's been really interesting and intelligent reading; much better than the 'news' paper.

skid

07-02-2012, 10:25 AM

fungus pudding

07-02-2012, 11:46 AM

The "give it to charity" argument is the same one John Key uses when accepting his PM's salary despite being worth 50mil plus.

I'm clearly a simpleton, because I always thought the point of getting 50mil plus was so you didn't need to take a salary in the first place.

So, having acquired a degree of wealth should an individual stop charging rent for his buildings, stop accepting dividends on his shares, lend his money free of interest - or should the free bit be limited to just his labour?

Hoop

07-02-2012, 11:55 AM

Hang on Blendy-We aint finished yet.
Alot of incentives for property investment have been removed[depreciation etc] and alot of investers have sold up.
We now have a chronic shortage of rental properties in Auckland.
Spare a thought for those poor souls who are looking for accomodation.
Rental property investment is not the ''easy ride'' some allude to.

No not an easy ride..I was a landlord with flats and houses (mostly flats) for 30 years...was!! Now waiting for the 7 cycle to spin around. Rentals still looking unattractive in Hamilton..Low yield rate no capital appreciation (slight Capital Loss since 2009), Interest rates at the bottom and can only go up from here, Lots of empties but the Students are starting to come back atm to boost demand and hopefully fill them up, little rental increases in the past couple of years most rents are considered too high by the renters and they are able to pick and choose.

Skid...Auckland is in a bubble atm...NZ has negative permanent migration atm...Waikato/Bay of Plenty ditto...however its a big positve in Auckland as most arrivals stay on in Auckland to live.
http://www.stuff.co.nz/waikato-times/news/6373365/Waikato-folks-head-for-the-exits
From my past experience most of my vacanies occurred over summer months (university stops) and during negative migration periods. Not sure about "investors selling up" argument because someone have to own those properties and you say there's a rental housing shortage..right?

In my view the property cycle still has some time to spin around until I'm tempted back into the Hamilton rental market

Stranger_Danger

07-02-2012, 12:04 PM

So, having acquired a degree of wealth should an individual stop charging rent for his buildings, stop accepting dividends on his shares, lend his money free of interest - or should the free bit be limited to just his labour?

Not at all, if he wishes to continue capitalistic endeavour for fun (something I can very much relate to) he should keep accepting a return on both his labour and his capital. Thats what capitalism is. Thats why they don't call it public service.

If instead he decides to do something instead of capitalism, such as charity work or politics or sport or the arts, a cool thing about having 50mil is you don't need to take the money, even if you're entitled to it.

I understand that this is a personal choice and I don't think any less of Key for doing so.

However, for me - especially as someone who proposes less benefits, less handouts and less dodges, for other people poorer than myself - I would be extremely uncomfortable taking a salary I don't need from those poorer people, in order to have a job (of PM) where I then told them to suck it up and think hard before accepting taxpayers money.

janner

07-02-2012, 07:36 PM

I must thank all of you .. It has been a very wide ranging discussion .

The main theme coming out is that there are opportunities. Doom and Gloom or not..

CGT and Taxes appear to be on most minds..

My stance.. NO INCOME TAX.. Very low company tax .. With few if any write offs
As an example.. When was the depreciation on cars set ?? You were very lucky if your car made it to 100,000 miles.
A million kilometres is very common these days.. Especially on trucks..

Remember those weekends under your or your mates car bonnet doing Big Ends or valve jobs ??
Still we have accountants saying .. Change the car ..( for tax purposes only.. nothing wrong with the car )..

CGT ??.. An envy tax..

A fairer tax is a consumption tax .. call it GST VAT Sales Tax you spend.. pay tax.. Maybe a Tobin tax ( that will have the FOREX guys in a whirl ). but it should help stabilize the dollar.

That will give incentive to people to earn more..

Having been bombed out of Catford/Depford.. Going to live with grandfather ( Farm labourer ) who had very little and we had nothing..

Percy.
Hi Craic and Janner.
You confirm what an old guy told me, The Royal Navy thaught him;good discipline,good habits and good food lay the foundations for a successful life.

I think Craic would agree with me.. Army would not be much different..

Royal Navy Boys Training ship was hell on earth.. Nothing had changed except the equipment since Lord Nelsons day..
We grew up very quickly indeed !!.
That was until PC came in about 1956.
To brutal was the cry.. Cold showers.. Greasy cold fish.. ( Yummy do you want that ? ).. a stonaky ( 2/3 feet of canvas sewn into a tube ... filled with sand ). Used frequently..
We will teach you to swim was the greeting for those that could not.. You will be sent home after 3 months if you can not swim ..
And they were sent home.. IN A WOODEN BOX.. ( documented ).. We could all swim like fishes..

You may find an ex HMS GANGES or HMS ST. VINCENT Boy Seaman prior to 1956.. ( PC Change ).. Still around..

They may shudder at the rememberance.. NONE will say they ever regretted having gone through it..

Discipline !!!!.. Percy.. Is that is what is missing today ??

Maybe the sons of bankers should be first in line :-))

Again .. thank you all for the response..

Lizard/Belg Hoop S.D. and to many to mention..

Onward and Upward !!

I'm with Craic when he quotes " you don't know how lucky you are "..

fungus pudding

07-02-2012, 08:26 PM

janner

07-02-2012, 08:32 PM

How often do companies change their cars ?? mostly Leased these days..

For tax reasons only.. even if it is the rentals companies tax reason.. to keep artificial costs down..

janner

07-02-2012, 08:34 PM

Because they want to is the operative word FP.. It is tax deductable.. No other reason.. EGO..

janner

07-02-2012, 08:37 PM

If the tax on SPENDING is low.. Now reason to change a very good car.. ONLY EGO..
Pay for it !!..

janner

07-02-2012, 08:39 PM

No reason :-((

fungus pudding

07-02-2012, 09:07 PM

Because they want to is the operative word FP.. It is tax deductable.. No other reason.. EGO..

I'll go along with 'because they want to'.

I'll even agree with ego.

But I very much doubt that any accountant would advise a client to buy a new car simply because of tax. Only a half-wit wastes money to save a portion in tax.

Stranger_Danger

07-02-2012, 09:15 PM

Confused by the whole car thing. Don't have one.

I just catch the bus and get half an hours reading done for free.

NZ'ers wouldn't know true frugality if it bit them on the bum.

janner

07-02-2012, 09:20 PM

Right on SD.

FP.. Cars are a TAX right of.. For companies .. That is why most today are LEASED.. Tax right off..

Bigger car.. Bigger Tax right off.. Bigger EGO !!

janner

07-02-2012, 09:24 PM

As the wife Darns the socks..

fungus pudding

07-02-2012, 11:24 PM

Right on SD.

FP.. Cars are a TAX right of.. For companies .. That is why most today are LEASED.. Tax right off..

Bigger car.. Bigger Tax right off.. Bigger EGO !!

I do realise vehicle depreciation is deductible for businesses, companies or not; I'm not sure why you think most vehicles are leased although certainly many are. I still want to know who is or are the accountant or accountants who advise clients to buy vehicles to save tax?

Jay

08-02-2012, 08:20 AM

I do realise vehicle depreciation is deductible for businesses, companies or not; I'm not sure why you think most vehicles are leased although certainly many are. I still want to know who is or are the accountant or accountants who advise clients to buy vehicles to save tax?

Tend to agree - lets spend 40K on a car to get a tax deduction of $10K - type of thing - ( effectively "losing" $30K in capital that you did not need to spend) - it happens - not sure if the accountant would necessarily advised to but the "businessman/woman" thinks its a good idea and overrides him/her.
Then there's the opposite - I don't want to earn too much as I will have to pay more tax - not realising that in general the more tax you pay the more you must be earning. - My mother thought like that to a degree with the small amount of investments they had - nevermind I treid to say that at 3% you get $3.00 less tax of say $1 = $2 net , however at 5% you get $5 less tax of aprox $1.65 and you have $3.35 net

macduffy

08-02-2012, 09:04 AM

I don't necessarily subscribe to the "world is doomed" school but this sort of contradictory comment on Bloomberg this morning shows how difficult it will be to get the world economy back on track.

“We need to see some real austerity from Greece,‘‘Hank Smith, chief investment officer at Haverford Trust Co. in Radnor, Pennsylvania, said in a telephone interview. His firm manages about $6.5 billion. ‘‘When we see that, we will have more confidence that Europe is serious about growth. I have confidence that we’ll get some sort of resolution that allows for additional funding.’’

:confused:

neopoleII

08-02-2012, 07:36 PM

talking about greece.............
as long as they keep paying benefits to folks that like matches, whips and kiddies along with all the real needy folks there....... the kiddie fiddilers and whipsters will bring down greece, the euro and the world.
who needs oil hungry presidents when the greeks look after their own so well.

sort of like mizz clark and her views of looking after those that choose not to work or feel they are incapacitated.

""The Labor Ministry said categories added to the expanded list that also includes pyromaniacs, compulsive gamblers, fetishists and sadomasochists were included for purposes of medical assessment and used as a gauge for allocating financial assistance.""

http://www.nzherald.co.nz/world/news/article.cfm?c_id=2&objectid=10777746

politics and socialism will bring the world down....... look at NZ labour and its policies.

a very large proportion of our next generation are raised for the purpose of generating an income for the "mothers" or a raised in solo families because of violent fathers.... so the mothers say.
and with the anti smacking laws and no discipline laws in schools and no legal consequences for child offenders ........ what will become of this land in 20 years time?

and then there are the hard working folks who seem to be stuck in the middle paying endless taxes and user pay direct taxes, low pay rises etc.
the benies seem to be almost as well off as the middle class workers.

and some folks want to tax their homes as well.

Stranger_Danger

08-02-2012, 07:44 PM

The ones "stuck in the middle" are not paying endless taxes.

Due to Working For Families, many of them are no longer net taxpayers.

neopoleII

09-02-2012, 11:46 AM

there happens to be quite a few (most) that have no kids or the kids have flown the coup.
like your average 45 year old tradesman on $26hr.
or the horde of fathers no longer living at home... for what ever reason.
or the average woman getting a career and waiting till 28 to have kids
NZ has a rate of 2.1 children per woman.
trouble is that rate is spread over some women having around 5 kids and some having none with a few having one.

reading the newspapers most can figure out who is collecting money and who is paying tax.

i guess in an ideal world, being able to have children should be a privilage, and being able to afford them must be a prerequisit.

instead we have working for families that gives financial aid to families up to the $100k bracket.

no wonder we have to sell assets.

Halebop

09-02-2012, 01:27 PM

instead we have working for families that gives financial aid to families up to the $100k bracket.

If you consider that Working for Families encourages a higher birth rate by providing a financial incentive (or at least mitigating the financial disincentive of not being fully engaged in paid work) then I'd prefer to have more $100k households breeding than $0k or $30k ones. I see absolutely no problem with enouraging a higher earning household to breed. At the end of that cycle those kids are more likely to be equiped with the same attitudes, tools and education that produces $100k households than $30k ones. The most inequitable element is that it is a progressive system based on income. It would probably be fairer and easier to pay a flat sum per child or have the progressive element represented in the count of children (i.e. $6k 1st child, $4k 2nd Child, $2k 3rd child)

pietrade

09-02-2012, 04:35 PM

politics and socialism will bring the world down....... look at NZ labour and its policies.

Of course the great capitalist structures of Wall St and the sub-prime mortgage rorts by the banks, had nothing to do with the current problem.??!! That and the Federal Reserve losing it's monopoly of having all international oil trades in US dollars. Maybe we should really trust 'the market', sell ALL of our state assets and land to the highest bidder . Oh yeah............ isn't that what we've already started doing ... again??

Major von Tempsky

09-02-2012, 06:13 PM

Buses suck. The last 2 I tried to catch, 1 never turned up and the other was 25 mins late.
So its either car or cycle or walk for me. I haven't caught a bus for years. Stamp them out.

neopoleII

09-02-2012, 07:43 PM

to halebop,....well said and i agree with your reasoning.
to pietrade..... the sub prime rorts were allowed to happen because of political policies..... the policies that allowed this to happen have been changed by politics.
the fed and it policies is overseen by political mandate as well.

im no expert on overseas matters, but i can say that for NZ the reserve bank does its job using the tools given it by government which is ultimately run by politicians.
since the finance failures and banking/credit blowouts in NZ, politicians have changed the rules.

so saying that the capitalist structure is pulling down society is wrong.
the system that governs the capitalist structure is failing, and that is the politics.
there is the left right and in between, and politicians of those flavours change the rules when they get power.
some go too far some not enough and some have no clue.
and then the citizens and corporates work inside those rules.
and lots will take advantage of what they can.

from uneducated 16 year old girls popping out babies as fast as they can for benefit payments
to mega banking institutions twisting and stretching banking laws to create shareholder wealth.

politicians and their law making and law enforcing/changing ability (granted to them by the voters)
is what controls the balances in our society.

look at what is going on around the world..... pick a country and look at its policies.
greece.... heavy socialism. germany hard working, america world police, Zimbabwe..... well.
china, factory ants.
all these countries have different policies, and their futures are all different.... all based on their political systems and those who are the politicians.

in this country..... muldoon to clark
america bush to obama
north korea.... well

and then the worst thing of all.........

most folks dont know what their voting for.

time for me to relax and water my vege patch.

i do like reading about the varied views and comments. i guess this is what makes a society a society...... good stuff

skid

10-02-2012, 10:03 AM

so saying that the capitalist structure is pulling down society is wrong.
the system that governs the capitalist structure is failing, and that is the politics.
there is the left right and in between, and politicians of those flavours change the rules when they get power.
some go too far some not enough and some have no clue.
and then the citizens and corporates work inside those rules.
and lots will take advantage of what they can.

With respect Neopole ,I think you have got that one wrong.[in the big time places like USA]
You are putting the politicians at the top of the process.
i think it is the big money that is at the top.
The politicians merely carry out their wishes in return for the gigantic funding they have received to get them there in the first place.
The US political system works around a system of lobbying.
If you dig a bit it becomes obvious that the big economic powers pull the strings

neopoleII

10-02-2012, 12:15 PM

If you dig a bit it becomes obvious that the big economic powers pull the strings.

you dont really have to dig that deep to see that..... and that is part of my point.
the politicians still make the rules and laws, the fact that big business has a hand in it shows the caliber of the politician and those that vote for them.
not untill a system wobbles or crashes and the citizens get angry do politicians get serious about an issue.
having said that, a politician is just a man or woman and can do only so much.

every now and then we see politicians cutting the strings from the lobby groups... it should be done more often.

and the more i think about this stuff the more i realise that nothing is really going to change.

pietrade

10-02-2012, 02:19 PM

If you dig a bit it becomes obvious that the big economic powers pull the strings....................................
the more i think about this stuff the more i realise that nothing is really going to change.

As a good friend puts it, "The more I learn of what people do to each other, the more I like my garden".

BIG MONEY seems to have no morals and ethics seem equally scarce.

neopoleII

10-02-2012, 07:03 PM

totally agree with that pietrade

craic

10-02-2012, 11:35 PM

It used to be , in my day"The more i see of people, the more I like my dog"

skid

11-02-2012, 08:47 AM

The people involved in big countries and big economic powers do seem to be worse in that respect.
In many ways we are fortunate to be here in little ole NZ.
Change is a bit more doable----I hope

fungus pudding

11-02-2012, 09:21 AM

As a good friend puts it, "The more I learn of what people do to each other, the more I like my garden".

BIG MONEY seems to have no morals and ethics seem equally scarce.

Money of course cannot have morals; cliches like that sound good, but are meaningless, and simply show prejudice. If you are saying people with money lack morals and ethics - well that's such a huge generalisation that it is also meaningless. Some no doubt do, but I can assure you that there are plenty without money who also lack morals.

pietrade

13-02-2012, 09:42 AM

elZorro

13-02-2012, 10:05 AM

The total lack of ethics exhibited by the BIG MONEY to which I refer, can be gleaned from the recent expose of the Tobacco company's
secret documents and how cigarettes became the most destructive drug on earth -

http://www.radionz.co.nz/national/programmes/sundays

and, for Monsanto's, ongoing, little 'games' see -

http://topdocumentaryfilms.com/the-world-according-to-monsanto/

Businesses of this sort are the REAL "terrorists".

I think the first link is faulty PT. But I get your drift. I think big business is good at looking after itself all right. Have a look at this info on British Virgin Island (BVI) companies, known as a tax haven. Too easy, if you want to avoid taxes in your home country. It makes me look sideways at any outfit registered there.

http://www.bvi-corporations-ibc-incorporate-in-bvi.offshore-companies.co.uk/

pietrade

13-02-2012, 11:18 AM

["I think the first link is faulty"}

That's weird. I just copied/pasted the link but it's to Chris Laidlaw's "Sunday" programme on Nation Radio Sunday 12th Feb. Head-shaking stuff....

skid

13-02-2012, 12:59 PM

This greek thing is starting to look a bit serious.

winner69

13-02-2012, 01:53 PM

This greek thing is starting to look a bit serious.

... will NZ be like Greece in 5 - 10 years - maybe

Or will NZ oldies just roll over and the govt take their pensions away without a fight

fungus pudding

13-02-2012, 04:34 PM

... will NZ be like Greece in 5 - 10 years - maybe

Or will NZ oldies just roll over and the govt take their pensions away without a fight

Nope! We're nowhere near like Greece.

BIRMANBOY

13-02-2012, 09:22 PM

Are you sure this thread wasnt started by Leonard Cohen? Come on chaps sing along now..."Always look on the bright side of life..da dum dadah do dee dee dee dee ". I'm losing hair just reading your posts!! All you can do is control what you do why bother angsting on about the hundreds of problems you cannot even begin to contol let alone understand with any degree of comprehension. OMMMMMMM.

Pumice

13-02-2012, 09:44 PM

Nope! We're nowhere near like Greece.

Do you think Gen X & Y will stump up with the required tax dollars to cover the huge imminent pension and health bills?
Or will they head to Aus? (Like myself)

Halebop

13-02-2012, 10:44 PM

Do you think Gen X & Y will stump up with the required tax dollars to cover the huge imminent pension and health bills?
Or will they head to Aus? (Like myself)

Because Australia doesn't have the same demographic pressures?

Pumice

13-02-2012, 11:09 PM

Because Australia doesn't have the same demographic pressures?

Not financially no. They have had super schemes since way back, so most will pay for their own retirement (Which is tax deductible) it is also means tested. Everyone has health insurance (Which is tax deductible) so it doesn’t cost the country as much as a full on Acc/free health care system does in NZ.

From my perspective, I just don’t think NZ can afford free health care and non means tested super based on future generations earnings we are slowly transitioning into a self-funded/user pays society.

If Nz could promise future generations would not have to take the burden of past generations that would be nice.
I know my kids and their kids won’t be paying for me, I’d be extremely embarrassed if they did.

fungus pudding

13-02-2012, 11:24 PM

Not financially no. They have had super schemes since way back, so most will pay for their own retirement (Which is tax deductible) it is also means tested. Everyone has health insurance (Which is tax deductible) so it doesn’t cost the country as much as a full on Acc/free health care system does in NZ.

From my perspective, I just don’t think NZ can afford free health care and non means tested super based on future generations earnings we are slowly transitioning into a self-funded/user pays society.

If Nz could promise future generations would not have to take the burden of past generations that would be nice.
I know my kids and their kids won’t be paying for me, I’d be extremely embarrassed if they did.

Aussies have a self-funded retiree scheme, whereby you can opt out of receiving superannuation and in return pay no income tax. Have to be 55 to qualify.

Pumice

13-02-2012, 11:45 PM

Aussies have a self-funded retiree scheme, whereby you can opt out of receiving superannuation and in return pay no income tax. Have to be 55 to qualify.

I didn’t know that. Sounds good.
The ATO also offer tax concessions on voluntary payments to your scheme where you put in untaxed dollars.

Let’s be fair, they have a lot more money and people earn significantly more (so pay more tax)
The mining boom here in Queensland has set a lot of young people up for life.
I have met quite a few under 30's who have little more than 7th form (equivalent) and own a $500k house mortgage free and the latest Holden commodore. Almost depressing really.

iceman

14-02-2012, 07:14 AM

I didn’t know that. Sounds good.
The ATO also offer tax concessions on voluntary payments to your scheme where you put in untaxed dollars.

Let’s be fair, they have a lot more money and people earn significantly more (so pay more tax)
The mining boom here in Queensland has set a lot of young people up for life.
I have met quite a few under 30's who have little more than 7th form (equivalent) and own a $500k house mortgage free and the latest Holden commodore. Almost depressing really.

Not depressing Pumice, bloody great for that generation and the country as a whole. Maybe one day we will do some minining off our stuff in NZ, that is if the snails etc that we NEED to protect move out of the way first. We just continue to borrow $500m per week and go backwards living in la-la land until then. Now that is depressing !

fungus pudding

14-02-2012, 07:59 AM

I didn’t know that. Sounds good.
The ATO also offer tax concessions on voluntary payments to your scheme where you put in untaxed dollars.

Let’s be fair, they have a lot more money and people earn significantly more (so pay more tax)
The mining boom here in Queensland has set a lot of young people up for life.
I have met quite a few under 30's who have little more than 7th form (equivalent) and own a $500k house mortgage free and the latest Holden commodore. Almost depressing really.

Sure, but life in Aussie is pretty tough for many, especially in the big cities where housing is so expensive. Higher wages mean higher costs, and it's all about disposable income. Sounds great when a motor mechanic can earn $40 or $45 per hour - until you take your car in for servicing. I know some young single people in Sydney who are flatting and earning around $75 k per annum. They reckon it takes every cent to live there.

Pumice

14-02-2012, 11:30 AM

Sure, but life in Aussie is pretty tough for many, especially in the big cities where housing is so expensive. Higher wages mean higher costs, and it's all about disposable income. Sounds great when a motor mechanic can earn $40 or $45 per hour - until you take your car in for servicing. I know some young single people in Sydney who are flatting and earning around $75 k per annum. They reckon it takes every cent to live there.

I can only tell you my experience and its completely the opposite. I came to Aus and increased my income by 187% and my partner also doubled her income.
Our rent is almost 50% of what we were paying in Wellington.
Food is insanely cheap, everything seems to be $1kg for fruit and veg (bananas are finally back to $2.70kg) milk and bread are stupidly cheap.
But this is in Brisbane and the only reason I left NZ was my mates told me that Aus is exponentially better than NZ.
It comes down to the fact that we live a lot better but save a higher % of what we would have in NZ. (roughly 60% of our incomes) and we live like kings compared to NZ.
Yes private transport is very expensive, however I don’t drive as the public transport system is incredibly good and cheap.
The other thing is, our rent, power and gas is tax deductable!! thats crazy.

P.s $75k would be classed as a pretty low income. especially if you choose to live in Sydney.

I wouldn’t have come to Aus if my NZ employer had accepted my 5% pay increase that I has asked for, in hindsight I'm damn glad they did reject it.

On the flip side, it seems every Aussie that has been to NZ wants to live there (they think it’s a stunning country), if only the wages were higher….
There no doom here! (maybe its on its way)

fungus pudding

14-02-2012, 12:31 PM

I can only tell you my experience and its completely the opposite. I came to Aus and increased my income by 187% and my partner also doubled her income.
Our rent is almost 50% of what we were paying in Wellington.
Food is insanely cheap, everything seems to be $1kg for fruit and veg (bananas are finally back to $2.70kg) milk and bread are stupidly cheap.
But this is in Brisbane and the only reason I left NZ was my mates told me that Aus is exponentially better than NZ.
It comes down to the fact that we live a lot better but save a higher % of what we would have in NZ. (roughly 60% of our incomes) and we live like kings compared to NZ.
Yes private transport is very expensive, however I don’t drive as the public transport system is incredibly good and cheap.
The other thing is, our rent, power and gas is tax deductable!! thats crazy.

P.s $75k would be classed as a pretty low income. especially if you choose to live in Sydney.

I wouldn’t have come to Aus if my NZ employer had accepted my 5% pay increase that I has asked for, in hindsight I'm damn glad they did reject it.

On the flip side, it seems every Aussie that has been to NZ wants to live there (they think it’s a stunning country), if only the wages were higher….
There no doom here! (maybe its on its way)

Here's the official Australian income survey.

http://www.abs.gov.au/ausstats/abs@.nsf/mf/6302.0

And here's the comparison with NZ.

http://en.wikipedia.org/wiki/Median_household_income_in_Australia_and_New_Zeala nd

neopoleII

14-02-2012, 01:15 PM

if you go to this page you will read......
Median weekly income from all sources for all people increased 3.9 percent to $550.

http://www.stats.govt.nz/browse_for_stats/income-and-work/Income/NZIncomeSurvey_HOTPJun11qtr.aspx

neopoleII

14-02-2012, 01:18 PM

what median means is that half the population get more than $550 a week and half the population get less than $550 a week.

Pumice

14-02-2012, 01:20 PM

Here's the official Australian income survey.

http://www.abs.gov.au/ausstats/abs@.nsf/mf/6302.0

And here's the comparison with NZ.

http://en.wikipedia.org/wiki/Median_household_income_in_Australia_and_New_Zeala nd

Aah, that explains it. I was just getting ripped of in NZ.
Both my partner and myself were below the median before we left.
Maybe degrees are worth more outside of NZ?

Like I said, I can only compare myself/my family and my other uni mates to what we had back in NZ to what we have now.
We are significantly better off.

Major von Tempsky

14-02-2012, 04:17 PM

There are at least two possible scenarios (other commentators may point out some more) to an Australian collapse which would have Kiwi emigrés fleeing back to NZ and Australians begging to be let in.

One is economic. The Australian economy has become very narrowly based and hence rather fragile. Coal and iron ore, coal and iron ore. The extraction and trade in these has pushed the Australian dollar to stratospheric heights which is killing other exports and tourism.
Come a slowdown in coal and iron ore exports, which is inevitable in the nature of economic cycles and the whole edifice comes crashing down.

The other is climatic. A growing desertification, heat waves and pressure on water supplies and Australia becomes uninhabitable.

I am content to wait with a cynical smile :-)

neopoleII

14-02-2012, 07:21 PM

and NZ has logs sold at or below cost.... re Tenon.
dairy products..... all in private hands...... watch out for foot and mouth with our lax border security.
tourism.... lots of small time operators.
so we aint safe either

other than that kiwiland is pretty.

Halebop

14-02-2012, 08:13 PM

Not financially no.

Demographic pressures are financial pressures. From around the age of 55 people start earning less and spending less as they retire and slowly become financial conservatives. The baby Boomer median age has crossed this point. And what do we see? Areas like car sales, retail, small business expansion all stalling. The spill on impact is on tax takes and growth rates. Australia's demographics are not as positive as New Zealand's. They had a bigger Baby Boomer Spike, A bigger Gen X Plunge and a smaller Gen Y Rise. Although New Zealand clings to an OECD ranking by the skin of it's third world primary economy teeth, it's demographics are the best of any OECD country from a post Boomer perspective. This will influence long term growth rates and the ability to pay for stuff.

This positive long term HSBC Forecast is made mostly on the strength of Demographics (http://www.interest.co.nz/news/57875/hsbc-predicts-nz-growth-average-31-annually-over-next-40-years-says-nz-be-fastest-growing)

...and in reference to the topic of the thread - long term top of OECD table growth for New Zealand is pretty good news.

h2so4

15-02-2012, 08:09 AM

If that is the case then Europe doesn't have a problem.

All the european countries show positive GDP growth, with Greece at 2.5%.

Naaa I dont think you can base any assumptions on that HSBC forcast.

Major von Tempsky

15-02-2012, 11:37 AM

http://www.theaustralian.com.au/national-affairs/resources-rivals-a-risk-to-the-boom-with-african-projects-to-hit-commodities/story-fn59niix-1226271241497

Halebop

15-02-2012, 12:53 PM

Naaa I dont think you can base any assumptions on that HSBC forcast.

It's the reverse, HSBC are making growth assumptions around demographic trends. It doesn't even matter what the numbers are, demographic trends are implict in the relativities.

Even the first band on the growth targets is looking at a one decade period to the year 2020 - not next week. The crisis of confidence will end at some point (probably when Gen Y enter the work force en-masse - I think Demographers point to a range between the years 2014 and 2017 for this) and business will get back to normal/stable. For most of the OECD however, normal will be slower than the and 90's and 00's because of a lacklustre demographic profile.

Pumice

15-02-2012, 09:55 PM

It's the reverse, HSBC are making growth assumptions around demographic trends. It doesn't even matter what the numbers are, demographic trends are implict in the relativities.

Even the first band on the growth targets is looking at a one decade period to the year 2020 - not next week. The crisis of confidence will end at some point (probably when Gen Y enter the work force en-masse - I think Demographers point to a range between the years 2014 and 2017 for this) and business will get back to normal/stable. For most of the OECD however, normal will be slower than the and 90's and 00's because of a lacklustre demographic profile.

Looking at demographics in isolation is far too simplistic.
By that rationale, countries like Uganda, Niger, Chad, Ethiopia, Somalia etc. with a median age of around 17 will have a booming economy. While Monaco with a median age of 50 will be bankrupt due its "lacklustre demographic profile"

Lets assume Gen X & Y do pull through, they wont want to be paying anymore tax than thier parents did.
BTW I hope you're right though, I want to come home eventually, especially if things pan out as HSBC predict.

BIRMANBOY

16-02-2012, 09:14 AM

It's the reverse, HSBC are making growth assumptions around demographic trends. It doesn't even matter what the numbers are, demographic trends are implict in the relativities.

Even the first band on the growth targets is looking at a one decade period to the year 2020 - not next week. The crisis of confidence will end at some point (probably when Gen Y enter the work force en-masse - I think Demographers point to a range between the years 2014 and 2017 for this) and business will get back to normal/stable. For most of the OECD however, normal will be slower than the and 90's and 00's because of a lacklustre demographic profile.

Gen Y etc are too busy playing computer games, drinking lattes and posting their latest photos on facebook to worry about "work". Why work when the govt gives you money for not working and when all else fails you can go back home and live with mum and dad. "Work" is something to be taken on in the direst of circumstances.....they seem to be looking for a lifestyle job that fits their concept of their importance and worthiness. Affluent Western style living and over consumption will and is causing a seismic shift in economies and who know how it will all play out.

Pumice

16-02-2012, 10:51 AM

LOL BB ... You have a fine grasp of Gen Y. I take it own a few?

Haha, all the decent Gen X/Y workers left NZ.
Does that mean the ones left behind don’t have a hope in hell of paying for NZ’s future liabilities?

Surprisingly young NZ workers are viewed very favourably overseas.

BIRMANBOY

16-02-2012, 11:17 AM

LOL BB ... You have a fine grasp of Gen Y. I take it own a few?

Observational I'm afraid...We were never lucky enough to be blessed with children. However would like to think that we would have instilled a strong work ethic that would have promoted success and responsibility.

trackers

16-02-2012, 11:30 AM

Gen Y etc are too busy playing computer games, drinking lattes and posting their latest photos on facebook to worry about "work". Why work when the govt gives you money for not working and when all else fails you can go back home and live with mum and dad. "Work" is something to be taken on in the direst of circumstances.....they seem to be looking for a lifestyle job that fits their concept of their importance and worthiness. Affluent Western style living and over consumption will and is causing a seismic shift in economies and who know how it will all play out.

They may not want to work but alas its unavoidable.. Particularly as older generations have gorged themselves on society funded retirement, loaded up on govt debt), and bid each others houses up to the highest levels possibly without being completely unaffordable by the masses. Now they get to sit back and say "Good luck!"

Agree about your last sentence

Haha, all the decent Gen X/Y workers left NZ.

<Citation needed> Oh wait, you live overseas nevermind

BIRMANBOY

16-02-2012, 12:05 PM

Haha, all the decent Gen X/Y workers left NZ.
Does that mean the ones left behind don’t have a hope in hell of paying for NZ’s future liabilities?

Surprisingly young NZ workers are viewed very favourably overseas.

Yes those with "get up and go" have got up and went. Hopefully they will return at some point and lead by example. Problem of course is you need a certain mass/percentage of the population contributing by working and producing goods or services in order to maintain infrastructure and I'm not sure that the necessary mass is something that can be relied on. Hope I'm wrong. I just dont see the work ethic now that seemed to be around everywhere back in the "good old days". Social security, wellfare and benefits are wonderfull things and many of the recipients are deserving.....but it seems many others are deserving of a good kick up the backside to stimulate their brain activity. When the proportion of "givers" drops and "takers" increases things get out of wack and we have the potential for REAL economic and social problems. I feel this is the position the global economy is sitting on the edge of. Its not irreversible, just requires a change of focus and a recognition that
(1) Any and all work is preferable rather than sucking on the government's teat
(2) Education is a must and basics of math and language plus work skills (not basket weaving) need to be given priority
(3) All govt handouts (other than severe disability) need to be "worked for" by establishing some work that must be contributed in order to receive benefits.
(4) Compulsory retirement deductions set up for every worker
(5) Employers need to be offered tax rebates and or subsidies when they take on staff and better tax deductions on research and development programs.
(6) Long time welfare beneficiaries should be given decent bonus when entering (and staying) in workforce

Lots more...what else would you guys do?

Pumice

16-02-2012, 12:14 PM

<Citation needed> Oh wait, you live overseas nevermind

Yes I live overseas, but alas I'm too old to be classed as Gen X or Y.
I just sympathise with them.
We expect them to stand on thier own two feet and provide for themselves (education, retirement etc), but we will want them to cough up tax dollars to pay for our countries accumulated liabilities both current and future. thats just unfair.
We call them lazy bludgers, but dont think of why? Its how they were raised.
Agrree with alot of what BB is saying

BIRMANBOY

16-02-2012, 12:23 PM

They may not want to work but alas its unavoidable.. Particularly as older generations have gorged themselves on society funded retirement, loaded up on govt debt), and bid each others houses up to the highest levels possibly without being completely unaffordable by the masses. Now they get to sit back and say "Good luck!"

<Citation needed> Oh wait, you live overseas nevermind

"""They may not want to work but alas its unavoidable.. """
What you mean they shouldnt have to work???? If you want to live in a community or country and use the benefits and assets the community has worked for and created then of course you should contribute or "work". If not p**s off and live somewhere else where they might tolerate you. Where I have no idea!!

""Particularly as older generations have gorged themselves on society funded retirement"'

Oh, you mean the generations that went to war and then came back (if they were lucky) and worked their arses off for their entire working life. Funny I dont remember my father as being "gorged" but there you go.

Pumice

16-02-2012, 12:38 PM

"""They may not want to work but alas its unavoidable.. """
What you mean they shouldnt have to work???? If you want to live in a community or country and use the benefits and assets the community has worked for and created then of course you should contribute or "work". If not p**s off and live somewhere else where they might tolerate you. Where I have no idea!!

""Particularly as older generations have gorged themselves on society funded retirement"'

Oh, you mean the generations that went to war and then came back (if they were lucky) and worked their arses off for their entire working life. Funny I dont remember my father as being "gorged" but there you go.

The generation that went to war, worked particularly hard agreed, but thier kids inherited the benifits of that hard work, then went on a shoping spree with other people money for the next 30 years (free education, state funded super etc) what are the kids of today doing? People no longer work hard, they work smart IMO (Does your boss care how hard you work? Or how much value you add?). they also save for thier own retirement and have to borrow for thier education. Do we expect them to pay for the nations debt and unfunded super schemes of thier parents?
I dont. I wish they did/could.

Halebop

16-02-2012, 12:44 PM

Looking at demographics in isolation is far too simplistic.
By that rationale, countries like Uganda, Niger, Chad, Ethiopia, Somalia etc. with a median age of around 17 will have a booming economy. While Monaco with a median age of 50 will be bankrupt due its "lacklustre demographic profile"

A median age of 17 is a drag on financial performance. Young people require education, healthcare, adults looking after them, all net soaks of fiscal performance. Its when a proportionately large number of workers hit ages 35 to 55 the economies boom. So the proportion within this band is what dictates a demographic inspired outperformance. The highlighted extreme ends of performance (17 and 50) are exactly where we don't want to be.

In the long run the trick is to have the best balance between births, deaths, immigration and aging that maintains an optimal population size in the 35-55 group without hollowing out future performance (also extraneous factors like avoiding wars and plagues helps). From this perspective New Zealand is in better shape than the OECD.

Gapminder.org is a great tool for understanding the consequences of this stuff and demistifying commonly held myths. Screenshot is of the free gapminder desktop tool... The higlighted graph shows Japan slowing growth as the median age rises beyond the optimal. The big dull red circle in the background is a snapshot of China.

3836

slimwin

16-02-2012, 12:49 PM

BIRMANBOY

16-02-2012, 12:59 PM

Its a metaphor...the fence prevents the cows from being bowled over by your BMW. If it was a Yaris we might save a few.

Pumice

16-02-2012, 01:06 PM

Thanks Halebop.
I'm guessing the 35-55 age group is when most are hitting their peak earning potential. I didn’t know NZ was in such a good position.
Cheers.

Agreed Slimwin, we should all work smarter not harder. Education and overseas experience forms part of that equation.

I'm not sure why we compare ourselves to Australia, the country is the size of Europe, most of which is desert, so it can take advantage of ripping it up and selling what lies beneath off to the likes of China.
I often wonder how much the “NZ” brand is worth globally If where mine, how much of our economic brand would we lose? (just a thought)

slimwin

16-02-2012, 01:18 PM

Silverlight

16-02-2012, 01:21 PM

I'm not sure why we're so worried about our youth going overseas. I went at 24 with about 30ish of my mates. Nearly everybody is home now (I came at 39) to raise a family and owns most if not all of their own houses. Some of us even have rentals (mostly paid off) on top.
You can always spot the guys at work who haven't travelled. Some of them really should have to broaden their views.
I can't see us ever "catching" up to OZ unless we start digging rocks out of the ground. Some would say thats a house of cards that will fall in on OZ one day soon.
My other pet hate is us banging on about our #8 fencing wire "can do". Give us a bit of metal we make a fence, give it to a german he makes a M3 BMW

Some of your post doesn't sound that consistent or maybe I just read it wrong.

With all their "overseas experience" they came home and invested in a rental property? And people who have not travelled for whatever reason (i.e. committments, affordability) need to broaden their views to realise that rental properties are where it is at? That is not the most productive idea for the NZ economy I would hope people coming home from their OE would bring...

slimwin

16-02-2012, 01:47 PM

Nope. Just that most came home with a good amount of money to buy a house with either a large deposit or outright. I think that is positive for NZ rather than borrowing huge amounts and servicing it for most of your working life.I managed outright and had enough to pay 70% deposit on my dunedin uni rental. For lack of knowing what else to do with my money I should add.

What I do next for my investments is why i'm reading as much about shares,including this website, as possible. I've been practicing for 3 years on investopedia.

I have no problem with my friends that didn't do an OE,although that wasn't many. It's just that there are quite a few that think NZ is the best country in the world and there's nothing else out there. We DO have a good spot here but there's also plenty of good spots out there. My pick is NZ or Luxembourg to rasie a child though.

And certainly in the company I work for (10,000+ employees) fresh ideas on the workface are constructive and essential if we need to stay ahead of the pack. There's a bit of "we've always done it that way mentality" from the long termers.

Not sure if it's still possible to go overseas with nothing and do alright but I encourage our young guys at work to give it a go while young and single. They can always come back.

pietrade

16-02-2012, 01:59 PM

Certainly, if you don't go away, you can't 'come back' and it's only by going away one can fully realize just how lucky we are to be living here, not 'on the way' to anywhere in particular and with WATER to spare..... a pluvial country indeed. Lucky us.

BIRMANBOY

16-02-2012, 02:06 PM

I doubt anybody would see most mining if it's done. The world would only see it because parts of society,wrongly or rightly,would shout about it.

BB,how big is that fence? I drive a Landcruiser with dirty big bull bars!

I'm sure you are having me on for the sake of bull-baiting..so to speak. So to make you happy I shall oblige-bit quiet here anyway. This is the essential global problem boiled down to its cloven hooved essentials. People consuming /producing items that do nothing to enhance anything other than said persons need to be perceived as bigger, smarter, faster, weathier and generally capable of producing a larger and more awe inspiring hard-on than the next guy. Not referring to you of course :-). If we took that extra 20,000 over and above what you pay for a "normal" car and invested it say in a start up business how much better would that be? Now multiply that by thousands of products and millions of people and what do you have. John F Kennedy said. "Ask not what your country can do for you, ask what you can do for your country." So replace country with..."Your fellow man and woman"..and you have the solution. Give more than you take.

slimwin

16-02-2012, 02:24 PM

fungus pudding

16-02-2012, 02:26 PM

I'm sure you are having me on for the sake of bull-baiting..so to speak. So to make you happy I shall oblige-bit quiet here anyway. This is the essential global problem boiled down to its cloven hooved essentials. People consuming /producing items that do nothing to enhance anything other than said persons need to be perceived as bigger, smarter, faster, weathier and generally capable of producing a larger and more awe inspiring hard-on than the next guy. Not referring to you of course :-). If we took that extra 20,000 over and above what you pay for a "normal" car and invested it say in a start up business how much better would that be? Now multiply that by thousands of products and millions of people and what do you have.

I'd say you have a huge pile of products, which you seem to advocate, we shouldn't want to buy.

BIRMANBOY

16-02-2012, 02:49 PM

Well my truck is a 1992 and would have negative equity if you took 20k away. I hunt and fish in the weekends and that's why I have it. Couldn't do without it. I don't own anything else cause as that would be extra insurance/rego etc. I grow my own vegies too as a side.
My dad struggled his whole life with a small business. Always begging to the bank to pay off someone or other whilst trying to get others to pay their bills. It's put me off.
My contribution will be putting capital in the share market to aid others hard work. Looking at SCT at the mo.

Your best investment in my opinion, after personally trying everything from pork bellies to oil options to now shares and bonds, has got to be YOURSELF. Unfortunately you cant always rely on others to spend your funds or contributions wisely and judiciously. However after learning my trade and working at times in two jobs to get seed capital I can say that starting my own business has been the most successfull investment I have ever made or done. Not that i would discourage someone in entering the sharemarket but I think in terms of return on investment I think the best option for long term success has got to be yourself. Whether its utilizing skills as a tradesman, IT specialist or Mr. Green doesnt matter. Yes there will be times when it looks like a bad idea...but its worth it in the long run. Benefits are you have a job for life or as long as you like, you have potential to grow and hire people providing employment for others.

fungus pudding

16-02-2012, 05:44 PM

Your best investment in my opinion, after personally trying everything from pork bellies to oil options to now shares and bonds, has got to be YOURSELF. Unfortunately you cant always rely on others to spend your funds or contributions wisely and judiciously. However after learning my trade and working at times in two jobs to get seed capital I can say that starting my own business has been the most successfull investment I have ever made or done. Not that i would discourage someone in entering the sharemarket but I think in terms of return on investment I think the best option for long term success has got to be yourself. Whether its utilizing skills as a tradesman, IT specialist or Mr. Green doesnt matter. Yes there will be times when it looks like a bad idea...but its worth it in the long run. Benefits are you have a job for life or as long as you like, you have potential to grow and hire people providing employment for others.

And the benefits of successful investing included being able to avoid a job for life or as long as you like. No contest really.

BIRMANBOY

16-02-2012, 06:03 PM

fungus pudding says "And the benefits of successful investing included being able to avoid a job for life or as long as you like. No contest really."

And how exactly do you intend to "invest" without generating some income from "work" first. Perhaps you can invest your dole money? Successfull investing is absolutely possible and should be encouraged but in the meantime get a job to sustain the investment funds. And it makes more sense to work towards a job that provides more rather than less in the available dosh dept. Where is your head? Avoiding a job for life may make sense to you but its a pipe dream for 99.9% of the population. Hopefully you are winding me up and dont believe that statement. Thats why people "invest" in lotto I suppose. Dreamers. People living in hope instead of working for a living.

fungus pudding

16-02-2012, 06:33 PM

BIRMANBOY

16-02-2012, 07:12 PM

I'm not winding you up - just challenging your claim that the best investment is in yourself. Yes - most of have had to work, but the choice to stick with it for many years or build a passive income very early in life is an individual one. I chose the latter with no regrets.
How do you build a "passive income very early"? Were you salting away your pocket money while you were in high school? To build enough funds for a passive income you would need to have minimum of 600,000 in investments/the market...tell me how you can achieve that much without working your butt off.....for a long time. Maybe your family is wealthy and supported you, MAybe you won lotto, maybe you got lucky with a spec mining stock...dont know but I do know that the majority and I mean a big majority will never get that lucky. Which leads me back to my original statement ..and its origens. The harder I work the luckier I get. You dont just "choose" to live off a passive income.

fungus pudding

16-02-2012, 08:08 PM

How do you build a "passive income very early"? Were you salting away your pocket money while you were in high school? To build enough funds for a passive income you would need to have minimum of 600,000 in investments/the market...tell me how you can achieve that much without working your butt off.....for a long time. Maybe your family is wealthy and supported you, MAybe you won lotto, maybe you got lucky with a spec mining stock...dont know but I do know that the majority and I mean a big majority will never get that lucky. Which leads me back to my original statement ..and its origens. The harder I work the luckier I get. You dont just "choose" to live off a passive income.

I didn't mention not working, or not working your butt off. That's necessary - so is going without - paying the price in those early years. I do admit it's harder now. It's always easier to make a fortune when Labour is in power. Was remarkably easy when dopey Wallace Rowling was finance minister. That got me to a state of independence.

BIRMANBOY

16-02-2012, 09:57 PM

I didn't mention not working, or not working your butt off. That's necessary - so is going without - paying the price in those early years. I do admit it's harder now. It's always easier to make a fortune when Labour is in power. Was remarkably easy when dopey Wallace Rowling was finance minister. That got me to a state of independence.
Oh I get it so you didn't really mean "build a passive income very early in life is an individual one". You sound very confused. When exactly did you "decide" and "choose to live off a passive income" and what vehicle did you use to make this work. I'm extremely intrigued at how you managed to achieve such an admirable goal. And yes I always wondered why suddenly all those millionaires suddenly appeared as soon as Labour was elected. So the real secret in your opinion is actually to make sure Labour gets in and then its a foregone conclusion that "It's always easier to make a fortune when Labour is in power". On those words of wisdom I will retire since I am struck dumb with the simplicity of your success.

fungus pudding

16-02-2012, 10:56 PM

Oh I get it so you didn't really mean "build a passive income very early in life is an individual one". You sound very confused. When exactly did you "decide" and "choose to live off a passive income" and what vehicle did you use to make this work. I'm extremely intrigued at how you managed to achieve such an admirable goal. And yes I always wondered why suddenly all those millionaires suddenly appeared as soon as Labour was elected. So the real secret in your opinion is actually to make sure Labour gets in and then its a foregone conclusion that "It's always easier to make a fortune when Labour is in power". On those words of wisdom I will retire since I am struck dumb with the simplicity of your success.

You assume a lot. I don't support Labour for a start, even though it is easier to make money when they are in power - the money flows. I started as a residential landlord - a mug's game nowadays, but Wallace gave us a massive boost when he introduced spec tax. It was a cake-walk to make a quick fortune in the 70s.
Remember Bob Jones' rule of economics - 'All govt. action achieves the opposite of what is intended' . There are a couple of opporunities around at present, but I can't be bothered anymore and see no point in making money I do not need and will never spend. Seeing you think I'm confused, there's little point in saying more.

trackers

17-02-2012, 03:09 PM

What you mean they shouldnt have to work????

That's neither what I said, or meant

Oh, you mean the generations that went to war

Wrong again. 0/2

Pumice said it best

The generation that went to war, worked particularly hard agreed, but thier kids inherited the benifits of that hard work, then went on a shoping spree with other people money for the next 30 years (free education, state funded super etc) what are the kids of today doing? People no longer work hard, they work smart IMO (Does your boss care how hard you work? Or how much value you add?). they also save for thier own retirement and have to borrow for thier education. Do we expect them to pay for the nations debt and unfunded super schemes of thier parents?
I dont. I wish they did/could.

---

Gen Y etc are too busy playing computer games, drinking lattes and posting their latest photos on facebook to worry about "work". Why work when the govt gives you money for not working and when all else fails you can go back home and live with mum and dad. "Work" is something to be taken on in the direst of circumstances.....they seem to be looking for a lifestyle job that fits their concept of their importance and worthiness. Affluent Western style living and over consumption will and is causing a seismic shift in economies and who know how it will all play out.

It may seem like I'm playing 'point the finger at the generation who buggered up' but I'm actually just having a go at you for doing it and I actually think everyone has/is playing their part.
How much of an average NZ baby boom's wealth, would you guess, is the product of savings or investment, and how much is the product of passively appreciating house prices? And you're lambasting GenX/Y for being unproductive...

fungus pudding

17-02-2012, 04:10 PM

The simplest and fairest way of addressing the wealth / age gap is a capital gains tax.

CGT is far from simple.

trackers

17-02-2012, 04:21 PM

Agree with both of the above statements.. .Belg that presumes that government spending is balanced as well (which I'm sure it is) :D

Lizard

17-02-2012, 06:19 PM

The simplest and fairest way of addressing the wealth / age gap is a capital gains tax.

Yeah. Let a few of the older ones claim their losses on Feltex, finance coys and the like. :)

janner

17-02-2012, 10:00 PM

Hahahaaa.. .. Touche !!..

Pumice

18-02-2012, 05:05 PM

Similar themed article in the Herald.

Retirement a big burden on economic horizon.
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10785059

"With an increasing proportion of the population over 65 and a decreasing proportion earning wages and paying taxes, the chunk of GDP being ploughed into NZ Super payments is forecast to double in less than a generation."

craic

18-02-2012, 05:52 PM

Many years ago we had a dual taxation system with a fixed rate of Social welfare tax or whatever it was called. When it was mooted that we amalgamate the two and save lots of money on administration etc. many people protested that that the tax was the money they were saving to pay their pensions in later years. But the gentleman who knew all at the time reassured everyone that their pensions were safe and the money would always be there. Now we are told that the workers are paying for these pensioners from their meagre earnings and the suggestion is that these oldies lived well and didn't make any provision for their future. Let me just say that nothing you have today would be there if it wasn't for the labours of those who went before and the financial incompetence of successive governments has emptied the coffers of the fruits of their labours.

fungus pudding

18-02-2012, 06:26 PM

elZorro

18-02-2012, 07:27 PM

.....with the help of an excessively generous social welfare scheme.

But FP (and others): none of this would matter if the work we were doing now was more profitable. We're paid above average incomes on a worldwide basis, so we have to be smarter at choosing what we compete with. If we get that right, we can pay ourselves like Australians. It's a pity we have them as near neighbours, they are doing very well on worldwide terms.

Pumice

18-02-2012, 09:33 PM

Lizard

19-02-2012, 07:46 AM

You get what you vote for.
Who did the government emptied the coffers on?

But our coffers aren't empty. At least not as empty as at the start of my working/tax-paying life. I've been helping fill them (paying back the expensive years when they were educating me and the older baby-boomers.)

3847

The only problem is that the % of population in retirement (and therefore due to receive a pension) is going to become considerably heavier - which might have been off-set to some extent by fewer in education if it wasn't that they're now needing to be educated for longer. It may also be able to be offset by a less unemployment and by further increases in the amount of time mothers spend participating in the workforce. However, pensions are the more manageable part of the equation. It is the healthcare burden that is probably more concerning - hard enough now that the relatively mobile are unable to get hip replacements until they have reached the stage of immobility (and therefore slow to recover). But playing "hand of God" over who gets what healthcare seems likely to become the subject of much future social debate. Best hope that the coming harvest from the 1990's biotech revolution really starts to get some cures - or at least allows less invasive/expensive procedures for chronic ailments of the elderly!

elZorro

19-02-2012, 09:51 AM

Nice post Lizard, I've just read the business pages of the SST and didn't find anything as interesting or useful. Being a bit of a Labour supporter, I can't help pointing out that most of the chunk of your graph that shows debt repayment, occurred when Labour were in office .:)

More well-paid, localised manufacturing jobs requiring a range of job skills would be an easy way forwards for NZ, the products being aimed at niche export areas, higher-value. How is the current government helping that process along?

fungus pudding

19-02-2012, 10:26 AM

Lizard

19-02-2012, 12:29 PM

Being a bit of a Labour supporter, I can't help pointing out that most of the chunk of your graph that shows debt repayment, occurred when Labour were in office .:)

El Zorro, I am neither a left or right-wing supporter - more in favour of logical policies. Regular switching between a left and right wing position should not be underestimated as a strategic tool for maintaining the equilibrium either.

However, I would point out that government debt per se is not the single best measure of the effects of economic policy. In my view, the best measure of improvements in overall wealth comes from the ratio of our international investment position to GDP. It's difficult to get a decent long term picture of this - this is probably about as accurate as it's possible to get (and is sadly limited to only relatively recent data):

3848

That gives a slightly different impression - during the period of the fifth labour government, NZ's overall debt position worsened. This occurred despite the government itself paying down debt, as the private sector borrowed or sold off enough to more than make up the difference. It's easy to feel wealthy while selling off or mortgaging your assets... for a while.

For this picture to improve, we need to run current account deficits that are below our rate of GDP growth. The trade part of that equation is in surplus - it is our investment balance that needs improving. Help out - invest wisely in overseas assets (and repatriate some of your gains to spend in NZ). :D

elZorro

19-02-2012, 02:09 PM

El Zorro, I am neither a left or right-wing supporter - more in favour of logical policies. Regular switching between a left and right wing position should not be underestimated as a strategic tool for maintaining the equilibrium either.

However, I would point out that government debt per se is not the single best measure of the effects of economic policy. In my view, the best measure of improvements in overall wealth comes from the ratio of our international investment position to GDP. It's difficult to get a decent long term picture of this - this is probably about as accurate as it's possible to get (and is sadly limited to only relatively recent data):

3848

That gives a slightly different impression - during the period of the fifth labour government, NZ's overall debt position worsened. This occurred despite the government itself paying down debt, as the private sector borrowed or sold off enough to more than make up the difference. It's easy to feel wealthy while selling off or mortgaging your assets... for a while.

For this picture to improve, we need to run current account deficits that are below our rate of GDP growth. The trade part of that equation is in surplus - it is our investment balance that needs improving. Help out - invest wisely in overseas assets (and repatriate some of your gains to spend in NZ). :D

Hi Liz, points taken, although the actual figure for investment position was a more healthy -70% of GDP as at June 2011. http://www.parliament.nz/en-NZ/ParlSupport/ResearchPapers/3/4/6/00PlibCIP121-New-Zealand-s-International-Investment-Position.htm

Of course, if we managed to export more of value, we'd have a better buffer in these figures. I know of one foreign-owned NZ engineering business that has been documenting all their processes for the last 2 years, so that most manufacturing can be carried out in a cheaper country offshore. At one stage this business exported 10% (by weight) of all our annual manufacturing, so I'm told. This type of manufacturing has to be replaced with new niche products, to keep an edge. For all its giant scale, farming is unlikely to be the whole answer, with its conversion efficiency being so low - it's a biological process.

Investing overseas? I'd prefer to spend my effort over here. Credit where it's due, the Labour Govt did pay down debt, and they did that by on average (note to FP) keeping taxes higher, and they also had a higher tax take because more people were in paid work. I'd call that growing the economy, whereas National has dropped taxes on average, and posted a minuscule increase to the minimum wage. Meanwhile a poorly-performing (over-leveraged) private sector and a mean-spirited public sector has booted tens of thousands people out of their jobs to put pressure on job applicants. That is not a 'call to action' to the manufacturing sector.

P.S. not expecting an immediate reply, I see you have an ST meeting going on..

Lizard

19-02-2012, 07:36 PM

Hi Liz, points taken, although the actual figure for investment position was a more healthy -70% of GDP as at June 2011. http://www.parliament.nz/en-NZ/ParlSupport/ResearchPapers/3/4/6/00PlibCIP121-New-Zealand-s-International-Investment-Position.htm

There was a one-off 6% adjustment to the IIP to GDP figures that was retrospectively applied after that graph was produced... Seems they decided they may have underestimated the full value of my off-shore direct investment shareholdings :D (along with those of many other direct investors).

Lizard

19-02-2012, 07:41 PM

To be honest, it is a hard call on where best to spend or invest your money to best improve the net IIP to GDP ratio. However, obtaining a good return on investment is useful wherever you do it.

It may also be useful to spend money in places that most contribute to NZ GDP. Although then we can start the debate as to whether it is actually counts as an improvement if GDP only increases because you paid the gardener to mow your lawns and a nanny to look after your children rather than doing these things for yourself.

Major von Tempsky

19-02-2012, 07:56 PM

fungus pudding

19-02-2012, 08:04 PM

Liz, very perceptive. But the easiest way to reverse our balance of payments deficit on current a/c is move your accounts to an NZ Bank, move your insurance to a NZ insurance company, only stay at NZ owned hotels and motels, only hire cars from NZ rental car companies and don't sell the farm to overseas landlords.

And hope like hell the rest of the world doesn't adopt that attitude.

Pumice

19-02-2012, 11:22 PM

I'm sure some are thinking: Why buy NZ made, when you can just buy NZ.
No doubt with the same money NZ has sent off sure by way of profits.

elZorro

20-02-2012, 07:05 AM

?? Maybe Robert Muldoon wasn't just cracking a joke?

Hoop

20-02-2012, 11:45 AM

Major von Tempsky

20-02-2012, 12:28 PM

And hope like hell the rest of the world doesn't adopt that attitude.

Hmmm, name one country in economic history which has succeeded by selling off its major exporting industry into foreign ownership in perpetuity?

Halebop

20-02-2012, 01:08 PM

I added some more data to Liz's chart.
A long term view
A simplistic view that shows rising debt as the Govt of that period receives less income and spends more to help the economy along during tough times.
and...
Falling debt when economic growth returns.

From this Chart,,,Overall Govt effect sees both Labour and National as equals.

Interesting fact from chart is that National got voted in the last two times due to recessions creating voter dissatisfaction, and Labour got in after the near recession in 1999

EDIT: mistake on chart at bottom left hand side it reads 1966 to 1995 ....should read 1966 to 1993

http://i458.photobucket.com/albums/qq306/Hoop_1/NZGovtdebttoGDP85to2011.jpg

http://i458.photobucket.com/albums/qq306/Hoop_1/NZrealGDP1990-2011.jpg

In the same vein, Tax Receipts as % of GDP. Red is Labour, Blue is National, Government as at years end. The Muldoon era shows him as a Socialist in Drag and the Lange Era hamstrung by structural deficits. Beyond that things get back to normal. National governments decrease taxes and Labour governments increase taxes. As Hoop surmised, we seem to have a preference for National clearing the decks through bad times and a Labour social agenda through the good times (Muldoon / Lange being the exception - but as Muldoon had gone somewhere to the left of Lenin economically, this was probably the only way it could be resolved).

3849

To my mind National's current response has been orthodox - the Government balance sheet is in better shape than the private sector, so it has chosen to swap the load. Private debt in the year to March 2011 dropped for the first time in a decade (I think -0.2% off the top of my head). In real terms this equated to a 3% drop in private debt - in this environment arguably sensible medicine. My innate fiscal conservatism doesn't like the government deficit, but the reduction in real private debt is arguably the better risk management decision.

Pumice

23-02-2012, 02:29 PM

Lets kick this debate off again.
This US example is a frightning read. (How does NZ compare?)

Two lessons from the blistering discourse just concluded on the debt ceiling. Language
matters. Social Security and Medicare are untouchable.
The Social Security retirement trust fund, according to the 2011 report of the program’s
trustees, will be exhausted in 2038. At that time current benefits will be paid from current tax
contributions. However, the trust fund already is encountering serious financial problems.
Benefits paid in 2010 amounted to $577 billion while net payroll tax contributions totaled $545
billion. The cash deficit was covered mainly by interest payments from the fund’s holdings of
Treasury securities purchased in the past with the fund’s excess cash. With no changes in this
program, anyone born after 1972 will not receive the full retirement benefits currently
promised.
The Medicare Hospital Insurance trust fund will be exhausted in 2024. The current plan is to
deal with this financial crisis by further cutting reimbursement to hospitals. Inevitably access
to care will be restricted or possibly denied entirely or the quality of care will diminish. These
outcomes will immediately impact anyone Medicare-eligible who was born before 1959
including many baby boomers.

Add to them the millions who pay no income taxes and there is little support for
addressing the public debt and Social Security retirement. With or without children, boomers
do have skin in the Medicare game.

Pity the president who in little more than 12 years, possibly sooner, has to deal with the
American people who have become outraged that Medicare is broken and the president who
in roughly 27 years has to admit that the promised retirement benefits cannot be delivered.
Just as the cost of repairing a leaky roof (apt for NZ) increases the longer one puts off those repairs, the
longer that Medicare and Social Security reforms are put off the more costly the reforms
become with every passing year.

elZorro

23-02-2012, 04:46 PM

Thanks for your chart work Halebop, and I think if you look at integrating the area under the % change in GDP for NZ, Labour's record in their last two terms is better than National's. Sure, National copped the recessions etc. The change in tax revenues as a portion of GDP ranges between 25% and 35%, so not as bad as the graph makes it look.

Pumice, agreed it might look bad for most developed countries at the moment, but as we're all using a lot of energy to run our flash economies, when that cost goes up, everything is in trouble. But if we do find some cheaper energy again, it will be champagne time once more.

janner

23-02-2012, 05:37 PM

More doom ???..

Fitch have down graded Greece to " C " from " CCC "..

Not over yet.

janner

23-02-2012, 06:05 PM

FYI.

The rating agency Fitch has further downgraded the credit rating of Greece. Fitch now rates the long-term credit rating of Greece with “C”. Thus, Greece has been downgraded by two steps and is now on the penultimate stage of the Fitch rating scale.

The reason for the renewed downgrading is the second bail-out package, which was approved yesterday by the Finance Ministers of the euro area (more here). It provides for an average debt cut of 53.3 percent for private investors and thus causes significant losses for investors.

Also, the plan of the Greek government to introduce legislation for a mandatory debt cut for all private investors (CAC) has led Fitch to lower the rating further.

Fitch gave notice that the exchange of Greek government bonds would be considered a default. After the restructuring, the rating of the Greek bonds would therefore be rated as “D”. Afterwards, the credit rating may be correspondingly re-evaluated to the circumstances.

Halebop

23-02-2012, 11:18 PM

Thanks for your chart work Halebop, and I think if you look at integrating the area under the % change in GDP for NZ, Labour's record in their last two terms is better than National's. Sure, National copped the recessions etc. The change in tax revenues as a portion of GDP ranges between 25% and 35%, so not as bad as the graph makes it look.

The graph just reports the trend EZ. If anything "looks bad" or "looks good" then it is. The trend on taxation as a % of GDP declined under National, paused then increased under Labour, declined under National again. There is no need to be defensive on Labour's behalf about it - they are very orthodox and unsurprising outcomes given the broad agendas of the two parties. The only surprising part of the graph is that I coloured the Muldoon era blue and the Lange/Douglas era red.

elZorro

24-02-2012, 06:10 PM

The graph just reports the trend EZ. If anything "looks bad" or "looks good" then it is. The trend on taxation as a % of GDP declined under National, paused then increased under Labour, declined under National again. There is no need to be defensive on Labour's behalf about it - they are very orthodox and unsurprising outcomes given the broad agendas of the two parties. The only surprising part of the graph is that I coloured the Muldoon era blue and the Lange/Douglas era red.

Sorry I've only just read this Halebop, and I'm not really defensive about Labour gathering in higher taxes on average. If you wanted to redistribute income to the working or manufacturing class, help improve ecological outcomes, try to ensure the wealthy pay a bit above average rates, that is what you'd do. My point is that over all these extremes, the tax ranged from 25% to 35% of all documented GDP. And of course we know there will be other business going on. The other point is that when Labour are in (and Bob Jones and FP will testify) buildings are all more let out, more people are employed, and the actual tax take will be quite a bit higher than a percentage graph will show. Labour helps the economy fizz along, and National screw it down so tight, that only the rich and powerful do well. Generalising a bit of course.

Halebop

24-02-2012, 06:30 PM

...Generalising a bit of course.

More than a bit. Lets hope we can go to 100% tax, we'll all be rich... Generalizing a bit of course.

Lizard

24-02-2012, 07:42 PM

Sorry I've only just read this Halebop, and I'm not really defensive about Labour gathering in higher taxes on average. If you wanted to redistribute income to the working or manufacturing class, help improve ecological outcomes, try to ensure the wealthy pay a bit above average rates, that is what you'd do. My point is that over all these extremes, the tax ranged from 25% to 35% of all documented GDP. And of course we know there will be other business going on. The other point is that when Labour are in (and Bob Jones and FP will testify) buildings are all more let out, more people are employed, and the actual tax take will be quite a bit higher than a percentage graph will show. Labour helps the economy fizz along, and National screw it down so tight, that only the rich and powerful do well. Generalising a bit of course.

EZ, I think the weakest point to your argument in favour of Labour is that changes in economic policy are rarely made overnight. More often, the policies of one 3 year term only fully start to reflect in the economy in the subsequent 3 year term. For instance, the last of Labour's big spend policies (highest rates of WFF and Kiwisaver subsidies) didn't really kick in until National was in power. You don't really get to see what would happen if this continued unabated and Labour just kept increasing the tax rates to cover the expenditure beyond that 35% of GDP level.

The other obvious point is that in the end, our economy is far too heavily influenced by overseas for governments to make a dramatic difference. Measures that could be taken to protect NZ from outside influence run the risk of being decried by larger powers as "protectionist" and provoking unwanted responses. It's not easy for a small island country to exert control - choices look something like "tax-haven whore" or "decaying dictatorship"

elZorro

24-02-2012, 07:51 PM

More than a bit. Lets hope we can go to 100% tax, we'll all be rich... Generalizing a bit of course.

I think there are too many people thinking too hard about how they can minimise tax. This means clamping down on GDP, helping a black economy, not looking for ways to be more profitable, seeking tax havens, buying less productive assets to depreciate. If all of the population had the freedom to do that, the govt would be in bigger trouble. Let's face it, if you earn an extra $100,000 a year, you do get to keep most of it. And there are many people around the world who have to survive on a whole lot less. We all need to keep things in perspective.

Some taxes, however, the govt has no trouble collecting. Yesterday I was informed by Genesis that my energy costs would be "changing". Read: the standard cost per kwHr is going up by 5% to over 23c. Hydro costs about 2-3c per kWhr to generate, and the Tiwai Point smelter pays (paid) a bulk rate in the region of 5-7cents. In their case the threat of the loss of 2,000+ jobs keeps the price keen, and they are bulk users of 20% of our entire power output. Now what NZ needs is more entrepeneurs turning that cheap aluminium into higher value goods for export.

Pumice

24-02-2012, 08:29 PM

So what your saying is we can't afford all these unfunded social schemes; namely free healthcare, pensions and non means tested aged care?

We are past the period where the bulk of the population has accumulated their wealth, but where is all the taxes that should have been set aside for these liabilities?

Are the youth, who probably haven’t even finished paying for their education, expected to pay via increased taxes?

From my perspective, as long as our taxes don’t increase and future generations don’t receive any less entitlements than their parents all is ok.

NZ is prepared to pay a lot of lip service to Social responsibility, but unfortunately the fact remains that those with social convictions don’t have any money yet.

Even those who are wealthy that also indulge in social benefits also pretend to not have any money, with the explosion of family trusts to avoid taxes and means testing etc.

Fair enough though, I’ll be doing the same as past generations if that is the precedent.

Look at the monsters you have created!!!

elZorro

24-02-2012, 10:12 PM

EZ, I think the weakest point to your argument in favour of Labour is that changes in economic policy are rarely made overnight. More often, the policies of one 3 year term only fully start to reflect in the economy in the subsequent 3 year term. For instance, the last of Labour's big spend policies (highest rates of WFF and Kiwisaver subsidies) didn't really kick in until National was in power. You don't really get to see what would happen if this continued unabated and Labour just kept increasing the tax rates to cover the expenditure beyond that 35% of GDP level.

The other obvious point is that in the end, our economy is far too heavily influenced by overseas for governments to make a dramatic difference. Measures that could be taken to protect NZ from outside influence run the risk of being decried by larger powers as "protectionist" and provoking unwanted responses. It's not easy for a small island country to exert control - choices look something like "tax-haven whore" or "decaying dictatorship"

NZ's economy is perhaps mirrored by the likes of PGGWrightson, lost a few mill last year but "turned it around" with a $3mill profit this year. Only trouble is, they had to turn over several hundred million in sales to make three million net profit. They'll sell anything to anyone, with a 10% markup. Compare that to Apple (AAPL), about 35% of turnover is net profit (maybe an extreme, and I don't like the overseas contractors' working conditions). Maybe if we go some way towards that smart business model, we'd be paying better wages and salaries here, and taxes will be a lower proportion of GDP.

The smart model would have been helped by Labour's R&D tax credits, a small inexpensive incentive for every business in the country. National stated that small businesses would try to rort the system. They knew that was unlikely, and easily controlled. But this gave them an excuse to scrap good policy in favour of big business. Perhaps that was Labour's mistake, to bring it in for the last year of a nine year stint.

elZorro

24-02-2012, 10:16 PM

Pumice

24-02-2012, 10:29 PM

Don't worry Pumice, I still have many years of taxpaying ahead of me too. And I won't be using a trust. Fair's fair - I had all my education paid for by the taxpayer.

Well i would definately forgoe my student loan and a life in Aus for a higher permanent tax rate and free education.
Education is atleast a social asset with solid returns. IMO

elZorro

25-02-2012, 09:45 AM

A Fairfax article (too new to post) shows that Wellington's council is scrabbling to get companies and employers to fill offices vacated by the public sector downsizing. The retail sector is also suffering. When National was trying to get back into office 3-4 years ago, they stated that they intended to cap the public sector, not downsize it. Here's yesterday's article from the same reporter, Danya Levy.

http://www.stuff.co.nz/national/politics/6464535/PSA-disappointed-Key-won-t-discuss-cuts

Lizard

25-02-2012, 10:15 AM

elZorro

25-02-2012, 11:11 AM

Never fear El Zorro, just because we don't need everyone to be fully employed to maintain our lifestyles these days doesn't mean we can't find new ways to force the private sector to make work for them:

"The Regulators always win in the end" - NZ Herald (http://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=10787818)

Very interesting article Lizard, brings up a few points.

For one, who were the dim-witted people who presided over the idea of removing most preservatives from pinus radiata without finding safer ones first? I have an idea this was discovered to be an issue by 1998, towards the end of a National term. The BIA didn't act. http://www.buildingdisputestribunal.co.nz/site/buildingdisputes/files/BuildLaw/Issue 5/THE LEAKY HOME DEBACLE MUST STOP NOW.pdf

I know builders who have left the profession meanwhile, laying off their staff, and another two who are very quiet. Painters leaving their families in Hamilton to find work in Christchurch. Another property repair and evaluation firm who stopped doing house checks for a few hundred dollars and got out of that side of the business when they could see the risks.

Regulations and bureaucracy: sometimes these back-room boffins also do some amazing research, the MED for example. When I had to tackle the one-inch thick paperwork for the R&D tax credits, I found most of it was the same text reworded, and in fact the real info for my application could have been condensed into a few pages. But they didn't want to make it too easy, and there were a few big accountants making hay from the situation. Anyone spending just a few hours looking at the paperwork would have seen that it wasn't so scary after all.

These extra rules are opportunities to get an edge in your business, not to give up.

Here's a comment from John Walley, of the NZMEA organisation, about this, in late 2010.

We worked very hard to get both the R&D credits and Accelerated Depreciation on productive equipment – we got the latter in the second Labour Government and the R&D in the third, sadly the current National Government killed both in this term. The removal was ideological and the comments around creative accounting a more palatable justification - few politicians have any empathy or understanding of what it takes to design, develop, produce and sell elaborate products, in particular the assistance available to competitors in other countries.

We continue to push these and other matters hard with both National and Labour as both will have the treasury benches over time. We are making headway with Labour on a policy framework that considers producers rather than disregarding them in favour of consumers.

See what we have to say on the web sites www.mea.org.nz (http://www.mea.org.nz/) www.johnwalley.co.nz (http://www.johnwalley.co.nz/) and www.realeconomy.co.nz (http://www.realeconomy.co.nz/) – they carry most of our policy promotion and association efforts.

craic

25-02-2012, 04:59 PM

In late 1968 I was appointed as a Timber Inspector in the NZ Forest Service, Responsible for imports and exports of timber through the ports. Shortly after that I was trained as an inspector for The Timber Preservation Authority with the duty to check and sample the produce from any plant in the area selling treated timber for any use, housing,fencing and marine were the main areas. I had to know all that there was to know at the time because we were frequently consulted by local councils and others in situations where someone had a new use or a curly problem. Copper/Chrome/Arsenate was by far the most common form of treatment and there were several grades with different levels of salts per cubic foot. Standard framing timber was the lowest level because the arsenic level was enough to frevent borer attack and copper was not a consideration because the framing would not be exposed to weather or dampness and therefore could not rot. The second level was "High Hazard" with a greater salts content for exposed timbers out of ground contact (18 inches or more above ground level). Next highes was Ground Contact timber and above that was Marine use. Diffusion treatment of green timber was introduced using Boric Acid for framing because boric acid is toxic to borer. Not all framing timber could be treated - NZ grown Douglas Fir would not take treatment but it was borer proof anyway. State Housing had their own rules and didn't require treatment of native sapwood . Problems were evident from the earliest composition woods. Chipboard floors frequently collapsed through dampness problems and it was evident that one major producer had the view that their products were bullet proof. I moved onwards and upwards in the mid-seventies and not long after that the industry managed to convince the government that it could oversee its own standards. Timber Inspectors and TPA Inspectors were disbanded and crap building practices were allowed along with the crap materials. Ironically, I finished up in an office in a building designed by one of the countries top architects and everytime we had heavy rain, the place would flood and all the architraves (Customwood) would swell up and need replacing _ they were still trying to fix the leaks years later when I retired.
Very interesting article Lizard, brings up a few points.

For one, who were the dim-witted people who presided over the idea of removing most preservatives from pinus radiata without finding safer ones first? I have an idea this was discovered to be an issue by 1998, towards the end of a National term. The BIA didn't act. http://www.buildingdisputestribunal.co.nz/site/buildingdisputes/files/BuildLaw/Issue 5/THE LEAKY HOME DEBACLE MUST STOP NOW.pdf

I know builders who have left the profession meanwhile, laying off their staff, and another two who are very quiet. Painters leaving their families in Hamilton to find work in Christchurch. Another property repair and evaluation firm who stopped doing house checks for a few hundred dollars and got out of that side of the business when they could see the risks.

Regulations and bureaucracy: sometimes these back-room boffins also do some amazing research, the MED for example. When I had to tackle the one-inch thick paperwork for the R&D tax credits, I found most of it was the same text reworded, and in fact the real info for my application could have been condensed into a few pages. But they didn't want to make it too easy, and there were a few big accountants making hay from the situation. Anyone spending just a few hours looking at the paperwork would have seen that it wasn't so scary after all.

These extra rules are opportunities to get an edge in your business, not to give up.

Here's a comment from John Walley, of the NZMEA organisation, about this, in late 2010.

elZorro

25-02-2012, 09:07 PM

Craic: Problems were evident from the earliest composition woods. Chipboard floors frequently collapsed through dampness problems and it was evident that one major producer had the view that their products were bullet proof. I moved onwards and upwards in the mid-seventies and not long after that the industry managed to convince the government that it could oversee its own standards. Timber Inspectors and TPA Inspectors were disbanded and crap building practices were allowed along with the crap materials. Ironically, I finished up in an office in a building designed by one of the countries top architects and everytime we had heavy rain, the place would flood and all the architraves (Customwood) would swell up and need replacing _ they were still trying to fix the leaks years later when I retired.

Thanks for that background Craic, fascinating. But also terrible to note. For the sake of a few bureaucrats (people the Nats love to hate) a sum of about 15-$20 billion (and more to come) has been lost to the economy. And I can see you've been careful about what you wrote, this is serious stuff. I've never bought a property younger than about 1965, never liked customwood or polystyrene as building material. I remember a plasterer saying (year 2000ish) how they made a 'tidy' $15k profit from retirement units, that had polystyrene walls. They looked after their customers, always made sure to repair any holes if a lawnmower spat a stone at the walls and broke the seal. No-one was going to win out of this sort of building code.

The even bigger picture is that a few more mining inspectors would have stopped Pike River mine in its tracks, before it was operational. Farmers don't like council inspections and planning rules. They're unlikely to consider all the fine detail of erosion effects, groundwater and waterway depletion, effluent and nutrient runoff, that engineers and planners have been trained to advise on. Our power generation system has been split up and is about to be half sold off, so the public sector can be downsized further. Again, this will work out badly for NZ, because who will safeguard our backup or standby generation? That is the unprofitable bit, no private sector firm would take it on. Already we tread a thin line in drought years, with no spare capacity for energy intensive businesses. We need another Think Big programme, and a giant jump to the left..

winner69

26-02-2012, 09:32 AM

Halebop

26-02-2012, 04:37 PM

Ah el-Z - but its the american way. America is the most successful economy in the world and the Nats are determined to create a system of govt in NZ just like the good ol' USA. It'll be wonderful ... for the 1% which all Nats voters aspire too but 99% will never reach.

I'm assuming you mean "economic system" rather than "system of government"? There isn't much evidence that our system is moving closer nor that any NZ party wants to emulate it. We also just had a referendum confirming MMP.

The whole 1% / 99% thing is also emotive (it's supposed to be) and alas more than a bit stupid. 99% of us will never reach the top 1% of wealth earners? No sh!t, that is how math works. By definition if you do a 99/1 split, the two can never meet. The same emotive math will work under any system, even communism.

The better question is how wealth and income and growth of wealth and income distributes? Without wholesale confiscation or the end of money, the top x% are always going to get relatively richer - compounding and the utility value of money ensures this. Focussing on this doesn't achieve anything. It would be much more interesting to understand movement within the the whole and what triggers and drives it? By definition you can't move more than a tiny fraction of the 99% into the 1% (and will anyone feel sorry for the guy at the bottom of the 1% who gets relegated to the 99% - do we suddenly feel OK about him when we hated him the week before?).

So the better questions are things like how big is the middle? How many fall from the middle to the bottom? What do they look like demographically? Who rises from the bottom to the middle? What do they look like? Can we distill this knowledge into a meaningful response or are we merely witnessing inexorable demographic and cultural change, rendering well intentioned attempts at policy response expensive and ineffective?

[logic switched off now, please return to your normal dogma]

elZorro

26-02-2012, 06:41 PM

To answer those questions, we'd need to be bureaucrats, boffins, a drag on the state...
If we could distill some of these discussions, the Waikato Times and other pruned-down newspapers would be a lot more interesting.

Halebop

26-02-2012, 07:00 PM

To answer those questions, we'd need to be bureaucrats, boffins, a drag on the state...

Not really, they work for Statistics NZ, Treasury, Reserve Bank and the like and distribute a lot of data freely. Stats NZ have their table builder function that assists extracting and dicing high level data. The Business Births and Deaths Data is interesting for budding policy analysts - notably Manufacturing employment under the previous government. You may gain an insight as why National didn't think some of the money was well spent...

elZorro

26-02-2012, 08:57 PM

Not really, they work for Statistics NZ, Treasury, Reserve Bank and the like and distribute a lot of data freely. Stats NZ have their table builder function that assists extracting and dicing high level data. The Business Births and Deaths Data is interesting for budding policy analysts - notably Manufacturing employment under the previous government. You may gain an insight as why National didn't think some of the money was well spent...

OK Halebop, did you mean this PDF? http://www.stats.govt.nz/~/media/Statistics/Browse for stats/BusinessDemographyStatistics/HOTPFeb09/BusinessDemographyStatisticsFeb09HOTP.pdf

One of the graphs shows manufacturing businesses trending down since 2002 in terms of births, and the death rate meeting the birth rate by 2009. They shed staff too, but notably it was mostly firms of over 20 staff, not the smaller ones. That implies manufacturers (who were the biggest employers by section) were finding it tough on average. I read somewhere else that it's well-known that R&D spend by larger firms is often aimed at making staff redundant (not just more productive?) through automation. I'm sure most of us have seen that happening. On the other hand, give that R&D funding to smaller firms, and they'll have to take on extra staff to do the R&D, and it'll be aimed at growing the manufacturing base. All those big firms started out as small enterprises.

Thanks for pointing out the data though.

Halebop

26-02-2012, 10:58 PM

OK Halebop, did you mean this PDF? http://www.stats.govt.nz/~/media/Statistics/Browse for stats/BusinessDemographyStatistics/HOTPFeb09/BusinessDemographyStatisticsFeb09HOTP.pdf

One of the graphs shows manufacturing businesses trending down since 2002 in terms of births, and the death rate meeting the birth rate by 2009. They shed staff too, but notably it was mostly firms of over 20 staff, not the smaller ones. That implies manufacturers (who were the biggest employers by section) were finding it tough on average. I read somewhere else that it's well-known that R&D spend by larger firms is often aimed at making staff redundant (not just more productive?) through automation. I'm sure most of us have seen that happening. On the other hand, give that R&D funding to smaller firms, and they'll have to take on extra staff to do the R&D, and it'll be aimed at growing the manufacturing base. All those big firms started out as small enterprises.

Thanks for pointing out the data though.

The table builder is a better source - A document is a point in time, contains an editorial bias and lacks data from revisions.

Manufacturing births and deaths were positive in 2002 but even going back the year before shows it was strongly negative. 2002 was an outlier rather than part of a trend.

The best year since 2002 was 2011 but this was still negative. Through Labour, National, boom, bust, recovery, incentives and non incentives all years have been negative. What it did demonstrate was that Labour being in charge made not a spit of difference. National doesn't appear to make any difference either. The data is telling us that in their current forms Government intervention or lack of it isn't making any difference. If that's the case, it would be more sensible spending no money making no difference than lots of money making no difference.

Rather than go straight to solution (i.e. R&D will solve it!), because it is not clear that is the problem (Professional, Technical & Scientific Services have been growing through this period) and instead look to broader causes of it's long term trend? I'd suggest we have quite a few issues like scale, geography, productivity etc that won't be resolved by building an R&D lab next to the factory.

elZorro

27-02-2012, 07:54 AM

Halebop

27-02-2012, 08:33 AM

Thanks Halebop, I'll be able to have a good look at the data, need to learn how to use the site first. One graph I did find that was in line with what I have been talking about: the trend of total employment and enterprises formed under a Labour term. I'm not a flag-waving Labour person, but they should be justifiably proud of this achievement.

It's a very nice trend.

Knowing that both net manufacturing employment and net Manufacturing Business births & deaths were in decline throughout this period suggests there was more to gain from other parts of the economy. Education, IT, Tourism, Construction and others were all winners without us having to do much more than provide basic infrastructure; Skilled or at least educated workers, roads, health care, law & order, reliable market mechanisms (banking, currency, foreign trade, consumer protections) etc.

westerly

27-02-2012, 07:18 PM

I.

The whole 1% / 99% thing is also emotive (it's supposed to be) and alas more than a bit stupid. 99% of us will never reach the top 1% of wealth earners? No sh!t, that is how math works. By definition if you do a 99/1 split, the two can never meet. The same emotive math will work under any system, even communism.

[logic switched off now, please return to your normal dogma]

An article in the Herald by Tim Hazeldine gives a much better explanation of the concerns about the top 1% Their share of the cake in the UK went
from 7% to 14%, in the US from 8% to18%, in NZ from 6% to !0%.following the Regan Thatcher neo liberal policies.of the 1980,s
In NZ 26 CEO,s are paid over a million dollars - 11 years ago there were none. He quotes the vice Chancellor of Auckland University is paid $640,000
a year when 10 years ago he was paid $360,000 a 40% increase while senior lecturers have had about 10% Inflation adjusted. These massive amounts paid are not based on an increase in productivity or for any real economic reason but have become basically pick a number"
And the rich get richer while a growing number of unemployed youth are perhaps a smouldering timebomb.

Pumice

27-02-2012, 08:44 PM

Far out, another casualty of generation debt
Otago NZRFU in liquidation after 126 years.

Good stuff NZ.

Halebop

27-02-2012, 08:56 PM

An article in the Herald by Tim Hazeldine gives a much better explanation of the concerns about the top 1% Their share of the cake in the UK went
from 7% to 14%, in the US from 8% to18%, in NZ from 6% to !0%.following the Regan Thatcher neo liberal policies.of the 1980,s
In NZ 26 CEO,s are paid over a million dollars - 11 years ago there were none. He quotes the vice Chancellor of Auckland University is paid $640,000
a year when 10 years ago he was paid $360,000 a 40% increase while senior lecturers have had about 10% Inflation adjusted. These massive amounts paid are not based on an increase in productivity or for any real economic reason but have become basically pick a number"
And the rich get richer while a growing number of unemployed youth are perhaps a smouldering timebomb.

I suspect we a comparing salaries and wealth after a massive expansion of standard of living (Asia and the Americas are only a few decades into it and Africa are only just starting), a demographic sweet spot, much better data than has historically been available (we seem to have forgotten there were incredibly wealthy robber barons, literal and figurative, at different points in history) and a move to globalisation and low cost production/improve productivity that makes for context that shouldn't be ignored when making comparisons. But anyhoo...

For the most part I see the salaries of the working rich (CEOs, bankers, whatever) as quite distinct from the wealth of the rich. Only a few people are lucky enough to make the cross over - we read about them in headlines - $100m bonus, $1b stock options or whatever, but these are still the exception.

In a global sense the 1% represents 70m people. Clearly very few of even these make the sorts of super salaries or bonuses that rate a headline. There are only a few thousand mega companies out there, and about 45,000 listed companies in the OECD. As much as we might like to bemoan them, there are hardly any - maybe... 10,000 to 20,000 who make an astounding amount of salary/bonus money out of the 1% (70m) in turn out of 7 billion. We can debate if they are worth it or the relative fairness of earning so much for a work week but they are actually little more than a sideshow spectacle, something emotive and interesting rather than important.

So then consider the truly rich - an unknown portion of the 70m (I don't really know how many of the 1% are actually rich and would suggest the average Wall St occupier wouldn't either). But say I have $100m invested and am happy to live on an income of 1% of my net. An impressive income of $1m but my lifestyle wouldn't be all that different on $2m a year. ...and if $2m it wouldn't be all that different on $3m etc. We are getting into diminishing returns - the utility value of that extra dollar in earnings is negligible. This allows me to choose to save instead of spend. But I still continue to earn 10% on my capital, leaving an extra $9m next year to compound. With this math, it is inevitable that the rich get richer. They can earn great incomes but still grow their wealth at a faster rate than reasonable benchmarks of relativity - average income growth, GDP growth, inflation etc. This doesn't make them evil. Just mathematically advantaged.

Society may choose to redress perceived imbalances with death duties or punishing wealth taxes or public beheadings. But in the end, when I die, even if only $50m is left after taxes, at my bidding my children can start with $50m when most mere mortals start at zero and so the process continues. Those who want to debate the social merit are kind of p!ssing in the wind, the math is inexorable. So really, what's the point?

winner69

27-02-2012, 09:13 PM

Far out, another casualty of generation debt
Otago NZRFU in liquidation after 126 years.

Good stuff NZ.

Get them creditors of their backs eh .... and start over again

Just confirms the old adage in that debt never goes away until paid (or forgiven one way or the offer)

At least teh Phoenix got bailed out ..... where's Forbar when Otago really needs them

elZorro

27-02-2012, 09:40 PM

Fair enough Halebop. And I thought $2mill was quite enough to retire on :)

I made a start on that research you suggested, the graphs are below. Looks to me like the heralded lower tax rates for companies encouraged smaller enterprises (owner proprietors and partnerships) to formalise the setup, from 2000 to 2011. Some may have retired or became employees. Companies are by far the biggest employers in the manufacturing sector. There are other enterprise types (up to 14) but these are negligible. As you say, the number of staff employed by manufacturing sector companies dropped off mostly after 2008, and has kept dropping at a greater rate under National.

However there was a period (2000-2006) when staff employed by manufacturing companies did rise, and without easy access to the 10 years beforehand, I can't see if this was significant. The number of manufacturing-based companies has levelled off, but they are still there, waiting for better times or a call to action.

Halebop, I cannot see your logic in suggesting that this sector should simply be left alone, without some kind of productivity incentive from central government. It can obviously be a powerful new employer, and it has a wide base, with more potential than most sectors for foreign exchange earnings, i.e. exports. If government was prodding this sector at the same time as they were decimating the ranks of the public service, at least the boffins would have some jobs to go to. I'm always looking for someone who can spell and write a document..

elZorro

27-02-2012, 10:03 PM

Here's another set of charts comparing the retail trade with manufacturing, very similar results over the 11 years. Either sector can take in another 40-50,000 staff, to combine with over half a million employees, but the agricultural sector is flat with a range of just 10,000 extra staff likely.

Halebop

28-02-2012, 06:46 AM

Halebop, I cannot see your logic in suggesting that this sector should simply be left alone, without some kind of productivity incentive from central government. It can obviously be a powerful new employer, and it has a wide base, with more potential than most sectors for foreign exchange earnings, i.e. exports. If government was prodding this sector at the same time as they were decimating the ranks of the public service, at least the boffins would have some jobs to go to. I'm always looking for someone who can spell and write a document..

This is a philosophical question rather than logical one. Tourism earns more foreign exhange - and still has demographics on its side. Various Technical, IT, Scientific Services pay people more money. I'm not sure why we'd specifically pick on manufacturing? If employment is the goal I'd rather go broader - and that ends up being quite basic stuff - as you suggest - you'd take on someone just because they could read & write.

I focussed on birth and death data because this is a leading indicator of health, attactiveness and profitability of a sector. But if you choose a slightly different variant of the report you are using and include employment size groups, you'll see small business did not grow. This corroborates the birth and death data. Manufacturing was not an attractive sector to enter, even when it was growing. The fact that employment was growing while there were few new entrants hints there are some outliers in the constituents... if you drill on ANZSIC code pretty much only food, beverage and tobacco showed good results. I suspect this links to competitive advantages in other sectors like agriculture, viticulture and outliers like the regional success of Independant Liquor. Just looking at your retail vs Manufacturing comparison, in percentage terms both retail and the totals slaughtered manufacturing so I'm not sure how you are reading the data? Manufacturing is one of the laggards.

fungus pudding

28-02-2012, 07:15 AM

This is a philosophical question rather than logical one. Tourism earns more foreign exhange - and still has demographics on its side. Various Technical, IT, Scientific Services pay people more money. I'm not sure why we'd specifically pick on manufacturing? If employment is the goal I'd rather go broader - and that ends up being quite basic stuff - as you suggest - you'd take on someone just because they could read & write.

Exactly. As I have pointed out, this is about picking winners. Far better to encourage all sectors through lower taxes on business.

winner69

28-02-2012, 07:20 AM

All I know is that 20 years ago manufacturing accounted for 24% of the country's GDP ..... and now is only 12% ..... a steady decline over the years .... like even over the 7 years that ratio has fallen from 15.5% to the 12.0% .... in real terms (constsnt $ basis) the sector is down 15% ($3 billion)

Manufacturing is the only broad sector of the economy to contract since 2004

And I think we all know the reasons why .... can those be overcome?

elZorro

28-02-2012, 08:18 AM

Points noted, the comparison with retail is that they have similar staffing levels and dropoff, and the agricultural sector is unlikely to employ many more. They're acting like larger manufacturers, automating to reduce staff. The tourism sector is a very poor payer in general, we won't get rich from that.

Manufacturing has dropped back because some businesses have not kept their margins up with R&D, or morphed quickly enough into higher-value products. In my sector, we have, I've tripled turnover and profit in the last few years. It's possible.

Halebop: If employment is the goal I'd rather go broader - and that ends up being quite basic stuff - as you suggest - you'd take on someone just because they could read & write.

I think you'll find that if you wanted to employ a graduate engineer with good practical skills who could also write a good technical document without spelling or syntax errors (i.e. handle quotes to important customers), it would be a short applicant list.

Blendy

28-02-2012, 10:58 AM

Where does software development fit into the stats? Manufacturing is where it should be IMO but I'll bet its under Services. Is software development the only example? Or are there others?

What about our film industry as another example? Or is that a separate category?

fungus pudding

28-02-2012, 11:46 AM

Major von Tempsky

28-02-2012, 01:16 PM

The definition of manufacturing requires "a physical transformation of a material good" and hence software development doesn't fit that.

westerly

28-02-2012, 03:58 PM

...

"For the most part I see the salaries of the working rich (CEOs, bankers, whatever) as quite distinct from the wealth of the rich. Only a few people are lucky enough to make the cross over - we read about them in headlines - $100m bonus, $1b stock options or whatever, but these are still the exception. "
"Society may choose to redress perceived imbalances with death duties or punishing wealth taxes or public beheadings. But in the end, when I die, even if only $50m is left after taxes, at my bidding my children can start with $50m when most mere mortals start at zero and so the process continues. Those who want to debate the social merit are kind of p!ssing in the wind, the math is inexorable. So really, what's the point?

You miss the point. Hazeldines article was based on the last chapter of an OECD report "Divided We Stand : Why Inequality Keeps Rising " The top 1% share of the cake was in decline for the 8 decades prior to Regan/ Thatcher. Since then it has steadily increased.
Ignoring the super rich whose decendants usually lose the family fortune fairly quickly those left behind the working rich are steadily increasing in numbers.The large number of people previously employed in manufacturing etc. especially those who worked with their muscles now find it hard to get worthwhile employment.
This leads inevitably to the sort of rioting seen recently in England as the frustrations come to the surface.
The rich maybe abe to live in relative security in gated communities immune to the common rabble but for how long?

elZorro

28-02-2012, 04:05 PM

The definition of manufacturing requires "a physical transformation of a material good" and hence software development doesn't fit that.

I'm sure Halebop can tell us where those categories fit with software and the film industry, but I'd bet there won't be near as many people employed in those areas. If politicians could help/fix the manufacturing sector, retail would do better too. Both sectors are major employers.

fungus pudding

28-02-2012, 05:16 PM

. If politicians could help/fix the manufacturing sector, retail would do better too.

What? No trouble to import goods in demand. Nothing suggests retail figures would lift if goods are made here. It's about quality and or value for money - nothing to do with place of manufacture to, I'd guess, around 99.9% of the poplulation.Anyway they can't fix things that aren't broken. You just have to face the facts that manufacturing in NZ will always be limited, which does not mean it's broken.

elZorro

28-02-2012, 05:31 PM

What? No trouble to import goods in demand. Nothing suggests retail figures would lift if goods are made here. It's about quality and or value for money - nothing to do with place of manufacture to, I'd guess, around 99.9% of the poplulation.Anyway they can't fix things that aren't broken. You just have to face the facts that manufacturing in NZ will always be limited, which does not mean it's broken.

FP, isn't there some kind of correlation between the percentage of people in paid employment, and the performance of the retail sector? Profitability has a part to play too. Out here in the provinces, we know all about it when the dairy payout is high. Retail sales are quite peaky then, and the opposite when payouts are low. That's what I meant by comparing manufacturing and retail. Drop a few tens of thousands of workers from a 'doomed?' sector, and retail will suffer. Not to mention commercial property utilisation..

Below is a meme (apparently - an inside joke on the internet). Ginga Adele screams the words of one of her songs. Courtesy of offspring..

Halebop

28-02-2012, 10:55 PM

You miss the point. Hazeldines article was based on the last chapter of an OECD report "Divided We Stand : Why Inequality Keeps Rising " The top 1% share of the cake was in decline for the 8 decades prior to Regan/ Thatcher. Since then it has steadily increased.
Ignoring the super rich whose decendants usually lose the family fortune fairly quickly those left behind the working rich are steadily increasing in numbers.The large number of people previously employed in manufacturing etc. especially those who worked with their muscles now find it hard to get worthwhile employment.
This leads inevitably to the sort of rioting seen recently in England as the frustrations come to the surface.
The rich maybe abe to live in relative security in gated communities immune to the common rabble but for how long?

I didn't so much miss the point as disagree with the premise.

Comparing wealth 8 decades prior to the 80's with what has happened beyond is not my idea of an ideal benchmark; Consider the 80 year period contained...

Influenza (Killed customers, Interrupted trade, Reduced confidence)
Recessions that we would now probably call depressions (Depending on the country) that occured around 5 times before the "great depression" - i.e. except for the bull run leading to the great depression most of the first 30 years of the 1900 were spent in financial panics and depression
2 World Wars (Created labour shortages and wage inflation)

So we are into the 1950s before things get relatively calm and a little more business friendly. But the returned soldiers wanted a wage dividend and this was delivered at the expense of business. Wage inflation was high, business profitability despite GDP growth hard to attain. Then western governments had to commit to the healthcare and education of the baby boom - raising taxes and building an inflationary momentum that bled productivity and real growth by the end of the 70's

Finally by the late 80's we finish with the costs of educating Baby Boomers, get a tail wind from the modern version of the industrial revolution (Personal Computing, Networked Computing, Faster Memory, Bigger Storage, Office Automation, Sotware Innovation, Wireless Communications, Broadband), have the baby boomers move into their peak earnings, further boost productivity via a liberalising of global trade... and we are surprised people get richer than the first 80 years of the century?

On riots in London, they are no different from occupying Wall Street or over-throwing despots in the Middle East. Demographers have been predicting youth revolutions between 2010 and 2020 for 20 years. They didn't predict the triggers and as we've seen they don't matter, the trigger just needs to be pulled. A bubble of highly educated, underemployed young people was inevitable. So were the consequences. And these have little to do with the 1% or Middle Eastern dictators and much to do with a bubble of highly educated, underemployed young people. Just like their mostly Baby Boomer parents they are rebelling against the status quo because they can - there are a lot of them.

westerly

29-02-2012, 08:59 PM

I didn't so much miss the point as disagree with the premise.

Comparing wealth 8 decades prior to the 80's with what has happened beyond is not my idea of an ideal benchmark; Consider the 80 year period contained...

Influenza (Killed customers, Interrupted trade, Reduced confidence)
Recessions that we would now probably call depressions (Depending on the country) that occured around 5 times before the "great depression" - i.e. except for the bull run leading to the great depression most of the first 30 years of the 1900 were spent in financial panics and depression
2 World Wars (Created labour shortages and wage inflation)

So we are into the 1950s before things get relatively calm and a little more business friendly. But the returned soldiers wanted a wage dividend and this was delivered at the expense of business. Wage inflation was high, business profitability despite GDP growth hard to attain. Then western governments had to commit to the healthcare and education of the baby boom - raising taxes and building an inflationary momentum that bled productivity and real growth by the end of the 70's

Finally by the late 80's we finish with the costs of educating Baby Boomers, get a tail wind from the modern version of the industrial revolution (Personal Computing, Networked Computing, Faster Memory, Bigger Storage, Office Automation, Sotware Innovation, Wireless Communications, Broadband), have the baby boomers move into their peak earnings, further boost productivity via a liberalising of global trade... and we are surprised people get richer than the first 80 years of the century?

On riots in London, they are no different from occupying Wall Street or over-throwing despots in the Middle East. Demographers have been predicting youth revolutions between 2010 and 2020 for 20 years. They didn't predict the triggers and as we've seen they don't matter, the trigger just needs to be pulled. A bubble of highly educated, underemployed young people was inevitable. So were the consequences. And these have little to do with the 1% or Middle Eastern dictators and much to do with a bubble of highly educated, underemployed young people. Just like their mostly Baby Boomer parents they are rebelling against the status quo because they can - there are a lot of them.

It was the decline in the wealth of the super rich over the previous 8 decades
The education costs of the Baby Boomers was cheap compared to the education costs of their children and grandchildren. Partly because of the expectations of the BB's
Health costs have risen mainly because of technological advances.
It could be argued that the computer revolution has benefited a relative few financially .
I am not sure the London rioters were "highly educated but definitely under employed."

Halebop

29-02-2012, 11:00 PM

From your response I'm now not sure if you are pro or con the 80 year comparison period? I'm going to stick with my prognosis the the 80 year prior period was a pretty dumb benchmark, OECD report or not.

It was the decline in the wealth of the super rich over the previous 8 decades

Correct. The more even wealth distribution was caused by Business people and Labourers alike losing money or going broke. Maybe not a good choice to benchmark against. But hey, when lots more people are on pitiful incomes wealth distribution looks really nice - very narrow and compact.

The education costs of the Baby Boomers was cheap compared to the education costs of their children and grandchildren. Partly because of the expectations of the BB's

That may be so, I haven't looked at relativities but it's not really relevent to the 80 year prior comparison. Because the Baby boomers were a large tightly packed demographic, they needed to be paid for all at once. This put pressure on economic growth (and therfore the wealth of the rich) because education is a laggy factor - pay now, benefits come later.

Health costs have risen mainly because of technological advances.

The healthcare referred to was the cost of birthing and raising the same tightly packed Baby boomer demographic. While they were children, a pay now, benefit later factor that was also a lid on economic performance (and therefore the wealth of the rich).

It could be argued that the computer revolution has benefited a relative few financially.

Productivity benefits for business were huge but it makes me confused about what you are trying to say? There was no reason why the wealthy got wealthier? More workers swapped tools and spades for keyboards, providing career longevity (manual labour wears people out and injures them more often). The Baby Boomers who work in doors will find this very same office automation allows them to effectively work beyond historical age norms. These are profound structural benefits without needing to reference a handful of internet billionares, but it certainly did influence wealth... There are plenty of non technology companies from Supermarkets (Scanners, bar coding, Remote Handheld Devices and automated stock ordering) to Insurance Companies (Remote Vehicle Assessing, Relational Databases, Analytical and Pricing Tools, Mobile Offices for Sales Staff) that extracted time, process and financial benefits from what are now common technologies.

I am not sure the London rioters were "highly educated but definitely under employed."

Relativities. Young people today are better educated than at any point in history in almost every country except perhaps a handful of African nations. Due to recession and simple demographic weight of numbers, there are also many of them and they are under employed. In the OECD at least the earlier 80 year period probably also included relatively more children working as labourers rather than learning their ABCs. Compared to this early period the rioters could at least read well enough to receive their flash mob texts. I'd suggest no matter which mob was rioting, protesting or shooting for their freedom in whichever country, they would in aggregate have a better education than they would otherwise have had at other points in the last century.

fungus pudding

01-03-2012, 08:16 AM

FP, isn't there some kind of correlation between the percentage of people in paid employment, and the performance of the retail sector? Profitability has a part to play too. Out here in the provinces, we know all about it when the dairy payout is high. Retail sales are quite peaky then, and the opposite when payouts are low. That's what I meant by comparing manufacturing and retail. Drop a few tens of thousands of workers from a 'doomed?' sector, and retail will suffer. Not to mention commercial property utilisation..

No doubt, but if the retail spending is benefitting because we have propped up manufacuring with long term incentives, or anything else with ongoing incentives, we will never find genuinely profitable areas where we can compete. It's still need that is invention's mum. So no point in making a $5 widget when we can buy one from Taiwan or Jupiter for $2. Look back to our proteced economy - it was like a communist state, where we needed a license to import everything. We had to collect postage stamps on a limited daily basis to subscibe to an overseas magazine etc. All shirts were Lichfield brand and like sandpaper to wear. Crockery was impossible to get because the Govt's Crown Lynn made stuff here - and you could hardly lift a cup. This was all largely because we were protecting NZ 'industries'. Problem was so many jobs didn't need to be done. Yes - we were probably more equal in terms of wealth distribution, which simply meant we were all broke. (As it's not possible to make everyone wealthy, the only way to make us all equal, is to make us all poor.) I was born in the 1940s, and I can assure you the average NZers are now up with the very wealthiest of that era. This country will eventually flourish by finding niche markets - and that is happening.
To quote from Desiderata,'Whether or not it is clear to you, no doubt the world is unfolding as it should.'

Hoop

01-03-2012, 12:52 PM

"........I am not sure the London rioters were "highly educated but definitely under employed....."

Quote from the Guardian (18th August 2011) (http://www.guardian.co.uk/news/datablog/2011/aug/11/uk-riots-magistrates-court-list)..."..People facing court charged with riot-related offences are overwhelmingly young, male and unemployed..."
".... And, in an unprecedented act of government transparency, the Ministry of Justice has instructed Magistrates Courts across the country to provide full court results details of all riot-related cases. These are compiled by the individual courts themselves and have never been released on such a scale before.They give unrivalled details of the inner workings of England's lower tier courts. They record each defendant's name, age, address, charge, plea and sentence - as well as if the case is remanded in jail or committed to the crown court for a jury trial.
Access to the data means for the first time we can work out what kinds of people are facing court, how old they are, where they live and how severe their punishments are, providing a unique insight into the criminal justice system following the worst riots in living memory...."

One study from the Guardian http://www.guardian.co.uk/news/datablog/interactive/2011/aug/10/poverty-riots-mapped.

It seems the British courts are giving the rioters jail time.

I've got 2 teenage boys who are also hellbent on destroying things for fun.....is this a GenY thing?

Halebop

01-03-2012, 02:58 PM

One study from the Guardian http://www.guardian.co.uk/news/datablog/interactive/2011/aug/10/poverty-riots-mapped.

It seems the British courts are giving the rioters jail time.

I've got 2 teenage boys who are also hellbent on destroying things for fun.....is this a GenY thing?

Nice map! The Google map API is very useful for depicting geo spatial data.

On your two teenage boys - can't offer solutions but if it makes you feel better I just think young people, males in particular, do stupid things. If we were honest most of us can recall doing some idiotic/dangerous/thoughtless things when we we young. Anthropologists would probably inform us that it's the way we learn ...Grrrr, Ugg say fire hurt! [2nd touch] Grrr, Ugg say fire still hurt!

elZorro

03-03-2012, 02:55 PM

This is the sort of business we need to be doing. I hope the govt can give this guy plenty of support.

http://www.stuff.co.nz/business/industries/6516334/US-hi-tech-firm-considers-NZ-launch

winner69

06-03-2012, 11:19 AM

Hey Lizard .... what you think of the stuff in this article?

If you ran your household like this you'd be heading to where the homeless go

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10790137
Treasury warns of deficit blowout

janner

07-03-2012, 08:50 AM

Came in 3 hours ago .

REAKING….as bondholder acceptance revealed to be a miserable 20%, Greek finance ministry stuns world with details of German banker meeting.
by John Ward

MARKETS IN FREEFALL AS BERLIN APPEARS TO PULL PLUG ON GREEK DEBT RESTRUCTURE

Just released by the Greek Finance Ministry. Complicated, but sounds absolutely sensational: (my highlight)

'The Republic?s representative noted that Greece?s economic programme does not contemplate the availability of funds to make payments to private sector creditors that decline to participate in PSI. Finally, the Republic?s representative noted that if PSI is not successfully completed, the official sector will not finance Greece?s economic programme and Greece will need to restructure its debt (including guaranteed bonds governed by Greek law) on different terms that will not include co-financing, the delivery of EFSF notes, GDP-linked securities or the submission to English law...'

This feels ominously like the Germans declaring UDI and saying no deal. I have to assume that 'official sector' means all central banks and sovereign holders - perhaps plus EU, but then why hasn't the release come from Brussels?

Major stock markets and banking sectors in France, the UK and Germany just fell off the Matterhorn, so I have to assume that they see it the same way. The CAC 40 in Paris has now fallen 3pc. French banks are leading the falls. Credit Agricole is down 6.3pc Societe Generale has shed 6pc and BNP Paribasis also down nearly 6pc.

In Germany, Commerzbank is the biggest faller in the DAX 30, down 6.5pc at ?1.776.

Finally, I just contacted A senior respected UK wealth manager Chairman who concurs: it's game over, and default.

It also, on the face of it, looks like amputation. Over to Washington?

winner69

07-03-2012, 09:41 AM

janner .... dont panic .... bad for the health .... punters just holding to the last minute before saying yes ....it'll be alright on the day

Pumice

07-03-2012, 10:47 AM

janner .... dont panic .... bad for the health .... punters just holding to the last minute before saying yes ....it'll be alright on the day

For what purpose would they do that? so their bank stocks can lose 6%?

I’m hoping for a default. Punish those who borrow too much and reset what the market would have done had it not been for intervention.
It’s not like they aren’t stuffed anyway.

Halebop

07-03-2012, 10:56 AM

janner .... dont panic .... bad for the health .... punters just holding to the last minute before saying yes ....it'll be alright on the day

I'm not clear if Greece are better off in the EU and can see the merit that maybe a default is a better option for them? There are however lots of balancing factors from both sides of the argument (Availability of freshly printed EU Cash being one of them)

Are you are being tongue in cheek or serious W69 (I agree all the same)? Suspect this is just a continuation of the same brinkmanship game Germany have been playing all along. They don't just want to debt deal - don't really think that is the hard part to sort - they want to strengthen the EU hold on its membership and Greece have been squirming under the harsh realities of what this means. In an honest moment even Greece would have to concede it hasn't played with a straight bat but I guess its the old story of - owe the bank a little money, it's your problem, owe the bank a lot of money, it's their problem.

Germany probably have the most to lose from a smaller EU but there are so many moving parts I'm struggling to work out who has played the best hand so far?

janner

07-03-2012, 11:28 AM

Hoop

07-03-2012, 12:04 PM

Not panicing W69.

It is the general opinion of many that the Hedgies would prefer a default so that they claim insurance.

The " Fallout " will effect our market.

The 23rd March is said to be the day.. Greek National holiday that weekend.

Effect our market??...short term media gunshots always scare rabbit investors...but rabbits quickly forget..eh? ......Remember the the 28th Fewbruary 2011 Media announcement S&P and Fitch at a similar time both downgraded Greece to default status...their lowest credit ranking... Logic has it that that announcement should have affected the Market then not now.

Methinks the 23 March could be the start to a few months holiday for many of the far too many overpaid public servants.

As Winner points out...Politically Greece will bargain right to the bitter end...yes Greece has bargaining power...except our terms or we will disorderly default and all your past loans will evaporate to nothing..

Actually.......I wouldn't be at all surprised if Greece is willing to accept a Disorderly default and is pissing around hoping that Germany will throw its toys out of the Cot..then Greece can say its all their fault.

History has a lesson or two for Greece. I wouldn't be at all surprised if Greece is looking at The Argentinian Disorderly Default Model as a possible solution.

winner69

07-03-2012, 12:10 PM

Effect our market??...short term media gunshots always scare rabbit investors...but rabbits quickly forget..eh?

23 march could be the start to a few months holiday for the far too many overpaid public servants.

As Winner points out...Politically Greece will bargain right to the bitter end...yes Greece has bargaining power...except our terms or we will disorderly default and all your past loans will evaporate to nothing..

Actually.......I wouldn't be at all surprised if Greece is willing to accept a Disorderly default and is pissing around hoping that Germany will throw its toys out of the Cot..then Greece can say its all their fault.

History has a lesson or two for Greece. I wouldn't be at all surprised if Greece is looking at The Argentinian Disorderly Default Model as a possible solution.

Big difference now is that back in the Argie days these toxic things called CDS and other exotic things didn't really exist

If there is a 'default' ,,,, technical or wahtever .... that will cause some turmoil as the derivatives get unwound .... some fool has to be at the end of the chain .... even if it some poor city council in outback Australia

janner

07-03-2012, 12:45 PM

Argentina was not so intertwined with the EU banks as Greece is. Also not so Geo-politically strategic.

There are many more Arses to covered before this is played out.

Hoop

07-03-2012, 01:18 PM

Big difference now is that back in the Argie days these toxic things called CDS and other exotic things didn't really exist

If there is a 'default' ,,,, technical or wahtever .... that will cause some turmoil as the derivatives get unwound .... some fool has to be at the end of the chain .... even if it some poor city council in outback Australia

Argentina was not so intertwined with the EU banks as Greece is. Also not so Geo-politically strategic.

There are many more Arses to covered before this is played out.

All true true..

Credit Default swaps were around in the Argentinian days and it was a nightmare to unwind so I'm told...but agree not to the same extent as the CDS used to unify the Euro nation..so yeah the Greece situation is far more complex and has a much more far reaching effect as European banks are everywhere in the world....But remember Greece is not a big nation so are these debt ginormous to the point that it will default the EU? or contagion from Greece to Spain to Italy to Ireland France has a lot of these CDS haven't they...in the end it's all speculation and doom talk atm...In reality the EU can still afford (economically) to cut Greece loose atm, but it's unattractiveness to do so is that it will take a long time (up to 5 years they say?).

It's too complex to write on ST about..because even ignoring the complex financial aspects, socially/culturally atm the Greeks haven't got productive earnings/ worker to get them out of the economic hole.

No disrespect to anyone but I now wish I hadn't written my post today:mellow:...haven't got that much spare time to be self-opinionated on ST in the first place.
.

To simplify all my posts.....Winner Janner ... odds on that Greece will disorderly default??????? ...yes I think so...Greece will be looking at those Argentinian Post Default GDP figures

janner

07-03-2012, 07:45 PM

Hoop says..

" No disrespect to anyone but I now wish I hadn't written my post today...haven't got that much spare time to be self-opinionated on ST in the first place. "..

I agree with his sentiments..

My original thought for this Dooomm site was to get the opposite reaction.. Which Lizards responded to very well ( and others )..

Now I think that we are into a critical phase of the European Problem.. ( My personal opinion ).

Greece is a country thought of in general as a country of Donkeys and Fishing villages.. Idyllic Islands.... Sun and olives..

And seamen that are the first over the side when in trouble .. ( A toss up with the Italians )..

It is strategic in the defence of western ideology..

Will now make all of my comments on Greece into the Eurogeddon site as advised by Craic..

.

pietrade

23-03-2012, 10:02 AM

Here's some more depressing news - thanks to 'Brasscheck' http://www.realecontv.com/videos/eur...t-default.html

craic

23-03-2012, 10:29 AM

doesn't work on my pc. Maybe it's in Greek?

pietrade

23-03-2012, 05:08 PM

Hmmmmmmmmm. This should do it. http://www.realecontv.com/page/9872.html

Cheers

trackers

29-03-2012, 10:33 AM

Pumice

29-03-2012, 11:05 AM

Great article! Cheers trackers

Animeart

30-03-2012, 11:03 PM

I just don't see the people with power doing anything to change the fundamentals, in order to build a more robust financial system. Greed on the wall street together with power hungry politicians will always ensure that self interest wins over public interest every time.
Have you ever come across an US or European leader willing to fight for what he/she believes in regardless of whether he/she wins a second term or not? I doubt it.
The result? Rich will continue to get richer and the poor continue to get poorer. Surely the middle class will grow in number, as evident in China and India, but the gap between the top tier and the bottom one will only get worse.

slimwin

30-03-2012, 11:44 PM

Have you ever come across an US or European leader willing to fight for what he/she believes in regardless of whether he/she wins a second term or not? I doubt it.

How about Hitler,Stalin and Franco. They fought to make sure the got a second term, and third and fourth...

elZorro

31-03-2012, 11:38 AM

Read this today, reminded me of the above:

http://www.esquire.com/print-this/young-people-in-the-recession-0412?page=all

Really good read

http://www.esquire.com/cm/esquire/images/NC/esq-chart-01-0412-lg.jpg

Trackers, this looks like the start of a great worldwide levelling out process. A few figures a bit distorted in that article, possibly written by a younger person, but very interesting anyway. The author hasn't looked a level deeper: the boomers haven't been able to trickle down more to the generation after them, because their working lives have coincided with the end of cheap energy.

Let's hope that research powerhouses like the USA will be able to resolve this soon, by one or more of many means, and we'll see what other resources run out first. With lots of cheap energy, it won't be clean water anyway. We could simply desalinate and purify the rising seas, and pump it anywhere it was needed.

trackers

31-03-2012, 12:43 PM

Hi elZ, I think the points made are accurate though I agree its one-sided and embellished somewhat...

Along the lines of what Animeart says...the decision makers that could facilitate the sort of changes you suggested (and others like reducing benefits to decrease deficit, CGT's etc) are unlikely to be voted in by the (resistant to change) middle aged middle-class white majority, and even if they were would likely get stonewalled by the big business-backed senate and congress.... Ideas like that often mean pain in the short term and that doesn't make one popular with voters (budget pulled from somewhere else like retirement or healthcare? higher energy prices when switching to sustainable alternative?). Interesting times

westerly

02-04-2012, 06:33 PM

Read this today, reminded me of the above:

http://www.esquire.com/print-this/young-people-in-the-recession-0412?page=all

Really good read

http://www.esquire.com/cm/esquire/images/NC/esq-chart-01-0412-lg.jpg

I built a house in 1967 [I'm older than a bb - not by much] It sat on a bare section , no fences,paths, or garage. No furnishings: all this was normal for the time. I look at the landscaped subdivisions fully fenced, with paths, built in garage etc. an wonder at the expectations of the current first home purchasers. It is hard to be sympathetic.
Westerly

Pumice

02-04-2012, 08:05 PM

I built a house in 1967 [I'm older than a bb - not by much] It sat on a bare section , no fences,paths, or garage. No furnishings: all this was normal for the time. I look at the landscaped subdivisions fully fenced, with paths, built in garage etc. an wonder at the expectations of the current first home purchasers. It is hard to be sympathetic.
Westerly

Agree with the sentiment. But unfortunately there’s little point building at $50k house on a $350k section.
To get a cheap section means you will end up spending more on transport costs than the increase in mortgage payments required to live closer to work.
IMH non home owning, massive student loan, having to live in Aus O.

elZorro

04-04-2012, 08:59 PM

You might be in the right place Pumice. Over here any go-forward R&D will mostly be top-up funded in association with CRIs. Small buinesses cannot be trusted to spend tax benefits wisely for the common good, according to National. Over in Aussie the govt thinks the private sector is worth a shot.

AUSINDUSTRY has replaced the R&D Tax Concession with the R&D Tax Incentive, increasing support for small and medium sized enterprises.

Ausindustry has made available a new publication which outlines what information will be required when businesses commence registering for the Incentive from 1 July 2012 and provides additional explanatory materials to help businesses complete their applications.

The R&D Tax Incentive replaces the R&D Tax Concession from 1 July 2011 and is jointly administered by AusIndustry(on behalf of Innovation Australia) and the Australian Taxation Office (ATO).

The new R&D Tax Incentive is said to be the biggest reform to business innovation support in more than a decade.

The new scheme boosts support for small and medium size enterprises with annual turnover of less than $20 million, with the rate of support above the normal tax deduction jumping from 7.5 cents in the dollar to 15 cents in the dollar. This yields a total tax offset of 45 cents in the dollar.

According to AusIndustry estimates, more than 8,000 businesses will access the R&D Tax Incentive. They will be able to register for the R&D Tax Incentive from 1 July and the online smart form will be made available in June 2012.