Originally Posted by
Bjauck
Leaving out land from inflation calculations taken into account by the RBNZ seriously underestimates the inflation rate. kiwis spend a significant percentage of their income on buying land. Consequently the way interest rates have been set in NZ inherently inflates land because buyers have easy access to leveraging.
I disagree with you about the older generation failing to save for retirement. Partly because of the above, in addition to fiscal settings, the NZ Govt has encouraged leveraged investment into housing, whether owner occupied or investor housing, as the de facto pension scheme.
Even when Kiwisaver eventually appeared, it was given no tax incentives to encourage people to contribute more than the minimum to get the now reduced annual credit. Contributions are taxed and income within the scheme is taxed despite being locked up until retirement age. No early retirement is allowed. It is a scheme with a weak begrudged incentive. There is no tax on withdrawals on retirement as it has already been fully taxed when locked up.
Hence NZ real estate prices have continued to rocket as Kiwis, especially the higher paid and wealthier, put their money in the tax efficient investment with the best incentives.
It is a disaster for some of the next generation - those who do not have wealthy family. The kids with parents who have multiple properties stand to inherit these. NZ does not have death duties or inheritance taxes.