New Zealand a high cost economy. 26 February 2021

New Zealand a high cost economy. 26 February 2021

Low income, low wage, high cost economy.

It has been reported through the media that New Zealand is a low income and low wage economy that is being really affected by the high costs imposed through policies and plans from central and local government.

The government (both Central and Local) should not be trying to address ideological ideas through policies and plans. This seems to be happening but it does not seem that the people making these decisions have thought through the consequences of their proposals.

These policies/plans which seem to have a large helping of social engineering built into them, all serve to drive up direct costs which are passed onto the general population. The problem is that the sectors that are mostly affected by this increase in direct costs are the lower wage and income earners and hence they tend to slip further below the median income levels and become more dependent on handouts.

The increase in direct costs hits the low income earners much harder than those above the median income levels with a classic example being the Auckland regional fuel tax. This tax is levied at a set rate per litre of fuel and therefore the amount paid by consumers is the same across all income levels.

But when it is calculated as a percentage of their total income the effect on the low income earners is shown to be far greater than that on the mid to high income earners. In fact the more you earn the less that this type of tax increase affects you even though you are all paying the same amount.

This situation is the same when we look at increases in local body taxes, utility charges etc. The charges are set as a direct cost but when you look at them as a percentage of overall income it is the low income earners that are hardest hit by any increases.

The government some years ago privatised the electricity supply market and as a result charges have gone up to allow for (among other things) the government to get a return on its investment in the generation and transmission networks. This increase in charges is much harder felt by the low income earners than those above the median income levels and this is just widening the gap between the haves and the have nots.

When we consider public health the situation is the same, the higher income earners can afford to spend more on private health insurance and therefore they receive better overall rates of care due to the ability to fund their own care through this, whereas the low income earners are left to rely totally on the public health system with no alternative option.

Central government has over many years devolved much of the responsibility for social services down to regional and district councils and this has driven quite a large overall increase in rates to allow for the councils to fund this extra responsibility. Again this increase in charges hits the low income earners much harder as a percentage of their total income.

The government’s economic policies have over many years led to a huge increase in housing costs (either rentals or purchased) and again this hits the low income earners much harder than those above the median income levels as a percentage of their total income.

Many of the causes of these policies, plans and costs come from Computer Modelling and Social Media.

In the case of Computer Modelling we have come to believe that computers can predict everything through Modelling. By putting in numbers/figures it can give the modeller the figure that is wanted by those who want to draft a policy to fix the issue that they perceive they need to fix.

It is a fact that computer modelling can be used to give any answer that you want, simply by changing the data inputs till you reach the desired result.

Social media has an important role in driving change and this is often used by minority groups who want to drive change towards a pre-conceived point of view.

These people often fail to look at the consequences of their intended changes which can often have perverse results.

It should always be remembered that computers (an inanimate tool) never have any feeling for what is happening it’s a very cold tool that can’t tell the user what the consequences of their actions are.

So the outcome is that we need people who have practical experience and common sense in the places of decision making.

The government of the day has to stop transferring responsibilities and social engineering functions down to regional and District Councils. These transfers have the effect of increasing the tax burden on the ratepayers of New Zealand without the Central Government needing to raise the tax take by introducing new national taxes.

The low income ratepayers that are mostly on a fixed rate of income simply cannot carry any increased burden of costs that result from these transfers.

The current government promised in its 2020 election campaign that there would be no new taxes brought in by them in this term of office but does this promise also extend to the increase in taxes levied by Local Governments due to the transfer of responsibility from Central Government or this just another way of bypassing their promises?

Peter Buckley

Board Member P.L.U.G.