What is the Real Economy?
The ‘Real Economy’ is made up of the farmers, manufacturers, tourist operators and service providers that sell to the world and generate New Zealand’s external income. As Angus Tait once said, “There are three ways to generate wealth; you farm things, you make things or you dig things up.” That is the essence of the real economy.
[ read more ]

mist Posted:
Perhaps IMF formulas are not accurate for this area.
(view article + comment)
mist Posted:
" tax increases in one area supports decreases in another is correct" it can only be correct if it is true. Observation and repeated sampling has proven that the hypothesis is faulty. Tax increases in one area are not causally linked to decreases elsewhere - not "possibly", not "it adds up". "Philosophically" it _might_ but testing proves it does not. One could even say "it should" but we both know an equivalent term for "it should" is "doesn't" What drives taxes down is political advantage. If a political party has an agenda they don't want the public to look at too closely, then sweeters (aka "bait") is put forwards. Tax decreases is a classic. This can be achieved because the tax increases and tax decreases are not linked. They're not zero sum nor do they have causal or proportional connection. This is because the "buffer solution" in the middle is that endless hole. tax increase means more spending. tax decrease means more government borrowing. The in/out relationship is decoupled, through size and power in the marketplace (financial economy). The abysmal productivity is because of the massive overheads from doing business in NZ. personal taxes double the rates of the US, huge taxes on goods and services, massive levies on critical imports, price gouging in the energy and communications markets, interest rates 300 to 500 times that of the US!, and not nearly the number of cost writeoffs either (subscriptions, training, vehicle rebates). Nor would get the 401k option either, of rebuying into the same market and not having to pay CGT. Oh and horrendous ever inflating local rates, again much much higher, for less, than our foreign counterparts (excepting Scandinavian countries). Our "abysmal production" is a result of this overtaxation being sand in the gears of the economy, wearing it down and rubbing out real growth. Putting CGT makes that problem worse!! And to sum up... your last comment.... O.M.G. You think that improving our situation, of people not wanting to save or invest in government buggered industry is to bugger up the ability to accumulate equity in useful assets??????? Where do you think people are going to get savings or capital to do anything??? (including retiring when their earning ability is severely reduced!) Put it in finance companies???????????? Buy the oh-so-excellently-performing NZX? In the few companies squeaking by?
(view article + comment)
John Walley Posted:
I think we agree on the lending without security issue. It might well be that the intent to change the source of tax and not increase government spending is fictitious, however given the provision that government spending does not change the statement that tax increases in one area supports decreases in another is correct. The broader point is demonstrated by the Romney situation where he pays tax at half the rate of his salaried staff - and in the USA capital gains carry a 15% tax rate - it will be interesting to see how that one pans out. For New Zealand the economic distortions supported by the complete absence of capital gains tax are clear from our abysmal productivity record. Why save, why invest in production (taxed interest paid or via the income statement) when money can be made without tax from passive asset appreciation.
(view article + comment)
carl Posted:
"a Capital Gains Tax means less tax in other areas or lower borrowing for the same amount of government spending. " Only in your wildest dreams, mate. a drip or a bucketful does not change an infinite hole. The only reduction in tax you would see is short-term, and done to create a perception. Once the elephant was sold it'll be put back up, often with extra claw-back clauses to catch more cash. And Banks do lend for shares - but at lower rates of coverage. 50% for business assets is rule of thumb, 80% for first mortgages, 20-25% for basic unencumbered share parcels. with additional security and reasonable ability to cover debt servicing compliance. That's the ball. So why's the man (original poster) running with such blatantly obvious fouls????
(view article + comment)
DGS Posted:
SEE ABOVE
(view article + comment)

Recent News

BusinessDesk: "US economy remains vulnerable to shocks from Europe" - Interest, 3 Feb 2012 Tweet It's been a great start to the year and investors found little reason to change much today, ahead of January's US jobs report due tomorrow. While Federal Reserve Chairman Ben Bernanke told lawmakers there were signs of improvement in the...
Oi! You’ve missed a bit... - Economist - Babbage, 3 Feb 2012 HOW much easier it would be to locate and repair damage to bridges, wind turbines and other dumb objects if those objects could tell you what the problem was. Researchers at the University of Strathclyde, in Britain, led by Mohamed Saafi, are therefore trying to give them a voice, by devising a...
Survey of Banks Shows a Sharp Cut in Lending in Europe - New York Times, 3 Feb 2012 The figures raise concern that Europe is on the verge of a credit crunch that would cause a deeper recession than had been expected.
TYSON: America’s Three Deficits - Project Syndicate, 3 Feb 2012 TYSON: America’s Three Deficits The US faces painful choices about how to close its long-run fiscal gap, and a credible plan should be decided now and implemented promptly – but only after the economy has recovered. For the next few years, the priorities of fiscal policy should be jobs,...
Dollar hampers 'knowledge intensive' exports - Stuff, 2 Feb 2012 The strong kiwi has stymied growth of high value exports in "knowledge intensive manufacturing", according to briefing papers from MED.
MED report highlights problems for high value exporters http://t.co/VoLBDWMv
3/02/2012 12:37 p.m.
Sales bounce at year end http://t.co/VtI5uuSq
3/02/2012 9:56 a.m.
Monetary policy matters http://t.co/45wTSnWd
2/02/2012 1:25 p.m.
New RBNZ Governor and prospects for policy change http://t.co/TiVh9HQY
31/01/2012 2:25 p.m.






3rd party posts

Showing 1 of 6 pages

03/02

MED report highlights problems for high value exporters
Print-friendly 0 comment(s) Posted in: 3rd party

The Ministry of Economic Development has released their Briefing to the Incoming Minister of Economic Development.

They discuss the reasons for ‘knowledge intensive’ exports flat lining from 2005:

"20. Unbalanced growth has been unhelpful. The housing boom and associated elevated exchange rate has put pressure on exporters. This was an intensification of a situation...

read more...



tags: med, housing boom, exchange rate


31/01

New RBNZ Governor and prospects for policy change
Print-friendly 0 comment(s) Posted in: 3rd party

Some reaction on Dr Alan Bollard's resignation as Governor of the Reserve Bank looking at the potential candidates for the job and whether the change could be a catalyst for broader monetary policy reform.

Radio New Zealand looks at whether monetary policy change is necessary (Ganesh Nana's comments are particularly interesting):

read more...



tags: monetary policy, rbnz, ganesh nana, bernard hickey


25/01

BBC: What really caused the eurozone crisis?
Print-friendly 0 comment(s) Posted in: 3rd party

A graphic on the BBC points out that the fiscal responsibility rules being imposed as a result of bailouts in Europe were also imposed in 1997 when the Euro was set up.

"Hang on a minute. They agreed to exactly the same 3% borrowing limit back in 1997, when the euro was being set up. The "stability and growth pact" was...

read more...



tags: european crises, private debt, public debt


20/01

Geoff Bertram: Some thoughts on exchange rate overvaluation and bank regulation
Print-friendly 0 comment(s) Posted in: 3rd party

This is a presentation by Geoff Bertram to the Fabian Society in July last year.

He comments on potential options to prevent exchange rate overvaluation:

http://www.realeconomy.co.nz/files/Bertram July 2011.pdf

read more...



tags: geoff bertram, exchange rate, bank regulation


17/01

Andrew Hooker: Insurance Aftershock
Print-friendly 0 comment(s) Posted in: 3rd party

Andrew Hooker writes an article for interest.co.nz on how the indemnity period for many businesses will end on 22 February, one year after the February quake. This will leave those businesses uncovered for further loss of profit.

Hooker...

read more...



tags: andrew hooker, canterbury earthquakes, insurance, indemnity period


22/12

Modern economies need manufacturing
Print-friendly 1 comment(s) Posted in: 3rd party

Ray Keefe writes about a presentation from Professor Goran Roos to the South East Business Network on Australian manufacturing:

Here is the short list on what manufacturing does for an economy:

  • R&D is driven by it.
  • Innovation is primarily...

read more...



tags: goran roos, r&d, innovation


15/12

Brian Fallow: Does NZ really need 28 ministers?
Print-friendly 0 comment(s) Posted in: 3rd party

Brian Fallow comments on the number of ministers used by successive Governments in an article for the Herald. This trend keeps the smaller parties and the caucus of the governing party happy but dilutes ministerial responsibility:

The division of ministerial labour...

read more...



tags: brian fallow, ministerial responsibility


05/12

Neville Bennett 2006: How Reserve Bank inflates economy
Print-friendly 0 comment(s) Posted in: 3rd party

Neville Bennett writes on the monetary policy problems facing the traded economy in September 2006. He notes the ever increasing money supply's impact on inflation control, the appearance of a property bubble and the impact on the exporters.

This insightful piece demonstrates the inevitability of our current economic problems.

Monetary policy creates vicious...

read more...



tags: money supply, monetary policy, exchange rate, current account deficit


30/11

Retail banking must get back to basics: Gareth Morgan
Print-friendly 0 comment(s) Posted in: 3rd party

Gareth Morgan writes about the problems in the banking sector since 2007 in an article for the Herald:

Three decades of sub-par central banking governance has seen an utter neglect of prudential policy and since 2008 it's been dawning on creditors that they've lent too much to those whose...

read more...



tags: deposit guarantee, bank regulation, reserve bank


30/11

Companies freeze hedging after big losses: Reuters
Print-friendly 0 comment(s) Posted in: 3rd party

This article from Reuters which featured on Stuff.co.nz yesterday demonstrates the problems firms have been having with hedging overseas.

These problems are even worse in New Zealand where the NZ Dollar tends to be even more volatile.

It's been a tough few months for...

read more...



tags: currency hedging, exchange rate, nz dollar