NZ Initiative

21 conclusions on inequality from new report

The NZ Initiative has published a report on inequality. They make 21 conclusions:

  1. Increased housing costs are hitting those on low incomes hardest, and to a very severe degree. (Figure 28.) Getting more houses built is a critical issue, regardless of economic inequality.
  2. There is substantial material hardship in New Zealand households.? Specifically, around 4% of the population are ?doing without? to a severe degree and 11% to a less severe degree.? For children the proportions are higher, at 8% and 18% respectively. ?For the elderly they are lower, at 1% and 3% respectively. The overall proportions are similar to an average for a group of EU countries. (Table 5 of the Poorly Understood report.)
  3. It is wrong and potentially counter-productive to conflate relatively low incomes with poverty or hardship.? Claims that quarter of a million of children or more (25%+) are living in poverty because they are in relatively low income households are gross exaggerations.
  4. Economic inequality rose markedly from the mid-1980s to the mid-1990s on all three of the main measures: pre-tax market income, disposable income and consumer spending. The share of the top 1% rose sharply in particular. Changes in household structure, socio-demographic attributes, employment outcomes and economic returns could account for perhaps 50% of the rise in disposable income inequality during this period.
  5. Current income is a poor indicator of hardship. Specifically, only around 40-50% of those experiencing relatively low current incomes are also experiencing hardship, and some on higher incomes are experiencing hardship.One reason is that low income is a temporary situation for a considerable proportion of households, another is that the elderly can be asset rich but income poor. But a real difficulty is that unanchored relative income measures don?t tell us anything about actual living standards, eg poverty. Our Poorly Understood report shows that current welfare benefits are much higher, inflation adjusted, than what was deemed to be an adequate wage for a labourer to earn in order to be able to support a dependent spouse and three children back in 1936. The Ministry of Social Development?s authoritative annual statistical reviews of well-being and inequality show that real income growth has markedly reduced the proportion of households falling below an earlier real income threshold.
  6. Consumer spending is a better indicator of living standards. ?More recent Motu research?has found that it is also a much better indicator of self-assessed wellbeing. ?? Read more »

Let’s revisit what the NZ Initiative said about housing in November 2015

The NZ Initiative hits the nail on the head. This is what needs to be done to fix Auckland’s problems.

It was back in November 2015 but it bears repeating.

Our own research leaves no doubt that planning rules are a root cause of the housing crisis, particularly in Auckland but not only there.

The situation is made worse by the way new infrastructure is financed. Councils, which regularly cop a lot of the blame, are operating under planning and finance rules that are simply not conducive to residential development. They have no financial incentive to promote it – quite the reverse is true.

We believe this view is more widely shared across the political spectrum than first meets the eye. But although politicians have been blaming planning rules for the high cost of housing for a decade now we are still waiting for genuine policy changes that are needed to restore New Zealand’s housing affordability.

Because this is a national housing crisis that has grown over decades and under governments of different hues, playing political blame games is pointless. You cannot solve problems in retrospect. We need to face the facts and work together for real reform.

We believe any attempts to reform the Resource Management Act (RMA) must protect the act’s environmental principles.

However, this should not stop us from changing the way councils regulate residential development under the RMA.

In our view, there are three issues to be addressed. ? Read more »

Are the left lying to us about inequality?

The left-wing parties claim that New Zealand is becoming less equal, that inequality is rising and that nasty Mr John Key, when he isn’t snacking on babies, is plotting with banksters to make things worse.

It is plausible to desperately stupid people but the reality is far from that:

New Zealand needs to “change its tune” on inequality, think tank The New Zealand institute says.

The group, which is supported by many leading business people, made the call following the publication of a Treasury paper which found inequality in this country has, with some variability, largely remained constant for the past 20 years.

The Treasury paper follows close on the heels of an ?OECD report which found income inequality in New Zealand was above average for the group, which includes many of the world’s most advanced economies.

Last December the OECD also said the Gini co-efficient – a broad measure of inequality – rose faster in New Zealand than in many other OECD countries between 1985 and 2011. Growing inequality meant New Zealand’s economy had only grown by 28 per cent between 1990 and 2010, rather than the 44 per cent growth it should have had.

The new Treasury report acknowledged inequality in this country did rise from the late 1980s to the early 1990s. But it said that since then inequality had – with some variability – remained either constant or had fallen slightly.

Read more »

Rodney Hide on Union muscle

Rodney Hide discusses the union muscle controlling the Labour leader selection.

The Labour Party is now busy deciding our other option for prime minister. It?s a big deal. The disturbing thing is that our option is being decided not in the backroom of the Labour Party but in the backroom of half-a-dozen unions.

The few dozen delegates belonging to the likes of the EPMU and the Meat Workers together hold 20% of the leadership vote. Their vote counts. Big time.

These are the unions that have affiliated with the Labour Party. They exercise enormous power within Labour and are now getting to choose our other option for prime minister.

The president of the NZ Council of Trade Unions, Helen Kelly, is clear on how the unions will work their vote. ?The union executive ? or members ? will make the decision about who to support and those [delegate] votes will be cast on behalf of the union.?

As Mrs Kelly has made plain, the delegates will be voting as their executives dictate. And, again as Ms Kelly has explained, the union executives are meeting and discussing their vote. The unions will block-vote and that vote is very powerful.? Read more »