Media Enquiries: 04 2820302 (24hr)

Lower Taxes, Less Waste,
More Transparency

Championing Value For Money From Every Tax Dollar

Blog: Why alternative monetary policy may not lead to investment spending in the economy

This blog post is written by Taxpayers' Union Economist Karan Menon.

Facing the biggest economic shock in our lifetime, Reserve Bank Governor Adrian Orr is signaling his support for the use of “alternative monetary policy” to jog the Kiwi economy.

He is currently holding the Official Cash Rate at 0.25%, the lowest it has been since the OCR was introduced in 1999, till March 2021.

The cash rate is predicted to be cut even further by the end of the year to fall below zero – that means banks will now be charged on their deposits with the Reserve Bank. The intention of this expansionary monetary policy is to curb a deflationary spiral (an overall decrease in price levels) caused by the COVID-19 pandemic and to disincentivise retail bank deposits held in the central bank.

The Reserve Bank of New Zealand (RBNZ) is already implementing another form of ‘alternative’ monetary policy with its LSAP (Large Scale Asset Purchase) programme.

The LSAP programme will reduce market interest rates further and thereby reduce borrowing costs for retail banks as their wholesale borrowing costs have reduced. This is due to interest rates being inversely related to bond prices. As the RBNZ purchases government bonds, the demand for bonds increases, thereby increasing the price of those bonds and decreasing interest rates.

The RBNZ will purchase $60 billion of government bonds over the next 12 months to achieve these reductions in interest rates on mortgages and term deposits. This value roughly amounts to 29% of NZ GDP.  This process is known as an open market operation where money supply is linked to the sale and purchase of government bonds

These tools are used by the RBNZ to control inflation – in this case, to keep it from dropping too low.

The RBNZ is given operational independence to keep inflation between 1 and 3 percent on average over the medium term, but with the recent COVID pandemic, sharp projected contractions in economic activity will likely reduce inflation and employment targets below RBNZ’s objectives.

Therefore, the RBNZ aims to lower the borrowing costs for households and businesses and increase spending across the economy. Retail banks are in the business of lending, and this lending is financed by depositor funds or borrowed funds. The ability to service this lending is based on a bank’s liquidity which is calculated by taking the total lending as a proportion of total deposits.

With expansionary monetary policy decreasing “hoarding behaviour”, we can expect lower retail interest rates on both mortgages and deposits for businesses and households.

The complication with decreased interest rates on deposits is that we could see (and in fact already are seeing) investments diverted away from bank deposits to other financial investments with higher rates of return.

The relationship between expansionary monetary policy and the diversion of investments can be seen internationally. The US currently has its cash rate at 0%, while its stock market has seen steady increases. The NASDAQ closed on a high Tuesday and the S&P 500 index saw a 0.43% gain. The increases in those indices obviously have additional explanations, but deposit interest rates are also decreasing, implying investors are looking to the financial market for higher returns.

Real economic conditions in the US are simply not reflected in the US stock market. A wave of optimism is sweeping through Wall Street, which stands in contrast to the stark economic realities of the US. Unemployment, which hovered around 4% in February shot up to 13% in May.

The real-world macroeconomic implication of expansionary monetary policy, and the subsequent diversion of investments, would be to diminish the capacity of retail banks to lend and further, lending would be on the back of bank borrowings.

Adrian Orr’s intention of increasing investment spending and incentivising businesses to spend more on their operations is in fact reasonable. The risk, however, is that the outcome of his approach will be an over-extension of the banking sector, which could further exacerbate the economic crisis. If in fact the RBNZ achieved its goal to encourage spending for both households and businesses, banks would be unable to increase their cash position in the case of any further shocks to spending.

If banks become unable to lend, any good achieved by Orr’s expansionary monetary policy would be wiped away and the economy would be left in an even worse condition than currently projected.

Taxpayer Talk: Chris Penk - Flattening the Country

In our newest episode of Taxpayer Talk, Jordan sits down (in-person!) with Helensville MP Chris Penk who has written a book investigating the claim that the Government had "gone early and hard" in its fight against
COVID-19. Support the show (http://www.taxpayers.org.nz/donate)

Flattening the Country is available at https://chrispenk.national.org.nz/flattening_the_country.

You can subscribe to Taxpayer Talk via Apple PodcastsSpotifyGoogle Podcasts, iHeartRadio and all good podcast apps.

Tool launched for Christchurch ratepayers to submit against rate hike

Chch rates preview

The New Zealand Taxpayers’ Union has launched a tool for Christchurch ratepayers to submit against Christchurch City Council’s proposed rate hike options.

The official consultation form for the Council’s updated budget is frankly a scam. Ratepayers are asked to choose between three different rate hikes – 3.5 percent, 4.65 percent, and 5.5 percent. This is a false choice, engineered to manipulate submitters into endorsing the 3.5 percent rate hike, when in reality many or most ratepayers would prefer a freeze or even a cut.

With the submission period closing on Monday, we’re encouraging Christchurch ratepayers to submit against the proposed rate options. Our submission form, available at www.ChchRates.nz, provides different rate options, and submissions are sent straight to the Council’s consultation inbox.

Christchurch City Council cannot seriously cry poverty while setting aside $118 million for a sports stadium, and paying 531 of its staff salaries higher than $100,000.

In April, Lianne Dalziel said she was “laser-focused” on delivering a rates freeze to reflect the hardships caused by COVID-19. But she and a majority of her Councillors have been swayed by self-interested Council staff warning of redundancies. That’s disgraceful – the responsibility of a Council is to protect ratepayers, not to provide livelihoods for its own staff.

With unemployment forecast to spike in coming months, the case against increasing council taxes is stronger than ever.

Taxpayer Update: Ihumātao | Sack Dr Clark | Posters investigated

Will Winston put the kibosh on the Ihumātao deal?

Winston/Ihumatao

After months of delays, it's been reported again that the Government is on the verge of purchasing the land at Ihumātao using $30 million of taxpayer money.

This would be a disgraceful capitulation to illegal occupiers. 

However, we understand that New Zealand First Leader Winston Peter is furious about the deal and had a tense exchange with the Prime Minister on Tuesday night. He has the power to block the deal at the 11th hour and gain huge publicity.

Jordan texted Winston yesterday to remind him of our petition against the deal, which has 11,000 signatures. We're watching very closely.

Petition launched for resignation of David Clark

David Clark

Health Minister Dr David Clark was missing in action for virtually all of the COVID-19 pandemic after repeatedly breaching his own guidelines by travelling unnecessarily, mountain biking when that was forbidden, and moving house and his office at the exact time he was requiring people to stay home and work from home.

And now he's overseen a series of quarantine failures: most spectacularly, the two COVID-19 positive women who were allowed to travel the length of the North Island without being tested.

In fact, 51 out of 55 quarantined individuals released under compassionate exemptions were not tested. That is disgraceful and Dr Clark has accepted no responsibility.

He's now been shunted away from the media, with Megan Woods brought in as a "Dr Fix-It". Why keep David Clark on a $300,000 salary?

We've launched a petition calling on the Prime Minister to immediately sack the Minister for his repeated failures in response to the COVID-19 pandemic.

--> Click here to sign the petition <--

Electoral Commission investigating 'Aroha' posters

Aroha poster

We're glad to hear that the posters of Jacinda Ardern plastered across the country have been taken down while the Electoral Commission investigates whether they count as election advertisements.

The posters are clearly advertisements: by the artist's own admission, they are drawn in a "propaganda style" and are inspired by the famous "Hope" posters of Barack Obama.

This means they need a promoter statement and should fall within election spending limits.

If the Commission finds that the posters are legit, we'll be surprised, but it means we can crowdfund our own poster campaign. Our posters could look like this:

Tax is Love poster

Ratepayer heroes! Horowhenua Council CUTS rates in response to COVID-19

Levin clock tower

This is what leadership looks like. Horowhenua District Council hasn't just frozen rates – it's cut them by 1.83% in response to COVID-10 hardships.

The Mayor and his officials wanted higher rates, but six out of eleven Horowhenua Councillors seized their democratic responsibility and put the interests of ratepayers first.

Well done to Councillors Wayne Bishop, Victoria Kaye-Simmons, Todd Isaac, Robert Ketu, Pirihira Tukapua and Sam Jennings.

Yes, the Council will have to cut employee costs and sacrifice spending plans, but it’s a necessary sacrifice that reflects the cut-backs being made in households across the country.

Ultimately, this move will make Levin and surrounding areas better off. More money in ratepayers’ pockets means more demand for local goods and services. And ratepayers from other parts of the country will be looking on in envy – perhaps even considering a move!

Is your local council hiking rates? Contact them NOW and tell them what Horowhenua District Council has done.

Petition launched: Keep it The Tron!

Hamilton sign

As if New Zealand doesn't have bigger issues to debate, Newshub, Stuff, and RNZ are all reporting on calls to change the name of Hamilton to "Kirikiriroa".

If the Council considers a name change, it will mean a divisive consultation process, a potential referendum, ratepayer-funded revamps of branding and signage, and staff and councillors' time wasted.

The change would then be considered by the New Zealand Geographic Board, meaning taxpayers across the country cough up.

--> Click here to sign our petition against the name change <--

We say Hamilton City Council should ignore the vocal minority and stick to their core business of delivering value for ratepayers.

There's also the suggestion the Council could go for a "compromise" option of a dual name. Based on previous government and council rebrands, we can imagine the new council logo looking like this:

Kirikiriroa logo

As if that will make anyone happy!

A surprise from Labour's list ranking...

Twyford promoted

Last week Labour revealed their updated Party list for the 2020 election.

We were astonished to see Phil Twyford moved from #5 up to #4 after his calamitous management of KiwiBuild, and more recently, his total failure to deliver his Auckland tram project.

(In fact, Twyford has now confirmed he's given up on Auckland Light Rail this side of the election. That project was the main reason for increased fuel taxes, so why is he planning to hike fuel tax again on 1 July?!)

For fun, I also researched Labour's lowest-ranked candidates. At the very bottom, #84, is a teacher unionist named Georgie Densey. Her Twitter page has one post, where she shares this praise of Metiria Turei:

Labour tweet

Interesting.

How would this look on a billboard?

National MP Nick Smith has revealed that Parliament's architecturally designed playground – which is basically just a slide and some stepping stones – went $172,000 over budget.

All up, the design, construction, landscaping, and engineering fees totalled $572,000.

Slide poster

We plan to make taxpayers remember this kind of waste when they cast their votes on 19 September.

All the best,

Louis circle


Louis Houlbrooke
Campaigns Manager
New Zealand Taxpayers' Union

Donate

Media coverage:

Horowhenua Mail  Horowhenua District Council labelled 'heroes' for cutting rates

Stuff  Taxpayers' Union urges Human Rights Commission to speak up on Kiwis paying for quarantine

Star News  Ardern posters make cash, draw complaints

Southland Times  Southland District Council approve rate amid deficit budget

Stuff  Shots fired: Hunters hit back at Keep It Real Online ad campaign

Newstalk ZB  Artist behind Jacinda Ardern poster denies it's political advertising

Newshub  Hunters up in arms over Government's new online safety ad campaign

Croaking Cassandra  Little fiscal discipline at the RB

1 News  Art or political propaganda? Electoral Commission investigating artists' Jacinda Ardern appreciation poster

NZ Herald  Shovel-ready projects get the green light to go ahead under new infrastructure law

Newshub  'Forget about tax cuts': Economist warns of hikes ahead no matter who wins election

Newshub  ACT Party demands end to Government's 'Unite for the Recovery' campaign

1 News  John Armstrong: Is Jacinda Ardern utilising taxpayer-generated revenue in order to run a 'propaganda unit'?

The Press  Surprise in the post as Christchurch rates hike is less than thought

Taxpayer Update: Statue madness | Taxpayer-funded propaganda | $4000 for tea

Statue controversy is pathetic

John Hamilton

We are currently facing the economic fallout of a literal pandemic. But our country's media and politicians have decided the biggest issue affecting New Zealanders is whether or not our statues are racist.

On Thursday, Hamilton City Council removed a statue of the city's namesake, John Hamilton, after a local kaumatua threatened to tear it down himself.

What a pathetic capitulation. Why are councillors focused on a statue? Don’t they realise that by so swiftly agreeing to pull it down, they’re inviting wasteful new debates over other statues, and even Hamilton’s name?

Councillors need to refocus their time and attention away from petty controversies and onto issues that matter: namely, their annual budget. Tear down wasteful spending, not statues.

Statues of Edward Gibbon Wakefield, Captain Cook, and Richard Seddon are also under siege, as are street names and museum exhibitions deemed 'colonial'. The Māori Party wants to make it an election issue.

God help us.

Here's a real problem

New data from the OECD confirms hard economic times ahead for New Zealand: we are looking at a forecast decline in productivity of 8.9%, or 10% if there’s a second wave of COVID-19. That’s worse than the average forecast decline for the OECD countries.

Because of New Zealand's lackluster contact tracing capabilities, the Government pursued an extremely strict lockdown in response to COVID-19. This hammered our output.

The lockdown also necessitated massive amounts of spending. Already, Government debt has risen from below 20% of GDP to above 25% – and it’s expected to peak much higher, at $109,000 household. And once the wage subsidy ends in September, we can expect an unemployment spike too.

In short: why are we talking about statues?

COVID-19 ads looking more like propaganda

You might think that the taxpayer-funded ad campaign to 'Unite against COVID-19' is now over. Instead, it's been replaced with a new one: 'Unite for the recovery'.

This double-page ad is being promoted in the Herald and the Dominion Post:

Unite ad
The message is being promoted by the Government in other platforms, along with the 'Be kind' slogan that is closely associated with Jacinda Ardern.

These advertisements are not primarily informative or educational, unlike earlier Government COVID-19 advertisements. We have now moved into the realm of thinly veiled political propaganda at the taxpayers’ expense.

‘Unite for the recovery’ is expected to be the central theme of the Labour Party’s 2020 election campaign. With Government debt going through the roof, we say borrowed funds should be used on vital services, not propaganda. 

Before previous elections, Auditors General have slapped down incumbent Governments for using taxpayer money for political messages. We've laid a formal complaint with the Auditor General – we'll let you know what he comes back with.

Napier City Council's morning tea is only the tip of the iceberg

Wayne Jack

RNZ reports that Napier City Council's CEO has thrown himself a $4,251 farewell morning tea.

Incredibly, the Mayor's only complaint about the spending was that she wasn't invited!

The RNZ report seems to skim the real waste in this story: CEO Wayne Jack has been given a $1 million golden handshake to leave. Ratepayers are forced to reward poor performance.

Mr Jack assumed 660 council staff would want to attend his farewell. On that note: does Napier City Council really need 660 staff on payroll??

Cutting council payrolls is key to rates relief

We've been advising councils to respond to COVID-19 by freezing rates. While some councils have taken our advice, many more are complaining that a rates freeze would involve major cuts to spending.

That's true. Why not review payroll spending?

A new report from local government analyst Larry Mitchell reveals that council employees earn, on average, 37.9% more than those in the private sector.

The average council spends 23.8% of its budget on payroll, but there is significant variation: Kapiti Coast District Council spends 34.7% on payroll, whereas Rangitikei spends just 10.3%. This suggests councils could cut down on staff or salaries if they were serious about relief for ratepayers.

You bought a free internet modem for Mike Hosking

Routers

This might be my favourite waste story of the year. Buried among the Government's countless "COVID-19 response" spending projects was $87 million worth of IT equipment for kids studying from home. The idea was to get the kit to kids in poor households without access to the internet.

The result: hundreds of unwanted internet modems are piling up in school offices, or being sent to families that don't need them. Even Mike Hosking's son got one!

Is the discriminatory elective surgery policy really a response to COVID-19?

The Taxpayers’ Union has filed a complaint with the Race Relations Commissioner over Capital and Coast DHB's policy of prioritising Māori and Pacific patients on elective surgery waiting lists.

Taxpayer-funded health resources should be allocated solely on clinical need in all instances, not racial preference. We hoped this was just a rogue DHB making policy on the hoof. We were wrong.

Eight other DHBs have introduced or are looking to introduce this clearly discriminatory policy. Three more refused to rule it out.

Supposedly, this policy is a response to COVID-19. There was a backlog of surgeries created when hospitals effectively shut down bracing for a tsunami of virus patients that never arrived.

Those days are past. There are no patients still in hospital with COVID-19. When the elective surgery backlog is cleared, and in many instances that has already happened, this policy should be immediately dropped if it really is just related to COVID-19.

The Union doubts that DHBs will do that. There is an agenda here and Official Information Act requests will be lodged to discover the truth.

Taxpayers’ Union lays complaint over ‘Unite for the recovery’ ads

The New Zealand Taxpayers’ Union has laid a formal complaint with the Auditor General regarding today’s full-page advertisements placed in a number of newspapers, including the NZ Herald and the Dominion Post, by the Government (pictured below).

Unite ad

These advertisements are not primarily informative or educational, unlike earlier Government COVID-19 advertisements. Today’s ads have moved into the realm of thinly veiled political propaganda at the taxpayers’ expense.

'Unite for the recovery’ is widely expected to be the central theme of the Labour Party’s 2020 election campaign. Only 102 days from an election, the public service should be vigilant to political masters using taxpayer-funded resources to support political messages.

Full page newspaper adverts of a political nature, even in this depressed media environment, are expensive. With Government debt going through the roof, borrowed funds should be used on vital services, not propaganda.

Formal complaint to the Race Relations Commissioner from Taxpayers’ Union

The New Zealand Taxpayers’ Union has lodged a formal complaint regarding the recent Capital and Coast District Health Board’s decision to move Māori and Pacific patients to the front of their elective surgery queues. We welcome Race Relations Commissioner Dr Meng Foon’s recent comments on radio that on the basis of our complaint he would “look into” the policy. However, he needs to go much further.

Taxpayer-funded health resources should be allocated solely on clinical need in all instances, not racial preference. Even if we are wrong, elective surgery waiting lists are not like primary health care, where race is sometimes used as a cheap proxy for need. For elective surgery, precise clinical data is available to determine the need of each and every individual. That is how the lists are constructed. The arguments that a particular race has higher or lower (on average) need is invalid.

The New Zealand Taxpayers’ Union is disappointed that Dr Foon has chosen to not speak up on this issue. He had time to acknowledge Rotuman Language Week on his Facebook page but apparently not enough time to address this clearly unfair policy which is based on ethnicity. The Capital and Coast District Health Board’s policy is a critical race relations issue and Dr Foon should bring the full force of his office against it immediately.

We are also extremely concerned by comments by Sean Plunket on his radio show that he was aware of ‘anecdotal evidence’ of other District Health Boards considering the same policy. This policy needs to be stopped before it starts.

Taxpayer Talk: Socialism – The Failed Idea that Never Dies

By many measures, socialist ideas are more popular than ever, with academics and increasingly hip activists unashamedly promoting the collective ownership of wealth and centralised government-led decision making. Louis has a discussion with Dr Kristian Niemietz from the Institute of Economic Affairs, who has written a book named 'Socialism: The Failed Idea that Never Dies'.

You can subscribe to Taxpayer Talk via Apple PodcastsSpotifyGoogle Podcasts, iHeartRadio and all good podcast apps.

Taxpayer Update: Race-based hospital waiting lists | Chch rates U-turn | Public health follies

DHB prioritises patients according to race

Wellington hospital

We were amazed to find out this week that Wellington's DHB now has a policy which moves Māori and Pacific patients to the front of their elective surgery queues.

We all pay tax into the health system with the expectation that we will receive help when we need it. This DHB's decision to use skin colour to determine who goes to the front of the queue isn't just racist, it goes against the egalitarian vision of a publicly-funded health system. What would Michael Joseph Savage say?

We say the Health and Disability Commissioner needs to step in to protect the integrity of the health system – taxpayer-funded health resources should be allocated on clinical need, not race politics. We've approached him for comment, and are preparing a complaint to the Race Relations Commissioner. We'll let you know how we get on.

Election Day's convenient timing

This week our analysts have been going back through the enormous volume of Budget announcements. One thing is clear: the Government's electoral strategy is to do all it can to keep the patient alive until after the election – then it'll send you the bill. Grant Robertson is spending like mad to keep New Zealanders happy... until after the election. To illustrate:

We would hope that, when politicians respond to a crisis with a spend-up costing tens of billions, they do it purely with the public interest at heart. But the timeline above does seem awfully convenient.

Auckland Council shamed with CBD billboards

Goff billboard

Our sister group, the Auckland Ratepayers' Alliance, has been doggedly campaigning to expose the "Rich List" of Auckland Council staff paid more than $250,000.

Thanks to a grassroots fundraising push, they are raising billboards across central Auckland. Pictured is an epic example from Eden Terrace.

Click here to browse the full Town Hall Rich List.

If you live in Auckland, make sure you sign up here to get updates on the campaign tackling Phil Goff's attempt to hike Council taxes again this year.

Betrayal in Christchurch? Council looks set to U-turn on rates freeze commitment

Lianne Dalziel

After initially opposing and then supporting a rates freeze, Christchurch City Mayor Leanne Dalziel is once again on track to hike rates.

The three options put in front of councillors this week – rate increases of 3.5%, 4.65%, and 5.5% – are offensive to households who've had their livelihoods damaged by COVID-19.
 
It is especially galling that councillors were swayed by self-interested staff warning of redundancies. Countless ratepayers have lost their livelihoods in the wake of COVID-19. Why should council employees be a protected class?
 
A rates freeze would have required some tough but necessary cuts to salaries and non-essential spending. But Dalziel is now pushing a budget that includes a massive $118 million discretionary spend on a sports centre! It’s like she’s decided the reality of this crisis is too hard to deal with, and has returned to a dreamworld in which COVID-19 never happened.

We'll be ensuring Christchurch ratepayers submit in favour of a zero rate increase during the consultation period, regardless of the "options" presented by the Council.

We continue to track where each local council stands on our Rates Freeze Dashboard.

Most recently, we've had to change the status of Waitomo District Council: the Mayor had been pushing for a rates freeze, but this week all of his councillors voted against the idea. Shame on them. Our statement is here.

Public health units waste our money – now using COVID-19 to claim they're underfunded.

Public health rules

This week public health specialists were touring media studios demanding more taxpayer funding.

This campaign could be taken more seriously if they stopped wasting money on pointless public relations campaigns under the guise of public health.

Here at the Taxpayers' Union we thought we should fact check their claims of poverty.

Public health units get around $440 million annually from the taxpayer. Fair enough. But what are they using it for? In recent years they've used these funds to:

Imagine if all this time and money had been used for pandemic planning! Public health units could have used their resources to set up contact-tracing capabilities, instead of telling New Zealanders how to live Government-approved ultra-PC lifestyles.

Two incredible tales of waste from Dunedin City Council

It's been an odd couple of weeks for Dunedin ratepayers.

Dots

First, the City Council spent $40,000 on a "street makeover" which consisted mainly of colourful dots painted directly onto the road. This was apparently a response to COVID-19. (We can't figure out how, either.)

Now, the Council has revealed its new tourism campaign:

Plan D

The slogan is Dunedin – A Pretty Good Plan D. The price tag for ratepayers is $145,000.

I'll admit, I think it's funny. But Dunedin ratepayers are apparently fuming at how much of their money has been spent on a campaign that insults under-sells their beloved town.

And in all seriousness, central government is already devoting funds to a major domestic tourism promotion campaign. What's the value in having every local council spend money to fight over a limited number of domestic tourists?

Public art, or election advertising?

Here's the sight that greeted Taxpayers' Union staff as we arrived at the office this week:

Poster

First we thought it was Wellington City Council trolling us (the ad is literally just outside thr entrance of our building), but it turns out these posters of Jacinda Ardern are rolling out across the country.

The massive posters are reminiscent of Barack Obama's "HOPE" ads and include the Māori word for "love".

Some research eventually revealed the ads are run by billboard company Phantom Billstickers. The art team is Weston Frizzell, who say:

We think Jacinda has done a brilliant job leading Aotearoa though the Covid19 pandemic. We were proud to show our support with an iconic painted portrait.

We've created this giant street poster. For $190 (+P&P) you can buy one hand signed by both of us, and we will paste up another FOR FREE as part of a nationwide street poster campaign to share this message of AROHA.

For the sake of transparency, election advertisements are legally required to carry a 'promoter statement' stating who is responsible. These posters don't.

We'll see what the Electoral Commission thinks!

Have a great long weekend,

Louis


Louis Houlbrooke
Campaigns Manager
New Zealand Taxpayers' Union

Donate


Join Us

Joining the Taxpayers' Union costs only $25 and entitles you to attend our annual conference, AGM and other events.

Donate

With your support we can make the Taxpayers' Union a strong voice exposing waste and standing up for Kiwi taxpayers.

Tip Line

Often the best information comes from those inside the public service or local government. We guarantee your anonymity and your privacy.