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An OECD smorgasbord of reform ideas
Here’s my daily Chorus in video, podcast and email form for both paying and non-paying subscribers, including my selection of the six key news items in Aotearoa’s political economy over the last day or so around housing, climate and poverty:
* The OECD called on New Zealand to reform its overpriced electricity market and undersized stock market in its annual survey published yesterday, along with some ways to make NZ Superannuation more affordable in the long run. (See more detail below and in the video above)
* The Climate Commission published its second National Climate Change Risk Assessment Report yesterday, pointing out: 97% of government spend is on responding to natural hazards and only 3% on building resilience, while more than half a million buildings were already exposed to inland flooding, with at least $235 billion at risk; and, damaging storm events now happen weekly vs monthly 15 years ago.
* The Opportunities Party (TOP) this morning released details of its election policy for a $19,400 tax-free Universal Basic Income and a tax-free Kiwisaver 2.0 scheme phasing in contributions of 6% from employees and 6% from employers.
* Oil prices fell 3% overnight on hopes the US and Iran might agree to begin peace talks after opening the Strait of Hormuz, but the details are frustratingly opaque and yet to be confirmed in a way to give any fuel price relief any time soon.
* Protest marches calling for lower fuel taxes are planned in 43 towns for next Saturday. They’re being organized and amplified by through social media linked to anti-vaxx and anti-mandate protest groups, but say they don’t want to unleash Irish-style violent protests.
* Police have contacted a New Zealand woman over a Facebook post that suggested the India Free Trade Agreement would begin a “mass immigration invasion” after a complaints about social cohesion. Police Minister Mark Mitchell said Police should not have contacted her, Henry Cooke reports for The Post-$.
An Early Bird version of this was sent to paying subscribers earlier today with my fuller Pick’ n Mix lists of links and detail. Subscribe as a paying subscriber for the fuller and earlier version and to get access to the Substack Live version of the video above. The presentation used in the video is attached at the end of this email.
The OECD lays out a smorgasbord of reform ideas
The big news yesterday for those looking for fresh ideas for economic and political reform was the annual OECD survey.
The focus this year was on pensions and the electricity market, and also on capital raising by companies and the NZX, including plenty of interesting detail and charts.
The OECD has come out bluntly and said the gentailor payout ratios are too high and electricity prices in New Zealand are too high.
The OECD is suggesting some interesting ways on how to fix this, in particular a so-called firming market to try to break the connection between volatile international gas prices and our domestic electricity prices. This idea of a ‘firming’ market is where people are able to invest in non-fossil fuel electricity, which can be traded and in effect help replace some of the gas, which is helping to drive prices at the moment.
Cheaper ways for SMEs to raise money
The OECD has also spent quite a bit of time looking at the capital raising and ability of small to medium businesses in New Zealand to borrow money or to get equity investment to grow. We have a relatively low amount of growth among small to medium businesses and not much capital raising from our stock market, which it turns out the OECD says is very expensive and small relative to GDP.
One of the issues here is that SMEs find it difficult to get real loans in their own right. And that’s because our banks are much more interested in lending to people against their homes. And if they are lending to small business, typically it’s actually against the business owner’s home. And so what we’re seeing here is that loan rejection rates are quite high in New Zealand relative to other countries, according to the OECD. And it’s proposing that people in KiwiSaver funds and KiwiSaver funds can put money into a type of small business market using sort fund investment type systems, which is sort of interesting.
The OECD idea has come up at the same time as the Reserve Bank has taken a look at profit margins charged by banks for lending to small businesses, which are also significantly higher than other countries and notably higher than in Australia.
The other area where the OECD has come up with some new ideas is around our New Zealand Superannuation system.
They proposed changing the way we tax our savings. At the moment, before you put money into a KiwiSaver account, it is taxed. And then while it’s in the KiwiSaver account, the earnings from that are taxed. And it’s only not taxed when you pull the money out. Now in other countries, that’s not how it works. You get a tax break going in, you’re not charged tax on earnings that you put into some sort of pension fund. And often while it’s in the fund, it doesn’t get taxed either.
And that means by the end of it, you’ve got a much bigger chunk of money. And that’s when the returns or the withdrawals get taxed. The OECD worked out you’d actually get a lot more funds in these pension funds if you didn’t tax it on the way in and while it was in.
My Top Six Pick ‘n Mix
* Scoop: Cecile Maier for BusinessDesk-$: Drury-linked startups speak on harassment allegations
* Scoop: WSJ-$ (gift): Saudi Arabia, Kuwait Lift Restrictions on U.S. Military Access to Bases, Airspace
* Interview for 1News: 1News: Jacinda Ardern opens up on Sydney life - ‘taking it as it comes.’ ‘The former PM joked she had considered putting “washed-up politician” on flight arrival cards into Australia.
* Deep-dive by Lauren Crimp for RNZ: David vs the Media: Has Seymour gone too far?
* Op-Ed by Waikato Uni’s Tahu Kukutai, John Bryant, and Polly Atatoa Carr for The Conversation: NZ is overdue for a population strategy – but there is only so much governments can do
* Interview with Quilae Wong by Alexia Russell for RNZ/Newsroom’s The Detail: The party that would be everyone’s coalition friend
Cartoon du Jour
Timeline-Cleansing Nature Pic
Cheers
Bernard
This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thekaka.substack.com/subscribe
View all episodes
By Bernard HickeyHere’s my daily Chorus in video, podcast and email form for both paying and non-paying subscribers, including my selection of the six key news items in Aotearoa’s political economy over the last day or so around housing, climate and poverty:
* The OECD called on New Zealand to reform its overpriced electricity market and undersized stock market in its annual survey published yesterday, along with some ways to make NZ Superannuation more affordable in the long run. (See more detail below and in the video above)
* The Climate Commission published its second National Climate Change Risk Assessment Report yesterday, pointing out: 97% of government spend is on responding to natural hazards and only 3% on building resilience, while more than half a million buildings were already exposed to inland flooding, with at least $235 billion at risk; and, damaging storm events now happen weekly vs monthly 15 years ago.
* The Opportunities Party (TOP) this morning released details of its election policy for a $19,400 tax-free Universal Basic Income and a tax-free Kiwisaver 2.0 scheme phasing in contributions of 6% from employees and 6% from employers.
* Oil prices fell 3% overnight on hopes the US and Iran might agree to begin peace talks after opening the Strait of Hormuz, but the details are frustratingly opaque and yet to be confirmed in a way to give any fuel price relief any time soon.
* Protest marches calling for lower fuel taxes are planned in 43 towns for next Saturday. They’re being organized and amplified by through social media linked to anti-vaxx and anti-mandate protest groups, but say they don’t want to unleash Irish-style violent protests.
* Police have contacted a New Zealand woman over a Facebook post that suggested the India Free Trade Agreement would begin a “mass immigration invasion” after a complaints about social cohesion. Police Minister Mark Mitchell said Police should not have contacted her, Henry Cooke reports for The Post-$.
An Early Bird version of this was sent to paying subscribers earlier today with my fuller Pick’ n Mix lists of links and detail. Subscribe as a paying subscriber for the fuller and earlier version and to get access to the Substack Live version of the video above. The presentation used in the video is attached at the end of this email.
The OECD lays out a smorgasbord of reform ideas
The big news yesterday for those looking for fresh ideas for economic and political reform was the annual OECD survey.
The focus this year was on pensions and the electricity market, and also on capital raising by companies and the NZX, including plenty of interesting detail and charts.
The OECD has come out bluntly and said the gentailor payout ratios are too high and electricity prices in New Zealand are too high.
The OECD is suggesting some interesting ways on how to fix this, in particular a so-called firming market to try to break the connection between volatile international gas prices and our domestic electricity prices. This idea of a ‘firming’ market is where people are able to invest in non-fossil fuel electricity, which can be traded and in effect help replace some of the gas, which is helping to drive prices at the moment.
Cheaper ways for SMEs to raise money
The OECD has also spent quite a bit of time looking at the capital raising and ability of small to medium businesses in New Zealand to borrow money or to get equity investment to grow. We have a relatively low amount of growth among small to medium businesses and not much capital raising from our stock market, which it turns out the OECD says is very expensive and small relative to GDP.
One of the issues here is that SMEs find it difficult to get real loans in their own right. And that’s because our banks are much more interested in lending to people against their homes. And if they are lending to small business, typically it’s actually against the business owner’s home. And so what we’re seeing here is that loan rejection rates are quite high in New Zealand relative to other countries, according to the OECD. And it’s proposing that people in KiwiSaver funds and KiwiSaver funds can put money into a type of small business market using sort fund investment type systems, which is sort of interesting.
The OECD idea has come up at the same time as the Reserve Bank has taken a look at profit margins charged by banks for lending to small businesses, which are also significantly higher than other countries and notably higher than in Australia.
The other area where the OECD has come up with some new ideas is around our New Zealand Superannuation system.
They proposed changing the way we tax our savings. At the moment, before you put money into a KiwiSaver account, it is taxed. And then while it’s in the KiwiSaver account, the earnings from that are taxed. And it’s only not taxed when you pull the money out. Now in other countries, that’s not how it works. You get a tax break going in, you’re not charged tax on earnings that you put into some sort of pension fund. And often while it’s in the fund, it doesn’t get taxed either.
And that means by the end of it, you’ve got a much bigger chunk of money. And that’s when the returns or the withdrawals get taxed. The OECD worked out you’d actually get a lot more funds in these pension funds if you didn’t tax it on the way in and while it was in.
My Top Six Pick ‘n Mix
* Scoop: Cecile Maier for BusinessDesk-$: Drury-linked startups speak on harassment allegations
* Scoop: WSJ-$ (gift): Saudi Arabia, Kuwait Lift Restrictions on U.S. Military Access to Bases, Airspace
* Interview for 1News: 1News: Jacinda Ardern opens up on Sydney life - ‘taking it as it comes.’ ‘The former PM joked she had considered putting “washed-up politician” on flight arrival cards into Australia.
* Deep-dive by Lauren Crimp for RNZ: David vs the Media: Has Seymour gone too far?
* Op-Ed by Waikato Uni’s Tahu Kukutai, John Bryant, and Polly Atatoa Carr for The Conversation: NZ is overdue for a population strategy – but there is only so much governments can do
* Interview with Quilae Wong by Alexia Russell for RNZ/Newsroom’s The Detail: The party that would be everyone’s coalition friend
Cartoon du Jour
Timeline-Cleansing Nature Pic
Cheers
Bernard
This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thekaka.substack.com/subscribe