What’s a platform Kiwi Millennials could all get behind?
New Zealand has a housing crisis in part because, as Bernard Hickey points out, Millennials don’t vote. Maybe it’s the media’s fault, maybe the issues are too complex, I don’t know. One thing that would help, though, is putting forward a platform: a set of policy ideas that are workable, internally consistent, more or less, go some way to solving problems.
The platform does not consider retail politics or marketing. In order to keep it short, I’ve opted to just lay out the policies without a whole lot of justification. ( I put some of the back story in the links).
What are the problems we are trying to solve?
- The housing crisis, which inflicts misery on the many people who are forced into becoming permanent renters, and is in the early stages of creating a de facto class system.
- A scarcity of high paying, intellectually challenging jobs, in other words low productivity.
- Overcrowding and congestion on public assets including roads, hospitals, beaches and national parks.
- Degradation of the environment (natural beauty, water purity quality, flora, fauna and noise) by intensive agriculture and suburban sprawl.
- Poor health, including high rates of obesity, unfitness, physical weakness and depression.
- Degradation of the system of higher education through low standards and corruption.
- Erosion of the bicultural constitutional arrangements that have made New Zealand an exceptionally stable place to live.
Note the very long list of problems not on this list: war, poverty, mass unemployment, income inequality, endemic violence etc. New Zealand continues to punch above its weight on many levels.
Increase the level of national savings through a comprehensive package across all three segments of society (government, business and households), including:
- Formally target a budget surplus of 1–2% pa until a net debt position of zero has been reached. This should need to be mainly achieved through spending restraint in order to avoid worsening problems 1 and 2. If necessary, reduce the right of people with assets over $1 million to access NZ Superannuation.
- Open our leading not-for-profit institutional fund managers (e.g. ACC and NZ Super Fund) to manage Kiwisaver contributions for the public.
- Make Kiwisaver compulsory at a level of 4% employee, 4% employer, increasing to 8% each over a period of four years. The exact endpoint doesn’t need to be determined now; we’ll know when we get there (i.e. we can finance all the investment we need without upward pressure on the exchange rate). This pool of savings could be tapped by the householder to finance professional education, out of pocket medical expenses, first home purchase, retirement income top-up, or simply to leave a legacy to descendants.
- Because we’re increasing the cost of labour with our compulsory saving, we’ll have to ease up on the minimum wage increases for a while so workers don’t get priced out. Workers will be getting a tax cut, though, so they should be no worse off.
- Reform corporate taxes to encourage saving, revisiting a Nordic “dual-track” system, treatment of dividend imputation and share buybacks.
- Lower labour and income taxes where consistent with point 1. above (reducing the value of tax breaks associated with housing).
A second set of policies is designed to limit the level of public investment to that which is strictly necessary. To wit:
7. Introduce market pricing on all congested public assets: roads, national parks and water. These revenues would be kept by the state, however, not private monopolies.
8. Reduce immigration in line with levels seen in other advanced economies; such as those described by Michael Reddell here. This translates to about 10,000 a year in terms of residence approvals. In addition, formalise a constitutional right for any ongoing programme of immigration to have the support of the Maori people of New Zealand. This reflects valid concerns about NZ’s constitutional arrangements raised by Ranginui Walker.
Note that the package of reforms Reddell suggests, and his views are worth reading at length, would also have the effect of reforming education somewhat, while taking some of the pressure off house prices. However, we can do more in these areas, for example:
8. Introduce a broad based tax on the unimproved value of land (no exceptions), with the proceeds to be shared between central and local government. Suspend or heavily tax the sale of land to foreigners.
9. Limit the ability of councils to regulate land use, for example by capping the level of complexity that can be zoned at roughly the Japanese level (see here), guaranteeing a “right to build” up to at least a terraced housing level of density, capping the number of buildings per city that can be heritage listed, and empowering the Commerce Commission to break up an anti-competitive market structures in building materials and construction with extreme prejudice.
10. Impose a minimum load of 4 courses per semester for academics, and reducing holidays for primary and secondary school teachers in line with other workers, thus alleviating the school holidays problem for parents. Cap the amount of time to be spent on administration at 10% and cap administrative staff at 10% of the institution.
On health, fitness and the environment, my main focus is to encourage walking and cycling everywhere. While many people find it hard to get to a gym or fitness studio 5–6 times a week, nearly all of us have to get places. If we can get daily exercise while travelling, good vibes shall ensue.
12. Compel all city councils to plan for a child-safe network of separated cycleways. These projects are not hugely capital intensive and over time and if you build them people will come.
13. Complete the Congestion Free Network for Auckland.
14. Reintroduce a tax on greenhouse gases at a price of $30/tonne CO2-e, no exceptions, increasing at $5 a year. This will have the effect of at least partially offsetting some of the pollution, noise, mortal fear, death, obesity and visual offence caused by motor cars.
As all these changes might require quite a bit of restructuring of the economy, we need to make sure we have enough demand in the economy to make sure everyone who wants a job will have one throughout the transition.
15. Revise the RBNZ inflation target to be a nominal income level target. (We’re getting very wonky here, but you can read a short essay on why this distinction matters here.)
And finally, something completely random:
16. Increase the rights of animals to freedom from suffering.
What would New Zealand look like if this platform were enacted?
- For the first time in a very long time (maybe ever), the rate of savings is going to be higher than the rate of investment.
- This means capital is going to be flowing out of the country, on net, as opposed to flowing into it. The RBNZ will be able to hold rates lower than in most other advanced countries, whereas they have historically always been higher.
- This means the net demand for NZ dollars will be negative, so the exchange rate will fall, on average.
- The tradeable part of the economy, will start growing faster, and the non-tradeable part will start growing slower.
- As productivity tends to go up faster in the globalised parts of the economy, productivity will start to increase.
- With lower taxes on capital, business should start to invest more, especially exporters, which increases productivity even more. Combined with the increase in public transport, we might even get more multinationals starting to do their high value stuff here instead of Australia.
- This means we will have more high-paying, interesting jobs, and fewer dull, low paying service jobs.
- More houses will be built in inner cities, where the jobs are. These houses will be cheaper to build and to buy.
- There will be fewer speculators competing with owner-occupiers for houses, making it easier to own a home.
- There will be fewer working visa students in inner cities competing for inner city housing, reducing rents for young people saving to buy a home.
- Income taxes will fall, making it easier to save money.
- There will be less debt and hence less chance of a financial crisis that disproportionately effects young people.
- People will be fitter, happier and better educated.
- They will be even happier when they know that animals are being fairly treated.
- Agriculture will become higher value, less tax driven. However, with the lower exchange rate, it will become more competitive even while being less environmentally damaging.
- Our natural environment will improve.
Who will be the losers?
Superficially, you might think that landlords and motorists, who tend to be older, would lose under the platform. However, even these groups would benefit from increase opportunities to do property development, and the lack of congestion on the roads. Over time, property yields would increase, and property would become a stable yield investment rather than a tool for speculative gains. So overall, almost everyone is a winner. But Millennials have the most to gain, just as they suffer most under the present regime.