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Archive for December, 2011

It seems that the OECD has been somewhat mischievous in its reporting of the gap between the rich and poor in New Zealand. One can only wonder why it has reported its “findings” in such a dramatic fashion. Why has it only told part of the story?

Tony Alexander, chief economist BNZ, has looked closely at the OECD data it used to claim that New Zealand has the fastest growing gap between rich and poor in the developed world. Alexander reports in his weekly overview that the gap was accelerating between 1986 and 2000, but since then the gap has continued to close.

So for the last ten years, while in other OECD countries the gap has continued to increase, the gap between rich and poor in New Zealand has been closing. A good thing. A fact not reported by the OECD.

Tony Alexander attributes the closing of the gap to the reforms of the mid eighties finally reaching their full economic effect in the mid nineties.

While some people might find his opinion galling, the fact remains that in New Zealand the trend is to closing the gap between rich and poor.

An increasing gap between rich and poor gives rise to social discontentment and resentment. Perception can become reality in people’s minds and that is why I accuse the OECD of being mischievous and biased in its reporting.

I would go further and suggest that the misleading claim by the OECD is dangerous to New Zealand’s social cohesion and that much of the damage has already been done and is difficult to undo. Peoples’ first impressions and perception are often lasting and difficult to refute, a behaviour well known to advertisers, marketers and those in PR.

Nonetheless, the gap between rich and poor in NZ is much higher in 2010 than in 1986, and there are too many people who, for whatever reason, are unable to feed and house themselves adequately … The gap needs to close, and close more quickly.

The OECD statistics are available on http://www.oecd.org/dataoecd/39/45/49170007.xls

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“The gap between rich and poor has widened further in New Zealand – and in Sweden – than in any other developed countries in the past 25 years …. (The OECD report ) calls for “three pillars” of action to close the gap – investing more in education and training, helping all groups into jobs, and closing tax loopholes to make the rich pay a fairer share of taxes.”

Simon Collins,  NZ Herald December 7 2011

Warning: the following contains unverified “facts” (there’s an oxymoron!),  and a mixture of my own opinions and those of others.

Much of the discussion I have heard today (National Radio Morning Report and The Panel) has focused on taxing the rich to pay more for government services, which raises two points – who are the rich, and how do you tax them.  Bernard Hickey said that the rich are those earning one and a half times the average wage ie in NZ, $70,000;  one of Jim Mora’s guests suggested that California’s bid to increase taxes of those earning US$250,000 is about right; another guest referred to Obama’s suggestion to tax millionaires to pay forgovernment projects, but also pointed out that in NZ only about 30,000 people earn more than $100,000. Bernard Hickey also suggested that NZ could close one tax loophole here by introducing a land tax, given that some rich people had quadrupled even quintupled their wealth over the last ten years by buying properties.

Someone I spoke to today (he was on the Savings and Capital Working group and has worked in the finance and energy sectors) said that taxation is the least of NZ’s problems. He knocked off the other two pillars in one blow by explaining that the export/manufacturing sector we need can’t develop because of one key factor – no energy policy. Overseas investors won’t come here, because our energy supply is inconsistent, inefficient and costly! Exporting commodities such as logs yields a fifty per cent return, exporting a partially transformed product eg cardboard boxes yield about seventeen per cent, and a fully transformed product eg furniture yields about three pc return. Why? Not just because of investment in plant, but because of problems with energy supply. Apparently, ten years ago the Dairy industry planned to have half its milk production in “elaborately transformed” product … It hasn’t happened because of the investment costs … And no energy policy.

So with an energy policy we wouldn’t have such a large unskilled workforce, people would have to be up skilled to manufacture “transformed product”. Productivity would increase and we could stop worrying about who these rich people are who will pay for clean rivers, public education, public health, and universal super, as well as working for families, and interest free loans.

Who would have thought it … An energy policy  …  Bring back Electricity Corporation?

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It’s Advent, so in preparation for Christmas I designed a Christmas Calligram:

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