20 Oct 2017

Chance for bold change - economists

10:51 am on 20 October 2017

The new government should introduce a capital gains tax as a minimum, economists say.

Auckland houses

Photo: 123RF

However, one economist believes Labour may not have the appetite for the bold economic change New Zealand First is signalling it wants.

During his coalition announcement yesterday evening, New Zealand First leader Winston Peters said he believed New Zealand was facing an imminent economic slowdown, and that current economic settings did not work for everyone.

"Far too many New Zealanders have come to view today's capitalism not as their friend but as their foe - and they are not all wrong," he said.

"Capitalism must regain its responsible, its human, face."

BERL economist Ganesh Nana said he took Mr Peters' remarks about capitalism as "a very strong signal of this being a change government".

"The Peters-type coalition is after spreading some of those gains to the ones who have lost out."

If a tax working group was formed it should be "as bold as possible" and consider resource taxes as well as a capital gains tax, Dr Nana said.

"There will be those asset owners who've been sitting on a bubble at the moment - they will be losing. They will no doubt blame the new government but those sorts of adjustments were already going to happen and, indeed, have to happen."

However, it was not clear if Labour would have the appetite for wholesale change or would instead look to make gradual change.

Jacinda Ardern appeared to be an "incrementalist" in the mold of her predecessor Helen Clark, he said.

Westpac Bank economist Dominick Stephens said Mr Peters had a point.

"Economic growth's been 2.5, 3 percent, so businesses have had it good - but actually, per capita economic growth has been low," he said.

"Once you take population growth out, per capita we've been going up at half a percent per annum so households have not really been feeling it."

When people spoke about inequality, what they were often talking about was the lack of ability to afford housing, Mr Stephens said.

"There's a wide consensus among economists in New Zealand that we need a capital gains tax. The lack of one is a tragedy - it's leading to greater inequality and skewing the nature of this economy.

"You need to change the tax system if you want to do anything about house prices and I'm going to be really interested to see if this coalition government has what it takes to do that."

Mr Peters could be right about a coming economic slowdown, he said.

Net immigration was already starting to drop and house price appreciation had also stopped.

Unions, business focus on wages

Public Service Association national secretary Glenn Barclay said he had "high hopes" wages would lift under the new government.

During the election campaign, Labour pledged to raise the minimum wage to $16.50 an hour and introduce minimum pay agreements for some industries.

New Zealand First has said it wants to see the minimum wage rise to $20.

Council of Trade Unions secretary Sam Huggard said the government needed to develop a plan to lift pay, which had not kept up with the cost of living, particularly for the low-paid and self-employed.

Business New Zealand chief executive Kirk Hope said some of his organisation's concerns about industry-wide agreements had been addressed during the campaign.

"We were concerned that those industry agreements might lead to widespread striking. But we've been comforted that that is not going to be the case.

"The challenge will be to understand which industries are going to be asked to negotiate the fair-pay agreements first."

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